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PART ONE - AGENCY ○ Under the GSAA, Orient Air shall remit (in US dollars) to

American Air the ticket stock or exchange orders, less


I. Nature, Form, and Kinds of Agency commissions due to Orient Air, at least semi-monthly. On
the other hand, American Air will pay Orient Air Services
A. Definition commission on transportation sold by Orient Air Services
or its sub-agents.
ORIENT AIR SERVICES AND HOTEL REPS. v. CA and AMERICAN AIRLINES 3. American Air alleged that Orient Air had reneged on its
(1991) obligations under the GSAA by failing to promptly remit the net
Padilla, J. | GR No. 76931 | Definition proceeds of sales for January-March 1981 in the amount of US
$254,400.40.
SUMMARY: ○ American Air then undertook the collection of the
American Air and Orient Air entered into a General Sales Agency proceeds of tickets sold originally by Orient Air and
Agreement (GSAA), where Orient Air served as American Air’s sales agent terminated forthwith the GSAA in accordance with par.
in the Philippines. Orient Air failed to remit ticket proceeds to American 13, which authorizes termination in case Orient Air is
Air, so the latter terminated the GSAA and filed this case against Orient unable to transfer to the funds payable by Orient Air to
Air. American Air.
The CFI declared the termination illegal and ordered American Air to 4. American Air filed a civil case against Orient Air before CFI Manila
reinstate Orient Air as its agent, and to pay Orient Air commission and for accounting with preliminary attachment/ garnishment,
damages. The SC reversed the reinstatement of Orient Air, ruling that mandatory injunction, and restraining order averring the
American Air cannot be compelled to make Orient Air its agent. aforesaid basis for the termination of the GSAA, as well as Orient
Air’s previous record of failures "to promptly settle past
DOCTRINE: outstanding refunds of which there were available funds in the
Art. 1868, NCC: By the contract of agency a person binds himself to possession of the defendant, . . . to the damage and prejudice of
render some service or to do something in representation or in behalf of plaintiff."
another, with the consent or authority of the latter. 5. Orient Air denied the material allegations of the complaint with
● A principal cannot be compelled by any authority to establish an respect to American Air's entitlement to the alleged unremitted
agent-principal relationship without its consent. Such would amounts, contending that after application thereof to the
violate the principles of agency. commissions due it under the GSAA, American Air in fact still
owed Orient Air a balance in unpaid overriding commissions.
FACTS ○ Further, Orient Air contended that the actions taken by
1. This is a consolidation of two petitions for certiorari from a CA American Air in the course of terminating the GSAA, as
decision which dismissed American Air’s civil case against Orient well as the termination itself, were untenable.
Air and granted Orient Air’s counterclaim for agent’s overriding 6. CFI Manila ruled in favor of Orient Air, ruling that the termination
commission and damages. of the GSAA by American Air was illegal and improper, and
2. American Airlines, Inc. (American Air), an air carrier offering ordering American Air to pay the balance of the overriding
passenger and air cargo transportation in the Philippines, and commission on total flown revenue of US$84,821.31, plus the
Orient Air Services and Hotel Representatives (Orient Air), additional amount of US$8,000.00 (3% overriding commission);
entered into a General Sales Agency Agreement (GSAA), whereby Pl,500,000 in exemplary damages; and P300,000 in attorney's
American Air authorized Orient Air to act as its exclusive general fees.
sales agent within the Philippines for the sale of air passenger
transportation.

1
7. IAC (now CA) affirmed with modification the CFI decision with
respect to the damages granted, reducing exemplary damages
to P200,000, and attorney’s fees to P25,000.

ISSUES and HELD


WON the CFI erred in ordering American Air to reinstate Orient Air as its
agent --- YES.

RATIO
1. By affirming this ruling of the trial court, respondent IAC, in effect,
compels American Air to extend its personality to Orient Air.
○ Such would be violative of the principles and essence of
agency, defined by law (Art. 1868) as a contract whereby
"a person binds himself to render some service or to do
something in representation or on behalf of another,
with the consent or authority of the latter” (emphasis
supplied)
○ In an agent-principal relationship, the personality of the
principal is extended through the facility of the agent. In
so doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the latter
would have him do. Such a relationship can only be
effected with the consent of the principal, which must
not, in any way, be compelled by law or by any court.
○ The GSAA itself between the parties states that "either
party may terminate the Agreement without cause by
giving the other 30 days' notice by letter, telegram or
cable." (emphasis supplied)

DISPOSITIVE
Lower court judgment affirmed with modification.

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B. Elements
Loadmasters Customs Services Inc. v Glodel Brokerage Corporation The basis of Agency is representation, that the agent acts for and on
J Mendoza; Elements of Agency behalf of the principal on matters within the scope of his authority and
Facts: said acts have the same legal effect as if they were personally executed
1. R&B Insurance insured Columbia Wire & Cable’s shipment of by the principal.
132 bundles of copper cathodes against All Risks. When the On the part of the principal, there must be an intention to appoint, either
shipment arrived in Manila, Columbia hired Glodel to release and actual or inferable.
withdraw the cargo from the pier; Glodel in turn hired On the part of the agent, there must be an intention to accept the
Loadmasters to use 12 of latter’s trucks to transport the goods appointment.
to Columbia’s warehouses in Bulacan and Valenzuela (6 trucks 2. Both Loadmaster & Glodel are common carriers and are
to each city). obligated to exercise extraordinary diligence from the time goods
2. The 6 trucks got to Valenzuela safely, but only 5 to Bulacan. The are placed in their care until actual/constructive delivery, as per
missing truck was later recovered but without the cathodes, so CC A1733.
Columbia filed a claim against R&B and recovered P1.9m as a. Private Carriers are those wherein carriage is
insurance indemnity, after the requisite investigation and undertaken by special agreement and the carrier does
adjustment. In turn, R&B sued both Loadmasters & Glodel for not hold itself to carry goods for the general public.
reimbursement. b. Glodel is a customs broker as conceded in its
3. The RTC held only Glodel liable for the P1.9m. R&B & Glodel memorandum. In [Schmitz Transport v Transport
appealed, with the CA granting only R&B’s appeal, making Venture], the SC held that customs brokers are common
Loadmaster, as the agent of Glodel, likewise liable to R&B. carriers, since transportation of goods is an integral part
Loadmaster filed this petition for review. of its business. It was thus negligent in selecting
Loadmasters, or not ensuring the safety of the cargo via
Issues: escorting the trucks, etc.
1. WON Loadmaster be legally considered an Agent of Glodel? No. c. Loadmasters admitted it was a common carrier, and
2. WON Glodel and Loadmaster are still liable for the loss? Yes, as there was no indication that the agreement between
joint-tortfeasors. . Glodel & Loadmasters was private in character. Under
3. WON Loadmaster is liable to Glodel despite the lack of cross A2180, employers are liable for the damage of their
claim filed by the latter? No. employees, and are juris tantum presumed negligent
unless they present convincing proof that they exercised
Ratio: the diligence of a good father of the family in selecting
1. The CA erred in holding so. A1868 provides the elements of and supervising their employees. This Loadmasters
Agency: failed to do.
a. Consent, express or implied, of the parties to establish Under A2194, the responsibility of 2 or more persons who are liable for a
the relationship. There was no mutual intent to establish quasi-delict is solidary, and either of them are responsible for the whole
the relationship of Agency; injury.
b. Object is the execution of a juridical act in relation to a 3. Despite having a definite cause of action, Glodel failed to file a
third person. cross-claim pursuant to S2 Rule 9. Under the rules, a compulsory
c. Agent acts as a representative and not for himself. As counterclaim or a cross-claim not set up shall be barred. The
such, Loadmasters never represented Glodel; Court’s equity jurisdiction cannot come to the aid of a party who
d. Agent acts within the scope of his authority. Glodel never was negligent, as Glodel was, as it can never operate against
authorized Loadmasters to represent it. statutory law or judicial rules of procedure.

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WESTMONT INVESTMENT CORP v. FRANCIA (2011) • The confirmation advice indicated the name of the borrower as
MENDOZA, J | GR No. 194128 | Nature, Form and Kinds of Agency Pearlbank. The due date was April 13, 2000
On April 13, 2000,
they again tried to get back the principal amount they invested
SUMMARY: Amos Francia and two siblings invested 3.9 million in plus interest but, again, they were frustrated. Several attempts
Vestment’s investment arm Wincorp. At maturity Wincorp extended the to settle the case proved futile.
maturity date by making a Confirmation Advice in the name of Pearlbank • After the testimony of Amos Francia, Wincorp filed a MOtion to
(making it look like Pearlbank borrowed the 3.9m from the plaintiffs). It Postpone due to unavailability of wtinesses. Denied by RTC
insists there was a contract of agency between it and the Francias (in • Pearlbank filed a Demurrer to Evidence. Granted. Complaint
effect saying that Pearlbank is the recipient of the investment and is against Pearlbank dismissed. Case with respect to Wincorp was
responsible too). Court says there is non because the evidence fails to submitted for decision
establish it.
• RTC Decision: Wincorp solely liable and ordered to pay 3.9m
representing the total investments + 11% per annum to be
DOCTRINE: Elements of the contract of agency counted from 10 March 2000
• CA: Affirmed with minor modification
1. consent, express or implied, of the parties to establish the
• Also mentioned by CA: "Defendant- appellant Wincorp never
relationship
negated these established facts because defendant-appellant
2. the object is the execution of a juridical act in relation to a third
WincorpÊs claim is that it received the money of plaintiffs-
person
appellees but it merely acted as an agent of plaintiffs- appellees
3. the agent acts as a representative and not for himself
 and that the actual borrower of plaintiffs-appellees’ money is
4. the agent acts within the scope of his authority. defendant-appellee PearlBank. Hence, defendant- appellant
Wincorp alleges that it should be the latter who must be held
FACTS liable to the plaintiffs-appellees.
• RTC: respondents Amos P. Francia, Jr., Cecilia Zamora and • However, the contract of agency and the fact that defendant-
Benjamin Francia (the Francias) filed a Complaint for Collection appellee PearlBank actually received their money were never
of Sum of Money and Damages against petitioner Westmont proven. The records are bereft of any showing that defendant-
Investment Corporation (Wincorp) and respondent Pearlbank appellee PearlBank is the actual borrower of the money invested
Securities Inc. (Pearlbank) by plaintiffs-appellees as defendant-appellant Wincorp never
• RTC issued an order dismissing the motions to dismiss of presented any evidence to prove the same.”
Wincorp and Pearlbank for lack of merit
Wincorp then filed its • Wincorp brings this to SC through Rule 45
Answer, while Pearlbank filed its Answer with Counterclaim and
Crossclaim (against Wincorp) ISSUE and HELD
• Testimony of Amos (FACTS): Amos Francia, his sister and and Is there a contract of agency between Wincorp and the Plaintiffs? NO.
brother were enticed by a member of Westmont Bank in
Meycauayan to invest 1.4m and 2.5 in its investment arm, RATIO
Wincorp, promising 11% return over a 43 day spread. The • Wincorp insists that there was a contract of agency between it
receipts were both dates Janueary 27, 2000. Upon maturity, and the Francias with the latter authorizing the former as their
Wincorp said it had no funds. It the“rolled-over” their placements agent to lend money to Pearlbank. According to Wincorp, the two
and issued Confirmation Advices extending their placements for Confirmation Advices presented as evidence by the Francias and
another 34 days. admitted by the court, were competent proof that the recipient of
the loan proceeds was Pearlbank

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• 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. It is said that the underlying
principle of the contract of agency is to accomplish results by
using the services of others·to do a great variety of things. Its aim
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. Its basis is representation.
• Elements of the contract of agency
1. consent, express or implied, of the parties to establish
the relationship
2. the object is the execution of a juridical act in relation to
a third person
3. the agent acts as a representative and not for himself

4. the agent acts within the scope of his authority.
• In this case, the principal-agent relationship between the
Francias and Wincorp was not duly established by evidence. The
records are bereft of any showing that Wincorp merely brokered
the loan transactions between the Francias and Pearlbank and
the latter was the actual recipient of the money invested by the
former.
• Pearlbank did not authorize Wincorp to borrow money for it.
Neither was there a ratification, expressly or impliedly, that it had
authorized or consented to said transaction.
• Although the subject Confirmation Advices indicate the name of
Pearlbank as the purported borrower of the said investments,
said documents do not bear the signature or acknowledgment of
Pearlbank or any of its officers.
• Another significant point which would support the stand of
Pearlbank that it was not the borrower of whatever funds
supposedly invested by the Francias was the fact that it initiated,
filed and pursued several cases against Wincorp questioning the
latter’s acts of naming it as borrower of funds from investors.
• Also, all the documents attached by Wincorp to its pleadings
before the CA cannot be given any weight or evidentiary value for
the sole reason that, as correctly observed by the CA, these
documents were not formally offered as evidence in the trial
court.
DISPOSITIVE: Petition Denied

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Soriamont Steamship Agencies, Inc. v. Sprint Transport Services, Inc. (14
July 2009) 1.c. The case is barren of any piece of evidence pointing to Harman Foods
CHICO-NAZARIO, J. | GR No. 174610 | Agency; Elements of; being involved in the transaction, save for it being identified as “xxx
shipper/consignee, and the location of said shipping line.”
SUMMARY: Soriamont assails the lower court decision that it was liable
to Sprint, as it held 1) it’s Equipment Lease Agreement (ELA) with the 1.d. “The settled rule is that persons dealing with an assumed agent are
latter established it as the principal – contracting party who 2) authorized bound at their peril, and if they would hold the principal liable, they must
co-respondent Papa Transport Services (PTS) to withdraw the equipment ascertain not only the fact of agency, but also the nature and extent of
to be leased to the former. The Court denies the petition. authority” – in this case, Sprint was able to prove by evidence by way of
the ELA, the Equipment Interchange Receipts which were signed by the
DOCTRINE: The settled rule is that persons dealing with an assumed driver of PTS.
agent are bound at their peril, and if they would hold the principal liable,
they must ascertain not only the fact of agency, but also the nature and
extent of authority. 2.a. Again, the authorization letter “xxx established an agency
relationship, with Soriamont as the principal and PTS as an agent.”
FACTS
1. Soriamont and Sprint entered into an ELA where the latter would 2.b. “xxx the actions taken by PTS as regards the subject equipment were
lease to the former equipment to facilitate its transport services. binding on Soriamont, making the latter laible to Sprint.”
2. Co-petitioner Patrick Ronas, General Manager of Soriamont,
issued authorization letters for Papa Transport Services (PTS) DISPOSITIVE:
and Rebson Trucking to withdraw the said chassis units from the WHEREFORE, premises considered, the instant Petition for Review on
container yard of Sprint. Certiorari is hereby DENIED. The Decision dated 22 June 2006 and
3. Sprint was informed of the supposed loss of the equipment by Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R.
Soriamont and Ronas. Sprint sought recovery of the equipment CV No. 74987 are hereby AFFIRMED. Costs against petitioner Soriamont
and/or payment but neither were achieved. Steamship Agencies, Inc.
4. Soriamont alleges that they could not be faulted as it was actually
PTS who withdrew the equipment for the real “agent” of
Soriamont, which was Harman Foods.

ISSUES and HELD


1. WoN a contract of agency existed between Soriamont and PTS –
YES
2. WoN Soriamont is therefore liable to Sprint - YES

RATIO
1.a.“The authorization issued by Soriamont to PTS established an agency
relationship, with Soriamont as the principal and PTS as an agent.”

1.b. The case is replete with evidence of PTS having been intended, both
by conduct and by the very authorization letter of Soriamont, as agent of
the petitioner to effect the ELA.

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J. Philippine Marine, Inc v. NLRC 1. Counsel argues that the amount of P450,000 is unconscionably
Carpio-Morales, J | GR 175366 | Scope of Agency low. However, only respondent Dumalaog can impugn the
consideration of the compromise as being unconscionable.
Summary: Warlito Dumaloag filed a claim against J. Phil. Marine for 2. The relation of attorney and client is in many respects one of
disability benefits. Pending his case in the NLRC, he had a compromise agency. The general rules of agency apply to such relation. The
agreement with quit claim with J. Marine. When J. Phil filed a acts of an agent are deemed acts of the principal only if the agent
manifestation with the NLRC saying that they had an amicable acts within the scope of his authority. However, the
settlement, Warlito’s counsel filed an opposition saying that there was circumstances of this case indicate that respondent’s counsel is
still a balance left to be paid and that the compromise was acting beyond the scope of his authority in questioning the
unconscionable. compromise agreement.
The Court dismissed the case saying that An employee had the right to 3. The client has a right to compromise a suit without intervention
compromise, and that the agent(lawyer) was exceeding his authority of the lawyer, who may only intervene if the compromise is
when he questioned the compromise. entered into with the intent to defraud the lawyer of the fees
justly due him. However, there is no showing that respondent
Doctrine: The acts of an agent are deemed the acts of the principal only intended to defraud his counsel of his fees. In fact, the Quitclaim
if the agent acts within the scope of his authority. and Release notes that “20% attorney’s fees (P90,000) would be
paid on April 12, 2007.
Facts:
1. Respondent Warlito Dumaloag served as a cook aboard vessels Dispositive: WHEREFORE, the petition is, in light of all the foregoing
plying overseas. He filed a complaint before the NLRC against discussion, DISMISSED.
petitioners J-Phil, a manning agency, and its foreign principal
Norman Shipping Services, for unpaid money claims, paid
leaves, disability benefits, among others. He claimed to have
been disabled due to enlargement of the heart and severe
thyroid enlargement contacted while discharging his duties as a
cook.
2. The NLRC awarded $50,000 disability benefit to respondent.
However, during the pendency of the case, respondent, against
the advice of his counsel, entered into a compromise agreement
with petitioners. He received P450,000. He signed a Quitclaim
and Release subscribed and sworn to before the Labor Arbiter.
3. Respondent’s counsel filed a Comment and Opposition
“purportedly on behalf of respondent” objecting to the absolution
of petitioners from paying respondent the award granted by the
NLRC ($50,000). Counsel prayed that the remaining balance be
paid.

