LIABILITY OF AGENT FOR FRAUD AND
NEGLIGENCE
MEBTC VS CA
DOCTRINE: The agent is responsible not only for fraud,
but also for negligence, which shall be judged 'with more
or less rigor by the courts, according to whether the
agency was or was not for a compensation.
FACTS
Eduardo Gomez opened an account with Golden Savings
and deposited over a period of two months 38 treasury
warrants. They were all drawn by the Philippine Fish
Marketing Authority and purportedly signed by its
General Manager and countersigned by its Auditor. Six of
these were directly payable to Gomez while the others
appeared to have been indorsed by their respective
payees, followed by Gomez as second indorser.
All these warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its
Savings Account in the Metrobank branch in Calapan,
Mindoro. They were then sent for clearing by the branch
office to the principal office of Metrobank, which
forwarded them to the Bureau of Treasury.
Later on, Castillo went to the Calapan branch several
times to ask whether the warrants had been cleared. She
was told to wait. Accordingly, Gomez was meanwhile not
allowed to withdraw from his account. Later, however,
"exasperated" over Gloria's repeated inquiries and also as
an accommodation for a "valued client," the petitioner
says it finally decided to allow Golden Savings to
withdraw from the proceeds of the warrant. In turn,
Golden Savings subsequently allowed Gomez to make
withdrawals from his own account
Metrobank informed Golden Savings that 32 of the
warrants had been dishonored by the Bureau of Treasury,
and demanded the refund by Golden Savings of the
amount it had previously withdrawn, to make up the
deficit in its account.
The demand was rejected. Metrobank sued Golden
Savings. RTC and CA ruled in favor of Golden Savings.
ISSUE: W/N the Metrobank is negligent in giving
Golden Savings the impression that the treasury warrants
had been cleared and that, consequently, it was safe to
allow Gomez to withdraw the proceeds thereof from his
account with it
RULING: YES. Without such assurance, Golden
Savings would not have allowed the withdrawals; with
such assurance, there was no reason not to allow the
withdrawal. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that
belonged to the depositor, who could withdraw it any time
The proceeds of the warrants were withheld from Gomez
until Metrobank allowed Golden Savings itself to
withdraw them from its own deposit.7 It was only when
Metrobank gave the go-signal that Gomez was finally
allowed by Golden Savings to withdraw
And now, to gloss over its carelessness, Metrobank would
invoke the conditions printed on the dorsal side of the
deposit slips through which the treasury warrants were
deposited by Golden Savings with its Calapan branch.
The conditions read as follows:
Kindly note that in receiving items on deposit, the
bank obligates itself only as the depositor's
collecting agent, assuming no responsibility
beyond care in selecting correspondents, and
until such time as actual payment shall have come
into possession of this bank, the right is reserved
to charge back to the depositor's account any
amount previously credited, whether or not such
item is returned. This also applies to
checks drawn on local banks and bankers and
their branches as well as on this bank, which are
unpaid due to insufficiency of funds, forgery,
unauthorized overdraft or any other reason
In stressing that it was acting only as a collecting agent
for Golden Savings, Metrobank seems to be suggesting
that as a mere agent it cannot be liable to the principal.
This is not exactly true. On the contrary, Article 1909 of
the Civil Code clearly provides that —
Art. 1909. — The agent is responsible not only for fraud,
but also for negligence, which shall be judged 'with more
or less rigor by the courts, according to whether the
agency was or was not for a compensation.
The negligence of Metrobank has been sufficiently
established. It was the clearance given by it that assured
Golden Savings it was already safe to allow Gomez to
withdraw the proceeds of the treasury warrants he had
deposited Metrobank misled Golden Savings. There may
have been no express clearance, as Metrobank insists
(although this is refuted by Golden Savings) but in any
case that clearance could be implied from its allowing
Golden Savings to withdraw from its account not only
once or even twice but three times. The total withdrawal
was in excess of its original balance before the treasury
warrants were deposited, which only added to its belief
that the treasury warrants had indeed been cleared.
ILLICIT ACTS OF AGENT
WOODCHILD HOLDINGS VS ROXAS ELECTRIC
DOCTRINE: Contracts entered into by corporate
officers beyond the scope of authority are unenforceable
against the corporation unless ratified by the corporation.
