AGENCYSoriano vs. Compania General Art 1868

Suffice it to state that the records do not sufficiently prove the existence of an agency between the plaintiff and the defendant, for although defen-dant was authorized to sell plaintiff’s sugar at the best price obtainable and to credit plaintiff with the sale thereof, these facts alone do not estab-lish the existence of an agency. The authorities relied upon by plaintiff to support his contention that an agent is liable to pay interest to the princi-pal is therefore not applicable. in any case, the defendant is liable to make good the loss or injury that it had occasioned the plaintiff from its wrongful concealment of the shipment and disposition of plaintiffs sugar.

Allied Free Workers Union vs Compania Maritima Art 1868

The court a quo held that under the CONTRACT , AFWU was an independent contractor of MARITIMA. In this connection, it is interesting to note that the facts as found by the court a quo strongly indicate that it is AFWU itself who is the "employer" of those laborers. The facts very suc-cinctly show that it was AFWU, through its officers, which (1) selected and hired the laborers, (2) paid their wages, (3) exer-cised control and supervision over them, and (4) had the power to discipline and dismiss them. These are the very elements constituting an employer-employee relationship.19

Agent must not act for an adverse party. — An agent cannot serve two masters, unless both consent, or unless he is a mere middleman or inter-mediary (e.g., real estate broker) with no in- dependent initiative. (Babb & Martin, op. cit., p. 143; see Allied Free Worker’s Union [PLUM] vs. Com-pania Maritima, 19 SCRA 258 [1967].)

Air France vs. CA Art 1868

Since notice by a third party to the agent is notice to the principal, the third party is not liable for damages for failure of the agent to give notice to his principal. Thus, in a case where A, who handled travel arrange-ments of P, was duly informed by B, P’s travel agent, of the advice of the office manager of T (air carrier) of the rejection of the request for exten-sion beyond the period of their validity of plane tickets of P without paying

the fare differentials and additional travel taxes brought about by in-creased fare rate and travel taxes, the court ruled that, to all legal intents and purposes, A was the agent of P and notice to her was notice to P. (Air France vs. Court of Appeals, 126 SCRA 448 [1983].)

Conde vs. CA Art. 1869

Facts: On April 7, 1938, S sold a parcel of land to P with right of repur -chase within ten (10) years from the date of sale. On November 28, 1945, A, son-in-law of P, signed a document wherein it is stated that P has allowed the representative of S in the name of EA to repurchase the land, that P has received together with A the redemption price; and that S has repurchased the land. P, however, was not a signatory to the deed and there is nothing in said document showing that A was specifically au-thorized to act for and in behalf of P, the vendee a retro.According to P, A signed the document merely to show that he had no objection to the repurchase and that A did not receive the redemption price inasmuch as he had no authority from P. On the other hand, S claimed that A signed the deed in representation of his father-in-law (P) who was then seriously sick and that A received the repurchase price. It appears that from the execution of the repurchase document, S has been in possession of the property, land taxes have been paid by him, and P never repudiated the deed that A had signed.

Issue: Has S validly exercised his right of repurchase?

Held: Yes. “If, as alleged, S exerted no effort to procure the signature of P after he had recovered from his illness, neither did P repudiate the deed that A had signed. Thus, an implied agency must be held to have been created from his silence or lack of action, or his failure to repudiate the agency.” (Conde vs. Court of Appeals, 119 SCRA 245 [1982].)

Dela Pena vs Hidalgo Art 1869

Principal’s silence or lack of action, or failure to repudiate agency. — P’s property was being administered by A. Later, B took charge of the admin-istration of said property through the designation by A who had to absent himself from the place for reasons of health. P did not oppose the desig-nation of B nor did P appoint a new agent although the designation was expressly communicated to him. He remained silent for nearly nine years allowing B to take charge of the property.It must be concluded that B acted by virtue of an implied agency equiva-lent to a legitimate agency, tacitly conferred by P. (See De la Peña vs. Hidalgo, 16 Phil. 450 [1950].)Jimenez vs. Rabot Art. 1874

Did the authority conferred on Nicolasa by the letter (asking her to sell one of his properties) enable her to bind her brother?

