BUSINESS ORGANIZATION

LAW ON AGENCY
(Elements of Agency)

G.R. No. L-24332 January 31, 1978 By reason of the very nature of the relationship between Principal and agent, agency
is extinguished by the death of the principal or the agent. This is the law in this
jurisdiction.8
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents. 3. As to the act Simeon Rallos in selling the property after the death of the principal
Concepcion Rallos:
MUÑOZ PALMA, J.:
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule
afore-mentioned.
Facts: Concepcion and Gerundia both surnamed Rallos were sisters and registered co-
owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu
covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, ART. 1930. The agency shall remain in full force and effect even after the
1954, the sisters executed a special power of attorney in favor of their brother, death of the principal, if it has been constituted in the common interest of
Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, the latter and of the agent, or in the interest of a third person who has
1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the accepted the stipulation in his favor.
undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan &
Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in
ART. 1931. Anything done by the agent, without knowledge of the death
the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer
of the principal or of any other cause which extinguishes the agency, is
certificate of Title No. 12989 was issued in the named of the vendee.
valid and shall be fully effective with respect to third persons who may
have contracted with him in good. faith.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint praying (1) that the sale of the undivided share of the
Article 1930 is not involved because admittedly the special power of attorney
deceased Concepcion Rallos in lot 5983 be declared unenforceable, and said share be
executed in favor of Simeon Rallos was not coupled with an interest.
reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix
Go Chan & Sons Realty Corporation be cancelled and another title be issued in the
names of the corporation and the "Intestate estate of Concepcion Rallos" in equal Article 1931 is the applicable law. Under this provision, an act done by the agent after
undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment the death of his principal is valid and effective only under two conditions, viz: (1) that
of costs of suit. the agent acted without knowledge of the death of the principal and (2) that the third
person who contracted with the agent himself acted in good faith. Good faith here
means that the third person was not aware of the death of the principal at the time he
Issues:
contracted with said agent. These two requisites must concur the absence of one will
render the act of the agent invalid and unenforceable.
(1) What is the legal effect of an act performed by an agent after the death of
his principal?
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the
(2) Is the sale of the undivided share of Concepcion Rallos in lot 5983 valid
death of his principal at the time he sold the latter's share in Lot No. 5983 to
although it was executed by the agent after the death of his principal?
respondent corporation. The knowledge of the death is clearly to be inferred from the
(3) What is the law in this jurisdiction as to the effect of the death of the
pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos knew of
principal on the authority of the agent to act for and in behalf of the
the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of
latter?
respondent appellate court when the latter stated that Simon Rallos 'must have
(4) Is the fact of knowledge of the death of the principal a material factor in
known of the death of his sister, and yet he proceeded with the sale of the lot in the
determining the legal effect of an act performed after such death?
name of both his sisters Concepcion and Gerundia Rallos without informing appellant
(5) Before proceedings to the issues, We shall briefly restate certain principles
(the realty corporation) of the death of the former. 14
of law relevant to the matter tinder consideration.

On the basis of the established knowledge of Simon Rallos concerning the death of his
Ruling:
principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the part of the agent of the
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in death of his principal; it is not enough that the third person acted in good faith.
the name of another without being authorized by the latter, or unless he has by law a
right to represent him. A contract entered into in the name of another by one who
4. Article 1919 provides that the death of the principal extinguishes the agency. That
has no authority or the legal representation or who has acted beyond his powers, shall
being the general rule it follows a fortiori that any act of an agent after the death of
be unenforceable, unless it is ratified, expressly or impliedly, by the person on whose
his principal is void ab initio unless the same fags under the exception provided for in
behalf it has been executed, before it is revoked by the other contracting party.
the aforementioned Articles 1930 and 1931.

Out of the above given principles, sprung the creation and acceptance of
5. Revocation by an act of the principal as a mode of terminating an agency is to be
the relationship of agency whereby one party, caged the principal (mandante),
distinguished from revocation by operation of law such as death of the principal which
authorizes another, called the agent (mandatario), to act for and in his behalf in
obtains in this case. By reason of the very nature of the relationship between principal
transactions with third persons. The essential elements of agency are: (1) there is
and agent, agency is extinguished ipso jure upon the death of either principal or agent.
consent, express or implied of the parties to establish the relationship; (2) the object is
Although a revocation of a power of attorney to be effective must be communicated
the execution of a juridical act in relation to a third person; (3) the agents acts as a
to the parties concerned, 18 yet a revocation by operation of law, such as by death of
representative and not for himself, and (4) the agent acts within the scope of his
the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the
authority. 5
agent's exercise of authority is regarded as an execution of the principal's continuing
will. 19 With death, the principal's will ceases or is the of authority is extinguished.
Agency is basically personal representative, and derivative in nature. The authority of
the agent to act emanates from the powers granted to him by his principal; his act is
The Civil Code does not impose a duty on the heirs to notify the agent of the death of
the act of the principal if done within the scope of the authority. Qui facit per alium
the principal What the Code provides in Article 1932 is that, if the agent die his heirs
facit se. "He who acts through another acts himself". 6
must notify the principal thereof, and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. Hence, the fact that no notice
2. Paragraph 3 of Article 1919 of the Civil Code provides for various ways of of the death of the principal was registered on the certificate of title of the property in
extinguishing agency – death of the principal. the Office of the Register of Deeds, is not fatal to the cause of the estate of the
principal.

