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AGENCY | ATTY. OBIETA | 2D 2012

IMPERIAL | DE LUZURIAGA | HIPOLITO 1

(1) BPI V. DE COSTER

FACTS: Defendant Gabriela Andrea de Coster y Roxas executed a Special Power of Attorney in favor of her husband. This authority gave Jean M. Poizat (agent-husband) the power to loan and borrow money in her behalf. The agent was able to obtain a loan from BPI, secured by a chattel mortgage on the steamers of his company, Poizat Vegetable Oil Mills and a real mortgage over a property, which is also subject to another mortgage in favor of La Orden de Dominicos. Defendants defaulted on their obligations to BPI and La Orden de Dominicos. Thus, both creditors prayed for the forclosure of the mortgaged properties. RTC declared the defendants in default for their failure to appear and ruled in favor of he plaintiffs. De Coster alleges that she never had any knowledge of the actual facts until she read about her default in the newspapers, since she was not in the Philippines when the summons were served; that her husband fled the country; that the mortgages executed by her agent-husband was without marital consent; and that he did not have any authority to make her liable as surety on the debt of a third person—it being a personal debt of her husband and his company. ISSUE: W/N the principal-wife, Gabriela De Coster y Roxas, is liable for the mortgage executed by her agent-husband, Jean Poizat HELD: NO. The note and mortgage show upon their face that at the time they were executed, the agent-husband was attorney-in-fact for the defendant wife, and the bank knew or should have known the nature and extent of his authority and the limitations upon his power. Par. 5 of the Power of Attorney authorizes the agent-husband for and in the name of his wife to “loan or borrow any sums of money or fungible things, etc.” This is taken to mean that he only had the power to loan his wife’s money and to borrow money for or on account of his wife as her agent and attorney-in-fact. It does not carry with it or imply that he had the legal right to make his wife liable as a surety for the preexisting debt of a third person. It is fundamental rule of construction that where in an instrument powers and duties are specified and defined, that all of such powers and duties are limited and confined to those which are specified and defined, and that all other powers and duties are excluded. The fact that the agent-husband failed and neglected to perform his duties and to represent the interests of his principal is NOT a bar to the principal obtaining legal relief for the negligence of her agent. It is apparent from the face of the instrument that the whole purpose and intent of the power of attorney was to empower and authorize the agent-husband to look after and protect the interests of the wife and for her

and in her name to transact any and all of her business. But nowhere does it provide or authorize him to make her liable as a surety for the payment of the preexisting debt of a third person. Thus, the agent-husband does not have the authority to sign the note and to execute the mortgage for and on behalf of the wife as her act and deed, and that as to her the note is void for want of power of her husband to execute it. (2) TAN TIONG TECK V. LA COMISION DE VALORES Y BOLSAS, y CUA OH & COMPANY.

El caso es en español. No puedo entender. The case is in Spanish. I cannot understand.

(3) VICENTE SY-JUCO AND CIPRIANA VIARDO V. SANTIAGO V. SY-JUCO

FACTS: In 1902, defendant-son was appointed by the plaintiffs-parents as administrator of their property and acted as such until 1916, when his authority was cancelled. Plaintiffs-parents allege that during his administration, the defendant-son acquired the property claimed in the complaint in his capacity as plaintiff’s administrator with their money and for their benefit. RTC ruled in favor of plaintiffs-parents and ordered the return of the launch Malabon, casco, 1 and automobile. However, the RTC also absolved the defendant-son from returning casco 2, house occupied by the defendant, typewriting machine, price of the piano, and a rendition of accounts of his administration of the property. ISSUE: W/N RTC’s decision is correct (both parties alleged that RTC erred in deciding whatever is unfavorable to them) HELD: YES.

(1) Launch Malabon belongs to the plaintiffs-parents. Although it is defendant-son who bought the property, he nonetheless bought it on behalf of the plaintiffs-parents. However, the question is not in whose favor the document of sale of the launch is executed nor in whose name it was registered, but with whose money was used to buy said launch. It was proved that what was used was the plaintiffs-parents’ money because immediately after the sale, the launch had to be repaired at their expense. If the launch was not bought for the plaintiffs-parents and with their money, it is not explained why they had to pay for its repairs. By the agency between the plaintiffs-parents and defendant-son, the former clothed the latter with their representation in order to purchase the launch.

A power of attorney “to loan and borrow money” and to mortgage the principal’s property does NOT carry with it or imply that the agent has a legal right to make the principal liable for the personal debts of the agent.

By virtue of the agency, agent is bound to transfer to principal all the rights which he received from the vendor, and principal have the right to be subrogated in all the effects of the sale.



