BA FINANCE CORPORATION vs.

COURT OF APPEALS [August 27, 1991]

In 1977, Manuel and Lilia Cuady obtained from Supercars, Inc. a credit of P39,574.80, for a Ford Escort, four-door
sedan. Said obligation was evidenced by a promissory note executed by the Cuadys in favor of Supercars, Inc. There
was also stipulated a penalty of P10 for every month of late installment payment. To secure the faithful and prompt
compliance of the obligation under the said promissory note, the Cuady spouses constituted a chattel mortage on
the aforementioned motor vehicle. Supercars, Inc. assigned the promissory note, together with the chattel
mortgage, to B.A. Finance Corporation. The Cuadys paid a total of P36,730.15 to the B.A. Finance Corporation, thus
leaving an unpaid balance of P2,344.65 as of July 18, 1980. In addition thereto, the Cuadys owe B.A. Finance
Corporation P460, representing penalties or surcharges for tardy monthly installments.

B.A. Finance Corporation, as the assignee of the mortgage lien, obtained the renewal of the insurance coverage over
the aforementioned motor vehicle for the year 1980 with Zenith Insurance Corporation, when the Cuadys failed to
renew said insurance coverage themselves. Under the terms and conditions of the said insurance coverage, any loss
under the policy shall be payable to the B.A. Finance Corporation.

In 1980, the aforementioned motor vehicle figured in an accident and was badly damaged. The incident was
reported to B.A. Finance and to Zenith Insurance. The Cuadys asked the B.A. Finance to consider the same as a total
loss, and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of
their remaining account and give them the surplus thereof, if any. Instead of heeding the request of the Cuadys, B.A.
Finance Corporation prevailed upon the former to just have the car repaired. Not long thereafter, however, the car
bogged down. The Cuadys wrote B.A. Finance Corporation requesting the latter to pursue their prior instruction of
enforcing the total loss provision in the insurance coverage. When B.A. Finance Corporation did not respond
favorably to their request, the Cuadys stopped paying their monthly installments on the promissory note. In 1982, in
view of the failure of the Cuadys to pay the remaining installments on the note, B.A. Finance Corporation sued
them in the RTC-Manila for the recovery of the said remaining installments.

RTC: rendered its decision in favor of the Cuady spouses and DISMISSED BA Finance’s complaint;

CA: affirmed the decision of the RTC. The appellate court held that under the established facts and circumstances, it
is unjust, unfair and inequitable to require the chattel mortgagors, the Cuady spouses, to still pay the unpaid balance
of their mortgage debt on the said car, the non-payment of which account was due to the stubborn refusal and
failure of BA Finance to avail of the insurance money which became due and demandable after the insured motor
vehicle was badly damaged in a vehicular accident covered by the insurance risk. ...

ISSUE: W/N B.A. Finance has waived its right to collect the unpaid balance of the Cuady spouses on the promissory
note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle
subject of the chattel mortgage.

B.A. Finance: contends that even if it failed to enforce the total loss provision in the insurance policy of the motor
vehicle subject of the chattel mortgage, said failure does not operate to extinguish the unpaid balance on the
promissory note, considering that the circumstances obtaining in the case at bar do not fall under Article 1231 of the
Civil Code relative to the modes of extinguishment of obligations.

Cuadys: insist that owing to its failure to enforce the total loss provision in the insurance policy, B.A. Finance
Corporation lost not only its opportunity to collect the insurance proceeds on the mortgaged motor vehicle in its
capacity as the assignee of the said insurance proceeds pursuant to the memorandum in the insurance policy which
states that the "LOSS: IF ANY, under this policy shall be payable to BA FINANCE CORP., as their respective rights and
interest may appear" but also the remaining balance on the promissory note.

HELD: YES. B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars, Inc. when
the latter assigned the promissory note, together with the chattel mortgage constituted on the motor vehicle in
question in favor of the former. Consequently, B.A. Finance Corporation is bound by the terms and conditions of the
chattel mortgage executed between the Cuadys and Supercars, Inc.
Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-in-fact with full power and
authority to file, follow-up, prosecute, compromise or settle insurance claims; to sign execute and deliver the
corresponding papers, receipts and documents to the Insurance Company as may be necessary to prove the claim,
and to collect from the latter the proceeds of insurance to the extent of its interests, in the event that the mortgaged
car suffers any loss or damage.

In granting B.A. Finance Corporation the aforementioned powers and prerogatives, the Cuady spouses created in
the former's favor an agency. Thus, under Article 1884 of the Civil Code, B.A. Finance Corporation is bound by its
acceptance to carry out the agency, and is liable for damages which, through its non-performance, the Cuadys, the
principal in the case at bar, may suffer.

Unquestionably, the Cuadys suffered pecuniary loss in the form of salvage value of the motor vehicle in question, not
to mention the amount equivalent to the unpaid balance on the promissory note, when B.A. Finance Corporation
steadfastly refused and refrained from proceeding against the insurer for the payment of a clearly valid insurance
claim, and continued to ignore the yearning of the Cuadys to enforce the total loss provision in the insurance policy,
despite the undeniable fact that Rea Auto Center, the auto repair shop chosen by the insurer itself to repair the
aforementioned motor vehicle, misrepaired and rendered it completely useless and unserviceable.

The records show that instead of acting on the instruction of the Cuadys to enforce the total loss provision in the
insurance policy, BA Finance insisted on just having the motor vehicle repaired, to which Cuady spouses reluctantly
acceded. As heretofore mentioned, the repair shop chosen was not able to restore the aforementioned motor
vehicle to its condition prior to the accident. Thus, the said vehicle bogged down shortly thereafter.

WHEREFORE, the instant petition is DENIED, and the decision appealed from is AFFIRMED.
PACIFIC REHOUSE CORPORATION vs. EIB SECURITIES, INC. [October 13, 2010]

Pacific Rehouse and EIB entered into a Securities Dealings Account Agreement, Sec. 7 of the SDAA provides:
7. Lien
The client agrees that all monies and/or securities and/or all other property of the Client in the Company’s custody or
control held from time to time shall be subject to a general lien in favour of Company for the discharge of all or any
indebtedness of the Client to the Company. The Client shall not be entitled to withdraw any monies or securities held by
the Company pending the payment in full to the Company of any indebtedness of the Client to the Company. The company
shall be entitled at any time and without notice to the Client to retain, apply, sell or dispose of all or any of the [client’s]
property if any such obligation or liability is not discharged in full by the client when due or on demand in or towards the
payment and discharge of such obligation or liability and the Company shall be under no duty to the client as to the price
obtained or any losses or liabilities incurred or arising in respect of any such sale or disposal. Subject to the relevant law
and regulation on the matter, the client hereby authorizes the Company, on his/its behalf, at any time and without notice to
the client’s property if any such obligation or liability is not discharged.
From June 2003 to March 2004, Pacific Rehouse bought about 60 million Kuok Properties, Inc. shares of stock
through the Philippine Stock Exchange. The KPP shares were acquired by Pacific Rehouse through their broker, EIB
Securities. The KPP shares of stock were bought by Pacific Rehouse at an average price of P0.22/share. Also from July
and August 2003, Pacific Rehouse bought 32 million DMCI shares of stock through the PSE. Of these shares, 16
million were likewise acquired by Pacific Rehouse through EIB, while the remaining 16 million DMCI shares were
transferred from Westlink Global Equities, Inc. The DMCI shares of stock were bought by plaintiffs at an average price
of P0.38/share.
In April 2004, Pacific Rehouse and EIB agreed to sell the 60 million KPP shares to any party for the price of
P0.14/share. The sale of the KPP shares was made with an option on the part of Pacific Rehouse to buy back or
reacquire the said KPP shares within a period of 30 days from the transaction date, at the buy-back price of
P0.18/share. Eventually, Pacific Rehouse decided not to exercise their option to buy back the KPP shares and did
not give any buy-back instruction to EIB.
In June 2004, without Pacific Rehouse’s prior knowledge and consent, EIB sold Pacific Rehouse’s 32 million DMCI
shares of stock for an average price of P0.24 per share. Defendant EIB sold the DMCI shares of plaintiffs for an
average price of only P0.24/share despite full knowledge that the sale would result in a substantial loss to the Pacific
Rehouse of around P4.5 Million. The proceeds of said sale were used by EIB to buy back 61 million KPP shares
earlier sold by Pacific Rehouse because EIB made an unauthorized promise to the buyer of the KPP shares that
Pacific Rehouse would buy back the KPP shares.
When Pacific Rehouse wrote to EIB to demand that their 32 million DMCI shares be transferred to Westlink Global
Equities Inc., EIB could not comply. In his letters to Pacific Rehouse, EIB admitted to having sold the 32 million DMCI
shares of stock and that it sent statements of account to Pacific Rehouse in July 2004. EIB claims that since Pacific
Rehouse made no exceptions to the statements of account, the sale of DMCI shares in June 2004 was supposedly
"validly executed". Affirmative defenses presented are that EIB disposed of the DMCI shares pursuant to Sec. 7 of
the SDAA, notices of sale, ratification and laches.
RTC: rendered judgment directing EIB to return Pacific Rehouse’s 32 million DMCI shares. On the other hand, Pacific
Rehouse is directed to reimburse EIB the amount of P10.9 million, representing the buy-back price of the 60 million
KPP shares of stocks at P0.18/share.
The RTC held that the sale of the Kuok Properties, Inc. shares was with a buy-back obligation and not an option as
Pacific Rehouse argued. However, it found that, as per their notices of sale agreements, the collateral for the sale
transactions is the same KKP shares. Thus, it held that EIB erred in selling the DMCI shares instead of the KKP shares
which served as collateral. It ruled that Section 7 of the Securities Dealings Account Agreement does not apply, since
it provided for a general agreement executed prior to the subsequent and specific agreements entered into by the
parties specifically for the sale and repurchase of the KKP shares. Thus, the trial court concluded that EIB went
beyond its authority in selling petitioners’ DMCI shares in order to buy back the KKP shares.
Anent Pacific Rehouse’s apparent lack of objection to the account statements issued by EIB and the sales
confirmation receipts covering the sale of DMCI shares, the RTC viewed it as not constituting ratification by Pacific
Rehouse for said documents did not disclose the purpose of the sale, applying the rule that any ambiguity in a
written document should be strictly construed against the party who caused its preparation. In fine, it held that
since the parties’ relation is fiduciary in nature, with more reason that EIB should have been more forthright in
getting the prior consent of petitioners before selling the DMCI shares.
CA: revoked the RTC’s judgment on the pleadings and remanding the case back to the RTC for further proceedings.
The CA found that while some material allegations in Pacific Rehouse’s complaint were admitted by EIB, the latter’s
answer nonetheless raised other genuine issues which it viewed can only be threshed out in a full-blown trial, like
"the average price of the KPP shares of stock, the scope of the collaterals stated in the Notices of Sale and the
monetary claims of EIB against Pacific Rehouse.

PACIFIC REHOUSE: assert the inapplicability of Sec. 7 of the SDAA to their liability to reacquire the KKP shares, as the
DMCI shares were not sold to pay for their P70 million obligation to EIB but to settle their obligation to the buyers of
their KKP shares.

ISSUE: W/N EIB can be compelled to return DMCI shares to petitioners based on the alleged unauthorized disposal
or sale of said shares to comply with the buy-back of the KKP shares.

HELD: YES. The Court ruled that EIB has no legal authority to sell the DMCI shares for the purpose or reacquiring
the KKP shares. Sec. 7 of the SDAA pertains to outstanding obligations or indebtedness of Pacific Rehouse to EIB, but
does not cover any obligation of Pacific Rehouse to third-party purchasers to reacquire its KKP shares under the "full
cross to seller" buy-back obligation subject of the various notices of sale. Certainly EIB could not use said provision
for the repurchase of the KKP shares. Indubitably, the sale of the DMCI shares made by EIB is null and void for lack
of authority to do so, for petitioners never gave their consent or permission to the sale.

As couched, the lien in favor of EIB attaches to any money, securities, or properties of petitioners which are in EIB’s
possession for the discharge of all or any indebtedness and obligations of Pacific Rehouse to EIB. For this, Pacific
Rehouse is also barred from withdrawing its assets that are in the possession of EIB pending full payment by Pacific
Rehouse of their indebtedness to EIB. The proviso also gives EIB the authority to sell or dispose of Pacific Rehouse’s
securities or properties in its possession to pay for Pacific Rehouse’s indebtedness to EIB. It is, thus, evident from the
above SDAA provision that said lien and authority granted to EIB to dispose of Pacific Rehouse’s properties in the
former’s possession apply only to discharge and pay off Pacific Rehouse’s indebtedness to EIB and nothing more.

Article 1881 of the Civil Code provides: "the agent must act within the scope of his authority." Pursuant to the
authority given by the principal, the agent is granted the right "to affect the legal relations of his principal by the
performance of acts effectuated in accordance with the principal’s manifestation of consent." In the case at bar, the
scope of authority of EIB as agent of petitioners is "to retain, apply, sell or dispose of all or any of the client’s
property," if all or any indebtedness or other obligations of petitioners to EIB are not discharged in full by petitioners
"when due or on demand in or towards the payment and discharge of such obligation or liability."

The right to sell or dispose of the properties of petitioners by EIB is unequivocally confined to payment of the
obligations and liabilities of petitioners to EIB and none other. Thus, when EIB sold the DMCI shares to buy back the
KKP shares, it paid the proceeds to the vendees of said shares, the act of which is clearly an obligation to a third party
and, hence, is beyond the ambit of its authority as agent. Such act is surely illegal and does not bind petitioners as
principals of EIB.

The essential elements of estoppel as related to the party estopped are: (1) conduct which amounts to a false representation or concealment
of material facts, or, at least, which calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which
the party subsequently attempts to assert; (2) intention, or at least expectation, that such conduct shall be acted upon by the other party; and
(3) knowledge, actual or constructive, of the actual facts.

Reliance by respondent EIB on estoppel is misplaced. There is no allegation that petitioners performed an act which
can be considered as false representation that EIB can sell their DMCI shares to reacquire the KKP shares, or
concealed a material fact. Sec. 7 of the SDAA is unequivocal that EIB can only sell the shares of petitioners for
payment of any indebtedness to EIB. Moreover, the second element is also absent. There was no showing that
petitioners authorized EIB to pay a third party from the proceeds of the sale of their DMCI shares. Lastly, on the third
element, petitioners had no knowledge of the fact that the proceeds of the sale of DMCI shares were paid to buy
back the KPP shares. Clearly, there is no estoppel.

WHEREFORE, the petition is GRANTED. The CA Decision is REVERSED and SET ASIDE. The RTC Resolution is hereby
REINSTATED.
JESUS GOZUN vs. JOSE MERCADO [December 19, 2006]

In the local elections of 1995, Jose Mercado a.k.a. Don Pepito Mercado vied for the gubernatorial post in
Pampanga. Upon Mercado’s request, Jesus Gozun, owner of JMG Publishing House, a printing shop located in San
Fernando, Pampanga, submitted to Mercado draft samples and price quotation of campaign materials.

Mercado’s wife told Gozun that Mercado had already approved his price quotation and that he could start printing
the campaign materials, hence, he did print the campaign materials. Given the urgency and limited time to do the job
order, Gozun availed of the services and facilities of Metro Angeles Printing and of St. Joseph Printing Press, owned
by his daughter Jennifer Gozun and mother Epifania Gozun, respectively. Gozun delivered the campaign materials to
Mercado’s headquarters.

Then, in 1995, Mercado’s sister-in-law, Lilian Soriano, obtained from Gozun a "cash advance" of P253,000 allegedly
for the allowances of poll watchers who were attending a seminar and for other related expenses. Lilian
acknowledged on Mercado’s 1995 diary receipt1 of the amount. Gozun then sent Mercado a Statement of Account in
the total amount of P2,177,906. Mercado’s wife partially paid P1 million to Gozun, who issued a receipt for such.
Despite repeated demands and Mercado’s promise to pay, he failed to settle the balance of his account. After
three years of waiting for nothing, Gozun filed with RTC-Angeles City a complaint against Mercado to collect the
remaining amount of P1,177,906 plus "inflationary adjustment" and attorney’s fees.

