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Entitlement of Agent to Commission Anchored on the Rendering of Service

The compensation that the principal agrees to pay to the agent is part of the terms of the contract of agency upon which their minds meet. Therefore, the extent and manner by which the agent would be entitled to receive compensation or commission is based on the terms of the contract. Sometimes, the terms are not that clear, and decisions have had to deal with the issue of when an agent has merited the right to receive the compensation either stipulated or implied from the terms of the contract. The doctrine that may be derived from the various decisions on the matter are anchored on the nature of the contract of agency as a species of contracts of services in general; and that consequently, an agent should be entitled to receive compensation when it has been established that it was through his efforts or service that the object of the agency was achieved.

Thus, in Inland Realty v. Court of Appeals, 273 SCRA 70 (1997), the Court held that "Although the ultimate buyer was introduced by the agent to the principal during the term of the agency, nevertheless, the lapse of the period of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale, cannot authorize compelling the principal to pay the stipulated broker's fee, since the agent was not longer entitled thereto. The Court takes into strong consideration that utter lack of evidence of the agent showing any further involvement in the negotiations between principal and buyer during that period and in the subsequent processing of the documents pertinent to said sale."

In contrast, in Manotok Bros. Inc. v. Court of Appeals, 221 SCRA 224 (1993), the Court held that although the sale of the object of the agency to sell was perfected three days after the expiration of the agency period, the agent was still be entitled to receive the commission stipulated based on the doctrine held in Prats v. Court of Appeals, 81 SCRA 360 (1978), that when the agent was the efficient procuring cause in bringing about the sale that the agent was entitled to compensation. In essence, the Court ruled that when there is a close, proximate and causal connection between the agent's efforts and labor and the principal's sale of his property, the agent is entitled to a commission.

Essential Characteristics of Agency

Nominate and Principal

Not only is the contract of agency specifically named as such under the Civil Code, it is a principal contract because it can stand on its own without need of another contract to validate it.

The real value of the contract of agency being a "nominate and principal" contract is that it has been so set apart by law and provided with its own set of rules and legal consequences, that any other arrangement that essentially falls within its terms shall be considered as an agency arrangement and shall be governed by the Law on Agency, notwithstanding any intention of the parties to the contrary. After all, a contract is what the law says it is, and not what the parties call it.

In Doles v. Angeles, 492 SCRA 607 (2006), it was held that if an act done by one person in behalf of another is in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called--it will be an agency whether the parties understood the exact nature of the relation or not.

Consensual

The contract of agency is perfected by mere consent. Under Article 1869, an agency may be expressed or implied from the act of the principal, from his silence or lack of action, or failure to repudiate the agency; agency may be oral, unless the law requires a specific form.

Under Article 1870, acceptance by the agent may also be express, or implied from his acts which carry out the agency, of from his silence or inaction according to the circumstances.

Unilateral and Primarily Onerous

Ordinarily, an agency is onerous in nature, where the agency expects compensation for his services in the form of commissions. However, Article 1875 recognizes that an agency may be supported by pure liberality, and thus would be gratuitous, but the burden of proof would be to show that the agency was constituted gratuitously.

1 | P a g e 2 o f S y l l a b u s – A g e n c y , T r u s t s , P a r t n e s h i pD e G u z m a n , M a r a n o , L e r i t

When it is gratuitous, the contract of agency is unilateral contract because it only creates an obligation on the part of the agent. But even when it is supported by a valuable consideration (i.e., compensated or onerous agency), it would still be characterized as a unilateral contract, because it is only the fulfillment of the primary obligations of the agent to render some service upon which the subordinate obligation of the principal to pay the compensation agreed upon arises.

When an agent accepts the agency position without compensation, he assumes the same responsibility to carry out the agency and therefore incurs the same liability when he fails to fulfill his obligations to the principal. Is is therefore rather strange that under Article 1909, the circumstance that the agency was for compensation or not shall be considered by the courts in determining the extent of the liability of the agent for fraud or negligence.

Preparatory and Representative

There is no doubt that agency is a species of the broad grouping of what we call the "service contracts", which includes employment contract, management contract and contract-for-a piece of work. There are also special service contracts which include the rendering of professional service (e.g., doctors and lawyers), and consultancy work. But it is the characteristic of "representation" that is the most distinguishing mark of agency when compared with other service contracts, in that the main purpose is to allow the agent to enter into contracts with third parties which would bind the principal.

