For the above consideration, I/We understand that Hontiveros and Associated Producers Phil. Yields, Inc. shall reserve said booth for our exclusive perusal; we also understand that the above cost includes overall exterior booth decoration and materials but does not include interior designs which will be per our specifications and expenses. Participant's Authorized Signature (Sgd) Emily White Participation Accepted by: (Sgd) Sylvia H. Bedia." White and her husband sued Bedia and Hontiveros & Associated Producers Phil. Yields, Inc. for damages caused by their fraudulent violation of their agreement She averred that Bedia had approached her and persuaded her to take part in the State Texas Fair, and that she made a down payment of $500 to Bedia on the agreed display space. In due time, she enplaned for Dallas with her merchandise but was dismayed to learn later that the defendants had not paid for or registered any display space in her name, nor were they authorized by the State Fair Director to recruit participants. She said she incurred losses as a result for which the defendants should be held solidarily liable. Defendants denied White's allegation that they had deceived her. No display space was registered in her name as she was only supposed to share the spaced leased by Hontiveros. She was not allowed to display her goods in that space because she had not paid her balance of $1,750 in violation of their contract. Bedia made the particular averment that she did not sign the participation contract on her own behalf but as an agent of Hontiveros and that she had later returned the advance payment of $500 to White. The trial court dismissed the complaint against Hontiveros, but found Bedia liable for fraud and awarded White actual and moral damages. The Court of Appeals sustained the trial court. ISSUE: In what capacity did Bedia enter into the participation contract with White? Both the trial and appellate courts held she was acting in her own personal behalf. 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.. COMMENT (1) Liability of Principal Because of Estoppel Reason for the law: The principal may be said to be in estoppel and therefore innocent third persons should not be prejudiced. It cannot be denied that here the principal failed to adopt the needed measures to prevent misrepresentation. (2) Solidary Liability This is an instance when solidarity is imposed by law. it would seem, however, that this Article is unjust for if the agent is considered innocent and acting within the scope of his authority, he should be exempted from liability.
Art. 1912. The principal must advance to the agent, should the latter so request, the sums necessary for the execution of the agency. Should" the agent have advanced them, the principal must reimburse him therefor, even if the business or undertaking was not successful, provided the agent is free from all fault. The reimbursement shall include interest on the sums advanced, from the day on which the advance was made. COMMENT: (1) Advancing of Necessary Funs (a) Failure of the agency through no fault of the agent must be borne solely by the principal. It is unfair to hold this failure against an innocent agent. (b) Even if the agency be gratuitous, this Article will also apply; hence, the agent will still be entitled to reimbursement and interest. This is so because the reimbursement and interest spoken of in this Article do not refer to compensation or commission. (2) Broker's Fee A broker is entitled to a commission if the sale is effected, but not if there is no perfected transaction. Art. 1913. The principal must also indemnify the agent for all the damages which the execution of the agency may have caused the latter, without fault or negligence on his part. COMMENT: Principal to Compensate Agent for Damages (a) This Article is based on equity, and applies even if the agency be gratuitous, as a matter of fact, even more so. (b) Naturally, this Article can be made use of only if the agency exists, otherwise the Article cannot apply. In such a case the supposed agent is not acting in behalf of a true principal, and the reason for the law would cease. Art. 1914 The agent may retain in pledge the things which are the object of the agency until the principal effects the reimbursement and pays the indemnity set forth in the two preceding articles.
COMMENT: Right of Agent to Retain by Way of Pledge The Article speaks of one kind of pledge by operation of law. Art. 1915. If two or more persons have appointed an agent for a common transaction or undertaking, they shall be solidarily liable to the agent for all the consequences of the agency. COMMENT: (1) Solidary Liability of Principals Solidarity is the rule under this Article because of the common transaction. Thus, even if the agent have been appointed separately, the rule should apply in the interest of justice. (2) Examples (a) W, X, and Y employ agent A to sell land owned in common by the three, with A receiving a commission of P1,500,000. If A is successful, A can collect from any of the three the amount of P1,500,000 because of their solidary liability. Of course, if X pays the P1,500,000, he can recover reimbursement of P500,000 each from Y and W. (b) C, D and E appoint F as their agent to sell their separate houses. The liability of C, D and E are merely joint and not solidary even if the appointment is made in one instrument. This is because this is NOT a common transaction or undertaking. Art. 1916. When two persons contract with regard to the same thing, one of them with the agent and the other with the principal, and the two contracts are incompatible with each other, that of prior date shall be preferred, without prejudice to the provisions of article 1544. COMMENT: QUESTION — (When Both Principal and Agent Contract with Respect to the Same Thing) On January 31, .2000, A who owns a piece of agricultural land, gave a general power of attorney to B. On February 20, 2000,A, without the knowledge of B, executed in favor of C a special power of attorney to sell said piece of land. On February 25, 2000, B as attorney-in-fact of A, executed a deed of sale in favor of D. On the same date, February 25, 2000, C, under the special power given by A, sold the same piece of land to E.
