Agency and Partnership

Agency and Partnership
Prof. Dionne Marie M. Sanchez
The Law on Agency

I. Introduction
A. How is agency defined? .................................................................................................... 2
B. Who are the parties to the contract of agency? ................................................................ 3
C. Must the parties be capacitated? ...................................................................................... 4
Rallos vs. Felix Go Chan ................................................................................................. 4
Orient Air Services vs. CA and American Airlines ............................................................5
William Uy and Rodel Roxas vs. CA, Hon. Balao, and NHA ........................................... 6
Macke vs. Camps ............................................................................................................7
Prudential Bank vs. CA .................................................................................................... 8
Litonjua, Jr. vs. Eternit Corp.............................................................................................9
II. What is the form of contract of agency?
Angeles vs. Philippine National Railways ......................................................................11
Jimenez vs. Rabot .........................................................................................................12
City-Lite Realty vs. CA ...................................................................................................13
Cosmic Lumber vs. CA and Isidro Perez ....................................................................... 14
San Juan Structural Steel vs. CA ..................................................................................15
Delos Reyes vs. CA .......................................................................................................15
AF Realty vs. Dieselman Freight ................................................................................... 16
III. Who has the obligation to determine existence and scope of agency?
Keeler Electric Co. vs. Rodriguez ..................................................................................18
Yu Eng Cho vs. Pan America......................................................................................... 19
IV. How is agency distinguished from other contracts/relationships?
A. Master-Servant ..........................................................................................................20
B. Employer-Employee .................................................................................................. 21
C. Lease of Service ........................................................................................................ 21
D. Independent Contractor ............................................................................................. 21
E. Trust........................................................................................................................... 21
F. Sale ........................................................................................................................... 22
G. Partnership ................................................................................................................22
H. Negotiorium gestio/quasi-contract ............................................................................. 22
I. Judicial Administrator .................................................................................................22
J. Broker ........................................................................................................................ 22
Sevilla vs. CA.................................................................................................................22
Shell vs. Firemens Insurance Co. .................................................................................23
Dela Cruz vs. Northern Theatrical Enterprises .............................................................. 24
Neilson & Co. vs. Lepanto Consolidated ....................................................................... 25
Quiroga vs. Parsons Hardware...................................................................................... 26
Gonzalo Puyat & Sons vs. Arco Amusement Co. ..........................................................27
Lim vs. People ...............................................................................................................29
Pacific Commercial vs. Yatco......................................................................................... 30
Ker vs. Lingad ................................................................................................................31
Hahn vs. CA and BMW ..................................................................................................33
Mac Tongson | D2019 1 of 33

The Law on Agency
I. Introduction
A. How is agency defined?
Art. 1868, NCC
By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or
authority of the latter.
This provides for a definition of a contract of agency. However, the definition is very broad to cover
almost every kind of service to another except those provided for in the Civil Code like employer-
employee relationship, master-servant, and employer and independent contractor relationship.
Agency is a fiduciary relationship which implies a power in an agent to contract with a third person on
behalf of a principal. An agent may effect the principals contractual relations with a third person which
differentiates him from an employee, servant, or independent contractor.
This usually relates to commercial and business relations, but may also arise in non-business
situations.
Agency was formerly governed by both the commercial law and civil law of the Philippines, but at
present all its provisions fall in the Civil Code.
Characteristics of a contract of agency are:
Consensual - perfected by mere consent
Principal - it can stand by itself without a need for a new contract
Nominate - it has its own name
Unilateral (if gratuitous, as in only the agent has an obligation towards the principal); bilateral (if with
consideration)
Preparatory - it is entered into as a means to an end, that is, it is preparatory for other transactions
or contracts
A contract of agency is a contract of representation. The basis or which is the trust and confidence
reposed by the principal to the agent, and is generally revocable upon breach of confidence.
Through the contract of agency, the acts of an agent are, within the scope of his authority, by legal
fiction, acts of the principal. (1881)
The purpose of agency is to extend the personality of the principal through the facility of the agent. It
enables him to do things which may be physically impossible or inadvisable to do, by extending his
personality to his agents, and thereby allowing him to be in many different places.
1. Consent
Art. 1868, NCC (supra.)

Art. 1869, NCC
Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
Art. 1870, NCC
Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction
according to the circumstances.
Art. 1871, NCC
Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the
agent and the latter receives it without any objection.
Art. 1872
Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except:
(1) When the principal transmits his power of attorney to the agent, who receives it without any objection;
(2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually
engaged as an agent, and he did not reply to the letter or telegram.
Art. 1898
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. In this case,
however, the agent is liable if he undertook to secure the principal's ratification.
Art. 1901, NCC
A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to
ratify the agent's acts.
Art. 1910, NCC
The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.
Art. 1317, NCC
No one may contract in the name of another without being authorized by the latter, or unless he has by law a right to represent him.
A contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers,
shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is
revoked by the other contracting party.
Art. 1403 (1), NCC
Those entered into in the name of another person by one who has been given no authority or legal representation, or who has acted
beyond his powers
Agency, being in the nature of a contract requires consent.

Consent is indispensable on the part of the principal. This may be manifested either expressly through
words, or through the conduct between the parties. Without intention, there is no agency. Thus, the
mere fact that an entity may be 100% subsidiary corporation of another corporation does not
necessarily mean that the former is a duly authorized agent of the latter because it is essential, for a
contract of agency to exist, that the principal consents that the other party, the agent, shall act on its
behalf and the agent consents so as to act. (Apex Mining Co., Inc. vs. Southeast Mindanao Gold Mining
Corp.)
By legal fiction, the agent becomes the principal authorized to do acts as the latter may have him do.
However, this could not be possible without the consent by the principal. (Orient Air Services & Hotel
Representatives vs. Court of Appeals)
2. Object
The object of a contract of agency is the execution of a juridical act in relation to third persons
Art. 1875, NCC

Agency is presumed to be for a compensation, unless there is proof to the
contrary.
3. Consideration
A contract of agency is not necessarily based upon a consideration. It may also be done gratuitously or
by the operation of law as in agency by estoppel.
B. Who are the parties to the contract of agency?

1. Principal
One whom the agent represents and from whom he derives his authority; he is the person
represented.
Agency imports the contemporaneous existence of a principal, and there is no agency unless one is
acting for and in behalf of another
May be a natural or artificial person. [1919(4)]
2. Agent
One who acts for and represents another; he is the person acting in a representative capacity.
The agent has derivative authority in carrying out the principals business. He may employ his own
agent in which case he becomes a principal with respect to the latter.
If an act done by one person in behalf of another is, in its essential nature, one of agency, the former
is agent of the latter notwithstanding that he is not so called.
3. Third party
This party is added to the agency relationship, from the time the agent acts or transacts the business
for which he has been employed in representation of another
His liability on such contract is to the principal and not to the agent, and liability to such third party is
enforceable against the principal, not the agent.
Normally, the agent has neither rights nor liabilities as against the third party. He cannot sue or be
sued on the contract. Since a contract may be violated only by the parties thereto as against each
other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must,
generally, be a party to said contract. [See: Uy vs. CA]
C. Must the parties be capacitated?

1. Principal
Must be capacitated or have the legal capacity to enter into contract. Logic: A person who cannot
legally enter into contracts directly should not be permitted to do it indirectly through another.
Non legal entity without legal existence has no capacity to appoint an agent
State of war: enemy alien may not appoint an agent to act in a belligerent country with which his
nation is at war.
The capacity to act by an agent depends in general on the capacity of the principal to do the act
himself if he were present.
GR: agent who assumes to contract in the name of a principal without contractual capacity renders
himself liable to third persons. E: where he was ignorant of the principals incapacity. This, however,
may be ratified by the third party.
2. Agent
Capacity is generally immaterial, since he assumes no personal liability, he does not have to possess
full capacity to act for himself insofar as third persons are concerned. An agent derives his authority
from the principal, and a contract made by the agent is legally viewed as a contract of the principal.
American jurisprudence states that where one permits another to act in his place, the capacity of the
agent is presumed. However, some mental capacity is necessary as an agent.
In some instances, special qualifications is required of an agent; as for example, a lawyer
representing his clients. Non-satisfaction of the special qualifications would void the relationship.
Rallos vs. Felix Go Chan

January 31, 1978 | Muoz-Palma, J.
FACTS:
Sisters Concepcion and Gerundia Rallos were registered co-owners of a parcel of land in Cebu.
They executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to
sell for and in their behalf the said parcel of land.
Concepcion died.
Upon the death of Concepcion Rallos, Simeon Rallos, her attorney-in-fact, sold he undivided share
pursuant to a power of attorney which the principal had executed in his favor, to Felix Go Chan & Sons
Realty Corporation. The sale was eventually registered.
The following year, Ramon Rallos, administrator of the intestate estate of Concepcion, filed a complaint
against Simeon praying that the sale be declared unenforceable and the lot be reconveyed to the
estate of Concepcion.
Corporation filed its crossclaim. During the pendency of the case, both Gerundia and Simeon died.
CFI Cebu: ruled in favor of the estate of Concepcion and ordered the estate of Simeon to indemnify the
corporation
CA: reversed; upheld the validity of the sale
ISSUE: W/N the sale of the undivided share of Concepcion Rallos on the parcel of land valid even though it
was executed by an agent after her death? NO.
Art. 1403(1) of the Civil Code provides for which contracts are unenforceable. The first paragraph of
which states that, a contract entered into in the name of another person by one who has been given no
authority or legal representation, or who has exceeded his power is an unenforceable contract.
Because of this principle, there arose the creation and acceptance of the relationship of agency
whereby one party, caged the principal (mandante), authorizes another, called the agent (mandatario),
to act for and in his behalf in transactions with third persons
Essential elements:
there is consent, express or implied of the parties to establish the relationship
the object is the execution of a juridical act in relation to a third person
the agents acts as a representative and not for himself
the agent acts within the scope of his authority
The nature of an agency is basically personal representative and derivative in nature. The authority of
an agent emanates from the power given to him by the principal. His act is the act of the principal if
done within the scope of his authority.
One of the modes of extinguishing agency is the death of the principal (or of the agent) as provided
under Art. 1919(3) of the Civil Code. This is so because the very essence of agency is the relation
between the principal and the agent.
However, the extinguishment of agency by death is subject to exceptions found in Art. 1930 and 1931
of the Civil Code.
1930: agency shall remain in force even after the death of the principal if it has been constituted in
the common interest of the principal and the agent, or of a third person who has accepted the
stipulation in his favor
1931: anything done by the agent without knowledge of the death of the principal or of any other
cause which extinguishes the contract of agency shall be valid and fully effective with respect to
third persons who may ha contracted with him in good faith.
Both of the exceptions find no application in the case at bar. The CA was wrong in arguing that there is
no provision in the Code which provides that whatever is done by an agent having knowledge of the
death of his principal is void even with respect to third persons who may have contracted with him in
good faith and without knowledge of the death of the principal. They ignored the GR set forth in 1919
and the only exception in 1930 and 1931.
The argument of Go Chan that they were buyers in good faith does not stand either because the
revocation of the contract of agency is automatically revoked upon the death of either the principal or
agent.
RULING: reversed CA. Sale was void.
Orient Air Services vs. CA and American Airlines

May 29, 1991 | Padilla, J.
FACTS:
American Airlines and Orient Air Services and Hotel Representatives entered in to a General Sales
Agency Agreement whereby American Air authorized Orient Air to act as its exclusive general sales
agent within the Philippines for the sale of air passenger transportation.
Subsequently, American Air terminated their agreement alleging breach of obligation by Orient Air.
Later, American Air filed a complaint against Orient Air before the CFI Manila for alleging that basis for
the termination of the Agreement as well as therein defendant's previous record of failures "to promptly
settle past outstanding refunds of which there were available funds in the possession of the
defendant, . . . to the damage and prejudice of plaintiff.
Orient Air filed a counterclaim stating that the unremitted amounts were their commissions under their
agreement and in fact, there was still an underpayment on the part of American Air.
CFI found for Orient Air and ordered American Air to reinstate the former as its general sales agent.
CA affirmed with modifications.
PETITIONERS CONTENTION:
Orient Air is entitled to the 3% overriding commission on the ground that its designation as the
exclusive General Sales Agent of American Air, with the corresponding obligations arising from such
agency, such as, the promotion and solicitation for the services of its principal, "all sales of
transportation over American Air's services are necessarily by Orient Air."
ISSUE: W/N Orient Air is entitled to the 3% overriding commission? YES.

