Sanchez Agency Reviewer

8/9/2019 Sanchez Agency Reviewer

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LAW ON AGENCY I. INTRODUCTIONA. DefnitionArt. 1868 By the contract of agency a person binds himself to render some service or to do something in representation oron behalf of another, with the consent or authority of the latter.

DEFINITION OF AGENCY IN THE CIVIL CODEArt. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failureto repudiate the agency, knowing that another person is acting on his behalf without authority.

Agency may be oral, unless the law requires a speci c form.Art. 187 . Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his

silence or inaction according to the circumstances.Art. 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more speci c transactions.

Art. 1878. pecial powers of attorney are necessary in the following cases! xx Art. "#$# % agency as a type of contract Art. "#&' % manner the agency relationship is

established, manner by which authori(ation oracceptance is made

Art. "#$), "#$& % manner by which the agency as thebusiness itself is handled by the agent

Agency used in its broadest meaning is both a contractand a representative relation. Agency, despite beingde ned as a contract in Art. "#, should also beconsidered as creating between the principal and anagent an on-going legal relationship which imposespersonal obligations on the parties.

!. Le"!# re#!tion$%i& *onnection in law between the principal and the agent +egal relationship between the agent and the principal

founded on contract or created by law -echem /iduciary relationship between the principal and the

agent, where the agent is sub0ect to the principal1scontrol 2estatement of Agency

/iduciary relationship by which a party con des toanother the management of some business to betransacted in the former s name, and by which the otherassumes to do the business and render an account of itAmerican 3urisprudence

2elationship whereby one party authori(es another toact for an in his behalf in transactions with third persons2allos v. /elix 4o *han

/iduciary relationship analogous to that of a trust, wherethe agent is estopped from acquiring or asserting a titleadverse to that of the principal everino v. everino

5x. A law is passed that for purposes of medicalmalpractice, an agency relationship exists betweenhospitals and doctors. 6s the law valid7 85 % itestablishes a legal relationship for speci c purpose

'. Contr!(t NCC 1868. By the contract of agency, a person binds

himself to render some service or to do something inrepresentation or on behalf of another, with the consentor authority of the latter.

*ompare with CC Art. 17 9. By the contract of agency,one person binds himself to render some service, or todo something for the account or at the request of another.

o +ess precise than Article "# in that Article"$)' can admit of other relations e.g.independent contractor apart from agency

Art. "# de nes the *9:T2A*T of agency. 6t de nesagency from the viewpoint of a contract. The de nitionis broad enough to include all situations in which oneperson is employed to render service for another,excludes however from its concept of the relationship of

employer and employee, of master and servant and of employer and independent contractor.

Agency is a relationship which implies a power in anagent to contract with third person on behalf of aprincipal. 6t is this power to e;ect the principal1scontractual relations with third persons thatdi;erentiates the agent from the employee, the servantand the independent contractor. Agency properlyspeaking relates to commercial or business transactions.

Being a contract, it is essential that the minds of theparties should meet in making it. +ike other contracts,

agency requires consent, ob0ect and cause Art. "+-, 9b0ect certain which is the sub0ect matter of the contract>+), *ause of the obligation which is established. Con$ent is crucial, although some agency relationships

may arise by operation of law, meaning without theparties1 consent. The principal must intend that theagent shall act for him, the agent must intend to acceptthe authority and act on it, and the intention of theparties must nd expression either in words or conductbetween them. ?ithout such intention, there isgenerally no agency. *onsent of the principal is

essential. The o' e(t of an agency is the agent s performance of acts in representation of the principal. This is the

0uridical basis of agency. 2allos v. /elix 4o *han The (!/$e of an agency is compensation. A person may

also request appointment as an agent to protect his owninterests.

@9?5 52, although the agency relationship is usually acontractual one, either express or implied, based upon aconsideration, this is not necessarily so> that is therelationship may be created by 9 52AT69: 9/ +A? ie.agency by estoppel or a person who acts for another asprincipal may do so gratuitously. Thus, without cause orconsideration, there can be an agency or agencypowers.

6e. 6n the exercise of governmental functions, localgovernments or municipal corporations act as agents forthe sovereign state. The legal consequences of agencymay attach where one person acts for another withoutauthority or in excess of his authority and the lattersubsequently rati es it.

GOVERNING LAWreviously, a distinction existed between agency and

commercial agency under the *ode of *ommerce. @owever,this distinction has been abolished under the :ew *ivil*ode. At present, all agencies are governed by the *ivil*ode.

TER0 U ED IN OTHER EN ECAgencyD is sometimes used in a sense other than to denotethe relationship of principal and agent.

" -ay be used to denote the +A*5 at which thebusiness is transacted. ?hen used in the sense of place of business, the relationship of and A is notnecessarily implied.

E -ay be used in the sense of 6: T2F-5:TAT+68 bywhich a thing is done

< -ay be used to refer to the 5G*+F 6 5 264@T of aperson to sell a product of another in a speci cterritory

CHARACTERI TIC OF A CONTRACT OF AGENCY *9: 5: FA+! perfected by mere consent

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26:*6 A+! can stand by itself without need of anothercontract

:9-6:AT5! has its own name F:6+AT52A+, if gratuitous ! creates obligations for only

one of the parties, i.e. agent> or B6+AT52A+, if forcompensation ! gives rise to reciprocal rights andobligations

25 A2AT928! entered into as a means to an end, ie.the creation of other transactions or contracts

2A I OF AGENCY Agency is also a representative relation. The agent

renders some service or does something Cinrepresentation or on behalf of anotherD.

RE3RE ENTATION (on$tit/te$ t%e '!$i$ o4 !"en(5 .

The acts of the agent on behalf of the principal withinthe scope of his authority produce the same legal andbinding e;ects as if they were personally done by theprincipal. Authority of the agent to act emanates fromthe powers granted to him by his principal. Thedistinguishing features of agency are its personal,representative and its derivative character. Qui facit per alium facit per se. C@e who acts through another, actshimself.D 2allos v /elix 4o *han

Thus, a person may make an o;er to enter into acontract through an agent and such o;er is acceptedfrom the time acceptance is communicated to the agentwho is deemed authori(ed to receive the acceptanceArt. " he is the &er$onre&re$ente . Agency imports the contemporaneousexistence of a principal, and there is no agency unlessone is acting for and in behalf of another

A45:T mandatario ! 9ne who acts for and representsanother> he is the &er$on !(tin" in re&re$ent!ti e(!&!(it5 . The agent may employ his own agent inwhich case he becomes a principal with respect to thelatter. 6f an act done by one person in behalf of anotheris, in its essential nature, one of CagencyD, the former isCagentD of the latter notwithstanding that he is not socalled

o /rom the time the agent acts or transacts thebusiness for which he has been employed inrepresentation of another, a third party is addedto the agency relationship % the party withwhom the business is transacted.

9ther terms used! attorney-in-fact, proxy, delegate,representative

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NOTE: :o one may contract in the name of anotherwithout being authori(ed by the latter, or unless he hasby law a right to represent him. A contract entered intoin the name of another by one who has no authority orthe legal representation or who has acted beyond hispowers, shall be unenforceable, unless it is rati ed,expressly or impliedly, by the person on whose behalf ithas been executed, before it is revoked by the othercontracting party M:** "N)< " 2allos v 4o *han

CA3ACITY OF THE 3ARTIE relate this with element of

consentArt. 1)-7. The following cannot give consent to a contract! " Fnemancipated minors> E 6nsane or demented persons, anddeafJmutes who do not know how to write.Art. 1)-9. The incapacity declared in Article " hence it has no capacity toappoint an agent

Also, during the existence of a state of war, an enemyalien may not appoint an agent to act in the belligerentterritory with which his nation is at war

6nasmuch as one who acts through an agent in law doesthe act himself, the capacity to act by an agent dependsin general on the capacity to act of the principal to dothe act himself if he were present.

6t is a general rule that that an agent who assumes tocontract in the name of a principal without contractualcapacity renders himself liable to third persons. The acts

of an agent done for an incompetent principal may berati ed by the latter after he acquires capacity. Theagent is not liable where he was ignorant of theprincipal1s incapacity.

5x. Agent makes a contract on behalf of wOoutknowledge that was a minor. thereafter disaKrmedthe contract. Agent is not liable to the other party to thecontract. Agent warrants that he is acting within thescope of his authority, but being a mere mouthpiece of his principal, he does not warrant the full contractualcapacity of his principal.

5x. Agent redeemed the share pro indiviso in a parcel of land upon A given by children of the owner and claimsownership over said share. Agent does not have theright to portion he claims as share. The children had no

authority to execute said A since their father is stillalive. antos v Buenconse0oE A45:T! ince agent assumes no personal liability, he doesnot have to possess /F++ *A A*6T8 to act insofar as thirdpersons are concerned. 5ven one under legal disability,whose contracts, therefore, are not binding upon him, maynevertheless act as an agent and bind his principal.apparently De Leon is the authority cited for this

?here one knowingly and without dissent permitsanother to act as his agent, the capacity of the latter willbe conclusively presumed.

@owever some mental capacity is necessary as anagent, and therefore, persons who are absolutelyincapacitated, such as insane persons, cannot be agents

as they are incapable of understanding the task to beperformed.

