1. Philpotts v. Philippine Manufacturing Co., 40 Phil.

471 (1919)
Facts:
The petitioner, W. G.’ Philpotts, a stockholder in the Philippine Manufacturing Company, one of
the respondents herein, seeks by this proceeding to obtain a writ of mandamus to compel the
respondents to permit the plaintiff, in person or by some authorized agent or attorney, to
inspect and examine the records of the business transacted by said company since January 1,
1918. The respondent corporation or any of its officials has refused to allow the petitioner
himself to examine anything relating to the affairs of the company. In the argument in support
of the demurrer it is conceded by counsel for the respondents that there is a right of
examination in the stockholder granted under section 51 of the Corporation Law, but it is
insisted that this right must be exercised in person.
Issue:
Whether the right which the law concedes to a stockholder to inspect the records can be
exercised by a proper agent or attorney of the stockholder as well as by the stockholder in
person.
Ruling:
Yes. Now it is our opinion, and we accordingly hold, that the right of inspection given to a
stockholder in the provision above quoted can be exercised either by himself or by any proper
representative or attorney in fact, and either with or without the attendance of the
stockholder. This is in conformity with the general rule that what a man may do in person he
may do through another; and we find nothing in the statute that would justify us in qualifying
the right in the manner suggested by the respondents. This conclusion is supported by the
undoubted weight of authority in the United States, where it is generally held that the
provisions of law conceding the right of inspection to stockholders of corporations are to be
liberally construed and that said right may be exercised through any other properly authorized
person. As was said in Foster v. White (86 Ala., 467), "The right may be regarded as personal, in
the sense that only a stockholder may enjoy it; but the inspection and examination may be
made by another. Otherwise it would be unavailing in many instances."

2. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978)
Facts:
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land
known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title
No. 11116 of the Registry of Cebu. They executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell such land for and in their behalf. After
Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion and
Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New TCTs
were issued to the latter. Petitioner Ramon Rallos, administrator of the Intestate Estate of
Concepcion filed a complaint praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed to her estate; (2)
that the Certificate of ‘title issued in the name of Felix Go Chan & Sons Realty Corporation be
cancelled and another title be issuedin the names of the corporation and the “Intestate estate
of Concepcion Rallos” in equal undivided and (3) that plaintiff be indemnified by way of
attorney’s fees and payment of costs of suit.
Issue:
Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that
exception?
Ruling:
Yes. Out of the above given principles, sprung the creation and acceptance of the relationship
of agency whereby one party, caged the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The essential
elements of agency are: (1) there is consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agents acts as a representative and not for himself, and (4) the agent acts within the scope of
his authority.
Agency is basically personal representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act of
the principal if done within the scope of the authority. Qui facit per alium facit se. "He who
acts through another acts himself". 6
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of
his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation.
The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos
before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a
finding of fact of the court a quo 13 and of respondent appellate court when the latter stated
that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the
sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing
appellant (the realty corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for
its application lack of knowledge on the part of the agent of the death of his principal; it is not
enough that the third person acted in good faith.

3. Eurotech Industrial Technologies, Inc. v. Cuizon, 521 SCRA 584 (2007)

Facts:
From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to P91,338.00 pesos. Subsequently, respondents sought to buy from petitioner one
unit of sludge pump valued at P250,000.00 with respondents making a down payment of
P50,000.00. When the sludge pump arrived from the United Kingdom, petitioner refused to
deliver the same to respondents without their having fully settled their indebtedness to
petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de Jesus, general manager of
petitioner, executed a Deed of Assignment of receivables in favor of petitioner. Impact systems
is owed by ERWIN Cuizon.
Issue:
Whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to petitioner.
Ruling:
No. Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however, presents
two instances when an agent becomes personally liable to a third person. The first is when he
expressly binds himself to the obligation and the second is when he exceeds his authority. In
the last instance, the agent can be held liable if he does not give the third party sufficient notice
of his powers. We hold that respondent EDWIN does not fall within any of the exceptions
contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales
manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that
it presupposes the grant of broad powers with which to conduct the business of the principal,
thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or
manager; such a position presupposes a degree of confidence reposed and investiture with
liberal powers for the exercise of judgment and discretion in transactions and concerns which
are incidental or appurtenant to the business entrusted to his care and management. In the
absence of an agreement to the contrary, a managing agent may enter into any contracts that
he deems reasonably necessary or requisite for the protection of the interests of his principal
entrusted to his management. x x x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the
one unit of sludge pump unless it received, in full, the payment for Impact Systems’
indebtedness.36 We may very well assume that Impact Systems desperately needed the sludge
pump for its business since after it paid the amount of fifty thousand pesos (₱50,000.00) as
down payment on 3 March 1995,37 it still persisted in negotiating with petitioner which
culminated in the execution of the Deed of Assignment of its receivables from Toledo Power
Company on 28 June 1995.38 The significant amount of time spent on the negotiation for the
sale of the sludge pump underscores Impact Systems’ perseverance to get hold of the said
equipment. There is, therefore, no doubt in our mind that respondent EDWIN’s participation in
the Deed of Assignment was "reasonably necessary" or was required in order for him to protect
the business of his principal. Had he not acted in the way he did, the business of his principal
would have been adversely affected and he would have violated his fiduciary relation with his
principal.

