I.

OBLIGATIONS AND LIABILITIES OF AGENTS TO THEIR PRINCIPALS a. Act within scope of authority

e.

Diligence

Art. 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a) Art. 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. b. Carry out the agency Art. 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. c. Not to carry out agency

Art. 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods.

Art. 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. f. Account/deliver

Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency, even though it may not be owing to the principal. Every stipulation exempting the agent from the obligation to render an account shall be void. g. Solidary liability

Art. 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723) Art. 1895. If solidarity has been agreed upon, each of the agents is responsible for the non-fulfillment of agency, and for the fault or negligence of his fellows agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n) h. Pay interest

Art. 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. d. Loyalty Art. 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. Art. 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal.

Art. 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (1724a) i. Fraud; negligence

Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation. Commission Agents: Note: Commission agent s distinction: has possession of the object of the principal. What are the rules related to them? Can he sell on credit? (Only if authorization is given). Why?

Difference between commission agent and broker? Broker only brings the parties to the table as a middle-man. What is a guarantee commission? He must guarantee proceeds of the agency. Commission agent bears the risk of the proceeds of the agency. Art. 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. Art. 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. Art. 1905. The commission agent cannot, without the express or implied consent of the principal, sell on credit. Should he do so, the principal may demand from him payment in cash, but the commission agent shall be entitled to any interest or benefit, which may result from such sale. Art. 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. Art. 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. Art. 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose.

Maximo executed in his own name, in favor of PNB, two chattel mortgages over the standing crops on the land, guaranteed by Associated. The lower court found for PNC, holding that the Sta. Marias and Associated liable. The Sta Maria brothers and sisters (except Maximo) appealed. The Sta Maria s contend that they did not authorize Maximo to borrow money but only to mortgage the real estate jointly owned by them. Issue: W/N the SPAs of (1) the Sta Marias and (2) Valeriana authorized Maximo to borrow money. Held: A Special Power of Attorney to mortgage real estate is limited to such authority to mortgage and does not carry with it the authority to contract obligation unless the contrary is shown. In the case at bar, the authority granted by the Sta Marias (except Valeriana) to Maximo was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. MAximo alone and Valeriana who authorized him to borrow money, must answer for said loans and the others only liability is that the real estate authorized by them would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. Hence, in the absence of ratification on their part by estoppel, they cannot be held personally liable for the payment of such obligations.

BPI vs. De Coster Facts: -

PNB v Sta Maria Facts: PNB filed an action against the Sta. Maria family and Associated Surety for the collection of certain amounts representing unpaid balances on two crop loans due from the defendants. Maximo Sta Maria obtained a Special Power of Attorney, executed in his favor from his brothers and sisters. Said power of attorney authorized Maximo to mortgage or convey as security to any bank, company or to any natural or juridical person, our undivided shares over a certain parcel of land together with the improvements thereon. In addition, sister Valerina alone executed in favor of Maximo, a Special Power of Attorney authorizing the latter to borrow money and make, execute, sign and deliver mortgages of real estate in my name xxx . By virtue of these two powers, applied for two loans from the PNB. As security,

De Coster, La Orden and Poizat issued a promissory note in favor of BPI for P292,000 The promissory note was secured by several mortgages on the several properties of the debtors The debtors defaulted so BPI asked the court to foreclose the mortgages CFI issued an execution order against the three debtors Gabriela de Coster, wife of Poizat, complained that at the time of the filing of the complaint she was in Paris and was absent in the Philippines .and has no knowledge of the actual facts. De Coster also alleged that the mortgage was made without her consent and made in excess of the authority given his husband and therefore it was null and void.

Issue: -

W/N de Coster is also liable as to the debt incurred by his husband

Held: -

No! Husband has no authority to execute a promissory note in behalf of his wife or to make the latter liable as an accommodation maker. Also, the debt was a preexisting debt of the husband wherein the wife was not a party and has no legal obligation to pay.