MERCADO: denied having transacted with Gozun or entering into any contract for the printing of campaign
materials. He alleged that the various campaign materials delivered to him were represented as donations. On the
claim that Lilian, on his behalf, had obtained a cash advance of P253,000, Mercado denied having given her
authority to do so and having received the same. Mercado alleged that the P1 million represented "compensation
to Gozun who helped a lot in the campaign as a gesture of goodwill." Further, Mercado contends that his wife was
not authorized to enter into a contract with Gozun regarding campaign materials as she knew her limitations.

RTC: rendered judgment in favor of Gozun, and ordered Mercado to pay the former the sum of P1,177,906 plus 12%
interest per annum from the filing of this complaint until fully paid.

CA: reversed the RTC’s decision and dismissed the complaint for lack of cause of action. The CA held that other than
Gozun’s testimony, there was no evidence to support his claim that Lilian was authorized by Mercado to borrow
money on his behalf. It noted that the acknowledgment receipt signed by Lilian did not specify in what capacity
she received the money. Thus, applying Article 1317 of the Civil Code, it held that Gozun’s claim for P253,000 is
unenforceable.

On the accounts claimed to be due JMG Publishing House, Metro Angeles Printing, and St. Joseph Printing Press, he
appellate court, noting that since the owners of the last two printing presses were not impleaded as parties to the
case and it was not shown that petitioner was authorized to prosecute the same in their behalf, held that petitioner
could not collect the amounts due them. Lastly, since Mercado’s wife already paid Gozun P1 million, the latter’s claim
of P640,310 (after excluding the P253,000) had already been settled.

ISSUE: W/N Lilian Soriano had the special authority to borrow money on behalf of Mercado.

HELD: NO. LILIAN SIGNED IN THE RECEIPT IN HER NAME ALONE, without indicating therein that she was acting for
and in behalf of Mercado. She thus bound herself in her personal capacity and not as an agent of Mercado or anyone
for that matter.

By the contract of agency a person binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter. Contracts entered into in the name of another person
by one who has been given no authority or legal representation or who has acted beyond his powers are classified as
UNAUTHORIZED CONTRACTS and are declared unenforceable, unless they are ratified.

1
“CASH ADVANCE given on 3-31-95 received by Mrs. Lilian Soriano in behalf of Mrs. Annie Mercado, amount P253,000”
Generally, the agency may be oral, unless the law requires a specific form. However, a SPECIAL POWER OF
ATTORNEY is necessary for an agent to borrow money, unless it be urgent and indispensable for the preservation of
the things which are under administration. The requirement of a special power of attorney refers to the nature of
the authorization and not to its form. The requirements are met if there is a CLEAR MANDATE FROM THE PRINCIPAL
specifically authorizing the performance of the act. If the special authority is not written, then it must be duly
established by evidence.

Gozun’s testimony failed to categorically state whether the loan was made on behalf of Mercado or of his wife. While
Gozun claims that Lilian was authorized by Mercado, the statement of account states that the amount was
received by Lilian "in behalf of Mrs. Annie Mercado."

Invoking Article 1873 of the Civil Code, Gozun submits that Mercado informed him that he had authorized Lilian to
obtain the loan, hence, following Macke v. Camps which holds that one who clothes another with apparent
authority as his agent, and holds him out to the public as such, Mercado cannot be permitted to deny the authority.

THE COURT DOES NOT AGREE. The receipt issued by Gozun only indicates the P253,000 received by one Lilian
Soriano, but without specifying for what reason the said amount was delivered and in what capacity did Lilian
Soriano received the money. Nowhere in the note can it be inferred that Mercado was connected with the said
transaction. Under Article 1317 of the New Civil Code, a person cannot be bound by contracts he did not authorize
to be entered into his behalf. LILIAN SIGNED IN THE RECEIPT IN HER NAME ALONE, without indicating therein that
she was acting for and in behalf of Mercado. She thus bound herself in her personal capacity and not as an agent of
Mercado or anyone for that matter.

It is a general rule in the law of agency that, in order to bind the principal [on acts] executed by an agent, it must
upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent
only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the
name of the principal.

SUB-ISSUE:

HOWEVER, on the amount due him and the other two printing presses, Gozun explains that he was the one who
personally and directly contracted with Mercado and he merely sub-contracted the two printing establishments in
order to deliver on time the campaign materials ordered. Gozun is a real party in interest insofar as recovery of the
cost of campaign materials made by Gozun’s mother and sister are concerned. In sum, Mercado has the obligation to
pay the total cost of printing his campaign materials delivered by Gozun in the total of P1,924,906, less the partial
payment of P1,000,000, or P924,906.

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is hereby REVERSED and SET ASIDE.
The Decision of the RTC is REINSTATED and MODIFIED in that the amount payable by Mercado to Gozun is reduced
to P924,906.
CARIDAD SEGARRA SAZON vs. LETICIA VASQUEZ-MENANCIO [February 22, 2012]

Leticia Menancio is a US resident. In 1979, she entrusted the management, administration, care and preservation
of her properties in Albay (residential lot, irrigated riceland, coconut land) to Caridad Sazon.

MENANCIO: avers that said properties are productive, and that Sazon as the administrator has collected and
received all the fruits and income accruing therefrom. Sazon never rendered a full accounting of the fruits and
income derived from the properties, but has instead appropriated and in fact applied these for her own use and
benefit.

SAZON: claims that several of the properties do not produce any fruit or generate any income at all, and that any
supposed income derived from them is not sufficient to answer for all the expenses incurred to maintain them. Sazon
also presented five letters—dated 1983 to 1988, and one undated—which had been sent to Menancio as proof of the
accounting. Furthermore, Sazon denies receipt of any letter asking her to make an accounting or to remit the fruits
collected from the properties. She further avers that, since the start of her agency agreement with Menancio, the
latter never answered "any of the communications" Sazon had sought to initiate.

Thus, Menancio revoked, in writing, all the powers and authority of administration granted to Sazon effective
March 1997. Thereafter, the Menancio demanded that Sazon return and/or turn over the possession and
administration of the properties. HOWEVER, Sazon continued to fail and refused to perform her obligation. In fact,
she continues to hold on to the properties and the management and administration thereof. Further, she continues
to collect, receive, and keep all the income generated by the properties. Thus, Menancio filed her Complaint with
Preliminary Injunction, praying that the RTC order Sazon to render an accounting and remit all the fruits and
income the latter, as the administrator, received from the properties.

SAZON: argues that Menancio has no cause of action against her since: (1) THREE properties are under valid lease
agreements, and TWO properties have been transferred to a third party by virtue of contracts of sale with
corresponding deeds of redemption, and (2) some properties are already in Menancio’s possession. During the
pretrial conference, the parties agreed that Menancio already had possession over Lots IV, VII, VIII, and IX. They also
agreed that all the income derived from Lots I to IX since 1979 were received by Menancio.

RTC: ruled in favor of Menancio. RTC ordered Sazon to turn over the possession, management and administration of
all the properties enumerated in paragraph 2 of the complaint to Sazon, except parcels 4, 7, 8 and 9 which were
already under Menancio’s possession since August, 1977. Sazon is also ordered to remit to Menancio P1,265,493.75
representing unremitted fruits and income of the subject properties, less the amount of P150,000 by way of
administration expenses incurred by Sazon. On the other hand, Menancio is ordered to pay Sazon P180,000,
representing the latter’s compensation in administering the former’s properties based on quantum meruit.

RTCMR: ruled in favor of Menancio and partly reversed its earlier Decision. RTC ordered Sazon to turn over the
possession, management and administration of all the properties enumerated in paragraph 2 of the complaint to
Menancio, except parcels 4, 7, 8 and 9 which were already under Menancio’s possession since August, 2007, and for
Sazon to render full, accurate and complete accounting of all the fruits and proceeds of the subject properties during
the period of her administration.

CA: dismissed Sazon’s appeal and affirmed the RTC decision except for the amount ordered to be remitted to
Menancio, which was reduced to P908,112.62.

ISSUE: W/N Lots I to III, subject of valid lease agreements, may be turned over to Menancio.

HELD: YES. None of the parties question the appellate court’s finding that the lease agreements covering Lots I-III
should be respected. After all, when Sazon entered into these agreements, she acted within her authority as
Menancio’s agent. However, even though the lease agreements covering these lots should be respected, Sazon
must turn over the administration of the leases to Menancio’s attorney-in-fact. The reason is that Menancio has
already revoked the authority of Sazon as administrator. Hence, the latter no longer has the right to administer the
properties or to receive the income they generate on Menancio’s behalf.
ISSUE: W/N the letters sent by Sazon to Menancio is considered as a fulfillment of her obligation as Menancio’s
agent to render an accounting of her administration.

HELD: NO. Article 1891 of the Civil Code 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, even though it may not be
owing to the principal.”

Every stipulation exempting the agent from the obligation to render an account shall be void. The reason behind
the failure of Sazon to render an accounting to Menancio is immaterial. What is important is that Sazon fulfill her
duty to render an account of the relevant transactions she entered into as Menancio’s agent.

Both the RTC and the CA found these letters insufficient. Sazon was the administrator of Menancio’s properties for
18 years or from 1979 to 1997, and four letters within 18 years can hardly be considered as sufficient to keep
Menancio informed and updated of the condition and status of the latter’s properties.

Sazon does not deny that she never remitted to Menancio any of the fruits or income derived from the properties. Instead, Sazon
claims that (1) the properties did not produce any fruit or generate any income at all; (2) any supposed income derived from the
properties was not sufficient to answer for all the expenses incurred to maintain them; and (3) she was never compensated for the
services she rendered as the administrator of the properties.
As previously mentioned, every agent is bound to deliver to the principal whatever the former may have received by virtue of the
agency, even though that amount may not be owed to the principal. In determining the value of the fruits, the RTC relied on the
computation submitted by Menancio’s attorney-in-fact, Edgar Segarra, and ordered Sazon to remit to Menancio the total sum of
P1,265,493.75.
In the Order of the RTC reversing its Decision, it found that it should have considered the Certifications issued by the NFA and PCA with
respect to the prevailing prices of palay, corn, and copra at the time of Sazon’s administration. The RTC found that the parties failed to
prove the exact quantity and quality of harvests for the period. Consequently, it ordered Sazon to "render full, accurate, and complete
accounting of all the fruits and proceeds of the subject properties during the period of her administration." The CA affirmed the RTC’s
original Decision and ordered Sazon to pay Menancio the amount of P1,315,533.75—even though the trial court had ordered the return
of only ₱ 1,265,493.75—representing the total value of the fruits and rents derived from the properties from 1979 to 1997 less the ₱
150,000 administrative expenses, the ₱ 180,000 compensation for administering the properties, and the ₱ 77,221.13 real estate taxes
paid by petitioner from 1979 to 1997.
SC: It was wrong for the CA to base the computation of unremitted fruits and rents solely on the evidence submitted by Menancio’s
attorney-in-fact, as this computation was obviously self-serving. Furthermore, the Certifications issued by the NFA and PCA should have
been be given weight, as they are documentary evidence issued by government offices mainly responsible for determining the
buying/selling price of palay, corn, and other food and coconut products. Thus, the Court is left with no other choice but to order both
parties to present their evidence in support of their respective claims considering that no evidence was submitted to prove the
quantity and quality of harvests for the relevant period.
The trial court correctly ordered petitioner to "render full, accurate, and complete accounting of all the fruits and proceeds of the
subject properties during the period of her administration." However, it should have also ordered Menancio to present all her evidence
regarding the alleged transportation expenses, attorney’s fees, docket fees, and other fees; the total amount expended for the purchase
of Menancio’s Las Piñas property; and the total amount of real property taxes paid. These claimed expenses, if and when duly proven
by sufficient evidence, should be deducted from the total income earned by the properties.
Since there was no exact amount agreed upon, and Sazon failed to fix her own salary despite the authority given to her, the RTC
correctly applied the doctrine of quantum meruit. Where the payment is based on quantum meruit, the amount of recovery would
only be the reasonable value of the thing or services rendered regardless of any agreement as to value. In the instant case, the amount
of P1,000 per month for 15 years representing defendant’s compensation for administering plaintiff’s properties appears to be just,
reasonable and fair.
The DOCTRINE OF QUANTUM MERUIT (as much as one deserves) prevents undue enrichment based on the equitable postulate that it
is unjust for a person to retain benefit without paying for it. Being an equitable principle, it should only be applied if no express contract
was entered into, and no specific statutory provision is applicable.

WHEREFORE (1) Sazon is ordered to TURN OVER the possession, management, and administration of Lots I, II, III, V,
and VI to Menancio through the latter’s attorney-in-fact, Edgar Segarra; (2) Menancio is ordered to TURN OVER the
possession, management, and administration of one-third of Lot IV to Sazon; (3) The case is REMANDED to RTC for
Sazon to render full, accurate, and complete accounting of all the fruits and proceeds earned by Menancio’s
properties during Sazon’s administration thereof; and for Sazon to submit a list of all her claimed expenses.
PABLITO MURAO and NELIO HUERTAZUELA vs. PEOPLE OF THE PHILIPPINES [June 30, 2005]

Pablito Murao is the sole owner of Lorna Murao Industrial Commercial Enterprises, a company engaged in the
business of selling and refilling fire extinguishers. Nelio Huertazuela is the Branch Manager of LMICE in Puerto
Princesa City, Palawan. In 1994, Murao and Chito Federico entered into a DEALERSHIP AGREEMENT for the
marketing, distribution, and refilling of fire extinguishers within Puerto Princesa City. According to the Dealership
Agreement, Federico as a dealer could obtain fire extinguishers from LMICE at a 50% discount, provided that he sets
up his own sales force, acquires and issues his own sales invoice, and posts a bond with LMICE as security for the
credit line extended to him. Failing to comply with the conditions under the Agreement, Federico, was still allowed to
act as a part-time sales agent for LMICE entitled to a percentage commission from the sales of fire extinguishers.

The amount of Federico’s commission as sales agent for LMICE was under contention. Federico claimed that he was
entitled to a commission equivalent to 50% of the gross sales he had made on behalf of LMICE, while Murao
maintained that he should receive only 30% of the net sales

Federico’s first successful transaction as sales agent of LMICE involved two fire extinguishers sold to Landbank for
P7,200. Landbank issued a check to the order of "LMICE c/o Chito Federico," for the amount of P5,936.40. Federico
encashed the check and remitted only P2,436.40 to LMICE, while he kept P3,500 for himself as his commission from
the sale. Murao alleged that it was contrary to the SOP of LMICE that Federico was named payee of the Landbank
check on behalf of LMICE, and that Federico was not authorized to encash the said check. Despite the supposed
irregularities committed by Federico in the collection of the payment from Landbank and in the premature
withholding of his commission from the said payment, Murao forgave Federico because the latter promised to make-
up for his misdeeds in the next transaction.

Federico subsequently facilitated a transaction with the City Government of Puerto Princesa for the refill of 202
fire extinguishers. Because of the considerable cost, the City Government of Puerto Princesa requested that the
transaction be split into two purchase orders. Pursuant to the two purchase orders. LMICE refilled and delivered all
202 fire extinguishers to the City Government of Puerto Princesa. The City Government of Puerto Princesa issued a
check to LMICE to pay for the first Purchase Order. Huertazuela claimed the Check from the City Government of
Puerto Princesa and deposited it under the current account of LMICE with PCIBank.

Federico went to see Huertazuela at the LMICE branch office to demand for the amount of P154,500 as his
commission from the payment of Purchase Order by the City Government of Puerto Princesa. Huertazuela refused to
pay Federico his commission since the two of them could not agree on the proper amount thereof. Thus, Federico
went to the police station to file an Affidavit-Complaint for estafa against petitioners.

