Case Digest Agency

PNB V. MANILA SURETY & FIDELITY CO., INC.

When Caoibes made use of the power of attorney, the principal was already dead.

FACTS: Adams & Taguba Corporation (ATACO) constituted PNB as its assignee and attorney-in-fact to receive and collect from the Bureau of Public Works the amount to pay for the asphalt delivered to it under a trust receipt guaranteed by Manila Surety. ATACO delivered to BPW asphalt worth P431,466.52. Of this amount, PNB was able to regularly collect a total of P106,382.01. However, due to unexplained reasons, PNB was not able to collect until the investigators found out that more money were payable to ATACO from BPW. The latter allowed another creditor to collect funds due to ATACO under the same purchase order, to a total of P311,230.41. An agent is required to act with the care of a good father of a family and becomes liable for the damages, which the principal may suffer through his non-performance. A bank is answerable for negligence in failing to collect the sums due its debtor from the latter’s own debtor, contrary to said bank’s duty as holder of an exclusive and irrevocable power of attorney to make such collections. The general rule under A1883 is that an agent who acts in his own name is a bar against the right of action of the principal against the person to whom the agent has contracted with. In this case, the agent is the one primarily bound. Exception: When the contract involves things belonging to the principal. Thus, PNB sued both ATACO and Manila Surety to recover the balance of P158,563.18, plus interests and damages. CA ruled that PNB was negligent in having stopped collecting from BPW before ATACO’s debt is fully collected, thereby allowing funds to be taken by other creditors to the prejudice of the surety. PNB asserts that the power of attorney executed in it is favor from ATACO was merely an additional security; that it was the duty of the surety to see to it that the obligor fulfills his obligation; and that PNB has no obligation to the surety to collect any sum from ATACO. ISSUE: W/N PNB is negligent as an agent-creditor of ATACO in collecting sums due to it HELD: YES. The CA did not hold PNB responsible for its negligence in failing to collect from ATACO for its debt to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO ATACO FROM BPW. An agent is required to act with the care and diligence of a good father of a family and becomes liable for the damages, which the principal may suffer through its nonperformance. PNB’s power to collect was expressly made irrevocable so that BPW could very well refuse to make payments to ATACO itself, and reject any demands by the surety.

Additional: Verbal donation requires the simultaneous delivery of the gift. In the absence of this requisite the donation shall produce no effect, unless made in writing and accepted in the same form. The alleged donation was made in writing but it has not been accepted in the same form, and consequently, has no validity. Gutierrez Hermanos vs Oria Hermanos Gutierrez Hermanos and Oria Hermanos entered into a contract wherein GH bound itself to acquire for and forward to OH certain goods such as rice, cash, petroleum, etc. Because of this, GH and OH decided to open a mutual current account under “Oria Hermanos” on the books of Gutierrez Hermanos with 8% interest. Gutierrez Hermanos informed Oria Hermanos. that said current account would be closed within 30 days, after which, Oria Hermanos would have to settle the balance due to Gutierrez Hermanos, if any. However, despite repeated demands from Gutierrez Hermanos to Oria Hermanos, the latter never paid which led to the filing of this suit. Up until the closing of the account, GH had sent OH various quantities of salt, petroleum, tobacco, groceries, and beverages and had collected a commission on the sale. The semiannual accounts rendered by GH were never questioned. However, OH claims that GH had set higher prices than the price actually paid, thereby defrauding OH. OH prayed that GH render an account as well as the vouchers used to determine the purchase price of the said goods. OH also claimed that GH had kept the discount in addition to collecting commission on the sale of goods. Issue: whether or not OH is liable to GH for its unsettled account? Held: Yes, but only upon proper accounting of the expenses for the shipment of rice and petroleum which were claimed to be overpriced. When an agent in executing the orders and commissions of his principal carries out the instructions he has received from his principal, and does not appear to have exceeded his authority or to have acted with negligence, deceit, or fraud, he cannot be held responsible for the failure of his principal to accomplish the object of the agency. Since it was not proven that the price of the goods were overstated, thereby defrauding OH, OH cannot escape the liability of paying GH for performing the task given to him by OH as his principal.

