1

OBLIGATION OF THE AGENT

1. BRITISH AIRWAYS VS CA, 285 SCRA RULING:

450
The Court cannot agree with the
FACTS: dismissal of the third-complaint. The
contractual relationship between petitioner
Private respondent decided to visit and respondent PAL is one of agency, the
his relative in Bombay, India. Since former being the principal, since it was the
petitioner had no direct flights from Manila one which issued the confirmed ticket, and
to Bombay, private respondent had to take a the latter the agent. Also, it is worth
flight to Hongkong via PAL, and upon arrival mentioning that both BA and PAL are
in Hongkong he had to take a connecting members of the International Air Transport
flight to Bombay on board the petitioner. Association (IATA), wherein member
Prior to his departure, private respondent airlines are regarded as agents of each other
checked in at respondent PAL's counter in in the issuance of the tickets and other matters
Manila his two pieces of luggage confident pertaining to their relationship. Since the
that upon reaching Hongkong, the same instant petition was based on breach of
would be transferred to the petitioner's flight contract of carriage, private respondent can
bound for Bombay. When private respondent only sue petitioner alone, and not respondent
arrived in Bombay he discovered that his PAL, since the latter was not a party to the
luggage was missing and that upon inquiry contract. However, respondent PAL is not
from the petitioner's representative, he was relieved from any liability due to any of its
told that the same might have been diverted negligent acts. It is but logical, fair and
to London. After waiting for his luggage for equitable to allow petitioner to sue
one week, petitioner finally advised him to respondent PAL for indemnification, if it is
file a claim. Back in the Philippines, private proven that the latter's negligence was the
respondent filed with the trial court his proximate cause of private respondent's
complaint for damages and attorney's fees unfortunate experience, instead of totally
against petitioner. Petitioner contends that absolving respondent PAL from any liability.
that private respondent did not have a cause
of action against it. Petitioner likewise filed a Syllabus:
third-party complaint against respondent
PAL as the non-transfer of his luggage was A. CIVIL LAW; COMMON CARRIERS;
due to the latter's late arrival in Hongkong. AIRLINE'S CONTRACT OF CARRIAGE;
Respondent PAL disclaimed any liability. TYPES. — The nature of an airline's contract
The trial court rendered its decision in favor of carriage partakes of two types, namely: a
of the private respondent. The third-party contract to deliver a cargo or merchandise to
complaint against third-party defendant PAL its destination and a contract to transport
was dismissed for lack of cause of action. passengers to their destination. A business
Petitioner appealed to the Court of Appeals intended to serve the travelling public
which, however, affirmed the trial court's primarily, it is imbued with public interest,
findings in toto. hence, the law governing common carriers
imposes an exacting standard. Neglect or
ISSUE: malfeasance by the carrier's employees could
predictably furnish bases for an action for
What is PAL’s participation in the damages.
contract of carriage between British Airways
and private respondent? Is PAL an agent of B. ID.; ID.; ID.; DAMAGES, LIABILITY OF
British Airways and, thus, also liable for the AIRLINE FOR MISPLACED LUGGAGE. —
damages? In the instant case, it is apparent that the