Issue and Held: W/N counsel, as agent of respondent, acted within the
scope of his authority as to allow him to impugn the consideration of the
compromise as being unconscionable. – NO
Ratio:

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Filipinas Life Assurance Co. v Pedroso (Feb. 4, 2008) 11. In this petition, Filipinas Life claims that the investment scheme
Quisimbing, J.|Gr no. 159489|Elements offered by the Valle, Apetrior, and Alcantara was outside the
scope of their authority and thus it cannot be held responsible.
Summary: Pedroso and Palacio invested in Filipinas Life due to a
promotional investment offered by its agent Valle, and this was verified Issue and Held: WON Filipinas Life is liable for the acts of its agent Valle,
by Apretrior and Alcantara (Administrative Asst. and Manager of Filipinas Apetrior, and Alcantara? Yes
Life Office). Filipinas Life refused to return the investment, which
prompted Pedroso and Palacio to file an action for a sum of money Ratio:
against Filipinas Life ,Valle, Apetrior and Alcantara. Filipinas Life argues 1. The investments were received by Valle and remitted to Filipinas
that Valle acted beyond its scope. SC held that his acts were ratified by Life, using Filipinas Life official receipts. Valles authority to solicit
Apetrior and Alcantara which binds Filipinas Life. and receive investments were established by the parties by
seeking confirmation with Alcantara and Apetrior, therefore the
Doctrine: The acts of an agent beyond the scope of his authority do not respondents exercised due diligence in confirming the validity of
bind the principal, unless the principal ratifies them, expressly or the Valles representations.
impliedly. Ratification in agency is the adoption or confirmation by one 2. Filipinas Life, as principal, is liable for obligations contracted by
person of an act performed on his behalf by another without authority. its agent Valle. Even if Valle acted beyond the scope of his
authority, the principal is still bound by his acts if it is ratified,
Facts: expressly or impliedly. In this case, Filipinas Life expressly ratified
1. Pedroso is a policyholder of Filipinas Life Assurance. Valles acts through Alcantara and Apetrior.
2. She was offered by her insurance agent, Valle, to invest in a Dispositive:
promotional investment program which gives 8% prepaid interest Petition denied for lack of merit. CA resolution affirmed.
per month for certain amounts deposited monthly.
3. Pedroso initially invested and issued a post-dated check for
P10,000, then Valle gave her a personal check for P800 for the
8% interest and a Life Agents Receipt.
4. Pedroso verified the promotional investment with the Filipinas
Life office and was assured by Alcantara (Administrative
Assistant) and Apetrior (Branch Manager) that there was a
promotion.
5. Pedroso waited for the maturity of her initial investment and then
requested a refund, which she received a month after.
6. Pedroso invested 7-8 more times at a lower rate of 5% prepaid
interest per month totaling P37,000.
7. Pedroso told Palacio about the investments and Palacio invested
a total amount of P49,950.
8. However, Filipinas Life refused to return the amounts when
Pedroso and Palacio tried to withdraw the investment.
9. Pedroso and Palacio filed an action for recovery of sum of money.
10. TC and CA held Filipinas Life and Valle, Apetrior, Alcantara jointly
and solidarily liable to Pedroso and Palacio.

8
EUROTECH INDUSTRIAL TECHNOLOGIES, INC. v. CUIZON (April 23 2007) aware of this fact. Trial court ruled in favor of Edwin. CA affirmed
Chico-Nazario, J. | 521 SCRA 584 | Agency: Elements TC. Hence this petition.

Petitioner: EUROTECH INDUSTRIAL TECHNOLOGIES, INC. Issue - Held


Respondents: EDWIN CUIZON and ERWIN CUIZON Did Edwin bind himself personally to pay the obligation to Eurotech? NO

Summary: Edwin, as sales manager of the sole proprietorship of his Ratio


brother, signed a Deed of Assignment in favor of Eurotech, covering ● Petitioner contends that Erwin’s act of collecting the receivables
receivables from Toledo Power. Despite this, the brother-proprietor from Toledo Power notwithstanding the existence of the Deed of
proceeded to collect from Toledo, prompting Eurotech to file a complaint. Assignment signed by Edwin, repudiated Edwin's power to sign
Eurotech impleads Edwin, claiming that he, in signing the Deed, acted in the DOA. As Edwin did not sufficiently notify it of the extent of his
excess of his authority as agent, as evidenced by his brother’s contrary powers as an agent, Eurotech claims that he should be made
action of collecting from Toledo. SC disagrees, as jurisprudence provides personally liable.
that the powers of an agent are particularly broad in the case of one acting ● The elements of the contract of agency are: (1) consent, express
as a general agent or manager. or implied, of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third
Doctrine: In the absence of an agreement to the contrary, a managing person; (3) the agent acts as a representative and not for
agent may enter into any contracts that he deems reasonably necessary himself; and (4) the agent acts within the scope of his authority.
or requisite for the protection of the interests of his principal entrusted to ● The parties do not dispute the existence of the agency
his management. relationship between Erwin as principal and Edwin as agent. The
only cause of the present dispute is whether Edwin exceeded his
Facts authority when he signed the Deed of Assignment.
● Eurotech is engaged in the business of importation and ● Article 1897 presents two instances when an agent becomes
distribution of various European industrial equipment. It has as personally liable to a third person. The first is when he expressly
one of its customers Impact Systems Sales, a sole proprietorship binds himself to the obligation and the second is when he
owned by ERWIN Cuizon. His brother EDWIN is the sales exceeds his authority. In the last instance, the agent can be held
manager. liable if he does not give the third party sufficient notice of his
● Eurotech sold to Impact Systems various products allegedly powers.
amounting to P91,338. Subsequently, the Cuizons sought to buy ● The Deed of Assignment clearly states that Edwin signed thereon
from Eurotech one unit of sludge pump valued at P250,000. as the sales manager of Impact Systems. The powers of an agent
When the sludge pump arrived, Eurotech refused to deliver the are particularly broad in the case of one acting as a general agent
same without respondents having fully settled their or manager; such a position presupposes a degree of confidence
indebtedness. reposed and investiture with liberal powers for the exercise of
● Thus, respondent Edwin executed a Deed of Assignment of judgment and discretion in transactions and concerns which are
receivables from Toledo Power Company in favor of Eurotech. Yet incidental or appurtenant to the business entrusted to his care
despite the existence of the Deed of Assignment, respondents and management. In the absence of an agreement to the
proceeded to collect from Toledo Power. contrary, a managing agent may enter into any contracts that he
● Because of respondents' failure to abide by demand letters, deems reasonably necessary or requisite for the protection of the
petitioner instituted a complaint. Respondent Edwin averred that interests of his principal entrusted to his management.
he is not a real party in interest. According to him, he was acting ● The significant amount of time spent on the negotiation for the
as mere agent of his principal, and the latter was very much sale of the sludge pump underscores Impact Systems'

9
perseverance to get hold of the said equipment. There is,
therefore, no doubt that Edwin's participation in the Deed of
Assignment was "reasonably necessary" or was required in order
for him to protect the business of his principal.
● Also, petitioner is seeking to recover both from respondents
Erwin, the principal, and Edwin, the agent. It must be pointed out
that in case of excess of authority by the agent, like what
petitioner claims exists here, the law does not say that a third
person can recover from both the principal and the agent.

DENIED.

10
Mr. and Mrs. Tan vs GVT Engineering Services (August 7, 2006) a. answer of spouses Tan and Cadag: (1) GVT’s work was
Austria-Martinez | GR No. 153057 | Nature, Form, and Kinds of Agency - defective so they awarded the work to other contractors
Elements to avoid further losses. (2) these changes were agreed
upon by the parties. (3) GVT has no legal personality
SUMMARY: since it is a single proprietorship
The spouses Tan hired GVT though its owner Tactaquin to construct their 4. Cadag testified that he was at the job site everyday to closely
residential house and engineer Cadag to supervise the project. changes supervise the construction with the assistance of other
were made during the course of the project which led to strained relations supervising representatives of the spouses (2 other engineers
between the parties and the deletion of certain tasks from the scope of and an architect)
GVT’s work. GVT withdrew from the project as a consequence of this. An 5. RTC ruled that the allegations of poor workmanship and
action was filed by Tactaquin for the payment of the balance of the incompetence were unsupported and that the act of deleting
contract against the Tans and Cadag but the case against Cadag was major items from GVT’s scope of work was uncalled for. The
eventually dismissed. The Tans argued that the case against them should losses suffered by GVT and the delay in the project was caused
have been dismissed as well since they merely relied on Cadag’s by the Tans’ failure to deliver the construction materials on time.
instructions but the court ruled that Cadag acted merely as an agent of Cadag and the spouses were held solidarily liable for the
the spouses Tan so the spouses, as principals, were liable for his acts. damages resulting from the breach of contract.
6. The spouses filed an appeal and the CA modified the RTC
DOCTRINE: decision by dismissing the case against Cadag
The essence of agency being the representation of another, it is evident
that the obligations contracted are for and on behalf of the principal. A ISSUES and HELD
consequence of this representation is the liability of the principal for the 1. if GVT as a sole proprietorship has the legal personality to
acts of his agent performed within the limits of his authority as if they were institute the complaint — NO, but the complaint was instituted by
acts of the principal himself. Tactaquin himself
2. if Tactaquin was wrong to discontinue the construction, in
FACTS violation of their construction agreement, considering that he
1. 18OCT1989 - the spouses Tan entered into a contract with GVT consented and acquiesced to the changes made in the plans?
through its owner/manager Gerino Tactaquin for the also if the spouses should be required to pay for the unfinished
construction of their residential house in consideration of P1.7M. portion of the house after it was abandoned and for the 5%
They hired engineer Rudy Cadag to supervise the construction. retention fee of Tactaquin — NO, the spouses Tan were the ones
2. During the course of the construction, the spouses Tan made guilty of breaching the contract. YES, they should pay.
changes in the plans and removed certain tasks from GVT’s 3. if the spouses should be absolved of any liability considering that
scope of work, causing some strain in their relations with the case against Cadag was dismissed and they merely relied
Tactaquin and Cadag. Following this, Tactaquin stopped the upon the advice and instructions of Cadag whom they hired to
construction of the house. supervise the construction — NO
3. Tactaquin filed a complaint for specific performance against the
Tans and Cadag alleging that (1) they were forced to borrow RATIO
money at exorbitant interest because of the changes made to the 1. being a sole proprietorship, GVT is not vested with a legal
plans (2) portions of their contract were deleted and awarded to personality to bring suit or defend an action in court. though
other contractors (3) the completion of the project was delayed initially the records were captioned as “GVT Engineering Services
because the Tans delayed the delivery of construction materials acting through its owner Gerino Tactaquin” suggesting that GVT
was the one which filed the complaint, subsequent allegations in

11
the complaint show that the suit was actually brought by 3. the CA was correct in ruling that contracts can only bind the
Tactaquin. In fact, one of the prayers in the complaint was for the parties who entered into it and cannot favor or prejudice third
recovery of moral damages for, among other things, his persons in line with the principle on relativity of contracts.
besmirched reputation as an Engineer and Contractor. a. contracts take effect only between he parties, their
Considering the rule that juridical persons aren’t entitled to moral successors in interest, heirs and assigns. also, every
damages, it is clear that Tactaquin was actually the complainant. cause of action ex contractu must be founded upon a
The caption should have read “Gerino Tactaquin doing business contract.
under the name and style of GVT Engineering Services” as is b. here, the complaint for specific performance was based
usually the practice but this is merely a technical defect that on the failure of the spouses Tan to comply with their
doesn’t affect jurisdiction contract. Cadag isn’t a party to this contract. Neither did
2. SC agreed with the RTC and CA ruling regarding the liability of the he enter into any contract with Tactaquin regarding the
spouses Tan for breach of their contract with GVT. Having construction of the house. since the Tactaquin’s cause
established this, they also ruled that the spouses should pay for of action was breach of contract and there’s no privity of
the balance of the price of their contract with GVT. contract contract between him and Cadag, there is no obligation
a. while he consented to the changes made to the plans, to speak about and no cause of action between Cadag
records show that Tactaquin refused to give his consent and Tactaquin.
to the deletions in their agreement as evidenced by 2 c. Cadag was employed by the spouses to supervise the
letters addressed to the spouses. the delay in the construction of their house. This being the case, his role
delivery of construction materials was evidenced by the was merely that of an agent. The essence of agency
minutes of the meeting held among the representatives being the representation of another, it is evident that the
of the spouses and GVT and a letter. obligations contracted are for and on behalf of the
b. Art. 2134 NCC states that if the obligation has been principal. A consequence of this representation is the
substantially performed in good faith, the obligor may liability of the principal for the acts of his agent
recover as though there had been a strict and complete performed within the limits of his authority as if they
fulfilment less damages suffered by the obligee. in the were acts of the principal himself. In the absence of any
present case, 74% of the work had been completed at allegation that he exceeded his authority, his acts are
the time that Tactaquin withdrew from the project. In considered as those of his principal who are answerable
other words, he had already substantially performed his for such acts.
obligation in good faith especially considering the fact
that a substantial part of the remaining work to be done DISPOSITIVE
was deleted from the scope of GVT’s work and awarded WHEREFORE, the petition is partly GRANTED. The appealed Decision and
to other contractors, forcing him to withdraw. Resolution of the Court of Appeals are AFFIRMED with MODIFICATION
c. If the deleted items were performed by GVT in whereby the amount of retention fee which petitioners are ordered to pay
accordance with their contract, 96% of the work would is reduced from P49,578.56 to P20,772.05
have been completed. So, Tactaquing should be paid
96% of the total contract price (P1,632,000 of P1.7M).
since P1,265,660 had already been paid, the spouses
are liable for the remaining P366,340
d. since his failure to complete his obligation was not due
to his own fault, he is still entitled to the retention fee.

12
JOCELYN B. DOLES v. MA. AURA TINA ANGELES (June 6, 2006) 2. Petitioner, then defendant, while admitting some allegations in
Austria Martinez, J. | GR No. 149353 | Topic in the syllabus the Complaint, denied that she borrowed money from
respondent. According to her, she referred her friends to
SUMMARY: The respondent alleged that she lent money to the petitioner respondent whom she knew to be engaged in the business of
however, the latter failed to pay the same. Thus the petitioner executed a lending money in exchange for personal checks through her
deed of absolute sale over a property in Cavite. Meanwhile, the petitioner (respondent’s) capitalist Arsenio Pua. She alleged that her
denied that she borrowed money from the respondent. She averred that friends borrowed money from respondent and issued personal
she re-lent the money to her friends who in turn, issued checks which checks. However, these checks bounced and said friends could
bounced. Because of the non-payment of her friends, she executed the not be located. This resulted to the respondent getting furious
said deed of sale over the property. and threatened to filed a criminal case against petitioner. With
regard to the sale of the Camella property, petitioner was forced
The Court held that both petitioner and respondent were agents of the to execute the same to avoid criminal prosecution.
debtor-friends and one Arsenio Pua respectively. Since both parties are 3. The RTC dismissed the complaint for insufficiency of evidence
agents, the deed of absolute sale is void for lack of consideration because and held that the sale was void for lack of cause or consideration.
neither of them are privy to the loan. 4. The CA reversed and set aside the judgement and concluded that
petitioner was the borrower and, in turn, would "re-lend" the
DOCTRINE: This Court has affirmed that, under Article 1868 of the Civil amount borrowed from the respondent to her friends. Hence, the
Code, the basis of agency is representation. The question of whether an Deed of Absolute Sale was supported by a valid consideration,
agency has been created is ordinarily a question which may be which is the sum of money petitioner owed respondent
established in the same way as any other fact, either by direct or amounting to P405,430.00, representing both principal and
circumstantial evidence. The question is ultimately one of intention. interest.
Agency may even be implied from the words and conduct of the parties
and the circumstances of the particular case. Though the fact or extent of ISSUES and HELD
authority of the agents may not, as a general rule, be established from 1. WON the petitioner can be considered as a debtor of the
the declarations of the agents alone, if one professes to act as agent for respondent --- (NO)
another, she may be estopped to deny her agency both as against the 2. WON the contract of sale was executed for a cause – (NO)
asserted principal and the third persons interested in the transaction in
which he or she is engaged. RATIO
1. During the examination, the Court took note that both petitioner
FACTS and respondent admitted that they are agents of the debtor-
1. Respondent alleged that petitioner took a loan from the former friends and Arsenio Pua respectively.
in the amount of P405,430.00. Subsequently, a "Deed of a. This Court has affirmed that, under Article 1868 of the
Absolute Sale" was executed by the petitioner, as seller, to the Civil Code, the basis of agency is representation. The
respondent, as buyer, a parcel of land, as well as the question of whether an agency has been created is
improvements thereon in Camella Townhomes Sorrente in ordinarily a question which may be established in the
Bacoor, Cavite, in order to satisfy her personal loan with same way as any other fact, either by direct or
respondent. This property was mortgaged to National Home circumstantial evidence. The question is ultimately one
Mortgage Finance Corporation (NHMFC) to secure petitioner's of intention. Agency may even be implied from the words
loan in the sum of P337,050.00 with that entity. Moreover and conduct of the parties and the circumstances of the
respondent shall assume the undue balance of the mortgage particular case. Though the fact or extent of authority of
and pay the monthly amortization. the agents may not, as a general rule, be established

13
from the declarations of the agents alone, if one
professes to act as agent for another, she may be
estopped to deny her agency both as against the
asserted principal and the third persons interested in
the transaction in which he or she is engaged.
b. In this case, petitioner knew that the financier of
respondent is Pua; and respondent knew that the
borrowers are friends of petitioner. For an agency to
arise, it is not necessary that the principal personally
encounter the third person with whom the agent
interacts.
c. In view of the two agency relationships, petitioner and
respondent are not privy to the contract of loan between
their principals.
2. Since the sale is predicated on that loan, then the sale is void for
lack of consideration. Moreover, the subject property does not
belong to the petitioner but to NHMFC.

