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 nonperformance. A bank is answerable for negligence in
failing to collect the sums due its debtor from the
latters own debtor, contrary to said banks 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 involves
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 ATACOs 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. PNBs 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.
Ramos vs. Caoibes, 94 Phil. 440
FACTS: Concepcion Ramos appointed Caoibes through
a power of attorney to collect an amount due him from
the Philippine War Damage Commission. Half of that
amount will then be given to the sister of Concepcion
and half to her niece and nephew as evidenced by an
affidavit. Days after Concepcion died, a Check was
issued to Caoibes when he presented the power of
attorney and affidavit and later on encashed it for
himself. The administratrix discovered the collection
made by Caoibes. The administratrix filed to the court
asking Caoibes to deposit the money to the clerk of
court. Caoibes contended that he will deliver half of the
amount to the clerk of court and then said that he had
the right to retain half of the money by virtue of the
power of attorney and the Affidavit.
ISSUE: Whether Caoibes is correct with her contention
that he had the right to retain the money by virtue of
the power of attorney?
RULING: No. Caoibes as an agent had the obligation to
deliver the amount collected by virtue of the power of
attorney to his principla, Concepcion or the

administratrix since she died. No where in the in power

of attorney did it state that the was a cession of rights
made in favour of Caoibes. And the prevailing provision
during the time of the transaction stated that a
contract of agency is deemed gratuitous unless the
agent is a professional agent and there was no showing
that Caoibes was such. Lastly, an agency is terminated
by death of the principal or of the agent. When Caoibes
made use of the power of attorney, the principal was
already dead.
Additional: Verbal donation requires the simultaneous
delivery of the gift. In the absence of this requisite the
donation shall produce no effect, unless made in
writing and accepted in the same form. The alleged
donation was made in writing but it has not been
accepted in the same form, and consequently, has no
validity.
Gutierrez Hermanos vs Oria Hermanos
Gutierrez Hermanos and Oria Hermanos entered into a
contract wherein GH bound itself to acquire for and
forward to OH certain goods such as rice, cash,
petroleum, etc. Because of this, GH and OH decided to
open a mutual current account under Oria Hermanos
on the books of Gutierrez Hermanos with 8% interest.
Gutierrez Hermanos informed Oria Hermanos. that said
current account would be closed within 30 days, after
which, Oria Hermanos would have to settle the balance
due to Gutierrez Hermanos, if any. However, despite
repeated demands from Gutierrez Hermanos to Oria
Hermanos, the latter never paid which led to the filing
of this suit.
Up until the closing of the account, GH had sent OH
various quantities of salt, petroleum, tobacco,
groceries, and beverages and had collected a
commission on the sale. The semiannual accounts
rendered by GH were never questioned. However, OH
claims that GH had set higher prices than the price
actually paid, thereby defrauding OH. OH prayed that
GH render an account as well as the vouchers used to
determine the purchase price of the said goods. OH
also claimed that GH had kept the discount in addition
to collecting commission on the sale of goods.
Issue: whether or not OH is liable to GH for its
unsettled account?
Held:
Yes, but only upon proper accounting of the expenses
for the shipment of rice and petroleum which were
claimed to be overpriced.
When an agent in executing the orders and
commissions of his principal carries out the instructions
he has received from his principal, and does not appear
to have exceeded his authority or to have acted with
negligence, deceit, or fraud, he cannot be held
responsible for the failure of his principal to accomplish
the object of the agency.
Since it was not proven that the price of the goods
were overstated, thereby defrauding OH, OH cannot
escape the liability of paying GH for performing the
task given to him by OH as his principal.

Domingo vs. Domingo

Facts:
Vicente Domingo granted Gregorio Domingo the
exclusive agency to sell his lot with a commission of
5% on the total price
Gregorio authorized Teofilo Purisima to look for a buyer
with half of the 5% as his commission
Teofilo introduced Oscar de Leon to Gregorio as a
prospective buyer
Oscar offered to purchase the lot at a lower price than
that made by Vicente.
Gregorio was able to persuade Vicente to accept
Oscar's offer and an agreement was made between
Vicente and Oscar