4. Philex Mining Corp. v. Commissioner of Internal Revenue, 551 SCRA 428 (2008)
Facts:
Petitioner Philex Mining Corp. entered into an agreement with Baguio Gold Mining Co. for the
former to manage and operate the latter’s mining claim, known as the Sto. Nino Mine. The
parties’ agreement was denominated as “Power of Attorney” and providing the following
terms:
Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to
the MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such
amounts as from time to time may be required by the MANAGERS for use in the MANAGEMENT
of the STO. NINO MINE. The said amount shall be deemed, for internal audit purposes, as the
owner’s account in the Sto. Nino PROJECT. Any part of any income of the PRINCIPAL from the
STO. NINO MINE, which is left with the Sto. Nino PROJECT, shall be added to such owner’s
account.
Whenever the MANAGERS shall deem it necessary and convenient in connection with the
MANAGEMENT of the STO. NINO MINE, they may transfer their own funds or property to the
Sto. Nino PROJECT.
xxxx
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until
termination of this Agency.
x xxx
Issue:
Whether a contract of agency was created.
Ruling:
No. In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by
the principal due to an interest of a third party that depends upon it, or the mutual interest of
both principal and agent.19 In this case, the non-revocation or non-withdrawal under
paragraph 5(c) applies to the advances made by petitioner who is supposedly the agent and not
the principal under the contract. Thus, it cannot be inferred from the stipulation that the
parties’ relation under the agreement is one of agency coupled with an interest and not a
partnership.
Neither can paragraph 16 of the agreement be taken as an indication that the relationship of
the parties was one of agency and not a partnership. Although the said provision states that
"this Agency shall be irrevocable while any obligation of the PRINCIPAL in favor of the
MANAGERS is outstanding, inclusive of the MANAGERS’ account," it does not necessarily follow
that the parties entered into an agency contract coupled with an interest that cannot be
withdrawn by Baguio Gold.
It should be stressed that the main object of the "Power of Attorney" was not to confer a power
in favor of petitioner to contract with third persons on behalf of Baguio Gold but to create a
business relationship between petitioner and Baguio Gold, in which the former was to manage
and operate the latter’s mine through the parties’ mutual contribution of material resources
and industry. The essence of an agency, even one that is coupled with interest, is the agent’s
ability to represent his principal and bring about business relations between the latter and third
persons.20 Where representation for and in behalf of the principal is merely incidental or
necessary for the proper discharge of one’s paramount undertaking under a contract, the latter
may not necessarily be a contract of agency, but some other agreement depending on the
ultimate undertaking of the parties.21
In this case, the totality of the circumstances and the stipulations in the parties’ agreement
indubitably lead to the conclusion that a partnership was formed between petitioner and
Baguio Gold.
4.Philex Mining vs. BIR
Facts:
Philex Mining Corporation (Philex Mining), entered into an agreement with Baguio Gold Mining
Company ("Baguio Gold") for the former to manage and operate the latter’s mining claim,
known as the Sto. Nino mine, located in Atok and Tublay, Benguet Province. The parties’
agreement was denominated as "Power of Attorney.
In the course of managing and operating the project, Philex Mining made advances of cash
and property in accordance with paragraph 5 of the agreement. However, the mine suffered
continuing losses over the years which resulted to petitioner’s withdrawal as manager of the
mine on January 28, 1982 and in the eventual cessation of mine operations on February 20,
1982.
Thereafter, the parties executed a "Compromise with Dation in Payment" wherein Baguio Gold
admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay
the same in three segments.
In its 1982 annual income tax return, petitioner deducted from its gross income the amount of
P112,136,000.00 as "loss on settlement of receivables from Baguio Gold against reserves and
allowances." However, the Bureau of Internal Revenue (BIR) disallowed the amount as
deduction for bad debt and assessed petitioner a deficiency income tax of P62,811,161.39.
Petitioner emphasized that the debt arose out of a valid management contract it entered into
with Baguio Gold. The bad debt deduction represented advances made by petitioner which,
pursuant to the management contract, formed part of Baguio Gold’s "pecuniary obligations" to
petitioner. It also included payments made by petitioner as guarantor of Baguio Gold’s long-
term loans which legally entitled petitioner to be subrogated to the rights of the original
creditor.
The CTA held that the "Power of Attorney" executed by petitioner and Baguio Gold was
actually a partnership agreement. Since the advanced amount partook of the nature of an
investment, it could not be deducted as a bad debt from petitioner’s gross income.
Petitioner’s claim that the prohibition in paragraph 5(c) against withdrawal of advances
should not be taken as an indication that it had entered into a partnership with Baguio Gold;
that the stipulation only showed that what the parties entered into was actually a contract of
agency coupled with an interest which is not revocable at will and not a partnership
Issue: Whether or not the Power of Attorney is actually a partnership agreement thus
advances made by petitioner is a form of investment in a partnership and not a bad debt
subject to deduction from petitioner’s income.
Ruling:
Yes. Perusal of the agreement denominated as the "Power of Attorney" indicates that the
parties had intended to create a partnership and establish a common fund for the purpose.
They also had a joint interest in the profits of the business as shown by a 50-50 sharing in the
income of the mine.
Under the "Power of Attorney", petitioner and Baguio Gold undertook to contribute money,
property and industry to the common fund known as the Sto. Niño mine. In this regard, we
note that there is a substantive equivalence in the respective contributions of the parties to the
development and operation of the mine. Pursuant to paragraphs 4 and 5 of the agreement,
petitioner and Baguio Gold were to contribute equally to the joint venture assets under their
respective accounts. .
It should be stressed that the main object of the "Power of Attorney" was not to confer a
power in favor of petitioner to contract with third persons on behalf of Baguio Gold but to
create a business relationship between petitioner and Baguio Gold, in which the former was
to manage and operate the latter’s mine through the parties’ mutual contribution of material
resources and industry. The essence of an agency, even one that is coupled with interest, is
the agent’s ability to represent his principal and bring about business relations between the
latter and third persons. Where representation for and in behalf of the principal is merely
incidental or necessary for the proper discharge of one’s paramount undertaking under a
contract, the latter may not necessarily be a contract of agency, but some other agreement
depending on the ultimate undertaking of the parties.
In this case, the totality of the circumstances and the stipulations in the parties’ agreement
indubitably lead to the conclusion that a partnership was formed between petitioner and
Baguio Gold. Thus, such advances were not bad debt subject to deduction as it forms part of
investment in a partnership.
5. China Airlinea vs. CA
6. PAL vs. Ca
Facts:
Jose E. Pagsibigan, then Vice-President and General Manager of Rentokil (Phils.) Inc. purchased
a plane ticket for a Manila-Taipei-Hongkong-Manila flight from the Transaire Travel Agency. The
said agency, through its Cecille Baron, contacted the Manila Hotel branch of defendant
Philippine Air Lines which at that time was a sales and ticketing agent of defendant China Air
lines. On June 6, 1968, PAL, through its ticketing clerk defendant Roberto Espiritu, cut and
issued PAL Ticket No. 01 7991 for a Manila-Taipei-Hongkong-Manila flight. According to the
plane ticket, the plaintiff was booked on CAL CI Flight No. 812 to depart from Manila for
Taipei on June 10, 1968 at 17:20 hours (5:20 p.m.).
On June 10, 1968, one hour before the scheduled time of the flight as stated in his ticket, the
plaintiff arrived at the airport to check in for CI Flight No. 812. Upon arriving at the airport, the
plaintiff was informed that the plane he was supposed to take for Taipei had left at 10:20 in the
morning of that day. The PAL employees at the airport made appropriate arrangements for the
plaintiff to take PAL's flight to Taipei the following day, June 11, 1968. The plaintiff took said
flight and arrived in Taipei around noontime of the said date.
On July 8, 1968, the plaintiff, through counsel, made formal demand on defendant PAL, for
moral damages in not less than P125,000.00 for what the plaintiff allegedly suffered as a result
of his failure to take the flight as stated in his plane ticket .
Philippine Air Lines alleged in its answer that the departure time indicated by Espiritu in the
ticket was furnished and confirmed by the reservation office of defendant China Air Lines. It
further averred that CAL had not informed PAL's Manila Hotel Branch of the revised schedule of
its flight, nor provided it with revised timetable; that when the travel agency sought to
purchase the ticket for the plaintiff on CAL CI Flight No. 812 for June 10, 1968. With respect to
PAL and Espiritu, they disclaim any liability on the theory that the former is merely an agent
of CAL and that the suit should have been directed against CAL alone
Defendant China Air Lines, for its part, disclaims liability for the negligence and incompetence
of the employees of PAL. It avers that it had revised its schedule since April 1, 1968, the same
to be effective on April 20, 1968, and the said revised schedule was adopted only after proper
petition with and approval of the Civil Aeronautics Board of which all airlines, including
defendant PAL, were notified.
Issue: Whether or not the suit against PAL and Espiritu sa agent of CAL may prosper
Ruling:
Yes. PAL's main defense is that it is only an agent. As a general proposition, an agent who duly
acts as such is not personally liable to third persons. However, there are admitted exceptions,
as in this case where the agent is being sued for damages arising from a tort committed by his
employee.
Suffice it to say, however, that in an action premised on the employee's negligence, whereby
respondent Pagsibigan seeks recovery for the resulting damages from both PAL and Espiritu
without qualification, what is sought to be imposed is the direct and primary liability of PAL
as an employer under said Article 2180.
The respondent court found that the mistake committed by Espiritu was done in good faith.
While there is no evidence that he acted with malice, we can not entirely condone his
actuations. As an employee of PAL, the nature of his functions requires him to observe for the
protection of the interests of another person that degree of care, precaution and vigilance
which the circumstances justly demand. He committed a clear neglect of duty.
Ergo, for his negligence, Espiritu is primarily liable to respondent Pagsibigan under Article 2176
of the Civil Code. For the failure of PAL to rebut the legal presumption of negligence in the
selection and supervision of its employee, it is also primarily liable under Article 2180 of the
same code which explicitly provides that employers shall be liable for the damages caused by
their employees and household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.

7. Rural Bank of Bombon v. Court of Appeals

G.R. No. 95703, 3 August 1992

FACTS: On January 12, 1981, Ederlinda M. Gallardo, married to Daniel Manzo, executed a
special power of attorney in favor of Rufina S. Aquino authorizing him: – To secure a loan from
any institution for any amount or mortgage the property at Las Pinas, Rizal. On August 26, 1981,
a Deed of Real Estate Mortgage was executed by Rufino S. Aquino in favor of the Rural Bank of
Bombon (Camarines Sur), Inc. The property was secured for a loan in the total sum of Three
Hundred Fifty Thousand Pesos only (P350,000.00), plus interest at the rate of fourteen (14%)
per annum. Spouses Gallardo filed an action against Rufino Aquino and Rural Bank. They alleged
that Aquino mortgaged the property to pay for his personal loans, from the same Bank.

The trial court temporarily restrained the Rural Bank “from enforcing the real estate mortgage
and from foreclosing it either judicially or extrajudicially until further orders from the court.”
Aquino, in his answer, alleged that the spouses allowed him to mortgage the property and use
the use the proceeds thereof to compensate for the pre-existing obligation of P350,000 that the
spouse owed him. The trial court lifted the TRO against the bank and ordered the foreclosure
proceeding against the mortgaged property. The Spouses Gallardo appealed to the Court of
Appeals (CA). The CA reversed the trial court and held that Rufino Aquino had no authority to
mortgage the land. Thus, this appeal against the decision.

ISSUE: Whether the Deed of Real Estate Mortgage executed by Aquino, as attorney-in-fact of
Ederlinda Gallardo, in favor of the Rural Bank of Bombon is valid.

RULING: No. In order to bind the principal by a mortgage on real property executed by an
agent, it must upon its face purport to be made, signed and sealed in the name of the principal,
otherwise, it will bind the agent only. It is not enough merely that the agent was in fact
authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it
ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a
power of attorney, if in fact the agent has acted in his own name and has set his own hand and
seal to the mortgage.

In view of this rule, Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone
as mortgagor, without any indication that he was signing for and in behalf of the property
owner, Ederlinda Gallardo, bound himself alone in his personal capacity as a debtor of the
petitioner Bank and not as the agent or attorney-in-fact of Gallardo. Petitioner claims that the
Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in
accordance with Article 1883 which provides: “If an agent acts in his own name, the principal
has no right of action against the persons with whom the agent has contracted; neither have
such persons against the principal.” In such case the agent is the one directly bound in favor of
the person with whom he has contracted, as if the transaction were his own, except when the
contract involves things belonging to the principal.

