Rallos v. Felix Go Chan & Sons Realty Corp., G.R. No.

L-24332, 31 January 1978

FACTS:
An SPA was executed by sisters Concepcion and Gerundia in favor of their brother Simeon for
the sale of a parcel of land co-owned by the two. Months after Conception died, Simeon sold the
undivided shares of his sisters to herein respondent Felix Go Chan & Realty Corp. Petitioner
Ramon Rallos, administrator of the late Concepcion’s estate, prayed that the sale of the
undivided share of the deceased be invalidated and a new certificate be issued in the name of
respondent corporation and Concepion’s intestate estate, plus damages. CFI ruled in favor
of petitioner and granted the payers but CA reversed the decision. Respondent’s MR was further
denied.

ISSUE:
Whether the sale entered into by an agent is valid although executed after death of the principal.

HELD:
No, the sale is void because Simeon’s authority as an agent of Concepcion was extinguished
upon her death.

Article 1317 provides that no one may contract in the name of another without being authorized
or unless he has, by law, a right to represent him. Article 1919 furthers that the death of the
principal terminates the agency.

The case at bar is also not among the exceptions whereby an agent’s acts bind the principal even
after the latter’s death because of Simeon’s knowledge of Concepion’s death is material. Hence,
the sale was null and void.
Orient Air Services vs. CA
Facts:
American Air, an air carrier offering passenger and air cargo transportation, entered into a
General Sales Agency Agreement with Orient Air, authorizing the latter to act as its exclusive
general sales agent for the sale of air passenger transportation. Orient air failed to remit the net
proceeds of sales for several months prompting American Air to undertake the collection of the
proceeds of tickets sold originally by Orient Air and terminating their agreement.

American air instituted suit against Orient Air for the settlement of past outstanding funds in
possession of the latter. Orient Air contended that because of the unpaid overriding commissions
it retained the sales proceeds before remitting the balance to American Air. American Air
contended that the sale must be made by Orient Air and the sale must be done with the use of
American Air’s ticket stocks in order for it to be entitled to the overriding commission. On the
other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission
covers the total revenue of American Air and not merely that derived from ticketed sales
undertaken by Orient Air because it was an exclusive General Sales Agent. CA held that Orient
Air is entitled to commissions and ordered American Air to reinstate Orient Air as its General
Sales Agent.

Issue:
1) Whether or not Orient Air is entitled to commissions.
2) Whether CA is correct in ordering reinstatement of Orient Air as an agent.

Held:
1.) Yes. Orient Air was entitled to an overriding commission based on total flown revenue.
American Air’s perception that Orient Air was remiss or in default of its obligations under the
Agreement was, in fact, a situation where the latter acted in accordance with the Agreement—
that of retaining from the sales proceeds its accrued commissions before remitting the balance to
American Air. Since the latter was still obligated to Orient Air by way of such commissions.
Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American
Air. The latter’s termination of the Agreement was, therefore, without cause and basis, for which
it should be held liable to Orient Air.

2.) No. CA in effect compels American Air to extend its personality to Orient Air. Such would
be violative of the principles and essence of agency, defined by law as a contract whereby “a
person binds himself to render some service or to do something in representation or on behalf of
another, WITH THE CONSENT OR AUTHORITY OF THE LATTER. In an agent-principal
relationship, the personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the
latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court.
MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAÑA, petitioners,
vs.
EDUARDO R. GULLAS and NORMA S. GULLAS, respondents.
G.R. No. 143978 December 3, 2002
Facts: Respondents, were the registered owners of a parcel of land, they executed aspecial power
of attorney authorizing petitioners Tan, a licensed real estate broker, and hisassociates Tecson
and Saldaña, to negotiate for the sale of the land, at a commission of 3% of thegross price. Tan
contacted the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), areligious
organization interested in acquiring a property. The Sisters, who had already seen andinspected
the land, found the same suitable for their purpose and expressed their desire to buy it. However,
they requested that the selling price be reduced. Respondents agreed to sell the property to the
Sisters of Mary. Petitioners went to see respondents who refused to pay the broker’s fee and
alleged that another group of agents was responsible for the sale of land to the Sisters of Mary.
Petitioners filed a complaint against the defendants for recovery of their broker’s fee. They
alleged that they were the efficient procuring cause in bringing about the sale of the, but that
their efforts in consummating the sale were frustrated by the respondents who, in evident bad
faith, malice and in order to evade payment of broker’s fee, dealt directly with the buyer whom
petitioners introduced to them.
Issues:
(1) Whether or not the petitioners are entitled to the brokerage commission.
(2) An agent distinguished from a broker.
Rulings:
(1) The records show that petitioner Tan is a licensed real estate broker, and other petitioners his
associates. "Broker" as "one who is engaged, for others, on a commission, negotiating contracts
relative to property with the custody of which he has no concern; the negotiator between other
parties, never acting in his own name but in the name of those who employed him. x x x a broker
is one whose occupation is to bring the parties together, in matters of trade, commerce or
navigation." The petitioners were responsible for the introduction of their presentatives of the
Sisters of Mary to respondent.
(2) There was no dispute as to the role that petitioners played in the transaction. "An agent
receives a commission upon the successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually
made." Clearly, therefore, petitioners, as brokers, should be entitled to the commission whether
or not the sale of the property subject matter of the contract was concluded through their efforts.
Manotoc vs Court of Appeals Digest
Facts: Ricardo Manotoc Jr. was one of the two principal stockholders of Trans-Insular
Management Inc. and the Manotoc Securities Inc., a stock brokerage house. He was in US for a
certain time. He went home to file a petition with SEC for appointment of a management
committee for both businesses. Pending disposition of the case, the SEC requested the
Commissioner of Immigration not to clear Manotoc for departure, and a memorandum to this
effect was issued by the Commissioner. Meanwhile, six clients of Manotoc Securities Inc. filed
separate criminal complaints for estafa against Manotoc. Manotoc posted bail in all cases. He
then filed a motion for permission to leave the country in each trial courts stating as ground
therefor his desire to go to the United States, "relative to his business transactions and
opportunities." His motion was denied. He also wrote the Immigration Commissioner requesting
the recall or withdrawal of the latter's memorandum, but said request was also denied. Thus, he
filed a petition for certiorari and mandamus before the Court of Appeals seeking to annul the
judges' orders, as well as the communication-request of the SEC, denying his leave to travel
abroad. The same was denied; hence, he appealed to the Supreme Court. He contends that having
been admitted to bail as a matter of right, the courts which granted him bail could not prevent
him from exercising his constitutional right to travel.
Issue: Whether a court has the power to prohibit a person admitted to bail from leaving the
Philippines.

