Orient Air Services vs CA 197 SCRA 645

May 29, 1991

dismissing the complaint and holding the termination made by the plaintiff American Airlines as affecting the GSA agreement illegal and improper and order the plaintiff American Airlines to reinstate defendant as its general sales agent for passenger tranportation in the Philippines in accordance with said GSA agreement;

Padilla,J;
1. On 15 January 1977, American Airlines, Inc. an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives , entered into a General Sales Agency Agreement whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement. Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the CFI of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order averring the aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." defendant Orient Air: denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions . Further, the defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its business interests.

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plaintiff is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of payment. Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of the court a quo on their material points but with some modifications with respect to the monetary awards granted. Both appealed the decision of the CA

ISSUE #1 WON American Air can be ordered by the court to "reinstate

defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement.

HELD. NO RATIO: By affirming this ruling of the trial court, respondent appellate court, 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 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 . 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

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TC ruled in favor of ORIENT AIR

effected with the consent of the principal, which must not, in any way, be compelled by law or by any court.

The Agreement 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." -

the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily by Orient Air." SC: It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the meaning of its provisions. The various stipulations in the contract must be read together to give effect to all. After a careful examination of the records, the Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue." As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services. It is immediately observed that the precondition attached to the first type of commission does not obtain for the second type of commissions. The latter type of commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a contract with meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.

ISSUE#2 WON Orient Air is entitled to the 3% overriding commission. YES and it
must be based on TOTAL REVENUE.

HELD: YES RATIO: - paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows: 5. Commissions a) . . . b) Overriding Commission In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air Services or its sub-agents.
AMERICAN AIR: Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales This is supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks. Orient Air: contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its designation as

RE: contract of adhesion

An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the 14 obscurity. To put it differently, when several interpretations of a provision are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the party in whose favor the provision was made and who did not cause the ambiguity. Yun Kwan Byung vs PAGCOR December 11, 2009

5. Petitioner claims that in the course of the games, he was able to

accumulate gambling chips worth US$2.1 million. Petitioner presented as evidence during the trial gambling chips with a face value of US$1.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCORs employees or agents, PAGCOR refused to redeem them

6. Petitioner brought an action against PAGCOR seeking the redemption of

gambling chips valued at US$2.1 million. claims that he won the gambling chips at the Casino Filipino, playing continuously day and night. alleges that every time he would come to Manila, PAGCOR would extend to him amenities deserving of a high roller. A PAGCOR official who meets him at the airport would bring him to Casino Filipino, a casino managed and operated by PAGCOR. The card dealers were all PAGCOR employees, the gambling chips, equipment and furnitures belonged to PAGCOR, and PAGCOR enforced all the regulations dealing with the operation of foreign exchange gambling pits. Petitioner states that he was able to redeem his gambling chips with the cashier during his first few winning trips. But later on, the casino cashier refused to encash his gambling chips so he had no recourse but to deposit his gambling chips at the Grand Boulevard Hotels deposit box, every time he departed from Manila PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket player who played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR alleges that it provided ABS Corporation with distinct junket chips. ABS Corporation distributed these chips to its junket players. At the end of each playing period, the junket players would surrender the chips to ABS Corporation. Only ABS Corporation would make an accounting of these chips to PAGCORs casino treasury. As additional information for the junket players playing in the gaming room leased to ABS Corporation, PAGCOR posted a notice written in English and Korean languages which reads: NOTICE This GAMING ROOM is exclusively operated by ABS under arrangement with PAGCOR, the former is solely accountable for all PLAYING CHIPS wagered on the tables. Any financial ARRANGEMENT/TRANSACTION

1. PAGCOR is a government-owned and controlled corporation tasked to

establish and operate gambling clubs and casinos as a means to promote tourism and generate sources of revenue for the government. To achieve these objectives, PAGCOR is vested with the power to enter into contracts of every kind and for any lawful purpose that pertains to its business.

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2. Pursuant to this authority, PAGCOR launched its Foreign Highroller

Marketing Program (Program). The Program aims to invite patrons from foreign countries to play at the dollar pit of designated PAGCOR-operated casinos under specified terms and conditions and in accordance with industry practice

3. The Korean-based ABS Corporation was one of the international groups

that availed of the Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino Filipino).

4. Petitioner, a Korean national, alleges that from November 1996 to March

1997, he came to the Philippines four times to play for high stakes at the Casino Filipino.

between PLAYERS and ABS shall only be binding upon said PLAYERS and ABS

8. PAGCOR argues that petitioner is not a PAGCOR player because under

PAGCORs gaming rules, gambling chips cannot be brought outside the casino. The gambling chips must be converted to cash at the end of every gaming period as they are inventoried every shift. Under PAGCORs rules, it is impossible for PAGCOR players to accumulate two million dollars worth of gambling chips and to bring the chips out of the casino premises -

9. TC: dismissed the complaint and counterclaim. ruled that based on

PAGCORs charter PAGCOR has no authority to lease any portion of the gambling tables to a private party like ABS Corporation.

The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it.Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. - The basis for agency is representation that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally 59 executed by the principal. On the part of the principal, there must be anactual intention to appoint or an intention naturally inferable from his words or actions, while on the part of the agent, there must be an 60 intention to accept the appointment and act on it. Absent such mutual intent, there is generally no agency

10. CA affirmed. Issue#1. WON an implied agency was created

Held: NO. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCORs actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and services. Ratio: Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, 49 authority to represent another.

Issue # 2 Whether the CA erred in using intent of the contracting parties as the test for creation of agency, when such is not relevant since the instant case involves liability of the presumed principal in implied agency to a third party HELD: NO. The Court of Appeals correctly used the intent of the contracting parties in determining whether an agency by estoppel existed in this case. Ratio: 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. 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 63 detriment. Such proof is lacking in this case. In the entire duration that petitioner played in Casino Filipino, he was dealing only with ABS Corporation, and availing of the privileges extended only to players brought in by ABS Corporation. The facts that he enjoyed special treatment upon his arrival in Manila and special accommodations in Grand Boulevard Hotel, and that he was playing in special gaming rooms are all indications that petitioner cannot claim good faith that he believed he was dealing with PAGCOR. Petitioner cannot be considered as an innocent third party and he cannot claim entitlement to equitable relief as well

Issue#3 Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the agent, ABS Corporation 4. Held: NO. The trial court has declared, and we affirm, that the Junket Agreement is void. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated 64 either by the passage of time or by ratification. Article 1409 of the Civil Code provides that contracts expressly prohibited or declared void by law, such as gambling contracts, "cannot be ratified." RE: VALIDITY OF AGREEMENT: - PAGCOR has the sole and exclusive authority to operate a gambling activity. While PAGCOR is allowed under its charter to enter into operators or management contracts, PAGCOR is not allowed under the same charter to relinquish or share its franchise. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter 41 to show that it has been expressly authorized to do so. Similarly, in this case, PAGCOR, by taking only a percentage of the earnings of ABS Corporation from its foreign currency collection, allowed ABS Corporation to operate gaming tables in the dollar pit. The Junket Agreement is in direct violation of PAGCORs charter and is therefore void. Since the Junket Agreement violates PAGCORs charter, gambling between the junket player and the junket operator under such agreement is illegal and may not 42 be enforced by the courts. Article 2014 of the Civil Code, which refers to illegal gambling, states that no action can be maintained by the winner for the collection of what he has won in a game of chance. 7.