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P1,000 was given by Oscar as earnest money P300 of

which was advanced by Vicente to Gregorio as his
commission
Also, Gregorio received P1,000 from Oscar as
'promised' by Oscar if Gregorio will be able to persuade
Vicente to sell the lot at a lower price
This 'promised money' or secret bonus of Gregorio was
not disclosed to Vicente
Oscar talked to Gregorio that he is now canceling the
sale but he will not try to recover the earnest money of
the secret bonus he gave
Gregorio, sensing something fishy, went to the Register
of Deeds and discovered that Vicente actually sold the
land to Oscar's wife as shown in the title
Gregorio approached Vicente and demanded his
commission but the latter refused to give him any
amount
Issue:
W/N Vicente is still liable to pay Gregorio his
commission even though the latter failed to disclose
everything he received form the transaction
Held:
Gregorio cannot demand from Vicente his commission
Article 1891 states that every agent is bound to render
an account of his transactions and to deliver to the
principal whatever he may have received by virtue of
the agency
When Gregorio accepted the secret bonus and failed to
disclose this to his principal, he violated the agency
agreement and FORFEITS HIS RIGHT TO COLLECT THE
COMMISSION FORM THE PRINCIPAL. This is regardless
to W/N the principal suffered any injury because of the
breach of trust.
His acceptance of the secret profit corrupted his duty
to serve the interest only of the principal. Instead of
exerting his best to persuade the buyer to purchase
the lot on the most advantageous terms desired by his
principal, he succeeded in persuading his principal to
accept the terms of the buyer to the detriment of his
principal.

U.S. VS. REYES (36 PHIL. 791)

FACTS:
R. B. Blackman, a surveyor in Pangasinan had an oral
agreement with Domingo Reyes. The latter would
collect in behalf of Blackman amounts due from 12
individuals in connection with the survey of their lands
totaling to Php 860.00. He only succeeded in collecting
Php 540 and delivered Php 368 to
Blackman, retaining the balance of Php 172.00. Both
parties had different claims. Blackman said that the
agreement was 10% commission for Reyes. But Reyes
insisted it was 20%. If the Court would accept
Blackmans claims, Reyes would be entitled to Php
54.00 therefore Php 172.00 misappropriated or Php
118.00 if commission was deducted. On the other
hand, if the Court accepts Reyes claims which was
20% then 20% of the amount supposed to be collected
was Php 172.00. Reyes was found guilty of estafa.
ISSUES:
1) Whether there was a contract of agency between
the parties?
2) Whether its terms and conditions are complied with?
HELD:
There was a contract of agency. But with the terms and
conditions are not complied with. On the onset there
was a contract of agency through an oral agreement.
Reyes was bound to pay the principal all he received
from the collecting dues as stated by Blackman. In

view of the discrepancy in the evidence the court was

not disposed to set up judgment as superior to that of
the trial court. Also conceding that Reyes was to
receive 20%, this unless some contrary and express
stipulation was included would not entitle him in
advance to 20% of the amount actually collected. The
right to receive a commission of either 10% or 20% did
not make to hold out any sum he chose. Since for all
practical purposes the agency was terminated the
agent was under the obligation to turn over to the
principal the amount collected, minus his commission
or that amount.

ROSA VILLA MONNA, plaintiff-appellee,

vs.
GUILLERMO GARCIA BOSQUE, ET
AL., defendants.
GUILLERMO GARCIA BOSQUE, F. H. GOULETTE,
and R. G. FRANCE, appellants.
FACTS:
This action was instituted in the Court of First
Instance of Manila by Rosa Villa y Monna, widow of
Enrique Bota, for the purpose of recovering from the
defendants, Guillermo Garcia Bosque and Jose Romar
Ruiz, as principals, and from the defendants R. G.
France and F. H. Goulette, as solidary sureties for said
principals, the sum of P20,509.71, with interest, as a
balance alleged to be due to the plaintiff upon the
purchase price of a printing establishment and
bookstore located at Escolta, Manila, which had been
sold to Bosque and Ruiz by the plaintiff, acting through
her attorney in fact, one Manuel Pirretas y Monros.
The case stemmed from the following:
1. Prior to September 17, 1919, the plaintiff Villa
was the owner of a printing establishment and
bookstore located at Escolta, Manila, and
known as La Flor de Cataluna, Viuda de E.
Bota, with the machinery, motors, bindery,
type material furniture, and stock appurtenant
thereto. Upon the date stated, the plaintiff,
then and now a resident of Barcelona, Spain,
acting through Manuel Pirretas, as attorney in
fact, sold the establishment above-mentioned
to the defendants Guillermo Garcia Bosque
and Jose Pomar Ruiz, residents of the City of
Manila, for the stipulated sum of P55,000.
2. In 1920, Pirretas absented himself from the
Philippine Islands on a prolonged visit to Spain;
and in contemplation of his departure he
executed a document purporting to be a
partial substitution of agency, whereby he
transferred to "the mercantile entity Figueras
Hermanos, or the person, or persons, having
legal representation of the same," the powers
that had been previously conferred on Pirretas
by the plaintiff "in order that," so the
document runs, "they may be able to effect
the collection of such sums of money as may
be due to the plaintiff by reason of the sale of
the bookstore and printing establishment
already mentioned, issuing for such purpose
the receipts, vouchers, letters of payment, and
other necessary documents for whatever they
shall have received and collected of the
character indicated."
3. When the time came for the payment of the
second installment and accrued interest due at
the time, the purchasers were unable to
comply. Figueras Hermanos, acting as attorney
in fact for the plaintiff, an agreement was
Afterwhich, another document was entered
(Exhibit 1) whereby the partnership in said
document it stated that Bosque is indebted to
Villa in the amount of 32k which France and
Goulette are bound as joint and several
sureties, and that the latters partnership had