FACTS
Respondent was the owner of 2 parcels of land. A portion
of one Lot which abutted the other Lot was a dirt road
accessing to the Sumulong Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondent's
Board of Directors approved a resolution authorizing the
corporation, through its president, Roberto B. Roxas, to
sell the Lots, at a price and under such terms and
conditions which he deemed most reasonable and
advantageous to the corporation; and to execute, sign and
deliver the pertinent sales documents and receive the
proceeds of the sale for and on behalf of the company.
Petitioner wanted to buy the Lot on which it planned to
construct its warehouse building, and a portion of the
adjoining lot, so that its 45-foot container van would be
able to readily enter or leave the property.
A Deed of Absolute Sale in favor of WHI was issued,
under which the Lot was sold for P5,000,000, receipt of
which was acknowledged by Roxas under the following
terms and conditions:
The Vendor agree (sic), as it hereby agrees and binds itself
to give Vendee the beneficial use of and a right of way
from Sumulong Highway to the property herein conveyed
consists of 25 square meters wide to be used as the latter's
egress from and ingress to and an additional 25 square
meters in the corner of Lot No. 491-A-3-B-1, as turning
and/or maneuvering area for Vendee's vehicles.
The Vendor agrees that in the event that the right of way
is insufficient for the Vendee's use (ex entry of a 45-foot
container) the Vendor agrees to sell additional square
meters from its current adjacent property to allow the
Vendee full access and full use of the property.
The respondent posits that Roxas was not so authorized
under the May 17, 1991 Resolution of its Board of
Directors to impose a burden or to grant a right of way in
favor of the petitioner on Lot No. 491-A-3-B-1, much less
convey a portion thereof to the petitioner. Hence, the
respondent was not bound by such provisions contained
in the deed of absolute sale.
ISSUE: W/N the respondent is bound by the provisions
in the deed of absolute sale granting to the petitioner
beneficial use and a right of way over a portion of Lot
accessing to the Sumulong Highway and granting the
option to the petitioner to buy a portion thereof, and, if so,
whether such agreement is enforceable against the
respondent
RULING: NO.
Generally, the acts of the corporate officers within the
scope of their authority are binding on the corporation.
However, under Article 1910 of the New Civil Code, acts
done by such officers beyond the scope of their authority
cannot bind the corporation unless it has ratified such acts
expressly or tacitly, or is estopped from denying them.
Thus, contracts entered into by corporate officers beyond
the scope of authority are unenforceable against the
corporation unless ratified by the corporation.
Evidently, Roxas was not specifically authorized under
the said resolution to grant a right of way in favor of the
petitioner on a portion of Lot No. 491-A-3-B-1 or to agree
to sell to the petitioner a portion thereof. The authority of
Roxas, under the resolution, to sell Lot No. 491-A-3-B-2
covered by TCT No. 78086 did not include the authority
to sell a portion of the adjacent lot, Lot No. 491-A-3-B-1,
or to create or convey real rights thereon. Neither may
such authority be implied from the authority granted to
Roxas to sell Lot No. 491-A-3-B-2 to the petitioner "on
such terms and conditions which he deems most
reasonable and advantageous."
The general rule is that the power of attorney must be
pursued within legal strictures, and the agent can neither
go beyond it; nor beside it. The act done must be legally
identical with that authorized to be done.30 In sum, then,
the consent of the respondent to the assailed provisions in
the deed of absolute sale was not obtained; hence, the
assailed provisions are not binding on it.
There can be no apparent authority of an agent without
acts or conduct on the part of the principal and such acts
or conduct of the principal must have been known and
relied upon in good faith and as a result of the exercise of
reasonable prudence by a third person as claimant and
such must have produced a change of position to its
detriment.
The apparent power of an agent is to be determined by the
acts of the principal and not by the acts of the agent.
FILIPINAS LIFE ASSURANCE COMPANY VS
PEDROSO
DOCTRINE: The acts of an agent beyond the scope of
his authority do not bind the principal, unless the principal
ratifies them, expressly or impliedly.