The obligation of the husband stated in the power if attorney was to borrow money for or in account of his wife as her agent as her attorney in fact. That does not carry with it the power to make his wife liable as a surety for his preexisting debt Also, the husband, the agent of his wife, failed to represent the interest of his principal in court. This gave the principal the authority to obtain relief under section 113 of the Code of Civil Procedure.

Hodges vs. Salas and Salas Agent s powers are limited by the stipulation in the PoA Facts: - Salas and Salas executed a PoA in favor of Felix Yulo authorizing the latter to obtain a loan in the Salas name and mortgage a parcel of land owned by the Salas . This PoA was registered in the RD. - Yulo obtained a loan from C.N. Hodges in the amount of 28k and mortgaged the land of the Salas . The loan was in the name of Salas and Salas, holding them solidarily liable. - The whole 28k was not delivered to the Yulo. Part of it was applied to a separate loan obtained by Yulo from Hodges. - Salas and Salas was not able to pay at maturity so Hodges filed for foreclosure of the mortgaged land. - RTC absolved Salas and Salas from liability on the whole amount. The RTC only held the Salas liable for the amount which was actually delivered to them. Issue: - W/n the Salas can be held liable for the whole debt. Held: - SC says no. The powers granted to Yulo by the PoA s were only limited to obtaining a loan and securing such with a mortgage on the property of the Salas . There is nothing to indicate that the Salas had authorized Yulo to convert the money to his personal use. In applying part of the loan to pay his obligations, Yulo exceeded the authority granted to him by the PoA s. in cases like this, the agent was obliged to turn over the money to the principal or at least, place it at their disposal. - (side issues) Registration of the mortgage was proven through oral evidence. The SC allowed this because there was no objection to the presentation of such evidence. Also, the loans were not usurious. The law allows the creditor to require payments of interest in advance, provided it does not exceed 1 year.

- the company, through its majority stockholder, agent, administrator general and one if its directors Repide, negotiated to sell its friar land to the gov t - pending negotiations, Repide employed Kauffman, who in turn designated Sloan to purchase 800 shares of stock in the company - such shares were then possessed by Jones, the agent of Strong - Sloan and Jones did not know who really wanted to buy the stocks - contract of sale of the shares of stock was consummated between Jones (who assumed he had the power w/o consulting w/ the principal Strong) and Sloan - the shares of stock were delivered to Kauffman who paid it at a much lower price (about 1/10 of the amount it could have been sold to the gov t) - Kauffman delivered them to Repide - Mrs. Strong sued to recover from Repide the shares of stock alleging that such had been sold and delivered by her agent (Jones) to the agent of Repide (Kauffman) w/o her authority - Strong contends that she would not have sold the shares had she known they would ultimately go to Repide - Strong contends that Repide, by hiring an agent to purchase the shares, fraudulently concealed who the ultimate buyer was Issue: W/N Repide is guilty of fraud in the purchase of the stock. Held. Yes. - by employing an agent to buy, concealing his identity as the buyer and his knowledge of the state of the negotiations for the sale of the lands to the gov t and the probable result thereof, Repide violated his duty as an agent of the company - Repide, being a director, owner of of the company s entire stock, administrator general of the company engaged in negotiations w/ the sale of the lands to the gov t w/c greatly enhances the value of the stock, it was his duty to act in good faith, to disclose to Sloan (agent of Strong) that fact w/c might affect the value of the stock - Repide employed deceit in the purchase of stocks - had Sloan known the actual state of the negotiations on the lands, he would not have sold the stocks - Repide liable for fraud Katigbak vs. Tai Hing Co Facts: -

Strong vs Gutierrez Repide Facts: - Strong owned Phil. Sugar Estates Dev t Co. (company) -

Barreto mortgaged his land to PNB for a loan of P60,000 Po Tecsi executed a general power of attorney in favor of Barreto authorizing him to buy and sell all sorts of property belonging to Po Tecsi Po Tecsi acknowledged his indebtedness to Barreto for the sum of P68,000 by virtue of the general power of attorney A second mortgage was made by Barreto on the same land to Limjuico for P140,000

