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EUROTECH INDUSTRIAL TECHNOLOGIES INC VS The Deed of Assignment clearly states that respondent EDWIN
CUIZON signed thereon as the sales manager of Impact Systems. As
discussed elsewhere, the position of manager is unique in that it
Facts: presupposes the grant of broad powers with which to conduct the
Eurotech Industrial Technologies Inc. is engaged in the business business of the principal, thus:
of importation and distribution of various European industrial
equipment for customers here in the Philippines. Impact Systems The powers of an agent are particularly broad in the case of one
Sales is sole proprietorship of ERWIN Cuizon while EDWIN acting as a general agent or manager; such a position
Cuizon is the sales manager. presupposes a degree of confidence reposed and investiture with
Eurotech sold to Impact various products, subsequently Impact liberal powers for the exercise of judgment and discretion in
sought to buy one unit of sludge pump from Eurotech for the transactions and concerns which are incidental or appurtenant to
amount of P250,000 in which Impact made a down payment the business entrusted to his care and management. In the
amounting to P50,000. When the said sludge pump arrived from absence of an agreement to the contrary, a managing agent may
UK, Eurotech refused to deliver it to Impact without having fully enter into any contracts that he deems reasonably necessary or
settled their balance. EDWIN and De jesus, general manager of requisite for the protection of the interests of his principal entrusted
Impact executed a Deed of Assignment of receivables in favor of to his management.
Eurotech. Following the execution of the Deed of Assignment
Eurotech deliver the said sludge pump to Impact. Edwin acted well- within his authority when he signed the Deed of
Despite the deed of assignment, ERWIN proceeded and Assignment, Eurotech refusal to deliver the sludge pump without
successfully collected from Toledo Power Company (one of the the full payment. It may be assume that Impact desparately
receivables assigned). Eurotech was alarmed by this development needed the sludge pump for its business since after they paid the
and made several demands upon the respondents to pay their downpayment they persisted in negotiating with the petitioner
obligations which resulted the latter to make partial payments. which resulted to the execution of deed of assignment.
Eurotechs counsel sent a final demand letter which the Thereforewithout a doubt such action was reasonably necessary
respondents failed to abide. As a result, Eurotech instituted a or was required in order for him to protect the business of his
complaint for sum of money with damages. principal. He did not act in the way that it would adversely affect
the rights of his principal.
CONTENTION OF CUIZON: EDWIN, sales manager, filed an
answer stating that he is not a real party in interest in this case. It is well to state here that Article 1897 of the New Civil Code upon
According to him, he was acting as mere agent of his principal which petitioner anchors its claim against respondent EDWIN
which is Impact System. TRIAL COURT dropped EDWIN as does not hold that in case of excess of authority, both the agent
party defendant. CA affirmed the decision of TC and the principal are liable to the other contracting party. To
reiterate, the first part of Article 1897 declares that the principal
Issue: is liable in cases when the agent acted within the bounds of
Whether the EDWIN acted within the scope of his authority as an his authority. Under this, the agent is completely absolved of
agent - YES any liability. The second part of the said provision presents the
Whether he should be personally liable for his actions NO situations when the agent himself becomes liable to a third
party when he expressly binds himself or he exceeds the
Held: limits of his authority without giving notice of his powers to
DEFINITION of COA: In a contract of agency, a person binds the third person. However, it must be pointed out that in case of
himself to render some service or to do something in excess of authority by the agent, like what petitioner claims exists
representation or on behalf of another with the latters consent. Its here, the law does not say that a third person can recover
PURPOSE is to extend the personality of the principal or the party from both the principal and the agent.
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 2. RAMON RALLOS, Administrator of the Estate of
effect as if they were personally executed by the principal. By this CONCEPCION RALLOS vs. FELIX GO CHAN & SONS
legal fiction, the actual or real absence of the principal is converted REALTY CORPORATION and COURT OF APPEALS,
into his legal or juridical presencequi facit per aliumfacit per se.
Nature of Case: Petition for review on certiorari of the decision of
The ELEMENTS of the contract of agency are: the Court of Appeals
(1) consent, express or implied, of the parties to establish the
relationship; Cause of Action: This is a case of an attorney-in-fact, Simeon
(2) the object is the execution of a juridical act in relation to a third Rallos, who after of his death of his principal, Concepcion Rallos,
person; sold the latter's undivided share in a parcel of land pursuant to a
(3) the agent acts as a representative and not for himself; power of attorney which the principal had executed in favor. The
(4) the agent acts within the scope of his authority. administrator of the estate of the __ went to court to have the sale
declared unenforceable and to recover the disposed share.
Article 1897 reinforces the familiar doctrine that an agent, who acts The TRIAL COURT granted the relief prayed for, but upon
as such, is not personally liable to the party with whom he appeal the CA reversed and uphold the validity of the sale and
contracts. The same provision, however, presents two instances the complaint..
when an agent becomes personally liable to a third person.
Facts: Concepcion and Gerundia both surnamed Rallos were
The first is when he expressly binds himself to the obligation and sisters and registered co-owners of a parcel of land known as Lot
the second is when he exceeds his authority. In the last instance, No. 5983 of the Cadastral Survey of Cebu covered by Transfer
the agent can be held liable if he does not give the third party Certificate of Title No. 11116 of the Registry of Cebu. On April 21,
sufficient notice of his powers. 1954, the sisters executed a special power of attorney in favor of
their brother, Simeon Rallos, authorizing him to sell for and in their
The Court held that respondent EDWIN does not fall within any of behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On
the exceptions contained in this provision. September 12, 1955, Simeon Rallos sold the undivided shares of
his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan
& Sons Realty Corporation for the sum of P10,686.90. The deed of 3. FABIOLA SEVERINO vs. GUILLERMO SEVERINO
sale was registered in the Registry of Deeds of Cebu, TCT No.
11118 was cancelled, and a new transfer certificate of Title No. Facts:
12989 was issued in the named of the vendee. An action was filed by Fabiola Severino, alleged natural daughter
and sole heir of Melencio Severino, deceased, to compel
On May 18, 1956 Ramon Rallos as administrator of the Intestate Guillermo Severino (brother of Melencio) to convey to her the
Estate of Concepcion Rallos filed a complaint docketed as Civil disputed parcels of land, or in default thereof to pay her the sum of
Case No. R-4530 of the Court of First Instance of Cebu, praying P800,000 in damages for wrongful registration of land in his own
(1) that the sale of the undivided share of the deceased name. The lower court rendered a judgment in favor of Fabiola and
Concepcion Rallos in lot 5983 be declared unenforceable, and from this judgment, Guillermo appeals.
said share be reconveyed to her estate; (2) that the Certificate of
'title issued in the name of Felix Go Chan & Sons Realty The evidence shows that Melecio Severino died on 1915; that
Corporation be cancelled and another title be issued in the names some 428 hectares of the land were recorded in the Mortgage Law
of the corporation and the "Intestate estate of Concepcion Rallos" Register in his name in the year 1901 by virtue of possessory
in equal undivided and (3) that plaintiff be indemnified by way of information proceedings instituted on that year by his brother
attorney's fees and payment of costs of suit. Named party AgapitoSeverino in his behalf; that during the lifetime of Melecio
defendants were Felix Go Chan & Sons Realty Corporation, Severino the land was worked by Guillermo,his brother, as
Simeon Rallos, and the Register of Deeds of Cebu, but administrator for and on behalf of the said MelecioSeverino; that
subsequently, the latter was dropped from the complaint. The after Melecio's death, Guillermo Severino continued to occupy the
complaint was amended twice; defendant Corporation's Answer land; that in 1916 a parcel survey was made of the lands in the
contained a crossclaim against its co-defendant, Simon Rallos municipality of Silay, including the land here in question, and
while the latter filed third-party complaint against his sister, cadastral proceedings were instituted for the registration of the
Gerundia Rallos While the case was pending in the trial court, both land titles within the surveyed area; that upon cadastral
Simon and his sister Gerundia died and they were substituted by proceedings, the court therefore decreed the title in his favor, in
