Rallos v. Felix Go Chan and Realty Corp., Munoz-Palma
1931 inapplicable:
Facts: This is a case of an attorney-in-fact, Simeon Rallos, who after the death of his
principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant
to a special power of attorney which the principal had executed in his favor. The
administrator of the estate of the deceased principal went to court to have the sale
declared unenforceable and to recover the disposed share. The trial court granted the
relief prayed for, but upon appeal, the Court of Appeals upheld the validity of the sale and
dismissed the complaint. Hence, this Petition for Review on certiorari.
Issues:
1) WON sale was valid although it was executed after the death of the principal,
Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the
authority of the agent
3) WON agents knowledge of the principals death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of
death in the title (thus there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated
parallel to that of an innocent purchaser for a value of a land.
Held:
1) Sale was void.
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 (Art. 1317 of the Civil
Code).
Simons authority as agent was extinguished upon Concolacions death
2) The sale did not fall under the exceptions to the general rule that death ipso jure
extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with
interest
o Art.
Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcions death
For Art 1931 to apply, both requirements must be present
3) Yes, agents knowledge of principals death is material.
Respondent asserts 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
Court says: this contention ignored the existence of the general rule enunciated in Article
1919 that the death of the principal extinguishes the agency. Article 1931, being an
exception to the general rule, is to be strictly construed.
4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or
others of the death of the principal.
If revocation was by the act of the principal: a general power which does not
specify the persons to whom represents' on should be made, it is the general
opinion that all acts, executed with third persons who contracted in good
faith, Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by
operation of law, is instantaneous without the need for notification to the
parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, should apply, the law
provides that death of the principal ipso jure extinguishes the authority of the
agent to sell rendering the sale to a third person in good faith unenforceable
unless at the agent had no knowledge of the principals death at that time
(exception under Art. 1931)
Ratio:
1
Relationship of Agency (concept arising from principles under Art 13171 and 14032)- one
party, caged the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal
Essential Elements:
(1) there is 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 agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.
Extinguishment
o Generally: among others3, By the death, civil interdiction, insanity or
insolvency of the principal or of the agent
Litonjua, Jr. v. Eternit Corp., Callejo, Sr.
Facts: Eternit Corp. is engaged in the manufacture of roofing materials and pipe products.
Its manufacturing operations were conducted on 8 parcels of land located in
Mandaluyong City. Eternit Corp. were owned by Eteroutremer S.A. Corporation (ESAC), a
corporation organized and registered under the laws of Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the
Philippines and wanted to stop its operations in the country. The Committee for Asia of
ESAC instructed Michael Adams, a member of Eternit Corp.s Board of Directors, to
dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro
G. Marquez so that the properties could be offered for sale to prospective buyers.
Marquez offered the parcels of land and the improvements thereon to Eduardo B.
Litonjua, Jr. Marquez declared that he was authorized to sell the properties for P27M
and that the terms of the sale were subject to negotiation.
1 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 the
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.
After negotiation as to price, Litonjua, Jr. accepted the counterproposal of Delsaux.
However, with the assumption of Corazon Aquino as the President of the RP, the political
situation improved and Glandville through Marquez informed Litonjua, Jr. that the sale
would no longer proceed.
When apprised of this development, the Litonjuas, through counsel, wrote Eternit Corp.,
demanding payment for damages they had suffered on account of the aborted sale. EC,
however, rejected their demand.
Issue: WON Marquez, Glandville and Delsaux were authorized by Eternit Corp. to act as
its agents relative to the sale of properties?
Held: No. 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
While a corporation may appoint agents to negotiate for the sale of its real properties, the
final say will have to be with the board of directors through its officers and agents as
authorized by a board resolution or by its by-laws. 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 Litonjuas failed to adduce in evidence any resolution of the Board of Directors of
Eternit Corp. empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone
offer for sale, for and in its behalf, the 8 parcels of land owned by Eternit Corp. including
the improvements thereon.
2The following contracts are unenforceable, unless they are justified: (1) Those entered into in the name of
another person by one who hi - been given no authority or legal representation or who has acted beyond
his powers; ...
