CHEMPHIL EXPORT & IMPORT CORP. VS.

COURT OF that Thelly Ruiz was the secretary of the President of

APPEALS Chemphil, for under the above-quoted provision she is
not among the officers so authorized or designated to be
served with the notice of garnishment.
Facts

Dynetics, Inc. and Antonio M. Garcia filed a complaint for Issue

declaratory relief and/or injunction against the PISO,
BPI, LBP, PCIB and RCBC or the consortium with the RTC Who has a better right to the shares of stocks?
seeking judicial declaration, construction and
interpretation of the validity of the surety agreement
that Dynetics and Garcia had entered into with the
Ruling
consortium and to perpetually enjoin the latter from
claiming, collecting and enforcing any purported The Consortium.
obligations which Dynetics and Garcia might have
undertaken in said agreement. The Court of Appeals agreed with the consortium's
position that the attachment of shares of stock in a
The consortium filed their respective answers with corporation need not be recorded in the corporation's
counterclaims alleging that the surety agreement in stock and transfer book in order to bind third persons.
question was valid and binding and that Dynetics and Section 7(d), Rule 57 of the Rules of Court was complied
Garcia were liable under the terms of the said agreement. with by the consortium (through the Sheriff of the trial
court) when the notice of garnishment over the Chemphil
A notice of garnishment covering Garcia's shares in
shares of Garcia was served on the president of
CIP/Chemphil (including the disputed shares) was
Chemphil. Indeed, to bind third persons, no law requires
served on Chemphil through its then President. The
that an attachment of shares of stock be recorded in the
notice of garnishment was duly annotated in the stock
stock and transfer book of a corporation.
and transfer books of Chemphil on the same date.
Therefore, ruled the Court of Appeals, the attachment
The trial court denied the application of Dynetics and
made over the Chemphil shares in the name of Garcia
Garcia for preliminary injunction and instead granted the
was made in accordance with law and the lien created
consortium's prayer for a consolidated writ of
thereby remained valid and subsisting at the time Garcia
preliminary attachment. Hence, after the consortium had
sold those shares to FCI (predecessor-in-interest of
filed the required bond, a writ of attachment was issued
appellee CEIC) in 1988.
and various real and personal properties of Dynetics and
Garcia were garnished, including the disputed shares. A secretary's major function is to assist his or her
superior. He/she is in effect an extension of the latter.
This garnishment, however, was not annotated in
Obviously, as such, one of her duties is to receive letters
Chemphil's stock and transfer book. The Court holds that
and notices for and in behalf of her superior, as in the
the CONSORTIUM has admitted that the writ of
case at bench. The notice of garnishment was addressed
attachment/garnishment issued on the shares of stock
to and was actually received by Chemphil's president
belonging to plaintiff Antonio M. Garcia was not
through his secretary who formally received it for him.
annotated and registered in the stock and transfer books
of CHEMPHIL. Thus, in one case, we ruled that the secretary of the
president may be considered an "agent" of the
On the other hand, the prior attachment issued in favor
corporation and held that service of summons on him is
of SBTC against the same CHEMPHIL shares of Antonio
binding on the corporation. Moreover, the service and
M. Garcia, was duly registered and annotated in the stock
receipt of the notice of garnishment was duly
and transfer books of CHEMPHIL. CEIC vigorously argues
acknowledged and confirmed by the corporate secretary
that the consortium's writ of attachment over the
of Chemphil, Rolando Navarro and his successor Avelino
disputed shares of Chemphil is null and void, insisting as
Cruz through their respective certifications. We rule,
it does, that the notice of garnishment was not validly
therefore, that there was substantial compliance with
served on the designated officers on 19 July 1985.
Sec. 7 (d), Rule 57 of the Rules of Court.
To support its contention, CEIC presented the sheriff's
notice of garnishment dated 19 July 1985 which showed
on its face that said notice was received by one Thelly
Ruiz who was neither the president nor managing agent
of Chemphil. It makes no difference, CEIC further avers,
FILIPINAS LIFE ASSURANCE CO. VS. CLEMENTE Filipinas Life contends: The investment scheme offered
PEDROSO to respondents by Valle (insurance agent), Apetrior
(manager) and Alcantara (authorized representative)
was outside the scope of their authority as agents of
Filipinas Life.
Facts

Respondent Teresita O. Pedroso is a policyholder of a 20-

year endowment life insurance issued by petitioner Issues
Filipinas Life Assurance Company (Filipinas Life).
Pedroso claims Renato Valle was her insurance agent Whether the agents of Filipinas Life exceeded the scope
since 1972 and Valle collected her monthly premiums. of their authority-- No

Valle told her that the Filipinas Life Escolta Office was Whether or not Filipinas Life is solidarily liable with the
holding a promotional investment program for agents-- Yes
policyholders. It was offering 8% prepaid interest a
month for certain amounts deposited on a monthly basis.
Enticed, she initially invested and issued a post-dated
Ruling
check for P10,000. In return, Valle issued Pedroso his
personal check for P800 for the 8% prepaid interest and No, the agents of Filipinas Life did not exceed the scope
an agents receipt. of their authority.

