1. Rallos v.

Felix Go Chan (MAI) January 31, 1978 FACTS: Concepcion and Gerundia Rallos were sisters and registered coowners of a parcel of land known as Lot No. 5983. In 1954, they executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the aforementioned parcel of land. On March 1955, Concepcion Rallos died. On September 1955, Simeon Rallos sold the undivided shares of his sisters in lot 5983 to Felix Go Chan and Sons Realty Corporation. The deed of sale was registered and the previous TCT was cancelled. On May 1956, Ramos Rallos, as administrator of the Intestate Estate of Concepcion Rallos, filed a complaint with the CFI of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos be declared unenforceable, and said share be reconveyed to her estate; (2) that the TCT issued in the name of Felix Go Chan and Sons Realty Corporation be cancelled; and (3) that the plaintiff be indemnified by way of attorneys fees and payment of costs of suit. The trial court rendered judgment declaring the deed of sale null and void, insofar as the one-half pro-indiviso share of Concepcion Rallos in the property in question, and sentencing Juan Borromeo, the administrator of the estate of Simeon Rallos, to pay Felix Go Chan and Sons Realty Corporation the sum representing the price of one-half of the lot. The appellate court reversed the decision and sustained the sale. ISSUE: Whether or not the sale of the agent of the principals property after the latters death is valid. HELD: NO. The general rule in Article 1919 of the NCC is that death is one of the causes for the extinguishment of agency. There being an integration of the personality of the principal into that of the agent, it is not possible for the representation to continue once the death of either is established. There are certain exceptions, however, Article 1931 being one of them. Under this provision, an act done by the agent after the death of the principal is valid and effective if two conditions concur: (1) the agent acted without knowledge of the death of the principal; and (2) that the third person who contracted with the agent acted in good faith. But because it was established that Simeon Rallos had knowledge of the death of his principal when he made the sale, Article 1931 will not apply. The general rule shall apply then that any act of an agent after the death of his principal is void ab initio. Simeon Rallos act of selling the share of Concepcion after her death is therefore null and void.

AGENCY: The relationship of agency is whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope of his authority. Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself".

2. Orient Air Services & Hotel Rep. v CA (GEN) May 29, 1991 FACTS: American Airlines Inc. (AAI) and Orient Air Services and Hotel Representatives (Orient Air) entered into a General Sales Agency Agreement authorizing the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. Due to the alleged failure of Orient Air to promptly remit the net proceeds of sales for 6 months, AAI undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated the agency agreement. AAI then instituted suit against Orient Air with CFI of Manila for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order. The CFI of Manila ruled in favor of Orient Air and dismissed the complaint. It then ordered AAI to reinstated Orient Air as its general sales agent for passenger transportation in the Philippines. The IAC affirmed with modifications the findings of CFI of Manila. ISSUE: WON the lower court may compel AAI to extend its personality to Orient Air? HELD: NO. It would be violative of the principles and essence of agency, defined by law as a contract whereby a person binds himself to another 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. 3. Uy & Roxas v. CA, Hon. Robert Balao, NHA Facts: William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a housing project. The NHA paid for the 5 parcels but after a test was done, the remaining 3 parcels were found to be unsuitable for housing or any civil structures. The NHA cancelled the contract and offered P1.225M to the landowners. Uy and Roxas found a complaint for damages and the RTC said the cancellation of the contract was justified but still awarded the P1.225M damages. The CA reversed the RTC since there was "sufficient justifiable basis" in cancelling the sale, "it saw no reason" for the award of damages. The CA also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the trial court. The damages prayed for were intended not for the benefit of their principals but to indemnify petitioners for the losses they themselves allegedly incurred as a result of such termination. These damages consist mainly of "unearned income" and advances. They brought the action in their own name and in their own behalf. Issue: WoN the agents have a cause of action against the NHA suing in their own name. Held: No. Petition dismissed. Petitioners are not parties to the contract of sale between their principals and NHA. They are mere agents of the owners of the land subject of the sale. As agents, they only render some service or do something in representation or on behalf of their principals. The rendering of such service did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract may be violated only by the parties thereto as against each other, the real parties-in-interest,

either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to said contract. An agent, in his own behalf, may bring an action founded on a contract made for his principal, as an assignee of such contract. Petitioners, however, have not shown that they are assignees of their principals to the subject contracts. While they alleged that they made advances and that they suffered loss of commissions, they have not established any agreement granting them "the right to receive payment and out of the proceeds to reimburse [themselves] for advances and commissions before turning the balance over to the principal[s]." Restatement: Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes on behalf of his principal can, although not a promise, maintain such action thereon maintain such action thereon as might a transferee having a similar interest. It does not appear that petitioners are beneficiaries of a stipulation pour autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person. That petitioners did not obtain their commissions or recoup their advances because of the non-performance of the contract did not entitle them to file the action below against respondent NHA. As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under the contracts of sale, they do not, under substantive law, possess the right they seek to enforce. Therefore, they are not the real parties-in-interest in this case. Petitioners not being the real parties-ininterest, any decision rendered herein would be pointless since the same would not bind the real partiesininterest. Now, on the merits of the case NHA: The cancellation was based on the negation of the cause arising from the realization that the lands, which were the object of the sale, were not suitable for housing. The NHA was justified in canceling the contract. The realization of the mistake as regards the quality of the land resulted in the negation of the motive/cause thus rendering the contract inexistent. Assuming that petitioners are parties, assignees or beneficiaries to the contract of sale, they would not be entitled to any award of damages.

1. Effects of special information 4. Macke v. Camps

Feb 12, 1907 FACTS: B.H. Macke and W.H. Chandler are partners and sold to Jose Camps of the Washington Caf various bills of goods amounting to P351.50 but he only received P174. Macke made a demand but Camps failed to pay. Macke said that Ricardo Flores the business manager of the hotel bar restaurant signed the receipt and that Flores was also the one who made the previous payments. A witness, one Galmes, the lessor of the building said that Flores also signed as a witness on the sublease contract as managing agent, which Jose Camps also signed. Camps now says that the foregoing facts are not sufficient to establish the fact that he received the goods for which payment is demanded. ISSUE: WoN Camps is estopped from proclaiming that Ricardo Flores was not his agent HELD: Yes. Flores was apparently in charge of the business, performing the duties usually entrusted to managing agent, leave little room for doubt that he was there as authorized agent of the defendant. One who clothes another apparent authority as his agent, and holds him out to the public as such, cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the following presumptions or deductions, which the law expressly directs to be made from particular facts, are deemed conclusive: "Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation arising out such declaration, act, or omission, be permitted to falsify it" and unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying his agency into effect.