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at the cost of P23.867 million, pursuant to which the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight parcels of land, however, only five were paid for by the NHA 1 because of the report it received from the Land Geosciences Bureau of the Department of Environment and Natural Resources (DENR) that the remaining area is located at an active landslide area and therefore, not suitable for development into a housing project. On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three parcels of land. The NHA, through Resolution No. 2394, subsecguently offered the amount of P1.225 million to the landowners as daos perjuicios. On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao. After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount initially offered by NHA to petitioners as damages Court of Appeals reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The Court of Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court

Issue#1 WON petitioners can recover damages

UY vs CA September 9, 1999
1. 2. Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said lands, with an area of 31.8231 hectares,

Petitioners: -claim that they lodged the complaint not in behalf of their principals but in their own name as agents directly damaged by the termination of the contract. -The damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred asa result of such termination. These damages consist mainly of "unearned income" and advances. 4 -Petitioners, thus, attempt to distinguish the case at bar from those involving agents or apoderedos instituting actions in their own name but in behalf of their principals. Petitioners in this case purportedly brought the action for damages in their own name and in their own behalf HELD. NO. Petitioners are not parties to the contract of sale between their
principals and NHA. They are mere agents of the owners of the land subject of the

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sale. As agents, they only render some service or do something in representation or 8 on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-ininterest, either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.

Are petitioners assignees to the rights under the contract of sale? In McMicking vs. 10 Banco Espaol-Filipino, we held that the rule requiring every action to be prosecuted in the name of the real party-in-interest. - Thus, an agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. We find the following declaration 11 in Section 372 (1) of the Restatement of the Law on Agency (Second):

RATIO: - Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended in the name of the real party-in-interest. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest, within the meaning of the rule, means material interest, an interest in the issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental 6 interest. Cases construing the real party-in-interest provision can be more easily understood if it is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be prosecuted in the name of the party 7 who, by the substantive law, has the right sought to be enforced. Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the negative. - The applicable substantive law in this case is Article 1311 of the Civil Code, which states: Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by provision of law. . . . If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor upon a third person.

Sec. 372. Agent as Owner of Contract Right (1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promisee, maintain such action thereon maintain such action thereon as might a transferee having a similar interest.

-Petitioners, however, have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person. That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against respondent NHA. Section 372 (2) of the Restatement of the Law on Agency (Second) states: (2) An agent does not have such an interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach.

- As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation

pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case.

-Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless since the same would not bind the real parties-ininterest. Issue#2 WON NHA had legal basis to "rescind" the sale of the subject three parcels of land. Held: NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Ratio: Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract under Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party that 16 violates the reciprocity between them. The power to rescind, therefore, 17 is given to the injured party. Article 1191 states: The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.Art 1191 states: The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the other parties to the contract, the vendors, did not 18 commit any breach, much less a substantial breach, of their obligation. Their obligation was merely to deliver the parcels of land to the NHA, an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof. The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. Cause is the essential reason which moves the contracting parties to enter 19 into it. In other words, the cause is the immediate, direct and proximate reason which justifies the creation of an obligation through the will of the 20 contracting parties. Cause, which is the essential reason for the contract,

should be distinguished from motive, which is the particular reason of a contracting party which does not affect the other party. Ordinarily, a party's motives for entering into the contract do not affect the contract. However, when the motive predetermines the cause, the motive may be regarded as the cause. In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the motive was the cause for its being a party to the sale. Were the lands indeed unsuitable for housing as NHA claimed? We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages.

Bordador vs Luz 1. Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their regular customer. On several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother to Brigida D. Luz, received several pieces of gold and jewelry from petitioner amounting to 1 P382,816.00. These items and their prices were indicated in seventeen receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated that they were received for Brigida D. Luz. Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of his unpaid account to petitioners, including interest, reached the sum of P725,463.98. Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount. In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and ultimately, she and her husband, together with Deganos, signed a compromise agreement with petitioners.

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In that compromise agreement, Deganos obligated himself to pay petitioners, on installment basis, the balance of his account plus interest thereon. However, he failed to comply with his aforestated undertakings. On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos, Bulacan against Deganos and Brigida, D. Luz for recovery of a sum of money and damages, with an application for 4 preliminary attachment. Ernesto Luz was impleaded therein as the spouse of Brigida. Petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him therefor. Private Respondent: Deganos admitted that he had an unpaid obligation to petitioners, he claimed that the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was he alone who was involved in the transaction with the petitioners; that he neither acted as agent for nor was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items were received by him for the latter. He further claimed that he never delivered any of the items he received from petitioners to Brigida. Trial court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while Brigida D. Luz did have transactions with petitioners in the past, the items involved were already paid for and all that Brigida owed petitioners was the sum of P21,483.00 representing interest on the principal account which she had previously paid for. CA AFFIRMED

of Appeals categorically stated that, "(Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners . . . .
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It is clear, therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to the transaction subject of this case. - The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved. Petitioners' attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised. - Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. - The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation between the two respondents where no evidence supports such claim.

ISSUE: whether or not herein respondent spouses are liable to petitioners for the latter's claim for money and damages in the sum of P725,463.98, plus interests and attorney's fees, despite the fact that the evidence does not show that they signed any of the subject receipts or authorized Deganos to received the items of jewelry on their behalf. HELD. NO. RATIO: - The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. While the quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court

LITONJUA, JR. v. ETERNIT CORP. G.R. No. 144805 June 8, 2006 Quick Summary: EC engaged the services of Marquez to dispose its eight parcels of land (sites used to manufacture their roofing materials and pipe products) in 1986 when it decided to stop operations due to the political instability of the country. Marquez was able to find a buyer, the Litonjua brothers, who accepted the counteroffer price offered to them by Delsaux, head of ESAC which owns 90% of EC and conferred to Marquez by Glanville, President and General Manager of EC. Litonjua deposited US$1,000,000.00 with the Security Bank & Trust Company,
Ermita Branch, and drafted an Escrow Agreement to expedite the sale. EC backed out of the sale compelling Litonjua to file for specific performance and damages. SC ruled that there was no valid sale as the officers (Glanville and

Delsaux) acted on behalf of ESAC and not on behalf of EC, which owns the properties. EC never ratified their agreement with any board resolution. EC did not knowingly allow its officers to assume such authority. No board resolution designating them as agent. Litonjua cannot invoke good faith and doctrine of apparent authority. He should have exercised due diligence in checking for the authorization papers of Marquez, Glanville and Delsaux.
Agency by estoppel (Requisites): 1. Principal manifested a representation of the agents authority / knowingly allowed agent to assume such authority 2. Third person in Good Faith relied upon such representation 3. 3rd person has changed its position to its detriment.

RTC ruled that EC was not liable for damages since there was no valid and binding sale between the plaintiffs and said defendants. Since the authority of the agents/realtors was not in writing, the sale is void and not merely unenforceable, and as such, could not have been ratified by the principal. In any event, such ratification cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the property without a clear authorization from the corporation concerned, that is, through resolutions of the Board of Directors and stockholders. Issues: 1. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents relative to the sale of the properties of EC and could represent the company in a contract of sale of real property of EC. 2. Whether an agency by estoppel was created or whether a person acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent authority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence on record

Facts: Eternit Corporation (EC) is a corporation engaged in the manufacture of roofing materials and pipe products in the Philippines. Its manufacturing operations were conducted on eight parcels of land with a total area of 47,233 square meters. In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the country. Michael Adams, a member of ECs Board of Directors engaged the services of realtor/broker Lauro G. Marquez so that the eight parcels of land could be offered for sale to prospective buyers. Marquez offered the parcels of land and the improvements to Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to sell the properties for P27,000,000.00 and could negotiate the terms of the sale. Litonjua, along with brother, offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville (President and General Manager of EC) of the Litonjua siblings offer and relayed the same to Delsaux (Head of ESAC, which owns 90% of EC) in Belgium, but the latter did not respond. On February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation." Litonjua accepted the counter-proposal of Glanville which was conferred to them in a letter. Within 90 days as provided in their agreement, the Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale. EC backed out of the sale. They wanted to continue operations in the Philippines since by then, in 1987, Marcos had left and the political situation had already improved. Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed with the sale of the subject land. Litonjua filed for specific performance and damages.