Thereafter, Barreto sold the land to Po Tecsi for P10,000 subject to the 2 mortgages Then, using his general power of attorney sold the land to Katigbak mentioning only the PNB mortgage and without recording the sale in the TCT Po Tecsi remained on possession of the land because of an oral contract of lease Po Tecsi died and he was replaced by his son Po Sun Suy Po Sun Suy failed to pay the rents so Katigbak filed the case PO Sun Suy: Katigbak is not the real owner of the land because the sale made by Barreto is null and void for lack of registration of the said power of attorney in the Registry of Deeds

that the contract of lease (yung 2nd na contract) between Herrrera and Chua void. Issue: W/n the contract of lease is void... Held: YES. - The contract involves a lease of real property for a period of more than one year. The contract was entered into by the agent of the lessor Herrera and not Herrera herself. In such a case the law requires that the agent be armed with a special power of attorney to lease premises. Art 1878 par 8 states "to lease any real property for more that one year". Vicenta Reynes the agent was not armed with a special power of attorney to enter into a lease contract for a period of more that one year. Austria vs. CA (Liability of Agent in case of loss of the thing) Facts: y Abad received from Austria one pendant with diamonds to be sold on commission or to be returned on demand. y However, while Abad was walking home, the jewelry was snatched. The incident gave rise to a case of robbery against the men who allegedly stole the item. y As Abad failed to return the jewelry or pay for its value, Austria brought an action against the former for the recovery of the pendant. y TC favored Austria and said that Abad failed to prove the fact of robbery or that it was not negligent when the item was stolen. CA reversed and said that Abad was not responsible for the loss of the pendant on account of a fortuitous event. y Austria contends that for robbery to fall under the category of a fortuitous event, there should be a finding on the guilt of the persons liable thereon. Issue: Can Abad be held liable for the loss of the pendant? Is a prior conviction of persons who committed the robbery necessary to exempt the consignee from liability of such loss? Held: No (in both questions). It is not disputed that if Abad were indeed the victim of robbery, then the occurrence of such fortuitous event would extinguish her liability. And in order to avail of this exempting circumstance, Art 1174 ( no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. ) of the Civil Code should be satisfied. In this provision, the emphasis is on the event and not on the agents or factors responsible for the same. It is not necessary that the person responsible for occurrence should be found or punished; it is sufficient to prove that the unforeseeable event took place without the concurrent fault of the debtor. This can be established by preponderant evidence. To require prior conviction of the culprits in the criminal case would be to demand proof beyond reasonable doubt.

Issue: -

W/N Barreto is authorized to sell the land to Katigbak

Held: -

Yes! The general power of attorney authorized Barreto to sell any kind of realty that might belong Po Tecsin. The use of the words might belong and not belong means that the authority given referred not only to the property Po Tecsin had at the time of the execution of the power of attorney, but also to all properties he might acquire afterwards. Although the sale was not recorded in the Registry of Deeds and the it does not bind third parties, it does however bind the principal to acknowledge the acts performed by his agent. It is evident in the case that Po Tecsin acknowledged and was aware of the sale to Katigbak.

Vda. De Chua vs IAC Facts: - Herrera executed a contract of lease in favor of Tian On. The contract of lease contains a stipulation giving the lessees an option to buy the leased property. Tian On erected a residential house on the leased premises. - Tian On executed a deed of absolute sale of building in favor of Chua Bok (predecessor-in-interest of petitioners herein) whereby Tian On sold the said residential house to Chua. Chua Bok and his family resided in the said residential building and paid the rentals thereof. When the contract of lease expired, Chua Bok and Herrera, landowner, through her alleged attorney-in-fact Vicenta Reynes, executed another contract of lease over the same parcel of land. - Herrera then through another attorney-in-fact, Luz Tormis, sold lots leased by Chua Bok to Vicente and Victoria Go. The spouses registered the sale. - Chua Bok filed this complaint for the annulment of the said sale between Herrera and Spouses Go. The trial court dismissed the complaint against the spouses Go and declared

