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SEVILLA VS. COURT OF APPEALS Facts: Tourist World Services, Inc.

(TWS) leased the premises belonging to Segundina Noguera to be used as a branch office. Sevilla held herself solidarily liable with TWS for the payment of the rent. When the branch office was opened, it was run by Sevilla payable to TWS by any airline for any fare brought in through the efforts of Sevilla, 4% would go to Sevilla and 3% was to be withheld by TWS. When TWS was informed that Sevilla was connected with a rival firm, Philippine Travel Bureau, and since the branch was losing, TWS considered closing down its office. The contract of lease was terminated. Canilao, the corporate secretary of TWS, went over to the branch and padlocked the premises to protect the interests of TWS. Sevilla and her employees could not enter. Sevilla filed for mandatory preliminary injunction which the trial court dismissed without prejudice. Sevilla filed an appeal, and one of her claims was that the trial court erred in holding that Sevillas arrangement with TWS was a mere employer-employee relation and not a joint business venture. She supports this claim by declaring that she was signatory to the lease contract and was solidarily liable with TWS for the prompt payment of the rent, that she did not receive any salary from TWS and that she earned commissions for her own passengers, her own bookings and her own business obtained from airline companies (She shared the 7% commission she got from the airline companies with TWS). The CA affirmed the decision of the trial court. ISSUE relevant to our topic: What was the nature of the relation between Sevilla and TWS? Held: PRINCIPAL-AGENT relationship. It was not an employer-employee relation. Sevilla was not subject to control by TWS either as to the result or as to the means used. Her binding herself to be solidarily liable with TWS belies the claims of a master-servant relationship. Furthermore, Sevilla was not in the companys payroll. It was not a joint venture. A joint venture, including a partnership, presupposes generally a of standing between the joint co-venturers or partners, in which each party has an equal proprietary interest in the capital or property contributed and where each party exercises equal rights in the conduct of the business. 16 furthermore, the parties did not hold themselves out as partners, and the building itself was embellished with the electric sign "Tourist World Service, Inc. in lieu of a distinct partnership name. It is a principal-agent relationship. Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And as we said, Sevilla herself pre-assumed her principal's authority as owner of the business undertaking. But unlike simple grants of a power of attorney, the agency that in this case cannot be revoked at will because it is one coupled with an interest, the agency having been created for mutual interest of the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. She continued the business, using her own name, after Tourist World had stopped further operations. Her interest, obviously, is not to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. It is an agency that cannot be revoked at the pleasure of the principal.

Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages. EXTRA: The Court is convinced that there is some malevolent design to put Sevilla in a bad light. There was no proof that the branch was losing and the padlocking was done 6 months after (rebuttal to the interest of the company argument of TWS).

SHELL COMPANY OF THE PHILIPPINES, LTD. V. FIREMENS INSURANCE CO. OF NEWARK J. Padilla (1957) FACTS: o A car belonging to Salvador SISON was brought to a gasoline and service station somewhere in Manila, owned by the SHELL Company of the Philippine Islands, Limited, but operated by Porfirio DE LA FUENTE, for the purpose of having said car washed and greased for a consideration of P8.00 o Said car was insured against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000 o The job of washing and greasing was undertaken by DE LA FUENTE through his two employees a greaseman and a helper/washer. To perform the job, the car was carefully and centrally placed on the platform of a hydraulic lifter before raising up said platform to a height of about 5 feet and then the servicing job was started o After more than one hour of washing and greasing, the job was about to be completed except for an ungreased portion underneath the vehicle which could not be reached by the greaseman. So, the lifter was lowered a little by the greaseman and while doing so, the car for unknown reason accidentally fell and suffered substantial damage o SISON forthwith brought the matter to his insurers attention. The insurance companies after due inspection paid the sum of P1,651.38 for the damaged cars repair. SISON, for his part made assignments of his rights to recover damages in favor of the Firemen's Insurance Company and the Commercial Casualty Insurance Company hence, the instant case for the recovery of the total amount of the damage from SHELL and DE LA FUENTE on the ground of negligence o CFI dismissed the complaint. Insurance Companies appealed. The Court of Appeals reversed the CFIs judgment and sentenced SHELL and DE LA FUENTE to pay the amount sought to be recovered, plus legal interest and costs o The CA ruled that DE LA FUENTE is SHELLs agent; hence, as principal, it is liable for his agents breach of undertaking o SHELL now comes to the SC on appeal questioning the aforesaid CA decision, raising the following ISSUE: WON DE LA FUENTE is really SHELLs agent? Isnt he more of an independent contractor? HELD: DE LA FUENTE is SHELLs agent. The operator of a gasoline station is an agent of the oil company. He cannot be considered as an independent contractor by reason of SHELLs extensive control and supervision over his tasks. The assailed CA decision is affirmed. RATIO: o DE LA FUENTE owed his position to SHELL which could remove him or terminate his services at any time. He merely undertook to exclusively sell SHELLs products at the station he operates. For this purpose, he was placed in possession of all the equipments needed to operate it, including the hydraulic lifter from which SISONs automobile fell o But it must be noted that these equipments were delivered to DE LA FUENTE merely on loan basis. SHELL still took charge of its care and maintenance. It supervised DE LA FUENTE and conducted periodic inspection of the gasoline and service station o Moreover, SHELL did not leave the fixing of price for gasoline to DE LA FUENTE; on the other hand, SHELL had complete control thereof; and it had supervision over DE LA FUENTE in the operation of the station and in the sale of its products therein o In fine, the gasoline and service station really belonged to SHELL. It bore its tradename and the operator DE LA FUENTE merely sold the products of SHELL there o Considering the abovelisted, in no wise can it be said that DE LA FUENTE is an independent contractor of SHELL. The extensive