Pursuant to the agreement between the parties, Orient Air, as the designated exclusive General Sales
Agent of American Air, was responsible for the promotion and marketing of American Air's services for
air passenger transportation, and the solicitation of sales therefor. In return for such efforts and
services, Orient Air was to be paid commissions of two (2) kinds:
a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air
when made on American Air ticket stock
an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation
over American Air services
It is immediately observed that the precondition attached to the first type of commission does not obtain
for the second type of commissions. The latter type of commissions would accrue for sales of American
Air services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers
or other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from American Air ticket stock would erase any distinction between the
two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into
a contract with meaningless provisions. Such an interpretation must at all times be avoided with every
effort exerted to harmonize the entire Agreement.
Moreover, it was American Air who prepared the contract. As a contract of adhesion, it should be
construed against the one who caused the ambiguity which could have been avoided by exercise of a
little more care. This is under Art. 1377 of the Civil Code provides that the interpretation of obscure
words or stipulations in a contract shall not favor the party who caused the obscurity.
ISSUE: W/N the lower courts erred in holding that Orient Air must be reinstated as the general sales agaent
of American Air? NO.
The ruling of the lower courts, in effect, compels American Air to extend its personality to Orient Air.
Such would be violative of the principles and essence of agency, defined by law as a contract whereby
"a person binds himself to render some service or to do something in representation or on behalf of
another, WITH THE CONSENT OR AUTHORITY OF THE LATTER.
In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts
which the latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court. The Agreement itself
between the parties states that "either party may terminate the Agreement without cause by giving the
other 30 days' notice by letter, telegram or cable.
RULING: Affirmed lower courts with modification. Orient Air could not be reinstated as the general sales
agent of American Air.
William Uy and Rodel Roxas vs. CA, Hon. Balao, and NHA
September 9, 1999 | Kapunan, J.
FACTS:
William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof.
By virtue of the authority, they offered to sell the lands in Benguet to NHA to be utilized and developed
as a housing project.
NHA approved the acquisition of the land. They executed a Deed of Sale.
Only 5 of 8 lands were paid because NHA received a report from DENR that the remaining lots were
prone to landslide and are not suitable for development into a housing project.
NHA then cancelled the sale for the 3 lots and offered to pay 1.225M as daos perjuicios to the
landowners.
Petitioners then filed a complaint for damages against NHA before the RTC QC.
RTC: cancellation of sale is justified. Awarded damages in the amount initially offered by NHA.
CA: reversed. Sale is justified but there is no basis for the award of damages. Petitioners were not the
real parties in interest, they are merely attorneys-in-fact. Also denied MR.
CA ruled that the omission of the landowners as party-plaintiffs is fatal to the case because when an
attorney-in-fact brings a case under his name, and not in the name of the principal must be
dismissed because of the rule that every action must be prosecuted in the name of the real parties-
in-interest (Section 2, Rule 3, Rules of Court).
ISSUE: W/N the complaint must be dismissed on the ground that the petitioners failed to join as
indispensable party-plaintiff the selling landowners? YES.
Petitioners contend that they brought the case in their name as agents of the landowners to claim for
damages for unrealized profits, and not as proxies of the latter.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in
the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited
or injured by the judgment or the party entitled to the avails of the suit. Interest, meaning material
interest. Principle: An action shall be prosecuted in the name of the party who, by the substantive law,
has the right sought to be enforced.
Here, the applicable provision is Art. 1311 or the privity principle (an individual cannot sue on a contract
to which one was not a party. E: heirs and assignees. E to E: not transmissible rights, stipulation, law)

The petitioners are not parties to the contract between the landowners and NHA. They are mere
agents of the owners of the land subject of the sale. As agents, they only render some service or do
something in representation or on behalf of their principals. The rendering of such service did not
make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be
violated only by the parties thereto as against each other, the real parties-in-interest, either as
plaintiff or defendant, in an action upon that contract must, generally, either be parties to said
contract.
The exception provided under Art. 1311 does not also find application in the case because it was
not alleged that they are heirs of the principal.
The question whether they were assignees to the right under the contract of sale now arises.
An agent, in his own behalf, may bring an action founded on a contract made for his principal, as an
assignee of such contract.
An agent becomes an assignee when understanding that he is to collect the claim against the
obligor by way of reimbursing himself for his advances and commissions, and thus he has an
irrevocable right to sue in his principals name as provided in Section 372 (1) of the Restatement of
the Law on Agency (Second).
Here, however, they have not shown that they were assignees to the contract.
It also could not be said that petitioners were beneficiaries of a stipulation pour autrui1
An agent does not have such an interest in a contract as to entitle him to maintain an action at law
upon it in his own name merely because he is entilted to a portion of the proceeds as compensation
for making it or because he is liable for its breach. [Sec. 372(2) of the Restatement of the Law on
Agency (Second)]
An agent who is not a promisee cannot maintain an action at law against a purchaser merely
because he is entitled to have his compensation or advances paid out of the purchase price before
payment to the principal.
NOTE: this should be clearly and deliberately conferred upon in the contract. [1311(2)]
RULING: Petition is denied; Agents are not real parties-in-interest
Macke vs. Camps

February 27, 1907 | Carson, J.
FACTS:
B. H. Macke and W. H. Chandler, partners doing business under the firm name of Macke, Chandler &
Company, allege that during the months of February and March, 1905, they sold to the defendant and
delivered at his place of business, known as the "Washington Cafe," various bills of goods amounting to
P351.50
However, Jose Camps paid only P174. The made demands for the payment of the balance but Camps
failed and refused to pay. And so they filed the present complaint.
According to Macke, one Ricardo Flores, who represented himself to be agent of the defendant, made
the orders, for which the former sent the bills of goods.
Ricardo Flores made various payments amounting to P174, but informed Macke subsequently that he
had insufficient funds for the remaining balance and that he had to wait for his principal to return from
the provinces.
The order was made on credit of Camps and the delivery was effected upon satisfaction after inquiry on
Camps credit and the authority of Flores.
Macke presented a written contract with Galmes, owner of the building where the Cafe was situated,
and Camps, obligating himself not to subrent the building or business without the consent of the
Galmes. In that contract, Flores was a witness signed as a managing agent of Camps.
Camps did not go on stand but relied on his contention that the facts are not sufficient to establish the
fact that he received the goods for which payment is demanded
ISSUE: W/N Flores was an agent of the principal? YES.

The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner of
business and of the bar, and the title of "managing agent" attached to the signature of Flores which
1 a stipulation in a contract clearly and deliberately conferring a benefit upon a third person who has the right to demand its
fulfillment, provided he communicated his acceptance of the benefit to the obligor before its revocation by the obligee or the original
parties (see Comments and Cases on Obligations and Contracts, p. 502 [2003])
appears on that contract, together with the fact that, at the time the purchases in question were made,
Flores was apparently in charge of the business, performing the duties usually entrusted to managing
agent, leave little room for doubt that he was there as authorized agent of the defendant.
One who clothes another apparent authority as his agent, and holds him out to the public as such, can
not be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent
third parties dealing with such person in good faith
"Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led
another to believe a particular thing true, and to act upon such belief, he can not, in any litigation
arising out such declaration, act, or omission, be permitted to falsify it
unless the contrary appears, the authority of an agent must be presumed to include all the
necessary and usual means of carrying his agency into effect.
Here, Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable
quantities of supplies as might from time to time be necessary in carrying on the business of hotel bar
may fairly be presumed from the nature of the business, especially in view of the fact that his principal
appears to have left him in charge during more or less prolonged periods of absence; from an
examination of the items of the account attached to the complaint, we are of opinion that he was acting
within the scope of his authority in ordering these goods are binding on his principal, and in the
absence of evidence to the contrary, furnish satisfactory proof of their delivery as alleged in the
complaint.
RULING: Flores is an agent of Camps
Prudential Bank vs. CA

June 14, 1993 | Cruz, J.
FACTS:
Aurora F. Cruz, together with her sister as co-depositor, invested P200K in Prudential Bank Q. Ave
branch, QC. The placement was for 63 days at 13.75% annual interest. For this purpose, the amount of
P196,122.88 was withdrawn from the depositors' Savings Account No. 2546 and applied to the
investment. The difference of P3,877.07 represented the pre-paid interest.
The transaction was evidenced by a Confirmation of Sale, delivered to Cruz 2 days later, with the debit
memo in the amount withdrawn and applied to the confirmed sale. The documents were issued by
Susan Quimbo, bank employee to whom Cruz was referred to.
Upon maturity of the placement, Cruz returned to the bank to "roll-over" or renew her investment. She
was attended by Quimbo who again prepared her Credit Memo and Debit Memo.
This time, however, she was made to sign a withdrawal slip for the amount to be deducted from her
savings account. Believing that this was a new bank policy, as stated by Quimbo.
When she returned to the bank later to withdraw her investment, she was told that she already made
such withdrawal upon the maturity of her first investment. There were no copies of the Credit and Debit
memos given to her.
She later sent a demand letter to the bank to release her P200K. Bank refused to do so because she
had already withdrawn her money.
She then filed a complaint for breach of contract against Prudential Bank. Bank filed a third-party
complaint against Quimbo.
RTC: for Cruz; CA: affirmed in toto
ISSUE: W/N the bank should be faulted for quasi-delict when it was sued for breach of contract? NOT QD.
Here, the issues are factual. What Cruz contends is that she was not able to collect her investment
evidenced by the Credit and Debit Memos issued to her by the bank, while the bank counters it by
saying that these were fake and hinges their position only on the withdrawal slip signed by Cruz.
SC, however, found no reason to disturb the findings of the lower courts that the withdrawal slip
signed by Cruz was merely part of the procedure of re-investment.
Moreover, they did not pursue their third-party complaint against Quimbo, even though they could
have, nor called her as witness.
CA did not hold Prudential Bank liable for quasi-delict, but, on the contrary, stated that their liability is
contractual, and because of BF on their part, they are guilty of breach of contract.
There is no question that the petitioner was made liable for its failure or refusal to deliver to Cruz the
amount she had deposited with it and which she had a right to withdraw upon its maturity. That

investment was acknowledged by its own employees, who had the apparent authority to do so and so
could legally bind it by its acts vis-a-vis Cruz.
The liability of the principal for the acts of the agent is not even debatable. Such liability dates
back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself.
Applying 1910 (supra.) and 19112, especially necessary because banks have a fiduciary
relationship with the public and their stability depends on the confidence of the people in their
honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the
selection and supervision of its employees, resulting in prejudice to their depositors.
Its non-pursuance of its case against Quimbo feeds the suspicion of her misdeed. By doing so, the
bank is absolving not only itself but also, in effect and by extension, the disappeared Quimbo who
apparently has much to explain.
RULING: Petition DENIED. Bank is liable for breach of contract.
Litonjua, Jr. vs. Eternit Corp.

