Agency Chapt 1 Digests 1 PDF

Agency 2020 - Chapter 1 digests 1 Cabato | Cruz | Leonardo | Mangurun | Rosette
1. Apex Mining vs. Southeast Mindanao The BDF issued a Prospecting Permit
Gold Mining Corp to MMC traversing the municipalities of
Monkayo and Cateel. The permit embraced
FACTS: the areas claimed by Apex and other
individual mining claimants.
The case revolves around a disputed
area, a rich tract of mineral land, inside the MMC filed an Exploration Permit
forest reserve covered by Proclamation No. Application with the BMG, and was
369 issued by Governor General Dwight F. subsequently issued Exploration Permit No.
Davis, located at Monkayo, Davao del Norte, 133 (EP 133)
and Cateel, Davao Oriental, which
encompasses Mt. Diwata. It became known as Discovering the existence of several
the “Diwalwal Gold Rush Area”, wherein mining claims and the proliferation of small-
which numerous mining claimants scrambled scale miners in the area covered by EP 133,
for gold that lies beneath its bosom. MMC filed before the BMG a Petition for the
Cancellation of the Mining Claims of Apex
Camilo Banad and his group, who and Small Scale Mining Permits, alleging that
organized themselves as the Balite Communal the areas covered by EP 133 and the mining
Portal Mining Cooperative (Balite), claimed claims of Apex were within an established
to have first discovered traces of gold in forest reservation under Proclamation No 369
Mount Diwata, filed a Declaration of and pursuant to P.D. No. 463, acquisition of
Location (DOL) for six mining claims in the mining right within a forest reserve is through
area. the application of a permit to prospect with
the BFD and not through registration of a
On 12 December 1983, Apex Mining
DOL with the BMG.
Corporation (Apex) entered into operating
agreements with Balite. Apex filed for a Motion to Dismiss,
which was then granted by the BMG,
On 02 February 1984, Marcopper
declaring that the area covered by the Apex
Mining Corporation (MMC) filed 16 DOLs
Mining claims and MMC’s permit to explore
for areas adjacent to the area covered by the
was not a forest reserve. It further declared
DOL of Balite. However, realizing that the
null and void MMC’s EP 133 and sustained
area encompassed by its mining claims is a
the validity of Apex mining claims over the
forest reserve, they abandoned the same, and
disputed area.
instead applied for a prospecting permit with
the Bureau of Forest Development (BFD). MMC appealed the adverse order of
the BMG to the Department of Environment
and Natural Resources (DENR). After due On 16 February 1994, MMC assigned
hearing, the DENR reversed the BMG order EP 133 to Southeast Mindanao Gold Mining
and declared MMC’s EP 133 valid and Corporation (SEM), a domestic corporation
subsisting. which is alleged to be a 100% owned
subsidiary of MMC.
Apex filed a Motion for
Reconsideration with the DENR, but was SEM filed an MPSA application with
subsequently denied. Apex then appealed to the BMG for the entire area covered by EP
the Office of the President. The Office of the 133, which was eventually accepted and
President dismiss Apex’s appeal and affirmed registered, and its Deed of Assignment.
the DENR ruling.
After the publication of SEM’s
Apex then filed a Petition for application, several mining groups filed
Certiorari before the Supreme Court (SC), before the BMG their adverse claims or
which on 16 July 1991 rendered a decision oppositions.
against Apex holding that the disputed area is
a forest reserve; hence, the proper procedure The DENR constituted a Panel of
Arbitrators (PA) to resolve the adverse claims
in acquiring mining rights therein is by
and the Petition to Cancel EP 133.
initially applying for a permit to prospect with
the BFD and not through a registration of The PA rendered a resolution relying
DOL with the BMG. on the 16 July 1991 decision of the SC and
opined that EP 133 was valid and subsisting.
On 27 December 1991, the DENR
With respect to the adverse claims, the PA
issued Department Administrative Order No.
ruled that the adverse claimant’s petitions
66 (DAO 66) declaring 729 hectares of the
were not filed in accordance with existing
areas covered by the Forest Reserve as non-
rules and regulations governing adverse
forest and open to small-scale mining
purposes. With this, several mining entities claims because they failed to submit the
sketch plan containing the technical
filed applications for Mineral Production
description of their respective claims, which
Sharing Agreements (MPSA).
is a mandatory requirement. It also added that
One 05 January 1994, Rosendo the adverse claimants were not claim owners
Villaflor and his group filed before the BMG by mere occupants conducting illegal mining
a Petition for Cancellation of EP 133 and for activities, since only MMC or its assignee
the admission of their MPSA. The Petition SEM had valid mining claims over the area. It
was docketed as Red Mines Case No. 8-8-94. also maintained that the adverse claimants are
not qualified as small-scale miners and that that the transfer if EP 133 was valid. It argued
they were large-scale miners. that since SEM is an agent of MMC, the
assignment of EP 133 did not violate the
The adverse claimants then appealed condition therein prohibiting its transfer
to the Mines Adjudication Board (MAB), except to MMC’s duly designated agent.
which declared the PA ruling to be erroneous Thus, despite the non-renewal of EP 133, the
for being rendered over a mere technicality of CA deemed it relevant to declare EP 133 as
failure to submit a sketch plan. With regard to valid since MMC’s mining rights were validly
the validity of EP 133, the MAB opined that transferred to SEM prior to its expiration. The
the said issue was not crucial and irrelevant in CA further ruled that the MMC’s right to
adjudicating the case because EP 133 has explore under EP 133 is a property right
long expired due to its non-renewal and that which the 1987 Constitution protects and
MMC was no longer a claimant of the forest which cannot be divested without the holder’s
reserve. After brushing aside the validity of consent. It stressed that MMC’s failure to
EP 133 for being irrelevant, the MAB proceed with the extraction and utilization of
proceeded to treat SEM’s MPSA application minerals did not diminish its vested right to
as an entirely new and distinct application, explore because its failure was not
and approved of the same. However, it attributable to it. The CA also faulted the
excluded the 729 hectares within the DENR in implementing DAO 66 to other
Diwalwal area as declared in DAO 66 as non- corporations who were not qualified as small-
forest lands open for small-scale mining. scale miners.
Dissatisfied, the Villaflor Group and Apex, Balite and the MAB elevated
Balite appealed to the SC. SEM, aggrieved by the case to the SC.
the exclusion of the 729 hectares from its
MPSA application likewise appealed. ISSUE:
The cases were remanded by the SC to WON the CA erred in upholding the validity
the Court of Appeals (CA) for proper and continuous existence of EP 133 as well as
disposition. The CA affirmed in toto the its transfer to SEM.
decision of the PA, granted SEM’s petition
RULING:
and declared null and void the MAB decision.
I N VA L I D . T h e S C r u l e d t h a t
The CA, banking on the premise that
Condition No. 6 of EP 133 categorically
SEM is the agent of MMC by virtue of its
states that the permit shall be for the
assignment of EP 133 and the purported fact
exclusive use and benefit of MMC or its duly
the SEM is a 100% subsidiary of MMC ruled
authorized agents. While it may be true that
SEM, the assignee of EP 133, is a 100% which can use EP 133 and benefit from it.
subsidiary corporation of MMC, records are Since SEM is not an agent of MMC, it goes
bereft of any evidence showing that the without saying that the assignment or transfer
former is the duly authorized agent of the of the permit in favor of SEM is null and
latter. For a contract of agency to exist, it is void.
essential that the principal consents that the
Furthermore, the concept of agency is distinct
other party, the agent, shall act on its behalf,
from assignment. In agency, the agent acts not
and the agent consents so as to act. The SC
on his own behalf but on behalf of his
then proceeded to enumerate the elements of
principal. The assignment of MMC of EP 133
agency, to wit:
in favor of SEM did not make the latter the
1. Consent, express or implied, of the former’s agent. It is a total abdication of
parties to establish the relationship; MMC’s rights over the permit, thus making
SEM the permittee.
2. The object is the execution of a
juridical act in relation to a third person; The SC cannot lend recognition to the CA’s
theory that SEM being a 100% subsidiary of
3. The agent acts as a representative and MMC, is automatically an agent of MMC. A
not for himself; corporation is an artificial being invested by
law with a personality separate and distinct
4. The agents acts within the scope of his
from persons composing it as well as from
authority.
that of any other legal entity to which it may
The elements of agency is a factual matter be related. Absent any clear proof to the
that needs to be established or proven by contrary, SEM is a separate and distinct entity
evidence. It must likewise be emphasized that from MMC.
the evidence to prove this fact must be clear,
positive and convincing. Furthermore, records indicate that on 06 July
1993, EP 133 was extended for 12 months or
In the instant Petitions, it is incumbent upon until 06 July 1994. MMC never renewed its
MMC or SEM to prove that a contract of permit prior and after its expiration. Thus, EP
agency actually exists between them so as to 133 expired by non-renewal. With this, MMC
allow SEM to use and benefit from EP 133 as lost any right to the Diwalwal Gold Rush
the agent of MMC. SEM did not claim nor Area. SEM, on the other hand, has not
submit proof that it is the designated agent of acquired any right to the said area because the
MMC to represent the latter in its business transfer if EP 133 in its favor is invalid,
dealings or undertaking. SEM cannot Hence, both MMC and SEM have not
therefore be considered an agent of MMC
acquired any vested right over the area under the Agreement, American Air still owed
covered by EP 133. Orient Air a balance in unpaid overriding
commissions. Orient Air further alleged that
2. Orient Air vs. CA actions taken by American Air in the course
of terminating the Agreement as well as the
FACTS: termination itself were untenable, claiming
that the latter’s precipitous conduct had
American Airlines, Inc. (American occasioned prejudice to its business interests.
Air) entered into a General Sales Agency
Agreement with Orient Air Services and The CFI dismissed the complaint and
Hotel Representatives (Orient Air) whereby ruled in favor of Orient Air, declaring the
the former authorized the latter to act as its termination of the Agreement illegal and
exclusive general sales agent within the improper, and order American Air to reinstate
Philippines for the sale of air passenger Orient Air as its general sales agent. It further
transportation. order American Air to pay the balance of
overriding commission, plus payment legal
In 1981, alleging that Orient Air had interest, exemplary damages and attorney’s
reneged on its obligation under the fees.
Agreement by failing to promptly remit the
net proceeds of sales for the months of On appeal, the Intermediate Appellate
January to March 1981 in the amount of US Court (no Court of Appeals) affirmed the
$254,400.40, American Air undertook the findings of the CFI on their material points,
collection of the proceeds of tickets sold but with some modifications with respect to
originally by Orient Air and terminated the monetary awards granted.
forthwith the Agreement.
American Air then elevated the case to
American Air instituted a suit against the SC.
Orient Air with CFI Manila, Branch 24, for
ISSUE:
Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and WON the CA is correct in ordering the
Restraining Order. reinstatement of Orient Air as an agent of
American Air.
In its Answer with counterclaim,
Orient Air denied the allegations with respect RULING:
to American Air’s entitlement to alleged
unremitted amounts, contending that after NO. The CA, in effect, compels
application thereof to the commissions due it American Air to extend its personality to
Orient Air. Such would be violative of the the above-mentioned parcel of land. On 03
principles and essence of agency, defined by March 1955, Concepcion Rallos died. Months
law as a contract whereby “a person binds after Concepcion died, Simeon sold the
himself to render some service or to do undivided shares of his sisters to herein
something in representation or on behalf of respondent Felix Go Chan & Realty Corp.
another, WITH THE CONSENT OR
Ramon Rallos, administrator of the
AUTHORITY OF THE LATTER. In an
late Concepcion’s estate, filed with with the
agent-principal relationship, the personality of
Court of First Instance praying that the sale of
the principal is extended through the facility
the undivided share of the deceased be
of the agent. In so doing, the agent, by legal
declared unenforceable and to recover the
fiction, becomes the principal, authorized to
disposed share. CFI granted the relief prayed
perform all acts which the latter would have
for, but upon appeal, the Court of Appeals
him do. Such a relationship can only be
reversed the decision.
effected with the consent of the principal,
which must not, in any way, be compelled by
Ramon Rallos then elevated the case
law or any court. The Agreement itself to the Supreme Court by way of Petition for
between the parties states that “either party Review on Certiorari.
may terminate the Agreement without cause
by giving the other 30 days’ notice by letter, ISSUE:
telegram, or cable.”
WON the sale if the undivided share
of Concepcion Rallos is valid although it was
The Supreme Court set aside the executed by the agent after the death of his
ruling of the CA with respect to the principal.
reinstatement of Orient Air as general sales
agent of American Air. RULING:
The sale is void. The SC held that no

3. Rallos vs. Felix Go Chan & Sons
one may contract in the name of another
Realty Corporation  without being authorized by latter, or unless
he has by law a right to represent him. A
FACTS: contract entered into in the name of another
by one who has no authority or the legal
Conception and Gerundia both
representation or who has acted beyond his
surnamed Rallos were sister and registered
powers, shall be unenforceable, unless it is
co-owners of a parcel of land. The sisters
ratified, expressly or impliedly, by the person
executed a special power of attorney in favor
of their brother Simeon Rallos for the sale of on whose behalf it has been executed, before
it is revoked by the other contracting party. Art. 1931 is also not applicable because
The Court also cited Article 1403 (1) Rallos knew of the principal’s death.
The SC then enumerated the essential Laws on agency, the terms of which
elements of agency, which are: (1) there is are clear and unmistakable leaving no room
consent, express or implied of the parties to for interpretation contrary to its tenor, should
establish the relationship; (2) the object is the apply. The law provides that the death of the
execution of a juridical act in relation to a principal ipso jure extinguishes the authority
third person; (3) the agents acts as a of the agent to sell rendering the sale to a
representative and not for himself, and (4) the third person in good faith unenforceable,
agent acts within the scope of his authority. unless that agent had no knowledge of the
principal’s death at that time.
Agency is basically personal
representative, and derivative of nature. The The SC reversed the decision of CA
authority of the agent to act emanates from and affirmed the decision of CFI. Sale was
the powers granted to him by his principal; null and void.
his act is the act of the principal if done
within the scope of the authority. Qui facit per
4. Caram v. Laureta
alium facit se. “He who acts through another
acts himself”.
FACTS:
The SC also declared that there are
various ways of extinguishing Agency, but in On June 25, 1959, Claro L. Laureta filed in
this case, it is only concerned with one cause the Court of First Instance of Davao an action
which is death of the principal and cited for nullity, recovery of ownership and/or
Paragraph 3 of Art. 1919 of the Civil Code reconveyance with damages and attorney's
(Agency is extinguished by the death, civil fees against Marcos Mata, Codidi Mata,
interdiction, insanity or insolvency of the Fermin Z. Caram Jr. and the Register of
principal or of the agent). Deeds of Davao City.
The SC further declared that the sale

