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Panlilio v. Citibank, N.A.

(LTCPs, withdrawal upon news about of stock crash)



Principals in an agency relationship are solely obliged to observe the solemnity of the transaction entered by the
agent on their behalf, absent any proof that the latter acted beyond its authority
Concomitant to this, the principal also assumes the risks that may arise from the transaction
Bank regulations prohibit banks from guaranteeing profits or the principal in an investment management account.

Amalia Panlilio deposited in Citibanks Makati branch Php1M into a Citihi account, which is a fixed-term
savings account with a higher-than-average interest. She initially wanted to invest the money in a Peso Repriceable
Promissory Note (PRPN), which yielded higher interest, but it wasnt available on that day. On the same day (Oct. 10,
1997), she also opened a checking account, to which the interests of the Citihi account will be credited. Jinky Suzara Lee
was assigned to personally transact w/ Amalia and handle the accounts. These accounts were ITF or in trust for
accounts. This means that they were intended to benefit her minor children in case she would meet an untimely death. In
order to open them, she had to sign 2 documents: a Relationship Opening Form (ROF) and a Invester Profiling and
Suitability Questionnaire (Questionnaire).
About a month later, on Nov. 28, Amalia phoned Citibank saying she wanted to place another investment
for Php3M. She brought a PCIB check worth that amount to Citibank. Php2,134,635 was placed in a Long-Term
Commercial Paper (LTCP) issued by Camella and Palmera Homes (C&P Homes). Essentially, an LTCP is a debt of
indebtedness with a maturity period of more than 365 days, and is issued by a corporation to any person or entity. Its a
higher-risk long-term investment that can yield higher pay-offs. In effect, Amalia loaned C&P Homes money, and the
latter pays it over a long periodin this case, the maturity period was in 2003 (five years later), with a gross
interest rate of 16.25% per annum. Invesment banks are authorized to buy such documents for investment purposes on
behalf of their clients upon the latters express instructions. The remaining money from the Php3M was put in two PRPN
accounts in trust for Amalias 2 children. That day, she signed the ff. documents: a Directional Investment
Management Agreement (DIMA), Term Investment Application (TIA), and a Directional Letter, which served as
Amalias specific instructions to Citibank regarding the investment of her money.
The DIMA and Directional Letter both contain specific provisions that state that clear Citibank of any
obligation to guarantee the principal and interest of the investment absent fraud or negligence on its part, and that
all risks shall be assumed by Amalia. Pursuant to these investments, Citibank regularly sent Amalia confirmations of
investment (COI), which is a 1-page computer generated document that stated where her money went. Amalia received
the first COI on December 9, 1997. According to her, it was the first time she learned that her money was put into an
LCTP and that she never instructed the bank to do so but only to open a trust account with an interest of around 16.25%
w/ a term of 91 days. She claims that upon receipt of the 1st COI, she immediately called Lee and asked that the
investment in the LTCP be withdrawn. However, according to Amalia, Lee convinced her not to withdraw her
investments immediately because C&P Homes is owned by Ayala Corp. and is therefore secure, and that in any case, she
could easily withdraw them at a later date. She also claims that she signed blank documents and that the bank only made
unauthorized intercalations.
Around August 1998, newspaper reports about the plummeting of C&P Homes stocks and Ayalas
subsequent withdrawal of its investments in the company hit the public. On Aug. 6, Amalia met with Lizza Colet,
another Citibank employee, to preterminate the LTCP and their other investments. However, in order for the LTCP to be
preterminated before maturity, there must be another willing buyer for it. It was very hard to find buyers then because of
the economic crisis. Still, petitioner spouses signed 3 sets of Sales Order Slips to sell the LTCP and left these with Colet.
On Aug. 18, Amalia sent their first formal, written demand to Citibank for the withdrawal of her investment
ASAP. In its response, Citibank says that the investment was not a deposit so its return to the investor was not guaranteed
by the bank and that its sale is still subject to the availability of other buyers. Also, Citibank denies that Amalia
immediately called them upon her receipt of the 1st COI, and they also deny that they just convinced her not to withdraw
her investments immediately.
Thus, petitioners filed a case with the RTC for the recovery of a sum of money and damages. The Panlilios won.
However, upon appeal, the CA reversed the RTC decision.

1. W/N Citibank is liable to return to Amalia the Php2,134,635.
1. No. As evidenced by the DIMA and Directional Letter, Amalia opned an investment managing account. In
essence, Amalia constituted Citibank as an investment manager, which gave birth to a principal-agent
relationship and NOT a creditor-debtor or trustee-trustor one. Thus, the money invested was the sole and
exclusive obligation of C&P Homes. Under Sec. 4 of the DIMA, it explicitly states that the agreement is one of
agency and not trust. As such, the principal shall at all times retain legal title to the fundssubject of the
agreement. Under Sec. 6, the investment manager (in this case, Citibank), is absolved of any liability in the
absence of fraud, bad faith, or gross or willful negligence on its part. The same terms are contained within the
Directional Letter. Thus, they generally extricate Citibank from responsibility in case the investment is lost.
The DIMA, Directional Letter, TIA and COIs, read together, establish that the agreement between the parties, as
an investment management agreement, created a principal-agent relationship. Citibank purchased the LTCPs only
as agent of petitioners. Amalias proper recourse is against C&P Homes and only upon maturity. As
principals, they are bound by the provisions of the contracts entered into by their agents absent any proof
that the latter acted beyond its authority. Its the principal who assumes the risks that may arise from the
The Court ruled that theres no merit to petitioners claim that they signed blank documents. Amalia testified that
she didnt ordinarily sign blank documents. Evidence shows that Amalia is a smart businesswoman. She wouldnt
just sign any document without first reviewing it. The rule that any ambiguity in a contract of adhesion shall be
strictly construed against the one who wrote the contract cant apply in this case because there is no evidence of
any ambiguity, obstruction or doubt. The construction only applies when the ambiguity, obstruction or doubt is
present in the contract. The word TRUST in the TIA merely indicates that it was to be handled by the trust
department. The fact that it was handled by the trust department of the bank is immaterial because the trust
department also handles other fiduciary and investment management services. Also, the fact that the ROF and
Questionnaire contradict the other documents is immaterial because they were filled up for a different
investmentnot the one in question here. Also, when they first demanded the withdrawal of the investment, the
Panlilios only questioned the maturity period and not the validity of the purchase of the LTCPs themselves.
Petitioners acts and omissions strongly indicate that they conformed to the agreement in the months after the
signing. In that period, they received several banks statements and earned interest from their investments. In fact,
C&P continued paying interest up to when this case was on trial. Suspiciously, it was only when news reports
about C&P Homes stock crash got out that the Panlilios decided to withdraw their investment.

Manila Memorial Park Cemetery v. Linsangan (2004) (See Compilation 3)

Air France v. Court of Appeals (1983) (Japan Trip, Ganas, expired ticket, knowledge )

From Agency Outline: Under the principle that knowledge of the agent is considered knowledge by the
principle, the Court ruled that the spouses cannot defend by contending lack of knowledge of the rules upon
which they received their tickets from the airline company since the evidence bore out that their travel agent who
handled their travel arrangements, was duly informed by proper representatives of the airline company.

Sometime in February, 1970, the late Jose G. Gana and his family (Ganas) purchased from Air France through
Imperial Travels 9 (nine) open-dated tickets for the Manila/Osaka/Tokyo/Manila route. Ganas were booked for
Manila/Osaka May 8, 1970 and Tokyo/Manila May 22, 1970. The expiry date was May 8. 1971. The Ganas, however,
did not depart on May 8, 1970.
Sometime in January 1971, Jose Gana asked the assitance of Teresita Manucdoc (Secretary of Sta Clara Lumber where Jose Gana is working as Director and Treaurer) for the extension of the validity of their tickets (which again due to
expire on May 8, 1971). Teresita asked for help from Lee Ella, Manager of the Philippine Travel Bureau. She used to
handle travels of Sta. Clara Lumber. She then sent the tickets to Cesar Rillo who is the Office Manager of Air France.
Tickets were returned to Ella. Ella was informed that extension was NOT possible, unless the following are paid first (1)
fare differentials resulting from the increase in fares triggered by an increase of the exchange rate of the USD to PHP and
(2) the increased travel tax.
Ella returned the tickets to Manucdoc and informed the impossibility of extension. Meanwhile, Ganas scheduled
their departure on May 7, 1971 (ONE DAY BEFORE expiry). Manucdoc requested Ella to arrange the tickets but Ella
warned her that the tickets can be used May 7, but they would NO longer be valid for the rest of the trip because it will
expire next day. Manucdoc said that Ganas will make the arrangements (This was verified through the Q&A. It was
even asked if Tagalog or in English. It was in English).
Assured, Ella ON HIS OWN, attached to the tickets revalidating stickers (Japan Airlines and Scandinavian
Airways System (SAS) sticker). The SAS indicates that it was Reevaluated by: the Philippine Travel Bureau, Branch
No.2 (as shown by a circular rubber stamp) and signed "Ador", and the date is handwritten in the center of the circle.
Then appear under printed headings the notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status). Ella made
no more attempt to contact Air France as there was no more time.
Come Osaka/Tokyo Flight on May 17, 1971 - Japan Airlines refused to honor the tickets and the Ganas had to
purchase new tickets. Same difficulty happened in their return trip to Manila - Air France also refused the tickets. They
were only able to return only after pre-payment in Manlia, through their relatives , of the adjusted rates. The family flew
separate flights.
1. W/N notice to Manucdoc is notice to the Ganas
2. W/N Ella acted beyond his powers as travel agent
1. YES. To all legal intents and purposes, Manucdoc was the agent of the Ganas and notice to her of the rejection
of the request for extension of the validity of the tickets was notice to the Ganas, her principal. There are
IAT (Intl Air Transportation Assoicatoin) Rules about ticket expiry and fare differentials (adjustment for
increase and decrease). The GANAS cannot defend by contending lack of knowledge of those rules since the
evidence bears out that Manucdoc was duly informed by Ella of the advice of Reno, the Office Manager of Air

France, that the tickets in question could not be extended beyond the period of their validity without paying the
fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes. This is the
topic for the Agency class
2. YES. The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the Ganas to
leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. It should be recalled
that the Ganas left in Manila the day before the expiry date of their tickets and that "other arrangements" were to
be made with respect to the remaining segments. Besides, the validating stickers that Ella affixed on his own
merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of
a ticket or revive an expired one. It should be recalled that AIR FRANCE was even unaware of the validating
SAS and JAL. stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely
acted within their contractual rights when they dishonored the tickets on the remaining segments of the trip and
when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila flight.
Emergency Facts: Tickets cost USD 2,528.58, exchange rate was P3.90/USD1, travel tax is P100 for each passenger,

Cuison vs. CA (1993) (manager, holds him out to the public, kinakapatid)

One who clothes another with apparent authority as his agent and holds him out to the public as such cannot be
permitted to deny the authority of such person to act as his agent to the prejudice of third parties dealing with
such person in good faith and in the honest belief that he is what he appears to be
Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed to latter to act as though he had full powers
The fact that the agent defrauded the principal in not turning over the proceeds of the transactions to the latter
cannot in any way relieve or exonerate such principal from liability to the third persons who relied on his agents
Equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done
should be the one to bear the resulting loss.

Case is for a sum of money. Kue Cuison (petitioner) is a sole proprietorship (stores: Baesa, QC and Binondo,
Manila) engaged in the buy and sell of newsprint, bond paper, and scrap. Valiant Investment Associates VIA
(respondent) delivered paper products amounting to 297k to a certain Lillian Tan of LT Trading. The deliveries were
made pursuant to orders allegedly placed by Tiu Huy Tiac who was then employed at Binondo of Cuison. It was likewise
pursuant to Tiacs instructions that the merchandise be delivered to Lillian Tan. Upon delivery, Lillian paid by issuing
several checks payable to cash at the specific request of Tiac. In turn, Tiac issued 9 postdated checks to VIA.
Unfortunately, these 9 checks were dishonored.
VIA made several demands to Kue Cuison to pay for the merchandise, claiming that Tiu Huy Tiac was duly
authorized by Cuison as the manager of his Binondo office, to enter into transactions with VIA and Lillian Tan. Cusion
denied any involvement and refused to pay.
1. W/N Cuison is liable for Tiu Huy Tiacs transactions
1. YES
By Cuisons own acts and admission, he held out Tiu Huy Tiac to the public as the manager of his store
in Binondo, Manila. More particularly, Cuison explicitly introduced Tiu Huy Tiac to Villanueva, VIAs manager,
as his (petitioners) branch manager as testified to by Villanueva.
Secondly, Lillian Tan (who has been doing business with Cuison for quite a while) also testified that she
knew Tiu Huy Tiac to be the manager of the store. The general perception of Tiu Huy Tiac as the manager is even
made manifest by the fact that Tiu Huy Tiac is known in the community to be the kinakapatid of Cuison. Even
petitioner admitted his close relationship in open court that they are like brothers.
Petitioners unexplained delay in disowning the transactions entered into by Tiu despite several attempts
made by VIA to collect the amount from him proved all the more that he was aware of the questioned
transactions. Also, 3 months after Tui Huy Tiac left petitioners employ, Cuison sent communications to its
customers notifying them that Tiu is no longer connected with his business. Such undertaking spoke unmistakenly
of Tius valuable position as manager. Cuison is now estopped from disclaiming liability for the transaction
entered into by Tiu Huy Tiac on his behalf because innocent third persons relied upon such representations in
good faith and for value.