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4.

transferred all its assets to the Bota Printing

Company.
Rosa is now alleging that Figueras had no
authority to execute the contract containing
the release of Guillermo from the liability, and
that she had not ratified the same. Defendants
argue otherwise, using the agreement as a
novation releasing him from personal liability.

CFIs ruling:
The defendant Ruiz put in no appearance, and
after publication judgment by default was entered
against him. The other defendants answered with a
general denial and various special defenses. The trial
judge gave judgment in favor of the plaintiff,
requiring all of the defendants, jointly and severally, to
pay to the plaintiff the sum of P19,230.01, as capital,
with stipulated interest, plus the further sum of
P1,279.70 as interest already accrued and unpaid upon
the date of the institution of the action, with interest.
ISSUE:
W/N Figueras had actual authority whatever to release
the sureties or to make a novation of the contract
without their additional guaranty

HELD:
NO. The partial substitution of agency (Exhibit
B to amended complaint) purports to confer on
Figueras Hermanos or the person or persons exercising
legal representation of the same all of the powers that
had been conferred on Pirretas by the plaintiff in the
original power of attorney. This original power of
attorney is not before the SC, but assuming, as is
stated in Exhibit B, that the document contained a
general power to Pirretas to sell the business known
as La Flor de Catalua upon conditions to be fixed by
him and power to collect money due to the plaintiff
upon any account, with a further power of substitution,
yet it is obvious upon the face of the act of substitution
(Exhibit B) that the sole purpose was to authorize
Figueras Hermanos to collect the balance due to the
plaintiff upon the price of La Flor de Catalua, the sale
of which had already been affected by Pirretas.
The act of substitution conferred no authority
whatever on M. T. Figueras as an individual.
In view of these defects in the granting and
exercise of the substituted power, we agree with the
trial judge that the Exhibit 1 is not binding on the
plaintiff. Figueras had no authority to execute the
contract of release and novation in the manner
attempted; and apart from this it is shown that in
releasing the sureties Figueras acted contrary to
instructions. From this it is obvious that Figueras had
no actual authority whatever to release the sureties or
to make a novation of the contract without their
additional guaranty.
As a result of our examination of the case the SC find
no error in the record prejudicial to any of the
appellants, and the judgment appealed from was
affirmed, So ordered, with costs against the appellants.
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
husbands 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 husbands
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 Dans 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 DBPs 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.
Philippine Products Company vs Primateria
Societe Anonyme Pour Le Commerce Exterieur
15 SCRA 301 Business Organization Corporation
Law Liability of Foreign Corporations and their Agents
Primateria Societe Anonyme Pour Le Commerce
Exterieur (Primateria Zurich, a sociedad anonima
formed in Zurich), through Alexander Baylin, entered
into an agreement with Philippine Products Company
(PPC) whereby it was agreed that from 1951 to 1953,
PPC shall ship copra products abroad.
Apparently, Primateria Zurich was not licensed by the
Securities and Exchange Commission to do business in
the Philippines. Primateria Zurich also failed to pay its
obligations amounting to P31,009.71. PPC sued
Primateria Zurich and it impleaded Baylin, Primateria
Philippines, and one Jose Crame, the latter three being
impleaded as agents of Primateria Zurich.
The lower court ruled in favor PPC but it absolved
Baylin, Crame, and Primateria Philippines.