3 See Art. 1919
2
While Glanville was the President and General Manager of Eternit Corp., and Adams and
Delsaux were members of its Board of Directors, the three acted for and in behalf of
respondent ESAC, and not as duly authorized agents of Eternit Corp.; a board resolution
evincing the grant of such authority is needed to bind Eternit Corp. to any agreement
regarding the sale of the subject properties. Such board resolution is not a mere formality
but is a condition sine qua non to bind Eternit Corp.
Victorias Milling Co., Inc. v. CA, Quisimbing
Facts: St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling Co.,
Inc. In the course of their dealings, Victorias Milling issued several Shipping List/Delivery
Receipts (SLDRs) to St. Therese Merchandising as proof of purchases. Among these was
SLDR No. 1214M which covers 25,000 bags of sugar. The transaction it covered was a
direct sale.
On October 25, 1989, STM sold to Consolidated Sugar Corp. its rights in SLDR No. 1214M
for P14,750,000.00. Consolidated Sugar Corp. issued checks in payment. That same day,
Consolidated Sugar Corp. wrote Victorias Milling that it had been authorized by St.
Therese Merchandising to withdraw the sugar covered by SLDR No. 1214M.
Consolidated Sugar Corp. surrendered SLDR No. 1214M to Victorias Millings NAWACO
warehouse and was allowed to withdraw sugar. However, after 2,000 bags had been
released, Victorias Milling refused to allow further withdrawals of sugar against SLDR No.
1214M because, according to it, St. Therese Merchandising had already withdrawn all the
sugar covered by the cleared checks.
Issue: Whether CSC was an agent of STM?
Held: No. Victorias Milling heavily relies upon St. Therese Merchandisings letter of
authority allowing Consolidated Sugar Corp. to withdraw sugar against SLDR No.
1214M to show that the latter was St. Therese Merchandisings agent. The pertinent
portion of said letter reads: This is to authorize Consolidated Sugar Corporation or its
representative to withdraw for and in our behalf (stress supplied) the refined sugar
covered by Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated
October 16, 1989 in the total quantity of 25, 000 bags.
Art. 1868. By the contract of agency a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or authority of
the latter.
The basis of agency is representation. On the part of the principal, there must be an actual
intention to appoint or an intention naturally inferable from his words or actions; and on
the part of the agent, there must be an intention to accept the appointment and act on it,
and in the absence of such intent, there is generally no agency. One factor which most
clearly distinguishes agency from other legal concepts is control; one person - the agent -
agrees to act under the control or direction of another - the principal.
Victorias Milling failed to sufficiently establish the existence of an agency relation
between Consolidated Sugar Corp. and St. Therese Merchandising. The fact alone that it
(St. Therese Merchandising) had authorized withdrawal of sugar by Consolidated Sugar
Corp. for and in our (St. Therese Merchandisings) behalf should not be eyed as pointing
to the existence of an agency relation. Further, Consolidated Sugar Corp. has shown that
the 25,000 bags of sugar covered by the SLDR No. 1214M were sold and transferred by
St. Therese Merchandising to it. A conclusion that there was a valid sale and transfer to
Consolidated Sugar Corp. may, therefore, be made thus capacitating Consolidated Sugar
Corp. to sue in its own name, without need of joining its imputed principal St. Therese
Merchandising as co-plaintiff.
Consolidated Sugar Corp. was a buyer of the SLDFR form, and not an agent of STM.
Consolidated Sugar Corp. was not subject to St. Therese Merchandisings control. That no
agency was meant to be established by the Consolidated Sugar Corp. and STM is clearly
shown by Consolidated Sugar Corp.s communication to petitioner that SLDR No. 1214M
had been sold and endorsed to it.27 The use of the words sold and endorsed means
that St. Therese Merchandising and Consolidated Sugar Corp. intended a contract of sale,
and not an agency.
Manila Memorial Park Cemetery Inc., v. Linsangan, Tinga
Facts: Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the
Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former
owner of a memorial lot under Contract No. 25012 was no longer interested in acquiring
the lot and had opted to sell his rights subject to reimbursement of the amounts he
3
already paid. The contract was for P95,000.00. Baluyot reassured Atty. Linsangan that
once reimbursement is made to the former buyer, the contract would be transferred to
him.
