[Agency] Midterms Reviewer

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 51 persons to believe that it was his signature 5. The act must be done IN BEHALF of the principal a. When the agent acted for his own benefit, the principal CANNOT ratify it. ACTS THAT MAY BE RATIFIED Valid/void acts Acts that may be authorized may be ratified. Acts which are absolutely void cannot be authorized nor ratified. Voidable acts Acts which are merely voidable may be ratified. Unrevoked acts GR: A principal must ratify his agent’s unauthorized contract before revoked by the other contracting party. Criminal acts Criminal acts cannot be ratified. Tortious acts An agency to commit a tort would generally be inoperative and therefore, the ratification without more of a tort is inconceivable. [De Leon, p. 569] EFFECTS OF RATIFICATION BY THE PRINCIPAL With respect to the agent Relieves the agent from liability to the third party to the unauthorized transaction and to his principal. He may recover compensation for performing the act which has been ratified. With respect to the principal himself The principal who ratifies assumes responsibility for the unauthorized act but he is not liable for acts outside the authority approved by his ratification. Not liable for fraudulent misrepresentations made by the agent without his knowledge. With respect to third persons Ordinarily, a third person is bound by a ratification to the same extent as he would have been bound if the ratified act was authorized in the first place. Where a third person is liable to a principal under an unauthorized act of his agent, the third person may not be relieved of his liability on the theory that the principal ratified the agent’s acts merely because the principal made an unsuccessful effort to collect from the agent. Before ratification, the third party is free to revoke the unauthorized contract. Macondray v. Sellner FACTS: The defendant Sellner, as real estate broker of petitioner Macondray, was authorized to sell a parcel of land belonging to and on behalf of the latter. It was agreed upon between the parties that the defendant was to be paid a commission as to the excess of the plaintiff’s selling price (any amount in excess of P 17,175) The defendant found a vendee, Barretto, willing to purchase the property for P 18,892.50. The vendee was willing to close the sale provided that he be allowed time to examine the title and deed to the property. The defendant left the deed of conveyance of title over the property with the vendee on the understanding that once the vendee found the same to be satisfactory, he would issue a check for payment to the defendant. Several lapses of time occurred before the completion of the sale, prompting the petitioner to insist that on September 2, that the deal would be off if the vendee would not pay before 5pm of that same day The defendant was able to receive the check for payment on September 3, the next day The defendant then issued the petitioner a check for the selling price of P 17,175 and kept the excess as commission, as per their agreement The petitioner refused to accept the check claiming that the sale had been cancelled when the defendant failed to obtain the purchase price on September 2 ISSUE: W/N defendant is entitled to compensation – YES HELD: A real estate broker is entitled to compensation upon his/her finding of a purchaser. The broker becomes entitled to commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly. IN THIS CASE: although the negotiations had been “terminated” by the plaintiff, the defendant had already earned his commission long before then The revocation of the defendant’s authority after the “termination” of the sale did not relieve the petitioner of its obligation to sell the property to Barretto for the price and terms agreed upon when the agency was still in effect. To hold otherwise would offer a premium for fraud whereby a principal can terminate the contract of agency with a broker after the latter presents potential purchasers to the principal. Valenzuela v. CA FACTS: Petitioner Valenzuela and his agency was a General Agent of respondent Philamgen and was authorized to solicit and sell non-life insurance on the latter’s behalf. In consideration of this contract of agency and for the acts performed by Valenzuela as General Agent, he received a commission. At some point, Philamgen expressed its intent to split the commission 50-50 with Valenzuela, to which the latter refused. Because of Valenzuela’s refusal, Philamgen pressured and harassed Valenzuela, which resulted in the downward spiral of Valenzuela’s business as an insurance agent. Since Valenzuela continued to refuse their demands, Philamgen unilaterally terminated the General Agency Agreement of Valenzuela. Subsequently, Valenzuela and his agency filed a complaint for damages against Philamgen. ISSUE: W/N Philamgen is liable for damages – YES HELD: Philamgen cannot unilaterally terminate the contract of agency and such termination was done in bad faith There is an exception to the principle that an agency is revocable at will and that is when the agency has been given not only for the interest of the principal but for the interest of

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 52 third persons or for the mutual interest of the principal and the agent IN THIS CASE: Philamgen could not have unilaterally terminated the agency since the agency was coupled with an interest Valenzuela spent years building up his business and received commissions from Philamgen and its clients, and terminating the agency agreement would result in Valenzuela’s loss of income from commissions on the renewal of insurance policies of clients sourced from his agency. The Court also ruled that Philamgen merely terminated the contract of agency in order to appropriate the entire insurance business of Valenzuela. Erskine v. Chevrolet Motors: Where the principal terminates or repudiates the agent’s employment in violation of the contract of employment and without cause the agent is entitled to receive either: • The amount of net losses caused and gains prevented by the breach OR • The reasonable value of the services rendered. The agent is entitled to prospective profits which he would have made except for such wrongful termination provided that such profits are not conjectural, or speculative but are capable of determination upon some fairly reliable basis. The agent may also file a suit for compensation and damages. However, the determining factor of Philamgen’s liability is not that the agency was coupled by an interest, but because the agency was terminated by them in bad faith. If a principal acts in bad faith and with abuse of right in terminating the agency, then he is liable for damages pursuant to Art 19, 20, and 21 of the Civil Code. In the case at bar, it was clear that the termination of the agency was the nail in the coffin of Philamgen’s efforts to harass Valenzuela into splitting the commissions he received with them 50-50. De Castro v. CA FACTS: Artigo was authorized by the De Castros, via a contract of agency, to sell their 4 lots for P23M, 5% of which will be given to Artigo as commission. It However, after the sale of 2 of the lots were consummated, Artigo only received P48,893.76 as commission. Thus, he instituted a suit to collect the unpaid balance of his brokers commission. The De Castros argue that the failure to implead indispensable parties is fatal to the complaint since Artigo, as agent of all the four coowners (the other siblings Carmela and Jose), would be paid with the funds co-owned by the four co-owners. HELD: the SC held that the contention was WITHOUT LEGAL BASIS. When the law provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation. The agent may recover the WHOLE compensation from ANY ONE OF THE CO-PRINCIPALS, as in this case. Solidarity does not make a solidary obligor an indispensable party in a suit filed by the creditor. Art. 1216 of the Civil Code says that the creditor may proceed against any one of the solidary debtors, or some of them, or all of them at once. ● The solidarity arises from the COMMON INTEREST of the principals, and NOT from the act of constituting the agency. By virtue of this agency, the agent can recover from ANY PRINCIPAL the WHOLE compensation and indemnity owing to him by the others. ● The parties however may, by express agreement, negate this solidary responsibility. The solidarity does not disappear by the mere partition effected by the principals after the accomplishment of the agency. o IN THIS CASE: There was an admission by the De Castros in one of their pleadings that there was solidary liability among them ● If the undertaking is one in which several are interested, BUT ONLY SOME CREATE THE AGENCY, only the latter are solidarily liable, without prejudice to negotiorum gestio with respect to others. And if the power granted includes various transactions some of which are common and others are not, only those interested in each transaction shall be liable for it. ● When the law provides for solidarity of the obligation, as in the liability of co-principals in a