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PPC appealed as it insists that Baylin et al should be

liable as agents because under Section 68 and 69 of
the Corporation Law, the agents of foreign corporations
not licensed to transact in the Philippines shall be
personally liable for contracts made in their (foreign
corporations) behalf.
ISSUE: Whether or not PPC is correct.
HELD: No. PPC was not able to prove that Primateria
Zurich, a sociedad anonima, is a foreign corporation.
And as a sociedad anonima, Primateria Zurich is not a
corporation under our Corporation Law. As such,
Sections 68 and 69 cannot be invoked in order to make
the alleged agents of Primateria Zurich be liable. PPC
will have to enforce the judgment against Primateria
Zurich alone.

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 Namercos obligation.
In the contract of sale, it was stipulated that delivery
should be made within 60 days from the establishment
on Namercos 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 NPCs 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 nonperformance. The Govt 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. Namercos 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 bidders 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.
ALBERT VS. UNIVERSITY PUBLISHING
FACTS:
Mariano Albert entered into a contract with University
Publishing Co., Inc. through Jose M. Aruego, its
President, whereby University would pay plaintiff for
the exclusive right to publish his revised Commentaries
on the Revised Penal Code. The contract stipulated
that failure to pay one installment would render the
rest of the payments due. When University failed to
pay the second installment, Albert sued for collection
and won.
However, upon execution, it was found that the records
of this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a
corporation or partnership. Albert petitioned for a writ
of execution against Jose M. Aruego as the real
defendant. University opposed, on the ground that
Aruego was not a party to the case.
ISSUE: WON University Publishing Co., Inc. is an
existing corporation with an independent juridical
personality despite not being registered with the SEC.

HELD: No. On account of the non-registration it cannot

be considered a corporation, not even a corporation de
facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no
personality separate from Jose M. Aruego; it cannot be
sued independently.
In the case at bar, Aruego represented a non-existent
entity and induced not only Albert but the court to
believe in such representation. He signed the contract
as President of University Publishing Co., Inc.,
stating that this was a corporation duly organized and
existing under the laws of the Philippines.
A person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such
privileges and obligations and becomes personally
liable for contracts entered into or for other acts
performed as such agent.
Aruego, acting as representative of such non-existent
principal, was the real party to the contract sued upon,
and thus assumed such privileges and obligations and
became personally liable for the contract entered into
or for other acts performed as such agent.
The Supreme Court likewise held that the doctrine of
corporation by estoppel cannot be set up against
Albert since it was Aruego who had induced him to act
upon his (Aruegos) willful representation that
University had been duly organized and was existing
under the law.

EUGENIO V. CA
As far as third persons are concerned, an act is
deemed to have been performed within the scope of
the agents authority, if such is within the terms of the
power of attorney, as written, even if the agent has in
fact exceeded the limits of his authority according to
the understanding between the principal and his agent.

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FACTS: Nora Eugenio was a dealer of Pepsi. She had