which owns 90% of EC and conferred to Marquez by Glanville, President and General Manager of EC. Litonjua deposited US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale. EC backed out of the sale compelling Litonjua to file for specific performance and damages. SC ruled that there was no valid sale as the officers (Glanville and Delsaux) acted on behalf of ESAC and not on behalf of EC, which owns the properties. EC never ratified their agreement with any board resolution. EC did not knowingly allow its officers to assume such authority. No board resolution designating them as agent. Litonjua cannot invoke good faith and doctrine of apparent authority. He should have exercised due diligence in checking for the authorization papers of Marquez, Glanville and Delsaux. Agency by estoppel (Requisites): 1. Principal manifested a representation of the agents authority / knowingly allowed agent to assume such authority 2. Third person in Good Faith relied upon such representation rd 3. 3 person has changed its position to its detriment. Facts: Eternit Corporation (EC) is a corporation engaged in the manufacture of roofing materials and pipe products in the Philippines. Its manufacturing operations were conducted on eight parcels of land with a total area of 47,233 square meters. In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the country. Michael Adams, a member of ECs Board of Directors engaged the services of realtor/broker Lauro G. Marquez so that the eight parcels of land could be offered for sale to prospective buyers. Marquez offered the parcels of land and the improvements to Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to sell the properties for P27,000,000.00 and could negotiate the terms of the sale. Litonjua, along with brother, offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville (President and General Manager of EC) of the Litonjua siblings offer and relayed the same to Delsaux (Head of ESAC, which owns 90% of EC) in Belgium, but the latter did not respond. On

6. LITONJUA, JR. v. ETERNIT CORP. G.R. No. 144805 June 8, 2006 Quick Summary: EC engaged the services of Marquez to dispose its eight parcels of land (sites used to manufacture their roofing materials and pipe products) in 1986 when it decided to stop operations due to the political instability of the country. Marquez was able to find a buyer, the Litonjua brothers, who accepted the counteroffer price offered to them by Delsaux, head of ESAC

February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation." Litonjua accepted the counter-proposal of Glanville which was conferred to them in a letter. Within 90 days as provided in their agreement, the Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale. EC backed out of the sale. They wanted to continue operations in the Philippines since by then, in 1987, Marcos had left and the political situation had already improved. Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed with the sale of the subject land. Litonjua filed for specific performance and damages. RTC ruled that EC was not liable for damages since there was no valid and binding sale between the plaintiffs and said defendants. Since the authority of the agents/realtors was not in writing, the sale is void and not merely unenforceable, and as such, could not have been ratified by the principal. In any event, such ratification cannot be given any retroactive effect. Plaintiffs could not assume that defendants had agreed to sell the property without a clear authorization from the corporation concerned, that is, through resolutions of the Board of Directors and stockholders. Issues: 1. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents relative to the sale of the properties of EC and could represent the company in a contract of sale of real property of EC. 2. Whether an agency by estoppel was created or whether a person acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent authority of its agent are, likewise, questions of fact to be resolved on the basis of the evidence on record Held: No. While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly

authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality but is a condition sine qua non to bind respondent EC. The mere fact that a corporation owns a majority of the shares of stocks of another (respondent ESAC owned 90% of the shares of stocks of respondent EC), or even all of such shares of stocks, taken alone, will not justify their being treated as one corporation. 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. It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers and to accept any counter-offer. Petitioners likewise failed to prove that their counter-offer had been accepted by respondent EC, through Glanville and Delsaux. When specific performance is sought of a contract made with an agent, the agency must be established by clear, certain and specific proof. A corporation is a juridical person separate and distinct from its members or stockholders and is not affected by the personal rights, obligations and transactions of the latter. It may act only through its board of directors or, when authorized either by its by-laws or by its board resolution, through its officers or agents in the normal course of business. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the limitations prescribed by law and the Constitution, as follows: SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and capacity: xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property, including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may reasonably and necessarily require, subject to the limitations prescribed by the law and the Constitution. The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold without express authority from the board of directors. Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of the deed of sale covering such property, can be performed by the corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of directors. Absent such valid delegation/authorization, the rules is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are not binding on the corporation. While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority. By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them. An agency may be expressed or implied from the act 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. Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances.

Agency may be oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void.

City-Lite Realty Corp. v. CA (JILL) February 10, 2000 FACTS: Respondent FP Holdings was selling its land, also known as the Violago Property (its a subdivision in QC now), to the general public via sales brochures. Its agent, Meldin Roy/Metro Drug transacted with City-Lite for the sale of the front portion of the land, provided that CityLite would put into writing its acceptance with the terms and conditions. After City-Lite conveyed their agreement into writing, FP Holdings refused to execute the corresponding Deed of Sale, prompting City-Lite to register an adverse claim in the Title. FP Holdings then filed a Petition for the cancellation of the adverse claim with the RTC QC but this was dismissed by a finding that there is sufficient ground for the adverse claim. City-Lite now sued FP Holdings for specific performance (execution of Deed of Sale). Pending this case, FP Holdings transferred the property to View Master, forcing City-Lite to again annotate a notice of lis pendens over the new Title of View Master. The trial court rendered a decision favorable to City-Lite, but this was reversed by the Court of Appeals on the ground that there was no perfected contract of sale since there was no definite agreement as to the manner of payment. ISSUE: WON a contract of sale was perfected? NO. RATIO: Under Art. 1874, when a sale of a piece of land or any interest therein is made by an agent, the authority of the latter must be made in writing; otherwise, the sale shall be void. Here, the authority of Meldin Roy/Metro Drug was just established by testimonies and evidences: (1) admissions of Roy/Metro Drug; (2) sales brochure specifying Roy to be a contact person; (c) the guard at the property saying Roy/Metro Drug are authorized agents; and (d) common knowledge among brokers. Roy/Metro Drug therefore was merely a contact person. Moreover, the President of FP Holdings, in a memorandum, merely requested Metro Drugs assistance in referring to us buyers for the property. Please proceed to hold preliminary negotiations with interested buyers and endorse formal offers to us for final evaluation and appraisal. This only meant that the task of Roy/Metro Drug was to look for buyers, but the final evaluation of the offers shall be made only by FP Holdings. In this case, the transaction was finalized only by Roy. Other testimonies even said that Roy/Metro

Drug was a mere broker whose task is to bring parties together for a possible transaction. Given these circumstances, the sale is declared null and void, with no legal effects.