DISPOSITIVE WHEREFORE, the petition is granted. The Decision and


Resolution of the Court of Appeals
are REVERS

14
APEX Mining Co. v. Southeast Mindanao Gold Mining Corp June 23, • Office of the President: Affirmed DENR ruling.
2006 Chico-Nazario, J. • SC: On certiorari, the SC held against Apex. The land was in the
forest reserve, hence Apex should have first applied for a permit
Summary: MMC was granted an exploration permit over the Diwalwal with the BFD.
Gold Rush Area, subject to the condition that the permit shall only be for • Multiple groups then sought to cancel MMC's EP 133, but
MMC's exclusive use and benefit, or of its duly authorized agents. MMC failed. In 1994, while one petition for cancellation against MMC
assigned the exploration permit to SEM, a domestic corp. that is 100% was pending, MMC assigned EP 133 to Southeast Mindanao
subsidiarily owned by MMC. The CA upheld the assignment, holding that Gold Mining Corporation (SEM), a domestic corporation which is
SEM is an agent of MMC, and under the doctrine of piercing the alleged to be a 100%-owned subsidiary of MMC.
corporate veil, MMC and SEM should not be treated as separate • 1995: BMG accepted and registered the assignment, as well as
entities. The SC reversed, holding that MMC did not prove SEM was their SEM's Mineral Production Sharing Agreement application
agent, and the assignment violated the condition in the EP. The doctrine • Due to the many oppositions, the DENR formed a Panel of
of piercing the corporate veil is therefore inapplicable, because it seeks Arbitrators to look into the issue. The panel upheld the validity
to prevent illegal acts, and allowing the application of the doctrine here of EP 133. The adverse claimants appealed to the Mines
would allow an illegal act. Adjudication Board, which ordered the stop of all mining
operations in the area pending compliance with mining licenses
Facts: and requirements, but upheld SEM's application for Mineral
• This case concerns multiple mining claims over the Diwalwal Production Sharing. They appealed to the SC, which remanded
Gold Rush Area. The said area is within the Agusan-Davao- the cases to the CA. The CA upheld the validity of EP 133,
Surigao Forest Reserve in Davao del Norte and Davao Oriental, because SEM is an agent of MMC. (Note: The CA used the
as per Proclamation 369 (in 1931), which set aside the said doctrine of piercing the corporate veil to uphold the validity of
area as a forest reserve. EP 133. Please see Ratio.) Hence, this petition by those
• 1984: Marcopper Mining Corp. (MMC) filed 16 DOLs opposing MMC and SEM's EP 133.
(Declaration of Location/mining claims) with the Bureau of
Mines and Geo-Sciences (BMG) over the area. After learning Issue: WON EP 133 and its transfer to SEM are valid—NO. The
that the area was within the forest reserve, MMC abandoned its assignment was a circumvention of the condition in the EP.
claims and instead applied for a Prospecting Permit with the
Bureau of Forest Development (BFD). The permit was granted, WHEREFORE, the petitions are PARTIALLY GRANTED, thus we
but it also included areas claimed by Apex Mining. hereby REVERSE and SET ASIDE the Decision of the CA and hereby
• Mar. 1986: Marcopper Mining Corp. (MMC) was granted an declare that EP 133 of MMC has EXPIRED on 7 July 1994 and that
Exploration Permit (EP 133) over the Diwalwal Gold Rush Area, its subsequent transfer to SEM on 16 February 1994 is VOID.
by the BMG. Hence, MMC sought to cancel Apex's mining claims
on the ground that they covered areas within the forest reserve. Ratio:
As such, MMC argued that Apex should have applied for a Re: Agency
Prospecting Permit with the BFD, and not a DOL with the BMG. • Apex argues that MMC failed to comply with the terms and
• BMG: Dismissed MMC's petition for cancellation, and held that conditions in EP 133, thus MMC and its successor-in-
the area covered by Apex's claim was not within a forest interest SEM lost their rights in the mining area. Apex
reserve. Apex's claim was upheld. pointed out that MMC violated four conditions in its permit.
• DENR: Reversed. Upheld the exploration permit of MMC First, MMC failed to comply with the mandatory work
instead. program, to complete exploration work, and to declare a

15
mining feasibility. Second, it reneged on its duty to submit Re: piercing the corporate veil
an Environmental Compliance Certificate. Third, it failed to • The CA held that by virtue of SEM being a 100% subsidiary of
comply with the reportorial requirements. Fourth, it violated MMC, it was automatically an agent of MMC. The CA also
the terms of EP 133 when it assigned said permit to SEM invoked the doctrine of piercing the corporate veil to legitimize
despite the explicit prohibition against its transfer. the prohibited transfer or assignment of EP 133. It held that
• Apex likewise emphasizes that MMC failed to file its MPSA SEM is just a business conduit of MMC, hence, the distinct legal
application required under DAO No. 8220 which caused its personalities of the two entities should not be recognized.
exploration permit to lapse because DAO No. 82 mandates • SC holds that the doctrine is inapplicable. The assignment of
holders of exploration permits to file a Letter of Intent and a the permit to SEM was used to circumvent the condition of non-
MPSA application not later than 17 July 1991. EP 133 transferability of the exploration permit. To allow SEM to avail
expired prior to its assignment to SEM. itself of this doctrine and to approve the validity of the
• One of the conditions of the exploration permit categorically assignment is tantamount to sanctioning an illegal act, which is
states that the permit shall be for the exclusive use and what the doctrine precisely seeks to forestall.
benefit of MMC or its duly authorized agents. While it may • For reasons of public policy and in the interest of justice, the
be true that SEM, the assignee of EP 133, is a 100% corporate veil will justifiably be impaled only when it becomes a
subsidiary corporation of MMC, there is no proof that SEM shield for fraud, illegality or inequity committed against a third
is a duly authorized agent of MMC. SEM is a distinct and person. However, courts should be mindful that it must only be
separate entity from MMC. For a contract of agency to exist, applied in cases where the corporate fiction was misused to
it is essential that there is: (1) consent, express or implied, such an extent that injustice, fraud or crime was committed
of the parties to establish the relationship; (2) the object is against another in disregard of its rights. Only then may the veil
the execution of a juridical act in relation to a third person; be pierced. Thus, a subsidiary corporation may be made to
(3) the agent acts as a representative and not for himself; answer for the liabilities or illegalities done by the parent
and (4) the agent acts within the scope of his authority. corporation if the former was organized for the purpose of
• Since SEM is not an authorized agent of MMC, it goes evading obligations that the latter may have entered into. In
without saying that the assignment or transfer of the permit other words, this doctrine is in place in order to expose and hold
in favor of SEM is null and void as it directly contravenes liable a corporation which commits illegal acts and use the
the terms and conditions of the grant of EP 133. The corporate fiction to avoid liability from the said acts. The
assignment by MMC of EP 133 in favor of SEM did not doctrine of piercing the corporate veil cannot therefore be used
make the latter the former's agent. Such assignment as a vehicle to commit prohibited acts because these acts are
involved actual transfer of all rights and obligations MMC the ones which the doctrine seeks to prevent.
had under the permit in favor of SEM, thus making SEM the
permittee. It was not a mere grant of authority to SEM, as
an agent of MMC, to use the permit. MMC totally abdicated
its rights over the permit.
• Agency vs. Assignment: In agency, the agent acts not on his
own behalf but on behalf of his principal. On the other
hand, in assignment, there is total transfer or
relinquishment of right by the assignor to the assignee. The
assignee takes the place of the assignor and is no longer
bound to the latter.

16
Litonjua Jr vs. Eternit Corpotration (June 8, 2006) 1. Eternit Corporation (EC) is a corporation duly organized and
CALLEJO, SR., J.| G.R. No. 144805 | Elements of Agency registered under Philippine laws. It’s engaged in the manufacture
of roofing materials and pipe products.
SUMMARY: a. It owns eight parcels of land with a total area of 47,233
Eternit Corporation (EC) owns eight parcels of land in Mandaluyong City square meter situated in Mandaluyong
where its manufacturing operations are done. In 1986, due to the political b. 90% of EC is owned by Eteroutremer S.A Corporation
situation (Marcos time) in the Philippines, the management of (ESAC) a corporation organized and registered under the
Eteroutremer S.A Corporation (ESAC) which owns 90% of EC’s share, laws of Belgium. Jack Glanville, was the General
wanted to stop the operations in the country. It instructed one of EC’s Manager and President of EC, while Claude Frederick
Board of Director’s member (Michael Adams) to dispose its land in PH. Delsaux was the Regional Director for Asia of ESAC.
Adams engaged the services of a broker, Marquez, who offered the land 2. In 1986, the management of ESAC grew concerned about the
to Eduardo and Antonio Litonjua, Jr. Litonjua brothers offered to buy the political situation in the PH and wanted to stop its operations in
land for 20 Million but EC’s General manager (Glanville) and Regional the country. It engaged the services of realtor/broker Lauro G.
Director for Asia of ESAC (Delsaux) made a counterproposal offer. Litonjua Marquez. Marquez offered the land to Eduardo Litonjua, Jr. of the
bros accepted the counter proposal offer and deposited the amount to a Litonjua & Company, Inc. for Php 27MM. Litonjua Bros offered to
trust account. Sometime in April 1987, GM of EC informed Marquez that pay Php 20M cash. Marquez apprised Glanville of the Litonjua
ECs BOD has decided not to sell the properties in view of the improving siblings’ offer and relayed the same to Delsaux in Belgium.
situation in PH upon assumption in office of Corazon Aquino. Litonjua bros Delsaux later on made a counterproposal offer/final offer of
filed a complaint for specific performance and damages against EC, "US$1,000,000.00 and P2,500,000.00 to cover all existing
ESAC. RTC dismissed the case and its decision was affirmed by CA. CA obligations prior to final liquidation. This was accepted by
ruled that Marquez is a special agent under Art 1874 and under Sec 23 Litonjua’s brother and proceeded to deposit the amount in
of the Corporation Code, he needs a special authority from EC’s BOD to Security Bank & Trust Company.
bind such corporation to the sale of properties. Delsaux is merely a 3. In 1987, Corazon Aquino took her oath of office and PH political
representative of ESAC and had to authority to bind EC. SC affirmed CA. condition improved. Marquez, through a letter from Delsaux, was
SC ruled that sale of real property of a corporation by a person purporting informed that EC Board decided not to sell the eight parcel of
to be an agent thereof but without written authority from the corp’s BOD land and to continue operations in the country.
who has such power, is null and void. 4. Litonjua brothers filed a complaint for specific performance and
damages against EC, ESAC and Far East Bank & Trust Company
DOCTRINE: (trustee under which the land’s TCT are entrusted).
An agency may be express or implied from the act of the principal, from 5. Argument of Litonjua: Marquez acted merely as a broker or go-
his silence or lack of action or failure to repudiate the agency. Agency may between and not as agent of the corporation; hence, it was not
be oral unless the law requires a specific form. However, to create or necessary for him to be empowered as such by any written
convey real rights, a special power of attorney is necessary authority. They further claimed that an agency by estoppel was
created when the corporation clothed Marquez with apparent
authority to negotiate for the sale of the properties. However,
FACTS since it was a bilateral contract to buy and sell, it was equivalent

17
to a perfected contract of sale, which the corporation was obliged of an individual director relating to the affairs of the corporation,
to consummate. but not in the course of, or connected with, the performance of
6. Argument of EC: Glanville, Delsaux and Marquez had no authority authorized duties of such director, are not binding on the
from the stockholders of respondent EC and its Board of corporation.
Directors to offer the properties for sale to the petitioners, or to
any other person or entity for that matter. While a corporation may appoint agents to negotiate for the sale of its real
7. RTC and CA ruled in favor of EC and dismissed the complaint. properties, the final say will have to be with the board of directors through
Petitioner filed a petition for review with SC. 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
ISSUES and HELD: on it unless the latter ratifies the same expressly or impliedly by its board
1. WON there was a perfected Contract of Sale? NONE of directors. Any sale of real property of a corporation by a person
2. Whether a written authority from EC is required before the sale purporting to be an agent thereof but without written authority from the
can be perfected? YES corporation is null and void. The declarations of the agent alone are
3. Whether Glanville and Delsaux have authority to enter into the generally insufficient to establish the fact or extent of his/her authority.
contract of sale/ granted the apparent authority by EC to enter
into such contract of sale? NO Agency may be oral unless the law requires a specific form. However, to
create or convey real rights over immovable property, a special power of
RATIO: attorney is necessary (under Article 1874). Thus, when a sale of a piece
1. Petitioners failed to prove that respondent EC had decided to sell of land or any portion thereof is through an agent, the authority of the
its properties and that it had empowered Adams, Glanville and latter shall be in writing, otherwise, the sale shall be void.
Delsaux or Marquez to offer the properties for sale to prospective
buyers and to accept any counter-offer. Petitioners likewise failed 3. Petitioners, failed to adduce in evidence any resolution of the
to prove that their counter-offer had been accepted by Board of Directors of respondent EC empowering Marquez,
respondent EC, through Glanville and Delsaux. It must be Glanville or Delsaux as its agents, to sell, let alone offer for sale,
stressed that when specific performance is sought of a contract for and in its behalf.
made with an agent, the agency must be established by clear,
certain and specific proof. While Glanville was the President and General Manager of respondent EC,
2. A corporation is a juridical person separate and distinct from its and Adams and Delsaux were members of its Board of Directors, the three
members or stockholders and is not affected by the personal acted for and in behalf of respondent ESAC, and not as duly authorized
rights, obligations and transactions of the latter. It may act only agents of respondent EC; a board resolution evincing the grant of such
through its board of directors or, when authorized either by its by- authority is needed to bind EC to any agreement regarding the sale of the
laws or by its board resolution, through its officers or agents in subject properties. Such board resolution is not a mere formality but is a
the normal course of business. Under Sec 36 of the Corporation condition sine qua non to bind respondent EC. Admittedly, respondent
Code, a corporation may sell or convey its real properties, subject ESAC owned 90% of the shares of stocks of respondent EC; however, the
to the limitations prescribed by law and the Constitution. Absent mere fact that a corporation owns a majority of the shares of stocks of
valid delegation/authorization, the rule is that the declarations

18
another, or even all of such shares of stocks, taken alone, will not justify Article 1874, NCC: When a sale of a piece of land or any interest therein
their being treated as one corporation. is through an agent, the authority of the latter shall be in writing; otherwise
the sale shall be void.
An agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal
fiction, becomes the principal, authorized to perform all acts which the
latter would have him do. Such a relationship can only be effected with
the consent of the principal, which must not, in any way, be compelled by
law or by any court.

Marquez had no authority to bind respondent EC to sell the subject


properties. A real estate broker is one who negotiates the sale of real
properties. His business, is only to find a purchaser who is willing to buy
the land upon terms fixed by the owner. He has no authority to bind the
principal by signing a contract of sale. Indeed, an authority to find a
purchaser of real property does not include an authority to sell.

DISPOSITIVE

Neither may respondent EC be deemed to have ratified the transactions


between the petitioners and respondent ESAC, through Glanville, Delsaux
and Marquez. The transactions and the various communications inter se
were never submitted to the Board of Directors of respondent EC for
ratification.
Petition is DENIED for lack of merit.

NOTES:
Requisites for an agency by estoppel to exist: For an agency by estoppel
to exist, the following must be established: (1) the principal manifested a
representation of the agent’s authority or knowingly allowed the agent to
assume such authority; (2) the third person, in good faith, relied upon
such representation; (3) relying upon such representation, such third
person has changed his position to his detriment. An agency by estoppel,
which is similar to the doctrine of apparent authority, requires proof of
reliance upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.

19
Amon Trading Corporation v. Court of Appeals (December 13, 2005) a. A certain Weng Chua signed the check vouchers while
Chico-Nazario | GR No. 158585 | Nature, Form, and Kinds of Agency- Sanchez issued receipts for the manager’s checks
Elements b. P84K was also paid to Lines & Spaces as consideration
for facilitation of orders
SUMMARY: Tri-Realty Corp. needed cement w/c Sanchez, representing 4. A total of 5200 out of the 12050 bags ordered were not delivered
Lines & Spaces promised it could source. Tri-Realty paid in advance to so PR sent demand letters to P and Juliana
Sanchez who made the orders for 12k bags. 5200 bags were undelivered a. Ps both responded that they already refunded the
and when Tri-Realty tried to claim, Petitioners said they refunded the amount of undelivered bags to Lines & Spaces per
amount undelivered to Sanchez who had since fled the country. RTC held written instructions of Sanchez
Lines & Spaces solely liable but CA Reversed. SC disgreed with the b. It was found out that Sanchez fled the country
reversal saying there was no contract of agency between Lines & Spaces 5. PR filed collection suit against Amon Trading/Juliana and Lines
and Tri-Realty Corp. thus there was no privity of contract between Tri- & Spaces
Realty and the Petitioners. Contract of Agency needs intent to appoint as a. P: no privity of contract between them since it was Lines
seen through his words, or actions which is lacking here. & Spaces/Sanchez that ordered and paid the price, not
informed that Lines & Spaces and Tri-Realty were
DOCTRINE: Art. 1868. By the contract of agency a person binds himself separate entities since Sanchez just represented being
to render some service or to do something in representation or on behalf from those corporations.
of another, with the consent or authority of the latter. b. LINES & SPACES: denied being represented by Sanchez
• There must be an actual intention to appoint or an intention 6. RTC: Lines & Spaces solely liable, Ps absolved
naturally inferable from his words or actions and on the part of 7. CA: REVERSED. Held the Ps solidarily liable with Lines & Spaces
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. ISSUES and HELD
• One factor which most clearly distinguishes agency from other WON there was a contract of agency between Lines & Spaces and Tri-
legal concepts is control; one person - the agent - agrees to act Realty? NO
under the control or direction of another - the principal. Indeed,
the very word "agency" has come to connote control by the RATIO
principal. The control factor, more than any other, has caused the • There was no written contract between Ps and PR; It was
courts to put contracts between principal and agent in a separate Sanchez who sourced the cement
category. o The manager’s checks were also made to Sanchez; not
directly paid to Ps
FACTS o No information from Sanchez that the order was for PRs
1. Private respondent Tri-Realty Corporation is a developer and benefit.
contractor w/ projects in Bulacan and QC. Lines & Spaces, • The meeting of minds was between Sanchez and Tri-Realty which
represented by Eleanor Sanchez informed PR that it could obtain was separate from the contract between Sanchez and Ps
the cement it needed for its projects from Amon Trading (P) and • The receipts for the manager’s check was also issued by Lines &
its sister company, Juliana Marketing. Spaces and NOT by Ps
2. PR ordered from Sanchez who ordered from P 6050 bags of • Petitioners were not remiss when they believed Eleanor
cement and 6000 bags from Juliana at P98/bag Sanchez's representation that "Lines & Spaces/Tri-Realty" refers
3. PR through Sanchez/Lines & Spaces, paid in advance P592K to
P and P588K to Juliana.

