[Agency] Midterms Reviewer

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 1 LAW 173 - AGENCY University of the Philippines – College of Law Prof. John Red PART I Nature, Form, & Kinds of Definition and objective Article 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. (1709a) Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. (1710a) Article 1317. No one may contract in 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 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. (1259a) Article 1403. The following contracts are unenforceable, unless they are ratified: xxxxx (1) Those 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; DEFINITION: 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. [NCC 1868] OBJECTIVE: It is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. Basis: Representation. • Agent acts for and on behalf of principal on matters within the scope of his authority, which have the same legal effect as that personally executed by the principal. [Eurotech Industrial v. Cuizon] Nature: Personal, representative, derivative. GR: 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. XPN: Ratified, expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other contracting party. [Rallos v. Felix Go Chan] What cannot be delegated 1. Personal acts; a. Right to vote; b. Making of a will; c. Testimonies, making of affidavits 2. Criminal acts or acts not allowed by law. a. Aliens are not allowed to own private agricultural lands and thus cannot purchase land through a Filipino agent b. NCC 1491; c. When a person participates in the commission of a crime, he cannot escape punishment on the ground that he simply acted as agent of another party. GR: The fact or extent of authority of the agents may not be established by the declarations of the agents alone XPN: If one professes to act as agent for another, she may be sopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which they engaged. [Doles v. Angeles] Elements Article 1305. A contract is a meeting of minds between two persons whereby one binds himself, with respect to the other, to give something or to render some service. (1254a) Article 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. (1261) Article 1868. Supra. Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Essential elements according to Rallos v. Felix Go Chan 1. consent, express or implied, of the parties to establish the relationship; 2. object is the execution of a juridical act in relation to a third person; 3. agent acts as a representative and not for himself; 4. agent acts within the scope of his authority. Villanueva: The last two elements are not essential to the perfection and validity of the contract of agency since they go into the performance stage of the contract. It does not affect the validity of the relationship but rather its enforceability. ELEMENTS [VILLANUEVA] 1. Consent (Express or implied) a. No person may be represented by another without his will; and no person can be compelled against his will to represent another. [NCC 1317] b. 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. [Orient Air Services v. CA] 2. Object

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 2 a. Execution of a juridical act in relation to a third person. 3. Cause or consideration a. This is the compensation or commission that the principal agreed or committed to pay for the latter’s services. b. GR: Agency is presumed to be for a compensation. c. XPN: Unless there is proof to the contrary. [NCC 1875] Parties 1. PRINCIPAL: One whom the agent represents and from whom he derives his authority. He is the person represented or the person who consents that another shall act on his behalf. a. May be either a natural or juridical person. 2. AGENT: One who acts for and represents another. He is the person acting in a representative capacity. From the time the agent acts or transacts the business for which he has been employed in representation of another, a third part is added: the party with whom the business is transacted. • His liability is to the principal and not to the agent. The third party’s liability is enforceable against the principal, not the agent. Capacity of the parties PRINCIPAL: A principal must be capacitated or have the legal capacity to enter into contract in his own right. Effects of incapacity If one of the parties is incapacitated to contract à VOIDABLE. o If principal has no legal capacity + agent enters into contract with third party à contract with third party is voidable o If principal has legal capacity + agent has NO legal capacity à agency relationship is voidable but contract with third party is valid. GENERAL RULE: Lack of legal capacity of the agent does not affect the constitution of the agency relationship. • Generally, anyone can be an agent. It is the capacity of the principal that is controlling since the contract is really entered into by the principal. EXCEPTION: Third parties who act in good faith with an agent have a right to expect that their contracts would be valid and binding on the principal. An agent who assumes to contract in the name of a principal without contractual capacity renders himself liable to third persons. • The acts of an agent done for an incompetent principal may be ratified by the latter after he acquires capacity. The agent is not liable where he was ignorant of the principal’s incapacity. Summary Of Rules On Capacity Principal Agent Agency contract Contract with third persons / / Valid Valid / X Voidable Valid X / Voidable Voidable x x Unenforceable (Art. 1403 (3)) Depends on the capacity of the third person Characteristics of a contract of agency 1. Consensual: Based on the agreement of the parties which is perfected by mere consent. 2. Principal: It can stand by itself without need of another contract. 3. Nominate: It has its own name. 4. Unilateral: If it is gratuitous since it creates obligations for only one of the parties (i.e. the agent) a. Bilateral:If it is for compensation since it vies rise to reciprocal rights and obligations 5. Preparatory: Entered into a means to an end (i.e. creation of other transactions or contracts). 6. Fiduciary and revocable a. Based on trust and confidence. b. GR: An agency, as a contract, is REVOCABLE, notwithstanding an indication in the appointment that it is irrevocable (basis: fiduciary) c. XPN: Constituted for the interest of the agency or third parties d. Sir: note that if there are consequences for revocation, the principal will be held liable for the consequences BUT it does not prevent the principal from revoking the agency at any time 7. Personal, representative, derivative a. Since the agent is only acting for and in behalf of the principal, all acts done by the agent pursuant to the agency are considered acts of the PRINCIPAL b. Generally, knowledge of the agent is notification to the principal c. XPN: i. When the agent’s interest is already adverse to the principal ii. Confidential information irrelevant to the task delegated to the agent iii. Person seeking to avail benefit of the rule colludes with the agent to defraud the principal. Doctrine of imputed knowledge The knowledge of the agent is imputed to the principal even though the agent never communicated such knowledge to the principal. • However, the knowledge of the principal cannot be imputed to the agent absent substantial proof of knowledge by the latter. EXCEPTIONS: 1. Where the agent’s interests are adverse to those of the principal; 2. Where the agent’s duty is not to disclose the information as where he is informed by way of confidential information; 3. Where the person claiming the benefit of the rule colludes with the agent to defraud the principal.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 3 Philpotts v. Philippine Manufacturing Co. (1919) FACTS: Petitioner, W. G. Philpotts is a stockholder in the respondent Philippine Manufacturing Company, who seeks to compel the respondents to permit the petitioner, in person or by some authorized agent or attorney, to inspect and examine the records of the business transacted by the respondent company since January 1, 1918. ISSUE: W/N a stockholder’s right to inspect the records of the company he holds stocks with be exercised by a proper agent or attorney of the stockholder – YES HELD: The right of inspection given to a stockholder can be exercised either by himself or by any proper representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the general rule that what a man may do in person he may do through another. However, there are some things which a corporation may undoubtedly keep secret, notwithstanding the right of inspection given by law to the stockholder. • As, for instance, where a corporation, engaged in the business of manufacture, has acquired a formula or process, not generally known, which has proved of utility to it in the manufacture of its products.The company’s Board of Directors may adopt measures for the protection of such process from publicity. Eurotech Industrial v. Cuizon (2007) FACTS: Respondents Edwin and Erwin Cuizon (of Impact Systems) sought to buy from Eurotech Industrial Technologies Inc. one unit of sludge pump for P250,000, paying P50,000 of the purchase price as down payment. As respondents have not paid their debt, petitioner refused to deliver the pump to them. Thus, EDWIN Cuizon and Eurotech executed a Deed of Assignment wherein receivables from Toledo Power Corp. were assigned by EDWIN to Eurotech as payment for the pump. Still, respondents collected the said receivables from Eurotech. Petitioner instituted a complaint for sum of money against respondents before the RTC, which later dropped EDWIN as defendant. Eurotech now argues before the SC that he should be included since he is personally liable for having exceeded his authority as agent ISSUE: W/N Edwin as agent should be personally liable for the obligations of Erwin, the principal – NO HELD: NO, Edwin is not personally liable under NCC 1897. Edwin does not fall under the exceptions and he did not act beyond the scope of his authority. Edwin acted within his authority when he signed the Deed. It is clearly stated in the Deed of Assignment that he signed as the sales manager of Impact Systems. The position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the principal. Underlying principle of agency: To accomplish results by using the services of others and do a great variety of things like selling, buying, manufacturing, and transporting. It is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act. Rallos v. Felix Go Chan Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land. The sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell the subject property. Before the property could be sold, Concepcion Rallos died. Simeon Rallos, with full knowledge of the death of his sister, sold the property to Respondent Felix Go Chan & Sons Realty Corporation and a TCT was issued in their favor. Petitioner Ramon Rallos, as the administrator of the intestate estate of Concepcion Rallos filed a civil complaint with the CFI praying that the sale of the share of Concepcion Rallos be declared unenforceable and that the share be reconveyed to her estate. The CFI ruled that the sale was null and void, but the CA reversed the lower court decision, citing that the respondent purchased the property in good faith. ISSUE: W/N the death of the principal ipso jure extinguishes the contract of agency – NO. However, the requisites for an act of an gent to be valid despite the death of the principal were not met in this case. HELD: An agency is personal, representative, and derivative in nature. For an act of an agent to be valid despite the death of the principal, two requisites must concur: 1. The agent acted without the knowledge of the death of the principal 2. The third person who contracted with the agent acted in good faith IN THIS CASE: The first requisite is lacking since Simeon knew of the death of his sister before contracting with respondents Orient Air Services v. CA (1991) FACTS: GENERAL SALES AGENCY AGREEMENT: Entered into by Orient Air Services and Hotel Representatives and American Airlines. American Airlines authorized Orient to act as exclusive general sales agent in the PH for sale of air passenger transportation. • Default - If Orient Air Services shall at any time default, the Agreement may, at the option of American, be terminated forthwith and American may, without prejudice to any of its rights under this Agreement, take possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to American. • American may terminate the Agreement on two days’ notice in the event Orient Air Services is unable to transfer to the United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate the Agreement without cause by giving the other 30 days’ notice by letter, telegram or cable. American Air itself undertook the collection of the ticket proceeds originally sold by Orient, alleging that the latter failed to promptly remit the net proceeds of USD254,400.40. It also terminated the GSA. SUIT FOR ACCOUNTING: Instituted by American Air against Orient Air with the CFI Manila.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 4 ORIENT AIR ARGUES: In fact, it is American Air who owes it a balance in unpaid overriding commissions. ISSUE: W/N Orient Air should be reinstated as the general sales agent of American Air – NO. The ruling of the CA reinstating Orient Air as the general sales agent of American Air should be set aside. HELD: 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. By affirming the trial court, the appellate court in effect compelled American Air to extend its personality to Orient Air • The agreement itself between the parties states that either party may terminate the Agreement without cause, subject to notice. Uy v. CA (1999) FACTS: Uy and Roxas are agents who were authorized to sell 8 parcels of land by the owners thereof. By virtue of this authority, they offered to sell the lots to NHA, to be utilized and developed as a housing project. Of the 8 parcels of land, only 5 were paid for by the NHA because of the report it received from the Land Geoscience 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. However, the sale was then cancelled by NHA. As such, petitioners Uy and Roxas filed a complaint for damages before the RTC against NHA and its general managers. The RTC ruled that cancellation of the contract was justified, but it ordered NHA to pay petitioners damages. However, the CA dismissed the complaint and deleted the award of damages. It held that petitioners were mere attorneys-in-fact and therefore not real parties-in-interest in the action before the RTC ISSUE: W/N the petitioners possess the right they seek to enforce (I.e., can they file this case in their own name?) – NO HELD: 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. 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. 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-ininterest in this and ARE NOT entitled to damages. Petitioners 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 Petitioners are also not beneficiaries of a stipulation pour autrui. • 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 an action against NHA Prudential Bank v. CA (1993) FACTS: Private respondent Cruz invested Php 200,000 in Central Bank bills with Prudential Bank. The transaction was evidenced by a Confirmation of Sale together with a Debit Memo issued by Quimbo, the bank employee who was apparently in charge of such transactions. Upon maturity of the placement, private respondent returned to the bank to renew her investment, where she was asked to sign a Withdrawal Slip for Php 196,122.98 with Quimbo explaining that the same was a new requirement of the bank. When private respondent sought to withdraw her Php 200,000, she was informed that the investment appeared to have been already withdrawn by her. Since her demands went unheeded, private respondent filed a complaint for breach of contract against Prudential Bank. ISSUE: WN the bank should be held liable – YES HELD: The principal is liable for obligations contracted by the agent. The agent’s apparent representation yields to the principal’s true representation and the contract is considered as entered into between the principal and the third person. Petitioner was made liable for its failure/refusal to deliver to private respondent the amount she had deposited and which she had a right to withdraw. That investment was acknowledged by its own employees, who had the apparent authority to do so and so could legally bind it by its acts vis-àvis private respondent The documents had been issued in the office of the bank itself and by its own employees with whom she had previously dealt. Such dealings had not been questioned before, much less invalidated. There was absolutely no reason why she should not have accepted their authority to act on behalf of their employer. Litonjua Jr. v. Eternit Corp. (2006) FACTS: Eternit (EC) is a domestic corporation in the Philippines that manufactures roofing materials & pipe products on 8 parcels of land. Eteroutremer SA Corporation (ESAC) owns 90% of the stock in EC & is registered in Belgium. This makes ESAC a majority stockholder of EC. Glanville was EC’s President & General Manager, while Delsaux was Regional Director for Asia of Eteroutremer. Due to the political situation in the Philippines (Marcos regime), ESAC wanted to stop its operations and & dispose of the 8 parcels of land on which EC was situated. Because of this, Adams, a member of EC’s Board of Directors, engaged the services of Marquez, a realtor/broker, to offer the properties to prospective buyers. Marquez offered the properties & their improvements to Eduardo Litonjua Jr. Marquez said he was authorized to sell such to Eduardo for P27M. Eduardo & his brother Antonio who are the Petitioners, gave a counter-offer

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 5 of P20M. After learning about the Petitioners’ offer from Glanville, Delsaux gave a final offer of $1M & P2.5M to cover all of the existing obligations prior to final liquidation of the properties. Petitioners accepted this counter-proposal & deposited $1M already. However, the Petitioners later on discovered that due to the improvement of the political condition in the country (assumption of Cory as President), ESAC decided not to proceed with the sale. This prompted the Petitioners to file a complaint for specific performance & payment of damages because of the aborted sale before the RTC. This was filed by them against Respondents EC, Far East Bank & Trust Company (trustee for TCTs), & ESAC. EC & ESAC argue that EC’s Board & stockholders never approved any resolution to sell the properties nor authorized Marquez to sell them, & that Glanville’s telex to Delsaux regarding the Petitioners’ P20M offer was Glanville’s own personal making, so it didn’t bind EC. On the other hand, the Petitioners assert that there was no need for a written authority for Marquez to validly act as a broker. ISSUE: W/N Marquez needed written authority from ESAC because he was acting as an agent – YES HELD: A corporation is a juridical person separate and distinct from its stockholders. It may act only through its board of directors or when authorized by its board resolution. The general principles of agency govern this relation between the corporation and its agents. Agency may be oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land or any portion is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. Doles v. Angeles FACTS: Respondent Angeles filed a complaint for Specific performance against Petitioner Doles. Respondent claims that petitioner is indebted to her for a sum of money and as settlement of this loan, petitioner ceded to respondent by way of a deed of absolute sale a parcel of land belonging to petitioner. Petitioner however, according to respondent, refuses to execute the necessary documents to transfer the title of the property. Petitioner on the other hand claims that she did not borrow money from respondent and that she only referred her friends (the actual borrowers) to respondent who was engaged in the business of money lending. She also argues that when the checks issued to respondent bounced and petitioner’s friends could no longer be located, respondent got furious and threatened to file a criminal complaint against petitioner. To avoid criminal prosecution, petitioner was forced to cede her property through a deed of absolute sale which she claims is void because there was no valid consideration. She further argues that respondent does not have legal capacity to sue her because respondent was merely acting as the agent of a certain Pua, the principal financier. ISSUE: W/N Angeles was an agent of Pua – YES, she is estopped to deny that she acted as an agent for Pua, her disclosed principal. She is also estopped from denying that Doles acted as an agent for the alleged debtors HELD: Under Article 1868 of the Civil Code, the basis of agency is representation. The question of whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention. Agency may even be implied from the words and conduct of the parties and the circumstances of the particular case. Though the fact or extent of authority of the agents may not, as a general rule, be established from the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against the asserted principal and the third persons interested in the transaction in which he or she is engage IN THIS CASE: Both petitioner and respondent have undeniably disclosed to each other that they are representing someone else, and so both of them are estopped to deny the same Viloria v. Continental While in the US, petitioner Fernando purchased for himself and his wife 2 Continental Air round trip tickets from a travel agency called Holiday Travel and was attended to by a certain Margaret Mager. Petitioner Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an intercity passenger train service provider in the US. When he later made inquiries at an Amtrak station 3, he was told that there are seats available on their travel dates and he can travel on Amtrak anytime and any day he pleased. Petitioner Fernando then demanded a refund, alleging that Mager had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked but his request was denied on the ground that the tickets are non-refundable. Petitioner spouses then filed a complaint against respondent CAI, praying that it be ordered to refund the money they used in the purchase of the tickets with legal interest and damages. CAI argued that CAI is not liable for any of Mager’s acts since she is not a CAI employee. ISSUE: W/N there is a principal-agency relationship between CAI and Holiday Travel – YES HELD: 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 act of the principal if done within the scope of the authority. IN THIS CASE: The requisites of a contract of agency are all present: • Under the agreement with Holiday Travel, Holiday Travel was to enter into contracts of carriage with third persons on CAI’s behalf • Holiday Travel merely acted in a representative capacity. It is CAI, and not Holiday Travel, who is bound by the contracts of carriage that Holiday enters on CAI’s behalf • CAI also did not allege that Holiday Travel exceeded the authority that was granted to it

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 6 Bordador v. Luz FACTS: Petitioners Bordador are engaging in buying and selling jewelry. Respondent Luz was a regular customer and on several occasions, her brother respondent Deganos had allegedly received from petitioners several pieces of jewelry. On 6 receipts covering the transactions, it was stated that some pieces were to be delivered to Luz. Deganos, with his jewelry, was planning to sell them and remit the profits while returning the unsold ones back to the petitioners. He never paid the balance or returned the unsold pieces though. So, there was a complaint for recovery of money filed against Deganos and against Luz. Petitioners’ theory was that Luz was a principal that authorized Deganos as her agent to buy the jewelry. So, for Deganos’ failure to pay the balance, Luz can be made solidarily liable. ISSUE: W/N respondent spouses Luz are liable to petitioners – NO, Luz cannot be held liable for Deganos’ balance because she never authorized Deganos to act on her behalf. Art. 1868 states that: “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.” IN THIS CASE: There is no showing that Luz consented to the acts of Deganos or authorized him to act on her behalf. • Neither express/implied agency was proven to exist between the two respondents. Philex Mining Corp v. CIR FACTS: Gold’s mining claim, known as the Sto. Nino mine in Benguet Province. The parties executed an agreement denominated as "Power of Attorney". Philex Mining made advances of cash and property. However, the mine suffered continuing losses over the years which resulted to petitioner’s withdrawal as manager of the mine and in the eventual cessation of mine operations. Thereafter, the parties executed a "Compromise with Dation in Payment" wherein Baguio Gold admitted an indebtedness to petitioner. Subsequently, petitioner wrote off in its books of account the remaining outstanding indebtedness of Baguio Gold; so in its annual income tax return, petitioner deducted from its gross income the "loss on settlement of receivables from Baguio Gold against reserves and allowances”. BIR disallowed the deduction for bad debt and assessed petitioner a deficiency income tax. Petitioner protested before the BIR but was denied. ISSUE: W/N a partnership was formed between Philex and Baguio Gold – YES HELD: The Power of Attorney is the instrument that is material in determining the true nature of their business relationship The totality of the circumstances and stipulations lead to the conclusion that a partnership or joint venture was indeed intended by the parties. • They established a common fund for the purpose. • They also had a joint interest in the profits of the business as shown by a 50-50 sharing in the income of the mine. • Under the "Power of Attorney", petitioner and Baguio Gold undertook to contribute money, property and industry to the common fund known as the Sto. Niño mine. It would seem therefore that under Philippine law, a joint venture is a form of partnership and should be governed by the law of partnerships. The Supreme Court has however recognized a distinction between these two business forms, and has held that although a corporation cannot enter into a partnership contract, it may however engage in a joint venture with others.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 7 Agency distinguished from other relationships Important characteristic feature of agency: Agent’s power to bring about business relations between principal and third persons. Agency vs. Master-Servant Contracts Article 1689. Household service shall always be reasonably compensated. Any stipulation that household service is without compensation shall be void. Such compensation shall be in addition to the house helper's lodging, food, and medical attendance. Article 1690. The head of the family shall furnish, free of charge, to the house helper, suitable and sanitary quarters as well as adequate food and medical attendance. Article 1691. If the house helper is under the age of eighteen years, the head of the family shall give an opportunity to the house helper for at least elementary education. The cost of such education shall be a part of the house helper's compensation, unless there is a stipulation to the contrary. Article 1692. No contract for household service shall last for more than two years. However, such contract may be renewed from year to year. Article 1693. The house helper's clothes shall be subject to stipulation. However, any contract for household service shall be void if thereby the house helper cannot afford to acquire suitable clothing. Article 1694. The head of the family shall treat the house helper in a just and humane manner. In no case shall physical violence be used upon the house helper. Article 1695. House helpers shall not be required to work more than ten hours a day. Every house helper shall be allowed four days' vacation each month, with pay. Article 1696. In case of death of the house helper, the head of the family shall bear the funeral expenses if the house helper has no relatives in the place where the head of the family lives, with sufficient means therefor. Article 1697. If the period for household service is fixed neither the head of the family nor the house helper may terminate the contract before the expiration of the term, except for a just cause. If the house helper is unjustly dismissed, he shall be paid the compensation already earned plus that for fifteen days by way of indemnity. If the house helper leaves without justifiable reason, he shall forfeit any salary due him and unpaid, for not exceeding fifteen days. Article 1698. If the duration of the household service is not determined either by stipulation or by the nature of the service, the head of the family or the house helper may give notice to put an end to the service relation, according to the following rules: (1) If the compensation is paid by the day, notice may be given on any day that the service shall end at the close of the following day; (2) If the compensation is paid by the week, notice may be given, at the latest on the first business day of the week, that the service shall be terminated at the end of the seventh day from the beginning of the week; (3) If the compensation is paid by the month, notice may be given, at the latest, on the fifth day of the month, that the service shall cease at the end of the month. Article 1699. Upon the extinguishment of the service relation, the house helper may demand from the head of the family a written statement on the nature and duration of the service and the efficiency and conduct of the house helper The agent is employed in a capacity superior to that of the servant, since he is entitled to use his discretion as to the means to accomplish the end for which he is employed, while the servant is directed by the master as to how the task should be done. Agency vs. Employer-Employee Contracts Article 1700. The relations between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. AGENCY E-E CONTRACTS Purpose is to enter juridical relationship on behalf of the principal with third parties Purpose is to render service for the direct benefit of the ER or business of the ER Basis is representation itself. No element of representation Dela Cruz v. Northern Theatrical Enterprises FACTS: In 1941, petitioner de la Cruz was employed as a special guard by respondent Northern Theatrical Enterprises, a domestic corporation operating a movie house in Laoag. Petitioner’s duties involve guarding the main entrance of the cinema house and maintaining peace and order in the premises. As a guard, he carried a revolver. One afternoon, a Benjamin Martin wanted to gate crash the movie house. Because of the petitioner's refusal to let him in without a ticket, Mertin attacked with a bolo, forcing petitioner to use the revolver. De la Cruz was charged with homicide and was later acquitted. He demanded reimbursement of legal expenses from the respondent corporation but was refused, prompting the present action. ISSUE: W/N an employee, who in the line of duty, performs an act caused by a stranger or third person and resulting in his incurring in expenses may recover damages against his employee – NO HELD: The relationship between the parties was not that of principal of agency because representation was in no way involved. There is a difference between being employed to represent the corporation in its dealings with third parties as