However, the defendant-son acted without this representation and bought the launch in his own name violating the agency. Moreover, Art. 1717 of Civil Code states that when an agent acts in his own name, the principal shall have no right of action against the person in whom the agent has contracted, except for cases involving things belonging to the principal. Defendant-son’s apparent representation yields to the principal’s true representation and that, in reality and in effect, the contract must be considered as entered into between the plaintiffs-parents and the seller; and consequently, if the obligations belong to the plaintiffs-parents, to them alone must also belong the rights arising from the contract. The money with which the launch was bought having come from the plaintiffs-parents, the exception is deemed applicable.

(2) Casco 1 belongs to the plaintiffs-parents. It is admitted that the plaintiff-father himself constructed it in his shipyard. Defendant-son’s allegation that it was constructed at his instance and with his money is not supported by evidence. Moreover, when the casco was constructed, he did not have enough money to pay the expense of the construction.

(3) Automobile belongs to the plaintiffs-parents. There was sufficient evidence to show that the price for the purchase of the car was paid with plaintiffs-parents’ money.

(4) Casco 2 was leased and sunk when in the possession of the lessee. Upon the examination of the evidence, it was found out that the plaintiffs-parents validly sold casco 2 to defendant-son and that there was no deceit that accompanied such sale. Thus, being the owner of casco 2, defendant-son is entitled to damages and interest from the lessee.

(5) Wood, windows and doors of the house occupied by the defendant-son belong to the defendant-son since these were given to him by the plaintiffs-parents.

(6) Rendition of accounts is not necessary to be made by the defendant-son because evidence showed that defendant-son used to render accounts of his agency after each transaction to the plaintiffs-parents’ satisfaction.

(4) FELISA NEPOMUCENO AND MARCIANA CANON V. GENARO HEREDIA

FACTS: As the business adviser of plaintiff Canon, defendant had in his possession for administration P1,500 (property of Marciana Canon). Felisa Nepo, on the other hand, had an unsecured debt due her for P500 from Marcelo Leano. To secure this debt, the latter proposed to give her a deed of conditional sale to a certain tract of land with buildings and improvements thereon, in consideration of P2000. The P500 debt is to be credited in Nepo’s favor and that she advance the balance of P1500. Knowing that defendant had P1500 of Canon,

Nepo proposed to Canon that they make a joint investment in the land. Plaintiffs alleged that defendant took the deed to the land in his own name without their knowledge or consent; that defendant undertook to extend the repurchase period without their express authority. ISSUES: W/N defendant-agent acted without authority and consent from plaintiffs-principal in the purchase of the land HELD: NO. It was clearly established at the trial that the defendant was acting merely as the agent for the plaintiffs throughout the entire transaction; that the purchase of the land was made not only with their full knowledge and consent, but at their suggestion; and that after the purchase had been effected, the plaintiffs-principal, with full knowledge of the facts, approved and ratified the actions of the defendant-agent in the premises. There is nothing in the record, which would indicate that defendant-agent failed to exercise reasonable care and diligence in the performance of his duty as such agent, or that he undertook to guarantee the vendor’s title to the land purchased by direction of plaintiffs-principal. (5) HODGES V. SALAS AND SALAS

FACTS: In 1923, defendants executed a power of attorney in favor of their brother-in-law, Felix Yulo, to enable him to obtain a loan and secure it with a mortgage on real property. Acting under said power of attorney, Yulo obtained a loan of P28,000 from Hodges, binding his principals jointly and severally to pay it within 10 years with 12% interest p.a. This loan is secured with a mortgage over a real property. However, the P28,000 loan was not delivered to agent Yulo. Instead, an agreement between him and Hodges indicate that the P28,000 loan was applied to pay his personal debts to Hodges, amounting to P10,188.29. Defendants failed to pay the interests at maturity, which should have been paid one year in advance. Hodges, now seeks to have the property subject of mortgage foreclosed. ISSUE: W/N agent Yulo was authorized to borrow money and invest it as he wished, without being obliged to apply it necessarily for the benefit of the principals, by virtue of the authority conferred by the defendants HELD: NO. The terms of the power of attorney are limited. The agent was thereby authorized only to

Agent cannot be held liable for hidden defects in the title to the land purchased.

With respect to a power of attorney of a special character, it cannot be interpreted as authorizing the agent to use the money as he pleased, particularly when it does not appear that such was the intention of the principals. The agent is obliged to turn over the money to the principals, or at least, place it at their disposal.



borrow any amount of money, which he deemed necessary. There is nothing, however, to indicate that the defendants had authorized him to convert the money obtained by him to his personal use. With respect to a power of attorney of a special character, it cannot be interpreted as authorizing the agent to use the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying such funds to pay his personal obligations, he exceeded his authority. Moreover, there is nothing in the document, which implied that the defendants ratified or approved the agent’s acts, contrary to what the Hodges contended. As to the payment of the loan, the Court ordered that defendants pay Hodges the balance of P17,811.71, since P10,188.29 was applied by agent Yulo to the payment of his personal debt to Hodges. As to the interest, since defendants already paid to Hodges a total of P18,138.77, which includes a usurious interest, they are still indebted to pay P4,321.79 (defendants have to pay P22, 460.56 interest—12% p.a. from 1926 to 1936—less P3,000 attorney’s fees). (6) DEL ROSARIO AND COSTA V. LA BADENIA

FACTS: − Spouses Del Rosario and Costa seek to recover from

La Badenia (Tobacco Co.) P1,795.25 for services rendered and expenses incurred in the sale of its products in Legaspi, Albay.

