C.

EFFECT OF AGENCY: Integration and Extension

1. Authority to Act
Doles v. Angeles

Though the fact or extent of authority of the

agents may not, as a general rule, be established from
the declarations of the agents alone, if one professes
to act as agent for another, he may be estopped to
deny his agency both as against the asserted principal
and the third person interested in the transaction in
which he is engaged.
2. Agent Not Real Party-in-Interest
Uy and Roxas v. CA

The fact that the agent did not obtain his

commissions or recoup his advances because of the
non-performance of the contract does not entitle him
to file an action against the buyer where he does not
appear as a beneficiary of a stipulation pour autrui
under Article 1311 of the Civil Code.
FACTS:
William Uy and Rodel Roxas (petitioners) are
agents authorized to sell 8 parcels of land in Benguet.
Uy and Roxas offered to sell the parcels of land to NHA
for a housing project.
In 1989, NHA passed a resolution approving the
acquisition of said lands, and they executed Deeds of
Absolute Sale. HOWEVER, only 5 out of 8 lands were
paid for by NHA because of a report from DENR that
the remaining area is located at an active landslide
area and are therefore not conducive for housing.
1991, NHA issued a resolution cancelling the sale
of the remaining lands and offered P1.225 million to
the landowners as daos perjuicios.
1992, Uy and Roxas filed a complaint for
damages against NHA.
RTC: cancellation was justified, but awarded the
amount offered by NHA as damages.
CA: affirmed the decision, but deleted the award.

ISSUES:
Whether or not Uy and Roxas are real parties in interest;
Whether or not, as agents, Uy and Roxas can maintain
an action against a third party.
HELD: No, they are not parties in interest because theyre
merely agents of their principal.
RATIO:

An action shall be prosecuted in the name of

the party who, by the substantive law, has the right
sought to be enforced. Uy and Roxas are not
parties to the contract of sale between their
principals and NHA. They are mere agents of the
owners of the land subject of the sale.
As agents, they only render some service or
do something in representation or on behalf of
their principals. The rendering of such service did
not make them parties to the contracts of sale
executed in behalf of the latter.
Since a contract may be violated only by the
parties thereto as against each other, the real
parties-in-interest, either as plaintiff or defendant,
in an action upon that contract must, generally,
either be parties to said contract.
Uy and Roxas, likewise, have not shown that
they are assignees of their principals to the subject
contracts.
Angeles v. PNR

Where agency exists, the third partys (in

this case, PNRs) liability on a contract is to the
principal and not to the agent and the
relationship of the third party to the principal is
the same as that in a contract in which there is no
agent.
FACTS:
Respondent Philippine National Railways
(PNR) informed a certain Gaudencio Romualdez
(Romualdez, hereinafter) that it has accepted the
latters offer to buy the PNRs scrap/unserviceable
rails located in Del Carmen and Lubao, Pampanga

at P1,300.00 and P2,100.00 per metric ton,

respectively, for the total amount of P96,600.00.
Romualdez paid the purchase price and
addressed a letter to Atty. Cipriano Dizon, PNRs
Acting Purchasing Agent. The letter authorized
LIZETTE R. WIJANCO to be his (Romualdez) lawful
representative in the withdrawal of the
scrap/unserviceable rails awarded to him.
Furthermore, the original copy of the award which
indicates the waiver of rights, interest and
participation in favor of Lizette R. Wijanco was also
given.
The Lizette R. Wijanco mentioned in the
letter was petitioner's now deceased wife. That
very same day, Lizette requested the PNR to
transfer the location of withdrawal for the reason
that the scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga were not ready for
hauling. The PNR granted said request and allowed
Lizette to withdraw scrap/unserviceable railsin
Murcia, Capas and San Miguel, Tarlac instead.
However, PNR subsequently suspended the
withdrawal in view of what it considered as
documentary discrepancies coupled by reported
pilferages of over P500,000.00 worth of PNR scrap
properties in Tarlac.
Consequently, the spouses Angeles
demanded the refund of the amount of
P96,000.00. The PNR, however, refused to pay,
alleging that as per delivery receipt duly signed by
Lizette, 54.658 metric tons of unserviceable rails
had already been withdrawn. The spouses Angeles
filed suit against the PNR for specific performance
and damages before the Regional Trial Court.
Lizette W. Angeles passed away and was
substituted by her heirs, among whom is her
husband, herein petitioner Laureno T. Angeles.
RTC: Lizette was merely a representative of
Romualdez in the withdrawal of scrap or
unserviceable rails awarded to him and not an
assignee to the latter's rights with respect to the
award.

