c.

When estopped
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent
if the former allowed the latter to act as though he had full powers. (n)
G.R. No. 88539 October 26, 1993
KUE CUISON vs. THE COURT OF APPEALS and VALIANT INVESTMENT ASSOCIATES
Facts:
1. Petitioner (Kue Cuison) is a sole proprietorship engaged in the purchase and sale of newsprint,
bond paper and scrap. On the other hand, the private respondent (Valiant Investment Associates)
is a partnership.
2. It was alleged that the private respondent delivered various kinds of paper products amounting to
P297,487.30 to Lilian Tan of LT Trading pursuant to orders of petitioner's manager, Tiu Huy Tiac.
Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific
request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdated checks to private respondent as
payment for the paper products.
3. After the said checks were later dishonored by the drawee bank, the private respondent made
several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy
Tiac was duly authorized as the manager of his Binondo office. However, petitioner denied any
involvement in the transaction and refused to pay private respondent.
4. Private respondent filed an action against petitioner for the collection of P297,487.30. After due
hearing, the trial court dismissed the complaint against petitioner for lack of merit. On appeal,
however, the decision of the trial court was reversed by the Court of Appeals (CA) ordering
petitioner to pay private respondent, among others, the sum of P297,482.30 with interest.
5. The petitioner filed to the Supreme Court a petition for review which assails the decision of the
respondent CA contending that the CA erred: (a) in finding Tiu Huy Tiac as petitioners agent; (b)
in finding petitioner liable for an obligation undisputedly belonging to Tiu Huy Tiac, and (c) in
reversing the well-founded decision of the trial court.
Issue: Whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the
latter liable for the disputed transaction.
Ruling: Yes. The Court denied the petition for lack of merit.
It is evident from the records that by his own acts and admission, the petitioner held out Tiu Huy Tiac to
the public as the manager of his store. Therefore, by petitioner's own representations and manifestations,
Tiu Huy Tiac became an agent of petitioner by estoppel, an admission or representation is rendered
conclusive upon the person making it, and cannot be denied or disproved as against the person relying
thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own
acts and representations to the prejudice of the other party who, in good faith, relied upon them
(Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).
Taken in this light, petitioner is liable for the transaction entered into by Tiu Huy Tiac on his
behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with

the agent if the former allowed the latter to act as though he had full powers (Article 1911 Civil
Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over
the proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of
his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the
one who made it possible for the wrong to be done should be the one to bear the resulting loss (Francisco
vs. Government Service Insurance System, 7 SCRA 577 [1963]).
G.R. No. 166044 June 18, 2012
COUNTRY BANKERS INSURANCE CORPORATION (CBIC) vs. KEPPEL CEBU SHIPYARD,
UNIMARINE SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER RODRIGUEZ, ALBERT
HONTANOSAS, and BETHOVEN QUINAIN
Facts:
1. On January 27, 1992, Unimarine, a corporation engaged in the shipping industry, contracted the
services of Cebu Shipyard, for dry docking and ship repair works on its vessel, the M/V Pacific
Fortune.
2. In compliance with the agreement, Unimarine secured a surety bond in favor of Cebu Shipyard
from CBIC through the latters agent, Bethoven Quinain. The expiration of this surety bond was
extended through endorsement. Unimarine also obtained another bond from Plaridel Surety and
Insurance Co.
3. Unimarine failed to settle its account despite repeated demands of Cebu Shipyard which caused
the latter to inform the sureties, CBIC and Plaridel, of Unimarines nonpayment and to ask them
to fulfill their obligations as sureties. However, even the sureties failed to discharge their
obligations.
4. Cebu Shipyard filed a complaint before the Regional Trial Court (RTC) against Unimarine,
CBIC, and Plaridel.
5. 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 Quinains actions were
within the terms of the SPA given to him.
6. On appeal, CBIC claimed that the RTC erred in enforcing its liability on the surety bond as it was
issued in excess of Quinains authority. Moreover, CBIC averred, its liability under such surety
had been extinguished by reasons of novation, payment, and prescription. CBIC also questioned
the RTCs order, holding it jointly and severally liable with Unimarine and Plaridel for a sum
larger than the face value of the surety bond and why the RTC did not hold Quinain liable to
indemnify CBIC for whatever amount it was ordered to pay Cebu Shipyard.
7. The Court of Appeals (CA) dismissed CBICs contention of novation for lack of merit. It also did
not allow CBIC to disclaim liability on the ground that Quinain exceeded his authority, because
third persons had relied upon Quinains representation as CBICs agent. 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. Quinain was, however, held solidarily liable with CBIC.
8. CBIC elevated its case to the Supreme Court seeking the reversal of the CAs decision. CBIC
argued that the Special Power of Attorney (SPA) granted to Quinain clearly set forth the extent
and limits of his authority with regard to businesses he can transact for and in behalf of CBIC and
that it was incumbent upon Cebu Shipyard to inquire and look into the power of authority
conferred to Quinain. CBIC claims that the foregoing is true even if Quinain was granted the
authority because third persons seeking to hold the principal liable for transactions entered into

by an agent should establish the the fact or existence of the agency and the nature and extent of
authority.
Issue: Whether or not CBIC is liable on the surety bond Quinain issued to Unimarine, in favor of Cebu
Shipyard.
Ruling: No. The Court dismissed the complaint against CBIC for lack of merit and ordered to release
CBIC from its liability on the surety bond.
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his authority only if
Quinains act of issuing the surety bond is deemed to have been performed within the written terms of the
power of attorney he was granted. However, contrary to what the RTC held, the SPA accorded to Quinain
clearly states the limits of his authority and particularly provides that in case of surety bonds, it can only
be issued in favor of the Department of Public Works and Highways, the National Power Corporation,
and other government agencies; furthermore, the amount of the surety bond is limited to P500,000.00.
This Court finds that the terms of the foregoing contract specifically provided for the extent and scope of
Quinains authority, and Quinain has indeed exceeded them.
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 agents 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.
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 Quinains deliberate failure to notify it of his transactions
with Unimarine. The settled rule is that, persons dealing with an assumed agent are bound at their peril.
To hold the principal liable, they are burdened to ascertain not only the fact of agency but also the nature
and extent of authority. In the case, the petitioners failed to discharge their burden; hence, petitioners are
not entitled to damages from respondent.