20
to just one entity. è Jurisprudence holds that “And/or” is used
interchangeable
• Neither Eleanor Sanchez nor Lines & Spaces was an agent for
private respondent, but rather a supplier for the latter's cement
needs. (SEE DOCTRINE)
• IN THIS CASE: The intention of PR was merely for Lines & Spaces
to supply them with the needed bags of cement.
• Ps have never directly dealt with private respondent and there is
no paper trail on record to guide them that the private
respondent, in fact, is the beneficiary, petitioners had no reason
to doubt the request of Eleanor Sanchez later on to refund the
value of the undelivered bags of cement to Lines & Spaces.
o Moreover, the check refund was payable to Lines &
Spaces, not to Sanchez, so there was indeed no cause
to suspect the scheme.
o The fact that the deliveries were made at the
construction sites of private respondent does not by
itself raise suspicion that petitioners were delivering for
private respondent. There was no sufficient showing
that petitioners knew that the delivery sites were that of
private respondent and for another thing, the deliveries
were made by petitioners' men who have no business
nosing around their client's affairs

DISPOSITIVE: WHEREFORE, the present petition is hereby GRANTED.


Accordingly, the Decision and the Resolution dated 28 November 2002
and 10 June 2003, of the Court of Appeals in CA-G.R CV No. 60031, are
hereby REVERSED and SET ASIDE. The Decision dated 29 January 1998
of the Regional Trial Court of Quezon City, Branch 104, in Civil Case Q-92-
14235 is hereby REINSTATED. No costs.

21
YU ENG CHO v. PAN AMERICAN WORLD AIRWAYS (2000) ○ Petitioner was supposed to go to Fairfield, New Jersey to
Puno, J. | GR No. 123560 | Elements purchase two lines of infrared heating system
processing textured plastic article.
SUMMARY: ○ Only the Manila-HK, then Tokyo was confirmed on the
Plaintiff Yu Eng Cho bought plane tickets for three flights from Claudia said date. Plan 002 or the flight from Tokyo-San
Tagunicar, who he claimed represented herself to be an agent of TWSI (a Franciso was on “RQ” status or “on request.” She told
travel agency) and Pan Am. It was later discovered that the third ticket the petitioners to come back after a few days to confirm
was not confirmed, which led to Yu Eng Cho not reaching his destination the last flight.
and canceling an important business transaction. Yu Eng Cho sued ○ After calling Julieta Canilao, the office manager of TWSI,
Tagunicar, as well as TWSI and Pan Am. CA found only Tagunicar liable. Tagunicar confirmed the petitioners flight to San
Francisco and attached confirmation stickers on their
Yu Eng Cho appealed to the SC, averring that Tagunicar was an agent of tickets.
TWSI and Pan Am, and the latter should be held solidarily liable with her. ○ Adrian Yu, son of petitioner, called the Pan Am office to
SC denied the petition and affirmed the CA. verify the status of their flight, and a personnel from Pan
Am confirmed it.
DOCTRINE: 3. They left for Hong Kong and stayed there for five days before
By the contract of agency, a person binds himself to render some service leaving for Tokyo. In Tokyo, they again called Pan Am for
or to do something in representation or on behalf of another, with the reconfirmation, to which it said that their names were not on the
consent or authority of the latter. manifest.
○ Since they were transient passengers, they couldn’t stay
The elements of agency are: in Japan for more than 72 hours. They couldn’t get any
1. consent, express or implied, of the parties to establish the flights to San Francisco because Northwest Airlines was
relationship; on strike at that time and booking a flight was difficult.
2. the object is the execution of a juridical act in relation to a third ○ They were offered tickets to Taipei, which they paid for,
person; but upon reaching Taipei, they were forced to go back to
3. the agent acts as a representative and not for himself; and Manila since there were no flights available.
4. the agent acts within the scope of his authority. ○ Yu Eng Cho lost the chance to buy said infrared heating
system from Radiant Heat, which could’ve given him a
FACTS profit of P300-400,000.
1. Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and 4. A complaint for damages was filed by petitioners before RTC
Achilles Marketing. He traveled from time to time to Malaysia, Manila.
Taipei, and Hong Kong. 5. Defendant TWSI testified that petitioners were referred to
2. Jul, 10, 1976: He bought plane tickets from private respondent Tagunicar who was an independent travel solicitor. She helped
Claudia Tagunicar, who represented herself as an agent of process travel papers, tickets, booking of passengers, and
Tourist World Services, Inc. (TWSI). Each ticket cost PhP25,000 airport assistance, and that Yu Eng Cho knew her because he
and the destinations were Hong Kong, Tokyo, and San Francisco. dealt with her in the past.
○ She advised petitioners to take Pan Am since Northwest ○ Tagunicar then bought the tickets from Canilao.
Airlines was on strike and Pan Am had a Tokyo-San Tagunicar says Julieta Canilao told her, “o, sige Claudia,
Francisco flight. confirm na,” which she even noted in her index card.
However, TWSI/Canilao denied confirming the San

22
Francisco flight since it was really difficult to book one Neither TWSI nor Pan Am ever authorized private respondent Tagunicar
because of the strike. to confirm the subject flight to San Francisco. It is a settled rule that
○ Neither TWSI nor Pan Am confirmed the flight and they persons dealing with an assumed agent are bound at their peril, if they
never authorized Tagunicar to attach said confirmation would hold the principal liable, to ascertain not only the fact of agency but
stickers. also the nature and extent of authority, and in case either is controverted,
6. RTC ruled in favor of Yu Eng Cho, holding Pan Am, TWSI, and the burden of proof is upon them to establish it.
Tagunicar jointly and severally liable. (Canilao was not included
since she was just doing her job as the general manager of TWSI.) DISPOSITIVE
They were ordered to pay P200,000 for actual damages, CA decision affirmed.
P100,000 as exemplary damages, 20% of the award as
attorney’s fees, and P30,000 for litigation expenses.
7. Pan Am and Tagunicar appealed. CA modified the judgment,
holding Tagunicar solely liable, lowering the amount for moral
and exemplary damages, and attorney’s fees to P50,000 and
P25,000, and P10,000 respectively, plus costs of suit, and
deleting the amount for actual damages.
○ CA also found that Tagunicar was an independent travel
solicitor and not a duly authorized agent or
representative of TWSI or Pan Am.

ISSUES and HELD


WON Tagunicar was an agent of Pan American Airways or Travel World
Services Inc. --- NO

RATIO
Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a
duly authorized ticketing agent of Pan Am. Proceeding from this premise,
they contend that TWSI and Pan Am should be held liable as principals for
the acts of Tagunicar. They stubbornly insist that the existence of the
agency relationship has been established by the judicial admissions
allegedly made by respondents:
(1) the admission made by Pan Am in its Answer that TWSI is its
authorized ticket agent;
(2) the affidavit executed by Tagunicar where she admitted that
she is a duly authorized agent of TWSI; and
(3) the admission made by Canilao that TWSI received
commissions from ticket sales made by Tagunicar.
However, Tagunicar has openly denied in court that she was an agent of
TWSI, and declared that she is an independent travel solicitor. In case of
conflict between statements in the affidavit and testimonial declarations,
the latter command greater weight.

23
RALLOS vs. FELIX GO CHAN • The realty company appealed to the CA which sustained the sale
Elements | Jan. 31, 1978 | Munoz Palma, J. in question and denying the motion for reconsideration

Summary: Attorney – in – fact, Simeon Rallos, who after the death of his Issue:
principal, Concepcion Rallos, sold the latter’s undivided share in a parcel WON the sale of the undivided share of Concepcion Rallos in the lot is
of land pursuant to a special power of attorney which the principal had valid although it was executed by the agent after the death of his
executed in his favor. The administrator of the estate of the deceased principal?
principal went to court to have the sale declared unenforceable and to
recover the disposed share. TC granted but the CA upheld the validity of Ratio:
the sale and dismissed the complaint. The SC ruled that the case does • The SC ruled on this first by restating principles of law relevant to
not fall under the exceptions provided by Article 1931 of the Civil Code, the issue:
because a sale by an agent after the death of the principal is not allowed, • Basic axiom in Civil Code – no one may contract in the name of
therefore invalidating the sale to the Realty Corporation. another without being authorized by the latter, or unless he has
by law a right to represent him – A contract entered into in the
Facts: name of another by one who has no authority or legal
• Concepcion and Gerundia Rallos were sisters and registered co representation, or who has acted beyond his power, shall be
– owners of a parcel of land, they executed a special power of unenforceable, unless it is ratified, expressly or impliedly (Article
attorney in favor of their brother, Simeon Rallos, authorizing him 1403(1), CC)
to sell for and in their behalf. • Creation and acceptance of the relationship of agency – one
• Simeon sold the undivided shared of his sisters to Felix Go Chan party, called the principal (mandante), authorized another, called
and Sons Realty Corporation for the sum of P10,686.90 – the the agent (mandatorio), to act for and in his behalf in
deed of sale was duly registered in the Registry of Deeds of Cebu transactions with third persons
and a new TCT was issued in the name of the vendee • Essential elements of agency:
• Ramon Rallos, as administrator of the Intestate Estate of o There is consent, express or implied, of the parties to
Concepcion filed a complaint with the CFI of Cebu: establish the relationship
o The sale of the undivided share of the deceased o The object is the execution of a juridical act in relation
Concepcion Rallos should be declared unenforceable to a third person
and said share be reconveyed to her estate o The agents act as a representative and not for himself
o The Title issued in the name of Feliz Go Chan and Sons o The agent acts within the scope of his authority
Realty Corporation should be cancelled and another title • Agency is basically personal, representative, and derivative in
shall be issued in the names of the corporation and the nature. The authority of the agent to act emanates from the
“Intestate estate of Concepcion Rallos” in equal powers granted to him by his principal; his act is the act of the
undivided shares principal if done within the scope of the authority. Qui facit per
o Indemnification by way of attorney’s fees and payment alium facit per se. “He who acts through another acts himself.”
of costs of suit • Extinguishment of agency – Death of a principal (Article 1919,
• CFI rendered judgment declaring the Deed of Sale null and void CC) – agency is extinguished by the death of the principal or the
insofar as the ½ pro – indivisio share of Concepcion Rallos in the agent. The rationale for the law is found in the juridical basis of
property in question and that the TCTs would be cancelled and to agency which is representation
deliver the possession of the portion to the Estate of Concepcion • Exceptions to the rule (1930 and 1931)
Rallos as well as denying the Realty Corporation’s cross claim

24
o Article 1931 is the one applicable to the case at bar: An purchases a registered land from one who acquired it in bad
act done by the agent after death of his principal is valid faith·even to the extent of foregoing or falsifying the deed of sale
and effective only under 2 conditions: in his favor·the registered owner has no recourse against such
§ That the agent acted without knowledge of the innocent purchaser for value but only against the forger. (Citing
death of the principal Blondeau vs. Nano and Vallejo)
§ That the third person who contracted with the • SC – Blondeau case is not on all fours with the case at bar:
agent himself acted in good faith o We are confronted with one who admittedly was an
o Good faith – the third person was not aware of the death agent of his sister and who sold the property of the latter
of the principal at the time he contracted with said agent after her death with full knowledge of such death.
o Two requisites must concur – absence of one will render o expressly covered by a provision of law on agency the
the act of the agent invalid and Unenforceable terms of which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, in the
• Simeon Rallos knew of the death of his principal when the share same manner that the ruling in Blondeau
of the lot was sold and this can be clearly inferred from the • CA – Cassiday vs. MacKenzie - payments made to an agent after
pleadings filed by Simeon Rallos before the trial court the death of the principal were held to be good, the parties being
• Article 1931 is therefore inapplicable - law expressly requires for ignorant of the death
its application lack of knowledge on the part of the agent of the • SC - Opinion of Justice Rogers was premised on the statement
death of his principal, it is not enough that the third person acted that the parties were ignorant of the death of the principal
in good faith • Whatever conflict of legal opinion was generated by Cassiday v.
• CA there is no provision in the Code which provides that whatever McKenzie in American jurisprudence, no such conflict exists in
is done by an agent having knowledge of the death of his our own provided by the Civil Code
principal is void even with respect to third persons who may have
contracted with him him in good faith
• SC - Article 1931, being an exception to the general rule, is to be HELD: Set aside the decision of respondent appellate court. Affirmed the
strictly construed; it is not to be given an interpretation or decision of the CFI Cebu
application beyond the clear import of its terms for otherwise the
courts will be involved in a process of legislation outside of their
judicial function.
• CA - vendee acting in good faith relied on the power of attorney
which was duly registered on the original certificate of title
recorded in the Register of Deeds of the Province of Cebu, that
no notice of the death was ever annotated on said certificate of
title by the heirs of the principal and accordingly they must suffer
the consequences of such omission
• SC - by reason of the very nature of the relationship between
principal and agent, agency is extinguished ipso jure upon the
death of either principal or agent. With death, the principal’s will
ceases or is terminated; the source of authority is extinguished.
• CA - a parallel between the instant case and that of an innocent
purchaser for value of a registered land, stating that if a person

25
C. Parties to the Contract • It is not expressly mentioned that this is the precise power of
attorney that Ramon Racelis Utilized to secure the loans the
COMMERCIAL BANK & TRUST CO. OF THE PHILS Vs. REP. ARMORED CAR
collection of which is sought in these cases.

SERVICE CORP. (1963)
ISSUE and HELD
BERSAMIN, J | GR No. 162826| Parties to the Contract
W/N the power of Atty gave Racelis authority to secure the loans? YES .
SUMMARY: A jeweler agreed to give pieces of jewelry to Narciso, who in
turn should give the same to his sister for the latter to sell. If they cannot RATIO
pay within a certain period, they should return the jewelry. They eventually • Racelis was authorized to negotiate for loans with other
defaulted in payment and also failed to return the jewelry. Narciso was institutions.
convicted of estafa. However, he insisted that the agreement was a sale • Assuming, for the sake of argument, that the said power of
on credit. The Court held that the transaction was an agency and not a attorney incorporated in the motion for reconsideration was the
sale on credit because the ownership of the items did not pass to him. one used to obtain the loans.
• We find that the movant's contention has no merit.
DOCTRINE: Where principal was bound by contract of loan executed by • In accordance with the document, Racelis was authorized to
his agent; Case at Bar.—Where in accordance with a power of attorney negotiate for a loan or various loans .. with other being institution,
executed by the principal, the agent was authorized to negotiate for a loan financing corporation, insurance companies or investment
or various loans with banking institutions, financing or insurance corporations, in such sum or sums, aforesaid Attorney-in-fact Mr.
companies etc., m such sum or sums, aforesaid agent may deem proper Ramon Racelis, may deem proper and convenient to my
and convenient to the interest of the principal, such general power of interests, ... and to execute any and all documents he deems
attorney was held sufficient authority for the agent to obtain the credits requisite and necessary in order to obtain such loans, always
subject of the case at bar. having in mind best interest;
• We hold that this general power attorney to secure loans from
FACTS any banking institute was sufficient authority for Ramon Racelis
• Defendant-appellant Damaso Perez has presented a motion for to obtain the credits subject of the present suits.
new trial on the ground of newly discovered evidence. 
 DISPOSITIVE: Motion for new trial is denied.
• Damaso Perez claims that he was not aware of the nature of the
power of attorney that Ramon Racelis used, purportedly signed
by him, to secure the loans for the Republic Armored Car Service
Corporation and the Republic Credit Corporation. 

• He claims that Ramon Racelis only used a photastic copy as
proof of the Power of Attorney. He further presents the original
purporting the alleged true authority granted by the movant.

26
PCIC v. Explorer Maritime (September 7, 2011) of the plaintiff's lack of interest to prosecute the action, or of any
Leonardo-De Castro, J. | GR No. 175409 | Parties to the Contract; prejudice to the defendant resulting from the failure of the
Undisclosed; plaintiff to comply with the rules. The failure of the plaintiff to
prosecute the action without any justifiable cause within a
SUMMARY: PCIC was faulted by the RTC and the CA for failure to reasonable period of time will give rise to the presumption that
prosecute its case for an unreasonable length of time, against Explorer he is no longer interested in obtaining the relief prayed for xxx”
Maritime, then an unknown or undisclosed party in the RTC level. PCIC’s 2. Sec.14, Rule 3 of the Rules of Court provides that even an
contention mainly was that it was waiting for resolution of its Motion to unknown owner or any defendant yet unknown may be properly
Disclose before it could even proceed with its pre-trial conference and sued. The resolution of the Motion to Disclose was therefore
setting of the same. The Court denies the petition, mainly on procedural unnecessary.
rules and applications thereof. 3. In this case therefore, it is of no moment that the identity of
respondent Explorer Maritime had been disclosed only after the
DOCTRINE: An agent acting in his own name and for the benefit of an Supreme Court had directed its counsel to show proof of its
undisclosed principal may sue or be sued without joining the principal identity.
except when the contract involves things belonging to the principal. 4. Section 3, Rule 3 of the RoC expressly provides the enunciated
doctrine in this case: An agent acting in his own name and for
FACTS the benefit of an undisclosed principal may sue or be sued
1. PCIC filed a complaint against respondents (then Unknown without joining the principal except when the contract involves
Owner of the M/V Explorer) Explorer Maritime, its agent Wallem things belonging to the principal.
Philippines Shipping Inc., arrastre Asian Terminals Inc., and
broker company Foremost International Port Services, Inc.
2. PCIC intended to recover the value of lost or damaged goods DISPOSITIVE:
which it paid to the insured, as well as interest and attorney’s WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals
fees. dated July 20, 2006 in CA-G.R. CV No. 78834 is hereby AFFIRMED.
3. The seminal complaint was filed on March 22, 1995; on Costs against petitioner Philippine Charter Insurance Corporation.
December 5, 2000 the respondents filed a Motion to Dismiss by SO ORDERED.
reason of PCIC’s failure to prosecute for an unreasonable length
of time.
4. PCIC opposed the Motion anchoring its cause on the yet
unresolved Motion to Disclose (the identity of then unknown
owner of the ship M/V Explorer.)
5. The RTC dismissed the case. Elevated to the CA, the CA affirmed
the decision of the RTC, hence the case was elevated yet still to
the Supreme Court.