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 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)
G.R. No. 76931 May 29, 1991
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED,respondents.
PADILLA, J.:
Facts:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to
as American Air), an air carrier offering passenger and air cargo transportation in
the Philippines, and Orient Air Services and Hotel Representatives (hereinafter
referred to as Orient Air), entered into a General Sales Agency Agreement
(hereinafter referred to as the Agreement), whereby the American Air
authorized the Orient Air to act as its exclusive general sales agent within the
Philippines for the sale of air passenger transportation.
On 11 May 1981, alleging that Orient Air had reneged on its
obligations under the Agreement by failing to promptly remit the net proceeds
of sales for the months of January to March 1981 in the amount of US
$254,400.40, American Air by itself undertook the collection of the proceeds of
tickets sold originally by Orient Air and terminated forthwith the Agreement..
Four (4) days later, or on 15 May 1981, American Air instituted suit
against Orient Air with the Court of First Instance of Manila, Branch 24, for
Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction
and Restraining Order averring the aforesaid basis for the termination of the
Agreement as well as therein defendant's previous record of failures "to
promptly settle past outstanding refunds of which there were available funds in
the possession of the defendant, . . . to the damage and prejudice of plaintiff."
Orient Air denied the material allegations of the complaint with
respect to plaintiff's entitlement to alleged unremitted amounts, contending that
after application thereof to the commissions due it under the Agreement,
plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions.
Further, the Orient Air contended that the actions taken by American Air in the
course of terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's precipitous conduct had
occasioned prejudice to its business interests.
RTC: Ruled in favor of Orient Air.
CA: On appeal, the Intermediate Appellate Court (now Court of Appeals)
affirmed the findings of the court a quo.
Issue: W/N the respondent appellate court correctly ruled that Orient Air
be reinstated again as sales agent of American Air
Ruling:
By affirming this ruling of the trial court, respondent appellate court, in effect,
compels American Air to extend its personality to Orient Air. Such would be
violative of the principles and essence of agency, defined by law as a contract
whereby "a person binds himself to render some service or to do something in
representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF
THE LATTER .17 (emphasis supplied).
Cayetano © Roxas ®
In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts which the latter would
have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court. The
Agreement itself between the parties states that "either party may terminate the
Agreement without cause by giving the other 30 days' notice by letter, telegram
or cable." (emphasis supplied) We, therefore, set aside the portion of the ruling
of the respondent appellate court reinstating Orient Air as general sales agent of
American Air.
________________________________________________________________
[G.R. No. 130148. December 15, 1997]
JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO
M. LUZ and NARCISO DEGANOS, respondents.
DECISION
REGALADO, J.:
Facts:
Petitioner Bordador was engaged in the business of purchase and sale
of jewelry and respondent Brigida D. Luz was their regular customer. Narciso
Deganos, the brother of Brigida D. Luz, received several pieces of gold and
jewelry from Bordador amounting to P382,816.00. These items and their prices
were indicated in seventeen receipts covering the same. Eleven of the receipts
stated that they were received for a certain Evelyn Aquino and the remaining six
indicated that they were received for Brigida D. Luz.
Deganos was supposed to sell the items at a profit and thereafter
remit the proceeds and return the unsold items to Bordador. However, he only
remitted the sum of P53,207.00. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to petitioners. Bordador eventually
filed a complaint in the barangay court where Deganos along with Luz signed a
compromise agreement. In that compromise agreement, Deganos obligated
himself to pay petitioners, on installment basis, the balance of his account plus
interest thereon. However, he failed to comply.
Bordador filed for recovery of a sum of money and damages, with an
application for preliminary attachment against Deganos and Brigida D. Luz. Four
years later they were charged with estafa which case is still pending.
Bordador claimed that Deganos acted as the agent of Brigida D. Luz
when he received the subject items of jewelry and, because he failed to pay for
the same, Brigida, as principal, and her spouse are solidarily liable with him
therefor.
On the other hand, while Deganos asserted that it was he alone who
was involved in the transaction with the petitioners; that he neither acted as
agent for nor was he authorized to act as an agent by Brigida D. Luz,
notwithstanding the fact that six of the receipts indicated that the items were
received by him for the latter. He further claimed that he never delivered any of
the items he received from Bordador to Brigida.
Brigida, on her part, denied that she had anything to do with the
transactions between petitioners and Deganos. She claimed that she never
authorized Deganos to receive any item of jewelry in her behalf and, for that
matter, neither did she actually receive any of the articles in question.
RTC: After trial, the court below found that only Deganos was liable to
petitioners for the amount and damages claimed. Said court was persuaded that
Luz was behind Deganos, but because there was no memorandum to this effect,
the agreement between the parties was unenforceable under the Statute of
Page 2
 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)

Frauds. Absent the required memorandum or any written document connecting G.R. No. 156262 July 14, 2005
the respondent Luz spouses with the subject receipts, or authorizing Deganos to
act on their behalf, the alleged agreement between petitioners and Brigida D.
MARIA TUAZON, ALEJANDRO P. TUAZON, MELECIO P. TUAZON, Spouses
Luz was unenforceable.
ANASTACIO and MARY T. BUENAVENTURA, Petitioners,
vs.
CA: Affirmed. HEIRS OF BARTOLOME RAMOS, Respondents.

ISSUE: W/N there was a contract of agency between Luz and Deganos. DECISION

RULING: No. PANGANIBAN, J.:

Petitioners argue that the CA in affirming that respondent spouses Facts:

are not liable to them, as said conclusion of the trial court is contradicted by the
finding of fact of the appellate court that (Deganos) acted as agent of his sister
The Heirs of Bartolome alleged that between the period of May 2, 1988 and
(Brigida Luz). In support of this contention, petitioners quoted several letters
June 5, 1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326
sent to them by Brigida D. Luz wherein the latter acknowledged her obligation to
petitioners and requested for more time to fulfill the same. They likewise aver cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of
respondents]. That of this quantity, only 4,437 cavans have been paid for so far,
that Brigida testified in the trial court that Deganos took some gold articles from
leaving unpaid 3,889 cavans valued at ₱1,211,919.00. In payment therefor, the
petitioners and delivered the same to her.
spouses Tuazon issued several Traders Royal Bank checks.