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control and supervision that SHELL exercises over DE LA FUENTE militate heavily against this contention. On the contrary, such circumstances show the existence of agency between them o The existence of agency between SHELL and DE LA FUENTE is also evidenced by a receipt issued by SHELL and signed by DE LA FUENTE, acknowledging the delivery of equipments for the gas station in question and an official from of the inventory of said equipment containing DE LA FUENTEs signature above the words: "Agent's signature" RE: Liability of Principal for Agents breach of undertaking o As the CA correctly ruled, the fall of SISONs car from the hydraulic lift was the result of some unforeseen shortcoming of the mechanism itself. As the servicing job on SISONs car was accepted by DE LA FUENTE in the normal and ordinary conduct of his business as operator of SHELLs service station, and that the defective hydraulic lift caused the fall of the car, he is liable therefor. SHELL, his principal, is also liable as DE LA FUENTE acted withn the representative authority granted him as SHELLs agent. As the act of the agent acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable Moreover, SHELL undertook to "answer and see to it that the equipments are in good running order and usable condition." Obviously, SHELL failed to make a thorough check up of the hydraulic lifter. Hence, it was also negligent in that aspect to which it must answer, as the faulty lifter was the cause of the fall of the SISONs car.


DELA CRUZ v. NORTHERN THEATRICAL ENTERPRISES 95 PHIL 739 August 31, 1954; Montemayor FACTS: Northern Theatrical Enterprises Inc - operated a movie house in Laoag, Ilocos Norte. Domingo De La Cruz special guard of Northern whose duties were to guard the main entrance, to maintain peace and order and to report the commission of disorders within premises. He carried a revolver. Martin wanted to crash the gate or entrance of the movie house. Infuriated by the refusal of De la Cruz to let him in without first providing himself with a ticket, Martin attacked him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which moment to save himself he shot Martin, resulting in the latter's death. De la Cruz was charged with homicide. After a re-investigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court De la Cruz was again accused of the same crime of homicide. After trial, he was finally acquitted of the charge. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie corporation and the three members of its board of directors, to recover not only the amounts he had paid his lawyers but also moral damages said to have been suffered Northern asked for the dismissal of the complaint CFI of Ilocos Norte, after rejecting the theory of De la Cruz that he was an agent of Northern and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency (Arts. 1709-1729 of the old Civil Code), found that De La Cruz had no cause of action and dismissed the complaint without costs. ISSUE: 1. WON the relationship was that of principal and agent. 2. Whether an employee or servant who in line of duty and while in the performance of the task assigned to him, performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages against his employer. HELD/RATIO: 1. The relationship was not that of principal and agent because the principle of representation was in no way involved.

De La Cruz was not employed to represent Northen in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task. If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said employee may not recover the amount he may have paid a lawyer hired by him. All the laws and principles of law we have found, as regards master and servants, or employer and employee, refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any one of the senses, or permanent physical disability or even death, suffered in line of duty and in the course of the performance of the duties assigned to the servant or employee, and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case involving damages caused to an employee by a stranger or outsider while said employee was in the performance of his duties, presents a novel question which under present legislation we are neither able nor prepared to decide in favor of the employee. In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of employment runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to the interest of the employer to give legal help to and defend its employee in order to show that the latter was not guilty of any crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be insolvent, the employer would be subsidiarily liable. It is to the interest of the employer to render legal assistance to its employee. But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. Damage suffered by reason of the expenses incurred by him in remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge of homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed against him, there would have been no expenses incurred or damage suffered. So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge, possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We fail to see now this responsibility can be transferred to the employer who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed De La Cruz to perform a special duty or task, which task or duty was performed lawfully and without negligence.

Judgment of the lower court is affirmed. NIELSON V. LEPANTO 26 SCRA 540 GRN L-21601 December 28, 1968 This digest I got from Facts: Operating agreement between Nielson and Co., Inc and Lepanto Consolidated Mining Company, whereby the former operated and managed the latters mining property. Contract was entered into on Jan. 30, 1937, for five years, with an option to renew for the same term on the same basis. Contract was renewed in 1941. Dec. 1941 WW II Jan. 1942 mining operations ceased. Feb. 1942 mills, plants and other property were destroyed and occupied by the Japanese Army. 1945 Japanese forces are ousted and parties regain control of the property. 1945 disagreement between Nielson and Lepanto as to w/n contract is to expire in 1947. June 26, 1948 mining operations officially resumed under Lepanto. Terms of the contract: Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or confidence that the Officials of each company have in the other; therefore, in