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 8 compared top being a mere employee hired to perform specific duties or tasks. Sevilla v. CA FACTS: Respondent Tourist World Service entered into a lease contract for its branch office, with petitioner Lina holding herself solidarily liable with respondent TWS for the payment of the monthly rent. When the branch office was opened, it was run by petitioner Lina, retaining 4% as commissions from airline bookings. When respondent TWS decided to close down the branch office, it terminated the lease contract and padlocked the premises thus preventing petitioner Lina from entering the premises and prompting the latter to file the instance complaint. ISSUE: W/N there was a contract of agency between the parties – YES HELD: The parties had contemplated a principal-agent relationship. • Petitioner Lina solicited airline fares, but she did so for and on behalf of her principal, Tourist World Service, Inc. As compensation, she received 4% of the proceeds in the concept of commissions. And she herself presumed her principal’s authority as owner of the business undertaking (1st bullet under the joint venture as applied discussion). The interest of petitioner Lina is not limited to the commissions she earned as a result of her business transactions, but one that extends to the very subject matter of the power of management delegated to her. • Petitioner Lina is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. • She had assumed a personal obligation for the operation thereof, holding herself solidarily liable for the payment of rentals. • She continued the business, using her own name, after Tourist World had stopped further operations. Thus, the revocation complained of should entitle the petitioner Lina to damages. Agency vs. Lease of Service (Management Contract) Article 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. (1544a) AGENCY LEASE OF SERVICE Basis Representation Employment Functions Agent exercises discretionary powers Lessor ordinarily performs only ministerial functions Parties Three persons: Principal, agent, third person Two persons: Lessor (master or employer) and Lessee (servant or employee) Object Commercial or business transactions Mere manual or mechanical execution Nature of contract Preparatory Principal Subject matter Agent has power to bring about business relations between his principal and third persons Contemplates only nonjuridical acts Nielson v. Lepanto FACTS: Lepanto filed this Motion for Reconsideration of the previous decision of the Court. Lepanto, among others, argued that the management contract in question was one of agency. Lepanto enumerated the duties of Nielson and used the same to bolster his argument. Further, Lepanto asserted that as their contract was one of agency, their contract, then, was revocable at the will of the principal, regardless of any term in their contract. Lepanto further alleged that the management contract is one of agency because: • Nielson was to manage and operate the mining properties and mill on behalf, and for the account, of Lepanto • Nielson was authorized to represent Lepanto in entering, on Lepanto's behalf, into contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores mined. • All these, Lepanto claims, show that Nielson was, by the terms of the contract, destined to execute juridical acts not on its own behalf but on behalf of Lepanto under the control of the Board of Directors of Lepanto "at all times". • Hence Lepanto claims that the contract is one of agency. ISSUE: W/N the management contract was a contract of agency – NO, the management contract is not a contract of agency, BUT A CONTRACT OF LEASE OF SERVICES HELD: It appears that the principal and paramount undertaking of Nielson under the management contract was the operation and development of the mine, and the operation of the mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third persons. Agency vs. Independent Contractor Article 1713. By the contract for a piece of work the contractor binds himself to execute a piece of work for the employer, in consideration of a certain price or compensation. The contractor may either employ only his labor or skill, or also furnish the material. (1588a) AGENCY CONTRACT FOR PIECE OF WORK Agent is subject to the control and direction of the principal whom he represents with respect to the matters entrusted to him The independent contractor, without being subject to the employer’s control except only as to the result of the work, exercises his employment

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 9 independently, and not in representation of the employer. For acts of the agent or servant within the scope of his authority or employment, the principal or employer is in general liable. The employer is not liable for the torts or injury inflicted by the independent contractor upon third persons or by the employees of such contractor. XPN: If the injury is caused by his negligence or the result of his interference in the work of the independent contractor. Shell v. Firemen’s Insurance Co. FACTS: A car owned by respondent Sison was brought to a Shell Gasoline and Service Station, for washing, greasing and spraying. The operator of the station, having agreed to do service upon payment of P8.00, the car was placed on the hydraulic lifter under the direction of the personnel of the station. However when the car was being greased, the car fell from the lifter after the greaseman/operator, respondent de la Fuente, of that Shell station had adjusted the valve to make the car lower. The initial petition was filed by the respondent Insurance Company to recover the costs for the repairs to the damaged car of Respondent Sison. Petitioner Shell Company questions the CA judgement that ordered them to solely pay for the damages caused by the acts of its operator de la Fuente, when the latter in the course of servicing a car fell from the hydraulic lifter. ISSUE: W/N the operator of a service station is an agent of petitioner company – YES HELD: The Court is not bound to rely on the name or title given to it by the contracting parties. The way the contracting parties do or perform their obligations may be shown and inquired into. If such performance is in conflict with the name of the contract, the FORMER shall prevail De la Fuente is an AGENT of Shell. The SC considered the following factors: 1. He owed his position to Shell and the latter could remove him or terminate his services at will 2. The service station belonged to Shell and bore its tradename 3. He only sold Shell’s products 4. The equipment used by De la Fuente belonged to Shell and were just loaned to him 5. Shell took charge of the repair and maintenance of the loaned equipment 6. An employee of Shell supervised De la Fuente and conducted periodic inspections 7. The price of the products sold was fixed by the company Agency vs. Trust Article 1440. A person who establishes a trust is called the trustor; one in whom confidence is reposed as regards property for the benefit of another person is known as the trustee; and the person for whose benefit the trust has been created is referred to as the beneficiary. AGENCY TRUST Agent represents and acts for his principal Title and control of the property under the trust instrument passes to the trustee who acts in his own name May be generally revoked at any time May be terminated ordinarily only by the fulfillment of its purpose Constant supervision and control by the principal Discrention in the trustee and guidance by the settler or cestui only to a limited extent and when expressly provided for. While not an agent, still possible for trustee to be an agent also where extensive direction and control are kept over the trustee. Agency vs. Sale Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent A contract of sale may be absolute or conditional. (1445a) AGENCY SALE Agent receives the goods or property as the goods of the principal Buyer receives goods as owner Agent delivers the proceeds of the sale Buyer pays the price Agent can return the object in case he is unable to sell General rule, the buyer cannot return the object sold Agency is bound to act according to the instructions of his principal Buyer can deal with the thing as he pleases, being the owner Essence of agency is the idea of an appointment of one to act for another Transfer of title Agency is a relationship which often results in a sale, but the sale is a subsequent step in the transaction. Quiroga v. Parsons Hardware FACTS: Petitioner Quiroga granted the exclusive rights to sell his beds in the Visayas region to respondent Parsons via a contract The contract, among other things, states that the respondent shall pay for the beds within 6 months from delivery of the beds to him Additionally, the contract includes that petitioner Quiroga grants respondent Parsons a commission on the sales that the latter makes in the form of 25% discounts on beds purchased by the latter from the

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 10 former. The contract also stated that respondent Parsons should not sell the beds at higher prices than the invoice prices, that Parsons should have an establishment in Iloilo, to keep the beds publicly displayed, among other conditions. These conditions were not complied with by respondent Parsons and as such, Petitioner Quiroga then filed a complaint for breach of contract against respondent Parsons ISSUE: W/N there was a contract of agency – NO, the alleged contract of agency had the elements of a contract of sale HELD: The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in Visayas. However, in the case at bar, the respondent was required to purchase the beds from the petitioner, and in the event that they would not be sold, he would not have been able to return the same. The petitioner cannot claim that the respondent was his agent on the basis that he received a commission for sales made because the “commission” in effect was merely a discount on the invoice price that the respondent pays to the petitioner for the purchase of beds Since the contract was that of sale, the disregard of the conditions laid forth therein was on the basis of mutual tolerance. Puyat & Sons v. Arco Amusement FACTS: Respondent Teatro Arco ordered two sound reproducing equipment from Starr Piano through petitioner Gonzalo Puyat & Sons, the exclusive agent of Starr Piano in the Philippines. Respondent and petitioner agreed that the petitioner will be paid a 10% commission fee for placing the order on behalf of the respondent. The orders arrived and were delivered in due time, and the purchase price of $1700 and $1600 plus the commission fees were duly paid to petitioner Gonzalo. Three years later, respondent Teatro found out that the price quoted to them with regards their two orders was not the net price but rather the list price, and that the petitioner had obtained a discount from the Starr Piano Company. Respondent demanded reimbursements for the amounts allegedly overpaid but petitioners refused. Thus a complaint was filed against petitioners. The trial court absolved petitioner from the complaint arguing that the agreement between them was one of a purchase and sale, but the CA reversed the trial court and ordered petitioners to reimburse the overcharges arguing that the relationship between the parties is one of agency. ISSUE: W/N the contract between Teatro Arco and Gonzalo is a contract of agency – NO, it is a contract of PURCHASE AND SALE HELD: In agency, the agent is exempted from all liability in the discharge of his commission provided he acts in accordance with the instructions received from his principal (section 254, Code of Commerce), and the principal must indemnify the agent for all damages which the latter may incur in carrying out the agency without fault or imprudence on his part (article 1729, Civil Code). Agency vs. Partnership Article 1767. By the contract of partnership two or more persons bind themselves to contribute money, property, or industry to a common fund, with the intention of dividing the profits among themselves. Two or more persons may also form a partnership for the exercise of a profession. (1665a) AGENCY PARTNERSHIP Control by the principal A partner’s power to bind his co-partner is not subject to the co-partner’s right to control, unless there is an agreement to that effect Agent acts only for his principal Partner acts both for his copartners and the partnership, and as his own principal (Contract of mutual agency) Ordinary agent assumes no personal liability where he acts within the scope of his authority Binds not only the firm members but himself as well If the alleged owner or partner takes his agreed share of profits, not as owner, but as an agreed measure of compensation for his services or the like If the profits belong to all the parties as common proprietors in agreed proportions Agency vs. Negotiorum Gestio Article 2144.Whoever voluntarily takes charge of the agency or management of the business or property of another, without any power from the latter, is obliged to continue the same until the termination of the affair and its incidents, or to require the person concerned to substitute him, if the owner is in a position to do so. This juridical relation does not arise in either of these instances: (1) When the property or business is not neglected or abandoned; (2) If in fact the manager has been tacitly authorized by the owner. In the first case, the provisions of articles 1317, 1403,No. 1, and 1404 regarding unauthorized contracts shall govern. In the second case, the rules on agency in Title X of this Book shall be applicable. (1888a) Article 2145. The officious manager shall perform his duties with all the diligence of a good father of a family, and pay the damages which through his fault or negligence may be suffered by the owner of the property or business under management. The courts may, however, increase or moderate the indemnity according to the circumstances of each case. (1889a) AGENCY NEGOTIORUM GESTIO There is representation

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 11 Representation is expressly conferred Representation is without authority of the owner and without his knowledge Agent acts according to express will of principal Gestor acts according to the presumed will of the owner by exercising all diligence of a good father of a family Contract Quasi-contract Agency vs. Brokerage BROKER: One who is engaged for others on a commission, a negotiator between other parties, never acting in his own name, but in the name of those who employed him. • No relation with the thing he buys or sells. He is merely an intermediary or negotiator between the purchaser and vendor relative to the property with the custody or possession of which he has no concern. AGENCY BROKERAGE Has relations with both the principal and the property No relation with the thing he buys or sells and is merely an intermediary Agent receives a commission Broker is paid merely by bringing the buyer and seller together even if no sale is eventually made Agent is a broader term are broker Powers are limited Pacific v. Yatco FACTS: Pacific sold, for the account of Victorias Milling Co. (Victorias), refined sugar manufactured by the latter, for which Pacific received commission. Afterwards, Victorias paid to the CIR merchant sales tax for the said sales. Notwithstanding such payment, the CIR also collected the same tax for the same amount from Pacific. It is now being argued that the payment of taxes by both Victorias and Pacifico constituted double taxation, there having been only one sale. The lower court found that Pacifico acted in two different capacities: (a) as a commission merchant for deliveries exwarehouse, and (b) as commission broker for deliveries exship. As such, it ordered the CIR to return to Pacifico the amount collected from it by way of tax on the sale of sugar to be delivered ex-ship, while denying the return of the amount collected for the sale of sugar to be delivered ex-warehouse. ISSUE: W/N Pacifico acted as a broker for deliveries ex-ship – YES HELD: • A commission merchant is one engaged in the purchase or sale of personal property for another, wherein the personal property is placed in the merchant’s possession and disposal. In such a case, the merchant maintains a relation with the principal, the purchasers, and the property. • A commercial broker, unlike a commission merchant, has no relation to the object. A commercial broker merely acts as an intermediary between the purchaser and the seller, limiting his purpose to bring together the parties to the transaction. IN THIS CASE: For the sugar delivered ex-ship, Pacifico never had possession of the sugar because it was delivered directly to the purchaser at an agreed port of arrival. The circumstance that the bill of lading was sent to Pacifico does not alter its character of being merely a broker, or constitute possession by it of the sugar shipped, inasmuch as the same was sent to it for the sole purpose of turning it over to the purchaser for the collection of the price. Ker v. Lingad FACTS: Petitioner Ker was assessed by the then CIR for a commercial broker’s percentage tax. Such liability arose from the contract it entered into with the United States Rubber International as its Distributor for the shipment and sale of products for consumption. The contract stipulated, among others, that: (1) the petitioner merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company; (2) that upon termination or cancellation of the agreement, all goods held on consignment shall be held by petitioner for the account of the company until their disposition is provided for by the latter; and that (3) the agreement does not constitute petitioner as distributor the agent or legal representative of the company for any purpose whatsoever. Petitioner requested for the cancellation of such assessment but this was denied by the CIR, maintaining that the petitioner should be taxed in such amount as a commercial broker. On appeal, the CTA held that petitioner is taxable except as to the compromise penalty. ISSUE: W/N there was a vendee-vendor relationship – NO HELD: The relationship created was one of BROKER AND PRINCIPAL Under the National Internal Revenue Code: Commercial broker “includes all persons . . . who, for compensation or profit, sell or bring about sales or purchases of merchandise for other persons . . . The term includes commission merchants” IN THIS CASE: The contract shows that the relationship arising therefrom was not one of seller and purchaser. Instead, the stipulations were so worded as to lead to no other conclusion than that the control by the United States Rubber International over the goods in question is, in the language of the Constantino opinion, “pervasive”. Hahn v. CA FACTS: Petitioner executed in favor of private respondent BMW a “Deed of Assignment with Special Power of Attorney,”, where the he as ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device in favor of the ASSIGNEE herein with the Philippines Patent Office. Per the agreement, the parties “continue[d] business relations as has been usual in the past without a formal contract.” But in a meeting with a BMW representative, petitioner was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC. BMW expressed willingness to continue business relations with the petitioner on the basis of a “standard BMW importer” contract. Hahn insisted that as long

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 12 as the assignment of its trademark and device subsisted, he remained BMW’s exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership. BMW withdrew its offer of a “standard importer contract” and terminated the exclusive dealer relationship. Thus, he filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership. The RTC decided to hear the case and deferred resolution of the motion to dismiss filed by BMW. The CA rendered judgment finding the trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. ISSUE: W/N Hahn is the agent or distributor of BMW in the PH – YES, the arrangement between the parties shows that the Hahn is the agent or distributor IN THIS CASE: 1. Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. 2. Payment was made by the buyer directly to BMW. 3. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. 4. Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn’s activities as a dealer and made regular inspections of Hahn’s premises to enforce compliance with BMW standards and specifications. Forms Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. (1710a) Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void. (n) Agency; how perfected: By mere consent. [Villanueva] There are some provisions of law which require certain formalities for particular contracts: 1. When the form is required for the validity of the contract; 2. When it is required to make the contract effective against third persons such as those in NCC 1357- 1358; 3. When it is required for the purpose of proving the existence of a contract such as those in the Statute of Frauds in NCC 1403. General rule: There is no formal requirement governing the appointment of an agent. • The authority may be oral or written, in public or private writing. • It may be even implied from words and conduct of the parties and circumstances of the particular case. But it cannot be inferred from mere relationship and family ties. Exceptions: 1. In instances provided by law (e.g. NCC 1874). 2. When it is required to make the contract effective against third persons (e.g. NCC 1357-1358) 3. When required for proving the existence of a contract (e.g. Statute of Frauds under NCC 1403) Presumption of agency GENERAL RULE: Agency is not presumed. The relation between principal and agent must exist as a fact. • Burden of proof: Upon the person alleging the agency. o What must be proven: Fact of agency + nature and extent. • Whatever statements or communications made by the parties, if anything appears contrary to their intention, the intention always prevails. EXCEPTIONS: A presumption of agency may arise when agency is: a. by operation of law or b. to prevent unjust enrichment. Should the agent be appointed directly by the principal? NO. It may be made through another. An agent appointed by the directors of a corporation to act for the corporation is an agent of the corporation and not of the directors. Perfection from the side of the principal An agency is constituted from: 1. his acts formally adopting it, or 2. from his silence or inaction, or particularly from his failure to repudiate the agency knowing something is acting in his name. Ideal form: Issue written power of attorney to the person designated as agent. • But according to NCC 1869, it still may be oral and deduced from the principal’s acts. Perfection from the side of the agent His acceptance may be: 1. express or implied from his acts which carry out the agency or 2. implied from his silence or inaction according to the circumstances.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 13 Air France v. CA HELD: The Ganas purchased 9 open-dated air passenger tickets for their Manila/Osaka/Tokyo/Manila trip. However, Air France exchanged the tickets, and such tickets were only valid until May 8, 1971. In Jan. 1971, Jose Ganas asked the help of Teresita, a secretary at the company where he was Director and Treasurer, to help with the extension of the tickets. Teresita then went to Ella, a manager of the Philippine Travel Bureau. Ella was informed by the Office Manager of Air France that the tickets’ validity could not be extended. Ella then warned Teresita that the Ganas would have to pay the fare differentials and the increased travel tax. On the day of the Ganas’ departure, Ella warned Teresita that although the tickets could be used by the Ganas if they left on May 7, the tickets would no longer be valid for the rest of their trip. Teresita replied that it would be up to the Ganas to make the arrangements. During the Osaka/Tokyo and Tokyo/Manila leg of their trip, the Ganas had difficulties because their tickets, which were expired, were not honored. Upon return to the PH, they filed a complaint for breach of contract. ISSUE: W/N Air France is liable to the Ganas for damages for breach of contract – NO HELD: For all legal intents and purposes, Teresita WAS AN AGENT OF THE GANAS, and notice to her of the rejection of the request for extension of the validity of the tickets WAS NOTICE TO THE GANAS, HER PRINCIPALS. Teresita was duly informed by Travel Agent Ella of the advice of Rillo that the tickets in question could not be extended beyond the period of their availability without paying the fare differentials and additional travel taxes. • The circumstance that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. • The validating stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of a ticket or revive an expired one. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL stickers that Ella had affixed spuriously. Cosmic Lumber v. CA FACTS: Petitioner Cosmic Lumber Corporation, through its General Manager, executed an SPA appointing Paz VillamilEstrada as attorney-in-fact to institute any action in court to eject persons occupying its lands. By virtue of her power of attorney, Villamil-Estrada instituted an action for the ejectment of one Isidro Perez and later on entered into a Compromise Agreement to have him buy a portion of the lot. The RTC approved the agreement and rendered judgment accordingly. Upon learning of the fraudulent transaction, petitioner sought annulment of the decision of the trial court before the CA on the ground that the compromise agreement was void because the attorney-in-fact did not have the authority to dispose of, sell, encumber or divest the plaintiff of its ownership over its real property or any portion thereof. The CA dismissed the complaint. ISSUE: WON the absence of the required authority renders the sale and compromise judgment based thereon void ab initio. – YES HELD: The authority granted Villamil-Estrada under the SPA was explicit and exclusionary. Nowhere in the authorization was she granted expressly or impliedly any power to sell the subject property nor a portion thereof • Neither can a conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement" because of the explicit limitation fixed by the grantor that the compromise entered into shall only be " so far as it shall protect the rights and interest of the corporation in the aforementioned lots." • Alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale The authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute • When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void Discussion on “Agency” between attorney and client Sir: Does the receipt of notice by the lawyer bind the client? GR: Principal is bound by notice received by the agent EXC: When the conduct or the dealings of the agent raises the presumption that he will not communicate such notice to the principal (Ex: he is perpetuating a fraud) • In such case, he is already acting for his own benefit ⇒ Acting outside the scope of his authority (but in this case, there was no evidence that the lawyer was committing a fraud) Scope of authority of attorney: An act performed by counsel within the scope of a “general or implied authority” is an act of the client. • Thus, the mistake or negligence of counsel may result in an unfavorable judgment against the client. Exceptions: a. When reckless or gross negligence of counsel deprives the client of due process; b. When its application results in outright deprivation of the client’s liberty or property; c. Where the interests of justice so require. Oesmer v. Paraiso Development