ISSUES and HELD


WoN the dismissal of PCIC’s case was proper - YES

RATIO
1. Citing the case of Espiritu v. Lazaro, “xxx the sanction of
dismissal may be imposed even absent any allegation and proof

27
Maritime Agencies & Securities v. CA July 12, 1990 whatever responsibility might have attached to the principal.
Cruz, J. | GR 77638 GR 77674 | Undisclosed In G.R. No. 77674, Union asks for the modification of the
Doctrine: The agent shall be liable for the act or omission of the principal decision of the respondent court so as to make Maritime
only if the latter is undisclosed. solidarily and solely liable, its principal not having been
Facts: impleaded and so not subject to the jurisdiction of our courts.
1. Transcontinental Fertilizer Company of London chartered from These two cases were consolidated.
Hongkong Island Shipping Company of Hongkong the motor Issue and Held: WON Maritime is liable? NO
vessel named "Hongkong Island" for the shipment of 8073.35 Ratio:
MT bagged urea from USSR to the Philippines. 1. Non-topic
2. Maritime Agencies & Services, Inc. was appointed as the a. The Court held that this was a contract of affreightment
charterer's(Transcontinental) agent and Macondray Company, meaning the charterer retains control of the vessel
Inc. as the owner's(Hong Kong Shipping) agent which makes them liable in case of loss during the
3. The agreement between Transcontinental and Hongkong was a voyage.
contract of affreightment. b. Maritime was only the agent of the charterer which will
a. Maritime was responsible for loading, stowage and only make them liable for the losses during the loading
discharging at the ports visited, while the Macondray and unloading process of the voyage.
was responsible for the care of the cargo during the 2. Topic: Liable for losses during loading and unloading? NO
voyage. a. As regards the goods damaged or lost during unloading,
4. Of the total shipment, 5,400.04 MT was for the account of Atlas the charterer is liable therefor. The difficulty is that
Fertilizer Company as consignee, 3,400.04 to be discharged in Transcontinental has not been impleaded in these
Manila and the remaining 2,000 MT in Cebu. cases and so is beyond our jurisdiction. The liability
5. The goods were insured by Atlas with the Union Insurance imposable upon it cannot be borne by Maritime which,
Society of Canton, Ltd. as a mere agent, is not answerable for injury caused by
6. There were 1,383 bags that were shortlanded, which could only its principal. It is a well-settled principle that the agent
mean that they were damaged or lost on board the vessel before shall be liable for the act or omission of the principal only
unloading of the shipment. if the latter is undisclosed.
7. Goods were also lost during the loading and unloading process. b. Maritime acted in representation of the charterer and
8. Atlas went to Union Insurance, which on demand paid the total not of the vessel. It thus cannot be considered a ship
indemnity of P113,123.86 pursuant to the insurance contract. agent. As a mere charterer’s agent, it cannot be held
9. As subrogee of Atlas, Union then filed a complaint for solidarily liable with Transcontinental for the
reimbursement against Hongkong Island Company, Maritime losses/damages to the cargo outside the custody of the
Agencies & Services, and later Macondray Company. vessel. Notably, Transcontinental was disclosed as the
10. TC rendered judgment holding the defendants liable charterer’s principal and there is no question that
11. CA modified the TC decision, finding the charterer Maritime acted within the scope of its authority.
Transcontinental Fertilizer Co., Ltd. represented by its agent 3. Only Hong Kong Shipping is liable for the losses during the
Maritime Agencies & Services, Inc. for the same liability but held voyage.
that Hongkong Island Co., Ltd. represented by Macondray Co.,
Inc. are accordingly exempted from any liability. Dispositive: WHEREFORE, the decision of the respondent court is
SET ASIDE and that of the trial court is REINSTATED as above
In G.R. No. 77638, Maritime pleads non-liability on the ground modified. The parties shall bear their respective costs.
that it was only the charterer's agent and should not answer for

28
Goldstar Mining v Lim-Jimena (Oct. 26, 1968) 6. Another contract was executed by the lessors, wherein 43% of
JBL Reyes, J.|Gr no. L-25301 |Parties to the Contract: Principal: the royalties due from Marinduque Iron Mines were agreed upon
Undisclosed: Exceptions to be paid by Lincallo.
7. From 1939 to 1952, Jimena repeatedly reminded Gold Star
Summary: Lincallo bound himself to turn over to Jimena 1/2 of the Mining and Marinduque Iron Mines of his interest over the mining
proceeds from the mining claims he would purchase with the money claims assigned by Lincallo and demanded payment of his 1/2
advanced by Jimena. However, Lincallo entered into several contracts in share in the royalties to be paid to Lincallo. Both ignored Jimenas
his own name and for his own benefit involving the same mining claims. demands.
Jimena demanded his share from Lincallo and the companies Lincallo 8. Jimena also demanded payment of his 1/2 share from Lincallo
contracted with. Gold Star argued that Jimena has no cause of action which Lincallo promised to settle but failed.
against it since there is no privity of contract between them. SC held that 9. A month after he promised to settle his account with Jimena, he
Lincallo, in transferring the mining claims to Gold Star, acted as Jimena's transferred 35 of his 45% share in the royalties due from Gold
agent with respect to Jimena's share which gives Jimena a cause of action Star to Tolentino.
against Gold Star, pursuant to Art 1883, which provides that the principal 10. Jimena then filed a suit against Lincallo, Gold Star, Marinduque
may sue the person with whom the agent dealt with in his own (agent's)
Iron Mines, and Tolentino for recovery of his advances and his
name, when the transaction involves things belonging to the principal. 1/2 share in the royalties.
Doctrine: The principal may sue the person with whom the agent dealt 11. TC and CA ordered all the defendants to pay Jimena.
with in his own name, when the transaction involves things belonging to 12. In this petition, Gold Star argues that Jimena has no cause of
the principal. action against it as there is no privity of contract between them.
Issue and Held: WON Jimena has a cause of action against Gold Star? Yes
Facts:
Ratio:
1. Lincallo bound himself to turn over to Jimena 1/2 of the proceeds
from all mining claims he would purchase with the money 1. While there is no privity of contract, the common subject-matter
advanced by Jimena and the lands constituting the same, and is supplies the juridical link.
binding on their heirs, assigns, or legal representatives. 2. It can also be said that Lincallo, in transferring the mining claims
2. The mining claims were made subject matter of contracts to Gold Star (without disclosing that Jimena was a co-owner,
entered into by Lincallo in his own name and for his own benefit. although Gold Star knew) acted as Jimena's agent with respect
to Jimena's share of the claims.
3. The mining rights over part of a claim were assigned by Lincallo
to Gold Star Mining Co. 3. In such case, Jimena has an action against Gold Star, pursuant
to Art 1883, which provides that the principal may sue the person
4. Thereafter, Lincallo and Alejandro Marquez, as separate owners
of particular mining claims, entered into an agreement with Gold with whom the agent dealt with in his own name, when the
transaction involves things belonging to the principal.
Star, the assignee, regarding allotment to Lincallo of 45% of the
Dispositive:
royalties due from the corporation.
CA decision affirmed.
5. 4 months later, Lincallo, Marquez, and Congressman
Manguerrra, as owners, leased certain mining claims to
Cabarrus, who transferred to Marinduque Iron Mines Agents his
rights under the lease contract.

29
LORCA v. DINEROS (February 28 1958) ● The Sheriff is liable to third persons on the acts of his deputy, in
Bengzon, J. | 103 Phil. 122 | Parties: Sub-agent the same manner that the principal is responsible for the acts of
his agent.
Petitioner: LORETO LORCA
Respondents: JOSE S. DINEROS Ratio (Issue 2)
● Appellant argues that the lower court could have simply included
Summary: Respondent sues the Deputy Sheriff for disregarding his third- the Sheriff as party defendant.
party claim over a property subject to execution and proceeding with the ● However, what should have been done was not "inclusion" as
auction. Court rules that the Deputy is not liable, having acted merely as plaintiff asked, nor "exclusion". It was "substitution" of the deputy
agent of the Sheriff. by the Sheriff. Anyway, the word "may" in Sec. 11 of (then) Rules
implies discretion of court; there was no indication of abuse of
Doctrine: The Sheriff is liable to third persons on the acts of his deputy, in such.
the same manner that the principal is responsible for the acts of his DENIED.
agent.

Facts [1] Right of Bonded Officer to Require Bond from Deputy or assistant. – A
● Pursuant to a writ of execution issued in a civil case, Dineros, as sheriff or other accountable official may require any of his deputies or
Deputy Sheriff and in the name of the Sheriff, sold at public assistants, not bonded in the fidelity fund, to give an adequate personal
auction to Bermejo and Suero the property attached therein, bond as security against loss by reason of any wrongdoing on the part of
disregarding the third-party claim of Lorca who asserted. This suit such deputy or assistant. xxx
for damages is the result of said auction sale. [2] xxx and in case the sheriff or attaching officer is sued for damages as
● Dineros denied liability, averring that he had merely acted for and a result of the attachment xxx
on behalf of Provincial Sheriff Cabaluna. Meanwhile, appellant
insists that Dineros was responsible in view of Sec. 334, (then)
Revised Admin. Code[1] and Sec. 15, Rule 39, (then) Rules of
Court[2].

Issues
1. Is there a cause of action against the Deputy Sheriff? NO
2. Should the complaint be dismissed? YES

Ratio (Issue 1)
● In light of Section 330, Administrative Code, the above provisions
apply where the deputy acts in his own name or is guilty of active
malfeasance or possibly where he exceeds the limits of his
agency. It is clear from the certificate of sale attached to the
complaint that Dineros acted all the time in the name of the Ex-
Officio Provincial Sheriff of Iloilo, and no allegations of
misfeasance are made.

30
Serona v. CA (Nov. 18, 2002)
Ynares-Santiago | GR No. 130423 | Parties to the Contract: Sub-Agent
ISSUES and HELD
SUMMARY: 1. w/n the elements of estafa were established by the prosecution
Serona received jewellery from Quilatan to be sold on commission basis (Serona: she neither abused the confidence reposed upon her by
but was to either remit the proceeds or return the jewellery if it wasn’t Quilatan nor converted or misappropriated the jewellery) — NO
sold. She failed to do either, apparently because she gave the jewellery 2. w/n giving the jewellery to a sub-agent for sale on commission
to Labrador to be sold on commission basis and the person who basis and under the same terms upon which it was entrusted to
eventually bought the jewellery absconded before paying. The court ruled her violated her undertaking with Quilatan
that though Serona wasn’t prohibited from appointing a sub-agent, having 3.
done so without the express authority of her principal, she was liable for
the sub-agent’s acts and therefore liable for the value of the lost jewellery. RATIO
1. she did not commit estafa by delivering the jewellery to a sub-
DOCTRINE: agent for sale on commission basis. this fact alone is not
the law on agency allows the appointment by an agent of a substitute or sufficient ground for holding that she disposed of the jewellery
sub-agent in the absence of an express agreement to the contrary as if it were hers
between the agent and principal a. The second element of misappropriation or conversion
is lacking. Elements of estafa through misappropriation
An agent who is not prohibited from appointing a sub-agent but does so or conversion are as follows: (1) that the money, good or
without express authority is responsible for the acts of the sub-agent other personal property is received by the offender in
trust, or on commission, or for administration, or under
FACTS any other obligation involving the duty to make delivery
1. from July to September 1992, Leonida Quilatan would deliver of, or to return, the same; (2) that there be
jewellery to Virgie Serona to be sold on commission basis. By oral misappropriation or conversion of such money or
agreement, Serona would remit payment or return the jewellery property by the offender or denial on his part of such
to Quilatan if not sold within 30 days from receipt of the items. receipt; (3) that such misappropriation or conversion or
2. Serona failed to pay and was made to execute an denial is to the prejudice of another; and (4) that there
acknowledgment receipt indicating their agreement and total is a demand made by the offended party on the offender
amount due (P567,750) signed by Serona and a witness, Rufino b. the law on agency allows the appointment by an agent
Navarette of a substitute or sub-agent in the absence of an express
3. apparently Serona failed to pay because she had entrusted the agreement to the contrary between the agent and
jewellery to a Marichu Labrador for the latter to sell on a principal.
commission basis but was not able to collect from Labrador. c. the appointment of Labrador as Serona’s sub-agent was
Quilatan did not know this not expressly prohibited by Quilatan. Such a limitation
4. Quilatan demanded payment and eventually filed a complaint was not stated in the acknowledgment receipt, neither
against Serona for estafa. Serona calmed that she failed to settle is there proof that she was verbally forbidden to do so.
her obligation because Labrador failed to pay her for the this cannot therefore constitute abuse of confidence.
jewellery. Labrador confirmed that she received the jewellery but d. the essence of estafa is the appropriation or conversion
claimed that she sold it to a person who absconded without of money or property to the prejudice of the owner. this
paying her. pertains to the using or disposing of another’s property
5. RTC found Serona guilty of estafa. the CA affirmed. as if it were one’s own or of devoting it to a purpose

31
different from that agreed upon. HERE, the inability of
Serona to return the jewellery or proceeds was due to
the failure of Labrador to abide by her agreement as
sub-agent.
e. Labrador herself admitted that she received the
jewellery from Serona and sold it to a third person. She
also acknowledged her indebtedness to Serona,
negating any criminal intent on the part of Serona.
There’s no showing that Serona derived any personal
benefit from or conspired with Labrador to deprive
Quilatan of the jewellery. there cannot be estafa in this
case.
f. An accused acquitted of estafa may still be held civilly
liable. An agent who is not prohibited from appointing a
sub-agent but does so without express authority is
responsible for the acts of the sub-agent. Serona is
liable to pay Quilatan the value of the unpaid pieces of
jewelry.

DISPOSITIVE
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. CR No. 17222 dated April 30, 1997 and its resolution
dated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie
Serona is ACQUITTED of the crime charged, but is held civilly liable in the
amount of P424,750.00 as actual damages, plus legal interest, without
subsidiary imprisonment in case of insolvency

32
D. Capacity of Principal Buenconsejo had no authority to execute said power of attorney, because
their father is still alive and, in fact, he and his wife opposed the petition
JOSE A. SANTOS Y DIAZ v. ANATOLIO BUENCONSEJO, ET AL. (June 23, of Santos. Lastly, Santos could have acquired no more than the share pro
1965) indiviso of Anatolio.
Concepcion, J. | GR No. L-20136 | Capacity of the principal
DISPOSITIVE
DOCTRINE: A special power of attorney authorizing a person to act on
behalf of the children of another cannot vest in the said attorney any WHEREFORE, the order appealed from is hereby affirmed, with treble
property right in his own name. costs against petitioner-appellant Jose A. Santos y Diaz. It is so ordered.

FACTS
1. A parcel of land was originally owned in common by Anatolio
Buenconsejo to the extent of ½ undivided portion and Lorenzo E. Capacity of Agent
Bon and Santiago Bon to the extent of the other ½.
2. Subsequently, a Certificate of Sale executed by the Provincial F. Distinction from other contracts
Sheriff of Albay, transferred and conveyed to one Atty. Ziga,
awardee in the corresponding auction sale conducted by said
Sheriff in connection with the execution of the decision of the
Juvenile Delinquency and Domestic Relations Court in separate
Civil Case.
3. Through redemption, such award was transferred and conveyed
to the herein petitioner in his capacity as Attorney-in-fact of the
children of Anatolio Buenconsejo.
4. Relying upon this power of attorney and redemption made by
him, Santos (the petitioner) now claims to have acquired the
share of Anatolio Buenconsejo.
5. As the alleged present owner of said share, Santos caused a
subdivision plan of said land and wants a certificate of title be
issued in his name exclusively for said subdivision.
6. The RTC held untenable the petitioner’s claim.

ISSUES and HELD


WON the petitioner, as an attorney-in-fact, adjuducate to himself a share
in the subject parcel of land -- (NO)

RATIO
The Court, upheld the decision of the trial court that the said special
power of attorney authorized him to act on behalf of the children of
Anatolio Buenconsejo, and, hence, it could not have possibly vested him
any property right in his own name. Moreover the children of Anatolio

33
ANTONIO VALEROSO AND ALLAN LEGATONA V. SKYCABLE CORPORATION ● In 2007, SkyCable decided to streamline its operations and
J. Del Castillo instead of contracting with numerous independent account
executives such as petitioners, SkyCable engaged the services of
FACTS: an independent contractor, Armada Resources & Marketing
● This case arose from a Complaint for illegal dismissal, non- Solutions, Inc. (Armada, for brevity; formerly Skill Plus Manpower
payment of 13th month pay, separation pay and illegal deduction Services) under a Sales Agency Agreement. As a result,
filed by petitioners against SkyCable on 25 Feb. 2009 before the petitioners' contracts were terminated but they, together with
Labor Arbiter. The Complaint was amended to include other sales account executives, were referred for transfer to
regularization and payment of moral and exemplary damages as Armada. Petitioners then became EEs of Armada. In 2009,
additional causes of action. SkyCable and Armada again entered into a Sales Agency
● Valeroso and Legatona alleged that they started working on 1 Agreement, wherein petitioners were again tasked to solicit
Nov. 1998 and 13 July 1998, respectively, as account executives accounts/ generate sales for SkyCable.
tasked to solicit cable subscriptions for SkyCable, as evidenced ● SkyCable insisted that in hiring petitioners and Armada as
by Certifications issued by Michael De la Cuesta, (Sky’s Sales independent contractors, it engaged in legitimate job contracting
Territory Manager). where no ER-EE relation exists between them.
● As shown in their payslips for the years 2001-06, they received ● In an affidavit, De la Cuesta stated that the certifications he
commissions ranging from P15k to 530k each upon reaching a issued are not employment certifications but are mere
specific quota every month and an allowance of P6,5k to P7k per accommodations, requested by petitioners themselves, for their
month. credit card and loan applications. Moreover, Armada's President,
● From being direct hires of SkyCable, they were transferred on 1 Navasa, in his affidavit, verified that Armada is an independent
Jan. 2007 to Skill Plus Manpower Services sans any agreement contractor which selected and engaged the services of
for their transfer. petitioners, paid their compensation, exercised the power to
● Feb. 2009: they were informed that their commissions would be control their conduct and discipline or dismiss them. Therefore,
reduced due to the introduction of prepaid cards sold to cable when petitioners filed their Complaint in Feb. 2009, they were
subscribers resulting in lower monthly cable subscriptions. EEs of Armada and as such, had no COA against SkyCable.
● Dismayed, they notified their manager, Pasta, of their intention ● Petitioners assailed the allegation that they were EEs of Armada,
to file a labor case with the NLRC, which they did on 25 Feb. claiming that they were directly hired, paid and dismissed by
2009. Pasta then informed them that they will be dropped from SkyCable. They cited the following as indicators that they are
the roster of its account executives, which act, petitioners under the direct control and supervision of SkyCable: 1)
claimed, constitutes unfair labor practice. SkyCable's officers supervise their area of work, monitor them
● Further, petitioners claimed that they did not receive 13th month daily, update them of new promos and installations they need to
pay for 2006 and were underpaid of such benefit for the years work on, inform them of meetings and penalize them for non-
2007 and 2008; and that in Jan. 2008, Legatona signed a attendance, ask them to train new agents/account executives,
Release and Quitclaim in consideration of the amount of P25k and inform them of new prices and expiration dates of product
as loyalty bonus from SkyCable. promos; 2) SkyCable's supervisors delegate to them authority to
● SkyCable claimed that it did not terminate the services of investigate, campaign against and legalize unlawful cable
petitioners for there was never an ER-EE relationship to begin connections; 3) SkyCable's supervisors monitor their quota
with. It averred that in 1998, SkyCable (then Central CATV, Inc.) production and impose guaranteed charges as penalty for failing
engaged petitioners as independent contractors under a Sales to meet their quota; and 4) SkyCable consistently gives trophies
Agency Agreement. to award them of their outstanding performance.