Cosmic Lumber v. CA Nov. 29, 1996 Bellosillo, J. FACTS: Cosmic, through its General Manager, executed a Special Power of Attorney appointing Paz G. Villamil-Estrada as attorney-in-fact: x x x to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the RTC of Dagupan. Later, Estrada entered into a Compromise Agreement with Perez, wherein the latter agreed to pay the portion being occupied by him and to deliver the sum of P26,640. The RTC approved the Compromise Agreement. However, it was not executed within the 5-year period from date of the finality of the judgment allegedly due to the failure of petitioner to produce the owners duplicate copy of the title needed to segregate from Lot No. 443 the portion sold by Estrada to Perez under the compromise agreement. Cosmic asserts that it was only upon the revival of the judgment that it came to know of the compromise agreement between Estrada and Perez. Hence, it sought to annul the decision of the trial court alleging that it was void because Estrada had no authority to dispose of the property but merely confined to file an ejectment case in order that the corporation may take material possession of the entire lot. Moreover, a board resolution was needed for the disposition of the property. The CA dismissed the complaint. ISSUE: WON Estrada was authorized to sell the property? HELD: NO. The authority granted Estrada under the special power of attorney was explicit and exclusionary. Nowhere in this authorization was Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. Neither can a conferment of the power to

sell be validly inferred from the specific authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale. By selling to Perez a portion of petitioners land through a compromise agreement, Estrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. *Other issue on agency: It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended toprotect those who exercise good faith and not as a shield for unfair dealing. Hence, there is a well established exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal.

San Juan Structural and Steel v CA Facts: San Juan Structural and Steel Fabricators Inc. entered into an agreement with Motorich Sales Corporation for the transfer of the latters parcel of land to the former. Nenita Gruenberg, Motorichs treasurer, was the one who entered the agreement for Motorich. She was, however, not authorized by the board of directors. There is also no evidence that she represented that she was authorized. San Juan Structural and Steel made a downpayment of P100,000. However, the transfer did not push through despite repeated demands made by San Juan Structural and Steel. Ruling: RTC dismissed. CA dismissed. Nenita to refund the down payment of 100,000 given by San Juan Structural and Steel. Issue: WON sale is valid [NO]

HELD: Motorich cannot be bound by the contract because it never authorized the sale. The general principles of agency govern the relation between the corporation and its officers or agents, subject to the article of incorporation, bylaws, or relevant provisions of law. Consequently, Selling is foreign to a corporate treasurers function. Neither is real estate sale shown to be a normal business activity of Motorich since its primary purpose is marketing, distribution, export and import in relation to a general merchandising business. Moreover, Art 1874 states that a sale of a piece of land through an agent must be in writing. Nenita was not authorized. Neither is there any proof that Motorich ratified, expressly or impliedly, the contract.

AF Realty & Development Inc. vs. Dieselman Freight Services Co. [GR 111448, 16 January 2002] Third Division, Sandoval-Gutierrez (J): 4 concur Facts: On 10 May 1988, Manuel C. Cruz, Jr., a member of the board of directors of Dieselman Freight Services Co., issued a letter denominated as "Authority To Sell Real Estate" to Cristeta N. Polintan, a real estate broker of the CNP Real Estate Brokerage. Cruz, Jr. authorized Polintan "to look for a buyer/buyers and negotiate the sale" of the lot at P3,000.00 per square meter, or a total of P6,282,000.00. Cruz, Jr. has no written authority from Dieselman to sell the lot. In turn, Cristeta Polintan, through a letter dated 19 May 1988, authorized Felicisima ("Mimi") Noble to sell the same lot. Felicisima Noble then offered for sale the property to AF Realty & Development, Inc. (AF Realty) at P2,500.00 per square meter. Zenaida Ranullo, board member and vice-president of AF Realty, accepted the offer and issued a check in the amount of P300,000.00 payable to the order of Dieselman. Polintan received the check and signed an "Acknowledgment Receipt" indicating that the amount of P300,000.00 represents the partial payment of the property but refundable within two weeks should AF Realty disapprove Ranullo's action on the matter. On 29 June 1988, AF Realty confirmed its intention to buy the lot. Hence, Ranullo asked Polintan for the board resolution of Dieselman authorizing the sale of the property. However, Polintan could only give Ranullo the original copy of TCT 39849, the tax declaration and tax receipt for the lot, and a photocopy of the Articles of Incorporation of Dieselman. On 2 August 1988, Manuel F. Cruz, Sr., president of Dieselman, acknowledged receipt of the said P300,000.00 as "earnest money" but required AF Realty to finalize the sale at P4,000.00 per square meter. AF Realty replied that it

has paid an initial down payment of P300,000.00 and is willing to pay the balance. However, on 13 August 1988, Mr. Cruz, Sr. terminated the offer and demanded from AF Realty the return of the title of the lot earlier delivered by Polintan. Claiming that there was a perfected contract of sale between them, AF Realty filed with the Regional Trial Court, Branch 160, Pasig City a complaint for specific performance (Civil Case 56278) against Dieselman and Cruz, Jr.. The complaint prayed that Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty." In its amended complaint, AF Realty asked for payment of P1,500,000.00 as compensatory damages; P400,000.00 as attorney's fees; and P500,000.00 as exemplary damages. In its answer, Dieselman alleged that there was no meeting of the minds between the parties in the sale of the property and that it did not authorize any person to enter into such transaction on its behalf. Meanwhile, on 30 July 1988, Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale of the same property. The agreed price was P2,800.00 per square meter. Midas delivered to Dieselman P500,000.00 as down payment and deposited the balance of P5,300,000.00 in escrow account with the PCIBank. Constrained to protect its interest in the property, Midas filed on 3 April 1989 a Motion for Leave to Intervene in Civil Case 56278. Midas alleged that it has purchased the property and took possession thereof, hence Dieselman cannot be compelled to sell and convey it to AF Realty. The trial court granted Midas' motion. After trial, the lower court rendered the Decision holding that the acts of Cruz, Jr. bound Dieselman in the sale of the lot to AF Realty. Consequently, the perfected contract of sale between Dieselman and AF Realty bars Midas' intervention. The trial court also held that Midas acted in bad faith when it initially paid Dieselman P500,000.00 even without seeing the latter's title to the property. Moreover, the notarial report of the sale was not submitted to the Clerk of Court of the Quezon City RTC and the balance of P5,300,000.00 purportedly deposited in escrow by Midas with a bank was not established. Dieselman was ordered to execute and deliver to AF Realty the final deed of sale of the property covered by TCT 39849 of the Registry of Deed of Rizal, Metro Manila District II, including the improvements thereon, and ordering Dieselman to pay AF Realty attorney's fees in the amount of P50,000.00 and to pay the costs. Dissatisfied, all the parties appealed to the Court of Appeals. In its Decision dated 10 December 1992, the Court of Appeals reversed the judgment of the trial court holding that since Cruz, Jr. was not authorized in writing by Dieselman to sell the subject property to AF Realty, the sale was not perfected; and that the Deed of Absolute Sale between Dieselman and Midas is valid, there being no bad faith on the part of the latter. The Court of Appeals then declared Dieselman and

