EFFECT OF ABSENCE OF
That the properties registered in QC
SPECIFIC AUTHORIZATION:
MERCADO VS ALLIED BANKING
CORP
Deceased Perla Mercado executed Special
power of Attorney (SPA) in favor of his
husband, Julian Mercado over several real
properties registered under her name.
She authorized her husband to sell,
alienate, mortgage, lease and deal over her
different parcels of land on her behalf.
Based on this SPA, Julian obtained P3M loan
from Allied Banking secured by real estate
mortgage which covers a parcel of land as
TCT 106338 Registered with Registry of
Deeds of Quezon City (QC).
Still using the same subject property, he
again obtained P5M loan from Allied
Banking secured by another real estate
mortgage (REM).
However, the property is not identified in
the SPA. What was identified was property
TCT 106338 registered with RoD of Pasig.
Subsequently, Julian faulted on payment.
Allied Banking initiated extra-judicial
foreclosure of REM and was sold at public
auction wherein it was the highest bidder.
Petitioners (Heirs of Perla) initiated with
RTC an action for annulment of REM on the
ground that the same was not covered by
the SPA, and that the SPA was no longer in
force and effect at the time of the loans
were contracted since the same was
revoked by Perla on March 1993.
HEIRS’ CONTENTION: The REM constituted
by Julian over subject property was NULL
and VOID, in the absence of authority.
Prayed for nullification of extrajudicial
foreclosure and auction sale.
ALLIED BANKING: The SPA in favor of
Julian included the subject property
covered by one of the titles specified in the
SPA.
and Pasig were one and the same.
RTC: Declared REM over subject property
as NULL AND VOID, for Julian was not
authorized by the terms of SPA to mortgage
the same.
Declared the nullification of the
foreclosure and auction sale.
CA: Reversed the decision of RTC, upheld
the validity of SPA. It declared that Perla
intended the subject property to be
included in the SPA.
ISSUE: WON the REM over subject property
is valid?
HELD: NO.
RATIO: For a mortgage to be valid, Article
2085 (3) of CC requires that the persons
constituting the pledge or mortgage have
the free disposal of their property, and in
the absence thereof, that they be LEGALLY
AUTHORIZED for the purpose. Third
persons who are not parties to the
principal obligation may secure the
property by pledging or mortgaging their
own property.
In the case, Julian does not have the
authority to mortgage the subject property
because the SPA does not extend his
authority over the real property in Quezon
City, the property being not included or
identified in the list of SPA as found by the
Court.
Under Art 1878 of CC, a SPA is necessary in
cases where real rights over immovable
property are created or conveyed. Thus,
the act of Julian constituting a mortgage
over the subject property is
UNENFORCEABLE for having been done
without authority under Art 1403 (1) of CC.
PETITION IS GRANTED, RTC DECISION
REINSTATED.
OBLIGATIONS OF AGENT:
CARRY OUT THE AGENCY
(ART 1884)
BA FINANCE VS CA, MANUEL AND LILIA
CUADY
July 15, 1977 – Manuel and Lilia Cuady
obtained from Supercars a credit of P39.5K
which amount covered the cost of one unit
of motor vehicle.
The obligation was evidenced by
promissory note executed by Cuadys in
favor of Supercars, obligating themselves
to:
a. Pay P39.5K inclusive of interest and
payable on monthly installments
starting August 16, 1977, and on the
16th of the next 35 months until full
payment.
b. Penalty of 10.00 for every month of
late installment payment.
c. The Spouses also secured the
obligation with chattel mortgage on
the motor vehicle.
July 25, 1977 – Superstars assigned the
promissory note together with the chattel
mortgage to BA Finance.
The Cuadys paid P36.730K to BA Finance,
thus leaving P2.3K as of July 18, 1080.
They also owed BA Finance of P460
representing penalties for tardy monthly
installments.
BA Finance (assignee) obtained renewal
with the insurance coverage over the
vehicle for the year 1980 with Zenith
Insurance Corp. when the Cuadys failed to
renew said insurance coverage, under the
terms, any loss under the policy shall be
payable to BA Finance Corp.
1980 – The motor vehicle figured an
accident and was badly damage. It was
reported to BA Finance and Zenith
Insurance.
Cuadys asked the BA Finance to consider
the same as total loss and to claim from
Zenith the face value of the car and apply
the same to the payment of their remaining
account and give them surplus.
BA Finance prevailed upon Cuadys to have
the car repaired instead, but the car later
on bagged down.
Cuadys wrote BA Finance requesting to
pursue their prior instruction of enforcing
the total loss provision in the insurance
coverage.
BA Finance did not respond favorably, thus
Cuadys stopped paying their monthly
installments on the promissory note.
BA Finance sued them in RTC.
RTC: Dismiss case.
CA: Affirmed RTC.
ISSUE: WON BA Finance has waived its right
to collect the unpaid balance of the Cuady
spouses on the promissory note for its
failure to enforce total loss provision in the
insurance coverage of motor vehicle
subject of the chattel mortgage?
HELD: YES.