the respective administrators of their estates. pursuance of which decree certificates of title were issued to him in
1917; that Guillermo Severino did not appear personally in the
Issue: Whether Simeon Rallos authorization ceased upon the proceedings and did not there testify; that the only testimony in
death of the principal affecting the sale to be void? support of his claim was that of his attorney Hofilea, who swore
that he knew the land and that he also knew that Guillermo
Held: Yes, the court ruled that the relationship between Severino inherited the land from his father and that he, by himself,
Principal and agent, agency is extinguished by the death of and through his predecessors in interest, had possessed the land
the principal or the agent. In addition, the death of the for thirty years.
principal effects instantaneous and absolute revocation of the
authority of the agent unless the Power be coupled with an Issue:
interest. Article 1930 is not involved because admittedly the Whether or not Guillermo, being an agent of Melencio, has the
special power of attorney executed in favor of Simeon Rallos was right to assert title over the property of the latter.
not coupled with an interest.
Held:
Article 1931 is the applicable law. Under this provision, an act No, Guillermo has no right over the disputed properties, being the
done by the agent after the death of his principal is valid and agent of the deceased.
effective only under two conditions, viz:
(1) that the agent acted without knowledge of the death of the It is an action in personam against an agent to compel him to
principal and return, or retransfer, to the heirs or the estate of its principal, the
(2) that the third person who contracted with the agent property committed to his custody as such agent, to execute the
himself acted in good faith. necessary documents of conveyance to effect such retransfer or,
Good faith here means that the third person was not aware of the in default thereof, to pay damages.
death of the principal at the time he contracted with said agent.
These two requisites must concur the absence of one will The defendant came into the possession of the property here in
render the act of the agent invalid and unenforceable. question as the agent of the deceased MelecioSeverino in the
administration of the property, cannot be successfully disputed. His
In the instant case, it cannot be questioned that the agent, Simeon testimony in the case of Montelibano vs. Severino (civil case No.
Rallos, knew of the death of his principal at the time he sold the 902 of the Court of First Instance of Occidental Negros and which
latter's share in Lot No. 5983 to respondent corporation. The forms a part of the evidence in the present case) is, in fact,
knowledge of the death is clearly to be inferred from the pleadings conclusive in this respect. He there stated under oath that from the
filed by Simon Rallos before the trial court. That Simeon Rallos year 1902 up to the time the testimony was given, in the year
knew of the death of his sister Concepcion is also a finding of fact 1913, he had been continuously in charge and occupation of the
of the court a quo and of respondent appellate court when the land as the encargado or administrator of Melencio Severino; that
latter stated that Simon Rallos 'must have known of the death of he had always known the land as the property of MelecioSeverino;
his sister, and yet he proceeded with the sale of the lot in the name and that the possession of the latter had been peaceful,
of both his sisters Concepcion and GerundiaRallos without continuous, and exclusive. In his answer filed in the same case,
informing appellant (the realty corporation) of the death of the the same defendant, through his attorney, disclaimed all personal
former. interest in the land and averred that it was wholly the property of
his brother Melecio.
On the basis of the established knowledge of Simon Rallos
concerning the death of his principal Concepcion Rallos, Neither is it disputed that the possession enjoyed by the defendant
Article 1931 of the Civil Code is inapplicable. The law expressly at the time of obtaining his decree was of the same character as
requires for its application lack of knowledge on the part of the that held during the lifetime of his brother, except in so far as
agent of the death of his principal; it is not enough that the third shortly before the trial of the cadastral case the defendant had
person acted in good faith. secured from his brothers and sisters a relinquishment in his favor
of such rights as they might have in the land.
The relations of an agent to his principal are fiduciary and it is concluding that petitioner was the borrower; and, in turn, would
an elementary and very old rule that in regard to property "re-lend" the amount borrowed from the respondent to her friends;
forming the subject-matter of the agency, he is estopped from hence, the Deed of Absolute Sale was supported by a valid
acquiring or asserting a title adverse to that of the principal. consideration. Petitioner filed her Motion for Reconsideration with
His position is analogous to that of a trustee and he cannot the CA, arguing that respondent categorically admitted in open
consistently, with the principles of good faith, be allowed to create court that she acted only as agent or representative of Arsenio
in himself an interestin opposition to that of his principal or cestui Pua, the principal financier and, hence, she had no legal capacity
que trust. The principle is well stated in the case of Gilbert vs; to sue petitioner. CA denied the motion.
Hewetson (79 Minn., 326):
Issue:
"A receiver, trustee, attorney, agent, or any other person Whether petitioner merely acted as an agent.
occupying fiduciary relations respecting property or persons,
is utterly disabled from acquiring for his own benefit the Ruling: Yes
property committed to his custody for management. This rule
is entirely independent of the fact whether any fraud has For an agency to arise, it is not necessary that the principal
intervened. No fraud in fact need be shown, and no excuse will be personally encounter the third person with whom the agent
heard from the trustee. It is to avoid the necessity of any such interacts. The law in fact contemplates, and to a great degree,
inquiry that the rule takes so general a form. The rule stands on impersonal dealings where the principal need not personally
the moral obligation to refrain from placing one's self in positions know or meet the third person with whom her agent transacts:
which ordinarily excite conflicts between self-interest and integrity. precisely, the purpose of agency is to extend the personality
It seeks to remove the temptation that might arise out of such a of the principal through the facility of the agent.
relation to serve one's self-interest at the expense of one's integrity
and duty to another, by making it impossible to profit by yielding to Based on testimonies during cross-examination, respondent is
temptation. It applies universally to all who come within its stopped to deny that she herself acted as agent of a certain
principle." Arsenio Pua, her disclosed principal. She is also stopped to deny
that petitioner acted as agent for the alleged debtors, the friends
Torrens titles being based on judicial decrees there is, of whom she (petitioner) referred. Petitioner knew that the financier of
course, a strong presumption in favor of their regularity or respondent is Pua; and respondent knew that the borrowers are
validity, and in order to maintain an action, such as the friends of petitioner. Both petitioner and respondent have
present, the proof as to the fiduciary relation of the parties undeniably disclosed to each other that they are representing
and of the breach of trust must be clear and convincing. Here, someone else, and so both of them are estopped to deny the
Guillermos Torrens title cannot be considered as valid for there same. It is evident from the record that petitioner merely refers
was breach of trust in acquisition thereof. actual borrowers and then collects and disburses the amounts of
the loan upon which she received a commission; and that
4. JOCELYN B. DOLES vs. MA. AURA TINA ANGELES respondent transacts on behalf of her "principal financier", a
certain Arsenio Pua. If their respective principals do not
Facts: actually and personally know each other, such ignorance
Respondent filed with the RTC a complaint for Specific does not affect their juridical standing as agents, especially
Performance with Damages against petitioner, alleging that since the very purpose of agency is to extend the personality
petitioner was indebted to the former in the concept of a personal of the principal through the facility of the agent.
loan; that by virtue of a "Deed of Absolute Sale", petitioner, as
seller, ceded to respondent, as buyer, a parcel of land in order to Thus, CA is incorrect when it considered the fact that the
satisfy her personal loan with respondent; that this property was "supposed friends of petitioner, the actual borrowers, did not
mortgaged to National Home Mortgage Finance Corporation present themselves to respondent" as evidence that negates the
(NHMFC); that petitioner refused to cooperate with respondent to agency relationship it is sufficient that petitioner disclosed
execute the necessary documents and other formalities required to respondent that the former was acting in behalf of her
by the NHMFC to effect the transfer of the title over the property. principals, her friends whom she referred to respondent.