6n an ordinary case, a person of sound mind nototherwise incapacitated may act as agent for anothersince his agreements bind only the principal. But insome instances, additional quali cations must exist, thelack of which may void the relationship which thealleged agent assumed. ie. attorney to represent aprincipal in legal matters

6nsofar as his obligations to his principal are concerned,the agent must be competent to bind himself. The

extent to which an agent is a /6PF*6A28 and is sub0ectto duties and liabilities to his principal depends upon hiscapacity.

The relationship of T2F T and *9:/6P5:*5 whichconstitutes one of the < /F:PA-5:TA+*@A2A*T526 T6* of the agency relationship results inthe disquali cation of agents to act for the principalwhen it is their duty to act inconsistently towardanother.

< 5//5*T 9/ +A*Q 9/ *A A*6T8 as adverted in illanueva 6f one of the parties has no legal capacity to contract,

then the contract of agency is not 96P but merely96PAB+5 by reason of vitiation of consent.

A voidable contract of agency will produce legalconsequences, when it is pursued to enter into 0uridical

relations with third parties. 6/ 26:*6 A+ wO9FT +54A+ *A A*6T8 and agent enters

into a contractual relationship in the principal1s namewith a third party, the re$/#tin" (ontr!(t is 96PAB+5and sub0ect to annulment.

6/ 26:*6 A+ @A +54A+ *A A*6T8 and A45:T has :9+54A+ *A A*6T8, the /n er#5in" !"en(5 re#!tion$%i&is 96PAB+5> and when the incapacitated agent entersinto a contract with a third party, the re$/#tin"(ontr!(t would be A+6P, not voidable, for the agent1sincapacity is irrelevant, the contract having beenentered into, for and in behalf of the principal, who hasfull legal capacity.

uch discussion supports the general proposition thatthe lack of legal capacity of the agent does not a;ect

the constitution of the agency relationship. @9?5 52! Art. "'"' < on extinguishment of agency,

provides that if during the term of the agency, the OA isplaced under civil interdiction, or becomes insane orinsolvent, the agency is ipso 0ure extinguished. Thus, if loss of legal capacity of agent extinguishes the agency,then any of those cause that have the e;ect of removing legal capacity on either or both the R A atthe time of perfection would not bring about a contractof agency.

@ow to explain the incongruity regarding legalcapacities of parties in a contract of agency!

o As to creating and extinguishing the*9:T2A*TFA+ 25+AT69: @6 B5T. R A! Theprovisions of law take into consideration purely

intramural matters pertaining to the partiesunder the principle ofrelativity. ince agency isessentially a personal relationship based on thepurpose of representation, then when either theprincipal or agent dies or becomes legallyincapacitated, then the agency relation shouldipso 0ure *5A 5.

o BFT as to *9:T2A*T wO < rd A2T65 ! 6t isemphasi(ed that the contract of agency ismerely a preparatory contract, where the mainpurpose is to e;ect, through the agent,contracts and other 0uridical relationships of theprincipal with third parties. The public policy isthat third parties who act in good faith with an

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agent have a right to expect that their contractswould be valid and binding on the principal. 9even when by legal cause, an agencyrelationship has terminated, say with principal1sinsanity, if the agent and a < rd party enter intocontract unaware of the situation, then thevarious provisions on the +aw on Agency wouldaKrm the validity of the contract.

NATURE OF RELATION 2ETWEEN 3RINCI3AL ANDAGENT

1, Re#!tion$ f /(i!r5 in (%!r!(ter 2elations are based on trust and con dence on a degreewhich varies considerably from situation to situation.

The agreement to act on behalf of the principal causesthe agent to be a duciary, a person having a duty,created by his undertaking, to act primarily for thebene t of another, the principal, in matters connectedwith his undertaking.-, A"ent e$to&&e 4ro !$$ertin" intere$t

! er$e to %i$ &rin(i&!# 6n regard to property forming the sub0ect matter of the

agency, the agent is estopped from asserting oracquiring a title adverse to that of the principal.

@owever, the agent does not, by accepting the agency,lose any prior claim which he himself may have to the

property with which he deals, nor is he estopped toassert that money or property in his hands was notreceived by him as agent for the principal, or that theprincipal parted with his interest in the propertysubsequent to the delivery to him as agent, or that theproperty has been taken from the principal byparamount title, or that he has been lawfully required toaccount for another, or that the title is in another towhom he would be liable if he should surrender theproperty to the principal.), A"ent /$t not !(t A !n ! er$e &!rt5

6n matters touching the agency, agents cannot act so asto bind their principals, where they have an adverseinterest in themselves.

The rule is founded upon the plain and obviousconsideration, that the principal bargains, in theemployment, for the exercise of the disinterested skill,diligence and (eal of the agent, for his own exclusivebene t.

5ven if impartiality could possibly be presumed on thepart of an agent, where his own interest wereconcerned, that is not what the principal bargains for>and in many cases, it is the very last thing which wouldadvance his interests.

o An agent cannot acquire by purchase theproperty, whose administration of sale has beenentrusted to him unless the consent of theprincipal has been given. The agent1s incapacityrests on the fact that A R form one 0uridicalperson. Ban connotes the idea of trust andcon dence.

o 6f principal authori(es agent to sell goods, theagent must not sell to himself. @is duty to getthe highest price conSicts with his interest tobuy as cheaply as possible .


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premises. *ristobal is an heir of a coJowner of the property.*ristobal argues that the registration was with anunderstanding between the coJowners, by reason of thecon dence they had in alma and his wife.Do(trine: alma is a mere trustee. @e did not acquireownership by prescription. alma held the property andsecured its registration in his name in a duciary capacity.@is pretension of building his right to claim ownership byprescription upon his own breach of a trust cannot becountenanced by any court, being subversive of generallyaccepted ethical principles .

DOCTRINE: Act of the agent is in duciary capacity, and itis elementary that a trustee cannot acquire by prescriptionthe ownership of the property entrusted to him. The positionof a trustee is of representative nature. @is position is theposition of a cestui que trust. 6t is logical that all bene tsderived by the possession and acts of the agent, as suchagent, should accrue to the bene t of his principal. everino vs. everino! LThe relations of an agent to his

principal are duciary and it is an elementary and veryold rule that in regard to property forming the sub0ectJmatter of the agency, he is estopped from acquiring orasserting a title adverse to that of the principal. @isposition is analogous to that of a trustee and he cannotconsistently, with the principles of good faith, beallowed to create in himself an interest in opposition tothat of his principal or cestuique trust.L

Barretto vs. Tuason! The registration of the property inthe name of the trustees in possession thereof, must bedeemed to have been e;ected for the bene t of thecestuique trust.

alet vs. Te0edor! ?hether or not there is bad faith orfraud in obtaining a decree with respect to a registeredproperty, the same does not belong to the person inwhose favor it was issued, and the real owners beentitled to recover the ownership of the property so longas the same has not been transferred to a third personwho has acquired it in good faith and for a valuableconsideration.

RELATION HI3 OF THIRD 3ARTY WITH 3RINCI3AL ANDAGENT ince an agent1s contract is not his own but his

principal1s, a third party1s liability on such contract is tothe principal and not to the agent, and liability to suchthird party is enforceable against the principal, not theagent.

?here an agency exists, the relationship of the thirdparty with whom the agent has contracted, to theprincipal, is the same as that in a contract in whichthere is no agent.

o :ormally, the agent has neither rights norliabilities as against the third party. @e cannotsue or be sued on the contract. ince a contractmay be violated only by the parties thereto asagainst each other, the real partyJinJinterest,either as plainti; or defendant in an action uponthat contract must, generally, be a party to saidcontract

o The fact that the agent did not obtain hiscommissions or recoup his advances because of the nonJperformance of the contract does notentitle him to le an action against the buyerwhere he does not appear as a bene ciary of astipulation pour autrui under Art. "I TENCE OF AGENCY The question of whether an agency has been created is

ordinarily a question which may be established in thesame way as any other fact, either by direct orcircumstantial evidence. The question is ultimately oneof 6:T5:T69:.

+1, De$i"n!tion '5 t%e &!rtie$CA E: A#'!#! e o 5 Ci! . 3%i#. Refnin" Co.

U00ARY: Albalade0o and isayan entered into a -9A inwOc the latter, as manufacturer of coconut oil, would buy allthe copra purchased by Albalade0o in Albay. Albalade0o ledan action to recover sum of money for its maintenance of itsagency on the basis of isayan1s representation that it wouldreopen which did not materiali(e. 6t also invoked Article"$E' claiming that the -9A is a contract of agency and thusisayan as principal has to indemnify the agent for damagesincurred in carrying out the agency. C: :ot an agency asAlbalade0o buys for its own account and the sale to isayanis a second sale. Art. "$E' not applicable.

DOCTRINE: An agent buys not on its own account but onthe account of its principal. The use of the term CagentD inthe one clause of the contract cannot dominate the realnature of the agreement as revealed in other clauses, noless than in the caption of the agreement itself.

+-, F!(t o4 e?i$ten(e L?here the relation of agency is dependent upon the

acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with theburden of proof resting upon the persons alleging the

agency, to show not only the fact of its existence, butalso its nature and extent. ictorias -illing v *A+), 3re$/ &tion o4 e?i$ten(e

The relation of agency cannot be inferred from mererelationship or family ties unattended by conditions,acts, or conduct clearly implying an agency. /or therelation to exist, there must be consent by both parties,i.e. the principal consents that the other party, theagent, shall act on his behalf and the agent consents soto act.