Held: A court has the power to prohibit a person admitted to bail from leaving the Philippines.
This is a necessary consequence of the nature and function of a bail bond. Rule 114, Section 1 of
the Rules of Court defines bail as the security required and given for the release of a person who
is in the custody of the law, that he will appear before any court in which his appearance may be
required as stipulated in the bail bond or recognizance. The condition imposed upon petitioner to
make himself available at all times whenever the court requires his presence operates as a valid
restriction on his right to travel. Indeed, if the accused were allowed to leave the Philippines
without sufficient reason, he may be placed beyond the reach of the courts. (Manotoc vs Court of
Appeals, G.R. No. L-62100, May 30, 1986)
Inland Realty Investment Service, Inc. v. Court of Appeals, G.R. No. 76969, 9 June 1997

Inland realty Invetsment Services, Inc. is a corporation engaged in the real estate business and
brokages. Gregotio Araneta Inc., through its Assistant Manger Armando Eduque, granted Inland
Realty the Authority to sell on a first comoe first served basis the holdings of Gregorio Araneta,
Inc. After receiving a proposal letter from the Inalnd Realty, Stanford Microsystem, Inc. a
Prospective buyer, counterproposed to nuy the shares. The authority to sell given to Inland
Realty by Gregorio Araneta Inc. was extended for three times. On july 8, 1977, Inland Realty
finally sold the shares of stock in Architect’s Building Inc. to Stanford Microsystems, Inc. for
13.5M. thereafter, Inland Realty sent a demand letter to Gregorio Araneta, Inc., for the Payment
of their 5% Broker’s Commission which was declined by Gregorio Araneta Inc., claiming that
that after their authority to sell expired 30 days where the petitioners were no longerprivy to the
consummation of the sale. Inland Realty filed as case in RTC for the collection of its broker
commission from Gregorio Araneta Inc. however, the RTC dismissed the case. CA also
dismissed the petition since the inland realty’s contract of agency and autjprity to sell already
expired.
Issue: Whether or not the Inland realty was entiled to the broker’s commission upon the
expiration of the contract of agency and authority to sell? Holding and ratio Decidendi Inland
Realty was not entitled to the Broker’s Commission since the petitioner was not eficient in
procuring cause in bringing about the sale on July, 7, 1977. Inland Realty had nothing to show
that they performed substantial acts that led to the consummation of the sale to Stanford of
Araneta, Inc’s shares in Architects’. Inland Realty
failed in selling said shares under the terms and agreements set out by Araneta, Inc. The Court of
Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5)
months between the expiration of petitioners' authority to sell and the consummation of the sale
to Stanford, to be a significant index of petitioners' non-participation in the really critical events
leading to the consummation of said sale, i.e., the negotiations to convince Stanford to sell at
Araneta, Inc.'s asking price, the finalization of the terms and conditions of the sale, the drafting
of the deed of sale, the processing of pertinent documents, and the delivery of the shares of stock
to Stanford.
MALIM, MINDA ABANGAN AND MAY MACAL G.R. NO. 222887 PATROCINIO S.
TICONG AND WILMA T. LAO vs. MANUEL A. MALIM, MINDA ABANGAN AND MAY
MACAL MENDOZA, J.:
FACTS: These consolidated cases originated from a complaint filed by respondents against
petitioners for collection of sum of money alleging that Malim was a realty broker/dealer while
Abangan and Macal were his associates; that the Ticongs were the registered owners of several
parcels of land; that Malim, presenting himself as the authorized representative of the

Ticongs, sent a letter of "formal intent to sell" to Jainus C. Perez (Perez), the real estate field
supervisor of the Church of Jesus Christ of Latter-Day Saints (Buyer), offering to sell the subject
properties for P2,000.00 per square meter; and that below Malim's signature were inscribed the
words, "NOTED/CONFORMED" with the signature of Lorenzo Ticong above "Lorenzo Ticong,
Lot Owner." Malim, Abangan and Macal (Malim, et al.) further averred that on February 11,
2000, they signed the Memorandum of Agreement (MOA) authorizing them to "look, negotiate,
and sell to any prospective buyer" for their properties on a commission basis; that they were also
authorized by the Ticongs to charge an "overprice" on top of the P900.00 per square meter price;
that the subject properties were eventually sold at P1,460.00 per square meter or for the total
amount of P7,300,000.00; that the sale was made possible due to their efforts which should
entitle them to an overprice commission of P2,800,000.00 based on the P560.00 per square meter
overprice; and that the Ticongs, however, paid them only P50,000.00 and refused to pay the
remaining balance despite demands. The Ticongs, on the other hand, stressed that Malim, et al.
were not entitled to the overprice commission; that the MOA was crafted and solely prepared by
Malim, et al. and that they signed the same without comprehending the salient aspects thereof
due to their limited education; that the sale of their properties prospered through their own active,
direct and personal efforts and was eventually attained when they sued the Buyer; and that
Malim, et al. had received not only the amount of P50,000.00 but a total of P225,000.00. The
Ticongs denied that Malim, et al. offered to sell their properties to the Buyer. They pointed out
that Malim, et al. were not even licensed realty brokers and considering the questionable and
anomalous nature of the MOA, the provision therein with respect to the overprice commission
and 5% finders' fee were not valid, binding and enforceable against them.
ISSUE: Whether or not Malim, et al. were entitled to the payment of their brokers' overprice
commission for being the procuring cause of the sale.
HELD: The term "procuring cause," in describing a broker's activity, refers to a cause originating
a series of events which, without break in their continuity, results in the accomplishment of the
prime objective of employing the broker to produce a purchaser ready, willing and able to buy
real estate on the owner's terms. When there is a close, proximate and causal connection between
the agent's efforts and the sale of the property, the agents are entitled to their commission.