34
● Labor Arbiter: LA dismissed the Complaint since petitioners failed ISSUE: WON the petitioners were employees of SkyCable—NO, an ER-EE
to establish by substantial evidence that SkyCable was their ER. relationship is absent in this case. The Petition has no merit.
LA observed that petitioners failed to identify and specify the
person who allegedly hired them, paid their wages and exercised RATIO:
supervision and control over the manner and means of ● Considering the conflicting findings of fact by the Labor Arbiter,
performing their work. There was neither any evidence to prove the NLRC and the CA, the SC is impelled to reexamine the records
that Pasta, who allegedly dismissed them, is an officer of and resolve this factual issue.
SkyCable with an authority to dismiss them. ● To prove the claim of an ER-EE relationship, the following should
● National Labor Relations Commission: Petitioners filed an appeal be established by competent evidence: (1) the selection and
with the NLRC attributing reversible error on the LA in dismissing engagement of the EE; (2) the payment of wages; (3) the power
their Complaint on the ground of no ER-EE relationship. NLRC of dismissal; and (4) the ER's power to control the EE with respect
reversed the LA's ruling. It found that petitioners are regular EEs to the means and methods by which the work is to be
of SkyCable having performed their job as account executives for accomplished. Among the four, the most determinative factor in
more than one year, even if not continuous and merely ascertaining the existence of ER-EE relationship is the "right of
intermittent, and considering the indispensability and continuing control test." Under this control test, the person for whom the
need of petitioners' tasks to the business. The NLRC observed services are performed reserves the right to control not only the
that there was no evidence that petitioners have substantial end to be achieved, but also the means by which such end is
capitalization or investment to consider them as independent reached.
contractors. On the other hand, the certifications and the pay ● The evidence presented by petitioners did not prove their claim
slips presented by petitioners constitute substantial evidence of that they were EEs of SkyCable. The certifications issued by De
ER-EE relationship. NLRC held that upon termination of the Sales la Cuesta are not competent evidence of ER-EE relation as these
Agency Agreement with Armada in 2009, petitioners were merely certified that SkyCable had engaged the services of
considered dismissed without just cause and due process. petitioners without specifying the true nature of such
SkyCable filed a MR which was denied. engagement. These documents did not certify that petitioners
● Court of Appeals: SkyCable filed a Petition for Certiorari with the were EEs but were only issued to accommodate petitioners'
CA, attributing grave abuse of discretion on the part of the NLRC request for loan applications, which fact was not refuted by
in holding it liable for the alleged illegal dismissal of petitioners. petitioners.
CA granted SkyCable's Petition for Certiorari and reversed the ● As for the pay slips presented, it appears that only the pay slips
NLRC Decision. The CA sustained the LA's finding that there was for the years 2001 to 2006 were submitted. No pay slips for the
no evidence to substantiate the bare allegation of ER-EE years material to this case (2007-09) were submitted. It is
relationship between the parties. Petitioners moved for undisputed that petitioners were transferred to Armada in 2007,
reconsideration, but this was denied by the CA. thus, we cannot give much credence to the pay slips issued
● Petitioners maintain that SkyCable failed to discharge the burden before this period.
of disproving the ER-EE relationship through competent evidence ● SC further finds no merit in petitioners' assertion that SkyCable's
of independent contractorship. They assert that the nature of control over them was demonstrated. "[Guidelines indicative of
their work and length of service with SkyCable made them labor law 'control' do not merely relate to the mutually desirable
regular EEs as defined in Art. 280 of the Labor Code and that result intended by the contractual relationship; they must have
consequently, the CA gravely erred in dismissing their Complaint the nature of dictating the means and methods to be employed
for illegal dismissal against SkyCable. in attaining the result.”
● Here, we find that SkyCable's act of regularly updating petitioners
of new promos, new price listings, meetings and trainings of new

35
account executives; imposing quotas and penalties; and giving ● Petitioner Legatona, in fact, in his Release and
commendations for meritorious performance do not pertain to Quitclaim, acknowledged that he was performing sales
the means and methods of how petitioners were to perform and activities as sales agent/independent contractor and
accomplish their task of soliciting cable subscriptions. At most, not an EE of SkyCable. In the same token, De la Cuesta
these indicate that SkyCable regularly monitors the result of and Navasa, made sworn testimonies that petitioners
petitioners' work but in no way dictate upon them the manner in are EEs of Armada which is an independent contractor
which they should perform their duties. Absent any intrusion by engaged to provide marketing services for SkyCable.
SkyCable into the means and manner of conducting petitioners' ● Moreover, evidence on record reveal the existence of
tasks, bare assertion that petitioners' work was supervised and independent contractorship between the parties. As mentioned,
monitored does not suffice to establish ER-EE relationship. the Sales Agency Agreement provided the primary evidence of
● Reliance by petitioners on the case of Francisco v. NLRC is such relationship. "While the existence of ER-EE relationship is a
misplaced. There, the Court adopted a two-tiered test in order to matter of law, the characterization made by the parties in their
determine the true relationship between the ER and EE. This two- contract as to the nature of their juridical relationship cannot be
tiered test, which involves: "(1) the putative ER's power to control simply ignored, particularly in this case where the parties' written
the EE with respect to the means and methods by which the work contract
is to be accomplished; and (2) the underlying economic realities ● Neither can we subscribe to petitioners' contention that they are
of the activity or relationship," has been made especially considered regular EEs of SkyCable for they perform functions
appropriate in cases where there is no written agreement to base necessary and desirable to the business operation of SkyCable
the relationship on and where the various tasks performed by the in consonance with Art. 280, LC, We have held that “Art. 280 is
worker brings complexity to the relationship with the ER. Thus, in not the yardstick for determining the existence of an employment
addition to the control test, the totality of the economic relationship because it merely distinguishes between two kinds
circumstances of the worker is taken into light to determine the of EEs, i.e., regular EEs and casual EEs, for purposes of
existence of employment relationship. determining [their rights] to certain benefits, [such as] to join or
● Here, there is a written contract, i.e., the Sales Agency form a union, or to security of tenure. Art. 280 does not apply
Agreement, which served as the primary evidence of the nature where the existence of an employment relationship is in dispute,”
of the parties' relationship. In this duly executed and signed as in this case.
agreement, petitioners and SkyCable unequivocally agreed that ● The legal relation of petitioners as sales account executives to
petitioners' services were to be engaged on an agency basis as SkyCable can be that of an independent contractor. There was
sales account executives and that no ER-EE relationship is no showing that SkyCable had control with respect to the details
created but an independent contractorship. It is therefore clear of how petitioners must conduct their sales activity of soliciting
that the intention at the time of the signing of the agreement is cable subscriptions from the public.
not to be bound by an ER-EE relationship. ● In Abante, Jr. v. Lamadrid Bearing & Parts Corporation,
● At any rate, even if we are to apply the two-tiered test Abante, a commission salesman who pursued his selling
pronounced in the Francisco case, there can still be no activities without interference or supervision from
ER-EE relationship since, as discussed, the element of SkyCable company and relied on his own resources to
control is already absent. Indeed, "[t]he presence of perform his functions, was held to be an independent
[the] power of control is indicative of an employment contractor.
relationship while the absence thereof is indicative of ● Similarly, in Sandigan Savings & Loan Bank, Inc. v.
independent contractorship."unequivocally states their NLRC, Anita Javier was also held to be an independent
intention" to be strictly bound by independent contractor as the Court found that Sandigan Realty
contractorship. Development Corporation had no control over her

36
conduct as a realty sales agent since its only concern or
interest was in the result of her work and not in how it
was achieved.
● SC sustains the CA's factual findings and conclusion and
accordingly, find no cogent reason to overturn the dismissal of
petitioners' Complaint against SkyCable.

WHEREFORE, the Petition is DENIED. The November 11, 2011 Decision


and May 18, 2012 Resolution of the Court of Appeals in CA-G.R. SP No.
116296 are AFFIRMED. SO ORDERED.

37
CESAR C. LIRIO vs. WILMER D. GENOVIA (November 23, 2011) respondent that his work on the album as composer and
PERALTA, J | G.R. No. 169757 | Distinctions from other contracts (lease arranger would only be done during his spare time, since his
of services) other work as studio manager was the priority.
3. Before the end of September 2001, he reminded petitioner
SUMMARY: about his compensation as composer and arranger of the album
Wilmer Genovia was hired by Cesar Lirio as studio manager for Celkor to no avail. Respondent worked until the completion of the
Recording Studio which he owns. Shortly after hiring, he was asked to album in February 22, 2002. In February 26, 2002, he reminded
assist the petitioner to produce an album for his 15-year old daughter, Lirio once again about the contract on his compensation as
Celine Mei Lirio. Lirio verbally promised to him to be given additional composer and arranger but he was told that he’s not deserving
compensation as composer and arranger of the album on top of what he’s of high compensation. He was informed that he’ll only receive
currently receiving as monthly salary. Genovia reminded Lirio a few times 20% of the net profit (rather than the gross sales of the album)
for the draft of the contract for his additional services and compensation and that his monthly salary will still be deducted from it. Genovia
to no avail. The album was completed and finally aired in February 2002. objected and subsequently, terminated from work
Upon another reminder re his additional compensation, things turned 4. Genovia filed for a complaint for llegal dismissal, non-payment
sour between the two when they did not agree on the compensation that of commission and award of moral and exemplary damages.
Genovia should receive for the additional services he rendered. He was 5. Genovia provided as evidence his Payroll certified as correct by
then verbally terminated and instructed not to report for work by Lirio. Lirio as well as Petty Cash Vouchers evidencing his receipt of
Genovia filed a complaint for illegal dismissal against the latter. Lirio payroll payments from Celkor.
asserted that no EE-ER relationship exists between them and what they 6. On the other hand, Lirio interposed as defense that there was
have in fact is one of informal partnership. LA ruled in favor of Genovia no EE-ER relationship existed between them and instead, they
but it was reversed by NLRC. CA reinstated LA’s ruling. SC affirmed CA. agreed to be partners in producing his daugther’s album. They
agreed to: 1) Lirio to provide all the financing, equipment and
DOCTRINE: recording studio; (2) Celine Mei Lirio shall sing all the songs; (3)
Elements to determine the existence of an employment relationship Genovia shall act as composer and arranger of all the lyrics and
are:(a) the selection and engagement of the employee; (b) the payment the music of the five songs he already composed and the revival
of wages; (c) the power of dismissal; and (d) the employer's power to songs; (4) petitioner shall have exclusive right to market the
control the employee's conduct. album; (5) petitioner was entitled to 60% of the net profit, while
>>No specific mention of concept related to agency but I guess we can respondent and Celine Mei Lirio were each entitled to 20% of
look at the elements in EE-ER relationship which are not necessarily the net profit; and (6) respondent shall be entitled to draw
present in a contract of agency. advances of ₱7,000.00 a month, which shall be deductible from
his share of the net profits and only until such time that the
FACTS: album has been produced. That they are informal partners
1. Wilmer Genovia was hired on August 15, 2001 as studio under Article 1767 of the Civil Code.
manager by petitioner Lirio, owner of Celkor Ad Sonicmix 7. LA ruled in favor or Genovia. NRLC reversed LA saying that
Recording Studio (Celkor). He was employed to manage and Genovia failed to show EE-ER relationship on the basis of the
operate Celkor and to promote and sell the recording studio's four fold test. CA reinstated LA’s decision with modification as to
services to music enthusiasts and other prospective clients. He award of damages.
received a monthly salary of ₱7,000.00.
2. Subsequently, petitioner approached him and told him about his
project to produce an album for his 15-year-old daughter, a ISSUES and HELD: WON EE-ER relationship existed between the parties?
former talent of ABS-CBN Star Records. Petitioner instructed YES

38
RATIO:
• The elements to determine the existence of an employment
relationship are: (a) the selection and engagement of the
employee; (b) the payment of wages; (c) the power of dismissal;
and (d) the employer’s power to control the employee’s conduct.
The most important element is the employer’s control of the
employee’s conduct, not only as to the result of the work to be
done, but also as to the means and methods to accomplish it.
• Documentary evidence presented by respondent showed that
petitioner hired respondent as an employee and he was paid
monthly wages of ₱7,000.00. Petitioner wielded the power to
dismiss as respondent stated that he was verbally dismissed by
petitioner, and respondent, thereafter, filed an action for illegal
dismissal against petitioner. The power of control refers merely
to the existence of the power. It is not essential for the employer
to actually supervise the performance of duties of the employee,
as it is sufficient that the former has a right to wield the power.
• On the other hand, Lirio's so-called existence of a partnership
agreement was not substantiated and his assertion thereto, in
the face of complainant's evidence, constitute but a self-serving
assertion, without probative value, a mere invention to justify the
illegal dismissal.
• It is a well-settled doctrine, that if doubts exist between the
evidence presented by the employer and the employee, the
scales of justice must be tilted in favor of the latter. It is a time-
honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the
interpretation of agreements and writing should be resolved in
the former’s favor.
• DISPOSITIVE WHEREFORE, the petition is DENIED. The Decision
of the Court of Appeals is AFFIRMED

39
Gregorio Tongko v. Manufacturer’s Life Insurance Co. and Renato Vergel a. Tongko’s gross earnings consisted of commissions,
de Dios (June 29, 2010) persistency income, and management overrides. Since
Brion | GR No. 167622 | Distinctions from Other Contracts – Lease of the beginning, Tongko consistently declared himself
Services/Employment self-employed in his income tax returns
4. Eventually, P’s Region was found to be the lowest performer (on
SUMMARY: Tongko was an Agent of ManuLife. Eventually he got promoted a per Manager basis) in terms of recruiting agents w/c was
and became Regional Sales Manager with additional administrative roles central to the company’s objectives
and recruiting functions. Eventually he was terminated so he filed with the a. i.e., Manulife’s goal to become a major agency-led
NLRC for illegal dismissal. LA said there was no EER so the case was distribution company in the Philippines
dismissed but NLRC reversed and said there was EER. CA reverted to the 5. Manulife terminated Tongko’s Agency Agreement through
LA Ruling but was reversed by the SC. This case is the MR of the SC written letter
decision that said EER exists. The SC here says that it was an agency 6. Tongko filed illegal dismissal with NLRC è the threshold issue is
because there’s a distinction between “control” as exercised in the Labor the existence of an employment relationship. A finding that none
Code for an Employer-employee relation compared to the “control” of a exists renders the question of illegal dismissal moot; a finding
principal over an agent in the case of a contract of Agency. In this case, that an employment relationship exists, on the other hand,
there’s another layer added as it is the agent of an insurance company necessarily leads to the need to determine the validity of the
meaning the Insurance Code also comes into effect together with the Civil termination of the relationship.
Code for Agency. a. TONGKO: says EER(Employer-employee relationship)
between him and Manulife è was assigned definite
DOCTRINE: when an insurance company has exercised control over its place in Manulife offices, Manulife provided for
agents so as to make them their employees, the relationship between the equipment used, also paid him. Also required to follow 3
parties, which was otherwise one for agency governed by the Civil Code codes of conduct
and the Insurance Code, will now be governed by the Labor Code. The b. MANULIFE: no fixed salary, paid thru commissions;
reason for this is simple – the contract of agency has been transformed Tongko even declared himself to be self-employed and
into an employer-employee relationship. consistently paid taxes as such è NLRC has no
jurisdiction
FACTS 7. LA Said no EER, NLRC REVERSED and said it was illegal
1. Contractual relation between Tongko and Manulife: dismissal.
2. 1st phase (1977): Career Agent’s Agreement 8. CA REVERTED TO LA RULING à SC Nov. 2008 found for EER and
a. “It is understood and agreed that the Agent is an REVERSED CA è Hence this MR
independent contractor and nothing contained herein
shall be construed or interpreted as creating an ISSUES and HELD
employer-employee relationship between the Company WON the decision contravenes rules in contract law and agency? (whether
and the Agent.” an agency or an employment relationship exists) YES. There is an agency
b. Duties: canvassing for applications for group policies in this case
and other products of the company
c. PROVISION FOR TERMINATION: for any breach or RATIO
violation of the Agreement by giving written notice to the • Insurance industry here so Insurance Code primarily governs
agent w/in 15days from discovery of breach. o The Insurance Code does not wholly regulate the
3. 2nd phase (1983): Became Unit Manager, then Branch Manager "agency" that it speaks of, as agency is a civil law matter
(1990), then Regional Sales Manager (1996) governed by the Civil Code. Thus, at the very least, three

40
sets of laws – namely, the Insurance Code, the Labor entered the Agreement, and they were governed by this
Code and the Civil Code – have to be considered in understanding throughout their relationship. è AT THE
looking at the present case. VERY LEAST, an aid to determining the nature.
o The Labor Code concept of "control" has to be compared o as a matter of Insurance Code-based business practice,
and distinguished with the "control" that must an agency relationship prevails in the insurance industry
necessarily exist in a principal-agent relationship. for the purpose of selling insurance. The Agreement, by
• INSURANCE CODE: the agent must, as a matter of qualification, its express terms, is in accordance with the Insurance
be licensed and must also act within the parameters of the Code model when it provided for a principal-agent
authority granted under the license and under the contract with relationship, and thus cannot lightly be set aside nor
the principal. The agent is limited in the way he offers and simply be considered as an agreement that does not
negotiates for the sale of the company’s insurance products, in reflect the parties’ true intent. This intent, incidentally,
his collection activities, and in the delivery of the insurance is reinforced by the system of compensation the
contract or policy. Agreement provides, which likewise is in accordance
o Rules regarding the desired results (e.g., the required with the production-based sales commissions the
volume to continue to qualify as a company agent, rules Insurance Code provides.
to check on the parameters on the authority given to the • Throughout his career, his role as insurance agent never
agent, and rules to ensure that industry, legal and changed; at most he was labeled as a “leading agent”
ethical rules are followed) are built-in elements of o Other agents also operated under their own agreements
control specific to an insurance agency and should not o NO OTHER AGREEMENTS WERE SUBMITTED
and cannot be read as elements of control that attend o His role was always to sell Manulife’s insurance
an employment relationship governed by the Labor policies/products
Code. • ESTOPPEL: he always declared himself as an independent agent
• CIVIL CODE: "person [who] binds himself to render some service in considering his tax returns
or to do something in representation or on behalf of another, with • CONTROL: The best evidence of control – the agreement or
the consent or authority of the latter." directive relating to Tongko’s duties and responsibilities – was
• The employer controls the employee both in the results and in never introduced as part of the records of the case.
the means and manner of achieving this result. The principal in o IN THIS CASE: Tongko was left practically alone to do his
an agency relationship, on the other hand, also has the business
prerogative to exercise control over the agent in undertaking the o Tongko’s “evidence of control” was really just codes of
assigned task based on the parameters outlined in the pertinent conduct that Manulife imposes on its agents è The mere
laws. presentation of codes or of rules and regulations,
• Under the general law on agency as applied to insurance, an however, is not per se indicative of labor law control as
agency must be express in light of the need for a license and for the law and jurisprudence teach us
the designation by the insurance company. è IN THIS CASE: the o Manulife’s codes of conduct, all of which do not intrude
agreement fulfills this requirement. into the insurance agents’ means and manner of
• By the Agreement’s express terms, Tongko served as an conducting their sales and only control them as to the
"insurance agent" for Manulife, not as an employee. desired results and Insurance Code norms, cannot be
o Agreement’s characterization of the relationship is not used as basis for a finding that the labor law concept of
conclusive BUT it cannot simply be brushed aside control existed between Manulife and Tongko.
because it embodies their intent at the time they • Labor =/= Agency RE: Control

41
o Labor: nature of dictating the means or methods to be for reconsideration and, accordingly, DISMISS Tongko’s petition. No
employed in attaining the result costs.
o Agency: coordinative standards (sales target, etc)
methodology is left undefined
• Tongko was given administrative functions as Manager BUT the
Agreement was never altered è no proof of such additional roles
except for affidavits

DISPOSITIVE: WHEREFORE, considering the foregoing discussion, we


REVERSE our Decision of November 7, 2008, GRANT Manulife’s motion

42
NIELSON AND CO. v. LEPANTO CONSOLIDATED MINING CO. (1968)
Zaldivar, J. | GR No. L-21601 | Distinctions from other contracts

SUMMARY:
Lepanto and Nielson entered into a management contract over Lepanto’s mines. After a disagreement, Lepanto unilaterally revoked the contract, prompting
Nielson to file this complaint for damages. SC ultimately decided in favor of Nielson.
In this MR, Lepanto advanced a new theory – that the management contract was actually a contract of agency, which meant it had the right to unilaterally
revoke it as principal. SC ruled in favor of Nielson, but reversed its decision only with respect to the sums to be paid by Lepanto.