Held: No. While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality but is a condition sine qua non to bind respondent EC. The mere fact that a corporation owns a majority of the shares of stocks of another (respondent ESAC owned 90% of the shares of stocks of respondent EC), or even all of such shares of stocks, taken alone, will not justify their being treated as one corporation. 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. It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers and to accept any counter-offer.

Petitioners likewise failed to prove that their counter-offer had been accepted by respondent EC, through Glanville and Delsaux. When specific performance is sought of a contract made with an agent, the agency must be established by clear, certain and specific proof. A corporation is a juridical person separate and distinct from its members or stockholders and is not affected by the personal rights, obligations and transactions of the latter. It may act only through its board of directors or, when authorized either by its by-laws or by its board resolution, through its officers or agents in the normal course of business. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the limitations prescribed by law and the Constitution, as follows: SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and capacity: xxxx 7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by the law and the Constitution. The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold without express authority from the board of directors. Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of sale covering such property, can be performed by the corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of directors. Absent such valid delegation/authorization, the rules is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are not binding on the corporation. While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but

without written authority from the corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority. By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them. An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. 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 attorney is necessary. Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void.

RALLOS v FELIX GO CHAN G.R. No. L-24332 January 31, 1978 Facts:
This is a case of an attorney-in-fact, Simeon Rallos, who after of the death of his principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of the went to court to have the sale declared unenforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals upheld the validity of the sale and the complaint. SC ruled for the plaintiff and held the sale as void. The general rule is

Facts: Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land. They executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the

sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title No. 12989 was issued in the name of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be declared unenforceable, and said share be reconveyed to her estate, certificate of title be reissued in their name, and for damages and attorneys fees. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. RTC declared the sale of the part of the land that belonged to Concepcion as null and void. CA upheld the validity of the sale. Issue/Held: 1. What is the legal effect of an act performed by an agent after the death of his principal? DEATH EXTINGUISHES AGENCY. 2. Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act performed after such death? YES. 3. Is the sale of the undivided share of Concepcion Rallos in the Lot valid although it was executed by the agent after the death of his principal? NO. Ratio: 1. General Rule: Death extinguishes agency. Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per 6 alium facit se. "He who acts through another acts himself". ART. 1919. Agency is extinguished. xxx xxx xxx By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied) By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the agent. Manresa: commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the juridical basis of agency which is representation, them being an integration of the personality of the principal

integration that of the agent it is not possible for the representation to continue to exist once the death of either is establish. 2. Exceptions:

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned. Article 1931 is the one applicable to the case at bar. ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. NOT APPLICABLE as the special power of attorney executed in favor of Simeon Rallos was not coupled with an interest. ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith. Under this provision, an act done by the agent after the death of his principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and unenforceable. 3. The sale is invalid as the case does not comply with first requisite. Simeon Rallos, knew of the death of his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. Yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith. Other relevant information:

Article 1931, being an exception to the general rule, is to be strictly construed, it is not to be given an interpretation or 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. 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 aver annotated on said certificate of title by the heirs of the principal and accordingly they must suffer the consequences of such omission. The agent acted fraudulently. When he transacted with vendee, he already knew the certificate of title was in the name of a dead person and without personality. If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made known to them. But if the agency is general in nature, without reference to particular person with whom the agent is to contract, it is sufficient that the principal exercise due diligence to make the revocation of the agency publicity known. In case of a general power which does not specify the persons to whom represents' on should be made, it is the general opinion that all acts, executed with third persons who contracted in good faith, Without knowledge of the revocation, are valid. In such case, the principal may exercise his right against the agent, who, knowing of the revocation, continued to assume a personality which he no longer had. The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be distinguished from revocation by operation of law such as death of the principal which obtains in this case. On page six of this Opinion 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. Although a revocation of a power of attorney to be effective must be communicated to the parties concerned, yet a revocation by operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an execution of the principal's continuing will. The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the Code provides in Article 1932 is that, if the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal

LEASE OF WORK Art. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. (1544a) NIELSON & COMPANY, INC v LEPANTO CONSOLIDATED MINING COMPANY G.R. No. L-21601 December 17, 1966 Quick Ratio:
- The management contract is a lease of service and not a contract of agency. Neilsons principal undertaking or operating the mine and mill wasnt executing juridical acts for Lepanto, to create, modify, or extinguish business relations between Lepanto and third persons. Neilson was not an agent as interpreted in the law of agency, but an only an agent only in the sense of performing material acts for an employer, for compensation. - Neilsons incidental capacity as purchasing agent of supplies and enter into contracts regarding the sale of mineral, but Neilson couldnt make any purchase or sell minerals without prior approval of Lepanto; hence, these are not considered juridical acts either, but just acting only as an intermediary.

Facts: Nielsen entered into a management contract with Lepanto before World War II broke out where Nielson managed and operated its mining company for PhP2,500 a month and 10% participation in the net profits. Prior case ruled for Nielson when it filed for damages in the view of Lepantos refusal to comply with the management contract (Nielson to be given back the control of Lepanto as their management contract was suspended when the war broke out). SC noted in this case that the lower court saw the management contract as lease of services. Lepanto, in this MR, raises for the first time this defense that it had right to not comply with the management contract as the contract was in nature an agency, and thus, as principal, they had the right to terminate at will pursuant to the provision of Article 1733 of the old Civil Code. Under the contract, Nielson had agreed, for a period of five years, with the right to renew for a like period, to explore, develop and operate the mining claims of Lepanto, and to mine, or mine and mill, such pay ore as may be found therein and to market the metallic products recovered therefrom which may prove to be marketable, as well as to render for Lepanto other services specified in the contract.

Nielson took complete charge but subject at all times to the general control of the Board of Directors of Lepanto, of the exploration and development of the mining claims, of the hiring of a sufficient and competent staff and of sufficient and capable laborers, of the prospecting and development of the mine, of the erection and operation of the mill, and of the benefication and marketing of the minerals found on the mining properties; and in carrying out said obligation Nielson should proceed diligently and in accordance with the best mining practice. In connection with its work Nielson was to submit reports, maps, plans and recommendations with respect to the operation and development of the mining properties, make recommendations and plans on the erection or enlargement of any existing mill, dispatch mining engineers and technicians to the mining properties as from time to time may reasonably be required to investigate and make recommendations without cost or expense to Lepanto. Nielson was also to "act as purchasing agent of supplies, equipment and other necessary purchases by Lepanto, provided, however, that no purchase shall be made without the prior approval of Lepanto; and provided further, that no commission shall be claimed or retained by Nielson on such purchase"; and "to submit all requisition for supplies, all constricts and arrangement with engineers, and staff and all matters requiring the expenditures of money, present or future, for prior approval by Lepanto; and also to make contracts subject to the prior approve of Lepanto for the sale and marketing of the minerals mined from said properties, when said products are in a suitable condition for marketing." Lepanto contends that the management contract in question is one of agency because: (1) Nielson was to manage and operate the mining properties and mill on behalf, and for the account, of Lepanto; and (2) Nielson was authorized to represent Lepanto in entering, on Lepanto's behalf, into contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores mined. All these, Lepanto claims, show that Nielson was, by the terms of the contract, destined to execute juridical acts not on its own behalf but on behalf of Lepanto under the control of the Board of Directors of Lepanto "at all times". Hence Lepanto claims that the contract is one of agency. Lepanto then maintains that an agency is revocable at the will of the principal (Article 1733 of the Old Civil Code), regardless of any term or period stipulated in the contract, and it was in pursuance of that right that Lepanto terminated the contract in 1945 when it took over and assumed exclusive management of the work previously entrusted to Nielson under the contract. Lepanto finally maintains that Nielson as an agent is not entitled to damages since the law gives to the principal the right to terminate the agency at will.