Ramos vs. Caoibes, 94 Phil. 440 Domingo vs. Domingo FACTS: Concepcion Ramos appointed Caoibes through a power of attorney to collect an amount due him from the Philippine War Damage Commission. Half of that amount will then be given to the sister of Concepcion and half to her niece and nephew as evidenced by an affidavit. Days after Concepcion died, a Check was issued to Caoibes when he presented the power of attorney and affidavit and later on encashed it for himself. The administratrix discovered the collection made by Caoibes. The administratrix filed to the court asking Caoibes to deposit the money to the clerk of court. Caoibes contended that he will deliver half of the amount to the clerk of court and then said that he had the right to retain half of the money by virtue of the power of attorney and the Affidavit. ISSUE: Whether Caoibes is correct with her contention that he had the right to retain the money by virtue of the power of attorney? RULING: No. Caoibes as an agent had the obligation to deliver the amount collected by virtue of the power of attorney to his principla, Concepcion or the administratrix since she died. No where in the in power of attorney did it state that the was a cession of rights made in favour of Caoibes. And the prevailing provision during the time of the transaction stated that a contract of agency is deemed gratuitous unless the agent is a professional agent and there was no showing that Caoibes was such. Lastly, an agency is terminated by death of the principal or of the agent.

Facts: Vicente Domingo granted Gregorio Domingo the exclusive agency to sell his lot with a commission of 5% on the total price Gregorio authorized Teofilo Purisima to look for a buyer with half of the 5% as his commission Teofilo introduced Oscar de Leon to Gregorio as a prospective buyer Oscar offered to purchase the lot at a lower price than that made by Vicente. Gregorio was able to persuade Vicente to accept Oscar's offer and an agreement was made between Vicente and Oscar P1,000 was given by Oscar as earnest money P300 of which was advanced by Vicente to Gregorio as his commission Also, Gregorio received P1,000 from Oscar as 'promised' by Oscar if Gregorio will be able to persuade Vicente to sell the lot at a lower price This 'promised money' or secret bonus of Gregorio was not disclosed to Vicente Oscar talked to Gregorio that he is now canceling the sale but he will not try to recover the earnest money of the secret bonus he gave Gregorio, sensing something fishy, went to the Register of Deeds and discovered that Vicente actually sold the land to Oscar's wife as shown in the title Gregorio approached Vicente and demanded his commission but the latter refused to give him any amount

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Issue: W/N Vicente is still liable to pay Gregorio his commission even though the latter failed to disclose everything he received form the transaction Held: Gregorio cannot demand from Vicente his commission Article 1891 states that every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by virtue of the agency When Gregorio accepted the secret bonus and failed to disclose this to his principal, he violated the agency agreement and FORFEITS HIS RIGHT TO COLLECT THE COMMISSION FORM THE PRINCIPAL. This is regardless to W/N the principal suffered any injury because of the breach of trust. His acceptance of the secret profit corrupted his duty to serve the interest only of the principal. Instead of exerting his best to persuade the buyer to purchase the lot on the most advantageous terms desired by his principal, he succeeded in persuading his principal to accept the terms of the buyer to the detriment of his principal. U.S. VS. REYES (36 PHIL. 791) FACTS: R. B. Blackman, a surveyor in Pangasinan had an oral agreement with Domingo Reyes. The latter would collect in behalf of Blackman amounts due from 12 individuals in connection with the survey of their lands totaling to Php 860.00. He only succeeded in collecting Php 540 and delivered Php 368 to Blackman, retaining the balance of Php 172.00. Both parties had different claims. Blackman said that the agreement was 10% commission for Reyes. But Reyes insisted it was 20%. If the Court would accept Blackman’s claims, Reyes would be entitled to Php 54.00 therefore Php 172.00 misappropriated or Php 118.00 if commission was deducted. On the other hand, if the Court accepts Reyes’ claims which was 20% then 20% of the amount supposed to be collected was Php 172.00. Reyes was found guilty of estafa. ISSUES: 1) Whether there was a contract of agency between the parties? 2) Whether its terms and conditions are complied with? HELD: There was a contract of agency. But with the terms and conditions are not complied with. On the onset there was a contract of agency through an oral agreement. Reyes was bound to pay the principal all he received from the collecting dues as stated by Blackman. In view of the discrepancy in the evidence the court was not disposed to set up judgment as superior to that of the trial court. Also conceding that Reyes was to receive 20%, this unless some contrary and express stipulation was included would not entitle him in advance to 20% of the amount actually collected. The right to receive a commission of either 10% or 20% did not make to hold out any sum he chose. Since for all practical purposes the agency was terminated the agent was under the obligation to turn over to the principal the amount collected, minus his commission or that amount.