Bordado insists that Deganos was the agent of Brigida D. Luz as the
But when these checks were encashed, all of the checks bounced due to
latter clothed him with apparent authority as her agent and held him out to the
insufficiency of funds. The Heirs of reyes averred that because spouses Tuazon
public as such, hence Brigida cannot be permitted to deny said authority to
anticipated that they would be sued, they conspired with the other [defendants]
innocent third parties who dealt with Deganos under such belief. ] Petitioners
to defraud them as creditors by executing fictitious sales of their properties.
further represent that the CA recognized in its decision that Deganos was an
agent of Brigida.
For their part, Tuazons denied having purchased rice from Bartolome Ramos.
They alleged that it was Magdalena Ramos, wife of said deceased, who owned
The evidence does not support the theory of petitioners that Deganos
and traded the merchandise and Maria Tuazon was merely her agent. They
was an agent of Brigida D. Luz and that the latter should consequently be held
argued that it was Evangeline Santos who was the buyer of the rice and issued
solidarily liable with Deganos in his obligation to petitioners. While the quoted
the checks to Maria Tuazon as payments therefor. In good faith, the checks were
statement in the findings of fact of the assailed appellate decision mentioned
received Maria Tuazon from Evangeline Santos and turned over to Ramos
that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and
without knowing that these were not funded. And it is for this reason that
ruling of the Court of Appeals categorically stated that, (Brigida Luz) never
authorized her brother (Deganos) to act for and in her behalf in any transaction Tuazons have been insisting on the inclusion of Evangeline Santos as an
indispensable party, and her non-inclusion was a fatal error. They assert that
with Petitioners xx x. It is clear, therefore, that even assuming arguendo that
they were merely agents and should not be held answerable."
Deganos acted as an agent of Brigida, the latter never authorized him to act on
her behalf with regard to the transactions subject of this case.
ISSUE: Whether or not Maria Tuazon was considered as an agent of Bartolome
Ramos.
The Civil Code provides:

RULING: NO, there was no contract of agency.

Art. 1868. By the contract of agency a person binds himself to render
some service or to do something in representation or on behalf of
another, with the consent or authority of the latter.
The basis for agency is representation. Here, there is no showing that
Brigida consented to the acts of Deganos or authorized him to act on her behalf,
much less with respect to the particular transactions involved. Petitioners
attempt to foist liability on respondent spouses through the supposed agency
relation with Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to
entrust to Deganos, not once or twice but on at least six occasions as evidenced
by six receipts, several pieces of jewelry of substantial value without requiring a
written authorization from his alleged principal. A person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent.
The records show that neither an express nor an implied agency was
proven to have existed between Deganos and Brigida D. Luz. Evidently,
petitioners, who were negligent in their transactions with Deganos, cannot seek
relief from the effects of their negligence by conjuring a supposed agency
relation between the two respondents where no evidence supports such claim.
__________________________________________________________________
In a contract of agency, one binds oneself to render some service or
to do something in representation or on behalf of another, with the latter’s
consent or authority. The following are the elements of agency:
(1) the parties’ consent, express or implied, to establish the relationship;
(2) the object, which is the execution of a juridical act in relation to a
third person;
(3) the representation, by which the one who acts as an agent does so,
not for oneself, but as a representative;
(4) the limitation that the agent acts within the scope of his or her
authority.
As the basis of agency is representation, there must be, on the part of the
principal, an actual intention to appoint, an intention naturally inferable from the
principal’s words or actions. In the same manner, there must be an intention on
the part of the agent to accept the appointment and act upon it. Absent such
mutual intent, there is generally no agency.
In the case at bar, the Tuazon’s were the rice buyers themselves; they were
not mere agents of Bartolome Ramos in their rice dealership. The question of
whether a contract is one of sale or of agency depends on the intention of the
parties.