A contract of agency does not exist for its own purpose; it is a preparatory contract entered into for other purpose that deal with the public. This characteristic of an agency is reflected in various provisions in the Law on Agency, and in case-law, that seek to protect the validity and enforceability of contracts entered into pursuant to the agency arrangement, even when to do so would contravene strict agency principles. In another way of putting it, an agency contract is merely a tool for a greater objective to enter into juridical relations on behalf of the principal; considerations that pertain merely to the tool, certainly cannot outweigh considerations that pertain to the main objects of the agency.

AMON TRADING V CA 477 SCRA 251

FACTS: Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City. Sometime in February 1992, Tri-Realty had difficulty in purchasing cement needed for its projects. Lines & Spaces Interior Center, represented by Eleanor Bahia Sanchez, informed Tri-Realty that it could obtain cement to its satisfaction from Amon Trading Corporation and its sister company, Juliana Marketing. On the strength of such representation, Tri-Realty proceeded to order from Sanchez 6,050 bags of cement from Amon Trading Corporation, and from Juliana Marketing, 6,000 bags at P98.00/bag.

Tri-Realty, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount of the cement. Tri-Realty likewise paid to Lines & Spaces an advance fee for the 12,050 cement bags at the rate of P7.00/bag, or a total of P84,350.00, in consideration of the facilitation of the orders and certainty of delivery.

The balance of 2,200 bags from Amon Trading Corporation and 3,000 bags from Juliana Marketing, or a total of 5,200 bags, was not delivered. Tri-Realty, thus, sent Amon Trading and Juliana Marketing written demands but in reply, they stated that they have already refunded the amount of undelivered bags of cement to Lines & Spaces per written instructions of Sanchez.

ISSUE: WON there was a contract of agency between Lines & Spaces and Tri-Realty?

HELD: There was no written contract entered into between Amon Trading and Juliana Marketing and Tri-Realty for the delivery of the bags of cement. Tri-Realty agreed with Sanchez of Lines & Spaces for the latter to source the cement needs of the former in consideration of P7.00 per bag of cement. It is worthy to note that the payment in manager’s checks was made to Sanchez and was not directly paid to Amon Trading and Juliana Marketing. While the manager’s check issued by Tri-Realty was eventually paid to Amon Trading and Juliana Marketing for the delivery of the bags of cement, there is obviously nothing from the face of said manager’s check to hint that Tri-Realty was the one making the payments. There was likewise no intimation from Sanchez that the purchase order placed by her was for Tri-Realty’s benefit. The meeting of minds, therefore, was between Tri-Realty and Sanchez. This contract is distinct and separate from


the contract of sale between Amon Trading and Juliana Marketing and Sanchez who represented herself to be from Lines & Spaces/Tri-Realty, which, per her representation, was a single account or entity.

Neither Sanchez nor Lines & Spaces was an agent for Tri-Realty, but rather a supplier for the latter’s cement needs.

Art. 1868. 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.

On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another - the principal. Indeed, the very word “agency” has come to connote control by the principal. The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.

The intention of Tri-Realty was merely for Lines & Spaces, through Eleanor Sanchez, to supply them with the needed bags of cement. Inasmuch as Amon Trading and Juliana Marketing have never directly dealt with Tri-Realty and there is no paper trail on record to guide them that the Tri-Realty, in fact, is the beneficiary, Amon Trading and Juliana Marketing had no reason to doubt the request of Sanchez later on to refund the value of the undelivered bags of cement to Lines & Spaces. Moreover, the check refund was payable to Lines & Spaces, not to Sanchez, so there was indeed no cause to suspect the scheme.

Tri-Realty was negligent. It was the one who had reposed too much trust on Sanchez for the latter to source its cement needs. Second, it failed to employ safety nets to steer clear of the rip-off. For such huge sums of money involved in this case, it is surprising that a corporation such as Tri-Realty would pay its construction materials in advance instead of in credit thus opening a window of opportunity for Sanchez or Lines & Spaces to pocket the remaining balance of the amount paid corresponding to the undelivered materials. Tri-Realty likewise paid in advance the commission of Sanchez for the materials that have yet to be delivered so it really had no means of control over her. Finally, there is no paper trail linking Tri-Realty to Amon Trading and Juliana Marketing thereby leaving the latter clueless that Tri-Realty was their true client. Tri-Realty should have, at the very least, required Amon Trading and Juliana Marketing to sign the check vouchers or to issue receipts for the advance payments so that it could have a hold on Amon Trading and Juliana Marketing. In this case, it was there representative of Lines & Spaces who signed the check vouchers.