The law makes no presumption thereof. 6t must exist asa fact.+


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E ?ith the consent of the other person.NOTE : rof. anche( said that the elements can besummed up into two! *onsent of AR and 2epresentation>seems she thinks this is more proper and this also in accordwith rof. *asis intimation in his book p. EE

/ri$&r/ en(e=$ < e$$enti!# e#e ent$ o4 !"en(5:" There is consent, express or implied, of the parties toestablish the relationship>E The ob0ect is the execution of a 0uridical act in relation toa third person>

< The agent acts as a representative and not for himself>N The agent acts within the scope of his authority. 2allos v/elix 4o *hanNOTE : rof. *asis says that * seemed to primarily rely onArt. "# R "##" as seen in 2allos v 4o *han footnote =.

The " st , < rd , Nth elements can be derived from these articlesalthough Art. "#&' R "#$) should be added as basis of thefact that consent may be express or implied.Art.1868. By the contract of the agency of a person blinds himself to render some service or to do something inrepresentation or on behalf of another, with the consent of the authority of the latter.Art. 1881. The agent must act within the scope of his authority. @e may do acts as may be conductive to theaccomplishment of the purpose of the agency.Art. 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failureto repudiate the agency, knowing that another person is acting on his behalf without authority.Agency may be oral, unless the law requires a speci c form. Art. 187implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances.NOTE : illanueva notes that the element not included inthe 2allos enumeration is the cause or consideration of every contract of agency. @e mentions that the last Eelements included in the 2allos enumeration should not beunderstood to be essential elements for the perfection andvalidity of the contract of agency for indeed they arematters that do not go into perfection but rather into theperformance stage of agency relationship. @e adds*onsideration or *ommission as an element to the contractof agency this will be discussed under the %ights of the

&gent . The nonJexistence of the E purported essential elements

does not a;ect the validity of the existing agencyrelationship but rather the enforceability of the contractsentered into by the agent on behalf of the principal.

o Fnder Art. "##

o Fnder Art. "#'#! Agent exceeds scope of hisauthority, and principal does not ratify thecontract, it shall be void as to the principal. submits that it is merely unenforceable but lawsays void

The last E elements are meant to emphasi(e that theCrelationship of agencyD is setJup essentially to complywith the basic axiom in ** that no one may contract inthe name of another without being authori(ed by thelatter. A contract entered into in the name of another byone who has no authority or legal representation shallbe unenforceable, unless it is rati ed, expressly or

impliedly, by the person on whose behalf it has beenexecuted. A+ 9, *ontrol! 9ne factor which most clearly

distinguishes agency from other legal concepts iscontrol> one person J the agent J agrees to act under thecontrol or direction of another J the principal. The veryword LagencyL has come to connote control by theprincipal. The control factor, more than any other, hascaused the courts to put contracts between principaland agent in a separate category. ictorias -illing v *A

CA E: R!##o$ . Fe#i? Go C%!n ; on$ Re!#t5 Cor&.U00ARY ! This is a case of an attorneyJinJfact, imeon2allos, who after of his death of his principal, *oncepcion

2allos, sold the latterUs undivided share in a parcel of landpursuant to a power of attorney which the principal hadexecuted in his favor. The administrator of the estate of went to court to have the sale declared unenforceable andto recover the disposed share. The trial court granted therelief prayed for, and nulli ed the sale with respect to the Vpro indiviso share of *oncepcion is concerned, but uponappeal, the *A upheld the validity of the sale and thecomplaint.HELD: 2eversed *A ruling and reinstated that of the trialcourt. The agency was extinguished by operation of law by

the death of the principal and this case does not fall underthe exceptions.DOCTRINE ! This case established the N essential elementsof agency as seen above.

CA E: E/rote(% In /$tri!# Te(%no#o"ie$B In(. . C/i onU00ARY: 5urotech is engaged in the business of importation and distribution of various 5uropean industrialequipment. 6t has as one of its customers 6mpact ystemsales which is a sole proprietorship owned by 52?6: *ui(on.5urotech sold to 6mpact ystems various products allegedlyamounting to '",


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:ino mines. The advances were not Cdebts.D Therelationship was that of a partnership. -oreover, in anagency coupled with interest, it is the agency that cannot berevoked or withdrawn by the principal due to an interest of athird party that depends upon it or the mutual interest of both principal and agent. 6n this case the nonJrevocation ornonJwithdrawal under the A applies to the advances madeby the petitioner who is the agent and not the principalunder the contract. Thus, it cannot be inferred from thestipulation that it is an agency.DOCTRINE: The essence of an agency, even one coupled

with interest, is the agent1s ability to represent his principaland bring about business relations between the latter andthird persons. ?here representation for and in behalf of theprincipal is merely incidental or necessary for the properdischarge of one1s paramount undertaking under a contract,the latter may not necessarily be a contract of agency, butsome other agreement depending on the ultimateundertaking of the parties

1. Con$ent to E$t!'#i$% t%e Re#!tion$%i& A person may express his consent by contract Art.

"# , by conduct Art. "#&' , or by rati cation Art."'") , or the consent may arise by presumption oroperation of law. 6n certain situations, the law presumesthat person has authority to act for another. 6e. 6n law,partners are considered agents of the partnership and of each other.

The essential element of consent is manifest from theprinciple embodied in Art. "


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as it was obtained on E 3uly "'#=, ahead of the consortiumUspurported attachment on "' 3uly "'#=. -ore importantly,said *56* lien was duly recorded in the stock and transferbooks of *hemphil.

HELD: *56* is not legally subrogated under Art. "


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DOCTRINE: 2elationship between the parties was not thatof principal and agent because the principle of representation was in no way involved.NOTE: rof. *asis says that this case should not beinterpreted to mean that an employee could not be anagent. /or as long as an employee has the power torepresent his employer and enter into binding transactions,he is both an employee and an agent.

). A"ent A(t$ !$ Re&re$ent!ti e !n Not 4orHi $e#4

The agent has an obligation to represent his principal1sinterest and not his own. ir *asis argues! That the agent actually represents the

principal should not be an element for the establishmentof the contract of agency because it is a consequence of the contract. After all, an agency contract can beestablished without the agent acting as agent. All that isnecessary is a meeting of the minds between theparties.

6f a principal appoints an agent and the agent accepts,the subsequent act of the agent acting for himself undercircumstances of conSict of interest does not invalidatethe original contract but constitutes a breach thereof.

&s regards to property 45:52A+ 2F+5! Art. "N'" provides that an agent cannot

acquire by purchase, even at a public or 0udicial auction,either in person or through the mediation of another,the property whose administration or sale may havebeen entrusted to them, unless the consent of theprincipal has been given. ale is voidable.

5G*5 T69: ! " 6f the principal consents> E An agentcan buy for himself the property after the termination of the agency alera v elasco > < purchases propertydi;erent from those he has been commissioned to sell

CA E: !nto$ . 2/en(on$e o

U00ARY: +ot "'"$ is owned in common by Buenconse0o"OE and +oren(o R antiago Bon "OE . Buenconse0o1s rightsover his portion of the land were executed in connection wOa decision by 3PP2 court and were eventually sold to Iiga.

These rights over Buenconse0o1s share pro indiviso on theparcel of land were allegedly redeemed by antos thru theauthority of a A executed in his favor by Buenconse0o1schildren. antos asks the court to grant him his share to +ot"'"$JA and cancel Buenconse0o1s 9*T over the title. HELD:@e has no authority to cause such cancellation since he hasno property right which could have possibly vested in hisown name when the A granted to him by Buenconse0o1schildren was an authority to act on their behalf. Besides, theA has no e;ect as Buenconse0o1s children has no authority

to execute it when Buenconse0o is still alive.

DOCTRINE: The contract of agency by virtue of Aauthori(es another agentOmandatario , to act for and 6: @6behalf principal1s on transactions with


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of a crime, he cannot escape punishment on theground that he simply acted as an agent of another party. 6e. urchase of land by aliensthru /ilipino agent, persons prohibited fromacquiring property under their control

EFFECT OF AGENCY: INTEGRATION AND E>TEN ION Inte"r!tion Z personality of the principal is merged

with that of the agent E?ten$ion Z personality of the principal is merged with

that of the principal

1. A/t%orit5 to A(t Qui facit per alium facit per se Che who does a thing by

an agent is considered as doing it himselfD The agent, by legal ction, becomes the principal,

authori(ed to perform all acts which the latter wouldhave him do. 9rient Air ervices v. *A

By this legal ction, the actual absence of the principalis converted into his legal or 0uridical presence.5urotech v. *uison

A principal becomes liable for obligations contracted bythe agent provided that the act is within the authority of the agent. rudential Bank v.*A

-. A"ent Not Re!# 3!rt5 In Intere$t ince the agent is a mere extension of the personality of

the principal, he is not a party to the contract with thethird person. The liability of the third party is to theprincipal and not to the agent. ee 9bligations of theprincipal, infra, page


11/85

Arti(#e 1868 de nes the contract of agency. Broadde nition which includes all situations in which one person isemployed to render service> it, however, excludes the ;.relationships!

a. 5mployerJ5mployee "$))b. -aster and ervant ")c. 5mployer and 6ndependent *ontractor "$"E Pispose of the goodJwill of the business>< Po any other act which would make it impossible tocarry on the ordinary business of a partnership>N *onfess a 0udgment>= 5nter into a compromise concerning a partnershipclaim or liability>& ubmit a partnership claim or liability to arbitration>$ 2enounce a claim of the partnership.:o act of a partner in contravention of a restriction onauthority shall bind the partnership to persons havingknowledge of the restriction.

