San Juan Structural and Steel Fabricators Inc. vs.
CA corporation in transactions with 3rd persons to the extent that the authority to do
[296 SCRA 631 (Sept 29 1998)]
Effect of Unauthorized Acts of Corporate Officer
Sufficiency of Proof to Pierce Veil of Corporate Fiction
Facts: San Juan Structural and Steel Fabricators entered into an agreement with
Motorich Sales Corporation through Nenita Gruenberg, corporate treasurer of
Motorich, for the transfer to the former a parcel of land upon a P100,000 earnest
money, balance to be payable within March 2, 1989. Upon payment of the earnest
money, and on March 1, 1989, San Juan allegedly asked to be submitted a
computation of the balance due to Motorich. The latter, despite repeated demands,
refused to execute the Deed of Assignment of the land. San Juan discovered that
Motorich entered into a Deed of Absolute Sale of the land to ACL Development
Corporation. Hence, San Juan filed a complaint with the RTC.
On the other hand, Motorich contends that since Nenita Gruenberg was only the
treasurer of said corporation, and that its president, Reynaldo Gruenberg, did not
sign the agreement entered into by San Juan and Motorich, the treasurer’s signature
was inadequate to bind Motorich to the agreement. Furthermore, Nenita contended
that since San Juan was not able to pay within the stipulated period, no deed of
assignment could be made. The deed was agreed to be executed only after receipt
of the cash payment, and since according to Nenita, no cash payment was made on
the due date, no deed could have been executed.
RTC dismissed the case holding that Nenita Gruenberg was not authorized by
Motorich to enter into said contract with San Juan, and that a majority vote of the
BoD was necessary to sell assets of the corporation in accordance with Sec. 40 of the
Corporation Code. CA affirmed this decision. Hence, this petition with SC.
Issues: (1) Whether or not there was a valid contract existing between San Juan
and Motorich.
(2) Whether or not the veil of corporate fiction could be pierced.
Held: (1) No. The contract entered into between Nenita and San Juan cannot bind
Motorich, because the latter never authorized nor ratified such sale. A corporation
is a juridical person separate and distinct from its stockholders or
members. Accordingly, the property of the corporation is not the property of its
stockholders and may not be sold by them without express authorization from the
corporation’s BoD. This is in accordance with Sec. 23 of the Corporation Code.
Indubitably, a corporation can only act through its BoD 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 AoI, by laws, or relevant
provisions of law. A corporate officer or agent may represent and bind the
so has been conferred upon him, and this includes powers which have been
intentionally conferred, and also such powers as, in the usual course of the
particular business, are incidental to, or may be implied from, the powers
intentionally conferred, powers added by custom and usage, as usually pertaining
to the particular officer or agent, and such apparent powers as the corporation has
caused persons dealing with the officer or agent to believe that it has
conferred. Furthermore, persons dealing with an assumed agent, whether the
assumed agency be a general or special one, are bound at their peril, if they would
hold the principal liable, to ascertain not only the fact of agency but also the nature
and extent of authority, and in case either is controverted, the burden of proof is
upon them to establish it. Unless duly authorized, a treasurer, whose powers are
limited, cannot bind the corporation in a sale of its assets.
In the case at bar, San Juan had the responsibility of ascertaining the extent of
Nenita’s authority to represent the corporation. Selling is obviously foreign to a
corporate treasurer’s function. Neither was real estate sale shown to be a normal
business activity of Motorich. The primary purpose of said corporation is
marketing, distribution, import and export relating to a general merchandising
business. Unmistakably, its treasurer is not cloaked with actual or apparent
authority to buy or sell real property, an activity which falls way beyond the scope
of her general authority.
Acts of corporate officers within the scope of their authority are binding on the
corporation. But when these officers exceed their authority, their actions cannot
bind the corporation, unless it has ratified such acts or is estopped from disclaiming
them.