June 8, 2006 | Callejo, Sr. J.
FACTS:
Eternit Corp. (EC) is a local corporation. 90% of its shares of stock is owned by Eteroutremer S.A.
Corporation (ESAC), a Belgian Corp. EC operates on 8 parcels of land in Mandaluyong.
Glanville, President and GM of EC; Claude Frederick Delsaux was the Regional Director for Asia of
ESAC.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and
wanted to stop its operations in the country. They resolved to sell the properties in Mandaluyong.
They engaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered
for sale to prospective buyers. Glanville later showed the properties to Marquez.
Marquez offered to sell to Litonjua, Jr. who responded to the offer. The sale was agreed on and Litonjua
brothers actually deposited the amount demanded on an Escrow Agreement. (transactions were only
between Litonjuas and Marquez, who send it to Glanville, and in turn send it to Delsaux in Belgium)
However, when the political situation in the Philippines had improved upon the assumption of Cory
Aquino of Presidency, Glanville informed Marquez that the sale will no longer proceed, and the
operations of the respondent will continue in the Philippines.
After the Litonjuas were informed of the situation, they demanded payment for damages suffered on the
account of the aborted sale. EC rejected.
Litonjuas then filed a complaint for specific performance and damages against EC.
As a defense, EC and ESAC alleged that since Eteroutremer was not doing business in the Philippines,
it cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never
approved any resolution to sell subject properties nor authorized Marquez to sell the same; and the
telex dated October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.
TC: dismissed complaint. The trial court declared that since the authority of the agents/realtors was not
in writing, the sale is void and not merely unenforceable, and as such, could not have been ratified by
the principal.
CA: affirmed.
ISSUE: Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its
agents relative to the sale of the properties of respondent EC? NO.
This is a question of fact. In the absence of express written terms creating the relationship of an
agency, the existence of an agency is a fact question. Findings of the TC, as affirmed by the CA are
binding on the SC.
Issues of facts may not be raised under Rule 45 because the court is not a trier of facts.
It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that
it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to
prospective buyers and to accept any counter-offer. Petitioners likewise failed to prove that their
counter-offer had been accepted by respondent EC, through Glanville and Delsaux. It must be stressed
2 Article 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed
the latter to act as though he had full powers. (n)
that when specific performance is sought of a contract made with an agent, the agency must be
established by clear, certain and specific proof.
A corporation is a juridical person separate and distinct from its members or stockholders and is not
affected by the personal rights, obligations and transactions of the latter. It may act only through its
board of directors or, when authorized either by its by-laws or by its board resolution, through its officers
or agents in the normal course of business. The general principles of agency govern the relation
between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law.
The property of a corporation, however, is not the property of the stockholders or members, and as
such, may not be sold without express authority from the board of directors. bsent such valid
delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of
the corporation, but not in the course of, or connected with, the performance of authorized duties of
such director, are not binding on the corporation.
An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same
expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person
purporting to be an agent thereof but without written authority from the corporation is null and void. The
declarations of the agent alone are generally insufficient to establish the fact or extent of his/her
authority.
By the contract of agency, a person binds himself to render some service or to do something in
representation on behalf of another, with the consent or authority of the latter. Consent of both principal
and agent is necessary to create an agency.
An agency may be expressed or implied from the act of the principal, from his silence or lack of action,
or his failure to repudiate the agency knowing that another person is acting on his behalf without
authority. Acceptance by the agent may be expressed, or implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances. Agency may be oral unless the
law requires a specific form. However, to create or convey real rights over immovable property, a
special power of attorney is necessary. Thus, when a sale of a piece of land or any portion thereof is
through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void.
Here, petitioners failed to adduce in evidence any resolution of the Board of Directors of respondent EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its
behalf, the eight parcels of land owned by respondent EC including the improvements thereon.
It bears stressing that in an agent-principal relationship, the personality of the principal is extended
through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be compelled by law or by any
court.
The settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they
would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to prove it.
Marquez acted not only as a real estate broker for petitioners, but also as their agent. However, SC
said that Marquez had no authority to bind respondent EC to sell the subject properties. A real estate
broker is one who negotiates the sale of real properties. His business, generally speaking, is only to
find a purchaser who is willing to buy the land upon terms fixed by the owner.
ISSUE: W/N EC is estopped from denying the existence of a principal-agency relationship between it and
Glanville or Delsaux? NO
For an agency by estoppel to exist, the following must be established:
(1) the principal manifested a representation of the agents authority or knowlingly allowed the agent
to assume such authority;
(2) the third person, in good faith, relied upon such representation;
(3) relying upon such representation, such third person has changed his position to his detriment.
An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance
upon the representations, and that, in turn, needs proof that the representations predated the action
taken in reliance.
Here, the proof is lacking.
ISSUE: W/N EC ratified the transactions? NO

The transactions and the various communications inter se were never submitted to the Board of
Directors of respondent EC for ratification.

RULING: petition DENIED.
II. What is the form of contract of agency?

Art. 1869, NCC (supra.)
Art. 1874, NCC
When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.
A. Oral
B. Written
When the law requires a certain kind of formality in particular kinds of contract i.e. contract of sale by
and agent
For validity [1358]
For enforceability [1403(2)]
C. Implied
From words and conduct of the parties and the circumstances of the particular case, but agency
cannot be inferred from mere relationship or family ties.
Angeles vs. Philippine National Railways

August 31, 2006 | Garcia, J.
FACTS:
In 1980, PNR informed a certain Gaudencio Romualdez that it has accepted the latters offer to buy, on
an AS IS, WHERE IS basis, the PNRs scrap/unserviceable rails located in Pampanga.
After paying the purchase price, Romualdez addressed a letter to Atty. Cipriano Dizon, PNRs Acting
Purchasing Agent, informing them that he has authorized Lizette Wijangco to be his lawful
representative in the withdrawal of the purchased scrap rails.
Wijangco requested the PNR to transfer the location of withdrawal for the reason that the scrap/
unserviceable rails located in Pampanga were not ready for hauling. PNR granted the request.
PNR, however, suspended the withdrawal in view of what it considered as documentary discrepancies
coupled by reported pilferages of over P500,000.00 worth of PNR scrap properties in Tarlac.
Sps. Angeles demanded for a refund for the full payment.
PNR refused alleging that the delivery receipts signed by Lizette were withdrawn and actually more that
what they paid for.
Angeles filed a complaint for specific performance and damages against PNR. During trial, Angeles
died. She was substituted by her heirs, including her husband.
TC: dismissed. Sps. Angeles were not the real party-in-interest. Angeles only an agent of Romualdez
CA: affirmed.
ISSUE: Is Angeles a mere agent or as an assignee of his (Romualdez's) interest in the scrap rails awarded
to San Juanico Enterprises? AGENT!
Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the principal and
not to the agent and the relationship of the third party to the principal is the same as that in a contract in
which there is no agent. Normally, the agent has neither rights nor liabilities as against the third party.
He cannot thus sue or be sued on the contract. Since a contract may be violated only by the parties
thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon
that contract must, generally, be a contracting party.
However, when and agent is constituted as an assignee, then the agent may, in his own behalf, sue on
a contract made for his principal, as an assignee of such contract. The rule requiring every action to be
prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and
also recognizes that when one has a right assigned to him, he is then the real party-in-interest and may
maintain an action upon such claim or right.
Here, Romualdezs letter reveals that Angeles was not an assignee, but was merely to act as a
representative of him to the withdrawal of unserviceable scrap.
If Angeles did not have the capacity to sue, moreso her husband.
Parties to a contract of agency are not only referred to as principal-agent, an agent may also be called
an attorney, proxy, delegate, or representative.
It is enough from the letter to gather that Angeles was merely an agent of Romualdez. The contention
that on the 2nd paragraph of which was provided that Romualdez was ceding his right to Angeles is
erroneous because of the fact that as expressed in that paragraph, it was provided that such is only for
that reason
The fact of agency was confirmed in subsequent letters from the Angeles spouses in which they
themselves refer to Lizette as authorized representative of San Juanico Enterprises. Mention may also
be made that the withdrawal receipt which Lizette had signed indicated that she was doing so in a
representative capacity. One professing to act as agent for another is estopped to deny his agency both
as against his asserted principal and third persons interested in the transaction which he engaged in.
Contention that the letter was invalid because it was not a power of attorney is wrong. No law
prescribes form of agency. Its primary purpose is not to define the authority of the agent as between
himself and his principal but to evidence the authority of the agent to third parties with whom the agent
deals. A power of attorney must be strictly construed and pursued. The instrument will be held to grant
only those powers which are specified therein, and the agent may neither go beyond nor deviate from
the power of attorney.
Here, Lizette was only authorized to withdraw the unserviceable/scrap railings.
Jimenez vs. Rabot

July 27, 1918 | Street, J.
FACTS:
Gregorio Jimenez instituted an action against Pedro Rabot, Nicolasa Jimenez and her husband, Emilio
Rodriguez, for the recovery of a parcel of land in Alaminos, Pangasinan.
Lower court ruled in favor of the plaintiff. Pedro Rabot appealed.
The subject property belonged to the heirs of the division of the estate of Gregorios father. While he
was staying in Vigan, in 1911, he confided to his sister, Nicolasa Jimenez, the care for the property.
On February 7, he wrote his sister that he was pressed for money and so he ordered her to sell one of
those lands and send him the money so he could pay his debts.
The letter, however, contained no description of the land to be sold.
Nicolasa then approached Pedro Rabot, who agreed to buy the parcel of land for 500 pesos. P250 was
paid initially, while the remaining balance was to be paid subsequently.
A year later, Gregorio came back to Alaminos to demand his property back. However, Nicolasa refused
to do so. So as a result, he and his other brothers and sisters whose properties were in the hands of
Nicolasa instituted an action against her which was favorably decided in their favor in 1913.
Meanwhile, in 1912, Nicolasa executed and delivered to Pedro Rabot a deed purporting to convey to
him the parcel of land which is the subject of this controversy. The deed recites that the sale was made
in consideration of the sum of P500, the payment of which is acknowledged. Pedro Rabot went into
possession, and the property was found in his hands at the time when final judgment was entered in
favor of the plaintiffs in the action above mentioned.
It appears that when Pedro Rabot acquired the property, he was aware of the pendency of the case.
ISSUE: W/N the authority conferred on Nicolasa by the letter of February 7, 1911, was sufficient to enable
her to bind her brother? YES.
In considering the questions presented by this appeal one or two preliminary observations may be
made. The first is that, as a matter of formality, a power of attorney to convey real property ought to
appear in a public document, just as any other instrument intended to transmit or convey an interest in
such property ought to appear in a public document. (Art. 1280, Civil Code.) But inasmuch as it is an
established doctrine that a private document is competent to create, transmit, modify, or extinguish a
right in real property, it follows that a power of attorney to convey such property, even though in the
form of a private document, will operate with effect.
Here, however, even if we assume that Nicolasa had adequate authority to sell the property of her
brother pursuant to the letter, her action in conveying the property in her own name, without
showing the action in which she acted is irregular.
The applicable provisions are Art. 1713 of the Civil Code and Sec. 335 of the Code of Civil Procedure.
1713: requires that the authority to alienate land shall be contained in an express mandate

Sec. 335 (5): the authority of the agent must be in writing and subscribed by the party to be
charged.
There is no provision in Sec. 335 that requires that the property which the agent is to be permitted to
sell must be particularly described in the authorization.
The purpose in giving a power of attorney is to substitute the mind and hand of the agent for the mind
and hand of the principal; and if the character and extent of the power is so far defined as to leave no
doubt as to the limits within which the agent is authorized to act, and he acts within those limits, the
principal cannot question the validity of his act. It is not necessary that the particular act to be
accomplished should be predestinated by the language of the power.
ISSUE: W/N the act which the agent performed within the scope of his authority? YES.
the problem with which we are here concerned relates to the sufficiency of the power of attorney under
subsection 5 of section 335 of the Code of Civil Procedure
GR: the description must be sufficiently definite to identify the land either from the recitals of the
contract or deed or from external facts referred to in the document, thereby enabling one to determine
the identity of the land and if the description is uncertain on its face or is shown to be applicable with
equal plausibility to more than one tract, it is insufficient.
Here, however, the GR does not apply. The description must be sufficiently definite to identify the land
either from the recitals of the contract or deed or from external facts referred to in the document,
thereby enabling one to determine the identity of the land and if the description is uncertain on its face
or is shown to be applicable with equal plausibility to more than one tract, it is insufficient.
RULING: for Rabot. Lower court REVERSED.
City-Lite Realty vs. CA

February 10, 2000 | Bellosillo, J.
FACTS:
Private respondent FP Holdings and Realty Corporation was the registered owner of a parcel of land in
E. Rod Ave. known as the Violago Property. It was offered for sale to the general public through the
circulation of a sales brochure containing details of the property with the contact person, Meldin Al Roy,
also a private respondent.
Meldin Al Roy sent a sales brochure together with a location plan and a copy of the TCT to Atty. Gelaio
Mamaril, who in turn, sent the same to Antonio Teng (EVP of City) and Atty. Victor P. Villanueva, legal
counsel of the same.
Subsequently, City Lite sent a letter to Meldin Al Roy expressing its intention to purchase 1/2 of the front
lot of Violago Property. After negotiations, they finally agreed to sell the lot to City Lite.
However, despite demands, FP Holdings refused to execute the corresponding deed of sale in favor of
CITY-LITE of the front lot of the property.
City Lite then registered an adverse claim to the title of the property with the Register of Deeds of
Quezon City and demanded from Roy to comply with commitment to CITY-LITE by executing the
proper deed of conveyance of the property under pain of court action.
FP Holdings filed for a cancellation of the adverse claim, and in attempt to settle amicably, its president
offered to sell, in place of the Violago Property, their property in Caloocan and Quezon Boulevard but
CITY-LITE refusing saying that the same did not meet their business needs.
RTC: for City-Lite; the adverse claim has factual basis.
City-Lite then filed an action for specific performance and damages and caused the annotation of the
second notice of lis pendens on the new certificate of title.
After such, the property was transferred to defendant VIEWMASTER CONSTRUCTION CORP. A new
TCT with the annotations was issued in its favor.
The original complaint was amended to implead VIEWMASTER as a necessary party and the Register
of Deeds of Quezon City as nominal defendant with the additional prayer for the cancellation of
VIEWMASTER's certificate of title.
RTC: for CITY-LITE; CA: Reversed. No perfected contract between FP Holdings and City-Lite; Meldin Al
Roy had no authority to sell to them; authority of Roy only limited to being the liaison or contact person.