Pleasantville Development v. CA (lot mix-up)

The principal cannot absolve itself from the damages sustained by its buyer on the premise that the fault was
primarily caused by its agent if the agent was acting within his authority, even if such agent has acted negligently.
The liability of the principal for acts done by its agent within the scope of his authority does not exclude those
done negligently.

A certain Robillo purchased from Pleasantville Development a parcel of land located in Pleasantville
Subdivision in Bacolod City. This lot was designated as Lot 9. Subsequently in 1975, a certain Jardinico bought the
rights to the lot from Robillo. At that time, the lot was vacant.
Upon completing payment in 1978, Jardinico applied for registration of the land under his name. It was then that
he learned that a certain Wilson Kee had already introduced improvements and took possession of Lot 9.
FLASHBACK! Apparently, in 1974, Kee bought on installment Lot 8 in the same subdivision from CT
Torres, the exclusive real estate agent of Pleasantville. Unfortunately, when Kees wife conducted an
inspection with a CT Torres employee, the employee mistakenly pointed to Lot 9, instead of Lot 8.
Thereafter, sometime after 1975, Kee constructed his residence and other improvements on the lot.
Jardinico and Kee tried to settle to no avail. Jardinico filed for ejectment and Kee countered with a third-party
complaint. The CA eventually ruled that the erroneous delivery was due to the negligence of CT Torres, and that Kee was
a builder in good faith as he was unaware of the mix-up when he began construction on Lot 9. The Court also said that the
wrong delivery was likewise imputable to the principal, Pleasantville.
1. W/N Pleasantville is liable as principal for the negligent acts of its agent.
1. YES. Pleasantville is liable for the damages sustained by its buyer primarily caused by its agent if the agent
was acting within his authority, even if such agent has acted negligently.
The rule is that the principal is responsible for the acts of the agent, done within the scope of his authority, and
should bear the damage caused to third persons. On the other hand, the agent who exceeds his authority is
personally liable for damages. In this case, CT Torres, the agent, was acting within its authority when it made the
delivery to Kee. In acting within the authority, it was, however, negligent. It is this negligence that is the basis of
Pleasantvilles liability, per Articles 1909 and 1910 of the Civil Code.
Therefore, Pleasantville and CT Torres are declared solidarity liable for damages due to negligence.

Rural Bank of Milaor v. Ocfemia (2000) Bank foreclosure, Board Resolution, Managers authority for conduct in
the normal course of business.

When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell an
acquired asset in the normal course of business, it is legally obliged to confirm the transaction by issuing a
board resolution to enable the buyers to register the property in their names. It has a duty to perform necessary
and lawful acts to enable the other parties to enjoy all benefits of the contract which it had authorized.

Several parcels of land were mortgaged by the respondents during the lifetime of the respondents grandparents to
the Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage and the Promissory Note. Spouses Felicisimo
Ocfemia and Juanita Ocfemia, one of the respondents, were not able to redeem the mortgaged properties consisting of
seven parcels of land and so the mortgage was foreclosed and thereafter ownership was transferred to the petitioner bank.
Out of the seven parcels of land that were foreclosed, five of them are in the possession of the respondents because these
five parcels of land were sold by the petitioner bank to the respondents as evidenced by a Deed of Sale. However, the five
parcels of land cannot be transferred in the name of the parents of Merife Nino, one of the respondents, because there is a
need to have the document of sale registered. The Register of deeds, however, said that the document of sale cannot be
registered without the board resolution of the petitioner bank confirming both the Deed of sale and the authority
of the bank manager, Fe S. Tena, to enter such transaction.
The petitioner bank refused her request for a board resolution and made many alibis. Respondents initiated the
present proceedings so that they could transfer to their names the subject five parcel of land and subsequently mortgage
said lots and to use the loan proceeds for the medical expenses of their ailing mother.
Issue: (Focusing on the case doctrine on the outline, di ko na isasama yung remedial part)
1. W/N the board of directors of a rural banking corporation may be compelled to confirm a deed of absolute sale of
real property owned by the corporation which deed of sale was executed by the bank manager without prior
authority of the board of directors of the rural banking corporation?
1. YES. The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena (bank manager)
to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in
dispute and paid the real estate taxes. If the bank management believed that it had title to the property, it should
have taken measured to prevent the infringement and invasion of title thereto and possession thereof. Likewise,
Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her
authority. A bank is liable to innocent third persons where representation is made in the course of its normal
business by an agent like Manager Tena even though such agent is abusing her authority. Clearly, persons dealing
with her could not be blamed for believing that she was authorized to transact business for and on behalf of the
The bank is estopped from questioning the authority of the bank to enter into contract of sale. If a
corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent
authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation
will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying
the agents authority.

Filipinas Life Assurance Co. V. Pedroso (2008) (Insurance, investment)

The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority
and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes
personally liable for the damage. But even when the agent exceeds his authority, the principal is still solidarily
liable together with the agent if the principal allowed the agent to act as though the agent had full powers. In other
words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies
them, expressly or implied. Ratification in agency is the adoption or confirmation by one person of an act
performed on his behalf by another without authority.
Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent
misrepresentation, much more so if the principal ratified his agents acts beyond the latters authority

Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by Filipinas Life. Pedroso
claims that Renato Valle was her insurance agent since 1972. Valle collected her monthly premiums. In January 1977,
Valle informed Pedroso that Filipinas Life Escolta Office was holding a promo investment program for policyholders: 8%
prepaid interest a month for certain amounts deposited on a monthly basis. Pedroso invested and issued a post-dated check
dated January 7, 1977 for P10,000. In return, Valle issued his personal check for P800 for the 8% prepaid interest and a
Filipinas Life Agents Receipt No. 807838.
Pedroso, through employees of the Escolta Office Alcantra (administrative assistant) and Apertrior (branch
manager), confirmed that there was such a promo. She was even told that she could push through with the check she
issued. The check she issued was, with endorsement of Alcantara at the back, deposited in the account of Filipinas Life
with Commercial Bank and Trust Company.
Relying on the representations made by Filipinas representatives, Pedroso waited for maturity of the investment.
After a month, her P10,000 investment was returned to her after she requested for its refund. After the initial investment,
she proceeded to make 7 to 8 more, totaling P37,000 but at a lower rate of 5% interest. Upon maturity of the subsequent
investments, Valle would take back from Pedroso the corresponding agents receipt he issued to the latter.
Pedroso later told Palacio, another Filipinas insurance policyholder of the investment plan. Palacio made a total
P49,550 investment but at 5% interest. When Pedroso subsequently tried to withdraw her investment, Valle didnt want to
return P17,000. Palacio also tried but was refused by Filipinas. Pedroso and Palacio went to Filipinas Escolta to collect
their investments and look for Valle (who they had not seen for some time). Hence, Pedroso and Palacio filed a case for
recovery of sum of money.
RTC ruled that Filipinas Life, Valle, Apertrior and Alcantara jointly and solidarily liable to the respondents. CA
1. W/N the CA err in holding Filipinas and its employees jointly and severally liable to Pedroso and Palacio?
1. NO
Filipinas does not dispute that Valle was its agent. But it claims that it was only a life insurance company and not
engaged in the business of collecting investment money. Filipinas says that the investment scheme offered to
Pedroso/Palacio by Valle/Apertrior/Alcantara was outside the scope of their authority as agents. And as such,
Filipinas claims that it cant be liable to Pedroso/Palacio.
It is indisputable that Pedroso/Palacio invested P47,000 and P49,550 respectively. Such amounts were received by
Valle and remitted to Filipinas Life thru its official receipts. When Pedroso sought confirmation, Alcantara and
Apertrior confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon
inquiry and must discover at his own peril the agents authority, in this case, respondents did exercise due
diligence in removing all doubts and in confirming the validity of the representations made by Valle.

Filipinas Life, as principal, is liable for obligations contracted by its agent, Valle. The general rule is that the
principal is responsible for the acts of its agent done within the scope of its authority and should bear the damage
caused to third persons. When the agent exceeds his authority, the agent becomes personally liable for the
damage. But even when the agent exceeds his authority, the principal is still solidarily liable together with the
agent if the principal allowed the agent to act as though the agent had full powers. In other words, the acts of an
agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or
implied. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority.
Filipinas Life cant profess ignorance of Valles acts. Even if Valles representations were beyond his authority as
a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valles acts.
In fact, Filipinas even benefitted from the investments deposited by Valle in the account of Filipinas. Filipinas
Life had clothed Valle with apparent authority, hence it is now estopped to deny said authority. Innocent third
persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation,
much more if the principal ratified his agents acts beyond the latters authority. Act of the agent is hence,
considered that of the principal.

Professional Service Inc. vs. CA (2008) (2 gauzes)


It must be stressed that under the doctrine of apparent authority, the question in every case is whether the
principal has by his voluntary act placed the agent in such a situation that a person of ordinary prudence,
conversant with business usages and the nature of the particular business, is justified in presuming that
such agent has authority to perform the particular act in question.

In 1984 Natividad Agana was suffering from "cancer of the sigmoid". She had a surgery(hysterectomy) in
Medical City, performed by Drs. Ampil(Aganas Neighbor) and Fuentes. After the operation the attending nurses
remarked that sponge count 2 lacking.
After a couple of days Natividad complained of pain to the Drs.. The Drs. advised her to see an oncologist. As a
consequence she went to the states for consultation, and there she was told she was fee of cancer. When she came back to
the Phil. still suffering from pains, her daughter found a piece of gauze protruding from her vagina. Then Dr. Ampil went
to the Agans and removed from Natividad a gauze measuring 1.5 in.
After Natividad pains intensified, despite the assurance of Dr. Ampil that the pain would soon go away. Then
Natividad went to Polymedic General Hospital, where it was detected a presence of a gauze measuring 1.5 inches in
width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which
forced stool to excrete through the vagina. Therefore Natividad underwent another surgery.
Natividad filed with the RTC, a complaint for damages against PSI (owner of Medical City), Dr. Ampil and Dr.
Fuentes. During the pendency of the case Natividad died and was substituted by her children.
The Aganas won in the RTC and CA.

1. W/N there was an employee-employer relationship between PSI and Dr. Ampil under the principle of respondeat
2. W/N Dr. Ampil was an agent of PSI under the doctrine of ostensible agency?
3. W/N PSI was liable to Natividad under the doctrine of corporate negligence?
1. YES, there existed between PSI and Dr. Ampil an employer-employee relationship as contemplated in Ramos v.
Court of Appeals that "for purposes of allocating responsibility in medical negligence cases, an employeremployee relationship exists between hospitals and their consultants." Although the Court in Ramos later issued a
Resolution reversing its earlier finding on the existence of an employment relationship between hospital and
doctor, a similar reversal was not warranted in the present case because the defense raised by PSI consisted of a
mere general denial of control or responsibility, maintaining that consultants, like Dr. Ampil, are independent
contractors, not employees of the hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but
an independent contractor, still the said hospital is liable to the Aganas.
2. YES, Dr. Ampil was an agent of PSI, because PSI is estopped from passing the blame solely to Dr. Ampil. Its act
of displaying his name and those of the other physicians in the public directory at the lobby of the hospital
amounts to holding out to the public that it offers quality medical service through the listed physicians. This
justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed that under
the doctrine of apparent authority, the question in every case is whether the principal has by his voluntary
act placed the agent in such a situation that a person of ordinary prudence, conversant with business
usages and the nature of the particular business, is justified in presuming that such agent has authority to
perform the particular act in question.
3. YES, Under the Doctrine of Corporate Responsibility, PSI is responsible for the proper supervision of the
members of its medical staff. Accordingly, the hospital has the duty to make a reasonable effort to monitor and
oversee the treatment prescribed and administered by the physicians practicing in its premises. PSI committed a
serious breach of its corporate duty when it failed to conduct an immediate investigation into the reported missing

Professional Service Inc. vs. CA (2010) (2 gauzes)

The two factors that determine apparent authority: first, the hospital's implied manifestation to the patient
which led the latter to conclude that the doctor was the hospital's agent; and second, the patients reliance
upon the conduct of the hospital and the doctor, consistent with ordinary care and prudence.