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 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)
The declarations of agents alone are generally insufficient to establish the
fact or extent of their authority. The law makes no presumption of agency;
proving its existence, nature and extent is incumbent upon the person alleging it.
In the present case, Tuazons’ raise the fact of agency as an affirmative defense,
yet fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued Evangeline
Santos for collection of the amounts represented by the bounced checks, in a
separate civil case that they sought to be consolidated with the current one. If,
as they claim, they were mere agents of respondents, petitioners should have
brought the suit against Santos for and on behalf of their alleged principal, in
accordance with Section 2 of Rule 3 of the Rules on Civil Procedure. Their filing a
suit against her in their own names negates their claim that they acted as mere
agents in selling the rice obtained from Bartolome Ramos.
__________________________________________________________________
G.R. No. 129919 February 6, 2002
DOMINION INSURANCE CORPORATION, petitioner,
vs.
COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO
AUSTRIA, respondents.
DECISION
PARDO, J.:
Facts:
Plaintiff Rodolfo S. Guevarra filed a Civil Case for sum of money
against defendant Dominion Insurance Corp. (Dominion). Guevarra sought to
recover thereunder the sum of P156,473.90 which he claimed to have advanced
in his capacity as manager of defendant to satisfy certain claims filed by
defendant’s clients.
Dominion denied any liability to Guevarra and asserted a
counterclaim for P249,672.53, representing premiums that plaintiff allegedly
failed to remit.
The pre-trial was always postponed, and during one of the pre-trial
conference dominion failed to arrive therefore the court declared them to be in
default. Dominion filed several Motions to Lift Order of Default but was always
denied by the court.
RTC: The RTC rendered its decision making Dominion liable to repay Guevarra for
the sum advanced and other damages and fees.
CA: Affirmed
Issue: W/N Guevarra acted within his authority as agent for Dominion Insurance
Corp.
Ruling: 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 basis for agency is representation. On the
part of the principal, there must be an actual intention to appoint or an intention
naturally inferrable from his words or actions; and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the
absence of such intent, there is generally no agency.
Cayetano © Roxas ®
A perusal of the Special Power of Attorney would show that Dominion
(represented by third-party defendant Austria) and respondent Guevarra
intended to enter into a principal-agent relationship. Despite the word "special"
in the title of the document, the contents reveal that what was constituted was
actually a general agency.
The agency comprises all the business of the principal, but, couched
in general terms, it is limited only to acts of administration.
A general power permits the agent to do all acts for which the law
does not require a special power. Thus, the acts enumerated in or similar to
those enumerated in the Special Power of Attorney do not require a special
power of attorney.
Article 1878, Civil Code, enumerates the instances when a special power of
attorney is required. The pertinent portion that applies to this case provides
that:
"Article 1878. Special powers of attorney are necessary in the
following cases:
"(1) To make such payments as are not usually considered as acts of
administration; "x x x xxx xxx
"(15) Any other act of strict dominion."
The payment of claims is not an act of administration. The settlement
of claims is not included among the acts enumerated in the Special Power of
Attorney, neither is it of a character similar to the acts enumerated therein. A
special power of attorney is required before respondent Guevarra could settle
the insurance claims of the insured.
Respondent Guevarra’s authority to settle claims is embodied in the
Memorandum of Management Agreement23dated February 18, 1987 which
enumerates the scope of respondent Guevarra’s duties and responsibilities as
agency manager for San Fernando, Pampanga, as follows:
"x x x xxx xxx
"1. You are hereby given authority to settle and dispose of all motor
car claims in the amount of P5,000.00 with prior approval of the
Regional Office.
"2. Full authority is given you on TPPI claims settlement.
"xxx xxx xxx"
In settling the claims mentioned above, respondent Guevarra’s
authority is further limited by the written standard authority to pay, which states
that the payment shall come from respondent Guevarra’s revolving fund or
collection. The authority to pay is worded as follows:
"This is to authorize you to withdraw from your revolving
fund/collection the amount of PESOS __________________ (P )
representing the payment on the _________________ claim of assured
_______________ under Policy No. ______ in that accident of
___________ at ____________.
"It is further expected, release papers will be signed and authorized by the
concerned and attached to the corresponding claim folder after effecting
payment of the claim.
Page 4
 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)
"(sgd.) FERNANDO C. AUSTRIA
Regional Manager" [Emphasis supplied]
The instruction of petitioner as the principal could not be any
clearer.,Respondent Guevarra was authorized to pay the claim of the insured,
but the payment shall come from the revolving fund or collection in his
possession.
Having deviated from the instructions of the principal, the expenses that
respondent Guevarra incurred in the settlement of the claims of the insured may
not be reimbursed from petitioner Dominion. This conclusion is in accord with
Article 1918, Civil Code, which states that:
"The principal is not liable for the expenses incurred by the agent in
the following cases:
"(1) If the agent acted in contravention of the principal’s
instructions, unless the latter should wish to avail himself of the
benefits derived from the contract; " x x x xxx xxx"
However, while the law on agency prohibits respondent Guevarra from obtaining
reimbursement, his right to recover may still be justified under the general law
on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
"Whoever pays for another may demand from the debtor what he has
paid, except that if he paid without the knowledge or against the will of the
debtor, he can recover only insofar as the payment has been beneficial to
the debtor."
In this case, when the risk insured against occurred, petitioner’s liability as
insurer arose.1âwphi1 This obligation was extinguished when respondent
Guevarra paid the claims and obtained Release of Claim Loss and Subrogation
Receipts from the insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished,
respondent Guevarra may demand for reimbursement from his principal. To rule
otherwise would result in unjust enrichment of petitioner.
________________________________________________________________
G.R. No. 145817 October 19, 2011
URBAN BANK, INC, Petitioner,
vs.
MAGDALENO M. PEÑA, Respondent.
DECISION
SERENO, J.:
Urban Bank, Inc. was a domestic Philippine corporation, engaged in the business
of banking. Atty. Magdaleno M. Peña (Peña) is a lawyer by profession and was
formerly a stockholder, director and corporate secretary of Isabel Sugar
Company, Inc. (ISCI).
ISCI owned a parcel of land located in Pasay City (the Pasay property). In 1984,
ISCI leased the Pasay property for a period of 10 years. Without its consent and
in violation of the lease contract, the lessee subleased the land to several
tenants, who in turn put up establishments, mostly beer houses and night clubs,
inside the compound. In 1994, a few months before the lease contract was to
expire, ISCI informed the lessee and his tenants that the lease would no longer
Cayetano © Roxas ®
be renewed and that it intended to take over the Pasay property for the purpose
of selling it.
Two weeks before the lease over the Pasay property was to expire, ISCI and
Urban Bank executed a Contract to Sell, whereby Urban Bank would pay ISCI the
amount of PhP241,612,000 in installments for the Pasay property. Both parties
agreed that the final installment of PhP25,000,000 would be released by the
bank upon ISCI’s delivery of full and actual possession of the land, free from any
tenants. In the meantime, the amount of the final installment would be held by
the bank in escrow.
ISCI then instructed Peña, who was its director and corporate secretary, to take
over possession of the Pasay property against the tenants upon the expiration of
the lease. ISCI’s president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to