Cruz, Jr. jointly and severally liable to AF Realty for P100,000.00 as moral damages; P100,000.00 as exemplary damages; and P100,000.00 as attorney's fees. On 5 August 1993, the Court of Appeals, upon motions for reconsideration filed by the parties, promulgated an Amending Decision, in the sense that only Cruz, should be made liable to pay AF Realty the damages and attorney's fees awarded therein, plus the amount of P300,000.00 unless, in the case of the said P300,000.00, the same is still deposited with the Court which should be restituted to AF Realty. AF Realty filed the petition for review on certiorari. Issue: Whether there was a perfected contract of sale involving the Dieselman real property in favor of AF Realty. Held: Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors. Just as a natural person may authorize another to do certain acts in his behalf, so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it. Thus, contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are held not binding on the corporation. Herein, Cruz has no written authority from the board of directors of Dieselman to sell or to negotiate the sale of the lot, much less to appoint other persons for the same purpose. Cruz's lack of such authority precludes him from conferring any authority to Polintan involving the subject realty. Necessarily, neither could Polintan authorize Felicisima Noble. Clearly, the collective acts of Cruz, Polintan and Noble cannot bind Dieselman in the purported contract of sale.

Sevilla held herself solidarily liable with Tourist World Service for the payment of the rent. When the branch office was opened, it was run by Sevilla payable to Tourist World by any airline for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Sevilla and 3% was to be withheld by The TWS. TWS appeared to have been informed that Sevilla was also connected to a rival firm, the Philippine Travel Bureau, and since th branch was losing, TWS considered closing its office. The Board issued two resolutions abolishing the office of the manager and VP of the TWS, and authorizing the corporate secretary to receive the properties of the TWS in the branch office. The lease contract was also terminated effective Jan. 3, 1962. The corporate secretary Gabino Canilao then went to the branch office and finding the office locked, and being unable to contact Sevilla, he padlocked the premises. Sevilla then filed a case against TWS. Sevilla claims that she is not a mere employee of TWS but that their arrangement was one of joint business venture.

Issue: What is the relationship between Sevilla and TWS Principal-Agent or Employer-Employee?

Held: Agent. The court denied both TWS and Sevillas contention not employee but not a partner. The Court used the control test in first determining if Sevilla was indeed an employee of TWS and it ruled in the negative. She was not subject to control by TWS, either as to the result of the enterprise or as to the means used. First, she had bound herself to solidarily pay the monthly rental payments. A true employee cannot be made to art with his own money in pursuance of his employers business; Second, when the branch opened, it was run by Sevilla payable to TWS by any airline for any fare brought in on the effort of Mrs. Sevilla. Third, Sevilla was not in the

Sevilla vs. CA 160 SCRA 171 (1988) Facts: On Oct. 19, 1960, Tourist World Service, Inc., represented by Mr. Eliseo Canilao and Mrs. Segundina Noguera entered into a lease contract for the premises at Mabini St., Manila. In the said contract, Mrs. Lina

companys payroll. She retained 4% in commissions from airline bookings, the remaining 3% going to TWS. The designation as branch manager was only for appearance purposes. Titles are weak indicators. Sevilla claimed that the agreement was a joint business venture or a partnership. A joint venture, including a partnership, presupposes generally a parity of standing between the joint co-venturers or partners, in which each has an equal proprietary interest in the capital or property contributed and where each party exercises equal rights in the conduct of the business. Considering the facts, the parties had contemplated a principalagent relationship. But unlike simple grants of power of attorney, the agency herein, which is compatible to the intent of the parties cannot be revoked by will. The reason is that it s coupled with an interest of the agent and the principal. Lina Sevilla is a bona fide travel agent herself, and as such, she had acquired an interest in the business entrusted to her. Sevilla was not a stranger in the lease contract so she could not be ousted from possession. There was malevolent design to put Sevilla in bad light in padlocking the branch office and abolishing the office of manager upon an information that Sevilla is connected with a rival company. For its unwarranted revocation of the contract of agency, TWS should pay damages under Arts. 21 and 2219 Php25,000 as moral, Php10,000 as exemplary, and Php5000 as nominal.

6 feet high for washing. After washing, it was greased but one part of the car cannot be reached by the greaseman, Alfonso M. Adriano, so the lifter was loosened to lower it a few feet. Unfortunately, while the lifter was being lowered, the car was swinging and it fell. The case was reported to the Manila Adjustor Company, the adjustor for the Firemens Insurance Company and the Commercial Casualty Insurance Company, the insurers of the car. The damaged car was repaired and restored to running condition for Php1651.38 and delivered to Sison, who assigned his rights to recover damages to the Insurers. Porfirio de la Fuente, the operator of the gasoline station denied negligence in the operation of the lifter and contended that the accidental fall was caused by unforeseen event. The insurers and the car owner brought an action against Shell Company and de la Fuente to recover the sum of the repair. The CA held Shell liable as it was the principal of de la Fuente and the latter being its agent. Issue: Is there a principal-agent relationship between Shell and de la Fuente making Shell liable? Held: Yes. Taking into consideration that the operator owed his position to the company and that the latter could remove him from his services at will, that the service station belonged to the company and bore its tradename and the operator only sold its products; that the equipment used belonged to the company and were just loaned to the operator and the company took charge of the repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the gasoline and service station; that the price of the products sold was fixed by the company; and that the receipts signed by the operator indicated that he was a mere agent, the finding that the operator was an agent of the company and not an independent contractor must stand. The nature of the contract is not determined by the name given by the parties but the intention behind it.

