City Savings Bank v Teresita Tobias

FACTS:
Rolando Robles, a CPA, has been employed with
petitioner Citystate Savings Bank since July 1998.
Robles was eventually promoted as manager for
petitioner’s Baliuag, Bulacan branch. Sometime in
2002, respondent Teresita Tobias was introduced by
her youngest son to Robles. Robles persuaded Tobias
to open an account with the petitioner and place her
money in some high interest rate mechanism, to which
the latter yielded.

Tobias was later offered by Robles to sign-up in

petitioner’s back-to-back scheme which is supposedly
offered only to petitioner’s most valued clients. Under
the scheme, the depositors authorize the bank to use
their bank deposits and invest the same in different
business ventures that yield high interest. Lured by the
attractive offer, Tobias signed the pertinent documents
without reading its contents and invested a total of
Php 1,800,000 to petitioner through Robles. Later,
Tobias included her daughter respondent Valdez, as co-
depositor in her accounts with the petitioner.

In 2005, Robles failed to remit to respondents the

interest as scheduled. In a meeting with Robles’
siblings, it was disclosed to the respondents that
Robles withdrew the money and appropriated it for
personal use. Robles later talked to the respondents,
promised that he would return the money. Robles,
however, reneged on his promise.

On January 8, 2007, respondents filed a Complaint for

sum of money and damages against Robles and the
petitioner. Respondents alleged that Robles committed
fraud in the performance of his duties as branch
manager when he lured Tobias in signing several pieces
of blank documents, under the assurance as bank
manager of petitioner, everything was in order. The
RTC ruled in favor of respondents. The CA modified the
decision and ruled that petitioner and Robles are
jointly and solidarily liable.

ISSUE:
Whether the CA erred in ruling that petitioner is jointly
and solidarily liable with Robles.

RULING:
No. The business of banking is one imbued with public
interest. As such, banking institutions are obliged to
exercise the highest degree of diligence as well as high
standards of integrity and performance in all its
transactions. The law expressly imposes upon the
banks a fiduciary duty towards its clients and to treat in
this regard the accounts of its depositors with
meticulous care. The contract between the bank and
its depositor is governed by the provisions of the Civil
Code on simple loan or mutuum, with the bank as the
debtor and the depositor as the creditor.

In light of these, banking institutions may be held liable

for damages for failure to exercise the diligence
required of it resulting to contractual breach or where
the act or omission complained of constitutes an
actionable tort.

It is without question that when the action against the

bank is premised on breach of contractual obligations,
a bank’s liability as debtor is not merely vicarious but
primary, in that the defense of exercise of due
diligence in the selection and supervision of its
employees is not available. Liability of banks is also
primary and sole when the loss or damage to its
depositors is directly attributable to its acts, finding
that the proximate cause of the loss was due to the
bank’s negligence or breach.
The bank, in its capacity as principal, may also be
adjudged liable under the doctrine of apparent
authority. The principal’s liability in this case, however,
is solidary with that of his employee.

The doctrine of apparent authority or the “holding

out” theory, or the doctrine of ostensible agency,
imposes liability, not “as the result of the reality of a
contractual relationship, but rather because of the
actions of a principal or an employer in somehow
misleading the public into believing that the
relationship or the authority exists.”

It is defined as:

The power to affect the legal relations of another

person by transactions with third persons arising from
the other’s manifestations to such third person such
that the liability of the principal for the acts and
contracts of his agent extends to those which 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.

Succinctly stating the foregoing principles, the liability

of a bank to third persons for acts done by its agents or
employees is limited to the consequences of the
latter’s acts which it has ratified, or those that resulted
in performance of acts within the scope of actual or
apparent authority it has vested.

In the case at bar, petitioner does not deny the validity

of respondents’ accounts, in fact it suggests that
transactions with it have all been accounted for as it is
based on official documents containing authentic
signatures of Tobias. In fine, respondents’ claim for
damages is not predicated on breach of their
contractual relationship with petitioner, but rather on
Robles’ act of misappropriation. At any rate, it cannot
be said that the petitioner is guilty of breach of
contract so as to warrant the imposition of liability
solely upon it.

Nonetheless, while it is clear that the proximate cause

of respondents’ loss is the misappropriation of Robles,
petitioner is still liable under Article 1911 of the Civil
Code, to wit:

Art. 1911. Even when the agent has exceeded his

authority, the principal is solidarity liable with the
agent if the former allowed the latter to act as though
he had full powers.

The case of Prudential Bank v. CA lends support to this

conclusion. There, this Court first laid down the
doctrine of apparent authority, with specific reference
to banks, viz.:
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.
A bank is liable for wrongful acts of its officers done in
the interests of the bank or in the course of dealings of
the officers in their representative capacity but not for
acts outside the scope of their authority. A bank
holding out its officers and agent as worthy of
confidence will not be permitted to profit by the frauds
they may thus be enabled to perpetuate in the
apparent scope of their employment; nor will it be
permitted to shirk its responsibility for such frauds,
even though no benefit may accrue to the bank
therefrom.
As aptly pointed by the CA, petitioner’s evidence
bolsters the case against it, as they support the finding
that Robles as branch manager, has been vested with
the apparent or implied authority to act for the
petitioner in offering and facilitating banking
transactions. In this light, respondents cannot be
blamed for believing that Robles has the authority to
transact for and on behalf of the petitioner and for
relying upon the representations made by him. After
all, Robles as branch manager is recognized “within his
field and as to third persons as the general agent and is
in general charge of the corporation, with apparent
authority commensurate with the ordinary business
entrusted him and the usual course and conduct
thereof.”