Issue/Held: Is the management contract between Nielson and Lepanto in the nature of an agency or a contract for lease of services? LEASE OF SERVICES.

Ratio:
This management contract is not a contract of agency as defined in Article 1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544 of the same Code. This contract cannot be unilaterally revoked by Lepanto.

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.

Ratio:
The principal and paramount undertaking of Nielson under the management contract was the operation and development of the mine and the operation of the mill. All the other undertakings mentioned in the contract are necessary or incidental to the principal undertaking these other undertakings being dependent upon the work on the development of the mine and the operation of the mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third persons. It was actually performing material acts for an employer, for compensation. While Nielson would also act as purchasing agent of supplies and enter into contracts regarding the sale of mineral, it could not make any purchase, or sell the minerals, without the prior approval of Lepanto. Thus, Nielson acted as an intermediary and not as an agent. Lepanto, as provided in their contract could also not terminate Nielson at will as Paragraph XI of the contract provides:

Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or confidence that the Officials of each company have in the other; therefore, in order to assure that such confidence and faith shall abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time upon ninety (90) days written notice, in the event that NIELSON for any reason whatsoever, except acts of God, strike and other causes beyond its control, shall cease to prosecute the operation and development of the properties herein described, in good faith and in accordance with approved mining practice. Lepanto could terminate or cancel the agreement only by giving notice of termination ninety days in advance only in the event that Nielson should prosecute in bad faith and not in accordance with approved mining practice the operation and development of the mining properties of Lepanto. Lepanto could not terminate the agreement if Nielson should cease to prosecute the operation and development of the mining properties by reason of acts of God, strike and other causes beyond the control of Nielson. It could not terminate Nielson at will. Contact does not qualify the relation between Lepanto and Nielson as that of principal and agent based on trust and confidence, such that the contractual relation may be terminated by the principal at any time that the principal loses trust and confidence in the agent. There is no showing that Nielson had ceased to prosecute the operation and development of the mines in good faith and in accordance with approved mining practice which would warrant the termination of the contract upon ninety days written notice. There was no such written notice of termination. Nielson ceased to operate and develop the mines because of the war a cause beyond the control of Nielson. Indeed, if the management contract in question was intended to create a relationship of principal and agent between Lepanto and Nielson, paragraph XI of the contract should not have been inserted because, as provided in Article 1733 of the old Civil Code, agency is essentially revocable at the will of the principal that means, with or without cause. But precisely said paragraph XI was inserted in the management contract to provide for the cause for its revocation. The provision of paragraph XI must be given effect. OTHER RELEVANT INFORMATION (the differences): Article 1709 of the Old Civil Code, defining contract of agency, provides: By the contract of agency, one person binds himself to render some service or do something for the account or at the request of another.

Article 1544, defining contract of lease of service, provides: In a lease of work or services, one of the parties binds himself to make or construct something or to render a service to the other for a price certain. In both agency and lease of services one of the parties binds himself to render some service to the other party. Agency, however, is distinguished from lease of work or services in that the basis of agency is representation, while in the lease of work or services the basis is employment. The lessor of services does not represent his employer, while the agent represents his principal. On the basis of the interpretation of Article 1709 of the old Civil Code, Article 1868 of the new Civil Code has defined the contract of agency in more explicit terms, as follows: 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. There is another obvious distinction between agency and lease of services. Agency is a preparatory contract, as agency "does not stop with the agency because the purpose is to enter into other contracts." The most characteristic feature of an agency relationship is the agent's power to bring about business relations between his principal and third persons. "The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts."
Agency Lease of services One of the parties binds himself to render some service to the other party Based on representation Based on employment Agent is destined to execute juridical acts Contemplates only (creation, modification, or material (non-juridical) extinction of relations with acts third parties) Preparatory act, purpose is Final act not a to enter into other preparatory act contracts

Issue: What is the relationship between Sevilla and TWS Principal-Agent or Employer-Employee? Sevilla vs. CA 160 SCRA 171 (1988) Held: Sarmiento, J. Agent. The court denied both TWS and Sevillas contention not employee but not a partner. The Court used the control test in first determining if Sevilla was indeed an employee of TWS and it ruled in the negative. She was not subject to control by TWS, either as to the result of the enterprise or as to the means used. First, she had bound herself to solidarily pay the monthly rental payments. A true employee cannot be made to art with his own money in pursuance of his employers business; Second, when the branch opened, it was run by Sevilla payable to TWS by any airline for any fare brought in on the effort of Mrs. Sevilla. Third, Sevilla was not in the companys payroll. She retained 4% in commissions from airline bookings, the remaining 3% going to TWS. The designation as branch manager was only for appearance purposes. Titles are weak indicators. Sevilla claimed that the agreement was a joint business venture or a partnership. A joint venture, including a partnership, presupposes generally a parity of standing between the joint co-venturers or partners, in which each has an equal proprietary interest in the capital or property contributed and where each party exercises equal rights in the conduct of the business. Considering the facts, the parties had contemplated a principalagent relationship. But unlike simple grants of power of attorney, the agency herein, which is compatible to the intent of the parties cannot be revoked by will. The reason is that it s coupled with an interest of the agent and the principal. Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Sevilla was

Facts: On Oct. 19, 1960, Tourist World Service, Inc., represented by Mr. Eliseo Canilao and Mrs. Segundina Noguera entered into a lease contract for the premises at Mabini St., Manila. In the said contract, Mrs. Lina Sevilla held herself solidarily liable with Tourist World Service for the payment of the rent. When the branch office was opened, it was run by Sevilla payable to Tourist World by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Sevilla and 3% was to be withheld by The TWS. TWS appeared to have been informed that Sevilla was also connected to a rival firm, the Philippine Travel Bureau, and since th branch was losing, TWS considered closing its office. The Board issued two resolutions abolishing the office of the manager and VP of the TWS, and authorizing the corporate secretary to receive the properties of the TWS in the branch office. The lease contract was also terminated effective Jan. 3, 1962. The corporate secretary Gabino Canilao then went to the branch office and finding the office locked, and being unable to contact Sevilla, he padlocked the premises. Sevilla then filed a case against TWS. Sevilla claims that she is not a mere employee of TWS but that their arrangement was one of joint business venture.

not a stranger in the lease contract so she could not be ousted from possession. There was malevolent design to put Sevilla in bad light in padlocking the branch office and abolishing the office of manager upon an information that Sevilla is connected with a rival company. For its unwarranted revocation of the contract of agency, TWS should pay damages under Arts. 21 and 2219 Php25,000 as moral, Php10,000 as exemplary, and Php5000 as nominal.

individual and group meetings, such as the managers unhappy with their income and wanting to become agents, and that the managers do what the management asks them to but earn less in the process. De Dios also expressed concern that Tongko and the management were not headed towards one direction in attaining corporate goals. Changes such as Tongko ordered to hire a competent assistant as well as making the SVP Kevin OConnor and the rest of the Agency Operations deal with the North Star Branch (NSB) in autonomous fashion. Subsequently, De Dios wrote Tongko another letter dated December 18, 2001, terminating Tongko's services under Section 14 of the Agents Contract effective 15 days from the letter. Tongko then filed a case for illegal dismissal with the NLRC. Manulife denied that Tongko is its employee.