which had been sold to Bosque and Ruiz by the plaintiff, acting through her attorney in fact, one Manuel Pirretas y Monros. The case stemmed from the following: 1. Prior to September 17, 1919, the plaintiff Villa was the owner of a printing establishment and bookstore located at Escolta, Manila, and known as La Flor de Cataluna, Viuda de E. Bota, with the machinery, motors, bindery, type material furniture, and stock appurtenant thereto. Upon the date stated, the plaintiff, then and now a resident of Barcelona, Spain, acting through Manuel Pirretas, as attorney in fact, sold the establishment above-mentioned to the defendants Guillermo Garcia Bosque and Jose Pomar Ruiz, residents of the City of Manila, for the stipulated sum of P55,000. 2. In 1920, Pirretas absented himself from the Philippine Islands on a prolonged visit to Spain; and in contemplation of his departure he executed a document purporting to be a partial substitution of agency, whereby he transferred to "the mercantile entity Figueras Hermanos, or the person, or persons, having legal representation of the same," the powers that had been previously conferred on Pirretas by the plaintiff "in order that," so the document runs, "they may be able to effect the collection of such sums of money as may be due to the plaintiff by reason of the sale of the bookstore and printing establishment already mentioned, issuing for such purpose the receipts, vouchers, letters of payment, and other necessary documents for whatever they shall have received and collected of the character indicated." 3. When the time came for the payment of the second installment and accrued interest due at the time, the purchasers were unable to comply. Figueras Hermanos, acting as attorney in fact for the plaintiff, an agreement was Afterwhich, another document was entered (Exhibit 1) whereby the partnership in said document it stated that Bosque is indebted to Villa in the amount of 32k which France and Goulette are bound as joint and several sureties, and that the latter’s partnership had transferred all its assets to the Bota Printing Company. 4. Rosa is now alleging that Figueras had no authority to execute the contract containing the release of Guillermo from the liability, and that she had not ratified the same. Defendants argue otherwise, using the agreement as a novation releasing him from personal liability. CFI’s ruling: The defendant Ruiz put in no appearance, and after publication judgment by default was entered against him. The other defendants answered with a general denial and various special defenses. The trial judge gave judgment in favor of the plaintiff, requiring all of the defendants, jointly and severally, to pay to the plaintiff the sum of P19,230.01, as capital, with stipulated interest, plus the further sum of P1,279.70 as interest already accrued and unpaid upon the date of the institution of the action, with interest. ISSUE:

ROSA VILLA MONNA, plaintiff-appellee, vs. GUILLERMO GARCIA BOSQUE, ET AL., defendants. GUILLERMO GARCIA BOSQUE, F. H. GOULETTE, and R. G. FRANCE, appellants.

FACTS:

W/N Figueras had actual authority whatever to release the sureties or to make a novation of the contract without their additional guaranty

HELD:

This action was instituted in the Court of First Instance of Manila by Rosa Villa y Monna, widow of Enrique Bota, for the purpose of recovering from the defendants, Guillermo Garcia Bosque and Jose Romar Ruiz, as principals, and from the defendants R. G. France and F. H. Goulette, as solidary sureties for said principals, the sum of P20,509.71, with interest, as a balance alleged to be due to the plaintiff upon the purchase price of a printing establishment and bookstore located at Escolta, Manila,

NO. The partial substitution of agency (Exhibit B to amended complaint) purports to confer on Figueras Hermanos or the person or persons exercising legal representation of the same all of the powers that had been conferred on Pirretas by the plaintiff in the original power of attorney. This original power of attorney is not before the SC, but assuming, as is stated in Exhibit B, that the document contained a general power to Pirretas to sell the business known as La Flor de Cataluña upon conditions to be