one store in Marikina but had a regular charge account
in Q.C. And Muntinlupa. Her husband Alfredo used to
be a route manager for Pepsi in its Q.C. Plant. Pepsi
filed a complaint for a sum of money against Eugenio
spouses. since according to them the spouses (1) had
an outstanding balance since it purchased and
received on credit various products from both its Q.C.
and Muntinlupa plant and (2) had an unpaid obligation
for the loaned empties from Pepsi. They contend that
the total outstanding account was P94,651.xx.
Eugenio's in their defense presented four Trade
Provisional Receipts (TPR) allegedly issued to and
received by them from Pepsi's Route Manager (Malate
Warehouse) Jovencio Estrada showing that they paid a
total sum of P80,500.xx. They also claim that the
signature of Nora Eugenio in a Sales Invoice (85366)
for the amount of P5,631.xx which was included in the
computation of their debt was falsified.
Therefore, without these errors, petitioner contend that
(1) they do not have any outstanding debt, and (2) it is
Pepsi who owes them P3,546.02. RTC found in favor of
Pepsi. CA affirmed the decision.
ISSUE: W/N the amounts in the TPR should be credited
in favor of the spouses.
HELD: CA decision is annulled and set-aside. Pepsi is
ordered to pay Eugenio. Background: Eugenio
submitted the TPR's to Atty. Rosario (Pepsi's lawyer).
Thereafter, Rosario ordered Daniel Azurin
(asst.personnel manager) to conduct an investigation
to verify the claim of the petitioners. According to
Azurin, Estrada denied that he issued and signed the
TPR's. Azurin testified to this in Court (However,
Estrada never did. He failed to appear and was never
found. Therefore, his testimony- as told by Azurin- is
barred by the Hearsay Evidence Rule).
Furthermore, the investigation conducted was really
more of an interview without any safeguards and did
not give Eugenio opportunity to object or crossexamine Estrada. The other points of Estrada (and
Pepsi) were all invalid since Estrada was nowhere to be
found and Pepsi failed to comply with the pertinent
rules for the admission of the evidence by which it
sought to prove its contentions. Pepsi therefore was
unable to rebut the aforestated presumptions in favor
of valid payment by petitioners,
In relation to Agency: Assuming in this case that Pepsi
never received the amounts reflected in the TPR's,
Pepsi still failed to prove that Estrada (its duly
authorized agent) did not receive the amounts. In so
far as Eugenio is concerned, their obligation is
extinguished when they paid Estrada using Pepsi's
official receipt. The substantive law is that payment
shall be made to the person in whose favor the
obligation has been constituted, or his successor in
interest, or any person authorized to receive it.
*TPR: Trade Provisional Receipts are bound and given in
booklets to the company sales representatives, under
proper acknowledgement by them and with a record of
the distribution thereof. After every transaction, when a
collection is made the customer is given by the sales
representative a copy of the TPR, that is, the triplicate
copy or customer's copy, properly filled up to reflect
the completed transactions. All unused TPR's,as well as
the collections made, are turned over by the sales
representative to the appropriate company officer.
GREEN VALLEY V. IAC
In an agency to sell, the agent is liable to pay the
principal for goods sold by the agent without the
principals consent. The commission agent cannot
without the express or implied consent of the principal,
sell on credit. Should he do so, the principal may
demand from him payment in cash, but the

commission agent shall be entitled to any interest or

benefit, which may result from such sale.
FACTS: In 1969, GREEN VALEY POULTRY AND ALLIED
PRODUCTS entered into a letter agreement with
SQUIBB & SONS PHILIPPINE CORPORATION. The details
of the agreement state that Green Valley will be the
nonexclusive distributor of the products of Squibb
Veterinary Products. As its distributor Green Valley is
entitled to 10% discount on Squibbs whole sale price
and catalogue price. Green Valley is also limited to
selling Squibbs products to central and northern
Luzon. Payment for purchases from Squibb will be due
60 days from date of invoice, etc. For goods delivered
to Green Valley but unpaid, Squibb filed a suit to
collect. Squibb argues that their relationship with
Green Valley is a mere contract of sale as evidenced by
the stipulation that Green Valley was obligated to pay
for the goods received upon the expiration of the 60day credit period. Green Valley counters that the
relationship between itself and Squibb is that of an
agency to sell. ISSUE: W/N Green Valley is an agent of
Squibb. RULING: Whether viewed as an agency to sell
or as a contract of sale GREEN VALLEY is liable to
Squibb for the unpaid products. If it is a contract of sale
then the Green Valley is liable by just merely enforcing
the clear words of the contract. If it is an agency then
Green Valley is liable because it sold on credit without
authority from its principal. The Civil Code says: Art.
1905 The commission agent cannot without the
express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand from
him payment in cash, but the commission agent shall
be entitled to any interest or benefit, which may result
from such sale.
Metropolitan Bank & Trust Company vs. Court of
Appeals
G.R. No. 88866
February, 18, 1991
Facts:
Eduardo Gomez opened an account with
Golden Savings and deposited 38 treasury warrants. All
warrants were subsequently indorsed by Gloria Castillo
as Cashier of Golden Savings and deposited to its
Savings account in Metrobank branch in Calapan,
Mindoro. They were sent for clearance. Meanwhile,
Gomez is not allowed to withdraw from his account,
later, however, exasperated over Floria repeated
inquiries and also as an accommodation for a valued
client Metrobank decided to allow Golden Savings to
withdraw from proceeds of the warrants. In turn,
Golden Savings subsequently allowed Gomez to make
withdrawals from his own account. Metrobank informed
Golden Savings that 32 of the warrants had been
dishonored by the Bureau of Treasury and demanded
the refund by Golden Savings of the amount it had
previously withdrawn, to make up the deficit in its
account. The demand was rejected. Metrobank then
sued Golden Savings.
Issue:
1. Whether or not Metrobank can demand refund
agaist Golden Savings with regard to the amount
withdraws to make up with the deficit as a result of the
dishonored treasury warrants.
2. Whether or not treasury warrants are negotiable
instruments
Held:
No. Metrobank is negligent in giving Golden
Savings the impression that the treasury warrants had
been cleared and that, consequently, it was safe to
allow Gomez to withdraw. Without such assurance,
Golden Savings would not have allowed the
withdrawals. Indeed, Golden Savings might even have
incurred liability for its refusal to return the money that
all appearances belonged to the depositor, who could
therefore withdraw it anytime and for any reason he
saw fit.
It was, in fact, to secure the clearance of the
treasury warrants that Golden Savings deposited them