Petitioner, then defendant, while admitting some allegations in the With respect to the admission of petitioner that she is "re-lending"
Complaint, denied that she borrowed money from respondent, and the money loaned from respondent to other individuals for profit, it
averred that she referred her friends to respondent whom she must be stressed that the manner in which the parties designate
knew to be engaged in the business of lending money in exchange the relationship is not controlling. If an act done by one person in
for personal checks through her capitalist Arsenio Pua. She behalf of another is in its essential nature one of agency, the
alleged that her friends borrowed money from respondent and former is the agent of the latter notwithstanding he or she is not so
issued personal checks in payment of the loan; that the checks called. The question is to be determined by the fact that one
bounced; that despite her efforts to assist respondent to collect represents and is acting for another, and if relations exist which will
from the borrowers, she could no longer locate them; that, constitute an agency, it will be an agency whether the parties
because of this, respondent threatened petitioner, she was forced understood the exact nature of the relation or not.
to issue checks to answer for the bounced checks; and when the
checks were subsequently dishonored; that respondent then Further, with regard to the disbursements and payments for the
threatened to initiate a criminal case against her; thus, she was loan made through the bank accounts of petitioner and
forced by respondent to execute an "Absolute Deed of Sale." respondent, it has been held that in the normal course of
commercial dealings and for reasons of convenience and practical
Petitioner argues that since she is merely the agent or utility it can be reasonably expected that the facilities of the agent,
representative of the alleged debtors, then she is not a party to the such as a bank account, may be employed, and that a sub-agent
loan; and that the Deed of Sale executed between her and the be appointed, such as the bank itself, to carry out the task,
respondent in their own names, which was predicated on that pre- especially where there is no stipulation to the contrary.
existing debt, is void for lack of consideration.
5. AIR FRANCE vs. COURT OF APPEALS
The RTC held that the sale was void for lack of cause or
consideration. Thereafter, respondent appealed to the Cause of Action: Petition for review on certiorari assailing the
CA reversed the RTC decision and granted her appeal, Decision of then respondent Court of Appeals which reversed the
Trial Court's judgment dismissing the Complaint of private Osaka, Japan. There is no question with respect to this leg of the
respondents for damages arising from breach of contract of trip.
carriage, and awarding instead P90,000.00 as moral damages.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan
Doctrine: Same; Same; Agency; Notice to travel agent of rejection Airlines refused to honor the tickets because of their expiration,
of request for extension of validity of plane tickets, also notice to and the GANAS had to purchase new tickets. They encountered
the principals.The GANAS cannot defend by contending lack of the same difficulty with respect to their return trip to Manila as AIR
knowledge of those rules since the evidence bears out that FRANCE also refused to honor their tickets. They were able to
Teresita, who handled travel arrangements for the GANAS, was return only after prepayment in Manila, through their relatives, of
duly informed by travel agent Ella of the advice of Rillo, the Office the readjusted rates. They finally flew back to Manila on separate
Manager of Air France, that the tickets in question could not be Air France Frights on 19 May 1971 for Jose Gana and 26 May
extended beyond the period of their validity without paying the fare 1971 for the rest of the family.
differentials and additional travel taxes brought about by the
increased fare rate and travel taxes. The ruling relied on by On 25 August 1971, the GANAS commenced before the then
respondent Appellate Court, therefore, in KLM vs. Court of Court of First Instance of Manila, Branch III, Civil Case No. 84111
Appeals, 65 SCRA 237 (1975), holding that it would be unfair to for damages arising from breach of contract of carriage. Also
charge respondents therein with automatic knowledge or notice of contending lack of knowledge of IATA tariff rules.
conditions in contracts of adhesion, is inapplicable. To all legal AIR FRANCE traversed the material allegations of the Complaint
intents and purposes, Teresita was the agent of the GANAS and and alleged that the GANAS brought upon themselves the
notice to her of the rejection of the request for extension of the predicament they found themselves in and assumed the
validity of the tickets was notice to the GANAS, her principals. Air consequential risks; that travel agent Ella's affixing of validating
France vs. Court of Appeals, 126 SCRA 448, No. L- 57339 stickers on the tickets without the knowledge and consent of AIR
December 29, 1983. FRANCE, violated airline tariff rules and regulations and was
beyond the scope of his authority as a travel agent; and that AIR
Facts: FRANCE was not guilty of any fraudulent conduct or bad faith.
Late Jose G. Gana and his family (the GANAS), purchased from
AIR FRANCE (9) "open-dated" air passage tickets for the RTC dismissed the Complaint of the GANAS based on Partial and
Manila/Osaka/Tokyo/Manila route. On 24 April 1970, AIR FRANCE Additional Stipulations of Fact .
exchanged or substituted the aforementioned tickets with other
tickets for the same route. At this time, the GANAS were booked The GANAS appealed to the CA. During the pendency of the
for the Manila/Osaka segment on AIR FRANCE Flight 184 for 8 appeal, Jose Gana, the principal plaintiff, died. CA set aside and
May 1970, and for the Tokyo/Manila return trip on AIR FRANCE reversed the RTC s decision ordering Air France to pay appellants
Flight 187 on 22 May 1970. moral damages in the total sum P90,000.00 plus costs.
Reconsideration sought by AIR FRANCE was denied, hence,
The aforesaid tickets were valid until 8 May 1971. The GANAS did petitioner's recourse before this instance, to which we gave due
not depart on 8 May 1970. Instead, Jose Gana sought the course.
assistance of TeresitaManucdoc, a Secretary of the Sta. Clara
Lumber Company where Jose Gana was the Director and Issues:
Treasurer, for the extension of the validity of their tickets, which a) Whether or not, AIR FRANCE can be faulted for breach
were due to expire on 8 May 1971. of contract
b) Whether or not Teresita was the agent of the GANAS
Teresita enlisted the help of Lee Ella Manager of the Philippine and notice to her of the rejection of the request for
Travel Bureau. Ella sent the tickets to Cesar Rillo, Office Manager extension of the validity of the tickets was notice to the
of AIR FRANCE. The tickets were returned to Ella who was GANAS, her principals? YES!
informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an Ruling:
increase of the exchange rate of the US dollar to the Philippine a) NO. AIR FRANCE cannot be faulted for breach of contract
peso and the increased travel tax were first paid. Ella then when it dishonored the tickets of the GANAS after 8 May 1971
returned the tickets to Teresita and informed her of the since those tickets expired on said date; nor when it required the
impossibility of extension. GANAS to buy new tickets or have their tickets re-issued for the
Tokyo/Manila segment of their trip. Neither can it be said that,
In the meantime, the GANAS had scheduled their departure on 7 when upon sale of the new tickets, it imposed additional charges
May 1971 or one day before the expiry date. Teresita requested representing fare differentials, it was motivated by self-interest or
travel agent Ella to arrange the revalidation of the tickets. Ella gave unjust enrichment considering that an increase of fares took
the same negative answer and warned her that although the effect, as authorized by the Civil Aeronautics Board (CAB) in
tickets could be used by the GANAS if they left on 7 May 1971, the April, 1971. This procedure is well in accord with the IATA tariff
tickets would no longer be valid for the rest of their trip because rules which provide:
the tickets would then have expired on 8 May 1971. Teresita
replied that it will be up to the GANAS to make the arrangements. 6. TARIFF RULES
7. APPLICABLE FARE ON THE DATE OF DEPARTURE
With that assurance, Ella on his own, attached to the tickets 3.1 General Rule. All journeys must be charged for at the
validating stickers for the Osaka/Tokyo flight, one a JAL. sticker fare (or charge) in effect on the date on which
and the other an SAS (Scandinavian Airways System) sticker. The transportation commences from the point of origin. Any
SAS sticker indicates thereon that it was "Reevaluated by: the ticket sold prior to a change of fare or charge (increase or
Philippine Travel Bureau, Branch No. 2" (as shown by a circular decrease) occurring between the date of commencement
rubber stamp) and signed "Ador", and the date is handwritten in of the journey, is subject to the above general rule and
the center of the circle. Then appear under printed headings the must be adjusted accordingly. A new ticket must be
notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK issued and the difference is to be collected or refunded
(status). Apparently, Ella made no more attempt to contact AIR as the case may be. No adjustment is necessary if the
FRANCE as there was no more time. increase or decrease in fare (or charge) occurs when the
Notwithstanding the warnings, the GANAS departed from Manila in journey is already commenced.
the afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for
a) YES. The GANAS cannot defend by contending lack of
knowledge of those rules since the evidence bears out that Issue: Whether or not the compromise agreement and sales is
Teresita, who handled travel arrangements for the GANAS, void.
was duly informed by travel agent Ella of the advice of Reno,
the Office Manager of Air France, that the tickets in question Held:
could not be extended beyond the period of their validity The authority granted Villamil-Estrada under the special power of
without paying the fare differentials and additional travel taxes attorney was explicit and exclusionary: for her to institute any
brought about by the increased fare rate and travel taxes. action in court to eject all persons found on Lots Nos. 9127 and
443 so that petitioner could take material possession thereof, and
Teresita was the agent of the GANAS and notice to her of the for this purpose, to appear at the pre-trial and enter into any
rejection of the request for extension of the validity of the tickets stipulation of facts and/or compromise agreement but only insofar
was notice to the GANAS, her principals. (AGENCY: NOTICE TO as this was protective of the rights and interests of petitioner in the
THE AGENT IS NOTICE TO THE PRINCIPAL) The circumstances property. Nowhere in this authorization was Villamil-Estrada
that AIR FRANCE personnel at the ticket counter in the airport granted expressly or impliedly any power to sell the subject
allowed the GANAS to leave is not tantamount to an implied property nor a portion thereof. Neither can a conferment of the
ratification of travel agent Ella's irregular actuations. It should be power to sell be validly inferred from the specific authority "to
recalled that the GANAS left in Manila the day before the expiry enter into a compromise agreement" because of the explicit
date of their tickets and that "other arrangements" were to be limitation fixed by the grantor that the compromise entered into
made with respect to the remaining segments. Besides, the shall only be "so far as it shall protect the rights and interest of the
validating stickers that Ella affixed on his own merely reflect the corporation in the aforementioned lots" In the context of the
status of reservations on the specified flight and could not legally specific investiture of powers to Villamil-Estrada, alienation by sale
serve to extend the validity of a ticket or revive an expired one. of an immovable certainly cannot be deemed protective of the right
The conclusion is inevitable that the GANAS brought upon of petitioner to physically possess the same, more so sold in lower
themselves the predicament they were in for having insisted on price. when the land was being sold for a price of P80.00 per
using tickets that were due to expire in an effort, perhaps, to beat square meter, very much less than its assessed value of P250.00
the deadline and in the thought that by commencing the trip the per square meter, and considering further that petitioner never
day before the expiry date, they could complete the trip even received the proceeds of the sale.
thereafter. It should be recalled that AIR FRANCE was even
unaware of the validating SAS and JAL. stickers that Ella had Sale of a piece of land or any interest thereon is through an
affixed spuriously. Consequently, Japan Air Lines and AIR agent, the authority of the latter shall be in writing; otherwise,
FRANCE merely acted within their contractual rights when they the sale shall be void. Thus the authority of an agent to execute a
dishonored the tickets on the remaining segments of the trip and contract for the sale of real estate must be conferred in writing and
when AIR FRANCE demanded payment of the adjusted fare rates must give him specific authority, either to conduct the general
and travel taxes for the Tokyo/Manila flight. business of the principal or to execute a binding contract
containing terms and conditions which are in the contract he did
WHEREFORE, the judgment under review is hereby reversed and execute. A special power of attorney is necessary to enter into
set aside, and the Amended Complaint filed by private any contract by which the ownership of an immovable is
respondents hereby dismissed. transmitted or acquired either gratuitously or for a valuable
consideration. The express mandate required by law to enable an
6. COSMIC LUMBER CORPORATION vs. COURT OF appointee of an agency (couched) in general terms to sell must be
APPEALS one that expressly mentions a sale or that includes a sale as a
necessary ingredient of the act mentioned. For the principal to
Facts confer the right upon an agent to sell real estate, a power of
Cosmic Lumber Corporation thru its General Manager executed attorney must so express the powers of the agent in clear and
SPA appointing Paz G. Villamil-Estrada as attorney-in-fact to unmistakable language. When there is any reasonable doubt that
initiate and file any court for the ejectment of squatters of the entire the language so used conveys such power, no such construction
lot 9127 and 443 and covered by TCT Nos. 37648 and 37649 in shall be given the document.
order to take possession of the entire lot and for this purpose, to
appear at the pre-trial conference and enter into any stipulation of
facts and/or compromise agreement so far as it shall protect the 7. ANASTACIO G. DUGO vs. ADRIANO LOPENA,
rights and interest of the corporation in the aforementioned lots. ROSA RAMOS and HON.ANDRES REYES