The above provision of the Civil Code relied upon by the petitioner Bank, is not applicable to the
case at bar. Herein respondent Aquino acted purportedly as an agent of Gallardo, but actually
acted in his personal capacity. Involved herein are properties titled in the name of respondent
Gallardo against which the Bank proposes to foreclose the mortgage constituted by an agent
(Aquino) acting in his personal capacity. Under these circumstances, we hold, as we did in
Philippine Sugar Estates Development Co. vs. Poizat, supra, that Gallardo’s property is not liable
on the real estate mortgage that there is no principle of law by which a person can become
liable on a real mortgage which she never executed either in person or by attorney in fact.

8. Uniland resources vs DBP

G.R. No. 95909 (1991)

MP: In the law on agency, it is elementary that when the main transaction between
the principal parties does not materialize, the claim for commission of the duly authorized
broker is disallowed. 1 How about the instance when the sale was eventually consummated
between parties introduced by a middleman who, in the first place, had no authority, express
or implied, from the seller to broker the transaction? Should the interloper be allowed a
commission? On these simplified terms rests the nature of the controversy on which this case
turns.

Facts:
The Uniland resource is a private corp., licensed to engage in real estate brokerage while DBP
is a govt corp. Engaged in finance and banking in proprietary capacity. Long before this case
arose, Marinduque Mining Corporation obtained a loan from the DBP and as security therefor,
mortgaged certain real properties to the latter, among them two lots located in Makati,
The said lots, however, been previously mortgaged by Marinduque Mining Corp., to Caltex, and
the mortgage in favor of DBP was entered on their titles as a second mortgage. The account of
the Marinduque Mining Corp., with the DBP was later transferred to the Assets Privatization
Trust (APT) pursuant to Proclamation No. 50. For failure of the Marinduque Mining Corp. to pay
its obligations to Caltex, the latter foreclosed its mortgage on the aforesaid two lots
APT on the other hand, to recover its investment on the Marinduque Account, offered for sale
to the public through DBP its right of redemption on said two lots by public bidding. Caltex had
required that both lots be redeemed, the bidding guidelines set by DBP provided that any bid to
purchase either of the two lots would be considered only should there be two bids or a bid for
the two items which, when combined, would fully cover the sale of the two lots in question
Seeing, however, that it would make a profit if it redeemed the two lots and then offer them for
sale, and as its right to redeem said lots from Caltex would expire on May 8, 1987, DBP
retrieved the account from APT and, on the last day for the exercise of its right of redemption,
May 8, 1987, redeemed said lots from Caltex,
In preparation for the sale of the two lots in question, DBP called a pre-bidding conference
wherein a new set of bidding guidelines were formulated the public bidding for the sale of the
two lots was held and again, there was only one bidder, the Charges Realty Corp.
Notwithstanding that there was no bidder for the office building lot, the DBP approved the sale
of the warehouse lot to Charges Realty Corp., and the proper documentation of the sale was
made
The DBP admittedly paid the (five percent) broker's fee on this sale to the DBP Management
Corporation, which acted as broker for said negotiated sale
After the sale through its President, wrote two letters to [respondent DBP], the first through its
Senior Vice President and, the second through its Vice Chairman asking for the payment of its
broker's fee in instrument of the sale of its (DBP's) warehouse lot to Charges Realty Corp. The
claim was referred to the Bidding Committee chaired by Amanda S. Guiam which met on
November 9, 1987, and which, on November 18, 1987, issued a decision denying [petitioner's]
claim.

Issue: Whether there was an agency between Uniland resources and DBP (art 1869 civil code)

Held: No agency, SC affirmed CA with modifications in relation with equity consideration. That
in equity respondent DBP is ordered to pay petitioner the amount of One Hundred Thousand
Pesos

It is obvious that Uniland was never able to secure the required accreditation from
respondent DBP to transact business on behalf of the latter. The letters sent by Uniland to the
higher officers of the DBP and the APT are merely indicative of Uniland's desire to secure such
accreditation. At best these missives are self-serving; the most that they prove is that they
were sent by Uniland and received by DBP, which clearly never agreed to be bound thereto.
As declared by the trial court even when it found in favor of Uniland, there was no express
reply from the DBP or the APT as to the accreditation sought by Uniland.  From the very
beginning, therefore, petitioner was aware that it had no express authority from DBP to find
buyers of its properties.

9. Dela Cruz vs Northern Theatrical Enterprises 95 SCRA 739

Facts:
In 1941, The Northern Theatrical Enterprises Inc., a domestic corporation operated a movie
house in Laoag, Ilocos Norte. Domingo De La Cruz was employed whose duties were to guard
the main entrance, to maintain peace and order and to report the commission of disorders
within premises. He carried a revolver.
Benjamin Martin wanted to crash the gate or entrance of the movie house. Infuriated by the
refusal of De la Cruz to let him in without first providing himself with a ticket, Martin attacked
him with a bolo. De la Cruz defendant himself as best he could until he was cornered, at which
moment to save himself he shot Martin, resulting in Benjamin Martin’s death.

De la Cruz was charged with homicide. After a re-investigation conducted by the Provincial
Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court. De la
Cruz was again accused of the same crime of homicide. After trial, he was finally acquitted of
the charge.
He then demanded from former employer to repay the expenses but was refused thus filed
present action against the Northern Theatrical Enterprises Inc company and to three members
of its Board of Directors to recover amounts he had paid his lawyers including moral damages
said to have been suffered due to his worry, neglect of his interests and his family as well in the
supervision of the cultivation of his land, a total of P 15,000.

Court of First Instance of Ilocos Norte rejected the theory of De la Cruz because he was an
agent of Northern Theatrical Enterprises Inc. and that as such agent he was entitled to
compensate the expenses incurred by him in connection with the agency. The court found and
decided that De La Cruz had no cause of action and dismissed the complaint without costs.

Issue:
Whether or not an agent who’s in the line of duty performs an act that resulted in his incurring
expenses caused by a stranger. May the latter recover the said expenses against his former
employer.

Held:
No, because the relationship between the Northern Theatrical Enterprises Inc. and plaintiff was
not that of principal and agent because the principle of representation as a characteristic of
agency was in no way involved. Plaintiff was not employed to represent corporation in its
dealings with third parties. Plaintiff is a mere employee hired to perform a certain specific duty
or task, that of acting as a special guard and staying at the main entrance of the movie house to
stop gate crashers and to maintain peace and order within the premises.

The relationship between Dela Cruz and Northern Theatrical Enterprises because Dela Cruz was
not the principal and agent, the principle of representation was in no way involved. Dela Cruz
was not employed to represent the dependant corporation in its dealings with third parties. he
was a mere employee hired to perform a certain duty or task.
10. SEVILLA v. CA G.R. Nos. L-41182-3; April 15, 1988

FACTS: On Oct. 19, 1960, the Tourist World Service, Inc. leased an office at Mabini St., Manila
for the former's use as a branch office. When the branch office was opened, the same was
run by the herein appellant Lina O. Sevilla payable to Tourist World Service Inc. by any airline
for any fare brought in on the efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla and 3%
was to be withheld by the Tourist World Service, Inc.
On or about November 24, 1961, the Tourist World Service, Inc. appears to have been
informed that Lina Sevilla was connected with a rival firm, the Philippine Travel Bureau, and,
since the branch office was any how losing, the Tourist World Service considered closing down
its office. This was firmed up by two resolutions of the board of directors of Tourist World
Service, Inc. dated Dec. 2, 1961, the first abolishing the office of the manager and vice-president
of the Tourist World Service, Inc., Ermita Branch, and the second, authorizing the corporate
secretary to
receivethe properties of the Tourist World Service then located at the said branchoffice.
It further appears that on Jan. 3, 1962, the contract with the appellees for the use of the
Branch Office premises was terminated and while the effectivity thereof was Jan. 31, 1962, the
appellees no longer used it. As a matter of fact appellants used it since Nov. 1961. Because of
this, and to comply with the mandate of the Tourist World Service, the corporate secretary
Gabino Canilao went over to the branch office, and, finding the premises locked, and, being
unable to contact Lina Sevilla,
he padlocked the premises on June 4, 1962 to protect the interests of theTourist World Service.
When neither the appellant Lina Sevilla nor any of her employees could enter the locked
premises, a complaint was filed by the herein appellants against the appellees with a prayer for
the issuance of
mandatory preliminary injunction. Both appellees answered with counterclaims. For apparent
lack of interest of the parties therein, the trial court ordered the dismissal of the case without
prejudice.
ISSUE: Whether the act of Tourist World Service in abolishing its Ermita branch proper
HELD:  No, the act of Tourist World Service in abolishing its Ermita branch is not proper. The
Supreme Court held that when the petitioner, Lina Sevilla, agreed to manage Tourist World
Service, Inc.'s Ermita office, she must have done so pursuant to a contract of agency. In the case
at bar, Sevilla solicited airline fares, but she did so for and on behalf of her principal, Tourist
World Service, Inc. As compensation, she received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself, based on her letter of November 28, 1961,
presumed her principal's authority as owner of the business undertaking. We are convinced,
considering the circumstances and from the respondent Court's recital of facts, that the parties
had contemplated a principal-agent relationship, rather than a joint management or a
partnership. But unlike simple grants of a power of attorney, the agency that we hereby declare
to be compatible with the intent of the parties, cannot be revoked at will. The reason is that it is
one coupled with an interest, the agency having been created for the mutual interest of the
agent and the principal. Accordingly, the revocation complained of should entitle the petitioner,
Lina Sevilla, to damage

11. SY-JUCO VS. SY-JUCO

FACTS: Defendant Santiago Sy-Juco was appointed by the plaintiff, his parents, as administrator
of their property and acted as such from 1902-1916. The Sy-jucos allege that during Santiago’s
administration, he acquired a launch, two cascos, and an automobile in his capacity as
administrator with their (Syjuco’s) money and for their benefit. The Trial Court ruled in favor of
the Sy-juco and ordered Santiago to return the properties.