RATIO: Under the deed of chattel
mortgage, BA Finance was constituted as
attorney-in-fact with full power and
authority to file, follow-up, prosecute,
compromise or settle insurance claims;
to sign execute and deliver the
corresponding papers, receipts and
documents to the Insurance Company as
may be necessary to prove the claim, and
to collect from the latter the proceeds of
insurance to the extent of its interests, in
the event that the mortgaged car suffers
any loss or damage.
In granting B.A. Finance Corporation the
powers and prerogatives, the Cuady
spouses created in the Cuady’s favor an
agency. Thus, under Article 1884 of the
Civil Code of the Philippines, B.A. Finance
Corporation is bound by its acceptance
to carry out the agency, and is liable for
damages which, through its non-
performance, the principal (Cuadys) in
the case at bar, may suffer. The Cuadys
suffered pecuniary loss in the form of
salvage value of the motor vehicle when
B.A. Finance Corporation steadfastly
refused and refrained from proceeding
against the insurer for the payment of a
clearly valid insurance claim, and
continued to ignore the yearning of the
Cuadys to enforce the total loss provision
in the insurance policy.
The Court affirmed CA when it provides
that it is unjust, unfair and inequitable to
require the chattel mortgagors, BA Finance,
to still pay the unpaid balance of their
mortgage debt on the said car, the non-
payment of which account was due to the
stubborn refusal and failure of appellant
mortgagee to avail of the insurance money
which became due and demandable after
the insured motor vehicle was badly
damaged in a vehicular accident covered
by the insurance risk..
CA DECISION AFFIRMED, PETITION
DISMISSED.
RATIFIED ACTS (ART 1901,
1910)
MANILA MEMORIAL PARK CEMETERY VS
PEDRO LINSANGAN
1984 – Baluyot offered Atty. Linsangan a lot
called Garden State at the Holy Cross
Memorial Park owned by petitioner
(MMPCI).
According to Baluyot, a former owner of a
memorial lot under Contract No. 25012 was
no longer interested in acquiring the lot
and had opted to sell his rights subject to
reimbursement of the amounts he already
paid.
The contract was for P95K. Baluyot
reassured Atty. Linsangan that once
reimbursement is made to the former
buyer, the contract would be transferred to
him.
Atty. Linsangan agreed and gave Baluyot
P35, 295.00 representing the amount to be
reimbursed to the original buyer and to
complete the down payment to MMPCI.
Baluyot issued handwritten and
typewritten receipts for these payments.
Baluyot informed Atty. Linsangan that a
new contract covering the subject lot will
be issued (Contract No. 28660) which has a
listed price of P132.250K
Atty. Linsangan objected to the new
contract price, as the same was not the
amount previously agreed upon.
To convince Atty. Linsangan, Baluyot
executed a document confirming that while
the contract price is P132, 250.00, Atty.
Linsangan would pay only the original
price of P95, 000.00.
Atty. Linsangan issued 12 postdated
checks in favor of MMPCO, and another 12
postdated checks again the following year.
Later on, Baluyot verbally advised Atty.
Linsangan that Contract No. 28660 was
cancelled for reasons the latter could not
explain, presented instead another
proposal for purchase of an equivalent
property.
For the alleged failure of MMPCI and
Baluyot to conform to their agreement,
Atty. Linsangan filed a Complaint for
Breach of Contract and Damages against
the former.
MMPCI: alleged that:
 Contract No. 28660 was cancelled
conformably with the terms of the
contract because of non-payment of
arrearages.
 MMPCI stated that Baluyot was not an
agent but an independent contractor,
and as such was not authorized to
represent MMPCI or to use its name
except as to the extent expressly
stated in the Agency Manager
Agreement (to receive only the down
payment).
 Moreover, MMPCI was not aware of
the arrangements entered into by
Atty. Linsangan and Baluyot, as it in
fact received a down payment and
monthly installments as indicated in
the contract.
 Whatever misimpression that Atty.
Linsangan may have had must have
been rectified by Account Updating
Arrangement signed by Atty
Linsangan.
TC: MMPCI and Baluyot jointly and
severally liable, ordered to perform their
undertakings.
CA: Affirmed the decision of the trial court.
(Agency, MMPCI is estopped when it
allowed Baluyot to act for and its behalf)
ISSUES:
1. Whether or not there was a contract of
agency between Baluyot and MMPCI?
2. Whether or not MMPCI should be liable
for Baluyot’s act?
HELD:
First Issue. Yes. By the contract of agency, ratification. The agreement between
a person binds himself to render some Baluyot and Atty. Linsangan bound only
service or to do something in the two of them.
representation or on behalf of another,
with the consent or authority of the latter.
As properly found both by the trial court
and the Court of Appeals, Baluyot was
authorized to solicit and remit to MMPCI
offers to purchase interment spaces
obtained on forms provided by MMPCI. The
terms of the offer to purchase, therefore,
are contained in such forms and, when
signed by the buyer and an authorized
officer of MMPCI, becomes binding on both
parties.