Shell Co. of the Philippines vs. Firemans Insurance Co. 100 SCRA 757 (1957) Facts: A Plymouth car owned by Salvador R. Sison was brought on Sept. 3, 1947 to the Shell Gasoline Service Station at Marques de Comillas and Isaac Peral Streets in Manila for washing, greasing and spraying for the amount of Php8.00. The car was placed on the hydraulic lifter up to about

As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent is one for which the principal is answerable. Shell is therefore liable.

Harry Keeler Electric Co. vs. Rodriguez November 11, 1922 FACTS: Harry Keeler is engaged in the electrical business and is selling the Matthews plant in the Philippine Islands. One day, A.C Montelibano went to the office of Harry Keeler and told him that he could find purchasers of the Matthews plant. Keeler agreed with the understanding that for every customer that he could find or any plant that he could sell, he would be given a 10% commission if the sale was consummated. Pursuant to this agreement, Montelibano was able to negotiate the sale of the the Matthews plant between Keeler and Rodriguez. After the machine had been installed, Rodriguez paid the purchase price of P2513.55 to Montelibano, without the knowledge of Keeler. Keeler alleged that it was his employee Cenar who installed the equipment in defendants premises. Moreover, Keeler also claimed that it was Cenar who gave him the statement of account totaling P2563.95. Cenar did not make any effort to collect the money since he was assured by Rodriguez that he will pay it in Manila. On the other hand, Rodriguez alleged that he paid the purchase price to Montelibano, since he was the one who sold, delivered and installed the electrical plant; that he was the one who presented the account; that he was assured by Montelibano that he was authorized to collect the value of the plant. The lower court decided in favor of Rodriguez, holding that Montelibano was an agent authorized to collect the purchase price. ISSUE: WON Montelibano was the agent of Harry Keeler. HELD: No. According to the Court, there is nothing in the receipt issued by Montelibano that would indicate that he was authorized by Keeler to collect the money. Accordingly, what was contained therein were his personal receipt and personal signature. There were no more indications of his authority. Moreover, the Court also ruled that the receipt presented in evidence by Rodriguez actually shows that it was Cenar who gave the

statement of accounts to him; otherwise, there would have been no need to incur shipping costs of P81.60 if it was Montelibano who installed the plant in his premises. In sum, there was no evidence that Keeler ever delivered any statement to Montelibano or that he was ever authorized to receive the money. It is a settled principle in agency that a person dealing with an agent must be careful in ascertaining the fact of the agency and the nature and extent of authority of the agent. Accordingly, In approaching the consideration of the inquiry whether an assumed authority exists in a given case, there are certain fundamental principles which must not be overlooked. Among these are, as has been seen, (1) that the law indulges in no bare presumptions that an agency exists: it must be proved or presumed from facts; (2) that the agent cannot establish his own authority, either by the representations or by assuming to exercise it; (3) that an authority cannot be established by mere rumor or general reputation; (4) that even a general authority is not an unlimited one; and (5) that every authority must find its ultimate source in some act or omission of the principal. Thus, when Rodriguez paid to Montelibano, he did so at his own peril. He is therefore, still liable to pay Keeler the amount of the electric plant.

Dominion Insurance Corp. v CA (GEN) Feb. 6, 2002 Pardo, J. FACTS: Rodolfo Guevarra claimed to have advanced P156, 473.90 in his capacity as a manager of Dominion Insurance Corp. to satisfy certain claims filed by the petitioners clients. He then instituted a complaint for sum of money against the petitioner. The petitioner denied any liability to plaintiff and asserted a counterclaim of P249,672.53, representing premium that Guevarra failed to pay. The RTC ruled in favor of Guevarra and ordered the petitioner to pay him the sum he claims. The CA affirmed the decision of the RTC. ISSUE: WON Guevarra acted within his authority as agent for petitioner? HELD: NO. The Special Power of Attorney entered into by petitioner and Guevarra would show that they intended to enter into a principal-agent relationship. Despite the word special in 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; hence it is limited only to acts of administration. Thus, the general agency constituted does not warrant the payment or settlement of claims as

they specifically require a Special Power of Attorney as provided by Art. 1878 of the Civil Code. But as provided by the Memorandum of Management Agreement, Guevarra was authorized to pay the claim 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 Guevarra incurred in the settlement of the claims of the insured may not be reimbursed from Dominion in accordance with Art. 1918 of the Civil Code. Nevertheless, under Art. 1236, to the extent that the obligation of the petitioner has been extinguished, Guevarra may demand for reimbursement from his principal.

Siasat v. IAC Oct. 10, 1985 . FACTS Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then Department of Education and Culture to purchase without public bidding, one million pesos worth of national flags for the use of public schools throughout the country. The respondent was able to expedite the approval of the purchase by hand-carrying the different indorsements from one office to another, so that by the first week of September, 1974, all the legal requirements had been complied with, except the release of the purchase orders. When Nacianceno was informed by the Chief of the Budget Division that the purchase orders could not be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval, she contacted the owners of the United Flag Industry. The next day, after the transaction was discussed, a document was drawn up authorizing Nacianceno to represent United Flag Industry to deal with any entity or organization, private or government, in connection with the marketing of Uniteds products-flags and its accessories, subject to 30% commission. On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The following day the respondent's authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat. After receiving the payment for the first delivery, tendered the amount of P23,900.00 or five percent (5%) of the amount received to the respondent as payment of her commission. The latter refused to accept the

said amount insisting on the 30% commission agreed upon. The respondent, however, was prevailed upon to accept the same because of the assurance of the petitioners that they would pay the commission in full after they delivered the other half of the order. Respondent Nacianceno later on learned that petitioner Siasat had already received payment for the second delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied receipt of the payment, at the same time claiming that the respondent had no participation whatsoever with regard to the second delivery of flags and that the agency had already been revoked. The respondent originally filed a complaint with the Complaints and Investigation Office in Malacaang but when nothing came of the complaint, she filed an action in the Court of First Instance of Manila to recover the following commissions: 25%, as balance on the first delivery and 30%, on the second delivery. CFI ruled in favor of respondent. CA affirmed. ISSUES WON Nacianceno is entitled to the commission despite the absence of specific authorization for the sale of 15,666 Philippine flags to DECS. HELD Yes. Nacianceno is a general agent. RATIONALE There are several kinds of agents. To quote a commentator on the matter: An agent may be (1) universal: (2) general,or (3) special. A universal; agent is one authorized to do all acts for his principal which can lawfully be delegated to an agent. So far as such a condition is possible, such an agent may be said to have universal authority. (Mec. Sec. 58). A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a business of a particular class or series. He has usually authority either expressly conferred in general terms or in effect made general by the usages, customs or nature of the business which he is authorized to transact. An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in a particular place, would, for this reason, be ordinarily deemed a general agent. (Mec Sec. ,30). A special agent is one authorized to do some particular act or to act upon some particular occasion. lie acts usually in accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. (Mec. Sec. 61) (Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).