contract of agency, each obligor may be compelled to pay the entire obligation. The agent may recover the WHOLE compensation from ANY ONE OF THE CO-PRINCIPALS, as in this case. Sir: Under 1915 → ALL the principals must concur in the appointment of the agent. Gonzales v. Habeerer FACTS: Plaintiffs Gomez & Gonzalez are husband & wife that sold a parcel of land owned by Gonzalez to defendant Haberer, with Gomez as Gonzalez’ agent. They filed an action to recover the sum of Php 34,260 from the defendant upon a written agreement for the sale of the land, & ask for Php10,000 damages for failure of defendant to comply with his part of the agreement. Defendant admitted that he hasn’t fully paid the purchase price of the land, but he also pointed out & argued that he found out that the plaintiffs falsely misrepresented themselves & made him believe that they were in possession of the land & the title of the same was not in dispute. In fact, the land was occupied by adverse claimants & the title was actually in dispute. He was unable to take possession of the land despite what was written in the contract executed by the parties because the entire area was occupied by adverse claimants & the title was disputed. The lower court decided in favor of the defendant, dismissed plaintiffs’ complaint, declared the contract rescinded & void, & granted Php30,000 with interest that the defendant prayed for in his counterclaim. ISSUE: W/N Gonzales can be charged with the representations of Gomez – YES HELD: Evidence leaves no doubt that some misrepresentations were made & that but for such misrepresentations, the defendant wouldn’t have been likely to enter into the agreement in the form it appeared Regarding Gonzalez’ contention that she cannot be charged with the misrepresentations of Gomez, it is sufficient to say that Gomez, in negotiating for the sale of the land acted, as the agent & representative of Gonzalez, his wife • Since Gonzalez accepted the benefit of the representations of her agent (her husband), she cannot escape liability for them.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 53 Sir: Is it always required for the benefit to receive benefits for him to be bound by the misrepresentations? NO. As long as he has knowledge, even if he does not get benefits, he will be bound. Sir: What if NO KNOWLEDGE, but received benefits? He will be bound if he later finds out that there was a misrepresentation (and does not rectify the same?) Tuason v. Orosco FACTS: Defendant's husband Juan Vargas, executed a power of attorney to Enrique Grupe, authorizing him, among other things, to dispose of all his property, and particularly of a certain house and lot in the city of Manila, for the price at which it was actually sold. Grupe was also authorized to mortgage the house for the purpose of securing the payment of any amount advanced to his wife, defendant Dolores, who was a necessary party to its sale or incumbrance since the property had been acquired with funds belonging to the conjugal partnership. Enrique Grupe and defendant Dolores Orozco obtained a loan from the plaintiff Tuason secured by a mortgage on the property referred to in the power of attorney. In the caption of the instrument evidencing the debt it is stated that Grupe acted for himself and also in behalf of Juan Vargas by virtue of the power granted him by the latter, and that Dolores Orozco appeared merely for the purpose of complying with the requirement contained in the power of attorney. The body of the instrument showed: • Enrique Grupe’s acknowledgement of having received the sum 3,500 pesos from plaintiff with a promise to pay it back within a year. • A declaration that of of the 3,500 pesos Grupe has received, he has delivered to Dolores Orozco the sum of 2,200 pesos, having retained the remaining 1,300 pesos for use in his business; that notwithstanding this distribution of the amount borrowed, he assumes liability for the whole sum of 3,500 pesos • rupe pledges as special security for the payment of the debt, 13 shares of stock in the 'Compañía de los Tranvías de Filipinas,' which shares he has delivered to his creditor duly indorsed so that the latter in case of his insolvency may dispose of the same without any further formalities. • To secure the payment of the 2,200 pesos delivered to Dolores Orozco, Grupe specially mortgages the house referred to in the power of attorney executed by Vargas to Grupe. • Dolores Orozco states that, in accordance with the requirement contained in the power of attorney executed by Vargas to Grupe, she appears for the purpose of confirming the mortgage created upon the property in question. The defendant denies having received the 2,200 pesos aforementioned in the instrument and contends that the loan with mortgage was void and not binding on her. She contends that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, the defendant’s husband Vargas, ISSUE: W/N the loan with mortgage contract was binding on defendant – YES HELD: The principal is directly liable to the creditor for the payment of a debt incurred by his agent acting within the scope of his authority. Irrespective of such liability on the part of the principal, the agent may bind himself personally to the payment of the debt incurred for the benefit and in behalf of his principal. In such a case the liability expressly incurred by the agent does not preclude the personal liability of the principal but constitutes a further security in favor of the creditor The SC established that defendant actually received the money as set forth in the instrument. Defendant's denial cannot overcome the proof to the contrary contained in the agreement. She was one of the parties to that instrument and signed it. This necessarily implies an admission on her part that the statements in the agreement relating to her are true. She executed another act which corroborates the delivery to her of the money in question—that is, her personal intervention in the execution of the mortgage and her statement in the deed that the mortgage had been created with her knowledge and consent. The appellant’s contention that the instrument is evidence of a debt personally incurred by Enrique Grupe for his own benefit, and not incurred for the benefit of his principal, Vargas, as alleged in the complaint cannot be sustained. A debt incurred by the agent is binding directly upon the principal, provided the former acted, as in the present case, within the scope of his authority. • The agreement, so far as that amount is concerned, was signed by Grupe as attorney in fact for Vargas. • Pursuant to instructions contained in the power of attorney: o The money was delivered to defendant Dolores. o To secure the payment of the debt, the house indicated in the power of attorney was mortgaged. o Defendant Dolores took part in the execution of the mortgage. The fact that the agent has also bound himself to pay the debt does not relieve from liability the principal for whose benefit the debt was incurred. The law does not provide that the agent can not bind himself personally to the fulfillment of an obligation incurred by him in the name and on behalf of his principal. On the contrary, it provides that such act on the part of an agent would be valid. (Art. 1725 of the Civil Code, now Art. 1897 of the NCC) • The individual liability of the agent constitutes in the present case a further security in favor of the creditor and does not affect or preclude the liability of the principal. • In the present case the latter's liability was further guaranteed by a mortgage upon his property Sps. Salvador v. Sps. Rabaja FACTS: Petitioner spouses were selling their subject property with the help of their agent, respondent Gonzales. Respondent spouses Rabaja, who were leasing an apartment in the subject lot had caught wind of the sale and were interested. Herminia Salvador had even introduced Gonzales to them as their administrator over the property. And so, the parties would come to execute a “Contract to Sell” and the respondents