Second Issue. No. While there is no more
question as to the agency relationship
between Baluyot and MMPCI, there is no
indication that MMPCI let the public, or
specifically, Atty. Linsangan to believe
that Baluyot had the authority to alter the
standard contracts of the company, as
his authority was limited only to
soliciting purchasers.
Neither is there any showing that prior to
signing Contract No. 28660, MMPCI had
any knowledge of Baluyot's commitment to
Atty. Linsangan. Even assuming that Atty.
Linsangan was misled by MMPCI's
actuations, he still cannot invoke the
principle of estoppel, as he was clearly
negligent in his dealings with Baluyot, and
could have easily determined, had he only
been cautious and prudent, whether said
agent was clothed with the authority to
change the terms of the principal's written
contract.
To repeat, the acts of the agent beyond the
scope of his authority do not bind the
principal unless the latter ratifies the
same. It also bears emphasis that when the
third person knows that the agent was
acting beyond his power or authority, the
principal cannot be held liable for the acts
of the agent. If the said third person was
aware of such limits of authority, he is to
blame and is not entitled to recover
damages from the agent, unless the latter
undertook to secure the principal's
 SAFIC ALCAN AND CIE VS IMPERIAL There can be no implied agency too
VEGETABLE OIL simply because there has been a previous
transaction between SAC and IVO where
In 1985, Safic Alcan & Cie (SAC), a
IVO was represented by Monteverde.
corporation, entered into an agreement
with Imperial Vegetable Oil Co., Inc. (IVO) This is because the 1985 contract and the
whereby IVO shall deliver tones of coconut 1986 contracts are very different. The 1985
oil to SAC. Both parties complied. contract is not speculative while the 1986
contracts are speculative hence, SAC
IVO was represented by its president,
should have secured the confirmation by
Dominador Monteverde.
IVO’s Board that Monteverde is indeed
In 1986, SAC again entered into several authorized to enter into such agreements.
agreements with IVO but this time it was
Further, Monteverde did not even present
agreed that IVO shall deliver the coconut
the said 1986 agreements before the Board
oil 8 months from the agreement or
of Directors so there was, in fact, no
sometime in 1987. This time, IVO failed to
occasion at all for ratification.
deliver, thus, SAC sued IVO.
The contracts were not even reported in
IVO: in its defense aver that Monteverde
IVO’s export sales book and turn-out book.
was acting beyond his power as president
Neither were they reflected in other books
when he made the 1986 agreement with
and records of the corporation. It must be
SAC; that Monteverde is acting beyond his
pointed out that the Board of Directors, not
power because the 1986 contracts were
Monteverde, exercises corporate power.
speculative in nature and speculative
contracts are prohibited by the by-laws of Clearly, Monteverde’s speculative
IVO. contracts with Safic never bound IVO and
Safic cannot therefore enforce those
SAC: insists that there is an implied agency
contracts against IVO.
between IVO and Monteverde because SAC
and Monteverde has been transacting since
1985 and that IVO benefited from said
transactions.
ISSUE: Whether or not Monteverde’s act in
entering into the 1986 contracts bounds
IVO in the 1986 agreements?
HELD: NO.
RATIO: It was proven by IVO, when they
presented a copy of their by-laws that
Monteverde acted beyond his authority
when he entered into speculative contracts
with SAC in 1986.
The 1986 contracts are speculative
because at the time of the contracts, the
coconuts are not even growing at that time
and are yet to be harvested. Hence, the
1986 contracts are sales of mere
expectations – and this is something
prohibited by the by-laws and the Board of
Directors of IVO.
PRINCIPAL AS SOLIDARY
LIABLE (ESTOPPEL) ART 1911
FILIPINAS LIFE ASSURANCE CO. VS
CLEMENTE, TERESITA PEDROSO and
JENNIFER PALACIO
Teresita Pedroso is a policyholder of a 20-
year endowment life insurance issued by
Filipinas Life Assurance Co.
Pedroso claims Renato Valle was her
insurance agent since 1972 and Valle
collected her monthly premiums.
In the first week of January 1977, Valle
told her that the Filipinas Life Escolta
Office was holding a promotional
investment program for policy holders. It
was offering 8% prepaid interest a month
for certain amounts deposited on a
monthly basis.
Enticed, she initially invested and issued a
post-dated check for P10, 000. In return,
Valle issued Pedroso his personal check for
P800 for the 8% prepaid interest and
a Filipinas Life Agent receipt.
Pedroso called the Escolta office and talked
to Francisco Alcantara, the administrative
assistant, who referred
her to the branch manager, Angel Apetrior.
Pedroso inquired about the promotional
investment and Apetrior confirmed that
there was such a promotion. She was even
told she could push through with the check
she issued. From the records, the check,
with the endorsement of Alcantara at the
back, was deposited in the account of
Filipinas Life with the Commercial Bank
and Trust Company, Escolta Branch.
Relying on the representations made by
Filipinas Life’s duly authorized
representatives Apetrior and Alcantara, as
well as having known agent Valle for quite
some time, Pedroso waited for the maturity
of her initial investment.