− Celestino Aragon is the general agent of La Badenia and is the one in charge of their campaign in Southern Luzon. He established a central distributing agency or depot in Legaspi at the residence of Del Rosario (using the lower portion of their house a the storage facility).

− Their relationship extended from Feb. 1, 1911- March 24, 1912. All goods sent to Legaspi were charged by the head office (which was in Manila) against the general agent Aragon. The books kept by Aragon showed that the products were then charged against the plaintiffs. The business at Legaspi appears to have been that of a distributing agency actively in charge of the plaintiffs under the supervision of the general agent.

− March 24, 1912: Aragon had a settlement with the plaintiffs and acknowledged over his signature that these books (his record books of the business) showed a balance in favpr of the plaintiffs amounting to P1,795.25.

− La Badenia refused to pay Del Rosario/ Costa the amount stating that they were merely merchants who purchased the goods at fixed wholesale prices

and sold them on their own account and were never employed as agents.

− Spouses countered by stating that they were in fact agents who received commissions on the sales and that they were authoirzed to extend a reasonable credit under the supervision of the general agent Aragon.

− Lower Court: Opinion was that the specific goods sold to delinquent debtors whose unpaid accounts form basis of this litigation had already been paid for by the plaintiffs and that this was conclusive evidence that the plaintiffs were not acting as agents and that in effect the purpose of the suit was to recover money already paid for the goods purchased and sold by the plainitiffs.

ISSUE: W/N Del Rosario and Costa are agents of La Badenia and are entitiled to the balance of P1,795.25 HELD: YES − The SC cannot agree with the findings of the lower

court. First, It is undisputed that Aragon was the duly appointed general agent of the area. It is not clear what the precise terms of the arrangement made by Aragon with the plainitiffs were. The record does not show what limitations, if any, were placed upon his powers to act for the corporation. Secondly, The head office in Manila was fully informed of plaintiffs relation with the general agent in extending the sales of its productsnd they did not seem to make any distinction between the business done by Aragon or the plaintiffs- evidenced by 2 letters (Exhibit A and B) from La Badenia addressed to the plaintiffs clearly recognizing them as agents of the company (Exhibit B states: “By the steamer Cebu we are sending, according to the attached invoice, 3 boxes of small cigars for the agency in your charge.”). Thirdly, looking at the books of Aragon shows that the plainitiffs were given credit on various items, such as advertising expenses.

− In view of the fact that plainitiffs are only seeking to enforce the payment of a balance admitted by the general agent of the defendant corporation to be rightly due them, SC fails to see how it can be reasonably urged that plainitiffs are attempting to saddle these unpaid claims on the defendant corporation.

− Therefore, judgment reversed. Plainitiffs win. (7) MUNICIPAL COUNCIL OF ILOILO V. EVANGELISTA

The Principal is liable upon sub-agency contracts entered into by the general agent in the name of the principal, when it appears that the general agent was clothed with such broad powers as to justify the inference that he was authorized to execute contracts of this kind, and it not appearing from the record what limitations, if any, were placed upon his powers to act for his principal.

An agent or atty.-in-fact empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's fees for services rendered in the interest of said principal, and may satisfy them by assignment of a judgment rendered in favor of said principal.



FACTS: − Tan Toco sought to recover from the Municipality of

Iloilo the value of a strip of land belonging to her which was taken by the municipality to widen a public street. Tan Toco was able to recover P42, 966.40.

− After the judgement had become final, several parties appeared to claim their respective shares: Atty. Evangelista in his own behalf and as administratrix of Jose Ma. Arroyo's intestate estate filed a claim for professional services; PNB asked that the amoun be deposited to it because the land was mortgaged to it; Antero Soriano claimed the amount as assigned to him and which he subsequently assigned to Mauricio Cruz & Co.

− Court after hearing the adverse claims ordered: Atty's lien in the amount of 15% of the judgment be recorded in favor of Atty. Evangelista; directed the Minicipality of Iloilo to file an action for interpleading against PNB, Antero Soriano, Mauricio Cruz & Co., Jose Evangelista, Jose Arroyo.