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 14 FACTS: Petitioner siblings (5 siblings out of 8) question the validity of the Contract to Sell they have made in favor of the respondent corporation with regards to their shares in two parcels of land they had inherited from their parents. They claim that their signatures on the margins of the Contract to Sell did not confer authority on co-petitioner and sibling Ernesto to act as their agent in selling their shares in the properties in question (since the check for the “option money” was made payable to Ernesto only). HELD: The SC agreed with the petitioners stating that pursuant to Art. 1874, the authority of an agent to sell a piece of land or any interest therein must be in writing for the sale to be valid. • The Contract to Sell is absolutely silent on the establishment of any principal-agent relationship between the five petitioners and their brother and copetitioner Ernesto as to the sale of the subject parcels of land. HOWEVER, in this case, the petitioners signed the Contract to Sell in their own right and not through an agent. Therefore, a written authority is no longer necessary for the Contract to Sell to be valid and binding on the petitioners aside from Ernesto. Art. 1874 explicitly requires a written authority before an agent can sell an immovable. The conferment of such an authority should be in writing, in as clear and precise terms as possible. When the Contract to Sell is signed by a party in his own capacity and not merely to effect the sale through an agent, such a written authority is no longer required to make the sale valid. AF Realty v. Dieselman Dieselman Freight Service Co. is an owner of commercial lot. Manuel C. Cruz, Jr. a member of the board of directors of Dieselman, issued a letter authorizing Cristeta N. Polintan "to look for a buyer and negotiate the sale" of the lot. Cruz Jr. has no written authority from Dieselman to sell the lot. In turn Polintan authorized Felicisima Noble to sell the same lot. Noble offered the property to AF Realty & Development, Inc. Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer and issued a check. Ranullo asked Polintan for the board resolution of Dieselman authorizing the sale. However, Polintan could only give Ranullo the original copy of TCT No. 39849, the tax declaration and tax receipt for the lot, and a photocopy of the Articles of Incorporation of Dieselman. Cruz, Sr. president of Dieselman, acknowledged receipt of the said ₱300,000.00 as "earnest money" but required AF Realty to finalize the sale at ₱4,000.00 per sqm. AF Realty replied that it is willing to pay the balance. However, Cruz, Sr. terminated the offer and demanded from AF Realty the return of the title of the lot claiming that there was no perfected contract of sale. AF Realty filed a complaint for specific performance against Dieselman and Cruz, Jr. The complaint prays that Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty. In its answer Dieselman alleged that it did not authorize any person to enter into such transaction on its behalf. Meanwhile, on July 30, 1988, Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale of the same property. The CA held that Cruz, Jr. was not authorized in writing by Dieselman to sell the property to AF Realty, the sale was not perfected, and that the Deed of Absolute Sale between Dieselman and Midas is valid, there being no bad faith on the part of the latter. HELD: The Court, in deciding the issue whether the sale of land by an unauthorized agent is ratified by the acceptance of the benefits involved, ruled that the void contract of the sale of land cannot be ratified on the basis of Art. 1874 in relation with Art. 1409 of the New Civil Code. The same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation, of whatever status or rank, in respect to his power to act for the corporation; and agents when once appointed, or members acting in their stead, are subject to the same rules, liabilities, and incapacities as are agents of individuals and private persons. AS APPLIED: • In this case is a sale of land through an agent. • Considering that respondent Cruz, Jr., Cristeta Polintan and Felicisima Ranullo were not authorized by respondent Dieselman to sell its lot, the supposed contract is void. • Being a void contract, it is not susceptible of ratification by clear mandate of Article 1409 of the Civil Code. • Thus, the receipt by respondent Cruz, Jr. from AF Realty of the P300,000.00 as partial payment of the lot effectively binds respondent Dieselman does not ratify this void contract. Sir: Why was it that the receipt of the purchase price not considered by the court as an act of estoppel of the corporation? BECAUSE THE RECEIPT OF THE MONEY WAS ALSO NOT AUTHORIZED

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 15 Kinds/Classifications of Agency Express/Implied Agency Article 1869. Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Agency may be oral, unless the law requires a specific form. (1710a) Article 1870. Acceptance by the agent may also be express, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. (n) Article 1871.Between persons who are present, the acceptance of the agency may also be implied if the principal delivers his power of attorney to the agent and the latter receives it without any objection. (n) Article 1872. Between persons who are absent, the acceptance of the agency cannot be implied from the silence of the agent, except: (1) When the principal transmits his power of attorney to the agent, who receives it without any objection; (2) When the principal entrusts to him by letter or telegram a power of attorney with respect to the business in which he is habitually engaged as an agent, and he did not reply to the letter or telegram. (n) EXPRESS AGENCY: One where the agent has been actually authorized by the principal, orally or in writing. IMPLIED AGENCY: One which is implied: a. from the acts of the principal, b. from his silence or lack of action or c. failure to repudiate the agency knowing that another person is acting on his behalf without authority or d. from the acts of the agent which carry out the agency or e. from his silence or inaction according to the circumstances. [NCC 1870] The enumeration of cases of implied agency in NCC 1869 and 1870 is not exclusive. Instances when there is meeting of the minds between the principal and the agent POWER OF ATTORNEY: Instrument in writing by which the principal appoints another as his agent and confers on him the authority to perform certain specified acts or kinds of acts on behalf of the principal. • Primary purpose: To evidence the authority of the agent to third parties within whom the agent deals. SITUATION RULE Both agent and principal physically present [NCC 1871] Acceptance may be implied if the principal delivers his power of attorney to the agent and the latter receives it without objection. Between persons who are absent [NCC 1872] No implied acceptance of the agency from the silence or inaction of the agent. XPNS: 1. When the principal transmits his power of attorney to the agent who receives it without objection 2. When the principal entrusts to the agent by letter/telegram a power of attorney with respect to the business he is habitually engaged as an agent, and he did not reply to the letter or telegram. The presumption of acceptance may be rebutted by contrary proof. Villanueva: The general rule laid under NCC 1872 is contrary to the implied acceptance rule laid down in NCC 1870. According to NCC 1872, courts should not conclude implied acceptance on the part of the purported agent by his silence or inaction. NCC 1872 provides the better rule. Universal, general, and special Article 1876. An agency is either general or special. The former comprises all the business of the principal. The latter, one or more specific transactions. (1712) Article 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. (n) GENERAL AGENCY: One which comprises all the business of the principal. • A general agency must not be confused with one couched in general terms. SPECIAL AGENCY: One which comprises one or more specific transactions. Universal agent One employed to do all acts that the principal may personally do, and which he can lawfully delegate to another the power of doing. “Full power and authority” General agent One employed to transact all the business of his principal, or all business of a particular kind or in a particular place, to do all acts connected with a particular trade, business, or employment. Special or particular agent One authorized to act in one or more specific transactions or to do one or more specific acts, or to act upon a particular occasion.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 16 • No authority to act in matters other than that for which he has been employed. • Only a particular act or a series of acts of very limited scope. GENERAL AGENT SPECIAL AGENT Scope of authority Usually authorized to do all acts connected with the business or employment where a principal is engaged Authorized to do only one or more specific acts to pursue particular instructions Continuous nature of service authorized Authorized to conduct a series of transactions over time (continuous employment) Authorized to conduct a single transaction or series not involving continuity of service for a relatively limited period of time Length of time Longer period of time Relatively shorter period Extent May bind his principal by an act within the scope of his authority although it may be contrary to his special instructions Cannot bind his principal in a manner beyond or outside the specific acts which he is authorized to perform on behalf of the principal Knowledge/disclosure of limitations of power General, continuing, unrestricted—aside from what is usual, proper, and necessary. Temporary and natural suggests limitations of which third persons must inform themselves Termination of authority Apparent authority is not terminated by mere revocation of his authority without notice to the third party. The duty imposed upon the third party to inquire makes termination of the relationship as between the principal and agent effective as to such third party unless the agency has been entrusted to contract with such third party. Construction of instructions of principal Authority of a special agent must be strictly pursued. Persons dealing with such agent are required to inquire into the nature and extent of such authority. The expertise or amount of discretion is not relevant in making a distinction between general and special agents. REVOCATION A general power of attorney is revoked by a special one granted to another agent as to matters covered by the special power. The special power naturally prevails over the general power. • Indispensable: The notice of revocation must be communicated in some way to the agent. Agency by estoppel Article 1873. If a person specially informs another or states by public advertisement that he has given a power of attorney to a third person, the latter thereby becomes a duly authorized agent, in the former case with respect to the person who received the special information, and in the latter case with regard to any person. The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n) Article 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. (n) Two ways of giving notice of agency: 1. By special information (e.g. letter): Agent is considered as such with respect to the person to whom it was given; 2. By public advertisement (e.g. newspaper, radio, posters, billboards): Agent is considered as such with regard to any person. [NCC 1873] In either case, the agency is deemed to exist whether there is actually an agency or not. Sir: What if the agency was revoked by public advertisement, but the agent continued to transact with the third party? Can the principal now say that he is not bound because the SPA was already revoked? o 1873(2) → The power shall continue to be in full force until the notice is rescinded in the same manner in which it was given. (n) o ITC: REVOCATION MUST BE DONE IN THE SAME MANNER AS TO HOW IT WAS MADE KNOWN → BY SPECIAL NOTICE AND DELIVERY REQUISITES OF AGENCY BY ESTOPPEL [Litonjua v. Eternit Corp] 1. The principal manifested a representation of the agent’s authority or knowingly allowed the agent to assume such authority; 2. The third person, in good faith, relied on such representation; 3. Relying on such representation, such third person changed his position to his detriment. There can be no apparent authority of an agent without acts or conduct on the part of the principal • Moreover, such acts or conduct of the principal must have been known and relied upon in good faith and as a result of reasonable prudence by a third person as claimant and such must have produced a change of position to its detriment o The apparent power of an agent is to be determined by the ACTS OF THE PRINCIPAL, not by the acts of the agent. [Woodchild v. Roxas] However, if the character assumed by the agent is a suspicious or unreasonable nature, or if the authority which he seeks is of such an unusual or improbable character to put an ordinarily prudent man on guard, the party dealing with him may not shut his eyes to the real state of the case but should withal refuse to

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 17 deal with the agent at all, or should ascertain from the principal the true condition of affairs. [Keeler v. Rodriguez] Liability of principal: Even when the agent has exceeded his authority, the principal shall be held solidarily liable with the agent if he allowed the agent to act as though h had full powers. {NCC 1911] • The agent must have acted in the name of a disclosd principal and the third person was not aware of the limits of the power granted by the principal. Manner of revocation: In the same manner in which the power of attorney was given. • It is always effective when the person dealing with the agent had actual knowledge thereof. Effects of revocation 1. If entrusted for the purpose of contracting with specified persons: Revocation shall not prejudice the third persons if without notice. [NCC 21] 2. If agent had general powers: Revocation does not prejudice third persons who acted in good faith and without knowledge of the revocation. a. Notice of the revocation in a newspaper of general circulation is sufficient warning to third persons. [NCC 1922] ESTOPPEL TO DENY AGENCY Who is estopped Rule Agent One professing to act as an agent may be estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he was engaged. Principal Against agent One who knows that another is acting as his agent + fails to repudiate his acts or accepts their benefits à estopped to deny the agency as against the other Against subagent The principal must have known or be charged with knowledge of the fact of the transaction and terms of the agreement between the agent and the subagent Against third persons One who knows that another is acting as his agent + permitted another to appear as his agent to the injury of third persons who dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence à estopped to deny the agency. Third persons May be estopped to deny the agency as against the principal, agent, or third persons in interest, having dealt with one as an agent. Exception: Where he has withdrawn from the contract made with the unauthorized agent before receiving any benefits thereunder. Government Neither estopped by the mistake or error of its agents. Except: Affirmative acts of its officers acting within the scope of their authority. Agency by estoppel vs. implied agency Agency by estoppel Implied agency Existence of actual agency No agency at all, but the one assuming to act as agent has apparent authority to represent another. a. If estoppel is because of principal à he is liable to any third party who relied on the misrepresentation; b. If estoppel is caused by agentà only agent is liable There is an actual agency, the principal alone is liable Reliance by third persons Can only be invoked by a third person who in good faith relied on the conduct of the principal in holding the agent out as being authorized Reliance is not necessary in an implied agency since the agent is a real agent. Principal is equally liable in the case of agency by estoppel and implied agency. Nature of authority Not an agent at all except where the principal’s representations are such that the agent reasonably believed that the principal intended him to act as agent on the matter. Agent has actual authority to act in behalf of the principal. See discussion on Estoppel vs. Ratification, infra. (context of NCC 1911) DOCTRINE OF APPARENT OR OSTENSIBLE AUTHORITY: When agency is conferred by words, conduct, or even silence of the principal which causes a third person reasonably to believe that a particular person has actual authority for the principal. • Liability: Only to third persons, who in good faith, believed that actual authority exists. • When not applicable: If the principal did not commit any act or conduct which a third party relied upon in good faith. Apparent authority vs. Authority by estoppel APPARENT AUTHORITY AUTHORITY BY ESTOPPEL

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 18 Principal knowingly permits the agent to exercise or holds him out as possessing Where the principal, by his culpable negligence, permits his agent to exercise powers not granted to him, even though the principal may have no notice or knowledge of the agent’s conduct Not founded in negligence of the principal but in the conscious permission of acts beyond the powers granted Based on the principal’s negligence in failing to properly supervise the agent’s affairs, allowing him to exercise powers not granted to him Reliance is unnecessary But note Litonjua v. Eternit where SC said that agency by estoppel is similar to the doctrine of apparent authority in that it requires reliance. Can only apply when a third party acted to his detriment in relying on the authority the principal held out the agent as having Agency by operation of law Article 1873. Supra. Article 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. (1738) GENERAL RULE: Death of the principal terminates the agency. EXCEPTION: The agent is required to finish the business of the business already begun on the death of the principal should delay entail any danger. [NCC 1884] Third persons are protected where it is not shown that the agent had knowledge of the termination of the agency because of the death of the principal or of any other cause which extinguishes the agency. Who is required to be in good faith? Both the third persons and also the agent. What if the third persons are in bad faith? The contract is VOID. For NCC 1931 to apply, lack of knowledge of the death of the principal must exist at the time of the contract with both the agent and the third parties. Two conditions for NCC 1931 [Rallos v. Felix Go Chan] 1. Agent acted without knowledge of the death of the principal; 2. Third person who contract with the agent himself acted in good faith. Durable Agency Article 1930. The agency 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. (n) General Rule: Agency is terminated instantly by the death of the principal. Exceptions: 1. Constituted in the common interest of the principal and of the agent; 2. Constituted in the interest of a third person who accepted the stipulation in his favor. The only exception to the non-termination is when the same is constituted in the name of the agent or third parties. Can the agent terminate at any time? • Inform the principal (due notice) and make sure that the affairs of the P are not jeopardized. Examples of agency coupled with an interest: a. The power of sale in a mortgage is a power coupled with an interest which survives the death of the grantor. b. When a power of attorney is constituted in a contract of real estate mortgage pursuant to Act 3135 to empower the mortgagee to sell the property through extrajudicial foreclosure upon default. Harry Keeler Electric v. Rodriguez FACTS: AC Montelibano approached HE Keeler, claiming that he was from Iloilo and lived with Governor Yulo; that he could find purchasers for the "Matthews" plant HE Keeler allegedly told him that for any plant that he could sell or any customer that he could find he would be paid a commission of 10 % for his services, if the sale was consummated. Montelibano interviewed the Rodriguez, and, through his efforts, one of the "Matthews" plants was sold to Rodriguez, and was shipped from Manila to Iloilo. Later on it was installed on Rodriguez’s premises. Without the knowledge of HE Keeler, Rodriguez paid the purchase price to Montelibano. ISSUE: W/N Montelibana was an agent of HE Keeler Electric – NO HELD. Under Art. 1162, payment must be made to the person in whose favor the obligation is constituted, or to another authorized to receive it in his name Fundamental principles to consider whether an assumed authority exists in a given case: 1. The law indulges in no bare presumptions that an agency exists; it must be proved or presumed from facts 2. The agent cannot establish his own authority, either by his representations or by assuming to exercise it 3. An authority cannot be established by mere rumor or general reputation 4. Even a general authority is not an unlimited one 5. Every authority must find its ultimate source in some act or omission by the principal An assumption of authority to act as an agent for another of itself challenges inquiry Fundamental rule: Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 19 ascertain not only the fact of the agency, but the nature and extent of the authority. In case either is controverted, the burden of proof is upon them to establish it. IN THIS CASE: Nothing in the receipt shows that Montelibano was the agent of, or that he was acting for HE Keeler. He had no authority to receive money for Keeler. Testimony is conclusive that Rodrigues indeed paid the price to Montelibano, and that no part of the money was ever paid to Keeler. Yu Eng Cho v. Pan American Petitioners bought from Tagunicar tickets for their HK/Tokyo/San Francisco Trip. Tagunicar represented herself as an agent of TWSI. However, upon arrival in Tokyo, they were told that they were not part of the Manifest. This was because the status of their booking was “RQ,” despite being told by Tagunicar that their flight was “confirmed all the way.” To avoid trouble with Japanese Immigration officials, they were forced to fly to Taipei. Upon arrival, they could not find flights to the USA and as such, they were forced to return to Manila. They then filed a complaint against Pan Am, TWSI, Tagunicar and Calinao. The RTC held that only Pan Am, TWSI, and Tagunicar were jointly liable for damages to petitioners. However, the CA modified the decision and held that only Tagunicar was liable because Tagunicar IS AN INDEPENDENT TRAVEL SOLICITOR and is not a duly authorized agent or representative of Pan Am or TWSI. ISSUE: W/N Tagunicar was a sub-agent of TWSI – NO HELD: 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 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 the authority • In case either is controverted, the burden of proof is upon them to establish it. IN THIS CAE: Tagunicar categorically denied in open court that she was a duly authorized agent of TWSI. She declared that she was an independent travel agent. Petitioners rely on the affidavit of Tagunicar where she stated that she was an authorized agent of TWSI. However, this has WEAK PROBATIVE VALUE because of her contrary testimony in court. Siasat v. IAC Respondent Nacianceno succeeded in convincing officials of the then Department of Education and Culture to purchase P1M worth of national flags for the use of public schools. Respondent thus contacted petitioners Siasat (owners of United Flag Industry), who authorized the former to represent them. Upon delivery of the first half of the orders, petitioners revoked the authority granted to respondent and refused to pay her the 30% commission for the other half of the orders. Respondent then filed an action in the CFI to recover the amounts due her. ISSUE: W/N Nacianceno was authorized to represent petitioners in the transaction with DECS – YES HELD: The agreement between the parties show that Nacianceno was instituted as a general agent. • It can easily be seen by the way general words were employed in the agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. • The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization. Sir: Did the power include the power to buy the flags? • When you speak of general power ⇒ Pertains to all the acts of business. There is no need to enumerate them all Dominion Insurance v. CA FACTS: Plaintiff Rodolfo S. Guevarra (Guevarra) instituted a civil case for sum of money against defendant Dominion Insurance Corporation (Dominion). Guevarra sought to recover thereunder the sum of P156,473.90 which he claimed to have advanced in his capacity as manager of Dominion to satisfy certain motor claims filed by Dominion’s clients. Dominion asserted a counterclaim for P249,672.53, representing premiums that Guevarra allegedly failed to remit. ISSUE: W/N Guevarra acted within his authority as an agent for Dominion – NO HELD: An SPA is required before Guevarra could settle insurance claims of the insured 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 and authority of the latter. • 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 action • 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. A general permits the agent to do all acts for which law does not require a special power. • The agency comprises all the business of the principal, but, couched in general terms, it is limited only to acts of administration IN THIS CASE: The Special Power of Attorney would show that Dominion (represented by third-party defendant Austria) and 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. Under Art. 1878, a SPA is necessary, among others, when payments are made as are not usually considered acts of administration

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 20 • The payment of claims is NOT an act of administration. • IN THIS CASE: The settlement of claims is not included among the acts enumerated in the SPA, and neither is it of a character similar to the acts enumerated therein. However, while the law on agency (Art. 1918) prohibits Guevarra from obtaining reimbursement, his right to recover may still be justified under the general law on obligations and contracts. To rule otherwise would result in unjust enrichment of Dominion. Sir: How do you now compare this with the case of Siasat? • 1878 (1) → To make such payments, as a general rule, a SPA is required o EXC: Such payments are considered as acts of administration Sir: Why is the SPA required? The documents need to be scrutinized before knowing how much should be disbursed • You need to distinguish the kinds of payments that are “acts of administration” (where SPA is NOT required) and those payments that require a SPA Republic v. Bañez FACTS: Respondents Bañez offered a parcel of land for sale to the petitioners PMO, who was previously operated under the Cellophil Resources Corp. name. The Letter-Agreement between the parties gave the respondents the obligation to take all necessary steps to register the land in their name so an absolute deed of sale could be executed in favor of petitioner after the respondents would be able to present the needed certificates and clearances and after the petitioner would provide full payment. In the meantime, the petitioner was also granted the permission to construct and improve on the land which they in fact, did. To execute this contract, the respondents executed an SPA in favor of respondent Hojilla who had the obligation to take all steps necessary to bring the land under the operation of RA 496 (Land Registration). But later on, the petitioners pursuant to the right granted to them in the contract, tried to enter the land but were then prohibited. It was found that guards had blocked them from entering and that respondents took it upon themselves to rent out staff houses that the petitioners actually built for their own use. Thus, this complaint for damages. A major defense the respondents raised was that the action had prescribed, having been done beyond the 10 year period ISSUE: W/N the action has prescribed – NO HELD: The running of the prescriptive period is interrupted when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgement of the debt by the debtor Hojilla’s letter was an acknowledgement of the respondents’ commitment under the contract. It was an update of the property’s status. This is a written acknowledgement of the obligation and interrupts the period of prescription Hojila was granted an EXPRESS AGENCY wherein Hojilla, as agent, bound himself to represent the respondents, in this case with their express consent • In a contract of agency, the agent acts for and on behalf of the principal on matters within the scope of authority conferred and those acts have the same legal effect as if they were personally done by the principal. Thus, Hojilla’s acts binds the respondents PRINCIPLE OF PROMISSORY ESTOPPEL APPLIES • Promissory estoppel – The principal is bound by the acts of his agency with the apparent authority which he knowingly permits the agent to assume When Hojilla made representations that not only was he in charge of registration, he was also in charge of the obligations of respondents to the Contract, he made representations that also binded the principals. • If Hojilla knew he had no authority to execute the Contract, he shouldn’t have opposed the petitioners’ demand letters. He also shouldn’t have been the one to receive them. • Since he continuously represented himself as the authorized agent for the Contract, his principals are also estopped by these acts and representation. • “A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them”. • Even assuming that Hojilla exceeded his authority, the respondents are still liable because they allowed Hojilla to act as if he had full powers to enforce the Contract. • They did this when they impliedly ratified Hojilla’s actions – action by omission. This is the import of the principle of agency by estoppel. Sir: Construction is not a tool to commit fraud; there was no way for the respondents to execute the contract because they were abroad • They should not be allowed to use this circumstance for them to avoid compliance Conde v. CA FACTS: In 1938, Margarita Conde, Bernardo Conde and Dominga Conde, as heirs of Santiago Conde, sold with right to repurchase, within 10 years from said date, a parcel of agricultural land to the sps Altera (Casimira and Pio Altera) for P165. Three years later, an Original Certificate of Title on the land was issued in the name of the Alteras with an annotation of the stipulated right of repurchase by the Condes. In 1945, Paciente Cordero, son-in-law of the Alteras and their representative, signed a document in Bisaya stating that the Memorandum of Repurchase got lost during World War II despite all diligent searches being made; and that Eusebio Amarille was authorized by the Condes to repurchase the land; that they received P165 in consideration of the sale; and that the Condes, by virtue of the repurchase, shall repossess the said parcels of land. Neither the vendees-a-retro, Pio Altera nor Casimira Pasagui, were signatories to that document. Many years later, the pacto de retro document was found. In 1965, Pio Altera sold the disputed lot to Ramon and Catalina Conde. Consequently, in 1969, Dominga filed with the CFI of Leyte a complaint for quieting of title and declaration of ownership against all the respondents. The TC dismissed the complaint and ordered Dominga to vacate the premises and to deliver the disputed land to respondents. The CA affirmed the decision and ruled that Dominga failed to validly exercise her

