Agency with Compensation

ORIENTAL PETROLEUM AND MINERALS CORPORATION, Petitioner,

G.R. No. 195481
Present:
-versusTUSCAN REAL TV, INC., Respondent.
FACTS:
June 9, 1999 when respondent Tuscan Realty, Inc. filed a complaint for sum of money with application for preliminary
attachment against petitioner Oriental Petroleum and Minerals Corporation before the Makati Regional Trial Court.
Oriental Petroleum owned two condominium units at Corinthian Plaza in Makati City. On August 13, 1996 it gave Tuscan Realty
a "non- exclusive authority to offer" these units for sale. On August 14, 1996 Tuscan Realty submitted an initial list of its
prospective client-buyers that included Gateway Holdings Corporation. Tuscan Realty updated this list on September 18, 1996.
Subsequently, Oriental Petroleum advised Tuscan Realty that it would undertake direct negotiation with a certain Gene de los
Reyes of Gateway for the sale of the units. This resulted in a contract to sell between Oriental Petroleum and Gateway on
August 1, 1997.
Interim, Gateway apparently turned around nearly two months later on September 29, 1997 and assigned its rights as buyer of
the units to Alonzo Ancheta in whose favor Oriental Petroleum executed a deed of absolute sale on December 10, 1997 for the
price of P69,595,400.00. Prompted by this development, Tuscan Realty demanded payment of its brokers commission of
P2,087,862.00 by Oriental Petroleum. The latter refused to pay, however, claiming that Tuscan Realty did nothing to close its
deal with Gateway and Ancheta.
July 28, 1999 the RTC granted Tuscan Realtys application for preliminary attachment but rendered a decision six years later or
on November 2, 2005, dismissing the complaint on the ground of Tuscan Realtys failure to substantiate its allegation that it was
responsible for closing the sale of the subject condominium units. Tuscan Realty appealed the RTC decision to the Court of
Appeals.
August 11, 2010 the CA granted the appeal and set aside the RTC decision. The CA ordered Oriental Petroleum to pay Tuscan
Realty its brokers commission of P2,087,862.00, which is 3% of the final purchase price, plus 6% interest from the finality of its
decision until actual payment.

ISSUE/S:
Whether or not Tuscan Realty is entitled to a brokers commission for the sale of Oriental Petroleums condominium units to
Ancheta.
RULING:
The CA invoked the principle of procuring cause in ordering the payment of brokers commission to Tuscan Realty. The term
procuring cause refers to a cause which starts a series of events and results, without break in their continuity, in the
accomplishment of a brokers prime objective of producing a purchaser who is ready, willing, and able to buy on the owners
terms. Similar to the concept of proximate cause in Torts, without which the injury would not have occurred. To be regarded as
the procuring cause of a sale, a brokers efforts must have been the foundation of the negotiations which subsequently resulted
in a sale.
But there is no question that the contract to sell that Oriental Petroleum concluded with Gateway was a valid and binding
contract to sell, which precluded Oriental Petroleum from peddling the properties to others. Indeed, Oriental Petroleum
executed a deed of absolute sale in Anchetas favor by virtue of Gateways assignment to him of its rights under the contract to
sell.