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contract of carriage was between Mahtani and the objection must be made at the earliest
BA. Moreover, it is indubitable that his opportunity, lest silence when there is
luggage never arrived in Bombay on time. opportunity to speak may operate as a waiver
Therefore, as in a number of cases we have of objections. BA has precisely failed in this
assessed the airlines' culpability in the form of regard. To compound matters for BA, its
damages for breach of contract involving counsel failed, not only to interpose a timely
misplaced luggage. objection, but even conducted his own cross-
examination as well.
C. ID.; ID.; ID.; ID.; ID.; CLAIMANT MUST
SATISFACTORILY PROVE EXISTENCE F. REMEDIAL LAW; EVIDENCE; FACTUAL
OF FACTUAL BASIS. — In determining the FINDINGS OF THE TRIAL COURT,
amount of compensatory damages in this kind AFFIRMED BY THE COURT OF
of cases, it is vital that the claimant APPEALS, ENTITLED TO GREAT
satisfactorily prove during the trial the RESPECT. — Needless to say, factual
existence of the factual basis of the damages findings of the trial court, as affirmed by the
and its causal connection to defendant's acts. Court of Appeals, are entitled to great respect.
Since the actual value of the luggage involved
D. ID.; ID.; ID.; LIABILITY NOT LIMITED BY appreciation of evidence, a task within the
ARTICLE 22(1) OF THE WARSAW competence of the Court of Appeals, its ruling
CONVENTION. — Admittedly, in a contract regarding the amount is assuredly a question
of air carriage a declaration by the passenger of fact, thus, a finding not reviewable by this
of a higher value is needed to recover a greater Court.
amount. (Article 22[1] of the Warsaw
Convention). American jurisprudence G. ID.; ACTIONS; THIRD-PARTY
provides that an air carrier is not liable for the COMPLAINT, NATURE. — In Firestone
loss of baggage in an amount in excess of the Tire and Rubber Company of the Philippines
limits specified in the tariff which was filed v. Tempengko, we expounded on the nature of
with the proper authorities, such tariff being a third-party complaint thus: "The third-party
binding on the passenger regardless of the complaint is, therefore, a procedural device
passenger's lack of knowledge thereof or whereby a 'third party' who is neither a party
assent thereto. This doctrine is recognized in nor privy to the act or deed complained of by
this jurisdiction. Notwithstanding the the plaintiff may be brought into the case with
foregoing, we have, nevertheless, ruled against leave of court, by the defendant who acts as
blind reliance on adhesion contracts where the third-party plaintiff to enforce against such
facts and circumstances justify that they third-party defendant a right for contribution,
should be disregarded. indemnity, subrogation or any other relief, in
respect of the plaintiff's claim. The third-party
E. ID.; ID.; ID.; BENEFITS OF LIMITED complaint is actually independent of and
LIABILITY, SUBJECT TO WAIVER; CASE separate and distinct from the plaintiff's
AT BAR. — Benefits of limited liability are complaint. Were it not for this provision of the
subject to waiver such as when the air carrier Rules of Court, it would have to be filed
failed to raise timely objections during the trial independently and separately from the original
when questions and answers regarding the complaint by the defendant against the third-
actual claims and damages sustained by the party. But the Rules permit defendant to bring
passenger were asked. Given the foregoing in a third-party defendant or so to speak, to
postulates, the inescapable conclusion is that litigate his separate cause of action in respect
BA had waived the defense of limited liability of plaintiff's claim against a third party in the
when it allowed Mahtani to testify as to the original and principal case with the object of
actual damages he incurred due to the avoiding circuitry of action and unnecessary
misplacement of his luggage, without any proliferation of law suits and of disposing
objection. It is a well-settled doctrine that expeditiously in one litigation the entire
where the proponent offers evidence deemed subject matter arising from one particular set
by counsel of the adverse party to be of facts.
inadmissible for any reason, the latter has the
right to object. However, such right is a mere H. CIVIL LAW; COMMON CARRIERS;
privilege which can be waived. Necessarily, AIRLINE'S CONTRACT OF CARRIAGE;

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CARRIAGE PERFORMED BY contract. However, this is not to say that PAL

SUCCESSIVE CARRIER, REGARDED AS is relieved from any liability due to any of its
SINGLE OPERATION; CARRIER ISSUING negligent acts. In China Air Lines, Ltd. v.
TICKET CONSIDERED THE PRINCIPAL Court of Appeals, while not exactly in point,
WHILE THE OTHER the case, however, illustrates the principle
ARE SUB-CONTRACTORS OR AGENTS. which governs this particular situation. In that
— The contract of air transportation was case, we recognized that a carrier (PAL),
exclusively between Mahtani and BA, the acting as an agent of another carrier, is also
latter merely endorsing the Manila to liable for its own negligent acts or omission in
Hongkong leg of the former's journey to PAL, the performance of its duties. Accordingly, to
as its subcontractor or agent. In fact, the fourth deny BA the procedural remedy of filing a
paragraph of the "Conditions of Contracts" of third-party complaint against PAL for the
the ticket issued by BA to Mahtani confirms purpose of ultimately determining who was
that the contract was one of continuous air primarily at fault as between them, is without
transportation from Manila to Bombay. "4. . . . legal basis. After all, such proceeding is in
carriage to be performed hereunder by several accord with the doctrine against multiplicity of
successive carriers is regarded as a single cases which would entail receiving the same or
operation." Prescinding from the above similar evidence for both cases and enforcing
discussion, it is undisputed that PAL, in separate judgments therefor. It must be borne
transporting Mahtani from Manila to in mind that the purpose of a third-party
Hongkong, acted as the agent of BA. complaint is precisely to avoid delay and
circuity of action and to enable the controversy
I. ID.; ID.; ID.; ID.; ID.; AGENT to be disposed of in one suit. It is but logical,
RESPONSIBLE FOR ANY NEGLIGENCE fair and equitable to allow BA to sue PAL for
AND LIABLE FOR DAMAGES WHICH indemnification, if it is proven that the latter's
THE PRINCIPAL MAY SUFFER. — negligence was the proximate cause of
Parenthetically, the Court of Appeals should Mahtani's unfortunate experience, instead of
have been cognizant of the well-settled rule totally absolving PAL from any liability.
that an agent is also responsible for any
negligence in the performance of its function
and is liable for damages which the principal
may suffer by reason of its negligent act. 2. PNB VS MANILA SURETY, 14 SCRA
Hence, the Court of Appeals erred when it 776
opined that BA, being the principal, had no
cause of action against PAL, its agent or sub- FACTS:
contractor. Also, it is worth mentioning that
both BA and PAL are members of the The PNB opened a letter of credit
International Air Transport Association and advanced $120,000.00 to Edington Oil
(IATA), wherein member airlines are regarded Refinery for 8,000 tons of hot asphalt, of
as agents of each other in the issuance of the which 2,000 tons worth P279,000.00 were
tickets and other matters pertaining to their delivered to Adams & Taguba Corp.
relationship. Therefore, in the instant case, the (ATACO) under a trust receipt guaranteed by
contractual relationship between BA and PAL Manila Surety & Fidelity Co. To pay for the
is one of agency, the former being the asphalt ATACO constituted PNB its assignee
principal, since it was the one which issued the and attorney-in-fact to receive and collect
confirmed ticket, and the latter the agent. payments from the Bureau of Public Works.