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 54 would be making their payments to Gonzales all amounting to P950K so far, out of the total P5M consideration. The petitioners were however alleging that they had yet to receive any payment from Gonzales. So the respondents suspended further payment but as a result of that, petitioners used this as an opportunity to eject the respondents for non-payment of rentals. The respondents had come to institute this action for rescission and demand payment back. Petitioners would continue to defend that there was no contract in the first place and that Gonzales was never their agent, the SPA being a falsified document. ISSUE: W/N Gonzales, as agent of petitioner spouses, could validly receive payments from respondent spouses – YES HELD : Since there was a valid SPA, respondent spouses correctly made payments to Gonzales, it being like they paid the petitioner spouses themselves. If the petitioner spouses have an issue with not receiving payment, they must bring it up in a separate action against Gonzales herself. Gonzales also acted within the scope of her authority. The SPA precisely stated that she could administer the property, negotiate the sale and collect any document and all payments. Filipinas Life v. Pedroso FACTS: Pedroso was enticed by Valle (agent) to invest in a plan with 8% prepaid interest per month. She made a total investment of P47,000. She called the Escolta office of Filipinas Life and was able to confirm that there was such an investment scheme. Palacio also made a total investment of P49,550. They were both not able to withdraw their money so they filed an action for recovery. RTC ruled that Filipinas Life and its agents are jointly and solidarily liable. CA affirmed. HELD: The acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The Court held that Valle was an agent of Filipinas Life and this was confirmed by the managers in the Escolta office. While it is true that a person dealing with an agent is put upon inquiry and must discover at his own peril the agent’s authority, in this case, respondents did exercise due diligence in removing all doubts and in confirming the validity of the representations made by Valle. Gen. Rule - the principal is responsible for the acts of its agent done within the scope of his authority, and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes personally liable for the damage. But even if the acts of the agent beyond his authority does not bind the principal, once the latter ratifies it, he also becomes liable. Qui per alium facit per seipsum facere videtur. He who does a thing by an agent is considered as doing it himself. Manila Memorial v. Lansangan FACTS: Baluyot offered respondent Linsangan a memorial lot owned by petitioner MMPCI under Contract No. 25012 with a purchase price of P95,000. However, Baluyot would later issue Linsangan Contract No. 28660 instead with a purchase price of P132,250. When Linsangan objected to the new contract price, Baluyot executed a document confirming that while the contract price is P132,250.00, Linsangan would pay only the original price of P95,000.00. By virtue of this document, Linsangan signed Contract No. 28660. A couple of years later, Linsangan filed a Complaint for Breach of Contract and Damages when he was informed that Contract No. 28660 was cancelled. MMPCI countered that it was cancelled conformably with the terms of the contract because of nonpayment of arrearages. MMPCI further alleged that it was not aware of the arrangements entered into by Linsangan and Baluyot, as it in fact received a down payment and monthly installments as indicated in the contract. ISSUE: W/N MMPCI should be held liable – NO HELD: Persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. • The ignorance of a person dealing with an agent as to the scope of the latter’s authority is no excuse to such person and the fault cannot be thrown upon the principal. IN THIS CASE: It was not established that Linsangan even bothered to inqure whether Baluyot was authorized to agree to terms contrary to those indicated in the written contract, much less bind MMPCI by her commitment with respect to such agreement. • Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces obtained on forms provided by MMPCI. The terms of the offer to purchase are contained in such forms and, when signed by the buyer and an authorized officer of MMPCI, becomes binding on both parties. • That he and Baluyot had an agreement different from that contained in the Offer to Purchase should not affect MMPCI since Baluyot had no authority to alter the terms of the written contract provided by MMPCI. No ratification. Linsangan failed to show that MMPCI had knowledge of the arrangement MMPCI is also not estopped. There is no indication that MMPCI led linsangan to believe that Baluyot had the authority to alter the standard contracts of the company. There is also no showing that prior to signing the contract that MMPCI had any knowledge of Baluyot’s commitment to Linsangan. • Even assuming that Linsangan was misled by MMPCI’s actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent in his dealings with Baluyot, and could have easily determined, had he only been cautious and prudent, whether said agent was clothed with the authority to change the terms of the principal’s written contract. Manila Remnants v. CA FACTS: Petitioner Manila Remnant is a subdivision developer that had contracted with AU Valencia and Co. who is now its agent in executing contracts to sell to lot buyers. Respondent spouses were hopefuls who wanted to buy 2 lots from petitioner. So, 2 contracts to sell were issued to the spouses and they would continue to pay on a monthly basis. They did not know however that at the same time, AU Valencia had decided to sell the same lots to a certain Crisostomo, their own sales agent for no consideration (they do this to ramp up prices).

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 55 All through the years, the spouses would pay to AU Valencia but AU Valencia would never remit the payments in their name; the payments were all in the name of Crisostomo. Based on the records, it would show the spouses were never even lot buyers. It was only after petitioner discovered the discrepancies in collection that they revoked the agency granted. It was also only 3 years later that they provided notice of cancelled contracts to sell in the newspaper. And it was more years after that the spouses came to learn that AU Valencia was no longer an agent. So, the spouses instituted a petition for specific performance and damages. The lower courts made petitioner solidarily liable to the spouses for the damages. ISSUE: W/N petitioner should be held solidarily liable with AU Valencia and Crisostomo – YES, by the principle of ESTOPPEL GENERAL RULE: Art. 1897: The agent who acts as such is not personally liable to that party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. • By the tenor of the above, petitioner should have been in the clear because the agent clearly acted outside the limits of his authority. • BUT, there is an unique relationship that exists between the principal and agent – that is that the president of both firms were the same. HELD: Petitioner as principal is chargeable with the knowledge or constructive notice of that fact and because they did not do anything to correct it, they are deemed to have ratified the same. Estoppel Petitioner allowed its agent to act as though it had plenary powers • EXC to the RULE: Art. 1911: “Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.” o By petitioner’s own negligence, they had permitted AU Valencia to exercise powers not granted to it. Petitioner is liable based on estoppel, which in turn, is rooted in their neglectfulness to properly supervise and control the affairs of its agent, and adopt needed measures to prevent further misrepresentation. Rural Bank v. Ocfemia FACTS: Marife is the daughter of Francisca, a co-respondent in this case, and the late Renato, with five other corespondents, who are the siblings of the late Renato. Five parcels of land owned originally by her grandparents were mortgaged along with two others to the petitioner Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage. Her grandparents were not able to redeem the mortgaged properties during their lifetime so the mortgage was foreclosed and ownership was transferred to the petitioner bank. Five of the seven are in the possession of the respondents because they were sold by the petitioner bank to the parents of Marife, as evidenced by a Deed of Sale. When Marife processed the transfer of the properties in the name of her parents, the petitioner bank refused her request for a board resolution and made many alibis. She was told that the petitioner bank had a new manager and it had no record of the sale. She complied with the request of the petitioner for a copy of the deed of sale and receipt of payment. However, after several exchanges of letters between Marife and her counsel with the bank officials, the bank declined reiterating that it had no records of the sale, thus, they could not issue the required board resolution. HELD: If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority. The Court held that the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. Citing Board of Liquidators v. Kalaw: settled jurisprudence has it that where similar acts have been approved by the directors as a matter of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors. Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena, even though such agent is abusing her authority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank. In this light, the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent's authority.