DOCTRINE:
Contract of Agency Contract of Lease of Services

In both contracts, one party binds himself in service to the other party.

Basis is representation Basis is employment

Agent represents the principal Lessor (of services) does not represent the
employer

Preparatory contract Not in preparation for other contracts

Agent is destined to perform juridical acts Lessor may only perform material (non-juridical)
between the principal and third persons acts for the employer

1
FACTS (#1-8 are from the main case; the issue on agency is in the MR) force majeure clause meant the extension of the same for a
1. Jan. 30, 1937: Plaintiff-appellee Nielson & Co. Inc. and period equivalent to the suspension.
defendant-appellant Lepanto Consolidated Mining Co. entered 9. In this motion for reconsideration, Lepanto advances a new
into an operating agreement whereby Nielson operated and theory. It now asserts that the management contract in question
managed the mining properties owned by Lepanto, for a is a contract of agency; thus, it had the right to revoke and
management fee of P2,500.00 a month and 10% participation terminate the said contract under the law of agency pursuant to
fee in the net profits resulting from the operation of the mining Art. 1733 of the Old Civil Code (now Art. 1920, NCC).
properties, for a period of 5 years.
2. 1941: The parties agreed to renew the contract for another ISSUES and HELD
period of 5 years; in the meantime, the Pacific War broke out in WON the management contract between Nielson and Lepanto was a
December 1941. contract of agency --- No.
3. Jan. 1942: Operation of the mining properties was disrupted
because of the war. The mill, power plant, supplies on hand, RATIO
equipment, concentrates on hand and mines, were destroyed. • The management contract was a contract of lease of services.
The Japanese forces occupied and operated the mines during o Agency: One person binds himself to render some
the war. service or do something for the account or at the request
4. After the mining properties were liberated from the Japanese of another. (Art. 1920, NCC)
forces, Lepanto took possession thereof and embarked in o Lease of service: One of the parties binds himself to
rebuilding and reconstructing the mines and mill. make or construct something or to render a service to
a. Shortly after the mines were liberated, a disagreement the other for a price certain. (Art. 1544, NCC)
arose between Nielson and Lepanto over the status of o Here, the principal and paramount undertaking of
the operating contract which expired in 1947. Nielson under the management contract was the
b. Under the terms thereof, the management contract shall operation and development of the mine and the
remain in suspense in case fortuitous event or force operation of the mill. All the other undertakings
majeure, such as war or civil commotion, adversely mentioned in the contract are necessary or incidental to
affecting the work of mining and milling. the principal undertaking.
5. Jun. 26, 1948: The mines resumed operation under the • In the performance of this principal undertaking, Nielson was not
exclusive management of Lepanto. executing juridical acts for Lepanto, destined to create, modify or
6. Feb. 6, 1958: Nielson brought an action against Lepanto to extinguish business relations between Lepanto and third
recover certain sums of money representing damages allegedly persons.
suffered by it in view of Lepanto’s refusal to comply with the • In other words, in performing its principal undertaking, Nielson
terms of the management contract. was not acting as an agent of Lepanto, in the sense that the term
7. TC dismissed the complaint. “agent” is interpreted under the law of agency, but as one who
8. The SC reversed the TC decision. It held that the war suspended was performing material acts for an employer, for a
the contract by virtue of the force majeure clause, and that the compensation.
intention of the parties regarding the meaning and usage of the

2
• 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 minerals, but the contract also
provides that Nielson could not make any purchase, or sell the
minerals, without the prior approval of Lepanto.
o 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.
• The annual report for 1936 and from Par. XI of the management
contract showed 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.
• According to Par. XI of the management contract, Lepanto could
not terminate the agreement at will.
o Lepanto could terminate or cancel the agreement by
giving notice of termination 90 days in advance only in
the event that Nielson should prosecute in bad faith and
not in accordance with approved mining practices.
Lepanto could not terminate the agreement if Nielson
should cease the operation and development of the
mining properties by reason of acts of God, strike, and
other causes beyond the control of Nielson.

DISPOSITIVE SC decision reversed (only with respect to the sums to be


paid by Lepanto – instead of stock dividends, all damages shall now be
paid by Lepanto to Nielson in cash).

3
Sevilla vs. CA • Determining the relationship first is important because if it turns
Sarmiento, J. | G.R. nos. L-41182-3 | April 15, 1988 out that Lina is an employee, then it means that the Courts have
no jurisdiction over the case.
Facts: • Using the control test and the existing economic conditions
• A contract was made between Segundina Nuguera (Nuguera), prevailing between the parties, it was determined that Lina is not
the Tourist World Service, Inc., and the Sps Sevilla (the Spouses) an employee of TWS.
for the lease of Nuguera’s property in Manila as a branch office o Lina was not the subject of control;
of the Tourist World Service. The same would be run by Lina o She was solidarily liable with TWS with regard to the
Sevilla, and that in the contract, she held herself solidarily liable monthly rentals;
with the Tourist World Service for the prompt payment of monthly o Not on the payroll; she earned compensation in
rental. She shared the 7% commissions given by airplane fluctuating amounts depending on her booking
companies, giving Tourist World Service the 3% and retaining the successes.
4% for herself. • However, there is no partnership between Lina and TWS (as Lina
• Tourist World Service caught hold of the information that Lina argued). She is, instead, an agent of TWS.
Sevilla was connected to a rival firm. Since the branch was o A joint venture, including a partnership, presupposes
anyhow losing, the TWS decided to close down the office. generally a parity of standing between join co-venturers
o Resolutions from its board of directors directed the or partners, in which each party has an equal proprietary
abolishment of the office of the manager and vice- interest in the capital or property contributed and where
president in the said branch, as well as the authorization each party exercises equal rights in the conduct of the
of the corporate secretary to receive the properties of business.
the same branch. To effectuate these resolutions, the o Lina recognized that there was no such relation between
corporate secretary went to the branch after working- them (Sevilla and TWS) and said in a letter that it’s TWS’
hours and padlocked the premises to ‘protect company right to stop the operation of its branch office.
interests’. o Agencyà renders service in representation or on behalf
o When neither Lina nor her employes could enter the of another.
office, a complaint was filed by the Spouses against TWS o But the agency between the two is something that
and Nuguera with a prayer for the issuance of cannot be revoked at will because it is one coupled with
mandatory preliminary injunction. an interest or that the agency was created for the
o For apparent lack of interest of the parties, the TC mutual interest of the agent and principal.
dismissed the case. This was appealed by Nuguera, and o Lina (who was a prominent social figure at the time—
eventually the Spouses re-filed the case. Both were socialite?) was a bona fide travel agent herself, and that
heard jointly. her interest was not solely on the commissions she had
• RTC held for TWS on the premise that TWS was the true lessee but to the very subject matter of the power of
of the office and that consequently, it was within its prerogative management delegated to her.
to terminate the lease and padlock the premises. She also personally assumed personal obligation in the
• CA affirmed the decision of the RTC. Hence, this petition. operation thereof, holding herself solidarily liable with
TWS for the rentals. And even after TWS stopped the
Held: operations of its branch, Lina continued the business
• The Court first determined the relationship of Lina and TWS. It using her own name.
concluded that Lina Sevilla is not an employee of TWS.

4
• TWS cannot on its own padlock the premises of the office for as
was said before, Lina had acquired a personal stake in the
business and that she was also part of the contract to the rentals
of the office.
• The Court pointed out the malevolent designs of TWS to
permanently shut down the operations of Lina’s branch office in
light of (the rumor) that she was in contact with a rival firm.
o TWS justified the shutting down as poor sales, but no
evidence was shown as to this effect.
o There is also the surreptitious after-work-hours
padlocking incident.
o For these reasons, TWS is liable to pay moral damages
to Lina (or to the Spouses). Added also are exemplary
damages and nominal/temperate damages.

Petition Granted; Decision (of the CA) Reversed.

5
DEGAÑOS V. PEOPLE (2013) refused to pay and return the subject jewelry. As of October
LABRADOR, J | GR No. L-18223-24 | 1998, the total obligation of the accused amounted to Php 725,
000.00.
SUMMARY: This was a motion for new trial due to the discovery of new • Accused Brigida Luz claimed that sometime in 1987, she already
evidence filed by Damaso Perez. He claimed that the movant did not know paid the principal amount of her indebtedness, but she refused
about the Power of Atty. used by Ramon Racelis à signed and used by him to pay the interest because the same was allegedly excessive. In
to claim loans for the Republic Armored Car Service Corp and Republic 1998, Jose Bordador brought a ledger to her and asked her to
Credit Corp. In the MFR, the Power of Atty was presented. It was not sigh the same. The ledger contains a list of her supposed debt to
mentioned whether this was the exact document used. The issue is W/N the private complaints. She refused to sign it because they were
the power of Atty gave Racelis authority to secure the loans? YES. Racelis not her debts, but her brother’s (Deganos). She even asked the
was authorized to negotiate for loans with other institutions. The private complainants why they gave so many pieces of jewelry
document stated that, “Atty in fact Racelis, may deem proper and and gold bars to Deganos without her permission, and told them
convenient to my interests…and execute any and all docs he deems that she has no participation in the transactions covered by the
requisite and necessary in order to obtain such loans, always having in subject Kasunduan and Katibayan receipts.
mind best interest” As agent of Damaso Perez, Racelis signed the docs • Accused Narciso Deganos claimed that initially, he was given a
for the loans by using “Damaso Perez by Ramon Racelis”. Perez agreed gold bracelet and necklace to sell. He was able to sell the same
to be solidarily liable for the loans. and paid the private complainants with the proceeds thereof.
Since then, he started conducting similar business transactions
DOCTRINE: Where principal was bound by contract of loan executed by with the private complainants, which are usually covered by
his agent; Case at Bar.—Where in accordance with a power of attorney receits denominated as Kasunduan and Katibayan. All of the
executed by the principal, the agent was authorized to negotiate for a loan receipts were issued by the Bordadors and was signed by him.
or various loans with banking institutions, financing or insurance The phrase “for Brigida Luz” and for “Everly Aquino” were written
companies etc., m such sum or sums, aforesaid agent may deem proper on the receipts so that in case he fails to pay for the items
and convenient to the interest of the principal, such general power of covered therein, the Bordadors would have someone to collect
attorney was held sufficient authority for the agent to obtain the credits from. However, he categorically admitted that he is the only one
subject of the case at bar who was indebted to the private complainants. He also claimed
Facts: that he already made partial payments, including Php 20,000,
hich wa contributed by his siblings and which amount was
• The Office of the Provincial Prosecutor of Bulacan charged
delivered by Luz to the Bordadors.
Brigida luz and Narciso Degaños in the RTC of Malolos, Bulacan
with estafa. • The RTC found Deganos guilty as charged and sentenced him to
20 years of reclusion temporal. Luz was acquitted for
• They allegedly received from the Spouses Jose and Lydia
insufficiency of evidence.
Bordador gold and pieces of jewelry worth Php 438, 702.00,
which they were to pay in cash. If they could not do so, they • Deganos assailed his conviction before the CA, which affirmed
should pay it after 1 month or return the unsold jewelry within the the conviction but lowered the penalty. Hence, the instant appeal
said period. Lydia delivered the said jewelry starting sometime in instituted by Deganos.
1986, as evidenced by several documents entitled Katibayan at
Issues:
Kasunduan.
• Everytime Narciso Degaños got jewelry from her, he signed the • WoN the CA erred in NOT finding the agreement between
receipts in her presence. They were able to pay only up to a Bordador and Deganos as one of sale on credit- NO.
certain point. Despite repeated demands, the accused failed and

6
o Pet: His agreement as embodied in the Kasunduan at
Katibayan was a sale on credit, not a consignment to sell
on commission basis.
o SC: The transaction was an agency, not a sale on credit.
Plainly, the transaction was a consignment under the
obligation to account for the proceeds of the sale, or to
return the unsold items. As such he was the agent of the
complainants in the sale to others of the items listed in
the Kasunduan. Contrary to petitioner’s contention,
there was no sale on credit because the ownership of
the items did not pass to him.
• WoN the CA erred in NOT finding that novation had converted the
liability of the accused into a civil one- NO.
o Pet: His partial payments to the complainants novated his
contract with the respondents from agency to loan, thereby
converting his liability from criminal to civil. His failure to
complete payments prior to the filing of the complaint-
affidavit by the complainants notwithstanding, the fact that
the complainants later required him to make a formal
proposal before the barangay authorities on the payment of
the balance of his outstanding obligations confirmed that
novation had occurred.
o SC: Novation is not a ground under the law to extinguish
criminal liability. The role of novation may only be either to
prevent the rise of criminal liability, or to cast doubt on the
true nature of the original basic transaction, whether or not
it was such that the breach of the obligation would not give
rise to penal responsibility, as when money loaned is made
to appear as a deposit, or other similar disguise is resorted
to.
o Although the novation of a contract of agency to make it one
of sale may relieve an offender from an incipient criminal
liability, that did not happen here, for the partial payments
and the proposal to pay the balance the accused made
during the barangay proceedings were not at all
incompatible with his liability under the agency that had
already attached. Rather than converting the agency to sale,
therefore, he even thereby confirmed his liability as the sales
agent of the complainants.

Ruling: CA decision affirmed.

7
Angeles v. PNR (August 31, 2006) 1. WoN Lizette was an assignee of Gaudencio Romualdez – NO
Garcia, J. | GR No. 150128 | Distinctions from Other Contracts; Sale 2. WoN she therefore could sue PNR - NO
SUMMARY: Petitioners-spouses allege that they are the proper party/ies
to sue respondent, being the parties-in-interest to institute and pursue RATIO
their case of complaint for specific performance and damages against the 1.a. The Court scrutinized the letter and found she was to act as a
respondents. Decisive in this case is the interpretation of the power of “representative” of Romualdez.
attorney in question, which the Court decided evinced that the female
spouse was a mere agent or representative, and not the assignee, of the 1.b. The Court stressed it doesn’t matter how the agent is called or
person who had executed the document. designated, or the parties in an agency relation.
DOCTRINE: Normally, the agent has neither rights nor liabilities as against
the third party; he cannot thus sue or be sued on the contract xxx The 1.c. The letter clearly stated Romualdez authorized Lizette Angeles to be
legal situation is, however, different where an agent is constituted as an his “lawful representative.”
assignee. In such a case, the agent may, in his own behalf, sue on a
contract made for his principal, as an assignee of such contract. The rule 1.d. Petitioners contest this, stressing the “waiver” part of the letter; the
requiring every action to be prosecuted in the name of the real party-in- Court however points out the phrase “For this reason,” which precedes
interest recognizes the assignment of rights of action and also recognizes the “waiver.” The said phrase could only refer to the authorization of
that when one has a right assigned to him, he is then the real party-in- Lizette to be the agent/representative of Romualdez. Therefore, the
interest and may maintain an action upon such claim or right. “waiver” was only a capacitation of Lizette in furtherance of her purpose
as agent to withdraw the subject rails. The Court here uses as basis Art.
FACTS 1374 providing a rule of construction.
1. On May 5, 1980, respondent informed Gaudencio Romualdez
that it has accepted his offer to buy scrap / unserviceable rails 1.e. Applying Art. 1371, the subsequent acts of the parties were analyzed,
amounting to Php 96,600. where still Lizette Angeles was identified or affirmed to be a mere agent
2. Romualdez then sent a letter to PNR’s Purchasing Agent, the or representative of San Juanico Enterprises (presumably belonging to
letter of which stated Lizette Angeles (petitioner) was authorized Romualdez, then.)
to be his lawful representative in withdrawing the said
equipment. 1.f. Petitioner assails the document as not being a special power of
3. However, in the same letter, the wording was such as to express attorney since it was not in the form of one. The Court declares this
a “waiver of rights, interests, and participation” in favor of Lizette. argument as being specious, as clearly no law mandates a form or
4. PNR suspended the withdrawal of the rails by reason of method of execution for a valid power of attorney.
suspected pilferage of PNR scrap properties in Tarlac.
5. Petitioners-spouses Angeles filed a suit against PNR for specific 1.g. “(A power of attorney’s) purpose is not to define the authority of the
performance and damages. agent xxx but to evidence the authority of the agent to third parties with
6. Lizette died pending resolution of the case, who was substituted whom the agent deals.
by her heirs and her husband.
7. RTC dismissed the complaint for lack of cause of action, finding DISPOSITIVE: WHEREFORE, the petition is DENIED and the assailed
the petitioners-spouses as not being the parties-in-interest. decision of the CA is AFFIRMED. Costs against the petitioner. SO
Lizette was deemed a mere agent or representative, not an ORDERED.
assignee. The CA affirmed the RTC Decision.

