Agency (2003)
distributor.
Jo-Ann asked her close friend, Aissa, to buy some groceries for her in the
supermarket.  Was there a nominate contract entered into between Jo-Ann
and Aissa? In the affirmative, what was it? Explain.
SUGGESTED ANSWER:
Yes, there was a nominate contract.   On the assumption that
Aissa accepted the request of her close friend Jo-Ann to but some groceries
for her in the supermarket, what they entered into was a nominate contract of
Agency.
Article 1868 of the New Civil Code provides that 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.
ALTERNATIVE ANSWER:
Yes,  they  entered  into  a  nominate  contract  of  lease  to service in
the absence of a relation of principal and agent between them (Article 1644,
New Civil Code).
Agency vs. Sale (2000)
A  foreign  manufacturer  of  computers  and  a  Philippine distributor entered
into a contract whereby the distributor agreed to order 1,000 units of the
manufacturer’s computers every month and to resell them in the Philippines
at the manufacturer’s suggested prices plus 10%. All unsold units at the end
of the year shall be bought back by the manufacturer at the same price they
were ordered. The manufacturer shall hold the distributor free and harmless
from any claim for defects in the units. Is the agreement one for sale or
agency?
SUGGESTED ANSWER:
The contract is one of agency, not sale. The notion of sale is negated by the
following indicia: (1) the price is fixed by the manufacturer with the 10%
mark-up constituting the commission;  (2)  the  manufacturer  reacquires  of the sale on the same terms agreed upon with the purchaser
the  unsold units at exactly the same price; and (3) warranty for the units was
borne  by  the  manufacturer.  The  foregoing  indicia negate sale because they
indicate that ownership over the units was never intended to transfer to the
Agency; coupled with an interest (2001)
Richard sold a large parcel of land in Cebu to Leo for P100 million payable
in annual installments over a period of ten years, but title will remain with
Richard until the purchase price is fully paid. To enable Leo to pay the price,
Richard gave him a power-of-attorney authorizing him to subdivide the land,
sell the individual lots, and deliver the proceeds to Richard, to be applied to
the purchase price. Five years later, Richard revoked the power of attorney
and took over the sale of the subdivision lots himself. Is the revocation valid
or not? Why?
SUGGESTED ANSWER:
The revocation is not valid. The power of attorney given to the  buyer  is
irrevocable  because  it  is  coupled  with  an interest: the agency is the means
of fulfilling the obligation of the buyer to pay the price of the land (Article
1927, CC). In other words, a bilateral contract (contract to buy and sell the
land) is dependent on the agency.
Agency; Guarantee Commission (2004)
As  an  agent,  AL  was  given  a  guarantee  commission,  in addition to his
regular commission, after he sold 20 units of refrigerators to a customer, HT
Hotel.   The customer, however, failed to pay for the units sold.   AL’s
principal, DRBI, demanded from AL payment for the customer’s
accountability.  AL objected, on the ground that his job was only to sell and
not to collect payment for units bought by the customer.
Is AL’s objection valid?   Can DRBI collect from him or not?  Reason.
SUGGESTED ANSWER:
No, AL’s objection is not valid and DRBI can collect from AL. Since
AL accepted a guarantee commission, in addition to his regular commission,
he agreed to bear the risk of collection and to pay the principal the proceeds
(Article 1907, Civil Code)
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Agency; Real Estate Mortgage (2004)
CX executed a special power of attorney authorizing DY to secure a loan from
any bank and to mortgage his property covered by the owner’s certificate of
title.  In securing a loan from MBank, DY did not specify that he was acting
for CX in the transaction with said bank.
Is CX liable for the bank loan?  Why or why not?  Justify your answer.
SUGGESTED ANSWER:
CX is liable for the bank loan because he authorized the mortgage on his
property to secure the loan contracted by DY. If DY later defaults and fails to
pay the loan, CX is liable to pay. However, his liability is limited to the extent
of the value of the said property.
ALTERNATIVE ANSWER:
CX is not personally liable to the bank loan because it was contracted  by  DY
in  his  personal  capacity.  Only  the property of CX is liable. Hence, while CX
has authorized the mortgage on his property to secure the loan of DY, the
bank cannot sue CX to collect the loan in case DY defaults thereon. The bank
can only foreclose the property of CX.
And if the proceeds of the foreclosure are not sufficient to pay the loan in full,
the bank cannot run after CX for the deficiency.
ALTERNATIVE ANSWER:
While as a general rule the principal is not liable for the contract entered into
by his agent in case the agent acted in his own name without disclosing his
principal, such rule does not apply if the contract involves a thing belonging
to the  principal.  In  such  case,  the  principal  is  liable  under Article  1883  management over A’s properties, stating that A withholds no power from B
of  the Civil  Code.  The contract  is deemed made on his behalf (Sy-
juco v. Sy-juco, 40 Phil. 634 [1920]).