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 56 PART IV Rights and obligations of third parties dealing with agent Article 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions shown them. (n) The third person deals with an agent at his peril. Hence, he is bound to inquire as to the extent of the agent’s authority, especially when the act of the agent is of an unusual nature. Ignorance of the agent’s authority is no excuse. Hence, he may require the agent to produce his power of attorney to ascertain the scope of his authority or the instructions of the principal [NCC 1902]. Private or secret orders and instructions do not bind the third person. It cannot be invoked as against third parties if the agent has apparent authority. BA Finance v. CA FACTS: Gebbs International applied for and was granted a loan with Traders Royal Bank. As security for the loan, the Gaytano spouses bound themselves as sureties of Gebbs International. Wong, the credit administrator of BA Finance Corporation for and in behalf of the latter, also undertook to guaranty the loan through a letter-guaranty. When Gebbs International failed to pay, Royal Bank filed a complaint for a sum of money against the Gaytano spouses and BA Finance as alternative defendant. BA Finance raised the defense of lack of authority of its credit administrator to bind the corporation. HELD: It is a settled rule that 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 liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. The issue here is W/N BA Finance is bound by the letterguaranty issued by Wong, its credit administrator? The Court ruled in the NEGATIVE. BA Finance is not bound by the letterguaranty because Wong, the credit administrator, exceeded his authority in issuing such guaranty. Although petitioner corporation clearly authorized Wong through a memorandum to approve loans, nothing in the said memorandum expressly vests on Wong the power to issue guarantees. A power of attorney or authority of an agent should not be inferred from the use of vague or general words. Guaranty is not presumed, it must be expressed and cannot be extended beyond its specified limits Royal Bank also failed to dispose of its burden to prove that Wong acted within the authority given to him when it transacted with him. It is a settled rule that 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 liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it. The only evidence presented by Royal Bank is the testimony of Wong. The sole allegation of Wong in the absence of any other proof that he is authorized to bind BA Finance in a contract of guaranty with third persons should not be given weight. Apex Mining v. Southeast Mindanao FACTS: A motion for reconsideration was filed by SEM. The Assailed Decision held that the assignment of Exploration Permit (EP) 133 in favor of SEM violated one of the conditions stipulated in the permit. It also ruled that the transfer of EP 133 violated Presidential Decree No. 463, which requires that the assignment of a mining right be made with the prior approval of the Secretary of the Department of Environment and Natural Resources (DENR). Moreover, the Assailed Decision pointed out that EP 133 expired by non-renewal since it was not renewed before or after its expiration. It likewise upheld the validity of Proclamation No. 297 absent any question against its validity. In view of this, and considering that under Section 5 of Republic Act No. 7942, otherwise known as the “Mining Act of 1995,” mining operations in mineral reservations may be undertaken directly by the State or through a contractor, the Court deemed the issue of ownership of priority right over the contested Diwalwal Gold Rush Area as having been overtaken by the said proclamation. Thus, it was held in the Assailed Decision that it is now within the prerogative of the Executive Department to undertake directly the mining operations of the disputed area or to award the operations to private entities including petitioners Apex and Balite, subject to applicable laws, rules and regulations, and provided that these private entities are qualified. Apex, for its part, filed a Motion for Clarification of the Assailed Decision, praying that the Court elucidate on the Decision’s pronouncement that “mining operations, are now, therefore within the full control of the State through the executive branch.” Moreover, Apex asks this Court to order the Mines and Geosciences Board (MGB) to accept its application for an exploration permit. Balite echoes the same concern as that of Apex on the actual takeover by the State of the mining industry in the disputed area to the exclusion of the private sector. In addition, Balite prays for this Court to direct MGB to accept its application for an exploration permit. Camilo Banad, et al., likewise filed a motion for reconsideration and prayed that the disputed area be awarded to them. In the Resolution, the Court En Banc resolved to accept the instant cases. In resolving the issue whether the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to SEM, the Court ruled that the appellate court indeed err in resolving the case. MMC’s supposed right was extinguished by the expiration of its exploration permit and by its violation of the condition prohibiting the assignment of EP 133 by MMC to SEM. In addition, even assuming that SEM has a valid exploration permit, such is a mere license that can be withdrawn by the State. In fact, the same has been withdrawn by the issuance of Proclamation No. 297, which places the disputed area under the full control of the State through the Executive Department. The concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his principal.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 57 While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee. PART V Extinguishment of Agency Presumption: Agency is continuing. Exception: When there is anything that shows it is revoked or terminated. Agency is extinguished [NCC 1919] 1. By its revocation; 2. By the withdrawal of the agent; 3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; 4. By the dissolution of the firm or corporation which entrusted or accepted the agency; 5. By the accomplishment of the object or purpose of the agency; 6. By the expiration of the period for which the agency was constituted. Sir: Grounds under Art 1919 may be classified as to causes: a. by agreement: nos. 5 & 6; b. by subsequent acts of the parties, either, by act of both parties, or by unilateral act of one of them: nos. 1 & 2; c. by operation of law: nos 3 & 4 The grounds under Art 1919 are not exclusive. Other modes (under extinguishment of obligations) may apply such as: a. mutual withdrawal from the relationship; and b. supervening event that makes illegal or impossible the objective or purpose for which the agency is constituted, such as loss or destruction of the subject matter of the agency. Revocation Article 1920. The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied. (1733a) Article 1921.If the agency has been entrusted for the purpose of contracting with specified persons, its revocation shall not prejudice the latter if they were not given notice thereof. (1734) Article 1922. If the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of the revocation in a newspaper of general circulation is a sufficient warning to third persons. (n) Article 1923. The appointment of a new agent for the same business or transaction revokes the previous agency from the day on which notice thereof was given to the former agent, without prejudice to the provisions of the two preceding articles. (1735a) Article 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing directly with third persons. (n)

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 58 Article 1925.When two or more principals have granted a power of attorney for a common transaction, any one of them may revoke the same without the consent of the others. (n) 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) Article 1927. An agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of fulfilling an obligation already contracted, or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable. (n) GENERAL RULE: The principal may revoke at will (Art 1920), for any or without any reason on the part of the principal, in keeping with the truism that an agency is a highly personal relationship and one that is built upon trust and confidence However, even with the near absolute power of the principal to revoke, he may be held liable for damages in the following situations: 1. For breach of the contract of agency, if the same is one for a definite term or period, or if “irrevocable” until a certain period or until the purpose of the agency is accomplished. In this case, the agency will still be terminated, but the principal can be held liable for damages 2. No breach, but principal is in bad faith. Here, even if the agency has no period, it can be revoked at will – no breach, subject only to the requirements of good faith. THUS, if principal’s revocation is tainted w BF, he can be held liable for damages. a. However, in Dialosa v CA (1984), the agency contract where the agent as appointed as exclusive sales agent to sell, cede, dispose “until all the subject property as subdivided is fully disposed of” – is held by the SC as one with a period or one with a specific purpose – thus, principal was held liable for damages. Note that whether agency is with a period or revocable at will, revocation on the basis of breach of trust by the agent, is considered just cause. Form: There is no particular