Basic is the principle that a contract (the MOA in this case) is the law between the parties, and its
stipulations are binding on them, unless the contract is contrary to law, morals, good customs,
public order or public policy. March 20, 2017
ROSA LIM vs. CA

FACTS:
Lim, who arrived from Cebu, received from Suarez 2 pieces of jewelry: a diamond ring and a
bracelet to be sold on commission basis. Lim returned the bracelet to Suarez, but failed to return
the diamond ring or to turn over the proceeds thereof if sold. Suarez wrote a demand letter asking
for the return of the ring or the proceeds of the sale thereof. Lim, however, alleges that she had
returned both the ring and the bracelet, hence she no longer has any liability.
Lim has a different version of the facts. She denies the transaction was for her to sell the 2 pieces
of jewelry on commission basis. She told Suarez that she would consider buying the pieces of
jewelry for her own use. Lim took the pieces of jewelry and asked Suarez to prepare the
necessary papers for her to sign because she was not yet prepared to buy it. The document was
prepared, and Lim signed it, but she claims that she didn’t agree to the terms of the receipt
regarding the sale on commission basis. Her ‘proof’ is that she signed the document on the upper
portion and not at the bottom where a space is provided for the signature of the persons receiving
the jewelry.
ISSUE:
Was the real transaction between Lim & Suarez a real contract of agency to sell on commission
basis as set out in the receipt or a sale on credit?
HELD:
The transaction between them was a contract of agency to sell on commission basis. Lim’s
signature indeed appears on the upper portion of the receipt below, but this fact doesn’t have the
effect of altering the terms of the transaction form a contract of agency to sell on commission
basis to a contract of sale. The moment she affixed her signature thereon, Lim became bound by
all the terms stipulated in the receipt.
Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. However there are some provisions in law w/c
require certain formalities for particular contracts. The 1 st is when the form is required for the
validity of the contract; the 2nd is when it is required to make the contract effective as against
3rd parties; and the 3rd is for the purpose of proving the existence of the contract, e.g. those
included in the Statute of Frauds. A contract of agency to sell on commission basis doesn’t
belong to any of these 3 categories, hence it is valid and enforceable in whatever form they may
be entered into.

There is only 1 type of legal instrument where the law strictly prescribes the location of the
signature of the parties thereto. This is in case of notarial wills. But in the case at bar, the parties
didn’t execute a notarial will but a simple contract of agency to sell on commission basis, thus
making the position of Lim’s signature immaterial.
JOSE BORDADOR and LYDIA BORDADOR, vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and
NARCISO DEGANOS, G.R. No. 130148. December 15, 1997
FACTS: Petitioners were engaged in the business of purchase and sale of jewelry and respondent
Brigida Luz, also known as Aida Luz, was their regular customer. On several occasions,
respondent Deganos, brother of Luz, received several pieces of gold and jewelry from petitioners
amounting to P382, 816. These items and their prices were indicated in seventeen receipts
covering the same. 11 of the receipts stated that they were received for a certain Aquino, a niece
of Deganos, and the remaining 6 receipts indicated that they were received for Luz. Deganos was
supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items
to Bordador. Deganos remitted only the sum of P53, 207. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to petitioners. The total of his unpaid account to
Bordador, including interest, reached the sum of P725, 463.98. Petitioners eventually filed a
complaint in the barangay court against Deganos to recover said amount. In the barangay
proceedings, Luz, who was not impleaded in the cases, appeared as a witness for Deganos and
ultimately, she and her husband, together with Deganos signed a compromise agreement with
petitioners. In that compromise agreement, Deganos obligated himself to pay petitioners, on
installment basis , the balance of his account plus interest thereon. However, he failed to comply
with his aforestated undertakings.
Petitioners instituted a complaint for recovery of sum of money and damages, with an
application for preliminary attachment against Deganos and Luz. Deganos and Luz was also
charged with estafa During the trial of the civil cae, petitioners claimed that Deganos acted as
agent of Luz when received the subject items of jewelry, and because he failed to pay for the
same, Luz, as principal, and her spouse are solidarily liable with him Trial court ruled that only
Deganos was liable to Bordador for the amount and damages claimed. It held that while Luz did
have transactions with petitioners in the past, the items involved were already paid for and all
that Luz owed Bordador was the sum or P21, 483 representing interest on the principal account
which she had previously paid for. CA afirmed RTC’s decision
ISSUE: Whether or not Luz are liable to petitioners for the latter’s claim for money and
damages?
RULING: No Evidence does not support the theory of Bordador that Deganos was an agent of
Luz and that the latter should consequently be held solidarily liable with Deganos in his
obligation to petitioners. The basis for agency is representation. Here, there is no showing that
Luz consented to the acts of Deganos or authorized him to act on her behalf, much less with
respect to the particular transactions involved. It was grossly and inexcusably negligent of
petitioner to entrust to Deganos, not once or twice but on at least six occasions as evidenced by 6
receipts, several pieces of jewelry of substantial value without requiring a written authorization
from his alleged principal. A person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. Records show that neither an express nor an implied
agency was proven to have existed between Deganos and Luz. Evidently, Bordador who were
negligent in their transactions with Deganos cannot seek relief from the efects of their negligence
by conjuring a supposed agency relation between the two respondents where no evidence
supports such claim. The trial court also found that it was petitioner Lydia Bordador who
indicated in the receipts that the items were received by Deganos for Evelyn Aquino and Brigida
D. Luz. [7]Said court was persuaded that Brigida D. Luz was behind Deganos, but because there
was no memorandum to this efect, the agreement between the parties was unenforceable under
the Statute of Frauds. Absent the required memorandum or any written document connecting the
respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf,
the alleged agreement between petitioners and Brigida D. Luz was unenforceable.
 SPOUSES ROLANDO and HERMINIA SALVADOR vs SPOUSES ROGELIO AND
ELIZABETH RABAJA and ROSARIO GONZALES
G.R. No. 199990 February 4, 2015

MENDOZA, J.