Villamil-Estrada, by virtue of the SPA, instituted an action for the (A COMPROMISE AGREEMENT ENTERED INTO BY AN
ejectment of Isidro Perez and recover the possession of a portion AGENT WITHOUT SPA IS NOT VOID BUT IS MERELY
of Lot 443 before the RTC of Dagupan. He entered into a UNENFORCEABLE THUS THE SAME CAN BE RATIFIED.)
Compromise Agreement with Perez to buy the land which he
occupied and pay Villamil-Estrada as the attorney-in-fact. Facts:
Herein petitioner Anastacio G. Dugo and one Rodrigo S.
The Compromise Agreement was approved by the trial court and Gonzales purchased 3 parcels of land from the respondents
judgement has rendered in accordance therewith. The decision Adriano Lopena and Ramos for the total price of P269,804,00. Of
was not executed within the 5-year period from the date of its this amount, P28,000.00 was given as down payment with the
finality due to failure of the attorney-in-fact to produce the owners agreement that the balance of P241,804.00 would be paid in 6
duplicate copy of Title No. 37649 needed to segregate the portion monthly installments.
sold under the compromise agreement. Perez filed a complaint to
revive the judgement. To secure the payment of the balance Anastacio G. Dugo and
Rodrigo S. Gonzales, the vendees, executed over the same 3
Contention of Corp: The Corporation sought annulment of the parcels of land a Deed of Real Estate Mortgage in favor of the
decision of the trial court before the Court Appeals on the ground respondents Adriano Lopena and Rosa Ramos.
that the compromise agreement was void.
The vendees defaulted on the first installment. It resulted then that
The Court of Appeals dismissed the complaint on the basis of the vendors, herein respondents Adriano Lopena and Rosa
its finding , of absence of any ground for annulment. Ramos, filed a complaint for the foreclosure of the aforementioned
real estate mortgage with the Court of First Instance of Rizal, the person, has obtained a special power of attorney for that
Hon. Judge Andres Reyes, presiding. purpose from the party intended to be bound.