requirement as to form. It can be express or implied. GR: Revocation by the principal may be done at will. • Principal is not required to give a reason, in keeping with the concept that agency is built on trust and confidence. Express revocation: 1. Oral; 2. Verbal; 3. In writing. Requirements in order that revocation will be valid to third persons: 1. If contracting with specified persons: Notice to specified persons [NCC 1921] a. The purpose of agency is to contract with a specific third person, who is notified through verbal or a particular written power. This requires that revocation shall not take effect for the third person if the latter is not given notice for such revocation. b. Example, if a specific person whom the agent will transact is named in the PA or upon verbal instructions of the principal, and such person was informed or provided a copy of the PA c. In this case, revocation shall not take effect to third party if he was not given notice of the revocation 2. If general powers: Notice in newspaper of general circulation [NCC 1922] a. Agency is directed to contract with any other persons and the public in general. This will determine the kind or form of revocation required in order to bind third parties. Note that this is consistent under Art 1873, where the principal specially informs another either verbally of in writing, or states by public advertisement, that he has given a power of attorney to a third person, the “power shall continue in full force and effect until the notice is rescinded in the same manner that it was give”. Note NCC 1821. This contemplates a scenario where the agency or the agent was appointed to contract or enter into a contract with a specific person vs. NCC 1922 if the agent had general powers, revocation of the agency does not prejudice third persons who acted in good faith and without knowledge of the revocation unless published in a newspaper of general circulation. Implied revocation: 1. Appointment of new agent for same business [NCC 1923]; There is implied revocation of the previous agency where the principal appoints a new agent for the same business or transaction provided there is incompatibility. [Dy Buncio v. Ong Guan Gan] When revocation effective: Until the revocation is in some way communicated to the agent. The rights of third persons who acted in good faith and without knowledge of the revocation will not be prejudiced thereby. When no revocation: Where the appointment of another agent is NOT incompatible with the continuation of a like authority in the first agent, or the first agent is not given notice of the appointment of the new agent. [Garcia v. De Manzano] Note 2: “the effect of revocation is without prejudice to the rights of third parties who were not aware of or notified of such situation”. • Same requirements of notice to bind third persons, that is, if agency was for contracting with specified persons or agent had general powers (not directed towards specific person) Note of the word “same business or transaction’.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 59 • How about appointment of several agents, simultaneously or successively in a “non-exclusive” capacity, such as non-excusive authority to offer or sell the same piece of land issued by the landowner to different agents? This provision may not apply when several agents are appointed in a “non-exclusive” capacity, unless it is clearly intended in the wording of the latest power of attorney that it revoked the ones earlier issued. o In any case, if the principal fails to comply with the notice requirements for revocation, he will be held liable to third parties who deals with the agents in good faith. 2. When principal directly manages the business [NCC 1924]; Effect: To revoke the agency since there is no basis for the representation previously conferred. • Unless the only desire of the principal for him and the agent to manage the business together. When: the moment the principal directly manages. Import: this will have the effect of revocation ONLY if the acts of the principal would be inconsistent with the terms of the PA previously given to the agent. How about “co-management” by the agent and principal over the same business? Again, this is a matter of intent, which should be clearly established. If the acts of the principal in taking over the business is inconsistent to the agency earlier granted, then the act of the principal impliedly revoked the agency. 3. Special power revokes a general power [NCC 1926] Sir: Note of the phrase “granted to another agent”. Will a PA considered revoked if a new PA with different scope or extent, is issued to the “same agent”? The general power is impliedly revoked as to matters covered by the special power. A special power naturally prevails over a general power. Requirement: It is indispensable that notice of the revocation be communicated in some way to the agent. Exceptions to principal’s power to revoke GENERAL RULE: The principal may revoke the contract of agency at will (Art 1920), for any or without any reason on the part of the principal. EXCEPTION TO POWER OF PRINCIPAL TO REVOKE: Agency coupled with interest. [NCC 1927] 1. Bilateral contract depends on it; 2. Means of fulfilling an obligation already contracted; 3. If a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable Per De Leon, an agency “coupled with interest” is not a true agency, since the agent has a separate proprietary interest in the subject matter of the agency, and the principal losses “control” over the agent in the subject matter of the agency. • Still follow the Civil Code. Label or terminology of “irrevocability” is not controlling. To be “irrevocable” under this Art 1927, the “Interest” of agent should not be limited to commission or compensation, but one that extends to the very subject matter of the power conferred”. NOTE: that even if agency is irrevocable under Art 1927, the principal may still revoke if agent betrays the interest of the principal, and the agency was used to commit FRAUD. Revocability of agency coupled with interest Where there is no just cause A revocation can have no effect unless by express provision the authority remains revocable. Where there is just cause May be revoked. A power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney- in-fact betrays the interest of the principal. The irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent, for that would amount to holding that a power, coupled with an interest authorizes the agent to commit frauds against the principal. [Caleongco v. Claparols] Example of agency coupled with interest: When a power of attorney is constituted in a contract of real estate mortgage pursuant to Act No. 3135 which would empower the mortgagee to sell the property through extrajudicial foreclosure. e.g. Power to foreclose and sell under Act 3135 is one coupled with interest which survives after death of principal – same example under durable agency under Art. 1930 – see (85) Perez v PNB (1966) -- which upheld the right of the mortgageeWithdrawal Article 1928. The agent may withdraw from the agency by giving due notice to the principal. If the latter should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor, unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. (1736a) Article 1929. The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (1737a) The agent may withdraw from the agency. • Requirement: Due notice to principal. [NCC 1928] General Rule: If the principal should suffer any damage by reason of the withdrawal, the agent must indemnify him therefor.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 60 Exception: Unless the agent should base his withdrawal upon the impossibility of continuing the performance of the agency without grave detriment to himself. [Ibid.] Withdrawal of agent Without just cause Agent should indemnify the principal should he suffer damage by reason of such withdrawal. With just cause (e.g. impossibility of continuing the agency without grave detriment, fortuitous event) Agent cannot be held liable. Even when the agent withdraws from the agency for a valid reason, he must continue to act until the principal has reasonable opportunity to take the necessary steps to remedy the situation. [NCC 1929] Note: See (92) Valera v Velasco (1928), where the act of filing of a case by the agent against the principal is tantamount to an express renunciation/termination of the agency. Death 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) 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) Article 1932. If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. (1739) General Rule: Death automatically extinguishes the contract of agency, ipso jure, since basis of agency is representation. • Contracts entered into by agent are void. Exceptions: 1. Durable Agency [NCC 1930] o Cf. also “coupled with interest” vs Irrevocable Agencies under Art 1927 o When the agency has been constituted in the common interest of the principal and the agent [NCC 1927] o If in the interest of a third person who has accepted the stipulation in his favor. [NCC 1930] Irrevocable Agencies: An irrevocable power of attorney is obligatory only on the principal who executed the agency. It cannot affect one who is not a party thereto. [New Manila Lumber Co. v. Republic] 2. Acts done by agent without knowledge of principal’s death [NCC 1931] Requirements: Lack of knowledge of the death must exist at the time of contract with BOTH the agent and third parties. 