(2) No. San Juan argues that the veil of corporate fiction should be pierced because
the spouses Reynaldo and Nenita Gruenberg own 99.96% of the subscribed capital
stock, they needed no authorization from the BoD to enter into the said contract.
The veil can only be disregarded when it is utilized as a shield to commit fraud,
illegality or inequity, defeat public convenience, confuse legitimate issues, or serve
as a mere alter ego or business conduit of a person or an instrumentality, agency or
adjunct of another corporation. Hence, the question of piercing the veil becomes a
matter of proof. In the case at bar, SC found no reason to pierce the veil. San Juan
failed to establish that said corporation was formed for the purpose of shielding any
fraudulent act of its officers and stockholder.
TUAZON V. HEIRS OF BARTOLOME RAMOS,
463 SCRA 408 J. Panganiban
ARTICLE 1868 (page 329, agent acts within the scope of his authority)
FACTS:
This case involves collection of sum of money.
The heirs of Bartolome Ramos (respondent), alleged that between the period of May 2, 1988 and June 5,
1988, spouses Leonilo and Maria Tuazon purchased a total of 8,326 cavans of rice from [the deceased
Bartolome] Ramos [predecessor-in-interest of respondents]. That out of 8,326 cavans, only 4,437 cavans
have been paid for so far, leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the
spouses Tuazon issued several Traders Royal Bank checks.
When these checks were encashed, all of the checks bounced due to insufficiency of funds. Respondents
advanced that before issuing said checks, spouses Tuazon already knew that they had no available fund
to support the checks, and they failed to provide for the payment of these despite repeated
demands.Respondents averred that because spouses Tuazon anticipated that they would be sued, they
conspired with the other defendants to defraud them as creditors by executing fictitious sales of their
properties which includes cars and residential house and lots.
The Tuazons denied having purchased rice from Bartolome Ramos. They alleged that it was Magdalena
Ramos, wife of said deceased, who owned and traded the merchandise and Maria Tuazon was merely
her agent.They argued that it was Evangeline Santos who was the buyer of the rice and issued the checks
to Maria Tuazon as payments therefor. In good faith, the checks were received by them from Evangeline
Santos and turned over to Ramos without knowing that these were not funded. And it is for this reason
that spouses Tuazon [petitioners] have been insisting on the inclusion of Evangeline Santos as an
indispensable party, and her non-inclusion was a fatal error.
Spouses Tuazon refuted that the sale of several properties were fictitious or simulated; spouses Tuazon
contended that these were sold because they were then meeting financial difficulties but the disposals
were made for value and in good faith and done before the filing of the instant suit. To dispute the
contention of plaintiffs that they were the buyers of the rice, they argued that there was no sales
invoice, official receipts or like evidence to prove this. They (Tuazon) assert that they were merely agents
and should not be held answerable.
Both RTC and CA ruled that petitioners (Tuazon) failed to prove the existence of agency between them
and the respondent spouses Ramos. Hence, this petition for review under Rule 45 of the Rules of Court.
ISSUES:
1) WON the Tuazon’s were agents of Bartolome Ramos in the alleged sale of rice to Evangeline Santos
since the checks were drawn in her name.
2) WON or not Evangeline Santos is an indispensable party in the suit since she was the one who issued
the checks.
HELD:
1) NO, the SC held that the Tuazon’s were the rice buyers themselves and not mere agents of Ramos.
2) NO, Evangeline Santos is not an indispensable party in the suit. RATIO 1:
RATIO:
In a contract of agency, one binds oneself to render some service or to do something in representation
or on behalf of another, with the latter’s consent or authority.
The following are the elements of agency: (1) the parties’ consent, express or implied, to establish the
relationship; (2) the object, which is the execution of a juridical act in relation to a third person; (3) the
representation, by which the one who acts as an agent does so, not for oneself, but as a representative;
(4) the
limitation that the agent acts within the scope of his or her authority. As the basis of agency is
representation, there must be, on the part of the principal, an actual intention to appoint, an intention
naturally inferable from the principal’s words or actions.