Same as the previous case of the same title because this is 2nd motion for reconsideration of the previous case this
time Manila Medical Services, Inc. (MMSI), Asian Hospital, Inc. (AHI), and Private Hospital Association of the
Philippines (PHAP) all sought to intervene in the case because it might affect the financial side of health care.
1. W/N there was an employee-employer relationship between PSI and Dr. Ampil under the principle of respondeat
2. W/N Dr. Ampil was an agent of PSI under the doctrine of ostensible agency?
3. W/N PSI was liable to Natividad under the doctrine of corporate negligence?
1. NO, the Court holds that, the concurrent finding of the RTC and the CA that PSI was not the employer of Dr.
Ampil is correct. Control as a determinative factor in testing the employer-employee relationship between doctor
and hospital under which the hospital could be held vicariously liable to a patient in medical negligence cases is a
requisite fact to be established by preponderance of evidence. Here, there was insufficient evidence that PSI
exercised the power of control or wielded such power over the means and the details of the specific process by
which Dr. Ampil applied his skills in the treatment of Natividad. Consequently, PSI cannot be held liable for the
negligence of Dr. Ampil under the principle of respondeat superior.
2. YES, the hospital (PSI) held out to the patient (Natividad) that the doctor (Dr. Ampil) was its agent. Present are
the two factors that determine apparent authority: first, the hospital's implied manifestation to the patient which
led the latter to conclude that the doctor was the hospital's agent; and second, the patients reliance upon the
conduct of the hospital and the doctor, consistent with ordinary care and prudence.
It was Dr. Ampil, after the first meeting, who asked Natividad to go to Medical City to be examined by Dr. Ampil
there. The decision made by Enrique for Natividad to consult Dr. Ampil was significantly influenced by the
impression that Dr. Ampil was a staff member of Medical City General Hospital. Enrique looked upon Dr. Ampil
not as independent of but as integrally related to Medical City.
It is of record that PSI required a "consent for hospital care" to be signed preparatory to the surgery of Natividad.
The form reads:
Permission is hereby given to the medical, nursing and laboratory staff of the Medical City General
Hospital to perform such diagnostic procedures and to administer such medications and treatments as
may be deemed necessary or advisable by the physicians of this hospital for and during the
confinement of xxx. (emphasis supplied)
By such statement, PSI reinforced the public impression that Dr. Ampil was a physician of its hospital, rather than
one independently practicing in it; that the medications and treatments he prescribed were necessary and
desirable; and that the hospital staff was prepared to carry them out.
3. Yes, PSI admitted that, Natividad only complained to Drs. Ampil and Fuentes, and if only she "informed the
hospital of her discomfort and pain, the hospital would have been obliged to act on it.", by such admission, PSI
defined the standards of its corporate conduct under the circumstances of this case, specifically: (a) that it had a
corporate duty to Natividad even after her operation to ensure her safety as a patient; (b) that its corporate duty

was not limited to having its nursing staff note or record the two missing gauzes and (c) that its corporate duty
extended to determining Dr. Ampil's role in it, bringing the matter to his attention, and correcting his negligence.
PSI violated its standard of conduct, by not reviewing what happened in the operation in connection with the
gauzes, Rather, it evaded its responsibility and passed it on to others to Dr. Ampil whom it expected to inform
Natividad, and to Natividad herself to complain before it took any meaningful step. By its inaction, therefore, PSI
failed its own standard of hospital care. It committed corporate negligence.

Sargasso Construction (Joint Venture) v. PPA (Philippine Ports Authority) (2010) (jumped the gun/
doctrine of apparent authority)

Under the law on agency, however, "apparent authority" is defined as the power to affect the legal relations of
another person by transactions with third persons arising from the other's manifestations to such third person
such that the liability of the principal for the acts and contracts of his agent extends to those which are within the
apparent scope of the authority conferred on him, although no actual authority to do such acts or to make such
contracts has been conferred.

Plaintiffs Sargasso Construction and Development Corporation, Pick and Shovel, Inc. and Atlantic
Erectors, Inc. (a joint venture now referred to as "the Consortium") was awarded by the Philippine Ports Authority
(PPA) the construction of Pier 2 and the rock causeway (R.C. Pier 2) for the port of San Fernando, La Union. Adjacent to
Pier 2 is an area intended for the reclamation project as part of the port development plan.
On Oct. 1, the Consortium through its director Mr. Melecio Go, offered to work on the reclamation between Pier
2 and Timber Per. Extra work for a price amounting to Php 36 million. Defendant PPA, through Asst. General Manager
Mr. Landicho, denied plaintiffs proposal and made a counter-offer lowering the Php 36M to Php 30M, but approval of
such is subject to the approval of higher authority.
On Aug 26, PPA General Manager Mr. Rogelio Dayan sent the approved Notice of Award for Php 30M
Supplemental Agreement with several conditions:
- Fendering of Pier No. 2 Port of San Fernando and the Port of Tobacco is completed before approval of the
reclamation contract.
- Acceptance by the contractor that mobilization/demobilization cost shall not be included in the contract and that
escalation shall be reckoned upon approval of the Supplemental Agreement.
The purpose of awarding the contract as a supplemental project was to save on mobilization costs.
On September 9, the PPA board advised the management to have the reclamation project for bidding, which
rejected the proposal, "since there is no strong legal basis to award the supplemental contract through negotiation." The
terms of the original contract, which was for construction of Pier 2, cannot be compared with a totally different project,
which was the reclamation project.
Apparently, the rejection of the supplemental agreement was not properly communicated to the consortium.
Through Mr. Go, the consortium sent a letter requesting a review of the agreement but no reply was received from the
June 30, the consortium filed a complaint for specific performance against the PPA for unjust refusal of the
Supplemental Agreement. They claim that such refusal lead to the delay of their other projects and prayed for a
reconsideration of the Aug 9 decision. They allocated resources and man power in accordance with the Notice of Award
approved by PPAs general manager. They also claim that because of the late notice of the bidding, they were not able
to join the bidding for lack of a permit. Their other companies have undertaken projects similar to what is specified in the
Supplemental Agreement.
Defendant PPA, through the OGCC, filed its answer with Compulsory Counterclaim contending that the
Notice of Award was revoked when the board rejected such proposal. The consortium's cannot hold defendant PPA

liable for their lack of a permit to bid for the project. And their act of allocating men and resources for the reclamation
project was due to them "jumping the gun" prior to the PPA's approval.
The trial court sided with the plaintiff, claiming that the higher authority referred to in the counter-offer refers to
the approval of the General Manager, Mr. Dayan, was deemed sufficient enough to perfect the contract based on PD 857,
amending PD 505 which created the PPA. CA sided with the trial court, but later on reversed its decision claiming that the
authority of the General Manager to sign contracts is overpowered by the PPA Board's power to enter into contracts. The
CA held that the Notice of Award signed by the General Manager was only a part of the contract, not an
acceptance thereof.
Hence this petition.
1. W/N the Notice of Award has perfected the contract between the consortium and the PPA.
2. W/N the general manager of PPA is vested with the authority to enter into a contract for and on behalf of PPA.
1. NO. The higher authority contemplated is the PPA's board.
The Notice of Award signed by the general manager was a mere supporting document, not an evidence of
perfection. EO 380 is clear when it stated that approval of entering into contracts with GOCCs requires the
governing board's approval.
Since the contract between the Consortium and the General Manager lacked an important requisite to perfect
contracts, which is the consent from the board of PPA.

NO. The doctrine of apparent authority invoked by the petitioners is misplaced, because this doctrine is
intended only to mean that the government is NOT bound by unauthorized acts of its agents, even though within
the apparent scope of their authority.
Furthermore, Sec. 51 of the Revised Administrative Code states that "contracts in behalf of the political
subdivisions and corporate agencies shall be approved by their respective boards."
The indicators of apparent authority is seen through (1) the general manner in which the corporation holds out
an officer or agent as having the power to act or, in other words, the apparent authority to act in general, with
which it clothes him; or (2) the acquiescence in his acts of a particular nature, with actual or constructive
knowledge thereof, whether within or beyond the scope of his ordinary powers. It requires presentation of
evidence of similar act(s) executed either in its favor or in favor of other parties.
Not a single act of respondent PPA, acting through its Board of Directors, was cited as having clothed its
general manager with apparent authority to execute the contracts with petitioner.

Banate v. PCRB (2010) (Cross collateral stipulation / apparent authority)

The existence of apparent authority may be ascertained through:

a) The general manner in which the corporation holds out an officer or agent as having the power to act.
b) The acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof, within or
beyond the scope of his ordinary powers.
. The principals liability, however, is limited only to third persons who have been led reasonably to believe by the
conduct of the principal that such actual authority exists, although none was given. In other words, apparent authority
is determined only by the acts of the principal and not by the acts of the agent. The present case failed to show the
manner by which PCRB, as supposed principal, has "clothed" or "held out" its branch manager as having the power to
enter into an agreement, as claimed by petitioners.

On July 1997, Spouses Rosendo Maglasang and Patrocinia Monilar (Spouses Maglasang) obtained from PCRB a
loan (subject loan) worth P1,070,000.00. The loan was evidenced by a promissory note payable on January 1998 and
secured by a real estate mortgage over the spouses property (subject properties), including the house constructed thereon
which is also owned by spouses Melgrid and Bonifacio Cortel, the spouses Maglasangs daughter and son-in-law,
respectively. Aside from the abovementioned loan, the spouses Maglasang obtained two other loans from PCRB
which were evidenced by separate promissory notes and secured by mortgages on their other properties.
Sometime in November 1997, the spouses Maglasang asked PCRBs permission to sell the subject properties.
They likewise requested that the subject properties be released from mortgage since the two other loans were adequately
secured by the other mortgages. Mondigo, PCRB branch manager, verbally agreed to their requested but required
first the full payment of the subject loan. The spouses Maglasang and Cortel thereafter sold to Banate the subject
properties for P1,750,000.00 and such amount was used to settle the subject loan. Banate was able to secure a title in her
name, however, the title still carried the mortgage lien in favor of PCRB. Banate, along with spouses Maglasang and
Cortel requested from PCRB a deed of release of mortgage but PCRB refused to comply. PCRB invoked the cross
collateral stipulation in the mortgage deed which states that:
That as security for the payment of the loan or advance in principal sum of one million seventy thousand
pesos only (P1,070,000.00) and such other loans or advances already obtained, or still to be obtained by the
MORTGAGOR(s) as MAKER(s), CO-MAKER(s) or GUARANTOR(s) from the MORTGAGEE plus interest
at the rate of _____ per annum and penalty and litigation charges payable on the dates mentioned in the
corresponding promissory notes, the MORTGAGOR(s) hereby transfer(s) and convey(s) to MORTGAGEE by
way of first mortgage the parcel(s) of land described hereunder, together with the improvements now existing for
which may hereafter be made thereon, of which MORTGAGOR(s) represent(s) and warrant(s) that
MORTGAGOR(s) is/are the absolute owner(s) and that the same is/are free from all liens and encumbrances;
PCRB claims that full payment of the 3 loans obtained from the bank must be fulfilled before the subject properties may
be released from mortgage. The settlement of the subject loan merely constituted partial payment of the total obligation.
On the other hand, petitioners claim that the contract was novated by the subsequent agreement with Mondigo that upon
full payment of the subject loan, subject properties may be released from mortgage.
1. W/N Mondigos verbal agreement to the petitioners request novated the mortgage contract.
1. NO.
Section 23 of the Corporation Code states that the powers of all corporations shall be exercised by the board of
directors. In the absence of authority from the board of directors, no person, not even its officers, can validly bind
a corporation. However, the board of directors may validly delegate some of its functions and powers to its
officers, committees or agents. The authority of a corporate officer or agent in dealing with third persons
may be actual or apparent. Actual authority is either express or implied. The extent of an agents express

authority is to be measured by the power delegated to him by the corporation, while the extent of his implied
authority is measured by his prior acts which have been ratified or approved, or their benefits accepted by his
principal. The doctrine of apparent authority on the other hand, with special reference to banks, had long
been recognized in this jurisdiction. The existence of apparent authority may be ascertained through:
a) The general manner in which the corporation holds out an officer or agent as having the power to act.
b) The acquiescence in his acts of a particular nature, with actual or constructive knowledge thereof,
within or beyond the scope of his ordinary powers.
The petitioners, in failing to prove that Mondigo had actual authority to novate the mortgage contract, base their
claim on Mondigos apparent authority. The petitioners claim is misplaced.
Under the doctrine of apparent authority, acts and contracts of the agent, as are within the apparent scope of the
authority conferred on him, although no actual authority to do such acts or to make such contracts has been
conferred, bind the principal. The principals liability, however, is limited only to third persons who have
been led reasonably to believe by the conduct of the principal that such actual authority exists, although
none was given. In other words, apparent authority is determined only by the acts of the principal and not
by the acts of the agent. The present case failed to show the manner by which PCRB, as supposed principal,
has "clothed" or "held out" its branch manager as having the power to enter into an agreement, as claimed
by petitioners. Neither was there any allegation, much less proof, that PCRB ratified Mondigos act or is
estopped to make a contrary claim. Being a mere branch manager alone is insufficient to support the
conclusion that Mondigo has been clothed with "apparent authority" to verbally alter terms of written
contracts. Also, it is a settled rule that persons dealing with an agent are bound at their peril, if they would hold
the principal liable, to ascertain not only the fact of agency but also the nature and extent of the agents authority,
and in case either is controverted, the burden of proof is upon them to establish it.
Being that Mondigo did not have the authority to bind PCRB, then novation cannot take place. The requisites of
novation are: (1) a previous valid obligation; (2) an agreement of all parties concerned to a new contract; (3) the
extinguishment of the old obligation; and (4) the birth of a valid new obligation. The second requisite is lacking in
this case because the consent of both parties was never obtained.