A month after, her investment of P10, 000
was returned to her after she made a
written request for its refund. To collect
the amount, Pedroso personally went to the
Escolta branch where Alcantara gave her
the P10, 000 in cash.
After a second investment, she made 7 to 8
more investments in varying amounts,
totaling P37, 000 but at a lower rate of 5%
prepaid interest a month. Upon maturity of
Pedroso’s subsequent investments, Valle
would take back from Pedroso the
corresponding agent’s receipt he issued to
the latter.
Pedroso told respondent Jennifer Palacio,
also a Filipinas Life insurance policy
holder, about the investment plan.
Palacio made a total investment of P49, 550
but at only 5% prepaid interest. However,
when Pedroso tried to withdraw her
investment, Valle did not want to return
some P17, 000 worth of it.
Palacio also tried to withdraw hers, but
Filipinas Life, despite demands, refused to
return her money.
Respondents filed in RTC. RTC: Filipinas
Life and Vale, Apetrior and Alcantara
jointly and severally liable.
CA: Affirmed RTC
ISSUE:
WON Filipinas Life is jointly and severally
liable with Apetrior (Manager) and
Alcantara (Admin Assistant) on the claim
of Pedroso and Palacio or WON its agent
Renato Valle is solely liable to Pedroso and
Palacio.
HELD: JOINTLY AND SEVERALLY LIABLE
Filipinas had clothed Valle with apparent
authority.
Filipinas Life authorized Valle to Solicit
investments for them. Its official
documents and facilities were used in
consummating transactions. Pedroso and
Palacio had invested P47, 000 and P49, 550,
respectively. These were received by Valle
and remitted to Filipinas Life, using
Filipinas Life’s official receipts.
Valle’s authority to solicit and
receive investments was also established
by the parties. When Pedroso and Palacio s
ought confirmation, Alcantara, holding a
supervisory position, and Apetrior, the
branch manager, confirmed that Valle had
authority. While it is true that a person
dealing with an agent is put upon inquiry
and must discover at his own peril the
agent’s authority, in this case, Pedroso and
Palacio did exercise due diligence in
removing all doubts and in confirming the
validity of the representations made by
Valle.
Filipinas Life, as the principal, is liable for
obligations contracted by its agent Valle.
The general rule is that the principal is
responsible for the acts of its agent done
within the scope of its authority, and
should bear the
damage caused to third persons.
When the
agent exceeds his authority, the agent bec
omes personally liable for the damage.
But even when the agent exceeds
his authority, the principal is still
solidarily liable together with the agent if
the principal allowed the agent to act as
though the agent had full powers.
Filipinas Life cannot profess ignorance of
Valle’s acts, as it expressly and knowingly
ratified his acts.
Even if Valle’s representations were
beyond his authority as a debit/insurance
agent, Filipinas Life thru Alcantara and
Apetrior expressly and knowingly ratified
Valle’s acts. Filipinas Life benefited from
the investments deposited by Valle in the
account of Filipinas Life.
NOTE: Ratification
Adoption or confirmation by one person of
an act performed on his behalf by another
without authority
APPOINTMENT OF SUBSTITUTE
(Art 1892-1893)
Escueta vs. Lim
Rufino Lim, herein respondent, averred
that she had bought the hereditary
properties of the Petitioners Rubio and
heirs of Baloloy.
On April 10, 1990 Petitioners executed a
Contract of Sale and received from
Respondent Lim a down payment of
102,169.86 and 450,000 respectively and
the balance will be paid after the titles are
transferred into Lim’s name.
Rubio and the heirs of Baloloy refused to
deliver the title to Lim despite her offer of
the payment of the balance. Despite the
existence of a Contract of Sale between Lim
and Rubio and the heirs of Baloloy,
Corazon Escueta having knowledge thereof
executed a simulated sale involving the
lots.
As for the Baloloys, they argued that they
already withdrawn their offer to sell for the
reason that respondent failed to pay the
balance on time, hence, the Contract of Sale
has no more force and effect.
As to Rubio, it alleged that Lim has no
cause of action since, Rubio appointed her
daughter Patricia Llamas to be his
attorney-in-fact, and not in favor of
Victoria Laygo Lim who represented Rubio
in the sale between the Respondent Rufina
Lim.
RTC declared the Petitioners in default.
CA affirmed RTC decision with
amendments.
ISSUE: Whether or not the Contract of Sale
between Rufina Lim and the Petitioners
Rubio and Baloloys is valid.
HELD: Yes, the Contract of Sale is valid.
RATIO: The Court held that the Contract of
Sale between the petitioner and respondent
is valid and binding.
Rubio argued that Victoria has no authority
to represent him in the Sale of the disputed
properties since Rubio appointed her
daughter as his attorney-in-fact and not
Victoria.
Art. 1892 provides:
The agent may appoint a substitute if the
principal has not prohibited him from
doing so; but he shall be responsible for
the acts of the substitute:
1) When he was not given the power to
appoint one.
In the case above, Rubio made his daughter
Patricia to be her Attorney-in –fact, and
according to the above article, Patricia is
not prohibited to appoint a substitute as
a representative of Rubio.