FACTS:
Teresita Pedroso is a policyholder of a 20-year
endowment life insurance issued by Filipinas Life
Assurance Co. Pedroso claims Renato Valle was her
insurance agent since 1972 and Valle collected her
monthly premiums. In the first week of January 1977,
Valle told her that the Filipinas Life Escolta Office was
holding a promotional investment program for
policyholders. It was offering 8% prepaid interest a month
for certain amounts deposited on a monthly basis.
Enticed, she initially invested and issued a post-dated
check for P10,000. In return, Valle issued Pedroso his
personal check for P800 for the 8% prepaid interest and a
Filipinas Life Agent receipt.
Pedroso called the Escolta office and talked to Francisco
Alcantara, the administrative assistant, who referred her
to the branch manager, Angel Apetrior. Pedroso inquired
about the promotional investment and Apetrior confirmed
that there was such a promotion. She was even told she
could push through with the check she issued. From the
records, the check, with the endorsement of Alcantara at
the back, was deposited in the account of Filipinas Life
with the Commercial Bank and Trust Company, Escolta
Branch.
Relying on the representations made by Filipinas Life’s
duly authorized representatives Apetrior and Alcantara,
as well as having known agent Valle for quite some time,
Pedroso waited for the maturity of her initial investment.
A month after, her investment of P10,000 was returned to
her after she made a written request for its refund. To
collect the amount, Pedroso personally went to the
Escolta branch where Alcantara gave her the P10,000 in
cash. After a second investment, she made 7 to 8 more
investments in varying amounts, totaling P37,000 but at a
lower rate of 5% prepaid interest a month. Upon maturity
of Pedroso’s subsequent investments, Valle would take
back from Pedroso the corresponding agent’s receipt he
issued to the latter.
Pedroso told respondent Jennifer Palacio, also a Filipinas
Life insurance policyholder, about the investment plan.
Palacio made a total investment of P49,550 but at only 5%
prepaid interest. However, when Pedroso tried to
withdraw her investment, Valle did not want to return
some P17,000 worth of it. Palacio also tried to withdraw
hers, but Filipinas Life, despite demands, refused to return
her money
ISSUE: WON Filipinas Life is jointly and severally liable
with Apetrior and Alcantara on the claim of Pedroso and
Palacio or WON its agent Renato Valle is solely liable to
Pedroso and Palacio
RULING
Pedroso and Palacio had invested P47,000 and P49,550,
respectively. These were received by Valle and remitted
to Filipinas Life, using Filipinas Life’s official receipts.
Valle’s authority to solicit and receive investments was
also established by the parties. When Pedroso and Palacio
sought confirmation, Alcantara, holding a supervisory
position, and Apetrior, the branch manager, confirmed
that Valle had authority. While it is true that a person
dealing with an agent is put upon inquiry and must
discover at his own peril the agent’s authority, in this case,
Pedroso and Palacio did exercise due diligence in
removing all doubts and in confirming the validity of the
representations made by Valle.
Filipinas Life, as the principal, is liable for obligations
contracted by its agent Valle. By the contract of agency,
a person binds himself to render some service or to do
something in representation or on behalf of another, with
the consent or authority of the latter. The general rule is
that the principal is responsible for the acts of its agent
done within the scope of its authority, and should bear the
damage caused to third persons. When the agent exceeds
his authority, the agent becomes personally liable for the
damage. But even when the agent exceeds his authority,
the principal is still solidarily liable together with the
agent if the principal allowed the agent to act as though
the agent had full powers. The acts of an agent beyond the
scope of his authority do not bind the principal, unless the
principal ratifies them, expressly or impliedly.
Ratification – adoption or confirmation by one person of
an act performed on his behalf by another without
authority
Even if Valle’s representations were beyond his authority
as a debit/insurance agent, Filipinas Life thru Alcantara
and Apetrior expressly and knowingly ratified Valle’s
acts. Filipinas Life benefited from the investments
deposited by Valle in the account of Filipinas Life.
COMMON PRINCIPALS
DE CASTRO VS CA
DOCTRINE: If two or more persons have appointed an
agent for a common transaction or undertaking, they shall
be solidarily liable to the agent for all the consequences
of the agency.