Spouses Angeles are not the real parties-ininterest, rendered judgment dismissing their
complaint for lack of cause of action.
CA: dismissed the appeal and affirmed that of the
trial court.
ISSUE:
Whether or not Lizette has a legal standing to sue and
appear in this case
HELD:
No. Lizette was not an assignee, but merely an
agent whose authority was limited to the
withdrawal of the scrap rails, hence, without
personality to sue.
RATIO:

Normally, the agent has neither rights nor

liabilities as against the third party. He cannot thus
sue or be sued on the contract. Since a contract
may be violated only by the parties thereto as
against each other, the real party-in-interest,
either as plaintiff or defendant in an action upon
that contract must, generally, be a contracting
party.

The legal situation is, however, different

where an agent is constituted as an assignee. In
such a case, the agent may, in his own behalf, sue
on a contract made for his principal, as an assignee
of such contract.
The rule requiring every action to be
prosecuted in the name of the real party-ininterest recognizes the assignment of rights of
action and also recognizes that when one has a
right assigned to him, he is then the real party-ininterest and may maintain an action upon such
claim or right.
Ong v. CA
Law of agency governing civil cases has no
application in criminal cases. When a person
participates in the commission of a crime, he

cannot escape punishment on the ground that he

simply acted as an agent of another party.
FACTS:
Edward Ong (Ong), in his capacity as an officer
of ARMAGRI International Corporation(ARMAGRI),
executed two trust receipts acknowledging receipt
from the Solid Bank Corp. of goods valued at
P2,532,500 and P2,050,000.
In addition, he bounded himself to any
increase or decrease of interest rate in case Central
Bank floated rates and to pay any additional
penalty until the trust receipts are fully paid.
When the trust receipts became due and
demandable, ARMAGRI failed to pay or deliver the
goods to the Bank despite several demand letters.
RTC: convicted Ong of two counts of estafa for
violation of the Trust Receipts Law.
CA: Ong posited that he is no longer liable for
Estafa since a compromise agreement was entered
into by him and ARMGARI.
ISSUE:
Whether or not Ong may be held liable for estafa
as he was only acting as agent

HELD:
Yes. Petitioner is a person responsible for violation
of the Trust Receipts Law. The Trust Receipts Law
expressly makes the corporations officers or
employees or other persons therein responsible
for the offense liable to suffer the penalty of
imprisonment.
RATIO:

The Trust Receipts Law recognizes the

impossibility of imposing the penalty of
imprisonment on a corporation. Hence, if the
entrustee is a corporation, the law makes the
officers or employees or other persons responsible
for the offense liable to suffer the penalty of

imprisonment.
The
reason
is
obvious:
corporations, partnerships, associations and other
juridical entities cannot be put to jail. Hence, the
criminal liability falls on the human agent
responsible for the violation of the Trust Receipts
Law.

The Trust Receipts Law is violated whenever

the entrustee fails to: (1) turn over the proceeds of
the sale of the goods, or (2) return the goods
covered by the trust receipts if the goods are not
sold. The mere failure to account or return gives
rise to the crime which is malum
prohibitum. There is no requirement to prove
intent to defraud.
PNB v. Ritratto
In a foreclosure of a mortgage undertaken by
an attorney-in-fact (agent) for his principal
(mortgagee), the validity of a loan contract
entered into between the mortgagee and
mortgagor cannot be raised against the agent as
the matter is solely between his principal and the
other party (mortgagor) to the contract.
FACTS:
Philippine National Bank is a domestic
corporation organized and existing under
Philippine law. Ritratto Group, Inc., Riatto
International, Inc. and Dadasan General
Merchandise are domestic corporations, likewise,
organized and existing under Philippine law.
On 1996 PNB International Finance Ltd. (PNBIFL), a subsidiary pf PNB, established a branch and
operated in Hong Kong, where it extended letters
of credit to Rittrato, in increasing amoubts, with
the final total of USD1.4M in 1998. The loan was
secured by a real estate mortgage of four parcel of
lands in Makati.
However, as of 1998, Rittrato's outstanding
balance is stil at USD1.4M. Pursuant to the terms
of their real estate mortgage, PNB-ICL thru its
attorney-in-fact PNB caused the foreclosure and
auction of the real estates on 1999.