RTC: rendered Judgment finding Murao and Huertazuela guilty beyond reasonable doubt as co-principals of the
crime of estafa penalized in Article 315(1)(b) 2 of the RPC. The RTC held that all the elements of estafa are present in
this case. Although the relationship between Federico and LMIC is not fiduciary in nature, still the clause "any other
obligation involving the duty to make delivery of or to return" personal property is broad enough to include a "civil
obligation". The refusal by the accused to give Federico whatever percentage his commission necessarily caused him
prejudice which constitute the third element of estafa. The fraudulent intent by the accused is indubitably indicated
by their refusal to pay Federico any percentage of the gross sales as commission; CA: affirmed the RTC Judgment.

ISSUE: W/N the petitioners are liable for estafa.

HELD: NO. Absent herein are two essential elements of the crime of estafa, namely: (1) That money, goods or other
personal property be received by the offender in trust, or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to return, the same; and (2) That there be a misappropriation or
conversion of such money or property by the offender.

2
ELEMENTS OF ESTAFA:
(a) that money, goods or other personal property is received by the offender in trust or on commission, or for administration, or under any other
obligation involving the duty to make delivery of or to return the same.
(b) that there be misappropriation or conversion of such money or property by the offender, or denial on his part of such receipt
(c) that such misappropriation or conversion or denial is to the prejudice of another; and
(d) there is demand by the offended party to the offender.
The findings of the RTC and the Court of Appeals that petitioners committed estafa rest on the erroneous belief that
Federico, due to his right to commission, already owned 50% of the amount paid by the City Government of
Puerto Princesa to LMICE by virtue of the check, so that the collection and deposit of the said check by petitioners
under the account of LMICE constituted misappropriation or conversion of Federico’s commission.

FEDERICO’s right to a commission does not make him a joint owner of the money paid to LMICE by the City
Government of Puerto Princesa, but merely establishes the relation of agent and principal. It is unequivocal that an
agency existed between LMICE and Federico. Although Federico never had the opportunity to operate as a dealer for
LMICE under the terms of the Dealership Agreement, he was allowed to act as a sales agent for LMICE. He can
negotiate for and on behalf of LMICE for the refill and delivery of fire extinguishers. Unlike the Dealership Agreement,
however, the agreement that Federico may act as sales agent of LMICE was based on an oral agreement.

As a sales agent, Federico entered into negotiations with prospective clients for and on behalf of his principal,
LMICE. When negotiations for the sale or refill of fire extinguishers were successful, Federico prepared the necessary
documentation. Purchase orders, invoices, and receipts were all in the name of LMICE. It was LMICE who had the
primary duty of picking up the empty fire extinguishers, filling them up, and delivering the refilled tanks to the
clients. All profits made and any advantage gained by an agent in the execution of his agency should belong to the
principal.The business belonged to LMICE. Consequently, payments made by clients for the fire extinguishers
pertained to LMICE.

Federico may claim commission, allegedly equivalent to 50% of the payment received by LMICE from the City
Government of Puerto Princesa, based on his right to just compensation under his agency contract with LMICE, but
not as the automatic owner of the 50% portion of the said payment. Since LMICE is the lawful owner of the entire
proceeds of the check payment from the City Government of Puerto Princesa, then the petitioners who collected the
payment on behalf of LMICE did not receive the same or any part thereof in trust, or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to return, the same to
Federico. No fiduciary relationship existed between petitioners and Federico. A fiduciary relationship between the
complainant and the accused is an essential element of estafa by misappropriation or conversion, without which
the accused could not have committed estafa.

[Manahan, Jr. v. Court of Appeals] The Manahan case involved the lease of a dump truck. Although a contract of
lease may not be fiduciary in character, the lessee clearly had the civil obligation to return the truck to the lessor at
the end of the lease period; and failure of the lessee to return the truck as provided for in the contract may
constitute estafa.

In contrast, the current Petition concerns an agency contract whereby the principal already received payment from
the client but refused to give the sales agent, who negotiated the sale, his commission. The obligation of LMICE to
pay Federico his commission does not arise from any duty to deliver or return the money to its supposed owner, but
rather from the duty of a principal to give just compensation to its agent for the services rendered by the latter.

SC finds that petitioners did not convert nor misappropriate the proceeds from the subject Check because the same
belonged to LMICE, and was not "another’s property." Petitioners collected the said check from the City Government
of Puerto Princesa and deposited the same under the Current Account of LMICE with PCIBank. Since the money was
already with its owner, LMICE, it could not be said that the same had been converted or misappropriated for one
could not very well fraudulently appropriate to himself money that is his own. Although petitioners’ refusal to pay
Federico his commission caused prejudice or damage to the latter, said act does not constitute a crime, particularly
estafa by conversion or misappropriation punishable under Article 315(1)(b) of the Revised Penal Code.

While petitioners may have no criminal liability, petitioners themselves admit their civil liability to the private
complainant Federico for the latter’s commission from the sale, whether it be 30% of the net sales or 50% of the
gross sales. However, this Court is precluded from making a determination and an award of the civil liability for the
reason that the said civil liability of petitioners to pay Federico his commission arises from a violation of the agency
contract and not from a criminal act. It would be improper and unwarranted for this Court to impose in a criminal
action the civil liability arising from a civil contract, which should have been the subject of a separate and
independent civil action.
CORNELIA HERNANDEZ vs. CECILIO HERNANDEZ [March 9, 2011]

The Republic of the Philippines, through DPWH, offered to purchase a portion of a parcel of land in Tanauan,
Batangas, for use in the expansion of SLEX. The land is pro-indiviso owned by: Cornelia Hernandez, Atty. Jose
Hernandez, deceased father of Cecilio Hernandez, represented by Paciencia Hernandez and Mena Hernandez, also
deceased and represented by her heirs. The government initially offered P35/sq.m. for the aforementioned land but
the Hernandez family rejected the offer. After a series of negotiations with the DPWH, the last offer stood at
P70/sq.m. They still did not accept the offer and the government was forced to file an expropriation case.

In 1993, an expropriation case was filed by the Republic, through the DPWH, before RTC-Tanauan. In the Civil Case,
different parcels of land in Tanauan Batangas, which belongs to 34 families including the Hernandezes are affected by
the expansion project of the DPWH. A similar case was consolidated with the former as it affects the same DPWH
endeavor. Thereafter, the owners of the Hernandez property executed a letter indicating: (1) Cecilio as the
representative of the owners of the land; and (2) the compensation he gets in doing such job. 3During the course of
the expropriation proceedings, an Order was issued by the RTC informing the parties of the appointment of
commissioners to help determine the JUST COMPENSATION. Cecilio was appointed as one of the commissioners to
represent the defendants in the Civil Case.

In 1996, Cornelia, and her other co-owners who were also signatories of the letter, executed an irrevocable Special
Power of Attorney appointing Cecilio Hernandez as their "true and lawful attorney" with respect to the expropriation
of the subject property. The SPA stated that the authority shall be irrevocable and continue to be binding all
throughout the negotiation. It further stated that the authority shall bind all successors and assigns in regard to any
negotiation with the government until its consummation and binding transfer of a portion to be sold to that entity
with Cecilio as the sole signatory in regard to the rights and interests of the signatories therein. There was no
mention of the compensation scheme for Cecilio, the attorney-in-fact.

RTC: rendered a decision for the just compensation of the condemned properties. RTC pegged the value of the land
at P1,500/sq.m. Thus, multiplying the values given, the Hernandez family will get a total of P21,964,500 as just
compensation. Included in the decision is the directive of the court to pay P4,000 to Cecilio, as Commissioner’s fees.

In 1999, Cornelia Hernandez executed a Revocation of the SPA, withdrawing the authority earlier granted to Cecilio in
the SPA. After the revocation, Cornelia moved for the withdrawal of her 1/3 share of the just compensation, which is
equivalent to P7,321,500. The motion of Cornelia was granted, with the condition that the money shall be released
only to the attorney-in-fact, Cecilio Hernandez. The trial court took cognizance of the irrevocable nature of the
SPA. Cecilio, therefore, was able to get not just 1/3, but the entire sum of P21,964,500.

In 2000, Cornelia received from Cecilio a BPI Check amounting to P1,123,000. The check was however accompanied
by a Receipt and Quitclaim document in favor of Cecilio. In essence it states that: (1) the amount received will be the
share of Cornelia in the just compensation paid by the government in the expropriated property; (2) in consideration
of the payment, it will release and forever discharge Cecilio from any action, damages, claims or demands; and (3)
Cornelia will not institute any action and will not pursue her complaint or opposition to the release to Cecilio or his
heirs or assigns, of the entire amount deposited in the Land Bank of the Philippines, Tanauan, Batangas, or in any
other account with any bank, deposited or will be deposited therein, in connection with the Civil Case representing
the total just compensation of expropriated properties under the aforementioned case. The check was received by
Cornelia with a heavy heart. She averred in her ex-parte testimony that she was forced to receive such amount
because she needs the money immediately for medical expenses due to her frail condition.

Cornelia averred that after a few days from her receipt of the check, she sought the help of her niece, Daisy Castillo,
to get the decision in the Civil Case. It was only then that she learned that she was entitled to receive P7,321,500.
Thus, in a letter, Cornelia demanded the accounting of the proceeds. The letter was left unanswered. Consequently,
Cornelia filed complaint for the Annulment of Quitclaim and Recovery of Sum of Money and Damages before RTC-
Makati.

3
Dear Cecilio: This would confirm to give you 20% percent of any amount in excess of P70/sq. m. of our respective shares as success fee for your effort in
representing us in the Civil Case. Whatever excess beyond P300/sq.m. shall likewise be given to you as additional incentive. We will give you One Thousand Five
Hundred (₱8,500) Pesos each for the preparation of the pleading before the RTC and such other reasonable expenses of litigation pro-indiviso.
RTC: rendered judgment in favor of Cornelia and against Cecilio, declaring the receipt and quitclaim signed by
Cornelia as null and void and ordering Cecilio to pay Cornelia P6,198,417.60, including the accrued interest thereon
with 12% per annum, computed from the date of the filing hereof until the said amount is fully paid.

CA: did not discuss whether the default order was proper. However, the appellate court reversed and set aside the
ruling of the trial court, declaring that the quitclaim signed by the petitioner is valid and incontrovertible.

ISSUE: W/N the receipt and quitclaim document signed by Cornelia is valid.

HELD: NO. CECILIO avers that he is the agent of the owners of the property. He bound himself to render service on
behalf of her cousins, aunt and mother, by virtue of the request of the latter. As an agent, Cecilio insists that he be
given the compensation he deserves based on the agreement made in the 1993 letter, also called as the service
contract, which was signed by all the parties. This is the contract to which Cecilio anchors his claim of validity of the
receipt and quitclaim that was signed in his favor.

The trial court, deviating from the principle that just compensation is determined by the value of the land at the
time either of the taking or filing, which was in 1993, determined the compensation as the 1998 value of
P1,500/sq.m. The trial court ratiocinated that the 1998 value was considered for the reason, among others that
prices of real estate in Batangas, have skyrocketed in the past two years. This 1998 "skyrocketed" price was pounced
upon by Cecilio as the amount against which the 1993 ceiling of P300/sq.m. [Cecilio’s Fees= (20% of anything over
P70) + (everything in excess of P300) Cecilio’s position would give him 83.07% of the just compensation due
Cornelia as a co-owner of the land. No evidence on record would show that Cornelia agreed, by way of the 1993
letter, to give Cecilio 83.07% of the proceeds of the sale of her land.

Cornelia asked for an accounting of the just compensation from Cecilio several times, but the request remained
unheeded. Right at that point, it can be already said that Cecilio violated the fiduciary relationship of an agent and a
principal. The relation of an agent to his principal is fiduciary and it is elementary that in regard to property subject
matter of the agency, an agent is estopped from acquiring or asserting a title adverse to that of the principal. His
position is analogous to that of a trustee and he cannot, consistently with the principles of good faith, be allowed
to create in himself an interest in opposition to that of his principal or cestui que trust.

Instead of an accounting, what Cornelia received was a receipt and quitclaim document that was ready for signing.
As testified to by Cornelia, due to her frail condition and urgent need of money in order to buy medicines, she
nevertheless signed the quitclaim in Cornelio’s favor. Quitclaims are also contracts and can be voided if there was
fraud or intimidation that leads to lack of consent. The preparation by Cecilio of the receipt and quitclaim document
which he asked Cornelia to sign, indicate that even Cecilio doubted that he could validly claim 83.07% of the price
of Cornelia’s land on the basis of the 1993 agreement. Based on the attending circumstances, the receipt and
quitclaim document is an act of fraud perpetuated by Cecilio. Very clearly, both the service contract of 1993 letter-
agreement, and the later receipt and quitclaim document, the first vitiated by mistake and the second being
fraudulent, are VOID.

Cecilio’s last source of authority to collect payment from the proceeds of the expropriation is the SPA executed in
1996 by the Hernandezes in favor of Cecilio as their "true and lawful" attorney with respect to the expropriation of
the Hernandez property. The SPA did not specify the compensation of Cecilio as attorney-in-fact of the
Hernandezes. The SPA, however, must be appreciated in the light of the fact that Cecilio was appointed and acted
as appraisal commissioner in the expropriation case. When Cecilio accepted the position as commissioner and
proceeded to perform the duties of such commissioner until the completion of his mandate as such, he created a
barrier that prevented his performance of his duties under the SPA. Due to the nature of his duties and functions as
commissioner, Cecilio became an officer of the court. The commissioner’s duty is to "ascertain and report to the
court the just compensation for the property to be taken." Cecilio could not have been a hearing officer and a
defendant at the same time. Indeed, Cecilio foisted fraud on both the Court and the Hernandezes when, after his
appointment as commissioner, he accepted the appointment by the Hernandezes to "represent" and "sue for" them.