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 21 right to repurchase because the Memorandum of Repurchase was not signed by the Alteras but by Paciente, who was not authorized to sign for the said vendees-a-retro. HELD: The SC held that although the contending parties were legally wanting in their respective actuations (Dominga did nothing to formalize her repurchase while the Alteras did nothing to clear their title of the encumbrance therein regarding Dominga’s right to repurchase) the repurchase by Dominga is supported by her admission that she had been in possession since 1945, the date of the repurchase, and has been paying land taxes thereon since then. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro, if the vendors-a-retro failed to exercise their right of redemption within 10 years. If, as alleged, Dominga did not exert an effort to procure Pio Altera’s signature after he had recovered from illness, neither did the Alteras repudiate the deed signed by their son-in-law for 24 years, from which the Alteras are deemed to have incurred in laches. Thus, an implied agency must have been held to have been created by their silence or lack of action, or their failure to repudiate the agency created. (Art. 1869, New Civil Code). Wherefore, Dominga is declared the owner of the land in question. Sir: you know someone is acting on your behalf, but you did not repudiate — is that an implied agency or is it apparent? How do you distinguish the two? If, as alleged, Dominga did not exert an effort to procure Pio Altera’s signature after he had recovered from illness, neither did the Alteras repudiate the deed signed by their son-in-law for 24 years, from which the Alteras are deemed to have incurred in laches. Thus, an implied agency must have been held to have been created by their silence or lack of action, or their failure to repudiate the agency created. (Art. 1869, New Civil Code). Wherefore, Dominga is declared the owner of the land in question. Pahud v. CA FACTS: Eight siblings inherited a land from their parents. Eufemia and her two brothers, Raul and Ferdinand, sold their shares to the Pahuds for P525,000 through a Deed of Absolute Sale of Undivided Shares. She also signed the deed on behalf of her four other co-heirs: Isabelita on the basis of a Special Power of Attorney, and also for Milagros, Minerva, and Zenaida but without their apparent written authority. Virgilio, one of the co-heirs, was not party to the contract. When Eufemia and her co-heirs drafted an extrajudicial settlement of estate to facilitate the transfer of the title to the Pahuds, Virgilio refused to sign it. So the other siblingsfiled a complaint for judicial partition. In the course of the proceedings, a Compromise Agreement was signed with seven of the co-heirs agreeing to sell their undivided shares to Virgilio for P700,000. This agreement was not approved by the RTC because the lawyer for the 7 co-heirs refused to sign it because he knew of the sale to the Pahuds. Nevertheless, Virgilio sold the land to the Belarminos and the latter immediately constructed a building on the said land. Alarmed by this construction, the Pahuds confronted Eufemia and the latter admitted that the land was sold to Virgilio. Aggrieved, the Pahuds filed a complaint in intervention in the pending case of judicial partition. In the lower courts, the siblings argued that the sale to the Pahuds was void because Eufemia did not have written authority to sell the land. ISSUE: W/N the sale between Euphemia and the Pahuds are valid – YES, with respect to the 4/8 shares. HOWEVER, 3/8 is also valid because of ESTOPPEL HELD: 4/8 of the land was validly transferred because Eufemia was given authority by his siblings through a SPA. 3/8 was also validly transferred by virtue of estoppel. Although Eufemia did not have the written authority to sell the said shares, the siblings concerned never assailed the validity of the transaction made by Eufemia for want of written authority to sell. By their continued silence, the three siblings caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. • They are then estopped from impugning the validity of the sale by assailing Eufemia’s authority to enter into such transaction [ESTOPPEL] It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latter’s reliance upon a deceitful representation by an agent in the course of his employment if: 1. The representation is authorized; 2. It is within the implied authority of the agent to make for the principal; or 3. It is apparently authorized, regardless of whether the agent was authorized by him or not to make the representation Sir: Any inaction is deemed implied authority to sell, except in the sale of land. In this case, the basis of the validity of the sale was not the inaction, but rather the admission in court. Yun Kwan Byung v. PAGCOR FACTS: PAGCOR launched its Foreign Highroller Marketing Program, inviting patrons from foreign countries to play at designated PAGCOR-operated casinos. Under a Junket Agreement, Korean-based ABS Corp. availed of the program. Petitioner Byung is a junket player brought into the Philippines by ABS. Byung sought to redeem the winnings from his gambling chips, but PAGCOR refused, so he filed a complaint against PAGCOR for a sum of money. HELD: Court ruled that the Junket Agreement is in direct violation of PAGCOR's charter and is therefore void. PAGCOR has the sole and exclusive authority to operate a gambling activity and cannot share its franchise with junket operators to operate gambling casinos in the country. PAGCOR’s charter at the time prohibited it from entering into any arrangement with a third party that would allow such party to actively participate in casino operations. PAGCOR, by taking only a percentage of the earnings of ABS, allowed ABS to operate gaming tables. RE: AGENCY ISSUE #1:W/N there is an implied agency – NO HELD #1: The law makes no presumption of agency. Proving its existence, nature, and extent is incumbent upon the person alleging it. 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.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 22 An IMPLIED AGENCY is derived from: 1. The acts of the principal 2. The principal’s silence or lack of action 3. The principal’s failure to repudiate the agency, knowing that another person is acting on his behalf without authority Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts IN THIS CASE: The acts and conduct of PAGCOR negates the existence of an implied agency or agency by estoppel. The Junket Agreement was merely a contract of lease of facilities and services. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCOR's actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. The players brought in by ABS Corporation were covered by a different set of rules in acquiring and encashing chips. • The players used a different kind of chip than what was used in the regular gaming areas of PAGCOR. • Such junket players played specifically only in the third floor area and did not mingle with the regular patrons of PAGCOR. PAGCOR, in posting notices stating that the players are playing under special rules, exercised the necessary precaution to warn the gaming public that no agency relationship exists ISSUE #2: W/N there is an agency by estoppel – NO HELD #2: Apparent authority is based on estoppel and can arise in two instances: 1. The principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority 2. The principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority In an agency by estoppel there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, authority to represent another There can be no authority of an agent without 1. Acts or conduct on the part of the principal; 2. Such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third party as a claimant; and 3. Such must have produced a change of position to its detriment An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that in turn, needs proof that the representations predated the action taken in reliance IN THIS CASE: CA correctly used the intent of the contracting parties in determining whether an agency by estoppel existed in this case. In the entire duration that petitioner played in Casino Filipino, he was dealing only with ABS Corporation, and availing of the privileges extended only to players brought in by ABS Corporation. Sir: Because of the acts of the principal, which led to the belief of third persons that the agent had authority—then as between the right of the principal and third persons, then the court usually protects the rights of the latter if there is no negligence or fraud on the part of the latter. Couched in general terms Article 1877. An agency couched in general terms comprises only acts of administration, even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate, or even though the agency should authorize a general and unlimited management. (n) 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; (2) To effect novations which put an end to obligations already in existence at the time the agency was constituted; (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; (4) To waive any obligation gratuitously; (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; (6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent; (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; (8) To lease any real property to another person for more than one year; (9) To bind the principal to render some service without compensation; (10) To bind the principal in a contract of partnership; (11) To obligate the principal as a guarantor or surety; (12) To create or convey real rights over immovable property; (13) To accept or repudiate an inheritance; (14) To ratify or recognize obligations contracted before the agency; (15) Any other act of strict dominion. (n) Article 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (n)

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 23 Article 1880. A special power to compromise does not authorize submission to arbitration. (1713a) Agency couched in general terms may be 1) a general agency; or 2) a special agency. It includes only acts of administration and an express power is necessary to perform any act of strict ownership event if the principal states that he withholds no power, or that the agent may execute such acts as he may consider appropriate or that he authorizes a general or unlimited management. Effect: Only acts of administration may be deemed granted, although the instrument may be captioned as special power of attorney. General Rule: When an agency is constituted, it only covers the powers to execute acts of administration in relation to the transaction. Exception: Unless so expressly stated. ACTS OF ADMINISTRATION: Those which do not imply the authority to alienate for the exercise of which an express power is necessary. • Question of fact. Sound management will sometimes require the performance of an act of ownership. Presumption: The authority of an agent is presumed to include all the necessary and usual means to carry out the agency into effect. [Macke v. Camps] Examples of acts of administration [p. 419, De Leon] 1. A person employed to sell goods in a retail store can sell without an SPA; 2. Right to sue for collection of debts owing to the principal; 3. An attorney-in-fact empower to pay principal’s debts is impliedly empowered to pay attorney’s fees for services rendered in the principal’s interests; 4. A person made an attorney-in-fact to deal with property may engage a lawyer to preserve ownership and possession thereof; 5. An officer or agent who has control and management of the corporation’s business or a specific part may bind the corporation by employing agents and employees in the usual and necessary conduct of the business (as long as reasonable), unless such is expressly vested in the BOD or trustees; 6. Authority to sell includes authority to make customary warranties and representations. GR: A salesman with authority to collect money belonging to the principal does NOT have implied authority to indorse checks received in payment. [Insular Drug Co. v. National Bank] EXCEPTION: A principal is liable on checks issued by an agent with a general power of attorney to issue checks, where such were issued for the agent’s own benefit. [Empire Trust Co. v. Cahan] SPECIAL POWER OF ATTORNEY [NCC 1878] The acts under NCC 1878 are general acts of strict dominion or ownership. Thus, an SPA is required for their execution through an agent. Rule of construction: Strict. Authority in the cases under NCC 1878 must be couched in clear and unmistakable language. Form: No need to be in writing. However, it must be duly established by evidence other than the self-serving assertion of the party claiming that such authority was verbally given to him. • Valid even if not notarized. Can it be included in a general power of attorney? YES. When it specifies therein the act or transaction for which the special power is required. • There should be a clear mandate from the principal specifically authorizing the performance of act. [Bravo-Guerrero v. Bravo] Payment All forms of payment for and in behalf of the principal which are not within the ordinary course of business would constitute acts of strict dominion, which are not within the power of even a duly appointed agent. Exception: Unless granted specially or under a special power of attorney. Payments made in the ordinary course of business are acts of administration. Novation SPA is needed to novate obligations already in existence at the time the agency was constituted. The obligations must already be in existence when the agency is constituted. • If the obligation was only constituted during the agency, then the power to create the obligation granted to the agent includes with it the implied power to novate it Sir: SEE if the novation is part of the day to day part of the operations. Condonation or remission Agent cannot waive a right belonging to the principal without valuable consideration or even for a nominal consideration, unless specially authorized to do so. Principal to render gratuitous service SPA is needed to bind the principal to enter into service without compensation. Effect if no SPA: Unenforceable. Villanueva: Any contract of service to be entered on behalf of the principal should properly be considered an act of strict ownership. Principal to enter into partnership SPA is needed to oblige the principal to contribute money or industry to a common fund to derive profits therefrom. Effect if no SPA: Unenforceable.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 24 GR partners are obligated to answer for liabilities and are bound to contribute money, property or industry. Oblige principal as guarantor No contract of guaranty or surety is enforceable against the principal when it has been entered into by an agent who possesses no SPA. A power of attorney to loan money does not include the implied power to make the principal a surety for the payment of debt of a third person. [BPI v. Coster] Form: An contract of guaranty is unenforceable unless made in writing. [NCC 1403(2)(b)] Mortgage Article 1878. Special powers of attorney are necessary in the following cases: xxx (12) To create or convey real rights over immovable property; An agent cannot create or convey real rights like mortgage, usufruct, easement, etc. over the principal’s immovable property without special power. NCC 1878 (12) covers dealings on immovable property outside the sale of land or any interest under NCC 1874 or those under NCC 1878(5). Effect if no SPA: Unenforceable against the principal. Power to sell excludes power to mortgage. Power to mortgage excludes power to sell. [NCC 1879] The sale proscribed by NCC 1879 is a voluntary and independent contract, and not an auction sale resulting from extrajudicial foreclosure of REM. Note: This does not necessarily mean that there is a transfer of ownership — any contract that will convey real rights over immovable property or the creation of an encumbrance. Power to accept or repudiate inheritance Any person having free disposal of his property may accept or repudiate an inheritance [NCC 1044], which is an act of strict dominion. Loan/borrow (7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration; Note: This article only refers to money and not other fungible things. GR: The power of an agent to either loan or borrow money is an act of strict ownership, and requires the same to be in the form of an SPA. XPN: When the act is urgent and indispensable for the preservation of the things which are under administration. The power to borrow money cannot be interpreted as also authorizing him to use the money as he pleases. [Hodges v. Salas] • It cannot be interpreted to include authority to mortgage the properties to support the agent’s personal loans and use the proceeds for his own benefit. Authority to borrow money cannot be implied from the SPA to mortgage real estate. Effect if without SPA: Contract is unenforceable, unless ratified. If the agent is empowered to borrow money, he can be the lender at the current rate of interest. If the agent is empowered to lend money at interest, he cannot borrow it without the principal’s consent. [NCC 1890] Sell (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration; Note that it only applies to immovables. The absence of a written authority to sell a piece of land renders the sale ipso jure void. GENERAL RULE: SPA is needed to enter any contract to transmit or acquire ownership of an immovable either gratuitously or for consideration under NCC 1878(5). • Resulting contracts without an SPA are generally unenforceable. But when it comes to a particular type of immovable, land or any interest therein, NCC 1874 applies specifically. • The SPA must be in writing. Otherwise, the resulting contract of sale is VOID. The sale of immovables other than land need only be express, not in writing, to be valid. Does NCC 1874 include agency to purchase land or any interest? NO. NCC 1874, 1878(5) and (12) only refer to sales made by an agent for a principal and not the sales made by the owner personally to another, whether the buyer is acting personally or through a representative. Does the grant of special power to sell include power to mortgage, and vice versa? NO. Article 1879. Is an oral contract of agency to sell a parcel of land void? NO. Contracts of agency are consensual in character, even if covered by NCC 1878. They only need be expressed formally, not written. Is the sale of a piece of land pursuant to an oral special power to sell really void or unenforceable? Villanueva believes that such are unenforceable, instead of voidable according to the De Leons, since the ratification process also applies to unenforceable contracts.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 25 The language of 1874 declaring the sale void means that it is only void as to the principal to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another. Thus, it is subject to ratification by the principal, whose interest is the one to be protected by 1874. Gifts An agent without special power from the principal cannot make gifts. EXCEPTIONS: 1. Customary gifts for charity, or 2. those made to employees in the business managed by the agent, which are only acts of administration. Lease (8) To lease any real property to another person for more than one year; The lease of real property for more than one year is an act of strict ownership since a lease of more than one year creates a right in rem. • If lease is for one year or less à act of administration and may be in the form of a general power of attorney. Scope: The requirement of SPA extends to renewal or extension of lease of real property to another. Form: An agreement for the leasing of real property for longer than one year is unenforceable unless made in writing. [NCC 1403(2)(e)] NCC 1878(8) does not cover: 1. Lease of real property from another person; 2. Personal property. a. Only covered by a general power of attorney. Compromise (3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired; The agent cannot enter into the following matters related to litigation in the name of the principal, unless covered by an SPA: 1. Compromise; a. Contract whereby the parties avoid litigation or put an end to one already commenced by making reciprocal concessions [NCC 2028] b. Confession of judgment stands on the same footing as cormpromise of causes. 2. Submit questions to arbitration; a. Where parties submit their controversies to one or more arbitrators for decision. 3. Renounce the right to appeal from a judgment; 4. Waive objections to venue; 5. Abandon a prescription already acquired. Ratify or recognize obligations before agency Ratify: Acceptance of a voidable or unenforceable contract, which cleanses the same of legal defects retroacting to the date of its perfection. Recognition: Acknowledging what was a natural obligation which was not the subject of civil enforcement. Other acts of strict dominion (15) Any other act of strict dominion Those not specifically mentioned in NCC 1878 but may be constituted as acts of strict ownership would always need an SPA. Generally, a sale or purchase of personal property is an act of strict dominion. But a sale or purchase in the ordinary course of management is merely an act of administration. An agent’s authority to file suit cannot be inferred from his authority to collect or receive payments. Doctrine of implied powers: The grant of express powers or SPA must necessarily include all power implied or incidental to such express powers, even if they amount to acts of ownership or strict dominion. PNB v. Sta. Maria FACTS: Maximo’s siblings executed a special power of attorney in his favor, to mortgage a 16-odd hectare parcel of land, jointly owned by all of them. In addition, one of his siblings, Valeriana, separately executed in favor of Maximo a special power of attorney to borrow money and mortgage any real estate owned by her. By virtue of the two above powers, Maximo applied for two separate crop loans with PNB. As security for the two loans, Maximo executed in his own name chattel mortgages in favor of PNB, including the parcel of land jointly owned by them. Later, PNB filed an action against Maximo and his siblings for the collection of unpaid balances on the two loans obtained by Maximo. However, the siblings claim that they should not be held liable to pay the unpaid balances on Maximo’s loans on the ground that under the special power of attorney, they had not given Maximo the authority to borrow money. The only authority they gave him was to mortgage the real estate jointly owned by them. They further added that they did not benefit from Maximo’s loans ISSUE: W/N Maximo’s siblings should be held liable – NO, except Valeriana HELD: Where, in an instrument, powers and duties are specified and defined, all of such powers and duties are limited and confined to those which are specified and defined, and all other powers and duties are excluded. There is a difference between authority to mortgage and authority to contract obligation The authority granted by Maximo’s siblings (except Valeriana) unto Maximo was merely to mortgage the property jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Therefore, their only liability is that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by Maximo. However, Valeriana stands liable for both the mortgage and for the loans because she had expressly granted Maximo the authority to incur such loans.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 26 BPI v. Coster FACTS: De Coster gave Poizat (her husband) power of attorney “to loan and borrow money and to mortgage her property”. Poizat (as agent and as himself) entered into a promissory note (with real estate mortgage of De Coster’s property) with BPI (for loan). He signed De Coster’s name – which the bank claims to make her liable. The promissory note became due and was NOT paid for. BPI filed a complaint for satisfaction of debt and for foreclosure of real mortgage. CFI granted foreclosure in favor of BPI and La Orden (another creditor). De Coster filed a Motion claiming that she had been absent (i.e. in Paris) during the filing of BPI’s complaint, hence there was no jurisdiction on her; and that Poizat acted without authority in binding her for payment of a pre-existing debt (of Poizat and Poizat & Co.) HELD: A power of attorney to loan and borrow money does not authorize the agent to make the principal liable as a surety for the payment of the debt of a third person. The powers and duties of the agent are confined and limited to those which are specified and defined his written power of attorney, which limitation is a notice to, and is binding upon, the person dealing with such agent. The SC found out that De Coster had a meritorious defense and should be granted opportunity to present evidence and appear before court. Poizat and his own firm had already incurred a loan with BPI EVEN BEFORE De Coster provided him with power of attorney. More than that, the Power of Attorney shows that no authority was given to make De Coster liable for payment of pre-existing debt of 3rd persons (Poizat and Poizat & Co.) – as De Coster is NOT a party to such prior promissory notes or debts. If the promissory note is VOID as to De Coster (due to lack of authority of Poizat), then it follows that the real mortgage is also VOID. On the other hand, while the mortgage to the religious order may have been executed by Jean within the authority granted by the special power of attorney, because the plea of the religious order was defective and because that plea was not served to either Gabriela or Jean, the Judgment in favor of the religious order could not be sustained. Sir: It should not include preexisting debt. The power of attorney should expressly include the authority to secure existing or preexisting debts. It should be intended in the SPA that it is covered. Providing a collateral to your loans is an added burden, thus it is not for the benefit of the borrower-principal. It is for the benefit of the lender. Again, there is no presumption there. Hodges v. Salas FACTS: The defendants executed a power of attorney in favor of their brother-in-law Felix to enable him to obtain a loan and secure it with a mortgage on the real property. Acting under said power of attorney, Felix obtained a loan from the plaintiff, binding his principals jointly and severally to pay it within ten (10) years, together with interest thereon at 12 per cent per annum payable annually in advance, to which effect he signed a promissory note for said amount and executed a deed of mortgage of the real property. In case the defendants failed to pay the stipulated interest and the taxes on the real property mortgaged and if the plaintiff were compelled to bring an action to recover his credit, said defendants would be obliged to pay 10 per cent more on the unpaid capital, as fees for the plaintiff's attorneys. The defendants failed to pay at maturity the interest stipulated. Some of the proceeds of the loan however were used by Felix to buy a piece of real property worth Php 2,000. HELD: With respect to a power of attorney of special character, it cannot be interpreted as also authorizing the agent to dispose of the money as he pleased, particularly when it does not appear that such was the intention of the principals, and in applying part of the funds to pay his personal obligations, he exceeded his authority. In answering whether or not agent Yulo was authorized to borrow money and invest it as he wished, without being obliged to apply it necessarily for the benefit of his principals, the SC held that the agent was obliged to turn over the money to the principals or place it at their disposal. Citing the case of Manila Trading & Supply Co. vs. Uy Tiepo, referring to a power of attorney to borrow any amount of money in cash and to guarantee the payment thereof by the mortgage of certain property belonging to the principals, this court held that the agent exceeded his authority in guaranteeing his personal account for automobile parts by the mortgage, not having been specially authorized to do so. The pertinent clauses of the power of attorney from which may be determined the intention of the principals in authorizing their agent to obtain a loan, securing it with their real property are limited; the agent was thereby authorized only to borrow any amount of money which he deemed necessary. There is nothing, however, to indicate that the defendants had likewise authorized him to convert the money obtained by him to his personal use. Katigbak v. Tai Hung Co. FACTS: Po Tecsi had executed a GPA in favor of his brother, Po Ejap, “to buy, sell, or acquire all sorts of property, belonging to me…”. Pursuant to this power, Po Ejap decided to sell his own personal land to his brother. So Po Tecsi owned the subject land. But, acting also as Po Tecsi’s agent that has authority over land belonging to his principal, he decided to sell the land to petitioner Katigbak. Po Tecsi had become a lessee to the land instead so he was made to pay monthly rentals to petitioner, through Po Ejap who was administrator of the land. Rent continued to accrue until Po Tecsi died. At that point, administration of the land was with Po Tecsi’s son, Po Sun Suy, who was now the lessee of the land. So now Po Sun Suy owes rent to petitioner. Until finally, petitioner had sought recovery of the rents owed. HELD: In a power of attorney granting the power to sell or acquire all sorts of property belonging to the principal, the fact that they used the subjunctive “pertenezcan” (might belong), and not “pertenecen” (belong), shows that the principal is granting the agent the authority over property that did not just belong to the principal at the time of constitution, but also any other property that he may acquire during their agency contract As a major defense of Po Sun Suy so he wouldn’t have to pay the rent, he tried to argue that the GPA granted to Po Ejap was rendered ineffective for two major reasons: first, that the GPA only applied to lands that already belonged to Po Tecsi prior to the GPA, not to lands acquired after. But the SC didn’t accept