On June 10, 1945, Marcos Mata conveyed a
did not fall under the exceptions to the
large tract of agricultural land covered by
general rule that death ipso jure extinguishes
Original Certificate of Title No. 3019 in favor
the authority of the agent. Art. 1930 is
of Claro Laureta, plaintiff, the respondent
inapplicable because the SPA in favor of
herein. The deed of absolute sale in favor of
Simeon Rallos was not coupled with interest.
the plaintiff was not registered because it was
not acknowledged before a notary public or
any other authorized officer. At the time the PETITIONER’S CONTENTION:

sale was executed, there was no authorized
officer before whom the sale could be The petitioner assails the finding of the trial
acknowledged inasmuch as the civil court that the second sale of the property was
government in Tagum, Davao was not as yet made through his representatives, Pedro
organized. However, the defendant Marcos Irespe and Atty. Abelardo Aportadera. He
Mata delivered to Laureta the peaceful and argues that Pedro Irespe was acting merely as
lawful possession of the premises of the land broker or intermediary with the specific task
together with the pertinent papers thereof and duty to pay Marcos Mata the sum of
such as the Owner's Duplicate Original P1,000.00 for the latter's property and to see
Certificate of Title No. 3019, sketch plan, tax to it that the requisite deed of sale covering
declaration, tax receipts and other papers the purchase was properly executed by
related thereto. Since June 10, 1945, the Marcos Mata; that the identity of the property
plaintiff Laureta had been and is still in to be bought and the price of the purchase had
continuous, adverse and notorious occupation already been agreed upon by the parties; and
of said land, without being molested, that the other alleged representative, Atty.
disturbed or stopped by any of the defendants Aportadera, merely acted as a notary public in
or their representatives. In fact, Laureta had the execution of the deed of sale.
been paying realty taxes due thereon and had
introduced improvements worth not less than ISSUE:
P20,000.00 at the time of the filing of the
complaint. Whether petitioner have acted in bad faith
through his agents action.
However, the said property was sold to
Fermin Caram, Jr., the petitioner, by Marcos RULING:
Mata on May 5, 1947. And was able to
declare the ODOCT in the possession of In the case at bar, the court found that the
Laureta null and void, after Mata filed for an Attorneys Irespe and Aportadera had
issuance of new ODOCT before the RD of knowledge of the circumstances, and knew
Davao on the ground of loss of the said title. that Mata's certificate of title together with
other papers pertaining to the land was taken
The Trial Court ruled infavor of Laureta, by soldiers under the command of Col. Claro
stating that Caram, Jr. was not a purchaser in L. Laureta. Added to this is the fact that at the
good faith, and the Court of Appeals thenafter time of the second sale Laureta was already in
affirmed the decision of the lower court. possession of the land. Irespe and Aportadera
should have investigated the nature of
Laureta's possession. If they failed to exercise "Art. 1544. If the same thing should have
the ordinary care expected of a buyer of real been sold to different vendees, the ownership
estate they must suffer the consequences. The shall be transferred to the person who may
rule of caveat emptor requires the purchaser have first taken possession thereof in good
to be aware of the supposed title of the vendor faith, if it should be movable property.
and one who buys without checking the
vendor's title takes all the risks and losses "Should it be immovable property, the
consequent to such failure. ownership shall belong to the person
acquiring it who in good faith first recorded it
The principle that a person dealing with the in the Registry of Property.
owner of the registered land is not bound to
go behind the certificate and inquire into "Should there be no inscription, the
transactions the existence of which is not ownership shall pertain to the person who in
there intimated 18 should not apply in this good faith was first in the possession; and, in
case. It was of common knowledge that at the the absence thereof, to the person who
time the soldiers of Laureta took the presents the oldest title, provided there is
documents from Mata, the civil government good faith. (1973)".
of Tagum was not yet established and that
there were no officials to ratify contracts of Since Caram was a registrant in bad faith, the
sale and make them registrable. Obviously, situation is as if there was no registration at
Aportadera and Irespe knew that even if Mata all.
previously had sold the disputed property
such sale could not have been
registered.cdrep 5. AIR FRANCE vs. Court of Appeals,
December 29, 1983 G.R. No. L-57339
There is no doubt then that Irespe and
Aportadera, acting as agents of Caram, Nature and Purpose of Agency
purchased the property of Mata in bad faith.
FACTS:
Applying the principle of agency, Caram, as
principal, should also be deemed to have In February, 1970, the late Jose G. Gana and
acted in bad faith. his family, (the GANAS), purchased from
AIRFRANCE through Imperial Travels,
Article 1544 of the New Civil Code provides Incorporated, a duly authorized travel agent,
that: nine "open-dated" air passage tickets for the
Manila/Osaka/Tokyo/Manila route.On April
24, 1970, AIR FRANCE exchanged or
substituted the aforementioned tickets with up to the GANAS to make the arrangements.
other tickets for the same route. At this time, Notwithstanding the warnings, the GANAS
the GANAS were booked for the Manila/ departed from Manila in the afternoon of May
Osaka segmenton AIR FRANCE Flight 184 7, 1971 on board AIR FRANCE Flight 184
for May 8, 1970, and for the Tokyo/Manila for Osaka,Japan.However, for the Osaka/
return trip on AIRFRANCE Flight 187 on Tokyo flight on May 17, 1971, Japan Airlines
May 22, 1970. The aforesaid tickets were refused to honor the tickets because of their
valid until May 8, 1971.TheGANAS did not expiration, and the GANAS had to purchase
depart on 8 May 1970.Jose Gana sought the new tickets. They Encountered the same
assistance of Teresita Manucdoc, a Secretary difficulty with respect to their return trip to
of the Sta. Clara Lumber Company where Manila as AIR FRANCE also refused to
Jose Gana was the Director and Treasurer, for honor their tickets. They were able to return
the extension of the validity of their tickets, only after prepayment in Manila, through
which were due to expire on May 8, 1971. their relatives, of the readjusted rates. They
Teresita enlisted the help of Lee EllaManager finally flew back to Manila on separate Air
of the Philippine Travel Bureau, who used to FranceFrights.
handle travel arrangements for the personnel
ISSUE:
of the Sta. Clara Lumber Company. Ella sent
the tickets to Cesar Rillo, OfficeManager of Whether or not Teresita was the agent of the
AIR FRANCE.The tickets were returned to GANAS and notice to of the rejection of the
Ella who was informed that extension was not request of the validity of the tickets was
possible. Ella then returned the tickets to notice to the GANAS, her principals.
Teresita and informed her of the impossibility
of extension.In the meantime, the GANAS RULING:
had scheduled their departure on May 7, 1971
or one day before the expiry date. In the The GANAS cannot defend by contending
morning of the very day of their scheduled lack of knowledge of those rules since the
evidence bears out that Teresita, who handled
departure on the first leg of their trip, Teresita
travel arrangements for the GANAS, was
requested travel agent Ella to arrange the
duly informed by travel agent Ella of the
revalidation of the tickets. Ella gave the same
advice of Reno, the Office Manager of Air
negative answer and warned her that although
France, that the tickets in question could not
the tickets could be used by theGANAS if
be extended beyond the period of their
they left onMay 7, 1971, the tickets would no
validity without paying the fare differentials
longer be valid for the rest of their trip
because the tickets would then have expired and additional travel taxes brought about by
on May 8,1971. Teresita replied that it will be the increased fare rate and traveltaxes.To all
legal intents and purposes, Teresita was the

agent of the GANAS and notice to her of the On August 17, 2011, Tomlin filed an
rejection of the request for extension of the Omnibus Motion seeking to quash the Writ of
validity of the tickets was notice to the Replevin, dismiss the Complaint, and turn
GANAS, her principals.WHEREFORE, the over the vehicle to him. Tomlin argued that
judgment under review is hereby reversed and that petitioner failed to show that he is the
set aside, and the AmendedComplaint filed by owner of the vehicle or that he is entitled to
private respondents hereby dismissed. its possession, and that the vehicle is
wrongfully detained by him, and that it has
6. ANGHIAN SIY vs. TOMLIN not been distrained, seized or placed under
G.R. No. 205998 April 24, 2017 custodia legis; and that he is a buyer in good
(Agency) faith and for value.
FACTS:
On July 2011, Siy filed a Complaint for ISSUE:
Recovery of Possession with Prayer for Was the issuance of the Writ of Replevin
Replevin against Ong, Centeno, Chua, and proper?
respondent Tomlin. The petition which
was filed before the Quezon City RTC, RULING:
alleged the following: No, the issuance of the Writ of Replevin was
not proper. The Supreme Court has held that
Petitioner is the owner of a 2007 model in a complaint of replevin, the claimant must
Range Rover with Plate Number ZMG 272 convincingly show that he
which he purchased from Alberto Lopez on is the owner or clearly entitled to the
July 22, 2009. possession of the object sought to be
recovered, and that the defendant, who is
In 2010, he entrusted the said vehicle to in actual or legal possession thereof,
Ong, a businessman who owned a second- wrongfully detained the same ( Superlines
hand car sales showroom, after the latter Transportation Company, Inc. v. Philippine
claimed that he had a prospective buyer. Ong National Construction Company, 2007). Also,
failed to remit the proceeds of the purported under the Civil Code on agency, Article 1869,
sale or return the vehicle. Siy found out agency may be express, or implied from the
that the vehicle had been transferred to acts of
Chua, and the principal, from his silence or lack of
later learned that the vehicle was being action, or his failure to repudiate the
transferred to Tomlin.
agency, knowing that another person is Accident Insurance Coverage Certificate, and
acting on his behalf without authority. Laingo was his named beneficiary.
Rheozel died due to a vehicular

Here, Siy constituted and appointed Ong
as his agent to sell the vehicle, accident. Laingo wanted to use the money in
the savings account for Rhoezel’s burial and
surrendering to the latter the vehicle, all
instructed the family’s personal secretary
documents of title pertaining thereto, and
Alice to go to BPI and inquire about the
a deed of sale signed in blank. Acting for
savings account. Alice then went to BPI
and on petitioner's behalf by virtue of the
regarding Laingo’s request. BPI acceded to
implied or oral agency, Ong was thus able to
Laingo’s request and allowed her to withdraw
sell the vehicle to Chua, Siy thus ceased to be
P995,000 from the account of Rhoezel. Two
the owner thereof. It was Tomlin who
years later, the sister of Rheozel, Rhealyn
obtained the vehicle from Chua and
Laingo-Concepcion found the above-
registered the transfer with the Land
Transportation Office, mentioned Personal Accident Insurance
Coverage Certificate and conveyed the
Who is the rightful owner thereof, and as
information to Laingo.
such, he is entitled to its possession.
Laingo then sent two letters to BPI

Hence the issuance of the Writ of Replevin and FGU Insurance requesting them to
was not proper. process her claim as the beneficiary of
Rheozel. FGU sent a reply letter denying her
claim, stating that Laingo should have filed
7. BPI vs. Laingo the claim within three calendar months from
the death of Rheozel as required by Paragraph
FACTS: 15 of the Personal Accident Certificate of
Insurance.
Rheozel Laingo (Rheozel), the son of
Yolanda Laingo (Laingo), opened a “Platinum Laingo then filed a Complaint for
2-in-1 Savings and Insurance” account with Specific Performance with Damages and
BPI in its Claveria, Davao City Branch. The Attorney’s Fees with the RTC of Davao City,
said account is a saving account where Branch 16, against BPI and FGU Insurance.
depositors are automatically covered by an
insurance policy against disability or death, The RTC dismissed the Complaint and
issued by FGU Insurance Corporation (FGU ruled in favor of BPI and FGU Insurance.
Insurance). Rheozel was given a Personal
Laingo filed an appeal with the Court
of Appeals, who reversed the ruling of the
RTC and granted the appeal, stating that The SC declared that BPI is the main
Laingo could not be expected to do an proponent of the 2-in-1 deposit account, tied
obligation which she did not know existed. up with its affiliate, FGU Insurance. Any
The CA further added that Laingo was not a customer interested to open a deposit account
party to the insurance contract. Thus, she under the 2-in-1 product and upon BPI’s
could not be bound by the 90-day stipulation. approval, will automatically be given an
insurance coverage. Thus, BPI acted as agent
BPI and FGU Insurance elevated the of FGU Insurance with respect to the
case to the Supreme Court (SC) insurance feature of its own marketed
product.
ISSUE:
The SC stated that for an agency to