− Municipal Treasurer of Iloilo paid Antero Soriano P6,000 as part payment (assigned to him by Tan Boon Tiong- Tan Toco's Atty.); deposited P6,000 with CFI who then paid it to Atty. Evangelista (who then waived the remaining P444.69); the remaining amount (P30,966.40) was adjudicated to Mauricio Cruz & Co.

− The appeal is confined to the claim of Mauricio Cruz & Co. (as assignee of the rights of the late Atty. Antero Soriano) for services rendered by him to Tan Toco and her coheirs (in connection with other cases).

− Tan Toco contends that: 1. Atty. Soriano has already been paid for his professional services. However, this was rebutted by the court by invalidating the evidence she presented (receipts) and by the fact that she still wired money to Atty. Soriano at a later date. 2. that Art. 1459 prohibits certain persons (lawyers included) from acquiring property in litigation which they may take part in by virtue of their profession. However, Antero Soriano was Tan Toco's counsel for other cases not connected with the property in question. Therefore, there was no client-atty. relationship between them for this particular case.

ISSUE: W/N it was legal for Tan Boon Tiong as atty- in- fact of Tan Toco to assign to Atty. Soriano all the credits, rights, and interest belonging to Tan Toco by virtue of the judgment rendered for her in her case v. Municipality of Iloilo. HELD: YES − It was legal for Tan Boon Tiong to do so. He is

authoirzed to employ and contract the services of lawyers upon such condition as he may deem convenient, to take charge of any actions necessary or expedient for the interest of his principal, and to defend suits against her. This power necessarily implies the authority to pay for professional services thus engaged.

(8) LYONS V. ROSENSTOCK

FACTS: − Lyons is bringing this action against Rosenstock (as

executor of the estate of Elser-deceased) to recover 446 2/3 shares of stock of J.K. Pickering and Co. Ltd together with the sum of about P125,000 representing dividends accrued with laeful interest.

− Elser was a resident of Manila enggaged in buying and selling Real Estate. Lyons (who was a Methodist Episcopalian Missionary) and Elser bought a piece of property in Carriedo St., Manila. Lyons then went to the states and was gone for nearly a year and a half.

− Before Lyons went away, he executed a general power of atty in favor of Elser to manage and dispose of property as he saw fit (they co-owned 3 properties originally. What was left was the Carriedo property).

− Meanwhile, Elser wanted to bay a 1,500,000 sq.m land in Manila (San Juan Estate) for P570,000. To obtain necessary amount, he loaned from Uy Siuliong (loan was secured through Uy Cho Yee) and in order to get the money it was necessary for Elser to give a personal note signed by himself (and his 2 other associates) and by Fidelity and Surety Co. (Fidelity)-who in turn had him mortgage the Carriedo property as security (Elser did this with the presumption that Lyons would eventually join him in the San Juan venture).

− With this loan together with his own money, he purchased the San Juan property and built a limited partnership- J.K. Pickering & Co. He was the primary capitalist with 3,290 shares.

− Elser wrote Lyons inviting him to join but Lyons replied that he did not think he would be able to (1. He was not sure that he would still go back to Manila, 2. His religious congregation did not approve of his independent investments).

− Upon buying the San Juna property, Elser discovered that he owed Lyons P11,669.72 as accrued earnings from varied investments they had. As payment, he issued to Lyons 200 shares (which Lyons sold for his benefit) of Pickering which amounted to P8,000 more than what he owed Lyons. Also, after realizing that Lyons would not be joining him in the San Juan venture, he replaced the mortgage of the Carriedo property with 2 other properties he owned so as not to burden Lyons.

− Before the Carriedo mortgage was replaced, Lyons then arrived back in Manila and eventually told Elser to let the Carriedo mortgage remain (as testified to by Mrs. Elser).

− Upon the death of Elser, Lyons is bringing this action under the presumption that since part of the money used to obtain the San Juan property was a loan granted upon the mortgage of the Carriedo property of which he co-owns with Elser- he is entitled to a part (shares) of Pickering.

No partnerhip is formed when it is contrary to the express determination of one of the parties. 8



ISSUE: W/N Lyons is a limited partner of Pickering by virtue of the Carriedo property, which was used as security for the loan. HELD: − The contention of Lyons is untenable. − The mortgage of the Carriedo property was

specifically allowed by Lyons. The risk he might have been exposed to is negligible considering that the shares issued to Lyons was greater than what Elser owed him.

− Elser actually used only his own money to purchase the San Juan property and no danger ever came to the investment of Lyons.

− What cannot be denied is that Elser and Lyons were coparticipants in various real estate ventures in the past. However, in the case of the San Juan Estate venture- no partnership between Lyons and Elser existed and the law cannot be distorted into a proposition which would make Lyons a participant in this deal contrary to his express determination.

(9) NFA V. IAC

FACTS: − Gil Medalla (acting as commission agent for Superior

Shipping Corporation) entered into a contract for hire of ship known as “MV Sea Runner” with National Grains Authority (NGA).