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order to assure that such confidence and faith shall abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time upon ninety (90) days written notice, in the event that NIELSON for any reason whatsoever, except acts of God, strike and other causes beyond its control, shall cease to prosecute the operation and development of the properties herein described, in good faith and in accordance with approved mining practice. Nielson contends that the contract was suspended and should be extended. Lepanto contends that the contract expired in 1947 and that period of suspension did not extend the contract. The Court of First Instance (CFI) in Manila held for the defendant, Lepanto. Nielsen appealed to the Supreme Court (SC) and the SC reversed the decision of the CFI; It held that the contract was suspended until Jan. 26, 1948, when mining operations resumed. Lepanto seeks for motion for reconsideration based on the ff grounds: 1. That the contract entered into was a contract of agency which was effectively revoked and terminated in 1945; 2. That the court erred in holding that the period of suspension extended the life of the management contract. 3. The court erred in reversing the ruling of the trial judge that the management agreement was only suspended but not extended on account of the war. 4. The court erred in reversing the finding of the trial judge that Nielson's action had prescribed, but considering only the first claim and ignoring the prescriptibility of the other claims. 5. The court erred in holding that the period of suspension of the contract on account of the war lasted from February 1942 to June 26, 1948. 6. Assuming arguendo that Nielson is entitled to any relief, the court erred in awarding as damages (a) 10% of the cash dividends declared and paid in December, 1941; (b) the management fee of P2,500.00 for the month of January, 1942; and (c) the full contract price for the extended period of sixty months, since these damages were neither demanded nor proved and, in any case, not allowable under the general law of damages. 7. Assuming arguendo that appellant is entitled to any relief, the court erred in ordering appellee to issue and deliver to appellant share's of stock together with fruits thereof. 8. The court erred in awarding to appellant an undetermined amount of shares of stock and/or cash, which award cannot be ascertained and executed without further litigation. 9. The court erred in rendering judgment for attorney's fees.

binds himself to make or construct something or to render a service to the other for a price certain." In both agency and lease of services one of the parties binds himself to render some service to the other party. Agency, however, is distinguished from lease of work or services in that the basis of agency is representation, while in the lease of work or services the basis is employment. The lessor of services does not represent his employer, while the agent represents his principal. Further, agency is a preparatory contract, as agency "does not stop with the agency because the purpose is to enter into other contracts." The most characteristic feature of an agency relationship is the agent's power to bring about business relations between his principal and third persons. "The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts." Herein, the principal and paramount undertaking of Nielson under the management contract was the operation and development of the mine and the operation of the mill. All the other undertakings mentioned in the contract are necessary or incidental to the principal undertaking these other undertakings being dependent upon the work on the development of the mine and the operation of the mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third persons. In other words, in performing its principal undertaking Nielson was not acting as an agent of Lepanto, in the sense that the term agent is interpreted under the law of agency, but as one who was performing material acts for an employer, for a compensation. It is true that the management contract provides that Nielson would also act as purchasing agent of supplies and enter into contracts regarding the sale of mineral, but the contract also provides that Nielson could not make any purchase, or sell the minerals, without the prior approval of Lepanto. It is clear, therefore, that even in these cases Nielson could not execute juridical acts which would bind Lepanto without first securing the approval of Lepanto. Nielson, then, was to act only as an intermediary, not as an agent. Further, from the statements in the annual report for 1936, and from the provision of paragraph XI of the Management contract, that the employment by Lepanto of Nielson to operate and manage its mines was principally in consideration of the know-how and technical services that Nielson offered Lepanto. The contract thus entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust and confidence in Nielson. Issue 2: W/N the contract was actually suspended and extended until 1948, on account of the war and its aftermath. Held: Yes, the contract was suspended and extended until 1948. The management contract provides as follows: In the event of inundation, flooding of the mine, typhoon, earthquake or any other force majeure, war, insurrection, civil commotion, organized strike, riot, fire, injury to the machinery or other event or cause reasonably beyond the control of NIELSON and which adversely affects the work of mining and milling; NIELSON shall report such fact to LEPANTO and without liability or breach of the terms of this Agreement, the same shall remain in suspense, wholly or partially during the terms of such inability. Also, since damages caused by the war were severe, rebuilding of the mines had to be undergone and thus causing the operations to officially resume on June 26, 1948. Issue 3: W/N damages awarded to Nielson is proper; (a) 10% of the cash dividends declared and paid in December, 1941; (b) the management fee of P2,500.00 for the month of January, 1942; and (c) the full contract price for the extended period of sixty months; (d) to issue and deliver to appellant share's of stock together with fruits thereof; (e) an undetermined amount of shares of stock and/or cash, and; (f) attorney's fees Held: Awards (a), (b), (c), and (f), with proper discretion of the court, are granted. Awards (d), and (c), however, are not granted. Awards (a), (b), (c) are awarded because it is based on the stipulations stated in the contract agreed upon by both parties. Award (f), is granted since attorneys fees are given to the discretion of the court. Award (d) and (c) is not granted because it is under the Corporation Law that stock dividends can