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fixed by him and power to collect money due to the plaintiff upon any account, with a further power of substitution, yet it is obvious upon the face of the act of substitution (Exhibit B) that the sole purpose was to authorize Figueras Hermanos to collect the balance due to the plaintiff upon the price of La Flor de Cataluña, the sale of which had already been affected by Pirretas. The act of substitution conferred no authority whatever on M. T. Figueras as an individual. In view of these defects in the granting and exercise of the substituted power, we agree with the trial judge that the Exhibit 1 is not binding on the plaintiff. Figueras had no authority to execute the contract of release and novation in the manner attempted; and apart from this it is shown that in releasing the sureties Figueras acted contrary to instructions. From this it is obvious that Figueras had no actual authority whatever to release the sureties or to make a novation of the contract without their additional guaranty. As a result of our examination of the case the SC find no error in the record prejudicial to any of the appellants, and the judgment appealed from was affirmed, So ordered, with costs against the appellants. DBP V. CA An agent acting as such is not personally liable unless he expressly binds himself or exceeds his authority. FACTS:  Juan Dans, together with his wife Candida, applied for a loan of P500K with the DBP. He was 76 at that time. He was advised by DBP to obtain a mortgage redemption insurance with the DBP Mortage Redemption Insurance Pool (DBP MRI pool)  The loan was approved at a reduced amount of P300K. DBP also deducted P1,476 as payment of the MRI premium. After than, Dans accomplished the application for Insurance and Health statement for the DBP MRI pool. The premium minus a 10% service fee was credited by DBP to the account of DBP MRI pool.  And then, Dans died of cardiac arrest. DBP MRI Pool notified DBP that he was not eligible for MRI coverage for being over the acceptance age limit of 60 years at the time of the application.  DBP informed Candida of the disapproval of her late husband’s application and offered to refund that premium of P1,476 but she refused. She also refused the ex gratia settlement of P30,000.  Candida, as administratix of her late husband’s estate, filed a complaint for collection of sum of money with damages. The RTC rules in her favor but absolved DBP MRI Pool from liability for there was no privity of contract between it and the deceased. The RTC also found DBP in estoppel for having led Dans into applying despite knowledge of the age ineligibility. The CA affirmed thus the case at bar. ISSUE: W/N DBP is liable HELD: YES  In dealing with Dans, DBP was wearing 2 hats, one, that of a lender and two that of an insurance agent. It required the borrower, as a matter of policy and practice, to secure MRI coverage but instead of allowing Dans to look for his own insurance carrier, DBP compelled him to apply with the DBP MRI Pool. It also deducted from the proceeds of the loan, MRI premium and deducted from this 10% as service fee for the application form and his health statement. As an insurance agent, DBP made Dans go through the motion of applying for said insurance despite knowing that his application would never be approved for being over the age limit.  Art. 1897 provides that the agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limit of his authority without giving such party sufficient notice of his powers.  DBP exceeded the scope of its authority when it accepted Dan’s application for it is not authorized to accept applications for MRI when its clients are over 60 years of age. Also there is no showing that Dans knew of the limitation on DBP’s authority to solicit applications for MRI. If the 3rd person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and the 3rd person has been deceived by the nondisclosure by the agent, the latter is liable for damages to him.  But DBP cannot be liable for the entire value of the insurance policy. Considering his advanced age, there is no absolute certainty that Dans could obtain an insurance coverage from