When Special Agency is required

Gozun v. Mercado
December 19, 2006
Facts:
Mercado ran for the 1995 local elections for the position of Governor in Pampanga. Gozun, Mercados compadre and
owner of a publishing and printing house, submitted draft samples and price quotations for the printing of campaign materials to
Mercado. Gozun was thereafter informed by Mercados wife, Annie, that Mercado approved the quotations. Thus, Gozun began
printing the campaign materials. Due to the urgency and quantity of the order, Gozun availed the services of 2 other publishing
houses owned by his mother and daughter. After the printing of materials, Gozun delivered it to Mercados headquarters in San
Fernando.
Meanwhile, early one morning, Mercados sister-in-law Lilian Soriano, obtained a cash advance of P253,000 from
Gozun for the allowances of poll watchers and other election related expenses because allegedly, they were unable to go to the
bank. Lilian said that she was borrowing money in behalf of Mercados wife as was indicated in the succeeding Statement of
Account. Gozun submits that Mercado informed him that he had authorized Lilian to obtain the loan. However, Lilian signed the
receipt in her name alone.
Gozun then sent a Statement of Account to Mercado in the total amount of P2,177,906, itemized as follows:
For Gozuns publishing house: P640,310
2 Other publishing houses: P1,284,596
Payment for Lilians cash advance in behalf of Annie Mercado: P253,000
Annie paid P1M and was issued a receipt. Despite repeated demands, Mercado failed to settle the balance. It took 3
years before Gozun finally asked his counsel to send a demand letter, to no avail. They subsequently filed a case to recover the
balance plus damages and costs.
Mercado claimed that the campaign materials that Gozun delivered were donations to his campaign and that he did not
authorize his wife to enter into a contract for the campaign materials. Also, he stressed that he did not authorize Lilian to borrow
money from Gozun. He further claimed that the P1M paid by Annie to Gozun was for a job well done as he would voluntarily
help his campaign and would give his opinions on his campaign strategy.
Issues:
1. Whether Mercado is liable to pay for the campaign materials
2. Whether Lilian was authorized to borrow money from Gozun
Held:
1. Yes. Mercados claim that the campaign materials were mere donations does not hold water. Per Comelec rules, if a
campaign material is donated, it must be so stated on its face, acknowledged that nothing of that sort was written on all
the materials made by petitioner. There was no such acknowledgment found on the materials. The court held that
Mercado must pay P924,906 for the campaign materials.
2. No. Generally, the agency may be oral, unless the law requires a specific form. However, a special power of attorney is
necessary for an agent to, as in this case, borrow money, unless it be urgent and indispensable for the preservation of
the things which are under administration. Since nothing in this case involves the preservation of things under
administration, a determination of whether Lilian had the special authority to borrow money on behalf of respondent is in
order. There was no SPA. Gozun claims that Mercado himself authorized the loan, however, the statement of account
says that it was in behalf of Annie. Thus, the alleged authority cannot be clearly inferred. Also, Lilian signed the receipt
in her name alone. There was no indication on the note that it was made on behalf of either Mercado or his wife.
Dispositive Portion:
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated April 14, 2005 of the
Court of Appeals are hereby REVERSED and SET ASIDE.

Third person was aware, Art. 1898

National Power Corporation vs. National Merchandising Corporation 117 SCRA 789
FACTS: Plaintiff-appellant National Power Corporation (NPC) and defendant- appellant National Merchandising Corporation
(NAMERCO), the Philippine representative of New York-based International Commodities Corporation, executed a contract of
sale of sulfur with a stipulation for liquidated damages in case of breach. Defendant-appellant Domestic Insurance Company
executed a performance bond in favor of NPC to guarantee the seller's obligation. In entering into the contract, Namerco,
however, did not disclose to NPC that Namerco's principal, in a cabled instruction, stated that the sale was subject to availability
of a steamer, and contrary to its principal's instruction, Namerco agreed that non-availability of a steamer was not a justification
for non-payment of liquidated damages. The New York supplier was not able to deliver the sulfur due to its inability to secure
shipping space. Consequently, the Government Corporate Counsel rescinded the contract of sale due to the supplier's nonperformance of its obligations, and demanded payment of liquidated damages from both Namerco and the surety. Thereafter,
NPC sued for recovery of the stipulated liquidated damages. After trial, the Court of First Instance rendered judgment ordering
defendants-appellants to pay solidarity to the NPC reduced liquidated damages with interest.
ISSUE: Whether or not National Merchandising Corporation is liable as an agent
HELD: In the case at bar, the Court held that the Namerco is liable for damages because under Article 1897 of the Civil Code
the agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers
is personally liable to such party. The Court, however, further reduced the solidary liability of defendants-appellants for liquidated
damages. Article 1403 of the Civil Code which provides that a contract entered into in the name of another person by one who
has acted beyond his powers is unenforceable, refers to the unenforceability of the contract against the principal. In the instant
case, the contract containing the stipulation for liquidated damages is not being enforced against its principal but against the
agent and its surety. It being enforced against the agent because Article 1897 implies that the agent who acts in excess of his
authority is personally liable to the party with whom he contracted. And that rule is complimented by Article 1898 of the Civil
Code which provides that "if the agent contracts, in the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the
powers granted by the principal." Namerco never disclosed to the NPC the cabled or written instructions of its principal. For that
reason and because Namerco exceeded the limits of its authority, it virtually acted in its own name and not as agent and it is,
therefore, bound by the contract of sale which, however, it not enforceable against its principal. If, as contemplated in Articles
1897 and 1898, Namerco is bound under the contract of sale, then it follows that it is bound by the stipulation for liquidated
damages in that contract.