WHEREFORE, the Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. The Decision of the RTC is
REINSTATED with the MODIFICATIONS that the interest on the monetary awards should be at 6% per annum.
BRITISH AIRWAYS vs. COURT OF APPEALS, GOP MAHTANI, and PHILIPPINE AIRLINES [January 29, 1998]
In 1989, GOP Mahtani decided to visit his relatives in Bombay, India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel plans. The latter purchased a ticket from BA. Since BA had no
direct flights from Manila to Bombay, Mahtani had to take a flight to Hongkong via PAL, and upon arrival in
Hongkong he had to take a connecting flight to Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL counter in Manila his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching Hongkong, the same would be transferred to the BA
flight bound for Bombay. Unfortunately, when Mahtani arrived in Bombay, he discovered that his luggage was missing
and he was told that the same might have been diverted to London. Back in the Philippines, Mahtani filed his
complaint for damages against BA and Mr. Gumar before the RTC. BA alleged that Mahtani did not have a cause of
action against it and iled a third-party complaint against PAL alleging that the reason for the non-transfer of the
luggage was due to PAL’s late arrival in Hongkong, thus leaving hardly any time for the proper transfer of Mahtani's
luggage to the BA aircraft bound for Bombay.
PAL: disclaimed any liability, arguing that there was adequate time to transfer the luggage to BA facilities in
Hongkong. Furthermore, the transfer of the luggage to Hongkong authorities should be considered as transfer to BA.
RTC: rendered its decision in favor of Mahtani, ordering BA to pay Mahtani P7,000 for the value of the two suit cases;
$400 for the value of the contents of the luggage; as well as damages. The Third-Party Complaint against third-party
defendant Philippine Airlines is DISMISSED for lack of cause of action;
CA: affirmed the RTC's findings. The CA sustained the RTC’s ruling dismissing BA’s third-party complaint against PAL.
The contract of air transportation in this case pursuant to the ticket issued by BA to Mahtani was exclusively between
Mahtani and BA. When Mahtani boarded the PAL plane from Manila to Hongkong, PAL was merely acting as a
subcontractor or agent of BA. This is shown by the fact that in the ticket issued by BA to Mahtani, it is specifically
provided on the "Conditions of Contract," paragraph 4 thereof that: “carriage to be performed hereunder by several
successive carriers is regarded as a single operation.” The rule that carriage by plane although performed by
successive carriers is regarded as a single operation and that the carrier issuing the passenger's ticket is considered
the principal party and the other carrier merely subcontractors or agent, is a settled issue.
ISSUE: W/N CA correctly dismissed BA’s third party complaint against PAL on grounds that PAL is BA’s agent.
HELD: NO. Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract
of carriage. Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies.
In other words, BA and PAL are blaming each other for the incident. The contract of air transportation was
exclusively between Mahtani and BA, the latter merely endorsing the Manila to Hongkong leg of the former's journey
to PAL, as its subcontractor or agent. Thus, it is undisputed that PAL, in transporting Mahtani from Manila to
Hongkong acted as the agent of BA.
The Court of Appeals should have been cognizant of the well-settled rule that an agent is also responsible for any
negligence in the performance of its function and is liable for damages which the principal may suffer by reason of
its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal, had no cause of
action against PAL, its agent or sub-contractor. ALSO, it is worth mentioning that both BA and PAL are members of the
International Air Transport Association (IATA), wherein member airlines are regarded as agents of each other in the
issuance of the tickets and other matters pertaining to their relationship. Therefore, the contractual relationship
between BA and PAL is one of agency, the former being the principal, since it was the one which issued the
confirmed ticket, and the latter the agent.
Since the instant petition was based on breach of contract of carriage, Mahtani can only sue BA alone, and not PAL,
since the latter was not a party to the contract. However, this is not to say that PAL is relieved from any liability due to
any of its negligent acts. A carrier (PAL), acting as an agent of another carrier, is also liable for its own negligent acts
or omission in the performance of its duties.
To deny BA the procedural remedy of filing a third-party complaint against PAL for the purpose of ultimately
determining who was primarily at fault as between them, is without legal basis. Such proceeding is in accord with
the doctrine against multiplicity of cases which would entail receiving the same or similar evidence for both cases
and enforcing separate judgments therefor. The purpose of a third-party complaint is precisely to avoid delay and
circuitry of action and to enable the controversy to be disposed of in one suit. It is but logical, fair and equitable to
allow BA to sue PAL for indemnification, if it is proven that the latter's negligence was the proximate cause of
Mahtani's unfortunate experience, instead of totally absolving PAL from any liability.
METROPOLITAN BANK & TRUST COMPANY vs. COURT OF APPEALS [February 18, 1991]

In January 1979, Eduardo Gomez opened an account with Golden Savings and deposited over a period of two
months 38 treasury warrants with a total value of P1,755,228.37. They were all drawn by the Philippine Fish
Marketing Authority and purportedly signed by its General Manager and countersigned by its Auditor. Six of these
were directly payable to Gomez while the others appeared to have been indorsed by their respective payees,
followed by Gomez as second indorser. All these warrants were subsequently indorsed by Gloria Castillo as Cashier
of Golden Savings and deposited to its Savings Account in the Metrobank branch in Calapan, Mindoro for
CLEARING to the principal office of Metrobank. Metrobank then forwarded them to the Bureau of Treasury for
special clearing.

Two weeks after the deposits, Castillo went to the Calapan branch several times to ask whether the warrants had
been cleared. She was told to wait. Accordingly, Gomez was not allowed to withdraw from his account. Later,
however, "exasperated" over Castillo’s repeated inquiries and also as an accommodation for a "valued client,"
MBTC says it finally decided to allow Golden Savings to withdraw from the proceeds of the warrants. Golden
Savings then made THREE WITHDRAWALS, amounting to P968.000. In turn, Golden Savings subsequently allowed
Gomez to make withdrawals from his own account, eventually collecting the total amount of P1,167,500 from the
proceeds of the apparently cleared warrants.

LATER, 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 in RTC-Mindoro.

RTC: judgment was rendered in favor of Golden Savings, directing MBTC to reverse its action of debiting Savings
Account of Golden Savings the sum of P1,754,089 and to reinstate and credit to such account such amount existing
before the debit was made including the amount of P812,033.37 in favor of Golden Savings, and thereafter, to allow
Golden Savings to withdraw the amount outstanding thereon before the debit; CA affirmed the decision of the RTC.

ISSUE: W/N Metrobank, acting as collecting agent for Golden Savings, as indicated on the deposit slips, may be
held liable for its failure to collect on the warrants.

HELD: YES. Metrobank was 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 the proceeds thereof. Without such
assurance, Golden Savings would not have allowed the withdrawals; with such assurance, there was no reason not to
allow the withdrawal.

It was to secure the clearance of the treasury warrants that Golden Savings deposited them 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. It was only when Metrobank gave the go-signal
that Gomez was finally allowed by Golden Savings to withdraw them from his own account.

It is clear that Golden Savings acted with due care and diligence and cannot be faulted for the withdrawals it allowed
Gomez to make. By contrast, Metrobank exhibited extraordinary carelessness. The amount involved was not trifling.
There was no reason why it should not have waited until the treasury warrants had been cleared. It would not have
lost a single centavo by waiting. Yet, despite the lack of such clearance, it allowed Golden Savings to withdraw from
the uncleared treasury warrants in the total amount of P968,000.

Metrobank would invoke the conditions4 printed on the dorsal side of the deposit slips through which the treasury
warrants were deposited by Golden Savings with its Calapan branch.

4
Kindly note that in receiving items on deposit, the bank obligates itself only as the depositor's collecting agent, assuming no responsibility beyond care in
selecting correspondents, and until such time as actual payment shall have come into possession of this bank, the right is reserved to charge back to the
depositor's account any amount previously credited, whether or not such item is returned. This also applies to checks drawn on local banks and bankers and their
branches as well as on this bank, which are unpaid due to insufficiency of funds, forgery, unauthorized overdraft or any other reason.
According to Metrobank, the said conditions clearly show that it was acting only as a collecting agent for Golden
Savings and give it the right to "charge back to the depositor's account any amount previously credited, whether
or not such item is returned. In stressing that it was acting only as a collecting agent for Golden Savings, Metrobank
seems to be suggesting that as a mere agent, it cannot be liable to the principal. This is not exactly true. On the
contrary, Article 1909 of the Civil Code clearly provides that, “The agent is responsible not only for fraud, but also for
negligence, which shall be judged 'with more or less rigor by the courts, according to whether the agency was or was
not for a compensation.”

The negligence of Metrobank has been sufficiently established. It was the clearance given by it that assured Golden
Savings it was already safe to allow Gomez to withdraw the proceeds of the treasury warrants he had deposited
Metrobank that misled Golden Savings. There may have been no express clearance, as Metrobank insists, but that
clearance could be implied from its allowing Golden Savings to withdraw from its account not only once or even
twice but three times.

The belated notification aggravated MBTC’s earlier negligence in giving express or at least implied clearance to the
treasury warrants and allowing payments therefrom to Golden Savings. On top of this, the supposed reason for the
dishonor, to wit, the forgery of the signatures of the general manager and the auditor of the drawer corporation, has
not been established.

A no less important consideration is the circumstance that the treasury warrants in question are not negotiable
instruments. Clearly stamped on their face is the word "non-negotiable." Moreover, and this is of equal significance,
it is indicated that they are payable from a particular fund, to wit, Fund 501. 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
unconditional" and the warrants themselves non-negotiable. There should be no question that the exception on
Section 3 of the Negotiable Instruments Law is applicable in the case at bar.

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 Section 66 of the Negotiable Instruments
Law. The simple reason is that this law is not applicable to the non-negotiable treasury warrants. The indorsement
was made by Gloria Castillo not for the purpose of guaranteeing the genuineness of the warrants but merely to
deposit them with Metrobank for clearing. It was in fact Metrobank that made the guarantee when it stamped on
the back of the warrants: "All prior indorsement and/or lack of endorsements guaranteed, Metropolitan Bank & Trust
Co., Calapan Branch."

We find the challenged decision to be basically correct. However, we will have to amend it insofar as it directs the
MBTC to credit Golden Savings with the full amount of the treasury checks deposited to its account. The total value
of the 32 treasury warrants dishonored was P1,754,089.00, from which Gomez was allowed to withdraw P1,167,500
before Golden Savings was notified of the dishonor. The amount he has withdrawn must be charged not to Golden
Savings but to Metrobank, which must bear the consequences of its own negligence. But the balance of P586,589.00
should be debited to Golden Savings, as obviously Gomez can no longer be permitted to withdraw this amount from
his deposit because of the dishonor of the warrants.

Gomez has in fact disappeared. To also credit the balance to Golden Savings would unduly enrich it at the expense
of Metrobank, let alone the fact that it has already been informed of the dishonor of the treasury warrants.

WHEREFORE, the challenged decision is AFFIRMED, with the modification.

CORAZON ESCUETA vs. RUFINA LIM [January 24, 2007]

Rufina Lim averred that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio and the heirs of
Luz Baloloy. Said vendors executed a contract of sale in 1990 in her favor. Rubio and the heirs of Baloloy received
earnest money of P102,169.86 and P450,000, respectively. It was agreed in the contract of sale that the vendors
would secure certificates of title covering their respective hereditary shares, and that the balance of the purchase
price would be paid to each heir upon presentation of their individual certificates of title.

Rubio refused to receive the other half of the down payment which is P100,000. Rubio refused and still refuses to
deliver to Lim the certificates of title covering his share on the two lots. With respect to the heirs of Baloloy, they also
refused and still refuse to perform the delivery of the two certificates of title covering their share in the disputed lots.

Corazon Escueta, in spite of her knowledge that the disputed lots have already been sold by Rubio to Lim, it is alleged
that a simulated deed of sale involving said lots was effected by Rubio in her favor; and that the simulated deed of
sale by Rubio to Escueta has raised doubts and clouds over respondent’s title. . Thus, Rufina Lim filed an action to
remove cloud on, or quiet title to, real property, with preliminary injunction and issuance of a hold-departure order
from the Philippines against Rubio. Lim amended her complaint to include specific performance and damages.

HEIRS OF BALOLOY: Lim has no cause of action because the subject contract of sale has no more force and effect as
far as the Baloloys are concerned. They have withdrawn their offer to sell for the reason that Lim failed to pay the
balance of the purchase price as orally promised on or before May 1, 1990. [Failed to appear at PRE-TRIAL, declared in default]

RUBIO & ESCUETA: Lim has no cause of action, because Rubio has not entered into a contract of sale with Lim. Rubio
appointed his daughter, Patricia Llamas, to be his attorney-in-fact and not Virginia Rubio Laygo Lim, who was the one
who represented him in the sale of the disputed lots in favor of Lim. [Llamas even disowned her signature appearing on the
"Joint Special Power of Attorney," which constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties.] Dealing
with an assumed agent, Lim should ascertain not only the fact of agency, but also the nature and extent of the
former’s authority. Besides, Virginia exceeded the authority for failing to comply with her obligations under the "Joint
Special Power of Attorney." Further, the P100,000 Lim claimed he received as down payment for the lots is by way
of a loan with Lim.

RTC: dismissed the complaint against Escueta, Rubio, and the Register of Deeds. However, Rubio is ordered to return
to Rufina Lim P102,169.80

CA: affirmed the trial court’s order and partial decision, but reversed the later decision. CA held that the decision
dismissing Lim’s complaint is REVERSED and SET ASIDE. The CA upheld the validity of the subject contract of sale in
favor of LIM. Thus, Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the
balance of the purchase price by Lim. The contracts of sale between Rubio and Escueta involving Rubio’s share in the
disputed properties is declared NULL and VOID.

ISSUE: W/N the contract of sale by Virginia Lim to Rufina Lim is BINDING.

HELD: YES. Article 1892 of the Civil Code provides: “The agent may appoint a substitute if the principal has not
prohibited him from doing so; but he shall be responsible for the acts of the substitute: (1) When he was not given
the power to appoint one x x x.”

In the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear that
she is not prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject properties, Patricia
merely acted within the limits of the authority given by her father, but she will have to be "responsible for the acts of
the sub-agent," among which is precisely the sale of the subject properties in favor of respondent.

Even assuming that Virginia Lim has no authority to sell the subject properties, the contract she executed in favor of
Rufina Lim is not void, but simply unenforceable, under the second paragraph of Article 1317 of the Civil Code. Art.
1317. x x x
A contract entered into in the name of another by one who has no authority or legal representation, or who has
acted beyond his powers, shall be UNENFORCEABLE, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other contracting party.

Ignacio Rubio merely denies the contract of sale. He claims, without substantiation, that what he received was a loan,
not the down payment for the sale of the subject properties. His acceptance and encashment of the check, however,
constitute ratification of the contract of sale and "produce the effects of an express power of agency." His action
necessarily implies that he waived his right of action to avoid the contract, and, consequently, it also implies the tacit,
if not express, confirmation of the said sale effected" by Virginia Lim in favor of respondent.

Similarly, the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. "The
DOCTRINE OF ESTOPPEL applicable to petitioners here is not only that which prohibits a party from assuming
inconsistent positions, based on the principle of election, but that which precludes him from repudiating an
obligation voluntarily assumed after having accepted benefits therefrom. To countenance such repudiation would be
contrary to equity, and would put a premium on fraud or misrepresentation."

Indeed, Virginia Lim and Rufina Lim have entered into a contract of sale. Not only has the title to the subject
properties passed to the latter upon delivery of the thing sold, but there is also no stipulation in the contract that
states the ownership is to be reserved in or "retained by the vendor until full payment of the price."

Applying Article 1544 of the Civil Code, [Rule on Double Sale] a second buyer of the property who may have had
actual or constructive knowledge of such defect in the seller’s title, or at least was charged with the obligation to
discover such defect, cannot be a registrant in good faith. Such second buyer cannot defeat the first buyer’s title. In
case a title is issued to the second buyer, the first buyer may seek reconveyance of the property subject of the
sale. Even the argument that a purchaser need not inquire beyond what appears in a Torrens title does not hold
water. A perusal of the certificates of title alone will reveal that the subject properties are registered in common, not
in the individual names of the heirs.

All the elements of a valid contract of sale under Article 1458 of the Civil Code are present, such as: (1) consent or
meeting of the minds; (2) determinate subject matter; and (3) price certain in money or its equivalent." Ignacio
Rubio, the Baloloys, and their co-heirs sold their hereditary shares for a price certain to which Rufina Lim agreed to
buy and pay for the subject properties. "The offer and the acceptance are concurrent, since the minds of the
contracting parties meet in the terms of the agreement." 27

Consequently, Ignacio Rubio could no longer sell the subject properties to Corazon Escueta, after having sold them
to Rufina Lim. In a contract of sale, the vendor loses ownership over the property and cannot recover it until and
unless the contract is resolved or rescinded x x x. The records do not show that Ignacio Rubio asked for a rescission of
the contract. What he adduced was a belated revocation of the special power of attorney he executed in favor of
Patricia Llamas. "In the sale of immovable property, even though it may have been stipulated that upon failure to pay
the price at the time agreed upon the rescission of the contract shall of right take place, the vendee may pay, even
after the expiration of the period, as long as no demand for rescission of the contract has been made upon him
either judicially or by a notarial act."32

WHEREFORE, the petition is DENIED. The Decision and Resolution of the Court of Appeals is AFFIRMED.
MUNICIPAL COUNCIL OF ILOILO vs. JOSE EVANGELISTA, ET AL. [November 17, 1930]

In 1924, CFI-Iloilo rendered judgment in a civil case wherein Tan Ong de Tan Toco was the plaintiff, and the
Municipality of Iloilo the defendant. Tan Toco sought to recover from the Municipality the value of a strip of land
belonging to Tan Toco which was taken by the Municipality to widen a public street. The judgment entitled Tan
Toco to recover P42,966.40 from the Municipality. Upon appeal to the SC, said judgment was affirmed.