J. REMEDIAL LAW; ACTIONS; THIRD- ATACO delivered asphalt worth

PARTY COMPLAINT; PROCEDURAL P431,466.52 to the Bureau of Public Works,
REMEDY AVAILABLE TO PRINCIPAL PNB regularly collected the payments
CARRIER FOR CLAIMS FILED BY amounting to P106,382.01, until they ceased
PASSENGER FOR LOSS OF LUGGAGE IN to collect payments. Then in 1962 PNB found
AGENT CARRIER. — Since the instant that there were more payables to ATACO
petition was based on breach of contract of from the Bureau of Public Works. PNB sued
carriage, Mahtani can only sue BA alone, and ATACO and the Surety, to recover the
not PAL, since the latter was not a party to the

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balance of P158,563.18 when their demands A. AGENCY; DUTY OF AGENT TO ACT

for payment were refused. WITH THE CASE OF A GOOD FATHER
OF A FAMILY. — An agent is required to
The trial court ordered ATACO and act with the care of a good father of a family
the Surety to pay PNB the sum of and becomes liable for the damages which
P174,462.34, and the total amount payable by the principal may suffer through his non-
the Surety shall not exceed P75,000.00. PNB performance.
recoursed to the Court of Appeals, which
rendered an adverse decision and modified B. ID.; ID.; BANK LIABLE FOR NEGLECT
the judgement of the court of origin as to the IN COLLECTING SUMS DUE ITS
Surety’s liability. Motions for DEBTOR. — A bank is answerable for
reconsideration were also denied. negligence in failing to collect the sums due
its debtor from the latter's own debtor,
ISSUE: contrary to said bank's duty as holder of an
exclusive and irrevocable power of attorney
Whether or not it is the duty of the to make such collections.
surety and not that of the creditor, to see to it
that the obligor fulfils his obligation, and that C. SURETYSHIP; SURETY RELEASED
the creditor owed the surety no duty of active WHEN ASSIGNED FUNDS PERMITTED
diligence to collect any sum from the BY CREDITOR TO BE EXHAUSTED
principal debtor. WITHOUT NOTIFYING FORMER. — By
allowing the assigned funds to be exhausted
RULING: without notifying the surety, the creditor
deprives the surety of any possibility of
The appealed decision is recoursing against that security, and therefore
AFFIRMED. the surety is released.

HELD:
3. VICENTE DOMINGO V. GREGORIO
The Court of Appeals did not hold DOMINGO, 42 SCRA 411
the bank answerable for negligence in failing
to collect from the principal debtor but for its FACTS:
negligence in collecting the sum due to the
debtor from the Bureau of Public Works, June 2, 1956, Vicente (petitioner),
contrary to its duty as holder of an exclusive owner of lot No. 883 of Piedad Estate with a
and irrevocable power of attorney to make total area of 88,477 sq.m., contracted the
such collections, since an agent is required to service of Gregorio (respondent), a real estate
act with care of a good father of a family and broker with an exclusive agency to sell the
becomes liable for the damages which the said property, at the rate of P2.00 per sq.m..
principal may suffer through his non Stated in their agency contract, that should
performance. Vicente sold the subject lot or by anyone else
during the 30-day duration of agency or
Even if the assignment with power should the property be sold by Vincent within
of attorney from the principal debtor were 3 months from the termination of the agency,
considered as more additional security, by Gregorio would be entitled to a commission
allowing the assigned funds to be exhausted of 5% from the total price. On the following
without notifying the surety, the Bank day, Gregorio authorized the service of
deprived the former of any possibility of Teofilo Purisima, to look for a buyer and
recoursing against that security. The Bank promised Purisima the one-half of 5%
exonerated the surety, pursuant to Art. 2080 commission. Thereafter, Purisima introduced
0f the Civil Code. Oscar de Leon, a prospective buyer.

SYLLABUS Oscar, offered to purchase the

property but at the rate of P1.20 per sq.m.. An
agreement between Vincente and De Leon
existed when Gregorio communicated the