FACTS: Petitioner spouses Rolando and Herminia Salvador, are the sellers over the parcel of
land. The buyers, are respondent Spouses Rogelio and Elizabeth Rabaja, with Rosario
Gonzales as the seller’s agent. Sometime in July 1998, Spouses Rabaja learned that Spouses
Salvador were looking for a buyer of the subject property. Petitioner Herminia Salvador
personally introduced Gonzales to them as the administrator of the said property. Spouses
Salvador even handed to Gonzales the owner’s duplicate certificate of title over the subject
property. On July, 3, 1998, Spouses Rabaja made an initial payment of P48,000.00 to
Gonzales in the presence of Herminia. Gonzales then presented the Special Power of Attorney,
executed by Rolando Salvador and dated July 24, 1998. On the same day, the parties executed
the Contract to Sell which stipulated that for a consideration of P5,000,000.00, Spouses
Salvador sold, transferred and conveyed in favor of Spouses Rabaja the subject property.
Spouses Rabaja made several payments totalling P950,000.00, which were received by
Gonzales pursuant to the SPA provided earlier as evidenced by the check vouchers signed by
Gonzales and the improvised receipts signed by Herminia.

Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they
did not receive any payment from Gonzales. This prompted Spouses Rabaja to suspend further
payment of the purchase price; and as a consequence, they received a notice to vacate the
subject property from Spouses Salvador for non-payment of rentals. Thereafter, Spouses
Salvador instituted an action for ejectment against Spouses Rabaja. In turn, Spouses Rabaja
filed an action for rescission of contract against Spouses Salvador and Gonzales, the subject
matter of the present petition. Spouses Rabaja demanded the rescission of the contract to sell
praying that the amount of P950,000.00 they previously paid to Spouses Salvador be returned
to them. They likewise prayed that damages be awarded due to the contractual breach
committed by Spouses Salvador.
Spouses Salvador filed their answer with counterclaim and cross-claim contending that there
was no meeting of the minds between the parties and that the SPA in favor of Gonzales was
falsified. In fact, they filed a case for falsification against Gonzales, but it was dismissed
because the original of the alleged falsified SPA could not be produced. They further averred
that they did not receive any payment from Spouses Rabaja through Gonzales. In her defense,
Gonzales filed her answer stating that the SPA was not falsified and that the payments of
Spouses Rabaja amounting to P950,000.00 were all handed over to Spouses Salvador.

RTC ruled in favor of Spouses Rabaja, holding that the contract although denominated as
contract to sell, was actually a contract of sale because Spouses Salvador, as vendors, did not
reserve their title to the property until the vendees had fully paid the purchase price. This was
subsequently affirmed by CA.

ISSUE: Whether or not contract entered into by the parties is a contract of sale and not a
contract to sell?

HELD: The contract entered into by the parties was essentially a contract of sale which could be
validly rescinded.

The New Civil Code on Agency states that:

Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms of the
power of attorney, as written, even if the agent has in fact exceeded the limits of his
authority according to an understanding between the principal and the agent.

Persons dealing with an agent must ascertain not only the fact of agency, but also the nature
and extent of the agent’s authority. 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. The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover on his own peril the authority of the agent. In this
case, Spouses Rabaja did not recklessly enter into a contract to sell with Gonzales. They
required her presentation of the power of attorney before they transacted with her principal. And
when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to rely on it.
By introducing Gonzales personally to Spouses Rabaja as the administrator of the subject
property, it is by their own ostensible acts, Spouses Salvador made third persons believe that
Gonzales was duly authorized to administer, negotiate and sell the subject property. This fact
was even affirmed by Spouses Salvador themselves in their petition where they stated that they
had authorized Gonzales to look for a buyer of their property.

Considering that there was a valid SPA, then Spouses Rabaja properly made payments to
Gonzales, as agent of Spouses Salvador and it was as if they paid to Spouses Salvador. It is of
no moment, insofar as Spouses Rabaja are concerned, whether or not the payments were
actually remitted to Spouses Salvador. Any internal matter, arrangement, grievance or strife
between the principal and the agent is theirs alone and should not affect third persons. If
Spouses Salvador did not receive the payments or they wish to specifically revoke the SPA,
then their recourse is to institute a separate action against Gonzales.
GR No. 166044, June 18, 2012
COUNTRY BANKERS INSURANCE CORP. vs. KEPPEL CEBU SHIPYARD

Facts:
On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a
corporation engaged in the shipping industry, contracted the services of Keppel
Cebu Shipyard, formerly known as Cebu Shipyard and Engineering Works, Inc.
(Cebu Shipyard) for dry docking and ship repair works on its vessel, the M/V
Pacific Fortune.

In compliance with the agreement, Unimarine secured from Country Bankers

However, even the sureties failed to discharge their obligations, and so Cebu
Shipyard filed a Complaint RTC. CBIC, in its Answer ] said that Cebu Shipyard’s
complaint states no cause of action.  CBIC alleged that the surety bond was
issued by its agent, Quinain, in excess of his authority.

The RTC applied Articles 1900 and 1911 of the Civil Code in holding CBIC
liable for the surety bond.  It held that CBIC could not be allowed to disclaim
liability because Quinain’s actions were within the terms of the special power of
attorney given to him.  The Court of Appeals agreed that CBIC could not be
permitted to abandon its obligation especially since third persons had relied on
Quinain’s representations.  It based its decision on Article 1911 of the Civil
Code and found CBIC to have been negligent and less than prudent in
conducting its insurance business for its failure to supervise and monitor the
acts of its agents, to regulate the distribution of its insurance forms, and to
devise schemes to prevent fraudulent misrepresentations of its agents.