Tongko vs The Manufacturers Life Insurance

G.R. No. 167622 (2010)

Velasco, J. Issue: Facts: Manulife is a domestic corporation engaged in life insurance business. Renato A. Vergel De Dios was its President and Chief Executive Officer. Gregorio V. Tongko started his professional relationship with Manulife on July 1, 1977 by virtue of a Career Agent's Agreement he executed with Manulife. Such Agreement provided that the agent is an independent contractor and nothing to be construed as granting an employer-employee relationship. In 1983, Tongko was named as a Unit Manager in Manulife's Sales Agency Organization. In 1990, he became a Branch Manager. In programs De Dios regarding Meeting. Tongkos 2001, Manulife instituted manpower development in the regional sales management level. Relative thereto, addressed a letter dated November 6, 200 to Tongko an October 18, 2001 Metro North Sales Managers In a letter, De Dios addressed several issues regarding management performance and his comments during the Whether or not there is an employer-employee relationship between Manulife and Tongko.

Held: YES. Labor Arbiter: Labor Arbiter Marita V. Padolina dismissed the complaint for lack of an employer-employee relationship. NLRC: The NLRC's First Division, while finding an employeremployee relationship between Manulife and Tongko applying the four-fold test, held Manulife liable for illegal dismissal. It further stated that Manulife exercised control over Tongko as evidenced by the letter dated November 6, 2001 of De Dios.

CA: The CA issued the assailed Decision dated March 29, 2005, finding the absence of an employer-employee relationship between the parties and deeming the NLRC with no jurisdiction over the case. The CA arrived at this conclusion while again applying the four-fold test. SC: Yes. The Court applied the Four-Fold Test in determining the employer-employee relationship between Manulife and Tongko. Line should be drawn between rules that merely serve as guidelines towards the achievement of the mutually desired result without dictating the means or methods to be employed in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the use of such means. The first, which aim only to promote the result, create no employer-employee relationship unlike the second, which address both the result and the means used to achieve it. Under the Agency Agreement, an agent of Manulife must
comply with three (3) requirements: (1) compliance with the regulations and requirements of the company; (2) maintenance of a level of knowledge of the company's products that is satisfactory to the company; and (3) compliance with a quota of new businesses. Thus, with the company regulations and requirements alone, the fact that Tongko was an employee of Manulife may already be established. More importantly, Manulife's evidence establishes the fact that Tongko was tasked to perform administrative duties that establishes his employment with Manulife. Additionally, it must be pointed out that the fact that Tongko was tasked with recruiting a certain number of agents, in addition to his other administrative functions, leads to no other conclusion that he was an employee of Manulife.

WHEREFORE, the petition is hereby GRANTED. The assailed March 29, 2005 Decision of the CA in CA-G.R. SP No. 88253 is REVERSED and SET ASIDE. Tongko was awarded (1) Full backwages, (2) Separation pay of one (1) month salary for every year of service from 1977 up to 2001 (3) Nominal damages of PhP 30,000 (4) Attorney's fees equivalent to ten percent (10%) of the aforementioned backwages and separation pay.

Shell Co. of the Philippines vs. Firemans Insurance Co. 100 SCRA 757 (1957)

Padilla, J.

Facts: A Plymouth car owned by Salvador R. Sison was brought on Sept. 3, 1947 to the Shell Gasoline Service Station at Marques de Comillas and Isaac Peral Streets in Manila for washing, greasing and spraying for the amount of Php8.00. The car was placed on the hydraulic lifter up to about 6 feet high for washing. After washing, it was greased but one part of the car cannot be reached by the greaseman, Alfonso M. Adriano, so the lifter was loosened to lower it a few feet. Unfortunately, while the lifter was being lowered, the car was swinging and it fell. The case was reported to the Manila Adjustor Company, the adjustor for the Firemens Insurance Company and the Commercial Casualty Insurance Company, the insurers of the car. The damaged car was repaired and restored to running condition for Php1651.38 and delivered to Sison, who assigned his rights to recover damages to the Insurers. Porfirio de la Fuente, the operator of the gasoline station denied negligence in the operation of the lifter and contended that the accidental fall was caused by unforeseen event. The insurers and the car owner brought an action against Shell Company and de la Fuente to recover the

Tongko was illegally dismissed. Manulife did not point out the specific
acts that Tongko was guilty of that would constitute gross and habitual neglect of duty or disobedience. Manulife merely cited Tongko's alleged "laggard performance," without substantiating such claim, and equated the same to disobedience and neglect of duty.

sum of the repair. The CA held Shell liable as it was the principal of de la Fuente and the latter being its agent.

MOISES SAN DIEGO, SR., petitioner, vs. ADELO NOMBRE and PEDRO ESCANLAR, respondents. Facts:

Issue: Is there a principal-agent relationship between Shell and de la Fuente making Shell liable?

Held: Yes. Taking into consideration that the operator owed his position to the company and that the latter could remove him from his services at will, that the service station belonged to the company and bore its tradename and the operator only sold its products; that the equipment used belonged to the company and were just loaned to the operator and the company took charge of the repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the gasoline and service station; that the price of the products sold was fixed by the company; and that the receipts signed by the operator indicated that he was a mere agent, the finding that the operator was an agent of the company and not an independent contractor must stand. The nature of the contract is not determined by the name given by the parties but the intention behind it. 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. Shell is therefore liable.

G.R. No. L-19265

May 29, 1964

- This case had its origin in Special Proceedings No. 7279 of the CFI of Negros Occidental wherein Nombre was the duly constituted judicial administrator of the intestate estate subject of such proceedings. - On May 1, 1960, Nombre, as judicial administrator, leased one of the properties of the estate (a fishpond in Kabankaban, Negros Occidental) to Pedro Escanlar for 3 years, (P3,000.00/yr.) to expire on May 1, 1963, without previous authority or approval of the Court - Nombre was removed as administrator by Order of the court and Campillanos was appointed in his stead, while Escanlar was cited for contempt, allegedly for his refusal to surrender the fishpond to Campillanos - Campillanos filed a motion asking for authority to execute a lease contract of the same fishpond, in favor of San Diego, Sr., for 5 years from 1961, at P5,000.00/yr. - Nombre presented a written opposition to the motion of Campillanos pointing out that: o the fishpond had been leased by him to Escanlar for 3 years to expire on May 1, 1963 o to grant the motion of Campillanos would in effect nullify the contract in favor of Escanlar, a person on whom the Court had no jurisdiction o the validity of the lease contract entered into by a judicial administrator, must be recognized unless so declared void in a separate action. - TC: (April 8, 1961) in effect declared the contract in favor of Escanlar null and void, for want of judicial authority and that unless he would offer the same as or better conditions than San Diego, theres no reason why the motion for authority to lease the property to San Diego should not be granted. - TC (on MR of Nombre that Escanlar is to increase the rent to P5K after the 3 yr. period) stated that the contract in favor of Escanlar was executed in BF and was fraudulent because of the imminence of Nombre's removal as administrator, one of the causes of which was his leasing of the pond with inadequate rentals. - A petition for Certiorari to annul the Orders of April 8 and 24, 1961 was filed by Nombre and Escanlar with the CA. - A Writ of preliminary injunction was likewise prayed for: o to restrain Campillanos from possessing the fishpond and from executing a new lease contract covering it; o to return the possession thereof to Escanlar, plus damages and P10K attorney's fees and costs. - Campillanos insisted on the invalidity of the lease contract; TC alleged that it did not exactly annul the lease in his orders but suggested merely that Escanlar "may file a separate ordinary action in the Court of general jurisdiction."