In Victorias Milling Co., Inc. v. Court Appeals, [333 SCRA 663 (2000)], the Court decreed from Article 1868 that the basis of agency is representation," and that consequently one of the strongest feature of a true contract of agency is that of "control"--that the agent is under the control and instruction of the principal. Thus, in Victorias Milling Co., Inc. v. Court of Appeals, 333 SCRA 663 (2000), it was ruled --

It is clear from Article 1868 that the basis of agency is representation.[6] On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions; and on the part of the agent, there must be an intention to accept the appointment and act on it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency from other legal concepts is control; one person -- the agent -- agrees to act under the control or direction of another -- the principal. Indeed, the very word "agency" has come to connote control by the principal.[7] The control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category. . . .

In Eurotech Industrial TEchnologies, Inc. v. Cuizon, 521 SCRA 584 (2007), the Court held -- It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presence - qui facit per alium facit per se.


Principles Flowing from Agency Characteristics of "Prepartatory and Representative. -- The following principles flow from the application of the essential characteristics of an agency being "preparatory and representative" contract, thus:

(a) The contract entered into with third persons pertains to the principal and not to the agent; the agent is a stranger to said contract although he physically was the one who entered into it in a representative capacity;

• the agent has neither rights or obligations from the resulting contract;

• the agent has no legal standing to sue upon said contract

(b) The liabilities incurred shall pertain to the principal and not the agent;

(c) Generally, all acts that the principal can do in person, he may do through an agent, except those which under public policy are strictly personal to the person of the principal.

(d) The agent who acts as such is not personality liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. (Art. 1897)

(e) Notice to the agent should always be construed as notice binding on the principal, even when in fact the principal never became aware thereof. Air France v. Court of Appeals, 126 SCRA 448 (1983)

(f) Knowledge of the agent is equivalent to knowledge of the principal.

EXCEPT: (1) where the agent's interests are adverse to those of the principal;

(2) where the agent's duty is not to disclose the information, as where he is informed by way of confidential information; and

(3) where the person claiming the benefit of the rule colludes with the agent to defraud the principal (De Leon & De Leon, at p. 367,citing TELLER, at p.150)

Thus, in Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007), the Court held -- Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. (at p. 593)

In Philpotts v. Phil. Mfg. Co., 40 Phil 471 (1919), the Court held that the right of inspection given to a stockholder under the law can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another.

Derivative, Fiduciary and Revocable

A contract of agency creates a legal relationship of representation by the agent on behalf of the principal, where the powers of the agent is essentially derived from the principal, and consequently, it is fiduciary in nature. One of the legal consequences of the fiduciary nature of the contract of agency is that it is essentially revocable: neither the principal nor the agent can be legally made to remain in the relationship when they choose to have it terminated.


Severino v. Severino, 44 Phil. 343 (1923), held that the relations of an agent to his principal are fiduciary in character because they are based on trust and confidence, which must flow from the essential nature a contract of agency that makes the agent the representative of the principal. Consequently:

(a) As regards property forming the subject matter of the agency, the agent is estopped from asserting or acquiring a title adverse to that of the principal. (Art. 1435);

(b) In a conflict-of-interest situation, the agent cannot choose a course that favors himself to the detriment of the principal; he must choose to the best advantage of the principal. Thomas v. Pineda, 89 Phil. 312 (1951); Palma v. Cristobal, 77 Phil. 712 (1946); and

(c) The agent cannot purchase for himself the property of the principal which has been given to his management for sale or disposition (Art. 1491[2]); unless there is an express consent on the part of the principal (Cui v. Cui, 100 Phil. 913 (1957); or when the agent purchases after the agency is terminated (Valera v. Velasco, 51 Phil. 695 (1928).

SEVERINO V. SEVERINO, 44 PHIL. 343 (1923)

FACTS: Melecio Severino died on the 25th day of May, 1915; that some 428 hectares of the land were recorded in the Mortgage Law Register in his name. That during the lifetime of Melecio Severino the land was worked by the defendant, Guillermo Severino, his brother, as administrator for and on behalf of the said Melecio Severino.