In the same manner, there must be an intention on the part of the agent to accept the appointment and
act upon it. Absent such mutual intent, there is generally no agency.The question of whether a contract
is one of sale or of agency depends on the intention of the parties. The declarations of agents alone are
generally insufficient to establish the fact or extent of their authority. The law makes no presumption of
agency; proving its existence, nature and extent is incumbent upon the person alleging it. In the present
case, petitioners raise the fact of agency as an affirmative defense, yet fail to prove its existence.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection of the
amounts represented by the bounced checks, in a separate civil case that they sought to be consolidated
with the current one. If, as they claim, they were mere agents of respondents, petitioners should have
brought the suit against Santos for and on behalf of their alleged principal, in accordance with Section 2
of Rule 3 of the Rules on Civil Procedure. Their filing a suit against her in their own names negates their
claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos.
RATIO 2:
The trial court held that Petitioner Maria Tuazon had indorsed the questioned checks in favor of
respondents, in accordance with Sections 31 and 63 of the Negotiable Instruments Law. That Santos was
the drawer of the checks is thus immaterial to the respondents’ cause of action.
As indorser, Petitioner Maria Tuazon warranted that upon due presentment, the checks were to be
accepted or paid, or both, according to their tenor; and that in case they were dishonored, she would
pay the corresponding amount. After an instrument is dishonored by nonpayment, indorsers cease to be
merely secondarily liable; they become principal debtors whose liability becomes identical to that of the
original obligor. The holder of a negotiable instrument need not even proceed against the maker before
suing the indorser. Clearly, Evangeline Santos -- as the drawer of the checks -- is not an indispensable
party in an action against Maria Tuazon, the indorser of the checks.
Indispensable parties are defined as “parties in interest without whom no final determination can be
had.”The instant case was originally one for the collection of the purchase price of the rice bought by
Maria Tuazon from respondents’ predecessor. In this case, it is clear that there is no privity of contract
between respondents and Santos. Hence, a final determination of the rights and interest of the parties
may be made without any need to implead her.
RULING:
SC affirmed the ruling of CA as follows:
“WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants,
ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs, as follows:
“1.The sum of P1,750,050.00, with interests from the filing of the second amended complaint;
“2. The sum of P50,000.00, as attorney’s fees;
“3. The sum of P20,000.00, as moral damages
“4. And to pay the costs of suit.
MANILA MEMORIAL PARK CEMETERY, INC.vs.
PEDRO L. LINSANGAN First Issue. Yes. By the contract of agency, a person binds himself to render some
FACTS: service or to do something in 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
Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at the
purchase interment spaces obtained on forms provided by MMPCI. The terms of the
Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a
offer to purchase, therefore, are contained in such forms and, when signed by the
former owner of a memorial lot under Contract No. 25012 was no longer interested
buyer and an authorized officer of MMPCI, becomes binding on both parties.
in acquiring the lot and had opted to sell his rights subject to reimbursement of the
amounts he already paid. The contract was for P95,000.00. Baluyot reassured Atty.
Second Issue. No. While there is no more question as to the agency relationship
Linsangan that once reimbursement is made to the former buyer, the contract would
between Baluyot and MMPCI, there is no indication that MMPCI let the public, or
be transferred to him.
specifically, Atty. Linsangan to believe that Baluyot had the authority to alter the
standard contracts of the company. Neither is there any showing that prior to signing
Atty. Linsangan agreed and gave Baluyot P35,295.00 representing the amount to be
Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to Atty.
reimbursed to the original buyer and to complete the down payment to
Linsangan. Even assuming that Atty. Linsangan was misled by MMPCI's actuations, he
MMPCI. Baluyot issued handwritten and typewritten receipts for these payments.
still cannot invoke the principle of estoppel, as he was clearly negligent in his dealings
Contract No. 28660 has a listed price of P132,250.00. Atty. Linsangan objected to the
with Baluyot, and could have easily determined, had he only been cautious and
new contract price, as the same was not the amount previously agreed upon. To
prudent, whether said agent was clothed with the authority to change the terms of
convince Atty. Linsangan, Baluyot executed a document confirming that while the
the principal's written contract.
contract price is P132,250.00, Atty. Linsangan would pay only the original price of
P95,000.00.