Issue:
Whether or not CBIC is liable for the unauthorized acts of its Agent. 

Held:
No. Under Articles 1898 and 1910, an agent’s act, even if done beyond the
scope of his authority, may bind the principal if he ratifies them, whether
expressly or tacitly. It must be stressed though that only the principal, and not
the agent, can ratify the unauthorized acts, which the principal must have
knowledge of.

Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s testimony
that it was unaware of the existence of Surety Bond No. G (16) 29419 and
Endorsement No. 33152. There were no allegations either that CBIC should
have been put on alert with regard to Quinain’s business transactions done on
its behalf. It is clear, and undisputed therefore, that there can be no
ratification in this case, whether express or implied.

Article 1911, on the other hand, is based on the principle of estoppel, which is
necessary for the protection of third persons. It states that the principal is
solidarily liable with the agent even when the latter has exceeded his authority,
if the principal allowed him to act as though he had full powers. However, for
an agency by estoppel to exist, the following must be established:
1. The principal manifested a representation of the agent’s authority or
knowingly allowed the agent to assume such authority;
2. The third person, in good faith, relied upon such representation; and
3. Relying upon such representation, such third person has changed his
position to his detriment.

In Litonjua, Jr. v. Eternit Corp.,  this Court said that “[a]n agency by estoppel,
which is similar to the doctrine of apparent authority, requires proof of reliance
upon the representations, and that, in turn, needs proof that the
representations predated the action taken in reliance.”
This Court cannot agree with the Court of Appeals’ pronouncement of
negligence on CBIC’s part. CBIC not only clearly stated the limits of its agents’
powers in their contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties. Moreover, its company
procedures, such as reporting requirements, show that it has designed a
system to monitor the insurance contracts issued by its agents. CBIC cannot
be faulted for Quinain’s deliberate failure to notify it of his transactions with
Unimarine. In fact, CBIC did not even receive the premiums paid by Unimarine
to Quinain.

Furthermore, nowhere in the decisions of the lower courts was it stated that
CBIC let the public, or specifically Unimarine, believe that Quinain had the
authority to issue a surety bond in favor of companies other than the
Department of Public Works and Highways, the National Power Corporation,
and other government agencies. Neither was it shown that CBIC knew of the
existence of the surety bond before the endorsement extending the life of the
bond, was issued to Unimarine. For one to successfully claim the benefit of
estoppel on the ground that he has been misled by the representations of
another, he must show that he was not misled through his own want of
reasonable care and circumspection.
298 REPUBLIC v BANEZ G.R. No. 169442 | 14 October 2015 | J. Perez | TIGLAO TOPIC:
Scope of Authority – Express Agency ER: Respondents Banez offered to sell to CRC a parcel of
land. After making several cash advances, CRC started constructing improvements on the
property. Since the Banez were to go abroad for some time, they executed a SPA in favor of
Hojilla. DBP eventually took over CRC’s operations. They found out that the Banez’ prohibited
DBP from entering the property and that the property was registered in the name of a certain
Urbano Banez (not one of the respondents). Hence, they filed an action for recovery of
possession, including Hojilla as party to the case. The issue is w/n Hojilla’s actions bind the
respondents Banez. Petitioner Republic wanted to compel Hojilla to execute the contract of sale
in favor of petitioner but Hojilla’s defense was that the SPA did not include such power to do so.
In fact, it was limited only to registering the land in the name of respondents Banez. Hojilla’s
actions bind the respondents Banez because he made several representations that he was not
only their attorney in fact, but also their agent with regard to the Banez’ obligations related to the
contract. This case involved an express agency, where Hojilla, as agent, binds imself to
represent his principal. Based on Hojilla's letter dated 15 August 1984 to petitioner, Hojilla made
the representation that besides being the attorney-in-fact of the respondents with limited
authority to register the property, he was also their agent with regard to respondents' other
obligations related to the Contract. If Hojilla knew that he had no authority to execute the
Contract and receive the letters on behalf of respondents, he should have opposed petitioner's
demand letter. However, having received the several demand letters from petitioner, Hojilla
continuously represented himself as the agent of the respondents, authorized not only to
administer and/or manage the subject property, but also authorized to register the subject
property and represent the respondents with regard to the latter's obligations in the Contract.

COURT’S RULING
Issue: W/N the Hojilla’s actions bind the respondents – YES
Held: When respondents went abroad pending the performance of their obligations in the
Contract, they authorized Hojilla to register the subject property— a single obligation in the
whole range of obligations in the Contract. The SPA appeared to have left no representative to
fulfill respondents' obligations in the Contract on their behalf except for Hojilla's authority to
register the subject property.

It observed that nowhere in the SPA was Hojilla authorized as administrator or agent of
respondents with respect to the execution of the Contract. In the case at bar, the reliefs prayed
for by petitioner include the execution of the Contract such as delivery of the subject title,
recovery of possession of the subject property, execution of the deed of sale or transfer of
absolute ownership upon full payment of the balance, and damages for alleged violation of
respondents of the Contract for non-delivery of the title and refusal to vacate the subject
property. Indeed, following the reading of the lower courts of the scope of Hojilla's authority,
Hojilla is neither the proper party to execute the Contract nor the proper party to receive the
demand letters on behalf of respondents. This strict construction of the tenor of the SPA will
render the obligatory force of the Contract ineffective. Construction is not a tool to prejudice or
commit fraud or to obstruct, but to attain justice. Ea Est Accipienda Interpretatio Quae Vitio
Caret. To favor the lower court's interpretation of the scope of Hojilla's power is to defeat the
juridical tie of the Contract—the vinculum juris of the parties. As no one was authorized to
represent respondents in the Contract, then petitioner cannot enforce the Contract, as it were.
This is an absurd interpretation of the SPA. It renders the Contract ineffective for lack of a party
to execute the Contract. Contrary to the findings of the lower court, the present case is a case of
an express agency, where, Hojilla, the agent, binds himself to represent another, the principal,
who are herein respondents, with the latter's express consent or authority. In a contract of
agency, the agent acts for and in behalf of the principal on matters within the scope of the
authority conferred upon him, such that, the acts of the agent have the same legal effect as if
they were personally done by the principal. Because there is an express authority granted upon
Hojilla to represent the respondents as evidenced by the SPA, Hojilla's actions bind the
respondents. As agent, the representations and guarantees of Hojilla are considered
representations and guarantees of the principal. This is the principle of agency by promissory
estoppel. We refer to the evidence on record. It was Hojilla who administered and/or managed
the subject property. Based on Hojilla's letter dated 15 August 1984 to petitioner, Hojilla made
the representation that besides being the attorney-in-fact of the respondents with limited
authority to register the property, he was also their agent with regard to respondents' other
obligations related to the Contract. The pertinent portion of the 15 August 1984 letter of Hojilla to
petitioner reads: Regarding our loan with the National Electrification Administration (NEA), Hon.
Mel Mathay who is helping the Bafiez heirs has initiated negotiations with NEA for Abreco to
purchase our lot in front of the Provincial Jail to offset our loan with NEA.