After Melecio's death, the defendant Guillermo Severino continued to occupy the land; that in 1916 a parcel survey was made of the lands in the municipality of Silay, including the land here in question, and cadastral proceedings were instituted for the registration of the lands titles within the surveyed area; that in the cadastral proceedings the land here in question was described as four separate lots numbered as above stated; that Roque Hofileña, as lawyer for Guillermo Severino, filed answers in behalf of the latter in said proceedings claiming the lots mentioned as the property of his client; that no opposition was presented in the proceedings to the claims of Guillermo Severino and the court therefore decreed the title in his favor.

It may be further observed that at the time of the cadastral proceedings the plaintiff Fabiola Severino was a minor; that Guillermo Severino did not appear personally in the proceedings and did not there testify; that the only testimony in support of his claims was that of his attorney Hofileña, who swore that he knew the land and that he also knew that Guillermo Severino inherited the land from his father and that he, by himself, and through his predecessors in interest, had possessed the land for thirty years.

HELD: The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust.

A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled from acquiring for his own benefit the property committed to his custody for management.

Defendant came into possession of the land as agent of the deceased (principal), he had been continuously in charge and occupation of the land as administrator, he had always known that the land belonged to the principal. Since the property is the subject matter of agency, agent is estopped from acquiring or asserting a title adverse to that of the principal. Position analogous to that of a trustee and he cannot be allowed to create in himself an interest in opposition to that of the principal.

THOMAS V PINEDA 89 PHIL 312

FACTS: The plaintiff David Thomas, bought the bar and restaurant known as Silver Dollar Cafe located at Plaza Santa Cruz, Manila, from Dell Clark, thereafter he employed the defendant, Clark's former employee, as a bartender. In the course of time, the defendant became successively cashier and manager of the business. The outbreak of war found him holding the latter position. To prevent the business and its property from falling into enemy hands, the plaintiff being a


citizen of the United States, David Thomas made a fictitious sale of the Café to the defendant; and to clothe the sale with a semblance of reality and that after the war, the sale becomes null and void.

The building was destroyed by fire but the defendant had been able to remove some of its furniture, the cash register, the piano, the safe, and a considerable quantity of stocks to a place of safety. A cafe was opened on Bambang, under the old name of Silver Dollar Cafe. Housed in a makeshift structure, which was erected on a lot belonging to the defendant, the Bambang shop was conducted for about four months, i.e., until September of the same year, when it was transferred to the original location of the Silver Dollar Cafe at No. 15 Plaza Sta. Cruz. After the war, the plaintiff brought a certified public accountant to the establishment in Sta. Cruz for the purpose of examining the books of the business and defendant threatened the plaintiff and his companion with a gun if they persisted in their purpose.

ISSUE: WON Pineda can register the trade name “Silver Dollar Café” for the second bar as his own.

HELD: NO, the relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject matter of the agency, he is estopped from acquiring or asserting a title adverse to that of principal. His position is analogous to that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest in opposition to that of his principal or cestui que trust. A receiver, trustee, attorney, agent or any other person occupying fiduciary relations respecting property or persons utterly disabled from acquiring for his own benefit the property committed to his custody for management. This rule is entirely independent of the fact whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from any such inquiry that the rule takes so general form. The rule stands on the moral obligation to refrain from placing one's self in position which ordinarily excite conflicts between self-interest at the expense of one's integrity and duty to another, by making it possible to profit by yielding to temptation. (citing Barreto vs. Tuason, 50 Phil. 888; Severino vs. Severino, 44 Phil., 343)

CUI VS CUI

Facts: The plaintiffs brought an action against the Defendants seeking for the annulment of the Contract of Sale of several parcels of land made by Don Mariano Cui. Plaintiffs alleged that at the time of the Sale, Don Mariano Cui was already 83 years old, was sickly and infirm, and was considered incapacitated to administer his properties. This fact was further supported when Don Mariano was judicially declared incompetent on March 31, 1949.Moreover, plaintiffs alleged that one of the vendees, Antonio Cui, was Don Mariano’s attorney in fact and agent, thus, the sale in favor to him was void by virtue of Article 1459 of the Civil Code.

Issues:(1) WON the Sale of parcels of land to defendants is valid. (2) WON the Sale specifically in favor to Antonio Cui is valid.