Issue 1: (AGENCY-RELEVANT)L: W/N management contract be considered a contract of agency and therefore effectively revoked and terminated. Held: No, the SC held that this ground of the motion for reconsideration be brushed aside. It is the rule, and the settled doctrine of this Court, that a party cannot change his theory on appeal-that is, that a party cannot raise in the appellate court any question of law or of fact that wa s not raised in the court below or which was not within the issue made by the parties in their pleadings (Obiter) Even if allowed, it cannot be sustained. It is the SCs view that the management contract is not a contract of agency but a contract of lease of services hence cannot be unilaterally revoked from Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the contract of agency, one person binds himself to render some service or do something for the account or at the request of another." Article 1544, defining contract of lease of service, provides that "In a lease of work or services, one of the parties

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only be given to stockholders of the said corporation, of which, Nielson and Co., Inc., is not a part of. QUIROGA V PARSONS HARDWARE CO. 38 PHIL 501 AVANCEA; August 23, 1918 FACTS - a contract was entered into by and between the plaintiff and J. for the exclusive sale of quiroga beds in the Visayan Island. The contract provides: - ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions: (A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila + 25 per cent discount of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within 60 days from the date of their shipment. Argument of Plaintiff: defendant violated the following obligations (a) not to sell the beds at higher prices than those of the invoices; (b) to have an open establishment in Iloilo; (c) itself to conduct the agency; (d) to keep the beds on public exhibition, and (e) to pay for the advertisement expenses fo the same; and to order the beds by the dozen and in no other manner. Some of these obligations were not set forth in the contract but the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency. ISSUE WON the defendant, by reason of the contract, was a purchaser or an agent of the plaintiff for the sale of his bed. HELD The contract is one of PURCHASE AND SALE. - In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. DISTINCTION: PURCHASE AND SALE (case at bar): There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. AGENCY or order to sell: whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. - Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. - The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it

forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.

LIM V PEOPLE Facts: Lim is a businesswoman. She went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. EXHIBIT A: To Whom It May Concern: This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was sold. (This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid, Genoveva Ruiz.) Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three different times. Demands for the payment of the balance of the value of the tobacco were made but even trips to Lims camarin proved futile because the same was empty. Petitioner Lourdes Valerio Lim was found guilty by the Trial Court and Court of Appeals of the crime of estafa (Ca only modified the penalty).

Issue: WON the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability of petitioner for the crime charged. contract of agency

Ratio: It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix a period, does not apply. Re: Agency Aside from the fact that Maria Ayroso testified that the appellant asked her to be her

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agent in selling Ayroso's tobacco, the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be given something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso's house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the transaction. Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not have been the appellant who would have gone to the house of Ayroso, but it would have been Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant. (CA) The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco if the same was not sold. PACIFIC COMMERCIAL COMPANY V. ALFRED YATCO July 20, 1939 Avancena, C.J. The broker, unlike the commission merchant, has no relation with the thing he sells or buys. He is merely an intermediary between the purchaser and the vendor. Facts: Pacific sold for the account of Victoria Milling Co. refined sugar up to the total amount of 1M. Pacific received by way of commission 29K. Victoria Milling paid merchant sales tax in its capacity as manufacturer and owner of the sugar sold. Likewise, Pacific paid tax also. There were two ways in which Pacific made the sales of sugar after looking for purchasers and sending the purchase order to Victoria Milling: 1) 2) the purchase is made for the delivery of the sugar EXWAREHOUSE sugar is first deposited in the warehouse of Pacific before delivery to the purchaser. the purchase is made for the delivery EX-SHIP Pacific would simply hand over the bill of lading to the purchaser and collect the price

it was later taken ex-ship by the purchaser. Pacific never had possession of the sugar at any time. The bill of lading sent to the broker was sent only for the purpose of turning it over to the purchaser for the collection of the price. The sugar did not come to its possession in any sense. KER & CO., LTD VS LINGAD FACTS: Ker & Co was assessed by a Commissioner of Internal Revenue the amount of P20272.33 as the commercial brokers percentage tax, surcharge and compromise penalty for the period from July 1, 1949 to Dec 31, 1953. He requested that such assessment be cancelled, but this was denied. Ker & Co filed a petition for review with the Court of Tax Appeals which held that as a commercial broker under Section 194(t) of the National Internal Revenue Code, it was liable for the taxes except for the compromise penalty of P500. This liability arose from Kers contract with United States Rubber International in which Ker was named Distributor. As the parties have agreed upon, Ker was precluded from disposing the products in places other than those mentioned in the contract unless it obtains a written consent from US Rubber Intl. Ker was required to exert every effort to have the shipment of the products in max quantity and to promote the sale thereof. Also, the prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of US Rubber Intl. The crucial stipulation (I included it kasi sabi sa case crucial. :P): The Company shall from time to time consign to the Distributor and the Distributor will receive, accept and/or hold upon consignment the products specified under the terms of this agreement in such quantities as in the judgment of the Company may be necessary for the successful solicitation and maintenance of business in the territory, and the Distributor agrees that responsibility for the final sole of all goods delivered shall rest with him. All goods on consignment shall remain the property of the Company until sold by the Distributor to the purchaser or purchasers, but all sales made by the Distributor shall be in his name, in which the sale price of all goods sold less the discount given to the Distributor by the Company in accordance with the provision of paragraph 13 of this agreement, whether or not such sale price shall have been collected by the Distributor from the purchaser or purchasers, shall immediately be paid and remitted by the Distributor to the Company. It is further agreed that this agreement does not constitute Distributor the agent or legal representative 4 of the Company for any purpose whatsoever. Distributor is not granted any right or authority to assume or to create any obligation or responsibility, express or implied, in behalf of or in the name of the Company, or to bind the Company in any manner or thing whatsoever." ISSUE: whether the relationship is one of vendor-vendee or of broker-principal HELD: Latter. Petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company (Par. 2); that it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company (Par. 8); that every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company (Par. 12); that on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month (Par. 14); that the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss (Par. 15); that upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former (Par. 15); and that upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter (Par. 19). All these circumstances are irreconcilably antagonistic to the idea of an independent merchant." Definition: National Internal Revenue Code: Commercial broker "includes all persons, other than importers, manufacturers, producers, or bona fide employees, who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons or bring