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to its account with Metrobank. Golden Savings had no

clearing facilities of its own. It relied on Metrobank to
determine the validity of the warrants through its own
services. The proceeds of the warrants were withheld
from Gomez until Metrobank allowed Golden Savings
itself to withdraw them from its own deposit.
Metrobank cannot contend that by indorsing the
warrants in general, Golden Savings assumed that they
were genuine and in all respects what they purport to
be, in accordance with Sec. 66 of NIL. The simple
reason that NIL is not applicable to non negotiable
instruments, treasury warrants.
No. The treasury warrants are not negotiable
instruments. Clearly stamped on their face is the word:
non negotiable. Moreover, and this is equal
significance, it is indicated that they are payable from
a particular fund, to wit, Fund 501. An instrument to be
negotiable instrument must contain an unconditional
promise or orders to pay a sum certain in money. As
provided by Sec 3 of NIL an unqualified order or
promise to pay is unconditional though coupled with:
1st, an indication of a particular fund out of which
reimbursement is to be made or a particular account to
be debited with the amount; or 2nd, a statement of the
transaction which give rise to the instrument. But an
order to promise to pay out of particular fund is not
unconditional. The indication of Fund 501 as the source
of the payment to be made on the treasury warrants
makes the order or promise to pay not conditional
and the warrants themselves non-negotiable. There
should be no question that the exception on Section 3
of NIL is applicable in the case at bar.
SET C
Prudential Bank vs. CA
Facts: The complaint in this case arose when private
respondent Aurora F. Cruz, with her sister as codepositor, invested P200, 000.00 in Central Bank bills
with the Prudential Bank at its branch in Quezon
Avenue, Quezon City, on June 23, 1986. Susan Quimbo,
the Bank employee assisted her on all her dealings.
One of such dealing involves Cruz withdrawal from her
Savings Account No. 2546 and applying such amount
to the investment with the same bank. Cruz was asked
to sign a Withdrawal Slip for P196, 122.98,
representing the amount to be re-invested after
deduction of the prepaid interest. Quimbo explained
this was a new requirement of the bank. Several days
later, Cruz received another Confirmation of Sale and a
copy of the Debit Memo coming from Quimbo. On
October 27, 1986, Cruz returned to the bank and
sought to withdraw her P200, 000.00. After verification
of her records, however, she was informed that the
investment appeared to have been already withdrawn
by her on August 25, 1986. There was no copy on file
of the Confirmation of Sale and the Debit Memo
allegedly issued to her by Quimbo. Quimbo herself was
not available for questioning as she had not been
reporting for the past week. Prompted by the event
Cruz's reaction was to file a complaint for breach of
contract against Prudential Bank in the Regional Trial
Court of Quezon City. She demanded the return of her
money with interest, plus damages and attorney's fees.
Cruz won the case in both the RTC and CA. Issue: Does
the fault of bank employee bind the Bank particularly
in cases where the bank employee created blunder or,
worse, intentionally cheat the depositor?
Held:
The liability of the principal for the acts of the agent is
not debatable. Law and jurisprudence are clearly and
absolutely against the petitioner. Such liability dates
back to the Roman Law maxim, Qui per alium facit per
seipsum facere videtur. "He who does a thing by an
agent is considered as doing it himself." This rule is
affirmed by the Civil Code thus: Art. 1910. The principal
must comply with all the obligations which the agent
may have contracted within the scope of his authority.
Art. 1911. Even when the agent has exceeded his