FACTS
De castro were co-owners of four (4) lots. In a letter,
Artigo was authorized by appellants to act as real estate
broker in the sale of these properties and five percent(5%)
of which will be given to the agent as commission. It was
appellee who first found Times Transit Corporation, who
bought 2 lots. Artigo felt short of his commission. Hence,
he sued below to collect the balance. De castros then
moved for the dismissal for failure to implead other co-
owners as indispensable parties. The De Castros claim
that Artigo always knew that the two lots were co-owned
with their other siblings and failure to implead such
indispensable parties is fatal to the complaint since
Artigo, as agent of all the four co-owners, would be paid
with funds co-owned by the four co-owners
ISSUE: W/N the complaint merits dismissal for failure to
implead other co-owners as indispensable parties
RULING:
The De Castros argue that Artigos complaint should have
been dismissed for failure to implead all the co-owners of
the two lots. The De Castros claim that Artigo always
knew that the two lots were co-owned by Constante and
Corazon with their other siblings Jose and Carmela whom
Constante merely represented. The De Castros contend
that failure to implead such indispensable parties is fatal
to the complaint since Artigo, as agent of all the four co-
owners, would be paid with funds co-owned by the four
co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be
affected by the courts action in the litigation, and without
whom no final determination of the case can be
had.[7] The joinder of indispensable parties is mandatory
and courts cannot proceed without their
[8]
presence. Whenever it appears to the court in the course
of a proceeding that an indispensable party has not been
joined, it is the duty of the court to stop the trial and order
the inclusion of such party.[9]
However, the rule on mandatory joinder of indispensable
parties is not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a
handwritten note dated January 24, 1984 to sell the
properties of the De Castros for P23 million at a 5 percent
commission. The authority was on a first come, first serve
basis.
Constante signed the note as owner and as representative
of the other co-owners. Under this note, a contract of
agency was clearly constituted between Constante and
Artigo. Whether Constante appointed Artigo as agent, in
Constantes individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for
failure to implead the other co-owners as indispensable
parties. The De Castros admit that the other co-owners
are solidarily liable under the contract of
agency,[10] citing Article 1915 of the Civil Code, which
reads:
Art. 1915. If two or more persons have appointed an agent
for a common transaction or undertaking, they shall be
solidarily liable to the agent for all the consequences of
the agency.
The solidary liability of the four co-owners, however,
militates against the De Castros theory that the other co-
owners should be impleaded as indispensable parties. A
noted commentator explained Article 1915 thus
The rule in this article applies even when the
appointments were made by the principals in separate
acts, provided that they are for the same transaction. The
solidarity arises from the common interest of the
principals, and not from the act of constituting the
agency. By virtue of this solidarity, the agent can recover
from any principal the whole compensation and
indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary
responsibility. The solidarity does not disappear by the
mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are interested,
but only some create the agency, only the latter are
solidarily liable, without prejudice to the effects
of negotiorum gestio with respect to the others. And if the
power granted includes various transactions some of
which are common and others are not, only those
interested in each transaction shall be liable for it.[11]
When the law expressly provides for solidarity of the
obligation, as in the liability of co-principals in a contract
of agency, each obligor may be compelled to pay the
entire obligation.[12]The agent may recover the whole
compensation from any one of the co-principals, as in this
case.
Indeed, Article 1216 of the Civil Code provides that a
creditor may sue any of the solidary debtors. This article
reads:
Art. 1216. The creditor may proceed against any one of
the solidary debtors or some or all of them
simultaneously. The demand made against one of them
shall not be an obstacle to those which may subsequently
be directed against the others, so long as the debt has not
been fully collected.
Thus, the Court has ruled in Operators Incorporated vs.
American Biscuit Co., Inc.[13] that
x x x solidarity does not make a solidary obligor an
indispensable party in a suit filed by the creditor. Article
1216 of the Civil Code says that the creditor `may proceed
against anyone of the solidary debtors or some or all of
them simultaneously. (Emphasis supplied)
EXTINGUISHMENT
DOCTRINE: Power to foreclose is not an ordinary
agency that contemplates exclusively the representation
of the principal by the agent but is primarily an authority
conferred upon the mortgagee for the latter's own
protection
FACTS
Vicente Perez mortgaged Lot No. 286-E of the
Kabankalan Cadastre, with Transfer certificate of Title
No. 29530, to the appellant Philippine National Bank,
Bacolod Branch, in order to secure payment of a loan of
P2,500, plus interest, payable in yearly installments. Later
Vicente Perez, mortgagor, died intestate, survived by his
widow and children (appellees herein). At that time, there
was an outstanding balance of P1,917.00, and
corresponding interest, on the mortgage indebtedness.