To repeat, the acts of the agent beyond the scope of his authority do not bind the
Later on, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was
principal unless the latter ratifies the same. It also bears emphasis that when the
cancelled for reasons the latter could not explain. For the alleged failure of MMPCI
third person knows that the agent was acting beyond his power or authority, the
and Baluyot to conform to their agreement, Atty. Linsangan filed a Complaint for
principal cannot be held liable for the acts of the agent. If the said third person was
Breach of Contract and Damages against the former.
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
MMPCI alleged that Contract No. 28660 was cancelled conformably with the terms
ratification.
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. 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.

The trial court held MMPCI and Baluyot jointly and severally liable. The Court of
Appeals affirmed the decision of the trial court.

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:

SUNACE INTERNATIONAL MANAGEMENT SERVICES, INC. v. NATIONAL LABOR
RELATIONS COMMISSION et al.
480 SCRA 146 (2006)
FACTS: Respondent Divina Montehermozo is a domestic helper deployed to Taiwan
by Sunace International Management Services (Sunace) under a 12-month contract.
Such employment was made with the assistance of Taiwanese broker Edmund Wang.
After the expiration of the contract, Montehermozo continued her employment with
her Taiwanese employer for another 2 years.
When Montehermozo returned to the Philippines, she filed a complaint against
Sunace, Wang, and her Taiwanese employer before the National Labor Relations
Commission (NLRC). She alleges that she was underpaid and was jailed for three
months in Taiwan. She further alleges that the 2-year extension of her employment
contract was with the consent and knowledge of Sunace. Sunace, on the other hand,
denied all the allegations.
The Labor Arbiter ruled in favor of Montehermozo and found Sunace liable thereof.
The National Labor Relations Commission and Court of Appeals affirmed the labor
arbiter’s decision. Hence, the filing of this appeal.
ISSUE: Whether or not the 2-year extension of Montehermozo’s employment was
made with the knowledge and consent of Sunace
HELD: There is an implied revocation of an agency relationship when after the
termination of the original employment contract, the foreign principal directly
negotiated with the employee and entered into a new and separate employment
contract.
Contrary to the Court of Appeals finding, the alleged continuous communication was
with the Taiwanese broker Wang, not with the foreign employer.
The finding of the Court of Appeals solely on the basis of the telefax message written
by Wang to Sunace, that Sunace continually communicated with the foreign
"principal" (sic) and therefore was aware of and had consented to the execution of
the extension of the contract is misplaced. The message does not provide evidence
that Sunace was privy to the new contract executed after the expiration on February
1, 1998 of the original contract. That Sunace and the Taiwanese broker
communicated regarding Montehermozo’s allegedly withheld savings does not
necessarily mean that Sunace ratified the extension of the contract.
As can be seen from that letter communication, it was just an information given to
Sunace that Montehermozo had taken already her savings from her foreign employer
and that no deduction was made on her salary. It contains nothing about the
extension or Sunace’s consent thereto.
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to
assume that it was sent to enlighten Sunace who had been directed, by Summons
issued on February 15, 2000, to appear on February 28, 2000 for a mandatory
conference following Montehermozo’s filing of the complaint on February 14, 2000.
Respecting the decision of Court of Appeals following as agent of its foreign principal,
[Sunace] cannot profess ignorance of such an extension as obviously, the act of its
principal extending [Montehermozo’s] employment contract necessarily bound it, it
too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to
the principal, employer, not the other way around. The knowledge of the principal-
foreign employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound
under the 2-year employment contract extension, it cannot be said to be privy
thereto. As such, it and its "owner" cannot be held solidarily liable for any of
Montehermozo’s claims arising from the 2-year employment extension. As the New
Civil Code provides, Contracts take effect only between the parties, their assigns, and
heirs, except in case where the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by provision of law.