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be
reimbursed to the original buyer and to complete the down payment to MMPCI. Baluyot
issued handwritten and typewritten receipts for these payments. Contract No. 28660 has
a listed price of P132,250.00. Atty. Linsangan objected to the new contract price, as the
same was not the amount previously agreed upon. To convince Atty. Linsangan, Baluyot
executed a document confirming that while the contract price is P132,250.00, Atty.
Linsangan would pay only the original price of P95,000.00.
Later on, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
for reasons the latter could not explain. For the alleged failure of MMPCI and Baluyot to
conform to their agreement, Atty. Linsangan filed a Complaint for Breach of Contract and
Damages against the former.
MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms of the
contract because of non-payment of arrearages. MMPCI stated that Baluyot was not an
agent but an independent contractor, and as such was not authorized to represent MMPCI
or to use its name except as to the extent expressly stated in the Agency Manager
Agreement. Moreover, MMPCI was not aware of the arrangements entered into by Atty.
Linsangan and Baluyot, as it in fact received a down payment and monthly installments
as indicated in the contract.
The trial court held MMPCI and Baluyot jointly and severally liable. The Court of Appeals
affirmed the decision of the trial court.
Issue: Whether Baluyot exceeded her authority in changing the original contract?
Held: Yes.
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 hits case, however, the agent is liable if he undertook to secure the principals
ratification.
Art. 1910. The principal must comoply with all the obligations that 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. 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.
Thus, the acts of an agent beyond the scope of his authority do not bind the principal,
unless he ratifies them, expressly or impliedly.
Ratification in agency is the adoption or confirmation by one person of an act performed
on his behalf by another without authority.
No ratification can be implied in the instant case.
Eurotech Industrial Technoloies, Inc. v. Cuizon, Chico-Nazario
Facts: From January to April 1995, petitioner sold to Impact Systems various products
allegedly amounting to P91,338.00 pesos. Subsequently, respondents sought to buy from
petitioner one unit of sludge pump valued at P250,000.00 with respondents making a
down payment of P50,000.00. When the sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents without their having fully settled
their indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto
de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in
favor of petitioner. Impact systems is owed by ERWIN Cuizon.
Despite the existence of the Deed of Assignment, respondents proceeded to collect from
Toledo Power Company the amount of P365,135.29. Alarmed by this development,
petitioner made several demands upon respondents to pay their obligations. As a result,
respondents were able to make partial payments to petitioner. On 7 October 1996,
petitioner's counsel sent respondents a final demand letter wherein it was stated that as
of 11 June 1996, respondents' total obligations stood at P295,000.00 excluding interests
4
and attorney's fees. Because of respondents' failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for
preliminary attachment against herein respondents
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a
real party in interest in this case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction with petitioner and the latter
was very much aware of this fact.
ISSUE: Whether the act of Edwin in signing the Deed of Assignment binds his principal
Impact Systems
HELD: Yes, the act of Edwin in signing the Deed of Assignment binds Impact Systems
The Supreme Court held that in a contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of another with the latter's
consent. Its purpose is to extend the personality of the principal or the party for whom
another acts and from whom he or she derives the authority to act. It is said that the basis
of agency is representation, that is, the agent acts for and on behalf of the principal on
matters within the scope of his authority and said acts have the same legal effect as if they
were personally executed by the principal.
In this case at hand, the parties do not dispute the existence of the agency relationship
between respondents ERWIN as principal and EDWIN as agent.
Siasat v. Intermediate Appellate Court
FACTS: Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing
officials of the then Department of Education and Culture, to purchase without public
bidding, one million pesos worth of national flags for the use of public schools throughout
the country. And for her service, she was entitled to a commission of thirty (30%) percent.