YES, the authority expressed in the letter is sufficient to bind her brother.

The relevant provisions of law bearing on this point are contained in Article 1713 of the Civil Code, which requires that the authority to alienate land shall be contained in an express mandate. Subsection 5 of Section 335 of the Code of Civil Prodecure says that the authority of the agent must be in writ-ing and subscribed by the party to be charged. The Court found sufficient compliance with these requirements.

The purpose in giving a power of attorney is to substi-tute the mind and hand of the agent for the mind and hand of the principal; and if the character and extent of the power is so far defined as to leave no doubt as to the limits within which the agent is authorized to act, and he acts within those limits, the principal cannot question the validity of his act.In the present case the agent was given the power to sell either of the parcels of land belonging to the plaintiff. We can see no reason why the performance of an act within the scope of this authority should not bind the plaintiff to the same extent as if he had given the agent authority to sell "any or all" and she had conveyed only one.

Prats vs CA Art. 1875

Where it appears that the offer of the owner to sell his lands was formally accepted by the buyer after the exclu- sive authority in favor of the real estate broker to negotiate the sale had expired and the broker was not the efficient pro- curing cause in bringing about the sale, for the buyer “never wanted to be in any way guided by, or otherwise subject to, the mediation or intervention of the [broker] relative to the negotiation” as manifested by the request of the buyer to the broker not to be present in the meeting between the buyer and the owner, the court, while it denied the right of the bro- ker to the payment of P1,380,000.00 as his profes-sional fee as computed under the agency agreement, noting that the bro-ker “had diligently taken steps to bring back together” the owner and the buyer to whom the owner previously had offered the sale of the property, granted in equity to the bro- ker the sum of P100,000.00 by way of com-pensation for his efforts and assistance in the transaction which was fi-nalized and consummated after the expiration of his exclusive au- thority. (Pratts vs. Court of Appeals, 81 SCRA 360 [1978].)(b) With more reason, the broker or agent should be paid his commission

where he was the sufficient procuring cause in bringing the sale,34

where said agent, notwithstanding the expiration of his authority, none-theless, took diligent steps to bring back together the parties such that a sale was finalized and consummated between them. (Prats vs. Court of Appeals, 81 SCRA 360 [1978]

Yu chuck vs. King li Po Art. 1877

Except where the authority for employing agents and employees is ex-pressly vested in the board of directors or trustees of a corporation, an officer or agent who has control and management of the corporation’s business, or a specific part thereof, may bind the corporation by the em-ployment of such agents and employees as are usual and necessary in the conduct of such business. But the contracts of employment must be reasonable. (Yu Chuck vs. “Kong Li Po,” 46 Phil. 608 [1924].)

Strong vs Rapide Art 1878

The express mandate required by law to enable an appointee of an agency couched in general terms to sell must be one that expressly men-tions a sale or that includes a sale as a necessary ingredient of the act mentioned. (Strong vs. Gutierrez Repide, 6 Phil. 680 [1906](1) Where authority not in writing. — Every person dealing with an as-sumed agent is put upon an inquiry and must discover upon his peril, if he would hold the principal liable, not only the fact of the agency but the nature and extent of authority of the agent. (Veloso vs. La Urbana, 58 Phil. 681 [1933]; Strong vs. Gutierrez Repide, 6 Phil. 680 [1906

PNB vs. Sta Maria Art. 1879

Owner of property mortgaged is sought to be made liable for loan se-cured by debtor given authority to mortgage.

Facts: P granted to A a special power to mortgage the former’s real es-tate. By virtue of said power, A secured a loan from C (PNB) secured by a mortgage on said real estate.