Manila Remnant Co v. CA (garnishment)
(Disclaimer: Im not sure how this is related to Agency since its mainly about Garnishment but its in the syllabus and
theres a supposed doctrine included.)
Even when the agent of the real estate company acts unlawfully and outside the scope of authority, the principal
can be held liable when by its own act it accepts without protest the proceeds of the sale of the agents which came
from double sales of the same lots, as when learning of the misdeed. It failed to take necessary steps to protect the
buyers and failed to prevent further wrong from being committed when it did not advertise the revocation of the
authority of the culprit agent. In such case, the liabilities of both principal and the agent is solidary.
Manila Remnant Co, Inc.(MRCI) owned parcels of land in Quezon City which became the subject of its
agreement with A.U. Valencia and Co., Inc., (AUVCI) by virtue of which the latter was to act as the petitioner's agent in
the development and sale of the property. For a stipulated fee, AUVCI was to convert the lands into a subdivision, manage
the sale of the lots, execute contracts and issue official receipts to the lot buyers. At the time of the agreement, the
president of both MRCI and AUVCI was Valencia.
AUVCI executed two contracts to sell in favor of spouses Oscar C. Ventanilla and Carmen Gloria Diaz for the
combined contract price of P66,571.00. Without the knowledge of the Ventanilla couple, Valencia, as president of MRCI,
resold the same parcels to Carlos Crisostomo, one of his sales agents, without any consideration. Upon orders of Valencia,
the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo, for which receipts were
issued in his name. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. The
Ventanillas continued paying their monthly installment.
MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's
collections and remittances and removed Valencia as MRCI president. The Ventanilla spouses, having learned of the
supposed sale of their lots to Crisostomo, commenced an action for specific performance, annulment of deeds, and
damages against Manila Remnant Co., Inc., A.U. Valencia and Co., Inc., and Carlos Crisostomo.
The trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting,
and annulling the contract to sell in favor of Crisostomo and ordered the MRCI to execute an absolute deed of sale in
favor of the Ventanillas, free from all liens and encumbrances. MRCI, AUVCI, and Crisostomo were held solidarily
liable for damages amounting to P210,000.
MRCI alleged that the subject properties could not be delivered to the Ventanillas because they had already been
sold to Samuel Marquez on February 7, 1990, while their petition was pending in this Court. Nevertheless, MRCI offered
to reimburse the amount paid by the respondents.
The Ventanillas accepted the amount of P210,000.00 as damages and attorney's fees but opposed the
reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. They contended that the alleged sale
to Marquez was void, fraudulent, and in contempt of court and that no claim of ownership over the properties in question
had ever been made by Marquez..
While the petitioners have readily complied with the order of the trial court for the payment of damages to the
Ventanillas, they have, however, refused to execute the absolute deed of sale. It was for the purpose of ensuring their
compliance with this portion of the judgment that the trial court issued the garnishment order which by its term could be
lifted only upon the filling of a cash bond of P500,000.00.

1. W/N the Trial Court and the Court of Appeals committed reversible errors to the prejudice of MRCI?
2. W/N the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the
lifting of the garnishment order at P500,000.
1. NO. No legal impediment exists to the execution, either by the petitioner or the trial court, of an absolute deed of
sale of the subject property in favor of the respondent Ventanillas.
Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him
from a stranger to the litigation. It is an attachment by means of which the plaintiff seeks to subject to his claim
property of the defendant in the hands of a third person or money owed by such third person or garnishee to the
defendant. As the main obligation of the petitioner is to execute the absolute deed of sale in favor of the
Ventanillas, its unjustified refusal to do so warranted the issuance of the garnishment order. Partial execution of
the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment
order. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary.
2. NO. The lower court did not abuse its discretion when it required the posting of a P500,000.00 cash bond for the
lifting of the garnishment order. As correctly pointed out by the respondent court, that amount corresponds to the
current fair market value of the property in litigation and was a reasonable basis for determining the amount of the

Litonjua v. Eternit (2006) (See compilation 1)

Yu Kwuan Byung v. PAGCOR (2009) (Junket Agreement)

The basis of 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, while on the part of the agent, there must be an
intention to accept the appointment and act on it. Absent such mutual intent, there is generally no agency.

The Korean-based ABS Corporation was one of the international groups that availed of PAGCORs Foreign
Highroller Marketing Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to
bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard
Hotel in Manila (Casino Filipino).
The relevant stipulations of the Junket Agreement state:
1. PAGCOR will provide ABS Corporation with separate junket chips. The junket chips will be distinguished
from the chips being used by other players in the gaming tables.
ABS Corporation will distribute these junket chips to its players and at the end of the playing period, ABS
Corporation will collect the junket chips from its players and make an accounting to the casino treasury.
2. ABS Corporation will assume sole responsibility to pay the winnings of its foreign players and settle the
collectibles from losing players.
Petitioner, a Korean national, alleges that from November 1996 to March 1997, he came to the Philippines four
times to play for high stakes at the Casino Filipino. Petitioner claims that in the course of the games, he was able to
accumulate gambling chips worth US$2.1 million. Petitioner contends that when he presented the gambling chips for

encashment with PAGCORs employees or agents, PAGCOR refused to redeem them. Petitioner sues for the sum of
In its essence, PAGCOR claims that the petitioner is dealing, not with them, but with ABS. Thus, PAGCOR
should not be held liable as according to their agreement. In addition, PAGCOR posted a notice that ABS will solely be
liable for the playing chips used gaming rooms occupied exclusively by ABS clients.
Trail Court dismisses complaint of the petitioner. On appeal, one of the contentions of the petitioner is that there
is an implied agency between PAGCOR and ABS. Court of Appeals said it was never PAGCORs intention to deal with
the junket players. Neither did PAGCOR intend ABS Corporation to represent PAGCOR in dealing with the junket
players. Thus, there can be no implied agency between PAGCOR and ABS.
1. Was there an implied agency between PAGCOR and ABS.
1. No. The basis of 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, while on the part of the agent, there must be an
intention to accept the appointment and act on it. Absent such mutual intent, there is generally no agency.
There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of
ABS Corporation. PAGCORs actions did not mislead the public into believing that an agency can be
implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any
apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of
facilities and services.
The players brought in by ABS Corporation were covered by a different set of rules in acquiring and encashing
chips. The players used a different kind of chip than what was used in the regular gaming areas of PAGCOR,
and that such junket players played specifically only in the third floor area and did not mingle with the
regular patrons of PAGCOR. Furthermore, PAGCOR, in posting notices stating that the players are playing
under special rules, exercised the necessary precaution to warn the gaming public that no agency relationship

Manotok Brothers v. CA (1993) (authority expired / efficient procuring cause)

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.

Efficient procuring cause: when there is a close proximate and causal connection between the efforts and labor of
the agent and the principals sale of property.

Manotok Brothers Inc 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. Manotok Brothers authorized Salvador Saligumba to
negotiate with the City of Manila the sale of the aforementioned property for not less than P425,000.00. 5% commission
would be paid to him in the event the sale is finally consummated and paid. Manotok executed a 2nd and 3rd letter, each for
120 days, extending the authority of Saligumba. Finally, the 4th letter dated November 16, 1967, ManotoK with Rufino
Manotok, its President, as signatory, authorized Saligumba to finalize and consummate the sale of the property to the City
of Manila for not less than P410,000.00. With this letter came another extension of 180 days.
The Municipal Board of the City of Manila, on April 26, 1968, passed Ordinance No. 6603, appropriating the
sum of P410,816.00 for the purchase of the aforementioned property. Said ordinance however, was signed by the City
Mayor only on May 17, 1968, 183 days after the last letter of authorization. On January 14, 1969, the parties signed the
deed of sale.
Saligumba never received any commission (should have been P20,540.00). He filed a complaint against Manotok
Brothers, alleging that he had successfully negotiated the sale of the property. He claimed that it was because of his efforts
that the Municipal Board of Manila passed Ordinance No. 6603 which appropriated the sum for the payment of the
property subject of the sale.
Manotok Borthers claimed (1) a broker is only entitled to a commission if the sale was consummated and the
price paid within the period given in the respective letters of authority; and (2) that Filomeno E. Huelgas, the PTA
president of the Claro M. Recto High School was responsible for the negotiation and consummation of the sale.
1. W/N Saligumba is entitled to the five percent (5%) agent's commission.
1. YES, Saligumba is entitled to the 5% agents commission because it was through his efforts that a purchase
actually materialized between the parties.
It would seem that Saligumba is not entitled to any commission because when the Deed of Sale was finally
executed, his extended authority had already expired. Going deeper however into the case would reveal that it is
within the coverage of the exception rather than of the general rule.
In an earlier case, 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 petitioner's property mainly through the efforts of Saligumba.
Without discounting the fact that when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17,
1968, Saligumbas authority had already expired, it is to be noted that the ordinance was approved on April 26,
1968 when Saligumbas authorization was still in force. Moreover, the approval by the City Mayor came only 3
days after the expiration of Saligumbas authority. It is also worth emphasizing that from the records, the only
party given a written authority by Manotok Brothers Inc. to negotiate the sale from July 5, 1966 to May 14, 1968
was Saligumba.
In the case at bar, private 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.

Note: Although Filomeno Huelgas followed up the matter with Councilor Magsalin (author of Ordinance) and
Mayor Villegas, his intervention regarding the purchase came only after the ordinance had already been passed
when the buyer has already agreed to the purchase and to the price for which said property is to be paid.

Hahn v. CA (1997) (See compilation 1)

Dominion Insurance v. CA (2002) (See compilation 2)
Albaladejo Y Cia., S en C. v. The Philippine Refining Co. (as successor to the Visayan Refining Co.)
(1923) (copra + not agency)
1. Art 1913: The principal must also indemnify the agent for all the damages which the executive of the
agency may have caused the latter, without fault or negligence on his part.
2. When the purchase by one company from another is by way of a contract of purchase rather than an agency
to purchase, the former is not liable to reimburse the latter for expenses incurred by the latter.
Albaladejo Y Cia is a limited partnership organized under Philippine laws for the purpose of buying and selling
Copra. They operate in Legazpi, Albay. Respondent Philippine Refining Co. is the successor of The Visayan Refining
Co., a business in Cebu, engaged in the manufacture of coconut oil, for which copra products are needed. In 1918, The
Visayan contracted with Albaladejo to buy all the copra products which the latter would purchase from all over
Albay, for a period of one year. The Visayan would provide transportation from Albay to Cebu. The parties were happy
with the arrangement and they allowed the same terms to govern their transactions until 1920, when the Visayan closed
down its factory and withdrew from the copra market. Over the next 8-10 months, the two companies liquidated their
accounts. Petitioner showed no sign of dissatisfaction against respondent during this time. However, 6 weeks later
petitioner instituted the present action in the Trial Court.
Petitioner relied on two causes of action, the first is that it suffered considerable damages when the Visayan,
allegedly, failed to send the ships which will carry the copra to Cebu on time, pursuant to its contract. Petitioner alleges
that the Visayan was negligent and due to their delay, the copras suffered shrinkages which diminished its value (value of
the copra was determined by weight). On this first cause of action, the trial court decided in favor of Philippine Refining
(Agency Issue) The second cause of action was based on the fact that petitioner, during the subsistence of the
contract, expanded its organization and created offices and sub-agencies all over Albay. This was done in view of
future purchases to be made by Visayan. However, as stated above, Visayan closed down. Petitioner alleged that the
expansion was maintained and extended at the express request of Visayan, coupled with constant reassurances that
the defendant would soon get back to the business of buying copra. Petitioner seeks to recover 110,00 Php from the
defendant the amount allegedly spent for the expansion and its maintenance. The trial court rendered a decision in favor
of the petitioners but awarded only 49, 626 on the basis that the Visayan constituted only 30% of Albaladejos business.
Both parties appealed the decisions on both causes of action. Hence this petition.
In their appellants brief, petitioners argued that the contract created a principal-agent relationship between
them and the respondents and that pursuant to article 1729 of the civil code (now 1913) the principal should be liable for
damages incurred by the agent in the execution of the agency.
1. W/N there was negligence on the part of The Visayan in sending ships to transport the copra products and
therefore W/N they should pay for the shrinkage.
2. W/N The Visayan should be liable for damages on account of the petitioner companys expansion.
3. W/N the contract created an agent-principal relationship between the petitioner and respondent.

1. NO. The Visayan was not negligent. Firstly, the delays were caused by violent weather and the inability to
dispatch boats to more remote ports. The SC agreed with the Trial Court that these do not constitute negligence.
Secondly, the shrinkage suffered by the copra products was average/normal at 8.187 per centum, this fact goes to
show that there was really no undue delay. Thirdly, their contract specified that the shrinkage, before it reaches
The Visayan in Cebu, should be shouldered by the petitioner, showing the intention of the parties that the price to
be paid by the Visayan should depend on the weight of the copra upon arrival in Cebu.
2. NO. Pursuant to Par. 4 of their contract, the defendant should keep Albaladejo advised regarding the current
market rates of copra in Cebu. For this reason, the Visayan, through its GM, sent trade letters to Albaladejo. In
considering these letters, the SC held that nothing that is contained therein indicated that Visayan mandated
the expansion of Albaladejo. At most, what the letters contained were mere hopes that the Visayan would reopen
and purchase copras extensively. The fact that the General Manager stated that if the various purchasing agents of
the Visayan would continue to open their agencies they would endeavor to see that the agents would not lose their
transactions is not sufficient to bind the Visayan to pay for the expansion.
3. NO. It is true that Visayan made Albaladejo one of its instruments in buying copra, but a perusal of the agreement
shows that when Albaladejo bought copras all over Albay, it is buying on its own account and not on behalf
of the Visayan. The sale to Visayan was, in effect, a second sale. Moreover, even though the contract and the
letters constantly use the word agent when referring to Albaladejo, the nature of the agreement does not
support the existence of an agency in its legal sense. The mere use of the word agent does not make the
contract one of agency. The word agent was used merely for convenience. The contract is one of sale and
not of agency. Art 1729 (1913) would not apply.