Also, one glaring fact that cannot escape us is Hojilla's representation and guarantee that
petitioner's obligation will only arise upon presentation of a clean title and execution of a Deed
of Sale signed by the respondents' heirs, which reads, "[t]he Bañez heirs will only claim for the
full payment of the property upon presentation of a clean title and execution of a Deed of Sale
signed by the heirs." If Hojilla knew that he had no authority to execute the Contract and receive
the letters on behalf of respondents, he should have opposed petitioner's demand letters.
However, having received the several demand letters from petitioner, Hojilla continuously
represented himself as the duly authorized agent of respondents, authorized not only to
administer and/or manage the subject property, but also authorized to register the subject
property and represent the respondents with regard to the latter's obligations in the Contract.
Hojilla also assured petitioner that petitioner's obligation to pay will arise only upon presentation
of the title. Clearly, the respondents are estopped by the acts and representations of their agent.
Falling squarely in the case at bar is our pronouncement in Philippine National Bank v. IAC
(First Civil Cases Div.),"[h]aving given that assurance, [Hojilla] may not turn around and do the
exact opposite of what [he] said [he] would do. One may not take inconsistent positions. A party
may not go back on his own acts and representations to the prejudice of the other party who
relied upon them." Assuming further that Hojilla exceeded his authority, the respondents are still
solidarity liable because they allowed Hojilla to act as though he had full powers by impliedly
ratifying Hojilia's actions—through action by omission. This is the import of the principle of
agency by estoppel or the doctrine of apparent authority. In an agency by estoppel or apparent
authority, "[t]he principal is bound by the acts of his agent with the apparent authority which he
knowingly permits the agent to assume, or which he holds the agent out to the public as
possessing." The respondents' acquiescence of Hojilla's acts was made when they failed to
repudiate the latter's acts. They knowingly permitted Hojilla to represent them and petitioners
were clearly misled into believing Hojilla's authority. Thus, the respondents are now estopped
from repudiating Hojilla's authority, and Hojilla's actions are binding upon the respondents.
Dominion Insurance Corp. vs CA G.R. No. 129919 (376 SCRA 239) February 6, 2002 │ │ Justice Pardo

FACTS: On January 25, 1991, plaintif Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money
against defendant Dominion Insurance Corporation. Plaintif sought to recover thereunder the sum of
P156, 473.90 which he claimed to have advanced in his capacity as manager of defendant to satisfy
certain claims filed by defendants clients. In its traverse, defendant denied any liability to plaintif and
asserted a counterclaim for P249, 672.53, representing premiums that plaintif allegedly failed to remit.
The terms of the agreement read:

That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., a corporation duly organized and existing
under and by virtue of the laws ofthe Republic of the Philippines, xxx represented by the undersigned as
Regional Manager, xxx do hereby appoint RSG Guevarra Insurance Services represented by Mr. Rodolfo
Guevarra xxx to be our Agency Manager in San Fdo., for our place and stead, to do and perform the
following acts and things:

1. To conduct, sign, manager (sic), carry on and transact Bonding and Insurance business as usually
pertain to a Agency Ofice, or FIRE, MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING with the
right, upon our prior written consent, to appoint agents and subagents.

2. To accept, underwrite and subscribed (sic) cover notes or Policies of Insurance and Bonds for and on
our behalf.

3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver and transfer for and receive and
give efectual receipts and discharge for all money to which the FIRST CONTINENTAL ASSURANCE
COMPANY, INC., may hereafter become due, owing payable or transferable to said Corporation by
reason of or in connection with the abovementioned appointment.

4. To receive notices, summons, and legal processes for and in behalf of the FIRST CONTINENTAL
ASSURANCE COMPANY, INC., in connection with actions and all legal proceedings against the said
Corporation.

Respondent Guevarra’s authority to settle claims is embodied in the Memorandum of Management

1. You are hereby given authority to settle and dispose of all motor car claims in the amount of
P5,000.00 with prior approval of the Regional Ofice.

2. Full authority is given you on TPPI claims settlement.Respondent Guevarra’s authority is further
limited by the written standard authority to pay, which states that the payment shall come from
respondent Guevarra’s revolving fund or collection

ISSUE:Whether or not respondent Guevarra acted within his authority as agent for petitioner in
accordance with the Special Power of Attorney?