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 27 this interpretation. The fact that the wording used was “belonging”, and not just “belong” showed that the authority was granted for any kind of property acquired either before or after the GPA. Secondly, Po Sun Suy tried to argue that because the GPA was not registered, the GPA was ineffective. So, any act performed by the agent is ineffective against a third person who, in good faith, may have acquired a right to it. But while that is true, the GPA is still enough to bind the principal to acknowledge the acts performed by the agent. Conclusion: While the GPA is ineffective, it does still bind the principal to acknowledge the acts done by his agent. In this case, Po Tecsi is bound to acknowledge that his agent entered into a contract of sale with Katigbak. So the sale remains valid and Po Sun Suy still owes the rent. Bautista-Spille v. NICORP Management & Development Corp. FACTS: Petitioner Florentina Bautista-Spille executed a general power of attorney (GPA) in favor of her brother Benjamin, giving him the authority to administer all her businesses & properties in the Philippines. A few years later, Benjamin entered into a contract to sell her 33,052 sqm lot with NICORP. When Florentina found out about the sale, she sent demand letters asking for the title of the property to be returned, asserting that Benjamin had no authority to sell her real property. The RTC held that the GPA only pertained to acts of administration & that the contract to sell is null & void. CA reversed ISSUE: W/N the general power of attorney gave Benjamin the authority to enter into a contract to sell Florentina’s property – NO HELD: When a parcel of land or any interest therein is through an agent, the authority of the latter shall be in writing, otherwise the sale shall be void (Art. 1874) • A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is acquired or transmitted, either gratuitously or for a valuable consideration. (Art. 1878 (5)) An SPA is necessary in conveyance of real rights over immovable property when done through an agent. When there’s any reasonable doubt that the language used conveys such power, no construction shall be given the document The authority must be conferred in writing and expresses the power of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell the real property IN THIS CASE: The only evidence presented to prove Benjamin’s authority was the GPA, but nowhere in it was he granted, expressly or impliedly, any power to sell the property (GPA had broad terms). The SC has stressed that before that the power of administration does not include acts of disposition, which are acts of strict ownership. Chua v. IAC FACTS: Respondent Herrera entered into a contract of lease over a parcel of land in favor of Tian On. 4 years into the contract, Tian On built a house on the premises and then sold the house to Chua, the predecessor-in-interest of the petitioners. The sale conveyed unto Chua the house of Tian On as well as his rights to the contract of lease, and was entered into with the consent of respondent Herrera via her attorneyin-fact Reynes. After the sale, the contract of lease in favor of Tian On was annulled and a new one was entered into between Chua and respondent Herrera represented by Reynes. In this new contract of lease, Chua was given the right of first refusal over the subject property should respondent Herrera opt to sell the same. It is also important to note that attorney-in-fact Reynes did not have an SPA when she entered into this agreement on behalf of respondent Herrera. The petitioners, successors-in-interest to Chua who had died, continued to stay on the premises for around 13 years after the expiry of the contract of lease. Respondent Herrera, represented by attorney-in-fact Tormis who was authorized by an SPA, then sold the property to respondent spouses Go. The petitioners filed a complaint with the RTC seeking to declare the sale void for being in violation of their right of first refusal. In a counterclaim, respondent Herrera filed an accion publiciana against the petitioners. HELD: The Court ruled that the contract of lease, through which the petitioners claimed a right of first refusal and right to possess the property, was void. Art. 1878 (8) of the Civil Code provides that an SPA is necessary [for an agent] to lease any real property to another person for more than one year, otherwise, said contract is void. In the case at bar, attorneyin-fact Reynes was not authorized by an SPA to enter into the contract of lease. However, since respondent Herrera allowed the petitioners to remain on the premises after the expiry of the contract, such was deemed a tacit renewal thereof. Through the tacit renewal, only the rights germane to the enjoyment of the property (such as right to possess) were renewed and other rights (such as the right of first refusal) were not. Vicente v. Geraldez FACTS: Hi Cement Corporation acquired a Placer Lease Contract under a Deed of Sale and Transfer. It covered two mining claims. Within the limits of one of the claims (Red Star VIII), are three parcels of land claimed by petitioners Ignacio Vicente, Moises Angeles, and Juan Bernabe and they have been informed by Hi Cement on several occasions of the company’s acquisition of the placer mining claims including petitioners’ land. Despite promising to pay damages, petitioners refused entry to allow Hi Cement’s workers and representatives to enter the area for exploration and development and to extract minerals. Thus, Hi Cement filed a complaint for injunction. The parties entered into a COMPROMISE AGREEMENT (Hi Cement ALLEGEDLY via its three counsels), which stated that Hi Cement is now willing to buy the properties and petitioners are willing to sell the same. RTC eventually ruled that Hi Cement should pay petitioners P15/sqm for the properties and upon full payment, the restraining order shall be lifted. This was eventually set aside. Petitioners argue that Hi Cement is bound by its lawyers into entering the Agreement while Hi Cement argues that the lawyers were not authorized to enter into the Agreement in the first place. HELD: Special powers of attorney are necessary, among other cases, in the following: to compromise and to renounce the right to appeal from a judgment. They have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure, but they cannot, without special

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 28 authority, compromise their clients' litigation, or receive anything in discharge of their clients' claims but the full amount in cash. IN THIS CASE: the Compromise Agreement was signed only by petitioners’ lawyers for Hi Cement but they did not submit any written authority to the Court from their client to enter into such compromise. No provision of the charter and by-laws of the corporation or any resolution or any other act of the board of directors of HI Cement Corporation has been cited, from which it can be inferred that the administrative manager had been granted expressly or impliedly the power to bind the corporation or the authority to compromise the case. Absent such authority, the signature of Atty. Cardenas on the agreement would be legally ineffectual. Insular Drug Co v. National Bank FACTS: This is a case where 132 checks made out in the name of the Insular Drug Co., Inc., were brought to the branch office of the Philippine National Bank in Iloilo by Foerster, a salesman of the drug company, Foerster's wife, and Foerster's clerk. The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife or his clerk. HELD: The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. • A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority. IN THIS CASE: When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals without there being any authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts represented by the checks. The bank could relieve itself from responsibility by pleading and proving that after the money was withdrawn from the bank, it passed to the drug company which thus suffered no loss, but the bank has not done so. Thus, it will have to stand the loss occasioned by its agents’ negligence. Insular Drug v. National Bank FACTS: This is a case where 132 checks made out in the name of the Insular Drug Co., Inc., were brought to the branch office of the Philippine National Bank in Iloilo by Foerster, a salesman of the drug company, Foerster's wife, and Foerster's clerk. The bank could tell by the checks themselves that the money belonged to the Insular Drug Co., Inc., and not to Foerster or his wife or his clerk. HELD: The right of an agent to indorse commercial paper is a very responsible power and will not be lightly inferred. • A salesman with authority to collect money belonging to his principal does not have the implied authority to indorse checks received in payment. Any person taking checks made payable to a corporation, which can act only by agents does so at his peril, and must abide by the consequences if the agent who indorses the same is without authority. IN THIS CASE: When the bank credited those checks to the personal account of Foerster and permitted Foerster and his wife to make withdrawals without there being any authority from the drug company to do so, the bank made itself responsible to the drug company for the amounts represented by the checks. The bank could relieve itself from responsibility by pleading and proving that after the money was withdrawn from the bank, it passed to the drug company which thus suffered no loss, but the bank has not done so. Thus, it will have to stand the loss occasioned by its agents’ negligence. Veloso v. CA FACTS: Petitioner Veloso was the registered owner of a parcel of land in Tondo until his title was cancelled and a TCT was issued to Respondent Aglaloma B. Escario. Petitioner claims that he only discovered his title was missing and that it had been transferred to respondent after his wife, Irma, had left for abroad. It was later revealed that the petitioner’s wife Irma had sold the property to the respondent. The transfer of property was supported by a General Power of Attorney and a Deed of Absolute Sale executed by Irma, appearing as petitioner’s attorney-in-fact. However, petitioner denied having executed the power of attorney and alleged that his signature was falsified, contending that the sale of the property, and the subsequent transfer, were null and void. ISSUE: W/N the assailed power of attorney was valid and sufficient – YES HELD: The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required. Whether the instrument be denominated as "general power of attorney" or "special power of attorney," what matters is the extent of the power or powers contemplated upon the agent or attorney in fact. • If the power is couched in general terms, then such power cannot go beyond acts of administration. However, where the power to sell is specific, it not being merely implied, much less couched in general terms, there cannot be any doubt that the attorney in fact may execute a valid sale. IN THIS CASE: The assailed power of attorney was valid and regular on its face. It was also notarized, thus carrying the evidentiary weight as vested by its due execution. While the document was denominated as a general power of attorney, a perusal of the document showed an authority to sell. Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property Bravo-Guerrero v. Bravo FACTS: Simona executed a General Power of Attorney (GPA) in favor of her husband, Mauricio. One of the items in the GPA stated that her husband may mortgage and sell any and all of Simona’s property. Following this, her husband mortgaged 2 of Simona’s Properties and later executed a Deed of Sale with Assumption of Mortgage in favor of one of their children, Roland, and two of Roland’s kids (who are the Petitioners). The other kid, Respondent Edward, was not included in that sale. Now, Edward seeks to annul the sale on the ground that a GPA may not be used to dispose of real property.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 29 HELD: The SC held that while this document is denominated as GPA and it does contain general provisions, and while the Civil Code requires that the sale of real property requires a Special Power of Attorney, the GPA executed does actually contain in one of its stipulations a Special Power of Attorney because the mandate is clear that there is an authorization to sell real estate. Article 1878 refers to the nature of the authorization, not to its form. Even if a document is titled as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate from the principal specifically authorizing the performance of the act. PART II Rights and Obligations of Agent Classifications of the Duties of an Agent 1. Fiduciary Duties: To insure he performs in good faith and loyalty to preserve trust throughout the relationship. a. Presumption: An agent performed his duty in good faith. b. Exception: Where there is no relation of trust or confidence between the parties, as where the agent is bound merely as an instrument. 2. Duty to Obey/Obedience: Within the scope or instruction of the principal a. Exception: An agent is not liable if he violates the principal’s instructions for good reason. 3. Exercise of reasonable care: The agent impliedly undertakes that he possesses a degree of skill reasonably or ordinarily competent for the performance of the service and that in performing his undertaking, he will exercise reasonable care, skill and diligence. Rights of an Agent Compensation Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Article 1909. 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. (1726) Prima facie presumption: Agency is for compensation. • May be contradicted by contrary evidence. The fact that he is acting without compensation has no effect upon his rights and duties with reference to the principal and to third parties. • However, the court should consider the circumstance whether the agency was for compensation or not to determine the extent of liability of an agent for negligence (not fraud). [NCC 1909] Who is liable for torts committed by the gratuitous agent? The principal. Amount to be paid: The compensation agreed upon, or reasonable value of the agent’s services if no compensation was specified. An agent employed to secure a purchaser may sue for commission upon showing that a purchaser whom he secured bought his principal’s property, even though the principal did not know that the agent had referred the purchaser. But he is not entitled to commission where the principal made a sale at a reduced price to one whom he believed in good faith to be unconnected with the broker. The agent must prove that he was the guiding cause for the transaction, or the procuring cause, depending on the facts of the case. Otherwise, he is not entitled to the stipulated broker’s commission.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 30 PROCURING CAUSE: A cause originating a series of events which, without a break in continuity, result in the accomplishment of the prime objective of the employment of the broker—producing a purchaser ready, willing, and able to buy on the owner’s terms. • The broker must be instrumental in the consummation of the sale to be entitled to a commission. [PH Health Care Providers Inc v. Estrada] GENERAL RULE: A broker is never entitled to commission for unsuccessful efforts. EXCEPTION: 1. Based on equity, for compensation of the broker’s efforts and assistance in the transaction which was finalized and consummated after his exclusive authority expired [Prats v. CA] 2. Where the broker was the sufficient procuring cause in bringing the sale where the agent, notwithstanding expiration of his authority, took diligent steps to bring back together the parties such that the sale was finalized. [Ibid.; Manotok Brothers v. CA] The seller’s withdrawal in bad faith of the broker’s authority cannot unjustly deprive the broker of his commission as the seller’s duly constituted agent. Can compensation be contingent on profit? YES, the agent is not entitled to compensation until the principal realizes the profit. TORTS An agent is personally liable to third parties who are injured by his act of fraud or negligence. [NCC 1909] General Rule: Principal is not responsible if the agent’s tort was intentional rather than merely negligent. Exception: The principal is solidarily liable if the tort was committed by the agent while performing his duties in furtherance of the principal’s business. Lend to/borrow money from the agency Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. (n) Rules: 1. If empowered to borrow money à He may be the lender at current interest; 2. If empowered to lend money at interest à cannot borrow without principal’s consent. Effect of violation of obligations under NCC 1980 [Villanueva] 1. If the agent was the lender à Difference has to be returned to the principal. 2. If agent borrows for himself without the principal’s consent the money à liable for the current interest that the principal would have earned + damages Appoint a substitute Article 1892. 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; (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. (1721) Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. (1722a) GENERAL RULE: The agent may appoint a sub-agent or substitute. EXCEPTIONS: 1. Unless prohibited by the principal; 2. Where the work entrusted to the agent requires special knowledge, skill, or competence. a. Exception to exception: Unless he has been authorized to do so by the principal. General Rule: Contracts are only binding between the contracting parties, their assigns, and heirs. Exception: The principal has a right of action against the agent and the substitute with respect to the obligations which the substitute has contracted. [NCC 1983] RELATION AMONG PRINCIPAL, AGENT, SUB-AGENT Situation Liability of Agent Liability of P Substitute is appointed solely by agent Liable to the principal or third parties if the subagent acts wrongfully Not liable to third parties for the sub-agent’s acts. Substitute is appointed by agent with authority from principal Neither agent nor substitute is liable as long as they act within the scope of authority. Any act done by the substitute is an act of the principal. Effect of death of principal/agent Authority of sub proceeds from the P Death of the agent who appointed him does not affect his authority. Sub-agent is a substitute for the agent Death of the agent terminates his authority. See Discussion on Effects of Substitution, infra. Note: Baltazar v. Ombudsman, on the difference between subdelegation of agency and the appointment of a substitute. Retain in pledge Article 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

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 31 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. (1728) Article 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. (1729) Article 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. (1730) Reimbursement General Rule: The principal must advance to the agent upon his request all the sums necessary for the execution of the agency. [NCC 1912] • cf. NCC 1886, where the agent is bound to advance sums necessary to carry out the agency, but only when he consents or it is stipulated in the agreement. • If the agent advanced the sums necessary for the execution of the agency, the advances must be reimbursed by the principal with interest from the day the advance was made. [NCC 1896] o Demand is not necessary. • The obligation to reimburse the agent cannot be defeated by the fact that the business was not successful provided that the agent if free from all fault. [NCC 1912] Exception: When there is a stipulation that the agent shall advance the necessary funds. [NCC 1876] Effect of non-compliance: Agent is not liable for the damage which the principal may suffer through his non-performance. [NCC 1884] Damages The principal should answer for damages resulting from the execution of the agency without fault or negligence on the agent’s part. [NCC 1913] De Leon: This counter-balances the liability of the agent to the principal for damages or losses the principal may suffer due to non-performance [NCC 1884], fraud or negligence [NCC 1909] But if the agent invades the rights of third persons and incurs liability, the loss falls upon the agent. • If the agent acted on his own account à no need to indemnify. The agent is entitled to be indemnified when he is compelled to pay damages for taking personal property by direction of his principal, which though claimed adversely by another, has reasonable ground to believe belongs to his principal. Scope of liability of principal: Limited only to that which the execution of the agency has caused the agent. • No promise to indemnify for the losses or damages caused by the independent and unexpected wrongful acts of third persons for which the principal is in no way responsible. Retain in pledge GENERAL RUE: The agent must deliver to the principal everything he received even if not due to the principal. [NCC 1891] EXCEPTION: He can retain in pledge the things which are the object of the agency until the P reimburses him or indemnifies him for damages. [NCC 1914] Effect for failure of P to reimburse or indemnify A: Agent has right to retain in pledge the things which are the object of the agency. • But the agent is not entitled to the excess in case the things are sold to satisfy his claim and the proceeds thereof are more than the amount due. To entitle the agent to a lien, the funds or property against which it is asserted must be in his actual or constructive possession and he must have acquired the same lawfully and in his capacity as agent. In whose favor: Absent a ratification of a sub-agent’s acts by the principal, the right of lien exists only in favor of the agent, and cannot be claimed by one to whom the agent delegates his authority where no privity exists between sub-agent and principal. Tan v. Gullas FACTS: Respondents, were the registered owners of a parcel of land, they executed a special power of attorney authorizing petitioners Tan, a licensed real estate broker, and his associates Tecson and Saldaña, to negotiate for the sale of the land, at a commission of 3% of the gross price. Tan contacted the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious organization interested in acquiring a property. The Sisters, who had already seen and inspected the land, found the same suitable for their purpose and expressed their desire to buy it. However, they requested that the selling price be reduced. Respondents agreed to sell the property to the Sisters of Mary. Petitioners went to see respondents who refused to pay the broker’s fee and alleged that another group of agents was responsible for the sale of land to the Sisters of Mary. Petitioners filed a complaint against the defendants for recovery of their broker’s fee. They alleged that they were the efficient procuring cause in bringing about the sale of the, but that their efforts in consummating the sale were frustrated by the respondents who, in evident bad faith, malice and in order to evade payment of broker’s fee, dealt directly with the buyer whom petitioners introduced to them. ISSUE: W/N petitioners are entitled to the brokerage commission – YES HELD: An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. Petitioners are BROKERS. In Schmid and Oberly v. RJL Martinez Corp., A broker is one who is engaged, for others, on a commission, negotiating contracts relative to the property with the custody of which he has no concern. the negotiator between other parties, never acting in his own name but in the name of those who employed him. A broker is one whose