Furthermore, as Sunace correctly points out, there was an implied revocation of its
agency relationship with its foreign principal when, after the termination of the
original employment contract, the foreign principal directly negotiated with
Montehermozo and entered into a new and separate employment contract in
Taiwan. Article 1924 of the New Civil Code states that the agency is revoked if the
principal directly manages the business entrusted to the agent, dealing directly with
third persons.

Manila Remnant vs. CA
G.R. No. 82978. November 22, 1990
Fernan
FACTS:
 Manila Remnant Co. owns Capital Homes Subdivision with 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 downpayment.
 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
RULING:
Yes. Due to the following:
(1) 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.
(2) The principle of estoppel, Manila Remnant is deemed to have allowed its
agent to act as though it had plenary powers. Article 1911 of the Civil Code
provides:
"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."
Authority by estoppel has arisen in the instant case because by its
negligence, the principal, Manila Remnant, has permitted its agent, A.U.
Valencia and Co., to exercise powers not granted to it.
 Fontanilla vs. Maliaman
G.R. No. L-55963, February 27, 1991
FACTS:
On December 1, 1989, the Court rendered a decision declaring National Irrigation
Administration (NIA), a government agency performing proprietary functions. Like an
ordinary employer, NIA was held liable for the injuries, resulting in death, of
Francisco Fontanilla, son of petitioner spouses Jose and Virginia Fontanilla, caused by
the fault and/or negligence of NIA’s driver employee Hugo Garcia; and NIA was
ordered to pay the petitioners the amounts of P 12,000 for the death of the victim;
P3,389 for hospitalization and burial expenses; P30,000 as moral damages; P8,000 as
exemplary damages, and attorney’s fees of 20% of the total award.
The National Irrigation Administration (NIA) maintains, however, that it does not
perform solely and primarily proprietary functions, but is an agency of the
government tasked with governmental functions, and is therefore not liable for the
tortuous act of its driver Garcia, who was not its special agent. For this, they have
filed a motion for reconsideration on January 26, 1990.
ISSUE:
Whether or not NIA is a government agency with a juridical personality separate and
distinct from the government, thereby opening it up to the possibility that it may be
held liable for the damages caused by its driver, who was not its special agent
HELD:
Yes. Reasoning the functions of government have been classified into governmental
or constituent and proprietary or ministrant. The former involves the exercise of
sovereignty and considered as compulsory; the latter connotes merely the exercise
of proprietary functions and thus considered as optional.
The National Irrigation Administration was not created for purposes of local
government. While it may be true that the NIA was essentially a service agency of
the government aimed at promoting public interest and public welfare, such fact
does not make the NIA essentially and purely a "government-function" corporation.
NIA was created for the purpose of "constructing, improving, rehabilitating, and
administering all national irrigation systems in the Philippines, including all
communal and pump irrigation projects." Certainly, the state and the community as
a whole are largely benefited by the services the agency renders, but these functions
are only incidental to the principal aim of the agency, which is the irrigation of lands.
NIA is a government agency invested with a corporate personality separate and
distinct from the government, thus is governed by the Corporation Law. Section 1 of
Republic Act No. 3601 provides:
Sec. 1. Name and Domicile— A body corporate is hereby created which shall
be known as the National Irrigation Administration. . . . which shall be
organized immediately after the approval of this Act. It shall have its
principal seat of business in the City of Manila and shall have
representatives in all provinces, for the proper conduct of its business.