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 any other extinguishing cause. [Herrera v. Luy Kim Guan; NCC 1931] Obligations of heirs if agent dies: Notify principal and adopt such measures as the circumstances may demand in the interest of the principal. [NCC 1932] In cases of multiple principals or agents – the effects of incapacity or death of one of the principals (or one of the agents) depend on the intention of the parties in constituting the agency. Dissolution of the firm/corporation Juridical personality is extinguished for every purpose that seeks to pursue “new business”, and personality continues only for purposes of liquidation. Accomplishment of the object or purpose Expiration of the period Civil interdiction, insanity, insolvency Since all these affect the capacity of the principal to give consent, the agency is extinguished upon occurrence since agency requires the presence, capacity, and solvency of both the agent and the principal. • But the status of the principal must be proven and established by preponderance of evidence, by the one alleging it. Effect: Contracts entered into by agent are considered voidable. Barreto v. Sta. Maria FACTS: Plaintiff Barretto was agent of the defendant and manager of Santa Marina’s business known as the La Insular Cigar and Cigarette Factory. A Chinaman didn’t pay his debt to the company, so the plaintiff felt responsible for the loss. He then sent a letter to Santa Marina tendering his resignation on the basis that he “thought that when the manager of a business trips up in a matter like this, he should tender his resignation. The position is at your disposal as you like.” Santa Marina did not reply; but he eventually appointed another agent. The plaintiff now seeks the payment of his salary and damages He claims that the revocation of his agency was in violation of the contract between him and defendant wherein the defendant obligated himself in writing to hire the services of plaintiff for so long a time as the plaintiff should not show discouragement and to compensate such services at the rate of P37,000 per year and that defendant without reason, justification, or pretext summarily and arbitrarily dispensed with his services and removed him from the management of the business. Since then, defendant has refused to pay Barretto compensation due him for services rendered. Plaintiff also claims that he suffered damages in the sum of P100,000. Defendant denied all the allegations made by plaintiff. He set forth that the plaintiff had no contract with him in which any period of time was stipulated. To prove this, evidence was provided by the defendant to show that a stipulation from the will of Don Joaquin Sana Marina (predecessor of the defendant) which provided for a salary,

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 61 allotment or emolument for plaintiff as judicial administration of Joaquin’s estate. This remuneration paid to him was independent from that which pertained to him as manager of La Insular factory. Defendant claims that he revoked for just cause the power conferred on plaintiff as his agent. HELD: In view of the resignation of the agent, the principal had to look for and appoint another –a lawful act which cannot serve as a ground upon which to demand indemnity. The agent could not expect, nor ought to have expected, that the principal should have insisted on his unsuccessful continuance of his position or that the principal should not have accepted the resignation. By the mere fact that the principal remained silent and later designated another person as agent, the agent (who resigned) should have understood that the resignation had been accepted. If the acceptance was not communicated to him immediately, it was owing to the circumstance that the owner did not have anyone else whom he could appoint. And as soon as the principal appointed another, the principal had revoked the agency. The Court held that the petitioner has no cause of action since his agency was validly revoked by the principal defendant. Firstly, plaintiff’s resignation was freely and voluntarily made as evidenced by the aforementioned letter plaintiff had sent to the defendant when the former had tendered his resignation. Secondly, even if the respondent did not reply to the plaintiff’s letter, the silence and lack of reply on the defendant’s part was sufficient indication that the resignation had been virtually accepted by the defendant. This is further established upon the appointment of another agent by the principal defendant. The plaintiff therefore had no right to demand an indemnity, particularly since he acknowledged that he had been negligent in the discharge of his duties. Lastly, from the mere fact that the principal no longer had confidence in the agent, the principal is entitled to withdraw it and to revoke the power he conferred upon the latter, even before the expiration of the period of the engagement or of the agreement made between them. But, in the present case, it has been shown that, between the deceased Joaquin Santa Marina and the latter's heir, now the defendant, and the plaintiff Barretto, on the other, no period whatever was stipulated during which the plaintiff should hold the office and manager of the said factory, it is unquestionable therefore that the defendant could lawfully revoke the power conferred upon the plaintiff and appoint in his place another person. Lustan v. CA FACTS: Petitioner Lustan leased his lot to respondent Parangan. During the period of lease, Parangan was regularly extending loans in small amounts to Lustan to defray her daily expenses and to finance her daughter's education. Lustan executed a Special Power of Attorney (SPA) in favor of Parangan to secure a loan from respondent PNB with the lot as collateral. A second SPA was executed by Lustan, by virtue of which, Parangan was able to secure 4 additional loans. The last 3 loans were without the knowledge of Lustan and all the proceeds therefrom were used by Parangan for his own benefit. Lustan signed a Deed of Definite Sale upon Parangan's representation that the same merely evidences the loans extended by Parangan unto Lustan. For fear that her property might be prejudiced by the continued borrowing of Parangan, Lustan demanded the return of her certificate of title, but Parangan asserted his rights over the property which allegedly had become his by virtue of the aforementioned Deed of Definite Sale. Lustan then filed an action for cancellation of liens, quieting of title, recovery of possession and damages against Parangan and PNB. HELD: Absent a valid revocation duly furnished to the mortgagee, an SPA continues to have force and effect as against third persons who had no knowledge of such lack of authority. SC ruled that the Deed of Definite Sale is in reality an equitable mortgage, as it was shown that the true intention of the parties was to obtain a loan secured by Lustan's land. Lustan, who is illiterate, had no knowledge that the contract she signed is a deed of sale. The outstanding mortgages on the lot can be enforced against Lustan. Since she gave her consent to the mortgages, the fact that the loans were solely for the benefit of Parangan would not invalidate the mortgage with respect to Lustan's property. Even granting that Lustan may not be assuming personal liability for the debt, her property shall nevertheless secure and respond for the performance of the principal obligation. Moreover, in accordance with Art. 1921, the SPAs she executed in favor of Parangan were continuing. Absent a valid revocation duly furnished to the mortgagee PNB, the same continues to have force and effect as against third persons who had no knowledge of such lack of authority. The SPA executed by Lustan in favor of Parangan duly authorized the latter to represent and act on behalf ofthe former. Having done so, Lustan clothed Parangan with authority to deal with PNB on her behalf. The SPA particularly provides that the same is good not only for the principal loan but also for subsequent commercial, industrial, agricultural loan or credit accommodation that the attorney-in-fact may obtain and until the power of attorney is revoked in a public instrument and a copy of which is furnished to PNB. However, Lustan has a right to demand proportional indemnification from Parangan with respect to the sum paid to PNB from the proceeds of the sale of her property in case the same is sold to satisfy the unpaid debts. Perez v. PNB FACTS: Vicente Perez mortgaged his lot to PNB. After he died, pursuant to authority granted it in the mortgage deed, PNB caused the mortgaged properties to be extrajudicially foreclosed. However, the widow and heirs were not notified of such foreclosure. The widow and heirs of Vicente Perez instituted this case against PNB, seeking to annul the extrajudicial foreclosure sale and title and to recover damages, claiming that PNB had acted illegally and in bad faith. The trial court ruled that PNB should have foreclosed its mortgage in court, and the power to sell contained in the deed of mortgage had terminated upon the death of the mortgagor, Vicente Perez. HELD: The power to foreclose extrajudicially survived the death of the mortgagor. The SC reversed the lower court’s judgment. Under the Rules of Court, a mortgage-creditor has a right to foreclose extrajudicially the property of the deceased mortgagor. Thus, PNB’s extra-judicial foreclosure was valid. Moreover, the power to foreclose extrajudicially survives the death of the mortgagor. There is an argument that foreclosure