WON Laingo, as named beneficiary
arise, it is not necessary that the principal
who had no knowledge of the existence of the
personally encounter the third person with
insurance contract, is bound by the three
whom the agent interacts. The law in fact
calendar month deadline for filing a written
contemplates impersonal dealing where the
notice of claim upon the death of the insured.
principal need not personally know or meet
RULING: the third person with whom the agent
transacts: precisely, the purpose of agency is
The petition lacks merit. to extend the personality of the principal
through the facility of the agent.
L a i n g o , a s R h o e z e l ’s n a m e d
beneficiary had no knowledge of the fact that Furthermore, when an agency
Rhoezel was covered by an insurance policy relationship is established, the agent acts for
against disability or death issued by FGU the principal insofar as the world is
Insurance that was attached to Rhoezel’s concerned. Consequently, the acts of the
account with BPI. Laingo argued that she agent on behalf of principal within the scope
dealth with BPI after her son’s death when of the delegated authority have the same legal
she withdrew funds from his savings account. effect and consequence as thought the
However, BPI did not notify her of the principal had been the one so acting in the
attached insurance policy. She thus attributes given situation.
responsibility to BPI and FGU Insurance for
her failure to file the notice of insurance The SC further averred that BPI, as
claim within three months after her son’s agent of FGU Insurance, had the primary
death. The SC agreed with her contention. responsibility the 2-in1 account be reasonably
carried out with full disclosure to parties
concerned, particularly beneficiaries. Thus, it
was incumbent upon BPO to give proper the existence of the insurance policy, Laingo
notice of the existence of the insurance had no means to ascertain that she was
coverage and the stipulation in the insurance entitled to the insurance claim. It would be
contract for filing a claim to Laingo, as unfair for Laingo to shoulder the burden of
Rhoezel’s beneficiary. loss when BPI was remiss in its duty to carry
out its duty.
The SC cited Art. 1884 and 1887
wherein both provision entail, on the part of The SC denied the petition and
BPI, to do all that a good father of a family affirmed the decision of the Court of Appeals.
would do, as required by the nature of
business. 8. Manuel Lim v CA
The SC further stated that there is FACTS:

rationale in the contract of agency, which Manuel Lim and Rosita Lim are the officers
flows from the “doctrine of representation”, of the Rigi Bilt Industries, Inc. (RIGI). RIGI
that notice to the agent is notice to the had been transacting business with Linton
principal. In the present case, BPI was Commercial Company, Inc. The Lims
informed of Rhoezel’s death by the latter’s ordered 100 pieces of mild steel plates from
family. Since BPI is the agent of FGU Linton and were delivered to the Lim’s place
Insurance, then such notice of death to BPI is of business which was in Caloocan. To pay
considered notice to FGU Insurance. FGU Linton, the Lims issued a postdated check for
cannot justify the denial of a beneficiary’s P51,800.00. On a different date, the Lims also
insurance claim for being filed out of time ordered another 65 pcs of mild steel plates
when notice of death had been communicated and were delivered in the place of business.
to its aagent within a few days after the death They again issued another postdated check.
of the depositor-insured. In short, there was On that same day, they also ordered purlins
timely notice of Rheozel’s death given to worth P241,800 which were delivered to them
FGU Insurance within three months from on various dates. The Lims issued 7 checks
Rheozel’s death as required by the insurance for this.
company. When the 7 checks were presented to the
drawee bank (Solidbank), it was dishonored
BPI had ample opportunity to inform
because payment for the checks had been
Laingo, whether verbally or in writing,
stopped and/or insufficiency of funds. So the
regarding the existence of the insurance
Lims were charged with 7 counts of violation
policy. However, BPI neglected to carry out
of Bouncing Checks Law.
its duty. Since BPI, as an agent of FGU
Insurance, fell short in notifying Laingo of
The Malabon trial court held that the Lims HOLDER = payee or indorsee of a bill/note
were guilty of estafa and violation of BP 22. who is in possession of it or the bearer
They went to CA on appeal.
The place where the bills were written, signed
The CA acquitted the Lims of estafa, on the or dated does not necessarily fix or determine
ground that the checks were not made in the place where they were executed. It is the
payment of an obligation contracted at the delivery that is important. It is the final act
time of their issuance. However, the CA essential to its consummation of an
affirmed the finding that they were guilty of obligation. An undelivered bill is unoperative.
violation for BP 22. Motion for The issuance and delivery of the check must
Reconsideration to SC. be to a person who takes it as a holder.
Although Linton sent a collector who
ISSUE: received the checks fr. The Lims at their place
Whether or not the issue was within the of business, the checks were actually issued
jurisdiction of the Malabon Trial Court and delivered to Linton in Navotas. The
collector is not a holder or an agent, he was
RULING: just an employee.
Yes. The venue of jurisdiction lies either in
the RTC Caloocan or Malabon Trial Court. *SC affirms conviction of the Lims for
BP 22 is a continuing crime. A person charged violation of BP 22 and the decision of CA
with a transitory crime may be validly tried in
any municipality or territory where the 9. Amon Trading Corp. and Juliana
offense was partly committed. In determining M a r k e t i n g v. C A a n d Tr i - R e a l t y
the proper venue, the ff. must be considered. Development and Construction Corporation
1) 7 checks were issued to Linton in its place
of business in Navotas. 2) The checks were
FACTS:
delivered Linton in the same place. 3) The
checks were dishonored in Caloocan 4) The Tri-Realty is a developer and contractor with
Lims had knowledge projects in Bulacan and Quezon City.
of their insufficiency of funds. Sometime in February 1992, Tri-Realty had
difficulty in purchasing cement needed for its
Under sec 191 of the Negotiable Instruments projects.
Law:
Lines & Spaces Interior Center, represented
ISSUE = 1ST delivery of the instrument
by Eleanor Bahia Sanchez, informed Tri-
complete in form to a person who takes it as a
Realty that it could obtain cement to its
holder
satisfaction from Amon Trading Corporation There was no written contract entered into
and its sister company, Juliana Marketing. On between Amon Trading and Juliana
the strength of such representation, Tri-Realty Marketing and Tri- Realty for the delivery of
proceeded to order from Sanchez 6,050 bags the bags of cement. Tri-Realty agreed with
of cement from Amon Trading Corporation, Sanchez of Lines & Spaces for the latter to
and from Juliana Marketing, 6,000 bags at source the cement needs of the former in
P98.00/bag. consideration of P7.00 per bag of cement. It is
worthy to note that the payment in manager’s
Tri-Realty, through Mrs. Sanchez of Lines &
checks was made to Sanchez and was not
Spaces, paid in advance the amount of the
directly paid to Amon Trading and Juliana
cement. Tri- Realty likewise paid to Lines &
Marketing. While the manager’s check issued
Spaces an advance fee for the 12,050 cement
by Tri-Realty was eventually paid to Amon
bags at the rate of P7.00/bag, or a total of
Trading and Juliana Marketing for the
P84,350.00, in consideration of the
delivery of the bags of cement, there is
facilitation of the orders and certainty of
obviously nothing from the face of said
delivery.
manager’s check to hint that Tri-Realty was
The balance of 2,200 bags from Amon the one making the payments. There was
Trading Corporation and 3,000 bags from likewise no intimation from Sanchez that the
Juliana Marketing, or a total of 5,200 bags, purchase order placed by her was for Tri-
was not delivered. Tri-Realty, thus, sent Realty’s benefit. The meeting of minds,
Amon Trading and Juliana Marketing written therefore, was between Tri-Realty and
demands but in reply, they stated that they Sanchez. This contract is distinct and separate
have already refunded the amount of from the contract of sale between Amon
undelivered bags of cement to Lines & Trading and Juliana Marketing and Sanchez
Spaces per written instructions of Sanchez. who represented herself to be from Lines &
S p a c e s / Tr i - R e a l t y, w h i c h , p e r h e r
ISSUES:
representation, was a single account or entity.
(1) WON there was a contract of agency
Neither Sanchez nor Lines & Spaces was an
between Lines & Spaces and Tri-Realty;
agent for Tri-Realty, but rather a supplier for
(2) WON Amon Trading and Juliana the latter’s cement needs.
Marketing and Tri-Realty has privity of
Art. 1868. By the contract of agency a person
contract
binds himself to render some service or to do
RULING: something in representation or on behalf of
another, with the consent or authority of the
1 & 2. No
latter.
On the part of the principal, there must be an Second, it failed to employ safety nets to steer
actual intention to appoint or an intention clear of the rip-off. For such huge sums of
naturally inferable from his words or actions money involved in this case, it is surprising
and on the part of the agent, there must be an that a corporation such as Tri-Realty would
intention to accept the appointment and act on pay its construction materials in advance
it, and in the absence of such intent, there is instead of in credit thus opening a window of
generally no agency. One factor which most opportunity for Sanchez or Lines & Spaces to
clearly distinguishes agency from other legal pocket the remaining balance of the amount
concepts is control; one person - the agent - paid corresponding to the undelivered
agrees to act under the control or direction of materials. Tri-Realty likewise paid in advance
another - the principal. Indeed, the very word the commission of Sanchez for the materials
“agency” has come to connote control by the that have yet to be delivered so it really had
principal. The control factor, more than any no means of control over her. Finally, there is
other, has caused the courts to put contracts no paper trail linking Tri-Realty to Amon
between principal and agent in a separate Trading and Juliana Marketing thereby
category. leaving the latter clueless that Tri-Realty was
their true client. Tri-Realty should have, at the
The intention of Tri-Realty was merely for
very least, required Amon Trading and Juliana
Lines & Spaces, through Eleanor Sanchez, to
Marketing to sign the check vouchers or to
supply them with the needed bags of cement.
issue receipts for the advance payments so
Inasmuch as Amon Trading and Juliana
that it could have a hold on Amon Trading
Marketing have never directly dealt with Tri-
and Juliana Marketing. In this case, it was the
Realty and there is no paper trail on record to
representative of Lines & Spaces who signed
guide them that the Tri-Realty, in fact, is the
the check vouchers.
beneficiary, Amon Trading and Juliana
Marketing had no reason to doubt the request
of Sanchez later on to refund the value of the 10. Jocelyn B. Doles vs. Ma. Aura Tina
undelivered bags of cement to Lines & Angeles 
Spaces. Moreover, the check refund was
payable to Lines & Spaces, not to Sanchez, so
FACTS:
there was indeed no cause to suspect the
scheme. Petitioner executed a Deed of Absolute Sale
ceding a parcel of land in favor of respondent
Tri-Realty was negligent. It was the one who
to satisfy the alleged indebtedness of the
had reposed too much trust on Sanchez for
former in the amount of P405,430.00. Since
the latter to source its cement needs.
the said land was mortgaged to the National
Home Mortgage Finance Corporation, they established in the same was as any other fact,
further agreed that respondent assumes the either by direct or circumstantial evidence.
remaining balance of the loan. Learning that Agency may be implied from the words and
the petitioner still has arrearages, respondent conduct of the parties and the circumstances
demanded that the arrearages be paid first. of the particular case. Though the fact or
Petitioner did not heed, thus a case was filed extent of authority of the agents may not, as a
by the respondent. general rule, be established from the
declarations of the agents alone, if one
In answer, the petitioner alleged that sale was
frofessed to act as agent for another, she may
void for lack of consideration and that she
be stopped to deny her agency both as against
was not indebted to the respondent as she
the asserted principal and the third persons
only referred her friends to respondent whom
interested in the transaction in which he or
she knew to be engaged in the business of
she is engaged.
lending money in exchange for personal
checks through her capitalist Arsenio Pua. In this case, the petitioner knew that the
Further petitioner contended that since the financier of the respondent is Pua, and
respondent is also an agent, she does not have respondent knew that the borrowers are
the capacity to sue her. friends of the petitioner. It is sufficient that
the petitioner disclosed to respondent that the
It is an admitted fact by both petitioner and
former was acting on behalf of her principals,
defendant, based on their testimonies, that
her friends. For an agency to arise, it is not
respondent knew that the money will be used
necessary that the principal personally
by the friends of the petitioner; that the
encounter the third person with whom the
respondent was merely representing Arsenio
agent interacts.
Pua; and that before the supposed friends of
the petitioner defaulted in payment, each Here, both petitioner and respondent have
issued their personal checks in the name of undeniably disclosed to each other that they
Arsenio Pua for the payment of their debt. are representing someone else and so both of
them are estopped to deny the same.
ISSUE:
That both parties acted as mere agents is
Whether or not petitioner and respondent
shown by the undisputed fact that the friends
were acting on their personal capacity or as
of the petitioner issued checks in payment of
mere agents.
the loan in the name of Arsenio Pua.
RULING:
The question whether an agency has been

created is ordinarily a question which may be
11 . S U N A C E I N T E R N AT I O N A L Desistance, copy of each document was

MANAGEMENT SERVICES, INC. v. annexed to said
NLRC
The Labor Arbiter rejected Sunace's claim
FACTS: that the extension of Divina's contract for two
Petitioner, Sunace International Management more years was without its knowledge and
Services (Sunace), deployed to Taiwan Divina consent.
A. Montehermozo (Divina) as a domestic
helper under a 12-month contract effective ISSUE:
February 1, 1997. The deployment was with Whether or not the act of the foreigner-
the assistance of a Taiwanese broker, Edmund principal in renewing the contract of Divina
Wang, President of Jet Crown International be attributable to Sunace
Co., Ltd.
After her 12-month contract expired on RULING:

February 1, 1998, Divina continued working No, the act of the foreigner-principal in
for her Taiwanese employer, Hang Rui Xiong, renewing the contract of Divina is not
for two more years, after which she returned attributable to Sunace.
to the Philippines on February 4, 2000.
Shortly after her return or on February 14, There being no substantial proof that Sunace
2000, Divina filed a complaint before the knew of and consented to be bound under the
National Labor Relations Commission 2-year employment contract extension, it
(NLRC) against Sunace, one Adelaide Perez, cannot be said to be privy thereto. As such, it
the Taiwanese broker, and the employer- and its "owner" cannot be held solidarily
foreign principal alleging that she was jailed liable for any of Divina's claims arising from
for three months and that she was underpaid the 2-year employment extension.
Reacting to Divina's Position Paper, Sunace Furthermore, as Sunace correctly points out,
filed on April 25, 2000 an ". . . ANSWER TO there was an implied revocation of its agency
COMPLAINANT'S POSITION PAPER" relationship with its foreign principal when,
alleging that Divina's 2-year extension of her after the termination of the original
contract was without its knowledge and employment contract, the foreign principal
consent, hence, it had no liability attaching to directly negotiated with Divina and entered
any claim arising therefrom, and Divina in into a new and separate employment contract
fact executed a Waiver/Quitclaim and Release in Taiwan.
of Responsibility and an Affidavit of
Note that it is a basic principle in law that latter part of 1941, the parties agreed to renew
contracts bind only the parties who had the contract for another period of 5 years, but
entered into it, it cannot favor or prejudice a in the meantime, the Pacific War broke out in
third person. (Visayan Surety & Insurance December 1941. In January 1942 operation of
Corporation vs. Court of Appeals, 364 SCRA the mining properties was disrupted on
631 [2001]) account of the war. In February 1942, the
mill, power plant, supplies on hand,
12. Nielson & Co. Inc. vs. Lepanto equipment, concentrates on hand and mines,
Consolidated Mining Co. were destroyed upon orders of the United
States Army, to prevent their utilization by the
FACTS: invading Japanese Army.
An operating agreement was executed before The Japanese forces thereafter occupied the
World War II (on 30 January 1937) between mining properties, operated the mines during
Nielson & Co. Inc. and the Lepanto the continuance of the war, and who were
Consolidated Mining Co. whereby the former ousted from the mining properties only in
operated and managed the mining properties August 1945. After the mining properties
owned by the latter for a management fee of were liberated from the Japanese forces,
P2,500.00 a month and a 10% participation in LEPANTO took possession thereof and
the net profits resulting from the operation of embarked in rebuilding and reconstructing the
the mining properties, for a period of 5 years. mines and mill; setting up new organization;
In 1940, a dispute arose regarding the clearing the mill site; repairing the mines;
computation of the 10% share of Nielson in erecting staff quarters and bodegas and
the profits. The Board of Directors of repairing existing structures; installing new
Lepanto, realizing that the mechanics of the machinery and equipment; repairing roads
contract was unfair to Nielson, authorized its and maintaining the same; salvaging
President to enter into an agreement with equipment and storing the same within the
Nielson modifying the pertinent provision of bodegas; doing police work necessary to take
the contract care of the materials and equipment
effective 1 January 1940 in such a way that recovered; repairing and renewing the water
Nielson shall receive (1) 10% of the system; and retimbering. The rehabilitation
dividends declared and paid, when and as and reconstruction of the mine and mill was
paid, during the period of the contract and at not completed until 1948. On 26 June 1948
the end of each year, (2) 10% of any depletion the mines resumed operation under the
reserve that may be set up, and (3) 10% of exclusive management of LEPANTO. Shortly
any amount expended during the year out of after the mines were liberated from the
surplus earnings for capital account. In the Japanese invaders in 1945, a disagreement
arose between NIELSON and LEPANTO thereon from the date of the filing of the
over the status of the operating contract which complaint; (3) management fees for the sixty-
as renewed expired in 1947. Under the terms month period of extension of the management
thereof, the management contract shall contract, amounting to P150,000.00, with
remain in suspense in case fortuitous event or legal interest from
force majeure, such as war or civil the date of the filing of the complaint; (4)
commotion, adversely affects the work of 10% share in the cash dividends during the
mining and milling. On 6 February 1958, period of extension of the management
NIELSON brought an action against contract, amounting to P1,400,000.00, with
LEPANTO before the Court of First Instance legal interest thereon from the date of the
of Manila to recover certain sums of money filing of the complaint; (5) 10% of the
representing damages allegedly suffered by depletion reserve set up during the period of
the former in view of the refusal of the latter extension, amounting to P53,928.88, with
to comply with the terms of a management legal interest thereon from the date of the
contract entered into between them on 30 filing of the complaint; (6) 10% of the
January 1937, including attorney's fees and expenses for capital account during the period
costs. of extension, amounting to P694,364.76, with
LEPANTO in its answer denied the material legal interest thereon from the date of the
allegations of the complaint and set up certain filing of the complaint; (7) to issue and
special defenses, among them, prescription deliver to Nielson and Co. Inc. shares of stock
and laches, as bars against the institution of of Lepanto Consolidated Mining Co. at par
the action. value equivalent to the total of Nielson's 10%
After trial, the court a quo rendered a decision share in the stock dividends declared on
dismissing the complaint with costs. The November 28, 1949 and August 22, 1950,
court stated that it did not find sufficient together with all cash and stock dividends, if
e v i d e n c e t o e s t a b l i s h L E PA N T O ' s any, as may have been declared and issued
counterclaim and so it likewise dismissed the subsequent to November 28, 1949 and August
same. NIELSON appealed. The Supreme 22, 1950, as fruits that accrued to said shares;
Court reversed the decision of the trial court provided that if sufficient shares of stock of
and enter in lieu thereof another, ordering Lepanto's are not available to satisfy this
Lepanto to pay Nielson (1) 10% share of cash judgment, Lepanto shall pay Nielson an
dividends of December, 1941 in the amount amount in cash equivalent to the market value
of P17,500.00, with legal interest thereon of said shares at the time of default, that is, all
from the date of the filing of the complaint; shares of stock that should have been
(2) management fee for January, 1942 in the delivered to Nielson before the filing of the
amount of P2,500.00, with legal interest
complaint must be paid at their market value basis is employment. The lessor of services
as of the date of the filing of the does not represent his employer, while the
complaint; and all shares, if any, that should agent represents his principal. Further, agency
have been delivered after the filing of the is a preparatory contract, as agency "does not
complaint at the market value of the shares at stop with the agency because the purpose is to
the time Lepanto disposed of all its available enter into other contracts." The most
shares, for it is only then that Lepanto placed characteristic feature of an agency
itself in condition of not being able to relationship is the agent's power to bring
perform its obligation; (8) the sum of about business relations between his principal
P50,000.00 as attorney's fees; and (9) the and third persons. "The agent is destined to
costs. execute juridical acts (creation, modification
Lepanto seeks the reconsideration of the or extinction of relations with third parties).
decision rendered on 17 December 1966. Lease of services contemplate only material
(non-juridical) acts." Herein, the principal and
ISSUE: paramount undertaking of Nielson under the
Whether the management contract is a management contract was the operation and
contract of agency or a contract of lease of development of the mine and the operation of
services. the mill. All the other undertakings mentioned
in the contract are necessary or incidental to
RULING: the principal undertaking — these other
Article 1709 of the Old Civil Code, defining undertakings being dependent upon the work
contract of agency, provides that "By the on the development of the mine and the
contract of agency, one person binds himself operation of the mill. In the performance of
to render some service or do something for this principal undertaking Nielson was not in
the account or at the request of another." any way executing juridical acts for Lepanto,
Article 1544, defining contract of lease of destined to create, modify or extinguish
service, provides that "In a lease of work or business relations between
services, one of the parties binds himself to Lepanto and third persons. In other words, in
make or construct something or to render a performing its principal undertaking Nielson
service to the other for a price certain." In was not acting as an agent of Lepanto, in the
both agency and lease of services one of the sense that the term agent is interpreted under
parties binds himself to render some service the law of agency, but as one who was
to the other party. Agency, however, is performing material acts for an employer, for
distinguished from lease of work or services a compensation. It is true that the
in that the basis of agency is representation, management contract provides that Nielson
while in the lease of work or services the would also act as purchasing agent of supplies
and enter into contracts regarding the sale of into the underground storage, right at the
mineral, but the contract also provides that opening of the receiving tank where the
Nielson could not make any purchase, or sell nozzle of the hose was inserted. The fire
the minerals, without the prior approval of spread to and burned several neighboring
Lepanto. It is clear, therefore, that even in houses, including the personal properties and
these cases Nielson could not execute effects inside them. Their owners, among
juridical acts which would bind Lepanto them petitioners here, sued respondents
without first securing the approval of Caltex (Phil.), Inc. and Mateo Boquiren, the
Lepanto. Nielson, then, was to act only as an first as alleged owner of the station and the
intermediary, not as an agent. Further, from second as its agent in charge of operation.
the statements in the annual report for 1936, Negligence on the part of both of them was
and from the provision of paragraph XI of the attributed as the cause of the fire. The trial
Management contract, that the employment court and the Court of Appeals found that
by Lepanto of Nielson to operate and manage petitioners failed to prove negligence and that
its mines was principally in consideration of respondents had exercised due care in the
the know-how and premises and with respect to the supervision
technical services that Nielson offered of their employees.
Lepanto. The contract thus entered into
ISSUES:
pursuant to the offer made by Nielson and
accepted by Lepanto was a "detailed 1. Whether or not, without proof as to
operating contract". It was not a contract of the cause and origin of the fire, the
agency. Nowhere in the record is it shown doctrine of res ipsa loquitor should
that Lepanto considered Nielson as its agent apply so as to presume negligence on
and that Lepanto terminated the management the part of the respondents.  
contract because it had lost its trust and
confidence in Nielson. 2. The next issue is whether Caltex
should be held liable for the damages
caused to appellants.
13. Africa vs. Caltex 16 SCRA 488
FACTS:
It appears that in the afternoon of March 18,

1948 a fire broke out at the Caltex service RULING:
station at the corner of Antipolo street and
Rizal Avenue, Manila. It started while 1. Where the thing which caused the
gasoline was being hosed from a tank truck injury complained of is shown to be
under the management of defendant the rule that those who distribute a dangerous
or his servants and the accident is article or agent, owe a degree of protection to
such as in the ordinary course of the public proportionate to and commensurate
things does not happen if those who with a danger involved ... we think it is the
have its management or control use generally accepted rule as applied to torts that
proper care, it affords 'if the effects of the actor's negligent conduct
reasonable evidence, in absence of actively and continuously operate to bring
explanation by defendant, that about harm to another, the fact that the active
the accident arose from want of care. and substantially simultaneous operation of
(45 C.J. #768, p. 1193). the effects of a third person's innocent,
tortious or criminal act is also a substantial
The gasoline station, with all its appliances, factor in bringing about the harm, does not
equipment and employees, was under the protect the actor from liability.' (Restatement
control of appellees. A fire occurred therein of the Law of Torts, vol. 2, p. 1184, #439).
and spread to and burned the neighboring Stated in another way, "The intention of an
houses. The persons who knew or could have unforeseen and unexpected cause, is not
known how the fire started were appellees sufficient to relieve a wrongdoer from
and their employees, but they gave no consequences of negligence, if such
explanation thereof whatsoever. It is a fair negligence directly and proximately
and reasonable inference that the incident cooperates with the independent cause in the
happened because of want of care. There is an resulting injury." (MacAfee, et al. vs. Traver's
admission on the part of Boquiren in his Gas Corporation, 153 S.W. 2nd 442.)
amended answer to the second amended
complaint that "the fire was caused through 2. The next issue is whether Caltex
the acts of a stranger who, without authority, should be held liable for the damages
or permission of answering defendant, passed caused to appellants. This
through the gasoline station and negligently issue depends on whether Boquiren
threw a lighted match in the premises." No was an independent contractor, as
evidence on this point was adduced, but held by the Court of Appeals, or an
assuming the allegation to be true — certainly agent of Caltex. This question,
any unfavorable inference from the admission in the light of the facts not
may be taken against Boquiren — it does not controverted, is one of law and hence
extenuate his negligence. A decision of the may be passed upon by this
Supreme Court of Texas, upon facts Court. These facts are: (1) Boquiren
analogous to those of the present case, states made an admission that he was an
the rule which we find acceptable here. "It is agent of Caltex; (2) at the time of the
fire Caltex owned the gasoline present any contract with Boquiren that
station and all the equipment therein; would reveal the nature of their relationship at
(3) Caltex exercised control over the time of the fire. There must have been one
Boquiren in the management of in existence at that time. Instead, what was
the state; (4) the delivery truck used presented was a license agreement manifestly
in delivering gasoline to the station tailored for purposes of this case, since it was
had the name of CALTEX painted on entered into shortly before the expiration of
it; and (5) the license to store the one-year period it was intended to
gasoline at the station was in the operate. This so-called license agreement was
name of Caltex, which paid the executed on November 29, 1948, but made
license fees. effective as of January 1, 1948 so as to cover
the date of the fire, namely, March 18, 1948.
Buquiren denied that he directed one of his This retroactivity provision is quite
drivers to remove gasoline from the truck into significant, and gives rise to the conclusion
the tank and alleged that the "alleged driver, if that it was designed precisely to free Caltex
one there was, was not in his employ, the from any responsibility with respect to the
driver being an employee of the Caltex (Phil.) fire, as shown by the clause that Caltex "shall
Inc. and/or the owners of the gasoline not be liable for any injury to person or
station." It is true that Boquiren later on property while in the property herein licensed,
amended his answer, and that among the it being understood and agreed that
changes was one to the effect that he was not LICENSEE (Boquiren) is not an employee,
acting as agent of Caltex. But then again, in representative or agent of LICENSOR
his motion to dismiss appellants' second (Caltex)."
amended complaint the ground alleged was
that it stated no cause of action since under But even if the license agreement were to
the allegations thereof he was merely acting govern, Boquiren can hardly be considered an
as agent of Caltex, such that he could not independent contractor. Under that agreement
have incurred personal liability. A motion to Boquiren would pay Caltex the purely
dismiss on this ground is deemed to be an nominal sum of P1.00 for the use of the
admission of the facts alleged in the premises and all the equipment therein. He
complaint. could sell only Caltex Products. Maintenance
of the station and its equipment was subject to
Caltex admits that it owned the gasoline the approval, in other words control, of
station as well as the equipment therein, but Caltex. Boquiren could not assign or transfer
claims that the business conducted at the his rights as licensee without the consent of
service station in question was owned and Caltex. The license agreement was supposed
operated by Boquiren. But Caltex did not
to be from January 1, 1948 to December 31, contractor should not be disturbed. To