On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag
Industry. The next day, on October 17, 1974, the respondent's authority to represent the
United Flag Industry was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of
P469,980.00 on October 23, 1974 for the first delivery, tendered the amount of
P23,900.00 or five percent (5%) of the amount received, to the respondent as payment of
her commission. The latter allegedly protested. She refused to accept the said amount
insisting on the 30% commission agreed upon. The respondent was prevailed upon to
accept the same because of the assurance of the petitioners that they would pay the
commission in full after they delivered the other half of the order. The respondent states
that she later on learned that petitioner Siasat had already received payment for the
second delivery of 7,833 flags. When she confronted the petitioners, they vehemently
denied receipt of the payment, at the same time claiming that the respondent had no
participation whatsoever with regard to the second delivery of flags and that the agency
had already been revoked. She then filed a case in court.
The trial court decided in favor of the respondent.
In assailing the appellate court's decision, the petition tenders the following arguments:
first, the authorization making the respondent the petitioner's representative merely
states that she could deal with any entity in connection with the marketing of their
products for a commission of 30%. There was no specific authorization for the sale of
15,666 Philippine flags to the Department; second, there were two transactions involved
evidenced by the separate purchase orders and separate delivery receipts, The
revocation of agency effected by the parties with mutual consent on October 17, 1974,
therefore, forecloses the respondent's claim of 30% commission on the second
transaction; and last,regarding damages and attorneys fees.
ISSUE: Whether or not respondent is an agent of petitioners.
HELD: YES, Respondent is indeed their agent. There are several kinds of agents. First, a
universal agent one who is authorized to do all acts for his principal which can lawfully
be delegated to an agent. Second, a general agent one authorized to do all acts pertaining
to a business of a certain kind or at a particular place, or all acts pertaining to a business
of a particular class or series. And third, a special agent one authorized to do some
particular act or act upon some particular occasion. He acts usually in accordance with
specific instructions the respondent is upon close scrutiny be classified as a general agent.
Indeed, it can easily be seen by the way general words were employed in the agreement
that no restrictions were intended as to the manner the agency was to be carried out or
in the place where it was to be executed. The power granted to the respondent was so
5
broad that it practically covers the negotiations leading to, and the execution of, a contract
of sale of petitioners' merchandise with any entity or organization.
A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court
states that "when the terms of an agreement have been reduced to writing, it is to be
considered as containing all such terms, and, therefore, there can be between the parties
and their successors-in-interest, no evidence of the terms of the agreement other than the
contents of the writing", except in cases specifically mentioned in the same rule.
Petitioners have failed to show that their agreement falls under any of these exceptions.
The petitioners' evidence is overcome by other pieces of evidence proving that there was
only one transaction.
Since only one transaction was involved, we deny the petitioners' contention that
respondent Nacianceno is not entitled to the stipulated commission on the second
delivery because of the revocation of the agency effected after the first delivery. The
revocation of agency could not prevent the respondent from earning her commission
because as the trial court opined, it came too late, the contract of sale having been already
perfected and partly executed.
We do not mean to question the general doctrine as to the power of a principal to revoke
the authority of his agent at will, in the absence of a contract fixing the duration of the
agency however, The principal cannot deprive his agent of the commission agreed upon
by canceling the agency and, thereafter, dealing directly with the buyer.
The petitioners are ordered to pay the respondent the amount of ONE HUNDRED FOURTY
THOUSAND NINE HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her
commission on the second delivery of flags with legal interest from the date of the trial
court's decision. No pronouncement as to costs.
SO ORDERED.
Nielson & Co., Inc. v. Lepanto Consolidated Mining Co. (1968,
Zaldivar)
Parties:
plaintiff-appelant: Nielson & Co
defendant-appelle: Lepanto Consolidated Mining Co.
Facts:
An operating agreement was executed before World War II (on 30 January 1937)
between Nielson & Co. Inc. and the Lepanto Consolidated Mining Co. whereby the
former operated and managed the mining properties owned by the latter for a
management fee of P2,500.00 a month and a 10% participation in the net profits
resulting from the operation of the mining properties, for a period of 5 years.
In the latter part of 1941, the parties agreed to renew the contract for another period
of 5 years, but in the mean time, the Pacific War broke out in December 1941.
In January 1942 operation of the mining properties was disrupted on account of the
war. The mill, power plant, supplies on hand, equipment, concentrates on hand and
mines, were destroyed. The Japanese forces thereafter occupied the mining
properties, operated the mines during the continuance of the war.