After the judgment had become final and executory, Attorney Jose Evangelista, as counsel for the administratrix of
Jose Ma. Arroyo's intestate estate, filed a claim in the same case for professional services rendered by him, which
the court fixed at 15% of the amount of the judgment. At the hearing on said claim, the claimants appeared: PNB,
which prayed that the amount of the judgment be turned over to it because the land taken over had been mortgaged
to it, and Antero Soriano claiming the amount of the judgment as it had been assigned to him, and by him, in turn,
assigned to Mauricio Cruz & Co., Inc.

CFI: [Action of Interpleading] rendered judgment, declaring valid and binding the deed of assignment of the credit
executed by Tan Toco's widow, through her attorney-in-fact Tan Buntiong, in favor of late Atty. Antero Soriano, and
likewise the assignment executed by Soriano in favor of Mauricio Cruz & Co., Inc. Municipality of Iloilo is hereby
ordered to pay the said Mauricio Cruz & Co., Inc., the balance of P30,966.40

The municipal treasurer of Iloilo paid the late Antero Soriano the amount of P6,000 in part payment of the
judgment mentioned above, assigned to him by Tan Boon Tiong, acting as attorney-in-fact of Tan Ong Tan Toco. The
municipal treasurer of Iloilo also deposited with the clerk of CFI-Iloilo the amount of P6,000 in pursuance of the
resolution ordering that the attorney's lien in the amount of 15% of the judgment be recorded in favor of Atty. Jose
Evangelista, as counsel for the late Jose Ma. Arroyo. At the hearing of the instant case, the co-defendants of Atty.
Evangelista agreed not to discuss the payment made to the latter by the clerk of the CFI-Iloilo of the amount of
P6,000 in consideration of said lawyer's waiver of the remainder of the 15% of said judgment amounting to P444.69.

With these two payments of P6,000 each making a total of P12,000, the judgment for P42,966.44 against the
municipality of Iloilo was reduced to P30,966.40, which was adjudicated by said court to Mauricio Cruz & Co.

This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged assignee of the rights of the late Attorney
Antero Soriano by virtue of the said judgment in payment of professional services rendered by him to the said widow
and her coheirs.

ISSUE: W/N the assignment made by Tan Boon Tiong, as attorney-in-fact of Tan Ong de Tan Toco, to Attorney Antero
Soriano, of all the credits, rights and interests belonging to Tan Ong de Tan Toco by virtue of the judgment rendered
in civil case of the CFI-Iloilo, adjudicating to said widow the amount of P42,966.40, in consideration of the
professional services rendered by said attorney to said widow of Tan Toco and her coheirs is VALID.

TAN ONG DE TAN TOCO: contends that said assignments was not made in consideration of professional services by
Attorney Antero Soriano, for they had already been satisfied before the execution of said deed of assignment, but in
order to facilitate the collection of the amount of said judgment in favor of the appellant, for the reason that, being
Chinese, she had encountered many difficulties in trying to collect.

A glance at the receipts shows that those amounts were received by Attorney Antero Soriano for the firm of Soriano
& Arroyo, which is borne out by the stamp on said receipts reading, "Befete Soriano & Arroyo," and the manner in
which said attorney receipted for them, "Soriano & Arroyo, by A. Soriano."

Therefore, the appellant's contention that the amounts of P200 and P500 evidence by said receipts should be
considered as payments made to Attorney Antero Soriano for professional services rendered by him personally to the
interests of the widow of Tan Toco, is untenable.

Besides, if at the time of the assignments to the late Antero Soriano his professional services to the appellant widow
of Tan Toco had already been paid for, no reason can be given why it was necessary to write him money in payment
of professional services on after the deed of assignment had been executed. In view of the fact that the amounts
involved in the cases prosecuted by Attorney Antero Soriano as counsel for Tan Toco's widow, some of which cases
have been appealed to this court, run into the hundreds of thousands of pesos, and considering that said attorney
had won several of those cases for his clients, the sum of P10,000 to date paid to him for professional services is
wholly inadequate, and shows, even if indirectly, that the assignments of the appellant's rights and interests made to
the late Antero Soriano and determined in the judgment aforementioned, was made in consideration of the
professional services rendered by the latter to the aforesaid widow and her coheirs.

The defendant-appellant also contends that the deed of assignment was drawn up in contravention of the
prohibition contained in article 1459, case 5, of the Civil Code, which reads as follows:

ART. 1459. The following persons cannot take by purchase, even at a public or judicial auction, either in person or through the mediation
of another:

5. Justices, judges, members of the department of public prosecution, clerks of superior and inferior courts, and other officers of such
courts, the property and rights in litigation before the court within whose jurisdiction or territory they perform their respective duties .This
prohibition shall include the acquisition of such property by assignment.

Actions between co-heirs concerning the hereditary property, assignments in payment of debts, or to secure the property of such persons,
shall be excluded from this rule.

The prohibition contained in this paragraph shall include lawyers and solicitors with respect to any property or rights involved in any
litigation in which they may take part by virtue of their profession and office.

It does not appear that the Attorney Antero Soriano was counsel for Tan Toco in the civil case of CFI- Iloilo, for the
recovery of the value of a strip of land expropriated by said municipality for the widening of a certain public street.
The only lawyers who appear to have represented her in that case were Arroyo and Evangelista, who filed a claim
for their professional fees .When Tan Toco’s credit, right, and interests in that case were assigned by her attorney-in-
fact, Tan Boon Tiong, to Attorney Antero Soriano in payment of professional services rendered by the latter to the
appellant and her coheirs in connection with other cases, that particular case had been decided, and the only thing
left to do was to collect the judgment. There was no relation of attorney and client, then, between Antero Soriano
and the appellant, in the case where that judgment was rendered. Therefore the assignment of her credit, right and
interests to said lawyer did not violate the prohibition cited above.

As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was empowered by his principal to make as
assignment of credits, rights and interests, in payment of debts for professional services rendered by lawyers, in
paragraph VI of the power of attorney, Tan Boon Tiong is authorized to employ and contract for the services of
lawyers upon such conditions as he may deem convenient, to take charge of any actions necessary or expedient for
the interests of his principal, and to defend suits brought against her. This power necessarily implies the authority to
pay for the professional services thus engaged. In the present case, the assignment made by Tan Boon Tiong, as
Attorney-in-fact for the appellant, in favor of Attorney Antero Soriano for professional services rendered in other
cases in the interests of the appellant and her coheirs, was that credit which she had against the municipality of
Iloilo, and such assignment was equivalent to the payment of the amount of said credit to Antero Soriano for
professional services.

For the foregoing considerations, the court is of opinion and so holds: (1) That an agent of attorney-in -fact
empowered to pay the debts of the principal, and to employ lawyers to defend the latter's interests, is impliedly
empowered to pay the lawyer's fees for services rendered in the interests of said principal, and may satisfy them by
an assignment of a judgment rendered in favor of said principal; (2) that when a person appoints two attorneys-in-
fact independently, the consent of the one will not be required to validate the acts of the other unless that appears
positively to have been the principal's attention; and (3) that the assignment of the amount of a judgment made by a
person to his attorney, who has not taken any part in the case wherein said judgment was rendered, made in
payment of professional services in other cases, does not contravene the prohibition of article 1459, case 5, of the
Civil Code.
SMITH, BELL & CO., INC. vs. COURT OF APPEALS and JOSEPH BENGZON CHUA [February 6, 1997]

In July 1982, Joseph Chua, doing business under the name of Tic Hin Chiong, Importer, bought and imported to the
Philippines from Chin Gact Co., Ltd. of Taipei; Taiwan, 50 metric tons of Dicalcium Phosphate, valued at US$13,000
CIF5 Manila. These were contained in 1,250 bags and shipped from the Port of Kaohsiung, Taiwan on Board S.S.
"GOLDEN WEALTH" for the Port on Manila.

This shipment was insured by First Insurance Co. for US$19,500 "against all risks" at port of departure under a
Marine Policy, with the note "Claim, if any, payable in U.S. currency at Manila” and with Smith, Bell, and Co.
stamped at the lower left side of the policy as "Claim Agent." The cargo arrived at the Port of Manila. The entire
cargo was discharged to the local arrastre contractor, Metroport Services Inc. with a number of the cargo in apparent
bad order condition. The surveyor's report showed that of the 1,250 bags of the imported material, 600 were
damaged by tearing at the sides of the container bags and the contents partly empty. Accordingly, Chua filed with
Smith, Bell, and Co., Inc. a formal statement of claim with proof of loss and a demand for settlement of the
corresponding value of the losses, in the sum of US$7,357.78.00.

After purportedly conveying the claim to its principal, Smith, Bell, and Co., Inc. informed Chua that its principal
offered only 50% of the claim or US$3,616.17 as redress, on the alleged ground of discrepancy between the amounts
contained in the shipping agent's reply to the claimant of only US$90.48 with that of Metroport's. Chua refused,
contending that the discrepancy was a result of loss from vessel to arrastre to consignees' warehouse, which losses
were still within the "all risk" insurance cover. No settlement of the claim having been made, Chua caused the
instant case to be filed.

SMITH, BELL, & CO.: averred that it is merely a settling or claim agent of First Insurance Co. and as SUCH agent, it is
not personally liable under the policy in which it has not even taken part of. It then alleged that Chua has no cause of
action against it. The First Insurance Co. Ltd. did not file an Answer, hence it was declared in default.

CA: rendered a decision favorable to Chua. It ruled that Chua has fully established the liability of the insurance firm
on the subject insurance contract as the former presented concrete evidence of the amount of losses resulting from
the risks insured against. As regards SMITH, BELL, & CO., CA held that since it is admittedly a claim agent of the
foreign insurance firm doing business in the Philippines, justice is better served if said agent is made liable without
prejudice to its right of action against its principal, the insurance firm.

ISSUE: W/N a claim agent of a disclosed principal — a foreign insurance company — can be held jointly and
severally liable with said principal under the latter's marine cargo insurance policy, given that the agent is not a
party to the insurance contract.

HELD: NO. SMITH, BELL, & CO. is undisputedly a settling agent acting within the scope of its authority. Thus, it
cannot be held personally and/or solidarily liable for the obligations of its disclosed principal merely because there is
allegedly a need for a speedy settlement of the claim of private respondent.

As a settlement and adjustment agent of the foreign insurance company, it has the authority to settle all the losses
and claims that may arise under the policies that may be issued by or in behalf of said company in accordance with
the instructions it may receive from time to time from its principal. However, said agent still had NOT assumed
personal liability under said policies, and, therefore, it cannot be sued in its own right. An adjustment and
settlement agent is no different from any other agent from the point of view of his responsibility, for he also acts
in a representative capacity. Whenever he adjusts or settles a claim, he does it in behalf of his principal, and his
action is binding not upon himself but upon his principal. The ordinary rule of agency applies. The

The scope and extent of the functions of an adjustment and settlement agent do not include personal liability. His
functions are merely to settle and adjusts claims in behalf of his principal if those claims are proven and undisputed,
and if the claim is disputed or is disapproved by the principal, like in the instant case, the agent does not assume any
personal liability. The recourse of the insured is to press his claim against the principal.

5
CIF - Cost, Insurance and Freight means the seller pays costs, freight and insurance against the buyer's risk of loss or damage in transit to
destination.
The agent cannot be sued nor held liable whether singly or solidarily with its principal.

Every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied. The
only "involvement" of SMITH, BELL, & CO. in the subject contract of insurance was having its name stamped at the
bottom left portion of the policy as "Claim Agent." Without anything else to back it up, such stamp cannot even be
deemed by the remotest interpretation to mean that petitioner participated in the preparation of said contract.
Hence, there is no privity of contract, and correspondingly there can be no obligation or liability, and thus no Cause
of action against SMITH, BELL, & CO. attaches. Under Article 1311 of the Civil Code, contracts are binding only upon
the parties (and their assigns and heirs) who execute them.

Article 1207 of the Civil Code provides that "there is a solidary liability only when the obligation expressly so states,
or when the law or the nature of the obligation requires solidarity." The well-entrenched rule is that solidary
obligation cannot lightly be inferred. It must be positively and clearly expressed. The contention that it would really
be First Insurance Company, Ltd. which would be held liable is specious and cannot be accepted. Such a stance would
inflict injustice upon SMITH, BELL, & CO. which would be made to advance the funds to settle the claim without any
assurance that it can collect from the principal which disapproved such claim, in the first place. Such position would
have absolutely no legal basis.

The Insurance Code is quite clear as to the Purpose and role of a resident agent. Such agent, as a representative of
the foreign insurance company, is tasked only to receive legal processes on behalf of its principal and not to answer
personally for any insurance claims.

Further, we note that in the case cited by respondent Court, petitioner was found to be a resident agent of First
Insurance Co. Ltd. In the instant case however, the trial court had to order the service of summons upon First
Insurance Co., Ltd. which would not have been necessary if petitioner was its resident agent. Indeed, from our
reading of the records of this case, we find no factual and legal bases for the finding of respondent Court that
petitioner is the resident agent of First Insurance Co., Ltd.

Lastly, being a mere agent and representative, SMITH, BELL, & CO. is also not the real party-in-interest in this case. If
the party sued is not the proper party, any decision that may be rendered against him would be futile, for the
decision cannot be enforced or executed. The cause of action of private respondent is based on a contract of
insurance which was not participated in by petitioner. It is not a "person who claim(s) an interest adverse to the
plaintiff" nor is said respondent "necessary to a complete determination or settlement of the questions involved"
in the controversy. SMITH, BELL, & CO. is improperly impleaded for not being a real-party-interest. It will not benefit
or suffer in case the action prospers.

Finally, CA also contends that "the interest of justice is better served by holding the settling agent jointly and severally
liable with its principal." As no law backs up such pronouncement, the appellate Court is thus resorting to equity.
However, equity which has been aptly described as "justice outside legality," is availed of only in the absence of, and
never against, statutory law or judicial pronouncements. Upon the other hand, the liability of agents is clearly
provided for by our laws and existing jurisprudence.

WHEREFORE, the Petition is GRANTED and the Decision of the CA is REVERSED and SET ASIDE.
WILLIAM UY and RODEL ROXAS vs. COURT OF APPEALS [September 9, 1999]

William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of
such authority, Uy and Roxas offered to sell the lands in Tuba, Benguet to National Housing Authority to be utilized
and developed as a housing project.

In 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of said lands at the cost of P23.867
million. Pursuant to which, the parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the
eight parcels of land, only five were paid for by the NHA because of the report it received from the Land Geosciences
Bureau of the DENR that the remaining area is located at an active landslide area and therefore, not suitable for
development into a housing project. NHA subsequently issued a Resolution cancelling the sale over the three parcels
of land, but offered the amount of P1.225 million to the landowners as daños perjuicios. In 1992, Uy and Roxas
filed before the RTC-Quezon City a Complaint for Damages against NHA and its General Manager Robert Balao.

RTC: rendered a decision declaring the cancellation of the contract to be justified. The trial court nevertheless
awarded damages to Uy and Roxas in the sum of P1.255 million, the same amount initially offered by NHA to
petitioners as damages.

CA: reversed the decision of the trial court and entered a new one dismissing the complaint. It held that since there
was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The Court of
Appeals also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the
action before the trial court.

“In paragraph 4 of the complaint, plaintiffs alleged themselves to be "sellers' agents" for the several owners of the 8 lots subject matter of the
case. Obviously, William Uy and Rodel Roxas in filing this case acted as attorneys-in-fact of the lot owners who are the real parties in interest
but who were omitted to be pleaded as party-plaintiffs in the case. This omission is fatal. Where the action is brought by an attorney-in-fact of a
land owner in his name, and not in the name of his principal, the action was properly dismissed because the rule is that every action must be
prosecuted in the name of the real parties-in-interest.”

UY & ROXAS: claim that they lodged the complaint not in behalf of their principals but in their own name as agents
directly damaged by the termination of the contract. The damages prayed for were intended not for the benefit of
their principals but to indemnify petitioners for the losses they themselves allegedly incurred as a result of such
termination. These damages consist mainly of "unearned income" and advances. Petitioners, thus, attempt to
distinguish the case at bar from those involving agents or apoderedos instituting actions in their own name but in
behalf of their principals. Petitioners in this case purportedly brought the action for damages in their own name
and in their own behalf.