ISSUE: W/N the contract of sale was perfected between CITY-LITE and FP Holdings through its agent,
Meldin Al Roy? NO
The Court cited Art. 1874 of the CC. "When the sale of a piece of land or any interest therein is through
an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. The Civil Code
requires that an authority to sell a piece of land shall be in writing
Here, the absence of authority to sell can be determined from the written memorandum issued by
respondent F. P. HOLDINGS' President requesting Metro Drug's assistance in finding buyers for the
property. The memorandum in part stated: "We will appreciate Metro Drug's assistance in referring to
us buyers for the property. Please proceed to hold preliminary negotiations with interested buyers and
endorse formal offers to us for our final evaluation and appraisal.
Obviously, FP Holdings meant that Meldin Al G. Roy and/or Metro Drug was only to assist F. P.
HOLDINGS in looking for buyers and referring to them possible prospects whom they were supposed
to endorse to F. P. HOLDINGS. But the final evaluation, appraisal and acceptance of the transaction
could be made only by F. P. HOLDINGS.
RULING: Petition DENIED. CA AFFIRMED.
Cosmic Lumber vs. CA and Isidro Perez

November 29, 1996 | Bellosillo, J.
FACTS:
COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a
Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact to initiate, institute and
file any court action for the ejectment of third persons and/or squatters in its lots.
Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of
private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before RTC
Dagupan.
Later, she entered into a compromise agreement with Perez stating therein that in the interest of peace,
Perez is allowed to buy the property. This compromise agreement was approved by the trial court.
Although the decision became final and executory it was not executed within the 5-year period from
date of its finality allegedly due to the failure of petitioner to produce the owners duplicate copy of the
title needed to segregate the lot sold to Perez under the compromise agreement.
Because of this, Perez filed a complaint to revive the judgment. Petitioner Cosmic Lumber was
summoned for this case.
Petitioner then asserts that it was only when the summons for the revival of judgment was served upon
it that it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and
respondent Isidro Perez. Upon learning so, petitioner sought annulment of the decision of the trial court
before respondent Court of Appeals on the ground that the compromise agreement was void because:
the attorney-in-fact did not have the authority to dispose of, sell, encumber or divest the plaintiff of
its ownership over its real property or any portion thereof
the authority of the attorney-in-fact was confined to the institution and filing of an ejectment case
against third persons/squatters on the property of the plaintiff, and to cause their eviction therefrom
while the special power of attorney made mention of an authority to enter into a compromise
agreement, such authority was in connection with, and limited to, the eviction of third persons/
squatters thereat, in order that the corporation may take material possession of the entire lot
the consideration for the compromise agreement was allegedly not received by the petitioner.
the private defendant acted in bad faith in the execution of said agreement knowing fully well the
want of authority of the attorney-in-fact to sell, encumber or dispose of the real property of plaintiff
the disposal of a corporate property indispensably requires a Board Resolution of its Directors
CA: dismissed complaint. Not one of the grounds for annulment, namely, lack of jurisdiction, fraud or
illegality was shown to exist.
ISSUE: W/N the compromise agreement was void because of the lack of authority on the part of the
attorney-in-fact? YES. VOID.
The authority granted Villamil-Estrada under the special power of attorney was explicit and
exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. 9127 and
443 so that petitioner could take material possession thereof, and for this purpose, to appear at the pre-
trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was
protective of the rights and interests of petitioner in the property. Nowhere in this authorization was
Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion
thereof. Neither can a conferment of the power to sell be validly inferred from the specific authority to
enter into a compromise agreement because of the explicit limitation fixed by the grantor that the
compromise entered into shall only be so far as it shall protect the rights and interest of the corporation
in the aforementioned lots.
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract
for the sale of real estate must be conferred in writing and must give him specific authority, either to
conduct the general business of the principal or to execute a binding contract containing terms and
conditions which are in the contract he did execute.
For the principal to confer the right upon an agent to sell real estate, a power of attorney must so
express the powers of the agent in clear and unmistakable language. When there is any reasonable
doubt that the language so used conveys such power, no such construction shall be given the
document.
It is therefore clear that by selling to respondent Perez a portion of petitioners land through a
compromise agreement, Villamil-Estrada acted without or in obvious authority. The sale ipso jure is
consequently void. So is the compromise agreement. This being the case, the judgment based thereon
is necessarily void.
There was also fraud on the part of Villamil-Estrada when she deliberately concealed from petitioner,
her principal, that a compromise agreement had been forged with the end-result that a portion of
petitioners property was sold to the deforciant, literally for a song. Thus completely kept unaware of its
agents artifice, petitioner was not accorded even a fighting chance to repudiate the settlement so much
so that the judgment based thereon became final and executory.
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable
with and bound by the knowledge of or notice to his agent received while the agent was acting as such.
But the general rule is intended to protect those who exercise good faith and not as a shield for unfair
dealing. Hence there is a well-established exception to the general rule as where the conduct and
dealings of the agent are such as to raise a clear presumption that he will not communicate to the
principal the facts in controversy.
Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive
benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope
of his agency. Indeed, the basic tenets of agency rest on the highest considerations of justice, equity
and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage,
and his act in secret hostility to the interests of his principal transcends the power afforded him.
RULING: for Cosmic Lumber. CA decision SET ASIDE.
San Juan Structural Steel vs. CA

September 29, 1998 | Panganiban, J.
FACTS:
San Juan Structural and Steel Fabricators, Inc. entered into an agreement with defendant-appellee
Motorich Sales Corporation for the transfer to it of a parcel of land
As stipulated in their agreement, SJSSFI paid the down payment in the sum 100K, the balance to be
paid on March 2, 1989.
On March 1, 1989, president of SJSSFI wrote Motorich requesting for a computation of the balance to
be paid. The letter was coursed through Motorichs broker, Linda Aduca who wrote the computation of
the balance
The following day, SJSSFI was ready with the balance covered by a cashiers check. They were
supposedly to meet at the office of SJSSFI, however, the treasurer of Motorich did not appear on the
meeting date.
Despite SJSSFIs repeated demands, Motorich refused to execute Transfer of Rights/Deed of
Assignment which is necessary to transfer the certificate of title
Delos Reyes vs. CA

September 3, 1999 | Gonzaga-Reyes, J.
FACTS:
Private respondent Daluyong Gabriel was the registered owner of a parcel of land in Tagum, Davao del
Norte having acquired the same by hereditary succession sometime in 1974 as one of the children and
heirs of the late Maximo Gabriel.
Because Daluyong Gabriel together with his family was then residing in Mandaluyong, Metro Manila,
his sister Maria Rita Gabriel de Rey acted as administratrix of the said parcel of land and took charge of
collecting the rentals for those portions which have been leased to certain tenants/lessees.
One of these lessees is LYDIA DE LOS REYES who by virtue of a Contract of Lease executed on June
21, 1985 by and between Maria Rita G. de Rey as lessor and Lydia de los Reyes as lessee, leased a
portion of the lot for a term of 1 year.
Sometime in 1985, he sent his son Renato Gabriel to Tagum reportedly with instructions to take over
from Maria Rita G. de Rey as administrator of the said parcel of land. Upon agreement of the parties,
the June 21, 1985 Contract of Lease covering a portion of land was novated and replaced by a
Contract of Lease executed on September 26, 1985 by and between RENATO GABRIEL as Lessor and
Lydia de los Reyes as Lessee. The term of the lease was changed to 6 years from and after June 15,
1985 or up to June 15, 1991; receipt of the payment in advance of the total rental amount of
P14,400.00 was acknowledged by Lessor Renato Gabriel.
Sometime in November 1987, during the effectivity of the lease contract, Lydia de los Reyes verbally
agreed to buy a total of 300sqm of Gabriels property. Receipt of the payment of the purchase price
made in several installments by Lydia de los Reyes was acknowledged by Renato Gabriel as
evidenced by official receipts issued and signed by him.
De los Reyes spouses were constructing a two-storey building on the subject land. When Gabriel found
out, he sent a letter to the spouses demanding they vacate the property as their occupancy is not even
covered by a lease agreement.
Sps. De los Reyes replied explaining that the De los Reyeses are the innocent party who entered into
the lease agreement and subsequent sale of subject portion of land in good faith and upon the
assurance made by the former administratrix, Maria Rita G. Rey, her nephew Tony Rey, Mrs. Fe S.
Gabriel and Mr. Daluyong Gabriel himself that Renato Gabriel is the new administrator authorized to
enter into such agreements involving the subject property.
Gabriel commenced an action against spouses Claudio and Lydia de los Reyes for the recovery of the
subject portion of land alleging in his complaint that his son Renato was never given the authority to
lease nor to sell any portion of his land as his instruction to him (Renato) was merely to collect rentals.
RTC: for Sps. De los Reyes; CA: reversed.
ISSUE: W/N the verbal agreement which petitioners entered into with Renato Gabriel in 1987 involving the
sale of the 300sqm. portion of land registered in the name of Daluyong Gabriel is a valid and enforceable
contract of sale of real property?
By law, a contract of sale is perfected at the moment there is a meeting of minds upon the thing which
is the object of the contract and upon the price. It is a consensual contract which is perfected by mere
consent. However, consent may only be given by those with the legal capacity to do so. It has also
been held that if the vendor is not the owner of the property at the time of the sale, the sale is null and
void, because a person can sell only what he owns or is authorized to sell. One exception is when a
contract entered into in behalf of another who has not authorized it, subsequently confirmed or ratified
the same in which case, the transaction becomes valid and binding against him and he is estopped to
question its legality.
Here, Renato Gabriel was neither the owner of the subject property nor a duly designated agent of the
registered owner (Daluyong Gabriel) authorized to sell subject property in his behalf, and there was
also no sufficient evidence adduced to show that Daluyong Gabriel subsequently ratified Renatos act.
In this connection it must be pointed out that pursuant to Article 1874 of the Civil Code, when the sale of
a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise the sale shall be void. In other words, for want of capacity (to give consent) on the part of
Renato Gabriel, the oral contract of sale lacks one of the essential requisites for its validity prescribed
under Article 1318, and is therefore null and void ab initio.
AF Realty vs. Dieselman Freight

January 16, 2002 | Sandoval-Gutierrez, J.

FACTS:
Dieselman Freight Service Co. is a domestic corporation and a registered owner of a parcel of
commercial lot in E. Rod., Pasig City.
Manuel C. Cruz, Jr., a member of the board of directors of Dieselman, issued a letter denominated as
"Authority To Sell Real Estate to Cristeta N. Polintan, a real estate broker of the CNP Real Estate
Brokerage authorizing her to look for a buyer/buyers and negotiate the sale at 3K/sqm. However, Cruz,
Jr. has no written authority from Dieselman to sell the lot.
Cristeta Polintan, through a letter dated May 19, 1988, authorized Felicisima ("Mimi") Noble to sell the
same lot.
Mimi then offered the sale of the lot to AF Realty at 2.5K/sqm. AF Realty accepted the offer and issued
a check in the amount of 300K payable to the order of Dieselman.
Subsequently, AF Realty confirmed its intention to buy the lot. Hence, Ranullo (president of AF Realty)
asked Polintan for the board resolution of Dieselman authorizing the sale of the property. However,
Polintan was only able to give her the original TCT, he tax declaration and tax receipt for the lot, and a
photocopy of the Articles of Incorporation of Dieselman.
Later, President of Dieselman acknowledged receipt of the said P300,000.00 as "earnest money" but
required AF Realty to finalize the sale at P4,000.00 per square meter. AF Realty replied that it has paid
an initial down payment of P300,000.00 and is willing to pay the balance.
However, on August 13, 1988, Mr. Cruz, Sr. terminated the offer and demanded from AF Realty the
return of the title of the lot earlier delivered by Polintan.
AF Realty filed a complaint for specific performance against Dieselman and Cruz, Jr. alleging that there
has been a perfected contract of sale.
Dieselman, in its answer, alleged that there was no meeting of the minds between the parties in the
sale of the property and that it did not authorize any person to enter into such transaction on its behalf.
Meanwhile, on July 30, 1988, Dieselman and Midas Development Corporation (Midas) executed a
Deed of Absolute Sale of the same property.
TC: for AF Realty; the acts of Cruz, Jr. bound Dieselman in the sale of the lot to AF Realty.
CA: Reversed; the sale was not perfected
ISSUE: Who has better right over the property? MIDAS.

Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations
shall be exercised by the board of directors. Just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its
functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must
be made either by the board of directors or by a corporate agent duly authorized by the board. Absent
such valid delegation/authorization, the rule is that the declarations of an individual director relating to
the affairs of the corporation, but not in the course of, or connected with, the performance of authorized
duties of such director, are held not binding on the corporation.
Here, respondent Cruz, Jr. has no written authority from the board of directors of respondent Dieselman
to sell or to negotiate the sale of the lot, much less to appoint other persons for the same purpose.
ISSUE: W/N the sale was ratified upon the acceptance of the benefits involved (receipt by respondent
Cruz, Jr. from AF Realty of the P300,000.00 as partial payment)? NO.
This is a case of sale through an agent. Thus, the law on agency under the Civil Code takes
precedence. This is well stressed in Yao Ka Sin Trading vs. Court of Appeals:
Since a corporation, such as the private respondent, can act only through its officers and agents, all
acts within the powers of said corporation may be performed by agents of its selection; and, except
so far as limitations or restrictions may be imposed by special charter, by-law, or statutory
provisions, the same general principles of law which govern the relation of agency for a natural
person govern the officer or agent of a corporation, of whatever status or rank, in respect to his
power to act for the corporation; and agents when once appointed, or members acting in their
stead, are subject to the same rules, liabilities, and incapacities as are agents of individuals and
private persons.
Restated 1874. Considering that respondent Cruz, Jr., Cristeta Polintan and Felicisima Ranullo were
not authorized by respondent Dieselman to sell its lot, the supposed contract is void. Being a void
contract, it is not susceptible of ratification.
RULING: For MIDAS. CA AFFIRMED.

III. Who has the obligation to determine existence and scope
of agency?
Keeler Electric Co. vs. Rodriguez

Under what topic: who has the obligation to determine existence and scope of agency
Plaintiff: Harry E. Keeler Electric Co Inc
Defendant: Domingo Rodriguez
Synopsis: Keeler tells Montelibano that he gets commission for every sale of plant he makes. He
finds rodriguez as a buyer. Keeler sends Cenar to deliver, install and make sure it functions. Cenar
brings a statement of account and gives it to Rodriguez who says he will pay at the manila office.
Rodriguez pays Montelibano based on his representation that he is authorized to receive payment.
Keeler now demands payment. Rodriguez says he already paid Montelibano because he is an
agent. Court rules that Montelibano is not an agent and Rodriguez trusting the sole representations
of Montelibano with regard to his authority is at risk. To be released of debt, he has the burden of
proof to show that he paid the creditor or his agent duly authorized to receive payment.
Doctrine: Persons dealing with an assumed agent are bound at their peril to ascertain not only the
fact of agency but the nature and extent of authority, and in case either is controverted, burden of
proof is upon them to establish.
Facts:
- Keeler is a domestic corporation engaged in electrical business and sale of Matthews
electic plant. Rodriguez is a resident of Negros Occidental.
- Montelibano is a resident of Iloilo who approached Keeler at its manila office claiming that
he could find a purchaser for the Matthews plant. Keeler told him that he would get 10%
commission for every sale he could find and would be consummated
- Montelibano interviews defendant and through his efforts, a Matthews plant was sold by
keeler to rodriguez. Plant was shipped by keeler from manila to Iloilo. Rodriguez paid
montelibano. Keeler is now suing for the payment (P2513.55) alleging that they never
received any.
- Lower court ruled in favor of defendant. Keeler now appeals the decision that payment to
montelibano releases the debt of rodriguez to keeler.
- It appears that keeler sent Cenar with the shipment to install it and make sure it functions
properly. Cenar also had with him a statement of accounts. After installing it, he gave the
stamen to rodriguez. He made no attempt to collect because rodriguez told Cenar that he
would pay at the manila office. Rodriguez says on his deposition that it was montelibano
who delivered, installed, and issued the receipt to him, which is why he paid the amount to
montelibano.
-
Issue/s - Holding:
Is rodriguez released from his debt
Ratio:no
- First, rodriguez says montelibano was the one who sold and installed the plant. However,
the receipt he signed shows that the trip of Cenar from manila to Iloilo was part of the price.
If montelibano was the one who sold and installed it, Cenars trip would not have been
necessary.
- Next, the receipt is signed by montelibano without any indication that he is an agent.
Rodriguez only assumed that he is an agent from the representations made by montelibano.
Persons dealing with an assumed agent are bound at their peril to ascertain not only the fact
of agency but the nature and extent of authority, and in case either is controverted, burden
of proof is upon them to establish. Not only must the person dealing with an agent ascertain
the existence of conditions , but he must also be able to trace the source of his reliance to
some word or act of the principal if the latter is to be held responsible. (Mechem on Agency,
volume I, section 743)

Yu Eng Cho vs. Pan America
xxxxx | Puno, J.
Under what topic: Who has the obligation to determine existence and scope of agency?
Petitioner: Yu Eng Cho and Francisco Tao Yu
Respondent: Pan American World Airways Inc, Tourist World Services Inc, Julieta Canilao, Claudia
Tagunicar
Synopsis: After the lower court found Tagunicar liable for damages, plaintiffs sought the reversal of
the decision, contending that Tagunicar was merely acting as the agent of TWSI and Pan Am, which
in turn, should be held liable for the plaintiffs incurring expenses from not being able to take their
flight to San Francisco. The Court dismissed their petition and held that the agency relationship did
not exist between Tagunicar and TWSI and Tagunicar and Pan Am.
Doctrine: It is the party alleging an agency relationship who has the burden of proving agency.
Facts:
Plaintiffs bought the plane tickets from defendant Claudia Tagunicar who represented herself to be
an agent of Tourist World Services Inc (TWSI) to get to the New Jersey:
1. Manila - Hong Kong - Cathay Pacific
2. Hongkong - Tokyo - Cathay Pacific
3. Tokyo - San Francisco - Pan Am (Status: "RQ", meaning "on request")
Before the date of the scheduled departure, defendant Tagunicar received several calls from the
plaintiffs inquiring about the status of their bookings. Tagunicar in turn called up TWSI, through
Julieta Canilao who still could not confirm the flight to San Francisco. When Yu Eng Cho personally
went to her office, pressing her about their flight, she called up Canilao, who allegedly told her "o
sige Claudia, confirm na." It was then that she allegedly attached the confirmation stickers from
TWSI to the tickets.
Plaintiffs left for Hongkong and then for Tokyo. Upon their arrival in Tokyo, they called up Pan-Am
office for reconfirmation of their flight to San Francisco. Said office, however, informed them that
their names are not in the manifest. Because they could not remain in Japan for more than 72
hours, they were constrained to accept airline tickets for Taipei instead, per advise of Japan Airlines
(JAL) officials. This is the only option left to them because Northwest Airlines was then on strike and
the JAL flight to LA was fullybooked. Upon reaching Taipei, there were no flights available for
plaintiffs, thus, they were forced to return back to Manila. JAL refunded the difference of the price
for Tokyo-Taipei and Tokyo-San Francisco. In view of their failure to reach New Jersey, Yu Eng Cho
lost the option to buy the two lines of infra-red heating system for which he was expected to realize
a profit of P300,000.00 to P400,000.00. Thus, he filed for damages against Pan Am, TWSI, Canilao
and Tagunicar.
The RTC held all the parties except Tagunicar liable for actual damages, moral damages,
exemplary damages, atty's fees and litigation expenses. Upon appeal to the CA however, the
appellate court absolved the parties from all liability and ordered Tagunicar to pay for moral
damages, exemplary damages and atty's fees. Hence, this petition.
According to the plaintiffs, Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized
ticketing agent of Pan Am. The existence of the agency relationship has been established by the
judicial admissions allegedly made by respondents, to wit: (1) the admission made by Pan Am in its
Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she
admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao that
TWSI received commissions from ticket sales made by Tagunicar. From this premise, they contend
that TWSI and Pan Am should be held liable as principals for the acts of Tagunicar.
Issue/s - Holding:
WON the agency relationship existed between TWSI, Pan Am and Taguincar - No
Ratio:

By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.The elements of
agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agent acts as a
representative and not for himself; (4) the agent acts within the scope of his authority.Persons
dealing with an assumed 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 authority, and in case either is
controverted, the burden of proof is upon them to establish it. As between the negative
allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the
other, and the affirmative allegation of petitioners that an agency relationship exists, it is the
latter who have the burden of evidence to prove their allegation,failing in which, their claim
must necessarily fail.
Petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized
agent of TWSI. This affidavit, however, has weak probative value.
Respondent Tagunicar testified that her affidavit was prepared and typewritten by the secretary of
petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter
went to see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo
brought his notarial seal and notarized the affidavit of the same day.They never told her that the
affidavit would be used in a case to be filed against her.They even assured her that she would not
be included as defendant if she agreed to execute the affidavit.They assured her that "it is
immaterial"and that "if we file a suit against you we cannot get anything from you."The
circumstances under which said affidavit was prepared put in doubt petitioners' claim that it
was executed voluntarily by respondent Tagunicar.
Respondent Tagunicar categorically denied in open court that she is a duly authorized agent
of TWSI, and declared that she is an independent travel agent.The Court has ruled that in case
of conflict between statements in the affidavit and testimonial declarations, the latter command
greater weight.
Moreover, documents showing sales commission cannot justify the decision that Tagunicar was
paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when she
pays TWSI, she already deducts in advance her commission and merely gives the net
amount to TWSI.From all sides of the legal prism, the transaction is simply a contract of sale
wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her clients.
Dispositive:
WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.
IV. How is agency distinguished from other contracts/

relationships?
A. Master-Servant
Article 1689. Household service shall always be reasonably compensated. Any stipulation that household
service is without compensation shall be void. Such compensation shall be in addition to the house helper's
lodging, food, and medical attendance.
Article 1690. The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary
quarters as well as adequate food and medical attendance.
Article 1691. If the house helper is under the age of eighteen years, the head of the family shall give an
opportunity to the house helper for at least elementary education. The cost of such education shall be a
part of the house helper's compensation, unless there is a stipulation to the contrary.

Article 1692. No contract for household service shall last for more than two years. However, such contract
may be renewed from year to year.
Article 1693. The house helper's clothes shall be subject to stipulation. However, any contract for
household service shall be void if thereby the house helper cannot afford to acquire suitable clothing.
Article 1694. The head of the family shall treat the house helper in a just and humane manner. In no case
shall physical violence be used upon the house helper.
Article 1695. House helpers shall not be required to work more than ten hours a day. Every house helper
shall be allowed four days' vacation each month, with pay.
Article 1696. In case of death of the house helper, the head of the family shall bear the funeral expenses if
the house helper has no relatives in the place where the head of the family lives, with sufficient means
therefor.
Article 1697. If the period for household service is fixed neither the head of the family nor the house helper
may terminate the contract before the expiration of the term, except for a just cause. If the house helper is
unjustly dismissed, he shall be paid the compensation already earned plus that for fifteen days by way of
indemnity. If the house helper leaves without justifiable reason, he shall forfeit any salary due him and
unpaid, for not exceeding fifteen days.
Article 1698. If the duration of the household service is not determined either by stipulation or by the
nature of the service, the head of the family or the house helper may give notice to put an end to the
service relation, according to the following rules:
(1) If the compensation is paid by the day, notice may be given on any day that the service shall end at
the close of the following day;
(2) If the compensation is paid by the week, notice may be given, at the latest on the first business day
of the week, that the service shall be terminated at the end of the seventh day from the beginning of
the week;
(3) If the compensation is paid by the month, notice may be given, at the latest, on the fifth day of the
month, that the service shall cease at the end of the month.
Article 1699. Upon the extinguishment of the service relation, the house helper may demand from the
head of the family a written statement on the nature and duration of the service and the efficiency and
conduct of the house helper.
D. Employer-Employee
Article 1700. The relations between capital and labor are not merely contractual. They are so impressed
with public interest that labor contracts must yield to the common good. Therefore, such contracts are
subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages,
working conditions, hours of labor and similar subjects.
E. Lease of Service
ARTICLE 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work
or to render to the other some service for a price certain, but the relation of principal and agent does not
exist between them. (1544a)
F. Independent Contractor
Article 1714. If the contractor agrees to produce the work from material furnished by him, he shall deliver
the thing produced to the employer and transfer dominion over the thing. This contract shall be governed
by the following articles as well as by the pertinent provisions on warranty of title and against hidden
defects and the payment of price in a contract of sale. (n)
G. Trust
Article 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as
regards property for the benefit of another person is known as the trustee; and the person for whose benefit
the trust has been created is referred to as the beneficiary.