After the mining properties were liberated from the Japanese forces, LEPANTO took
possession thereof and embarked in rebuilding and reconstructing the mines and
mill. On 26 June 1948 the mines resumed operation under the exclusive management
of LEPANTO.
Shortly after the mines were liberated from the Japanese invaders in 1945, a
disagreement arose between NIELSON and LEPANTO over the status of the operating
contract which as renewed expired in 1947. Under the terms thereof, the
management contract shall remain in suspense in case fortuitous event or force
majeure, such as war or civil commotion, adversely affects the work of mining and
milling.
On 6 February 1958, NIELSON brought an action against LEPANTO to recover certain
sums of money representing damages allegedly suffered by the former in view of the
refusal of the latter to comply with the terms of a management contract.
The Trial Court dismissed the complaint.
The Supreme Court reversed the decision. It held that the war suspended the contract
by virtue of the force majeure clause. And that the intention of the parties regarding
the meaning and usage concerning the force majeure clause meant the extension of
the same for a period equivalent to the suspension.
6
 In this motion for reconsideration, LEPANTO advances a new theory. It now asserts
that the management contract in question is a contract of agency such that it has the
right to revoke and terminate the said contract, as it did terminate the same, under
the law of agency, and particularly pursuant to Article 1733 of the Old Civil Code
(Article 1920 of the New Civil Code).
Issue: Whether the management contract is a contract of agency or a contract of lease of
services.
Held:
Contract of Agency v Contract of Lease of Services:
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."
Neilson not executing 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. 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.
Prior approval of LEPANTO required:
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.
Detailed operating contract:
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.
Contract cannot be revoked at will:
From the provision of paragraph XI of the management contract, Lepanto could not
terminate the agreement at will. Lepanto could terminate or cancel the agreement by
giving notice of termination ninety days in advance only in the event that Nielson
should prosecute in bad faith and not in accordance with approved mining practice
the operation and development of the mining properties of Lepanto. Lepanto could
not terminate the agreement if Nielson should cease to prosecute the operation and
development of the mining properties by reason of acts of God, strike and other
causes beyond the control of Nielson. The management contract in question is not
revocable at the will of Lepanto. It is not a contract of agency as defined in Article
1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544
of the same Code. This contract can not be unilaterally revoked by Lepanto.
7

Dispositive:
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision of the
court a quo and enter in lieu thereof another, ordering the appellee Lepanto to pay the
appellant Nielson.
NARIC vs. CA et al G.R. No. L-32320 July 16, 1979
FACTS: The National Rice and Corn Corporation (Naric) had on stock 8000 metric tons
of corn which it could not dispose of due to its poor quality. Naric called for bids for the
purchase of the corn and rice. But precisely because of the poor quality of the corn, a
direct purchase of said corn even with the privilege of importing commodities did not
attract good offers. Davao Merchandising Corporation (Damerco) came in with its offer
to act as agent in the exportation of the corn, with the agent answering for the price
thereof and shouldering all expenses incidental thereto, provided it can import
commodities, paying the NARIC therefor from the price it offered for the corn. Damerco
was to open a domestic letter of credit, which shall be available to the NARIC drawing
therefrom through sight draft without recourse. The availability of said letter or letters
of credit to the NARIC was dependent upon the issuance of the export permit. The
payment therefor depended on the importation of the collateral goods, that is after its
arrival.
The first half of the collateral goods were successfully imported. Due to the inferior
quality of the corn, it had to be replaced with more acceptable stock. This caused such
delay that the letters of credit expired without the NARIC being able to draw the full
amount therefrom. Checks and PN were issued by DAMERCO for the purpose of
securing the unpaid part of the price of the corn and as guaranty that DAMERCO will
purchase the corresponding collateral goods.
But because of the change of administration in the government, barter transactions
were suspended. Hence, DAMERCO was not able to import the remaining collateral
goods.
NARIC instituted in the CFI of Manila against DAMERCO and Fieldmens Insurance Co.
Inc. an action for recovery of a sum of money representing the balance of the value of
corn and rice exported by DAMERCO.