One does not have to undertake a close scrutiny of the document embodying the agreement between the petitioners and the respondent to deduce that the 'latter was instituted as a general agent. Indeed, it can easily be seen by the way general words were employed in the agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners' merchandise with any entity or organization. NIELSON & COMPANY, INC v LEPANTO CONSOLIDATED MINING COMPANY G.R. No. L-21601 December 17, 1966 Quick Ratio: - The management contract is a lease of service and not a contract of agency. Neilsons principal undertaking or operating the mine and mill wasnt executing juridical acts for Lepanto, to create, modify, or extinguish business relations between Lepanto and third persons. Neilson was not an agent as interpreted in the law of agency, but an only an agent only in the sense of performing material acts for an employer, for compensation. - Neilsons incidental capacity as purchasing agent of supplies and enter into contracts regarding the sale of mineral, but Neilson couldnt make any purchase or sell minerals without prior approval of Lepanto; hence, these are not considered juridical acts either, but just acting only as an intermediary. Facts: Nielsen entered into a management contract with Lepanto before World War II broke out where Nielson managed and operated its mining company for PhP2,500 a month and 10% participation in the net profits. Prior case ruled for Nielson when it filed for damages in the view of Lepantos refusal to comply with the management contract (Nielson to be given back the control of Lepanto as their management contract was suspended when the war broke out). SC noted in this case that the lower court saw the management contract as lease of services. Lepanto, in this MR, raises for the first time this defense that it had right to not comply with the management contract as the contract was in nature an

agency, and thus, as principal, they had the right to terminate at will pursuant to the provision of Article 1733 of the old Civil Code. Under the contract, Nielson had agreed, for a period of five years, with the right to renew for a like period, to explore, develop and operate the mining claims of Lepanto, and to mine, or mine and mill, such pay ore as may be found therein and to market the metallic products recovered therefrom which may prove to be marketable, as well as to render for Lepanto other services specified in the contract. Nielson took complete charge but subject at all times to the general control of the Board of Directors of Lepanto, of the exploration and development of the mining claims, of the hiring of a sufficient and competent staff and of sufficient and capable laborers, of the prospecting and development of the mine, of the erection and operation of the mill, and of the benefication and marketing of the minerals found on the mining properties; and in carrying out said obligation Nielson should proceed diligently and in accordance with the best mining practice. In connection with its work Nielson was to submit reports, maps, plans and recommendations with respect to the operation and development of the mining properties, make recommendations and plans on the erection or enlargement of any existing mill, dispatch mining engineers and technicians to the mining properties as from time to time may reasonably be required to investigate and make recommendations without cost or expense to Lepanto. Nielson was also to "act as purchasing agent of supplies, equipment and other necessary purchases by Lepanto, provided, however, that no purchase shall be made without the prior approval of Lepanto; and provided further, that no commission shall be claimed or retained by Nielson on such purchase"; and "to submit all requisition for supplies, all constricts and arrangement with engineers, and staff and all matters requiring the expenditures of money, present or future, for prior approval by Lepanto; and also to make contracts subject to the prior approve of Lepanto for the sale and marketing of the minerals mined from said properties, when said products are in a suitable condition for marketing." Lepanto contends that the management contract in question is one of agency because: (1) Nielson was to manage and operate the mining properties and mill on behalf, and for the account, of Lepanto; and (2) Nielson was authorized to represent Lepanto in entering, on Lepanto's

behalf, into contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores mined. All these, Lepanto claims, show that Nielson was, by the terms of the contract, destined to execute juridical acts not on its own behalf but on behalf of Lepanto under the control of the Board of Directors of Lepanto "at all times". Hence Lepanto claims that the contract is one of agency. Lepanto then maintains that an agency is revocable at the will of the principal (Article 1733 of the Old Civil Code), regardless of any term or period stipulated in the contract, and it was in pursuance of that right that Lepanto terminated the contract in 1945 when it took over and assumed exclusive management of the work previously entrusted to Nielson under the contract. Lepanto finally maintains that Nielson as an agent is not entitled to damages since the law gives to the principal the right to terminate the agency at will. Issue/Held: Is the management contract between Nielson and Lepanto in the nature of an agency or a contract for lease of services? LEASE OF SERVICES. Ratio: This management contract is not a contract of agency as defined in Article 1709 of the old Civil Code, but a contract of lease of services as defined in Article 1544 of the same Code. This contract cannot be unilaterally revoked by Lepanto.

the operation of the mill. All the other undertakings mentioned in the contract are necessary or incidental to the principal undertaking these other undertakings being dependent upon the work on the development of the mine and the operation of the mill. In the performance of this principal undertaking Nielson was not in any way executing juridical acts for Lepanto, destined to create, modify or extinguish business relations between Lepanto and third persons. It was actually performing material acts for an employer, for compensation. While Nielson would also act as purchasing agent of supplies and enter into contracts regarding the sale of mineral, it could not make any purchase, or sell the minerals, without the prior approval of Lepanto. Thus, Nielson acted as an intermediary and not as an agent. Lepanto, as provided in their contract could also not terminate Nielson at will as Paragraph XI of the contract provides: Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or confidence that the Officials of each company have in the other; therefore, in order to assure that such confidence and faith shall abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time upon ninety (90) days written notice, in the event that NIELSON for any reason whatsoever, except acts of God, strike and other causes beyond its control, shall cease to prosecute the operation and development of the properties herein described, in good faith and in accordance with approved mining practice. Lepanto could terminate or cancel the agreement only by giving notice of termination ninety days in advance only in the event that Nielson should prosecute in bad faith and not in accordance with approved mining practice the operation and development of the mining properties of Lepanto. Lepanto could not terminate the agreement if Nielson should cease to prosecute the operation and development of the mining properties by reason of acts of God, strike and other causes beyond the control of Nielson. It could not terminate Nielson at will. Contact does not qualify the relation between Lepanto and Nielson as that of principal and agent based on trust and confidence, such that the