Issue: Is P personally liable for said loan?

Held: No. A special power to mortgage property is limited to such author-ity to mortgage and does not bind the grantor personally to other obliga-tions contracted by the grantee in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning such other obligations contracted by the grantee.Consequently, A alone must answer for said loan, and P’s only liability is that the real estate authorized by him to be mortgaged would be subject to foreclosure and sale to respond for the obligations contracted by A.

But he cannot be held personally liable for the payment of such obliga-tions.It is not unusual in family and business circles that one would allow his property or an undivided share in real estate to be mortgaged to another as security either as an accommodation or for valuable consideration, but the grant of such authority does not extend to assuming personal liability, much less solidary liability, for any loan secured by the grantee in the ab-sence of express authority given by the grantor. The outcome would be different if the authority given were “to borrow money and mortgage.” (Phil. National Bank vs. Sta. Maria, 29 SCRA 303 [1969]; see De Villa vs. Fabricante, 105 Phil. 672.)

BPI vs De Coster

Husband, with authority to mortgage from wife, mortgagedher property to secure his pre-existing debt.Facts: W (wife) gave H (husband) a written power of attorney “to loan and borrow money and to mortgage her property.” H signed W’s name to a promissory note which would make her liable for the payment of the pre-existing debt of H or that of his firm, for which W was not previously liable, mortgaging her property to secure said debt.

Issue: Is the mortgage binding upon W?

Held: No. H acted outside the scope of his authority. (See Art. 1881.) The powers and duties of H as agent of W are confined and limited to those which are specified and defined his written power of attorney, which limi-tation is a notice to, and is binding upon, the person dealing with such agent. (Bank of the P.I. vs. De Coster, 47 Phil. 594 [1925].)A power of attorney to loan money does not authorize the agent to make the principal liable as a surety for the payment of the debt of a third per-son (Bank of the Phil. Islands vs. Coster, 47 Phil. 594 [1925].)

NPC vs. National Merchandising Corp.

Agent of seller guaranteed to purchaser availability of vessel to ship quantity of sulfur purchased contrary to seller’s instruction that sale be subject to availability of vessel.

Facts: NPC and NMC, the latter as representative of P, a New York firm, executed in Manila a contract for the purchase by NPC from P of crude sulfur for NPC’s Maria Cristina Fertilizer Plant in Iligan City. A perfor-mance bond was executed by DIC, an insurance company, in favor of NPC to guarantee P’s obligations. P was not able to deliver the sulfur due to its inability to secure shipping space. Under the contract, the non-availability of a steamer to transport the sulfur was not a ground for non-

payment of the liquidated damages in case of non-performance by the seller, and NMC even guaranteed and made itself “responsible for the availability of bottom or vessel.”It appeared that before the contract was signed, P advised NMC that the sale was subject to the availability of a steamer, and that NMC should not sign the contract unless it wished to assume full responsibility for the shipment. NMC did not disclose the cable to NPC when it finalized the contract. P disclaimed responsibility for the contract.NPC sued P, NMC, and DIC for the recovery of liquidated damages. The case against P was dismissed by the trial court for lack of jurisdiction be-cause it was not doing business in the Philippines. DIC contended that it was not liable to NDC because its bond was posted, not for NMC, but for P, which was not liable on the contract of sale.

Issue: Are NMC and DIC liable to NPC for the recovery of the stipulated liquidated damages?

Held: (1) Agent who exceeded his authority personally liable. — Yes. NMC is liable for damages because under Article 1897, the agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. The rule that every person dealing with an agent is put upon an inquiry and must discover upon his peril the authority of the agent, applies if the principal is sought to be held liable on the contract entered into by the agent, but not in this case where it is the agent that is “sought to be held liable on a contract of sale which was expressly repudiated by the princi-pal because the agent took chances, it exceeded its authority, and, in ef-fect, it acted in its own name.”