The trial court rendered in favor of NARIC ordering DAMERCO and Fieldmens
Insurance Co. Inc., to pay, jointly and severally. CA reversed the trial courts decision and
rendered a new judgement dismissing the complaint as premature and for lack of cause
of action. Hence this petition for certiorari.
ISSUE: Whether DAMERCO only acted as an agent of NARIC or is a buyer
HELD: the petition for review is denied and the resolution of the CA appealed from is
hereby affirmed
AGENT
Clearly from the contract between NARIC and DAMERCO: bids were previously called
for by the NARIC for the purchase of corn and rice to be exported as well as of the
imported commodities that will be brought in, but said biddings did not succeed in
attracting good offers. Subsequently, Damerco made an offer. Now, to be sure, the
contract designates the Naric as the seller and the Damerco as the buyer. These
designations, however, are merely nominal, since the contract thereafter sets forth the
role of the buyer (Damerco) as agent of the seller in exporting the quantity and kind
of corn and rice as well as in importing the collateral goods thru barter and to pay the
aforementioned collateral goods.
The contract between the NARIC and the DAMERCO is bilateral and gives rise to a
reciprocal obligation. The said contract consists of two parts: (1) the exportation by the
DAMERCO as agent for the NARIC of the rice and corn; and (2) the importation of
collateral goods by barter on a back to back letter of credit or no-dollar remittance
basis. It is evident that the DAMERCO would not have entered into the agreement were
it not for the stipulation as to the importation of the collateral goods which it could
purchase.
It appears that we were also misled to believe that the Damerco was buying the corn. A
closer look at the pertinent provisions of the contract, however, reveals that the price as
stated in the contract was given tentatively for the purpose of fixing the price in barter.
It should likewise be stressed that the aforesaid exportation and importation was on a
no-dollar remittance basis. In other words, the agent, herein defendant Damerco, was
not to be paid by its foreign buyer in dollars but in commodities. Damerco could not get
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paid unless the commodities were imported, and Damerco was not exporting and
importing on its own but as agent of the plaintiff, because it is the latter alone
which could export and import on barter basis according to its charter.Thus,
unless Damerco was made an agent of the plaintiff, the former could not export the corn
and rice nor import at the same time the collateral goods. This was precisely the
intention of the parties.
He is not to be considered a buyer, who should be liable for the sum sought by NARIC
because the contract itself clearly provides the Damerco was to export the rice and corn,
AND TO BUY THE collateral goods. There is nothing in the contract providing
unconditionally that Damerco was buying the rice and corn. To be more specific, if the
agreement was just a sale of corn to Damerco, the contract need not specify that
Damerco was to buy the collateral goods.
Ker and Co., LTD vs Lingad
GR No. L-20871 April 30, 1971
Facts:
CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax,
surcharge, and compromise penalty against Ker & Co. Ker and Co. requested for the
cancellation of the assessment and filed a petition for review with the Court of Tax
Appeals. The CTA ruled that Ker and Co is liable as a commercial broker. Ker has a
contract with US rubber. Ker is the distributor of the said company. Ker was precluded
from disposing the products elsewhere unless there has been a written consent from the
company. The prices, discounts, terms of payment, terms of delivery and other conditions
of sale were subject to change in the discretion of the Company.
Issue:
Whether the relationship of Ker and Co and US rubber was that of a vendor- vendee or
principal-broker
Ruling:
The relationship of Ker and Co and US rubber was that of a principal-broker/ agency. Ker
and Co is only an agent of the US rubber because it 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, it merely receives, accepts and/or holds upon
consignment the products, which remain properties of the latter company, every effort
shall be made by petitioner to promote in every way the sale of the products and that
sales made by petitioner are subject to approval by the company. 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 companys control, the
relationship between the company and the dealer is one of agency.
J. DANON vs. A. BRIMO (1921) Procuring Cause
NATURE: Action to recover the sum of P60,000, alleged to be the value of services by the
plaintiff as a broker.