Besides, Section 2, subsection b of P.D. 552 provides that:
(b) To charge and collect from the beneficiaries of the water from all
irrigation systems constructed by or under its administration, such fees or
administration charges as may be necessary to cover the cost of operation,
maintenance and insurance, and to recover the cost of construction within
a reasonable period of time to the extent consistent with government
policy; to recover funds or portions thereof expended for the construction
and/or rehabilitation of communal irrigation systems which funds shall
accrue to a special fund for irrigation development under section 2 hereof;
Unpaid irrigation fees or administration charges shall be preferred liens first, upon
the land benefited, and then on the crops raised thereon, which liens shall have
preference over all other liens except for taxes on the land, and such preferred liens
shall not be removed until all fees or administration charges are paid or the property
is levied upon and sold by the National Irrigation Administration for the satisfaction
thereof. . . .
The same section also provides that NIA may sue and be sued in court. It has its own
assets and liabilities. It also has corporate powers to be exercised by a Board of
Directors. Section 2, subsection (f):. . . and to transact such business, as are directly
or indirectly necessary, incidental or conducive to the attainment of the above
powers and objectives, including the power to establish and maintain subsidiaries,
and in general, to exercise all the powers of a corporation under the Corporation
Law, insofar as they are not inconsistent with the provisions of this Act.
The court concluded that the National Irrigation Administration is a government
agency with a juridical personality separate and distinct from the government. It is
not a mere agency of the government but a corporate body performing proprietary
functions. Therefore, it may be held liable for the damages caused by the negligent
act of its driver who was not its special agent.
 REPUBLIC OF THE PHILIPPINES, et al. vs. HON. VICTORINO EVANGELISTA,
et al.
G.R. No. 156015. August 11, 2005.
Nature: PETITION for review on certiorari
Ponente: PUNO, J.
Facts:
 Private respondent Legaspi is the owner of a land located in
Bulacan.
 Petitioner Calimlim (Lt. General), entered into a MOA with one
Ciriaco Reyes. The MOA granted Reyes a permit to hunt for treasure
in a land in Bulacan. Reyes, with petitioners, started, digging,
tunneling and blasting works on the said land of Legaspi. It was also
alleged that Calimlim assigned about 80 military personnel to guard
the area and intimidate Legaspi and other occupants of the area
from going near the subject land.
 Legaspi executed an SPA appointing his nephew, private respondent
Gutierrez, as his attorney-in-fact. Gutierrez was given the power to
deal with the treasure hunting activities on Legaspi’s land and to file
charges against those who may enter it without the latter’s
authority. Legaspi agreed to give Gutierrez 40% of the treasure that
may be found in the land.
 Gutierrez filed a case against petitioners for illegally entering
Legaspi’s land. He hired the legal services of Atty. Adaza (as legal
fees, Atty. Adaza shall be entitled to 30% of Legaspi’s share in
whatever treasure may be found in the land). Upon the filing of the
complaint, a 72-hour TRO was issued against petitioners. The case
was then raffled to the court of Judge Evangelista, who then
granted an extension to the TRO.
 Petitioners filed a Motion to Dismiss contending. One issue that
they raised was that there is no real party-in-interest as the SPA of
Gutierrez to bring the suit was already revoked by Legaspi as
evidenced by a Deed of Revocation.
 RTC ruled in favor of the private respondents. CA affirmed the
decision.
Issue: Whether the contract of agency between Legaspi and Gutierrez has
been effectively revoked by Legaspi.
Held: NO. CA decision is Affirmed.
Ratio:
A contract of agency is generally revocable as it is a personal
contract of representation based on trust and confidence reposed by the
principal on his agent.
An exception to the revocability of a contract of agency is when it is
coupled with interest, i.e., if a bilateral contract depends upon the agency.
The reason for its irrevocability is because the agency becomes part of
another obligation or agreement. It is not solely the rights of the principal
but also that of the agent and third persons which are affected. Hence, the
law provides that in such cases, the agency cannot be revoked at the sole
will of the principal.