- CA: dismissed the petition for certiorari, and said o issue is the legality of the lease contract between Nombre and Escanlar o Even in the absence of authorization or approval by the Court, a contract of lease for more than 6 years is not entirely invalid; invalid only in so far as it exceeds the 6-year limit (Enrique v. Watson Co.). o No such limitation on the power of a judicial administrator to grant a lease of property placed under his custody is provided for in the present law. Under Article 1647 of the NCC, it is only when the lease is to be recorded in the Registry of Property that it cannot be instituted without special authority. Thus, regardless of the period of lease, there is no need of special authority unless the contract is to be recorded in the Registry of Property. As to whether the contract in favor of Escanlar is to be so recorded is not material to our inquiry. o On the contrary, Rule 85, Sec. 3, of the Rules of Court authorizes a judicial administrator to administer the estate of the deceased not disposed of by will. o Commenting on this Section, Chief Justice Moran says: "Under this provision,
the executor or administrator has the power of administering the estate of the deceased for purposes of liquidation and distribution. He may, therefore, exercise all acts of administration without special authority of the Court. For instance, he may lease the property without securing previously any permission from the court. And where the lease has formally been entered into, the court cannot, in the same proceeding, annul the same, to the prejudice of the lessee, over whose person it had no jurisdiction. The proper remedy would be a separate action by the administrator or the heirs to annul the lease.

- Lease has been considered an act of administration (Jocson v. Nava). - The Civil Code, on lease, provides:
If a lease is to be recorded in the Registry of Property, the following persons cannot constitute the same without proper authority, XXX the manager without special power. (Art. 1647).

- The same Code, on Agency, states: Special powers of attorneys are necessary:
(8) To lease any real property to another person for more than one year. (Art. 1878)

- San Diego, Sr., who was not a party in the case, intervened and moved for a reconsideration, but was denied - Only San Diego, appealed therefrom, raising legal questions, which center on "Whether a judicial administrator can validly lease property of the estate without prior judicial authority and approval", and "whether the provisions of the New Civil Code on Agency should apply to judicial administrators." Issue: WON the rule on agency (No. 8, Art. 1878) requiring special power (or authorization by the Court) to lease a property held under administration applies to a judicial administrator Held: NO - The Rules of Court provide that
An executor or administrator shall have the right to the possession of the real as well as the personal estate of the deceased so long as it is necessary for the payment of the debts and the expenses of administration, and shall administer the estate of the deceased not disposed of by his will. (Sec. 3, Rule 85, old Rules).

- San Diego: o No. 8, Art. 1878 is the limitation to the right of a judicial administrator to lease real property without prior court authority and approval, if it exceeds one year. The lease contract in favor of Escanlar being for 3 years and without such court approval and authority is, therefore, null and void. - Nombre, et al.: o there is no limitation of such right; Article 1878 does not apply in the instant case. - While it may be admitted that the duties of a judicial administrator and an agent are in some respects, identical, the provisions on agency (Art. 1878, C.C.), should not apply to a judicial administrator. - A judicial administrator: o is appointed by the Court. o not only the representative of said Court, but also the heirs and creditors of the deceased. o before entering into his duties, is required to file a bond. These circumstances are not true in case of agency. - The agent o is only answerable to his principal. o The protection which the law gives the principal, in limiting the powers and rights of an agent, stems from the fact that control by the principal can only be thru agreements, whereas the acts of a judicial administrator are subject to specific provisions of law and orders of the appointing court. - The observation of former Chief Justice Moran is indeed sound. - petitioner's legal standing to pursue this appeal is dubitable. - After the expiration of the original period of the lease contract executed by Nombre in favor of Escanlar, a new contract in favor of Escanlar, was executed on

May 1, 1963, by the Campillanos, who did not take active participation in the present appeal, the right of San Diego to the fishpond becomes a moot and academic issue, which We need not pass upon. Affirmed, in all respects, with costs against petitioner Moises San Diego, Sr. G.R. No. 113074 January 22, 1997 ALFRED HAHN, petitioner, vs. CA and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT (BMW), respondents. Facts: - Alfred Hahn is a Filipino citizen doing business under the name "Hahn-Manila," while BMW is a nonresident foreign corporation existing under the laws of the former Federal Republic of Germany. - Hahn executed in favor of BMW a "Deed of Assignment with Special Power of Attorney," which reads in full as follows: WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the Philippines, x x x; X x x the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions:
Xxx 2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR.

mentioning decline in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW dealer. Nonetheless, BMW expressed willingness to continue business relations with Hahn on the basis of a "standard BMW importer" contract, otherwise, BMW would have to terminate Hahns exclusive dealership effective June 30, 1993. Hahn protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment and that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership; that the decline in sales was due to lower prices offered for BMW cars in the US and that few customers returned for repairs and servicing because of the durability of BMW parts and the efficiency of petitioner's service. Thus, BMW withdrew on March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts, Hahn found it unacceptable. On May 14, 1993, Hahn filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership and later he included an application for TRO and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . xxx xxx xxx 5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney. . where Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the Philippines. . . . xxx xxx xxx 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and

- Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." - But in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, Hahn was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same. - Later, Hahn received confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various aspects of petitioner's business,

other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW. Xxx 15. The actuations of BMW are in breach of the assignment agreement between itself and plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff.

TC: deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in its motion did not seem to be indubitable. - Without seeking reconsideration of the order, BMW filed a petition for certiorari with CA alleging that respondent judge erred in deferring resolution of the motion to dismiss on the ground of lack of jurisdiction, and thereby failing to immediately dismiss the case - BMW asked for the immediate issuance of a TRO and, after hearing, for a writ of preliminary injunction pointing out that, unless the TCs order was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the very question was whether the court had jurisdiction over it. - CA: enjoined the TC from hearing Hahns complaint and rendered judgment finding the TC guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated: o BMWs motion to dismiss could be resolved then and there, and that the respondent judge's deferment of his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion. o CA itself resolved the motion. o CA dismissed the appeal and ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, 14. o that Hahn acted in his own name and for his own account and independently of BMW, based on Hahn's allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products other than those of BMW. o that Hahn was a mere indentor or broker and not an agent of BMW Issues: 1. 2. 3. What constitutes doing business in the Philippines WON Hahn was doing business in his own name or as agent of BMW WON BMW was doing business in the Philippines for purposes of serving summons to it

- RTC of the Quezon City issued a TRO. Summons and copies of the complaint and amended complaint were thereafter served on BMW through the DTI, pursuant to Rule 14, 14 of the Rules of Court, which in turn sent them to BMW via registered mail on June 15, 1993 and received by the latter on June 24, 1993. - On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte, with petitioner Hahn testifying. - TC issued an order granting the writ of preliminary injunction upon the filing of a bond of P100,000.00; following the posting of the required bond, a writ of preliminary injunction was issued. - BMW moved to dismiss the case, contending that: o TC did not acquire jurisdiction over it through the service of summons on the DTI, because it (BMW) was a foreign corporation and it was not doing business in the Philippines. o the execution of the Deed of Assignment was an isolated transaction; o that Hahn was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; o and that Hahn was an indentor or middleman transacting business in his own name and for his own account. - Hahn opposed the motion and argued: o that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; o that he gave warranties as exclusive BMW dealer; o that BMW officials periodically inspected standards of service rendered by him; o and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.