Peña, confirming the latter’s engagement as the corporation’s agent to handle
the eviction of the tenants from the Pasay property.
On 29 November 1994, the day the lease contract was to expire, ISCI and Urban
Bank executed a Deed of Absolute Sale over the Pasay property for the amount
agreed upon in the Contract to Sell, but subject to the escrow provision. The title
to the land was eventually transferred to the name of Urban Bank on 05
December 1994.
On 30 November 1994, the lessee duly surrendered possession of the Pasay
property to ISCI, but the unauthorized sub-tenants refused to leave the
area. Pursuant to his authority from ISCI, Peña had the gates of the property
closed to keep the sub-tenants out. He also posted security guards at the
property, services for which he advanced payments. Despite the closure of the
gates and the posting of the guards, the sub-tenants would come back in the
evening, force open the gates, and proceed to carry on with their businesses.
Peña then filed a complaint with the RTC, which issued a TRO. At the time the
complaint was filed, a new title to the had already been issued in the name of
Urban Bank. When information reached the judge that the had already been
transferred by ISCI to Urban Bank, the trial court recalled the TRO and issued a
break-open order for the property. Peña immediately contacted ISCI’s president
and told him that because of the break-open order of the RTC, he (Peña) would
be recalling the security guards he had posted to secure the property. The
President asked him to suspend the withdrawal of the posted guards, so that ISCI
could get in touch first with Urban Bank
Peña also called Urban Bank’s President. The President allegedly assured him
that the bank was going to retain his services, and that the he should not give up
possession of the subject land.
Thereafter, Peña, in representation of Urban Bank, filed a separate
complaint with the RTC-Makati City, to enjoin the tenants from entering the
Pasay property. Acting on Urban Bank’s preliminary prayer, the RTC-Makati City
issued a TRO.
While the 2nd complaint was pending, Peña made efforts to settle the issue
of possession of the property with the sub-tenants. During the negotiations, he
was exposed to several civil and criminal cases and received several threats
against his life. The sub-tenants eventually agreed to stay off the property for a
total consideration of PhP1.5M. Peña advanced the payment for the full and final
settlement of their claims against Urban Bank. Peña formally informed Urban
Bank that it could already take possession of the Pasay property. There was
however no mention of the compensation due and owed to him for the services
he had rendered. The bank subsequently took actual possession of the property
and installed its own guards at the premises.
Peña thereafter made several attempts to contact Urban Bank, but the bank
officers would not take any of his calls. Peña formally demanded from Urban
Bank the payment of the 10% compensation and attorney’s fees allegedly
promised to him during his telephone conversation with Urban Bank’s President
for securing and maintaining peaceful possession of the property.
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 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)
Urban Bank and individual bank officers and directors argued that it was ISCI, the
original owners of the Pasay property, that had engaged the services of Peña in
securing the premises; and, consequently, they could not be held liable for the
expenses Peña had incurred.
RTC: ruled in favor of Peña, after finding that an agency relationship had indeed
been created between him and Urban Bank.
CA: Annulled the Decision of the RTC-Bago City and ruled that no agency
relationship had been created.
ISSUE: W/N Pena is entitled to payment for the services he rendered as agent
of Urban Bank.
RULING: YES
Peña is entitled to payment for compensation for services rendered
as agent of Urban Bank, but on the basis of the principles of unjust enrichment
and quantum meruit, and not on the purported oral contract.
The Court finds that Peña should be paid for services rendered under
the agency relationship that existed between him and Urban Bank based on the
civil law principle against unjust enrichment, but the amount of payment he is
entitled to should be made, again, under the principle against unjust enrichment
and on the basis of quantum meruit.
In a contract of agency, agents bind themselves to render some
service or to do something in representation or on behalf of the principal, with
the consent or authority of the latter. The basis of the civil law relationship of
agency is representation, the elements of which include the following:
(a) the relationship is established by the parties’ consent, express or
implied;
(b) the object is the execution of a juridical act in relation to a third person;
(c) agents act as representatives and not for themselves; and
(d) agents act within the scope of their authority.
Whether or not an agency has been created is determined by the fact
that one is representing and acting for another. The law makes no presumption
of agency; proving its existence, nature and extent is incumbent upon the person
alleging it.
With respect to the status of Atty. Peña’s relationship with Urban
Bank, the trial and the appellate courts made conflicting findings that shall be
reconciled by the Court. On one end, the appellate court made a definitive ruling
that no agency relationship existed at all between Peña and the bank, despite
the services performed by Peña with respect to the Pasay property purchased by
the bank. Although the Court of Appeals ruled against an award of agent’s
compensation, it still saw fit to award Peña with Ph3,000,000 for expenses
incurred for his efforts in clearing the Pasay property of tenants. On the other
extreme, the trial court heavily relied on the sole telephone conversation
between Peña and Urban Bank’s President to establish that the principal-agent
relationship created between them included an agreement to pay Peña the huge
amount of PhP24,000,000. In its defense, Urban Bank insisted that Peña was
never an agent of the bank, but an agent of ISCI, since the latter, as seller of the
Pasay property committed to transferring it free from tenants. Meanwhile, Peña
argues on the basis of his successful and peaceful ejectment of the sub-tenants,
who previously occupied the Pasay property.
Based on the evidence on records and the proceedings below, the
Court concludes that Urban Bank constituted Atty. Peña as its agent to secure
possession of the Pasay property. This conclusion, however, is not determinative
of the basis of the amount of payment that must be made to him by the bank.
The context in which the agency was created lays the basis for the amount of
compensation Atty. Peña is entitled to.
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The transactional history and context of the sale between ISCI and
Urban Bank of the Pasay property, and Atty. Peña’s participation in the transfer
of possession thereof to Urban Bank provide crucial linkages that establish the
nature of the relationship between the lawyer and the landowner-bank.
The evidence reveals that at the time that the Contract to Sell was
executed on 15 November 1994, and even when the Deed of Absolute Sale was
executed two weeks later on 29 November 1994, as far as Urban Bank was
concerned, Peña was nowhere in the picture. All discussions and
correspondences were between the President and Corporate Secretary of Urban
Bank, on one hand, and the President of ISCI, on the other. The title to the Pasay
property was transferred to Urban Bank on 5 December 1994. Interestingly,
Peña testifies that it was only on 19 December 1994 that he learned that the
land had already been sold by ISCI to Urban Bank, notwithstanding the fact that
Peña was a director of ISCI. Peña was not asked to render any service for Urban
Bank, neither did he perform any service for Urban Bank at that point.
ISCI undertook in the Contract to Sell, to physically deliver the
property to Urban Bank, within 60 days from 29 November 1994, under
conditions of "full and actual possession and control ..., free from tenants,
occupants, squatters or other structures or from any liens, encumbrances,
easements or any other obstruction or impediment to the free use and
occupancy by the buyer of the subject Property or its exercise of the rights to
ownership over the subject Property...." To guarantee this undertaking, ISCI
agreed to the escrow provision where PhP25,000,000 (which is a little over 10%
of the value of the Pasay property) would be withheld by Urban Bank from the