− Medalla obligated to transport on the MV Sea Runner 8,550 sacks of rice belonging to NGA from San Jose, Occidental Mindoro to Malabon, Metro Manila.

− Upon completion of the delivery of rice, Superior Shipping Corp. (SSC) wrote NGA (on Oct. 17,1979) requesting that it be allowed to collect the amount written on its Statement of Account (Freightage+Demurrage+Stevedoring) amounting to P93,538.70.- [Demurrage: Amount of money the charterer will have to pay the shipowner for its extra time/use of the vessel; Stevedore: man who loads ships]

− November 15, 79: SSC wrote NGA again specifically saying that payment should be made to them (SSC) and not to Medalla because it is SSC who owns MV Sea Runner.

− NGA replied that it could not grant its request since SSC did not disclose that Medalla was acting as a mere agent of the company and that (on Nov. 19,79) they already paid Medalla P25, 974.90 for the service rendered.

− Dec. 4, 1979: SSC wrote Medalla demanding the sum amounting to P27,000.xx. Medalla ignored this

demand. − SSC filed this complaint against NGA. − Judgment rendered in favor of SSC. IAC affirmed the

decision. Hence, this petition. − NFA claims it is not liable since it had no knowledge

of the fact of agency between SSC and Medalla. It claims that an undisclosed principal cannot maintain an action upon a contract made by his agent unless such principal was disclosed in such contract.

ISSUE: W/N the instant case falls within the exception of the general rule provided in A.1883 of the Civil Code.

A1883: If an agent acts in his own name, the principal has no right of action against the person with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provision of this article shall be understood to be without prejudice to the actions between the principal and agent HELD: NO. NFA's contention incorrect. − The agent's authority acting in his own name must

yield to the principal's true representation (since what is involved is a thing belonging to the principal). In reality and in effect, the contract must be considered as entered into between the principal and the 3rd person . If the principal can be obliged to perform his duties under the contract, he can also demand the enforcement of his rights.

− Therefore SSC wins. Petition denied and TC/IAC decision upheld.

(10) PNB V. MANILA SURETY & FIDELITY CO., INC.

FACTS: Adams & Taguba Corporation (ATACO) constituted PNB as its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the amount to pay for the asphalt delivered to it under a trust receipt guaranteed by Manila Surety. ATACO delivered to BPW asphalt worth P431,466.52. Of this amount, PNB was able to regularly collect a total of P106,382.01. However, due to unexplained reasons, PNB was not able to collect until the investigators found out that more money were payable to ATACO from BPW. The latter allowed another creditor to collect funds due to ATACO under the same purchase order, to a total of P311,230.41.

An agent is required to act with the care of a good father of a family and becomes liable for the damages, which the principal may suffer through his non-performance.

A bank is answerable for negligence in failing to collect the sums due its debtor from the latter’s own debtor, contrary to said bank’s duty as holder of an exclusive and irrevocable power of attorney to make such collections.

The general rule under A1883 is that an agent who acts in his own name is a bar against the right of action of the principal against the person to whom the agent has contracted with. In this case, the agent is the one primarily bound. Exception: When the contract invloves things belonging to the principal.



Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18, plus interests and damages. CA ruled that PNB was negligent in having stopped collecting from BPW before ATACO’s debt is fully collected, thereby allowing funds to be taken by other creditors to the prejudice of the surety. PNB asserts that the power of attorney executed in it is favor from ATACO was merely an additional security; that it was the duty of the surety to see to it that the obligor fulfills his obligation; and that PNB has no obligation to the surety to collect any sum from ATACO. ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting sums due to it HELD: YES. The CA did not hold PNB responsible for its negligence in failing to collect from ATACO for its debt to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO FROM BPW. An agent is required to act with the care and diligence of a good father of a family and becomes liable for the damages, which the principal may suffer through its non-performance. PNB’s power to collect was expressly made irrevocable so that BPW could very well refuse to make payments to ATACO itself, and reject any demands by the surety. (11) US V. KIENE

FACTS: Defendant Kiene was an insurance agent. As such agent there was paid over to him for the account of his employers, China Mutual Life Insurance Company (CMLIC), the sum of P1,539.20 which he failed to turn over to them. He was convicted of the crime of Estafa in the CFI of Manila and sentenced to be imprisoned for 1 year and 6 mos in Bilibid and to pay the costs of trial. On appeal, defendant alleges the failure of the prosecution to establish the existence of a duty or obligation imposed on defendant to turn over to his principal the funds which he is charged for appropriating to his own use. His counsel contends that the trial court erroneously admitted in evidence a certain document purporting to be a contract of agency signed by defendant. The name of the accused is attached to this document, and one of the witnesses, the district agent of the CMLIC, stated that it was indeed the contract but failed to state specifically that the signature attached thereto was the signature of defendant. It is contended that that the trial court failed to establish the execution of such document and that it erred in taking into consideration one of its provisions whereby the defendant appears to have expressly obligated himself to deliver to CMLIC the funds collected on its account. ISSUE: W/N the document purporting to be the contract of agency should have been admitted as evidence?