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 32 occupation is to bring the parties together, in matters of trade, commerce or navigation. There was no dispute as to the role that petitioners played in the transaction. At the very least, petitioners set the sale in motion. They were not able to participate in its consummation only because they were prevented from doing so by the acts of the private respondents. Philippine Health Care Providers v. Estrada FACTS: Maxicare allegedly engaged the services of Estrada for the sale of the MAXICARE plan, a prepaid group practice healthcare delivery program. Estrada was formally appointed by Maxicare as its “general agent” through a letter saying that Estrada shall be entitled to commission for her services. Estrada then made proposals and representations to the officers of Meralco regarding the MAXICARE plan, but when Meralco decided to subscribe to the Plan, Maxicare took it upon itself to directly negotiate with Meralco, thereby leaving Estrada out of the negotiations. Meralco later on subscribed to the Plan and paid premiums to Maxicare amounting to P20 Million. Per their agreement, Estrada tried to collect her commission from the successful sale to Meralco, but Maxicare refused saying that it was the one that directly transacted with Meralco and that no agent was authorized to intervene in the negotiations. It refused to acknowledge the contention of Estrada that she was the procuring cause of the service agreement between Maxicare and Meralco. Estrada then filed a complaint ISSUE: W/N Estrada is entitled to a commission for the Meralco account – YES HELD: Both courts were one in the conclusion that Maxicare successfully landed the Meralco account for the sale of healthcare plans only by Virtue of Estrada’s involvement in the negotiations. Estrada is the PROCURING CAUSE of the sale between Maxicare and Meralco. Without her intervention, no sale could have been consummated since it was Estrada who introduced Maxicare to Meralco and prior to this, Meralco did not know anything about Maxicare. • The only reason Estrada was not able to participate in the collection and remittance of premium dues to Maxicare was because she was prevented from doing so by the acts of Maxicare, its officers, and employees. Prats v. CA FACTS: Doronilla offered to sell his land to SSS, however, the latter did not take any action prompting Doronilla to withdraw his offer. Doronilla then granted to Prats an exclusive option and authority to sell the property. Prats was to be paid 10% in commissions should he complete the sale within a specific period. If no written offer to purchase has been made to the agent (Prats) by the end of the period, the option and authority would be null and void. Prior to the final expiry of the period, the petitioner took many steps to secure the sale such as meeting with the SSS chairman and making offers and counter-offers. During this period, the SSS expressed interest to purchase but no written offer to purchase was entered into. SSS formally accepted the private respondent’s offer to sell AFTER the expiration of the period. The petitioner demanded that he be paid his commission for the amount of P 1,380,000 but the private respondent refused to pay, prompting the petitioner to file a complaint for sum of money plus damages ISSUE: W/N Prats is entitled to compensation – YES, as a matter of equity HELD: Prats has no basis in law to be entitled to compensation because he was not the efficient procuring cause in bringing about the sale because the private respondent had already been in negotiations with the SSS prior to the authority and because said authority had already expired once the contract of sale had become perfected. However, due to the efforts made by Prats to re-open negotiations between Doronilla and SSS, an eventual sale was perfected and consummated albeit after the expiry of the authority. As such, Prats is entitled to compensation on the basis of equity. Manotok Brothers v. CA FACTS: Petitioner Manotok Brothers Inc. owns a parcel of land & a building leased to the City of Manila before & used by Claro M. Recto High School. It later authorized private respondent Saligumba to negotiate with the City for the sale of the property through a letter. In the letter, the purchase price was specified (not less than Php425,000, later became just Php410,000) & it was stated that it agreed to pay Saligumba a 5% commission if the sale is consummated & paid. Later on, petitioner granted 3 succeeding extensions to give him more time to negotiate the sale: 120 days, 120 days, & 180 days. Ordinance No. 6603 (for appropriation of money for payment) was passed by the Municipal Board of the City of Manila before the 180-day period expired, but it was signed by the City Mayor 3 days after the 180-day period lapsed. Even if the purchase price was later on fully paid (Php410,816), & the parties signed the deed of sale, Saligumba did not receive his commission (should’ve been Php20,554.50). Petitioner refused to recognize his role as an agent in the transaction, arguing that when the ordinance was passed after his authority has expired, so he isn’t entitled to receive his commission. Saligumba argued otherwise, saying that he was able to successfully negotiate the sale & the ordinance was passed due to his efforts ISSUE: W/N Saligumba is entitled to 5% agent’s commission – YES since he is the efficient procuring cause. HELD: Despite expiration of authority, when the sale was consummated, the agent is entitled to compensation for his services, even if he/she/they wasn’t/weren’t the efficient procuring cause due to the said expiration of authority. The agent is considered the efficient procuring cause when his/her/their efforts made in negotiating the sale produced the consummation of the sale. Even if the agent isn’t the efficient procuring cause, compensation should be given because the agent diligently took steps to bring the parties together & his efforts were somehow instrumental to the consummation of the transaction, even if it was finalized after his authority expired. When there’s a close, proximate, & causal connection between the agent’s efforts & labor, & principal’s sale of his property, the agent is entitled to a commission. IN THIS CASE: The City of Manila purchased the property through Saligumba’s efforts. Without his efforts, the

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 33 municipality would not have anything to pass and the Mayor would not have anything to approve. His labor set the intervention of the third party in motion which produced the sale. Baltazar v. Ombudsman FACTS: Patricia Regala owns a fishpond. Her Attorney-inFact, Mercado, leased the fishpond to Lapid who in-turn subleased the fishpond to Lopez during the last few months of the lease. Respondent Salenga was hired by Lapid and Lopez as fishpond watchman. Later, Respondent Salenga sent a demand letter to Lopez and Lapid for unpaid salaries and nonpayment of 10% share in the harvest. He then filed a Complaint before the Provincial Agrarian Reform Adjudication Board. Mercado, as Attorney-in-Fact, filed a motion to intervene which was granted. The complaint was dismissed for lack of merit, so Salenga appealed to the DARAB Appellate Board. Pending resolution of the agrarian case (above), the instant case was instituted by petitioner Antonio Baltazar, an alleged nephew of Faustino Mercado, against private respondents before the Ombudsman. Petitioner maintains that the DARAB Adjudicator has no jurisdiction because there was no tenancy relation between respondent Salenga and Lopez. ISSUE: W/N Baltazar is duly authorized by Mercado (Regala’s attorney-in-fact) to institute the suit – NO HELD: The agency cannot be further delegated. Mercado is an agent himself and as such, he cannot further delegate his agency to another. The legal maxim potestas delegate non potest delegari is a principle of agency. Moreover, a re-delegaton of the agency would be detrimental to the principal bas the second agent has no privity of contract with her. Moreover, while the Civil Code under Article 1892 allows the agent to appoint a substitute, such is not the situation in the instant case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute. Besides, it is clear in the aforecited Article that what is allowed is a substitute and not a delegation of the agency. Duties/Obligations of an Agent Specific obligations of agent to principal [As listed in De Leon] 1. To carry out the agency which he has accepted; 2. To answer for damages which through his performance the principal may suffer; 3. To finish the business already begun on the death of the principal should the delay entail any danger; 4. To observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner in case he declines an agency, until an agent is appointed; 5. To advance the necessary funds should there be a stipulation to do so; 6. To act in accordance with the instructions of the principal, and in default thereof, to do all that a good father of a family would do; 7. Not to carry out the agency if its execution would manifestly result in loss or damage to the principal; 8. To answer for damages if there being a conflict between his interests and those of the principal, he should prefer his own; 9. Not to loan himself if he has been authorized to lend money at interest; 10. To render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency; 11. To distinguish goods by countermarks and designate the merchandise respectively belonging to each principal, in the case of a commission agent who handles goods of the same kind and mark, which belong to different owners; 12. To be responsible in certain cases for the acts of the substitute appointed by him; 13. To pay interest on funds he has applied to his own use; 14. To inform the principal, where an authorized sale of credit is made, of such sale; 15. To bear the risk of collection, should he receive also on a sale, a guarantee commission; 16. To indemnify the principal for damages for his failure to collect the credits of his principal at the time they become due; 17. To be responsible for fraud or negligence. Act within the scope of authority Article 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a) Article 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715) An agent need not follow instructions that are outside the scope of the agency relationship agreed upon. Twin duties of the agent in executing the agency [Villanueva] 1. Act in accordance with the principal’s instructions; 2. Absent guiding instructions, do all that a good father of a family would do as required by the nature of the business.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 34 There is a presumption that even if the act is not specifically not included in the authority given, as long as they are conducive to the purposes of the agency → Deemed within scope of authority. [Class Notes] When is the principal liable TO the agent? When he breaches his contractual or any other duty. Requisites to bind principal by the act of an agent as to third persons: 1. Agent must act within the scope of his authority; 2. Agent must act in behalf of the principal. The principal is not bound when: [NCC 1883] 1. The agent acts without or beyond the scope of his authority in the principal’s name; 2. The agent acts within the scope of his authority in his own name, except when the transactions involve things belonging to the principal. When authority is not exceeded: When the agent performs the agency in a manner more advantageous to the principal than that indicated by him. [NCC 1882] Act in accordance with instructions Article 1887. In the execution of the agency, the agent shall act in accordance with the instructions of the principal. In default thereof, he shall do all that a good father of a family would do, as required by the nature of the business. (1719) Article 1899. If a duly authorized agent acts in accordance with the orders of the principal, the latter cannot set up the ignorance of the agent as to circumstances whereof he himself was, or ought to have been, aware. (n) INSTRUCTIONS: Private directions which the principal may give the agent in regard to the manner of performing his duties as such agent but of which a third party is ignorant. INSTRUCTIONS AUTHORITY Direct the manner of transacting the authorized business and contemplates only a private rule of guidance to the agent and are independent and distinct in character The sum total of the powers committed or permitted to the agent by the principal may be limited in scope and such limitations are themselves a part of the authority The manner or mode of his action with respect to matters which in their substance are within the scope of permitted action Subject with which the agent is empowered to deal or the kind of business or transactions on which he is empowered to act Limitations are without significance as against those dealing with the agent with neither knowledge nor notice of them. Its limitations are operative against those who have or are charged with knowledge of them Not expected to be made known to those with whom the agent deals Made known to the third person dealing with the agent What should be obeyed? The reasonable and lawful instructions of the principal. What can the agent disobey? Performance of illegal acts, or where he is privileged to do so to protect his security interest in the subject matter of the agency. Effect if agent exceeds, violates, or fails to act upon instructions: 1. Agent is liable to the principal for any loss or damage resulting therefrom. 2. If an agent does an act within the apparent scope of the authority, the principal is nevertheless liable to third persons unless the third person knew that the agent was exceeding his authority or violating the principal’s instructions. a. While third persons are bound to inquire as to the extent of the agent’s authority, they are not required to investigate the instructions of the principal. What if there are no specific instructions? The agent shall do all that a good father of a family taking care of the business as if it were his own would do as required by the nature of the business. If he acts in good faith and with due care, the agent is not liable for the losses due to errors or mistakes of judgment as regards to matters with which he is vested with discretionary powers. • Presumption: Agent acted in good faith and in accordance with his power as he understood it. When an agent, in executing the orders and commissions of his principal, carries out the instructions he has received from his principal, and does not appear to have exceeded his authority or to have acted with negligence, deceit, or fraud, he cannot be held responsible for the failure of his principal to accomplish the object of the agency. Since an agent is required to exercise only ordinary care, skill, and diligence, he is not, in the absence of an agreement, an insurer of the success of his undertaking, and does not guarantee thee principal against incidental losses. Effect of ignorance of the agent: The principal is still bound by the acts of the agent. If he appoints an ignorant agent, it is his fault alone. It is enough that the agent 1) acts within the scope of authority and 2) in accordance with the instructions of the principal. [NCC 1899] Carry out the agency Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer. He must also finish the business already begun on the death of the principal, should delay entail any danger. (1718) Article 1888. An agent shall not carry out an agency if its execution would manifestly result in loss or damage to the principal. (n)

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 35 A person is bound to carry out the agency in accordance with its terms in good faith and following the principal’s instructions, if any. The duty of an agent is to act for the benefit and not the detriment of the principal. If the agent fulfills his duty, he is not personally liable unless he expressly binds himself. • The agent shall not carry out the agency if its execution would manifestly result in loss or damage to the principal. [NCC 1888] Prestation in contract of agency: To do (as opposed to “to give”) GENERAL RULE: Specific performance is not available against an agent. • NCC 1884 states that thee agent is liable for nonperformance. What compelling forces would push the agent to comply with his obligations, if specific performance is not an available remedy? 1. Agent becomes personally liable for damages [NCC 1884] a. Amount depends on the circumstances b. In many cases, the SC assessed the degree of negligence or diligence. If there is fraud, the extent of knowledge to the principal, or if the principal is also guilty of negligence and has participation therein. c. Also liable if acted outside the scope of his authority. He would also be liable for damages caused to third parties. 2. Agent becomes liable for the contracts he entered into. [Class notes] Loyalty Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own. (n) Article 1890. If the agent has been empowered to borrow money, he may himself be the lender at the current rate of interest. If he has been authorized to lend money at interest, he cannot borrow it without the consent of the principal. (n) Article 1491. The following persons cannot acquire by purchase, even at a public or judicial auction, either in person or through the mediation of another: xxx (2) Agents, the property whose administration or sale may have been intrusted to them, unless the consent of the principal has been given; Is the contract void when the agent violates his duty of loyalty? NO. The agent is merely liable for damages suffered by the principal. [NCC 1889] • As the law does not distinguish, the rule is the same whether the agency is onerous or gratuitous. The principal may waive the benefit of this rule, as long as it is with full knowledge of the facts. But without such waiver, the rule is absolute. General Rule: The agent should prefer the interests of the principal over his own. Otherwise, he or she is liable for damages. [NCC 1889] Exception: Where the agent’s interests are superior, as where he has a security interest in goods of the principal in possession, he may protect his interest even if it means disobeying the principal. Effect of violation of fiduciary duty: An action in personam will lie against an agent to compel him to return or retransfer to his principal the real property committed to his custody as such agent and also to execute the necessary documents of conveyance to effect such retransfer. [Severino v. Severino] Austria v. CA FACTS: Maria G. Abad received a pendant with diamonds from Guillermo Austria valued at Php4,500.00 to be sold on commission basis or returned on demand. A day later, she was robbed of the pendant by two men in Manila while walking home at night. Austria demanded the return of the jewelry or payment of its value, which Abad couldn’t or refused to do. Austria filed an action for recovery against Abad. The CFI held for Austria, finding that Abad failed to prove the fact of robbery, and that she was guilty of negligence in going home without a companion at night while carrying a large amount of valuables. The CA reversed, finding that there was a robbery, and it was a caso fortuito event that extinguished Abad’s liability to Austria. The SC affirmed the CA’s finding of robbery and caso fortuito, and holding that Abad was not negligent in the manner she went home as Manila did not possess the crime rate it did in 1961 when the robbery occurred NOTE: There was nothing expressly stated about Agency. This is a generic Oblicon case. Class notes: Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. (1105a) Domingo v. Domingo FACTS: Petitioner Vicente granted respondent Gregorio the exclusive agency to sell his lot at the rate of P2 per sqm with a commission of 5% on the total price. Gregorio introduced Oscar as a prospective buyer, who ultimately offered to buy the lot at P1.2 per sqm, to which Vicente agreed. Oscar then gave Gregorio a gift of P1,000 for succeeding in persuading Vicente to sell his lot at P1.2 per sqm, which amount was not disclosed by Gregorio to Vicente. Gregorio was informed by Oscar that he was giving up in the negotiation but would later discover that Vicente approached Oscar and told the latter that he would sell his property at a lower price if Gregorio is eliminated from the transaction. Pursuant to the agreement, a deed of sale was executed by Aaraparo Diaz (wife of Oscar) over their house and lot in favor of Vicente as down payment by Oscar on the purchase price of Vicente’s lot. HELD: The Court here resolved the issue of whether or not Gregorio is entitled to his commission of 5% of the purchase price in the negative. It stated that the agent has an absolute obligation to make a full disclosure or complete account to his principal of all his transactions and other material facts relevant to the agency.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 36 An agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it. IN THIS CASE: Gregorio accepted a gift from the prospective buyer, without the knowledge and consent of his principal, and in exchange he persuaded his principal to accept a counteroffer at a price much lower than the original offer. As a necessary consequence of such breach of trust, Gregorio must forfeit his right to the commission and must return the part of the commission he received from his principal. Class Notes: Can the duty of loyalty be cured or fulfilled by full disclosure? If there is full disclosure of benefits received will there be a violation? In Domingo v. Domingo, if you will be forced to address the same scenario, then argue that there is knowledge on the part of the principal. But in this case, there was no allegation of knowledge on the part of the principal. Why? Because knowledge on the part of P and failure to object is tantamount to ratification. As long as there is disclosure, there is NO breach of the agent’s duty of loyalty. But in this case, what is the extent of punishment given by the court to the agent? Severino v. Severino FACTS: Melecio Severino owns land. During Melecio’s lifetime, his brother, Guillermo, worked to administer the land for Melecio’s behalf. When Melecio died, Guillermo continued to occupy the said land. Cadastral proceedings were instituted for the registration of the land titles within the surveyed area. Guillermo’s lawyer filed answers in Guillermo’s behalf, claiming the lots mentioned as the property of his client. No opposition was presented in the proceedings. Thus, the court decreed the title in Guillermo’s favor. This action was brought by Fabiola to compel Guillermo to convey to her four parcels of land described in the complaint, or in default thereof to pay her damages for wrongfully causing said land to be registered in his own name. Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio Severino, has filed a complaint in intervention claiming the same relief as Fabiola except in so far as she prays that the conveyance be made, or damages paid, to the estate. Guillermo argues in his defense that the land was owned in common by all heirs of Ramon Severino (father of the Severino brothers), and not by Melecio alone. He also argues that more than a year having elapsed since the entry of the final decree adjudicating the land to the defendant, said decree cannot now be re-opened, in accordance with Section 38 of the Land Registration Act. Thus, he has already acquired an indefeasible title to the land. The question of ownership of the land being thus judicially settled, the question as to the previous relations between the parties cannot now be inquired into HELD: The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. SC ruled against Guillermo and ordered him to convey to Melecio’s estate and heir (Felicitas as administratrix of the estate and Fabiola as the child) their respective lots. Guillermo was a mere agent of the landowner Melecio. An agent, acting in his fiduciary capacity, cannot obtain title to his principal’s property for his own benefit. If he does, he is deemed to hold it in trust for the principal. His testimony in the case of Montelibano v. Severino is, in fact, conclusive in this respect, wherein he stated under oath that he had always known the land as the property of Melecio Severino. Sir: The conflict of interest provisions under the Code are strictly enforced against the agent. Note that the agent cannot acquire properties owned by the principal. Will extraordinary prescription apply to an agent? NO. For as long as the agent acknowledges the ownership of the principal, then there is no way he can acquire the same through prescription. • XPN: If the agent exercises adverse ownership of the property entrusted to him, such acts of adverse ownership can be considered as PUPO (requisites) , then the agent may successfully acquire ownership of such principal property through prescription. Why is it that the Court did not consider the act of registration as repudiation of the agency in this case? Prescription was not alleged. But if you allege and prove the same, it is possible that the agent acquires ownership of the property. Diligence Article 1885. In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (n) Article 1887. Supra Article 1909. 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. (1726) By contract, the parties may make the agent’s duty of diligence in carrying out the agency either stricter or more lenient. If a person declines an agency à he is still bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner. • Basis: Equity. However, the owner must act as soon as practicable either: 1. By appointing an agent; 2. By taking charge of the goods. Obligation of an agent who withdraws from an agency: The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 37 reasonable opportunity to take the necessary steps to meet the situation. [NCC 1929] Account/deliver Article 1891. 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. (1720a) General Rule: It is the duty of the agent to account for and deliver to the principal all money and property which may have come to him as a result of the agency, including gifts from third parties in connection with the agency. [NCC 1891] Secret profit: An agent who takes a secret profit in the nature of a bonus without revealing the same to his principal is guilty of breach of loyalty to the principal and forfeits his right to collect the commission from his principal, even if the principal does not suffer any injury. The fact that the principal may have been benefited by the valuable services does not exculpate the agent. [Domingo v. Domingo] Effect of stipulation exempting agent from obligation to account: It is void for being contrary to public policy. Exceptions: The obligation to account does not apply when: 1. The agent or broker only acted as a middleman to bring together the vendor and vendee, who will themselves thereafter negotiate on the terms and conditions of the transaction. 2. If the agent or broker informed the principal of the gift or bonus or profit he received from the purchaser and his principal did not object thereto. 3. A right of lien exists in favor of the agent. What happens if the agent converts the money/property to his own use? The agent is liable for estafa. He cannot retain the commission pertaining to him by subtracting it from his collections. Pay interest Article 1896. The agent owes interest on the sums he has applied to his own use from the day on which he did so, and on those which he still owes after the extinguishment of the agency. (1724a) Two distinct cases under NCC 1896: 1. Agent applied sums belonging to P to his own personal use à The agent is thus liable for interest by way of compensation or indemnity which shall be computed from the day on which he did so. a. Without prejudice to a criminal action that may be brought against him because of the conversion. 2. Agent still owes sums to the principal after the extinguishment of the agency à Liable for interest from the date the agency is extinguished. Is demand by the principal necessary for the delay to exist? NO. Since the agent is bound to deliver whatever he may have received by virtue of the agency, demand is no longer necessary. Fraud; negligence Article 1909, supra. General rule: Any person guilty of fraud, negligence, or delay in the fulfillment of his obligation, or who in any other manner fails to comply with the terms thereof, shall be liable for damages. If the agent fulfills his duty, he is not personally liable unless he expressly binds himself. Upon the agent’s failure to do so, he is liable for the damage which the principal may suffer. What damages is the principal entitled to? Those which result from the agent’s non-performance. The principal must prove his damages and the amount thereof. Responsibility for acts of substitutes Article 1892. 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; (2) When he was given such power, but without designating the person, and the person appointed was notoriously incompetent or insolvent. All acts of the substitute appointed against the prohibition of the principal shall be void. (1721) Article 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may furthermore bring an action against the substitute with respect to the obligations which the latter has contracted under the substitution. (1722a) EFFECTS OF SUBSTITUTION Situation Effect Substitution prohibited If the agent appoints a substitute against the express prohibition of the principal, the agent exceeds the limits of his authority. All acts of the substitute are void. [NCC 1892 (2)] If P did not prohibit à P is liable to third persons for the acts of the sub-agent which are within the scope of his authority, W/N the sub-agent is known to the P. Substitution authorized (Agent is given the power to appoint, but no named person) The agent is released from responsibility unless the person appointed is notoriously incompetent or insolvent. [Ibid.] P may proceed against both the agent and the substitute for damages.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 38 But if the substitute is the person designated by the P, agent is absolutely exempted. Substitution not authorized, but not prohibited. The substitution is valid if the same is beneficial to the P. If damage is made against P à agent is primarily responsible for the acts of the substitute. • P has a right of action against the substitute. [NCC 1893] [De Leon, p. 492] Two scenarios: [From Class Notes] 1. Express authority for delegation à Acts of the subagent will bind the principal. What happens if the sub-agent acts beyond the authority that was originally granted by the principal to the agent? (Note that there is no privity between principal and sub-agent) This will NOT bind the principal, because it is as if sub-agent exceeded his authority. Does NCC 1892 apply? NO. If there is express authority but no specific person designated and the person is NOT notoriously incompetent or insolvent – will the agent still be held liable for the acts of sub-agent? Negligence à Principal can still be bound. There was an EXPRESS consent/approval/authority given to the agent to appoint a sub-agent — What is the difference between this and 1892(1), as to the effects of the acts of the sub-agent to the principal and the liability of the agent? Sub-scenarios a. There is an appointment but no naming of sub-agent; b. Express mention of names of agent and subagents 2. No prohibition nor is there express authority for delegation a. Agent can appoint b. If a sub-agent commits negligent acts or was at fault, or exceeded the authority of the agent, does it bind the principal? NO. What is the difference between the acts of the sub-agents between the two scenarios? • The difference is whether or not there has been benefit to the principal. IMPLICATION UNDER 1892: It appears that there is a privity now if there is an express authority for the principal to appoint a sub-agent, if the latter is not notoriously incompetent or insolvent as to fall under NCC 1892 (2). • But if such authority to appoint is through silence o No prohibition, but also no express authorization — during the course of the acts, the principal knows of the sub-agent and there are already transactions between the sub-agent and the principal => IMPLIED AUTHORITY TO THE SUB-AGENT Note that in the last paragraph of 1892, all acts of the substitute against the prohibition of the principal is VOID. • Not binding at all to the principal and the P can refuse to acknowledge any act of the sub-agent appointed by the agent against the P’s will. Specific obligations of commission agents Article 1903. The commission agent shall be responsible for the goods received by him in the terms and conditions and as described in the consignment, unless upon receiving them he should make a written statement of the damage and deterioration suffered by the same. (n) Article 1904. The commission agent who handles goods of the same kind and mark, which belong to different owners, shall distinguish them by countermarks, and designate the merchandise respectively belonging to each principal. (n) Article 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. (n) Article 1906. Should the commission agent, with authority of the principal, sell on credit, he shall so inform the principal, with a statement of the names of the buyers. Should he fail to do so, the sale shall be deemed to have been made for cash insofar as the principal is concerned. (n) Article 1907. Should the commission agent receive on a sale, in addition to the ordinary commission, another called a guarantee commission, he shall bear the risk of collection and shall pay the principal the proceeds of the sale on the same terms agreed upon with the purchaser. (n) Article 1908. The commission agent who does not collect the credits of his principal at the time when they become due and demandable shall be liable for damages, unless he proves that he exercised due diligence for that purpose. (n) FACTOR OR COMMISSION AGENT: One whose business is to receive and sell goods for a commission, who is entrusted by the principal with the possession of goods to be sold, and usually selling in his own name. • He may act in his own name or in that of the principal. • The commission agent must have possession of the goods. Liability of commission agent: He is responsible for any damage or deterioration suffered by the goods. • Exception: If the commission agent makes a written statement of the damage or deterioration if the goods