ISSUE: W/N petitioners are real parties-in-interest in the action.

HELD: NO. The real party-in-interest is the party who stands to be benefited or injured by the judgment or the party
entitled to the avails of the suit. "Interest, within the meaning of the rule, means material interest, an interest in the
issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest. An action shall be prosecuted in the name of the party who, by the substantive law, has the right
sought to be enforced.

Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the
owners of the land subject of the sale. As agents, they only render some service or do something in representation or
on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale
executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the
real parties-in-interest, either as plaintiff or defendant, in an action upon that contract must, generally, either be
parties to said contract. 9

The rule requiring every action to be prosecuted in the name of the real party-in-interest recognizes the
assignments of rights of action and also recognizes that when one has a right of action assigned to him, he is then
the real party in interest and may maintain an action upon such claim or right. The purpose of this rule is to require
the plaintiff to be the real party in interest, or, in other words, he must be the person to whom the proceeds of the
action shall belong, and to prevent actions by persons who have no interest in the result of the same. Thus, an agent,
in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such
contract. Petitioners, however, have not shown that they are assignees of their principals to the subject contracts.
While they alleged that they made advances and that they suffered loss of commissions, they have not established
any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for
advances and commissions before turning the balance over to the principal[s]."

Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second
paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale
"clearly and deliberately" conferring a favor to any third person. That petitioners did not obtain their commissions or
recoup their advances because of the non-performance of the contract did not entitle them to file the action below
against NHA.

Section 372 (2) of the Restatement of the Law on Agency (Second) states: “(2) An agent does not have such an
interest in a contract as to entitle him to maintain an action at law upon it in his own name merely because he is
entitled to a portion of the proceeds as compensation for making it or because he is liable for its breach.”

The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance or
nonperformance of the contract by the principal or by the other party thereto does not entitle him to maintain an
action on his own behalf against the other party for its breach. An agent entitled to receive a commission from his
principal upon the performance of a contract which he has made on his principal's account does not, from this fact
alone, have any claim against the other party for breach of the contract, either in an action on the contract or
otherwise. An agent who is not a promisee cannot maintain an action at law against a purchaser merely because he
is entitled to have his compensation or advances paid out of the purchase price before payment to the principal. . . .

As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of
sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real
parties-in-interest in this case.

In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the contract were the lands not suitable for
housing. In other words, the quality of the land was an implied condition for the NHA to enter into the contract. On the part of the NHA,
therefore, the motive was the cause for its being a party to the sale.

The findings contained in the report of the Land Geosciences Bureau dated 15 July 1991 sufficient basis for the cancellation of the sale.
Accordingly, NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the
negation of the motive/cause thus rendering the contract inexistent. Article 1318 of the Civil Code states that:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established.

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not
be entitled to any award of damages. WHEREFORE, the instant petition is hereby DENIED.

LAUREANO ANGELES vs. PHILIPPINE NATIONAL RAILWAYS AND RODOLFO FLORES [August 31, 2006]
On May 5, 1980, Philippine National Railways informed Gaudencio Romualdez that it has accepted the latter’s offer
to buy, on an "AS IS, WHERE IS" basis, the PNR’s scrap/unserviceable rails located in Del Carmen and Lubao,
Pampanga for the total amount of P96,600. After paying the stated purchase price, Romualdez addressed a letter 6 to
Atty. Cipriano Dizon, PNR’s Acting Purchasing Agent, authorizing Lizette Wijanco as the representative of Romualdez
in withdrawing the rails. Lizette requested the PNR to transfer the location of withdrawal for the reason that the
scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not ready for hauling. The PNR
granted said request and allowed Lizette to withdraw scrap/unserviceable rails in Tarlac instead. However, the PNR
subsequently suspended the withdrawal in view of what it considered as documentary discrepancies coupled by
reported pilferages of over P500,000 worth of PNR scrap properties in Tarlac.

Consequently, the spouses Angeles demanded the refund of the amount of P96,000. The PNR, however, refused to
pay, alleging that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already
been withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an amount that exceeds the claim for
refund. Thus, spouses Angeles filed suit against the PNR for specific performance and damages before RTC-Quezon
City, praying that PNR be directed to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages.
Trial ensued. Meanwhile, Lizette Angeles passed away and was substituted by her heirs, among whom is her
husband, Laureno Angeles.

RTC: on the postulate that the spouses Angeles are not the real parties-in-interest, rendered judgment dismissing
their complaint for lack of cause of action. RTC held that Lizette was merely a representative of Romualdez in the
withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter's rights with respect to
the award; CA: dismissed the appeal and affirmed that of the trial court.

ISSUE: W/N the May 26, 1980 letter of Romualdez to Atty. Dizon of PNR was meant to designate Lizette Angeles as
an assignee of Romualdez's interest in the scrap rails awarded to San Juanico Enterprises, thus making her a REAL
PARTY IN INTEREST with personality to sue.

HELD: NO. Upon scrutiny of the subject letter to Atty. Dizon, Lizette was to act just as a "representative" of
Romualdez in the "withdrawal of rails," and not an assignee.

Where agency exists, PNR’s liability on a contract is to the principal and not to the agent and the relationship of
the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has
neither rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract
may be violated only by the parties thereto as against each other, the real party-in-interest, either as plaintiff or
defendant in an action upon that contract must, generally, be a contracting party.

The legal situation is different where an agent is constituted as an assignee. In such a case, the agent may, in his
own behalf, sue on a contract made for his principal, as an assignee of such contract. The rule requiring every action
to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also
recognizes that when one has a right assigned to him, he is then the real party-in-interest and may maintain an action
upon such claim or right.

The words "principal" and "agent," are not the only terms used to designate the parties in an agency relation. The
agent may also be called an attorney, proxy, delegate or, as here, representative.

Romualdez's use of the active verb "authorized," instead of "assigned," indicated an intent on his part to keep and
retain his interest in the subject matter. He intended to limit Lizette’s role in the scrap transaction to being the
representative of his interest therein.

Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted
together, attributing to the doubtful ones that sense which may result from all of them taken jointly. In fine, the real
intention of the parties is primarily to be determined from the language used and gathered from the whole
6
“This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE WIJANCO to be my lawful representative in the
withdrawal of the scrap/unserviceable rails awarded to me. For this reason, I have given her the original copy of the award, which will indicate my waiver of
rights, interests and participation in favor of LIZETTE WIJANCO.”
instrument. When put into the context of the letter as a whole, it is abundantly clear that the rights which
Romualdez waived or ceded in favor of Lizette were those in furtherance of the agency relation that he had
established for the withdrawal of the rails.

Article 1371 of the Civil Code provides that to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered. The fact of agency was confirmed in
subsequent letters from the Angeles spouses in which they themselves refer to Lizette as "authorized
representative" of San Juanico Enterprises. Mention may also be made that the withdrawal receipt which Lizette had
signed indicated that she was doing so in a representative capacity. One professing to act as agent for another is
estopped to deny his agency both as against his asserted principal and third persons interested in the transaction
which he engaged in.

Petitioner maintains that the Romualdez letter in question was not in the form of a special power of attorney,
implying that the latter had not intended to merely authorize his wife, Lizette, to perform an act for Romualdez. In
the absence of statute, no form or method of execution is required for a valid power of attorney; it may be in any
form clearly showing on its face the agent’s authority.

A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his
agent and confers upon him the authority to perform certain specified acts on behalf of the principal. The written
authorization itself is the power of attorney, and this is clearly indicated by the fact that it has also been called a
"letter of attorney." Its primary purpose is not to define the authority of the agent as between himself and his
principal but to evidence the authority of the agent to third parties with whom the agent deals. The letter under
consideration is sufficient to constitute a power of attorney. Except as may be required by statute, a power of
attorney is valid although no notary public intervened in its execution.

A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers
which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.
Contextually, all that Lizette was authorized to do was to withdraw the unserviceable/scrap railings. Allowing her
authority to sue therefor, especially in her own name, would be to read something not intended, let alone written
in the Romualdez letter.

WHEREFORE, the petition is DENIED and the assailed decision of the CA is AFFIRMED.

NATIONAL POWER CORPORATION vs. NATIONAL MERCHANDISING CORPORATION [October 23, 1982]
In 1956, the National Power Corporation and National Merchandising Corporation, as the representative of the
International Commodities Corporation of New York City, executed a contract for the purchase of crude sulfur by the
NPC for its Maria Cristina Fertilizer Plant in Iligan City. It was stipulated in the contract of sale that the seller would
deliver the sulfur at Iligan City within 60 days from notice of the establishment in its favor of a letter of credit for
$212,120. FAILURE to effect delivery would subject the seller and its surety to the payment of liquidated damages.

The deadline for the delivery of the sulfur was January 15, 1957. The New York supplier was not able to deliver the
sulfur due to its inability to secure shipping space. During the period from January 20 to 26, 1957 there was a
shutdown of the NPC’s fertilizer plant because there was no sulfur. No fertilizer was produced. NPC advised Namerco
that under Article 9 of the contract of sale "non-availability of bottom or vessel" was not a fortuitous event that
would excuse non-performance and that the NPC would resort to legal remedies to enforce its rights. The
Government Corporate Counsel rescinded the contract of sale due to the New York supplier’s non-performance of
its obligations and demanded from Namerco the payment of P360,572.80 as liquidated damages. NPC sued the
New York firm, Namerco and the Domestic Insurance Company for the recovery of the stipulated liquidated damages.
[CFI dismissed the case as to the New York firm for lack of jurisdiction because it was not doing business in the Philippines, while MELVIN
WALLICK, assignee of the New York Corporation, sued NAMERCO for damages in connection w/ the same sulfur transaction.]

NAMERCO: contend that the delivery of the sulfur was conditioned on the availability of a vessel to carry the
shipment and that Namerco acted within the scope of its authority as agent in signing the contract of sale. [ HOWEVER,
the invitation to bid issued by the NPC provides that non-availability of a steamer is not a ground for non-payment of the liquidated damages in
case of non-performance by the seller.] Further, NAMERCO argues that it was incumbent upon the NPC to inquire into the
extent of the agent’s authority and, for its failure to do so, it could not claim any liquidated damages.

NPC: argues that Namerco should have advised the NPC of the limitations on its authority to negotiate the sale.

The New York corporation in its cable to Namerco stated that the sale was subject to availability of a steamer.
However, Namerco did not disclose that cable to the NPC and, contrary to its principal’s instruction, it agreed that
non-availability of a steamer was not a justification for nonpayment of the liquidated damages.

CFI: concluded that Namerco acted beyond the bounds of its authority because it violated its principal’s cabled
instructions (1) that the delivery of the sulfur should be "C & F Manila", not "C & F Iligan City"; (2) that the sale be
subject to the availability of a steamer and (3) that the seller should be allowed to withdraw right away the full
amount of the letter of credit and not merely 80% thereof.

ISSUE: W/N NAMERCO should be liable for damages.

HELD: YES. Namerco is liable for damages because under Article 1897 of the Civil Code, 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.

Even before the contract of sale was signed, Namerco was already aware that its principal was having difficulties in
booking shipping space. The New York supplier advised Namerco that the latter should not sign the contract unless
Namerco wished to assume sole responsibility for the shipment. Sycip, Namerco’s president, replied in his letter that
he had no choice but to finalize the contract of sale because the NPC would forfeit Namerco’s bidder’s bond if the
contract was not formalized. Thus, the New York firm cabled Namerco that the firm did not consider itself bound by
the contract of sale and that Namerco signed the contract on its own responsibility.

The rule relied upon by NAMERCO that every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent would apply in this case if the principal is sought to be held liable on the
contract entered into by the agent. That is not so in this case. Here, it is the agent that it sought to be held liable on
a contract of sale which was expressly repudiated by the principal because the agent took chances, it exceeded its
authority, and, in effect, it acted in its own name.

NAMERCO also contend that the trial court erred in holding as enforceable the stipulation for liquidated damages
despite its finding that the contract was executed by the agent in excess of its authority and is unenforceable.
Article 1403 of the Civil Code provides that a contract entered into in the name of another person by one who has
acted beyond his powers is unenforceable. HOWEVER, Article 1403 refers to the unenforceability of the contract
against the principal. In the instant case, the contract containing the stipulation for liquidated damages is not being
enforced against it principal but against the agent and its surety.

It is being enforced against the agent because article 1807 implies that the agent who acts in excess of his authority is
personally liable to the party with whom he contracted . Article 1898 of the Civil Code provides 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 exceeded the limits of its authority in contracting with the NPC in the name of its principal. The NPC was
unaware of the limitations on the powers granted by the New York firm to Namerco. The New York corporation in its
letter certified that National Merchandising Corporation is its exclusive representatives in the Philippines for the sale
of its products. NAMERCO is also empowered to present offers in behalf of the New York Corporation in accordance
with cabled or written instructions."

Namerco never disclosed to the NPC the cabled or written instructions of its principal. For that reason and because
Namerco exceeded the limits of its authority, it virtually acted in its own name and not as agent and it is, therefore,
bound by the contract of sale which, however, is not enforceable against its principal. If Namerco is bound under the
contract of sale, then it follows that it is bound by the stipulation for liquidated damages in that contract.

It would be unjust and inequitable for Namerco to escape liability after it had deceived the NPC. Namerco is being held liable under the
contract of sale because it virtually acted in its own name. It became the principal in the performance bond. In the last analysis, the Domestic
Insurance Company acted as surety for Namerco. The rule is that "want of authority of the person who executes an obligation as the agent or
representative of the principal will not, as a general rule, affect the surety’s liability thereon, especially in the absence of fraud, even though the
obligation is not binding on the principal".

Defendants’ other contentions are that they should be held liable only for nominal damages, that interest should not be collected on the
amount of damages and that the damages should be computed on the basis of a forty-five day period and not for a period of one hundred
fifteen days.

With respect to the imposition of the legal rate of interest on the damages from the filing of the complaint in 1957, or a quarter of a century
ago, defendants’ contention is meritorious. It would be manifestly inequitable to collect interest on the damages especially considering that the
disposition of this case has been considerably delayed due to no fault of the defendants.

Ruling on the amount of damages. — A painstaking evaluation of the equities of the case in the light of the arguments of the parties as
expounded in their five briefs leads to the conclusion that the damages due from the defendants should be further reduced to P45,100 which is
equivalent to their bidder’s bond or to about 10% of the selling price of the sulfur.

WHEREFORE, the lower court’s judgment is modified and NAMERCO and Domestic Insurance Company of the
Philippines are ordered to pay solidarily to the National Power Corporation the sum of P45,100.00 as liquidated
damages.

DEVELOPMENT BANK OF THE PHILIPPINES vs. COURT OF APPEALS [March 21, 1994]
In May 1987, Juan Dans, together with his wife Candida, his son and daughter-in-law, applied for a loan of P500,000
with the DBP-Basilan Branch. As the principal mortgagor, Dans (76 year old) was advised by DBP to obtain a mortgage
redemption insurance with the DBP Mortgage Redemption Insurance Pool.

A loan of P300,000 was approved and released by DBP. From the proceeds of the loan, DBP deducted P1,476 as
payment for the MRI premium. Dans accomplished and submitted the "MRI Application for Insurance" and the
"Health Statement for DBP MRI Pool7." The MRI premium of Dans, less the DBP service fee of 10%, was credited by
DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP MRI Pool was advised of the credit.

On September 1987, Dans died of cardiac arrest. The DBP, upon notice, relayed this information to the DBP MRI Pool.
DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage, being over the acceptance age limit of 60
years at the time of application. Thus, DBP apprised Candida Dans of the disapproval of her late husband's MRI
application. The DBP offered to refund the premium of P1,476 which the deceased had paid, but Candida Dans
refused to accept the same, demanding payment of the face value of the MRI or an amount equivalent to the loan.
She, likewise, refused to accept an ex gratia settlement of P30,000 which the DBP later offered.