ALTERNATIVE ANSWER:
CX would not be liable for the bank loan. CX’s property would also not be
liable on the mortgage. Since DY did not specify that he was acting for CX in
the transaction with the bank, DY in effect acted in his own name. In the case
of Rural Bank of Bombon v. CA, 212 SCRA, (1992), the Supreme
Court, under the same facts, ruled that “in order to bind the principal by a
mortgage on real property executed by an agent, it must upon its face purport
to be made, signed and sealed in the name of the principal, otherwise, it will
bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he, has not acted in the name of the
principal. Neither is it ordinarily sufficient that in the mortgage the agent
describes himself as acting by virtue of a power of attorney, if in fact the
agent has acted in his own name and has set his own hand and seal to the
mortgage. There is no principle of law by which a person can become liable
on a real estate mortgage which she never executed in person or by attorney
in fact”.
Appointment of Sub-Agent (1999)
X appoints Y as his agent to sell his products in Cebu City. Can Y appoint a su
b-agent and if he does, what are the effects of such appointment?
SUGGESTED ANSWER:
Yes, the agent may appoint a substitute or sub-agent if the principal has not
prohibited him from doing so, but he shall be responsible for the acts of the
substitute:
(1)  when he was not given the power to appoint one;
(2)  when he was given such power, but without designating the person, and
the person appointed was notoriously incompetent or insolvent.
General Agency vs. Special Agency (1992)
A as principal appointed B as his agent granting him general and unlimited
and that the agent may execute such acts as he may consider appropriate.
Accordingly, B leased A’s parcel of land in Manila to C for four (4) years at
P60,000.00 per year, payable annually in advance.
B leased another parcel of land of A in Caloocan City to D without a fixed
term at P3,000.00 per month payable monthly.
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B sold to E a third parcel of land belonging to A located in Quezon City for
three (3) times the price that was listed in the inventory by A to B.
All  those  contracts  were  executed  by  B  while  A  was confined due to
illness in the Makati Medical Center. Rule on the validity and binding effect
of each of the above contracts upon A the principal. Explain your answers.
 SUGGESTED ANSWER:
The agency couched in general terms comprised only acts of administration
(Art. 1877, Civil Code). The lease contract on the Manila parcel is not valid,
not enforceable and not binding upon A. For B to lease the property to C, for
more than one (1) year, A must provide B with a special power of attorney
(Art. 1878. Civil Code).
The lease of the Caloocan City property to D is valid and binding upon A.
Since the lease is without a fixed term, it is understood to be from month to
month, since the rental is payable monthly (Art. 1687, Civil Code).
The sale of the Quezon City parcel to E is not valid and not binding upon A. B
needed a special power of attorney to validly sell the land (Arts. 1877 and
1878, Civil Code). The sale of the land at a very good price does not cure the
defect of the contract arising from lack of authority.
Powers of the Agent (1994)
Prime Realty Corporation appointed Nestor the exclusive agent in the sale of
lots of its newly developed subdivision. Prime Realty told Nestor that he
could not collect or receive payments from the buyers. Nestor was able to sell
ten lots to Jesus and to collect the down payments for said lots. He did not
turn over the collections to Prime Realty. Who shall bear the loss for Nestor’s
defalcation, Prime Realty or Jesus?
SUGGESTED ANSWER:
a) The general rule is that a person dealing with an agent must inquire into
the authority of that agent. In the present case, if Jesus did not inquire into
that authority, he is liable for the loss due to Nestor’s defalcation unless
Article 1900, Civil Code governs, in which case the developer corporation
bears the loss.
Art. 1900 Civil Code provides: “So far as third persons are concerned, an act
is deemed to have been performed within the scope of the agent’s authority, if
such act is within the terms of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.
However,  if  Jesus  made  due  inquiry  and  he  was  not informed by the
principal Prime Realty of the limits of Nestor’s authority. Prime Realty shall
bear the loss.
b) Considering that Prime Realty Corporation only “told” Nestor that he
could not receive or collect payments, it appears that the limitation does not
appear in his written authority or power of attorney. In this case, insofar as
Jesus, who  is  a  third  person  is  concerned,  Nestor’s  acts  of collecting
payments is deemed to have been performed within the scope of his authority
{Article  1900. Civil Code). Hence, the principal is liable.
However, if Jesus was aware of the limitation of Nestor’s power as an agent,
and Prime Realty Corporation does not ratify the sale contract, then Jesus
shall be liable (Article 1898. Civil Code).
Termination; Effect of Death of Agent (1997)
Stating briefly the thesis to support your answer to each of the following
cases, will the death – (c)   of an agent end an agency?
SUGGESTED ANSWER:
Yes. The death of an agent extinguishes the agency, by express provision of
par. 3, Art 1919 of the Civil Code.
From the ANSWERS TO BAR EXAMINATION QUESTIONS in
CIVIL LAW by the UP LAW COMPLEX and PHILIPPINE
ASSOCIATION OF LAW SCHOOLS.
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