total contract price until there is full compliance with this undertaking.
Apparently to ensure that ISCI is able to deliver the property
physically clean to Urban Bank, it was ISCI’s president, Enrique Montilla who
directed on 26 November 1994 one of its directors, Peña, to immediately
recover and take possession of the property upon expiration of the contract of
leas. Peña thus first came into the picture as a director of ISCI who was
constituted as its agent to recover the Pasay property against the lessee as well
as the sub-tenants who were occupying the property in violation of the lease
agreement. He was able to obtain possession of the property from the lessee on
the following day, but the unauthorized sub-tenants refused to vacate the
property.
It was only on 7 December 1994, that Urban Bank was informed of
the services that Peña was rendering for ISCI. The faxed letter from ISCI’s Marilyn
Ong. It is clear from that ISCI was asking Urban Bank for help to comply with
ISCI’s own contractual obligation with the bank under the terms of the sale of
the Pasay property. Urban Bank could have ignored the request, since it was
exclusively the obligation of ISCI, as the seller, to deliver a clean property to
Urban Bank without any help from the latter.
Urban Bank thus chose to cooperate with ISCI without realizing the
kind of trouble that it would reap in the process. In an apparent attempt to allow
the efforts of ISCI to secure the property to succeed, it recognized Peña’s role in
helping ISCI, but stopped short of granting him authority to act on its behalf.
Up to this point, it is unmistakable that Urban Bank was staying clear
from making any contractual commitment to Peña and conveyed its sense that
whatever responsibilities arose in retaining Peña were to be shouldered by ISCI.
When the RTC-Pasay City decided to recall the TRO and issue a break-open order
in the First Injunction Complaint, Peña allegedly called up the president of ISCI,
Montilla, who, according to Peña, confirmed to him that the Pasay property had
indeed been sold to Urban Bank. Peña allegedly told Montilla that he (Peña)
would be withdrawing his guards from the property because of the break-open
order from the RTC-Pasay City. Montilla requested Peña to suspend the
withdrawal of the guards while ISCI gets in touch with Urban Bank.
Apparently in view of Montilla’s efforts, Bejasa, an officer of Urban
Bank called Peña and according to the latter, told him that Urban Bank would
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(Elements of Agency)
continue retaining his services and for him to please continue with his effort to
secure the property.
This statement of Bejasa was not enough for Peña and he insisted
that he be enabled to talk with no less than the President of Urban Bank,
Borlongan.
Peña now claims to have arisen from the telephone conversation with
Borlongan: (1) A contract of agency was created between Peña and Urban Bank
whereby Borlongan agreed to retain the services of Peña directly; (2) This
contract of agency was to be embodied in a written letter of authority from
Urban Bank; and (3) The agency fee of Peña was to be 10% of the market value
as "attorney’s fees and compensation" and reimbursement of all expenses of
Peña from the time he took over the land until possession is turned over to
Urban Bank.
This Court concludes that the legal consequences described in
statements (1) and (2) above indeed took place and that the facts support them.
However, the evidence does not support Peña’s claim that Urban Bank agreed to
"attorney’s fees and compensation" of 10% of the market value of the property.
Urban Bank’s letter dated 19 December 1994 confirmed in no
uncertain terms Peña’s designation as its authorized representative to secure
and maintain possession of the Pasay property against the tenants. Under the
terms of the letter, petitioner-respondent bank confirmed his engagement (a)
"to hold and maintain possession" of the Pasay property; (b) "to protect the
same from former tenants, occupants or any other person who are threatening
to return to the said property and/or interfere with your possession of the said
property for and in our behalf"; and (c) to represent the bank in any instituted
court action intended to prevent any intruder from entering or staying in the
premises.
These three express directives of petitioner-respondent bank’s letter
admits of no other construction than that a specific and special authority was
given to Peña to act on behalf of the bank with respect to the latter’s claims of
ownership over the property against the tenants. Having stipulated on the due
execution and genuineness of the letter during pretrial, the bank is bound by the
terms thereof and is subject to the necessary consequences of Peña’s reliance
thereon. No amount of denial can overcome the presumption that we give this
letter – that it means what it says.
In any case, the subsequent actions of Urban Bank resulted in the
ratification of Peña’s authority as an agent acting on its behalf with respect to
the Pasay property. By ratification, even an unauthorized act of an agent
becomes an authorized act of the principal.
Both sides readily admit that it was Peña who was responsible for
clearing the property of the tenants and other occupants, and who turned over
possession of the Pasay property to petitioner-respondent bank. When the latter
received full and actual possession of the property from him, it did not protest or
refute his authority as an agent to do so. Neither did Urban Bank contest Peña’s
occupation of the premises, or his installation of security guards at the site,
starting from the expiry of the lease until the property was turned over to the
bank, by which time it had already been vested with ownership thereof.
Furthermore, when Peña filed the Second Injunction Complaint in the RTC-
Makati City under the name of petitioner-respondent bank, the latter did not
interpose any objection or move to dismiss the complaint on the basis of his lack
of authority to represent its interest as the owner of the property. When he
successfully negotiated with the tenants regarding their departure from its Pasay
property, still no protest was heard from it. After possession was turned over to
the bank, the tenants accepted PhP1,500,000 from Peña, in "full and final
settlement" of their claims against Urban Bank, and not against ISCI.
In all these instances, petitioner-respondent bank did not repudiate
the actions of Peña, even if it was fully aware of his representations to third
parties on its behalf as owner of the Pasay property. Its tacit acquiescence to his
dealings with respect to the Pasay property and the tenants spoke of its intent to
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ratify his actions, as if these were its own. Even assuming arguendo that it issued
no written authority, and that the oral contract was not substantially established,
the bank duly ratified his acts as its agent by its acquiescence and acceptance of
the benefits, namely, the peaceful turnover of possession of the property free
from sub-tenants.
The Civil Code expressly acknowledged instances when two or more
principals have granted a power of attorney to an agent for a common
transaction. The agency relationship between an agent and two principals may
even be considered extinguished if the object or the purpose of the agency is
accomplished. In this case, Peña’s services as an agent of both ISCI and Urban
Bank were engaged for one shared purpose or transaction, which was to deliver
the property free from unauthorized sub-tenants to the new owner – a task that
Peña was able to achieve and is entitled to receive payment for.
Amount of Compensation
Agency is presumed to be for compensation. But because in this case
we find no evidence that Urban Bank agreed to pay Peña a specific amount or
percentage of amount for his services, we turn to the principle against unjust
enrichment and on the basis of quantum meruit.
Agency is presumed to be for compensation. Unless the contrary
intent is shown, a person who acts as an agent does so with the expectation of
payment according to the agreement and to the services rendered or results
effected. We find that the agency of Peña comprised of services ordinarily
performed by a lawyer who is tasked with the job of ensuring clean possession
by the owner of a property. We thus measure what he is entitled to for the legal
services rendered.
A stipulation on a lawyer’s compensation in a written contract for
professional services ordinarily controls the amount of fees that the contracting
lawyer may be allowed to collect, unless the court finds the amount to be
unconscionable. In the absence of a written contract for professional services,