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same to Vicente. And because Gregorio obligation to render an account shall be

succeeded in persuading Vicente for a lower void,” stresses the highest loyalty that is
price, De Leon gave Gregorio a “propina” or required to an agent.
a gift amounting to P1,000, to which was not
disclosed by Gregorio to Vicente and neither The aforementioned provisions
did De Leon pay Vicente the additional demand the utmost good faith, fidelity,
amount of P1,000 as a way of earnest money. honesty, candor and fairness on the part of the
Later, De Leon informed Gregorio that he did agent, the real estate broker in this case, to his
not receive the money that was supposed to principal, the vendor. The law imposes upon
be sent by his brother from US, causing for the agent the absolute obligation to make a
him to give up the negotiation. full disclosure or complete account to his
principal of all his transactions and other
After several weeks, when Gregorio material facts relevant to the agency, so much
did not see De Leon, Gregorio went to so that the law as amended does not
Vicente for the alleged 5% commission, if the countenance any stipulation exempting the
sale is consummated within 3 months after agent from such an obligation and considers
the expiration of the 30-day period of the such an exemption as void. The duty of an
exclusive agency in his favor from the agent is likened to that of a trustee. This is not
execution of the agency contract. Gregorio a technical or arbitrary rule but a rule founded
read the contract (Exhibit A) and Vicente on the highest and truest principle of morality
grabbed the original of Exhibit "A" and tore as well as of the strictest justice.
it to pieces. Gregorio held his peace, not
wanting to antagonize Vicente further,
because he had still duplicate of Exhibit "A".
From his meeting with Vicente, Gregorio 4. MURAO & HUARTALEZA v. PEOPLE
proceeded to the office of the Register of OF THE PHILIPPINES, 462 SCRA 366
Deeds of Quezon City, where he discovered
deed of sale executed on September 17, 1956 FACTS:
by Amparo Diaz, wife of Oscar de Leon, over
their house and lot No. 40 Denver Street, Pablito Murao is the sole owner of
Cubao, Quezon City, in favor Vicente as Lorna Murao Industrial Commercial
down payment by Oscar de Leon on the Enterprises (LMICE), a company engaged in
purchase price of Vicente's lot No. 883 of the business of selling and refilling fire
Piedad Estate. extinguishers, with branches in Palawan,
Naga, Legaspi, Mindoro, Aurora, Quezon,
ISSUE: Isabela, and Laguna. (Petitioner) Nelio
Huertazuela is the Branch Manager of
W/N (related to obligation of an LMICE in Puerto Princesa City, Palawan.
agent) the failure on the part of Gregorio to
disclose to Vicente the payment to him by On 01 September 1994, Murao and
Oscar de Leon of the amount of One (private complainant) Chito Federico entered
Thousand Pesos (P1,000.00) as gift or into a Dealership (Oral) Agreement for the
"propina," constitutes to a fraud as to cause a marketing, distribution, and refilling of fire
forfeiture of his commission on the sale price. extinguishers within Puerto Princesa City.
According to the agreement, private
RULING: complainant Federico, as a dealer for
LMICE, could obtain fire extinguishers from
Yes. The duties and liabilities of a LMICE at a 50% discount, provided that he
broker to his employer are essentially those sets up his own sales force, acquires and
which an agent owes to his principal. Art. issues his own sales invoice, and posts a bond
1891. Provides that “Every agent is bound to with LMICE as security for the credit line
render an account of his transactions and to extended to him by LMICE. Failing to
deliver to the principal whatever he may have comply with the conditions under the said
received by virtue of the agency, even though Dealership Agreement, private complainant
it may not be owing to the principal. Every Federico, nonetheless, was still allowed to act
stipulation exempting the agent from the as a part-time sales agent for LMICE entitled

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to a percentage commission from the sales of contract whereby "a person binds himself to
fire extinguishers. render some service or to do something in
representation or on behalf of another, with
Federico made his first successful the consent or authority of the latter."
transaction as a sales agent of LMICE by Federico, acted as a (sales) agent when he
selling 2 fire extinguishers amounting to negotiated for and behalf of the LMICE for
P7,200 that which he obtained from (buyer) the refill and delivery of fire extinguishers in
Landbank of the Philippines, Puerto Princesa 2 occasions: with LBP and City Gov’t of
Branch. In return, LBP issued a check with Puerto Princesa. But Since LMICE is the
“LMICE as the payee c/o to Chito Federico.” lawful owner of the entire proceeds of the
Federico proceeded to encash the check and check payment from the City Government of
remitted only P2,436.40 to LMICE and took Puerto Princesa and it was the petitioner who
the remaining amount as his commission collected the payment on behalf of LMICE
from the sale. did not receive the same or any part thereof
in trust, or on commission, or for
Murao complained that Ferederico administration, or under any other obligation
was not authorized to encash the check, but involving the duty to make delivery of, or to
despite such irregularities, Murao forgave return, the same to private complainant
Ferederico, as the latter promised to make-up Federico, thus, there exist no fiduciary
for his misdeeds in the following transaction. relationship between Murao (& Huertaleza)
Later, on behalf of LMICE, Federico and Federico. A fiduciary relationship
facilitated a transaction with the City of between the complainant and the accused is
Gov’t of Puerto Princesa for the refill of 202 an essential element of estafa by
fire extinguishers (subject of the present misappropriation or conversion, without
petition is limited to the 154 of 202 units of which the Murao & Huertaleza could not
extinguishers). In return, City Gov’t of have committed estafa.
Puerto Princesa issued a check in favor of the
LMICE amounting to P300, 572.73. On the The obligation of LMICE to pay
same, Huertazuela claimed the check and private complainant Federico his commission
deposited the same under the account of does not arise from any duty to deliver or
LMICE with PCIBank. return the money to its supposed owner, but
rather from the duty of a principal to give just
17 June 1994, private complainant compensation to its agent for the services
Federico went to see petitioner Huertazuela rendered by the latter.
at the LMICE branch office in Puerto
Princesa City to demand for the amount of 5. ESCUETA v. LIM, 512 SCRA 411
₱154,500.00 as his commission but
Huertazuela refused to adhere to the request FACTS:
because the two of them could not agree on
the proper amount. Respondent Rufino Lim, herein
respondent, averred that she had bought the
Later that, Federico went to the hereditary properties of the Petitioners Rubio
police station to file an Affidavit-Complaint and heirs of Baloloy. On April 10, 1990
for estafa against Murao and Huartaleza. Petitioners executed a Contract of Sale and
received from Respondent Lim a down
ISSUE: payment of 102,169.86 and 450,000
respectively and the balance will be paid after
W/N, Murao and Huertazuela are the titles are transferred into Lim’s name.
guilty of estafa. Rubio and the heirs of Baloloy refused to
deliver the title to Lim despite her offer of the
RULING: payment of the balance. Despite the existence
of a Contract of Sale between Lim and Rubio
No. For the petitioners to be guilty and the heirs of Baloloy, Corazon Escueta
of estafa the following must exist first in having knowledge thereof executed a
relation to Principal-agent relation. Art. 1868 simulated sale involving the lots. As for the
of the Civil Code defines agency as a special Baloloys, they argued that they already