Ritratto filed for a writ of preliminary

injunction with RTC as against PNB, where they
were granted and thus issued a TRO. PNB then filed
motion to dismiss but was likewise rejected.
ISSUE:
Whether or not PNB is a party to the case being
merely the attorney-in-fact authorized to
enforce ancillary contract
HELD:
No. PNB is just the attorney-in-fact for PNB-IFL. It
is not privy to the loan contracts entered into by
respondents and PNB-IFL, hence, not a party to the
case.
RATIO:
As a rule, a suit as against the agent is not a suit
against the principal. For the suit to prosper, the
petitioner must implead the proper party to the
case.
The mere fact that a corporation owns all of
the stocks of another corporation, taken alone is
not sufficient to justify their being treated as one
entity. The courts may, in the exercise of judicial
discretion, step in to prevent the abuses of
separate entity privilege and pierce the veil of
corporate entity - doctrine developed to address
situations where the separate corporate
personality of a corporation is abused or used for
wrongful purposes.
3. Notice to Agent is Notice to Principal
Francisco v. GSIS

If a corporation knowingly permits one of its

officers, or any other agent, to do acts within the
scope of an apparent authority, and thus holds him
out to the public as possessing power to do those
acts, the corporation will, as against anyone who
has in good faith dealt with the corporation
through such agent, be estopped from denying his
authority. At any rate, even if the compromise
agreement is void because of the unauthorized
telegram, GSISs silence and acceptance of the

subsequent remittances of the Franciscos ratified

the compromise agreement.
Sunace International v. NLRC
The theory of imputed knowledge ascribes the
knowledge of the agent to the principal, not the
other way around. The knowledge of the principal
cannot be imputed to his agent.
Cosmic Lumber v. CA
When the sale of a piece of land or any interest
thereon is through an agent, the authority of the
latter shall be in writing; otherwise, the sale should
be void.

For the principal to confer the right upon an

agent to sell real estate, a power of attorney must
so express the powers of the agent in clear and
unmistakable language. When there is any
reasonable doubt that the language so used
conveys such power, no such construction shall be
given the document.
New Life Enterprises v. CA

The knowledge of such insurance by the

insurer's agents, even assuming the acquisition
thereof by the former, is not the "notice" that
would estop the insurers from denying the claim.

A rule in insurance law that any information

material to the transaction, either possessed by
the agent at the time of the transaction or acquired
by him before its completion, is deemed to be the
knowledge of the principal, at least so far as the
transaction is concerned, even though in fact the
knowledge is not communicate.
4. Bad Faith of the Agent is Bad Faith of the
Principal
Caram v. Laureta
A person may make an offer to enter into a
contract through an agent and such offer is
accepted from the time acceptance is
communicated to the agent who is deemed
authorized to receive the acceptance. Applying
the same principle, where an agent purchased

property in bad faith, the principal should also be

deemed a purchaser in bad faith.
FACTS:
Marcos Mata conveyed an agricultural land in
favor of respondent, Claro Laureta. Despite of the
fact that the Deed of Absolute Sale was not
registered, the former delivered to respondent
peaceful and lawful possession of the premises of
the land together with the pertinent documents
thereof, such as, Original Certificate of title, tax
declarations receipts and other papers related
thereto.
Subsequently, the same land was sold by
Mata to herein plaintiff, Fermin Caram through his
agents Irispe and Atty. Aportadera who allegedly
had knowledge of the existence of unregistered
prior sale between Mata and Respondent as the
time of second sale the respondent was already in
possession of the land. Nevertheless, the second
sale was properly registered to Registry of
Property and thereafter a new Certificate of Title
was issued in favor of plaintiff. The plaintiff denied
any knowledge of the encumbrances, conveyance
and alienation of the property in favor of the
respondent.
ISSUE:
Whether or not the purchase of property in
bad faith by Irispe and Atty. Aportadera should
also impugn Plaintiff?
HELD:
Yes. There is no doubt then that Irespe and
Aportadera, acting as agents of Caram, and the
said agents purchased the property of Mata in bad
faith.
RATIO:
Applying the principle of agency, Caram as
principal, should also be deemed to have acted in
bad faith. Furthermore, Article 1544 of the New
Civil Code provides that:

Art. 1544.
If the same thing should
have been sold to different vendees, the
ownership shall be transferred to the person who
may have first taken possession thereof in good
faith, if it should be movable property.
Should it be immovable property, the
ownership shall belong to the person acquiring it
who in good faith first recorded it in the Registry
of Property.
Should there be no inscription, the ownership
shall pertain to the person who in good faith was
first in the possession; and, in the absence
thereof, to the person who presents the oldest
title, provided there is good faith.
5. Extinguished by Death
Rallos v. Felix Go Chan
No one may contract in the name of another
without being authorized by the latter, or unless
he has by law a right to represent him.