(2) Surety liable on its performance bond. — The contention of DIC can-not be sustained. The rule is that “want of authority of the person who ex-ecutes an obligation as the agent or representative of the principal will not, as a general rule, affect the surety’s liability thereon, especially in the absence of fraud, even though the obligation is not binding on the princi-pal.” (72 C.J.S. 525.) In this case, it was NMC that actually solicited the bond from DIC and NMC is being held liable under the contract of sale because it virtually acted in its own name. It became the principal in the performance bond. In the last analysis, DIC acted as surety for NMC. (National Power Corp. vs. National Merchandising Corp., 117 SCRA 789 [1982].)

Smith Bell vs Matti Art 1883

(1) General rule. — Article 1883 speaks of a case where the agent (a) being authorized to act on behalf of the principal, (b) acts instead in his own name. In such case, the general rule is that the agent is the one di -

rectly liable to the person with whom he had contracted as if the transac-tion were his own.The reason for the rule is that there is no representation of the principal when the agent acts in his own name. In effect, the resulting contractual relation is only between the agent and the third person. Therefore, the principal cannot have a right of action against the third person nor the

third person against him.44 (see Lim vs. Ruiz y Rementeria, 15 Phil. 367 [1910]; Herranz & Garriz vs. Ker & Co., 8 Phil. 162 [1907]; Smith Bell & Co. vs. Sotelo Matti, 44 Phil. 874 [1923]

OBLIGATIONS of AGENT PNB vs Manila Surety Art. 1884

Creditor-assignee neglected in its duty to collect the sums due the debtor-assignor from the latter’s debtors, thereby allowing such funds to be exhausted by other creditors.

Facts: A (PNB) had opened a letter of credit and advanced thereon $120,000.00 for 8,000 tons of hot asphalt in favor of P. Of this amount, 2,000 tons worth P280,000.00 were released and delivered to P under a trust receipt guaranteed by a surety. To pay for the asphalt, P constituted A, its assignee and attorney- in-fact, to receive and collect from D (Bu-reau of Public Works) the amount aforesaid out of funds payable to A. The assignment stipulated that the power of attorney shall remain irrevo-cable until P’s total indebtedness to A has been fully liquidated.A regularly collected from D for about 8 months. Thereafter, for unex-plained reasons, A stopped collecting from D the money falling due in fa-vor of P before the debt was fully collected, thereby allowing such funds to be taken and exhausted by other creditors.

Issue: Is A answerable for negligence in failing to collect the sums due its debtor (P) from the latter’s debtor (D)?

Held: Yes. A is guilty of neglect in collecting from D (not from P, the prin-cipal debtor), contrary to its duty as holder of an exclusive and irrevoca-ble power of attorney to make such collections since an agent is required to act with the care of a good father of a family (Art. 1887.) and becomes liable for the damages which the principal may suffer through his non- performance. It must not be forgotten that A’s power to collect was ex-pressly made irrevocable, so that D could very well refuse to make pay-ments to P, the principal debtor himself, and a fortiori, reject any de-mands by the surety. A’s negligence exonerated the surety. (Phil. Na-tional Bank vs. Manila Surety & Fidelity Co., Inc., 14 SCRA 776 [1965].)

Guitierrez vs. Hermanos & Co. Art. 1887

(4) Exemption from liability for failure of undertaking. — The agent has the power (not the right) in many cases to bind his principal even when he acts beyond his authority. Accordingly, the law imposes upon him the duty not to exceed the author- ity given him by his principal. However, when an agent, in ex- ecuting the orders and commissions of his princi-pal, carries out the instructions he has received from his principal, and does not appear to have exceeded his authority or to have acted with neg- ligence, deceit, or fraud, he cannot be held responsible for the fail-ure of his principal to accomplish the object of the agency. (Gutierrez Hermanos vs. Oria Hermanos, 30 Phil. 491 [1915];

Domingo vs. Domingo Art 1891

An agent acting at once for both contracting parties (e.g., vendor and vendee) assumes a double agency.(1) With knowledge of both principals. — Such agency is disap- proved of by law unless the agent acted with full knowledge and free consent of both principals, or unless his employment was merely to bring the parties together. In this case, recovery may be had by the agent. (see Domingo vs. Domingo, 42 SCRA 131 [1971], cited under Art. 1891.)