Before the cases could be tried, a compromise agreement dated However, although the Civil Code expressly requires a special
January 15, 1960 was submitted to the lower court for approval: power of attorney in order that one may compromise an interest of
That, the plaintiffs, have agreed to give the defendants another, it is neither accurate nor correct to conclude that its
up to June 30, 1960 to pay the mortgage indebtedness in absence renders the compromise agreement void (not void).
each of the said cases; In such a case, the compromise is merely unenforceable. This
That, should the defendants fail to pay the said mortgage results from its nature as a contract.
indebtedness, judgments of foreclosure shall thereafter
be entered against the said defendants. ART. 1403. The following contracts are unenforceable,
unless they are ratified:
It was signed by herein respondents Lopena and Ramos on one (1) Those entered into in the name of another person by
hand, and, Gonzales, on the other. It was not signed by the herein one who has been given no authority or legal
petitioner. However, Gonzales represented that his signature was representation, or who has acted beyond his powers;
for both himself and the herein petitioner.

This compromise agreement was approved by the lower court on On the second issue:
the same day it was submitted, January 15, 1960. The Court held that the Tri-Party Agreement was an instrument
intended to render effective the compromise agreement. It
Subsequently, on May 3, 1960, a so-called Tri-Party Agreement complemented and ratified the same.
was drawn. The signatories to it were AnastacioDugo (herein
petitioner) and Rodrigo S. Gonzalesas debtors, Adriano Lopena When it appears that the client, on becoming aware of the
and Rosa Ramos (herein respondents) as creditors, and, one compromise and the judgment thereon, fails to repudiate promptly
Emma R. Santos as payor, WHEREAS, the PAYOR, hereby the action of his attorney, he will not afterwards be heard to
submits and binds herself to the force and effect of the Order contest its validity. This Court believes that the herein petitioner
dated January 15, 1960, of the Court of First Instance of Pasig, should not be heard to repudiate the said agreement.
Rizal, Branch VI, which order is hereby made an integral part of
this agreement, and WHEREAS, the PAYOR, with due knowledge Court Action:
and consent of the DEBTOR, hereby proposes to pay the The petition for certiorari and mandamus filed by the herein
aforesaid indebtedness in the sum of P503,000.00 to the petitioner is hereby dismissed (against Petitioner Dungo). The
CREDITOR for and in behalf of the DEBTOR. order of the lower court dismissing the appeal is hereby affirmed,
with costs.
When Anastacio Dugo (herein petitioner) and Rodrigo S.
Gonzales failed to pay the balance of their indebtedness, herein 8. AF REALTY VS DIESELMAN
respondents Lopena and Ramos filed on July 5, 1960, a Motion for Facts:
the Sale of Mortgaged Property and the lower court granted the a) In 1988, Manuel Cruz, Jr., a board member of Dieselman
above motion on July 19, 1960, and ordered the sale of the Freight Services, Co. (DFS) authorized Cristeta Polintan to sell a
mortgaged property. parcel of land owned by DFS.

On August 25, 1960, the 3 parcels of land above-mentioned were b) Polintan in turn authorized Felicisima Noble to sell the same
sold by the Sheriff at a public auction where-at herein petitioners, lot. Noble then offered AF Realty & Development, Co., represented
together with the plaintiffs of the other two cases won as the by Zenaida Ranullo (Board member and Vice President), the land
highest bidders. at the rate of P2,500.00 per sq. m. AF Realty accepted the offer
and issued a P300,000 check as downpayment.
Contention of Dungo: Anastacio Dugo insists that the
Compromise Agreement was void ab initio and could have no c) AF Realty was able to obtain the original copy of the title, tax
effect whatsoever against him because he did not sign the same. declaration and tax receipt of the lot and a photocopy of the
Furthermore, as it was void, all the proceedings subsequent to its Articles of Incorporation of Dieselman.
execution, including the foreclosure sale of August 25, 1960, were
similarly void and could not result to anything adverse to his d) Manuel Cruz, Sr. (father) and president of DFS, accepted
interest. the check as earnest money but modified the offer. He increased
the selling price to P4,000.00 per sq. m.
Anastacio Dugo filed a Notice of Appeal from the order approving
the foreclosure sale of August 25, 1960. e) AF Realty, in its response, did not exactly agree nor
disagree with the counter-offer but only said it is willing to pay the
balance (but was not clear at what rate).
Issues:
a) Whether the compromise agreement of January 15, f) Cruz, Sr. terminated the offer and demanded from AF Realty
1960, the Order of the same date approving the same, the return of the title of the lot delivered to them.
and, all the proceedings subsequent thereto, valid or void
insofar as the petitioner herein is concerned. g) Now AF Realty is suing DFS for specific performance on the
b) Whether the herein petitioner, AnastacioDugo, had or ground that there was a perfected contract.
had not ratified the compromise agreement. Contention of AF: It claims that DFS ratified the contract when it
accepted the check and made a counter-offer.

h) DFS contended: that there was no meeting of the minds


Held: 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.
On the first issue:
Under Article 1878 of the Civil Code, a third person cannot i) Meanwhile, DFS sold the same property to Midas
bind another to a compromise agreement unless he, the third Development Corporation.
amount lower than the first offer. Marquez appraised Glanville of
j) Midas filed Motion for Leave to Intervene in the civil case the counteroffer of the Lintonjua siblings. Glanville relay the
filed by AF Realty in which they alleged that it has purchased the counteroffer to Delsaux and gave counter offer offer. Marquez then
property and took possession thereof, hence, DFS cannot be furnished Lintonjua a copy of telex sent by Delasaux offer which
compelled to sell and convey it to AF Realty. the the Lintonjua siblings accepted.