another company since he died almost immediately. But Dans is entitled to moral damages. Philippine Products Company vs Primateria Societe Anonyme Pour Le Commerce Exterieur 15 SCRA 301 – Business Organization – Corporation Law – Liability of Foreign Corporations and their Agents Primateria Societe Anonyme Pour Le Commerce Exterieur (Primateria Zurich, a sociedad anonima formed in Zurich), through Alexander Baylin, entered into an agreement with Philippine Products Company (PPC) whereby it was agreed that from 1951 to 1953, PPC shall ship copra products abroad. Apparently, Primateria Zurich was not licensed by the Securities and Exchange Commission to do business in the Philippines. Primateria Zurich also failed to pay its obligations amounting to P31,009.71. PPC sued Primateria Zurich and it impleaded Baylin, Primateria Philippines, and one Jose Crame, the latter three being impleaded as agents of Primateria Zurich. The lower court ruled in favor PPC but it absolved Baylin, Crame, and Primateria Philippines. PPC appealed as it insists that Baylin et al should be liable as agents because under Section 68 and 69 of the Corporation Law, the agents of foreign corporations not licensed to transact in the Philippines shall be personally liable for contracts made in their (foreign corporation’s) behalf. ISSUE: Whether or not PPC is correct. HELD: No. PPC was not able to prove that Primateria Zurich, a sociedad anonima, is a foreign corporation. And as a sociedad anonima, Primateria Zurich is not a corporation under our Corporation Law. As such, Sections 68 and 69 cannot be invoked in order to make the alleged agents of Primateria Zurich be liable. PPC will have to enforce the judgment against Primateria Zurich alone.

NPC V. NATIONAL MERCHANDISING CORP. The agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. FACTS:  National Merchandising Corp, as representative of International Commodities Corp, and National Power Corp (NPC) executed a contract for the purchase by NPC of 4000 long tons of crude sulfur for its Ma. Cristina Fertilizer Plant. Domestic Insurance Co. executed a performance bond in the sum of P90,143.20 to guarantee the Namerco’s obligation.  In the contract of sale, it was stipulated that delivery should be made within 60 days from the establishment on Namerco’s favor of a letter of credit otherwise it would be liable for the payment of liquidated damages.  The letter of credit was opened and was received by cable by the New York firm thereby making Jan. 15, 1957 the deadline for the delivery of the sulfur. The New York supplier was not able to deliver due to its inability to secure shipping space. Because of this from Jan 20-26, there was a shutdown of NPC’s fertilizer plant because there was no sulfur. It could not produce fertilizer.  NPC advices Namerco that under Art. 9 of the contract of sale, “non-availability of bottom or vessel” was not a fortuitous event that would excuse non-performance. The Gov’t Corporate Counsel informed Namerco that it rescinded the contract of sale and demanded payment of P360, 572.80. NPC sued for recovery of stipulated liquidated damages against the New York firm, Namerco and the Domestic Insurance Company.  The CFI dismissed the case as to the New York firm for lack of jurisdiction because it was not doing business in the Philippines. It then ordered Namerco and the Domestic Insurance Corp to pay solidarily reduced liquidated damages. Both parties appealed to the SC which was consolidated thus the case at bar. ISSUE: W/N Namerco can be held liable HELD: YES  Art. 1897 provides that an agent who exceeds the limits of his authority without giving the party with whom he contracts sufficient notice of his powers is personally liable to such party. This provision is complemented by Art. 1898 in which

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it states that if the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal.  Namerco acted beyond the bounds of its authority therefore it is personally liable to the party with whom he contracted. Namerco’s principal expressly provided instructions that the sale would be subject to the availability of a steamer. Even before the signing of the contract of sale, Namerco was aware that its principal was having difficulty in booking shipping space. It was also advised not to sign the contract unless it would assume full responsibility for the shipment. However, the president of Namerco had no choice but to sign for NPC would forfeit the bidder’s bond if the contract was not formalized. Also NPC was not aware of the limitations on the powers of Namerco. Since Namerco exceeded the limits of its authority, it virtually acted in its own name and is not being held liable under the contract of sale and is bound by the stipulation for liquidated damages.

ALBERT VS. UNIVERSITY PUBLISHING FACTS: Mariano Albert entered into a contract with University Publishing Co., Inc. through Jose M. Aruego, its President, whereby University would pay plaintiff for the exclusive right to publish his revised Commentaries on the Revised Penal Code. The contract stipulated that failure to pay one installment would render the rest of the payments due. When University failed to pay the second installment, Albert sued for collection and won. However, upon execution, it was found that the records of this Commission do not show the registration of UNIVERSITY PUBLISHING CO., INC., either as a corporation or partnership. Albert petitioned for a writ of execution against Jose M. Aruego as the real defendant. University opposed, on the ground that Aruego was not a party to the case. ISSUE: WON University Publishing Co., Inc. is an existing corporation with an independent juridical personality despite not being registered with the SEC.