In the case at bar, we agree with the finding of the trial and
appellate courts that the agency granted by Legaspi to Gutierrez is coupled
with interest as a bilateral contract depends on it. It is clear from the
records that Gutierrez was given by Legaspi, inter alia, the power to manage
the treasure hunting activities in the subject land. It was likewise agreed
upon that Gutierrez shall be entitled to 40% of whatever treasure may be
found in the land. When an agency is constituted as a clause in a bilateral
contract, that is, when the agency is inserted in another agreement, the
agency ceases to be revocable at the pleasure of the principal as the agency
shall now follow the condition of the bilateral agreement. Consequently, the
Deed of Revocation executed by Legaspi has no effect. The authority of
Gutierrez to file and continue with the prosecution of the case at bar is
unaffected.
JESUS M. GOZUN, Petitioner, vs. JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO, petitioners claim against him only after receiving a copy of the complaint, which surprised
Respondent. him because he knew fully well that the campaign materials were donations.

FACTS: In the local elections of 1995, respondent vied for the gubernatorial post in
Pampanga. Upon respondents request, petitioner, owner of JMG Publishing House, a printing
shop located in San Fernando, Pampanga, submitted to respondent draft samples and price
quotation of campaign materials. By petitioners claim, respondents wife had told him that
respondent already approved his price quotation and that he could start printing the
campaign materials, hence, he did print campaign materials. Given the urgency and limited
time to do the job order, petitioner availed of the services and facilities of Metro Angeles
Printing and of St. Joseph Printing Press, owned by his daughter Jennifer Gozun and mother
Epifania Macalino Gozun, respectively. Petitioner delivered the campaign materials to
respondent’s headquarters.
Meanwhile, on March 31, 1995, respondents sisterinlaw, Lilian Soriano (Lilian) obtained from
petitioner cash advance of P253,000 allegedly for the allowances of poll watchers who were
attending a seminar and for other related expenses. Petitioner later sent respondent a
Statement of Account in the total amount of P2,177,906 itemized as follows: P640,310 for
JMG Publishing House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing
Press; and P253,000, the cash advance obtained by Lilian. On August 11, 1995, respondents
wife partially paid P1,000,000 to petitioner who issued a receipt therefor. Despite repeated
demands and respondents promise to pay, respondent failed to settle the balance of his
account to petitioner. Respondent denied having transacted with petitioner or entering into
any contract for the printing of campaign materials. He alleged that the various campaign
materials delivered to him were represented as donations from his family, friends and
political supporters. He added that all contracts involving his personal expenses were
coursed through and signed by him to ensure compliance with pertinent election laws.
On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a cash
advance of P253,000, respondent denied having given her authority to do so and having
received the same. At the witness stand, respondent, reiterating his allegations in his
Answer, claimed that petitioner was his overall coordinator in charge of the conduct of
seminars for volunteers and the monitoring of other matters bearing on his candidacy; and
that while his campaign manager, Juanito Johnny Cabalu (Cabalu), who was authorized to
approve details with regard to printing materials, presented him some campaign materials,
those were partly donated.
Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is
donated, it must be so stated on its face, acknowledged that nothing of that sort was written
on all the materials made by petitioner.
ISSUE: won respondent is liable to petitioner.
HELD: Yes, but not for Lilian's cash advance.
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.
Contracts entered into in the name of another person by one who has been given no
authority or legal representation or who has acted beyond his powers are classified as
unauthorized contracts and are declared unenforceable, unless they are ratified.
Generally, the agency may be oral, unless the law requires a specific form. However, a special
power of attorney is necessary for an agent to, as in this case, borrow money, unless it be
urgent and indispensable for the preservation of the things which are under administration.
Since nothing in this case involves the preservation of things under administration, a
determination of whether Soriano had the special authority to borrow money on behalf of
respondent is in order. While petitioner claims that Lilian was authorized by respondent, the
statement of account marked as Exhibit A states that the amount was received by Lilian in
behalf of Mrs. Annie Mercado.