E$$enti!# C%!r!(teri$ti($ o4 A"en(5

Aside from being a no in!teB &rin(i&!# and (on$en$/!#(ontr!(t , Rallos v. Felix Go Chan characteri(es a contractof agency as being &er$on!#B re&re$ent!ti e !neri !ti e in nature.

1. NO0INATE AND 3RINCI3AL:ot only is it speci cally named under the :**, it is aprincipal contract because it can stand on its own andwithout need of another contract to validate it.

The real value of the contract of agency being a nominateand principal contract is that it has been so set apart by lawand provided with its own set of rules and legalconsequences, that any other arrangement that essentially

A45:*8 H A:*@5I H by @ipolito, aras and FgalinoH ""


12/85

falls within its terms shall be considered as an agencyarrangement and shall be governed by the +aw on Agency,notwithstanding the intention of the parties to the contrary.A4ter !##B ! (ontr!(t i$ @%!t t%e #!@ $!5$ it i$B !n not@%!t t%e &!rtie$ (!## it.

-. CON EN UALee: 1869 !n 187 o4 t%e NCC . A contract of agency is aconsensual contract and no formOsolemnity is required inorder to make it valid, binding and enforceable.

). UNILATERAL AND 3RI0ARILY ONEROU9rdinarily, an agency is onerous in nature, where the agentexpects compensation for his services in the form of commissions. HOWEVER 187* recogni(es that an agencymay be supported by pure liberality, but the burden of proof would be to show that the agency was constitutedgratuitously.

W%en "r!t/ito/$: Fndoubtedly unilateral because it onlycreates an obligation on the part of the agent.W%en $/&&orte '5 (on$i er!tion: T6++ F:6+AT52A+because it is only the ful llment of the primary obligations of the agent to render some service upon which thesubordinate obligation of the principal to pay thecompensation agreed upon arises.


13/85

and, in this case, the property in question was sold toAntonio *ui while he was already the agent or administratorof the properties of Pon -ariano *ui, * believe that thisquestion cannot now be raised or invoked.Fnder theprovisions of article "N'", section E, of the new *ivil *ode,an agent may now buy property placed in his hands for saleor administration as opposed to the old ** , provided thatthe principal gives his consent thereto. ?hile the new *odecame into e;ect only on August the agent must intend to accept theauthority and act on it, and the intention of the parties mustnd expression either in words or conduct between them.

An agency may be expressed or implied from theact of the principal, from his silence or lack of action, or his failure to repudiate the agencyknowing that another person is acting on his behalf without authority. Acceptance by the agent may beexpressed, or implied from his acts which carry outthe agency, or from his silence or inaction according

to the circumstances. Agency may be oral unlessthe law requires a speci c form. @owever, to createor convey real rights over immovable property, aspecial power of attorney is necessary.

Thus, when a sale of a piece of land or any portionthereof is through an agent, the authority of thelatter shall be in writing, otherwise, the sale shall bevoid.

6n an agentJprincipal relationship, the personality of the principal is extended through the facility of theagent. 6n so doing, the agent, by legal ction,

becomes the principal, authori(ed to perform allacts which the latter would have him do. uch arelationship can only be e;ected with the consent of the principal, which must not, in any way, becompelled by law or by any court.

A person dealing with a known agent is notauthori(ed, under any circumstances, blindly totrust the agents> statements as to the extent of hispowers> such person must not act negligently butmust use reasonable diligence and prudence toascertain whether the agent acts within the scope of his authority. The settled rule is that, personsdealing with an assumed agent are bound at theirperil, and if they would hold the principal liable, toascertain not only the fact of agency but also the

nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them toprove it.

Vi##!n/e !: C6t bears stressing that in an agentJprincipalrelationship, the personality of the principal is extendedthrough the facility of the agent. 6n so doing, the agent, bylegal ction, becomes the principal, authori(ed to perform allacts which the latter would have him do. uch a relationshipcan only be e;ected with the consent of the principal, whichmust not, in any way, be compelled by law or by any court.D

CA E: Do inion In$/r!n(e Cor&. . Co/rt o4 A&&e!#$ +- -,U00ARY: 4uevarra instituted a civil case for the recoveryof a sum of money against Pominion 6nsurance. @e soughtto recover sums he had advanced in his capacity asmanager. Pominion denied any liability to 4uevarra. 2T*ruled that Pominion was to pay 4uevarra. *A aKrmed. *also ruled that Pominion should pay 4uevarra, but not underthe law on agency, but the law on obligations and contracts.

This is because 4uevarra deviated from the instructions of Pominion under which he would have had authority tosettler the latter1s claims, i.e. to pay through the revolvingfund. :evertheless, recovery may be made under Art. "E


14/85

this action against the administrator of -ariano1s estate torecover ',&)) for the value of his services. The * did notaward him the said amount.

DOCTRINE ! 6f it were true that Aguna and -ariano had anunderstanding that Aguna was to receive compensationaside from the use and occupation of the houses of thedeceased, it cannot be explained how the plainti; couldhave rendered services as he did for eight years withoutreceiving and claiming any compensation from thedeceased.

CA E: In#!n Re!#t5 . Co/rt o4 A&&e!#$ +1997,

U00ARY: Araneta authori(ed 6nland as its broker in thesale of '#)) shares of stock of Architect Bldg for "=)) pershare. 6nland informed Araneta of tandford1s o;er to buythe shares of stocks for "))). Araneta asked 6nland tonegotiate for a better price but the agency expired withoutthe sale being consummated. The sale was consummated "year and = months after the expiration of the agency for" however, if theagency contract speci cally stipulated that the deed of salebe executed within an agreed time period.

CA E: 3r!t$ . Co/rt o4 A&&e!#$ +1978,

U00ARY ! This is a petition for certiorari to review thedecision of *A, dismissing rats1 case for recovery of sum of money. Poronilla wishes to sell property to but failed toconsummate such sale. rats was then given an exclusiveoption and authority in writing to negotiate the sale of PoronillaUs -ontalban lot. @owever, the sale to wasnali(ed and consummated only after the expiration of theexclusive option. Poronilla was ordered in the 2T* to payrats ".


15/85

sugar corresponding to T-1s checks has already beenwithdrawn by T-. * * then led complaint for speci cperformance. -* argues that the dealings between it andT- were part of a series of transactions involving only oneaccount or one general contract of sale and * *, as T-1sagent, could withdraw bags of sugar only against clearedchecks of T-. To prove that * * is T-1s agent, itmentioned the letter of authority wOc authori(ed * * Ctowithdraw for and in our T-1s behalf the sugar.. C: * *was a buyer of the +P/2 form, and not an agent of T-. 6twas not sub0ect to T-Us control. -* failed to suKciently

establish the existence of an agency relation between * *and T-. The use of the words Lsold and endorsedL meansthat T- and * * intended a contract of sale, and not anagency.DOCTRINE: 6t is clear from Article "# that the basis of agency is representation. 9n the part of the 26:*6A+,there must be an actual intention to appoint or an intentionnaturally inferable from his words or actions> and on the partof the A45:T, there must be an intention to accept theappointment and act on it, and in the absence of suchintent, there is generally no agency . 9ne factor which mostclearly distinguishes agency from other legal concepts iscontrol> one person J the agent J agrees to act under thecontrol or direction of another J the principal. The very wordLagencyL has come to connote control by the principal. Thecontrol factor, more than any other, has caused the courts toput contracts between principal and agent in a separatecategory. L?here the relation of agency is dependent uponthe acts of the parties, the law makes no presumption of agency, and it is always a fact to be proved, with the burdenof proof resting upon the persons alleging the agency, toshow not only the fact of its existence, but also its natureand extent.

CA E: Re&/'#i( . E !n"e#i$t! +- *,U00ARY: *alimlim representing the A/ entered into a-9A with 2eyes granting 2eyes to hunt for treasure in a landin Bulacan. *alimlim employed #) military personnel toguard the area and intimidate the other occupants, including+egaspi, owner of one of the lands. +egaspi thenappointed his nephew A to deal w treasure hunting

activities on his land and le charges against those who mayenter without 1s authority. A was to get N)W of the treasurethey found. A then hired a lawyer and his atty1s fees were tobe


16/85

acquires neither the possession nor the custody of thethings sold

his only oKce is to bring together the parties to thetransaction

Co er(i!# 0er(%!nt +Co i$$ion !"ent, engaged in the purchase or sale for another of personal

property wOc, for this purpose, is placed in hispossession or at his disposal

maintains a relation not only wO his principal, but also wOthe property wOc is the sub0ect matter of the transaction

Fnless so otherwise indicates, the term meant to covera commercial broker

The notion of commission merchant is still maintained inthe :ew *ivil *ode in Articles "')E to "')' on theduties and responsibilities of a Ccommission agentD

Li!'i#it5 o4 2ro erJA"ent chmid ?hether the intermediary was acting as a commission

merchantO agent or a pure commercial broker, thegenral principal is neither of them would be liablepersonally for breach of warranty of the principalJseller.

A commission agent who acts in the name of theprincipal and within the scope of his authority isprotected by the principle in Agency +aw that he doesnot therefor become liable for the contracts he enteredinto in the name of the principal.

A commercial broker, who merely intermediatesbetween the seller and the buyer and for whom he hasnot executed any 0uridical act, is a complete stranger tothe resulting contract of sale and certainly cannot beheld liable thereon for lack of privity.