Patricia, acting on the authority given to
her, appointed Victoria as her substitute
hence the transaction between Victoria
and Respondent is valid.
Art. 1317 further provides: Art. 1317. x x x
A contract entered into in the name of
another by one who has no authority or
legal representation, or who has acted
beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been
executed, before it is revoked by the other
contracting party.
The acceptance of Rubio of the down
payment and encashment of the said
checks serves as the ratification of Rubio
of the Sale of the Properties with the
respondent Rufina Lim.
SUBSTITUTE AGENT:
ALTERNATE NOT DELEGATE
ANTONIO BALTAZAR VS OMBUDSMAN,
EULOGIO MARIANO, JOSE JIMENEZ ET AL
Paciencia Regala owns a seven (7)-hectare
fishpond located at Sasmuan, Pampanga.
Her Attorney-in-Fact Faustino R. Mercado
leased the fishpond for PhP 230,000.00 to
Eduardo Lapid for a three (3)-year period.
Lessee Eduardo Lapid in turn sub-leased
the fishpond to Rafael Lopez for PhP
50,000.00 during the last seven (7) months
of the original lease.
Respondent Ernesto Salenga was hired by
Eduardo Lapid as fishpond watchman
(bante-encargado). In the sub-lease, Rafael
Lopez rehired respondent Salenga.
Meanwhile, on March 11, 1993, respondent
Salenga, through a certain Francis Lagman,
sent his January 28, 1993 demand letter to
Rafael Lopez and Lourdes Lapid for unpaid
salaries and non-payment of the 10% share
in the harvest.
On June 5, 1993, sub-lessee Rafael Lopez
wrote a letter to respondent Salenga
informing the latter that for the last two (2)
months of the sub-lease, he had given the
rights over the fishpond to Mario Palad and
Ambit Perez for PhP 20,000.00.
This prompted respondent Salenga to file a
Complaint before the Provincial Agrarian
Reform Adjudication Board (PARAB).
On November 24, 1994, pending resolution
of the agrarian case, the instant case was
instituted by petitioner Antonio Baltazar,
an alleged nephew of Faustino Mercado,
through a Complaint-Affidavit against
private respondents before the Office of
the Ombudsman.
Petitioner charged private respondents of
conspiracy through the issuance of the
TRO in allowing respondent Salenga to
retain possession of the fishpond, operate
it, harvest the produce, and keep the sales
under the safekeeping of other private
respondents
Antonio Baltazar asserts that he is duly
authorized by Faustino Mercado to
institute the suit and presented a Special
Power of Attorney (SPA) from Faustino
Mercado.
ISSUE: Whether Faustino Mercado can
delegate his agency to his nephew Antonio
Baltazar
HELD: NO. Faustino Mercado cannot
delegate his agency to his nephew Antonio
Baltazar.
RATIO: The Supreme Court held that
petitioner's principal, Faustino Mercado, is
an agent himself and as such cannot
further delegate his agency to another.
Otherwise put, an agent cannot delegate to
another the same agency. The legal maxim
potestas delegata non delegare potest; a
power once delegated cannot be re-
delegated, while applied primarily in
political law to the exercise of legislative
power, is a principle of agency.
For another, a re-delegation of the agency
would be detrimental to the principal as
the second agent has no privity of contract
with the former.
In the instant case, petitioner has no
privity of contract with Paciencia Regala,
owner of the fishpond and principal of
Faustino Mercado.
Moreover, while the Civil Code under
Article 1892 allows the agent to appoint a
substitute, such is not the situation in the
instant case. The SPA clearly delegates the
agency to Baltazar to pursue the case and
not merely as a substitute. Besides, it is
clear in the said Article that what is allowed
is a substitute and not a delegation of the
agency. Clearly, petitioner is not a party
who will be benefited or injured by the
results of both cases.
AGENT RESPONSIBLE FOR THE
ACTS OF SUB-AGENT
VIRGIE SERONA VS CA AND PEOPLE
Virgie Serano received in trust from
Leonida E. Quilatan various pieces of
jewelry in the total value of P567,750.00 to
be sold on commission basis under the
express duty and obligation of remitting
the proceeds thereof to Quilantan if sold or
returning the same to the latter if unsold.
Unknown to Quilatan, Serona entrusted the
jewelry to one Marichu Labrador for the
latter to sell on commission basis.
Serona was not able to collect payment
from Labrador, which caused her to
likewise fail to pay her obligation to
Quilatan.
Issue/s:
1. W/N THERE WAS AN ABUSE OF
CONFIDENCE ON THE PART OF PETITIONER
IN ENTRUSTING THE SUBJECT JEWELRIES
TO HER SUB-AGENT FOR SALE ON
COMMISSION TO PROSPECTIVE BUYERS.
2. W/N THERE WAS MISAPPROPRIATION OR
CONVERSION ON THE PART OF PETITIONER
WHEN SHE FAILED TO RETURN THE
SUBJECT JEWELRIES TO PRIVATE
COMPLAINANT.