HELD: No. On account of the non-registration it cannot be considered a corporation, not even a corporation de facto (Hall vs. Piccio, 86 Phil. 603). It has therefore no personality separate from Jose M. Aruego; it cannot be sued independently. In the case at bar, Aruego represented a non-existent entity and induced not only Albert but the court to believe in such representation. He signed the contract as “President” of “University Publishing Co., Inc.,” stating that this was “a corporation duly organized and existing under the laws of the Philippines”. “A person acting or purporting to act on behalf of a corporation which has no valid existence assumes such privileges and obligations and becomes personally liable for contracts entered into or for other acts performed as such agent.” Aruego, acting as representative of such non-existent principal, was the real party to the contract sued upon, and thus assumed such privileges and obligations and became personally liable for the contract entered into or for other acts performed as such agent. The Supreme Court likewise held that the doctrine of corporation by estoppel cannot be set up against Albert since it was Aruego who had induced him to act upon his (Aruego’s) willful representation that University had been duly organized and was existing under the law.

EUGENIO V. CA

As far as third persons are concerned, an act is deemed to have been performed within the scope of the agent’s authority, if such is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to the understanding between the principal and his agent. FACTS: Nora Eugenio was a dealer of Pepsi. She had one store in Marikina but had a regular charge account in Q.C. And Muntinlupa. Her husband Alfredo used to be a route manager for Pepsi in its Q.C. Plant. Pepsi filed a complaint for a sum of money against Eugenio spouses. since according to them the spouses (1) had an outstanding balance since it purchased and received on credit various products from both its Q.C. and Muntinlupa plant and (2) had an unpaid obligation for the loaned “empties” from Pepsi. They contend that the total outstanding account was P94,651.xx. Eugenio's in their defense presented four Trade Provisional Receipts (TPR) allegedly issued to and received by them from Pepsi's Route Manager (Malate Warehouse) Jovencio Estrada showing that they paid a total sum of P80,500.xx. They also claim that the signature of Nora Eugenio in a Sales Invoice (85366) for the amount of P5,631.xx which was included in the computation of their debt was falsified. Therefore, without these errors, petitioner contend that (1) they do not have any outstanding debt, and (2) it is Pepsi who owes them P3,546.02. RTC found in favor of Pepsi. CA affirmed the decision. ISSUE: W/N the amounts in the TPR should be credited in favor of the spouses. HELD: CA decision is annulled and set-aside. Pepsi is ordered to pay Eugenio. Background: Eugenio submitted the TPR's to Atty. Rosario (Pepsi's lawyer). Thereafter, Rosario ordered Daniel Azurin (asst.personnel manager) to conduct an investigation to verify the claim of the petitioners. According to Azurin, Estrada denied that he issued and signed the TPR's. Azurin testified to this in Court (However, Estrada never did. He failed to appear and was never found. Therefore, his testimony- as told by Azurinis barred by the Hearsay Evidence Rule). Furthermore, the “investigation” conducted was really more of an interview without any safeguards and did not give Eugenio opportunity to object or cross-examine Estrada. The other points of Estrada (and Pepsi) were all invalid since Estrada was nowhere to be found and Pepsi failed to comply with the pertinent rules for the admission of the evidence by which it sought to prove its contentions. Pepsi therefore was unable to rebut the aforestated presumptions in favor of valid payment by petitioners, In relation to Agency: Assuming in this case that Pepsi never received the amounts reflected in the TPR's, Pepsi still failed to prove that Estrada (its duly authorized agent) did not receive the amounts. In so far as Eugenio is concerned, their obligation is extinguished when they paid Estrada using Pepsi's official receipt. The substantive law is that payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it. *TPR: Trade Provisional Receipts are bound and given in booklets to the company sales representatives, under proper acknowledgement by them and with a record of the distribution thereof. After every transaction, when a collection is made the customer is given by the sales representative a copy of the TPR, that is, the triplicate copy or customer's copy, properly filled up to reflect the completed transactions. All unused TPR's,as well as the collections made, are turned over by the sales representative to the appropriate company officer. GREEN VALLEY V. IAC In an agency to sell, the agent is liable to pay the principal for goods sold by the agent without the principal’s consent. 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.