H. Sale
Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the
ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its
equivalent.
A contract of sale may be absolute or conditional. (1445a)
I. Partnership
Article 1767. By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing the profits among themselves.
Two or more persons may also form a partnership for the exercise of a profession. (1665a)
J. Negotiorium gestio/quasi-contract
Article 2144. Whoever voluntarily takes charge of the agency or management of the business or property
of another, without any power from the latter, is obliged to continue the same until the termination of the
affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to
do so. This juridical relation does not arise in either of these instances:
(1) When the property or business is not neglected or abandoned;
(2) If in fact the manager has been tacitly authorized by the owner. In the first case, the provisions of
articles 1317, 1403, No. 1, and 1404 regarding unauthorized contracts shall govern. In the second
case, the rules on agency in Title X of this Book shall be applicable. (1888a)
Article 2145. The officious manager shall perform his duties with all the diligence of a good father of a
family, and pay the damages which through his fault or negligence may be suffered by the owner of the
property or business under management.
The courts may, however, increase or moderate the indemnity according to the circumstances of each
case. (1889a)
I. Judicial Administrator
J. Broker
Sevilla vs. CA
April 16, 1988 | Sarmiento, J.
FACTS:
Tourist World Services, Inc. (TWS) leased the premises belonging to Segundina Noguera to be used as
a branch office. Sevilla held herself solidarily liable with TWS for the payment of the rent.
When the branch office was opened, it was run by Sevilla payable to TWS by any airline for any fare
brought in through the efforts of Sevilla, 4% would go to Sevilla and 3% was to be withheld by TWS.
When TWS was informed that Sevilla was connected with a rival firm, Philippine Travel Bureau, and
since the branch was losing, TWS considered closing down its office.
The contract of lease was terminated. Canilao, the corporate secretary of TWS, went over to the branch
and padlocked the premises to protect the interests of TWS.
Sevilla and her employees could not enter. Sevilla filed for mandatory preliminary injunction which the
trial court dismissed without prejudice.
Sevilla filed an appeal, and one of her claims was that the trial court erred in holding that Sevillas
arrangement with TWS was a mere employer-employee relation and not a joint business venture.
She supports this claim by declaring that she was signatory to the lease contract and was solidarily
liable with TWS for the prompt payment of the rent, that she did not receive any salary from TWS and
that she earned commissions for her own passengers, her own bookings and her own business
obtained from airline companies (She shared the 7% commission she got from the airline companies
with TWS).
The CA affirmed the decision of the trial court.
ISSUE relevant to our topic: What was the nature of the relation between Sevilla and TWS? PRINCIPAL-
AGENT relationship.

It was not an employer-employee relation. Sevilla was not subject to control by TWS either as to the
result or as to the means used. Her binding herself to be solidarily liable with TWS belies the claims of a
master-servant relationship. Furthermore, Sevilla was not in the companys payroll.
It was not a joint venture. A joint venture, including a partnership, presupposes generally a of standing
between the joint co-venturers or partners, in which each party has an equal proprietary interest in the
capital or property contributed and where each party exercises equal rights in the conduct of the
business. furthermore, the parties did not hold themselves out as partners, and the building itself was
embellished with the electric sign "Tourist World Service, Inc. in lieu of a distinct partnership name.
It is a principal-agent relationship. Sevilla solicited airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept
of commissions. And as we said, Sevilla herself pre-assumed her principal's authority as owner of the
business undertaking. But unlike simple grants of a power of attorney, the agency that in this case
cannot be revoked at will because it is one coupled with an interest, the agency having been created for
mutual interest of the agent and the principal. It appears that Lina Sevilla is a bona fide travel agent
herself, and as such, she had acquired an interest in the business entrusted to her. Moreover, she had
assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment
of rentals. She continued the business, using her own name, after Tourist World had stopped further
operations. Her interest, obviously, is not to the commissions she earned as a result of her business
transactions, but one that extends to the very subject matter of the power of management delegated to
her. It is an agency that cannot be revoked at the pleasure of the principal.
Accordingly, the revocation complained of should entitle the petitioner, Lina Sevilla, to damages.
EXTRA: The Court is convinced that there is some malevolent design to put Sevilla in a bad light. There
was no proof that the branch was losing and the padlocking was done 6 months after (rebuttal to the
interest of the company argument of TWS).
Shell vs. Firemens Insurance Co.

January 29, 1957 | Padilla, J.
FACTS:
Plymounth car owned by Salvador R. Sison was brought to the Shell Gasoline and Service Station in
Manila for washing, greasing and spraying. The operator of the station, having agreed to do service
upon payment of P8.00, the car was placed on a hydraulic lifter under the direction of the personnel of
the station.
The car was put in the lifter and was lifted at about 6ft high. When the washing was done, it was
supposed to be greased. However, the greasing men could not reach it so they had to loosen the lifter a
bit to lower it. While the air was being released in order to lower the lifter, the car fell.
The case was immediately reported to the Manila Adjustor Company, the adjustor of the firemen's
Insurance Company and the Commercial Casualty Insurance Company, as the car was insured with
these insurance companies.
The owner of the car forthwith notified the insurers who ordered their adjustor, the Manila Adjustor
Company, to investigate the incident and after such investigation the damaged car, upon order of the
insures and with the consent of the owner, was brought to the shop of the Philippine Motors, Inc.
The car was restored to running condition after a payment of a consideration of 1.6K shouldered by the
insurance company.
The insurance company the owner of the car brought an action against the Shell Company of the
Philippines, Ltd. and Porfirio de la Fuente (operator of the gasoline and service station) to recover from
them, jointly and severally, the sum of P1,651.38, interest thereon at the legal rate.
CFI: dismissed; CA: reversed, sentenced Shell to pay for damages prayed for.
ISSUE: W/N Shell is liable for the damages prayed for? YES.
De la Fuente was an agent of the company and not an independent contractor taking into consideration
that he owed his position to the company and the latter could remove him or terminate his services at
will; that the service station belonged to the company and bore its tradename and the operator sold
only the products of the company; that the equipment used by the operator belonged to the company
and were just loaned to the operator and the company took charge of their repair and maintenance; that
an employee of the company supervised the operator and conducted periodic inspection of the
company's gasoline and service station; that the price of the products sold by the operator was fixed by
the company and not by the operator; and that the receipt signed by the operator indicated that he was
a mere agent.

To determine the nature of a contract courts do not have or are not bound to rely upon the name or title
given it by the contracting parties, should there be a controversy as to what they really had intended to
enter into, but the way the contracting parties do or perform their respective obligation stipulated or
agreed upon may be shown and inquired into, and should such performance conflict with the name or
title given the contract by the parties, the former must prevail over the latter.
As the act of the agent or his employees acting within the scope of his authority is the act of the
principal, the breach of the undertaking by the agent is one for which the principal is answerable.
Moreover, the company mechanic failed to make a thorough check up of the hydraulic lifter and the
check up made by its mechanic was "merely routine which is negligent, and thus, as the employer,
Shell should be liable for the negligent act of the mechanic.
Dela Cruz vs. Northern Theatrical Enterprises

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

these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation
Act.
But a case involving damages caused to an employee by a stranger or outsider while said
employee was in the performance of his duties, presents a novel question which under present
legislation we are neither able nor prepared to decide in favor of the employee. In a case like the
present or a similar case of say a driver employed by a transportation company, who while in the
course of employment runs over and inflicts physical injuries on or causes the death of a
pedestrian; and such driver is later charged criminally in court, one can imagine that it would be to
the interest of the employer to give legal help to and defend its employee in order to show that the
latter was not guilty of any crime either deliberately or through negligence, because should the
employee be finally held criminally liable and he is found to be insolvent, the employer would be
subsidiarily liable. It is to the interest of the employer to render legal assistance to its employee. But
we are not prepared to say and to hold that the giving of said legal assistance to its employees is a
legal obligation.
Damage suffered by reason of the expenses incurred by him in remunerating his lawyer, is not
caused by his act of shooting to death the gate crasher but rather by the filing of the charge of
homicide which made it necessary for him to defend himself with the aid of counsel. Had no criminal
charge been filed against him, there would have been no expenses incurred or damage suffered.
So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge,
possibly at the instance of the heirs of the deceased gate crasher and by the State through the
Fiscal.
We fail to see now this responsibility can be transferred to the employer who in no way intervened,
much less initiated the criminal proceedings and whose only connection or relation to the whole
affairs was that he employed De La Cruz to perform a special duty or task, which task or duty was
performed lawfully and without negligence.
Judgment of the lower court is affirmed.
Neilson & Co. vs. Lepanto Consolidated

December 17, 1966 | Zaldivar, J.
FACTS:
Operating agreement between Nielson and Co., Inc and Lepanto Consolidated Mining Company,
whereby the former operated and managed the latters mining property.
Contract was entered into on Jan. 30, 1937, for five years, with an option to renew for the same term on
the same basis. Contract was renewed in 1941.
Dec. 1941 WW II
Jan. 1942 mining operations ceased.
Feb. 1942 mills, plants and other property were destroyed and occupied by the Japanese Army.
1945 Japanese forces are ousted and parties regain control of the property.
1945 disagreement between Nielson and Lepanto as to w/n contract is to expire in 1947.
June 26, 1948 mining operations officially resumed under Lepanto.
Terms of the contract: Both parties to this agreement fully recognize that the terms of this Agreement
are made possible only because of the faith or confidence that the Officials of each company have in
the other; therefore, in order to assure that such confidence and faith shall abide and continue,
NIELSON agrees that LEPANTO may cancel this Agreement at any time upon ninety (90) days written
notice, in the event that NIELSON for any reason whatsoever, except acts of God, strike and other
causes beyond its control, shall cease to prosecute the operation and development of the properties
herein described, in good faith and in accordance with approved mining practice.
Nielson contends that the contract was suspended and should be extended.
Lepanto contends that the contract expired in 1947 and that period of suspension did not extend the
contract.
CFI in Manila: held for the defendant, Lepanto.
Nielsen appealed to the SC and the SC reversed the decision of the CFI; It held that the contract was
suspended until Jan. 26, 1948, when mining operations resumed.
Lepanto seeks for motion for reconsideration on the ground that the contract entered into was a
contract of agency which was effectively revoked and terminated in 1945.
ISSUE: W/N management contract be considered a contract of agency and therefore effectively revoked
and terminated. NO
the SC held that this ground of the motion for reconsideration be brushed aside. It is the rule, and the
settled doctrine of this Court, that a party cannot change his theory on appeal-that is, that a party
cannot raise in the appellate court any question of law or of fact that was not raised in the court below
or which was not within the issue made by the parties in their pleadings
(Obiter) Even if allowed, it cannot be sustained. It is the SCs view that the management contract is not
a contract of agency but a contract of lease of services hence cannot be unilaterally revoked
Article 1709 of the Old Civil Code, defining contract of agency, provides that "By the contract of agency,
one person binds himself to render some service or do something for the account or at the request of
another." Article 1544, defining contract of lease of service, provides that "In a lease of work or
services, one of the parties binds himself to make or construct something or to render a service to the
other for a price certain."
In both agency and lease of services one of the parties binds himself to render some service to the
other party.
Agency, however, is distinguished from lease of work or services in that the basis of agency is
representation, while in the lease of work or services the basis is employment. The lessor of
services does not represent his employer, while the agent represents his principal. Further, agency is a
preparatory contract, as agency "does not stop with the agency because the purpose is to enter
into other contracts." The most characteristic feature of an agency relationship is the agent's power
to bring about business relations between his principal and third persons. "The agent is destined
to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of
services contemplate only material (non-juridical) acts."
Herein, the principal and paramount undertaking of Nielson under the management contract was the
operation and development of the mine and the operation of the mill. All the other undertakings
mentioned in the contract are necessary or incidental to the principal undertaking these other
undertakings being dependent upon the work on the development of the mine and the operation of the
mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts
for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third
persons. In other words, in performing its principal undertaking Nielson was not acting as an agent of
Lepanto, in the sense that the term agent is interpreted under the law of agency, but as one who was
performing material acts for an employer, for a compensation.
It is true that the management contract provides that Nielson would also act as purchasing agent of
supplies and enter into contracts regarding the sale of mineral, but the contract also provides that
Nielson could not make any purchase, or sell the minerals, without the prior approval of Lepanto. It is
clear, therefore, that even in these cases Nielson could not execute juridical acts which would bind
Lepanto without first securing the approval of Lepanto.
Nielson, then, was to act only as an intermediary, not as an agent. Further, from the statements in the
annual report for 1936, and from the provision of paragraph XI of the Management contract, that the
employment by Lepanto of Nielson to operate and manage its mines was principally in consideration of
the know-how and technical services that Nielson offered Lepanto. The contract thus entered into
pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating contract". It
was not a contract of agency. Nowhere in the record is it shown that Lepanto considered Nielson as its
agent and that Lepanto terminated the management contract because it had lost its trust and
confidence in Nielson.
Quiroga vs. Parsons Hardware

August 23, 1918 | Avancea, J.
FACTS:
a contract was entered into by and between the plaintiff and J. Parsons for the exclusive sale of
quiroga beds in the Visayan Island. The contract provides:
ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J.
Parsons under the following conditions:
(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in
Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila + 25 per cent
discount of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by
the dozen
(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within 60 days from the
date of their shipment.