HELD: Virgie Serona is ACQUITTED of the
crime of estafa, but is held civilly liable.
RATIO: An agent who is not prohibited
from appointing a sub-agent but does so
without express authority is responsible
for the acts of the sub-agent.
1. Serano did not ipso facto commit the
crime of estafa through conversion or
misappropriation by delivering the jewelry
to a sub-agent for sale on commission
basis.
The law on agency in our jurisdiction
allows the appointment by an agent of a
substitute or sub-agent in the absence of
an express agreement to the contrary
between the agent and the principal.
In the case at bar, the appointment of
Labrador as petitioners sub-agent was not
expressly prohibited by Quilatan, as the
acknowledgment receipt does not contain
any such limitation. Neither does it appear
that petitioner was verbally forbidden by
Quilatan from passing on the jewelry to
another person before the
acknowledgment receipt was executed or
at any other time. Thus, it cannot be said
that petitioners act of entrusting the
jewelry to Labrador is characterized by
abuse of confidence because such an act
was not proscribed and is, in fact, legally
sanctioned.
2. It was established that the inability of
petitioner as agent to comply with her duty
to return either the pieces of jewelry or the
proceeds of its sale to her principal
Quilatan was due, in turn, to the failure of
Labrador to abide by her agreement with
petitioner. Notably, Labrador testified that
she obligated herself to sell the jewelry in
behalf of petitioner also on commission
basis or to return the same if not sold. In
other words, the pieces of jewelry were
given by petitioner to Labrador to achieve
the very same end for which they were
delivered to her in the first place.
Consequently, there is no conversion since
the pieces of jewelry were not devoted to a
purpose or use different from that agreed
upon.
Similarly, it cannot be said that petitioner
misappropriated the jewelry or delivered
them to Labrador without right.
Aside from the fact that no condition or
limitation was imposed on the mode or
manner by which petitioner was to effect
the sale, it is also consistent with usual
practice for the seller to necessarily part
with the valuables in order to find a buyer
and allow inspection of the items for sale.
IMPERIAL INSURANCE VS ROSETE, CHIU the petitioner an opportunity to comply
ENG HUA with the requirement of the court. Just the
same, the respondent judge declared
The case was set for pre-trial conference of
petitioner to be in default.
which the parties and their counsel were
duly notified. No doubt, the respondent judge was
unnecessarily harsh when the Rules call for
At said pre-trial conference petitioner was
liberality in such cases. This is a case
represented by Atty. Arturo A. Magallanes
where petitioner filed an answer with
who presented a special power of attorney
counterclaim and advanced apparently a
executed by Bernardito R. Pulvera, regional
meritorious and valid defense. It should be
branch manager of petitioner for Mindanao
given its day in court and the opportunity
and Visayas, authorizing said counsel to
to prove its assertions. This is the situation
represent petitioner at the pre-trial
contemplated by the Rules. The courts
conference, to enter into any amicable
must lean in favor of affording substantial
settlement and to do such other acts as
justice as against a technical requirement.
may be necessary to implement the
authority.
The presiding judge refused to honor the
same and observed that it is only the Board
of Directors of the petitioner who may
authorize the appearance of the regional
manager in behalf of petitioner and that he
cannot delegate his functions.
Counsel for private respondent stated he
was willing to give petitioner a chance to
produce the appropriate authority.
Nevertheless, the respondent judge
declared the petitioner in default
ISSUE: WON Pulvera as agent of the
petitioner may appoint a substitute. YES
RULING: There can be no doubt therefore
that regional branch manager Pulvera, as
regional manager for Visayas and
Mindanao of petitioner, was authorized to
represent petitioner in any litigation and in
the process to enter into a compromise
agreement or settlement thereof.
As such agent of petitioner he may appoint
a substitute, as he was not prohibited from
doing so by his principal. Moreover, even
assuming for the sake of argument that the
observations of the respondent judge is
correct in that a board resolution of the
petitioner is required for the purposes of
authorizing Pulvera and/or Magallanes to
bind the petitioner, the counsel for the
private respondent manifested to the
respondent judge his willingness to give
 MANILA REMNANT VS CA AND OSCAR
VENTILLA AND CARMEN DIAZ
Manila Remnant Co. is the owner of Capital
Homes Subdivision and Artemio Valencia
as President. A.U. Valencia and Co., is the
authorized agent of Manila Remnant to
develop the aforesaid subdivision with
authority to manage the sales thereof,
execute contracts to sell to lot buyers and
issue official receipts. Artemio Valencia is
also the president of this company.
Sometime in March 1970, Manila Remnant
thru A.U. Valencia, executed contracts to
sell with Ventanilla covering two lots
amounting to P66k to paid monthly for 10
years. Ventanilla paid the down payment.
After 10 days, Artemio Valencia sold the
same lots without informing Ventanilla to
Crisostomo, his sales agent without any
consideration.
Artemio Valencia then transmitted the
fictitious Crisostomo contracts to Manila
Remnant while he kept in his files the
contracts to sell in favor of the Ventanillas.