RULING: No. A perusal of the Special Power of Attorney would show that petitioner (represented by
third-party defendant Austria) and respondent Guevarra intended to enter into a principal-agent
relationship. Despite the word special in the title of the document, the contents reveal that what was
constituted was actually a general agency The agency comprises all the business of the principal, but,
couched in general terms, it is limited only to acts of administration. A general power permits the agent
to do all acts for which the law does not require a special power. Thus, the acts enumerated in or similar
to those enumerated in the Special Power of Attorney do not require a special power of attorney. The
payment of claims is not an act of administration. The settlement of claims is not included among the
acts enumerated in the Special Power of Attorney, neither is it of a character similar to the acts
enumerated therein. A special power of attorney is required before respondent Guevarra could settle
the insurance claims of the insured. Respondent Guevarra was authorized to pay the claim of the
insured, but the payment shall come from the revolving fund or collection in his possession. Having
deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the
settlement of the claims of the insured may not be reimbursed from petitioner Dominion.
Patrimonio vs. Gutierrez

Patrimonio vs. Gutierrez

Doctrines: In order however that one who is not a holder in due course can enforce
the instrument against a party prior to the instrument’s completion, two requisites
must exist: (1) that the blank must be filled strictly in accordance with the authority
given; and (2) it must be filled up within a reasonable time. If it was proven that the
instrument had not been filled up strictly in accordance with the authority given and
within a reasonable time, the maker can set this up as a personal defense and avoid
liability. However, if the holder is a holder in due course, there is a conclusive
presumption that authority to fill it up had been given and that the same was not in
excess of authority.

Facts: The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a
business venture under the name of Slam Dunk Corporation (Slum Dunk), a
production outfit that produced mini-concerts and shows related to basketball. In the
course of their business, the petitioner pre-signed several checks to answer for the
expenses of Slam Dunk; however, these checks had no payee’s name, date or amount.
The blank checks were entrusted to Gutierrez with the specific instruction not to fill
them out without previous notification to and approval by the petitioner. Without the
petitioner’s knowledge and consent, Gutierrez went to Marasigan to secure a loan in
the amount of ₱200,000.00 and  Gutierrez simultaneously delivered to Marasigan one
of the blank checks the petitioner pre-signed with Pilipinas Bank in the amount of
"₱200,000.00. When Marasigan deposited the check, it was dishonored for the reason
"ACCOUNT CLOSED" and so Marasigan sought recovery from Gutierrez and petitioner
asking for the payment of ₱200,000.00.

Issue: Whether or not Marasigan is a holder in due course thus may hold petitioner
liable.

Held: No, Marasigan is not a holder in due course. Section 52(c) & (d) of the NIL states
that a holder in due course is one who takes the instrument “in good faith and for
value" and that it is necessary that at the time it was negotiated to him he had no
notice of any infirmity in the instrument or defect in the title of the person negotiating
it. In the present case, Gutierrez was only authorized to use the check for business
expenses; thus, he exceeded the authority when he used the check to pay the loan he
supposedly contracted for the construction of petitioner's house. Marasigan’s
knowledge that the petitioner is not a party or a privy to the contract of loan, and
correspondingly had no obligation or liability to him, renders him dishonest, hence, in
bad faith. Considering that Marasigan is not a holder in due course, the petitioner can
validly set up the personal defense that the blanks were not filled up in accordance
with the authority he gave; hence, Marasigan has no right to enforce payment against
the petitioner and the latter cannot be obliged to pay the face value of the check.
Virata vs Ng Wee (Myling)

1. Before the Court are the Motion for Reconsiderations filed in view of its 5 July 2017 Decision holding
the directors and officers of Wincorp jointly and severally liable with the company for the unpaid
investments of Ng Wee made to Power Merge through Wincorp.

2. [From the 5 July 2017 Decision] Ng Wee, as a valued client of Westmont Bank, was enticed by the
bank manager to make investments with Westmont Investment Corporation (Wincorp). Wincorp would
match a corporate borrower with an investor willing to provide funds.

3. Ng Wee’s initial investments were matched with Hottick Holdings Corporation whose majority shares
were owned by Halim Saad. The Credit Facility extended to Hottick by Wincorp was secured by, among
others, a Suretyship Agreement executed by Luis Juan Virata and another Suretyship Agreement by
Halim Saad.

4. Hottick fully availed of the loan facility but defaulted in payment during the Asian financial crisis.
Wincorp filed collection suits against Hottick but Virata eventually brokered a compromise

5. Ng Wee confronted Wincorp about the default of Hottick. Wincorp assured Ng Wee that it will absorb
the losses from Hottick and Ng Wee’s investments will be transferred to another borrower, Power
Merge. Virata is the majority stockholder of Power Merge owning 374,996 out of its 375,000 subscribed
capital stock.

6. In a special meeting of Wincorp’s board of directors held on 9 February 1999, Wincorp approved
Power Merge’s application for a P1.3bn credit line. On 15 February 1999, Wincorp President Antonio
Ong and Vice-President for Operations Anthony Reyes executed the Credit Line Agreement in favor of
Power Merge. On 11 March 1999, Wincorp, through another board meeting, increased the credit limit
to P2.5bn and an Amendment to the Credit Line Agreement was executed. Power Merge drew a total of
P2,183,755,253.11 from the line covered by Promissory Notes (PN) in favor of Wincorp for itself or as
agent in behalf of investors which included Ng Wee who put in the total amount of P213,290,410.36.

7. Unknown to Ng Wee, however, on the same date the two Agreements were separately signed, Side
Agreements were also entered between Wincorp (represented by Ong and Reyes) and Power Merge
absolving Power Merge of liability on the PNs.

8. Ng Wee was not able to collect his investment from Power Merge. On 19 October 2000, he instituted
a Complaint for Sum of Money with Damages against 17 defendants of which only Virata, Power Merge,
UPDI, UEM-MARA, Wincorp, Ong, Reyes, Cua, Tankiansee, Santos-Tan, Vicente and Henry Cualoping,
and Estrella were duly served with summons. The last six were board directors of Wincorp. Virata filed a
cross claim against Wincorp and its board of directors.

9. [Start of Case] On 5 July 2017, the Court issued its Decision in the present consolidated cases. The
Court held that the actuations of Wincorp establishes actionable fraud for which it can be held liable
while Power Merge is liable to Ng Wee based on the promissory notes even as an accommodation party.