QUICK FACTS & HELD:
Danon (Broker) found a purchaser for the factory of his manager (Brimo), who promised
5% commission to Danon; Another broker found another purchaser who would buy the
factory at a higher price, said factory was sold to this purchaser; As such, Danons client
did not perfect the sale with Brimo. Held: Danon not the procuring cause. A broker is
never entitled to commissions for unsuccessful efforts. The risk of failure is only his. The
reward comes only with his success. Where no time for the continuance of the contract is
fixed by its terms, either party is at liberty to terminate it at will, subject only to the
ordinary requirements of good faith.
DETAILED FACTS:
1. Antonio Brimo, informed the Danon, that he (Brimo) desired to sell his factory,
the Holland American Oil Co., for the sum of P1,200,000
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 2. Brimo agreed and promised to pay to the Danon commission of 5% provided the
latter could sell said factory for that amount
3. No definite period of time was fixed within which the Danon should effect the sale.
It seems that another broker, Sellner, was also negotiating the sale, or trying to
find a purchaser for the same property and that the plaintiff was informed of the
fact either by Brimo himself or by someone else; at least, it is probable that the
plaintiff was aware that he was not alone in the field, and his whole effort was
to forestall his competitor by being the first to find a purchaser and effect the sale.
4. Immediately after having an interview with Mr. Brimo, Danon went to see Mr.
Mauro Prieto, president of the Santa Ana Oil Mill, a corporation, and offered to sell
to him the defendant's property at P1,200,000. The said corporation was at that
time in need of such a factory, and Mr. Prieto, instructed the manager, Samuel E.
Kane, to see Mr. Brimo and ascertain whether he really wanted to sell said factory,
and, if so, to get permission from him to inspect the premises. Mr. Kane inspected
the factory and, presumably, made a favorable report to Mr. Prieto. The latter
asked for an appointment with Mr. Brimo to perfect the negotiation. In the
meantime Sellner, the other broker referred to, had found a purchaser for the
same property, who ultimately bought it for P1,300,000. For that reason Mr.
Prieto, the would be purchaser found by the plaintiff, never came to see Mr. Brimo
to perfect the proposed negotiation.
ISSUE: Whether Danon as broker was the Procuring Cause of Sale? NO. Whether Danon
is entitled to Compensation - NO
HELD:
The most that can be said as to what the plaintiff had accomplished is, that he had
found a person who might have bought the defendant's factory. The evidence does
not show that the Santa Ana Oil Mill had definitely decided to buy the property at
the fixed price of P1,200,000. The plaintiff claims that the reason why the sale was
not consummated was because Mr. Brimo refused to sell.
Defendant agreed and promised to pay him a commission of 5% provided he (the
plaintiff) could sell the factory at P1,200.000. It is difficult to see how the plaintiff
can recover anything in the premises. The plaintiff's action is an action to recover
"the reasonable value" of services rendered.
It is clear that his "services" did not contribute towards bringing about the sale.
He was not "the efficient agent or the procuring cause of the sale."
The broker must be the efficient agent or the procuring cause of sale. The
means employed by him and his efforts must result in the sale.
The duty assumed by the broker is to bring the minds of the buyer and seller to an
agreement for a sale, and the price and terms on which it is to be made, and until
that is done his right to commissions does not accrue.
It follows, that a broker is never entitled to commissions for unsuccessful
efforts. The risk of a failure is wholly his. The reward comes only with his success.
He may have introduced to each other parties who otherwise would have never
met; he may have created impressions, which under later and more favorable
circumstances naturally lead to and materially assist in the consummation of a
sale; he may have planted the very seed from which others reap the harvest; but
all that gives him no claim.
The failure therefore and its consequences were the risk of the broker only. This
however must be taken with one important and necessary limitation. If the
efforts of the broker are rendered a failure by the fault of the employer;
if capriciously he changes his mind after the purchaser, ready and willing,
and consenting to the prescribed terms, is produced; or if the latter declines
to complete the contract because of some defect of title in the ownership of
the seller, some unremoved incumbrance, some defect which is the fault of
the latter, then the broker does not lose his commissions. But this limitation
is not even an exception to the general rule affecting the broker's right for it goes
on the ground that the broker has done his duty, that he has brought buyer and
seller to an agreement, but that the contract is not consummated and fails though
the after-fault of the seller.