CFI of Manila: in the first case, Pacific acted as a commission merchant; in the second case as a broker ordered Yatco to return to Pacific the amount collected from it by way of tax on the sale of sugar to be delivered EX-SHIP and denied prayer for return of amount paid for the sales of sugar to be delivered EX-WAREHOUSE. Issues: 1) 2) 3) WON there is double taxation NO WON Pacific acted as a commission merchant as to the sugar delivered ex-warehouse YES WON Pacific acted as a mere commercial broker as to the sugar delivered ex-ship YES Ratio: 1) 2) There is no double taxation. Tax is not upon property or products, but upon occupation or industry. A commission merchant is one engaged in the purchase or sale for another of personal property which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or vendors, but also with the property which is the property which is the subject matter of transaction. The deposit of the sugar in the warehouses of Pacific was made upon its own account and at its own risk until it was sold and taken by the purchaser. The broker has no relation with the thing he sells or buys. He is merely an intermediary between the purchaser and the vendor. He acquired neither the possession nor the custody of the things sold. His only office is to bring together the parties to the transaction. The sugar was shipped by Pacific at its expense and risk until it reached its destination, where


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proposed buyers and sellers together, or negotiate freights or other business for owners of vessels or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other means of transportation. The term includes commission merchants." The controlling doctrine announced in the recent case of Commissioner of Internal Revenue v. Constantino. The decisive test, as therein set forth, is the retention of the ownership of the goods delivered to the possession of the dealer, like herein petitioner, for resale to customers, the price and terms remaining subject to the control of the firm consigning such goods. Salisbury vs. Brooks: " 'The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agent's commission upon sales made.' " Hahn v. CA and BMW J. Mendoza (1997) FACTS: o Petitioner Alfred HAHN is a Filipino citizen doing business under the name "Hahn-Manila." He is the holder of the BMW trademark in the Philippines (which makes him a legit dealer of BMW cars here). On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of Germany o HAHN executed in favor of BMW a "Deed of Assignment with Special Power of Attorney" where he ceded his rights over the BMW trademark in the Philippines in favor of BMW so that the latter can proceed to also become a dealer of BMW cars in the Philippines, on the condition that HAHN remain in close business relation with BMW (i.e. that HAHN remains exclusive dealer of BMW cars) o Also, one of the stipulations in the Deed of Assignment made Hahn an attorney-in-fact of BMW in cases of prosecutions against usurpers of the BMW trademark in the Philippines o Later, Hahn was informed that BMW was arranging to grant exclusive dealership of BMW cars to another entity, accordingly due to BMWs dissatisfaction with various aspects of HAHN's business (decline in sales, deteriorating services, inadequate showroom and warehouse facilities, and his alleged failure to comply with the standards for an exclusive BMW dealership) o Nonetheless, BMW expressed willingness to continue business relations with HAHN on the basis of a "standard BMW importer" contract, otherwise, if this was not acceptable to HAHN, BMW would have no alternative but to terminate petitioner's exclusive dealership o HAHN protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment. HAHN insisted that as long as the assignment of its trademark subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership o Because of HAHN's insistence on the former business relation, BMW withdrew its offer of a "standard importer contract" and terminated the exclusive dealer relationship o Hence, HAHN filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. He also filed application for a TRO and preliminary injunction to enjoin BMW from terminating his exclusive dealership o QC RTC issued a TRO. Summons and copies of the complaint were thereafter served on BMW through DTI (pursuant to Rule 14, 14, ROC) which the DTI forwarded to BMW Germany via registered mail. However, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte. As stated above, the trial court granted the writ of preliminary injunction o Thereafter, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service of

summons on the DTI because it (BMW) was a foreign corporation and it was not doing business in the Philippines BMW also pointed out the execution of the Deed of Assignment was an isolated transaction; that HAHN was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; and that HAHN was merely a middleman (indentor) transacting business in his own name and for his own account HAHN opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive BMW dealer; that BMW officials periodically inspected standards of service rendered by him; and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines The trial court deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW did not seem to be indubitable. Without seeking reconsideration of the trial court order, BMW filed a petition for certiorari with the CA, primarily assailing the trial courts lack of jurisdiction to issue the TRO The CA enjoined the trial court from further hearing HAHN's complaint. It rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. The CA also proceeded to decide on the merits of the specific performance case (ratiocinating that the case would be elevated to it on appeal anyway). It ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, 14. CA also favored BMWs contention that HAHN acted in his own name and for his own account and independently of BMW, based on HAHN's own allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines. It held that petitioner was a mere broker and not an agent through whom BMW transacted business in the Philippines. Consequently, the CA dismissed HAHN's complaint against BMW. Hence, this appeal by HAHN