The Trial Court granted Midas Motion. Lintonjua brothers deposited the offered amount and drafted an
Trial Court (Favored AF) The act of Mr. Cruz, Jr. bound DFS in Escrow agreement (arrangement by which one party deposits an
the sale of the lot to AF Realty. Also held Midas bad faith when it asset with a third person [called an escrow agent], who, in turn,
initially paid DFS the price without seeing the latters title to the makes a delivery to another party if and when the specified
property. conditions of the contract are met.) to expedite the sale.

Court of Appeals Reversed the decision of the Trial Court on Marquez received a telephone call from Glanville advising that the
the basis that Mr. Cruz Jr. was not authorized in writing by DFS to sale would no longer proceed, that the decision has been taken at
sell the subject property to AF Realty. The sale was not perfected. a Board Meeting not to sell the properties. Delsaux sent a letter
The DOS between DFS and Midas was valid. stating that the Group has decided not to proceed with the sale.
Considering the new political situation since the departure of
Issue: Marcos and a certain stabilization in the Philippines, the
Whether or not the sale made through an agent was ratified upon Committee has decided not to stop the operation in Manila.
the receipt of the downpayment.
As a result Lintonjuas filed a complaint for specific performance
Held: and damages. Eternit contended: that the board and stockholder
No. There was no valid agency created. The Board of of Eternit never approved any resolution to sell subject properties
Directors of DFS never authorized Cruz, Jr. to sell the land. nor authorized Marquez to sell the same and that Glanville was his
Hence, the agreement between Cruz, Jr. and Polintan, as well as own personal making which did not bind Eternit.
the subsequent agreement between Polintan and Noble, never
bound the corporation. Therefore the sale transacted by Noble Trial court ruled that there is no valid and binding sale, since
purportedly on behalf of Polintan and ultimately purportedly on the authority was not in writing the sale is void and not merely
behalf of DFS is VOID. unenforceable.

Being a void sale, it cannot be ratified even if Cruz, Sr. accepted Lintonjuas contention: that Marquez acted merely as a broker
the check and made a counter-offer. (Cruz, Sr. returned the check hence not necessary for him to empowered as such by any written
anyway). Under Article 1409 of the Civil Code, void authority. Eternit alleged that Marquez had no written authority
transactions can never be ratified because they were void from the Board of Directors neither were Glanville and Delsaux
from the very beginning. authorized by its board of directores to offer the property for sale.
CA ruled that Marquez, needs a special authority, as a special
Section 23 of the Corporation Code expressly provides that agent, he from the board of directors to bind such corporation
the corporate powers of all corporations shall be exercised by
the Board of Directors. Thus, contracts or acts of a corporation Issue:
must be made either by the Board of Directors or by a corporate Whether Marquez, Glanville, and Delsaux are authorized to sell
agent duly authorized by the Board. In this case, it is undisputed the parcel of lands of Eternit, Whether sale is valid
that respondent Cruz, Jr. has no written authority from the board of
directors of DFS to sell or to negotiate the sale of the lot, much Held:
less to appoint other persons for the same purpose. A Corporation may act only through its board of directors or,
when authorized either by its by-laws or by its board
Under Art. 1874 of the Civil Code provides that when a sale of resolution, through its officers or agents in the normal course
piece of land or any interest therein is through an agent, the of business. The general principles of agency govern the relation
authority of the latter shall be in writing; otherwise the sale between the corporation and its officers or agents, subject to the
shall be void. articles of incorporation, by-laws, or relevant provisions of law. The
property of a corporation, however, is not the property of the
Cruz, Jr.s lack of such (written) authority precludes him from stockholders or members, and as such, may not be sold
conferring any authority to Polintan involving the subject realty. without express authority from the board of directors. Absent
such valid delegation/authorization, the rule is that the declarations
9. LITONJUA VS. ETERNIT CORPORATION of an individual director relating to the affairs of the corporation, but
not in the course of, or connected with, the performance of
Facts: authorized duties of such director, are not binding on the
Eternit Corporation is engaged in the manufacture of roofing corporation.
materials and pipe products. It manufacturing operations were
conducted on eight parcels of land. 90% of the shares of Eternit While a corporation may appoint agents to negotiate for the sale of
were owned by Eteroutremer SA Corporation ESAC foreign its real properties, the final say will have to be with the board of
corporation (Belgium). The General Manager and President of directors through its officers and agents as authorized by a board
Eternit is Glanville, an Australian citizen while Delsaux is the resolution or by its by-laws. An unauthorized act of an officer of
Regional Director of ESAC the corporation is not binding on it unless the latter ratifies
the same expressly or impliedly by its board of directors. Any
ESAC management grew concerned about political situation in the sale of real property of a corporation by a person purporting to be
Philippines (1986). The Committee for Asia ESAC instructed an agent thereof but without written authority from the corporation
Adams, one of Board of Directors of Eternit to dispose of the eight is null and void. The declarations of the agent alone are generally
parcels of land. Adams engaged the service of Marquez, a broker, insufficient to establish the fact or extent of his/her authority.
Marquez later offered the said properties to Eduardo Litonjua. In a
letter, Marquez declared that he was authorized to sell the While Glanville was the President and General Manager of
properties and that the terms of sale were subject to negotiation. respondent EC, and Adams and Delsaux were members of its
Eduardo Litonjua and his siblings offered to buy the property for Board of Directors, the three acted for and in behalf of respondent
ESAC, and not as duly authorized agents of respondent EC. a
board resolution evincing the grant of such authority is needed to To secure the loan, Queao executed a Deed of Real Estate
bind EC to any agreement regarding the sale of the subject Mortgage dated 11 August 1980 in favor of Naguiat, and
properties. Such board resolution is not a mere formality but is surrendered to the latter the owners duplicates of the titles
a condition sine qua non to bind respondent EC covering the mortgaged properties. On the same day, the
mortgage deed was notarized, and Queao issued to Naguiat a
The petitioners cannot feign ignorance of the absence of any promissory note for the amount of TWO HUNDRED THOUSAND
regular and valid authority of respondent EC empowering Adams, PESOS (P200,000.00), with interest at 12% per annum, payable
Glanville or Delsaux to offer the properties for sale and to sell the on 11 September 1980. Queao also issued a Security Bank and
said properties to the petitioners. A person dealing with a known Trust Company check, postdated 11 September 1980, for the
agent is not authorized, under any circumstances, blindly to trust amount of TWO HUNDRED THOUSAND PESOS (P200,000.00)
the agents; statements as to the extent of his powers; such person and payable to the order of Naguiat.
must not act negligently but must use reasonable diligence and
prudence to ascertainwhether the agent acts within the scope of Upon presentment on its maturity date, the Security Bank check
his authority was dishonored for insufficiency of funds. On the following day, 12
September 1980, Queao requested Security Bank to stop payment
The settled rule is that, persons dealing with an assumed agent of her postdated check, but the bank rejected the request pursuant
are bound at their peril, and if they would hold the principal liable, to its policy not to honor such requests if the check is drawn
to ascertain not only the fact of agency but also the nature and against insufficient funds.
extent of authority, and in case either is controverted, the burden
of proof is upon them to prove it On 16 October 1980, Queao received a demand letter from
Naguiats lawyer, demanding settlement of the loan. Shortly
An agency may be expressed or implied from the act of the thereafter, Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met
principal, from his silence or lack of action, or his failure to with Naguiat.
repudiate the agency knowing that another person is acting on his Contention of Queao: At the meeting, Queao told Naguiat that
behalf without authority. Acceptance by the agent may be she did not receive the proceeds of the loan, adding that the
expressed, or implied from his acts which carry out the agency, checks were retained by Ruebenfeldt, who purportedly was
or from his silence or inaction according to the circumstances. Naguiats agent.
Agency may be oral unless the law requires a specific form.
However, to create or convey real rights over immovable Naguiat applied for the extrajudicial foreclosure of the mortgage
property, a special power of attorney is necessary. Thus, when with the Sheriff of Rizal Province, who then scheduled the
a sale of a piece of land or any portion thereof is through an agent, foreclosure sale on 14 August 1981. Three days before the
the authority of the latter shall be in writing, otherwise, the sale scheduled sale, Queao filed a compliant for the annulment of the
shall be void. mortgage deed. The trial court eventually stopped the auction sale.