All the amounts paid by the Ventanillas
were deposited in Valencia's bank account
and this is remitted to Manila Remnant in
favor of Crisostomo. Receipts issued by
Manila Remnant in favor of Crisostomo are
kept by Valencia.
Ventanilla is not aware of Valencia's
scheme and thus continued paying their
monthly installments. Sometime in May
1973, Manila Remnant terminated its
collection agreement with AU Valencia due
to discrepancies and irregularities
discovered in its collections and
remittances. Valencia was also removed as
the President of Manila Remnant.
The Ventanilla couple unaware of the
circumstances happened, continued
paying their installments to Valencia. It is
only in 1978 they learned the termination
of Valencia, thus they went immediately to
Manila Remnant to pay their balance but to
their shock they discovered from Gloria
Caballes, an accountant of Manila Remnant,
that their names did not appear in the
records of A.U. Valencia and Co. as lot
buyers. Thus, the Ventanillas commenced
an action for specific performance,
annulment of deeds and damages against
Manila Remnant, A.U. Valencia and Co. and
Carlos Crisostomo. Lower court's rendered
judgment in favor of Ventanilla, and in the
decision, the court ordered defendants
A.U. Valencia and Co. Inc.,
Manila Remnant and Carlos Crisostomo
jointly and severally to pay the Ventanillas
the amount of P100,000.00 as moral
damages, P100,000.00 as exemplary
damages and P100,000.00 as attorney's
fees and in case the transfer of lots cannot
be effected for any legal reason, the
defendants should reimburse jointly and
severally to the Ventanillas the total
amount of P73,122.35 representing the
total amount paid for the two lots plus
legal interest thereon from March 1970
plus damages.
While petitioner Manila Remnant has not
refuted the legality of the award of
damages per se, it believes that it cannot
be made jointly and severally liable with its
agent A.U. Valencia and Co. since it was not
aware of the illegal acts perpetrated nor
did it consent or ratify said acts of its
agent.
ISSUE: Whether or not petitioner Manila
Remnant should be held solidarily liable
together with A.U. Valencia and Co. and
Carlos Crisostomo for the payment of
moral, exemplary damages and attorney's
fees in favor of the Ventanillas
HELD: YES.
RATIO: The unique relationship existing
between the principal and the agent at the
time of the dual sale must be underscored.
Bear in mind that the president then of
both firms was Artemio U. Valencia, the
individual directly responsible for the sale
scam. Hence, despite the fact that the
double sale was beyond the power of the
agent, Manila Remnant as principal was
chargeable with the knowledge or
constructive notice of that fact and not
having done anything to correct such an
irregularity was deemed to have ratified
the same.
CERVANTES VS CA AND PHIL AIRLINES
Cervantes was issued a round ticket for
Manila-Honolulu-Los Angeles-Honolulu-
Manila, which ticket expressly provided an
expiry date of March 27, 1990.
He was issued the said ticket following a
compromises agreement between the two
parties from previous lawsuits. On March
23, four days before its expiration, he used
the ticket and went to Los Angeles.
He booked a return ticket for the April 2
flight which was confirmed by PAL
personnel. On the day of his supposed
return, he was not allowed to board
because it was already expired.
ISSUE: Whether or not the PAL agents
(personnel), upon confirmation of
Cervantes’ return ticket, extended the
validity of the ticket.
HELD: No, PAL agents’ confirmation did not
extend the validity of the ticket. They did
not have authority.
RATIO: Since the PAL agents are not privy
to the said agreement and petitioner knew
that a written request to the legal counsel
of PAL was necessary, he cannot use what
the PAL agents did to his advantage. The
said agents acted without authority when
they confirmed the flights of the
petitioner. If the said third person is aware
of such limits of authority, he is to blame.
SIREDY ENTERPRISES, INC. petitioner, vs. HELD: Siredy Enterprises, Inc. is ordered to
HON. COURT OF APPEALS and CONRADO pay Conrado de Guzman actual damages
DE GUZMAN, respondents. with legal interest.
Conrado De Guzman is an architect- RATIO: By the relationship of agency, one
contractor doing business under the name party called the principal authorizes
and style of Jigscon Construction. Siredy another called the agent to act for and in
Enterprises, Inc. (hereafter Siredy) is the his behalf in transactions with third
owner and developer of Ysmael Village, a persons. The authority of the agent to act
subdivision in Sta. Cruz, Marilao, Bulacan. emanates from the powers granted to him
by his principal; his act is the act of the
The president of Siredy is Ismael E. Yanga.
principal if done within the scope of the
As stated in its Articles of Incorporation,
authority. He who acts through another
the primary corporate purpose of Siredy is
acts himself. On its face, the Letter of
to acquire lands, subdivide and develop
Authority executed by Yanga clearly and
them, erect buildings and houses thereon,
unequivocally constituted Santos to do and
and sell, lease or otherwise dispose of said
execute, among other things, the act of
properties to interested buyers.
negotiating and entering into contract or
Sometime before October 1978, Yanga contracts to build Housing Units on the
executed an undated Letter of Authority subdivision lots in Ysmael Village, Sta.
duly signed by Yanga which constituted Rosa, Marilao, Bulacan. Nothing could be
Hermogenes Santos as Siredys agent, more express than the written stipulations
whose authority included entering into a contained therein. It was upon the
contract for the building of housing units authority of this document that De
at Ysmael Village. Guzman transacted business with Santos
that resulted in the construction contract
Thereafter, Santos entered into a Deed of
denominated as the Deed of Agreement.