ISSUE: Whether or not the properties bought by Santiago in his own name, as an
administrator, belong to him.

RULING: No. Santiago bought the properties in his own name but this not necessarily show that
he bought it for himself and with his own money. The transaction was within the agency which
he had received from the plaintiffs. The fact that he has acted in his own name may be only, as
we believe it was, a violation of the agency on his part.

The question is not in whose favor the document of sale of the properties is executed
nor in whose name the same were registered, but with whose money was said property bought
with.

12. GREEN VALLEY V. INTERMEDIATE APPELLATE COURT

FACTS: On November 3, 1969, Squibb and Green Valley entered into a letter agreement the text
of which reads as follows:

“E.R. Squibb & Sons Philippine Corporation is pleased to appoint Green Valley Poultry & Allied
Products, Inc. as a non-exclusive distributor for Squibb Veterinary Products, as recommended
by Dr. Leoncio D. Rebong, Jr. and Dr. J.G. Cruz, Animal Health Division Sales Supervisor.”

For goods delivered to Green Valley but unpaid, Squibb filed suit to collect. The trial court as
aforesaid gave judgment in favor of Squibb which was affirmed by the Court of Appeals.

In both the trial court and the Court of Appeals, the parties advanced their respective theories.

Green Valley claimed that the contract with Squibb was a mere agency to sell; that it never
purchased goods from Squibb; that the goods received were on consignment only with the
obligation to turn over the proceeds, less its commission, or to return the goods ff not sold, and
since it had sold the goods but had not been able to collect from the purchasers thereof, the
action was premature.

Upon the other hand, Squibb claimed that the contract was one of sale so that Green Valley
was obligated to pay for the goods received upon the expiration of the 60-day credit period.

Both courts below upheld the claim of Squibb that the agreement between the parties was a
sales contract.

ISSUE: Whether or not the agreement signed by the parties was a sales contract and thus Green
Valley is liable for its unpaid obligations against Squibb Veterinary Products.

RULING: The Supreme Court upheld the decision of the defunct Court of Appeals. By adopting
Green Valley’s theory that the contract is an agency to sell, it is liable because it sold on credit
without authority from its principal. It further gives emphasis to the decision based on Article
1905 of the Civil Code which reads:

“The commission agent cannot, without the express or implied consent of the principal, sell on
credit. Should he do so, the principal may demand from him payment in cash, but the
commission agent shall be entitled to any interest or benefit, which may result from such sale.”

13. Domingo vs.Domingo, L-30573, October 29,1971

FACTS: Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive
agency to sell his lot at the rate of P2.00 per square meter with a commission of 5% on the total
price, if the property is sold by Vicente or by anyone else during the 30-day duration of the
agency or if the property is sold by Vicente within 3months from the termination of the agency.

Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per
square meter. Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After several
conferences between Gregorio and Oscar de Leon they agreed. Upon demand of Vicente, Oscar
issued to him a check in the amount of P1,000.00 as earnest money, after which Vicente
advanced to Gregorio the sum of P300.00. Oscar de Leon confirmed his former offer to pay for
the property at P1.20 per square meter in another letter. Subsequently, Vicente asked for
additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to
him. Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of
P1,000.00 for succeeding in persuading Vicente to sell his lot at P1.20 per square meter. This
gift of P1,000 was not disclosed by Gregorio.

ISSUE: Whether Gregorio is entitled to receive the 5% commission.

RULING: No. The duties and liabilities of a broker to his employer are essentially those which an
agent owes to his principal. The law imposes upon the agent the absolute obligation to make a
full disclosure or complete account to his principal of all his transactions and other material
facts relevant to the agency, so much so that the law as amended does not countenance any
stipulation exempting the agent from such an obligation and considers such an exemption as
void. Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal
benefit from the vendee, without revealing the same to his principal, the vendor, is guilty of
breach of his loyalty to the principal and forfeits his right to collect the commission from his
principal.

Agency is for compensation

14. Aguna vs. Larena, 53 Phil 630

FACTS: This action is brought to recover the sum of P29,600 on two cause against the
administrator of the estate of the deceased Mariano Larena. Upon his first cause of action, the
plaintiff claims the sum of P9,600, the alleged value of the services rendered by him to said
deceased as his agent in charge of the deceased’s houses situated in Manila. Under the second
cause of action the plaintiff alleges that one of the buildings belonging to the deceased and
described in his complaint was built by him with the consent of the deceased, and for the
reason he is entitled to recover the sum disbursed by him in its construction, amounting to
P20,000.

ISSUE: Whether or not there is a contract of agency.

RULING: No. Plaintiff insists that, as his services as agent of the deceased Larena having been
rendered, an obligation to compensate them must necessarily arise. The trial court held that
the compensation for the services of the plaintiff was the gratuitous use and occupation of
some of the houses of the deceased by the plaintiff and his family. This conclusion is correct. If
it were true that the plaintiff and the deceased had an understanding to the effect that the
plaintiff was to receive compensation aside from the use and occupation of the houses of the
deceased, it cannot be explained how the plaintiff could have rendered services as he did for 8
years without receiving and claiming any compensation from the deceased. The fact that the
plaintiff-appellant did not have any source of income that could produce him such as large sum
of money as that invested in the construction of the house.

STIPULATION GRANTING AUTHORITY TO SELL IN A MORTGAGE IS MERELY ANCILLARY

15. Bicol Savings and Loan Association vs. CA

FACTS: Juan de Jesus was the owner of a parcel of land situated in Naga City. He executed a
Special Power of Attorney in favor of his son, Jose de Jesus, to negotiate, mortgage his real
property in any bank either private or public entity preferably in the Bicol Savings Bank in any
amount that may be agreed upon between the bank and the attorney-in-fact. By virtue thereof,
Jose de Jesus obtained a loan of P20,000 from petitioner bank and executed a deed of
mortgage on the real property. Juan de Jesus died at an unknown date. By reason of his failure
to pay the loan obligation even during this lifetime, petitioner bank caused the mortgage to be
extrajudicially foreclosed.

In the subsequent public auction, the mortgaged property was sold to the bank as the highest
bidder. Private respondents herein, including Jose de Jesus, who are all the heirs of the late
Juan de Jesus, failed to redeem the property within one year from the date of the registration
of the Provisional Certificate of Sale. Nonetheless, the private respondents still negotiated for
the repurchase of the property but were unsuccessful despite offers and counter-offers.

Private respondents filed a complaint praying for the annulment of the deed of sale but it was
dismissed by the trial court ruling that the deed became absolute. Upon appeal, the CA reverse
the ruling referring to Article 1879 of the Civil Code and stated that since the special power to
mortgage granted to Jose de Jesus did not include the power to sell, it was error for the lower
Court not to have declared the foreclosure proceedings.

ISSUE: Whether or not the agent-son exceeded the scope of his authority.

RULING: No. The sale proscribed by a special power to mortgage under Article 1879 is a
voluntary and independent contract, and not an auction sale resulting from extrajudicial
foreclosure, which is precipitated by the default of a mortgagor. The stipulation granting an
authority to extrajudicially foreclose a mortgage is an ancillary stipulation supported by the
same cause or consideration for the mortgage and forms an essential or inseparable part of
that bilateral agreement.
It matters not that the authority to extrajudicially foreclose was granted by an attorney-in-fact
and not by the mortgagor personally. The stipulation in that regard, although ancillary, forms
and essential part of the mortgage contract and is inseparable therefrom. No creditor will agree
to enter into a mortgage contract without the stipulation intended for its protection.