Secret profit. — It has been held that 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 breach of his loyalty to the principal and forfeits his right to collect the commis-sion 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; be-cause the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.

By taking such profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his com-mission is concerned, as if no agency existed. The fact that the principal may have been benefited by the valuable services of the said agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy. (Domingo vs. Domingo, 42 SCRA 131 [1971].)Paragraph 2 of Article 1891 is designed to stress the highest loyalty that is required of an agent. Article 1891 (and Art. 1909.) imposes upon the agent the absolute obligation to make a full disclosure or complete ac-count to his principal of all his transactions and other material facts rele-vant to the agency, so much so that the law does not countenance any

stipulation exempting the agent from such obligation and condemns as void such stipulation. The duty of an agent is likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as of the strictest justice. (Domingo vs. Domingo, supra.)

(1) The duty embodied in Article 1891 will not apply if the agent or broker acted only as a middleman with the task of mere- ly bringing together the vendor and the vendee, who themselvesthereafter will negotiate on the terms and conditions of the trans- action. (Domingo vs. Domingo, 42 SCRA 131 [1971].)

Austria vs. CA Art. 1891

Municiapal Council of Iloilo vs Evangelista Art. 1895(3) An attorney-in-fact empowered to pay the debts of the principal and to employ attorneys to defend the latter’s interests is impliedly empowered to pay attorney’s fees for services rendered in the interests of the princi-pal. (Municipal Council of Iloilo vs. Evangelista, 55 Phil. 290 [1930].)

(3) Form of renunciation. — It is not always necessary for the agent to re-nounce the agency expressly, as for example, where he has conducted himself in a manner clearly incompatible with his duties as agent.(b) When an agent institutes an action against his principal for the recov-ery of the balance in his favor resulting from the liquidation of the ac-counts between them arising from the agency, and renders a final ac-count of his operations, such actions are equivalent to an express renun-ciation of the agency, and terminates the juridical relation between them. Although the agent has not expressly told his principal that he renounced the agency, yet neither dignity nor decorum permits one to continue rep-resenting a person who has adopted an antagonistic attitude towards him. The act of filing a complaint against the principal is more expressive than words renouncing the agency. (Valera vs. Velasco, 51 Phil. 695 [1928].)

OBLIGATIONS of PRINCIPALSNational bank vs. Palma Art.1910-1911A promissory note and two mortgages executed by the agent for and on behalf of his principal, in accordance with a power of attorney executed by the principal in favor of the agent, are valid, and as provided by article 1727 of the Civil Code, the principal must fulfill the obligations contracted by the agent; but a mortgage on real property of the principal not made and

signed in the name of the principal, is not valid as to the princi-pal.

EXTINGUISHMENT of AGENCYRallos vs. Yangco Art. 1920-1927

Principal terminated his relations with his agent without giving notice to one who was especially informed of agent’s authority to act on his behalf.Facts: P sent a letter to B informing that he has opened in his steamship office “a shipping and commission department for buying and selling leaf tobacco and other native products” and that he had conferred upon A a public power of attorney “to perform in my name and on my behalf all acts necessary for carrying out my plans” with a request to “make due note of his (A’s) signature hereto affixed.” Accepting the invitation, B pro-ceeded to do a considerable business with P through A, as his factor.A converted to his own use part of the proceeds from the sale of tobacco leaf which were sent by B to A. Prior to the sending of said tobacco, P had severed his relations with A, which fact was not known to B and no notice of any kind was given to B of the termination of the relations be-tween P and A.Issue: Is P liable for A’s conversion?Held: Yes. Having advertised the fact that A was his agent and given B a special invitation to deal with A, it was the duty of P on the termination of the relationship of principal and agent to give due and timely notice thereof to B. Failing to do so, P is responsible to B for whatever the latter may have in good faith and without negligence sent to A without knowl-edge, actual or constructive, of the termination of such relationship. (Ral-los vs. Yangco, 20 Phil. 269 [1911].)