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 39 received by him do not agree with the description in the consignment. Commingling of goods General Rule: The agent may not commingle the goods without authority from the principal. [NCC 1904] Exceptions: 1. Some agents, such as auctioneers, are normally permitted to mingle their principal’s property with their own. 2. Some agents, such as collecting banks, are permitted to mingle the funds of their principal with their own and the property of other principals. Sale on credit The commission agent cannot sell on credit without the express or implied consent of the principal. [NCC 1905] Two alternatives of the principal if sale is made without authority: 1. He may require payment in cash. Any interest or benefit from the sale on credit shall belong to the agent since the principal cannot be allowed to enrich himself at the agent’s expense; a. An authorized sale on credit is deemed to have been on cash basis [NCC 1905] insofar as the principal, not third parties, is concerned, upon failure of the agent to inform he principal of such sale on credit with a statement of the names of the buyers. [NCC 1906] 2. He may ratify the sale on credit in which case it will have all the risks and advantages to him. [Green Valley Poultry v. IAC] The agent shall be entitled to the benefits arising from the credit sale. The principal may also choose to ratify the sale on credit with all its resulting benefits and risks. Guarantee commission GUARANTEE COMMISSION: One where, in consideration of an increased commission, the factor or commission agent guarantees to the principal the payment of debts arising through his agency. Purpose: To compensate the agent for the risks he will have to bear in the collection of the credit due to the principal. Liability of a del credere agent: He is liable to the principal if the buyer fails to pay or is incapable of paying, but he is not primarily the debtor. • The liability does not extend to other obligations of the contract. A del credere agent may sue in his name for the purchase price in the event of non-performance by the buyer. Collection of credits A commission agent must collect the credits due the principal at the time they become due and demandable. [NCC 1908] Liability for failure to collect credits: Agent is liable for damages, unless he can show that the credit could not be collected notwithstanding the exercise of due diligence on his part. • Principal’s remedy if agent is not liable: Proceed against debtor. Green Valley Poultry v. IAC FACTS: ER Squibb and Sons filed a collection suit against Green Valley for goods which were delivered to the latter that were left unpaid. This was pursuant to a letter agreement entered into by the parties wherein Squibb appointed Green Valley as a non-exclusive distributor for its veterinary products. Green Valley argues that it is not liable since the contract was a mere agency to sell and it never purchased goods from Squibb. HELD: 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. The Supreme Court ruled that there is no need to categorize the contract since Green Valley is liable either way. If it is an agency to sell, Green Valley is liable since it is sold on credit without authority from the principal. Abacus Securities v. Ampil FACTS: Respondent Ampil opened a cash or regular account with petitioner Abacus Securities Corporation for the purpose of buying and selling securities. Respondent actively traded his account but failed to pay in full, or even just his deficiency, for the transactions on April 10 and 11, 1997. Despite respondent’s failure to cover his initial deficiency, petitioner subsequently purchased and sold securities for respondent’s account on April 25 and 29. His purchases were consistently unpaid from April 10 to 30, 1997 but petitioner did not cancel or liquidate a substantial amount of respondent’s stock transactions until May 6, 1997. Despite the lapse of the period as well as sufficient time given by petitioner, respondent failed to settle his account. Petitioner thereafter sold respondent’s securities to set off against his unsettled obligations. After applying the proceeds of such sale against his account, respondent still had a remaining unsettled obligation. Petitioner demanded that this be paid but despite the extension granted, respondent still failed to pay. This prompted petitioner to sue. For his defense, respondent claimed that there was a violation of Revised Securities Act (which mandates that if one fails to pay for the first order, he/she cannot subsequently make any further order without depositing the cash price in full) and that if this would be applied, he would only be liable for the first transaction. HELD: The Court held that the respondent is liable for the initial trades, but not for the subsequent ones. In arriving at that conclusion, the Court first explained that in securities trading, the brokers are essentially the counterparties to the stock transactions at the Exchange. Since the principals of the broker are generally undisclosed, the broker is personally liable for the contracts thus made and so the brokers have to advance the payments for the trades of their principals. Brokers, however, have the right to be reimbursed for sums advanced by them with their principals’ express or implied authorization. Since a brokerage relationship is essentially a

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 40 contract for the employment of an agent, principles of contract law also govern the broker-principal relationship. The Court also looked into the provisions governing the transactions between the parties, specifically Sections 23 and 25 of the RSA and Rule 25-1 of the RSA Rules, which places the burden of compliance with margin requirements primarily upon the brokers and dealers. Sections 23 and 25 and Rule 25- 1 clearly vest upon them the obligation, not just the right, to: (1) cancel or otherwise liquidate a customer’s order, if payment is not received within 3 days from the date of purchase; and (2) for transactions subsequent to an unpaid order, require its customer to deposit funds into the account sufficient to cover each purchase transaction prior to its execution. In this case, petitioner’s right to collect is justified under the general law on obligations and contracts and this right cannot be denied to petitioner as the initial transactions were entered pursuant to the instructions of respondent. The obligation of respondent for stock transactions made and entered into on April 10 and 11, 1997 remains outstanding because the transactions were valid as there was no violation of the RSA yet at that time. Oliver v. PH Savings Bank and Castro FACTS: Petitioner Oliver was a depositor of respondent PSBank and respondent Castro was Assistant Vice President of PSBank and the Acting Branch Manager of PSBank San Pedro, Laguna. Petitioner alleged she made an initial deposit of Php 12 Million into her PSBank account and that respondent Castro had convinced her to loan out her deposit as interim or bridge financing for the approved loans of bank borrowers who were waiting for the actual release of their loan proceeds. • Under this arrangement, respondent Castro would first show the approved loan documents to petitioner Oliver. Thereafter, respondent would withdraw the amount needed from the petitioner's account. • Together with the interest income of 4%, the principal amount previously withdrawn from the petitioner's bank account would be deposited back to her account. • Meanwhile, respondent Castro would earn a commission of 10% from the interest. • Petitioner instructed respondent Castro to pay P2 million monthly to PSBank starting on September 3, 1998 so that her credit line for P10 million would be fully paid by January 3, 1999. • However, respondent Castro stopped rendering an accounting for Oliver and when petitioner demanded the return of her passbook, she noticed several erasures and superimpositions therein. She later found, upon checking a copy of her transaction history as supplied by the bank, the following anomalous loan transactions that were not entered in the passbook, which was acquired in connection with her credit line and real estate mortgage • December 21, 1998 - Php 4.5 Million loan (and withdrawal of Php 7 Million) • January 5, 1999 - Php 1.4 Million loan Petitioner assails the respondent bank’s foreclosure of petitioner’s property for petitioner’s alleged failure to pay her loans amounting to P5,888,149.33. Petitioner also questions a P7 M withdrawal made by respondent Castro from petitioner’s account without petitioner’s authority, which would have sufficed payment for the said loans. ISSUE: W/n the loans and withdrawal made by Castro were properly acquired for her principal Oliver – YES FOR LOANS, NO FOR WITHDRAWAL HELD: LOANS The loans were properly acquired by Catro since there was an implied agency between Oliver and Castro An agency can be express or implied from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. • The question of whether an agency has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial evidence. The question is ultimately one of intention The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (Art. 1881) • As long as the agent acts within the scope of the authority given by his principal, the actions of the agent will bind the principal IN THIS CASE: The laws on agency apply to the relationship between petitioner and respondent Castro since clearly, an agency was formed because respondent Castro bound herself to render some service in representation or on behalf of petitioner, in the furtherance of their business pursuit. • For months, the agency between Oliver and Castro benefited both parties. Oliver, through Castro’s representations, was able to obtain loans, relend them to borrowers, and earn interests; while Castro acquired commissions from the transactions. The promissory notes and the release tickets for the loans bore Oliver’s signatures and she failed to prove that they were forged. WITHDRAWAL The withdrawal is NOT VALID since this was done by Castro beyond her authority • There is no evidence to prove that the petitioner allowed the withdrawal. There was no withdrawal slip presented authorizing Castro to withdraw such Thus, the foreclosure is also invalid. Finding PSBank and Castro solidarily liable to Oliver in the amount of P7 million because it was improperly withdrawn from her bank account, the Court agrees with the RTC that had it not been for the said unauthorized withdrawal, Oliver’s debts amounting to P5,888,149.33 would have been satisfied.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 41 Woodchild v. Roxas FACTS: The respondent RECCI was the owner of two parcels of land. The respondent's Board of Directors approved a resolution authorizing the corporation, through its president, Roberto B. Roxas, to sell the land at a price and under such terms and conditions which he deemed most reasonable and advantageous to the corporation. WHI President Jonathan Y. Dy offered to buy land. A Deed of Absolute Sale in favor of WHI was issued and receipt of cash was acknowledged by Roxas under the following relevant terms and conditions: (1) the right of way in case the land is insufficient for the Vendee's use; (2) full access and full use of the property; and (3) eject all existing squatters and occupants of the premises. There were delays in the construction due to the failure to eject the squatters. This resulted to increase in cost of building the structure and loss of income from rentals. Dy and Roxas discussed the need of the WHI to buy a portion of the adjacent land, however, Roxas died soon. WHI wrote the RECCI, reiterating its verbal requests to purchase a portion of the said land and complained about the latter's failure to eject the squatters. But there was no response from RECCI. ISSUE: W/N respondent is bound by the provisions in the deed of absolute sale granting beneficial use and a right of way over a portion of adjacent land – NO HELD: Roxas was not specifically authorized under the said resolution to grant other rights to the petitioner Generally, the acts of the corporate officers within the scope of their authority are binding on the corporation. However, under Article 1910 of the New Civil Code, acts done by such officers beyond the scope of their authority cannot bind the corporation unless it has ratified such acts expressly or tacitly, or is estopped from denying them. • Thus, contracts entered into by corporate officers beyond the scope of authority are unenforceable against the corporation unless ratified by the corporation. IN THIS CASE: There is no evidence on record of specific acts made by the respondent showing or indicating that it had full knowledge of any representations made by Roxas to the petitioner that the respondent had authorized him to grant to the respondent an option to buy a portion of Lot No. 491-A-3- B-1 covered by TCT No. 78085, or to create a burden or lien thereon, or that the respondent allowed him to do so. Del Rosario v. La Badenia FACTS: Respondent La Badenia works in the manufacture and sale of tobacco products. They had initiated a selling campaign in Legaspi. They hired a general agent Aragon to operate it and Aragon in turn, set up the distributing agency with petitioner spouses who acted as the actual managers of the agency just under Aragon’s supervision. After more than a year of operation and when Aragon was trying to settle accounts, it was concluded that they owed the petitioners P1,795.25. The respondent corporation however contested this arguing that they owed the petitioners nothing because the petitioners were not even their agents in the first place, they were just independent merchants ISSUE: W/N petitioners were agents of the respondent – YES HELD: The principal is liable upon subagency contracts entered into by a general agent in the name of the principal, when it appears that the general agent was clothed with such broad powers as to justify the inference that he was authorized to execute contracts of this kind, and it not appearing from the record what limitations, if any, were placed upon his powers to act for his principal. Petitioners were agents that were just operating under the close supervision of the Aragon, respondent’s general agent Records do not show if there were any limitations placed on his powers but the general conduct of Aragon was approved by the head office. The head office appears to be fully informed of petitioner’s relationship with Agent and that petitioners would extend the sales of the corporation’s products. The head office nor Aragon would bother distinguishing between the business Aragon would personally do with that of the petitioners. Because to him, all business belonged to the corporation, not their independent business. • The fact that the corporation kept only an account with Aragon and no account with the petitioners showed that the corporation did not consider the petitioners as separate merchants. Aragon was granted very broad powers. No evidence indicates that he acted beyond them and there’s no doubt that Aragon himself authorized the petitioners to extend credit. International Films v. Lyric Film FACTS: Gabelman, acting as agent of International Films (China), Ltd., leased the film entitled "Monte Carlo Madness" to Lyric Film Exchange, Inc. Following the last showing of the film, Albo, then chief of the film department of Lyric Film, notified Gabelman and expressed his intention to return the film. In response, Gabelman asked whether he could deposit the film in question in the vault of Lyric Film because International Films did not have their own safety vault. Gabelman then offered to deposit the film in the vault of Lyric Film under Gabelman’s own responsibility, which was approved by Albo’s chief, O’Malley. Furthermore, a verbal agreement was also executed between Gabelman and Lyric Film, whereby the latter would act as a subagent of International Films, with authority to show the film "Monte Carlo Madness" in any theater despite the expiration of the original lease agreement. Later, the bodega of the Lyric Film burned, together with the film "Monte Carlo Madness". HELD: A submandatary or subagent is not obliged to fulfill more than the contents of the mandate and to answer for the damages caused to the principal by his failure to do so. The Court ruled that Lyric Film is not liable for the destruction of the film. The verbal agreement between Gabelman and Lyric Film was a subagency or a submandate. The defendant company is not civilly liable for the destruction by fire of the film in question because, as a mere submandatary or subagent, it was not obliged to fulfill more than the contents of the mandate and to answer for the damages caused to the principal by his failure to do so. The fact that the film was not insured against fire does not constitute fraud or negligence on the part of Lyric Film, because as a subagent, it received no instruction to that effect from its principal and the insurance of

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 42 the film does not form a part of the obligation imposed upon it by law. Liabilities of an Agent General Rule [1897, 1899] The principal is responsible for the acts of the agent done within the scope of his authority and should bear any damage caused to third persons. The agent is liable to third persons for his torts which result in an injury to the third person. When solidary Article 1894. The responsibility of two or more agents, even though they have been appointed simultaneously, is not solidary, if solidarity has not been expressly stipulated. (1723) Article 1895. If solidarity has been agreed upon, each of the agents is responsible for the nonfulfillment of agency, and for the fault or negligence of his fellow agents, except in the latter case when the fellow agents acted beyond the scope of their authority. (n) General Rule: The responsibility of two or more agents, even though appointed simultaneously, is not solidary. • cf NCC 1915: When the agent is serving two or more principals, the liability of the principals is solidary. Exception: When solidarity has been expressly stipulated. [NCC 1894] In this case, if solidarity has been agreed upon, each of the agents become solidarily liable: 1. For the non-fulfillment of the agency even though in this case, the fellow agents acted beyond the scope of their authority; and 2. For the fault or negligence of his fellow agents provided the latter acted within the scope of their authority. If the agent exceeds his powers, he does not act as such agent and therefore the principal assumes no liability to third persons. When personally liable Article 1897. Supra Article 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. (n) Article 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal. In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal. The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent. (1717) The agent who exceeds his authority is personally liable either to the principal or to the third party, absent ratification by the principal. Nature Agent is liable to: If P is liable to the third party due to apparent authority Principal If P is not liable to the third person since no apparent authority Third party Agent personally assumes responsibility If principal defaults, agent is liable as co-principal Effect of unauthorized acts in the name of the principal: Unenforceable transaction, whether or not the party with whom the agent contracted was aware of the agent’s power. Exceptions: 1. If the principal ratifies the transaction before it is revoked by the other contracting party or 2. Estoppel. Agency with undisclosed principal GR: An agent who enters into a contract in his own name without disclosing the identity of his principal renders himself personally liable, even though the third person knows that he is acting as agent. • Unless it affirmatively appears that it was the mutual intention of the parties to the contract that the agent should not be bound. XPN: When the contract involves things belonging to the principal, then the contract is considered as entered into between the principal and the third person. • Application of exception: Only when the agent has been authorized by the principal to enter into the particular transaction. The agent, instead of contracting for and in behalf of the principal, acts in his own name.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 43 The exception in NCC 1883 applies when the money with which the property was bought by the agent belonged to the principal. [Sy-Juco v. Sy-Juco] Remedy of principal: Demand damages from agent for failure to comply with the agency. • If goods are bought from an agent with undisclosed principal without knowledge on the part of the buyer that the vendor is only an agent, the principal only has a right of action against the agent and not the buyer. Remedy of third person: The third person has a right of action against both the principal and the agent when the rights and obligations cannot be determined without hearing both of them. Liability of PRINCIPAL for acts of agent within scope of authority GR: If within the scope of authority, principal is liable for the acts of the agent that were entered into by the latter. XPNS: The agent can still be liable to third persons even if he acts within the scope of his authority when: 1. He expressly made himself as a party and binds himself to the contract a. Nature of liability: Joint, unless there is a stipulation that liability is solidary. 2. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as written. [NCC 1900] 3. The principal has ratified, or has signified his willingness to ratify the agent's acts. [NCC 1901] Liability of PRINCIPAL if agent acted beyond authority GR: The principal is NOT bound by the acts of the agent beyond his limited powers. • Third persons dealing with the agent do so at their risk and are bound to inquire as to the scope of their powers. XPNS: The principal is still liable when: 1. Principal ratifies it, expressly or impliedly; 2. Even if the agent expressly violated or exceeded the limits of the instructions given to him by P but within the scope of a written SPA, and a third party relied on such 3. Apparent authority [NCC 1911] 4. When the contract entered into involves property belonging to the principal. [NCC 1883] a. What if the object of the contract entered into by the agent belongs to the principal? It appears that the principal shall be bound. b. Sir: It can lead to unjust circumstances when the agent enters into contracts involving the P’s things and the P has no choice but to respect it. c. Note: Check interpretation of NCC 1883 in cases 5. Where the principal’s acts contributed to deceive a person in good faith; 6. Where the limitations on the power could not have been known by the third person; 7. Where the P placed in the hands of the agent the instruments signed by him in blank. [Class Notes, De Leon] When can a third person be liable to an agent directly? [Class Notes] 1. When agent contracts in his name 2. When the third person commits negligence directly against the agent 3. NCC 1907: Where the agent actually guarantees to the principal the collection of the proceeds of the sale (Guaranty Commission) a. Reason: Because the agent guarantees collection and he is held liable to the principal. PH Products v. Primateria FACTS: Primateria Zurich, through defendant Alexander B. Baylin, entered into an agreement with plaintiff Philippine Products Company, whereby the latter undertook to buy copra in the Philippines for the account of Primateria Zurich. The plaintiff caused the shipment of copra to foreign countries, pursuant to instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc acting by defendant Alexander G. Baylin and Jose M. Crame, officers of said corporation. As a result, the total amount due to the plaintiff was P33, 009.71. Judgment was rendered by the lower court holding defendant Primateria Zurich liable to the plaintiff for the sum of P31,009.71; and absolving defendants from any and all liability. Plaintiff appealed from that portion of the judgment dismissing its complaint as regards the three defendants. It is plaintiff's is theory that Primateria Zurich is a foreign corporation within the meaning of Sections 68 and 69 of the Corporation Law, and since it has transacted business in the Philippines without the necessary license, as required by said provisions, its agents here are personally liable for contracts made in its behalf. ISSUE: W/N Primateria Zurich’s agents may be held personally liable on contracts made in the name of the entity wih third person in the PH – NO HELD: There is no proof that, as agents, they exceeded the limits of their authority. In fact, the principal — Primateria Zurich — who should be the one to raise the point, never raised it, denied its liability on the ground of excess of authority NPC v. National Merchandising FACTS: Defendant Namerco, as representative of the New York firm/supplier International Commodities Corp (ICC), executed a contract in Manila with Plaintiff NPC for purchase by NPC from ICC of 4,000 long tons of crude sulfur for Php450,716. The sulfur was going to be used for NPC’s Maria Cristina Fertilizer Plant in Iligan City. Defendant Domestic Insurance Company executed a performance bond of Php90,143.20 in favor of NPC to guarantee the seller’s obligations stipulated in the contract. It was stipulated that the seller will deliver the sulfur at Iligan City 60 days from notice of the establishment of a letter of credit for $212,120 in its favor, & failure to effect delivery will subject seller & its surety to payment of liquidated damages: 2/5 of 1% of full contract price for first 30 days of default, plus 4/5 of 1% for every day after until complete delivery. ICC was unable to deliver the sulfur due to its inability to secure shipping space, so NPC rescinded the contract & demanded liquidated damages of Php360,572.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 44 CFI dismissed the case as to ICC due to lack of jurisdiction since it wasn’t doing business in the Philippines. NPC appealed to the CFI which ordered Namerco and Domestic Insurance to pay solidarily the liquidated damages of Php72,114.56 plus legal interest for breach of contract, despite the stipulation for Php360,572.80 ISSUE: W/N Namerco is liable for damages – YES IN THIS CASE: ICC’s letters revealed: • Namerco was never authorized to enter into the contract & acted contrary to ICC’s repeated instructions • ICC didn’t consider itself bound by the contract of sale • Namerco signed the contract on its own responsibility • Namerco is bound by the contract of sale, but it is not enforceable against its principal Here, it is the agent that it sought to be held liable on a contract sale which was expressly repudiated by the principal because the agent took chances, it exceeded its authority, & in effect, it acted in its own name. PH National Bank v. Welch Fairchild FACTS: La Compania is engaged in the business of marine shipper. Respondent Welch Fairchild & Co is one of their shareholders. Since La Compania is a new enterprise, it needed to acquire new vessels and equipment. They had applied for a loan with petitioner PNB for $125K to purchase a boat, Benito Juarez, from the US market. Respondent had helped to get the purchase going in the US and the boat was even ready for shipment. The deal was, PNB’s agent banks in the US would forward the purchase money for the boat and at the same time, would receive the bill of sale and insurance policy. But it became evident that the bill of sale and insurance would not be able to be delivered. Both principal La Compania, and agent respondent Fairchild & Co., took the risk because they needed the purchase to move forward. In a 1918 letter, they directed PNB to release the purchase money anyway without asking anymore for the bill of sale or insurance proceeds. La Compania instead promised that they would give the insurance policy afterwards, when it was delivered. So PNB followed as instructed and the vessel was able to set sail for Manila. It however suffered a total loss when it hit a storm. Insurance was indeed taken out for the voyage but the policy was never issued. At some point, the insurance proceeds accidentally were sent to PNB (which is good because it was supposed to end up with them anyway) but respondent, needing the money, convinced PNB that they had a right to the money and that PNB was wrong to intercept it and withhold it from them. As an argument, respondent would argue that PNB should be demanding the payment owed from the principal instead, not from respondent because they were mere agents to the whole transaction. Later, as principal and agent continued to default, PNB filed a complaint to recover against respondent. HELD: An agent who obligates his principal to deliver specific property to a third party may not thereafter, to the prejudice of such third party, appropriate and apply the same property, or its proceeds, to the payment of debts owing by the principal to the agent; and the circumstance that the principal assents to such application of the property does not alter the case. On the question of WON the agent respondent can be made liable, the Court answered YES. The general rule is that an agent that acts for a revealed principal cannot be personally bound in such a way that an action can be maintained against them. This won’t apply in this case because the agent is also prohibited from intercepting and appropriating the thing that the principal is bound to deliver. When the agent respondent did exactly what was prohibited when they appropriated the insurance proceeds despite it rightfully going to La Compania so they could pay back PNB themselves, the agent has now intervened in the contract in such a way that they can now be made liable. PNB is allowed to recover from respondent agent. Cervantes v. CA FACTS: Respondent PAL issued to petitioner Cervantes a round trip plane ticket for Manila-Honolulu-Los AngelesHonolulu-Manila, which ticket expressly provided an expiry date of one year from issuance (until March 27, 1990). On March 23, 1990, Petitioner used the ticket. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. Upon learning that the same PAL plane would make a stop-over in San Francisco on April 2, and considering that he would be there on that day, petitioner made arrangements with PAL for him to board the flight in San Francisco instead of boarding in Los Angeles. On April 2, 1990, petitioner was not allowed to board when he checked in at the PAL counter in San Francisco. The PAL personnel concerned marked the following notation on his ticket: “TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY.” Petitioner filed a Complaint for Damages for breach of contract of carriage. ISSUE: W/N the act of the PAL agents in confirming the subject ticket extend the period of validity – NO HELD: The acts of an agent beyond the scope of his authority do not bind the principal, unless the latter ratifies the same expressly or impliedly. (Art. 1898) • Further, when the third person (herein petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. • If the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages from the agent, unless the latter undertook to secure the principal’s ratification. IN THIS CASE: The PAL employees in LA had no authority to extend the validity or lifetime of the ticket in question and petitioner knew that such employees had no such authority • The PAL agents were not privy to the compromise agreement (the cause of the issuance of the round trip ticket in the first place) • Petitioner knew that the ticket in question would expire on March 27, 1990 and that to secure an extension, he would have to file a written request for extension at the PAL’s office in the Philippines. Despite this knowledge, appellant persisted to use the ticket in question. Petitioner knew there was a need to send a letter to the legal counsel of PAL for the extension of the period of validity of his