16. VELOSO v. CA
FACTS: Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo,
Manila, with an area of 177 square meters. The title was registered in the name of Francisco A. Veloso.
The said title was subsequently cancelled and a new one issued in the name of Aglaloma B. Escario,
married to Gregorio L. Escario, on May 24, 1988.  On August 24, 1988, petitioner Veloso filed an action
for annulment of documents, reconveyance of property with damages and preliminary injunction and/or
restraining order. Petitioner alleged therein that he was the absolute owner of the subject property and
he never authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the
title but when his wife, Irma, left for abroad, he found out that his copy was missing. He then verified
with the Registry of Deeds of Manila and there he discovered that his title was already canceled in favor
of defendant Aglaloma Escario.  The transfer of property was supported by a General Power of Attorney
dated November 29, 1985 and Deed of Absolute Sale, dated November 2, 1987, executed by Irma
Veloso, wife of the petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario. 
Petitioner Veloso, however, denied having executed the power of attorney and alleged that his
signature was falsified. He also denied having seen or even known Rosemarie Reyes and Imelda Santos,
the supposed witnesses in the execution of the power of attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended that the sale of the property, and the subsequent
transfer thereof, were null and void. Defendant Aglaloma Escario in her answer alleged that she was a
buyer in good faith and denied any knowledge of the alleged irregularity. She allegedly relied on the
general power of attorney of Irma Veloso which was sufficient in form and substance and was duly
notarized. 
ISSUE: Whether there was a valid sale of the subject property
Held: Yes. An examination of the records showed that the assailed power of attorney was valid and
regular on its face. It was notarized and as such, it carries the evi-dentiary weight conferred upon it with
respect to its due execution. Thus, there was no need to execute a separate and special power of
attorney since the general power of attorney had expressly authorized the agent or attorney in fact the
power to sell the subject property. The special power of attorney can be included in the general power
when it is specified therein the act or transaction for which the special power is required. We found,
however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery.
Mere variance of the signatures cannot be considered as conclusive proof that the same were forged.
Forgery cannot be presumed. Petitioner, however, failed to prove his allegation and simply relied on the
apparent difference of the signatures. His denial had not established that the signature on the power of
attorney was not his. Forgery should be proved by clear and convincing evidence and whoever alleges it
has the burden of proving the same. To determine forgery, it was held in Cesar vs. Sandiganbayan
(quoting Osborn, The Problem of Proof) that: “The process of identification, therefore, must include the
determination of the extent, kind, and significance of this resemblance as well as of the variation. It then
becomes necessary to determine whether the variation is due to the operation of a different
personality, or is only the expected and inevitable variation found in the genuine writing of the same
writer. It is also necessary to decide whether the resemblance is the result of a more or less skillful
imitation, or is the habitual and characteristic resemblance which naturally appears in a genuine writing.
When these two questions are correctly answered the whole problem of identification is solved.”

17. DIOLOSA v CA
Facts: An agreement was entered into between Baterna, a licensed real estate broker, and spouses
Diolosa, whereby the former was constituted as exclusive sales agent of the spouses, its successors,
heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included in VILLA ALEGRE
SUBDIVISION owned by the spouses, “until all the subject property as subdivided is fully disposed of.”
Pursuant to said agreement, Baterna acted for and in behalf of the spouses as their agent in the sale of
the lots included in the VILLA ALEGRE SUBDIVISION. Through a letter, the spouses terminated the
services of Baterna as their exclusive sales agent for the reason that the lots remained unsold were for
reservation for their grandchildren. Baterna filed this suit to recover the unpaid commission against the
Diolosas over some of the lots subject of the agency that were not sold.
CFI dismissed the complaint. CA reversed holding that Diolosas could not terminate the agency at will
without paying damages because of the express provision in the contract that “until all the subject
property as subdivided is fully disposed of.” It noted that there were still 27 unsold lots but Diolosas had
only 6 granchildren, hence, not a legal reason to terminate the agency.

Issue: Whether the spouses Diolosa could terminate the agency agreement without paying damages to
Baterna.

Held: NO. According to the contract, Exhibit “A”, herein petitioners allowed the private respondent “to
dispose of, sell, cede, transfer and convey x x x until all the subject property as subdivided is fully
disposed of.” The authority to sell is not extinguished until all the lots have been disposed of. When,
therefore, the petitioners revoked the contract with private respondent in a letter, Exhibit “B” x x x x x x
they become liable to the private respondent for damages for breach of contract. And, it may be added
that since the agency agreement, Exhibit “A”, is a valid contract, the same may be rescinded only on
grounds specified in Articles 1381 and 1382 of the Civil Code, as follows: x x x. : A contract of agency,
being a valid contract, is rescissible only on grounds provided under Article 1381 and 1382 of the Civil
Code . Not one of the grounds mentioned above is present which may be the subject of an action of
rescission, much less can spouses Diolosa say that Baterna violated the terms of their agreement-such as
failure to deliver to them the proceeds of the purchase price of the lots.

18. Rallos vs. Yangco

Facts: Yangco sent a letter Rallos to be the consignor in buying and selling leaf tobacco and other native
products. Terms and conditions were also contained in the letter. Accepting this invitation, the plaintiffs
proceeded to do a considerable business with the defendant through the said Collantes, as his factor,
sending to him as agent for the defendant a good deal of produce to be sold on commission. Collantes,
being the agent thereof, sold the tobaccos/products as agreed upon, but instead of giving it to his
principal, he converted it to his own use. It appears, however, that prior to the sending of said tobacco
the defendant had severed his relations with Collantes and that the latter was no longer acting as his
factor. This fact was not known to the plaintiffs; and it is conceded in the case that no notice of any kind
was given by the defendant to the plaintiffs of the termination of the relations between the defendant
and his agent. The defendant refused to pay the said sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time the said tobacco was received and sold by Collantes he was
acting personally and not as agent of the defendant. This action was brought to recover said sum.
Issue: Whether or not the plaintiffs, acting in good faith and without knowledge, having sent produce to
sell on commission to the former agent of the defendant, can recover of the defendant under the
circumstances above set forth.
Held: Yes. Yangco is liable. The defendant having advertised the fact that C was his agent, having given
special notice to the plaintiffs of the agency, and having also given them a special invitation to deal with
such agent, it became the defendant's duty, upon the termination of the relationship of principal and
agent, to give due and timely notice thereof to the plaintiffs. The general rule is that, when the
relationship of principal and agent is established, and the principal gives notice of the agency and holds
out the agent as his authorized representative, upon the termination of the agency it is the duty of the
principal to give due and timely notice thereof, otherwise, he will be held liable to third parties acting in
good faith and properly relying upon such agency.
19. CMS LOGGING vs CA
FACTS: CMS and DRACOR entered into a contract of agency whereby the former appointed the
latter as its exclusive export and sales agent for all logs that the former may produce, for a
period of five (5) years. By virtue of said agreement, CMS was able to sell through DRACOR a
total of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS
discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko) as agent, representative or
liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00
per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to
collect a total of U.S. $77,264.67. Due to this discovery cms proceeded to sell directly to japan
w/o aid of DRACOR. CMS claimed that this commission paid to Shinko was in violation of the
agreement and that it (CMS) is entitled to this amount as part of the proceeds of the sale of the
logs. CMS contended that since DRACOR had been paid the 5% commission under the
agreement, it is no longer entitled to the additional commission paid to Shinko as this
tantamount to DRACOR receiving double compensation for the services it rendered. After this
discovery, CMS sold and shipped logs directly to several firms in Japan without the aid or
intervention of DRACOR. CA DIMISSES CASE, HOLDS THAT DRACOR ENTITLED TO COMMISSION
FROM DIRECT SALES MADE BY CMS TO JAPANESE BUYERS. CMS filed suit against DRACOR while
the latter in turn filed counterclaims against the former, the CA dismissed CMS’s complaint and
even held that DRACOR is entitled to its 5% commission arising from the direct sales made by
CMS to buyers in Japan. Aggrieved, CMS appeals to the SC.
ISSUE: Whether or not DRACOR was entitled to its commission from the sales made by CMS to
Japanese firms.
RULING: NO. The principal may revoke a contract of agency at will, and such revocation may be express,
or implied, and may be availed of even if the period fixed in the contract of agency as not yet expired. As
the principal has this absolute right to revoke the agency, the agent cannot object thereto; neither may
he claim damages arising from such revocation, unless it is shown that such was done in order to evade
the payment of agent’s commission. In the case at bar, CMS appointed DRACOR as its agent for the sale
of its logs to Japanese firms. Yet, during the existence of the contract of agency, DRACOR admitted that
CMS sold its logs directly to several Japanese firms. This act constituted an implied revocation of the
contract of agency under Article 1924 of the Civil Code. Since the contract of agency was revoked by
CMS when its sold its logs to Japanese firms without the intervention of DRACOR, the latter is no longer
entitled to its commission from the proceeds of such sale and is not entitled to retain whatever moneys
it may have received as its commission for said transactions. Neither would DRACOR be entitled to
collect damages from CMS, since damages are generally not awarded to the agent for the revocation of
the agency, and the case at bar is not one falling under the exception mentioned, which is to evade the
payment of the agent’s commission.