HELD: The SC held that it is not necessary to review the action of the court in admitting the evidence because the obligation of the defendant (agent) to deliver the funds in question to his employers is determined by the provision of Art. 1720 of the CC: “Every agent is bound to give an account of his transactions and pay to the principal all that he may have received by virtue of the agency, even though what was received is not owed to the principal.” The existence of agency and the collection of funds on account of the principal having been established, the obligation to deliver these funds to the principal must be held to have been imposed upon the agent by virtue of the contract of agency. (12) SEVERINO V. SEVERINO

FACTS: Plaintiff Fabiola Severino, the daughter and sole heir of Melecio Severino, is praying for the court to compel defendant Guillermo Severino, Melecio’s brother to convey the four parcels of land in question to her favor. Melecio Severino died in 1915. Some 428 hectares of land were recorded in the Mortgage Law Register in his name. During his lifetime, the land was worked by the defendant, Guillermo as administrator for and on behalf of Melecio. In 1916, cadastral proceedings were instituted for the registration of land titles. The land was described as 4 separate lots. Roque Hofilena, as lawyer for Guillermo, filed answers in behalf of the latter, claiming the lot in question as the property of his client. No opposition was presented and the court therefore decreed the title in Guillermo’s favor. It should be noted that during the cadastral proceeding, plaintiff Fabiola was only a minor and that Guillermo did not appear personally in the proceedings and the only testimony in support of his claim was that of Hofilena’s sworn statement that the former inherited the land from his father and that he has possessed the land for 30 years. ISSUE: W/N defendant Guillermo is an agent of Melecio and was guilty of fraud in procuring title to the lands in question thereby compelling him to convey the lands in favor of Fabiola as the sole heir. HELD: Conveyance of the land to Fabiola is proper. Guillermo alleges that one year having passed since the entry of the final decree adjudicating the land to his name, said decree cannot now be opened. The SC said that this is not an action to set aside the decree under the Land Registration Act but is an action in personam against an agent to compel him to return, or retransfer, to the heirs or the estate of its principal, the property commited to his custody as such agent, to

Agent has the obligation to deliver to his principal all funds collected on his account.

The relations of an agent and his principal are fiduciary and in regard to his property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal.



execute the necessary documents of conveyance to effect such retransfer or, in default thereof, to pay damages. It cannot be disputed that Guillermo came into the possession if the property as only the agent of the deceased. In his testimonies in a similar case involving the same land, he testified that he was the administrator of the land and that he had always known the land as property of Melecio. 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 agency, he is estopped from acquiring or asserting title adverse to that of the principal. The principal’s right of action to compel a reconveyance is not extinguished through the registration of the land in favor of the agent. Though such registration may not be reopened, there appears no reason why the agent should not be compelled, through a suit in equity, to make such reparation as may lie within his power for the breach of trust committed by him, and as long as the land stands registered in his name such reparation may take the form of a conveyance or transfer of title to the cestui que trust, i.e. the principal. (13) SMITH, BELL & CO. V. CA

A resident agent of a foreign insurance company is only tasked on behalf of its principal to receive processes and not to answer personally for any insurance claims therefore it cannot be held solidarily liable with the principal.

FACTS: Plaintiff, doing business under the business name of

Tic Hin Chiong, importer, bought and imported to the Philippines 50 metric tons of Dicalcium phosphate, feed grade F-15% at US$19,500.00. These were contained in 1,250 bags to be shipped from Taiwan to the Philippines. Such shipment is insured by First Insurance Co. against all risks at port of departure and with Smith, Bell and Co stamped at the lower left side as Claim agent.

When the cargo arrived, Chua had the cargo surveyed and found 600 bags were damaged by tearing at the sides of the container bags and it weighed 18,546.0 kg short

Plaintiff filed with Smith, Bell and Co., a formal statement of claim for settlement of the corresponding losses but the latter informed the former that its principal is only willing to pay 50% of the claim on the ground of discrepancy between the amounts contained in the shipping agent’s reply and that of Metroport, the local arrastre contractor.

Chua refused the offer contending that the discrepancy was a result of loss from vessel to arrastre to consignee’s warehouse which losses were still within the ‘all risk’ insurance cover. Since no settlement was made, Chua instituted the instant petition.