Argument of Plaintiff: defendant violated the following obligations (a) not to sell the beds at higher
prices than those of the invoices; (b) to have an open establishment in Iloilo; (c) itself to conduct the
agency; (d) to keep the beds on public exhibition, and (e) to pay for the advertisement expenses fo the
same; and to order the beds by the dozen and in no other manner. Some of these obligations were not
set forth in the contract but the plaintiff alleged that the defendant was his agent for the sale of his beds
in Iloilo, and that said obligations are implied in a contract of commercial agency.
ISSUE WON the defendant, by reason of the contract, was a purchaser or an agent of the plaintiff for the
sale of his bed.
HELD
The contract is one of PURCHASE AND SALE. - In the contract in question, what was essential, as
constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds
which the latter might order, at the price stipulated, and that the defendant was to pay the price in the
manner stipulated.
The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with
a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of
sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last
two cases an additional discount was to be allowed for prompt payment. These are precisely the
essential features of a contract of purchase and sale.
DISTINCTION: PURCHASE AND SALE (case at bar): There was the obligation on the part of the
plaintiff to supply the beds, and, on the part of the defendant, to pay their price. AGENCY or
order to sell: whereby the mandatory or agent received the thing to sell it, and does not pay its
price, but delivers to the principal the price he obtains from the sale of the thing to a third
person, and if he does not succeed in selling it, he returns it. By virtue of the contract between
the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay
their price within the term fixed, without any other consideration and regardless as to whether
he had or had not sold the beds.
Not a single one of these clauses necessarily conveys the idea of an agency. The words commission
on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere
discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the
defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the
remaining clauses, the least that can be said is that they are not incompatible with the contract of
purchase and sale.
The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that,
without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant
received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the
most only shows that, on the part of both of them, there was mutual tolerance in the performance of the
contract in disregard of its terms; and it gives no right to have the contract considered, not as the
parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to,
and in connection with, the execution of the contract, must be considered for the purpose of interpreting
the contract, when such interpretation is necessary, but not when its essential agreements are clearly
set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore,
the return made was of certain brass beds, and was not effected in exchange for the price paid for
them, but was for other beds of another kind; and requested the plaintiff's prior consent with respect to
said beds, which shows that it was not considered that the defendant had a right, by virtue of the
contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in
the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the
plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they
merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds
sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the
contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered
as a result of that advertisement.
Gonzalo Puyat & Sons vs. Arco Amusement Co.

Ponente: Laurel
Petitioner: Gonzalo Puyat & Sons
Respondent: Arco Amusement Co.
Under what topic: How is agency distinguished from other contracts/relationships?

Synopsis: Respondent was engaged in the business of operating a cinematograph. Puyat was acting as
exclusive agent in the Philippines for Starr Piano Company. Arco purchased sound reproducing devices from
Puyat. Arco ordered the equipment and paid a 10% commission plus all expenses. Arco discovered that the
price quoted to them with regard to their orders was not the net price but rather the list price and that Puyat
was able to purchase at a discount. They sought a reduction from Puyat. SC held that Arco is not entitled to
reimbursement since the contract between Gonzalo and Arco is a contract of sale and that Arco agreed to the
purchase price.
Doctrine: There can be no agency where the person is both the agent of the vendor and the purchaser.
Facts:
1. Respondent Arco Amusement Company (formerly known as Teatro Arco) is engaged in the business of
operating cinematographs.
2. Petitioner Gonzalo Puyat & Sons, Inc. (GPSI) was acting as exclusive agent in the Philippines for the
Starr Piano Company of Richmond, Indiana, U.S.A (Starr).
3. Arco approached GPSI, and after some negotiations, it was agreed between the parties that GPSI would,
on behalf of Arco, order sound reproducing equipment from Starr and that Arco would pay the price for the
equipment + 10% commission and all other expenses (freight, insurance, banking charges, cables, etc.).
4. GPSI sent a cable to Starr inquiring about the equipment desired and asking for a price quotation without
discount. Starr replied with the list price of $1,700 FOB Factory Richmond, Indiana. GPSI merely informed
the respondent of the $1,700 price and did not disclose the cable of inquiry nor the reply. Arco, by means
of a letter, formally authorized the order.
5. Two orders were made with an interval of one year. The first order was priced at $1,700 + 10%
commission and all other expenses while the second order was priced at $1,600 + 10% commission and
all other expenses. Both orders were formalized through a signed letter (Exhibit 1 and 2).
6. 3 years later, Arco discovered in another civil case involving GPSI that the sum they paid for the 2 orders
were not the net price but a list a price and plaintiff had a discount with Starr. Officials of Arco were
convinced that the prices charged them by GPSI were much too high including the charges for out-of-
pocket expenses.
7. Arco sought to obtain a reimbursement from the GPSI but when they failed, they brought the present
action.
8. TC dismissed the complaint because the contract between the parties was a valid purchase and sale.
9. CA reversed the decision and held that the petitioner was acting as an agent of respondent in the
purchase of equipment.
Issue/s - Holding: W/N GPSI was acting as an agent of Arco Amusement Co. NO. The contract between
the parties was a contract of sale.
Ratio:
- The contract is the law between the parties and should include all the things they are supposed to have
been agreed upon. What does not appear on the face of the contract should be regarded merely as
dealers or traders talk
- The letters (exhibits 1 and 2) are clear in their terms and admit of no other interpretation than that
respondent agreed to purchase from petitioner the equipment at a fixed and determinate price of $1,700
and $1,600 respectively.
- Whatever unforeseen events might have taken place unfavorable to the petitioner (change in prices,
mistake in their quotation, loss of the goods not covered by insurance or failure of Starr to properly fill the
orders as per specifications) the respondent might still hold the petitioner to the prices fixed of $1700 and
$1,600.
This is incompatible in agency, because in agency, the agent is exempted from all liability in the
discharge of his commission provided he acts in accordance with the instructions received
from his principal (Sec. 254, Code of Commerce), and the principal must indemnify the agent for
all damages which the latter may incur in carrying out the agency without fault or imprudence on his
part (Art. 1729, Civil Code).
The 10% commission does not necessarily make the petitioner an agent of respondent, as this
provision is only an additional price respondent bound itself to pay. This stipulation is not
incompatible with the contract of purchase and sale
- To hold the petitioner an agent of the respondent in the purchase of equipment and machinery is
incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the
Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser.
- The facts point to the plain ordinary transaction where the respondent enters into a contract of purchase
and sale with the petitioner, the latter as the exclusive agent of Starr Piano Company in the US.
- Petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the
cost price and the sales price which represents the profit realized by the vendor out of the transaction.

- Arco contends that it merely agreed to pay the cost price as distinguished from the list price, plus 10%
commission and all out-of-pocket expenses incurred by the GPSI. The distinction drawn by Arco is
spacious. The 25% discount granted by Starr to Arco is available only to the latter as the formers exclusive
agent in the Philippines.
- Moreover, GPSI was not duty bound to reveal to Arco the private arrangement it had with Starr relative to
such discount to its prospective customers, and Arco was not even aware of such an arrangement. Arco,
therefore, could not have offered to pay a 10% commission to GPSI provided it was given the benefit of the
25% discount enjoyed by GPSI.
- It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount
from the home office, sometimes add to the list price when they resell to local purchasers.
- If Arco later on discovers itself at the short end of a bad bargain, it alone must bear the blame, and it cannot
rescind the contract, much less compel a reimbursement of the excess price, on that ground alone.
Dispositive: CA decision is reversed.
Lim vs. People

Ponente: Avancena, J
Petitioner: Lourdes Valerio Lim
Respondent: People of the Philippines
Under what topic: IV. How is Agency distinguished from other contracts/relationships
Synopsis:
Doctrine:
Facts:
- Lim is a businesswoman. She went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco.
Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615 kilos at P1.30 a
kilo. The appellant was to receive the overprice for which she could sell the tobacco.
EXHIBIT A: To Whom It May Concern:
- This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva
Ecija, six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount
of Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was
sold.
This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the
latter's maid, Genoveva Ruiz.
- Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three
different times. Demands for the payment of the balance of the value of the tobacco were made but even
trips to Lims camarin proved futile because the same was empty.
- Lim was found guilty by the Trial Court and Court of Appeals of the crime of estafa
Issue/s: WON the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject
tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding
criminal liability of petitioner for the crime charged. (YES -contract of agency)
Held-Ratio:
- It is clear in the agreement that the proceeds of the sale of the tobacco should be turned over to the
complainant as soon as the same was sold, or, that the obligation was immediately demandable as soon
as the tobacco was disposed of. Hence, Article 1197 of the New Civil Code, which provides that the
courts may fix the duration of the obligation if it does not fix a period, does not apply.
- The Court quoted the CA: Aside from the fact that Maria Ayroso testified that the appellant asked her to
be her agent in selling Ayroso's tobacco, the appellant herself admitted that there was an agreement that
upon the sale of the tobacco she would be given something. The appellant is a businesswoman, and it is
unbelievable that she would go to the extent of going to Ayroso's house and take the tobacco with a jeep

which she had brought if she did not intend to make a profit out of the transaction. Certainly, if she was
doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her tobacco, it would not
have been the appellant who would have gone to the house of Ayroso, but it would have been Ayroso
who would have gone to the house of the appellant and deliver the tobacco to the appellant.
- The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to
complainant as soon as it was sold, strongly negates transfer of ownership of the goods to the petitioner.
The agreement (Exhibit "A') constituted her as an agent with the obligation to return the tobacco if the
same was not sold.
Dispositive: The petition for review on certiorari is dismissed for lack of merit.
Pacific Commercial vs. Yatco