De Castro v. CA & Artigo (2002) (EDSA property, 5% commission)

Art. 1915 provides that if 2 or more persons have appointed an agent for a common transaction or undertaking,
they shall be solidarily liable to the agent for the consequences of agency.
The solidarity arises from the common interest of the principals, and not from the act of constituting the agency.
By virtue of this solidarity, the agent can recover from any principal the whole compensation and indemnity
owing to him by the others.

Petitoners Constante and Corazon De Castro (with 2 other co-owners not made parties to the suit) were coowners of 4 parcels of land in EDSA corner New York Cubao, which they undertook to sell through their private
respondent Artigo (for a 5% commission of the total selling price as agents fee).
This is to state that Mr. Artigo is authorized as our real estate broker in connection with the sale or
our property in EDSA. Asking price: 23 million with 5% commission as agents fee C. de Castro owner
and representing co-owners
This authority is on a first come first serve basis
2 parcels of the respective property were sold to Times Transit at the price of 7,050,000php through the brokerage of
Artigo. Artigo was subsequently paid by De Castro only 48, 893.76php while he was, under the above agreement, entitled
to 353,500php (5% of selling price. He brings this suit to collect the unpaid balance of his commission. The De Castros
contend that Artigo had already been given his proportionate share and that he was only one among other agents also
entitled to a proportionate share.
1. W/N dismissal is proper for not impleading the other co-owners
2. W/N artigos claim has been extinguished by full payment, waiver or abandonment
1. No. Constante De Castro signed as owner and as representative of other owners. The de Castros admit that other
co-owners are solidarily liable under the above contract of agency. Art. 1915 provides that if 2 or more persons
have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for
the consequences of agency.

2. No. it was proved that the other agents the de Castros were referring to were agents of Times Transit. The fact that
other agents intervened cannot vary the terms of the contract of agency granting Artigo 5% commission. He is not
estopped from claiming the balance as the mere receipt of partial payment is not equivalent to the required
acceptance of performance as would extinguish the whole obligation under article 1235 (when obligee accepts
performance, knowing its incompleteness or irregularity, and without protest, the obligation is deemed complied

Garcia vs. de Manzano (1919) (GPA to both his son and wife)

The appointment of a new agent for the same business produces revocation of the previous agency from the day
on which notice was given to the former agent, excepting the provisions of the next preceding article.


Narciso Manzano was a Filipino merchant who went to Spain in May 1910 and died there on 08 September 1913.
He gave a general power of attorney to his son, Angel Manzano and a second general power of attorney to
his wife, Josefa Samson
Narciso was a partner of Ocejo, Perez & Co.(OPC) in running a small steamer. When the period expired, OPC
refused to continue the contract and demanded that Narciso buy or sell.
Angel, by virtue of the GPA from his father:
o sold the other half of the boat to Garcia (registered in his son's name since he was a Spaniard and cannot
register the same at the Custom House)
o Executed a contract of loan where Garcia agreed to lend Narciso P12,000.00. This was secured by a
mortgage over 3 parcels of land (registration though was refused by registrar)
Josefa was assigned as the administratix of the property of Narciso. CFI then ordered the partition of Narciso's
property among his heirs.
Garcia filed his action to foreclose the so-called mortgage. Josefa stated that the estate had already been divided
to Narciso's heirs.
Josefa alleged that:
o The GPA given to Josefa revoked the one given to Angel
o Garcia took advantage of the youth and inexperience of Angel to falsely and maliciously make him
believe that he had the authority under the GPA to sell the interest of his father.
CFI: judgment against Josefa Samson only

1. W/N the GPA to Josefa revoked the GPA of Angel
2. W/N the GPA authorized the sale by Angel of the half interest in the steamer to Garcia
1. NO. According to Article 1753, the appointment of a new agent for the same business produces revocation of the
previous agency from the day on which notice was given to the former agent, excepting the provisions of the
next preceding article.
Defendants failed to prove that notice of the subsequent GPA was given to Angel. He did not know of the GPA
given to his mother.
Thus, it must be considered to prove that he was acting under a valid GPA when he sold the half interest in the
2. YES. The GPA given to Angel is general and complete, terms of which authorize the sale, buying and mortgaging
of real property and the borrowing of money.
Although it does not state that the agent may sell the steamer, since it is so full and complete as to authorize sale
of real property, it must necessarily carry with it the right to sell the half interest.
The record further shows the sale was necessary in order to get money or a credit without it would be impossible
to continue the business which was being conducted in the name of Narciso and for his benefit.

CMS Logging vs. Court of Appeals (1992) (Alleged separate commissions for logs)

The principal may revoke a contract of agency at will, and such revocation may be express or implied, and may be
availed of even if the period fixed in the contract of agency has not yet expired.
Damages are generally not awarded to the agent for the revocation of the agency, except if the revocation was
done precisely to avoid payment of the agents commission.

On August 28, 1957, CMS Logging and private respondent Dr. Aguinaldo Corporation (DRACOR), entered into
a contract of agency for a period of five years, in which DRACOR is appointed as CMSs exclusive export and sales agent
for all logs CMS may produce. Pertinent to the case at bar is the following provision of their contract:
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive five (5%)
per cent commission of the gross sales of logs of SISON (herein petitioner CMS) based
on F.O.B. invoice value which commission shall be deducted from the proceeds of any
and/or all moneys received by DRACOR for and in behalf and for the account of SISON;
CMS was able to sell thru DRACOR a total of 77, 264, 672 board feet of logs. Then, about six months prior to the
expiration of the agreement, CMS President Atty. Carlos Moran Sison and legal counsel Atty. Teodoro Dominguez ,
while on a trip to Tokyo discovered that DRACOR used Shinko Trading as agent, representative and liaison officer in
selling CMSs logs in Japan, for which Shinko earned $1.00 per 1,000 board feet from the buyer of the logs. Under this
arrangement, Shinko earned a total of $77, 264.77.
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it (CMS) is entitled
to this amount as part of the proceeds of the sale of the logs. CMS contended that since DRACOR had been paid the 5%
commission under the agreement, it is no longer entitled to the additional commission paid to Shinko as this tantamount to
DRACOR receiving double compensation for the services it rendered. After this discovery, CMS sold and shipped logs
valued at $739,321.13 or P2,883,351.90, directly to several firms in Japan without the aid or intervention of
CMS then sued DRACOR for the commission received by Shinko and damages. DRACOR in turn
counterclaimed for its commission amounting to 144, 679.59 pesos. The trial court dismissed the complaint of CMS,
explaining that it received no evidence that Shinko did receive the disputed amount by way of commission from
DRACOR. The CA also affirmed the dismissal in a 3-2 decision, saying that the trial court could not have made a
categorical finding that Shinko did receive commission for sale of CMSs logs in Japan. Aggrieved, CMS filed the present
1. W/N Shinko Trading did receive the disputed amount for commission.
2. W/N DRACOR was still entitled to its commission from CMS.
3. W/N DRACOR committed acts of fraud and bad faith against CMS.

The SC explained that while it was undisputed that DRACOR enlisted the services of Shinko as its agent,
representative and liaison officer in Japan, there was no evidence that clearly established the fact that the said
amounts received by Shinko were from the sale of CMSs logs to various firms in Japan. The testimony of Atty
Teodoro Dominguez failed to establish the receipt of those amounts by Shinko, as it was hearsay. A certain letter

from Mr. K. Shibata of Tokyo Menka Kaisha (one of the companies Shinko sold the logs to) nor Mr. K. Shibata
himself was not presented in court to establish the contested fact about the commissions.
The SC also took note the conclusion reached by the CA that even if it was shown that Shinko did in fact
receive the commissions in question, CMS is not entitled thereto since these were apparently paid by the
buyers to Shinko for arranging the sale. This is therefore not part of the gross sales of CMS's logs.
2. NO.
In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet,
during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several
Japanese firms. This act constituted an implied revocation of the contract of agency under Article 19241 of
the Civil Code. Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without
the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and
is not entitled to retain whatever moneys it may have received as its commission for said transactions. Neither
would DRACOR be entitled to collect damages from CMS, since damages are generally not awarded to the agent
for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to
evade the payment of the agent's commission.
3. NO.
Like the matter on the alleged commissions received by Shinko, CMS failed to clearly establish evidence
regarding this matter.

1 Art. 1294 - The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with

third persons.

Dy Buncio & Co. vs. Ong Guan Can (1934) (rice-mill case)

Art. 1926- General power of Attorney is revoked by a special one granted to another agent as regards the special
matter involved in the later
A special power of attorney giving the son the authority to sell the principals properties is deemed revoked by a
subsequent general power of attorney that does not give such power to the son, and any sale effected thereafter by
the son in the name of the father would be void.

On July 31, 1931, Ong Guan Can Jr. as agent of Ong Guan Can, the proprietor of the commercial firm of Ong
Guan Can & Sons, sells the rice mill and camarin situated at Dao, Province of Capiz for P 13,000 and gives as his
authority the power of attorney dated May 23, 1928, a copy of this public instrument being attached to the deed and
recorded with the deed in the office of the register of deeds in Capiz. The receipt of the money acknowledged in the deed
was to the agent and was signed by the agent in his own name and without any words indicating he was signing it for the
Dy Buncio & Company as the judgement creditor of Ong Guan Can claims that the properties in question still
belongs to the latter alleging that the sale executed on July 31, 1931 is void for not being in accordance with the limited
power given to Ong Guan Can Jr. Being a limited power of attorney and not a general one, it does not give him the
express power to alienate the properties in question.
Defendants Juan Tong and Pua Giok Eng as owner and lessee of the owner by a virtue of the deed executed by
Ong Guan Can Jr. on July 31, 1931 claims that the said defect in the power of attorney is cured by Exhibit 1 (no
description) which purports to be a general power of attorney given to the same agent in 1920.
The trial court of First Instance of Capiz held that the deed was invalid and that the property was subject to the
execution of the judgement creditor hence, this petition.
1. W/N the deed is valid
1. NO
The Civil Code is silent over the partial termination of an agency. The making and accepting of a new power of
attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to
supplant and revoke the latter when the two are inconsistent. If the new appointment with limited powers does not
revoke the general power of attorney, the execution of the second power of attorney would be a mere futile

Republic vs. Evangelista (2005) (treasure hunt in bulacan)

An exception to the revocability of a contract of agency is when it is coupled with interest such as in a bilateral
contractwhich depends upon the agency. The reason for its irrevocability is because the agency becomes part of
another obligation or agreement. It is not solely the rights of the principal but also that of the agent and the thirds
persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole
will of the principal.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service
or do something in representation or on behalf of another, known as the principal, with the consent or authority of
the latter

Legaspi is the owner of a land located in Bigte, Norzagaray, Bulacan. In November 1999, Petitioner Calimlim,
representing the Republic of the Philippines, and as then head of the Intelligence Service of the Armed Forces of the
Philippines and the Presidential Security Group, entered into a Memorandum of Agreement (MOA) with one named
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan.
It was alleged that, Reyes, together with the Petitioners, started, digging, tunneling and blasting works on the said
land of Legaspi. The complaint also alleged that petitioner Calimlim assigned about 80 military personnel to guard

the area and encamp thereon to intimidate Legaspi and other occupants of the area from going near the subject
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private
respondent Gutierrez, as his attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting activities
on Legaspi's land and to file charges against those who may enter it without the latter's authority. Legaspi agreed to give
Gutierrez 40% of the treasure that may be found in the land.

On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally
entering Legaspis land. He hired the legal services of Atty. Homobono Adaza. Their contract provided that as
legal fees, Atty. Adaza shall be entitled to 30% of Legaspis share in whatever treasure may be found in the
land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per court hearing and
defray all expenses for the cost of the litigation
On March 14, 2000, Petitioners filed a Motion to dismiss contending first that there is no real party-in-interest
as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March 7, 2000, as evidenced by a
Deed of Revocation, second Gutierrez failed to establish that the armed men was acting under the orders of the
petitioners and third that the respondent judge on the ground of alleged partiality favored the private respondent.
1. W/N the contract of agency between Legaspi and Gutierrez has been effectively revoked by Legaspi
1. NO. Gutierrezs unilateral revocation last March 7 is invalid as his agency is coupled with interest.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some
service or do something in representation or on behalf of another, known as the principal, with the consent or
authority of the latter.
A contract of agency is generally revocable as it is a personal contract of representation based on trust
and confidence reposed by the principal on his agent. As the power of the agent to act depends on the will
and license of the principal he represents, the power of the agent ceases when the will or permission is
withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will.
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a
bilateral contract depends upon the agency. The reason for its irrevocability is because the agency becomes part of
another obligation or agreement. It is not solely the rights of the principal but also that of the agent and third

persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole
will of the principal. It is clear that the treasure that may be found in the land is the subject matter of the agency;
that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and
Atty. Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the
land. This bilateral contract depends on the agency and thus renders it as one coupled with interest,
irrevocable at the sole will of the principal Legaspi.
When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in
another agreement, the agency ceases to be revocable at the pleasure of the principal as the agency shall
now follow the condition of the bilateral agreement. Consequently, the Deed of Revocation executed by
Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is

Sevilla v. Court of Appeals (1988) Mabini St. leased property

Irrevocable Agencies: When it is a means of fulfilling an obligation already contracted.