For an agency by ESTOPPEL to exist, the following must be On 8 March 1991, the RTC rendered judgment, declaring
established: the Deed of Real Estate Mortgage null and void, and ordering
(1) the principal manifested a representation of the agents Naguiat to return to Queao the owners duplicates of her titles to
authority or knowingly allowed the agent to assume such authority; the mortgaged lots. Naguiat appealed the decision before the
(2) the third person, in good faith, relied upon such representation; Court of Appeals, making no less than eleven assignments of
(3) relying upon such representation, such third person has error. The Court of Appeals promulgated the decision now
changed his position to his detriment. assailed before us that affirmed in toto the RTC decision. Hence,
An agency by estoppel, which is similar to the doctrine of the present petition.
apparent authority, requires proof of reliance upon the Contention of Naguiat: Naguiat questions the admissibility of the
representations, and that, in turn, needs proof that the various written representations made by Ruebenfeldt on the
representations predated the action taken in reliance. ground that they could not bind her following the res inter alia
actaalterinocere non debet rule. The Court of Appeals rejected the
argument, holding that since Ruebenfeldt was an authorized
representative or agent of Naguiat the situation falls under a
recognized exception to the rule. Still, Naguiat insists that
Ruebenfeldt was not her agent.
10. CELESTINA T. NAGUIAT vs. COURT OF APPEALS
and AURORA QUEAO Issue:
Whether Ruebenfeldt is considered as an agent of Naguiat.
Nature of Case: A Petition for Review on Certiorari under Rule 45,
assailing the decision of the Sixteenth Division of the respondent
Held:
Court of Appeals promulgated on 21 December 1994 [1], which
Yes, the court ruled that the existence of an agency relationship
affirmed the decision of Regional Trial Court (RTC) of Pasay City.
between Naguiat and Ruebenfeldt is supported by ample
EVIDENCE. As correctly pointed out by the Court of Appeals,
Cause of Action: The case arose when on 11 August 1981,
Ruebenfeldt was not a stranger or an unauthorized
private respondent Aurora Queao (Queao) filed a complaint before
person. Naguiat instructed Ruebenfeldt to withhold from Queao the
the Pasay City RTC for cancellation of a Real Estate Mortgage she
checks she issued or indorsed to Queao, pending delivery by the
had entered into with petitioner Celestina Naguiat (Naguiat). The
latter of additional collateral. Ruebenfeldt served as agent of
RTC rendered a decision, declaring the questioned Real Estate
Naguiat on the loan application of Queaos friend,
Mortgage void, which Naguiat appealed to the Court of Appeals.
MarilouFarralese, and it was in connection with that transaction
Court of Appeals affirmed the RTC decision, Naguiat instituted
that Queao came to know Naguiat.
the present petition.
It was also Ruebenfeldt who accompanied Queao in her meeting
Facts:
with Naguiat and on that occasion, on her own and without Queao
Queao applied with Naguiat for a loan in the amount of Two
asking for it, Reubenfeldt actually drew a check for the sum
Hundred Thousand Pesos (P200,000.00), which Naguiat granted.
of P220,000.00 payable to Naguiat, to cover for Queaos alleged
On 11 August 1980, Naguiat indorsed to Queao Associated Bank
liability to Naguiat under the loan agreement.
An agent receives a commission upon the successful conclusion of
The Court of Appeals recognized the existence of an agency a sale. On the other hand, a broker earns his pay merely by
by estoppels citing Article 1873 of the Civil Code. Apparently, it bringing the buyer and the seller together, even if no sale is
considered that at the very least, as a consequence of the eventually made.
interaction between Naguiat and Ruebenfeldt, Queao got the
impression that Ruebenfeldt was the agent of Naguiat, but Naguiat 2. BMW exercised control over Alfred Hahns activities- As to
did nothing to correct Queaos impression. In that situation, the the service centers and showrooms which he said he had put up at
rule is clear. One who clothes another with apparent authority his own expense, Hahn said that he had to follow BMW
as his agent, and holds him out to the public as such, cannot specifications as exclusive dealer of BMW in the Philippines.
be permitted to deny the authority of such person to act as According to Hahn, BMW periodically inspected the service
his agent, to the prejudice of innocent third parties dealing centers to see to it that BMW standards were maintained. Indeed,
with such person in good faith, and in the honest belief that it would seem from BMW's letter to Hahn that it was for Hahn's
he is what he appears to be. The Court of Appeals is correct in alleged failure to maintain BMW standards that BMW was
invoking the said rule on agency by estoppel. 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
11. ALFRED HAHN vs. COURT OF APPEALS and an agent of BMW. For as already noted, there are facts in the
BAYERISCHE MOTOREN WERKE record which suggest that BMW exercised control over Hahn's
AKTIENGESELLSCHAFT (BMW) activities as a dealer and made regular inspections of Hahn's
Facts: premises to enforce compliance with BMW standards and
On 1967, Alfred Hahn (Filipino citizen) executed in favor of BMW specifications.For example, in its letter to Hahn dated February 23,
(nonresident foreign corporation) a "Deed of Assignment with 1996, BMW stated:
Special Power of Attorney". Per the agreement, the parties In the last years we have pointed out to you in several discussions
"continue[d] business relations as has been usual in the past and letters that we have to tackle the Philippine market more
without a formal contract." But on February 16, 1993, in a meeting professionally and that we are through your present activities not
with a BMW representative and the president of Columbia Motors adequately prepared to cope with the forthcoming challenges.
Corporation (CMC), Jose Alvarez, Hahn was informed that BMW
was arranging to grant the exclusive dealership of BMW cars and In effect, BMW was holding Hahn accountable to it under the 1967
products to CMC, which had expressed interest in acquiring the Agreement.
same. Hahn also received confirmation of the information from
BMW which, in a letter, expressed dissatisfaction with various 3. BMW engaged in business in the Philippines with Hahn as
aspects of petitioner's business, mentioning among other things, its exclusive distributor-This case fits into the mould
decline in sales, deteriorating services, and inadequate showroom of Communications Materials, Inc. v. Court of Appeals, in which
and warehouse facilities, and petitioner's alleged failure to comply the foreign corporation entered into a "Representative Agreement"
with the standards for an exclusive BMW dealer.Nonetheless, and a "Licensing Agreement" with a domestic corporation, by
BMW expressed willingness to continue business relations with virtue of which the latter was appointed "exclusive representative"
Hahn on the basis of a "standard BMW importer" contract, in the Philippines for a stipulated commission. Pursuant to these
otherwise, it said, if this was not acceptable to latter, BMW would contracts, the domestic corporation sold products exported by the
have no alternative but to terminate petitioner's exclusive foreign corporation and put up a service center for the products
dealership. sold locally. This Court held that these acts constituted doing
business in the Philippines. The arrangement showed that the
Because of Hahn's disapproval, BMW withdrew its offer of a foreign corporation's purpose was to penetrate the Philippine
"standard importer contract" and terminated the exclusive dealer market and establish its presence in the Philippines.
relationship and made a proposal that Hahn and CMC jointly In addition, BMW held out private respondent Hahn as its
import and distribute BMW cars and parts. exclusive distributor in the Philippines, even as it announced in the
Asian region that Hahn was the "official BMW agent" in the
Hahn found the proposal unacceptable. he filed a complaint for Philippines.
specific performance and damages against BMW to compel it to
continue the exclusive dealership. Later he filed an amended
complaint to include an application for temporary restraining order
and for writs of preliminary, mandatory and prohibitory injunction to
enjoin BMW from terminating his exclusive dealership.