20. GOLD STAR MINING vs. LIM-JIMENA

FACTS: In 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena half of the
proceeds from all mining claims that he would purchase with the money to be advanced by the latter.
This agreement was later on modified to include in the equal sharing agreement not only the proceeds
from several mining claims, but also the lands constituting the same, and so as to bing thereby their
“heirs, assigns, or legal representatives.” Eventually, the mining rights over parts of the claims were
assigned by Lincallo to Gold Star Mining Co., Inc., while others were assigned to Marinduque Iron Mines
Agents. Meanwhile, Jimena repeatedly apprised both mining corporations of his interests over the
mining claims so assigned and/or leased by Lincallo. However, both corporations ignored his demands.
Jimena also demanded Lincallo for the payment of the P5,800 he gave Lincallo as money to purchase the
mining claims and the lands, but to no avail. Lincallo did not only fail to settle his accounts with Jimena,
he even transferred about majority of his share in the royalties due from Gold Star to Gregorio
Tolentino, a salaried employee. Hence, on Sept. 2, 1954, Jimena filed a suit against Lincallo for recovery
of his advances and his one-half share in the royalties, and impleaded Gold Star and Marinduque Iron
Mines, as well as Tolentino, later on as defendants. Two weeks later, the trial court issued a writ of
preliminary injunction, preventing both mining companies from paying royalties during the pendency of
the case to Lincallo, his assigns or legal representatives. Despite of such injunction, Gold Star still paid
P30,691.92 to Lincallo and Tolentino (claiming that a writ of preliminary attachment filed by Jimena
supposedly superseded the injunction, but the condition to such attachment - the filing of a bond - was
not fulfilled, so it cannot be said that the injunction was superseded).Jimena and Tolentino died
successively during the pendency of the case in the trial court and were, accordingly, substituted by
their respective widows and children. CFI decided in favor of Victor Jimena’s heirs, declaring among
others that they be entitled to half of the shares of the royalties of Lincallo in his contracts with Gold
Star, Marinduque Iron Mines and Alejandro Marquez, that both mining companies pay directly to the
former half of the shares of the royalties until said contracts were terminated, that Lincallo pay the heirs
the capital Victor Jimena gave him to purchase the mining claims and the latter’s shares with interest,
and that Gold Star Mining Co., Inc. pay them the sum of P30,691.92 solidarily with Ananias Isaac Lincallo
for violation of an injunction. The defendants appealed to the CA, which affirmed CFI Manila’s decision.

ISSUE: Whether or not the CA erred in finding that the Jimena’s have a cause of action against Gold Star
Mining Co., as there is no privity of contract between Gold Star and Jimena.

HELD: NO. The existence of a common subject-matter supplies the juridical link. Jimena repeatedly
made demands upon God Star for the payment of his 1⁄2 share of the royalties, but all in vain, so he was
forced to implead Gold Star for having refused to recognize his right. Furthermore, under such
conditions wherein Jimena was repeatedly denied of his interests, Jimena has an action against Gold
Star, pursuant to Art. 1883, NCC, which provides that the principal may sue the person with whom the
agent dealt with in his (agent’s) own name, when the transaction ‘involves things belonging to the
principal.’
ISSUE: Whether or not the CA erred in condemning Gold Star to pay the sum of P30,691.92 for violation
of an allegedly non-existent injunction.

RULING: NO. Said award is not so much a penalty against petitioner as a decree of restitution, in order
to make the violated injunction effective, as it should be, by placing the parties in the same condition as
if the injunction had been fully obeyed. If Gold Star Mining Co., Inc., had only heeded the injunction and
had not paid to Lincallo the royalties of P30,691.92, such amount would now be available for the
satisfaction of the claims of Jimena and his heirs against Lincallo. By sentencing Gold Star Mining Co.,
Inc., to pay, for the account of Lincallo, the sum aforesaid, the court merely endeavoured to prevent its
award from being rendered pro tanto nugatory and ineffective, and thus make it conformable to law
and justice. The questioned award was not intended to be a penalty against appellant Gold Star Mining
Co., Inc., is shown by the provision in the judgment that the P30,691.92 to be paid by it to Jimena is "to
be imputed to Lincallo's liability under this judgment." The court thus left the way open for Gold Star
Mining Co., Inc., to recover later the whole amount from Lincallo, whether by direct action against him
or by deducting it from the royalties that may fall due under his 1951 contract with appellant.
WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs
against petitioner-appellant, Gold Star Mining Co., Inc.

DOCTRINE: PRINCIPAL CAN SUE THE PERSON WITH WHOM HIS AGENT DEALS WITH . — Where
plaintiff's co-owner of mining claims transferred the same to defendant mining company (without
disclosing that plaintiff was his co-owner although the mining company had knowledge of this fact), said
co-owner shall be deemed to have acted as plaintiff's agent with respect to plaintiff's share of the
claims. Hence, plaintiff has an action against the mining company, pursuant to Article 1883 of the new
Civil Code, which provides that the principal may sue the person with whom the agent dealt with in his
agent's name, when the transaction "involves things belonging to the principal." And where the
evidence overwhelmingly established the fact that despite demand by plaintiff, the mining company
refused to recognize plaintiff's right to the payment of his 1/2 share of the royalties, the plaintiff may
implead the company, in an action led by the former for accounting of the royalties paid by the company
to the co-defendant (plaintiff's co-owner of the mining claims) and for direct payment to plaintiff of his
share of the royalty, because the relief prayed for cannot be granted without joining the mining
company especially in the face of the attitude it has displayed towards plaintiff.

21. MARTINEZ vs ONG PONG CO

G.R. No. L-5236, January 10, 1910

FACTS: On December 12, 1900, Pedro Martinez (plaintiff) delivered Php.1,500.00 to Ong Pong
Co and Ong Lay (defendants). Said amount was reflected in a private instrument where the
plaintiff and defendants agreed that “they are to invest the amount in a store, the profits or
losses of which we are to divide with the former, in equal shares.” The store business did not
prosper and the plaintiff demanded from the defendants either to render an accounting of the
partnership as agreed to, or to refund him the Php.1,500.00. Ong Pong Co alleged in his defense
that his co-defendant Ong Lay, now deceased, was the one who managed the business. He also
alleged that nothing had resulted from the business venture save the loss of the capital of
Php.1,500.00, to which the plaintiff agreed.

ISSUE: Whether or not the partners are liable.

RULING: YES. The partners are liable jointly. The defendants acted as administrators and as
such, they were obliged to render an accounting of the business. Since both failed in this
aspect, they are obliged to return the capital. Article 1688 of the Civil Code (Article 1796 of the
New Civil Code) which provides “that the partnership is liable to every partner for the amounts
he may have disbursed on account of the same and for the proper interest” does not apply to
the case at bar since no other money than the one contributed by the plaintiff was involved.
The court ruled that Ong Pong Co should pay Pedro Martinez the sum of Php.750.00 with the
legal interest thereon, being liable jointly.

A contract of mandatum requires that agents shall account to the principal for all their
transactions and pay him whatever sum they received by virtue thereof. By not accounting for
it, or otherwise justifying the investment of the money received and administered, the parties
who received it become debtors and are under obligation to make restitution of the money to
the person who entrusted it to them. The above obligation is not in solidum, neither by reason
of the general rules governing the obligations of two or more persons, nor by the special rule
governing contracts of partnership or of mandatum; it is simply a contract in severalty, each
person being liable for one half.

22. Villa v Bosque

Facts: Rosa, widow of E. Bota, was the owner of a printing establishment in Escolta, known as
La Flor de Cataluna, Viuda de E. Bota. Rosa, acting through her attorney-in-fact, Manuel
Pirretas, sold the store to Guillermo Bosque and Jose Ruiz for P55,000.00, payable in four
installments. France and Goulette obligated themselves as solidary sureties for Bosque. First
installment was paid in order.

Manuel, the attorney-in-fact, went to a prolonged visit to Spain, and in consideration of that
trip, he made a document purporting to be a partial substitution of agency, to Figueras
Hermanos, a mercantile entity so that "they may be able to effect the collection of money as
may be due to the plaintiff by reason of the sale of the bookstore"

When the time to collect the 2 nd year installment became due, Bosque was unable to to comply.
After several negotiations with Alfredo Rocha, representative of Figueras Hermanos, an
agreement was reached – Figueras will accept P5,800.00 plus three promissory notes. The
notes were not paid promptly by Bosque but the balance due to them was paid in full on
December 24, 1921.

Later, the owners of La Flor de Cataluña appear to have converted it into a limited partnership
under the style of Guillermo Garcia Bosque, S. en C.;" and presently a corporation was formed
to take over the business under the name "Bota Printing Company, Inc.". The partnership
appears to have conveyed all its assets to this corporation for the purported consideration of
P15,000.00. Meanwhile the seven notes representing the unpaid balance of the second
installment and interest were failing due without being paid.
A certain M. T. Figueras later enters into an agreement with Bosque, stating as follows:
o Guillermo was indebted to Rosa in the amount of P32,000 for which R. G. France and F.
H. Goulette are bound as joint and several sureties, and that the partnership mentioned
had transferred all its assets to the Bota Printing Company, Inc., of which George
Andrews was a principal stockholder.
o France and Goulette shall be relieved from all liability on their contract as sureties and
that in lieu of Guillermo, France and Goulette, the Bota Printing Company, Inc., as
debtor to the extent of P20,000, which indebtedness was expressly assumed by it, and
George Andrews as debtor to the extent of P12,000, will undertake to pay Rosa.

Rosa is now alleging that Figueras had no authority to execute the contract containing the
release of Guillermo et al from their liability, and that she had not ratified the same. Guillermo
et al argue otherwise, using the agreement as a novation releasing him from personal liability.

Issue: Whether Rosa is bound to the agreement made by Figueras therefore removing her
cause of action against Guillermo et al.