Subsequently, she called the Escolta office and talked to The Supreme Court ruled that the general rule is that the
the branch manager, Angel Apetrior. Pedroso inquired principal is responsible for the acts of its agent done
about the promotional investment and Apetrior within the scope of its authority, and should bear the
confirmed that there was such a promotion. damage caused to third persons.

A month after, her investment of P10,000 was returned When the agent exceeds his authority, the agent becomes
to her after she made a written request for its refund. The personally liable for the damage. But even when the
formal written request, dated February 3, 1977, was agent exceeds his authority, the principal is still
written on an inter-office memorandum form of Filipinas solidarily liable together with the agent if the principal
Life prepared by Alcantara. To collect the amount, allowed the agent to act as though the agent had full
Pedroso personally went to the Escolta branch where powers.
Alcantara gave her the P10,000 in cash.
In other words, the acts of an agent beyond the scope of
After a second investment, she made 7 to 8 more his authority do not bind the principal, unless the
investments in varying amounts, totaling P37,000 but at principal ratifies them, expressly or impliedly.
a lower rate of 5% prepaid interest a month. Upon Ratification in agency is the adoption or confirmation by
maturity of Pedroso's subsequent investments, Valle one person of an act performed on his behalf by another
would take back from Pedroso the corresponding without authority.
yellow-colored agent's receipt he issued to the latter.
Filipinas Life cannot profess ignorance of Valle's acts.
Pedroso told respondent Jennifer N. Palacio, also a Even if Valle's representations were beyond his
Filipinas Life insurance policyholder, about the authority as a debit/insurance agent, Filipinas Life thru
investment plan. Palacio made a total investment of Alcantara and Apetrior expressly and knowingly ratified
P49,550 but at only 5% prepaid interest. Valle's acts. It cannot even be denied that Filipinas Life
benefited from the investments deposited by Valle in the
Pedroso tried to withdraw her investment, Valle did not
account of Filipinas Life. In our considered view, Filipinas
want to return some P17,000 worth of it. Palacio also
Life had clothed Valle with apparent authority; hence, it
tried to withdraw hers, but Filipinas Life, despite
is now estopped to deny said authority. Innocent third
demands, refused to return her money.
persons should not be prejudiced if the principal failed to
Hence, respondents filed an action for the recovery of a adopt the needed measures to prevent
sum of money. misrepresentation, much more so if the principal ratified
his agent's acts beyond the latter's authority.
EUROTECH INDUSTRIAL TECHNOLOGIES VS. CUIZON Whether or not petitioner can claim both from the
principal (ERWIN the owner) and the agent (EDWIN the
sales manager)-- No
Facts

Petitioner is engaged in the business of importation and Ruling

distribution of various European industrial equipment
for customers here in the Philippines. Article 1897 reinforces the familiar doctrine that an
agent, who acts as such, is not personally liable to the
One of its customers, Impact Systems Sales (Impact party with whom he contracts. The same provision,
Systems) is a sole proprietorship owned by respondent however, presents two instances when an agent becomes
ERWIN Cuizon (ERWIN). personally liable to a third person. The first is when he
expressly binds himself to the obligation and the second
Respondent EDWIN is the sales manager of Impact is when he exceeds his authority. In the last instance, the
Systems and was impleaded in the court a quo in said agent can be held liable if he does not give the third party
capacity. sufficient notice of his powers. We hold that respondent
EDWIN does not fall within any of the exceptions
Respondents sought to buy from petitioner one unit of contained in this provision.
sludge pump valued at P250,000.00 with respondents
making a down payment of P50,000.00. When the sludge Edwin Cuizon acted well-within his authority when he
pump arrived from the United Kingdom, petitioner signed the Deed of Assignment. To recall, petitioner
refused to deliver the same to respondents without their refused to deliver the one unit of sludge pump unless it
having fully settled their indebtedness to petitioner. received, in full, the payment for Impact Systems
Thus, on 28 June 1995, respondent EDWIN sales indebtedness. We may very well assume that Impact
manager of Impact Systems and Alberto de Jesus general Systems desperately needed the sludge pump for its
business since after it paid the amount of fifty thousand
manager of Eurotech, executed a Deed of Assignment of
pesos (P50,000.00) as down payment on 3 March 1995,
receivables in favor of petitioner.
it still persisted in negotiating with petitioner which
Despite the existence of the Deed of Assignment, culminated in the execution of the Deed of Assignment of
its receivables from Toledo Power Company on 28 June
respondents proceeded to collect from Toledo Power
1995. The significant amount of time spent on the
Company. Alarmed by this development, petitioner made
negotiation for the sale of the sludge pump underscores
several demands upon respondents to pay their Impact Systems perseverance to get hold of the said
obligations. As a result, respondents were able to make equipment. There is, therefore, no doubt in our mind that
partial payments to petitioner. respondent EDWINs participation in the Deed of
Assignment was reasonably necessary or was required
Petitioner's counsel sent respondents a final demand in order for him to protect the business of his principal.
letter. Because of respondents' failure to abide by said Had he not acted in the way he did, the business of his
final demand letter, petitioner instituted a complaint for principal would have been adversely affected and he
sum of money, damages, with application for preliminary would have violated his fiduciary relation with his
attachment against herein respondents. principal.