ISSUES: (1) WON the trial court gravely abused its discretion in deferring action on the motion to dismiss; and (2) WON HAHN is BMWs agent* *For our purposes, only issue 2 shall be highlighted, but these two issues are tightly intertwined HELD: Petitioner's appeal is well taken. The decision of the CA is REVERSED and the case is REMANDED to the trial court for further proceedings RATIO: (1) Suffice it to say that the trial court acted with competent authority in entering its assailed order deferring resolution of BMWs motion to dismiss pending trial on merits. Rule 16, 3 (ROC) authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. Here (as to be discussed below) the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof if only pleadings without benefit of a full blown trail are considered. In any case, there seems to be a significant issue that had to be resolved first via full trial (presentation of evidence, etc) - WON HAHN is truly an agent of BMW o On the issue of jurisdiction, Rule 14, 14, ROC read in conjunction with the provisions of the Foreign Investments Act of 1991 (RA 7042) confers jurisdiction on the trail court over foreign corporations like BMW.1 Fundamentally, the aforementioned statutory authorities read together allow the trial court to serve summons to foreign companies via the DTI (and hence gain jurisdiction thereover) as long as they are considered to be doing

See full text for the provisions of the Rules of Court and RA 7042 (or you can ask me before class). This has something to do with the phrase doing business in the Philippines
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business in the Philippines this includes appointing representatives or distributors in the Philippines" but not when the representative or distributor "transacts business in its name and for its own account" the question then is whether HAHN is the agent/distributor in the Philippines of BMW. If he is, BMW may be considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the DTI. Otherwise, the trial court did not acquire jurisdiction over it (BMW) (2) CA held that HAHN acted in his own name and for his own account and not as agent in the Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles. To support this conclusion, the CA relied heavily on HAHNs own allegation to the effect that he alone and without any monetary contributions from BMW, established BMW's goodwill and market presence in the Philippines; that he alone invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies; and that he has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW this conclusion by the CA is flawed o There is nothing to support the CA's finding that HAHN solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." To the contrary, HAHNs full allegations in his complaint show the opposite o HAHN, in his complete allegations pointed out that he placed orders made with him directly with BMW. It is BMW that fixed the downpayment and pricing charges, the scheduled production month for the orders and that payment was made by the buyer directly to BMW! HAHN was merely credited with commissions from the total purchase price upon the invoicing of a vehicle order by BMW. All orders were on invoices and forms of BMW. And these allegations were substantially admitted by BMW which in its petition for certiorari before the CA o Contrary to the CA's conclusion, this arrangement shows an agency. 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 o As to the service centers and showrooms which he said he had put up at his own expense, HAHN has said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. BMW also periodically inspected the service centers to see to it that BMW standards were maintained this illustrates the extent of BMWs control over HAHNs activities! More so, these allegations as to BMW extensive control over HAHNs activities were also admitted by BMW in its letter to HAHN terminating the exclusive dealership. In any case, the fact that HAHN invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW o Finally, BMWs fear that by responding to the summons it would be waiving its objection to the trial court's jurisdiction is no longer a prime issue It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not go beyond the allegations of the complaint in order to determine whether it has jurisdiction. A determination that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding should evidence later show that it is not transacting business in the country (in other words, the right to question the courts jurisdiction is not deemed foreclosed by its active participation in the trial!) o Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is the CA which committed grave abuse of discretion by ruling that BMW is not doing business (in the Philippines) on the basis merely of uncertain allegations in the pleadings, disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action.

SIASAT v. IAC 139 SCRA 238 October 10, 1985; Gutierrez, Jr. FACTS Nacianceno succeeded in convincing officials of the Department of Education and Culture, hereinafter called Department, to purchase without public bidding, 1m worth of national flags for the use of public schools throughout the country. When Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase orders could not be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval, she contacted the owners of the United Flag Industry. The next day, after the transaction was discussed, a document was executed formalizing Naciancenos authority to represent United Flag Industry and entitling her to a 30% commission. This was signed by Primitive Siasat. After the first delivery of flags was made, Naciancenos authority was revoked by Siasat. After Siasat received the payment for the first delivery, he tendered 5% of the amount received to Nacianceno as payment of her commission. Nacainceno refused to accept the said amount insisting on the 30% commission agreed upon. However, Nacianceno still accepted the amount because the Siasat assured her that she would receive the commission in full after the delivery of the other half of the order. When Nacianceno later on learned that Siasat had already received payment for the 2nd delivery, she confronted him. Siasat denied the receipt of payment, at the same time claiming that the Naciaceno had no participation whatsoever with regard to the 2 nd delivery of flags and that the agency had already been revoked. Nacianceno filed a complaint with the Complaints and Investigation Office of Malacanang. When nothing came of the complaint, she filed an action in the CFI to recover her commissions (25%, as balance of the 1st delivery and 30%, on the 2nd delivery) TC decided in favour of Nacianceno IAC affirmed the decision. Siasat (1) the authorization making Nacianceno United Flag Industrys representative merely states that she could deal with any entity in connection with the marketing of their products for a commission of 30%. There was no specific authorization for the sale of the Philippine flags to the Department (2) there were 2 transaction. The revocation of agency effected by the parties with mutual consent forecloses Naciancenos claim of 30& commission on the 2nd transaction (3) no basis for granting of attorneys fees and moral damages because there was no showing of bad faith on the part of Siasat. ISSUE 1. WON Nacianceno was authorized to negotiate the sale of the Philippine flags to the Department. 2. WON the revocation of agency forecloses Naciancenos claim of 30% commission on the 2nd transaction. 3. WON the grant of attorneys fees and moral damages was proper. HELD/RATIO: 1. YES. It can easily be seen by the way general words were employed in the agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the Nacianceno was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of Siasats merchandise with any entity or organization. There are several kinds of agents: o An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one authorized to do all acts for his principal which can lawfully be delegated to an agent. So far as such a condition is possible, such an agent may be said to have universal authority. o A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series. He has usually authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business which he is authorized to transact. o An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in a