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FACTS: In 1969, GREEN VALEY POULTRY AND ALLIED PRODUCTS entered into a letter agreement with SQUIBB & SONS PHILIPPINE CORPORATION. The details of the agreement state that Green Valley will be the nonexclusive distributor of the products of Squibb Veterinary Products. As its distributor Green Valley is entitled to 10% discount on Squibb’s whole sale price and catalogue price. Green Valley is also limited to selling Squibb’s products to central and northern Luzon. Payment for purchases from Squibb will be due 60 days from date of invoice, etc. For goods delivered to Green Valley but unpaid, Squibb filed a suit to collect. Squibb argues that their relationship with Green Valley is a mere contract of sale as evidenced by the stipulation that Green Valley was obligated to pay for the goods received upon the expiration of the 60-day credit period. Green Valley counters that the relationship between itself and Squibb is that of an agency to sell. ISSUE: W/N Green Valley is an agent of Squibb. RULING: Whether viewed as an agency to sell or as a contract of sale GREEN VALLEY is liable to Squibb for the unpaid products. If it is a contract of sale then the Green Valley is liable by just merely enforcing the clear words of the contract. If it is an agency then Green Valley is liable because it sold on credit without authority from its principal. The Civil Code says: Art. 1905 – 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. Metropolitan Bank & Trust Company vs. Court of Appeals G.R. No. 88866 February, 18, 1991 Facts: Eduardo Gomez opened an account with Golden Savings and deposited 38 treasury warrants. All warrants were subsequently indorsed by Gloria Castillo as Cashier of Golden Savings and deposited to 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: 1. Whether or not Metrobank can demand refund agaist Golden Savings with regard to the amount withdraws to make up with the deficit as a result of the dishonored treasury warrants. 2. Whether or not treasury warrants are negotiable instruments Held: No. Metrobank is negligent in giving Golden Savings the impression that the treasury warrants had been cleared and that, consequently, it was safe to allow Gomez to withdraw. Without such assurance, Golden Savings would not have allowed the withdrawals. Indeed, Golden Savings might even have incurred liability for its refusal to return the money that all appearances belonged to the depositor, who could therefore withdraw it anytime and for any reason he saw fit. It was, in fact, to secure the clearance of the treasury warrants that Golden Savings deposited them to its account with Metrobank. Golden Savings had no clearing facilities of its own. It relied on Metrobank to determine the validity of the warrants through its own services. The proceeds of the warrants were withheld from Gomez until Metrobank allowed Golden Savings itself to withdraw them from its own deposit. Metrobank cannot contend that by indorsing the warrants in general, Golden Savings assumed that they were genuine and in all respects what they purport to be,” in accordance with Sec. 66 of NIL. The simple reason that NIL is not applicable to non negotiable instruments, treasury warrants. No. The treasury warrants are not negotiable instruments. Clearly stamped on their face is the word: non negotiable.” Moreover, and this is equal significance, it is indicated that they