Held: (1) YES. The Court held that although at the time of the sale he was already 83 years old, he was sickly and forgetful, as contended, yet, according to the authorities, weakness of mind alone, not caused by insanity, is not a ground for avoiding a contract, for it is still necessary to show that the person at the time of doing the act "is not capable of understanding with reasonable clearness the nature and effect of the transaction in which he is engaging". And here the evidence shows that such is not the case, for the several letters and documents signed all executed by Don Mariano many months after the execution of the deed of sale Exhibit A clearly indicate that, while he was of an advanced age, he was however still physically fit and his mind was keen and clear.

(2) YES. The prohibition of the law, as alleged by the plaintiffs, is contained in Article 1459 of the old Civil Code, but this prohibition has already been removed. Under the provisions of Article 1491, section 2, of the new Civil Code, an agent may now buy property placed in his hands for sale or administration, provided that the principal gives his consent thereto.

VALERA VS VELASCO


Facts: Plaintiff Valera executed Exhibits X and Z appointing the Defendant Velasco as attorney-in-fact with an authority to manage his property in the Philippines, consisting of the usufruct of a real property located at Echague Street, City of Manila. The defendant accepted such appointment, managed the property, reported his operations and rendered the account of his administration. Upon liquidation of accounts, it was revealed that the plaintiff owed the defendant an amount of 1,100 Php. A misunderstanding arose between them which resulted to a filing of suit against the plaintiff. Judgment was then rendered in favor of the defendant and after the writ of execution was issued, the sheriff levied upon the plaintiff's right of usufruct, sold it at public auction and adjudicated it to the defendant in payment of all of his claim.

Later, the plaintiff sold his right of redemption to one Eduardo Hernandez (pampagulo lang to eh. Hahaha). Upon recovery of the right of redemption, one Salvador Valleja, who had the execution of judgment, subsequently adjudicated the property through a public auction. Later, Valleja transferred said right of redemption to defendant Velasco. This is how the title to the right of usufruct to the aforementioned property later came to vest the said defendant.

Issue: WON an institution of a civil action by an agent against his principal is equivalent to an express renunciation of the agency.

Held: YES. The Court held that when the agent filed the complaint against his principal for recovery of a sum of money arising from the liquidation of the accounts between them in connection with the agency, the Principal (Valera) could not have understood otherwise than that the Agent (Velasco) renounced the agency; because such act was more expressive than words and could not have caused any doubt.

The disagreements between an agent and his principal with respect to the agency, and the filing of a civil action by the former against the latter for the collection of the balance in favor of the agent, resulting from a liquidation of the agency accounts, are facts showing a rupture of relations, and the complaint is equivalent to an express renunciation of the agency, and is more expressive than if the agent had merely said, "I renounce the agency."

REPUBLIC VS EVANGELISTA

Facts: Private Respondent Legaspi, the owner of a land located in Norzagaray, Bulacan, appointed his nephew Gutierez as his attorney-in-fact with a power to manage the treasure hunting activities in the land, to file any case against anyone who enters the land without the authority of Legaspi and to engage the services of a lawyer in order to carry out the agency and to dig for any treasure within the land. Legaspi further agreed to give Gutierrez 40% of the treasure that may be found in the land.

On the other hand, Petitioner Calimlim, representing the Republic of the Philippines, and as then head of the Intelligence Service of the Armed Forces of the Philippines and the Presidential Security Group, entered into a Memorandum of Agreement granting one Ciriaco Reyes a permit to hunt for treasures in the land of Legaspi. Upon knowing this, Gutierez, hired the legal services of Atty. Adaza to file a case for damages and injunction against the petitioners for illegally entering Legaspi’s land. Their contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspi’s share in whatever treasure may be found in the land.

The Trial Court granted the application for writ of preliminary injunction. The petitioners filed the instant petition alleging that the Agency between Legaspi and Gutierez has been effectively revoked solely by Legaspi.

Issue: WON a Principal may solely revoked a contract of agency which is coupled with interest.

Held: NO. Generally, a contract of agency may be revoked by the principal’s own will. However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends upon the agency. The reason for its irrevocability is because the agency becomes part of another obligation or agreement. It is not solely the rights of the principal but also that of the agent and third persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at the sole will of the principal.