RTC: ruled in favor of Chua, finding that he the liability of the insurance firm was fully established and since Smith, Bell and Co is a claim agent of the

foreign insurance firm, justice is better served if said agent is made liable without prejudice to the right of action against the principal

CA: affirmed the decision of the RTC thus the case at bar. ISSUE: W/N Smith, Bell can be held solidarily liable with First Insurance Co, the principal HELD: NO

There is only solidary liability when the obligation expressly so states. It cannot be lightly inferred. The insurance code is quite clear as to the purpose and role of a resident agent which is what Smith, Bell and Co is in the case at bar. Such agent, as representative of the foreign insurance company, is tasked only to receive processes on behalf of its principal and not to answer to answer personally for any insurance claims.

Also, a settling agent acting within the scope of its authority, cannot be held personally and/or solidarily liable for the obligations of its disclosed principal merely because there is allegedly a need for speedy settlement of the claim of Chua. When an adjustment and settlement agent adjusts or settles a claim he is no different from any other agent in that he also acts in a representative capacity. He acts in behalf of his principal and his acts are binding upon such principal.

Contracts are binding only upon the parties who execute them. The only involvement of Smith Bell in the contract of insurance was having its name stamped in the bottom left portion as claim agent. It cannot be interpreted to mean that it participated in the contract. Since there is no privity of contract then there is no obligation or liability and Chua has no cause of action against Smith Bell.

(14) DBP V. CA

An agent acting as such is not personally liable unless he expressly binds himself or exceeds his authority.

FACTS: Juan Dans, together with his wife Candida, applied

for a loan of P500K with the DBP. He was 76 at that time. He was advised by DBP to obtain a mortgage redemption insurance with the DBP Mortage Redemption Insurance Pool (DBP MRI pool)

The loan was approved at a reduced amount of P300K. DBP also deducted P1,476 as payment of the MRI premium. After than, Dans accomplished the application for Insurance and Health statement for the DBP MRI pool. The premium minus a 10% service fee was credited by DBP to the account of DBP MRI pool.

And then, Dans died of cardiac arrest. DBP MRI Pool notified DBP that he was not eligible for MRI coverage for being over the acceptance age limit of 60 years at the time of the application.

DBP informed Candida of the disapproval of her late husband’s application and offered to refund that premium of P1,476 but she refused. She also refused the ex gratia settlement of P30,000.



Candida, as administratix of her late husband’s estate, filed a complaint for collection of sum of money with damages. The RTC rules in her favor but absolved DBP MRI Pool from liability for there was no privity of contract between it and the deceased. The RTC also found DBP in estoppel for having led Dans into applying despite knowledge of the age ineligibility. The CA affirmed thus the case at bar. ISSUE: W/N DBP is liable HELD: YES

In dealing with Dans, DBP was wearing 2 hats, one, that of a lender and two that of an insurance agent. It required the borrower, as a matter of policy and practice, to secure MRI coverage but instead of allowing Dans to look for his own insurance carrier, DBP compelled him to apply with the DBP MRI Pool. It also deducted from the proceeds of the loan, MRI premium and deducted from this 10% as service fee for the application form and his health statement. As an insurance agent, DBP made Dans go through the motion of applying for said insurance despite knowing that his application would never be approved for being over the age limit.

Art. 1897 provides that the agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limit of his authority without giving such party sufficient notice of his powers.

DBP exceeded the scope of its authority when it accepted Dan’s application for it is not authorized to accept applications for MRI when its clients are over 60 years of age. Also there is no showing that Dans knew of the limitation on DBP’s authority to solicit applications for MRI. If the 3rd person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and the 3rd person has been deceived by the non-disclosure by the agent, the latter is liable for damages to him.

But DBP cannot be liable for the entire value of the insurance policy. Considering his advanced age, there is no absolute certainty that Dans could obtain an insurance coverage from another company since he died almost immediately. But Dans is entitled to moral damages.

(15) BA FINANCE CORP. V. CA

Persons dealing with an assumed agent, whether the assumed agency be a general one or special one are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority and in case either is controverted, the burden of proof is upon them to establish it.

FACTS: Renato Gaytano, under the name of Gebbs

International, applied for and was granted a loan with Traders Royal Bank for P60,000. As security for the payment of the loan, the Gaytano Spouses executed a deed of suretyship. Also Philip Wong, as credit

administrator of BA Finance Corp., sent a letter to Traders Royal Bank stating that BA Finance undertakes to guarantee the loan of the spouses.

Partial payments on the loan were made leaving only a balance of 85,807.25. The spouses refused to pay so TRB filed a complaint for collection of sum of money against the spouses and BA Finance as alternative defendant. BA Finance contends as defense the lack of authority of Wong to bind the corporation.

The RTC ruled in favor of TRB ruling that the spouses are solidarily liable to pay which was modified by the CA to include BA Finance solidarily liable as well since it was estopped from asserting otherwise the guaranty made by its credit administrator thus the case at bar. ISSUE: W/N BA Finance is liable by the acts of its credit administrator HELD: NO

It is settled that persons dealing with an assumed agent, whether the assumed agency be a general one or special one are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority and in case either is controverted, the burden of proof is upon them to establish it.