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withdrawn their offer to sell for the reason Art. 1317. A contract entered into in
that respondent failed to pay the balance on the name of another by one who has no
time hence the Contract of Sale has no more authority or legal representation, or who has
force and effect. As to Rubio, it alleged that acted beyond his powers, shall be
Lim has no cause of action since, Rubio unenforceable, unless it is ratified, expressly
appointed her daughter Patricia Llamas to be or impliedly, by the person on whose behalf
his attorney-in-fact, and not in favor of it has been executed, before it is revoked by
Victoria Laygo Lim who represented Rubio the other contracting party.
in the sale between the Respondent Rufina
Lim. The RTC declared the Petitioners in A contract entered into in the name
default. CA affirmed RTC decision with of another by one who has no authority or
amendments. Hence, this petition. legal representation, or who has acted beyond
his powers, shall be unenforceable, unless it
ISSUE is ratified, expressly or impliedly, by the
person on whose behalf it has been executed,
Whether or not the Contract of Sale before it is revoked by the other contracting
between Rufina Lim and the Petitioners party.
Rubio and Baloloys is valid.
The acceptance of Rubio of the
HELD down payment and encashment of the said
checks serves as the ratification of Rubio of
Yes, the Contract of Sale is valid. the Sale of the Properties with the respondent
Rufina Lim.
RULING
6. CAOILE V. CA. 226 SCRA 658
The Court held that the Contract of
Sale between the petitioner and respondent is FACTS:
valid and binding. Rubio argued that Victoria
has no authority to represent him in the Sale Soledad de Jesus met Erlinda
of the disputed properties since Rubio Domingo (Domingo), a resident of Sterling
appointed her daughter as his attorney-in-fact Life Homes, Las Piñas, Metro Manila.
and not Victoria. Art. 1892 provides: Soledad de Jesus told Domingo that she was
interested in buying a residential lot. Upon
Article 1892 of the Civil Code reaching home, Domingo got in touch with
provides: her Gatchalian, who is also a resident of
Sterling Life Homes, and informed her of
Art. 1892. The agent may appoint a Soledad de Jesus' desire to buy a residential
substitute if the principal has not prohibited lot. Gatchalian told Domingo that she knew
him from doing so; but he shall be of a lot for sale in the subdivision. A Caridad
responsible for the acts of the substitute: Tameta also informed Soledad about the said
lot. Soledad, together with Tess Tameta
(1) When he was not given the (sister of Caridad), Domingo and Gatchalian,
power to appoint one inspected the lot, which was identified as Lot
No. 5, Block 8 of the subdivision. She
In the case above, Rubio made his decided to buy it.
daughter Patricia to be her Attorney-in –fact,
and according to the above article, Patricia is Soledad went to the developer of
not prohibited to appoint a substitute as a Sterling Life Homes Subdivision. Soledad
representative of Rubio. Patricia, acting on was introduced to Anita Caoile, Chief
the authority given to her, appointed Victoria Accountant and Assistant Vice-President of
as her substitute hence the transaction Sterling Life Assurance Corporation. Anita
between Victoria and Respondent is valid. assured Soledad that the lot was for sale and
Art. 1317 further provides: gave the latter a photocopy of the certificate
of title in the name of the corporation. Anita
required Soledad to pay P10,000.00 as a
deposit for the lot, which the latter paid as