1948, and thereafter until terminated by determine the nature of a contract
Caltex upon two days prior written notice. courts do not have or are not bound to rely
Caltex could at any time cancel and terminate upon the name or title given it by the
the agreement in case Boquiren ceased to sell contracting parties, should thereby a
Caltex products, or did not conduct the controversy as to what they really had
business with due diligence, in the judgment intended to enter into, but the way the
of Caltex. Termination of the contract was contracting parties do or perform their
therefore a right granted only to Caltex but respective obligations stipulated or agreed
not to Boquiren. These provisions of the upon may be shown and inquired into,
contract show the extent of the control of and should such performance conflict
Caltex over Boquiren. The control was such with the name or title given the contract by
that the latter was virtually an employee of the parties, the former must prevail
the former. over the latter. (Shell Company of the
Philippines, Ltd. vs. Firemens' Insurance
Taking into consideration the fact that Company of Newark, New Jersey, 100
the operator owed his position to t h e Phil. 757). The written contract was
company and the latter could remove him or apparently drawn for the purpose of creating
terminate his services at will; that the the apparent relationship of employer
service station belonged to the company and and independent contractor, and of avoiding
bore its tradename and the operator sold only liability for the negligence of the employees
the products of the company; that the about the station; but the company was not
equipment used by the operator belonged to satisfied to allow such relationship to
the company and were just loaned to the exist. The evidence shows that it immediately
operator and the company took charge assumed control, and proceeded to
of their repair and maintenance; that an direct the method by which the w o r k
employee of the company supervised contracted for should be performed. By
the operator and conducted periodic reserving the right to terminate the contract
inspection of the company's gasoline and at will, it retained the means of compelling
service station; that the price of the products submission to its orders. Having elected to
sold by the operator was fixed by the assume control and to direct the means and
company and not by the operator; and that methods by which the work has to be
the receipts signed by the operator indicated performed, it must be held liable for the
that he was a mere agent, the finding of the negligence of those performing service
Court of Appeals that the operator was an under its direction. We think the evidence was
agent of the company and not an independent sufficient to sustain the verdict of the jury.
(Gulf Refining Company v. Rogers, 57 S.W. Wherefore, the decision appealed from is
2d, 183). Caltex further argues that the reversed and respondents-appellees are held
gasoline stored in the station belonged to liable solidarily to appellants, and ordered to
Boquiren. But no cash invoices were pay them the aforesaid sum of P9,005.80 and
presented to show that Boquiren had bought P10,000.00, respectively, with interest from
said gasoline from Caltex. Neither was there a the filing of the complaint, and costs.
sales contract to prove the same. As found by
14. Reyes v. Rural Bank of San Miguel
the trial court the Africas sustained a loss of
P9,005.80, after deducting the amount of FACTS:
P2,000.00 collected by them on the insurance
of the house. The deduction is now Petitioners are officials of the Bangko Sentral
challenged as erroneous on the ground that ng Pilipinas (BSP). At the time material to
Article 2207 of the New Civil Code, which this case, Alberto V. Reyes was Deputy
provides for the subrogation of the insurer to Governor and Head of the Supervision and
the rights of the insured, was not yet in effect Examination Sector (SES), Wilfredo B.
when the loss took place. However, regardless Domo-ong was Director of the Department of
of the silence of the law on this point at that Rural Banks (DRB), while Herminio
time, the amount that should be recovered be Principio was an Examiner of the DRB. They
measured by the damages actually suffered, filed this petition for review on certiorari of
otherwise the principle prohibiting unjust the decision of the Court of Appeals which
enrichment would be violated. With respect to found them administratively liable for
the claim of the heirs of Ong P7,500.00 was unprofessionalism under the Code of Conduct
adjudged by the lower court on the basis of and Ethical Standards on Public Officials and
the assessed value of the property destroyed, Employees and imposed upon each of them a
namely, P1,500.00, disregarding the fine equivalent to six months of their salaries.
testimony of one of the Ong children that said
property was worth P4,000.00. We agree that The case arose from a letter, dated May 19,
1999, which respondent Rural Bank of San
the court erred, since it is of common
Miguel (Bulacan), Inc. (RBSMI) sent to then
knowledge that the assessment for taxation
BSP Governor Gabriel Singson. In its letter,
purposes is not an accurate gauge of fair
RBSMI charged petitioners with violations of
market value, and in this case should not
Republic Act No. 3019 (Anti-Graft and
prevail over positive evidence of such value.
Corrupt Practices Act) and Republic Act No.
The heirs of Ong are therefore entitled to
6713 (Code of Conduct and Ethical Standards
P10,000.00.
for Public Officials and Employees). The
Monetary Board of the BSP created a accounting and internal control system. He
committee to investigate the matter. likewise claims that sometime in March 1997,
petitioner Reyes urged him (Soriano) to
The ensuing investigation revealed that consider selling the bank. Soriano says that
RBSMI had had a history of major violations/ on or about May 28, 1997, Soriano, through a
exceptions dating back to 1995. The Report telephone introduction made by petitioner
of Examination3 on RBSMI submitted by Reyes the day before, met with Exequiel
BSP cited 10 major exceptions/violations and Villacorta, President and Chief Executive
deficiencies of RBSMI, for which reason the Officer of TA Bank. In his sworn affidavit,
latter was directed to immediately desist from Villacorta confirmed that he and Soriano
conducting business in an unsound and unsafe indeed met to discuss a possible corporate
manner. RBSMI undertook to take corrective combination of RBSMI and TA Bank. The
measures and/or comply with the instructions/ talks between TA Bank and RBSMI never got
recommendations of the BSP.In 1996, past the exploratory stage. Their discussions
RBSMI was again examined. In a "Report of were cut short as Soriano wanted a "sell-out,"
Examination on RBSMI as of September 15, while Villacorta was interested in a "buy-in."
1996," noted 20 serious exceptions/violations Around the same time, petitioner Reyes,
and deficiencies of RBSMI. Upon her Deputy Governor of the BSP, started urging
request, Rose Ilagan, an RBSMI director, was Soriano (RBSMI president) to consider
given a copy of the list of exceptions/ selling the bank, and introduced him to a
deficiencies found. Ms. Ilagan, however, certain Villacorta – a possible buyer.
claimed that the copy she was given was Negotiations fell through immediately, but
unreadable, "making it impossible for RBSMI Reyes continued to introduce him to other
to immediately react to said list of possible buyers. Meanwhile, on June 13,
exceptions."The Monetary Board issued 1997, the MB approved Resolution No. 724.
Resolution requiring RBSMI to explain in RBSMI to correct the major... exceptions
writing within 15 days the findings of the noted within 30 days from receipt of the
examiner. It also directed the DRB to verify, advice and to remit to the BSP the amount of
monitor, and report to the Deputy Governor, P2,538,483.00 as fines and penalties...
petitioner Reyes, the findings/exceptions petitioner Domo-ong wrote the bank on June
noted until the same had been corrected. 25, 1997, informing it of the prescriptions of
RBSMI president Hilario Soriano claims that the resolution. On July 21, 1997, Soriano
he was pressured on March 4, 1997 into submitted RBSMI's answers to the BSP
issuing a memorandum to the bank exceptions/findings mentioned. Soriano said
employees authorizing petitioner Principio in the letter that "the... actions taken or to be
and Ms. Reyes to review the bank’s taken by the bank (RBSMI) were deliberated
and ratified by the Board of Directors in its been fully corrected, then the DRB can
regular meeting held on July 9, 1997." With immediately recommend the lifting of said
regard to the fines and penalties amounting to monitoring." Meanwhile, petitioner Principio
P2,538,483.00, RBSMI requested the director allegedly requested RBSMI on October 6,
of the DRB to debit its... demand deposit with 1997 to authorize him and a new BSP
the amount. Nearly six months after Domo- examiner, Ms. Zeny Cabais, to visit the bank
ong seeking clarification of two specific from time to time to review accounting and
issues: May the scope/coverage of monitoring control systems. This was before a letter of
be expanded as to include verifications of introduction, dated October 10, 1997,... was
bank transactions, before and beyond the cut- issued by DRB introducing the new
off date of the general examinations as of examination team of petitioner Principio and
September 15, 1996? If so, to what extent? Ms. Cabais. Soriano claims that sometime in
November 1997, he accidentally met
Was there no pre-empting of the Monetary petitioner Reyes who allegedly told him to
Board directive which was approved under sell out or RBSMI would suffer a bank run
Resolution No. 96 dated January 29, 1997? and it would be placed under conservatorship.
It likewise warned the officers of the bank
Domo-ong explained that "DRB's monitoring
that unless they ceased from conducting
of the extent of corrective measures must
business in such an unsafe and unsound...
necessarily cover bank transactions after the
manner, drastic actions might be taken against
examination cut-off date to be assured that the
the bank, including the take-over of
same exceptions have not been repeated."
management without prejudice to the
As to the... second issue, he explained that prosecution of parties responsible pursuant to
"there was no pre-empting of the MB § 36 of R.A. No. 7653. In another
directive as it was approved on January 29, development, the Manila Electric Company
1997, way ahead of the initial monitoring (MERALCO) issued a memorandum,... to all
which was undertaken from March 4 to 26, of its collection officers enjoining them not to
1997 with a cut-off date of February 26, accept RBSMI checks from customers and
1997." In conclusion, petitioner Domo-ong... other payees of bills, service deposit, and
said that "considering that 'monitoring' in this other... payments until further advice from the
regard simply means overseeing, observing or Treasury. MERALCO issued another
keeping track of the corrective measures memorandum... to its collection officers,
being made by the bank on the serious informing them that RBSMI's alleged bank
findings/exceptions noted, we do not see any holiday was... not true MERALCO issued a
reason for your apprehensions on the matter. letter of apology to RBSM. Thereafter, more
As soon as said... findings/exceptions have than one year after authorizing the BSP to
debit its demand deposit up to the extent of RULING:  

the fines and penalties imposed by BSP, (1) First. Petitioners, particularly petitioner
RBSMI,... , appealed to the MB to... reverse Reyes, are faulted with the careless handling
the imposition of the P2.5 million penalty on of confidential and vital information
the ground that "no Board Resolution [had regarding the financial status of RBSMI. It
been] adopted to authorize the debit in the is indeed unfortunate that information
Demand Deposit maintained by the bank with regarding the financial
the Bangko Sentral ng Pilipinas." needs of RBSMI came to the knowledge of
the media. We realize that a
On January 21, 1999, the MB,... authorized bank’s lifeline depends largely on the trust
the conditional reversal of sixty percent and confidence
(60%) of the penalty debited against RBSMI accorded to it by its depositors and the public
pending resolution of the dispute on the in general. However, too
findings on reserve deficiency. many possibilities exist on how word got to
the press. 
ISSUES:
1. Whether or not petitioners