Dy Buncio & Co. vs. Ong Guam Can Art.1920-1927

Property was sold under a special power of attorney not giving authority to sell, executed after a general power was previously granted.Facts: P gave a general power of attorney to his son, A. About eight (8) years later, P executed in favor of A a special power of attorney which did not give A the express power to alienate the properties of P. There-after, A sold certain properties of P to B.C subsequently obtained attachment and execution against the same properties for a judgment debt against P.Issue: Did the second power of attorney supplant the first?Held: Yes. 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. If the new appointment with limited powers did not revoke the general power of attorney, the execution of the second power of attorney would have been a mere futile gesture. The properties in question were subject to attachment and execution, the title of P not having been divested by the sale made by A. (Dy Buncio vs. Ong Guan Gan, 60 Phil. 696 [1934].)

(1) Implied revocation of previous agency. — There is implied revocation of the previous agency when the principal appoints a new agent for the same business or transaction provided there is incompatibility. (Dy Bun-cio & Co. vs. Ong Guan Gan, 60 Phil. 696 [1934].)

Pasno vs. Ravina Art. 1930-1932

In this connection, it is to be noted that the law provides two remedies. The creditor here is not taking advantage of the first remedy for the mortgage security has not been abandoned. Rather is the second remedy invoked but until now unsuccess-fully since the mortgagee has not begun an ordinary action in court to foreclose the mortgage making the special administra-tor a party defendant.

The power of sale given in a mortgage is a power coupled with an interest which survives the death of the grantor. Conceding that the power of sale is not revoked by the death of the mortgagor, nevertheless in view of the silence of Act No. 3135 and in view of what is found in section 708 of the Code of Civil Procedure, it would be preferable to reach the conclusion that the mortgagee with a power of sale should be made to foreclose the mortgage in conformity with the procedure pointed out in section 708 of the Code of Civil Procedure. That would safeguard the interests of the estate by putting the estate on notice while it would not jeopardize any rights of the mortgagee. The only result is to suspend temporarily the power to sell so as not to interfere with the orderly administration of the estate of a decedent.

Herrera vs. Luy Kim Guan Art. 1930-1932

The death of the principal extinguishes the agency; but in the same way that revocation of the agency does not prejudice third persons who have dealt with the agent in good faith without no- tice of the revocation (Arts. 1921, 1922.), such 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 princi- pal or of any other cause which extinguishes the agency. (Her- rera vs. Luy Kim Guan, 1 SCRA 406 [1961]

Rallos vs. Felix Go Chan Art.

(a) Although a revocation of a power of attorney to be effective must be communicated by the parties concerned (see Arts. 1921 and 1922.), yet a revocation by operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch as “by legal fiction the agent’s exercise of authority is regarded as an execution of the principal’s contin-uing will.” (2 C.J.S. 1174.)

With death, the principal’s will ceases or is terminated; the source of au-thority is extinguished. (Rallos vs. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 [1978].)

(3) Duty to notify agent of principal’s death not imposed by law on latter’s heir. — “The Civil Code does not impose a duty on the heirs of the princi-pal to notify the agent of the death of the principal. What the Code pro-vides in Article 1932 is that if the agent dies his heirs must notify the prin-cipal thereof x x x. Hence, the fact that no notice of the death of the prin -cipal was registered on the certificate of title of the property in the Office of the Register of Deeds is not fatal to the cause of the estate of P. ’’ (Rallos vs. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 [1978].)