CERVANTES v. Court of Appeals, Philippine Airlines

G.R.No.125138

March 2, 1999

Facts:
Private respondent, PAL, issued to the herein petitioner, Nicholas Cervantes, a round trip plane ticket for Manila-HonoluluLA-Honolulu-Manila, which expressly provided an expiry of date of one year from issuance, i.e., until March 27, 1990. The
issuance of the ticket was in compliance with a Compromise Agreement entered into between the contending parties in two
previous
suits
dismissing
petitioners
complaint
for
damages.
Four days before the expiry date of ticket, the petitioner used it. Upon his arrival in Los Angeles on March 23, he immediately
booked his LA-Manila return ticket with the PAL office, and was confirmed for April 2. Learning that the same PAL plane would
make a stop-over in San Francisco, and considering that he would be there on April 2, 1990, petitioner made arrangements with
PAL for him to board the flight in San Francisco instead of boarding in Los Angeles. When the petitioner checked in at the PAL
counter in SF, he was not allowed to board, his ticket was marked: TICKET NOT ACCEPTED DUE EXPIRATION OF
VALIDITY.
Cervantes filed a Complaint for Damages but dismissed for lack of merit.
Issues:
1. W/N act of PAL agents in confirming ticket extended the period of validity of petitioners ticket. No

2. W/N denial of the award for damages was proper

Ratio:
1. PAL agents had no authority to do so. Appellant knew this from the start when he called up the Legal Department of appellee
in the Philippines before he left for the US. He had first hand knowledge that the ticket in question would expire on March
27,1990 and that to secure an extension, he would have to file a written request for extension at the PALs office in the
Philippines.
Despite
this
knowledge,
appellant
persisted
to
use
the
ticket
in
question.
Since PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal counsel of PAL was
necessary, he cannot use what the PAL agents did to his advantage. The agents acted without authority when they confirmed
the flights of the petitioner.
Article 1898 of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal, unless
the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein petitioner) knows that the
agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If the said
third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent,
unless the latter undertook to secure the principals ratification.
2. Award of damages is improper as petitioner failed to show that PAL acted in bad faith in refusing to allow him to board its
plane in San Francisco. In awarding moral damages for breach of contract of carriage, the breach must be wanton and
deliberately injurious or the one responsible acted fraudulently or with malice or bad faith. Petitioner knew of the possibility that
he could not use the subject ticket that he bought a back-up ticket to ensure departure. Should there be a finding of bad faith,
we are of the opinion that it should be on the petitioner. What the employees of PAL did was one of simple negligence. No
injury resulted on the part of petitioner because he had a back-up ticket should PAL refuse to accommodate him with the use of
subject ticket.
Neither can the claim for exemplary damages be upheld. Such kind of damages is imposed by way of example or
correction for the public good, and the existence of bad faith is established. The wrongful act must be accompanied by bad
faith, and an award of damages would be allowed only if the guilty party acted in a wanton, fraudulent, reckless or malevolent
manner. Here, there is no showing that PAL acted in such a manner. An award for attorneys fees is also improper.
Dispositive Portion: WHEREFORE, the Petition is DENIED and the decision of the Court of Appeals dated July 25, 1995
AFFIRMED in toto.