BMW moved to dismiss the case, contending that the trial court did
not acquire jurisdiction over it through the service of summons on
the Department of Trade and Industry, because it (BMW) was a
foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of
Assignment was an isolated transaction; that Hahn was not its
agent because the latter undertook to assemble and sell BMW
cars and products without the participation of BMW and sold other
products; and that Hahn was an indentor or middleman transacting
business in his own name and for his own account.

Issue:
Whether or not Alfred Hahn is the agent or distributor in the
Philippines of Private respondent, BMW.

Held:
1. Yes, Alfred Hahn is an agent of BMW
Prescinding from the above discussion, it is undisputed that PAL,
12. BRITISH AIRWAYS vs. COURT OF APPEALS, GOP in transporting Mahtani from Manila to Hongkong acted as the
MAHTANI, and PHILIPPINE AIRLINES agent of BA.

Facts: It is a well-settled rulethat an agent is also responsible for any


Mahtani decided to visit his relatives in Bombay, India. He negligence in the performance of its function and is liable for
obtained the services of Mr. Gumar to prepare his travel plans. damages which the principal may suffer by reason of its negligent
The latter, in turn, purchased a ticket from BA. act.
CARRIER FLIGHT DATE TIME STATUS
MANILA Also, it is worth mentioning that both BA and PAL are members of
toHONGKONG (PAL) the International Air Transport Association (IATA), wherein
toBOMBAY (BA) member airlines are regarded as agents of each other in the
issuance of the tickets and other matters pertaining to their
Since BA had no direct flights from Manila to Bombay, Mahtani relationship.Therefore, in the instant case, the contractual
had to take a flight to Hongkong via PAL, and upon arrival in relationship between BA and PAL is one of agency, the former
Hongkong he had to take a connecting flight to Bombay on board being the principal, since it was the one which issued the
BA. confirmed ticket, and the latter the agent.

Prior to his departure, Mahtani checked in at the PAL counter in Thus, a carrier (PAL), acting as an agent of another carrier, is also
Manila his luggage.Unfortunately, when Mahtani arrived in liable for its own negligent acts or omission in the performance of
Bombay he discovered that his luggage was missing. BA advised its duties.
him to file a claim.
It must be borne in mind that the purpose of a third-party complaint
Back in the Philippines, Mahtani filed his complaint for damages is precisely to avoid delay and circuity of action and to enable the
and attorneys feesagainst BA and Mr. Gumar. controversy to be disposed of in one suit.It is but logical, fair and
equitable to allow BA to sue PAL for indemnification, if it is proven
BA filed its answer with counter claimto the complaint raising, as that the latters negligence was the proximate cause of Mahtanis
special and affirmative defenses, that Mahtani did not have a unfortunate experience, instead of totally absolving PAL from any
cause of action against it. Likewise, BA filed a third-party liability.
complaintagainst PAL alleging that the reason for the non-transfer
of the luggage was due to the latters late arrival in Hongkong, thus WHEREFORE, in view of the foregoing, the decision of the Court
leaving hardly any time for the proper transfer of Mahtanis luggage of is hereby MODIFIED, reinstating the third-party complaint filed
to the BA aircraft bound for Bombay. by British Airways.

PAL filed its answer to the third-party complaint, wherein it


disclaimed any liability, arguing that there was, in fact, adequate
time to transfer the luggage to BA facilities in Hongkong.
Furthermore, the transfer of the luggage to Hongkong authorities
should be considered as transfer to BA.

The trial court rendered its decision in favor of Mahtani, and the
Third-Party Complaint against third-party defendant Philippine
Airlines is DISMISSED for lack of cause of action.

BA appealed to the Court of Appeals, which however, affirmed the


trial courts findings.

Issue:
Whether BA has cause of action against Philippine Airlines.

Ruling: YES

Third-party complaint isa procedural device whereby a third party


who is neither a party nor privy to the act or deed complained of by
the plaintiff, may be brought into the case with leave of court, by
the defendant, who acts as third-party plaintiff to enforce against
such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiffs claim.
The third-party complaint is actually independent of and separate
and distinct from the plaintiffs complaint.

The contract of air transportation was exclusively between Mahtani


and BA, the latter merely endorsing the Manila to Hongkong leg of
the formers journey to PAL, as its subcontractor or agent. In fact,
the fourth paragraph of the Conditions of Contracts of the ticket
issued by BA to Mahtani confirms that the contract was one of
continuous air transportation from Manila to Bombay.

4. xxx carriage to be performed hereunder by several successive


carriers is regarded as a single operation.

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