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particular place, would, for this reason, be ordinarily deemed a general agent. o A special agent is one authorized to do some particular act or to act upon some particular occasion. lie acts usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. There is no merit in Siasats allegations that the contract of agency between the parties was entered into under fraudulent representation because Nacianceno would not disclose the agency with which she was supposed to transact and made Siasat believe that she would be dealing with The Visayas", and that "the petitioner had known of the transactions and/or project for the said purchase of the Philippine flags by the Department of Education and Culture and precisely it was the one being followed up also by the petitioner." If the circumstances were as claimed by Siasat, they would have exerted efforts to protect their interests by limiting the Nacianceno's authority. It is incredible that they could be so careless after being in the business for fifteen years. A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that "when the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be between the parties and their successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing", except in cases specifically mentioned in the same rule. Petitioners have failed to show that their agreement falls under any of these exceptions. The respondent was given ample authority to transact with the Department in behalf of the petitioners. NO. The revocation of agency could not prevent the respondent from earning her commission because it came too late, the contract of sale having been already perfected and partly executed. The petitioners' evidence does not necessarily prove that there were two separate transactions. Exhibit "6" is a general indorsement made by Secretary Manuel for the purchase of the national flags for public schools. It contains no reference to the number of flags to be ordered or the amount of funds to be released. Exhibit "7" is a letter request for a "similar authority" to purchase flags from the United Flag Industry. This was, however, written by Albarracin who was appointed Acting Secretary of the Department after Secretary Manuel's tenure, and who may not have known the real nature of the transaction. o If the contracts were separate and distinct from one another, the whole or at least a substantial part of the government's supply procurement process would have been repeated. In this case, what were issued were mere indorsements for the release of funds and authorization for the next purchase. o Since only one transaction was involved, we deny the petitioners' contention that Nacianceno is not entitled to the stipulated commission on the second delivery because of the revocation of the agency effected after the first delivery. o Macondray & Co. v. Sellner - Our ruling is that at the time fixed by the manager of the plaintiff company for the termination of the negotiations, the defendant real estate agent had already earned the commissions agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff company in declining to execute the contract of sale for some reason personal to itself. o Infante v. Cunanan - The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and, thereafter, dealing directly with the buyer o Heimbrod et al. v. Ledesma - The appellee is entitled to recovery. No citation is necessary to show that the general law of contracts the equitable principle of estoppel and the expense of another, uphold payment of compensation for services rendered. There is merit, however, in the petitioners' contention that the agent's commission on the 1st delivery was fully paid. o When Nacianceno asked the Malacanang Complaints and Investigation Office to help her collect her commission, her statement under oath referred exclusively to the 30% commission on the second delivery. The demand letter of the Naciacenos lawyer asked Siasat only for the 30% commission due from the second delivery. The fact that the Naciaceno demanded only the commission on the 2nd delivery without reference to the alleged unpaid balance


which was only slightly less than the amount claimed can only mean that the commission on the first delivery was already fully paid, Considering the sizeable sum involved, such an omission is too glaringly remiss to be regarded as an oversight. o Moreover, the Naciaceno's authorization letter bears her signature with the handwritten words "Fully Paid", inscribed above it. o The respondent contested her signature as a forgery, Handwriting experts from two government agencies testified on the matter. o While the experts testified in a civil case, the principles in criminal cases involving forgery are applicable. Forgery cannot be presumed. It must be proved. Borromeo v. Court of Appeals - Where the evidence, as here, gives rise to two probabilities, one consistent with the defendant's innocence and another indicative of his guilt, that which is favorable to the accused should be considered. The constitutional presumption of innocence continues until overthrown by proof of guilt beyond reasonable doubt, which requires moral certainty which convinces and satisfies the reason and conscience of those who are to act upon it We also rule against the respondent's allegation that the petitioners acted in bad faith when they revoked the agency given to the respondent. Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts. To support a judgment for damages, facts which justify the inference of a lack or absence of good faith must be alleged and proven. o There is no evidence on record from which to conclude that the revocation of the agency was deliberately effected by the petitioners to avoid payment of the respondent's commission. What appears before us is only the petitioner's use in court of such a factual allegation as a defense against the respondent's claim. This alone does not per se make the petitioners guilty of bad faith for that defense should have been fully litigated. NO. The award of moral damages and attorneys fees is without basis.