The petitioners invoke the provisions on human relations of the Civil Code in this appeal by certiorari.
Tourist World Services, Inc. (TWSI) entered into a lease agreement with Segunida Noguera over a property in
Mabini St., Manila to be used by the TWSI as a branch office. Petitioner Sevilla held herself solidarily liable with TWSI
for the prompt payment of monthly rental agreed upon. When the branch was opened, Sevilla run the operations as
branch manager and for her efforts she received 4% for airline tickets bought (remaining 3% for TWSI).
Later on, TWSI was informed that Sevilla was connected with a rival firm (Philippine Travel Bureau) and since
the branch was losing, it considered closing down its office. The board of directors issued 2 resolutions to effect the
following: (1) abolishing of manager and VP of TWSI Ermita Branch (2) authorizing corporate secretary to receive the
properties of TWSI located at that branch. To comply with the latter, Corporate Secretary Canilao padlocked the premises
to protect the interest of TWSI. Further, the lease contract was terminated.
As a result, Sevilla and her employees could not enter the locked premises. The petitioners filed a complaint of
mandatory preliminary injunction against TWSI and lessor Noguera. The trial court held for private respondents on the
premise that TWSI being the true lessee, has within its prerogative to terminate the lease and padlock the premise. It also
found that Sevilla was merely an employee of TWSI and as such, was bound by the acts of her employer.
1. AGENCY RELATED: What was the true nature of the relation between petitioner Sevilla and private respondent
2. Whether the appellee Tourist World Service unilaterally disconnected the telephone line at the branch office on
3. Whether or not the padlocking of the office by the Tourist World Service was actionable or not;
1. Contract of Agency. In essence, Sevilla renders services in representation or on behalf of another.
In this jurisdiction, there has been no uniform test to determine the existence of an employer-employee relation. In
general, we have relied on the so-called right of control test, "where the person for whom the services are
performed reserves a right to control not only the end to be achieved but also the means to be used in reaching
such end." Lina Sevilla, was not subject to control by the private respondent Tourist World Service, Inc., either as
to the result of the enterprise or as to the means used in connection therewith. In the first place, lease agreemen
bounding her in solidum for rental payments belie claims of master-servant relationship. Second, Sevilla in
pursuing the business obviously relied on her own gifts and capabilities. It was alos further admitted that she was
not in TWSIs payroll. The use of branch manager was only for appearances sake.
Contrary to Sevillas claim, relationship was also not that of a joint venture, wherein generally there is parity of
standing between the joint co-venturers or partners. Further, the parties did not hold themselves out as partners
(buildings electric sign: Tourist World Services, Inc.)
Unlike simple grants of a power of attorney, the agency that we hereby declare to be compatible with the intent of
the parties, cannot be revoked at will. The reason is that it is one coupled with an interest, the agency having
been created for the mutual interest of the agent and the principal. 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 limited 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, as we said,
cannot be revoked at the pleasure of the principal.
2. Not proven. The CA holds that there is no evidence that the TWSI disconnected the telephone lines, yet it did
not take pains to have them re-connected. As owner of the telephone lines, it is their responsibility.
3. Yes. The fact that Tourist World Service, Inc. was the lessee named in the lease contract did not accord it any
authority to terminate that contract without notice to its actual occupant, and to padlock the premises in such

blitzkrieg fashion. Lina Sevilla, had acquired a personal stake in the business itself, she was not a stranger to that
contract having been explicitly named therein as a third party in charge of rental payments solidarily with Tourist
World, Inc.
In summary:
For unwarranted revocation of contract of agency - award for damages based on breach of contract
For moral injury done to Sevilla arising from brazen conduct subsequent to the cancellation of the power of attorney
granted to her additional award for damages based on Art. 21 (Qillfully causing lose or injury to another in a manner
contrary to morals, good customs or public policy.)

Valenzuela v Court of Appeals (1990) (kawawang insurance agent)

One party in an agency contract could not terminate at his own will the agency if it is coupled with Interest.
There are cases in which an agent has been induced to such circumstances that, if the authority be withdrawn, the
agent will be exposed to personal loss or liability.
The exception is that an agency is revocable at will and that is when the agency has been given not only for the
interest of the principal but for the interest of third persons or for mutual interest of the principal and the agent. In
these cases, it is evident that the agency ceases to be freely revocable by the sole will of the principal.

Valenzuela is a General Agent of Philippine American General Insurance Company Inc. (Philamgen) since 1965.
He was asked to solicit and sell all non-life insurances of Philamgen. For his service, he is to receive a full agents
commission of 32.5%. Valenzuela closed a deal with Delta Motors in the amount of P4.4Million. However, Valenzuela
did not receive his commission amounting to P1.6Million from Philamgen. He also did not receive anything from the
premiums that were annually paid by Delta Motors amounting to P1.9Million, which entitles him to a commission
amounting to P632,700.
Philamgen offered that the commission entitled to Valenzuela be split in a 50-50 basis. Valenzuela refused the
offer and stood firmly on his claim that he is entitled to the full commission.
Philamgen, thru Aragon, Catolico, Parnell took drastic action against Valenzuela reversing the commission due to
him, placed the transaction on a cash and carry basis (I have no idea what this is), threatened to terminate the policies of
the agency, and started to leak out that Valenzuela has a substantial account with Philamgen which diminished
Valenzuelas credibility as an insurance agent.
1. W/N the general agency can be terminated at the will of Philamgen
2. W/N Valenzuela is entitled for damages
1. No.
In the insurance business in the Philippines, the most difficult and frustrating period is the solicitation and
persuasion of the prospective clients to buy insurance policies. Normally, agents would encounter much
embarrassment, difficulties, and oftentimes frustrations in this said period of solicitation.
The agency involved is coupled with Interest on the part of Valenzuela. This could not be freely revocable
at the unilateral will of Philamgen. This would be in violation of the Civil Code frowning on Unjust Enrichment.
In addition to the Interest that is due to Valenzuela, he had an interest on the continuation of the agency
when it was unceremoniously terminated not only because of the commissions he should continue to receive from
the insurance business he had solicited and procured but also for the fact that the very acts of Philamgen, he is
made liable to them in the event that the insured failed to pay the premiums.
2. YES.
Due to the bad faith of Philamgen in stating different motives of terminating the agency, it should be
noted that their allegations were not true. Their real motive in the termination is the want to have a part on
Valenzuelas commission. The statements that Philamgen released against Valenzuela is destructive for his
character and especially in his profession as an insurance agent, which he had taken cared of for about 13 years.

National Sugar Trading v. PNB (2003) (promissory note as interest, cannot be revoked by will of a party)

If the agency established is coupled with interest, it cannot be revoked or cancelled at the will of any of the

Pursuant of PD No. 388, PHILSUCOM (Philippine Sugar Commission) was made in order to function as the sole
agent for the buying and selling of sugar on the quedan permit level of the government and to regulate all purchases of
sugar in the country. In the same year, PHILEXHANGE (Philippine Exchange Company Inc.) was authorized to be as the
marketing agent of the PHILSUCOM. PHILEXCHANGE purchases of sugar are to be financed by PNB, which in turn
shall be paid thru the proceeds of PHILEXCHANGEs profits.
PHILEXCHANGE was then authorized to be the exclusive trading agency of the government for buying sugar
from local millers and exporting them abroad. PNB financed PHILEXHANGEs operations. At first, PHILEXCHANGE
religiously paid its obligations to PNB, but then defaulted for the amount of P206Million due to the fall of the sugar prices
in the world market.
3 years after, NASUTRA (National Sugar Trading Corp.) replaced PHILEXHANGE to be the marketing agent of
PHILSUCOM. (Take note that PHILSUCOM is just a government entity regulating the sugar trade in the Philippines and
is using PHILEXHANGE, now NASUTRA for its trading transactions) PHILEXCHANGE then sold and turned over
all sugar quedans to NASUTRA, which were acquired previously.
No immediate payment was required by PHILEXCHANGE from NASUTRA/PHILSUCOM. As of 1984,
NASUTRA/PHILSUCOM still failed to pay the amount due to PHILEXHANGE and now amounting to P498Million. As
a consequence, PHILEXCHANGE was not able to pay PNB for its previous loans.
In 1981, NASUTRA then applied for a P408Million Revolving Credit Line with PNB in order to finance its sugar
trading operations. For every use of the credit line, NASUTRAs EVP, Unson, executed a promissory note in favor of
PHILSUCOM allowed local millers thru a liquidation scheme to loan from PNB. Such loans would be treated
as loans of NASUTRA. PHILSUCOM added that NASUTRA would shoulder the interest rates that would apply. This is
stabilizing the sugar prices in the country.
NASUTRA still failed to pay to remit the interest payment thus President Marcos dissolved NASUTRA thru PD
No. 2005. However, the records of NASUTRA of its trading operations were lost during the EDSA Revolution. Cory
Aquino then created the SRA (Sugar Regulatory Administration) abolishing PHILSUCOM. All assets including interests
over the assets of NASUTRA were transferred to SRA.
NASUTRA established a trusteeship with PNB to liquidate and settle its amounts. But NASUTRA still defaulted.
With glimpse of hope to finally settle their debts, foreign banks finally gave remittances of the proceeds of
NASUTRA, which amounted to P696Million. The remittances should be applied to the unpaid accounts of
PNB applied such amount to PHILSUCOMs account with PHILEXCHANGE, which in turn was applied to
PHILEXCHANGEs account with PNB. NASUTRA is dissatisfied on the disposition of the remittances by PNB. PNB
also failed to produce documents for them about the disposition. NASUTRA claims that PNB arbitrarily applied the
remittances due to them to different accounts.
NASUTRA contends that no compensation (which means they could not allocate the remittances in their own
will) involving the subject remittances can take effect by operation of law since the subject remittances were created in a
trustee-beneficiary relationship between PNB and NASUTRA, and not one of a creditor-debtor.
PNB claims that it can apply the remittances on the long overdue obligations of NASUTRA in pursuit of national
interest and policy.

1. W/N PNB can offset the remittances with the accounts of NASUTRA despite the fact that no creditor-debtor
relationship existed between NASUTRA and PNB.
1. YES.
The promissory notes issued by EVP Unson, executed for every loan made in the P408Million Credit Line
applied for gave PNB the power compensate with its discretion the remittances, which it received.
The relationship that NASUTRA and PNB has is not of simple agency. NASUTRA assigned and practically
surrendered its rights in favor of PNB for a substantial consideration. Meaning, the relationship between
NASUTRA and PNB is an agency coupled with interest, which cannot be revoked or cancelled at will by any of
the parties.

Bacaling v. Muya (2011) (110 sub-lots; J-MALT; JJ TONG, irrevocable SPA)

Art. 1927. An agency cannot be revoked (1) if a bilateral contract depends upon it, or (2) if it is the means of
fulfilling an obligation already contracted, or (3) if a partner is appointed manager of a partnership and his
removal from the management is unjustifiable
The agency, to stress, is one coupled with interest which is explicitly irrevocable x x x.

The title of the case is: NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN TONG,
and JOSE JUAN TONG, in his personal capacity, petitioners, vs. FELOMINO MUYA, CRISPIN AMOR,
Bacaling owned three 9.96 hectares of land in Barangay Cubay, Jaro, Iloilo City which was subdivided to 110
sub-lots as registered in the Registry of Deeds in Iloilo.
On May 16, 1955, the landholding was processed and approved as "residential" or "subdivision" by the National
Urban Planning Commission (NUPC).
On May 24, 1955 the Bureau of Lands (BOL) approved the corresponding subdivision plan for purposes of
developing the said property into a low-cost residential community which the spouses referred to as the Bacaling-Moreno
In 1957, a P600,000 real estate loan from GSIS was granted to Bacaling with a mortgage on the 110 sub-lots.
Only P240,000 was released to Bacaling. Bacaling was unable to complete the project due to the immensity of the project
cost. GSIS forclosed the 110 sub-lots.
1964 was a point in time in which the respondents Muya, Amor, Jereza, Lazarte, Tonocante (J-MALT) claim they
were legally instituted by Bacalings administrator/overseer as tenant-tillers of the 110 sub-lots on a sharing basis (J-1.1
ha, M-2.5 ha, A-2.5 ha, L-2.5 ha, T-2.5 ha) [Alam ko 11.5 ha pag-inadd mo. Sobra sa 9.96 ha. Pero yun ang sabi ng case
In 1972, the Office of the President (OP) released findings that J-MALT clandestinely entered and occupied the
entire 110 sub-lots. J-MALT took advantage of the problematic peace and order situation at the onset of Martial Law and
the GSIS forclosure. J-MALT sowed the lots, altered roads, drainages, boundaries, and monuments, as if the lots were
their own.
1974 was a point in time in which J-MALT claim their relationship with the landowner changed from tenanttillers to leasehold. J-MALT religiously delivered rental payments to Bacaling as agricultural-lessor.
In 1977, the City Council of Iloilo enacted Zoning Ordinance 212 declaring the 110 sublots as residential and
non-agricultural, consistent with the NUPC and BoL decisions.
In 1978, Bacaling registered 110 sub-lots as Bacaling-Moreno Subdivision with the National Housing Authority
(NHA) and obtained a license to sell the sub-lots pursuant to the development plan.
In 1980, J-MALT secured certificates of land transfer (CLTs) in their names for the 110 sub-lots. J-MALT made
various payments to Landbank as amortizing owners-cultivators of their respective tillage.
In 1989, after a decision of the Supreme Court in a prior case regarding the same 110 sublots, Bacaling eventually
repurchased the 110 sub-lots from GSIS.
In 1990, petitioner Jose Juan Tong (JJ Tong), together with Juan and Siady bought the 110 sub-lots from
Bacaling for P1,700,000.
In 1992, to secure performance of the contracts of absolute sale and facilitate the transfer of the title of the
lots, Bacaling appointed JJ Tong as her attorney-in-fact under and irrevocable Special Power of Attorney (I-SPA)
with the following mandate:
1. To file, defend and prosecute any case/cases involving lots nos. 1 to 110 covered by TCT Nos. T-10664 to T10773 of the Register of Deeds of the City of Iloilo;

2. To assume full control, prosecute, terminate and enter into an amicable settlement and compromise agreement of
all cases now pending before the DARAB, Region VI, Iloilo City, which involved portion of Lots 1 to 110, covered
by TCT Nos. T-10664 to T-10773 of the Register of Deeds of Iloilo City, which were purchased by Jose Juan Tong,
Vicente Juan Tong and Victoria Siady;
3. To hire a lawyer/counsel which he may deem fit and necessary to effect and attain the foregoing acts and deeds;
handle and prosecute the aforesaid cases;
4. To negotiate, cause and effect a settlement of occupation and tenants on the aforesaid lots;
5. To cause and effect the transfer of the aforesaid lots in the name of the VENDEES;
6. To execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts
and deeds.