D/tie$ !n Re$&on$i'i#itie$ o4 t%e A"ent !n t%e2ro er to t%eir C#ient$2ro er does not owe duciary duties to his clients, although like

any ordinary professional or businessman, he issupposed to act wO due diligence in carrying out thea;airs of his clients.

no duty to account if his negligence causes damage to a client, his liability

is based on a tort or quasiJdelict, rather than that arisingfrom the breach of the duty of diligence

A"ent +or 'ro er @%o %!$ !$$/ e t%e ro#e o4 !n!"ent: %!$ f /(i!r5 /tie$, has duties of diligence and loyalty to the client1s cause

or interest prohibited from taking secret pro ts on the transaction,

and is bound to account to the client all sums receivedon the transactions even those wOc were given to him bythe other party for his own account as broker

Pomingo v. Pomingo broker accepted the role of anagent and thereby bound himself to the latter1s duciaryduties

o The duties and liabilities of a broker to hisemployees are essentially those wOc an agentowes to his principal

o The decisive legal provisions ]on the duty toaccount and to deliver whatever he may havereceived and the obligation arising from fraudand negligence^ are found in Art. "#'" and Art"')'

o Art. "#'" and "')' demand the utmost goodfaith, delity, honesty, candor and fairness onthe part of the agent ]the real estate broker inthis case^ to his principal ]the vendor^

o The law imposes upon the agent the absoluteobligation to make a full disclosure or completeaccount to his principal of all his transactions

and other material facts relevant to the agency,so much so that the law as amended does notcountenance any stipulation exempting theagent from such an obligation and considerssuch an exemption as void.

o The duty of an agent is likened to that of atrustee.

C!&!(it5 to 3/r(%!$e t%e 3ro&ert5 o4 t%e 3rin(i&!#2ro er

o no prohibitionA"ent

o legally incapacitated to buy the property of theprincipalo &rt. . he following persons cannot acquire by

purchase, even at a public or /udicial auction, either in person or through the mediation of another0 '1+

&gents, the property whose administration or salemay have been entrusted to them, unless theconsent of the principal has been given2

Entit#e ent to Co i$$ion The very terms CbrokerD or CbrokeringD are

commercial terms where the essence of the activityor occupation undertaken is to earn a commission

2eyes v. 2ural Bank of an -iguel CBrokeringDclearly indicates the performance of certain acts

Cfor monetary consideration or compensationD wOc itconcluded from the various de nitions of CbrokeringD and CbrokerD

Abacus ecurities *orp. v. Ampil ince a brokeragerelationship is essentially a contract for theemployment of an agent, principles of contract of law also govern the brokerJprincipal relationship.

?hether the relationship is a pure brokerJmiddleman one, or a brokerJagency, the right of thebroker to the commission promised by the clientprincipal is primarily governed by the terms andconditions agreed upon them at the time of theperfection of the contract

6n the absence of clear provisions in the contract of brokerage, the CeKcient agent or the procuring

cause of saleD doctrine applies ee Panon vAntonion A. Brimo R *o. 6n other words, /n#e$$ot%er@i$e $ti&/#!te '5 t%e &!rtie$B ! 'ro ere!rn$ %i$ (o i$$ion on#5 @%en t%ro/"% %i$$er i(e$ t%ere i$ e ent/!##5 ! (ontr!(t t%!t i$&er4e(te !n (on$/ !te

There is only one form of CserviceD for which thebroker is entitled to his agreed commission unlessotherwise stipulated of course ! that his serviceprocured the buyer and which eventually resultedinto a perfected and consummated contract of sale.

?here the services and e;orts expended by thebroker were of such suKcient amount that theywould have brought about the sale, but the principalterminated his services in bad faith to frustrate theability of the broker to receive the commission towOc his e;orts would have led to its reali(ation withevery intention to proceed with the sale to theperson procured by the broker, then the latter wouldstill be entitled to his compensation under theprinciple of CeKcient or procuring causeD

-acondray R *o. v. ellner A broker is entitled tothe usual commission whenever he brings to hisprincipal a party who is able and willing to take theproperty and enter into a valid contract upon theterms then named by the principal, although theparticulars may be arranged and the matternegotiated and consummated between the principaland the purchaser directly. 6t would be the height of

A45:*8 H A:*@5I H by @ipolito, aras and FgalinoH "&


17/85

in0ustice to permit the principal to withdraw theauthority as against an express provision of thecontract, and reap the bene ts of the agent1slabors, without being liable to him for hiscommission

2eyes v. -osqueda paraphrased 6n order to earnthe broker1s commission, it is not suKcient to nd aprospective buyer but to nd one who will actuallybuy the property on the terms and conditionsimposed by the owner

2amos v. *A A broker is not entitled to any

commission until he has successfully done the 0obgiven by him. A broker is never entitled tocommission for unsuccessful e;orts

rats v. *A 6n equity, however, the court notes thatthe broker had diligently taken steps to bring backtogether Poronilla and eller and Buyer , _under the circumstances, the court grants in equity"))Q by way of compensation for his e;orts andassistance in the transaction, wOc however wasnali(ed and consummated after the expiration of his exclusive authority

o 2eal lesson accdg to illanueva! As a rulethe services for wOc the broker or agent canclaim compensation for as the basis for theapplication of the CeKcient procuring

causeD doctrine was those rendered whenthe brokerage or agency relationshipexisted> and that after the termination of the period of the contractual relationshipthere is no basis by which to be paid forservices that were not contracted for.

-edrano v. *A! 5Kcient procuring cause wasequated to the doctrine of proximate cause

o C rocuring causeD is meant to be theproximate cause. The term Cprocuringcause,D in describing the cause originatinga series of events which, wOo breaking intheir continuity result in accomplishment of prime ob0ective of employment of thebroker % producing a purchaser ready,willing and able to buy real estate on theowner1s terms. A broker will be regarded asthe Cprocuring causeD of a sale so as to beentitled to the commission, if his e;orts arethe foundation on wOc the negotiationsresulting in a sale are begun. The brokermust be the eKcient agent or the procuringcause of the sale. The means employed byhim and his e;orts must result in the sale.@e must nd the purchaser, and the salemust proceed from his e;orts acting asbroker.

o ?hen there is a close, proximate and causalconnection between the broker1s e;orts andthe principal1s sale of his property, thebroker is entitled to a commission

The CeKcient or procuring causeD doctrine cannotovercome express stipulations in the agreementproviding when exactly the broker is entitled tohave earned his commission

R/#e$ on Co &en$!tion 4or 2ro er$ !&ie$ !#$o toCo i$$ion A"ent$

ince both a pure brokerage and commercialagency arrangement have CserviceD as their verysub0ect matter, there is nothing in the applicabilityof the CeKcient or procuring causeD doctrine in agiven situation determinative of whether it is abrokerJmiddleman or a brokerJagency situation

-anotok v. *A 2ules on entitlement to commissionwere basically the same whether the contract is onefor brokerage or agency

o The established principle is that a broker oragent is not entitled to any commissionuntil he has successfully done the 0ob givenhim

2ro er o4 ! !#e i$tin"/i$%e 4ro 2ro er Hi $e#4 3/r(%!$in"-basically if you import or buy stu3 yourself, di #a bro#er 'di

naman to impt+

CA E: 2e%nB 0e5er !n Co.B Lt . . No#tin" !nG!r(i!B 1916U00ARY: B-* is a wholesale liquor dealer, manufacturedtobacco dealer, merchant, exporter and importer. *ollectorof 6nternal 2evenue demanded that B-* obtain a license asa real estate broker and pay =#) "')& to "'"E> tax andpenalty as real estate broker . B-* paid wO protest. Fnder ageneral merchant1s license, B-* alleged that it had beenengaged in the business of buying and selling copra, hempand other merchandise aside from the liquor and tobaccobusiness . ?hat it does! B-* advances money for futuredelivery of copra and hemp, and takes as security for thefuture delivery of such copra and hemp so contracted for, amortgage upon the land upon which said copra or hemp wasproduced, and charges a discount on the future deliveries of said copra or hemp, which was in compensation for themoney advanced. ]Pef1n of real estate broker! ec "NN E of Act :o. ""#' 6nternal 2evenue +aw ! 5very person, rm, orcompany whose business it is for themselves or others tonegotiate purchases or sales of lands, buildings, or intereststherein, or to negotiate loans secured by lands, buildings, orinterest therein, or to rent real estate for others or to collectrents thereon, shall be regarded as a realJestate broker . *!:9T 25A+ 5 TAT5 B29Q52. Tax was collected illegally andshould be repaid. The business was to purchase and sellagricultural products, and that the tasking of said mortgageswas a mere incident of their principal business. The plainti; was acting for itself. ?hatever was done with reference tothe taking of the mortgages was done as an incident of itsown business.DOCTRINE:Hen er$on . T%e t!te 2#!( =$ L!@ Di(tion!r5: LALrealJestate brokerL has been variously de ned. A broker isgenerally de ned as one who is engaged, for others, on acommission, negotiating contracts relative to property withthe custody of which he has no concern> the negotiatorbetween other parties, never acting in his own name, but inthe name of those who employed him> he is strictly amiddleman and for some purposes the agent of both parties.0e(%e on A"en(5B $e( 1) W%!rton on A"en(5B $e(6*9: A broker is one whose occupation it is to bring partiestogether to bargain, or to bargain for them, in matters of trade, commerce or navigation.