the attorney’s fees are fixed on the basis of quantum meruit, i.e., the reasonable
worth of the attorney’s services. When an agent performs services for a principal
at the latter’s request, the law will normally imply a promise on the part of the
principal to pay for the reasonable worth of those services. The intent of a
principal to compensate the agent for services performed on behalf of the
former will be inferred from the principal’s request for the agents.
_________________________________________________________________
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and
CONSOLIDATED SUGAR CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Facts:
St. Therese Merchandising (STM) regularly bought sugar from Victorias Milling
Co.,Inc., (VMC). In the course of their dealings, VMC issued several Shipping
List/DeliveryReceipts (SLDRs) to STM as proof of purchases. Among these was
SLDR No. 1214M which covers 25,000 bags of sugar. STM sold to private
respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M.
CSC issued one check dated October 25, 1989 and three checks postdated
November13, 1989 in payment. That same day, CSC wrote petitioner that it had
been authorizedby STM to withdraw the sugar covered by SLDR No. 1214M.
Enclosed in the letter were acopy of SLDR No. 1214M and a letter of authority
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 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)
from STM authorizing CSC "to withdraw for and in our behalf the refined sugar
covered by SLDR No. 1214M”. SLDR was “sold and indorsed” to CSC.
However, CSC was only able to withdraw 2,000 of the 25,000 bags of sugar
covered by SLDR No. 1214M.
VMC replied that it could not allow any further withdrawals of sugar against
SLDR No.1214M because STM had already withdrawn all the sugar covered by
the cleared checks. CSC demanded the release of the 23,000 bags. Victorias
Milling reiterated that all bags had been fully withdrawn
CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the
amount of STM's cleared checks had been fully withdrawn and hence, there
would be no more deliveries of the commodity to STM's account. Petitioner also
noted that CSC had represented itself to be STM's agent as it had withdrawn the
2,000 bags against SLDR No. 1214M "for and in behalf" of STM.
CSC filed a complaint for specific performance against defendants Teresita Ng Sy
(doing business under the name of St. Therese Merchandising) and Victorias
Milling Corp..
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered
by SLDR No. 1214M. Therefore, the latter had no justification for refusing
delivery of the sugar.
Victorias primary defense a quo was that it was an unpaid seller for the 23,000
bags. Since STM had already drawn in full all the sugar corresponding to the
amount of its cleared checks, it could no longer authorize further delivery of
sugar to CSC. Petitioner also contended that it had no privity of contract with
CSC. It explained that SLDRs prescribed delivery of the sugar to the party
specified therein and did not authorize the transfer of said party's rights and
interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's
co-conspirator to defraud it through a misrepresentation that CSC was an
innocent purchaser for value and in good faith.
RTC: Ordered defendant Victorias Milling Company to deliver to the CSC 23,000
bags of refined sugar due under SLDR No. 1214;
CA: Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No.
1214M;
Issue: W/N CSC is an agent of STM.
Ruling: No.
(Anent the first issue, we find from the records that petitioner raised this issue
for the first time on appeal. It is settled that an issue which was not raised during
the trial in the court below could not be raised for the first time on appeal as to
do so would be offensive to the basic rules of fair play, justice, and due process.
Nonetheless, the Court of Appeals opted to address this issue, hence, now a
matter for our consideration.)
Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw
sugar against SLDR No. 1214M to show that the latter was STM's agent. The
pertinent portion of said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to
withdraw for and in our behalf (stress supplied) the refined sugar covered by
Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October 16,
1989 in the total quantity of 25, 000 bags."
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The Civil Code defines a contract of agency as follows:
"Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter."
It is clear from Article 1868 that the basis of agency is representation. On the
part of the principal, there must be an actual intention to appoint or an intention
naturally inferable from his words or actions; and on the part of the agent, there
must be an intention to accept the appointment and act on it, and in the
absence of such intent, there is generally no agency. One factor which most
clearly distinguishes agency from other legal concepts is control; one person -
the agent - agrees to act under the control or direction of another - the principal.
Indeed, the very word "agency" has come to connote control by the
principal.The control factor, more than any other, has caused the courts to put
contracts between principal and agent in a separate category. The Court of
Appeals, in finding that CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the
acts of the parties, the law makes no presumption of agency, and it is always a
fact to be proved, with the burden of proof resting upon the persons alleging the
agency, to show not only the fact of its existence, but also its nature and extent
(Antonio vs. Enriquez [CA], 51 O.G. 3536].
Here, defendant-appellant failed to sufficiently establish the existence of an
agency relation between plaintiff-appellee and STM. The fact alone that it (STM)
had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's)
behalf" should not be eyed as pointing to the existence of an agency relation ...It
should be viewed in the context of all the circumstances obtaining. Although it
would seem STM represented plaintiff-appellee as being its agent by the use of
the phrase "for and in our (STM's) behalf" the matter was cleared when on 23
January 1990, plaintiff-appellee informed defendant-appellant that SLDFR No.
1214M had been "sold and endorsed" to it by STM. Further, plaintiff-appellee
has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were
sold and transferred by STM to it ...A conclusion that there was a valid sale and
transfer to plaintiff-appellee may, therefore, be made thus capacitating plaintiff-
appellee to sue in its own name, without need of joining its imputed principal
STM as co-plaintiff."
In the instant case, it appears plain to us that private respondent CSC was a
buyer of the SLDFR form, and not an agent of STM. Private respondent CSC was
not subject to STM's control. The question of whether a contract is one of sale or
agency depends on the intention of the parties as gathered from the whole
scope and effect of the language employed. That the authorization given to CSC
contained the phrase "for and in our (STM's) behalf" did not establish an agency.
Ultimately, what is decisive is the intention of the parties. That no agency was
meant to be established by the CSC and STM is clearly shown by CSC's
communication to petitioner that SLDR No. 1214M had been "sold and
endorsed" to it. The use of the words "sold and endorsed" means that STM and
CSC intended a contract of sale, and not an agency. Hence, on this score, no
error was committed by the respondent appellate court when it held that CSC
was not STM's agent and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions entered
into between petitioner and STM are but serial parts of one account, petitioner
insists that its debt has been offset by its claim for STM's unpaid purchases,
pursuant to Article 1279 of the Civil Code. However, the trial court found, and
the Court of Appeals concurred, that the purchase of sugar covered by SLDR No.
1214M was a separate and independent transaction; it was not a serial part of a
single transaction or of one account contrary to petitioner's insistence. Evidence
on record shows, without being rebutted, that petitioner had been paid for the
sugar purchased under SLDR No. 1214M. Petitioner clearly had the obligation to
deliver said commodity to STM or its assignee. Since said sugar had been fully
paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and
debtors of each other. No reversible error could thereby be imputed to
respondent appellate court when, it refused to apply Article 1279 of the Civil
Code to the present case.
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 BUSINESS ORGANIZATION
LAW ON AGENCY
(Elements of Agency)