ISSUES and HELD

8
Victoria Milling Co., Inc. v. CA and Consolidated Sugar Corporation June 2. Art. 1868. By the contract of agency a person binds himself to
19, 2000 render some service or to do something in representation or on
Quisumbing, J. | G.R. No. 117356 | Agency or Sale behalf of another, with the consent or authority of the latter.
3. The basis of agency is representation. On the part of the principal,
Doctrine: The question of whether a contract is one of sale or agency there must be an actual intention to appoint or an intention
depends on the intention of the parties as gathered from the whole scope naturally inferable from his words or actions; and on the part of the
and effect of the language employed. 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
FACTS: agency. One factor which most clearly distinguishes agency from
1. St. Therese Merchandising (STM) regularly bought sugar from other legal concepts is control; one person - the agent - agrees to
Victorias Milling Co.(VMC), Inc. In the course of their dealings, act under the control or direction of another - the principal.
Victorias Milling issued several Shipping List/Delivery Receipts 4. Victorias Milling failed to sufficiently establish the existence of an
(SLDRs) to St. Therese Merchandising as proof of purchases. agency relation between Consolidated Sugar Corp. and St. Therese
Among these was SLDR No. 1214M which covers 25,000 bags of Merchandising. The fact alone that St. Therese Merchandising had
sugar. Each bag contained 50 kilograms and priced at P638.00 per authorized withdrawal of sugar by CSC. “for and in our behalf”
bag. The transaction it covered was a direct sale. should not be eyed as pointing to the existence of an agency
2. On October 25, 1989, St. Therese Merchandising sold to relation. Further, CSC has shown that the 25,000 bags of sugar
Consolidated Sugar Corp (CSC). its rights in SLDR No. 1214M for covered by the SLDR No. 1214M were sold and transferred by St.
P14,750,000.00. CSC issued checks in payment. That same day, Therese Merchandising to it. A conclusion that there was a valid
CSC wrote Victorias Milling that it had been authorized by St. sale and transfer to Consolidated Sugar Corp. may, therefore, be
Therese Merchandising to withdraw the sugar covered by SLDR No. made thus capacitating Consolidated Sugar Corp. to sue in its own
1214M. name, without need of joining its imputed principal St. Therese
3. CSC surrendered SLDR No. 1214M to Victorias Milling’s NAWACO Merchandising as co-plaintiff.
warehouse and was allowed to withdraw sugar. However, after 5. CSC was a buyer of the SLDR form, and not an agent of STM.
2,000 bags had been released, Victorias Milling refused to allow Consolidated Sugar Corp. was not subject to St. Therese
further withdrawals of sugar against SLDR No. 1214M because, Merchandising’s control. That no agency was meant to be
according to it, St. Therese Merchandising had already withdrawn established by the CSC and STM is clearly shown by CSC’s
all the sugar covered by the cleared checks. communication to petitioner that SLDR No. 1214M had been “sold
and endorsed” to it. The use of the words “sold and endorsed”
ISSUE/Held: WON the contract was one of agency or sale? Sale means that St. Therese Merchandising and CSC intended a
contract of sale, and not an agency.
Ratio:
1. Victorias Milling heavily relies upon St. Therese Merchandising’s Dispositive: WHEREFORE, the instant petition is DENIED for lack of merit.
letter of authority allowing Consolidated Sugar Corp. to withdraw Costs against petitioner.
sugar against SLDR No. 1214M to show that the latter was St.
Therese Merchandising’s 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” the refined sugar
covered by SDR No. 1214

9
Hahn v CA (Jan. 22, 1997) DTI because BMW is a foreign corporation and it was not doing
Mendoza, J. | GR No. 113074 | Distinctions from other contracts: Sale business in the Philippines.
8. BMW also contended that Hahn was not its agent because he
Summary: Hahn is the authorized exclusive dealer of BMW in the assembled and sold BMW cars and products without the
Philippines. BMW wanted to convert his contract to a standard BMW participation of BMW and that he also sold other products. BMW
importer or terminate his exclusive dealership. Hahn refused and filed a claims that Hahn was a middleman transacting business in his
complaint for specific performance to compel BMW to continue with the own name and on his own account.
exclusive dealership. BMW moved to dismiss on the ground that 9. TC deferred the resolution of the Motion to Dismiss.
jurisdiction cannot be acquired over it by service of summons through DTI 10. BMW filed a petition for certiorari with the CA and the CA ruled
since it is a foreign corporation, not doing business in the Philippines. SC that TC committed grave abuse of discretion is deferring
held that Hahn's arrangement with BMW is an agency and therefore it is resolution of the motion to dismiss.
doing business in the Philippines and can be served summons through
11. CA ruled that the BMW was not doing business in the country and
DTI. (See Ratio for details of their arrangement)
therefore jurisdiction over it could not be acquired through
service of summon on DTI.
Doctrine: In an agency to sell, an agent receives commission upon the
successful conclusion of a sale. Whereas, a broker earns his pay merely 12. CA ruled that Hahn was a mere broker and not an agent, that he
by bringing the buyer and the seller together, even if no sale was made. acted in his own name and on his own account and
independently of BMW based on the fact that he invested his own
Facts: money and resources in establishing BMW's goodwill in the
Philippines.
1. Hahn is the authorized exclusive dealer of BMW in the Philippines Issue and Held: WON Hahn is the agent or distributor of BMW in the
but with no formal contract.
Philippines (to determine if BMW is doing business in the Philippines)?
2. BMW informed Hahn, in a letter, of its dissatisfaction with various Yes
aspects of his business, such as decline in sales, deteriorating
services, inadequate showroom and warehouse facilities, and Ratio:
failure to comply with the standards for an exclusive BMW dealer.
1. Hahn claimed he took orders for BMW cars and transmitted them
3. BMW expressed willingness to continue business relations on to BMW. Upon receipt of the orders, BMW fixed the down
the basis of a "standard BMW importer" contract, otherwise, payment and pricing charges, notified Hahn of the scheduled
BMW would terminate Hahn's exclusive dealership. production month for the orders, and reconfirmed the orders by
4. Hahn refused and BMW terminated the exclusive dealer signing and returning to Hahn the acceptance sheets. Payment
relationship. was made by the buyer directly to BMW. Title to the cars passed
5. Hahn filed a complaint for specific performance and damages directly to the buyer and Hahn does not pay the purchase price
against BMW to compel it to continue the exclusive dealership. of BMW cars sold.
6. Summons and copies of the complaint were served on BMW 2. Hahn received a commission equal to 14% of the purchase price
through the Dept. of Trade and Industry pursuant to Rule 14 Sec upon the invoicing of a vehicle order by BMW. Upon confirmation
14, on the ground that it was a foreign corporation doing in writing that the cars had been registered in the Philippines and
business in the Philippines. These were sent by DTI to BMW via serviced by him, he received additional 3% of the purchase price.
registered mail. 3. He also performed after-sale services, for which he received
7. BMW moved to dismiss the case, contending that the TC did not reimbursement from BMW.
acquire jurisdiction over it through the service of summons on 4. All orders were on invoices and forms of BMW.

10
5. The Court held that this arrangement shows an agency. An agent
receives commission upon successful conclusion of a sale. While
a broker earns his pay by bringing the buyer and the seller
together, even if no sale was made.
6. In addition, BMW has held out Hahn as its exclusive distributor
in the Philippines.
7. Therefore, BMW is doing business in the Philippines through its
agent Hahn.

Dispositive: Decision of CA reversed and remanded to the TC for further


proceedings.

11
LIM v. PEOPLE (November 21 1984) the complainant thereby precluding criminal liability of Lim?
Relova, J. | G.R. No. L-34338 | Sale vs. Agency to Sell CONTRACT OF AGENCY TO SELL

Petitioner: Lourdes Valerio Lim Ratio (Issue 1)


Respondents: The People ● Petitioner’s theory is that the obligation does not fix a period, but
from its nature and the circumstances it can be interred that a
Summary: Lim proposed to sell Ayroso’s tobacco; in turn Lim was to period was intended; hence the only action that can be
receive the overprice for which she could sell them. Ayroso failed to pay maintained is a petition to ask the court to fix the duration
in full and return the goods. As a defense in the estafa case, Lim argues thereof.
that the agreement was a contract of sale, not of agency to sell. Court ● Court: It is clear in the agreement that the proceeds of the sale
disagrees, saying that there was no transfer of ownership from Ayroso to of the tobacco should be turned over to the complainant as soon
Lim. as the same was sold, or, that the obligation was immediately
demandable as soon as the tobacco was disposed of. Hence,
Doctrine: The fact that appellant received the tobacco to be sold at P1.30 Article 1197 NCC does not apply.
per kilo and the proceeds to be given to complainant as soon as it was
sold, strongly negates transfer of ownership of the goods to the petitioner. Ratio (Issue 2)
The agreement constituted her as an agent with the obligation to return ● Alternatively, petitioner argues that she was not an agent
the tobacco if the same was not sold. because the agreement does not say that she would be paid the
commission if the goods were sold.
Facts ● Court: Aside from the fact that Ayroso testified that the appellant
● Appellant went to the house of Ayroso and proposed to sell the asked her to be her agent in selling the tobacco, the appellant
latter’s tobacco. Ayroso agreed to sell her tobacco consisting of herself admitted that there was an agreement that upon the sale
615 kilos at P1.30 a kilo. The appellant was to receive the of the tobacco she would be given something. The appellant is a
overprice for which she could sell them. The written agreement businesswoman, and it is unbelievable that she would go to the
states that the proceed will be given to Ayroso as soon as it was extent of going to Ayroso’s house and take the tobacco with a
sold. jeep which she had brought if she did not intend to make a profit
● Ofthe total value of P799.50, appellant had paid to Ayroso only out of the transaction.
P240.00, and this was paid on three different times. Ayroso’s ● The fact that appellant received the tobacco to be sold at P1.30
sister testified that she had gone to the house of appellant per kilo and the proceeds to be given to complainant as soon as
several times, but Lim often eluded her; and that the 'camarin' of it was sold, strongly negates transfer of ownership of the goods
the appellant was empty. to the petitioner. The agreement constituted her as an agent with
● As no further amount was paid, Ayroso filed a complaint for the obligation to return the tobacco if the same was not sold.
estafa. Trial court found Lim guilty. CA affirmed. Hence this
appeal. DENIED.

Issues - Held
1. WON the CA was right in holding that the agreement fixed a
period such that the obligation was immediately demandable as
soon as the tobacco was sold? YES
2. Whether the receipt/agreement is a contract of agency to sell, or
a contract of sale of the subject tobacco between petitioner and

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Chua Ngo v. Universal trading Co., Inc. (September 19, 1950) RATIO
Bengzon | No. L-2870 | Distinctions from other Contracts: Sale 1. the circumstances of record indicate a sale:
a. no commission was paid
SUMMARY: b. the contract says that “if balance is not paid within 48
Chua Ngo entered into a contract with UTC for the acquisition of 300 hours of notification, merchandise may be resold by the
boxes of oranges. While in transit, 180 boxes were lost so Chua Ngo sued UTC and the deposit forfeited — “resold” implies the
UTC to recover the price paid in advance. UTC refused to pay alleging that goods had been sold to Chua Ngo and the forfeiture of
it merely acted as an agent in purchasing the oranges. the SC held, the deposit is incompatible with a contract of agency
however, that circumstances revealed the transaction to be one of sale. c. after executing the contract wherein the oranges were
This being the case, Chua Ngo was entitled to repayment for the lost quoted at $6.30/box, UTC placed a order for purchase
boxes. of the same ranges with Gabuardi company at $6/box —
if UTC was an agent, it could not mark up the prices the
FACTS way that it did. since good faith is presumed, the
1. Chua Ngo and UTC entered into a contract for the sale of 300 conclusion is that UTC did so because it was acting as
boxes of oranges (and onions but this was later deleted) to be an independent purchaser from Gabuardi Company
acquired from a supplier in the USA. d. UTC charged Chua Ngo P218.87 for the 3.5% sales tax
2. UTC wrote Chua Ngo 2 letters informing him that the contract for — implies that their transaction was a sale
oranges (and onions) had been confirmed by the supplier and e. if the purchase of the oranges had been made on behalf
asking for the deposit of 65% of the price. of Chua Ngo, all claims for losses against the insurance
3. Chua Ngo delivered to UTC the price of 300 boxes of Sunkist company and shipping company should’ve been
oranges and UTC ordered the boxes from Gabuardi Company. assigned to Chua Ngo. Here, UTC pressed the claims for
The goods were loaded in good condition, marked “UTC Manila” itself
and shipped to Manila from San Francisco but 180 boxes were 2. because the goods were sold “FOB San Francisco” the loss
lost in transit and never delivered. should be borne by UTC because the goods were considered as
4. Chua Ngo sued UTC to recover the price he paid in advance but delivered to the purchaser at San Francisco on board the vessel.
UTC refused to pay, alleging it merely acted as agent of Chua Ngo this is why UTC was trying to recover the loss from the steamship
in purchasing the oranges. Chua Ngo argued that he bought the company and insurer.
oranges from UTC and was therefore entitled to the return of the
price of the undelivered fruit. DISPOSITIVE
a. note that UTC paid in its own name to Gabuardi In view of the foregoing, the appealed judgment for plaintiff in the sum of
Company and made claims for the lost oranges to the P3,882.60 is affirmed, with costs,
steamship company and the insurance company that
insured the shipment. Also, UTC received no
commission for its transaction with Chua Ngo.
5. the trial court ruled in favor of Chua Ngo

ISSUES and HELD


1. did UTC merely agree to buy for and on behalf of Chua Ngo or did
it agree to sell the oranges? — it was a sale
2. who should suffer the loss of the 180 boxes? — UTC

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THE SHELL COMPANY OF THE PHILIPPINES, LTD. v. FIREMEN'S 5. The case was immediately reported to the Manila Adjustor
INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL Company, the adjustor for the Firemen's Insurance Company and
CASUALTY INSURANCE CO., SALVADOR SISON, PORFIRIO DE LA FUENTE the Commercial Casualty Insurance, Company, as the car was
and THE COURT OF APPEALS (January 29, 1957) insured.
Padilla, J. | GR No. L-8169 | Distinction from other contracts; 6. After the car was restored to running condition, the vehicle was
independent contractor delivered to Sison who made assignment of his rights to recover
damage in favor of the two insurance companies amounting to
SUMMARY: A Plymouth car was brought to a Shell station for servicing. As P1,651.38, the cost of the repairs.
the car was being lower from a hydraulic lift, it swung and subsequently 7. The respondents filed an action for recovery of sum of money,
fell. The insurance company was subrogated to the rights of the car owner based on alleged negligence of the petitioners.
and filed and action for collection of sum of money against the company 8. The CFI dismissed the complaint.
Shell. CFI dismissed the complaint. The CA and SC found that the 9. The CA reversed the ruling of the CFI and held that the operator
circumstances reveal that the operator was a mere agent of its principal of the gasoline and service station was an agent of the Shell
Shell, thus the petitioner was held liable for the damage caused to the Company.
car.
ISSUES and HELD: WON the operator of the gas station is an agent of
DOCTRINE: The act of [an] agent or his employees acting within the scope Shell and not an independent contractor-- (YES)
of his authority is the act of the principal, the breach of the undertaking
by the agent is one for which the principal is answerable. RATIO:
1. The Court affirmed the decision of CA’s findings that:
The Court is not bound to rely upon the name or title given by the a. the operator owed his position to the company and the
contracting parties, should there be a controversy as to what they really latter could remove him or terminate his services at will;
had intended to enter into, but the way the contracting parties do or b. the service station belonged to the company and bore
perform their respective obligations stipulated or agreed upon. Should its tradename and the operator sold only the products
such performance conflict with the name or title given the contract by the of the company;
parties, the former must prevail over the latter. c. the equipment used by the operator belonged to the
company and were just loaned to the operator and the
FACTS: company took charge of their repair and maintenance;
1. A Plymouth car owned by Salvador P. Sison was brought to the d. an employee of the company supervised the operator
Shell Gasoline and Service Station, located at the corner of and conducted periodic inspection of the company's
Marqués de Comillas and Isaac Peral Streets, Manila, for gasoline and service station;
washing, greasing and spraying. e. the price of the products sold by the operator was fixed
2. The operator of the station, having agreed to do service upon by the company and not by the operator;
payment of P8.00, the car was placed on the hydraulic lifter 2. The Court also emphasized that they are not bound to rely upon
under the direction of the personnel of the station. the name or title given by the contracting parties, should there
3. According to Sison, after lifting the car through the hydraulic lifter be a controversy as to what they really had intended to enter into,
and washing the same, the next thing to do was to grease it. but the way the contracting parties do or perform their respective
However, the greasemen could not reach shelf of the right front obligations stipulated or agreed upon. Should such performance
fender, thus they were to lower the car. conflict with the name or title given the contract by the parties,
4. While it was being lowered, Sison saw the car swinging until it the former must prevail over the latter.
fell.

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3. It was admitted by the operator of the gasoline and service
station that the car was carefully and centrally placed on the
platform of the lifter and the fall of the car were the result of the
jerking and swaying of the lift when the valve was released, and
that the jerking was due to some accident and unforeseen
shortcoming of the mechanism itself, which caused its faulty or
defective operation or functioning.
4. It is to be noted that the company undertook to "answer and see
to it that the equipment are in good running order and usable
condition and the CA found that the Company's mechanic failed
to make a thorough check up.
5. As the act of the agent or his employees acting within the scope
of his authority is the act of the principal, the breach of the
undertaking by the agent is one for which the principal is
answerable.

DISPOSITIVE
WHEREFORE, the judgment under review is affirmed, with costs against
the petitioner.

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