/ "e tore5B in %i$ @or on A"en(5B e(. -8: de nes a

broker as an agent employed to make bargains andcontracts between other persons, in matters of trade,commerce or navigation, for a compensation commonlycalled brokerage.2o/ ier=$ L!@ Di(tion!r5: A realJestate broker negotiatesthe purchase or sale of real property. @e may also procureloans on mortgage security, collect rents, and attend to theletting and leasing of houses and lands.A broker works for another.Art. 1- 9B CC: By the contract of brokerage a person bindshimself to render some service or to do something in behalf of or at the request of another person. Art. "E)', *ivil*ode.

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Territor5 . H!rri$: a man1s business, or the business of acorporation, is that which busies or occupies his time,attention, or labor, as his principal concern or occupation.-any persons make an occasional loan of money, securedby a mortgage, in the course of their business. That fact,however, will not constitute such a person a realJestatebroker.

CA E: (% i !n O'er#5B In(. . R L 0!rtineU00ARY ! 23+ bought < :agata generators from chmidwhich chmidt got from its stock. 23+ then bought "E

generators from :agata *o with chmidt facilitating theorder and receiving commission. ayment for the generatorswere made to :agata and the "E were delivered directly to23+. All "= generators broke. chmidt replaced the thenegotiator between other parties, never acting in his ownname, but in the name of those who employed him_ abroker is one whose occupation is to bring the partiestogether, in matters of trade, commerce or navigation J`*@5*Q 6/ 6: 92646:A+A commission merchant is one engaged in the purchase orsale for another of personal property placed at hispossession or disposal?ebster de nes an indent as La purchase order for goodsespecially when sent from a foreign country.L

There are three parties to an indent transaction, namely, thebuyer, the indentor, and the supplier who is usually a nonJresident manufacturer residing in the country where thegoods are to be bought:o indentor will 0ust fold its hands when a client complainsabout the goods it has bought upon the indentorUsmediation.

The chief features of a commercial broker and a commercialmerchant is that in e;ecting a sale, they are merelyintermediaries or middlemen, and act in a certain sense asthe agent of both parties to the transaction.?ebster de nes an indent as Ca purchase order for goodsespecially when sent from a foreign country.DAn indentor may therefore be best described as one who, forcompensation, acts as a middleman in bringing about a

purchase and sale of goods between a foreign supplier and alocal purchaser.NOTE: chmid, wOc is under the :ew *ivil *ode, reiteratesthe de nition of a broker in Behn, -eyer wOc was under theold civil code

CA E: Re5e$ . R/r!# 2!n o4 !n 0i"/e#U00ARY: 2eyes and PomoJong were charged for

unprofessionalism 2A &$"< for allowing 2B -61s nancialcondition to be a sub0ect of a case study at B , and for2eyes1 brokering for the sale of 2B -6. 2eyes urged oriano

to consider selling the bank and introduced him to illacortaand *astillo through telephone. C: 6t was another deptwhich conducted the seminar and also there was noconcrete evidence on their alleged role in the disclosure of info . @ence, they are not liable for acts of subalterns.@ighranking oKcers cannot be expected to monitor theactivities of their subalterns. 2eyes did not conduct himself in an unprofessional manner in doing the acts imputed tohim.2eyes did not act as a broker. All that 2eyes did was tointroduce 2B -61s resident to the resident of TA Bank and56B. There was not even a hint that he was motivated bymonetary consideration or swayed by any personal interestin doing what he did. Talks never got past the exploratorystage because the two wanted a buyJin while he was for atotal sellJout. 6f he was personally invovled, he would atleast have an inkling of the plans of illacorta and *astillo soas not to waste his time. To e;ectively implement the policyof the B to promote mergers and consolidations byproviding incentives to banks that would undergo suchcorporate combinations, it was necessary that the banks beadvised and assisted by a person knowledgeable about thetransactions like 2eyes.DOCTRINE:C!$e #!@ de nes a CbrokerD as Cone who is engaged, forothers, on a commission, negotiating contracts relative toproperty with the custody of which he has no concern> thenegotiator between other parties, never acting in his ownname but in the name of those who employed him. . . . abroker is one whose occupation is to bring the partiestogether, in matters of trade, commerce or navigation.D

2o/ ier=$ L!@ Di(tion!r5B CbrokerageD refers to Cthetrade or occupation of a broker> the commissions paid to abroker for his services,D while CbrokersD are Cthose who areengaged for others on the negotiation of contracts relativeto property, with the custody of which they have noconcern.DCBrokeringD clearly indicates the performance of certain actsfor monetary consideration or compensation.

CA E: Ar!net!B In(. . De# 3!ternoU00ARY: 4regorio Araneta 6nc led an action to compela( Tuason to deliver to it, a clear title to the lots in the Peedof Absolute ale free from all liens and encumbrances, and adeed of cancellation of the mortgage. a( Tuason argues thatthe Peed is not valid as it is in violation of Art. "N=' whichprovides that an agent cannot buy property under hismanagement. he avers that 3ose Araneta, Araneta 6nc1sresident is her agent> that 4regorio Araneta 6nc. and 3oseAraneta are identical invoking the principle of equity todisregard the ction of corporate entity> and thus, 4regorioAraneta 6nc. cannot validly purchase her property. C:

3oseAraneta is not Tuason1s agent but is a broker. Peed of ale valid. 3ose Araneta was not an agent within the

meaning of article "N='. @e was to be nothing more than agoJbetween or middleman between the defendant and thepurchaser, bringing them together to make the contractthemselves. There was no con dence to be betrayed. @ewas not authori(ed to make a binding contract for thedefendant. @e was not to sell and he did not sell the

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19/85

defendantUs property. @e was to look for a buyer and theowner herself was to make, and did make, the sale. @e wasnot to x the price of the sale because the price had beenalready xed in his commission. @e was not to make theterms of payment because these, too, were clearly speci edin his commission. 3ose Araneta was left no power ordiscretion whatsoever, which he could abuse to hisadvantage and to the ownerUs pre0udice.DOCTRINE: ]A broker^ is Cnothing more than a goJbetweenor middleman between the defendant and the purchaser,bringing them together to make the contract themselves.

There was no con dence to be betrayed ]since the broker^was not authori(ed to make a binding contract for the]purported principal^. @e was not to sell and he did not sellthe property. @e was to look for a buyer and the ownerherself was to make, and did make, the sale. @e was not tox the price of the sale because the price had been alreadyxed in his commission. @e was not to make the terms of payment because these, too, were clearly speci ed in hiscommission. 6n ne, ]the broker^ was left no power ordiscretion whatsoever, which he could abuse to hisadvantage and to the ownerUs pre0udice.Agency is de ned in article "$)' in broad terms, and wehave not come across any commentary or decision dealingdirectly with the precise meaning of agency as employed inarticle "N='.0!nre$!: Agent is one who accepts anotherUsrepresentation to perform in his name certain acts of moreor less transcendency.(!e o#!: The agentUs incapacity to buy his principalUsproperty rests in the fact that the agent and the principalform one 0uridicial person. 6n this connection, the fear thatgreed might get the better of the sentiments of loyalty anddisinterestedness which should animate an administrator oragent, is the reason underlying various classes of incapacityenumerated in article "N='.A eri(!n Co/rt$: The law does not trust human nature toresist the temptations likely to arise of antogonism betweenthe interest of the seller and the buyer.

The ban of par. E of Art. "N=' in the old civil code of thecounterpart of Art. "N'" E of the :** wOc renders an agentlegally incapable of buying the properties of the principal

connotes the idea of trust and con dence> and so where therelationship does not involve considerations of good faithand integrity the prohibition should not and does not apply.

To come under the prohibition, the agent must be in aduciary with his principal.NOTE: The agent1s incapacity to buy his principal1s propertyrests in the fact that the agent and the principal form one

0uridical person

CA E: T!n . G/##!$U00ARY ! The spouses 4ullas executed a nonJexclusiveA authori(ing Tan, a licensed real estate broker, and his

associates Tecson and aldana, to negotiate for the sale of their land in *ebu. Tan et al introduced the spouses to theisters of -ary of Banneaux, 6nc. who were the eventualbuyers of the property. ?hen Tan et al went to the spousesto claim their commission, the spouses denied the samesaying that another group of agents was responsible for thesale of the land to the isters. Tan et. al. led a complaint forthe recovery of their broker1s fee. * ruled in favor of thebrokers Tan et al . They are entitled to their commission.

Tan et al, as brokers, were authori(ed by the spouses tonegotiate for the sale of their land within a period of "month from 3une E', "''E. The authority given to Tan et alwas nonJexclusive, which meant that private respondentswere not precluded from granting the same authority toother agents with respect to the sale of the same property.6n fact, the spouses authori(ed another agent in the personof -r. Bobby acana to sell the same property. There was

nothing illegal or amiss in this arrangement, per se,considering the nonJexclusivity of petitioners1 authority tosell. The problem arose when it eventually turned out thatthese agents were entertaining one and the same buyer, theisters of -ary. The argument of the sps that acana wasthe one entitled to the stipulated


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An agent receives a commission upon the successfulconclusion of a sale. 9n the other hand, a broker earns hispay merely by bringing the buyer and the seller together ,even if no sale is eventually made.