Estate of JUAN DANS, through Candida as administratrix, filed a complaint with RTC-Basilan, against DBP and the
insurance pool for "Collection of Sum of Money with Damages." Estate alleged that Dans became insured by the
DBP MRI Pool when DBP, with full knowledge of Dans' age at the time of application, required him to apply for MRI,
and later collected the insurance premium thereon. Estate therefore prayed: (1) that the sum of P139,500, which it
paid under protest for the loan, be reimbursed; (2) that the mortgage debt of the deceased be declared fully paid;
and (3) that damages be awarded.

RTC: rendered a decision in favor of the Estate and against DBP. The DBP MRI Pool was absolved from liability, after
the trial court found no privity of contract between it and the deceased. The trial court declared DBP in estoppel for
having led Dans into applying for MRI and actually collecting the premium and the service fee, despite knowledge of
his age ineligibility; CA: affirmed the decision of the RTC.

Under the Health Statement for DBP MRI POOL, the MRI coverage shall take effect: (1) when the application shall be
approved by the insurance pool; and (2) when the full premium is paid during the continued good health of the
applicant. These two conditions must concur. The power to approve MRI applications is lodged with the DBP MRI
Pool. The pool, however, did not approve the application of Dans. There is also no showing that it accepted the sum
of P1,476, which DBP credited to its account with full knowledge that it was payment for Dan's premium. There was,
as a result, no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does
not exist.

ISSUE: W/N DBP may be held liable.

HELD: YES. In dealing with Dans, DBP was wearing two legal hats: the first as a lender, and the second as an
insurance agent. As an insurance agent, DBP made Dans go through the motion of applying for said insurance,
thereby leading him and his family to believe that they had already fulfilled all the requirements for the MRI and that
the issuance of their policy was forthcoming.

Apparently, DBP had full knowledge that Dan's application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption
Insurance Policy signed in 1984 by all the insurance companies concerned.

Under Article 1987 of the Civil Code of the Philippines, "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 limits of his authority without giving
such party sufficient notice of his powers."

The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age. Knowing
all the while that Dans was ineligible for MRI coverage because of his advanced age, DBP exceeded the scope of its

7
“I hereby declare and agree that all the statements and answers contained herein are true, complete and correct to the best of my knowledge and belief and
form part of my application for insurance. It is understood and agreed that no insurance coverage shall be effected unless and until this application is approved
and the full premium is paid during my continued good health.”
authority when it accepted Dan's application for MRI by collecting the insurance premium, and deducting its agent's
commission and service fee.

The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of
the limits of the agent's powers. There is no showing that Dans knew of the limitation on DBP's authority to solicit
applications for MRI.

If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the
agent and the third person has been deceived by the non-disclosure thereof by the agent, then the agent is liable for
damages to the third person.

RATIONALE: The rule that the agent is liable when he acts without authority is founded upon the supposition that
there has been some wrong or omission on his part either in misrepresenting, or in affirming, or concealing the
authority under which he assumes to act. Inasmuch as the non-disclosure of the limits of the agency carries with it
the implication that a deception was perpetrated on the unsuspecting client, the provisions of Articles 19, 20 and 21
of the Civil Code of the Philippines come into play.

Article 19: Every person must, in the exercise of his rights and in the performance of his duties, act with justice give everyone his due and
observe honesty and good faith.
Article 20: Every person who, contrary to law, willfully or negligently causes damage to another, shall indemnify the latter for the same.
Article 21: Any person, who willfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall
compensate the latter for the damage.

The DBP's liability, however, cannot be for the entire value of the insurance policy. To assume that were it not for
DBP's concealment of the limits of its authority, Dans would have secured an MRI from another insurance company,
and therefore would have been fully insured by the time he died, is highly speculative. Considering his advanced age,
there is no absolute certainty that Dans could obtain an insurance coverage from another company. It must also be
noted that Dans died almost immediately, i.e., on the 19 th day after applying for the MRI, and on the 23 rd day from
the date of release of his loan.

One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved.
Damages, to be recoverable, must not only be capable of proof, but must be actually proved with a reasonable
degree of certainty. Speculative damages are too remote to be included in an accurate estimate of damages.

While Dans is not entitled to compensatory damages, he is entitled to moral damages. No proof of pecuniary loss is
required in the assessment of said kind of damages. The same may be recovered in acts referred to in Article 2219 of
the Civil Code.

The assessment of moral damages is left to the discretion of the court according to the circumstances of each case.
Considering that DBP had offered to pay P30,000 to the Estate in ex gratia settlement of its claim and that DBP's non-
disclosure of the limits of its authority amounted to a deception to its client, an award of moral damages in the
amount of P50,000 would be reasonable.

WHEREFORE, the decision of the Court of Appeals is MODIFIED and DBP is ORDERED: (1) to REIMBURSE the Estate
of Juan Dans the amount of P1,476.00 with legal interest from the date of the filing of the complaint until fully
paid; and (2) to PAY said Estate P50,000 as moral damages and P10,000 as attorney's fees.

NORA and ALFREDO EUGENIO vs. COURT OF APPEALS [December 15, 1994]
Pepsi-Cola Bottling Company of the Philippines, Inc. is engaged in the business of manufacturing, making bottling and
selling soft drinks and beverages to the general public. Nora Eugenio is the owner of a Minimart in Marikina and was
a dealer of the soft drink products of Pepsi-Cola. Eugenio had a regular charge account in both the Quezon City plant
as well as in the Muntinlupa plant of Pepsi-Cola. Her husband and co-petitioner, Alfredo Eugenio, used to be a route
manager of Pepsi-Cola in its Quezon City plant.

It appears that on August 1, 1981, Pepsi-Cola through the head of its Legal Department, Atty. Antonio Rosario, sent
an inter-office correspondence to Alfredo Eugenio inviting him for an interview/interrogation regarding alleged
"non-payment of debts to the company, inefficiency, and loss of trust and confidence." A statement of overdue
accounts were prepared showing that spouses Eugenio owed Pepsi-Cola P94,651. A reconciliation of Eugenio’s
account was then conducted and the amount was reduced to P74,849.

After the meeting, Pepsi-Cola alleged that Alfredo Eugenio requested that he be allowed to retire and the existing
accounts be deducted from his retirement pay, but that he later withdrew his retirement plan. Eugenio disputed
that allegation and, in fact, he subsequently filed a complaint for illegal dismissal. Labor arbiter later affirmed that
Alfredo was indeed illegally dismissed, and that he never filed an application for retirement.

With their aforesaid accounts still unpaid, Alfredo Eugenio submitted to Atty. Rosario four trade provisional receipts
allegedly issued to and received by them from Pepsi-Cola’s Route Manager Jovencio Estrada of its Malate
Warehouse, showing payments in the total sum of P80,500 made by Abigail's Store. Atty. Rosario ordered an
investigation to verify this claim. During the investigation, Estrada allegedly denied that he issued and signed such.
Surprisingly, however, said supposed affidavit is inexplicably dated February 5, 1982. At this point, it should be noted
that Estrada never testified thereafter in court and what he is supposed to have done or said was merely related by
Azurin.

In 1982, Pepsi-Cola filed a complaint for a sum of money against Eugenio spouses with CFI-Quezon City. Altogether,
Eugenio spouses had an outstanding account of P94,651 which they failed to pay despite oral and written
demands. EUGENIO spouses argue that if the TPR amounts were credited in their favor, it would be Pepsi-Cola
which would be indebted to them in the sum of P3,546 representing overpayment.

CFITake 2: rendered a second decision wherein spouses Eugenio were ordered to pay, jointly and severally, the reduced
amount of P64,188.60, plus legal interest of 6% per annum from the filing of the action until full payment of the
amount adjudged;

CA affirmed the judgment of the trial court. The appellate court held that "the questioned TPR's are merely
'provisional' and were, as printed at the bottom of said receipts, to be officially confirmed by Pepsi-Cola within 15
days by delivering the original copy thereof stamped paid and signed by its cashier to the customer. Spouses Eugenio
failed to present the original copies of the TPRs in question, showing that they were never confirmed by Pepsi-Cola,
nor did they demand from Pepsi-Cola the confirmed original copies thereof.

Nature of the TPRs: After every transaction, when a collection is made, the customer is given by the sales
representative a copy of the trade provisional receipt, that is, the triplicate copy or customer's copy, properly filled up
to reflect the completed transaction. All unused TPRs, as well as the collections made, are turned over by the sales
representative to the appropriate company officer.

ISSUE: W/N the amounts in the trade provisional receipts should be credited in favor of Eugenio spouses. [Q of F]

HELD: YES. We do not agree with the strained implication intended to be adverse to spouses Eugenio. The TPRs
presented in evidence by the spouses are disputably presumed as evidentiary of payments made on account of the
spouses. There are presumptions juris tantum in law that private transactions have been fair and regular and that the
ordinary course of business has been followed. Even assuming arguendo that Pepsi-Cola's cashier never received the
amounts reflected in the TPRs, still Pepsi-Cola failed to prove that Estrada, who is its duly authorized agent with
respect to the spouses, did not receive those amounts from the latter.

As explained by the spouses, "in so far as the Pepsi-Cola’s customers are concerned, for as long as they pay their
obligations to the sales representative of Pepsi-Cola using the latter's official receipt, said payment extinguishes their
obligations." Otherwise, it would unreasonably cast the burden of supervision over its employees from Pepsi-Cola
to its customers.

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. As far as third persons are
concerned, an act is deemed to have been performed within the scope of the agent's 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 an understanding between the principal and his agent. In fact, Atty. Rosario admitted that "it is the responsibility
of the collector to turn over the collection."

Except for its speculation that Alfredo Eugenio could have had easy access to blank forms of the TPRs because he
was a former route manager, no evidence whatsoever was presented by Pepsi-Cola in support of that theory.
Azurin himself admitted that their accounting department could not even inform them regarding the persons to
whom the TPRs were issued. In addition, it is significant that Pepsi-Cola did not take proper action if indeed some
receipts were actually lost, such as the publication of the fact of loss of the receipts, with the corresponding
investigation into the matter.

On November, 1981, Alfredo Eugenio submitted the four TPRs. He explained, and this was not disputed, that at the
time the reconciliation meeting was held, his daughter Nanette, who was helping his wife manage the store, had
eloped and she had possession of the TPRs. It was only in November, 1981 when petitioners were able to talk to
Nanette that they were able to find and retrieve said TPRs. He added that during the reconciliation meeting, Atty.
Rosario assured him that any receipt he may submit later will be credited in his favor, hence he signed the
reconciliation documents. Accordingly, when he presented the TPRs to Pepsi-Cola, Atty. Rosario directed Mr. Azurin
to verify the TPRs. Thus, the amount stated in the reconciliation sheet was not final, as it was still subject to such
receipts as may thereafter be presented by petitioners.

HELD: Pepsi-Cola has dismally failed to comply with the pertinent rules for the admission of the evidence by which
it sought to prove its contentions. Its default inevitably depletes the weight of its evidence which cannot just be
taken in vacuo, with the result that for lack of the requisite quantum of evidence, it has not discharged the burden of
preponderant proof necessary to prevail in this case.

WHEREFORE, the judgment of the Court of Appeals, affirming that of the trial court, is ANNULLED and SET ASIDE.
Pepsi-Cola Bottling Company is hereby ORDERED to pay Nora and Alfredo Eugenio P5,710.60 representing
overpayment made to the former.

SPOUSES YU ENG CHO and FRANCISCO TAO YU vs. PAN AMERICAN WORLD AIRWAYS, INC. [March 27, 2000]
Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In 1976, Yu Eng Cho bought plane tickets
from Claudia Tagunicar8, who represented herself to be an agent of Tourist World Services, Inc. Yu wanted to go to
New Jersey. Tagunicar advised plaintiffs to take Pan-Am because Northwest Airlines was then on strike and plaintiffs
are passing Hongkong, Tokyo, then San Francisco and Pan-Am has a flight from Tokyo to San Francisco. After verifying
from defendant TWSI, thru Julieta Canilao, she informed plaintiffs that the fare would be P25,093.93 giving them a
discount of P738.95. Plaintiffs, however, gave her a check in the amount of P25,000 only for the two round trip
tickets. Out of this transaction, Tagunicar received a 7% commission and 1% commission for TWSI.

Only the passage from Manila to Hongkong, then to Tokyo, were confirmed. The flight from Tokyo to San Francisco
was on "RQ" status, meaning "on request". After calling up Canilao of TWSI, Tagunicar told spouses Yu that their
flight is now confirmed all the way. Thereafter, she attached the confirmation stickers on the plane tickets.

Upon the spouses’ arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco.
Said office, however, informed them that their names are not in the manifest. Since spouses Yu were supposed to
leave on July 29, 1978, and could not remain in Japan for more than 72 hours, they were constrained to agree to
accept airline tickets for Taipei instead, per advise of JAL officials. Upon reaching Taipei, there were no flights
available for the spouses, thus, they were forced to return back to Manila instead of proceeding to the United
States.

Japan Air Lines (JAL) refunded the spouses Yu the difference of the price for Tokyo-Taipei [and] Tokyo-San Francisco in
the total amount of P2,602. In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc.
cancelled Yu Eng Cho's option to buy the two lines of infra-red heating system. The agreement was for him to
inspect the equipment and make final arrangements with the said company not later than August 7, 1978. From this
business transaction, Yu Eng Cho expected to realize a profit of P300,000-P400,000.

A few days later, said Adrian Yu came over with his lawyer and his secretary. Tagunicar claims that plaintiffs were
asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she will not be
involved, she agreed to sign the affidavit prepared by the lawyer.

TWSI/Canilao: denied having confirmed the Tokyo-San Francisco segment of plaintiffs' flight because flights then
were really tight because of the on-going strike at Northwest Airlines. Tagunicar is very much aware that said
particular segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar called up TWSI
from the airport; Canilao asked her why she attached stickers on the tickets when in fact that portion of the flight was
not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and never authorized Tagunicar to attach the
confirmation stickers. In fact, the confirmation stickers used by Tagunicar are stickers exclusively for use of Pan-Am
only. Furthermore, if it is the travel agency that confirms the booking, the IATA number of said agency should appear
on the validation or confirmation stickers.

A complaint for damages was filed by spouses Yu against Pan American World Airways, Inc., Tourist World
Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred
such as costs of tickets and hotel accommodations by reason of the non-confirmation of their booking.

RTC: held that Pan-Am is the principal, and TWSI and Tagunicar, its authorized agent and sub-agent, respectively.
Consequently, Pan-Am, TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs for
damages. Julieta Canilao, who acted in her official capacity as Office Manager of defendant TWSI should not be held
personally liable. 5

CA: held Tagunicar solely liable, and absolving Pan Am and TWSI from any and all liability. CA found that Tagunicar is
an independent travel solicitor and is not a duly authorized agent or representative of either Pan Am or TWSI. It
held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI
as its agent and sub-agent, respectively.

SPOUSES YU: assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am.
Proceeding from this premise, they contend that TWSI and Pan Am should be held liable as principals for the acts of

8
TRAVEL SOLICITOR - helps in the processing of travel papers like passport, plane tickets, booking of passengers and some assistance at the
airport. She is known to Pan-Am, TWSI/Julieta Canilao, because she has been dealing with them in the past years.
Tagunicar. Petitioners stubbornly insist that the existence of the agency relationship has been established by the
judicial admissions allegedly made by respondents herein, to wit: (1) the admission made by Pan Am in its Answer
that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she admitted that she is a duly
authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions from ticket sales
made by Tagunicar.

ISSUE: W/N Tagunicar is a sub-agent of TWSI, while TWSI is an agent of Pan Am.

HELD: NO. By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. The elements of agency are: (1)
consent, express or implied, of the parties to establish the relationship; (2) the object is the execution of a juridical
act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within
the scope of his authority. It is a settled rule that persons dealing with an assumed agent are bound at their peril, if
they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to establish it.