are payable from a particular fund, to wit, Fund 501. An instrument to be negotiable instrument must contain an unconditional promise or orders to pay a sum certain in money. As provided by Sec 3 of NIL an unqualified order or promise to pay is unconditional though coupled with: 1st, an indication of a particular fund out of which reimbursement is to be made or a particular account to be debited with the amount; or 2nd, a statement of the transaction which give rise to the instrument. But an order to promise to pay out of particular fund is not unconditional. The indication of Fund 501 as the source of the payment to be made on the treasury warrants makes the order or promise to pay “not conditional” and the warrants themselves non-negotiable. There should be no question that the exception on Section 3 of NIL is applicable in the case at bar. SET C Prudential Bank vs. CA Facts: The complaint in this case arose when private respondent Aurora F. Cruz, with her sister as co-depositor, invested P200, 000.00 in Central Bank bills with the Prudential Bank at its branch in Quezon Avenue, Quezon City, on June 23, 1986. Susan Quimbo, the Bank employee assisted her on all her dealings. One of such dealing involves Cruz withdrawal from her Savings Account No. 2546 and applying such amount to the investment with the same bank. Cruz was asked to sign a Withdrawal Slip for P196, 122.98, representing the amount to be re-invested after deduction of the prepaid interest. Quimbo explained this was a new requirement of the bank. Several days later, Cruz received another Confirmation of Sale and a copy of the Debit Memo coming from Quimbo. On October 27, 1986, Cruz returned to the bank and sought to withdraw her P200, 000.00. After verification of her records, however, she was informed that the investment appeared to have been already withdrawn by her on August 25, 1986. There was no copy on file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo. Quimbo herself was not available for questioning as she had not been reporting for the past week. Prompted by the event Cruz's reaction was to file a complaint for breach of contract against Prudential Bank in the Regional Trial Court of Quezon City. She demanded the return of her money with interest, plus damages and attorney's fees. Cruz won the case in both the RTC and CA. Issue: Does the fault of bank employee bind the Bank particularly in cases where the bank employee created blunder or, worse, intentionally cheat the depositor? Held: The liability of the principal for the acts of the agent is not debatable. Law and jurisprudence are clearly and absolutely against the petitioner. Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He who does a thing by an agent is considered as doing it himself." This rule is affirmed by the Civil Code thus: Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of his authority. Art. 1911. 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. Conformably, we have declared in countless decisions that the principal is liable for obligations contracted by the agent. The agent's apparent representation yields to the principal's true representation and the contract is considered as entered into between the principal and the third person. WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED. G.R. No. 88539 October 26, 1993 KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner, vs. THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents. FACTS: Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap. Valiant Investment Associates delivered various kinds of paper products to a certain Tan. The deliveries were made by Valiant pursuant to orders allegedly placed by Tiac who was then employed in the Binondo office of petitioner. Upon delivery, Tan paid for the merchandise by issuing several checks payable to

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cash at the specific request of Tiac. In turn, Tiac issued nine (9) postdated checks to Valiant as payment for the paper products. Unfortunately, sad checks were later dishonored by the drawee bank. Thereafter, Valiant made several demands upon petitioner to pay for the merchandise in question, claiming that Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with Valiant and Tan. Petitioner denied any involvement in the transaction entered into by Tiac and refused to pay Valiant.

in good faith, relied upon them. Taken in this light,. petitioner is liable for the transaction entered into by Tiac on his behalf. Thus, even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had full powers (Article 1911 Civil Code), as in the case at bar. Finally, although it may appear that Tiac defrauded his principal (petitioner) in not turning over the proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss.

Left with no recourse, private respondent filed an action against petitioner for the collection of sum of money representing the price of the merchandise. After due hearing, the trial court dismissed the complaint against petitioner for lack of merit. On appeal, however, the decision of the trial court was modified, but was in effect reversed by the CA. CA ordered petitioner to pay Valiant with the sum plus interest, AF and costs. ISSUE: WON Tiac possessed the required authority from petitioner sufficient to hold the latter liable for the disputed transaction HELD: YES

As to the merits of the case, it is a well-established rule that one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be It matters not whether the representations are intentional or merely negligent so long as innocent, third persons relied upon such representations in good faith and for value. 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 tortfeasors whose liability is joint and solidary. It is evident from the records that by his own acts and admission, petitioner held out Tiac to the public as the manager of his store in Binondo. More particularly, petitioner explicitly introduced to Villanueva, Valiant’s manager, as his (petitioner’s) branch manager as testified to by Villanueva. Secondly, Tan, who has been doing business with petitioner for quite a while, also testified that she knew Tiac to be the manager of the Binondo branch. Even petitioner admitted his close relationship with Tiu Huy Tiac when he said that they are “like brothers” There was thus no reason for anybody especially those transacting business with petitioner to even doubt the authority of Tiac as his manager in the Binondo branch.

Tiac, therefore, by petitioner’s own representations and manifestations, became an agent of petitioner by estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon (Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice of the other party who, Page 6 of 6 Agency Digests Set B and C