Tthe widow of Perez instituted Special Proceedings for
the settlement of the estate of Vicente Perez. The widow
was appointed Administratrix and notice to creditors was
duly published. The Bank did not file a claim. The project
of partition was submitted on July 18, 1956; it was
approved and the properties distributed accordingly.
Special Proceedings No. 512 was then closed.
It appears also that, as early as March of 1947, the widow
of the late Vicente Perez inquired by letter from the Bank
the status of her husband's account; and she was informed
that there was an outstanding balance thereon of
P2,758.84 earning a daily interest of P0.4488. She was
furnished a copy of the mortgage and, on April 2, 1947, a
copy of the Tax Declaration
The Bank, pursuant to authority granted it in the mortgage
deed, caused the mortgaged properties to be
extrajudicially foreclosed. The Provincial Sheriff
accordingly sold Lot No. 286-E at auction, and it was
purchased by the Bank. In the ordinary course after the
lapse of the year of redemption, Certificate of Title No. T-
29530 in the name of Vicente Perez was cancelled, and
Certificate T-32066, dated May 11, 1962, was issued in
the name of the Bank. The widow and heirs were not
notified.
Three months later, the widow and heirs of Vicente Perez
instituted this case against the Bank in the court below,
seeking to annul the extra-judicial foreclosure sale and the
transfer of the Certificate of Title as well as to recover
damages, claiming that the Bank had acted illegally and
in bad faith. The Bank answered, denying the charges.
After trial, the court a quo, rendered judgment holding
that the Bank should have foreclosed its mortgage in
court; that the power to sell contained in the deed of
mortgage had terminated upon the death of the mortgagor,
Vicente Perez. Wherefore, the trial court declared null and
void the extra-judicial foreclosure sale to the Bank, as
well as the cancellation of the Certificate of Title of
Vicente Perez and issuance in it's stead of a new
certificate in the name of the Bank, and ordered the latter
to pay the plaintiffs P3,000 damages and P2,000
attorney's fees and cost.
ISSUE: W/N the foreclosure by the bank under power of
sale is barred upon death of the debtor
RULING
The argument that foreclosure by the Bank under its
power of sale is barred upon death of the debtor, because
agency is extinguished by the death of the principal, under
Article 1732 of the Civil Code of 1889 and Article 1919
of the Civil Code of the Philippines, neglects to take into
account that the power to foreclose is not an ordinary
agency that contemplates exclusively the representation
of the principal by the agent but is primarily an authority
conferred upon the mortgagee for the latter's own
protection. It is, in fact, an ancillary stipulation supported
by the same causaor consideration for the mortgage and
forms an essential and inseparable part of that bilateral
agreement. As can be seen in the preceding quotations
from Pasno vs. Ravina, 54 Phil. 382, both the majority
and the dissenting opinions conceded that the power to
foreclose extrajudicially survived the death of the
mortgagor, even under the law prior to the Civil Code of
the Philippines now in force.
Nevertheless, while upholding the validity of the
appellant Bank's foreclosure, We can not close our eyes
to the fact that the Bank was apprised since 1947 of the
death of its debtor, Vicente Perez, yet it failed and
neglected to give notice of the foreclosure to the latter's
widow and heirs as expressly found by the court a quo.
Such failure, in effect, prevented them from blocking the
foreclosure through seasonable payment, as well as
impeded their effectuating a seasonable redemption. In
view of these circumstances, it is our view that both
justice and equity would be served by permitting herein
appellees to redeem the foreclosed property within a
reasonable time, by paying the capital and interest of the
indebtedness up to the time of redemption, plus
foreclosure and useful expenses, less any rents and profits
obtained by the Bank from and after the same entered into
its possession.