Invoking Article 1873 of the Civil Code, petitioner submits that respondent informed him that
he had authorized Lilian to obtain the loan, hence, following Macke v. Camps which holds
that one who clothes another with apparent authority as his agent, and holds him out to the
public as such, respondent cannot be permitted to deny the authority. It bears noting that
Lilian signed in the receipt in her name alone, without indicating therein that she was acting
for and in behalf of respondent. She thus bound herself in her personal capacity and not as
an agent of respondent or anyone for that matter.

When confronted with the official receipt issued to his wife acknowledging her payment to
JMG Publishing House of the amount of P1,000,000, respondent claimed that it was his first
time to see the receipt, albeit he belatedly came to know from his wife and Cabalu that the
P1,000,000 represented compensation [to petitioner] who helped a lot in the campaign as a
gesture of goodwill.

Acknowledging that petitioner is engaged in the printing business, respondent explained that
he sometimes discussed with petitioner strategies relating to his candidacy, he (petitioner)
having actively volunteered to help in his campaign; that his wife was not authorized to enter
into a contract with petitioner regarding campaign materials as she knew her limitations;
that he no longer questioned the P1,000,000 his wife gave petitioner as he thought that it
was just proper to compensate him for a job well done; and that he came to know about
 Sevilla vs. Court of Appeals
160 SCRA 171
FACTS:
On the strength of a contract, Tourist World Service Inc. (TWS)
leased the premises belonging to Mrs. Segundina Noguera for the
former’s use as a branch office. Lina Sevilla bound herself solidarily
liable with TWS for the prompt payment of the monthly rentals thereon.
When the branch office was opened, it was run by appellant Sevilla
payable to TWS by any airline for any fare brought in on the efforts of
Sevilla, 4% was to go to Sevilla and 3% was to be withheld by TWS.
TWS appears to have been informed that Sevilla was connected
with a rival firm, the Philippine Travel Bureau, and, since the branch
office was anyhow losing, the TWS considered closing down
its office. Two resolutions of the TWS board of directors were passed
to abolish the office of the manager and vice president of the branch
office and authorizing the corporate secretary to receive the properties
in the said branch office.
Subsequently, the corporate secretary went to the branch office,
and finding the premises locked and being unable to contact Sevilla,
padlocked the premises to protect the interests of TWS. When neither
Sevilla nor her employees could enter the locked premises, she filed a
complaint against TWS with a prayer for the issuance of a mandatory
preliminary injunction.
The trial court dismissed the case holding that TWS, being the
true lessee, was within its prerogative to terminate the lease and padlock
the premises. It likewise found that Sevilla was a mere employee of
TWS and as such, was bound by the acts of her employer.
The CA affirmed. Hence this petition.
ISSUE:
Whether or not there was an employer-employee relationship
between TWS and Sevilla
RULING:
NONE. It was a principal-agent relationship. The records show
that petitioner, Sevilla, was not subject to control by the private
respondent TWS.
In the first place, under the contract of lease, she had bound
herself in solidum for rental payments, an arrangement that would belie
claims of a master-servant relationship. That does not make her an
employee of TWS, since a true employee cannot be made to part with
his own money in pursuance of his employer’s business, or otherwise,
assume any liability thereof.
In the second place, when the branch office was opened, the
same was run by the appellant Sevilla payable to TWS by any airline
for any fare brought in on the effort of Sevilla. Thus, it cannot be said
that Sevilla was under the control of TWS. Sevilla in pursuing the
business, relied on her own capabilities. It is further admitted that
Sevilla was not in the company’s payroll. For her efforts, she retained
4% in commissions from airline bookings, the remaining 3% going to
TWS. Unlike an employee, who earns a fixed salary, she earned
compensation in fluctuating amount depending on her booking
successes. The fact that Sevilla had been designated “branch manager”
does not make her a TWS employee. It appears that Sevilla is a bona
fide travel agent herself, and she acquired an interest in the business
entrusted to her. She also had assumed personal obligation for the
operation thereof, holding herself solidary liable for the payment of
rentals.
Wherefore, TWS and Canilao are jointly and severally liable to
indemnify the petitioner, Sevilla.