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evidenced by a receipt signed by Anita Caoile The trial court, however, observed
as "agent." The total agreed price for the lot and concluded that: "It was the defendant
was P120,000.00 or P500.00 per square Caoile who prepared the receipt for
meter. Soledad verified the status of the P61,000.00. According to defendant
property from the Register of Deeds of Gatchalian, she was asked by the defendant
Makati and was informed that the lot was not Caoile to sign the said receipt for P61,000.00
mortgaged and was still in the name of the as a witness thereof. Defendant Gatchalian
Sterling Life Assurance Corporation. did not sign any other receipts." There is as
Soledad paid a second installment in the well no evidence to show that it was
amount of P61,000.00 to Anita Caoile, a Gatchalian who received the P61,000.00.
receipt for which was signed by Anita as That Soledad did not include Gatchalian as a
"agent" and by Gatchalian, also as "agent." co-respondent of Anita in the estafa case and
Soledad paid another installment in the did not demand reimbursement from
amount of P39,000.00 to Anita Caoile when Gatchalian before ling Civil Case No. 86-
the latter went alone to the former's house. 36543 are strong indications that the latter
Anita issued a receipt therefor. Soledad paid never received anything on account of the
the balance of P10,000.00 to Anita Caoile on subject transaction. More importantly, it was
21 March 1986 and the latter issued a established that on 21 March 1986, Anita
consolidated receipt, under oath, in the total Caoile executed and issued to Soledad de
sum of P120,000.00 "as full payment of Lot Jesus a sworn consolidated receipt. Said
5, Block 8, Sterling Life Homes Subdivision, receipt includes the P61,000.00 indicated in
Pamplona, Las Piñas." Exhibit "A-1." This is an admission by Anita
that the total purchase price of P120,000.00
After Soledad had fully paid the was in fact received by her alone. As
price of the lot, Soledad de Jesus demanded correctly found by the trial court, no
from Anita Caoile the delivery of the Deed of conspiracy among Caoile, Domingo and
Sale and the Transfer Certificate of Title but Gatchalian was proven by Soledad de Jesus.
the latter could not comply. Soledad
discovered upon inquiry from Alberto N.
Villareal, that Anita was not authorized to 7. NATIONAL POWER CORPORATION,
sell the lot, that Lot No. 5 was sold to one v. NATIONAL MERCHANDISING
Ruben Rodis under a Memorandum of CORPORATION and DOMESTIC
Agreement dated 29 December 1977 and a
INSURANCE COMPANY OF THE
Contract to Sell, that Anita was forced to
resign from Sterling Life Assurance PHILIPPINES, 117 SCRA 789
Corporation because of the anomalies she
committed in the corporation, and that she
had not been reporting for work since May FACTS:
1986. Soledad thus led a complaint for a sum
of money against Caoile, Domingo, The National power corporation
Gatchalian and Sterling Life Assurance (NPC) entered into a contract of sale with
Corporation with the Regional Trial Court of National Merchandising Corporation
Manila. The Regional Trial Court ruled
against Caoile only. Caoile then appealed to representative of a new york based
the Court of Appeals. international commodities for the sale of
sulfur used in fertilization. The I.C instructed
ISSUE NMC to stipulate that the sale was subject to
the availability of a steamer. Domestic
Whether on the sole basis of the insurance company executed a performance
receipt for P61,000.00, which she signed as bond in favor of the NPC to guarantee the
"agent" with Anita Caoile, the petitioner
seller’s obligation. The New York supplier
became solidarily liable with Anita.
was not able to deliver the sulfur due to its
HELD inability to secure shipping space.
Consequently, the NPC rescinded the
contract for non-performance of the

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obligation and filed a case against the NMC Corporation the sum of P45,100.00 as liquidated
and the insurance company for breach of damages.
contract asking for liquidated damages
amounting to 360,357 with interest. NMC
argued that the delivery of the sulfur was 8. EUROTECH INDUSTRIAL
conditioned on the availability of a vessel to TECHNOLOGIES, INC. vs. EDWIN
carry the shipment and that Namerco acted CUIZON and ERWIN CUIZON, 521
within the scope of its authority as agent in SCRA 584
signing the contract of sale. After
examination of the contract, NMC stipulated
that that non-availability of a steamer was not
a justification for non-payment of liquidated
damages in which case contrary to the
instruction of his principal.
FACTS:
ISSUE: Eurotech industrial technologies
W/O NMC is acted within the scope inc., is a company engaged in the business of
of his authority importation and distribution of various
European industrial equipment for customers
RULING: here in the Philippines. One of its customers
is Impact Systems Sales which is a sole
No, National Merchandising proprietorship owned by respondent ERWIN
Corporation exceeded its authority as agent of his Cuizon. On the other hand, EDWIN cuizon is
principal thereby making himself personally the sales manager of Impact system sales.
liable to National Power Corporation. Contrary. Edwin bought one unit of sludge pump
NMC exceed his authority by not complying with valued at ₱250,000.00 with the down
the instruction of his principal but instead acted payment of 50,000. When the unit arrived,
on the contrary. Hence, Under Article 1897 of the the eurotech refused to deliver the item until
Civil Code the agent who exceeds the limits of his the obligation has been paid. Hence, EDWIN
authority without giving the party with whom he Alberto de Jesus, general manager of
contracts sufficient notice of his powers is petitioner, executed a Deed of Assignment of
receivables in favor of petitioner stating that
personally liable to such party. Moreover, NPC
EDWIN has an outstanding recievables from
can held NMC liable on the ground that Article
Toledo Power Corporation in the amount of
1403 of the Civil Code which provides that a
365,000.00 and assign the same to the
contract entered into in the name of another assignee, which is herein petitioner.
person by one who has acted beyond his powers consequently, the unit has been delivered to
is unenforceable in which case it refers to the herein respondents. Eurotech alleged despite
unenforceability of the contract against the the existence of the deed of assignment; the
principal but against NMC who NPC sought to be Erwin collected the said receivables. Hence,
held liable. On the other hand, the insurance petitioner instituted a complaint for sum of
company contains that the latter in snot liable to money, damages, with application for
NPC because the bond was posted not for NMC preliminary attachment against herein
but to his principal. This contention is untenable respondents. Edwin did not deny the
because it was NMC who solicited the bond to the transaction. however, by way of affirmative
insurance company and not his principal. National defense, Edwin alleged that he is merely an
Merchandising Corporation and Domestic agent of Impact system sale and the petitioner
is aware of his position.
Insurance Company of the Philippines are ordered
to pay solidarily to the National Power ISSUE:

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1. W/O Edwin is an agent of Impact system well-within his authority when he signed the
sale Deed of Assignment. To recall, petitioner
2. W/O Edwin acted within the scope of his refused to deliver the one unit of sludge pump
authority as agent unless it received, in full, the payment for
Impact Systems’ indebtedness. We may very
RULING: well assume that Impact Systems desperately
Yes, Edwin is an agent of the Impact needed the sludge pump for its business since
system sale and Edwin acted within the scope after it paid the amount of 50,000.00 as down
of this authority as agent. The complaint payment. it still persisted in negotiating with
shows that in the Deed of Assignment, petitioner which culminated in the execution
defendant Edwin B. Cuizon acted in behalf of of the Deed of Assignment of its receivables
or represented Impact Systems Sales; that from Toledo Power Company. The
Impact Systems Sale is a single significant amount of time spent on the
proprietorship entity and the complaint negotiation for the sale of the sludge pump
shows that defendant Erwin H. Cuizon is the underscores Impact Systems perseverance to
proprietor. On the other hand, the Plaintiff get hold of the said equipment. There is,
Corporation is represented by its general therefore, no doubt in our mind that
manager Alberto de Jesus in the contract deed respondent EDWIN’s participation in the
of assignment. the complaint also reveals that Deed of Assignment was "reasonably
Impact Systems Sales which is owned solely necessary" or was required in order for him
by defendant Erwin H. Cuizon, made a down to protect the business of his principal. Had
payment of ₱50,000.00 two days after the he not acted in the way he did, the business
execution of deed of assignment, thereby of his principal would have been adversely
showing that Impact Systems Sales ratified affected and he would have violated his
the act of Edwin B. Cuizon; the records fiduciary relation with his principal. Thus,
further show that plaintiff knew that Impact Edwin is not a real party in interest. Therefore
Systems Sales, the principal, ratified the act he should be excluded in the case.
of Edwin B. Cuizon, the agent, when it 9. BACALTOS COAL MINES V. CA, 245 SCRA
accepted the down payment of ₱50,000.00. 460
Plaintiff, therefore, cannot say that defendant
Edwin B. Cuizon deceived it, since in the
instant case the principal has ratified the act FACTS:
of its agent and plaintiff knew about said
ratification. Plaintiff could not say that Edwin Under and by virtue of an
B. Cuizon entered into the subject contract in Authorization issued by GERMAN A.
excess of his powers since Impact Systems BACALTOS to RENE ROSEL
Sales made a down payment of ₱50,000.00 SAVELLON, the Trip Charter Party was
two days later. Article 1897 provides that the executed “by and between BACALTOS
agent who acts as such is not personally COAL MINES, represented … by its Chief
liable to the party with whom he contracts, Operating Officer, RENE ROSEL
unless he expressly binds himself or exceeds SAVELLON” and private respondent San
Miguel Corporation (hereinafter SMC).
the limits of his authority without giving such
Thereunder, Savellon claims that Bacaltos
party sufficient notice of his powers. Further,
Coal Mines is the owner of the vessel M/V
Article 1868 provides that n a contract of Premship II and that for P650,000.00 to be
agency, a person binds himself to render paid within seven days after the execution of
some service or to do something in the contract, it “lets, demises” the vessel to
representation or on behalf of another with charterer SMC “for three round trips to
the latter’s consent. Its purpose is to extend Davao.”
the personality of the principal or the party
for whom another acts and from whom he or As payment of the aforesaid
she derives the authority to act. The Supreme consideration, SMC issued a check payable
court also held that we Edwin Cuizon acted