The term Lprocuring causeL in describing a broker1s activity,refers to a cause originating a series of events which,without break in their continuity, result in theaccomplishment of the prime ob0ective of the employmentof the brokerXproducing a purchaser ready, willing and ableto buy on the owner1s terms. To be regarded as theLprocuring causeL of a sale as to be entitled to a

commission, a broker1s e;orts must have been thefoundation on which the negotiations resulting in a salebegan.A broker is the procuring cause of the sale if his act sets inmotion a series of events which produced a buyer willingand able to buy on the seller1s terms. 6n such a case, he willbe entitled to commission.

CA E: A'!(/$ e(/rit5 Cor&. . A &i# ' 7orry, pero di #oto magets #aya nilagay #o lahat. 8 tried 5%*4879+U00ARY: Abacus is a broker and dealer of securities of listed companies at the hil. tock. 5xchange *enter. Ampilopened a cash or regular account with Abacus for thepurpose of buying and selling securities as evidenced by theAccount Application /orm.Ampil actively traded his account, and as a result, heaccumulated an &.&- outstanding obligation in favor of Abacus.Pue to Ampil1s failure to settle his account, the latter failedto do so, Abacus sold Ampil1s securities. But there remained their broker advances for them the balance of the purchase price and keeps the securities as collateral forthe advance or loan. Brokers take these securitiesOstocks totheir bank and borrow the LbalanceL on it, since they have topay in full for the traded stock. @ence, increasing marginsi.e., decreasing the amounts which brokers may lend for thespeculative purchase and carrying of stocks is the mostdirect and e;ective method of discouraging an abnormalattraction of funds into the stock market and achieving amore balanced use of such resources. The primary concernis the eKcacy of security credit controls in preventingspeculative excesses that produce dangerously large andrapid securities price rises and accelerated declines in theprices of given securities issued and in the general pricelevel of securities. +osses to a given investor resulting fromprice declines in thinly margined securities are not of serioussigni cance from a regulatory point of view. ?hen forcedsales occur and put pressures on securities prices, however,they may cause other forced sales and the resultantsnowballing e;ect may in turn have a general adverse e;ectupon the entire market.L

The nature of the stock brokerage business enables brokers,not the clients, to verify, at any time, the status of theclient1s account. Brokers, therefore, are in the superiorposition to prevent the unlawful extension of credit. Because

of this awareness, the law imposes upon them the primaryobligation to enforce the margin requirements.*! Ampil +iable for the /irst,But :ot for the ubsequent

Trades These margin requirements are applicable only totransactions entered into by the present parties subsequentto the initial trades of April ") and "", "''$. Abacus can stillcollect from Ampil to the extent of the di;erence betweenthe latter1s outstanding obligation as of April "", "''$ lessthe proceeds from the mandatory sell out of the sharespursuant to the 2 A 2ules. Abacus1s right to collect is

0usti ed under the general law on obligations and contracts. &rticle 1:; '1+ of the


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stock purchases, or on April "N and "=, "''$> and Ecomplete its liquidation no later than ten days thereafter,applying the proceeds thereof as payment for Ampil1soutstanding obligation.ince the buyer was not able to pay for the transactions thattook place on April ") and "", that is at T N, the broker wasdutyJbound to advance the payment to the settlement bankswithout pre0udice to the right of the broker to collect laterfrom the client.6n securities trading, the brokers are essentially thecounterparties to the stock transactions at the 5xchange.

ince the principals of the broker are generally undisclosed,the broker is personally liable for the contracts thus made.@ence, Abacus had to advance the payments for Ampil1strades. Brokers have a right to be reimbursed for sumsadvanced by them with the express or implied authori(ationof the principal, in this case, Ampil.:ot to require Ampil to pay for his April ")O"" trades wouldput a premium on his circumvention of the laws and wouldenable him to enrich himself un0ustly at the expense of Abacus.Abacus obviously failed to enforce the terms and conditionsof its Agreement with Ampil, speci cally par. #, purportedlyacting on the plea of Ampil to give him time to raise funds.

These stipulations, in relation to par. N, constituted faithfulcompliance with the 2 A. By failing to ensure Ampil1spayment of his rst purchase transaction within the periodprescribed by law, thereby allowing him to make subsequentpurchases, Abacus e;ectively converted Ampil1s cashaccount into a credit account. @owever, extension ormaintenance of credits on nonmargin transactions, arespeci cally prohibited under ection E< b . Thus, Abacuswas remiss in its duty and cannot be said to have come tocourt with Lclean handsL insofar as it intended to collect ontransactions subsequent to the initial trades of April ") and"", "''$.:ote! 6n ari Pelicto 2ule also applies on subsequent trades,hence Abacus cannot claim against Ampil and Ampildeserves no legal or equitable reliefDOCTRINE: ince a brokerage relationship is essentially acontract for the employment of an agent, principles of contract law also govern the brokerJprincipal relationship.

-. Lo!n +Art. 19)),Art. 19)). By the contract of loan, one of the partiesdelivers to another, either something not consumable sothat the latter may use the same for a certain time andreturn it, in which case the contract is called acommodatum> or money or other consumable thing, uponthe condition that the same amount of the same kind andquality shall be paid, in which case the contract is simplycalled a loan or mutuum.*ommodatum is essentially gratuitous.imple loan may be gratuitous or with a stipulation to payinterest.6n commodatum the bailor retains the ownership of thething loaned, while in simple loan, ownership passes tothe borrower.

The relation between the parties depends on the terms of the contract between them.

+9A: A45:*8-oney advanced toanother is expresslyregarded as money lent9ne borrows money toconduct a business inwhich the lender has nointerest or concern in themanner of its conduct

The nancing of operationsto be carried on by anotherfor the mutual advantageof both, wOo any obligationof such other to return the

money advancedA borrower is given moneyfor the purposes of his ownand he must generallyreturn it whether or not hisown business is successful

An agent is given funds bythe principal for latter1sbusiness

After the checks arecollected and convertedinto cash, the creditor anddebtor relationship iscreated between the

depositor and the bank

?here the checks aredeposited wO a collectorbank, the nature of therelationship at that stage isone of agency, that is the

bank is to collect from thedrawees of the checks thecorresponding proceeds

?here one deposits money wO a bank wO instructions toapply it in satisfaction of he debt of a third person, theconventional Cdebtor and creditor relationshipD betweenthe bank and the depositor is created, coupled wO anCagencyD on the part of the bank to pay the debt, wOc isrevocable at the will of the depositor

CA E: Do#e$ . An"e#e$U00ARY: Angeles supposedly loaned N)=k to Poles.Poles sold her property as payment, but refused to executethe documents. Poles contends that it is her friends wholoaned amounts through Angeles who acted as agent for her

nancier, ua> ?hen her friends did not pay, Angelesthreatened to le cases against her, forcing her to executethe deed of sale. Angeles led a complaint for peci cerformance wO Pamages against Poles. *! Angeles is

estopped to deny that she herself acted as agent of ua, herdisclosed principal. he is also estopped to deny that Polesacted as agent for her friends.Angeles admitted she knew that the borrowers are thefriends of Poles. Poles knew that the nancier of Angeles isua> and Angeles knew that the borrowers are friends of Poles. 6t is suKcient that Poles disclosed that she was actingin behalf of her principals. 6f it is true that Poles was LreJlendingL, then the checks should have been drawn in hername and not directly paid to ua. 6n view of the two agencyrelationships, Poles and Angeles are not privy to thecontract of loan between their principals. 7ince the sale is

predicated on that loan, then the sale is void for lac# of consideration.DOCTRINE:

The question of whether an agency has been created isordinarily a question which may be established in the sameway as any other fact, either by direct or circumstantialevidence.

The question is ultimately one of intention.Agency may even be implied from the words and conduct of the parties and the circumstances

Though the fact or extent of authority of the agents maynot, as a general rule, be established from the declarationsof the agents alone, if one professes to act as agent foranother, she may be estopped to deny her agency both asagainst the asserted principal and the third persons

interested in the transaction in which he or she is engaged./or an agency to arise, it is not necessary that the principalpersonally encounter the third person with whom the agentinteracts.

The law in fact contemplates, and to a great degree,impersonal dealings where the principal need not personallyknow or meet the third person with whom her agenttransacts! precisely, the purpose of agency is to extend thepersonality of the principal through the facility of the agent.6f their respective principals do not actually and personallyknow each other, such ignorance does not a;ect their

0uridical standing as agents.

A45:*8 H A:*@5I H by @ipolito, aras and FgalinoH E"


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The fact that the parties may not be aware of the nuances of an agency relationship does not prevent the establishmentof such relationship between them.6t is suKcient that the parties understand that one of them isacting in representation of the other and they consented tothis arrangement.

The manner in which the parties designate the relationshipis not controlling.6f an act done by one person in behalf of another is in itsessential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called.

The question is to be determined by the fact that onerepresents and is acting for another, and if relations existwhich will constitute an agency, it will be an agency whetherthe parties understood the exact nature of the relation ornot .

). In e&en ent Contr!(t +Arti(#e 171),Art. 171). 25 t%e (ontr!(t 4or ! &ie(e o4 @or t%e(ontr!(tor 'in $ %i $e#4 to e?e(/te ! &ie(e o4 @or 4or t%e e o5erB in (on$i er!tion o4 ! (ert!in &ri(eor (o &en$!tion. T%e (ontr!(tor !5 eit%ere o5 on#5 %i$ #!'or or $ i##B or !#$o 4/rni$% t%e!teri!#.