Petitioner contends: Respondent EDWIN acted beyond Article 1897 of the New Civil Code upon which petitioner
the authority granted by his principal and he should anchors its claim against respondent EDWIN does not
therefore bear the effect of his deed pursuant to Article hold that in case of excess of authority, both the agent
1897 of the New Civil Code. and the principal are liable to the other contracting party.
To reiterate, the first part of Article 1897 declares that
Respondent contends: EDWIN (sales manager) alleged the principal is liable in cases when the agent acted
that he is not a real party in interest in this case. within the bounds of his authority. Under this, the agent
According to him, he was acting as mere agent of his is completely absolved of any liability. The second part of
principal, which was the Impact Systems, in his the said provision presents the situations when the agent
transaction with petitioner and the latter was very much himself becomes liable to a third party when he expressly
aware of this fact. binds himself or he exceeds the limits of his authority
without giving notice of his powers to the third person.
However, it must be pointed out that in case of excess of
authority by the agent, like what petitioner claims exists
Issues here, the law does not say that a third person can recover
from both the principal and the agent.
Whether or not EDWIN exceeded the limits of his
authority as salaes manager-- No
VIOLETA BANATE VS. PHIL COUNTRYSIDE RURAL Under the doctrine of apparent authority, acts and
BANK contracts of the agent, as are within the apparent scope
of the authority conferred on him, although no actual
authority to do such acts or to make such contracts has
been conferred, bind the principal. The principal’s
Facts
liability, however, is limited only to third persons who
Spouses Maglasang obtained a loan from PCRB. As have been led reasonably to believe by the conduct of the
security, they mortgaged their lot and the house on it principal that such actual authority exists, although none
owned by the Spouses Cortel. was given. In other words, apparent authority is
determined only by the acts of the principal and not by
Sometime in 1997, Spouses Maglasang and Spouses the acts of the agent. There can be no apparent authority
Cortel asked PCRB’s permission to sell the properties of an agent without tacts or conduct on the part of the
which they mortgaged with the bank. They likewise principal; such acts or conduct must have been known
requested that the said properties be released from the and relied upon in good faith as a result of the exercise of
mortgage since their two other loans were adequately reasonable prudence by a third party as claimant, and
secured by the other mortgages. such acts or conduct must have produced a change of
position to the third party’s detriment.
The spouses Maglasang and the spouses Cortel claimed
that the PCRB, acting through its Branch Manager, Further, we would be unduly stretching the doctrine of
Pancrasio Mondigo, verbally agreed to their request but apparent authority were we to consider the power to
required first the full payment of the subject loan. They undo or nullify solemn agreements validly entered into
thereafter sold to petitioner Violeta Banate the subject as within the doctrines ambit. Although a branch
properties and used the amount to pay the subject loan manager, within his field and as to third persons, is the
with PCRB. general agent and is in general charge of the corporation,
with apparent authority commensurate with the
PCRB then gave the owner’s duplicate certificate of title
ordinary business entrusted him and the usual course
of Lot 12868-H-3-C to Banate, who was able to secure a
and conduct thereof, yet the power to modify or nullify
new title in her name. It, however, carried the mortgage
corporate contracts remains generally in the board of
lien in favor of PCRB, prompting the petitioners to
directors. Being a mere branch manager alone is
request from PCRB a Deed of Release of Mortgage.
insufficient to support the conclusion that Mondigo has
As PCRB refused to comply with the petitioners’ request, been clothed with apparent authority to verbally alter
the petitioners instituted an action for specific terms of written contracts, especially when viewed
performance before the RTC to compel PCRB to execute against the telling circumstances of this case: the
the release deed. unequivocal provision in the mortgage contract; PCRBs
vigorous denial that any agreement to release the
Accordingly, PCRB claimed that full payment of the three mortgage was ever entered into by it; and, the fact that
loans, obtained by the spouses Maglasang, was necessary the purported agreement was not even reduced into
before any of the mortgages could be released; the writing considering its legal effects on the parties
settlement of the subject loan merely constituted partial interests. To put it simply, the burden of proving the
payment of the total obligation. Thus, the payment does authority of Mondigo to alter or novate the mortgage
not authorize the release of the subject properties from contract has not been established.
the mortgage lien.
It is a settled rule that persons dealing with an agent are
bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the
Issue nature and extent of the agents authority, and in case
Whether or not Mondigo, as branch manager of PCRB, either is controverted, the burden of proof is upon them
has the authority to modify the original mortgage to establish it. As parties to the mortgage contract, the
contract on behalf of the company. petitioners are expected to abide by its terms. The
subsequent purported agreement is of no moment, and
cannot prejudice PCRB, as it is beyond Mondigos actual
or apparent authority, as above discussed.
Ruling

NO. He is not authorized to modify the mortgage contract

that would in effect cause novation.