The decision of the respondent court is hereby MODIFIED. The petitioners are ordered to pay the respondent the amount of P140,994.00 as her commission on the second delivery of flags. DOMINION INSURANCE CO. V. CA The Case This is an appeal via certiorari[1] from the decision of the Court of Appeals[2] affirming the decision[3] of the Regional Trial Court, Branch 44, San Fernando, Pampanga, which ordered petitioner Dominion Insurance Corporation (Dominion) to pay Rodolfo S. Guevarra (Guevarra) the sum of P156,473.90 representing the total amount advanced by Guevarra in the payment of the claims of Dominions clients. The Facts January 25, 1991: Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money against Dominion Insurance Corporation. Plaintiff sought to recover thereunder the sum of P156,473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy certain claims filed by defendants clients Dominion denied any liability to Guevarra and asserted a counterclaim for P249,672.53, representing premiums that plaintiff allegedly failed to remit. August 8, 1991: Dominion filed a third-party complaint against Fernando Austria, who, at the time relevant to the case, was its Regional Manager for Central Luzon area. Pre-trial reset for many times May 22, 1992 the case was again called for pre-trial conference. Only plaintiff and counsel were present. Despite due notice, defendant and counsel did not appear, although a messenger, Roy Gamboa, submitted to the trial court a handwritten note sent to him by defendants counsel which instructed him to request for postponement. Plaintiffs counsel objected to the desired

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postponement and moved to have defendant declared as in default. TC granted motion. Plaintiff presented his evidence on June 16, 1992. This was followed by a written offer of documentary exhibits on July 8 and a supplemental offer of additional exhibits on July 13, 1992. The exhibits were admitted in evidence in an order dated July 17, 1992. August 7, 1992: defendant corporation filed a MOTION TO LIFT ORDER OF DEFAULT. denied. MR also denied TC decided in favor of Guerrero. CA affirmed TCs decision. MR denied. Hence, the petition. The Issues

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. Article 1878, Civil Code, enumerates the instances when a special power of attorney is required. The pertinent portion that applies to this case provides that: 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; xxx xxx xxx (15) Any other act of strict dominion. The payment of claims is not an act of administration. The settlement of claims is not included among the acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts enumerated therein. A special power of attorney is required before respondent Guevarra could settle the insurance claims of the insured. Respondent Guevarras authority to settle claims is embodied in the Memorandum of Management Agreement[23] dated February 18, 1987 which enumerates the scope of respondent Guevarras duties and responsibilities as agency manager for San Fernando, Pampanga, as follows: xxx xxx xxx 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. xxx xxx xxx[24] In settling the claims mentioned above, respondent Guevarras authority is further limited by the written standard authority to pay,[25] which states that the payment shall come from respondent Guevarras revolving fund or collection. The authority to pay is worded as follows: This is to authorize you to withdraw from your revolving fund/collection the amount of PESOS __________________ (P ) representing the payment on the _________________ claim of assured _______________ under Policy No. ______ in that accident of ___________ at ____________. It is further expected, release papers will be signed and authorized by the concerned and attached to the corresponding claim folder after effecting payment of the claim. (sgd.) FERNANDO C. AUSTRIA Regional Manager [Emphasis

(1) whether respondent Guevarra acted within his authority as agent for petitioner (2) whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money in settling the claims of several insured. The Court's Ruling The petition is without merit. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The basis for agency is representation. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferrable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. A perusal of the Special Power of Attorney would show that petitioner (represented by third-party defendant Austria) and respondent Guevarra intended to enter into a principalagent relationship. Despite the word special in the title of the document, the contents reveal that what was constituted was actually a general agency. The terms of the agreement 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, xxx represented by the undersigned as Regional Manager, xxx do hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo Guevarra xxx 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. 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.[19] [Emphasis supplied]


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. 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 states that: The principal is not liable for the expenses incurred by the agent in the following cases:

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(1) If the agent acted in contravention of the principals instructions, unless the latter should wish to avail himself of the benefits derived from the contract; xxx xxx xxx 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. 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. In this case, when the risk insured against occurred, petitioners 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. The extent to which petitioner was benefited by the settlement of the insurance claims could best be proven by the Release of Claim Loss and Subrogation Receipts[27] which were attached to the original complaint as Annexes C-2, D-1, E-1, F-1, G-1, H-1, I-1 and J-l, in the total amount of P116,276.95. However, the amount of the revolving fund/collection that was then in the possession of respondent Guevarra as reflected in the statement of account dated July 11, 1990 would be deducted from the above amount. 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. The Fallo IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the decision of the Court of Appeals[28][29] in that petitioner is ordered to pay respondent Guevarra the amount of P112,672.11 representing the total amount advanced by the latter in the payment of the claims of petitioners clients. and that of the Regional Trial Court, Branch 44, San Fernando, Pampanga, No costs in this instance. SO ORDERED.

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