Before September 19, 1997, JJ Tong filed for cancellation of the CLTs of J-MART to the Department of
Agricultural Reform (DAR). DAR dismisses the petition. MR to DAR also fails.
On September 19, 1997, the Office of the President (OP) reverses the DAR decision.
On July 22, 1999, the MR to the OP decision is denied.
Before December 2, 1999, J-MART appealed the OP decision to the CA under Rule 43.
On December 2, 1999 Bacaling revokes the I-SPA, and admits the status of J-MART as her
tenants to the 110 sub-lots which she now alleges as agricultural lands.
On January 1, 2001, the Court of Appeals reversed the OP decision.
On June 5, 2001, without reference to Bacalings repudiation of JJ Tongs acts, denies the MR.
Hence, the instant petition to the Supreme Court (SC).
On 8 October, 2001, Bacaling moved to dismiss the petition in the SC on the ground of her nullification of the ISPA.
1. W/N JJ Tong has the requisite interest to litigate case?
2. W/N J-MART are agricultural lessees?
3. W/N the 110 sub-lots are residential?
1. YES. Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the irrevocable special power
of attorney which she had duly executed in favor of petitioner Jose Juan Tong and duly acknowledged before a
notary public. The agency, to stress, is one coupled with interest which is explicitly irrevocable since the
deed of agency was prepared and signed and/or accepted by petitioner Tong and Bacaling with a view to
completing the performance of the contract of sale of the one hundred ten (110) sub-lots. It is for this reason
that the mandate of the agency constituted Tong as the real party in interest to remove all clouds on the title of
Bacaling and that, after all these cases are resolved, to use the irrevocable special power of attorney to ultimately
"cause and effect the transfer of the aforesaid lots in the name of the vendees [Tong with two (2) other buyers]
and execute and deliver document/s or instrument of whatever nature necessary to accomplish the foregoing acts
and deeds." The fiduciary relationship inherent in ordinary contracts of agency is replaced by material
consideration which in the type of agency herein established bars the removal or dismissal of petitioner
Tong as Bacaling's attorney-in-fact on the ground of alleged loss of trust and confidence.
Furthermore, Bacalings allegations of fraud on the constitution of the I-SPA is not supported by evidence.
2. NO. SC rules that the 110 sub-lots are not agricultural land because it does not satisfy all the 6 requisites to a valid
agricultural lease. Requisites #1,3, and 6 are lacking.
3. YES. SC rules that the 110 sublots are residential pursuant to the ruling in Natalia Realty Inc vs DAR where the
court held that where we excluded lands not devoted to agricultural activity, i.e., lands previously converted to
non-agricultural or residential uses prior to the effectivity of the 1988 agrarian reform law (R.A. No. 6657) by
agencies other than the DAR, from the coverage of agrarian reform. Also, the SC rules on the validity of the
charter of the NUPC.

Coleongco v. Claparols (nails, acid on machines)

It must not be forgotten that a power of attorney although coupled with interest in a partnership can be revoked
for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It
is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the
perpetration of acts in bad faith, breach of confidence, or betrayal of trusts, by the agents for that would amount to
holding that a power coupled with an interest authorizes the agent to commit frauds against the principal.

Since 1951, defendant-appellee, Eduardo L. Claparols, operated a factory manufacturing nails in Talisay,
Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from
foreign sources such as Belgium. Claparols had a regular dollar allocation granted by the Import Control Commission and
the Central Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a
Chinaman named Kho To.
Kho To introduced Vicente Coleongco to help finance the factory of Claparols. Claparols and Coleongco
executed a financing contract whereby Coleongco undertook to finance and put up the funds necessary for the importation
of nail wire, which Claparols will convert to nails.
The terms of the contract were as follows:

Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these
nails and the promotion of sales all over the Philippines", except the Davao Agency;
Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a
representative in the management;
that all contracts and transactions should be jointly approved by both parties;
that proper books would be kept and annual accounts rendered;
and that profits and losses would be shared "on a 50-50 basis".

Two days after the execution of the basic agreement, Claparols executed in favor of Coleongco, a special power
of attorney:

to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions;
to represent appellee and the nail factory;
and to accept payments and cash advances from dealers and distributors.

Coleongco also became the assistant manager of the factory, and took over its business transactions, while
Claparols devoted most of his time to the nail manufacture processes.
Around mid-November of 1956, Claparols was surprised by service of an alias writ of execution to enforce a
judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had
submitted an amortization plan to settle the account. Upon conferring with bank authorities, he learned that the execution
had been procured because of derogatory information against him had reached the bank from Coleongco. Coleongco
wrote to the bank of his acquisition of the whole interest of Claparols in the factory and also stated that Claparols is not
serious in meeting his obligations with the bank.
Claparols revoked the power of attorney and informed Coleongco demanding a full accounting at the same time.
Claparols also wrote a letter to Coleongco dismissing him as assistant manager of the plant and asked auditors to go over

the books and records of the business with a view to adjusting the accounts of the associates. These last steps were taken
in view of the revelation made by his machinery superintendent that Coleongco had drawn him aside and proposed that
the latter should pour acid on the machinery to paralyze the factory.
In this appeal, it is first contended by the appellant Coleongco that the power of attorney was made to protect his
interest under the financing agreement and was one coupled with an interest that the appellee Claparols had no legal
power to revoke. This point can not be sustained. The financing agreement itself already contained clauses for the
protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco.
1. W/N Claparols can revoke the SPA?
1. YES. The power of attorney can be made irrevocable by contract only in the sense that the principal may not
recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for just cause, such
as when the attorney-in-fact betrays the interest of the principal. It is not open to serious doubt that the
irrevocability of the power of attorney may not be used to shield the perpetuation of acts in bad faith, breach of
confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with interest
authorizes the agent to commit frauds against the principal.
That the appellee Coleongco acted in bad faith towards his principal Claparols is unquestionable and cannot be
justified by claiming that Claparols' mal-administration of the business endangered the security for the advances
that he had made under the financing contract. If that were the case, it is to be expected that Coleongco would
have first protested to Claparols himself.

Rallos v. Yangco (1911) (See compilation 1)

Ramnani vs CA (1991) (brother makes brothers attorneys-in-fact of business in the Philippines)

(from Syllabus): In a case covering a power of attorney to deal with the general public, the fact that the
revocation was advertised in a newspaper of general circulation would be sufficient warning to third persons.

This case involves the bitter quarrel of brothers over 2 parcels of land. Ishwar, Choitram and Navalrai Jethmal
Ramnani are full-blooded brothers.
In 1965, Ishwar Jethmal Ramnani sent US $150K to Choithram through two bank drafts of US$65,000.00 and
US$85,000.00, the purpose of which is investing the same in real estate in the Philippines. Subsequently, spouses Ishwar
executed a general power of attorney appointing Ishwars full blood brothers Choithram and Navalrai as
attorneys-in-fact, empowering them to manage and conduct their business concerns in the Philippines.
Choithram, as attorney-in-fact, entered into two agreements for the purchase of 2 parcels of land in Ugong, Pasig
from Ortigas & Company, Ltd. Partnership (Ortigas Ltd.) afterwards 3 buildings were constructed thereon and
were leased out by Choithram as attorney-in-fact. 2 of these buildings were later burned.
In 1970, Ishwar asked Choithram to account for the income and expenses of these properties during the period
1967 to 1970. Choithram failed and refused to render an accounting which prompted Ishwar to revoke the general
power of attorney. Choithram and Ortigas Ltd. were duly notified by notice in writing of such revocation. It was also
registered with the Securities and Exchange Commission and published in The Manila Times. Nevertheless, Choithram
as such attorney-in-fact of Ishwar, transferred all rights and interests of Spouses Ishwar to Nirmla Ramnani, the wife of
Choitrams son, Moti. Ortigas also executed the corresponding deeds of sale in favor of Nirmla and the TCT issued in her
favor. Thus, spouses Ishwar filed a complaint in the Court of First Instance of Rizal against Choithram and
spouses Nirmlaand Moti (Choithram et al.) and Ortigas Ltd. for reconveyance of said properties or payment of its value
and damages.
Trial court dismissed the complaint ruling that the lone testimony of Ishwar regarding the cash remittance
is unworthy of faith and credit because the cash remittance ($150K) was made before the execution of the general
power of attorney. He also failed to prove his testimony by not exhibiting any commercial document as regard the alleged
remittances. TC believed the claim of Choithram that he and Ishwar entered into a temporary arrangement in order to
enable Choithram, then a British citizen, to purchase the properties in the name of Ishwar who was an American citizen
and who was then qualified to purchase property in the Philippines under the then Parity Amendment.
Upon appeal, the CA reversed the decision and gave credence to Ishwar. It upheld the validity of Ishwars
testimony and gave cognizance to a letter written by Choithram imploring Ishwar to renew the power of attorney after it
was revoked. It states therein that Choithram reassures his brother that he is not after his money and that the revocation is
hurting the reputation of Ishwar. Choithram also made no mention of his claimed temporary arrangement in the letter. The
CA ruled that Choithram is also estopped in pais or by deed from claiming an interest over the properties because of
Choitrams admissions of the power of attorney, the Agreements, and the Contract of Lease. CA also held
that Choithram's temporary arrangement, by which he claimed purchasing the two 2 parcels of land in question and
placing them in the name of Ishwar who is an American citizen circumvents the disqualification provision of aliens
acquiring real properties in the Philippines. Upholding the supposed "temporary arrangement" with Ishwar would be a
culpable violation of the Constitution.
During the pendency of the case, Choithram made several attempts to dispose of his properties by way of
donation and also mortgaged the properties under litigation for US $3 million to Overseas with a mere capital of US $100.
(This tactic was obviously Choithrams ploy to place the properties out of the reach of Ishwar should they gain a favorable

1. W/N there was a principal-attorney-in-fact between the brothers Ishwar and Choithram and that it was not a mere
temporary arrangement as Choithram claims
2. W/N Ortigas Ltd. is liable.
1. YES
The scenario is clear. Spouses Ishwar supplied the capital of $150,000.00 for the business. They entrusted the
money to Choithram to invest in a profitable business venture in the Philippines. For this purpose they appointed
Choithram as their attorney-in-fact. Choithram in turn decided to invest in the real estate business. He bought the
two (2) parcels of land in question from Ortigas as Ishwars attorney-in-fact. Instead of paying for the lots in
cash, he paid in installments and used the balance of the capital entrusted to him, plus a loan, to build two
buildings. Although the buildings were burned later, Choithram was able to build two other buildings on the
property. He rented them out and collected the rentals. Through Choithram, Ishwar's property was developed and
improved into a valuable asset worth millions of pesos. In the words of the SC: We have a situation where two
brothers engaged in a business venture. One furnished the capital, the other contributed his industry and talent.
Justice and equity dictate that the two share equally the fruit of their joint investment and efforts. Perhaps this
Solomonic solution may pave the way towards their reconciliation. Both would stand to gain. No one would end
up the loser. After all, blood is thicker than water. However, because of the devious machinations and schemes
that Choithram employed he should pay moral and exemplary damages as well as attorney's fees to spouses
2. YES
Ortigas had several notices of the revocation. The fact that the revocation was advertised in a newspaper of
general circulation (The Manila Times) would be sufficient warning to third persons. Despite said notices,
Ortigas acceded to the representation of Choithram, as alleged attorney-in-fact of Ishwar, to assign the rights of
petitioner Ishwar to Nirmla. While Choithram is the one mainly to be blamed, Ortigas is not entirely without fault.
It should have required Choithram to secure another power of attorney from Ishwar. For Ortigass negligence in
believing Choithrams pretension that his power of attorney was still good, it must share in the latter's liability to