Ruling: No. It was argued that the original power of attorney included a wide range of powers
(including the general power of Pirretas to sell the business upon conditions fixed by Pirretas, as
well as the power of substitution to collect balance due to Rosa). However, the Court has also
said that the substitution agreement between Pirretas and FH were explicit – the sole purpose
of the substitution was only to “collect the balance of the selling price of the Printing
Establishment and Bookstore above-mentioned, which has been sold to Messrs. Bosque and
Pomar”. Nothing can be construed to authorize Figueras to discharge debtors or novate the
contract. On the other hand, the substitution agreement is very much explicit in limiting the
powers of Figueras.

Furthermore, it was the mercantile entity Figueras Hermanos (or its legal representatives) who
were given the capacity to exercise the substituted power. M. T. Figueras intervenes as
purpoted attorney in fact without anything whatever to show that he is in fact the legal
representative of Figueras Hermanos or that he is there acting in such capacity. The act of
substitution conferred no authority whatever on M. T. Figueras as an individual.

The argument of Bosque that Rosa had ratified the novation of the contract through acceptance
of the amount paid by the Bota Printing Co., Inc. as payment was also disregarded by the Court,
stating that the By the assumption of the debts of its predecessor the Bota Printing Company
became a primary debtor for Guillermo et al. Rosa could therefore accept the payment of the
debt despite Rosa’s refusal to be bound by the supposed novation of the contract of debt of
Guillermo.

23. Travel Wide Associated Sales (Phils.) Inc. et al v CA

Facts: Decision Systems Corporation and its President, Manuel A. Alcuaz, Jr., filed a complaint
alleging that defendants Travel Wide Associated Sales (Phils.), Inc. and Trans World Airlines, Inc.
had failed to comply with their obligations under Travel Pass ‘73 U.S.A., a package deal
consisting of a TWA ticket to Los Angeles, New York and Boston, in the United States, and hotel
accommodations, for which the plaintiffs had made the corresponding payment in Manila.

Acting on a motion to dismiss filed by TWA , on the ground that the complaint did not state a
cause of action, the court ordered the plaintiffs to amend their complaint and particularize their
averments. The plaintiffs complied. TWA and Travel Wide filed separate motions to dismiss on
the ground that the amended complaint still did not state a cause of action. Both motions were
denied.1aw library

The defendants filed a joint answer in which they alleged the special defense that they were
not the real parties-in-interest because they had acted only as agents of a disclosed principal.
Subsequently, they filed a Joint Motion for Preliminary Hearing of Special Defense, which was
opposed by the Plaintiffs on the ground that the special defense was barred, not having been
raised in the two motions to dismiss the amended complaint. The joint motion was
nevertheless granted.

After the preliminary hearing, Judge Fernandez issued his order, dismissing the complaint. His
finding was that Travel Wide was only the general agent of TWA and that the latter was only an
agent of a disclosed principal, namely, Tour Services, Inc. As neither of the defendants was a
real party-in-interest, there could be no cause of action against them. The motion for its
reconsideration having been denied, the order was elevated to the then Intermediate Appellate
Court, which, reversed the trial court.

Issue: Whether agents can be held liable.

Ruling: Yes. The trial court has erred in holding that the petitioners were mere agents of a
disclosed principal and so could not be held liable on the complaint. In disclaiming liability, the
petitioners point to the stipulation on Responsibility in the Travel Pass ‘73 Plan brochure that
"Tour Services, Inc. and/or their agents" are acting "as agents for the passengers." They stress
further that the Miscellaneous Charge Order issued to Alcuaz indicated that the amount of
$218.00 was payable to Tour Services, Inc. and not to either of them . This would mean that, if
at all, they were acting as agents of Tour Services, Inc. and not as principal obligors.

If the petitioners were indeed acting as agents of the passengers, as the brochure stipulates,
they could still be held liable under Article 1909 of the Civil Code, which provides: The agent is
responsible not only for fraud, but also for negligence, which shall be judged with more or less
rigor by the courts, according to whether the agency was or was not for a compensation.

24. Herera, etc. v Luy Kim Guan, et al

Facts: Natividad Herrera is the daughter of Luis Herrera who executed a general power of
attorney in favor of Luy Kim Guan to sell and administer his properties. Natividad is now
questioning the validity of the transactions entered into by Luy Kim Guan on the ground that
agency was already extinguished (by way of death of Luis Herrera) at the time the lots were
sold.

Natividad Herrera is the legitimate daughter of Luis Herrera who owned 3 parcels of land and
their improvements known as lots 1740, 4465 and 4467. Before leaving for China (where Luis
died) Luis, executed on Dec 1, 1931 a deed of General Power of Attorney which authorized Luy
Kim Guan to administer and sell the properties of Luis Herrera. LOT 1740: originally in the name
of Luis Herrera, married to Go Bang under an OCT, was sold by Luy Kim Guan in his capacity as
attorney in fact to Luy Chay. TCT was issued in the name of Luy Chay by virtue of a deed of sale.
Luy Chay executed a deed of mortgage over the property to secure a loan and subsequently
sold the lot to Lino Bangayan. TCT was likewise issued to Bangayan by virtue of a deed of sale.

LOTS 4465 and 4467 were sold to Luy Kim Guan (1/2 share over the lots, sold by Luis to Luy Kim
on Dec 1, 1931) and Nicomedes Salazar (1/2 share over the lots, sold by Luy Kim to Salazar on
July 23, 1937) with equal shares on each lot.

Lot 4465 was sold to Carlos Eijansantos for P100,000. As for Lot 4467, Salazar sold his one half
share over the lot to Bangayan, a new TCT was issued in favor of Luy Kim Guan and Bangayan as
co-owners in equal shares. As admitted by both parties, Luis Herrera is now deceased but as to
the specific date of his death, the evidence of both parties failed to show such fact. Natividad is
arguing that all the transactions mentioned above were all fraudulent as they were executed
after the death of Luis Herrera which makes the power of attorney no longer operative. It is also
claimed that Lino Bangayan and Luy Kim Guan are Chinese by nationality and are disqualified to
acquire real properties. Lastly, Natividad claims that the supposed deed of sale allegedly
executed by Luis Herrera in favor of Luy Kim Guan conveying shares over the 2 lots was actually
a lease contract.

Issue: Whether the transactions were null and void because they were executed by the atty-in-
fact after the death of the Principal?

Ruling: No. The date of death of Luis Herrera has not been satisfactorily proven. The only
evidence presented by the Plaintiff-appellant in this respect is a supposed letter received from a
certain "Candi", dated at Amoy in November, 1936, purporting to give information that Luis
Herrera (without mentioning his name) had died in August of that year. This piece of evidence
was properly rejected by the lower court for lack of identification. On the other hand, we have
the testimony of the witness Chung Lian to the effect that when he was in Amoy the year 1940,
Luis Herrera visited him and had a conversation with him, showing that the latter was still alive
at the time. Since the documents had been executed by the attorney-in-fact one in 1937 and
the other in 1939, it is evident, if we are to believe this testimony, that the documents were
executed during the lifetime of the principal. Be that as it may, even granting  arguendo that
Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the
record, that the age Luy Kim Guan was aware of Luis’ death at the time he sold the property.
The death of the principal does not render the act of an agent unenforceable, where the latter
had no knowledge of such extinguishment of the agency.
25. THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT OF APPEALS
FACTS:
Petitioner is the owner of the parcels of land and constituting the subdivision known as Capital
Homes Subdivision. Petitioner and A.U. Valencia & Co. Inc. entered into a written to formalize
an earlier verbal agreement wherein A.U. Valencia & Co., Inc. was to develop the aforesaid
subdivision with authority to manage the sales thereof, execute contracts to sell to lot buyers
and issue official receipts.

At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant Co., Inc. was
Artemio U. Valencia. Manila Remnant thru A.U. Valencia and Co. executed two "contracts to
sell" covering 2 lots in favor of Oscar C. Ventanilla and Carmen Gloria Diaz. The Ventanillas paid
the down payments.
Ten (10) days after the signing of the contracts with the Ventanillas, Artemio U. Valencia, as
President of Manila Remnant, and without the knowledge of the Ventanilla couple, sold the
again, this time in favor of Carlos Crisostomo, one of his sales agents without any consideration.
Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila Remnant while
he kept in his files the contracts to sell in favor of the Ventanillas. The amounts paid by the
Ventanillas were deposited in Valencia’s bank account. Upon orders of Artemio Valencia, the
monthly payments of the Ventanillas were remitted to Manila Remnant as payments of
Crisostomo for which the former issued receipts in favor of Crisostomo. The Ventanillas
remained ignorant of Valencia’s scheme. Thus, the Ventanillas continued paying.

Subsequently, the harmonious business relationship between Artemio Valencia and Manila
Remnant ended. Manila Remnant wrote Artemio Valencia informing him that Manila Remnant
was terminating its existing collection agreement with his firm on account of the considerable
amount of discrepancies and irregularities discovered in its collections and remittances by
virtue of confirmations received from lot buyers.
Since A.U. Valencia and Co. failed to forward its collections, Manila Remnant caused the
publication in the Times Journal of a notice cancelling the contracts to sell of some lot buyers.