The burden is on TRB to satisfactorily prove that the credit administrator with whom they transacted acted within the authority given to him by his principal. The only evidence presented by Wong was a memorandum authorizing him to approve loans but nothing in the document shows authority to make guarantees. It cannot be held to be included in the term “contingent commitment”. An authority of an agent should not be inferred from the use of vague or general words. Guaranty is not presumed, it must be expressed and cannot be extended beyond its specified limits.

TRB has not shown any evidence aside from the testimony of Wong that their transaction was entered into the official records of the corporation thus it would be unfair to hold BA Finance guilty of estoppel. Wong acted beyond the scope of his authority therefore he should personally be liable.

(16) NPC V. NATIONAL MERCHANDISING CORP.

The agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party.

FACTS: National Merchandising Corp, as representative of

International Commodities Corp, and National Power Corp (NPC) executed a contract for the purchase by NPC of 4000 long tons of crude sulfur for its Ma. Cristina Fertilizer Plant. Domestic Insurance Co. executed a performance bond in the sum of P90,143.20 to guarantee the Namerco’s obligation.

In the contract of sale, it was stipulated that delivery should be made within 60 days from the



establishment on Namerco’s favor of a letter of credit otherwise it would be liable for the payment of liquidated damages.

The letter of credit was opened and was received by cable by the New York firm thereby making Jan. 15, 1957 the deadline for the delivery of the sulfur. The New York supplier was not able to deliver due to its inability to secure shipping space. Because of this from Jan 20-26, there was a shutdown of NPC’s fertilizer plant because there was no sulfur. It could not produce fertilizer.

NPC advices Namerco that under Art. 9 of the contract of sale, “non-availability of bottom or vessel” was not a fortuitous event that would excuse non-performance. The Gov’t Corporate Counsel informed Namerco that it rescinded the contract of sale and demanded payment of P360, 572.80. NPC sued for recovery of stipulated liquidated damages against the New York firm, Namerco and the Domestic Insurance Company.

The CFI dismissed the case as to the New York firm for lack of jurisdiction because it was not doing business in the Philippines. It then ordered Namerco and the Domestic Insurance Corp to pay solidarily reduced liquidated damages. Both parties appealed to the SC which was consolidated thus the case at bar. ISSUE: W/N Namerco can be held liable HELD: YES

Art. 1897 provides that an agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. This provision is complemented by Art. 1898 in which it states that if the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal.

Namerco acted beyond the bounds of its authority therefore it is personally liable to the party with whom he contracted. Namerco’s principal expressly provided instructions that the sale would be subject to the availability of a steamer. Even before the signing of the contract of sale, Namerco was aware that its principal was having difficulty in booking shipping space. It was also advised not to sign the contract unless it would assume full responsibility for the shipment. However, the president of Namerco had no choice but to sign for NPC would forfeit the bidder’s bond if the contract was not formalized. Also NPC was not aware of the limitations on the powers of Namerco. Since Namerco exceeded the limits of its authority, it virtually acted in its own name and is not being held liable under the contract of sale and is bound by the stipulation for liquidated damages.

(17) CERVANTES V. CA

When 3rd persons knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. 17

FACTS: By virtue of a compromise agreement between

Philippine Airlines (PAL) and Nicholas Cervantes, the latter was issued a round trip plane ticket for Manila-Honolulu-Los Angeles- Honolulu-Manila which ticket expressly provides that it would expire on March 27, 1990 or 1 year after its issuance.

4 days before the expiry of the ticket. Cervantes used it. Upon arrival in Lon Angeles, he immediately booked his Los Angeles-Manila return ticket with the PAL office and it was confirmed for the April 2, 1990 flight.

Upon learning that his flight would make a stop-over in San Francisco, he made arrangements to board instead in San Francisco instead of Los-Angeles since he would be there on said date. On April 2, when the checked in at the counter of PAL, he was not allowed to board and his ticket was marked with “TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY”. He then filed a complaint for damages for breach of contract of carriage but was dismissed by the RTC for lack of merit which was affirmed by the CA thus the case at bar.

ISSUE: W/N the acts of the PAL agent confirming his ticket extended the period of validity HELD: NO The agents had no authority to do so. And Cervantes

was aware of this from the start when he called up the Legal Department of PAL before the left for the US. He was informed that if he wants to secure an extension, he would have to file a written request for extension at the PAL’s office in the Philippines. The PAL agents acted without authority but as provided by Art. 1898, the acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. When the 3rd person was aware that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. Therefore, since he was aware of the need to file a written request and still persisted on using the ticket, he only has himself to blame and he is not entitled to recover damages from PAL.

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