Held: 1. Rule 14, 14 provides:

14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in

the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines.

purchase price. Hahn performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals.. - This arrangement shows an agency. An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. - As to the service centers and showrooms: Hahn said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. BMW periodically inspected the service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership. The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. - There are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. In effect, BMW was holding Hahn accountable to it under the 1967 Agreement. - BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines. - CA also found that Hahn dealt in other products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. This finding is based entirely on allegations of BMW in its motion to dismiss filed in the 14 TC and in its petition for certiorari before the CA. But this allegation was denied 15 by Hahn and therefore the CA should not have cited it as if it were the fact. - Indeed this is not the only factual issue raised, which should have indicated to the CAs the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss. 3.YES - BMW cannot short circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it denies. - Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. - Here the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof.

- What acts are considered "doing business in the Philippines" are enumerated in 7 3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows:
d) the phrase "doing business" shall include x x x appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; x x x and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, x x x nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

- Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor "transacts business in its name and for its own account." The same rule is stated in 1(f)(1) of the IRR the Omnibus Investment Code of 1987 (E.O. 226) 2. Hahn is an agent of BMW - [If he is an agent, BMW may be considered doing business in the Philippines and the TC
acquired jurisdiction over it (BMW) by virtue of the service of summons on the DTI. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the TC did not acquire jurisdiction over it (BMW).]

- Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. - Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. - Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. - Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full

- BMW need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. - It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. - The court need not go beyond the allegations of the complaint in order to 18 determine whether it has Jurisdiction. - A determination that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding should evidence later show that it is not transacting business in the country. - TC properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. - Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss. Reversed and remanded.

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. (E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. (F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds. ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party.

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendantappellee.

FACTS
On January 24, 1911, a contract between Quiroga and J. Parsons (to whose rights and obligations the present defendant later subrogated itself) for the exclusive sale of the Quiroga beds in the Visayan islands with the following conditions:
(A) Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 % of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles. (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of 60 days from the date of their shipment. (C) The expenses for transportation and shipment shall be borne by Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Parsons. (D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.

Only 2 of the 3 causes of action constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. The plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency.

ISSUE: WON Parsons is a purchaser or an agent of Quiroga for the sale of his beds HELD: PURCHASER In the contract, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price.

These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. It must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. The return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other

conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will. The judgment appealed from is affirmed, with costs against the appellant. So ordered.
GONZALO PUYAT & SONS, INC., petitioner, vs ARCO AMUSEMENT COMPANY (Teatro Arco), respondent. FACTS Arco brought an action against the Gonzalo Puyat and Sons in the CFI of Manila to secure a reimbursement of certain amounts allegedly overpaid by it on account of the purchase price of sound reproducing equipment and machinery ordered by the petitioner from the Starr Piano Company of Richmond, Indiana, U.S.A. In the year 1929, the "Teatro Arco" ( Arco Amusement) was engaged in the business of operating cinematographs. C. S. Salmon was the president, while A. B. Coulette was the business manager. Gonzalo Puyat & Sons, Inc. was acting as exclusive agents in the Philippines for the Starr Piano Company of Richmond, Indiana, U.S. A. It would seem that this last company dealt in cinematographer equipment and machinery, and the Arco Amusement Company desiring to equipped its cinematograph with sound reproducing devices, approached Gonzalo Puyat & Sons, Inc., thru its then president and acting manager, Gil Puyat, and an employee named Santos. It was agreed between the parties that Gonzalo Puyat and Sons, on behalf of Arco, would order sound reproducing equipment from the Starr Piano Company and that the plaintiff would pay the defendant, in addition to the price of the equipment, a 10 % commission, plus all expenses, such as, freight, insurance, banking charges, cables, etc. At the expense of the plaintiff, the Gonzalo Puyat and Sons sent a cable to the Starr Piano Company, inquiring about the equipment desired and making the said company to quote its price without discount. A reply was received by Gonzalo Puyat & Sons, Inc., with the price, evidently the list price of $1,700 f.o.b. factory Richmond, Indiana. The defendant did not show the plaintiff the cable of inquiry nor the reply but merely informed the plaintiff of the price of $1,700. Being agreeable to this price, the plaintiff, by a letter, formally authorized the order. The equipment arrived about the end of the year 1929, and upon delivery of the same to the plaintiff and the presentation of necessary papers, the price of $1.700, plus the 10 per cent commission agreed upon and plus all the expenses and charges, was duly paid by the plaintiff to the defendant. A year after, another order for sound reproducing equipment was placed by the plaintiff with the defendant, on the same terms as the first order. This agreement or order was confirmed by the plaintiff by its letter Exhibit "2", without date, that is to say, that the

plaintiff would pay for the equipment the amount of $1,600, which was supposed to be the price quoted by the Starr Piano Company, plus 10 per cent commission, plus all expenses incurred. About 3 years later, in connection with a civil case in Vigan, filed by one Fidel Reyes against the defendant herein Gonzalo Puyat & Sons, Inc., the officials of the Arco Amusement Company discovered that the price quoted to them by the defendant with regard to their two orders mentioned was not the net price but rather the list price, and that the defendants had obtained a discount from the Starr Piano Company. Moreover, by reading reviews and literature on prices of machinery and cinematograph equipment, said officials of the plaintiff were convinced that the prices charged them by the defendant were much too high including the charges for out-of-pocket expense. For these reasons, they sought to obtain a reduction from the defendant or rather a reimbursement, and failing in this they brought the present action.

TC: The contract between was one of outright purchase and sale, and absolved that petitioner from the complaint. CA: The relation between petitioner and respondent was that of agent and principal, the petitioner acting as agent of the respondent in the purchase of the equipment in question, and sentenced the petitioner to pay the respondent alleged overpayments ($1,335.52 or P2,671.04), together with legal interest The appellate court further argued that even if the contract between the petitioner and the respondent was one of purchase and sale, the petitioner was guilty of fraud in concealing the true price and hence would still be liable to reimburse the respondent for the overpayments made by the latter. ISSUE: WON the contract was one of purchase and sale HELD: YES The contract is the law between the parties and should include all the things they are supposed to have been agreed upon. What does not appear on the face of the contract should be regarded merely as "dealer's" or "trader's talk", which cannot bind either party. The letters by which the respondent accepted the prices of $1,700 and $1,600, respectively, for the sound reproducing equipment subject of its contract with the petitioner, are clear in their terms and admit no other interpretation that the respondent in question at the prices indicated which are fixed and determinate. The respondent admitted in its complaint filed with the CFI of Manila that the petitioner agreed to sell to it the first sound reproducing equipment and machinery. "whatever unforseen events might have taken place unfavorable to the defendant (petitioner), such as change in prices, mistake in their quotation, loss of the goods not covered by insurance or failure of the Starr Piano Company to properly fill the orders as