Lustan v. CA (2nd SPA used to obtain unauthorized loans from PNB)

Art. 1921: If the agency has been entrusted for the purpose of contracting with specified persons, its revocation
shall not prejudice the latter if they were not given notice thereof\
The third party who relies on a special power of attorney executed by the principal in favor of an agent can rely on
such power of attorney until it is given due notice that such has been rovked

Adoracion Lustan, an illiterate, owns a parcel of land w/ an area of 10.0057 hectares in Calinog Ilo-ilo. In 1969,
she leased it to private respondent Nicolas Parangan for an annual rent of Php1k and a term of 10 years. During the
period of the lease, Parangan regulary extended loans to Lustan in small amounts for her daily expenses and her
daughters education. In 1970, Lustan executed a Special Power of Attorney (SPA) in favor of Parangan to secure an
agricultural loan from private respondent PNB, w/ the aforesaid lot as collateral. A second SPA was again issued in
favor of Prangan in 1972, for another loan. By virtue of the 2nd SPA, Parangan was able to secure four more loans for
over 5 years (Php24k in Dec. 1975, Php38k in Sept. 1976, Php38.6k in July 1979, and Php 25k in June 1980). The last
three loans obtained w/o the knowledge of Lustan and were used by Parangan for his own benefit. These
encumbrances were duly annotated in the certificate of title.
On April 16, 1973, Lustan signed a Deed of Pacto de Retro Sale (w/ a right of repurchase) in favor of Parangan.
However, this was superseded by a Deed of Definite Sale issued on May 4, 1979. Lustan signed the latter upon
Parangans representation that it was merely to evidence the loans he extended to Lustan. But according to
Parangan, Lustan really sold the property and all improvements thereon to him for Php75k. Thus, Lustan filed a
case for a quieting of title, recovery of possession and damages against Parangan and PNB. The RTC ruled in favor of
Lustan, but the CA reversed the decision.
1. W/N petitoners property is liable to PNB for the loans contracted by Parangan by virtue of the 2nd SPA
1. Yes. Though Lustan argues that the last three mortgages were void for lack of authority, she failed to consider that
the SPA was a continuing one and that absent a valid revocation duly furnished to the mortgagee, it continued to
have force and effect against third persons who had no knowledge of such lack of authority. The SPA clothed
Parangan with the authority to deal with PNB on Lustans behalf. In the absence of proof that PNB had
knowledge that agency has been revoked and that the last three loans were obtained without Lustans
authority, then it cannot be prejudiced in its rights. In this case, the SPA particularly provides that it is
valid not just for the principal loan but also for subsequent ones, and that the attorney-in-fact (Parangan)
may avail of it until it is revoked in a public instrument, of which a copy is given to PNB.
Moreover, as far as 3rd persons are concerned, an act is deemed to have been performed w/in the scope of
the agents authority if it is w/in SPA as written even if the agent has in fact exceeded the limits of his authority
according to the understanding between him and his principal. However, Luscan still has a right to demand
proportional indemnification from Parangan w/ respect to the sums paid by PNB to the latter by virtue of the
unauthorized loans.
**In this case, the court also held that the Deed of Definite Sale was really an equitable mortgage pursuant to
Arts. 1602 and 1604 of the Civil Code. According to Art. 1602, a contract will be considered as an equitable
mortgage if the real intention of the parties is to secure the payment of a debt or the performance of any other
obligation. Art. 1604 provides that this also applies to those purporting to be an absolute sale. In this case, Luscan
did not know that it was a deed of sale. It wasnt explained to her, and she, being unable to read and write, did not
really understand the contract. Plus, there was discrepancies in the testimonies of Parangans witnesses, while
Luscans witness was found to be credible by the RTC.

Rallos v. Felix Go Chan & Sons (1978) (See compilation 1)

Amparo G. Perez v. PNB (1966) (AGENCY COUPLED WITH INTEREST, mortgage, extrajudicial foreclosure after death)

The power of foreclosure is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latters own protection. It
is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an
essential and inseparable part of that bilateral agreement.
The power to foreclose extrajudicially survives the death of the mortgagor.

Vicente Perez mortgaged a lot to PNB to secure payment of a loan of P2,500 plus interest. He died intestate
survived by his wife and children, during which there was an outstanding balance of P1,917 and corresponding interest
on the mortgage. Thereafter, the widow of Perez instituted Special Proceedings on CFI of Occidental Negros for
settlement of the estate of the deceased. The widow was appointed Administratrix and notice was duly published to
creditors. PNB did not file a claim. The property was partitioned and thereafter distributed accordingly.
The Bank afterwards caused for the extrajudicial foreclosure of the mortgaged properties, which was sold at
auction and subsequently bought by the bank. After the lapse of the year of redemption, the Certificate of Title was also
transferred in the name of the Bank.
The widow and heirs of Perez then filed a complaint against the Bank seeking to annul the extrajudicial
foreclosure sale and the transfer of the Certificate of Title. The trial court rendered judgment favorable to the former
holding that, according to the doctrine of Pasco v. Ravina (54 Phil. 382), the Bank should have foreclosed its mortgage in
court; that the power to sell contained in the deed of mortgage had terminated upon the death of the mortgagor. Trial court
declared the sale null and void.
The Bank appealed to SC.
1. W/N the power to sell (extrajudicially) contained in a deed of mortgage terminates upon the death of the
1. NO, the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the
principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own
protection. It is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage
and forms an essential and inseparable part of that bilateral agreement.
Nevertheless, Bank was late in foreclosing property (Bank was informed of death since 1947; property partitioned
in 1956; Bank foreclosed in 1962). SC ruled:
it is our view that both justice and equity would be served by permitting herein appellees to redeem the
foreclosed property within a reasonable time, by paying the capital and interest of the indebtedness up to the time
of redemption, plus foreclosure and useful expenses, less any rents and profits obtained by the Bank from and
after the same entered into its possession.
SC in deciding, relied on Pasno vs. Ravina which in turn relied on Sec. 7, Rule 87, of the original Rules of Court (Sec. 7, Rule 86 of Revised Rules of
Court) which presented three ways wherein a creditor may hold a claim against a deceased when secured by a mortgage, to wit: (1) to waive the
mortgage and claim the entire debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any
deficiency as an ordinary claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription,
without right to file a claim for any deficiency.
Pasno ruled that #3 should not be applied for equitable purposes. Dissent on same case ruled otherwise (duh). BOTH decisions acknowledged the
fact that the power to foreclose extrajudicially survives the death of the mortgagor. SC relied on the dissenting opinion in its ruling.

Pasno vs. Ravina (redemption of mortgage by estate administrator)
There are two appeals in this case. One is about validity of the will of Gabina Labitoria. The other is taken by the
PNB concerning the survivability of the right of sale of the mortgaged property under special power while the mortgaged
property is in custodia legis.
1st Appeal:
No discussion on the evidence is possible since the stenographic notes have not been elevated to the court. The
only issue was the date of execution of the will, either July 27 1928 or February 6, 1926. The reason for the error was that
the will was a reproduction of another will dated February 6, 1926, such inadvertently added as the date of the will in
question. The Judge ruled that the will is probate (genuine and conferring on the executors the power to administer the
2nd Appeal:
Gabina Labitoria mortgaged 3 parcels of land to the PNB to secure an indebtedness of P1,600. The mortgage
stipulated that the mortgagee may dispose of the property or anything attached to it or take legal action deemed necessary.
Labitoria died, and a petition for the validity of his will was presented in court and a special administrator was appointed
and took possession of Labitorias estate. Upon the estates failure to comply with the mortgage, PNB now want to
proceed with the sale of the lands. The lawyer of the special administrator knew about this and filed a motion in court to
stop this. The court granted the motion and denied PNBs reconsideration.
The mortgage made reference to Act. No. 3135, one that regulates the sale of property under special powers
annexed to mortgages. This failed to provide for sale of mortgaged property in custodial egis. The appellant then concedes
to Sec. 708 of the Code of Civil Procedure which provided remedies: (1) Mortgagee waives his security and prove his
credit as an ordinary debt against the estate, (2) foreclose the mortgage by ordinary action in court and recover any
deficiency against the estate. (3) Foreclose without action at any time within the period allowed by the statute of
limitations with no share in the estate for deficiency. Nothing was shown prohibit the administrator from redeeming
the property mortgaged by paying the debt seeing that it is for the best interest of the state. The mortgagee chose the
2nd option.
1. W/N the administrator can redeem the mortgaged property.
1. NO. The power of sale given in a mortgage survives the death of the grantor. Given this and the provisions of Sec.
708, the power to sell must be suspended, but the mortgagee should be made to foreclose the mortgage. This is in
line with safeguarding the interest of the estate while securing the orderly administration of the estate of a

Spouses Terrado v. Court of Appeals (1984) (Bayambang fisheries case)

Death of the agent extinguishes the agency.

The contract of agency establishes a purely personal relationship between the principal and the agent, such that
the agency is extinguished by the death of the agent, and his rights and obligations arising from the contract of
agency are not transmissible to his heirs.

Pursuant to Act No. 4041 of the Philippine Legislature approved January 21, 1983, the Fisheries situated in the
locality known as Mangabul, Bayambang, Pangasinan, and falling within Plan No. Ipd Ninety-two of the Bureau of Lands
and recently declared by the courts as public land was reserved and the usufruct thereof ceded to the municipality of
Bayambang, Province of Pangasinan. In virtue of this, on May 15, 1974 the Municipality passed Resolution no. 35,
enacting Ordinance no. 8, establishing the Bayambang Fishery and Hunting Park and Municipal Watershed. In the said
ordinance, the municipality designated appointed and constituted private respondent Geruncio Lacuesta as
Manager-Administrator for a period of 25 years, renewable for another 25 years, under the condition that said
respondent shall pay the municipality. a sum equivalent to 10% of the annual gross income that may be derived from the
sale of forest products, wild game and fish, which amount shall not be less than P200,000.00 annually. He was further
required to post a bond in the amount of P200,000.00 to guaranty payment of the 10% due the municipality.
MO no. 8 was approved by the Provincial Board of Pangasinan, and accordingly forwarded to the then Secretary
of Agriculture and National Resources for approval pursuant to the provisions of the Fisheries Act, Act no. 4003. On
April 4, 1975, the Secretary disapproved the Ordinance because it grants fishery privileges to respondent Lacuesta
without the benefit of competitive public bidding in contravention of the provisions of Act 4003 as amended.
Lacuesta interposed an appeal to the Office of the President, but later on withdrew the same. In the meantime,
acting on the disapproval, the Municipality informed Lacuesta to refrain and desist from acting as Manager-Administrator
under the contract, but the latter refused, and insisted on remaining in possession of the fisheries. Notwithstanding, the
Sanggunian Bayan of Bayambang passed Resolution no. 31 resolving to advertise for public bidding the fisheries in
question. As a consequence of this, herein petitioners Spouses Terrado and Domingo Fernandez won. Petitioners
subsequently entered in possession of the fisheries, and Lacuesta thus started the legal tug-of-war. On the one hand,
Lacuesta filed actions for prohibition, mandamus and restraining orders. Petitioners were also arrested. On the other hand,
the Municipality sued for annulment of contract. The situation became too complicated in that the Sanggunian had to pass
Resolution no. 34 requesting the assistance of the DENR, Philippine Constabulary, DOJ, the Provincial Fiscal, the
Provincial Governor and other agencies.
Eventually the cases reached the Supreme Court and consolidated in this action. Pending the resolution of the
controversy by the SC, respondent Lacuesta passed away.
1. W/N Municipal Ordinance no. 8 was valid.
2. W/N petitioners still have a right over the Mangabul fisheries, considering they won at the public bidding.

The ordinance cannot be valid, as it was disapproved for direct contravention of the provision of the Fisheries Act
as follows:
Section 29. Grant of Fishery Privileges. A municipal or city council, conformably with an ordinance
duly approved by the Secretary pursuant to section 4 hereof, may: (a) grant to the highest qualified
bidder the exclusive privilege of construction and operating fish corrals, oyster culture beds, or of
gathering "bangus" fry, or the fry of other species in municipal waters for a period not exceeding
five (5) years: ...

As a consequence of this invalidity, therefore, per force the contract of management and administration between
the Municipality and Lacuesta is likewise null and void. It also follows that the actions filed by Lacuesta for
prohibition to enjoin the Municipal Council of Bayambang from leasing the Mangabul Fisheries upon public
bidding as authorized in its Resolution' No. 31, series of 1977 is without legal basis and merit for Lacuesta has no
right or interest under the void ordinance and contract.
Lacuestas death also throws the issue in another light. The SC held that the contract entered into by the
Municipality and respondent was one of agency. According to Art 1919 of the NCC, agency is extinguished by
the death of the agent, and the agents rights and obligations arising from the contract cannot be transmitted to his
2. NO.
Petitioners anchored their claims to certain portions of the Mangabul Fisheries which they allege to have won in
public bidding under the authority of Resolution No. 31, series of 1977 of the Municipal Council of Bayambang
which leased the fisheries for a four-year period. The period has already lapsed, hence their fishing privilege is no
longer effective as of June 30, 1981. To restore and place petitioners in possession of the fisheries would be an
extension of their four-year period lease which is not authorized under the ordinance.