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 11

to “RENE SAVELLON IN TRUST FOR peril, if they would hold the principal, to
BACALTOS COAL MINES” for which ascertain not only the fact of the agency but
Savellon issued a receipt under the heading also the nature and extent of the authority,
of BACALTOS COAL MINES. and in case either is controverted, the burden
of the proof is upon them to establish it.
The vessel was able to make only
one trip. Its demands to comply with the The person dealing with the agent
contract having been unheeded, SMC filed must also act with ordinary prudence and
against the petitioners and Rene Savellon the reasonable diligence. Obviously, if he knows
complaint for specific performance and or has good reason to believe that the agent is
damages. exceeding his authority, he cannot claim
protection. So if the suggestions of probable
In their Answer, the petitioners limitations be of such a clear and reasonable
alleged that Savellon was not their Chief quality, or if the character assumed by the
Operating Officer and that the powers agent is of such a suspicious or unreasonable
granted to him are only those clearly nature, or if the authority which he seeks to
expressed in the Authorization which do not exercise is of such an unusual or improbable
include the power to enter into any contract character, as would suffice to put an
with SMC. They further claimed that if it is ordinarily prudent man upon his guard, the
true that SMC entered into a contract with party dealing with him may not be shut his
them, it should have ISSUEd the check in eyes to the real state of the case, but should
their favor. either refuse to deal with the agent at all, or
should ascertain from the principal the true
conditions of affairs.
RTC ruled in favor of SMC holding
petitioners Bacaltos Coal Mines and German
A. Bacaltos and their co-defendant Rene R. In the instant case, since the agency
Savellon jointly and severally liable to of Savellon is based on a written document,
private respondent SMC under a Trip Charter the Authorization of 1 March 1988, the extent
Party. RTC ruled that the Authorization given and scope of his powers must be determined
by German Bacaltos to Savellon necessarily on the basis thereof.
included the power to enter into the Trip
Charter Party. There is only one express power
granted to Savellon, viz., to use the coal
CA affirmed RTC’s decision. operating contract for any legitimate purpose
it may serve. The enumerated “five
prerogatives” — to employ the term used by
ISSUE: the Court of Appeals — are nothing but the
specific prerogatives subsumed under or
Whether Savellon was duly classified as part or as examples of the power
authorized by the petitioners to enter into the to use the coal operating contract. The clause
Trip Charter Party under and by virtue of an “but not by the way of limitation” which
Authorization given by German Bacaltos. precedes the enumeration could only refer to
or contemplate other prerogatives which
RULING: must exclusively pertain or relate or be
germane to the power to use the coal
operating contract. The conclusion then of
Every person dealing with an agent
the Court of Appeals that the Authorization
is put upon inquiry and must discover upon
includes the power to enter into the Trip
his peril the authority of the agent. If he does
Charter Party because the “five prerogatives”
not make such inquiry, he is chargeable with
are prefaced by such clause, is seriously
knowledge of the agent’s authority, and his
flawed. It fails to note that the broadest scope
ignorance of that authority will not be any
of Savellon’s authority is limited to the use of
excuse. Person dealing with an assumed
the coal operating contract and the clause
agent, whether the assumed agency be a
cannot contemplate any other power not
general or special one, are bound at their
included in the enumeration or which are

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unrelated either to the power to use the coal Metrobank as a collecting agent of
operating contract or to those already Golden Savings will be held liable.Art. 1909.
enumerated. In short, while the clause allows — The agent is responsible not only for
some room for flexibility, it can comprehend fraud, but also for negligence, which shall be
only additional prerogatives falling within judged 'with more or less rigor by the courts,
the primary power and within the same class according to whether the agency was or was
as those enumerated.
not for a compensation.The negligence of
Metrobank has been sufficiently established.
Wherefore, decision of CA is To repeat for emphasis, it was the clearance
REVERSED and SET ASIDE. given by it that assured Golden Savings it was
already safe to allow Gomez to withdraw the
proceeds of the treasury warrants he had
deposited Metrobank misled Golden Savings.
There may have been no express clearance,
as Metrobank insists (although this is refuted
10. METROPOLITAN BANK & TRUST by Golden Savings) but in any case that
COMPANY VS. COURT OF APPEALS clearance could be implied from its allowing
Golden Savings to withdraw from its account
FACTS: not only once or even twice but three times.
Eduardo Gomez opened an account The total withdrawal was in excess of its
with Golden Savings and deposited 38 original balance before the treasury warrants
treasury warrants. All warrants were were deposited, which only added to its belief
subsequently indorsed by Gloria Castillo as that the treasury warrants had indeed been
Cashier of Golden Savings and deposited to cleared.
its Savings account in Metrobank branch in
Calapan, Mindoro. They were sent for
clearance. Meanwhile, Gomez is not allowed
to withdraw from his account, later, however,
“exasperated” over Floria repeated inquiries
and also as an accommodation for a “valued”
client Metrobank decided to allow Golden
Savings to withdraw from proceeds of the
warrants. In turn, Golden Savings
subsequently allowed Gomez to make
withdrawals from his own account.
Metrobank informed Golden Savings that 32
of the warrants had been dishonored by the
Bureau of Treasury and demanded the refund
by Golden Savings of the amount it had
previously withdrawn, to make up the deficit
in its account. The demand was rejected.
Metrobank then sued Golden Savings.

ISSUE:

WON Metrobank as a collecting

agent of Golden Savings will be held liable.

RULING:

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