One other principle applicable: Where no time for the continuance of the contract
is fixed by its terms either party is at liberty to terminate it at will, subject only to
the ordinary requirements of good faith. Usually the broker is entitled to a fair
and reasonable opportunity to perform his obligation, subject of course to the
right of the seller to sell independently. But having been granted him, the right of
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 the principal to terminate his authority is absolute and unrestricted, except only MAXICARE Plan, Maxicare directly negotiated with MERALCO regarding the terms and
that he may not do it in bad faith. conditions of the agreement and left plaintiff-appellee Estrada out of the discussions on
the terms and conditions.
Although the present plaintiff could probably have effected the sale, he is not
entitled to the commissions agreed upon because he had no intervention
Issue: Whether or not Estrada is entitled to the commission despite her admission that
whatever in, and much sale in question. It must be borne in mind that no
the negotiation between her and MERALCO failed.
definite period was fixed by the defendant within which the plaintiff might effect
the sale of its factory. Nor was the plaintiff given by the defendant the
Held: Yes. The statement in Annex F amounted to an admission, provides a contrary
exclusive agency of such sale. Therefore, the plaintiff cannot complaint of the
answer to Maxicares ridiculous contention. We intoned therein that in spite of the
defendant's conduct in selling the property through another agent before the
presence of judicial admissions in a partys pleading, the trial court is still given leeway
plaintiff's efforts were crowned with success. "One who has employed a broker
to consider other evidence presented.
can himself sell the property to a purchaser whom he has procured, without any
aid from the broker."
As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a
judicial admission is conclusive upon the party making it and does not require proof
admits of two exceptions: 1) when it is shown that the admission was made through
DISPOSITIVE: For the foregoing reasons the judgment appealed from is hereby revoked palpable mistake, and 2) when it is shown that no such admission was in fact made. The
and the defendant is hereby absolved from all liability under the plaintiff's complaint, latter exception allows one to contradict an admission by denying that he made such an
with costs in both instances against the plaintiff. So ordered. admission.
Philippine Health-Care Providers Inc. vs Estrada
GR No. 171052 January 28, 2008 For instance, if a party invokes an admission by an adverse party, but cites the
admission out of context, then the one making the admission may show that he made
Facts: Maxicare is a domestic corporation engaged in selling health insurance plans no such admission, or that his admission was taken out of context.
whose Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and
Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants. This may be interpreted as to mean not in the sense in which the admission is made to
On September 15, 1990, Maxicare allegedly engaged the services of Carmela Estrada who appear. That is the reason for the modifier such.
was doing business under the name of CARA HEALTH SERVICES.to promote and sell the
prepaid group practice health care delivery program called MAXICARE Plan with the In this case, the letter, although part of Estradas Complaint, is not, ipso facto, an
position of Independent Account Executive. Maxicare formally appointed Estrada as its admission of the statements contained therein, especially since the bone of contention
General Agent, evidenced by a letter-agreement dated February 16, 1991. The letter relates to Estradas entitlement to commissions for the sale of health plans she claims to
agreement provided for plaintiff-appellees Estradas compensation in the form of have brokered. It is more than obvious from the entirety of the records that Estrada has
commission. Maxicare alleged that it followed a franchising system in dealing with its unequivocally and consistently declared that her involvement as broker is the proximate
agents whereby an agent had to first secure permission from Maxicare to list a cause which consummated the sale between Meralco and Maxicare.
prospective company as client. Estrada alleged that it did apply with Maxicare for the
MERALCO account and other accounts, and in fact, its franchise to solicit corporate Moreover, Section 34, Rule 132 of the Rules of Court requires the purpose for which the
accounts, MERALCO account included, was renewed on February 11, 1991. Plaintiff- evidence is offered to be specified. Undeniably, the letter was attached to the Complaint,
appellee Estrada submitted proposals and made representations to the officers of and offered in evidence, to demonstrate Maxicares bad faith and ill will towards Estrada.
MERALCO regarding the MAXICARE Plan but when MERALCO decided to subscribe to the
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