per specifications, the plaintiff (respondent) might still legally hold the defendant (petitioner) to the prices fixed of $1,700 and $1,600." This is incompatible with the pretended relation of agency between the petitioner and the respondent, because in agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code). While the letters state that the petitioner was to receive 10% commission, this does not necessarily make the petitioner an agent of the respondent, as this provision is only an additional price which the respondent bound itself to pay, and which stipulation is not incompatible with the contract of purchase and sale. To hold the petitioner an agent of the respondent in the purchase of equipment and machinery from the Starr Piano Company of Richmond, Indiana, is incompatible with the admitted fact that the petitioner is the exclusive agent of the same company in the Philippines. It is out of the ordinary for one to be the agent of both the vendor and the purchaser. It follows that the petitioner as vendor is not bound to reimburse the respondent as vendee for any difference between the cost price and the sales price which represents the profit realized by the vendor out of the transaction. This is the very essence of commerce without which merchants or middleman would not exist. The respondents contends that it merely agreed to pay the cost price as distinguished from the list price, plus 10% commission and all out-of-pocket expenses incurred by the petitioner. The distinction which the respondents seeks to draw between the cost price and the list price we consider to be spacious. It is to be observed that the 25% discount granted by the Starr piano Company to the petitioner is available only to the latter as the former's exclusive agent in the Philippines. No reason is advanced by the respondent why the petitioner should waive the 25 % discount granted it by the Starr Piano Company in exchange for the 10 percent commission offered by the respondent. The petitioner was not duty bound to reveal the private arrangement it had with the Starr Piano Company relative to such discount to its prospective customers, and the respondent was not even aware of such an arrangement. The respondent, therefore, could not have offered to pay a 10 per cent commission to the petitioner provided it was given the benefit of the 25 per cent discount enjoyed by the petitioner. It is well known that local dealers acting as agents of foreign manufacturers, aside from obtaining a discount from the home office, sometimes add to the list price when they resell to local purchasers. It was apparently to guard against an exhorbitant additional price that the respondent sought to limit it to 10 per cent, and the respondent is estopped from questioning that additional price. If the respondent later on discovers itself at the short end of a bad

bargain, it alone must bear the blame, and it cannot rescind the contract, much less compel a reimbursement of the excess price, on that ground alone. The respondent could not secure equipment and machinery manufactured by the Starr Piano Company except from the petitioner alone; it willingly paid the price quoted; it received the equipment and machinery as represented; and that was the end of the matter as far as the respondent was concerned. The fact that the petitioner obtained more or less profit than the respondent calculated before entering into the contract or reducing the price agreed upon between the petitioner and the respondent. Not every concealment is fraud; and short of fraud, it were better that, within certain limits, business acumen permit of the loosening of the sleeves and of the sharpening of the intellect of men and women in the business world. The writ of certiorari should be, as it is hereby, granted. The decision of the appellate court is accordingly reversed .
[G.R. No. 117356. June 19, 2000.] VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents. QUISUMBING, J p: Old Buyer regularly bought sugar from petitioner (SELLER), issuing the latter Shipping List/Delivery Receipts (SLDRs) as proof of purchase. October 16, 1989 Subject SLDR was issued, covering 25,000 bags of sugar containing 50kg and priced at P638.00 per bag. The transaction was a direct sale, and an additional note in the SLDR said that the delivery was subject for availability of a stock at the NAWACO warehouse. October 25, 1989 Old Buyer sold to private respondent (NEW BUYER) its rights under subject SLDR for P14,750,000.00, the latter issuing a check of the same date and 3 checks postdated November 13, 1989 for payment. It also informed seller that the authority to withdraw sugar covered by the SLDR was already transferred to him, enclosing in the letter a copy of the SLDR and a letter of authority from the old buyer authorizing the new buyer to withdraw the sugar on their behalf. October 27, 1989 Old buyer issued 16 checks totaling P31,900,000.00 with the seller, the latter issuing an Official Receipt for payment of P50,000 bags covering the SLDR bought and a new SLDR. However, when the new buyer surrendered the SLDR he bought to the NAWACO warehouse, he was released only 2,000 bags and NAWACO refused further withdrawals, saying that the old buyer already withdrew the remaining 23,000 bags. March 2, 1990 New buyer sent the old buyer a letter demanding the 23,000 bags withdrawn. March 9, 1990 Seller reiterated that all sugar corresponding to the subject SLDR was already withdrawn. Moreover, the authority given by the old buyer mentioned the new buyer as his agent, withdrawing sugar for and in behalf of him. April 27, 1990 New buyer filed a complaint for specific performance against old buyer and seller, praying the delivery of 23,000 bags of sugar plus damages. P: It was unpaid for the 23,000 bags.

SLDRs were delivery receipts and not documents of title. It did not authorize the transfer of rights for another party to withdraw sugar bags. New buyer did not pay for the SLDR, and the buyers conspired to defraud seller of his sugar. He then posted a counterclaim for damages. February 13, 1991 RTC ruled for new buyer, ordering the delivery of the sugar bags due under SLDR No. 1214 and payment of damages, attorneys fees and costs of the suit, saying that: The subject SLDR have been fully paid, as evidenced by the official receipt issued when old buyer issued checks to pay the purchases. This evidence cannot stand against sellers witness bare assertions, and inability to produce evidence that the check initially issued was dishonored. CA P: Contends that its dealings with the old and new buyers are part of one general contract of sale. As an agent of the old buyer, the new buyer can only withdraw bags of sugar against cleared checks of the old buyer. Since the value of the cleared checks were only up to the extent of the released sugar, it cannot be ordered to release more sugar bags because they were still unpaid. R: The transaction including subject SLDR is separate and independent from the rest of the purchases. The payment was made in a single statement for ease of transactions. February 24, 1994 CA modified RTC judgment, reducing the deliverable bags to P12,586 (and hence reducing the attorneys fees to 10% of the value of the undelivered bags). This was subsequently modified to reinstate the RTC judgment relating to the quantity of deliverable sugar bags, ruling that: The increase of the deliverable bags was due to the reconsideration of the evidence, holding that since there was evidence to the withdrawal of only 2,000 bags pursuant to the subject SLDR, the remainder is not yet withdrawn. It rejected sellers contention that the value of the cleared checks was the already withdrawn. I: WON the new buyer is an assignee of the old buyer. WON the CA erred in not applying the law on compensation to offset credits between the buyers. WON the transaction was in the nature of a contract to sell or conditional sale. WON the CA erred in not applying the clean hands doctrine to prevent new buyer from seeking relief. H: On the first issue: This was raised only at the first time on appeal. Because of this, it will not be normally entertained because it violates the basic rules of fair play, justice and due process. However, since CA opted to address the issue, SC will now rule on it. Contract of agency defined: Art. 1868, NCC The basis of the contract is representation, which requires, for the principal, the intent to appoint the agent as his representative (and his control over it), and for the agent, the intent to accept the appointment and act on it. CA Ruling: Law does not presume agency. It is a fact to be proved, the

burden of which is dependent on those who allege it, who must prove its existence and the nature of extent of the powers granted. The old buyers letter of authority was heavily relied to show agency between the buyers. Despite the language of the letter that has an inkling of agency, the sale of the SLDR proves that there is no agency between the buyers. On the second issue: P: Since the transactions between the buyers are parts of one account, its debt has been offset by its claim for the old buyers unpaid purchases, according to Art. 1279 of the Civil Code SC: The purchase of sugar contained in the subject SLDR is a separate and independent transaction, with a separate payment. Because of this, seller is under obligation to deliver it to the buyer or his assignee. No compensation is possible because buyers are not mutual debtors and creditors of each other. On the third issue: P: The sale of sugar is a conditional sale (or a contract to sell), with title to the sugar still remaining with the vendor. SC: Judging from the terms and conditions of the SLDR, it is a contract of sale. It is therefore estopped from alleging the contrary as the contract is the law between the contracting parties. Because of this, seller is obliged to deliver the sugar to the buyer or its assignee. On the fourth issue: P: Buyers entered into a conspiracy to defraud it of its sugar, evidenced by the fact that old buyer sold the sugar below its market price; new buyer refused to pursue the case against old buyers owner; and the authority given by the old buyer to other person to withdraw against the subject SLDR after she sold her rights under it to new buyer. SC: The assertions are fully speculative and bereft of direct proof. D: Petition denied for lack of merit.