Assuming that the vendees have not yet registered their respective documents or have taken possession of the land, which of the two sales is valid and enforceable and who is responsible for damages, if any? Reasons. ANS.: The sale by C in favor of E is valid and enforceable because C was specifically granted authority to sell. B, who only had a general power of attorney had NO right to sell, since selling ordinarily is not a mere act of administration. Moreover, under Art. 1878, a special power of attorney is needed to effectuate a sale. If anyone is liable for damages, it is certainly B who performed an unauthorized thing. Art. 1917. In the case referred to in the preceding article, if the agent has acted in good faith, the principal shall be liable in damages to the third person whose contract must be rejected. If the agent acted in bad faith, he 'alone shall be responsible. COMMENT: Liability of Principal if Agent Acted in Good Faith or in Bad Faith Note the liability of the principal for damages. Art. 1918. 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 instructions, unless the latter should wish to avail himself of the benefits derived from the contract; (2) When the expenses were due to the fault of the agent; (3) when the agent incurred them with knowledge that an unfavorable result would ensue if the principal was not aware thereof; (4) When it was stipulated that the expenses would be borne by the agent or that the latter would be allowed only a certain sum. COMMENT: When Principal ifs Not Liable for Agent's Expenses (a) Reason for Par. 1 — to punish the agent. Reason for the exception — this is implied ratification. (b) Reason for Par. 2 this is self-evident. (c) Reason for Par. 3 — this is tantamount to bad faith and lack of due diligence. (d) Reason for Par. 4-- this stipulation would not contravene good morals or public policy, etc.
Chapter 4 MODES OF EXTINGUISHMENT OF AGENCY Art. 1919. Agency is extinguished: (1) By its revocation; (2) By the withdrawal of the agent, (3) By the death, civil interdiction, insanity or insolvency of the principal or of the agent, (4) By the dissolution of the firm or corporation which entrusted or accepted the agency; (5) By the accomplishment of the object or purpose of the agency; (6) By the expiration of the period for which the agency was constituted. COMMENT: (1) Keyword for Extinguishment of the Agency – EDWARD E – Expiration D – Death, etc. W – Withdrawal A – Accomplishment R – Revocation D – Dissolution [OTHER CAUSES: Termination by mutual consent, novation, loss of subject matter of the agency, outbreak of war if inconsistent with the agency. (2) Death Ordinarily, the death of the principal terminates the agency, even if a period had been stipulated and such period has not yet ended. However, under Art. 1931, “anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the agency, is VALID and shall be fully effective with respect to third persons who may have contracted with him in good faith.” (3) Dissolution Note that the dissolution of the firm or corporation (whether it be the principal or the agent) ends the agency.
Art. 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. COMMENT: (1) Revocation by Principal or Agency (a) Reason – Agency is generally revocable at the will of the principal because the trust and confidence may have been lost. (b) Revocation at will is proper: 1) even if the agency is onerous; 2) even if the period fixed has not yet expired. (2) When Agency Cannot Be Revoked at the Principal’s Will The agency cannot be revoked at will in the following instances: (a) When it is “coupled with an interest” (interest possessed by the agent not in the proceeds arising from the exercise of the power, but interest in the subject matter of the power). (b) In the cases mentioned under Art. 1927 – 1) When a bilateral contract depends on the agency; 2) When the agency is the means of fulfilling an obligation already contracted; 3) In the case of a partner appointed manager in the contract of partnership and his removal from the management is unjustifiable. (c) When there has been a WAIVER by the principal (however, the irrevocability of a power of attorney cannot affect one who is not a party there to, it being obligatory only on the principal who created the agency.) (d) When the principal is obliged not to revoke. (Here, the principal can still revoke, but he can be held liable for damages, for breach of contract.) (e) When the revocation is done in bad faith. [Here, the principal can still revoke, but innocent third parties should not be prejudiced; moreover, the innocent agent can be entitled to damages from him. (3) Agent cannot generally Recover Damages Under the general rule, when revocation is proper, the agent cannot get damages because the principal is merely exercising a right.
(4) Kinds of Revocation (a) Express (b) Implied – as in the following: 1) Appointment of a new agent for the same business or transaction (Art. 1923) provided there is INCOMPABILITY. 2) If the principal directly damages the business entrusted into the agent, dealing directly with third persons, in a way INCOMPATABLE with the agency. Art. 1921. If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. COMMENT: Agency for Contracting With Specified Persons (a) So that innocent third parties may not be prejudiced, the principal who fails to give the notification can be held liable for damages. (b) No notice is required for persons who already know of the revocation for then the purpose of the notification shall have already been served. Art. 1922. If the agent had general powers, revocation of the agency does not prejudice third person who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. COMMENT: Agency When Third Parties Are Not Specified (a) In this Article, as distinguished from the preceding one, the third persons have not been SPECIFIED. (b) Note the effect of a revocation in a newspaper of general circulation. Art. 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. COMMENT: Effect of Appointment of a New Agent (a) Appointment of a new agent revokes the first agency only in case of incompatibility.