authority, the principal is solidarily liable with the

agent if the former allowed the latter to act as though
he had full powers. Conformably, we have declared in
countless decisions that the principal is liable for
obligations contracted by the agent. The agent's
apparent representation yields to the principal's true
representation and the contract is considered as
entered into between the principal and the third
person. WHEREFORE, the petition is DENIED and the
appealed decision is AFFIRMED.
G.R. No. 88539 October 26, 1993
KUE CUISON, doing business under the firm
name and style"KUE CUISON PAPER
SUPPLY," petitioner,
vs.
THE COURT OF APPEALS, VALIANT INVESTMENT
ASSOCIATES, respondents.
FACTS: Kue Cuison is a sole proprietorship engaged in
the purchase and sale of newsprint, bond paper and
scrap.
Valiant Investment Associates delivered various kinds
of paper products to a certain Tan. The deliveries were
made by Valiant pursuant to orders allegedly placed by
Tiac who was then employed in the Binondo office of
petitioner. Upon delivery, Tan paid for the merchandise
by issuing several checks payable to cash at the
specific request of Tiac. In turn, Tiac issued nine (9)
postdated checks to Valiant as payment for the paper
products. Unfortunately, sad checks were later
dishonored by the drawee bank.
Thereafter, Valiant made several demands upon
petitioner to pay for the merchandise in question,
claiming that Tiac was duly authorized by petitioner as
the manager of his Binondo office, to enter into the
questioned transactions with Valiant and Tan. Petitioner
denied any involvement in the transaction entered into
by Tiac and refused to pay Valiant.
Left with no recourse, private respondent filed an
action against petitioner for the collection of sum of
money representing the price of the merchandise. After
due hearing, the trial court dismissed the complaint
against petitioner for lack of merit. On appeal,
however, the decision of the trial court was modified,
but was in effect reversed by the CA. CA ordered
petitioner to pay Valiant with the sum plus interest, AF
and costs.
ISSUE: WON Tiac possessed the required authority
from petitioner sufficient to hold the latter liable for the
disputed transaction
HELD:
YES

As to the merits of the case, it is a well-established rule

that one who clothes another with apparent authority
as his agent and holds him out to the public as such
cannot be permitted to deny the authority of such
person to act as his agent, to the prejudice of innocent
third parties dealing with such person in good faith and
in the honest belief that he is what he appears to be
It matters not whether the representations are
intentional or merely negligent so long as innocent,
third persons relied upon such representations in good
faith and for value. Article 1911 of the Civil Code
provides:

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Even when the agent has exceeded his authority, the

principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers.
The above-quoted article is new. It is intended to
protect the rights of innocent persons. In such a
situation, both the principal and the agent may be
considered as joint tortfeasors whose liability is joint
and solidary.
It is evident from the records that by his own acts and
admission, petitioner held out Tiac to the public as the
manager of his store in Binondo. More particularly,
petitioner explicitly introduced to Villanueva, Valiants
manager, as his (petitioners) branch manager as
testified to by Villanueva. Secondly, Tan, who has been
doing business with petitioner for quite a while, also
testified that she knew Tiac to be the manager of the
Binondo branch. Even petitioner admitted his close
relationship with Tiu Huy Tiac when he said that they
are like brothers There was thus no reason for
anybody especially those transacting business with
petitioner to even doubt the authority of Tiac as his
manager in the Binondo branch.

Tiac, therefore, by petitioners own representations and

manifestations, became an agent of petitioner by
estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be
denied or disproved as against the person relying
thereon (Article 1431, Civil Code of the Philippines). A
party cannot be allowed to go back on his own acts and
representations to the prejudice of the other party who,
in good faith, relied upon them. Taken in this light,.
petitioner is liable for the transaction entered into by
Tiac on his behalf. Thus, even when the agent has
exceeded his authority, the principal is solidarily liable
with the agent if the former allowed the latter to fact
as though he had full powers (Article 1911 Civil Code),
as in the case at bar.
Finally, although it may appear that Tiac defrauded his
principal (petitioner) in not turning over the proceeds
of the transaction to the latter, such fact cannot in any
way relieve nor exonerate petitioner of his liability to
private respondent. For it is an equitable maxim that as
between two innocent parties, the one who made it
possible for the wrong to be done should be the one to
bear the resulting loss.

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