PNB vs Manila Surety Facts: PNB had opened a letter of credit and advanced thereon $120,000 to Edgington Oil Refinery for 8,000 tons of hot asphalt. Of this amount, 2,000 tons worth P279,000 were released and delivered to ATACO under a trust receipt guaranteed by Manila Surety and Fidelity. To pay for the asphalt, ATACO constituted PNB its assignee and attorney-in-fact to receive and collect for Bureau of Public Works the amount out of the funds payable to the assignor. ATACO delivered to the Bureau of Public Works and the latter accepted. Of this amount the Bank regularly collected. Thereafter for unexplained reasons, the Bank ceased to collect from the bureau. It was later on discovered that more money were payable to ATACO from the Public Works office but the bank allowed another creditor to collect the funds due to ATACO. Issue: W/n the bank was negligent in failing to collect the funds from the bureau and therefore liable for damages... Held: Yes. The bank has been negligent in having stopped collecting from the bureau the moneys falling due in favor of ATACO, thereby allowing such funds to be taken and exhausted by other creditors to the prejudice of the surety. These acts of PNB were contrary to its duty as holder of an exclusive and irrevocable power of attorney to make such collection, since an agent is required to act with the care of a good father of a family. PNB thereby becomes liable for the damages which the principal may suffer through its nonperformance. Manila Surety is released from liability as guarantor of the obligation. By the acts of the creditor PNB, guarantor Manila Surety cannot be subrogated to the rights of PNB. (SECTRANS) Domingo vs. Domingo

Gregorio was able to persuade Vicente to accept Oscar's offer and an agreement was made between Vicente and Oscar P1,000 was given by Oscar as earnest money P300 of which was advanced by Vicente to Gregorio as his commission Also, Gregorio received P1,000 from Oscar as 'promised' by Oscar if Gregorio will be able to persuade Vicente to sell the lot at a lower price This 'promised money' or secret bonus of Gregorio was not disclosed to Vicente Oscar talked to Gregorio that he is now canceling the sale but he will not try to recover the earnest money of the secret bonus he gave Gregorio, sensing something fishy, went to the Register of Deeds and discovered that Vicente actually sold the land to Oscar's wife as shown in the title Gregorio approached Vicente and demanded his commission but the latter refused to give him any amount Issue: W/N Vicente is still liable to pay Gregorio his commission even though the latter failed to disclose everything he received form the transaction Held: Gregorio cannot demand from Vicente his commission Article 1891 states that every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency When Gregorio accepted the secret bonus and failed to disclose this to his principal, he violated the agency agreement and FORFEITS HIS RIGHT TO COLLECT THE COMMISSION FORM THE PRINCIPAL. This is regardless to W/N the principal suffered any injury because of the breach of trust. His acceptance of the secret profit corrupted his duty to serve the interest only of the principal. Instead of exerting his best to persuade the buyer to purchase the lot on the most advantageous terms desired by his principal, he succeeded in persuading his principal to accept the terms of the buyer to the detriment of his principal. Severino vs. Severino Facts: During the lifetime of Melecio Severino, his brother Agapito was the administrator of his property. This is evidenced by a possessory information secured by Agapito on Melecio's behalf. Melecio died. The land became subject of a cadastral proceeding. Thus, Hofilena (Agapito's lawyer) appeared on his behalf. At this point, Fabiola was still a minor. The claim was successful. Agapito was able to register the land in his name. Fabiola now claims the parcel of land TC: ruled in favor of Fabiola Agapito contends that his title to the land is indefeasible Issue: who has a better claim to the parcel of land? Will the registration of hte land under the Torrens system divest Fabiola of ownership?

Facts: Vicente Domingo granted Gregorio Domingo the exclusive agency to sell his lot with a commission of 5% on the total price Gregorio authorized Teofilo Purisima to look for a buyer with half of the 5% as his commission Teofilo introduced Oscar de Leon to Gregorio as a prospective buyer Oscar offered to purchase the lot at a lower price than that made by Vicente.

Ruling: The relations of an agent and his principal are fiduciary in nature. In regard to the property of Melecio, Agapito is estopped from acquiring or asserting title adverse that of his principal. Agapito is a trustee and whatever he does for the advantage of the trust estate inures to the benefit of the principal.