Under what topic: IV. How is agency distinguished from other contracts/relationships? J. Broker
plaintiff-appellant: PACIFIC COMMERCIAL COMPANY
defendant-appellee: ALFREDO L. YATCO
Synopsis: Pacific looks for purchasers for the sugar manufactured by Victoria Milling Co. Delivery
is either ex-warehouse, where Pacific acts as a commission merchant, or ex-ship, where it acts as a
broker. In either kind of delivery, taxed is imposed upon Pacific Similarly, Victoria Milling is taxed for
the same purchases made. Issue on double taxation. Court: no double taxation wrt to Pacifics
capacity as commission merchant; what is taxed against Pacific and Victoria Milling, respectively, is
upon their occupation or industry, not upon the property or products. As commission merchant,
Pacific gains and retains possession of the sugar until sold. There is double taxation for delivery ex-
ship bec Pacific, as a broker, merely acts as intermediary between purchaser and Victoria Milling;
Pacific has no relation with the thing sold.
Doctrine: The broker, unlike the commission merchant, has no relation with the thing he sells or
buys. He is merely an intermediary between the purchaser and the vendor
Facts:
The plaintiff sold for the account of Victorias Milling Co. refined sugar manufactured by the said
corporation. Victorias Milling Co., paid to the Collector of Internal Revenue for this sale the amount
of P16,944.90 as merchant sales tax in its capacity as manufacturer and owner of the sugar sold.
Notwithstanding this payment made by Victorias Milling Co., the Collector of Internal Revenue also
collected from the plaintiff the same tax for the same amount of P16,944.90.
The sales of this sugar were made by the plaintiff in two ways. The plaintiff looked for purchasers of
thesugar,and once thecorresponding purchase order is obtained from them, thesameis sent to the
office of Victorias Milling Co., with instructions to ship the sugar thus ordered to Manila, Cebu or
Iloilo,as thecase may be. At times, the purchase is made for the delivery of the sugar ex-warehouse
of the plaintiff and at other times for delivery ex-ship.
Pacific assailed the merchant sales tax.
Lower court: ordered the defendant to

return to the plaintiff the amount collected from it, by way of tax on the sale of sugar to be delivered
ex-ship, and denied the prayer in the complaint for the return of the amount paid for the sales of
sugar to be delivered ex warehouse.
Issue/s - Holding:
(a) whether there is double taxation in the present case;
(b) whether the plaintiff acted as a commission merchant as to the sugar delivered ex-warehouse;
(c) whether the plaintiff acted as a mere commercial broker as to the sugar delivered ex-ship
Ratio:
(a) No, this is not a case of double taxation, because the tax is not upon property or products, but
upon occupation or industry. The tax was paid in consideration of the occupation or industry in
which each is engaged. The value of the thing sold is taken into account only as a basis for the
fixing of the amount of the tax and not as the reason and purpose thereof.
(b) A commission merchant is one engaged in the purchase or sale for another of personal property
which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not
only with his principal and the purchasers or vendors, but also with the property which is the subject
matter of the transaction. Here, the sugar was shipped by Victorias Milling Co.,and upon arrival at
the port of destination, the plaintiff received and transferred it for deposit in its warehouses until the
purchaser called for it. The deposit of the sugar in the warehouses of the plaintiff was made upon its
own account and at its own risk until it was sold and taken by the purchaser. Thus, after taking the
sugar on board until it was sold, had it in its possession and at its own risk, Pacific is deemed a
commission merchant.
(c) The broker, unlike the commission merchant, has no relation with the thing hesells or buys. He is
merely an intermediary between the purchaser and the vendor. He acquires neither the possession
nor the custody of the things sold. His only office is to bring together the parties to the transaction.
These circumstances are present in connection with the plaintiff's sale of the sugar which was
delivered to the purchaser's exship. The sugar sold under these conditions was shipped by the
plaintiff at its expense and risk until it reached its destination, where it was later taken ex-ship by the
purchaser. The plaintiff never had possession of the sugar at any time. The circumstance that the
bill of lading was sent to the plaintiff does not alter its character of being merely a broker, or
constitute possession by it of the sugar shipped , inasmuch as thesame was sent to it for thesole
purpose of turning it over to the purchaser for the collection of the price. The sugar did not come to
its possession in any sense.
Dispositive:
Affirm
Digesters notes:
Separate opinion deals wholly on double taxation issue.
Ker vs. Lingad

Under what topic: IV. How is Agency distinguished from other contracts/relationships?
Petitioner: KER & CO., LTD.
Respondent: JOSE B. LINGAD, as Acting Commissioner of Internal Revenue
Synopsis: [This case helps distinguish a Contract of Agency from that of Sale.] Ker and Co. Ltd (Ker)
entered into an agreement with United States Rubber International (USRI) whereby Ker would distribute
the latters goods in specific areas in the Philippines. USRI retained ownership and had pervasive control
over the goods delivered to Ker. The Commissioner of Internal Revenue assessed Ker to pay P20,272.33
as commercial brokerage tax. This was affirmed by the CTA. Ker sought to exempt itself from such tax by
arguing that what was established was a vendor-vendee relationship instead of a principal-broker one. The
SC affirmed the CTA applying CIR v. Constantino. SC said that since the company retained ownership of
the goods, and controlled the price and the terms subject to it, the relationship of USRI and Ker is one of
agency.
Doctrine: (JBL in CIR v. Constantino): "Since the company retained ownership of the goods, even as it
delivered possession unto the dealer for resale to customers, the price and terms of which were subject to
the company's control, the relationship between the company and the dealer is one of agency, ... ";
(Salisbury v. Brooks, cited in CIR v. Commissioner): if the transfer of title puts the transferee in the attitude
or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not
merely as an agent who must account for the proceeds of a resale, it is a sale; while the essence of an
agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who
remains the owner and has the right to control sales, fix the price and terms, demand and receive the
proceeds less the agents commission upon sales made.
Facts:
USRI and Ker entered into an agreement wherein Ker was to sell USRIs goods in the Philippines.

USRI retained ownership of the goods and held pervasive control over them. The following was
contained in the consignment agreement:
the goods were to be sold in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except
the province of Davao, Ker was precluded from selling anywhere else without the consent of USRI
every effort shall be made by petitioner to promote in every way the sale of the products; that sales
made by petitioner are subject to approval by the company
on dates determined by USRI, Ker shall render a detailed report showing sales during the month
USRI shall invoice the sales as of the dates of inventory and sales report; that the rubber company
agrees to keep the consigned goods fully insured under insurance policies payable to it in case of
loss
upon request of USRI at any time, petitioner shall render an inventory of the existing stock which may
be checked by an authorized representative of the former
upon termination or cancellation of the Agreement, all goods held on consignment shall be held by
petitioner for the account of the rubber company until their disposition is provided for by the latter
CIR assessed Ker with P20,272.33 brokerage tax
CTA affirms but reduced the amount to P19,772.33 (P500 compromise penalty)
Issue/s - Holding:
WoN the relationship of USRI and Ker is one of Vendor-Vendee and not of Principal-Broker
Principal- Broker, thus Ker is taxable, CTA affirmed.
Ratio:
The CTA decision under review conforms to and is in accordance with the controlling doctrine announced
in the case of Commissioner of Internal Revenue v. Constantino, which relied on Salisbury v. Brooks .
(See Doctrine)
Basically, since USRI retained ownership of the goods and had pervasive control over them and its terms
and conditions, there was a contract of agency. How much control? See the following (optional reading
since the gist is in the facts):
"That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International
is borne out by the facts that petitioner can dispose of the products of the Company only to certain
persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber
Company (Par. 2); that it merely receives, accepts and/or holds upon consignment the products,
which remain properties of the latter company (Par. 8); that every effort shall be made by petitioner to
promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to
approval by the company (Par. 12); that on dates determined by the rubber company, petitioner shall
render a detailed report showing sales during the month (Par. 14); that the rubber company shall
invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company
agrees to keep the consigned goods fully insured under insurance policies payable to it in case of
loss (Par. 15); that upon request of the rubber company at any time, petitioner shall render an
inventory of the existing stock which may be checked by an authorized representative of the former
(Par. 15); and that upon termination or cancellation of the Agreement, all goods held on consignment
shall be held by petitioner for the account of the rubber company until their disposition is provided for
by the latter (Par. 19). All these circumstances are irreconcilably antagonistic to the idea of an
independent merchant."
Dispositive:
WHEREFORE, the Court of Tax Appeals decision of October 19, 1962 is affirmed. With costs against
petitioner.
Digesters Notes:
The Agreement contained the clause It is further agreed that this agreement does not constitute Distributor
(Ker) the agent or legal representative of the Company (USRI) for any purpose whatsoever. Distributor is
not granted any right or authority to assume or to create any obligation or responsibility, express or implied,
in behalf of or in the name of the Company, or to bind the Company in any manner or thing whatsoever."
Ker tried to argue this clause did not make them an agent of USRI. SC said this assertion was wrong since
when the whole instrument is taken into account, it is clear that there is an agency relationship. "It would
be, however, to impart to such an express disclaimer a meaning it should not possess to ignore
what is manifestly the role assigned to petitioner considering the instrument as a whole. That
would be to lose sight altogether of what has been agreed upon.
Hahn vs. CA and BMW

January 22, 1997 | Mendoza, J.
FACTS:
Alfred Hahn is a Filipino citizen doing business under the name and style Hahn-Manila." He executed a
"Deed of Assignment with Special Power of Attorney," in favor of BMW.
It provided that BMW assigns that right to take appropriate steps against any user, other than Hahn, or
infringer of the BMW trademark in the Philippines.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without a
formal contract. However, subsequently, Hahn was informed that BMW was arranging to grant the
exclusive dealership of BMW cars and products to Columbia Motors Corporation (CMC), which had
expressed interest in acquiring the same.
Hahn later received a letter form BMW confirming such and stating its dissatisfaction in Hahns
performance. Nonetheless, BMW expressed willingness to continue business relations with the
petitioner on the basis of a "standard BMW importer" contract, otherwise, it said, if this was not
acceptable to petitioner, BMW would have no alternative but to terminate petitioner's exclusive
dealership effective June 30, 1993.
Hahn protested this. He claims that the termination of his exclusive dealership is a breach of the Deed
of Assignment. Hahn insisted that as long as the assignment of its trademark and device subsisted, he
remained BMW's exclusive dealer in the Philippines because the assignment was made in
consideration of the exclusive dealership.
Because of Hahns insistence, BMW withdrew on March 26, 1993 its offer of a "standard importer
contract" and terminated the exclusive dealer relationship.
Sometime later, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found this unacceptable. He filed a complaint for specific performance and damages against
BMW to compel it to continue the exclusive dealership.
CA: Dismissed. Ruled that BMW was not doing business in the country and, therefore, jurisdiction over
it could not be acquired through service of summons on the DTI
ISSUE: W/N Hahn was an agent or distributor of BMW in the Philippines? AGENT.
An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made.
According to Hahn, BMW periodically inspected the service centers to see to it that BMW standards
were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure
to maintain BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not
necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record
which suggest that BMW exercised control over Hahn's activities as a dealer and made regular
inspections of Hahn's premises to enforce compliance with BMW standards and specifications.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even
as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines.

Agency and Partnership

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Agency and Partnership

Hochgeladen von

Copyright:

Verfügbare Formate

Agency and Partnership

Prof. Dionne Marie M. Sanchez

The Law on Agency

Mac Tongson | D2019 1 of 33

Art. 1868, NCC (supra.)

Agency, being in the nature of a contract requires consent.

Art. 1875, NCC

B. Who are the parties to the contract of agency?

C. Must the parties be capacitated?

Rallos vs. Felix Go Chan

RULING: reversed CA. Sale was void.

Orient Air Services vs. CA and American Airlines

ISSUE: W/N Orient Air is entitled to the 3% overriding commission? YES.

Mac Tongson | D2019 6 of 33

RULING: Petition is denied; Agents are not real parties-in-interest

Macke vs. Camps

ISSUE: W/N Flores was an agent of the principal? YES.

RULING: Flores is an agent of Camps

Prudential Bank vs. CA

Mac Tongson | D2019 8 of 33

RULING: Petition DENIED. Bank is liable for breach of contract.

Litonjua, Jr. vs. Eternit Corp.

ISSUE: W/N EC ratified the transactions? NO

Mac Tongson | D2019 10 of 33

II. What is the form of contract of agency?

Angeles vs. Philippine National Railways

Jimenez vs. Rabot

Mac Tongson | D2019 12 of 33

RULING: for Rabot. Lower court REVERSED.

City-Lite Realty vs. CA

Mac Tongson | D2019 13 of 33

RULING: Petition DENIED. CA AFFIRMED.

Cosmic Lumber vs. CA and Isidro Perez

RULING: for Cosmic Lumber. CA decision SET ASIDE.

San Juan Structural Steel vs. CA

Delos Reyes vs. CA

AF Realty vs. Dieselman Freight

Mac Tongson | D2019 16 of 33

ISSUE: Who has better right over the property? MIDAS.

Mac Tongson | D2019 17 of 33

Keeler Electric Co. vs. Rodriguez

Plaintiff: Harry E. Keeler Electric Co Inc

Defendant: Domingo Rodriguez

Mac Tongson | D2019 18 of 33

Petitioner: Yu Eng Cho and Francisco Tao Yu

Mac Tongson | D2019 19 of 33

IV. How is agency distinguished from other contracts/

Mac Tongson | D2019 20 of 33

Mac Tongson | D2019 21 of 33

Mac Tongson | D2019 22 of 33

Shell vs. Firemens Insurance Co.

Mac Tongson | D2019 23 of 33

Dela Cruz vs. Northern Theatrical Enterprises

Mac Tongson | D2019 24 of 33

Neilson & Co. vs. Lepanto Consolidated

Quiroga vs. Parsons Hardware

Mac Tongson | D2019 26 of 33

Gonzalo Puyat & Sons vs. Arco Amusement Co.

Under what topic: How is agency distinguished from other contracts/relationships?

Mac Tongson | D2019 27 of 33

Mac Tongson | D2019 28 of 33

Dispositive: CA decision is reversed.

Lim vs. People

Petitioner: Lourdes Valerio Lim