The juridical tie between the principal and

the agent is severed ipso jure upon the death of
either without necessity for the heirs of the fact
to notify the agent of the fact of the death of the
former.
The death of the principal effects
instantaneous and absolute revocation of the
authority of the agent unless the power be
coupled with interest.

D. Nature of Agency: General and Special

1. Distinguishing General Agency and Agency
Couched in General Terms
a. As to Scope: General Agency
Article 1876 - An agency is either
general or special. The former
comprises all the business of the
principal. The latter, one or more
specific transactions.
Dominion Insurance v. CA
When a special power of attorney is required
for the agent to do a certain act, the agent, in the
performance of such act, must comply with the
specifications embodied in the special power of
attorney giving him authority to do such.
FACTS:
Rodolfo Guevarra instituted a civil case for the
recovery of a sum of money against Dominion
Insurance. He sought to recover P156,473.90,
which he claimed to have advanced in his capacity
as manager of Dominion to satisfy claims filed by
Dominions clients. Dominion denied any liability
to Guevarra and asserted a counterclaim for
premiums allegedly unremitted by the latter.
The pre-trial conference never pushed
through despite being scheduled and postponed
nine times over the course of six months. Finally,
the case was called again for pre-trial and
Dominion and counsel failed to show up. The trial
court declared Dominion in default and denied any
reconsideration.
RTC ruled that Dominion was to pay Guevarra
the P156,473.90 claimed as the total amount
advanced by the latter in the payment of the
claims of Dominions clients. The CA affirmed.
ISSUES:
Whether or not Guevarra acted within his
authority as agent for Dominion
Whether or not Guevarra is entitled to
reimbursement of the amounts

HELD:

No. A perusal of the Special Power of

Attorney would show that Dominion and
Guevarra intended to enter into a principal-agent
relationship. Despite the word special, the
contents of the document reveal that what was
constituted was a general agency. The agency
comprises all the business of the principal, but,
couched in general terms, is limited only to acts of
administration. A general power permits the agent
to do all acts for which the law does not require a
special power.
Art. 1878 enumerates the instances when a special
power of attorney is required, including (1) to
make such payments as are not usually considered
as acts of administration; (15) any other act of
strict dominion.
The payment of claims is not an act of
administration. The settlement of claims is not
included among the acts enumerated in the Special
Power of Attorney, neither is it of a character
similar to the acts enumerated therein. A special
power of attorney would have been required
before Guevarra could settle the insurance claims
of the insured.
Guevarras authority to settle claims is embodied
in the Memorandum of Management Agreement
which enumerated the scope of Guevarras duties
and responsibilities. However, the Memorandum
showed the instruction of Dominion that payment
of claims shall come from a revolving fund. Having
deviated from the instructions of the principal, the
expenses that Guevarra incurred in the settlement
of the claims of the insured may not be reimbursed
from Dominion.
Yes. However, while the law on agency prohibits
Guevarra from obtaining reimbursement, his right
to recovery may still be justified under the general
law on Obligations and Contracts, particularly, Art.
1236 - The creditor is not bound to accept payment or
performance by a third person who has no interest in the
fulfillment of the obligation, unless there is a stipulation to the
contrary

In this case, when the risk insured against

occurred, Dominions liability as insurer arose. This
obligation was extinguished when Guevarra paid
such claims. Thus, to the extent that the obligation
of Dominion had been extinguished, Guevarra may
demand reimbursement from his principal. To rule
otherwise would result in unjust enrichment of
Dominion.
_________________________________________
b. As to Authority: Agency Couched in
General Terms
Article 1877 - An agency couched in
general terms comprises only acts of
administration, even if the principal
should state that he withholds no
power or that the agent may execute
such acts as he may consider
appropriate, or even though the
agency should authorize a general
and unlimited management.