10. On the basis of fraud, the Court pierced the veil of Wincorp and held the directors and officers
personally liable to Ng Wee. The basis of the liability was Section 31 of the Corporation Code when they
assented to the grant of the Credit Line Agreement and its Amendment to Power Merge.
11. The cross claim of Virata against Ong, Reyes and the board members were also granted and
Wincorp, Ong and Reyes together with the board members were ordered jointly and severally liable to
pay and reimburse Virata for any payment or contribution he made to Ng Wee. Petitioners filed for an
MR which is the basis of this Resolution.

12. The Court notes that the grounds relied upon by Virata, Estrella, Ng Wee, Cua and the Cualopings,
Reyes, and Wincorp are the same or substantially similar to those raised in their respective petitions
thus were denied.

13. Santos-Tan however did not appeal the decision of the CA holding her liable with her co-parties to
Ng Wee and was only participating in the proceedings in her plea of reconsideration. She argues that the
cross-claim should not have been granted because the Side Agreements which served as the basis
thereof never got the imprimatur of the Board of Directors. Moreover, considering the P2.18bn
drawdowns of Power Merge, she found it iniquitous and immoral to require her and her co-directors to
reimburse Virata of whatever he was required to pay Ng Wee.

ISSUES: 1. Are the board of directors personally liable to Ng Wee for the investment he placed with
Power Merge through Wincorp? YES

RATIO: 1. In its 5 July 2017 decision, the Court explained the liabilities of the board directors in view of
Section 31 of the Corporation Code

2. Section 31 of the Corporation Code provides: Section 31. Liability of directors, trustees or officers . —
Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the
corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation
or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall
be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its
stockholders or members and other persons. When a director, trustee or officer attempts to acquire or
acquire, in violation of his duty, any interest adverse to the corporation in respect of any matter which
has been reposed in him in confidence, as to which equity imposes a disability upon him to deal in his
own behalf, he shall be liable as a trustee for the corporation and must account for the profits which
otherwise would have accrued to the corporation.

3. For Cua and the Cualopings, the totality of circumstances proves that they are either complicit to the
fraud, or at the very least guilty of gross negligence.

a. The board is charged with a fiduciary duty which it failed to fulfill when it did not heed the
warning signs which would have cautioned it from approving the loan in haste:

(1) Power Merge has only been in existence for two years when it was granted a credit
facility;

(2) Power Merge was thinly capitalized with only P37,500,000.00 subscribed capital;

(3) Power Merge was not an ongoing concern since it never secured the necessary
permits and licenses to conduct business, it never engaged in any lucrative business, and
it did not file the necessary reports with the SEC; and
 (4) no security other than its Promissory Notes was demanded by Wincorp or was
furnished by Power Merge in relation to the latter's drawdowns.

b. Further, prior to Power Merge’s application for a credit facility, Virata had outstanding unpaid
transactions with Wincorp for its Hottick obligations. Instead of impleading Virata in the Hottick account,
however, Wincorp released him from liability and granted him a credit facility in the amount of P1.3bn.

c. It is immaterial if Cua and the Cualopings approved or not the Side Agreements or authorized
its signing. Wincorp could have avoided its troubles if they were vigilant enough to disapprove the
Power Merge credit application.

4. Tankiansee was absolved because his immigration records clearly show that he was outside the
country during the dates when the Agreements were approved by the board.

5. Estrella tried to echo the same defense as Tankiansee although the minutes of both board meetings
indicate his presence. He claims to have left the meeting before the matter of Power Merge’s
application was discussed. He however failed to offer concrete evidence for this alibi. The Court likewise
did not allow him to use as defense his being a mere nominee and that he only had one nominal share
as well as whether or not he received compensation or honoraria for attending the board meetings

6. The liability of Santos-Tan is no different from Cua and the Cualopings in their personal capacity under
Section 31 of the Corporation Code.

7. The contention that the Side Agreements were without the imprimatur of its board of directors
cannot be given credence. The totality of circumstances supports the conclusion that the Wincorp
directors impliedly ratified, if not furtively authorized, the signing of the Side Agreements in order to lay
the groundwork for the fraudulent scheme.

a. Virata had existing obligations to Wincorp from the Hottick account. However, the board
excluded Virata as a party respondent to its collection suit against Hottick and, on the same day,
approved the P1.3bn credit line to Power Merge.

b. Proceeds of the credit line were released to Power Merge before the corresponding
Agreements were signed. This lends credence to Virata’s claim that Wincorp did not intend for
Power Merge to be strictly bound by the terms of the credit facility.

8. RULING: The MRs were denied

FACTS: Richard and Linda Johnson were members of Joy Training’s Board of Trustees who sold the real
properties, a wrangler jeep, and other personal properties in favor of the spouses Sally and Yoshio
Yoshizaki. Joy Training filed an action for cancellation of sales alleging that the spouses Johnson is
without the requisite authority from the Board of Directors. The RTC ruled in favor of the spouses
Yoshizaki. It found that Joy Training owned the real properties and it authorized he spouses Johnson to
sell the real properties. It recognized that there were only five actual members of the board of trustees;
consequently, a majority of the board of trustees validly authorized the It also ruled that the sale of
personal properties was valid because they were registered in the spouses Johnson’s name. The CA
upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to the sale of real
properties. It also ruled that the resolution is void because it was not approved by a majority of the
board of trustees.

ISSUE: Was there a contract of agency to sell the real properties between Joy Training and the spouses
Johnson?

RULING: The Supreme Court ruled that there was no contract of agency between Joy Training and the
spouses Johnson to sell the parcel of land with its improvements. Art. 1868 of the Civil Code defines a
contract of agency as a contract whereby a person “binds himself to render some service or to do
something in representation or on behalf of another, with the consent or authority of the latter.” It may
be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority. In this
case, the presented evidence did not convince the SC of the existence of the contract of agency to sell
the real properties. The certification is a mere general power of attorney which comprises all of Joy
training. Art. 1877 of the Civil Code clearly states that an agency couched in general terms comprises
only acts of administration, even if the principal should state that he withholds no power or that the
agent may execute such acts as he may authorize as general and unlimited management.