Contr!(t 4or ! &ie(e o4 @or contractor is not an agent of the principal client

and the contractor has no authority to represent theprincipal in entering into 0uridical acts wO thirdparties.

5ssence! ervices rendered must give rise to themanufacture of production of the ob0ect agreedupon

Although the description of the sub0ect matter to bemanufactured or produced is agreed upon by theparties in a contract for a piece of work, there is noelement of CcontrolD

since the contractor cannot be dictated upon by theclient on how to go about accomplishing theob0ective of the contract 6n the case of hell v./iremen1s 6ns! control is limited to the result of thework

Ne@ !n . e!r$ As a general rule, the employer is not liable for the

torts or in0ury inSicted by the independentcontractor upon third persons or by the employeesof such contractor

The employer is not relieved from liability if thein0ury is caused by his negligence or the result of hisinterference in the work of the independentcontractor in this case, the contractor is notindependent

There are cases wOc hold the employer liable wherethe work contracted is intrinsically dangerous or anuisance.

+De Leon (itin" - C. . . 1 -9, 9ne may be an independent contractor and, at the

same time for certain purposes, be an agent of theemployer.

An independent contractor becomes an agent by hisemployer agreeing to be responsible for obligationsincurred by him in the completion of hisundertaking, but payment of the workmen by anowner or employer does not necessarily transforman independent contractor into an agent

CA E: Fre$$e# . 0!ri!no U5 C%!(o on$ ; Co.U00ARY ! -ariano entered into a contract with -erritt,whereby latter undertook to build for -ariano a costlyedi ce. /ressel delivered materials to -erritt but has yet to

be paid despite demand. /ressel led an action against-ariano alleging -eritt was its agent. *! /resell1sallegations demonstrate that -erritt was an independentcontractor not of a principal and an agent and that thematerials were purchased by him as such contractor withoutthe intervention of the -ariano. The fact that -arianoentered into a contract with one 5. -erritt, where by the-erritt undertook and agreed with the -ariano to build forthe -ariano a costly edi ce shows that -erritt wasauthori(ed to do the work according to his own method andwithout being sub0ect to the defendantUs control, except as

to the result of the work. @e could purchase his materialsand supplies from whom he pleased and at such prices as hedesired to pay. The mere fact that -erritt R -ariano hadstipulated in their building contract that the latter could,Lupon certain contingencies,L take possession of theuncompleted building and all materials on the ground, didnot change -erritt from an independent contractor to anagent. ?hen the client did take over the un nished works,he did not assume any direct liability to the suppliers of thecontractors.DOCTRINE !An independent contractor is one who is authori(ed to dothe work according to his own method and without beingsub0ect to the employerUs control, except as to the result of the work.6n the absence of a statute creating what is known asmechanicsU liens, the owner of a building is not liable for thevalue of materials purchased by an independent contractoreither as such owner or as the assignee of the contractor.


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agreed proportions. share of pro ts, not asowner but as an agreedmeasure of compensationfor his services or the like,the relation is one of agency.** "$&' N provides thatthe receipt by a person of the share of the pro ts of abusiness is not prima facieevidence that he is a

partner in the business if such pro ts were receivedCas wages of anemployeeD

The agent or partner can bind the principal or his coJpartner only by such contracts as are entered into withinthe scope of his authorityBoth import the idea of duciary relationship

*. !#e +Art. 1


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DOCTRINE:

6t cannot be an agent as Cno commission or monetaryconsideration was paid or agreed to be paid by the buyers toalleged agentD. There was also no privity of contractbetween the principal and alleged buyer.

?here a foreign company has an agent here selling itsgoods and merchandise, that same agent could not very

well act as agent for local buyers, because the interests of his foreign principal and those of the buyer would be indirect conSict. @e could not serve two masters at the sametime. 4on(alo uyatR ons 6ncorporated vs . ArcoAmusement

CA E: 3e!r# I$#!n Co er(i!# Cor&. . Li T!n Ton"U00ARY ! earl 6sland was engaged in the manufacture of Soor wax under the name CBee ?ax.D 6t entered into acontract with Tong who was designated as the soledistributor of the said article in amar, +eyte, *ebu, Bohol,and :egros 9riental, and all the provinces in -indanao.Fnder the same contract, Tong was going to buy the Soorwax for resale in the said territories. -anila urety R /idelity*o., 6nc. led the necessary surety bond under the contractto cover all shipments of Soor wax that are damaged orunmerchantable. earl 6sland shipped E'' cases of Bee ?axto Tong, valued at $,")$. Tong was able to pay only $$).earl 6sland sued Tong and -anila urety. The lower courtheld the surety liable. The surety appealed, saying that itled the bond on theory that the contract was one of

agency. Thus, it led the bond to guarantee the faithfulperformance of Tong as agent> that since it turned out thatthe contract was one of purchase and sale, -anila uretythen never undertook to guaranty the faithful performanceof Tong as a purchaser. The * said! C@owever, a carefulexamination of the said contract shows that appellant isonly partly right, for the reason that the terms of the saidcontract, while providing for sale of Bee ?ax from the

plainti; to Tong and purchase of the same by Tong from theplainti;, also designates Tong as the sole distributor of thearticle within a certainterritory.D?hile the contract provided for the sale of the items, it alsosaid that Tong was sole distributor> * seemed to have putmore weight on the sole distributor aspectDOCTRINE !

The designation of the contract does not matterNOTE : illanueva The * was unsure of its footing whenit tried to characteri(e a contract of sale between themanufacturer and distributor, as still being wOin the contractof agency. Accdg to illanueva, this is not sound since asearly as in Yuiroga, v. arson, the *ourt had already ruledthat appointing one as CagentD or Cdistributor,D suchappointee assumes the responsibilities of a buyes of thegoods, does not make one a relationship of agency, but thatof saleJThe suit was not between the buyer and seller, but by theseller against the surety of the buyer who had secured theshipment of the wax to the buyer, and the truecharacteri(ation of the contract between the buyer andseller was not the essential criteria by which to x theliability of the surety

CA E: Li . Co/rt o4 A&&e!#$U00ARY: +im received E pieces of 0ewelry ring bracelet from uare(, as evidence by a receipt, for her tosell on commission basis. he returned the bracelet but not

the ring. Pespite demands, she claims that she returnedboth items. uare( led a complaint for 5stafa. *! +im anduare( entered into a contract of agency to sell on

commission basis, as evidenced by a recieipt. . +im1ssignature indeed appears on the upper portion of the receiptimmediately below the description of the items taken. Themoment she aKxed her signature thereon, +im becamebound by all the terms stipulated in the receipt. he is notauthori(ed to return the ring to :adera. he is liable for it.he is therefore liable for 5stafa bec. of her failure to returnthe said 0ewelry to uare(

DOCTRINE: There are some provisions of the law whichrequire certain formalities for particular contracts. The rst iswhen the form is required for the validity of the contract> thesecond is when it is required to make the contract e;ectiveas against third parties such as those mentioned in Articles"


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an agency, as ultimately what is decisive is the intention of the parties.

CA E: N!tion!# Ri(e !n Corn Cor&. . Co/rt o4 A&&e!#$

SUMMARY: A formal contract was entered into betweenPA-52*9 and :A26* where they agrees that PA-52*9agreed to act as an agent of :A26* in exporting such cornand rice and in importing collateral goods in exchange that

will be imported on a back to back letter of credit or noJdollar remittance basis, and to buy from :A26* the saidcollateral goods. Although the corns and grains were dulyexported, the 4ov1t had issued rules banning the barter of goods from abroad. :A26* instituted against PA-52*9 and/ieldmenUs 6ns. *o. 6nc. an action for recovery of a sum of money of the price of the export grains *! 6nsofar as theexporting of the grains was concerned, PA-52*9 actedmerely as agent of :A26* for wOc it cannot be held liable forthe shortfall considering that it had acted wOin the scope of its authority. The fact of PA-52*91s agency in exporting thecollateral goods is admitted in the counterJstatement of facts of the :A26* in its appelleeUs brief led with the *A. 6tis also a fact that because of the change of administration inthe government, barter transactions were suspended.

The other half of the agreement whereby PA-52*9 bounditself Cas the purchaser of the collateral goods to beimported from the proceeds of the sale of the corn and rice,Dwas a valid and binding contract of sale, but for wOcPA-52*9 could not be made a purchase price, because:A26* itself was no longer in a position to import any of suchgoods into the country, by reason of force ma0eure. AfterPA-52*9 had spent huge sums incident to carrying out thepurpose of the contract, the importation of the remainingcollateral goods worth N#)Q could not be e;ected due tothe suspension by the gov1t under a new administration of

barter transactions, :A26* ought to make the necessaryrepresentations wO the gov1t to enable representations wOthe gov1t to enable PA-52*9 to import the said remainingcollateral goods. The contract has reciprocal stipulations wOcmust be given force and e;ect.

NOTE @J DOCTRINE: illanueva Although PA-52*9 hadassumed also the position of being a buyer of goods from:A26*, the * was able to segregate his role as merely anagent of :A26* insofar as the export of grains is concerned,and apply the doctrine that an agent does not assume anypersonal obligation wO respect to the sub0ect of the agencynor of the proceeds hereof, his obligation being merely to

turn over the proceed to the principal whenever he receivesthem.

The case also demonstrated the Cprogressive natureD of every contract of agency, in that it presents a pliable legalrelationship which may be a

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