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 62 by PNB under its power of sale is barred upon death of the debtor, because agency is extinguished by the death of the principal [Article 1919 of the Civil Code]. However, this neglects to take into account that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection. It is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an essential and inseparable part of that bilateral agreement. In the interest of justice, the family of the deceased may still redeem the property. PNB failed to give notice of the foreclosure to the latter's widow and heirs. Such failure, in effect, prevented them from blocking the foreclosure through seasonable payment, as well as impeded their effectuating a seasonable redemption. Thus, both justice and equity would be served by permitting herein appellees to redeem the foreclosed property. Lim v. Saban FACTS: Ybañez entered into an agency agreement with respondent Saban, authorizing him to find a buyer for his property at P200k with the stipulation that the purchase price in excess of the P200k, as well as the other expenses incident to the sale, would be respondent’s commission. Through Saban’s efforts, the property was sold to petitioner Lim and the spouses Lim for P600k. After the sale, petitioner Lim remitted to Saban the amounts of P113,257 for payment of taxes and P50,000 as broker’s commission. She also issued 4 postdated checks in his favor. Later, Ybañez asked Lim to cancel all checks issued in Saban’s favor, and instead extend another partial payment to himself. Thus, Saban filed a complaint against Ybañez and petitioner for collection of a sum of money, alleging that they connived to deprive him of his sales commission by withholding payment. HELD: A broker has the right to his commission for finding a suitable buyer for the seller’s property even though the seller himself consummated the sale with the buyer. It would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker’s efforts The Court held that Saban is entitled to his commission, as the agency was not revoked when Ybañez requested Lim to cancel the checks payable to Saban, given that he already performed his obligation as agent. The Court explained that the right of a broker to his commission for finding a suitable buyer for the seller’s property even though the seller himself consummated the sale with the buyer was recognized, because it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the broker’s efforts. Moreover, a broker still has the right to his commission although the seller revoked their authority to act in his behalf after finding a buyer. Saban may recover from Lim, though she was not a party to the agency agreement, because it is evident that Ybañez and petitioner connived to deprive Saban of his commission by dealing with each other directly and reducing the purchase price of the lot and leaving nothing to compensate Saban for his efforts. The case against Ybañez was dismissed as he passed during the pendency of the case. Diolosa v.CA FACTS: Quirino Baterna, a real estate broker, was made the exclusive sales agent of the Spouses Diolosa for the sale of the latter’s properties in a subdivision in Iloilo. Under the contract, such agency will exist “until all the subject property as subdivided is fully disposed of.” However, on September 27, 1986, the Spouses Diolosa terminated Baterna’s services as their agent. This led to Baterna filing an action against them for the collection of commissions and damages. ISSUE: W/N the Sps. Diolosa (principals) could terminate the agency agreement without paying damages to Baterna (agent) – NO. HELD: Under the parties’ contract of agency (see facts), the Sps. Diolosa allowed the private respondent "to dispose of, sell, cede, transfer and convey x x x until all the subject property as subdivided is fully disposed of." The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the Sps. revoked the contract with private respondent in a letter, they become liable to the private respondent for damages for breach of contract. New Manila v. Republic FACTS: The Republic of the Philippines, through the Director of Public Schools entered into a contract with Alfonso Mendoza to build two school houses. Mendoza procured the lumber from New Manila Lumber Company, Inc.. Before Mendoza could receive payment for the school houses, he executed a power of attorney authorizing NMLCI to collect all amounts due to Mendoza from the Republic. The Republic received the originals of the power of attorney, and promising NMLCI it would pay it. However, Mendoza demanded and received the payment instead, prompting NMLCI to file against the Republic. The CFI and SC dismissed NMLCI’s complaint. It held that the latter’s recourse under Act No. 3688 was to intervene in an existing case between the Republic and Mendoza against the latter’s bond. HELD: The Republic was NOT a party to the execution of the power of attorney. Additionally, the Director of Public Schools has no authority to bind the Republic to the payment. Such action is subject to approval by the Auditor General. The State cannot be sued without its consent. The SC cites Articles 1920 and 1924 to determine that the agency granted by Mendoza to MNLCI was revoked upon Mendoza demanding and collecting the amount from the Republic. When the act of the contractor (Mendoza) in directly collecting the sums due from the Republic was deemed a revocation of the SPA to collect earlier issued in favor of Manila Lumber. However, here, the “irrevocability” is only obligatory on the part of the principal (Mendoza), and not to third party (Republic) Dy Buncio v. Ong Guan FACTS: Plaintiff Dy Buncio & Company, Inc. claimed that the rice-mill and camarin belonged to its judgment debtor, Ong Guan Can (principal). Defendants Juan Tong and Pua Giok Eng, on the other hand, claimed as owner and lessee of the owner by virtue of a deed dated 1931 by Ong Guan Can Jr. (agent)

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 63 The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong Guan Can, sells the rice-mill and camarín for P13,000 and gives as his authority the power of attorney dated 1928, a copy of this public instrument being attached to the deed and recorded with the deed in the office of the register of deeds The receipt of the money acknowledged in the deed was to the agent, and the deed was signed by the agent in his own name and without any words indicating that he was signing it for the principal HELD: The title of Ong Guan Can was NOT divested to defendants by the so-called deed of 1931. The making and accepting of a new power of attorney, whether it enlarges or decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke the latter when the two are inconsistent • Article 1732 of the Civil Code is silent over the partial termination of an agency • If the new appointment with limited powers does not revoke the general power of attorney, the execution of the second power of attorney would be a mere futile gesture IN THIS CASE: The title of Ong Guan Can not having been divested by the so-called deed of 1931, his properties are subject to attachment and execution • Leaving aside the irregularities of the deed and coming to the power of attorney referred to in the deed and registered therewith, it is at once seen that it was not a general power of attorney but a limited one, which did not give the express power to alienate the properties in question (Article 1713 of the Civil Code) • Appellants’ claim that this defect was cured by the deed in 1920, which purported to be a general power of attorney given to the same agent, is untenable (since a subsequent deed was executed, which was limited in nature, thereby supplanting/revoking the previous one) Where the previous GPA was held revoked by the latter PA when the 2 are inconsistent, - the latter PA was a limited one and did not include the power to alienate. The SC held that the “making or accepting of new PA, whether it enlarges of decreases the power of the agent under the prior PA, must be held to supplant or revoke the latter when the 2 are inconsistent.” Caleongco v. Claparols FACTS: Eduardo Claparols operated a factory for the manufacture of nails in Talisay. Claparols executed in favor of Vicente Coleongco an SPA to open and negotiate letters