The employment by Lepanto of Nielson to operate and manage its mines was principally in consideration of the know-how and technical services that Nielson offered Lepanto. The contract thus entered into pursuant to the offer made by Nielson and accepted by Lepanto was a "detailed operating contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust and confidence in Nielson. Ratio: The principal and paramount undertaking of Nielson under the management contract was the operation and development of the mine and

contractual relation may be terminated by the principal at any time that the principal loses trust and confidence in the agent. There is no showing that Nielson had ceased to prosecute the operation and development of the mines in good faith and in accordance with approved mining practice which would warrant the termination of the contract upon ninety days written notice. There was no such written notice of termination. Nielson ceased to operate and develop the mines because of the war a cause beyond the control of Nielson. Indeed, if the management contract in question was intended to create a relationship of principal and agent between Lepanto and Nielson, paragraph XI of the contract should not have been inserted because, as provided in Article 1733 of the old Civil Code, agency is essentially revocable at the will of the principal that means, with or without cause. But precisely said paragraph XI was inserted in the management contract to provide for the cause for its revocation. The provision of paragraph XI must be given effect. OTHER RELEVANT INFORMATION (the differences): Article 1709 of the Old Civil Code, defining contract of agency, provides: By the contract of agency, one person binds himself to render some service or do something for the account or at the request of another. Article 1544, defining contract of lease of service, provides: In a lease of work or services, one of the parties binds himself to make or construct something or to render a service to the other for a price certain. In both agency and lease of services one of the parties binds himself to render some service to the other party. Agency, however, is distinguished from lease of work or services in that the basis of agency is representation, while in the lease of work or services the basis is employment. The lessor of services does not represent his employer, while the agent represents his principal.

On the basis of the interpretation of Article 1709 of the old Civil Code, Article 1868 of the new Civil Code has defined the contract of agency in more explicit terms, as follows: By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. There is another obvious distinction between agency and lease of services. Agency is a preparatory contract, as agency "does not stop with the agency because the purpose is to enter into other contracts." The most characteristic feature of an agency relationship is the agent's power to bring about business relations between his principal and third persons. "The agent is destined to execute juridical acts (creation, modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts." Agency Lease of services One of the parties binds himself to render some service to the other party Based on representation Based on employment Agent is destined to execute juridical acts Contemplates only (creation, modification, or material (non-juridical) extinction of relations with acts third parties) Preparatory act, purpose is Final act not a to enter into other preparatory act contracts

ALFRED HAHN, petitioner, vs. CA and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT (BMW), respondents. Facts:

- Alfred Hahn is a Filipino citizen doing business under the name "HahnManila," while BMW is a nonresident foreign corporation existing under the laws of the former Federal Republic of Germany. - Hahn executed in favor of BMW a "Deed of Assignment with Special Power of Attorney," which reads in full as follows: WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which ASSIGNOR uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive Dealer of the ASSIGNEE in the Philippines, x x x; X x x the ASSIGNOR hereby affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions: Xxx 2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal contract, and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the only limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to ASSIGNOR. - Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." - But in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, Hahn was informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in acquiring the same. - Later, Hahn received confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various aspects of petitioner's business, mentioning decline in sales, deteriorating services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW dealer. - Nonetheless, BMW expressed willingness to continue business relations with Hahn on the basis of a "standard BMW importer" contract, otherwise, BMW would have to terminate Hahns exclusive dealership effective June 30, 1993.

- Hahn protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment and that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment was made in consideration of the exclusive dealership; that the decline in sales was due to lower prices offered for BMW cars in the US and that few customers returned for repairs and servicing because of the durability of BMW parts and the efficiency of petitioner's service. - Thus, BMW withdrew on March 26, 1993 its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective June 30, 1993. - At a conference of BMW Regional Importers held on April 26, 1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. - On April 29, 1993, BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts, Hahn found it unacceptable. - On May 14, 1993, Hahn filed a complaint for specific performance and damages against BMW to compel it to continue the exclusive dealership and later he included an application for TRO and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership. Hahn's amended complaint alleged in pertinent parts: 2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be served with summons and other court processes through the Secretary of the Department of Trade and Industry of the Philippines. . . xxx xxx xxx 5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney. . where Plaintiff was duly acknowledged as the "exclusive Dealer of the Assignee in the Philippines. . . . xxx xxx xxx 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's

goodwill and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to single-handedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as service centers and showrooms to maintain and promote the car and products of defendant BMW. Xxx 15. The actuations of BMW are in breach of the assignment agreement between itself and plaintiff since the consideration for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows that the exclusive dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark assigned to it by Plaintiff. - RTC of the Quezon City issued a TRO. Summons and copies of the complaint and amended complaint were thereafter served on BMW through the DTI, pursuant to Rule 14, 14 of the Rules of Court, which in turn sent them to BMW via registered mail on June 15, 1993 and received by the latter on June 24, 1993. - On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte, with petitioner Hahn testifying. - TC issued an order granting the writ of preliminary injunction upon the filing of a bond of P100,000.00; following the posting of the required bond, a writ of preliminary injunction was issued. - BMW moved to dismiss the case, contending that: o TC did not acquire jurisdiction over it through the service of summons on the DTI, because it (BMW) was a foreign corporation and it was not doing business in the Philippines. o the execution of the Deed of Assignment was an isolated transaction; o that Hahn was not its agent because the latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; o and that Hahn was an indentor or middleman transacting business in his own name and for his own account. - Hahn opposed the motion and argued:

o that BMW was doing business in the Philippines through him as its agent, as shown by the fact that BMW invoices and order forms were used to document his transactions; o that he gave warranties as exclusive BMW dealer; o that BMW officials periodically inspected standards of service rendered by him; o and that he was described in service booklets and international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines. TC: deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in its motion did not seem to be indubitable. - Without seeking reconsideration of the order, BMW filed a petition for certiorari with CA alleging that respondent judge erred in deferring resolution of the motion to dismiss on the ground of lack of jurisdiction, and thereby failing to immediately dismiss the case - BMW asked for the immediate issuance of a TRO and, after hearing, for a writ of preliminary injunction pointing out that, unless the TCs order was set aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the very question was whether the court had jurisdiction over it. - CA: enjoined the TC from hearing Hahns complaint and rendered judgment finding the TC guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated: o BMWs motion to dismiss could be resolved then and there, and that the respondent judge's deferment of his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion. o CA itself resolved the motion. o CA dismissed the appeal and ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could not be acquired through service of summons on the DTI pursuant to Rule 14, 14. o that Hahn acted in his own name and for his own account and independently of BMW, based on Hahn's allegations that he had invested his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products other than those of BMW. o that Hahn was a mere indentor or broker and not an agent of BMW