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 45 ticket (the tickets were a result of a compromise agreement entered into by the parties). BPI and FGU Insurance v. Laingo FACTS: Rheozel, the son of the respondent Laingo, opened a Platinum 2-in-1 Savings and Insurance Account with petitioner BPI. The Platinum 2-in-1 account is a savings account where the depositors are automatically covered by an insurance policy against disability or death issued by petitioner FGU Insurance Corp. A year later, Rheozel died due to a vehicular accident. His death was covered by the news. Respondent Laingo inquired about the savings account of Rheozel with BPI, hoping to use the money for the burial and funeral expenses of Rheozel. More than 2 years later, Laingo found out about the insurance coverage included in the Platinum 2-in-1 Savings Account. Laingo sent letters to BPI and FGU Insurance hoping to claim the insurance benefits as she was the beneficiary indicated therein, but was denied. The petitioners claimed that under the terms of the insurance contract, the claim must have been made within 3 months of the death of the insured. Respondent Laingo filed a complaint for specific performance with damages and attorney’s fees. ISSUE: W/N Laingo is bound by the 3-month prescriptive period in the insurance policy – NO HELD: The agent acts for the principal insofar as the world is concerned. Consequently, the acts of the agent on behalf of the principal within the scope of the delegated authority have the same legal effect and consequences as though the principal had been the one acting in the given situation IN THIS CASE: BPI was the agent of FGU insurance with respect to the insurance feature attached to its savings account product • Thus, since BPI was acting as an agent of FGU Insurance, it had the responsibility to ensure that the 2-in-1 account be reasonably carried out with full disclosure to the parties concerned, particularly the beneficiaries The Civil Code is clear that an agent is bound to carry out the agency. The relationship existing between principal and agent is a fiduciary one, demanding conditions of trust and confidence. It is the duty of the agent to act in good faith for the advancement of the interests of the principal (Art. 1884 and 1887) IN THIS CASE: In the case at bar, BPI had the obligation to carry out the agency by informing the beneficiary of the existence of the insurance coverage and the terms and conditions thereof in order for the beneficiary to be able to claim the benefits. • An insurance company has the duty to communicate with the beneficiary upon receipt of notice of the death of the insured. This notification is how a good father of a family should have acted within the scope of its business dealings with its clients. Furthermore, notice to the agent is deemed notice to the principal Rural Bank of Bombon v. CA FACTS: Respondent Gallardo executed a special power of attorney in favor of respondent Aquino authorizing him “to secure a loan from any bank… for any amount or otherwise mortgage the property covered by TCT No. S-79238…, the same being my paraphernal property, and in that connection, to sign, or execute any deed of mortgage and sign other document requisite and necessary in securing said loan and to receive the proceeds thereof…” A Deed of Real Estate Mortgage was executed by respondent Aquino in favor of petitioner Rural Bank of Bombon over the property covered by TCT No. S-79238. The deed stated that the property was being given as security for the payment of “certain loans, advances, or other accommodations obtained by the mortgagor from the mortgagee in the total sum of P350,000. In 1984, Respondent spouses Gallardo and Manzo filed an action against respondent Aquino and petitioner Bank when they discovered that the property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino. ISSUE: W/N the deed of real estate mortgage was valid as to Gallardo – NO HELD: In order to bind the principal by a mortgage on real property 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. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal. IN THIS CASE: Respondent Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor, without any indication that he was signing for and in behalf of the property owner, respondent Gallardo, bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo. With the execution of the mortgage for a loan taken exclusively for Aquino’s benefit, Gallardo in effect becomes a surety who is made primarily answerable for loans taken by Aquino in his personal capacity in the event Aquino defaults in such payment. Sy-Juco v. Sy-Juco FACTS: Spouses Sy-Juco (plaintiffs) appointed their son, Santiago Sy-Juco (defendant) as administrator of their property. Defendant acted as such from 1902 until 1916, when his authority was cancelled During his administration, the plaintiffs alleged that the defendant acquired several properties in his capacity as plaintiff’s administrator with their money and for their benefit. This prompted them to sue. ISSUE: W/On the launch Malabon is owned by the plaintiff – YES IN THIS CASE: By the agency, the plaintiffs clothed the defendant with their representation in order to purchase the

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 46 launch. However, the defendant acted without this representation and bought the launch in his own name thereby violating the agency. Since the money with which the launch was bought came from the plaintiffs, the exception established in Art. 1717 is applicable. • GENERAL RULE: When an agent acts in his own name, the principal shall have no right of action against the person with whom the agent has contracted, in cases involving things belonging to the principal are excepted (Art. 1717) National Food Authority v. IAC FACTS: Gil Medalla was the commission agent of Superior Shipping Corporation. Acting in such capacity, Medalla entered into a contract for hire of ship known as "MV Sea Runner" with National Grains Authority (NGA). Superior Shipping wrote again to NGA, this time specifically requesting that the payment of charges be made to it and not to Medalla, since it was Superior Shipping who owns the ship. NGA replied that it could not grant the request because when NGA entered into the contract with Medalla, the latter did not disclose that he was acting as a mere agent of Superior Shipping. Subsequently, NGA made the payment of charges to Medalla. Afterwards, Superior Shipping wrote to Medalla, demanding that the latter turn over the payment made by NGA. When Medalla ignored the demand, Superior Shipping filed a complaint. In the lower courts, Medalla and NFA (formerly NGA) were ordered to pay solidarily. NFA contends that, pursuant to Art. 1883 of the Civil Code, it is not liable since it had no knowledge of the fact of agency between Medalla and Superior Shipping at the time the contract was executed. ISSUE: W/N NFA is liable – YES HELD: Under the second paragraph of Art. 1883, it provides that “x x x the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.” Consequently, when things belonging to the principal are dealt with, the agent is bound to the principal although he does not assume the character of such agent and appears acting in his own name. In other words, the agent's apparent representation yields to the principal's true representation and that, in reality and in effect, the contract must be considered as entered into between the principal and the third person. Corollarily, if the principal can be obliged to perform his duties under the contract, then it can also demand the enforcement of its rights arising from the contract. Gold Star Mining v. Jimenez FACTS: Jimena and Lincallo were co-owners of mining claims, and the lands constituting therein, purchased with money advanced by Jimena. On several occasions, the mining claims would be the subject of various contracts entered into by Lincallo in his own name, without slightest intimation of Jimena’s interests over the same. The rights over parts of the claim were assigned to petitioner corporation and another mining company. In return, Lincallo was to receive 45% and 43%, respectively, of the royalties due from the mining companies. Throughout these transactions, Jimena repeatedly apprised the mining companies of his interests over the claims, demanding recognition and payment of his ½ share in all the royalties paid to Lincallo. He was ignored. Jimena also repeatedly demanded from Lincallo payment for the P5800 advance and his share of the royalties. Lincallo off and on promised to settle his obligations but failed to do so. Jimena was thus prompted to file a suit against Lincallo and the mining companies. The lower courts decided in favor of Jimena, and amongst other orders, directed petitioner company to pay Jimena’s successors-in-interest, P30,691.92 solidarily with Lincallo.for “flagrant violation of the injunction.” Petitioner company, however, contends that respondents had no cause of action and that the injunction for which it is made to pay was non-existent. HELD: The Court held that respondents Jimena have a cause of action against petitioner company as the existence of a common subject matter supplies a juridical link between them. Moreover, it can be said that Lincallo, in transferring the mining claims to petitioner company (without disclosing Jimena was a co-owner although petitioner had knowledge of this fact) acted as Jimena’s agent with respect to Jimena’s share of the claims Under such conditions, Jimena has a cause of action against petitioner, pursuant to Art. 1883, NCC, which provides that the principal may sue the person with whom the agent dealt with in the agent’s own name, when the transaction involves things belonging to the principal. DBP v. CA FACTS: Juan Dans applied for a P500,000 loan with DBP. He was advised by the bank to get a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). The loan was reduced to P300,000 and approved by DBP and was eventually released. P1,476 was deducted for the MRI premium. Dans accomplished the MRI Application for Insurance and the Health Statement for the DBP MRI Pool. A short while after, Juan died. The DBP MRI Pool then notified the bank that he was not eligible for coverage, since he was over 60 years old at the time of application. DBP offered to refund the premium of P1,476 paid by Juan but Candida refused to accept it, thus she filed a complaint for collection as administratrix of her husband’s Estate ISSUE: W/N DBP should be held liable for leading Dans into applying for the MRI pool and actually collecting the premium – YES HELD: 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. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is liable for damages to him. • 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 apply IN THIS CASE: The Supreme Court ruled that DBP is liable for leading Dans into applying for the MRI Pool and collecting the

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 47 premium. 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. • DBP had full knowledge that Dan's application was never going to be approved. The maximum age for MRI acceptance is 60 years. • There was no showing that Juan knew of the limits of DBP’s authority to solicit applications for MRI. PART III Obligations and liabilities of the principal To Agents The primary obligation of the principal to the agent is simply that of complying with the terms of their employment contract, if one exists. Obligations of principal to agent 1. To comply with all the obligations the agent may have contracted within the scope of his authority; 2. To advance to the agent, should the latter so request, the sums necessary for the execution of the agency; 3. To reimburse the agent for all advances made by him, provided the agent is free from fault; 4. To indemnify the agent for all damages which the execution of the agency may have caused the latter without fault or negligence on his part; 5. To pay the agent the compensation agreed upon, or if no compensation was specified, the reasonable value of the agent’s services. Advance/reimburse Article 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. (1728) Article 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. (1730) Article 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's 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. (n) Is the agent required to advance? NO, unless required to avoid damage to the object of the agency or there is urgency to the situation. Under NCC 1912, the principal should reimburse all amounts that the agent has advanced even if the business or undertaking was not successful, if the agent is free from all fault.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 48 Principal is not liable for expenses incurred by the agent when [NCC 1918] 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; 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, orthat the latter would be allowed only a certain sum. Indemnify Article 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. (1729) Solidary Liability Article 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. (1731) Common transaction or undertaking: One as to which their interests are in accord and in harmony. Requisites for solidary liability [De Leon] 1. There are two or more principals; 2. The principals have all concurred in the appointment of the same agent; 3. The agent is appointed for a common transaction or undertaking. The liability of the principals is solidary for all the consequences of the agency. Each principal may be sued by the agent for the entire amount due and not just for his proportionate share. Application of NCC 1915: It applies even when the appointments were made by the principals in separate acts, provided that they are for the same transaction. • However, the parties may negate the solidary liability. Compensation Article 1875. Agency is presumed to be for a compensation, unless there is proof to the contrary. (n) Agent’s lien Article 1914, supra. To third parties For acts of agent within scope of authority Article 1910. The principal must comply with all the obligations which 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. (1727) Article 1881. The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (1714a) Article 1882. The limits of the agent's authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (1715) Article 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. (n) GENERAL RULE: Where the relation of agency legally exists, the principal will be liable to third persons only for acts committed by the agent and obligations contracted by him in the principal’s behalf within the scope of authority, and should bear damage caused to third persons. How to make principal liable to third party: 1. Third party only needs to show that one type of authority of the agent exists [NCC 1881-1882] 2. If the principal ratifies or approves an act of his agent. The third party may waive his claims against the principal. Liability of agent or principal who contracts separately under NCC 1916: 1. If agent acted in bad faith à Agent alone is responsible to such third person 2. If agent acted in good faith à Principal incurs liability. [NCC 1917] GENERAL RULE: The PRINCIPAL is the real party-in-interest where an agent represents a party. • If an action is instituted in the name of an attorney-infact and not the principal, the complaint must be dismissed on the ground that it is improperly instituted. • The bringing of an action against the agent does not have any legal effect except that of notifying the agent of the claim. • An agent cannot file suit in his own name on behalf of the principal. Exception: An agent acting in his own name for the benefit of an undisclosed principal may sue or be sued without joining the principal. [Section 3, Rule 3, Rules of Court] • Exception to exception: When the contract involves things belonging to the principal. Elements for the exception to apply [NCC 1883] 1. Agent acted in his name during the transaction; 2. He acted for the benefit of an undisclosed principal;

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 49 3. Transaction did not involve the property of the principal. Sir: Go back to the intentions of the party vis-a-vis the objectives of the agency [is it pursuant to the reason as to why the agency was constituted?] 1. Go back to the scope of the agency (is it general? Specific?) → Concerned with subject matter 2. Go back to the extent of the authority (couchedin general or specific terms?) o If the tenor is couched in general terms → Limited to acts of administration (day to day operations/business) o Ex: business is sale of subdivision lots vs. the principal is only selling his lot (personally) NCC 1881 vs. 1882 • There is a presumption that even if the act is not specifically not included in the authority given, as long as they are conducive to the purposes of the agency → Deemed within scope of authority • There is a presumption in 1882 that the manner, as long as is advantageous to the principal → within the scope of the authority o Even if such act is not expressly enumerated in the power of attorney For acts of agent outside scope of authority Article 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the agent's authority, if such act 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 the agent. (n) Article 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. (n) Article 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. (n) Article 1917. supra When within the scope of authority: If such act is within the terms of the power of attorney as written, but also includes that which is apparently or impliedly delegated to him. • As to third parties acting in good faith, the written instructions of the principal are the binding powers of the agent and cannot be overcome by non-written instructions of the principal not made known to them. Outside the written power of attorney of an agent, third parties who deal with such agent are not supposed to presume that the agent is fully authorized. • Every person dealing with an assumed agent is put on inquiry and must discover upon his peril the fact of the agency, and the nature and extent of the agent’s authority. General Rule: The motive of the agent in entering into a contract with a third person is immaterial. The principal is still liable to the third person. Exceptions: 1. Where the third person knew that the agent was acting for his private benefit. 2. Where the owner is seeking recovery of personal property of which he has been unlawfully deprived. Liability of PRINCIPAL for agent’s misrepresentation • Within the scope of agent’s authority: Estopped to deny the authority of the agent. o Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more if the principal ratified the agent’s acts beyond the latter’s authority. [Filipinas Life v. Pedroso] • Beyond the scope of agent’s authority: The principal is NOT bound by the misrepresentation of his agent committed beyond the scope of his authority. o Exception: When he accepts the benefit made from a contract under the false representation of the agent. • Within the scope of authority but for the agent’s own benefit: Principal is liable. When two persons contract separately with the agent and principal If the two contracts are incompatible with each other, the one of prior date is preferred. [NCC 1916] • Subject to the rules of double sale. Ratified acts Article 1901. A third person cannot set up the fact that the agent has exceeded his powers, if the principal has ratified, or has signified his willingness to ratify the agent's acts. (n) Article 1910. Supra. The principal is not bound by the contract of his agent should the latter exceed his power. • Effect: Contract is unenforceable, but only as regards him. • Hence, the principal may ratify the contract, by giving it the same effect as if he had originally authorized it. [NCC 1910(2)] The third person cannot set up the fact that the agent exceeded his authority to disaffirm his contract not only after the principal ratified the agent’s acts but even before such ratification where he has signed his willingness to ratify. [NCC 1901] • In such a case, the third person can be compelled to abide by his contract. Effect of ratification: Retroacts to the time of the act or contract. Who may ratify: Only the principal. • There must be knowledge on the part of the principal.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 50 Villanueva: Doctrine of apparent authority is actually akin to agency by estoppel. Ratification vs. Estoppel [From class discussion] RATIFICATION ESTOPPEL Conscious consent; it cured everything the agent did at the beginning. The effect retroacts to the time the agent entered into the transaction with third parties. It cures everything. Third person was led to believe that the principal clothed the agent with authority by acts which were committed consciously or not RATIFICATION ESTOPPEL Rests on intention, regardless of prejudice to another Rests on prejudice rather than intention Retroactive; makes the agent’s unauthorized act good from the beginning Operates upon something which has been done but after the misleading act and only extends to so much of such act as can be shown to be affected by the estopping conduct Confirmation of the unauthorized act or contract after it has been done or made Principal’s inducement to another to act to his prejudice Ratification may be complete without any elements of estoppel Estoppel in pais may sometimes amount to a ratification [De Leon, p. 575] Sir: There’s a thin line when you say the principal “was aware” of the acts of the agent • You might still be able to argue that there was ratification because there was knowledge. Effect on third persons: Distinctions are of little importance since the principal is bound by the acts of the agent. There is no solidary liability in ratification, under Article 1910. While in authority by estoppel, the Court has consistently held that both the agent and the principal would be held jointly and severally liable to third parties. • Note the case of Filipinas Life. There seems to be an interchange between these two concepts. While the SC used the doctrine of estoppel, it hinged its discussion on the knowledge of the principal. It ruled that the principal was jointly and severally liable with the agent, despite the fact that the basis for such liability was estoppel (although it used the word “ratification” in its discussion). Principal can be held liable under estoppel even in cases where he does not know that agent acted beyond the scope of authority. DOCTRINE OF IMPUTED KNOWLEDGE: Knowledge of the agent is considered knowledge of the principle. • What if the third person communicates something material to the execution of the agency? Will this bind the principal? YES o EXC: 1. Agent is in connivance with the third party 2. Communication is not related to the agency When is knowledge on the part of the principal required for him to become liable. Is knowledge of the principal an absolute requirement for him to remain liable? For crimes; for torts The agent is liable to third persons for his torts which result in an injury to the third person. If the tort is committed by the agent within the scope of his authority à both the principal and agent are liable. The third person is liability for tort to the principal when: 1. The third person damages or injures property or interest of the principal in the possession of the agent; 2. The third person colludes with the agent to injure or defraud the principal; 3. The third person person induces the agent to violate his contract with the principal to betray the trust reposed upon him by the principal. [De Leon, p. 546] Conditions for a valid ratification [Class Notes] 1. The principal must have the capacity and power to ratify. 2. The principal must have had knowledge or had reason to know of the material or essential facts about the transaction. a. The principal cannot ratify something he was not aware of b. What constitutes “material facts”? Those reasonably should be within the knowledge of the principal (sir: Gives person basis to decide on something) 3. He must ratify the act IN ITS ENTIRETY a. He cannot ratify only the parts that benefit him 4. The act must be capable of ratification; AND a. Are there acts that cannot be ratified? YES, VOID ACTS CANNOT BE RATIFIED b. Ex: The agent forged the signature of the principal. Can the principal ratify the act? NO, it would be against public policy. BUT this does not prevent the acts of the agent from being valid (ex: the principal is now estopped from questioning the validity of the signature when he affirmed that it was his — De Leon, citing US Jurisprudence) i. Sir: the best way to ratify a forged agreement is for the principal to execute another instrument (in this case it would already be the act of the principal ii. In the crime of forgery, who is the private injured party? it’s the principal (whose signature was forged) → Thus, the doctrine of estoppel could bind the principal if he acted in a way that led third