In the case at bar, petitioners rely on the affidavit of Tagunicar where she stated that she is an authorized agent of
TWSI. This affidavit, however, has weak probative value in light of Tagunicar's testimony in court to the contrary.
Tagunicar testified that her affidavit was prepared and typewritten by the secretary of petitioners' lawyer, Atty.
Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to see her at her office. This
purported admission of Tagunicar cannot be used by petitioners to prove their agency relationship.

At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship
cannot be established on its sole basis. The declarations of the agent alone are generally insufficient to establish the
fact or extent of his authority. In addition, as between the negative allegation of Canilao and Tagunicar that neither is
an agent nor principal of the other, and the affirmative allegation of petitioners that an agency relationship exists, it
is the latter who have the burden of evidence to prove their allegation.

Tagunicar categorically denied that she is a duly authorized agent of TWSI, and declared that she is an independent
travel agent. Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and
merely gives the net amount to TWSI. The transaction is simply a contract of sale wherein Tagunicar buys airline
tickets from TWSI and then sells it at a premium to her clients.

ISSUE: W/N Pan Am should be held liable for the acts of Tagunicar on the supposition that since TWSI is its duly
authorized agent, and Tagunicar is an agent of TWSI.

HELD: NO. There is nothing in the records to show that Tagunicar has been employed by Pan Am as its agent, except
the bare allegation of petitioners. The real motive of petitioners in suing Pan Am appears in its Amended Complaint
that “TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the amounts herein sought to be
recovered, and in such event, Pan Am, being their ultimate principal, is primarily and/or subsidiary liable to pay the
said amounts to plaintiffs."

In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and their names were
not listed in the passenger manifest. In other words, this is not a case where Pan Am bound itself to transport
petitioners and thereafter reneged on its obligation. Hence, respondent airline cannot be held liable for damages.

The validation stickers which Tagunicar attached to petitioners' tickets were those intended for the exclusive use of
airline companies. She had no authority to use them. Hence, said validation stickers, wherein the word "OK"
appears in the status box, are not valid and binding. Undoubtedly, Tagunicar should be liable for having acted in bad
faith in misrepresenting to petitioners that their tickets have been confirmed. Her culpability, however, was properly
mitigated. Yu Eng Cho testified that he repeatedly tried to follow up on the confirmation of their tickets with Pan Am
because he doubted the confirmation made by Tagunicar. This is clear proof that petitioners knew that they might be
bumped off at Tokyo when they decided to proceed with the trip.

MANILA MEMORIAL PARK CEMETERY, INC. vs. PEDRO LINSANGAN [November 22, 2004]
Sometime in 1984, Florencia Baluyot offered Atty. Pedro Linsangan a lot called Garden State at the Holy Cross
Memorial Park owned by MMPCI. According to Baluyot, a former owner of a memorial lot under was no longer
interested in acquiring the lot and had opted to sell his rights subject to reimbursement of the amounts he already
paid. The contract was for P95,000. Baluyot reassured Atty. Linsangan that once reimbursement is made to the
former buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave Baluyot P35,295,
representing the amount to be reimbursed to the original buyer and to complete the down payment to MMPCI.
Baluyot issued handwritten and typewritten receipts for these payments.

Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued a new contract covering the
subject lot in the name of the latter instead of old Contract. Atty. Linsangan protested, but Baluyot assured him that
he would still be paying the old price of P95,000 with P19,838 credited as full down payment, leaving a balance of
about P75,000. Subsequently, Baluyot brought an Offer to Purchase Lot and the Official Receipt for the amount of
P19,838. The new contract has a listed price of P132,250 and Atty. Linsangan objected to the new contract price. To
convince Atty. Linsangan, Baluyot executed a document confirming that while the contract price is P132,250, Atty.
Linsangan would pay only the original price of P95,000.00.

By virtue of this letter, Atty. Linsangan signed the new Contract and accepted the Official Receipt. As requested by
Baluyot, Atty. Linsangan issued 12 postdated checks of P1,800, each in favor of MMPCI. The next year, Atty. Linsangan
again issued 12 postdated checks in favor of MMPCI.

In 1987, Baluyot verbally advised Atty. Linsangan that the new contract was cancelled for reasons the latter could
not explain, and presented to him another proposal for the purchase of an equivalent property. He refused the
new proposal and insisted that Baluyot and MMPCI honor their undertaking. For the alleged failure of MMPCI and
Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint for Breach of Contract and Damages against
the former.

MMPCI: alleged that the Contract was cancelled conformably with the terms of the contract because of non-
payment of arrearages. MMPCI stated that Baluyot was not an agent but an independent contractor, and as such was
not authorized to represent MMPCI or to use its name except as to the extent expressly stated in the Agency
Manager Agreement. Moreover, MMPCI was not aware of the arrangements entered into by Atty. Linsangan and
Baluyot, as it in fact received a down payment and monthly installments as indicated in the contract. Official receipts
showing the application of payment were turned over to Baluyot whom Atty. Linsangan had from the beginning
allowed to receive the same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may have had
must have been rectified by the Account Updating Arrangement signed by Atty. Linsangan which states that he
"expressly admits that Contract No. 28660 'on account of serious delinquency…is now due for cancellation under its
terms and conditions.'''12

RTC: held MMPCI and Baluyot jointly and severally liable. It found that Baluyot was an agent of MMPCI and that the
MMPCI was estopped from denying this agency, having received and enchased the checks issued by Atty. Linsangan
and given to it by Baluyot. While MMPCI insisted that Baluyot was authorized to receive only the down payment, it
allowed her to continue to receive postdated checks from Atty. Linsangan, which it in turn consistently encashed.

MMPCI: alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter exceeded the terms of
her agency, neither did MMPCI ratify Baluyot's acts. It added that it cannot be charged with making any
misrepresentation, nor of having allowed Baluyot to act as though she had full powers as the written contract
expressly stated the terms and conditions which Atty. Linsangan accepted and understood. In canceling the contract,
MMPCI merely enforced the terms and conditions imposed therein. Imputing negligence on the part of Atty.
Linsangan, MMPCI claimed that it was the former's obligation, as a party knowingly dealing with an alleged agent,
to determine the limitations of such agent's authority, particularly when such alleged agent's actions were
patently questionable. According to MMPCI, Atty. Linsangan did not even bother to verify Baluyot's authority or ask
copies of official receipts for his payments.

CA: affirmed the decision of the trial court. It upheld the trial court's finding that Baluyot was an agent of MMPCI at
the time the disputed contract was entered into, having represented MMPCI's interest and acting on its behalf in the
dealings with clients and customers. Hence, MMPCI is considered estopped when it allowed Baluyot to act and
represent MMPCI even beyond her authority. The appellate court likewise found that the acts of Baluyot bound
MMPCI when the latter allowed the former to act for and in its behalf and stead. While Baluyot's authority "may not
have been expressly conferred upon her, the same may have been derived impliedly by habit or custom, which
may have been an accepted practice in the company for a long period of time."

Innocent third persons such as Atty. Linsangan should not be prejudiced where the principal failed to adopt the
needed measures to prevent misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the
principal accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility for such
misrepresentation.

ISSUE: W/N Baluyot was an agent of MMPCI.

HELD: YES. By the contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter. Thus, the elements of agency are:
(i) consent, express or implied, of the parties to establish the relationship; (ii) the object is the execution of a juridical
act in relation to a third person; (iii) the agent acts as a representative and not for himself; and (iv) the agent acts
within the scope of his authority.34

MMPCI pointed out that under its Agency Manager Agreement; an agency manager such as Baluyot is considered an
independent contractor and not an agent. However, in the same contract, Baluyot as agency manager was authorized
to solicit and remit to MMPCI offers to purchase interment spaces belonging to and sold by the latter.
Notwithstanding the claim of MMPCI that Baluyot was an independent contractor, the fact remains that she was
authorized to solicit solely for and in behalf of MMPCI. Baluyot was an agent of MMPCI, having represented the
interest of the latter, and having been allowed by MMPCI to represent it in her dealings with its clients/prospective
buyers. Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the contract
procured by Atty. Linsangan and solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on forms
provided by MMPCI. The terms of the offer to purchase, therefore, are contained in such forms and, when signed by
the buyer and an authorized officer of MMPCI, becomes binding on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI showed a total list price
of P132,250. Likewise, it was clearly stated therein that "Purchaser agrees that he has read or has had read to him
this agreement, that he understands its terms and conditions, and that there are no covenants, conditions,
warranties or representations other than those contained herein." By signing the Offer to Purchase, Atty. Linsangan
signified that he understood its contents. That he and Baluyot had an agreement different from that contained in
the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made outside Baluyot's
authority. To repeat, Baluyot's authority was limited only to soliciting purchasers. She had no authority to alter the
terms of the written contract provided by MMPCI. The document/letter "confirming" the agreement that Atty.
Linsangan would have to pay the old price was executed by Baluyot alone. Nowhere is there any indication that the
same came from MMPCI or any of its officers.

Persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof
is upon them to establish it. The basis for agency is representation and a person dealing with an agent is put upon
inquiry and must discover upon his peril the authority of the agent. If he does not make such an inquiry, he is
chargeable with knowledge of the agent's authority and his ignorance of that authority will not be any excuse.

In the instant case, it has not been established that Atty. Linsangan even bothered to inquire whether Baluyot was
authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her
commitment with respect to such agreements.

Art. 1898. 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. In this
case, however, the agent is liable if he undertook to secure the principal's ratification.
 Art. 1910. The principal must comply with all the obligations that the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.

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.

Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he ratifies them,
expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own unauthorized acts. Moreover, the
principal must have knowledge of the acts he is to ratify.

RATIFICATION in agency is the adoption or confirmation by one person of an act performed on his behalf by another
without authority. The substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior
authority. Ordinarily, the principal must have full knowledge at the time of ratification of all the material facts and
circumstances relating to the unauthorized act of the person who assumed to act as agent. Thus, if material facts
were suppressed or unknown, there can be no valid ratification and this regardless of the purpose or lack thereof in
concealing such facts and regardless of the parties between whom the question of ratification may arise.

Nevertheless, this principle does not apply if the principal's ignorance of the material facts and circumstances was
willful, or that the principal chooses to act in ignorance of the facts. However, in the absence of circumstances
putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is
ignorant of the facts. No ratification can be implied in the instant case. Atty. Linsangan failed to show that MMPCI
had knowledge of the arrangement. As far as MMPCI is concerned, the contract price was P132,250.00, as stated in
the Offer to Purchase signed by Atty. Linsangan and MMPCI's authorized officer.

In view of Baluyot's failure to give her share in the payment, MMPCI received only P1,800 checks, which were clearly
insufficient payment. In fact, Atty. Linsangan would have incurred arrearages that could have caused the earlier
cancellation of the contract, if not for MMPCI's application of some of the checks to his account. However, the checks
alone were not sufficient to cover his obligations. If MMPCI was aware of the arrangement, it would have refused
the latter's check payments for being insufficient.

Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of a party amounting
to false representation or concealment of material facts or at least calculated to convey the impression that the facts
are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (ii) intent, or at
least expectation, that this conduct shall be acted upon by, or at least influence, the other party; and (iii) knowledge,
actual or constructive, of the real facts.

While there is no more question as to the agency relationship between Baluyot and MMPCI, there is no indication
that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot had the authority to alter the
standard contracts of the company. Neither is there any showing that prior to signing the Contract, MMPCI had any
knowledge of Baluyot's commitment to Atty. Linsangan.

One who claims the benefit of an estoppel on the ground that he has been misled by the representations of
another must not have been misled through his own want of reasonable care and circumspection. Even assuming
that Atty. Linsangan was misled by MMPCI's actuations, he still cannot invoke the principle of estoppel, as he was
clearly negligent in his dealings with Baluyot, and could have easily determined, had he only been cautious and
prudent, whether said agent was clothed with the authority to change the terms of the principal's written contract.
Estoppel must be intentional and unequivocal, for when misapplied, it can easily become a most convenient and
effective means of injustice.

This does not preclude Atty. Linsangan from instituting a separate action to recover damages from Baluyot, not as an
agent of MMPCI, but in view of the latter's breach of their separate agreement. To review, Baluyot obligated herself
to pay P1,455 in addition to Atty. Linsangan's P1,800 to complete the monthly installment payment under the
contract, which, by her own admission, she was unable to do due to personal financial difficulties.

GREEN VALLEY POULTRY vs. INTERMEDIATE APPELLATE COURT [December 26, 1984]
On November 3, 1969, Squibb and Green Valley entered into a letter agreement, whereby E.R. Squibb & Sons
appointed Green Valley as a non-exclusive distributor for Squibb Veterinary Products, as recommended by Dr.
Leoncio Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor.

As a distributor, Green Valley Poultry & Allied Products, Inc. will be entitled to a discount (10%). There are exceptions to the above price
structure. These products are subject to price fluctuations. Therefore, they are invoiced at net price per vial.
Deals and Special Offers are not subject to the above distributor price structure. A 5% distributor commission is allowed when the distributor
furnishes copies for each sale of a complete deal or special offer to a feedstore, drugstore or other type of account. Deals and Special Offers
purchased for resale at regular price invoiced at net deal or special offer price. Prices are subject to change without notice. Squibb will
endeavor to advise you promptly of any price changes. However, prices in effect at the tune orders are received by Squibb Order Department
will apply in all instances.
Green Valley Poultry & Allied Products, Inc. win distribute only for the Central Luzon and Northern Luzon including Cagayan Valley areas. We
will not allow any transfer or stocks from Central Luzon and Northern Luzon including Cagayan Valley to other parts of Luzon, Visayas or
Mindanao which are covered by our other appointed Distributors. In line with this, you will follow strictly our stipulations that the maximum
discount you can give to your direct and turnover accounts will not go beyond 10%.
It is understood that Green Valley Poultry and Allied Products, Inc. will accept turn-over orders from Squibb representatives for delivery to
customers in your area. If for credit or other valid reasons a turn-over order is not served, the Squibb representative will be notified within 48
hours and hold why the order will not be served.
It is understood that Green Valley Poultry & Allied Products, Inc. will put up a bond of P20,000.00 from a mutually acceptable bonding
company. Payment for Purchases of Squibb Products will be due 60 days from date of invoice or the nearest business day thereto. No payment
win be accepted in the form of post-dated checks. Payment by check must be on current dating.
It is mutually agreed that this non-exclusive distribution agreement can be terminated by either Green Valley Poultry & Allied Products, Inc. or
Squibb Philippines on 30 days notice.
I trust that the above terms and conditions will be met with your approval and that the distributor arrangement will be one of mutual
satisfaction. If you are agreeable, please sign the enclosed three extra copies of this letter and return them to this Office at your earliest
convenience.
Thank you for your interest and support of the products of E.R. Squibb & Sons Philippines Corporation.

For goods delivered to Green Valley but unpaid, Squibb filed suit to collect.

RTC & CA: judgment is rendered in favor of E.R. Squibb & Sons Philippine Corporation, ordering Green Valley Poultry
to pay the sum of P48,374.74 plus P96 with interest at 6% per annum from the filing of this action; plus attorney's
fees in the amount of P5,000 and to pay the costs.

GREEN VALLEY: claimed that the contract with Squibb was a mere agency to sell; that it never purchased goods from
Squibb; that the goods received were on consignment only with the obligation to turn over the proceeds, less its
commission, or to return the goods if not sold. Since it had sold the goods but had not been able to collect from the
purchasers thereof, the action was premature.

SQUIBB: claimed that the contract was one of sale so that Green Valley was obligated to pay for the goods received
upon the expiration of the 60-day credit period.

ISSUE: W/N the agreement between the parties was a sales contract.

SC: We do not have to categorize the contract. Whether viewed as an agency to sell or as a contract of sale, the
liability of Green Valley is indubitable. Adopting Green Valley's theory that the contract is an agency to sell, it is liable
because it sold on credit without authority from its principal. The Civil Code has a provision exactly in point. It reads:

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.

WHEREFORE, the petition is hereby dismissed; the judgment of the defunct Court of Appeals is affirmed with costs
against the petitioner.