Agreement with De Guzman.
From October 1978 to April 1990, De
Guzman constructed 26 residential units at
Ysmael Village. Thirteen (13) of these were
fully paid but the other 13 remained
unpaid. The total contractual price of these
13 unpaid houses is P412,154.93 which
was verified and confirmed to be correct by
Santos, per an Accomplishment Billing that
the latter signed. Yanga is not a signatory
to the said contact. De Guzman tried but
failed to collect the unpaid account from
petitioner.
Thus, he instituted the action below for
specific performance against Siredy,
Yanga, and Santos who all denied liability.
During the trial, Santos disappeared and
his whereabouts remain unknown.
ISSUE: W/N Hermogenes B. Santos was a
duly constituted agent of Siredy, with
authority to enter into contracts for the
construction of residential units in Ysmael
Village and thus the capacity to bind Siredy
to the Deed of Agreement.
 LAURO CRUZ VS CA AND PURE FOODS
Lauro Cruz owns a store under the
tradename Mang Uro Store. However, he
was dismayed when he was sued by
Purefoods Corporation in an action for sum
of money in the amount of P55, 246.21 for
the unpaid canned goods. It appeared that
although the store is now being manage by
his son, it is still licensed under his name
and the credit card application signed by a
certain Me Cruz and Marilou Cruz.
ISSUE:
WON Lauro is liable to pay P55, 246.21
contracted under his name by Me Cruz and
Marilou Cruz.
Answer: No.
RATIO: Lauro is not liable to pay the
amount demanded by Purefoods
Corporation.
It is provided under Artcicle 1902 of the
Civil Code that a third person with whom
the agent wishes to contract on behalf of
the principal may require the presentation
of the power of attorney, or the
instructions as regards the agency.
In the case at bar, there is no showing that
Purefoods Corporation exerted effort to
inquire on the relationship of the
signatories Me Cruz and Marilou Cruz to
that of the owner/manager Lauro Cruz.
Also, there was no showing on its part to
ascertain the extent of authority of the said
signatories to represent Lauro in the credit
transaction.
The failure on the part of Purefoods to
observe the primary duty of persons
dealing with parties who act for others bars
it cannot to collect the sum of money from
Mr Lauro. Hence, Lauro is not liable to pay
P55, 246.21.
RESPONSIBILITY FOR RULING: NO, it can be made liable for its
negligence, under Art 1909 of the Civil
FRAUD/NEGLIGENT (ART Code
1909)
RATIO: Art. 1909 of the Civil Code states
METROBANK VS CA, LUCIA CASTILLO ET that “the agent is responsible not only for
AL his fraud but also for negligence which
shall be judged with more or less signs by
Eduardo Gomez opened an account with
the courts, according to whether the
Golden Savings and deposited 38 treasury
agency was or was not for a
warrants. All these warrants were indorsed
compensation.”
by Golden Savings’ Cashier and deposited
to its Savings Account in Metrobank. The negligence of Metrobank has been
sufficiently established. It was the
They were sent for clearing by the branch
clearance given by it that assured Goldman
office to the principal office of Metrobank,
Savings it was already safe to allow Gomez
which forwarded them to the Bureau of
to withdraw the proceeds of the treasury
Treasury for special clearing.
warrants he had deposited.
The dorsal side of the deposit slip provides
Metrobank misled Golden Savings. There
that “the bank obligates itself only as the
may have been no express clearance, as
depositor’s collecting agent, assuming no
Metrobank insists but in any case that
responsibility beyond care in selecting
clearance could be implied from its
correspondents, and until such time as
allowing Golden Savings to withdraw from
actual payment shall have come into
its account not only once or even twice but
possession of his bank, the right is
three times.
reserved to charge back to the depositor’s
account any amount previously credited, The total withdrawal was in excess of its
whether or not such item is returned.” original balance before the treasury
warrants were deposited, which only added
Meanwhile, Gomez was not allowed to
to its belief that the treasury warrants had
withdraw from his accounts.
indeed been cleared.
Because of persistent inquiries by Golden
Conclusion: The challenged decision is
Savings’ cashier about whether the
affirmed.
warrants had been cleared, Metrobank
decided to allow Golden Savings to
withdraw from the proceeds of the
warrants.
In turn, Golden Savings allowed Gomez to
make withdrawals from his own account.
The warrants, however, had been
dishonored by the Bureau of Treasury, and
hence Metrobank demanded the refund by
GS of the amount it had previously
withdrawn.
The RTC and CA ruled in favor of Golden
Savings.
ISSUE: WON Metrobank is merely a
collecting agent and hence cannot be made
liable for its failure to collect on the
warrants