ISSUE:W/N Petitioner, as the principal, is solidarily liable with its agent

RULING: YES
By the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as
though it had plenary powers. Article 1911 of the Civil Code provides: "Even when the agent
has exceeded his authority, the principal is solidarily liable with the agent if the former
allowed the latter to act as though he had full powers." The above-quoted article is new. It is
intended to protect the rights of innocent persons. In such a situation, both the principal and
the agent may be considered as joint feasors whose liability is joint and solidary (Verzosa v.
Lim, 45 Phil. 416). Authority by estoppel has arisen in the instant case because by its
negligence, the principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That the principal might not have had actual knowledge of
the agent’s misdeed is of no moment.

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale
and disposition of the subdivision lots. As a disclosed principal in the contracts to sell in favor of
the Ventanilla couple, there was no doubt that they were in fact contracting with the principal.
Indeed, once Manila Remnant had been furnished with the usual copies of the contracts to sell,
its only participation then was to accept the collections and pay the commissions to the agent.
The latter had complete control of the business arrangement.

Secondly, it is evident from the records that Manila Remnant was less than prudent in the
conduct of its business as a subdivision owner. For instance, Manila Remnant failed to take
immediate steps to avert any damage that might be incurred by the lot buyers as a result of its
unilateral abrogation of the agency contract. The publication of the cancelled contracts to sell
in the Times Journal came three years after Manila Remnant had revoked its agreement with
A.U. Valencia and Co. Moreover, Manila Remnant also failed to check the records of its agent
immediately after the revocation of the agency contract despite the fact that such revocation
was due to reported anomalies in Valencia’s collections. Altogether, as pointed out by the
counsel for the Ventanillas, Manila Remnant could and should have devised a system whereby
it could monitor and require a regular accounting from A.U. Valencia and Co., its agent.

In essence, therefore, the basis for Manila Remnant’s solidary liability is estoppel which, in
turn, is rooted in the principal’s neglectfulness in failing to properly supervise and control the
affairs of its agent and to adopt the needed measures to prevent further misrepresentation.
As a consequence, Manila Remnant is considered estopped from pleading the truth that it
had no direct hand in the deception employed by its agent.
26. NATIONAL FOOD AUTHORITY, (NFA) vs. INTERMEDIATE APPELLATE COURT, SUPERIOR
(SG) SHIPPING CORPORATION
FACTS:
Gil Medalla, as commission agent of Superior Shipping Corporation, entered into a contract for
hire of ship known as "MV Sea Runner" with defendant National Grains Authority. Under the
said contract Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice
belonging to from Occidental Mindoro to Malabon, Metro Manila.

Upon completion of the delivery of rice at its destination, plaintiff wrote a letter requesting
defendant NGA that it be allowed to collect the amount stated in its statement of account. The
statement of account included not only a claim for freightage but also claims for demurrage
and stevedoring charges.

Plaintiff wrote again defendant NGA, this time specifically requesting that the payment for
freightage and other charges be made to it and not to defendant Medalla because plaintiff was
the owner of the. In reply, defendant NGA informed plaintiff that it could not grant its request
because the contract to transport the rice was entered into by defendant NGA and defendant
Medalla who did not disclose that he was acting as a mere agent of plaintiff. Thereupon
defendant NGA paid defendant Medalla the freight services.

Plaintiff wrote defendant Medalla demanding that he turn over the amount paid to him by
defendant NFA. Defendant Medalla, however, "ignored the demand."

Defendant-appellant National Food Authority admitted that it entered into a contract with Gil
Medalla whereby plaintiffs vessel "MV Sea Runner" transported sacks of rice of said defendant.
Judgment was rendered in favor of the plaintiff. Defendant National Food Authority appealed to
this court.

ISSUE: W/N an undisclosed principal can sue a third person who the agent dealt with
RULING: YES
 It is an undisputed fact that Gil Medalla was a commission agent of respondent Superior
Shipping Corporation which owned the vessel "MV Sea Runner" that transported the sacks of
rice belonging to petitioner NFA. The context of the law is clear. Art. 1883, which is the
applicable law in the case at bar provides:
Art. 1883. If an agent acts in his own name, the principal has no right of action against
the persons with whom the agent has contracted; neither have such persons against the
principal.
 In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things
belonging to the principal.
The provision of this article shall be understood to be without prejudice to the actions
between the principal and agent.
Consequently, when things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although he does not assume
the character of such agent and appears acting in his own name. In other words, the agent's
apparent representation yields to the principal's true representation and that, in reality and in
effect, the contract must be considered as entered into between the principal and the third
person. Corollarily, if the principal can be obliged to perform his duties under the contract, then
it can also demand the enforcement of its rights arising from the contract.

27. PHILIPPINE NATIONAL BANK vs. IAC and ROMEO ALCEDO,

FACTS:
Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB over a lot registered in
her nameto secure the payment of a sugar crop loan of P3,400. Later, Leticia Sepe, acting as
attorney-in-fact for her brother-in-law, private respondent Romeo Alcedo, executed an
amended real estate mortgage to include his (Alcedo’s) lot (being a portion of the Isabela
Cadastre lot) as additional collateral for Sepe’s increased loan of P16,500 . Leticia Sepe and
private respondent Alcedo verbally agreed to split fifty-fifty (50-50) the proceeds of the loan
but failing to receive his one-half share from her, Alcedo revoked the Special Power of
Attorney which he had given to Leticia Sepe to mortgage his lot. He wrote a letter to PNB
informing it of his revocation.

The PNB Branch Manager, Jose T. Gellegani, advised Alcedo that his land had already been
included as collateral for the sugar crop loan, which the latter had already availed of,
nevertheless, he assured Alcedo that the bank would exclude his lot as collateral for Sepe’s
forthcoming sugar crop loan (informed Alcedo via letter).

PNB advised Sepe in writing to replace his lot with another collateral of equal or higher value.
Despite the above advice from PNB, Sepe was still able to obtain an additional loan from PNB
increasing her debt on the security of Alcedo’s property as collateral. Alcedo received two (2)
letters from PNB: (1) informing him of Sepe’s failure to pay her loan; and (2) giving him six (6)
days to settle Sepe’s outstanding obligation, as otherwise, foreclosure proceedings would be
commenced against his property. Alcedo requested Sepe to pay her accounts to forestall
foreclosure proceedings against his property, but to no avail.
PNB alleged that it had no knowledge of the agreement between Mrs. Sepe and Alcedo to split
the crop loan proceeds between them. It required Sepe to put up other collaterals when it
granted her an additional loan because Alcedo informed the Bank that he was revoking the
Special Power of Attorney he gave Sepe; that the revocation was not formalized in accordance
with law; and the revocation of the SPA did not impair the real estate mortgage earlier
executed.

ISSUE: W/N PNB validly foreclosed the real estate mortgage despite the notice of
Alcedo’s revocation.
RULING: NO
Under the doctrine of promissory estoppel the act and assurance given by the PNB to Alcedo of
the exclusion of the aforementioned lot as a collateral is binding on the bank. Having given that
assurance, the bank may not turn around and do the exact opposite of what it said it would not
do. One may not take inconsistent positions. A party may not go back on his own acts and
representations to the prejudice of the other party who relied upon them.

The Supreme Court held that the bank must abide by its representations. On equitable
principles, particularly on the ground of estoppel, we must rule against petitioner Bank. The
doctrine of estoppel is based upon the grounds of public policy, fair dealing, good faith and
justice, and its purpose is to forbid one to speak against its own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably relied
thereon. The doctrine of estoppel springs from equitable principles and the equities in the case.
It is designed to aid the law in the administration of justice where without its aid injustice might
result. It has been applied by this Court wherever and whenever the special circumstances of a
case so demands.

Since PNB had promised to exclude Alcedo's property as collateral for Sepe's sugar crop loan, it
should have released the property to Alcedo. The mortgage which Sepe gave to the bank on
Alcedo's lot as collateral was null and void for having been already disauthorized. Since Alcedo's
property secured only P13,100.00 of the sugar crop loan of P16,500.00 (because P3,400 was
secured by Sepe's own property), Alcedo's property may be held to answer for only the unpaid
balance, if any, of Sepe's loan, but not the additionalcrop loan.

While Article 1358 of the New Civil Code requires that the revocation of Alcedo's Special Power
of Attorney to mortgage his property should appear in a public instrument:

Art. 1358. The following must appear in a public document:

 (1) Acts or contracts which have for their object the creation, transmission,
modification or extinguishment of real rights over immovable property; sales of
real property or of an interest therein are governed by Articles 1403, No. 2 and
1405.

nevertheless, a revocation embodied in a private writing is valid and binding between the
parties for —

The legalization by a public writing and the recording of the same in the registry
are not essential requisites of a contract entered into, as between the parties,
but mere conditions of form or solemnities which the law imposes in order that
such contract may be valid as against third persons, and to insure that a publicly
executed and recorded agreement shall be respected by the latter.

The PNB acted with bad faith in proceeding against Alcedo's property. The extrajudicial
foreclosure being null and void ab initio, the certificate of sale delivered to PNB as the highest
bidder at the sale is also null and void.