Issues: 1. What constitutes doing business in the Philippines 2. WON Hahn was doing business in his own name or as agent of BMW 3. WON BMW was doing business in the Philippines for purposes of serving summons to it Held: 1. Rule 14, 14 provides: 14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or agents within the Philippines. - What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) as follows: 7 d) the phrase "doing business" shall include x x x appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more; x x x and any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, x x x nor appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account. - Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor

"transacts business in its name and for its own account." The same rule is stated in 1(f)(1) of the IRR the Omnibus Investment Code of 1987 (E.O. 226) 2. Hahn is an agent of BMW - [If he is an agent, BMW may be considered doing business in the Philippines and the TC acquired jurisdiction over it (BMW) by virtue of the service of summons on the DTI. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991 and the IRR, and the TC did not acquire jurisdiction over it (BMW).] - Hahn claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets. - Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. - Hahn was credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle order by BMW. - Upon confirmation in writing that the vehicles had been registered in the Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including warranty services, for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals.. - This arrangement shows an agency. 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. - As to the service centers and showrooms: Hahn said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines. BMW periodically inspected the service centers to see to it that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership. The fact

that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an agent of BMW. There are facts in the record which suggest that BMW exercised control over Hahn's activities as a dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. In effect, BMW was holding Hahn accountable to it under the 1967 Agreement. BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region that Hahn was the "official BMW agent" in the Philippines. CA also found that Hahn dealt in other products, and not exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. This finding is based entirely on allegations of BMW in its motion to dismiss filed in the TC and in its petition for certiorari before the CA. 14 But this allegation was denied by Hahn 15 and therefore the CA should not have cited it as if it were the fact. Indeed this is not the only factual issue raised, which should have indicated to the CAs the necessity of affirming the trial court's order deferring resolution of BMW's motion to dismiss.

foreclose a contrary finding should evidence later show that it is not transacting business in the country. - TC properly deferred resolution of the motion to dismiss and thus avoided prematurely deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. - Although the injunction was issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to dismiss. Reversed and remanded.

ANDRES QUIROGA, plaintiff-appellant, vs.PARSONS HARDWARE CO., defendant-appellee. FACTS On January 24, 1911, a contract between Quiroga and J. Parsons (to whose rights and obligations the present defendant later subrogated itself) for the exclusive sale of the Quiroga beds in the Visayan islands with the following conditions: (A) Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 % of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles. (B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of 60 days from the date of their shipment. (C) The expenses for transportation and shipment shall be borne by Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Parsons. (D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.

3.YES - BMW cannot short circuit the process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it denies. - Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is based does not appear to be indubitable. - Here the record of the case bristles with factual issues and it is not at all clear whether some allegations correspond to the proof. - BMW need not apprehend that by responding to the summons it would be waiving its objection to the trial court's jurisdiction. - It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. - The court need not go beyond the allegations of the complaint in order to determine whether it has Jurisdiction. 18 - A determination that the foreign corporation is doing business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation through service of summons pursuant to Rule 14, 14. Such determination does not

The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash. (E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given. (F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds. ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party. Only 2 of the 3 causes of action constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: not to sell the beds at higher prices than those of the invoices; to have an open establishment in Iloilo; itself to conduct the agency; to keep the beds on public exhibition, and to pay for the advertisement expenses for the same; and to order the beds by the dozen and in no other manner. With the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. The plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency.

ISSUE: WON Parsons is a purchaser or an agent of Quiroga for the sale of his beds HELD: PURCHASER In the contract, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price

agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale. It must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties. The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly

show that the contract belongs to a certain kind and not to another. The return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.

precluded from disposing such products elsewhere than in the above places unless written consent would first be obtained from the Company. It was required to exert every effort to have the shipment of the products in the maximum quantity and to promote in every way the sale thereof. The prices, discounts, terms of payment, terms of delivery and other conditions of sale were subject to change in the discretion of the Company. Issue: WON the relationship Ker & Co and US Rubber was that of a vendorvendee or principal-broker? PRINCIPAL- BROKER, hence liable under Section 194 (t) of the NIRC. Held: The relationship between them is one of brokerage or agency. That the petitioner Ker & Co., Ltd. is, by contractual stipulation, an agent of U.S. Rubber International is borne out by the facts that: 1. petitioner can dispose of the products of the Company only to certain persons or entities and within stipulated limits, unless excepted by the contract or by the Rubber Company; 2. it merely receives, accepts and/or holds upon consignment the products, which remain properties of the latter company 3. every effort shall be made by petitioner to promote in every way the sale of the products (Par. 3); that sales made by petitioner are subject to approval by the company 4. on dates determined by the rubber company, petitioner shall render a detailed report showing sales during the month 5. the rubber company shall invoice the sales as of the dates of inventory and sales report (Par. 14); that the rubber company agrees to keep the consigned goods fully insured under insurance policies payable to it in case of loss 6. upon request of the rubber company at any time, petitioner shall render an inventory of the existing stock which may be checked by an authorized representative of the former 7. upon termination or cancellation of the Agreement, all goods held on consignment shall be held by petitioner for the account of the rubber company until their disposition is provided for by the latter. CONTROLLING TEST (cited CIR vs. Constantino): Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and terms of

The judgment appealed from is affirmed, with costs against the appellant. So ordered.

KER & CO., LTD. vs. LINGAD G.R. No. L-20871 April 30, 1971 Facts: CIR assessed the sum of P20,272.33 as the commercial brokers percentage tax, surcharge, and compromise penalty against Ker & Co. There was a request on the part of petitioner for the cancellation of such assessment, which request was turned down. As a result, it filed a petition for review with the Court of Tax Appeals. CTA ruled that that Ker & Co is liable as a commercial broker under Section 194 (t) of the National Internal Revenue Code. Ker & Co signed a contract with the United States Rubber International, the former being referred to as the Distributor and the latter specifically designated as the Company. The shipments would cover products for consumption in Cebu, Bohol, Leyte, Samar, Jolo, Negros Oriental, and Mindanao except [the] province of Davao. Ker & Co, as Distributor, was

which were subject to the companys control, the relationship between the company and the dealer is one of agency. Sale vs. Agency a. In sale, the essence is the transfer of title or agreement to transfer it for a price paid or promised. In agency, the essence is the delivery to an agent. b. In sale, the transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale. In agency, the transfer does not make the property as the agents own, but that of principal, who remains the owner and has the right to control sales, fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. Besides, The control by the United States Rubber International over the goods in question is pervasive.