In the case at bar, the agency between Legaspi and Gutierez is coupled with interest as a bilateral contract depends on it. Legaspi granted several authorities to Gutierez such as the power to manage the land, to file any case with anyone who will enter the land illegally and to engage the services of a lawyer to carry out the agency. It was likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be found in the land and as a payment for legal services, Gutierrez assigned to Atty. Adaza 30% of Legaspi’s share in whatever treasure may be recovered. It is clear that the treasure that may be found in the land is the subject matter of the agency, and both Gutierez and Atty. Adaza have an interest in such subject matter.

ORIENT AIR SERVICES v. COURT OF APPEALS

FACTS:

American Air, an air carrier offering passenger and air cargo transportation, entered into a General Sales Agency Agreement with Orient Air, authorizing the latter to act as its exclusive general sales agent for the sale of air passenger transportation. Orient air failed to remit the net proceeds of sales for several months prompting American Air to undertake the collection of the proceeds of tickets sold originally by Orient Air and terminating their agreement. American air instituted suit against Orient Air for the settlement of past outstanding funds in possession of the latter. Orient Air contended that because of the unpaid overriding commissions it retained the sales proceeds before remitting the balance to American Air. American Air contended that the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks in order for it to be entitled to the overriding commission. On the other hand, 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 because it was an exclusive General Sales Agent. CA held that Orient Air is entitled to commissions and ordered American Air to reinstate Orient Air as its General Sales Agent.

Issue:

Whether or not Orient Air is entitled to commissions.

Whether CA is correct in ordering reinstatement of Orient Air as an agent.

Held:

1. Yes. Orient Air was entitled to an overriding commission based on total flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.

2. No. CA 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 effected with the consent of the principal, which must not, in any way, be compelled by law or by any court.

Preparatory And Progressive

In Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978), the Court held that "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 alium facit per se. 'He who acts through another acts himself.'"


Kinds of Agency

a. Based on the Business or Transactions Covered

Under Article 1876, an agency is termed to be a "general agency" when it encompasses all of the business of the principal. The better term for such an agency would be a "universal agency," for the term "general agency" is one that is addressed to the general public, and not just a particular person or group of persons which whom the agent is to transact.

In Siasat v. Intermediate Appellate Court, 139 SCRA 238 (1985), the Court held that a power of attorney which provides that "This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or organization, private or government, in connection with the marketing of our products--flags and all its accessories. For your services, you will be entitled to a commission of 30%," was construed to authorize the agent to enter into contract of sale over the products covered and for which he would be entitled to receive commissions stipulated. It held that "[a] general agent usually has authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business which he is authorized to transact."

On the other hand, Article 1876 defines a "special agency" when it covers only one or more specific transactions. The better term for such an agency is "particular agency;" for indeed, the term "special agency" has been used in decisions of the Supreme Court to refer to one which is addressed to a particular person or group of persons with whom the agent is to transact.

The classifications under Article 1876 are more academic than practical, since outside of guardianship proceedings, hardly anybody in the modern world empowers an agent to cover every business aspect owned by the principal. Beside such a classification is not really useful because a "general or universal agency" can by law only cover general powers of attorney covering merely acts of administration; and cannot, without express or detailed description, cover special powers of attorney, covering particular acts of strict ownership. Therefore, a general agency is better achieved by other contractual forms such as a contract of employment, or a universal partnership.

Siasat v. IAC

Facts:

Nacianceno was able to convince the Department of Education and Culture to purchase without bidding Philippine Flags. When she followed-up the Department of Budget regarding such purchase, the latter informed her that purchase order cannot be released until a formal offer to deliver the flags is given. Due this, she contacted Siasat, the owner of the United Flag Ind. The latter then issued a document authorizing Nacianceno to deal with any entity regarding the marketing of the products of the UFI. They also agreed that Nacianceno shall be entitled to a commission of 30%. The purchase order was then released in favor of UFI. After the first delivery was made, UFI gave Nacianceno her commission amounting to 5% of the amount purchased. UFI then revoked the authorization given to Nacianceno. After such revocation, another delivery was made by UFI to the DEC. Because of this, Nacianceno demanded that her full 30% from the first delivery be given as well as her commission for the second delivery. UFI then contended, among others, that she has no right over the commission since the agency contract is special in character (as it is limited to the marketing of the UFI products only).

Issue: WON the agency contract authorizing of Nacianceno is special in character.

Held:

No. A special agent is one authorized to do some particular act or to act upon some particular occasion while a general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series.

In this case, it is clear from the document that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization.


Documents

Page-2-syl-ATP