It is to be noted that before the Manila Times
Reyes and Domo-ong are guilty of
article came out in 1999, RBSMI had already
unprofessionalism by reason of
undergone several examinations and was
their alleged "careless handling of...
subject to continuous monitoring for major
confidential matters involving the
exceptions and violations found during the
internal problems of RBSMI."... 
1996 General Examination. Word could have
gotten around that the bank was being
2. whether or not petitioners guilty
examined and that interested persons or
of undue pressure, unprofessionalism,
entities could have inquired into the purpose
and arrogance relative to the
of the examinations and monitoring.
latter's act of recommending penalty
RBSMI’s own employees could have made
c h a rg e s f o r R B S M I ' s r e s e r v e
remarks to friends and family members -
deficiency... questioned decision
maybe harmless - without totally realizing the
violates the constitutional provision
effect of such statements. Indeed, MERALCO
that a decision should state the facts
said that the basis of its memorandum was the
and law on which it is based.  
information concerning RBSMI obtained
from the Philippine Clearing House, an entity
distinct and separate from the BSP. In fact, it
was the BSP which dispelled the rumors
which incited the second memorandum of We agree with the appellate court. The
recantation. The undated fax message alleged facilitators of the seminar who prepared the
to be a forged memorandum has not been materials obviously applied little or no
sufficiently proven as having been produced creativity at all as shown by the words used
by any of the petitioners. therein, i.e., "Mrs. Ona I. Ros" which clearly
is Soriano’s name in reverse, and "Rural Bank
The article might have attributed the source to of Barangay Ginebra" referring to the bank’s
be an official or employee of the BSP if only name - Rural Bank of San Miguel. While
to appear more credible. In any case, an there was indeed no evidence showing that
inquiry was conducted by an investigating either petitioner Reyes or petitioner Domo-
committee especially formed upon RBSMI’s ong distributed or used the materials, the very
request. But the committee was unable to fact that the seminar was conducted under
determine the source of the leak. We have to their auspices is enough to make them liable
presume that the said committee had to a certain extent. Petitioner Reyes, as Head
performed its tasks with regularity and good of the BSP Supervision and Examination
faith, and thus it is entitled to due respect for Sector, and petitioner Domo-ong, as Director
its findings. of the BSP Department of Rural Banks,
should have exercised their power of control
The issue of the training materials is a
and supervision so that the incident could
different matter. RBSMI claims that during
have been prevented or at the very least
one of the BSP training seminars, the bank
remedied.
was used as a case study albeit not
specifically mentioned in the training (2) Second. On the charge that petitioner
materials. The Court of Appeals found that Reyes was brokering the sale of RBSMI, the
"the derision against RBSMI in the seminar Court of Appeals ruled: Nor can respondent
materials is truly an additional pound of salt Reyes escape administrative liability for the
to RBSMI’s already wounded reputation." charge of having displayed undue interest in
Petitioners allege that the seminar was for brokering the sale of petitioner RBSM. In a
bank examiners who were bound not to reveal number of occasions, such an interest readily
any confidential information they learned in surfaced. . . . If anything else, Reyes’
the performance of their duties. They further actuations smack of unprofessionaliam as
claim that there is no evidence showing that he had concerned himself with transactions
petitioners Reyes and Domo-ong were the that had nothing to do with his official
ones who distributed and used the materials function as BSP Deputy Governor. Nor
or that they harbored any ill will against the is it correct to say that respondent Alberto V.
bank to employ such means. Reyes did no brokering simply because he
was not paid for his efforts. As rightly discharge and execution of official duties: (b)
argued by petitioner, there is no law which Professionalism - Public officials and
defines brokering in t e r m s o f p a y m e n t employees shall perform and discharge their
thereof. To our mind, it suffices that duties with the highest degree of excellence,
respondent Reyes introduced and brought professionalism, intelligence and skill.
the parties together to try to hammer o u t a They shall enter public service with utmost
sale of RBSMI. After all, a broker’s duty is devotion and dedication to duty. They shall
mainly to bring the prospective buyers endeavor to discourage w r o n g
and sellers together.  perceptions of their roles as dispensers or
peddlers of undue patronage. We do not
think Soriano was subjected to undue
We agree with the foregoing ruling of the pressure since he was also interested in
Court of Appeals. In introducing Soriano to selling the bank. However, petitioner Reyes’
the presidents of TA Bank and EIB Bank, active participation in looking for possible
petitioner Reyes was clearly not acting in his buyers for RBSMI was clearly a violation of
official capacity. It is enough that he brought the standards of professionalism. For his part,
the parties together to discuss the possibility petitioner Principio is charged with "undue
of a sale in order for him to be found guilty of haste" in submitting his report to the
brokering. Petitioner Reyes did not have to be Monetary Board. His recommendation for the
paid for what he did in order to be considered imposition of a penalty of P2.5 million on
to have committed a breach of the RBSMI is also complained of as a way of
requirement of propriety expected of a BSP pressuring the bank. RBSMI points out that
official. The circulars26 presented by there was an irregularity in the fact that
petitioner Reyes indicate that it is indeed petitioner Principio headed the three
BSP’s policy to promote mergers and consecutive examinations conducted on the
consolidations by providing incentives for bank. We find no undue haste in the
banks who would undergo such corporate submission of petitioner Principio’s report.
combinations. But nowhere in these circulars The 1996 examination on RBSMI was
is it stated that BSP officials should take an concluded on December 13, 1996. The list of
active role in bringing parties together for the exceptions prepared by petitioner Principio
possibility of a buy-in or sell-out. was dated December 23, 1996, and a copy
thereof was sent to RBSMI on January 9,
Section 4 (A)(b) of R.A. No. 6713
1997. This was 18 days before petitioner
states:Norms of Conduct of Public Officials
Principio finally submitted the report to the
and Employees. - (A) Every public official
Monetary Board. Having had sufficient time
and employee shall observe the following as
to prepare its reply, RBSMI cannot pretend
standards of personal conduct in the
ignorance of the findings of the examiner. It It took RBSMI more than one year before it
should have anticipated the actions it needed contested the imposition of the penalty. That
to take considering the urgency of the matter. the BSP subsequently reversed, albeit
Moreover, it is clear from the records that conditionally, the debiting of the amount of
RBSMI was given not only one but two penalty is not an admission that it erred in
opportunities to answer the findings in the imposing the same. It was only an
report before the report was submitted to the accommodation on the part of the BSP to ease
MB. It should be noted that the exit the financial difficulties of RBSMI. More
conference for the 1996 General Examination importantly, it was a conditional reversal
was originally scheduled on January 13, pending the resolution of the dispute on the
1997. However, upon the request of RBSMI’s finding of legal reserve deficiency.
corporate counsel, the examination was
RBSMI likewise complains that petitioner
postponed to January 21, 1997. RBSMI was
Principio took part in three consecutive
furnished a copy of the findings on January 9,
1997. Although RBSMI claimed that the copy examinations in violation of BSP’s own
Manual of Examiners which states:
it received was unreadable, it made this
accusation only after the complaint had been G. ROTATION OF ASSIGNMENTS FOR
filed with the Monetary Board.The members EXAMINERS: 
of the Board of Directors only discussed their A Bank Examiner shall not be in
reply on the very day of the rescheduled exit charge of more than two consecutive
conference. Surely, RBSMI only had itself to examinations of any financial institutions. No
blame. It was given a sporting chance to exception to this rule shall be permitted. 
react to the findings before it was confirmed But, as petitioners explain, RBSMI was
by the MB, but it did not make use of the subjected only to one examination ¾ the 1996
opportunity. Again, it was given another
General Examination ¾ in which major
chance after the exit conference when the exceptions and violations were found. The
MB, upon review of the report of petitioner ensuing examinations were "special
Principio, issued Resolution No. 96 requiring examinations" meant to monitor the progress
RBSMI to answer the findings within 15 days of the bank in correcting the exceptions
from receipt of the advice. On the other hand, found. With the finding of serious violations
the imposition of the P2.5 million fine was by the bank, the MB, through its Resolution
made on the basis of the finding of legal No. 96, thought it best to put RBSMI under
reserve deficiencies. Soriano wrote to the continuous monitoring until the exceptions
BSP authorizing the latter to debit its demand had been corrected. It is logical for petitioner
deposit in the amount of the penalty a few
Principio to be part of the monitoring team
days after MB Resolution No. 96 was issued. considering that he was the initial examiner
and was familiar with the matters to be made Respondent failed to pay petitioner his
in order. By and large, therefore, we find that liabilities. Petitioner sold respondent’s
while there may have been some irregularities securities to set off against his unsettled
and badges of unprofessionalism which can obligations. After the sale of respondent’s
be held against petitioners, these are not so securities and application of the proceeds
grave as to merit the imposition of the penalty thereof against his account, respondent’s
of fine equal to six months salary imposed by remaining unsettled obligation to petitioner
the appellate court. The modification of the was P3,364,313.56. Petitioner demanded that
Court of Appeals decision is proper. respondent settle his obligation plus the
agreed penalty charges accruing thereon
WHEREFORE, the decision of the Court of equivalent to the average 90-day Treasury
Appeals dated December 14, 2001 is Bill rate plus 2% per annum. Despite said
AFFIRMED with MODIFICATIONS. demand and the lapse of said requested
Petitioner Alberto V. Reyes is ordered to pay extension, respondent failed and/or refused to
a fine equivalent to two (2) months salary, pay his accountabilities to petitioner.
while petitioner Wilfredo B Domo-ong is Respondent claims that he was induced to
fined in an amount equivalent to one (1) trade in a stock security with petitioner
month salary. Petitioner Herminio C. because the latter allowed offset settlements
Principio is found not administratively liable. wherein he is not obliged to pay the purchase
price. Rather, it waits for the customer to sell.
SO ORDERED.
And if there is a loss, petitioner only requires
15. ABACUS vs. AMIL the payment of the deficiency (i.e., the
difference between the higher buying price
FACTS: and the lower selling price). In addition, it
charges a commission for brokering the sale.
In April 1997, respondent opened a cash or However, if the customer sells and there is a
regular account with petitioner for buying and profit, petitioner deducts the purchase price
selling securities as evidenced by the Account and delivers only the surplus – after charging
Application Form. The parties’ business its commission. Regional Trial Court of
relationship was governed by the terms and Makati City held that petitioner and
conditions stated therein. Since April 10, respondent were in pari delicto and therefore
1997, respondent actively traded his account, without recourse against each other. Cout of
and as a result of such trading activities, he Appeals upheld the lower court’s finding that
accumulated an outstanding obligation in the parties were in pari delicto. It castigated
favor of petitioner in the sum of petitioner for allowing respondent to keep on
P6,617,036.22 as of April 30, 1997. trading despite the latter’s failure to pay his
outstanding obligations. It explained that “the SEC. 23. Margin Requirements.

reason behind petitioner’s act is because
(b) It shall be unlawful for any member of an
whether respondent’s trading transaction
exchange or any broker or dealer, directly or
would result in a surplus or deficit, he would
still be liable to pay petitioner its commission. indirectly, to extend or maintain credit or
arrange for the extension or maintenance of
Hence, this Petition.
credit to or for any customer
ISSUES: Whether or not the Court of
(1) On any security other than an exempted
Appeal's ruling that the petitioner and
security, in contravention of the rules and
respondent are in pari delicto is in accord
regulations which the Commission shall
with law and applicable jurisprudence
prescribe under subsection (a) of this Section;
considering the Account Opening Form is a
valid agreement. (2) Without collateral or on any collateral
other than securities, except (i) to maintain a
RULING:
credit initially extended in conformity with
the rules and regulations of the Commission
In the present controversy, the following
and (ii) in cases where the extension or
pertinent facts are undisputed:
maintenance of credit is not for the purpose
of... purchasing or carrying securities or of
(1) on April 8, 1997, respondent opened a
evading or circumventing the provisions of
cash account with petitioner for his
subparagraph (1) of this subsection.
transactions in securities; (2) respondent's
purchases were consistently unpaid fromApril "SEC. 25. Enforcement of margin
10 to 30, 1997; (3) respondent failed to pay in re q u i re m e n t s a n d re s t r i c t i o n s o n
full, or even just his deficiency, for the borrowings. To prevent indirect violations of
transactions on April 10 and 11, 1997; (4) the margin requirements under Section 23
despite respondent's failure to cover his initial hereof, the broker or dealer shall require the
deficiency,... petitioner subsequently customer in nonmargin transactions to pay the
purchased and sold securities for respondent's price of the security... purchased for his
account on April 25 and 29; (5) petitioner did account within such period as the
not cancel or liquidate a substantial amount of Commission may prescribe, which shall in no
respondent's stock transactions until May 6, case exceed three trading days; otherwise, the
1997.The provisions governing the above broker shall sell the security purchased
transactions are Sections 23 and 25 of the starting on the next trading day but not
RSA[16] and Rule 25-1 of the RSA Rules, beyond ten trading days following the last day
which state as follows: for the... customer to pay such purchase price,
unless such sale cannot be effected within Commission, in the case of a non-member of
said period for justifiable reasons. The sale the Exchange.
shall be without prejudice to the right of the
Applications for the extension must be based
broker or dealer to recover any deficiency
from the customer. x x x." upon exceptional circumstances and must be
filed and acted upon before the expiration of
"RSA RULE 25-1 the original payment period or the expiration
of any subsequent extension."
Purchases and Sales in Cash Account
Section 23(b) above -- the alleged violation
"(a) Purchases by a customer in a cash of petitioner which provides the basis for
account shall be paid in full within three (3) respondent's defense -- makes it unlawful
business days after the trade date. for a broker to extend or maintain credit
on any securities other than in conformity
"(b) If full payment is not received within the
with the rules and regulations issued by
required time period, the broker or dealer
Securities and Exchange Commission
shall cancel or otherwise liquidate the
(SEC). Section 25 lays down the rules to
transaction, or the unsettled portion thereof,
prevent indirect violations of Section 23 by
starting on the next business day but not
brokers or dealers. RSA Rule 25-1 prescribes
beyond ten (10) business days following the
in detail the regulations governing cash
last day for... the customer to pay, unless such
accounts.
sale cannot be effected within said period for
justifiable reasons. The United States, from which our country's
security policies are patterned, abound with
"(c) If a transaction is cancelled or otherwise
authorities explaining the main purpose of the
liquidated as a result of non-payment by the
above statute on margin requirements. This
customer, prior to any subsequent purchase
purpose is to regulate the volume of credit...
during the next ninety (90) days, the customer
flow, by way of speculative transactions, into
shall be required to deposit sufficient funds in
the securities market and redirect resources
the account to cover each purchase
into more productive uses. Specifically, the
transaction... prior to execution.
main objective of the law on margins is
"(f) Written application for an extension of explained in this wise:
the period of time required for payment under
"The main purpose of these margin provisions
paragraph (a) be made by the broker or dealer
xxx is not to increase the safety of security
to the Philippine Stock Exchange, in the case
loans for lenders. Banks and brokers normally
of a member of the Exchange, or to the
require sufficient collateral to make
themselves safe without the help of law. Nor petitioner the... obligation, not just the right,
is the main purpose even protection of the... to cancel or otherwise liquidate a customer's
small speculator by making it impossible for order, if payment is not received within three
him to spread himself too thinly although days from the date of purchase. The word
such a result will be achieved as a byproduct "shall" as opposed to the word "may," is
of the main purpose. imperative and operates to impose a duty,
which may be legally enforced.
"The main purpose is to give a [g]overnment
credit agency an effective method of reducing For transactions subsequent to an unpaid
the aggregate amount of the nation's credit order, the broker should require its customer
resources which can be directed by to deposit funds into the account sufficient to
speculation into the stock market and out of cover each purchase transaction prior to its
other more desirable uses of commerce and execution. These duties are imposed upon the
industry x x... x." broker to ensure faithful compliance with...
the margin requirements of the law, which
A related purpose of the governmental forbids a broker from extending undue credit
regulation of margins is the stabilization of to a customer.
the economy. Restrictions on margin
percentages are imposed "in order to achieve It will be noted that trading on credit (or
the objectives of the government with due "margin trading") allows investors to buy
regard for the promotion of the economy more securities than their cash position would
and... prevention of the use of excessive normally allow. Investors pay only a portion
credit." of the purchase price of the securities; their
broker advances for them the... balance of the
Otherwise stated, the margin requirements set purchase price and keeps the securities as
out in the RSA are primarily intended to collateral for the advance or loan. Brokers
achieve a macroeconomic purpose -- the take these securities/stocks to their bank and
protection of the overall economy from borrow the "balance" on it, since they have to
excessive speculation in securities. Their pay in full for the traded stock. Hence,
recognized secondary purpose is to protect increasing... margins[26] i.e., decreasing the
small investors. amounts which brokers may lend for the
speculative purchase and carrying of stocks is
The law places the burden of compliance with
the most direct and effective method of
margin requirements primarily upon the
discouraging an abnormal attraction of funds
brokers and dealers. Sections 23 and 25 and
into the stock market and achieving a... more
Rule 25-1, otherwise known as the
balanced use of such resources.
"mandatory close-out rule," clearly vest upon
" [T]he primary concern is the efficacy of to deposit cash before embarking on trading
security credit controls in preventing stocks any further, petitioner, as the broker,
speculative excesses that produce violated the law at its own peril.
dangerously large and rapid securities price WHEREFORE, the assailed Decision and
rises and accelerated declines in the prices of Resolution of the Court of Appeals are hereby
given securities issues and in the general... MODIFIED.
price level of securities. Losses to a given
16. Alfred Hahn vs. CA
investor resulting from price declines in
thinly margined securities are not of serious FACTS:
significance from a regulatory point of view.
When forced sales occur and put pressures on Petitioner Alfred Hahn is a Filipino citizen
securities prices, however, they may cause doing business under the name and style
other forced... sales and the resultant "Hahn-Manila." On the other hand, private
snowballing effect may in turn have a general respondent Bayerische Motoren Werke
adverse effect upon the entire market." The Aktiengesellschaft (BMW) is a nonresident
nature of the stock brokerage business foreign corporation existing under the laws of
enables brokers, not the clients, to verify, at the former Federal Republic of Germany,
any time, the status of the client's account. with principal office at Munich, Germany.
Brokers, therefore, are in the superior position Petitioner executed in favor of private
to prevent the unlawful extension of credit. respondent a "Deed of Assignment with
Because of this awareness, the law imposes S p e c i a l P o w e r o f A t t o r n e y, " . . . t h e
upon them the primary obligation to enforce ASSIGNOR is the present owner and holder
the margin requirements. Right is one thing; of the BMW trademark and device in the
obligation is quite another. A right may not be Philippines which ASSIGNOR uses and has
exercised; it may even be waived. An been using on the products manufactured by
obligation, however, must be performed; ASSIGNEE, and for which ASSIGNOR is the
those who do not discharge it prudently must authorized exclusive Dealer of the
necessarily face the consequence of their ASSIGNEE in the Philippines. That the
dereliction or omission. ASSIGNOR and the ASSIGNEE shall
continue business relations as has been usual
We consider the foregoing formula to be just in the past without a formal contract. But on
and fair under the circumstances. When February 16, 1993, in a meeting with a BMW
petitioner tolerated the subsequent purchases representative and the president of Columbia
of respondent without performing its Motors Corporation (CMC), Jose Alvarez,
obligation to liquidate the first failed petitioner was informed... that BMW was
transaction, and without requiring respondent
arranging to grant the exclusive dealership of
BMW cars and products to CMC, which had ISSUE:

expressed interest in acquiring the same.
Whether petitioner Alfred Hahn is the agent
Nonetheless, BMW expressed willingness to
or distributor in the Philippines of private
continue business relations with the petitioner
on the basis of a "standard BMW importer" respondent BMW.
contract, otherwise, it said, if this was not RULING:
acceptable to petitioner, BMW would have no
alternative but to terminate petitioner's... What acts are considered "doing business in
exclusive dealership Petitioner protested, the Philippines" are enumerated in 3(d) of the
claiming that the termination of his exclusive Foreign Investments Act of 1991 (R.A. No.
dealership would be a breach of the Deed of 7042) as follows:
Assignment.[3] Hahn insisted that as long as
d) the phrase "doing business" shall include
the assignment of its trademark and device
soliciting orders, service contracts, opening
subsisted, he remained BMW's exclusive
dealer in the Philippines because the offices, whether called "liaison" offices or
assignment was made in consideration of the branches; appointing representatives or
exclusive dealership. BMW withdrew on distributors domiciled in the Philippines or
who in any calendar year stay in the country
March 26, 1993 its offer of a "standard
for a period or periods totalling one hundred
importer contract" and terminated the
eighty (180) days or more; participating in the
exclusive dealer relationship effective June
management, supervision or control of any
30, 1993 BMW moved to dismiss the case,
domestic business, firm, entity or corporation
contending that the trial court did not acquire
in the Philippines; and any other act or acts
jurisdiction over it through the service of
that imply a continuity of commercial
summons on the Department of Trade and
Industry, because it (BMW) was a foreign dealings or arrangements, and contemplate to
corporation and it was not doing business in that extent the performance of acts or works,
the Philippines. Petitioner Alfred Hahn or the exercise of some of the functions
normally incident to, and in progressive
opposed the motion. He argued that BMW
prosecution of, commercial gain or of the
was doing business in the Philippines through
purpose and object of the business
him as its agent. Court of Appeals enjoined
organization: Provided, however, That the
the trial court from hearing petitioner's
phrase "doing business" shall not be deemed
complaint. On December 20, 1993, it
to include mere investment as a shareholder
rendered judgment finding the trial court
by a foreign entity in domestic corporations
guilty of grave abuse of discretion in
deferring resolution of the motion to dismiss. duly registered to do business, and/or the
exercise of rights as such investor; nor having
a nominee director or officer to represent its jurisdiction over it (BMW) by virtue of the
interests in such corporation;nor appointing a service of summons on the Department of
representative or distributor domiciled in the Trade and Industry. Otherwise, if Hahn is not
Philippines which transacts business in its the agent of BMW but an independent dealer,
own name and for its own account. albeit of BMW cars and products, BMW, a
foreign corporation, is not considered doing
Thus, the phrase includes "appointing business in the Philippines within the
representatives or distributors in the meaning of the Foreign Investments Act of
Philippines" but not when the representative 1991 and the IRR, and the trial court did not
or distributor "transacts business in its name acquire jurisdiction over it (BMW).
and for its own account." In addition, 1(f)(1)
of the Rules and Regulations implementing The Court of Appeals held that petitioner
(IRR) the Omnibus Investment Code of 1987 Alfred Hahn acted in his own name and for
(E.O. No. 226) provided: his own account and not as agent or
distributor in the Philippines of BMW on the
(f) "Doing business" shall be any act or ground that "he alone had contacts with
combination of acts, enumerated in Article 44 individuals or entities interested in acquiring
of the Code. In particular, "doing business" BMW vehicles. Independence characterizes
includes: Hahn's undertakings, for which reason he is to
be considered, under governing statutes, as
(1) . . . A foreign firm which does
doing business." (p. 13) In support of this
business through middlemen
conclusion, the appellate court cited the
acting in their own names, such
following allegations in Hahn's amended
as indentors, commercial brokers
complaint:
or commission merchants, shall
not be deemed doing business in 8. From the time the trademark "BMW &
the Philippines. But such DEVICE" was first used by the Plaintiff in
indentors, commercial brokers or the Philippines up to the present, Plaintiff,
commission merchants shall be through its firm name "HAHN MANILA"
the ones deemed to be doing and without any monetary contributions from
business in the Philippines defendant BMW, established BMW's
goodwill and market presence in the
The question is whether petitioner Alfred
Philippines. Pursuant thereto, Plaintiff
Hahn is the agent or distributor in the
invested a lot of money and resources in order
Philippines of private respondent BMW. If he
to single-handedly compete against other
is, BMW may be considered doing business
motorcycle and car companies. . . . Moreover,
in the Philippines and the trial court acquired
Plaintiff has built buildings and other
infrastructures such as service centers and 9.4. As soon as the vehicles are fully
showrooms to maintain and promote the car manufactured and full payment of the
and products of defendant BMW. purchase prices are made, the vehicles are
shipped to the Philippines. (The payments
As the above quoted allegations of the may be made by the purchasers or third-
amended complaint show, however, there is persons or even by Hahn.) The bills of lading
nothing to support the appellate court's are made up in the name of the purchasers,
finding that Hahn solicited orders alone and but Hahn-Manila is therein indicated as the
for his own account and without "interference person to be notified.
from, let alone direction of, BMW." (p. 13) To
the contrary, Hahn claimed he took orders for 9.5. It is Hahn who picks up the
BMW cars and transmitted them to BMW. vehicles from the Philippine
Upon receipt of the orders, BMW fixed the ports, for purposes of conducting
downpayment and pricing charges, notified pre-delivery inspections.
Hahn of the scheduled production month for Thereafter, he delivers the
the orders, and reconfirmed the orders by vehicles to the purchasers.
signing and returning to Hahn the acceptance
9.6. As soon as BMW invoices
sheets. Payment was made by the buyer
the vehicle ordered, Hahn is
directly to BMW. Title to cars purchased
credited with a commission of
passed directly to the buyer and Hahn never
fourteen percent (14%) of the full
paid for the purchase price of BMW cars sold
purchase price thereof, and as
in the Philippines. Hahn was credited with a
soon as he confirms in writing
commission equal to 14% of the purchase
that the vehicles have been
price upon the invoicing of a vehicle order by
registered in the Philippines and
BMW. Upon confirmation in writing that the
vehicles had been registered in the have been serviced by him, he
will receive an additional three
Philippines and serviced by him, Hahn
percent (3%) of the full purchase
received an additional 3% of the full purchase
prices as commission.
price. Hahn performed after-sale services,
including warranty services, for which he Contrary to the appellate court's conclusion,
received reimbursement from BMW. All this arrangement shows an agency. An agent
orders were on invoices and forms of BMW. receives a commission upon the successful
conclusion of a sale. On the other hand, a
These allegations were substantially admitted
broker earns his pay merely by bringing the
by BMW which, in its petition for certiorari
buyer and the seller together, even if no sale
before the Court of Appeals, stated:
is eventually made.
As to the service centers and showrooms entered into a "Representative Agreement"

which he said he had put up at his own and a "Licensing Agreement" with a domestic
expense, Hahn said that he had to follow corporation, by virtue of which the latter was
BMW specifications as exclusive dealer of appointed "exclusive representative" in the
BMW in the Philippines. According to Hahn, Philippines for a stipulated commission.
BMW periodically inspected the service Pursuant to these contracts, the domestic
centers to see to it that BMW standards were corporation sold products exported by the
maintained. Indeed, it would seem from foreign corporation and put up a service
BMW's letter to Hahn that it was for Hahn's center for the products sold locally. This
alleged failure to maintain BMW standards Court held that these acts constituted doing
that BMW was terminating Hahn's dealership. business in the Philippines. The arrangement
showed that the foreign corporation's purpose
The fact that Hahn invested his own money to was to penetrate the Philippine market and
put up these service centers and showrooms establish its presence in the Philippines.
does not necessarily prove that he is not an
agent of BMW. For as already noted, there are In addition, BMW held out private respondent
facts in the record which suggest that BMW Hahn as its exclusive distributor in the
exercised control over Hahn's activities as a Philippines, even as it announced in the Asian
dealer and made regular inspections of Hahn's region that Hahn was the "official BMW
premises to enforce compliance with BMW agent" in the Philippines.
standards and specifications. For example, in
The Court of Appeals also found that
its letter to Hahn dated February 23, 1996,
petitioner Alfred Hahn dealt in other products,
BMW stated:
and not exclusively in BMW products, and,
In the last years we have pointed out to you in on this basis, ruled that Hahn was not an
several discussions and letters that we have to agent of BMW. (p. 14) This finding is based
tackle the Philippine market more entirely on allegations of BMW in its motion
professionally and that we are through your to dismiss filed in the trial court and in its
present activities not adequately prepared to petition for certiorari before the Court of
cope with the forthcoming challenges. Appeals. 14 But this allegation was denied by
Hahn and therefore the Court of Appeals
In effect, BMW was holding Hahn should not have cited it as if it were the fact.
accountable to it under the 1967 Agreement.
Indeed this is not the only factual issue raised,
This case fits into the mould of which should have indicated to the Court of
Communications Materials, Inc. v. Court of Appeals the necessity of affirming the trial
Appeals, in which the foreign corporation court's order deferring resolution of BMW's
motion to dismiss. Petitioner alleged that need not go beyond the allegations of the
whether or not he is considered an agent of complaint in order to determine whether it has
BMW, the fact is that BMW did business in Jurisdiction. A determination that the foreign
the Philippines because it sold cars directly to corporation is doing business is only tentative
Philippine buyers. This was denied by BMW, and is made only for the purpose of enabling
which claimed that Hahn was not its agent the local court to acquire jurisdiction over the
and that, while it was true that it had sold cars foreign corporation through service of
to Philippine buyers, this was done without summons pursuant to Rule 14, 14. Such
solicitation on its part. determination does not foreclose a contrary
finding should evidence later show that it is
It is not true then that the question whether not transacting business in the country. As
BMW is doing business could have been this Court has explained:
resolved simply by considering the parties'
pleadings. There are genuine issues of facts This is not to say, however, that the
which can only be determined on the basis of petitioner's right to question the jurisdiction
evidence duly presented. BMW cannot short of the court over its person is now to be
circuit the process on the plea that to compel deemed a foreclosed matter. If it is true, as
it to go to trial would be to deny its right not Signetics claims, that its only involvement in
to submit to the jurisdiction of the trial court the Philippines was through a passive
which precisely it denies. Rule 16, 3 investment in Sigfil, which it even later
authorizes courts to defer the resolution of a disposed of, and that TEAM Pacific is not its
motion to dismiss until after the trial if the agent, then it cannot really be said to be doing
ground on which the motion is based does not business in the Philippines. It is a defense,
appear to be indubitable. Here the record of however, that requires the contravention of
the case bristles with factual issues and it is the allegations of the complaint, as well as a
not at all clear whether some allegations full ventilation, in effect, of the main merits
correspond to the proof. of the case, which should not thus be within
the province of a mere motion to dismiss. So,
Anyway, private respondent need not also, the issue posed by the petitioner as to
apprehend that by responding to the summons whether a foreign corporation which has done
it would be waiving its objection to the trial business in the country, but which has ceased
court's jurisdiction. It is now settled that, for to do business at the time of the filing of a
purposes of having summons served on a complaint, can still be made to answer for a
foreign corporation in accordance with Rule cause of action which accrued while it was
14, 14, it is sufficient that it be alleged in the doing business, is another matter that would
complaint that the foreign corporation is yet have to await the reception and admission
doing business in the Philippines. The court
of evidence. Since these points have 17. DOMINGA CONDE, petitioner, vs. THE
seasonably been raised by the petitioner, there HONORABLE COURT OF APPEALS,
should be no real cause for what may
FACTS:
understandably be its apprehension, i.e., that
by its participation during the trial on the
On April 7, 19311, Margarita Conde,
merits, it may, absent an invocation of Bernardo Conde and (petitioner)Dominga
separate or independent reliefs of its own, be Conde (the vendors-a-retro) sold with right of
considered to have voluntarily submitted repurchase, within ten (10) years from said
itself to the court's jurisdiction. date, a parcel of agricultural land located in
Maghubas, Burauen, Leyte, to Casimira
Far from committing an abuse of discretion,
Pasagui, married to Pio Altera (the vendees-a-
the trial court properly deferred resolution of
retro ). Accordingly, an Original Certificate of
the motion to dismiss and thus avoided
Title No. N-534 was issued to the Alteras,
prematurely deciding a question which
which stipulated right of redemption of the
requires a factual basis, with the same result if
it had denied the motion and conditionally vendors-a-retro.
assumed jurisdiction. It is the Court of During the repurchase period ,particularly on
Appeals which, by ruling that BMW is not Nov. 28, 1943, Paciente Cordero who is the
doing business on the basis merely of son-in-law of and representing the vendees-a-
uncertain allegations in the pleadings, retro signed a Memorandum of Repurchase
disposed of the whole case with finality and declaring therein that he received from
thereby deprived petitioner of his right to be Eusebio Amarille, a representative of the
heard on his cause of action. Nor was there vendors-a-retro, the full amount of the
justification for nullifying the writ of repurchase price. To be noted is the fact that
preliminary injunction issued by the trial neither of the vendees-a-retro, Pio Altera
court. Although the injunction was issued ex
(who was seriously sick on that occasion) nor
parte, the fact is that BMW was subsequently Casimira Pasagui (who was in Manila at the
heard on its defense by filing a motion to time), was a signatory to the deed. Petitioner
dismiss. Dominga Conde, claiming that she redeemed
t h e p r o p e r t y w i t h h e r o w n m o n e y,
WHEREFORE, the decision of the Court
immediately took possession of the land in
of Appeals is REVERSED and the case is
1945 and paid the land taxes thereon since
REMANDED to the trial court for further
then.
proceedings.
However, on 1965, the vendees-a-retro sold