G.R. No. 179446 January 10, 2011 R&B Insurance: claims that Glodel is deemed to have interposed a cross-claim
against Loadmasters because it was not prevented from presenting evidence to
prove its position even without amending its Answer. As to the relationship
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,
between Loadmasters and Glodel, it contends that a contract of agency existed
vs.
between the two corporations.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE
CORPORATION, Respondents.
Ruling: The Court ruled that there exists no principal-agent relationship between
Glodel and Loadmasters, as erroneously found by the CA.
THE FACTS:

On August 28, 2001, R&B Insurance issued a Marine Policy in favor of Columbia
to insure the shipment of 132 bundles of electric copper cathodes against All
Risks. On August 28, 2001, the cargoes were shipped on board the vessel
"Richard Rey" from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived
on the same date.
Columbia engaged the services of Glodel for the release and withdrawal of the
cargoes from the pier and the subsequent delivery to its warehouses/plants.
Glodel, in turn, engaged the services of Loadmasters for the use of its delivery
trucks to transport the cargoes to Columbia’s warehouses/plants in Bulacan and
Valenzuela City.
The cargoes in six truckloads for Lawang Bato were duly delivered in Columbia’s
warehouses there. Of the six (6) trucks en route to Balagtas, Bulacan, however,
only five (5) reached the destination. One (1) truck, loaded with 11 bundles or
232 pieces of copper cathodes, failed to deliver its cargo.
Because of this incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of ₱1,903,335.39. After the requisite investigation and
adjustment, R&B Insurance paid Columbia the amount of ₱1,896,789.62 as
insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against both
Loadmasters and Glodel before the Regional Trial Court. It sought
reimbursement of the amount it had paid to Columbia for the loss of the subject
cargo. It claimed that it had been subrogated "to the right of the consignee to
recover from the party/parties who may be held legally liable for the loss."2
RTC: It held Glodel liable for damages for the loss of the subject cargo and
dismissing Loadmasters’ counterclaim for damages and attorney’s fees against
R&B Insurance.
CA: It ruled that considering that Loadmasters is an agent of appellant Glodel,
whatever liability the latter owes to appellant R&B Insurance Corporation as
insurance indemnity must likewise be the amount it shall be paid by appellee
Loadmasters.
ISSUE: WON Loadmaster was an agent of Glodel. NO
Loadmasters: To totally exculpate itself from responsibility for the lost goods,
Loadmasters argues that it cannot be considered an agent of Glodel because it
never represented the latter in its dealings with the consignee. At any rate, it
further contends that Glodel has no recourse against it for its (Glodel’s) failure to
file a cross-claim pursuant to Section 2, Rule 9 of the 1997 Rules of Civil
Procedure.
Article 1868 of the Civil Code provides: "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 a
contract 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.22
Accordingly, there can be no contract of agency between the parties.
Loadmasters never represented Glodel. Neither was it ever authorized to make
such representation. It is a settled rule that the basis for agency is
representation, that is, the agent acts for and on behalf of the principal on
matters within the scope of his authority and said acts have the same legal effect
as if they were personally executed by the principal. On the part of the principal,
there must be an actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent, there must be an
intention to accept the appointment and act on it. Such mutual intent is not
obtaining in this case.
Note: What is their liability? petitioner Loadmasters Customs Services, Inc. and
respondent Glodel Brokerage Corporation jointly and severally liable to
respondent R&B Insurance Corporation for the insurance indemnity it paid to
consignee Columbia Wire & Cable Corporation and they are to pay, jointly and
severally, R&B Insurance Corporation the amount of the insurance indemnity
Basis: Negligence of the parties in the carriage of goods :)
Note:
 Article 1732 of the Civil Code, common carriers are persons,
corporations, firms, or associations engaged in the business of
carrying or transporting passenger or goods, or both by land, water or
air for compensation, offering their services to the public.
 Loadmasters and Glodel, being both common carriers, are mandated
from the nature of their business and for reasons of public policy, to
observe the extraordinary diligence in the vigilance over the goods
transported by them according to all the circumstances of such case,
as required by Article 1733 of the Civil Code. When the Court speaks
of extraordinary diligence, it is that extreme measure of care and
caution which persons of unusual prudence and circumspection
observe for securing and preserving their own property or rights.

Glodel: counters that Loadmasters is liable to it under its cross-claim because the
latter was grossly negligent in the transportation of the subject cargo. With
respect to Loadmasters’ claim that it is already estopped from filing a cross-
claim, Glodel insists that it can still do so even for the first time on appeal
because there is no rule that provides otherwise. Finally, Glodel argues that its
relationship with Loadmasters is that of Charter wherein the transporter
(Loadmasters) is only hired for the specific job of delivering the merchandise.
Thus, the diligence required in this case is merely ordinary diligence or that of a
good father of the family, not the extraordinary diligence required of common
carriers.

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