of credit, sign contracts, bills of lading, invoices, and papers covering transactions; to represent Claparols and the nail factory; and to accept payments and cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. Claparols suddenly received an alias writ of execution to enforce a judgment against him by PNB despite the fact that the preceding September he had submitted an amortization plan to settle the account. Claparols managed to have the execution levy lifted. He consulted lawyers and revoked the SPA and informed Coleongco. Coleongco protested. Claparols dismissed the Coleongco as manager of the plant and asked C. Miller & Company, auditors, to go over the books and records of the business. An action for complaint for breach of contract was filed by Coleongco against Claparols. HELD: The Supreme Court ruled that Claparols may validly revoke the SPA. Coleongco acted in bad faith. His letters to PNB attempt to undermine the credit of the principal and to acquire the factory of Claparols. Coleongco’s letter to his cousin Kho To instructing the latter to reduce half of the usual monthly advances to Claparols on account of nail sales to compel him to extend the contract so that Coleongco has a share in the profits of the factory in better terms and ultimately own his factory. Coleongco also attempted to have Agsam pour acid on the machinery and illegally diverted funds to his own benefit. The surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio are acts of deliberate sabotage by the agent that fully satisfied the revocation of the power of attorney by Claparols and his demand of accounting from Coleongco. Valera v. Velasco FACTS: Federico Valera executed powers of attorney in favor of Miguel Velasco, authorizing the latter to manage Valera’s usufructuary right over a Manila property. A misunderstanding arose when, after liquidation of assets, Valera owed Php1000 to Velasco, which the former refused to pay. This caused Velasco to file a complaint in the CFI against Valera for the same, receiving favorable judgment. The sheriff levied upon Valera’s right of usufruct to satisfy the amount owed Velasco. After a series of sales and transfers, Velasco himself would come into possession of Valera’s old right of usufruct. Valera filed against Velasco, stating that the latter breached his obligation as an agent in acquiring the property he was duly authorized to administer. HELD: The SC held that despite Velasco failing to expressly renounce the agency, his act in filing against Valera was a clear sign that he renounced the same. Said act was held to have expressed the renunciation of the agency more than words could ever do. As a result, Velasco validly acquired the usufructuary right. The fact that an agent institutes an action against his principal for the recovery of the balance in his favor resulting from the liquidation of the accounts between them arising from the agency, and renders and final account of his operations, is equivalent to an express renunciation of the agency, and terminates the juridical relation between them. Pasno v. Ravina FACTS: Gabina Labitoria mortgaged 3 parcels of land to PNB to secure a loan of P1,600. In the mortgage PNB was given the power to remove, sell or dispose of the property in accordance with Act No. 3135. After Labitoria died, a special administrator was appointed to take possession of the mortgaged properties. PNB asked the sheriff to proceed with foreclosing the properties as the state was unable to comply with the conditions of the mortgage, but this was contested by the administrator, who filed a motion for the sheriff to abstain from foreclosing them. The PNB elevated the case to the SC, alleging it had the right to foreclose Labitoria’s mortgaged properties.

Law 173 | Agency | Prof. John Red Ignacio | Zamora | D2022 64 HELD: The SC ruled in favor of the estate, holding that although the power of sale given in a mortgage survives the death of the grantor, said power must be suspended while estate proceedings are ongoing. The power of sale given in a mortgage is a power coupled with an interest which survives the death of the grantor. However, this power must be temporarily suspended in case of ongoing estate proceedings as to not interfere with its orderly administration. See (93) Pasno v Ravina (1930) and (85) Perez v PNB (1966) -the Power to foreclose and sell under Act 3135 is one coupled with interest which survives after death of principal. In Perez v PNB (1966), the SC upheld the right of the mortgagee-creditor to foreclose extrajudicially under Sec 7, Rule 86 of the then Revised Rules of Court. Ramos v. Caoibes FACTS: Concepcion Ramos appointed Caoibes through a power of attorney to collect an amount due him from the Philippine War Damage Commission. Half of that amount will then be given to the sister of Concepcion and half to her niece and nephew as evidenced by an affidavit. Days after Concepcion died, a Check was issued to Caoibes when he presented the power of attorney and affidavit and later on encashed it for himself. The administratrix discovered the collection made by Caoibes. The administratrix filed to the court asking Caoibes to deposit the money to the clerk of court. Caoibes contended that he will deliver half of the amount to the clerk of court and then said that he had the right to retain half of the money by virtue of the power of attorney and the Affidavit. HELD: An agency is terminated, among other causes, by the death of the principal or of the agent. The Court herein ruled that Caoibes has no right to retain the money. Caoibes as an agent had the obligation to deliver the amount collected by virtue of the power of attorney to his principal, Concepcion or the administratrix since she died. Nowhere in the power of attorney did it state that the was a cession of rights made in favour of Caoibes. And the prevailing provision during the time of the transaction stated that a contract of agency is deemed gratuitous unless the agent is a professional agent and there was no showing that Caoibes was such. Lastly, an agency is terminated by death of the principal or of the agent. When Caoibes made use of the power of attorney, the principal was already dead. Sir: Wherein the agent (Caoibes) made use of the SPA (to claim amounts from War Damage Commission) after the principal was already dead. The death of principal terminated the agency, thus, the agent was ordered to turn-over the funds to the administratrix of the estate of the deceased. Herrera v. Luy Kim Guan FACTS: Natividad Herrera, daughter of Luis Herrera who executed a general power of attorney in favor of Luy Kim Guan to sell and administer his properties, filed an action for recovery of 3 parcels of land owned by her father. Natividad questioned the validity of the transactions entered into by Luy Kim Guan on the ground that agency was already extinguished (by way of death of Luis Herrera) at the time the lots were sold. HELD: The death of the principal does not render the act of an agent unenforceable, where the latter had no knowledge of such extinguishment of the agency. The SC held that Natividad was not able to prove by evidence that Luis indeed died before the transactions of sale were entered into by Luy Kim Guan. Even assuming arguendo that Luis did in fact die before the sales were executed, Natividad failed to show that Luy Kim Guan knew of Luis’ death. The death of the principal would not automatically render the acts of the agent unenforceable if the agent did not know of such extinguishment (principal’s death). Sir: When the sale of the land by the agent (Kim Guan) because: (1) plaintiff (heir of principal Luis Herrera) failed to establish death of the principal at the time the sale was entered into by agent; and (2) even assuming that principal died before the sale, it was not shown that the agent knew of the principal’s death (in China). Rallos v. Felix Go Chan FACTS: 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. HELD: Upon appeal to the SC, the Court ruled that the sale was null and void. Agency is by nature personal, representative, and derivative. As such, the death of the principal ipso jure extinguishes the contract of agency. There are exceptions to this rule, and applicable to the case at bar is Art. 1931 of the Civil Code. However, in order for contracts executed by an agent to be held valid despite the death of the principal, two requisites must concur: (1) that the agent had no knowledge of the death of the principal, and (2) that the third party contracting with the agent had done so in good faith. In the present case, Simeon knew of the death of his sister before contracting with the respondent, thus the exception in Art. 1931 cannot validate his acts as agent. Hence, the decision of the CFI declaring the sale void was reinstated. Sir: When the sale by agent of the ½ share was void being done after the death of the principal (Concepcion Rallos). Under Art 1931, the act of the agent after the death of the principal is valid only under 2 conditions: (1) the agent acted without knowledge of principal’s death; and (2) the third party acted in good faith