SO ORDERED.
the land to the (private respondent spouses),
the Condes. Because of this, petitioner filed possession since the year 1945, the date of the
with the Court of First Instance a complaint deed of repurchase, and has been paying land
for quieting of title and declaration of taxes thereon since then.
ownership against all the private respondents.
Also, if, as alleged, petitioner exerted no
The complaint was dismissed and petitioner effort to procure the signature of Pio Altera
was ordered to vacate the disputed property after he had recovered from his illness,
and to deliver its peaceful possession to the neither did the Alteras repudiate the deed that
Conde spouses. The CA affirmed the decision their son-in-law had signed. Thus, an implied
and held that petitioner failed to validly agency must be held to have been created
exercise her right of repurchase because the from their silence or lack of action, or their
Memorandum of Repurchase was not signed failure to repudiate the agency. (Art. 1869,
by the vendees-a-retro but by Paciente Civil Code.) Also, the equitable principle of
Cordero who was not formally authorized to laches brought about by private respondent's
sign for said vendees-a-retro. inaction and neglect for 24 years, loom in
petitioner's favor. Judgment of the Court of
ISSUE: Appeals is reversed and set aside, and
petitioner is declared owner of the disputed
Whether or not there was an implied agency
property.
when Cordero signed the Memorandum of
Repurchase. 18. TIRSO UYTENGSU III, complainant, vs
ATTY. JOSEPH M. BADUEL
RULING:
FACTS:
WHEREFORE, the judgment of respondent
Court of Appeals is hereby REVERSED and On July 1999, Tirso Uytengsu III
SET ASIDE, and petitioner is hereby declared (complainant) filed a sworn letter-complaint
the owner of the disputed property. against Atty. Joseph M. Baduel (respondent)
for violation of Rule 1.01 3 of the Code of
The SC held that even though both parties
Professional Responsibility. Complainant is
were legally wanting in their respective
one of the heirs of Tirso Uytengsu, Jr. He and
actuations, petitioner had done nothing to
his co-heirs had a pending patent application.
formalize her repurchase while the vendees-a-
retro had done nothing to clear their title of Complainant alleged that on 1998 respondent
the encumbrance therein regarding requested him to sign a special power of
petitioner's right to repurchase, the repurchase attorney (SPA) authorizing Luis Wee (Wee)
by petitioner is supported by the admissions and/or Thomas Jacobo (Jacobo) to claim,
of the pre-trial that petitioner has been in demand, acknowledge and receive on his
behalf the certificates of title and other WHEREFORE, premises considered, the
documents due to complainant and his co- instant case against respondent is hereby
heirs by reason of their application for DISMISSED for lack of merit.
Homestead Patent.
The Court finds that respondent was in fact
He refused to sign the SPA as he wanted to the counsel in the homestead patent
obtain the documents personally. But, before application of the heirs of Tirso Uytengsu, Jr.
he could get the title and other documents, he This can be deduced from the letters
learned that respondent caused to have the addressed to respondent by Victoria Villasor-
SPA signed by Connie U. Kokseng Inong (Villasor-Inong), Accounts Liquidation
(Kokseng), the former guardian of the heirs of Officer III of the Board of Liquidators of
Tirso Uytengsu, Jr. Complainant argued that General Santos City.
respondent caused Kokseng to execute an
In said letters, Villasor-Inong communicated
SPA in favor of Wee and/or Jacobo to the
to respondent the requirements for the grant
damage and prejudice of him and his co-heirs
even if he knew that Kokseng had no of the homestead patent to herein complainant
and his co-heirs. From the tenor of the letters,
authority to do so. Respondent argues that the
it would seem that respondent actively
complaint is hearsay and intended to harass
participated in representing complainant and
him.
his co-heirs in their patent application for the
On 2000, the court referred the case to the s u b j e c t l a n d . Wi t h t h a t o s t e n s i b l e
Integrated Bar of the Philippines (IBP. The representation and without any evidence to
Investigating Commissioner recommended show that complainant or his co-heirs
the dismissal of the case and characterized the withdrew such authority from respondent, the
evidence against respondent as hearsay. IBP latter himself can even claim the certificates
approved and adopted the report and of titles and other documents with regard to
recommendation of the investigating the homestead patents.
commissioner, and dismissed the complaint
The relation of attorney and client is in many
against respondent. Hence, this petition for
respects one of agency and the general rules
review on certiorari.
of ordinary agency apply to such relation. The
ISSUE: Whether Atty. Baduel exceeded his extent of authority of a lawyer, when acting
authority as counsel when he asked Uytengsu on behalf of his client outside of court, is
to sign an SPA measured by the same test as that which is
applied to an ordinary agent. Such being the
RULING: case, even respondent himself can acquire the
certificates of title and other documents
without need of an SPA from complainant and to the dismissal of the petition but objected to
his co-heirs. the absolution of petitioners from paying
respondent US$50,000.00, the amount
19. J-PHIL MARINE, INC. and/or JESUS awarded by the NLRC
CANDAVA and NORMAN SHIPPING
SERVICES, petitioners, vs . NATIONAL ISSUE: Whether or not the compromise
LABOR RELATIONS COMMISSION and agreement entered into by the respondent,
WARLITO E. DUMALAOG without his counsel, is valid.
FACTS: RULING:
Warlito E. Dumalaog (respondent) was a cook The petition is DISMISSED.

for vessels plying overseas. He filed a pro-
According to Article 2037 of the Civil Code,
forma complaint before the NLRC against
“compromise has upon the parties the effect
( petitioners )manning agency J-Phil Marine,
and authority of res judicata”, applies
Inc. (J-Phil), its then president Jesus Candava,
suppletorily to labor cases even if the
and its foreign principal Norman Shipping
Services. Labor Arbiter dismissed the compromise is not judicially approved. That
respondent was not assisted by his counsel
complaint for lack of merit. But on appeal the
when he entered into the compromise does
NLRC reversed the Labor Arbiter’s decision.
not render it null and void.
The CA also affirmed the NLRC’s decision.
Thus, petitioners filed the present petition for Also, in Eurotech Hair Systems, Inc. v. Go,
Review on Certiorari. 500 SCRA 611 (2006), “A compromise
agreement is valid as long as the
During the pendency of the case before the
consideration is reasonable and the employee
SC, respondent Dumalaog, against the advice
signed the waiver voluntarily, with a full
of his counsel, entered into a compromise
understanding of what he was entering into.
agreement with petitioners. He thereupon
signed a Quitclaim and Release subscribed All that is required for the compromise to be
deemed voluntarily entered into is personal
and sworn before the Labor Arbiter.
and specific individual consent. Thus,
Petitioners then filed a Manifestation
contrary to respondent’s contention, the
informing that they had forged an amicable
employee’s counsel need not be present at the
settlement with respondent. Accordingly, the
time of the signing of the compromise
case was dismissed.
agreement. “
Because of this, respondent’s counsel filed
The relation of attorney and client is in many
before the SC a Comment and Opposition to
respects one of agency, and the general rules
the Manifestation. He interposed no objection
of agency apply to such relation. The acts of The RTC held PSI solidarily liable with Dr.
an agent are deemed the acts of the principal Ampil and Dr. Fuentes for damages. On
only if the agent acts within the scope of his appeal, the CA, absolved Dr. Fuentes but
authority. The circumstances of this case affirmed the liability of Dr. Ampil and PSI,
indicate that respondent’s counsel is acting subject to the right of PSI to claim
beyond the scope of his authority in reimbursement from Dr. Ampil. On petition
questioning the compromise agreement. That for review, the SC affirmed the CA decision.
a client has undoubtedly the right to The SC premised the direct liability of PSI to
compromise a suit without the intervention of the Aganas on the following: (1) For the
his lawyer cannot be gainsaid, the only purposes of allocating responsibility in
qualification being that if such compromise is medical negligence cases, an employer-
entered into with the intent of defrauding the employee relationship exists between
lawyer of the fees justly due him, the hospitals and their consultants; and (2) PSI
compromise must be subject to the said fees. created the public impression that Dr. Ampil
was its agent by accrediting Dr. Ampil and
advertising his qualifications. Thus, under the
doctrine of apparent authority, PSI was liable
20. PROFESSIONAL SERVICES, INC.,
for the negligence of Dr. Ampil. (3) PSI
PETITIONER, VS. THE COURT OF
committed a serious breach of its corporate
A P P E A L S A N D N AT I V I D A D A N D
duty when it failed to conduct an immediate
ENRIQUE AGANA
investigation into the reported missing
FACTS: gauzes.
PSI, together with Dr. Miguel Ampil (Dr. ISSUES: Whether or not PSI is vicariously
Ampil) and Dr. Juan Fuentes (Dr. Fuentes), liable for the negligence of Dr. Ampil
was impleaded by Enrique Agana and
RULING:
Natividad Agana (later substituted by her
heirs), in a complaint for damages filed in the WHEREFORE, the second motion for
RTC, for the injuries suffered by Natividad reconsideration is DENIED and the motions
when Dr. Ampil and Dr. Fuentes neglected to for intervention are NOTED.
remove from her body two gauzes which were
used in the surgery they performed on her on The court ruled that PSI is liable to the
April 11, 1984 at the Medical City General Aganas, not under the principle of respondeat
Hospital. PSI was impleaded as owner, superior for lack of evidence of an
operator and manager of the hospital. employment relationship with Dr. Ampil but
under the principle of ostensible agency for
the negligence of Dr. Ampil and, pro hac vice, the doctor, the hospital may be held directly
under the principle of corporate negligence liable to the patient for its own negligence or
for its failure to perform its duties as a failure to follow established standard of
hospital. conduct to which it should conform as a
corporation.
This Court still employs the "control test" to
determine the existence of an employer- With that said, there is ample evidence that
employee relationship between hospital and PSI held out to the Natividad that Dr. Ampil
doctor. Under the "control test", an was its agent. Present are the two factors that
employment relationship exists between a determine apparent authority: first, the
physician and a hospital if the hospital hospital's implied manifestation to the patient
controls both the means and the details of the which led the latter to conclude that the
process by which the physician is to doctor was the hospital's agent; and second,
accomplish his task. The findings of the RTC the patient's reliance upon the conduct of the
and CA showed that PSI was not the hospital and the doctor, consistent with
employer of Dr. Ampil. Control as a ordinary care and prudence.
determinative factor in testing the employer-
Natividad’s husband Enrique testified that he
employee relationship between doctor and
had known Dr. Ampil to be a specialist on
hospital under which the hospital could be
that part of the body as a surgeon and a staff
held vicariously liable to a patient in medical
member of the Medical City which is a
negligence cases is a requisite fact to be
prominent and known hospital. Clearly, the
established by preponderance of evidence.
decision made by Enrique for Natividad to
Here, there was insufficient evidence that PSI
consult Dr. Ampil was significantly
exercised the power of control or wielded
influenced by the impression that Dr. Ampil
such power over the means and the details of
the specific process by which Dr. Ampil was not an independent contractor but an
integral staff member related to Medical City.
applied his skills in the treatment of
Natividad. PSI’s acts only tended to confirm and
reinforce this when PSI required a "consent
But, even though no employment relationship
for hospital care" to be signed preparatory to
exists, when it is shown that the hospital
the surgery of Natividad. The form reads:
holds out to the patient that the doctor is its
agent, the hospital may still be vicariously Permission is hereby given to the medical,
liable under Article 2176 in relation to Article nursing and laboratory staff of the Medical
1431[36] and Article 1869[37] of the Civil City General Hospital to perform such
Code or the principle of apparent authority. diagnostic procedures and to administer such
Moreover, regardless of its relationship with
medications and treatments as may be

deemed necessary or advisable by the
physicians of this hospital for and during the
confinement of xxx. (emphasis supplied)
By such statement, PSI virtually reinforced

the public impression that Dr. Ampil was a
physician of its hospital, rather than one
independently practicing in it; that the
medications and treatments he prescribed
were necessary and desirable; and that the
hospital staff was prepared to carry them out.
Thus, the court must therefore maintain the

ruling that PSI is vicariously liable for the
negligence of Dr. Ampil as its ostensible
agent. The ruling is also unique to this case,
for the liability of PSI arose from an implied
agency with Dr. Ampil and an admitted
corporate duty to Natividad.

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Agency 2020 - Chapter 1 digests 1 Cabato | Cruz | Leonardo | Mangurun | Rosette

The sale is void. The SC held that no

The SC further declared that the sale

any other authorized officer. At the time the PETITIONER’S CONTENTION:

legal intents and purposes, Teresita was the

Rheozel died due to a vehicular

Laingo then sent two letters to BPI

The SC stated that for an agency to

The SC further stated that there is FACTS:

The question whether an agency has been

11 . S U N A C E I N T E R N AT I O N A L Desistance, copy of each document was

After her 12-month contract expired on RULING:

It appears that in the afternoon of March 18,

to be from January 1, 1948 to December 31, contractor should not be disturbed. To

debit its demand deposit up to the extent of RULING:

1. Whether or not petitioners

outstanding obligations. It explained that “the SEC. 23. Margin Requirements.

BMW cars and products to CMC, which had ISSUE:

As to the service centers and showrooms entered into a "Representative Agreement"

However, on 1965, the vendees-a-retro sold

Warlito E. Dumalaog (respondent) was a cook The petition is DISMISSED.

medications and treatments as may be

By such statement, PSI virtually reinforced

Thus, the court must therefore maintain the

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debit its demand deposit up to the extent of RULING:  