(b) A special power revokes a general one. (c) If the first agent is not notified of the appointment of the second agent, it is understood that the first agency still exists. Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. COMMENT: (1) Effect if the Principal Directly Manages the Business The rule applies only in case of incompatibility, because it may be that the only desire of the principal is for him and the agent to manage the business together. In case of true inconsistency, the agent is revoked, for there would no longer be any basis thereof. (2) Case CMS Logging, Inc. v. CA & D.R. Aguinaldo Corp. GR L-41420, July 10, 1992 The principal may revoke a contract of agency at will, and such revocation may be express or implied, and may availed of even if the period fixed in the contract of agency has not yet expired. As the principal has this absolute right to revoke the agency, the agency cannot object thereto; neither may he claim damages arising from such revocation, unless it is shown that such was done in order to evade the payment of agent’s commission. In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the contract of agency under Art. 1924 of the civil Code. And since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is not entitled to reain whatever moneys it may have received as its commission for said transactions. Neither would DRACOR be entitle to collect damages from CMS, since damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the payment of the agent’s commission. Be it noted that the act of a contractor who, after executing powers of attorney in favor of another empowering the latter to collect whatever amounts may be due to him from the Government the money the collection of which he entrusted to his attorney-infact, constituted revocation of the agency in favor of the attorney-in-fact.
Art. 1925. When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. COMMENT: Revocation by One of Two or More Principals The power of revoke here is a consequence of the solidary liability of coprincipals. Art. 1926. A general power of attorney is revoked by a special one granted to another agent, as regards the special matter involved in the latter. COMMENT: Rule When Special Power Is Granted to Another Agent (a) In this Article, two agents are involved. (b) A specific right naturally prevails over a general one. Art. 1927. An agent cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in a contract of partnership and his removal from the management is unjustifiable. COMMENT: (1) When an Agency Cannot Be Revoked This enumerates three instances of irrevocability: (a) If a bilateral contract depends upon the agency. (b) If the agency is the means of fulfilling an obligation already contracted. (c) If a partner is appointed manager of a partnership in the contract of partnership, and his removal from the management is unjustifiable. (2) Effect When “Interest” Terminates An agency coupled with an interest cannot be terminated unilaterally by the principal, but revocation can be made AFTER the interest terminates. So if the Government allows the De la Rama Steamship Co. to manage for its help in acquiring the vessels, at the end of said two years, the Government may end the agency.
Art. 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdraw, the agent must in demnify him therefor, unless the agent should base his withdrawals upon the impossibility of continuing the performance of the agency without grave detriment to himself. COMMENT: (1) Withdrawal by Agent (a) Just as a principal may revoke generally under Art. 1920, so also may an agent withdrawal under Art. 1928. (b) Reasons of health can justify withdrawal by the agent. (2) Effect When Agent Sues Principal When an agent files a complaint against the principal for a monetary claim in the former’s favor, dignity and decorum will not ordinarily permit the continuation of the agency. Such a complaint is therefore equivalent to withdrawal of the agent from the agency. Art. 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. COMMENT: When a Withdrawn Agent Must Still Act Reason for the Article – to prevent damage to the principal. Art. 1930. The agent shall remain in full force and effect even after the death of the principal, if it has been constituted in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor. COMMENT: (1) When Agency Continues Even After Death of Principal This Article speaks of an agency: (a) coupled with a common interest; (b) coupled with the interest of a third person whi has accepted the stipulation in his favor.
(2) Agency Coupled With an Interest It is a well-settled general rule that if the authority of an agent is coupled with an interest, it is not revocable by the death, act, or condition of the principal, unless there is some agreement to the contrary between the parties. This is a well-recognized exception to the rule that the death of the principal revokes the authority of an agent appointed by him. However, it must be noted that an agent whose agency is coupled with an interest cannot stand on a better ground that a partner appointed as manager in the articles of partnership insofar as revocability of authority or power is concerned. Inasmuch as a partner appointed as manager in the article of partnership can be divested of his power in there is a just or lawful cause, it follows that an agent whose agency is coupled with an interest can also be stripped of his power of attorney, if there is a JUST CAUSE. (3) Nature of the Agent’s Interest In order that a power may be irrevocable because it is coupled with an interest, it is necessary that the interest shall be in the subject matter of the power and not in the proceeds which will arise from the exercise of the power. The person clothed with the power must derive under the instrument creating it, or from the nature of the relation, a present or future interest in the thing or subject itself on which the power is to be exercised, and not merely that which is produced by the exercise or the power. Art. 1931. Anything done by the agent, without knowledge of the death of the principal or any other cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have constructed with him in good faith. COMMENT: (1) Effect of Agent’s Act Without Knowledge of the Termination of the Agency Note that the law there requires the third persons to be in good faith. If in bad faith, they cannot be protected. (2) Rule in Case Business Was Already Begun Under the second paragraph of Art. 1884, the agent “must also finish the business already begun on the death of the principal should delay entail any danger.” Art. 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter.
COMMENT: (1) Death of the Agent If the heirs of the dead agent are unable to give notice, one good measure for them to do is to consign the object or property of the agency in the court. In this way, they can still protect the interest of the principal, who trusted their predecessor in interest. The heir’s duty arises from what may be termed as a presumed agency or tacit agency or an agency by operation of law.