Domingo dela Cruz vs. Northern Theatrical Enterprises

Inc., et al. G.R. No. L-7089, 31 August
1954,Montemayor [J].
Facts:
In 1941 the Northern Theatrical Enterprises Inc., a
domestc corporaton operated a moviehouse in Laoag,
Ilocos Norte, and among the persons employed by it
was DOMINGO DE LA CRUZ, hired as a special guard
whose duties were to guard the main entrance of the
cine, to maintain peace and order and to report the
commission of disorders within the premises. As such
guard he carried a revolver. In the aternoon of July 4,
1941, one Benjamin Martn wanted to crash the gate or
entrance of the movie house. Infuriated by the refusal
of De la Cruz to let him in without first providing
himself with a tcket, Martn attacked him with a bolo.
De la Cruz defended himself as best as he could until
he was cornered, to save himself he shot the gate
crasher, resultng in Matin's death.
For the killing, De la Cruz was charged with homicide
twice but was acquited on both cases.During the trials,
De la Cruz employed a lawyer, he demanded from his
employer reimbursement of his expenses but the latter
refused. Hence, a petition in court. The court denied
the same. Hence, this petition.
ISSUE:
WON there was a contract of agency between Dela
Cruz and NTE

RULING:
No.
The Court agrees with the trial court that the
relationship between the movie corporation and the
plaintiff was not that of principal and agent because
the principle of representation was in no way involved.
Plaintiff was not employed to represent the defendant
corporation in its dealings with third parties. He was a
mere employee hired to perform a certain specific duty
or task, that of acting as special guard and staying at
the main entrance of the movie house to stop gate
crashers and to maintain peace and order within the
premises.
In view of the foregoing, the judgment of the lower
court is affirmed. No costs.
No. A claim of an employee against his employer for
damages caused to the former by a stranger or
outsider while said employee was in the performance
of his dutes, presents a novelqueston which under
present legislaton cannot be decided in favor of the
employee. While it is to the interest of the employer to
give legal help to, and defend, its employees charged
criminally in court, inorder ro show that he was, not
guilty of any crime either deliberately or through
negligence, because should the employee be held
criminally liable and he is found to be insolvent, the
employer would be subsidiarily liable, such legal
assistance might be regarded as a moral obligaton but
it does not at present count with the sancton of man-
made laws. If the employer is not legally obliged to give
legal assistance to its employee and provide him with a
lawyer, naturally said employee may not recover from
his employer the amount he may have paid a lawyer
hired by him.Stll another point of view is that the
damages incurred here consistng of the payment of the
lawyer's fee did not result directly from the
performance of his duties but only indirectly because
there was an effcient intervening cause, namely, the
filing of the criminal charges. In other words, the
shootng to death of the deceased by the plainttiff was
not the proximate cause of the damages suffered but
may be regarded as only a remote cause, because from
the shooting to the damages suffered there was not
that natural and continuous sequence required to
claim civil responsibility.
Fallo:
In view of he foregoing, he judgmen  of he
lower cour is armed.

Sevilla v. The Court of Appeals G.R. Nos. L-41182-3.

April 15, 1988
DOCTRINE:
The agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an
interest, the agency having been created for the
mutual interest of the agent and the principal.
FACTS:
In 1960, the Tourist World Services Inc. (TWS) and
Sevilla entered into a lease contract for the use as
branch office. In the said contract, both parties were
held solidarily liable for the prompt payment of the
monthly rental agreed on. When the branch office was
opened, it was run by appellant Sevilla wherein any
airline fare brought in on her efforts, 4% of that would
go to her and 3% was to be withheld by TWS.
The TWS appears to have been informed that Sevilla
was connected with a rival firm, the Philippine Travel
Bureau, and, since the branch office was anyhow
losing, the TWS considered closing down its office. The
premises were locked and neither the appellant Sevilla
nor any of her employees could enter, a complaint was
filed by the herein appellants against the appellees
with a prayer for the issuance of mandatory
preliminary injunction.
In the appeal, Lina Sevilla claims she was not an
employee of the TWS to the end that her relationship
with TWS was one of a joint business venture. She
declares that she did not receive any salary from TWS
and only earned commissions. Sevilla likewise claimed
that she shared in the expenses maintaining the office
and TWS shouldered the rental in consideration for the
3% split in the commissions procured.
TWS contend that the appellant was an employee of
the appellee Tourist World Service, Inc. and as such
was designated manager and she had no say on the
lease executed.
ISSUE:
Whether or not appellant Sevilla was in a joint venture
with TWS or at least its agent coupled with an interest
which could not be terminated or revoked unilaterally
by TWS.
HELD:
It is the Court’s considered opinion, that when the
petitioner, Lina Sevilla, agreed to (wo)man the private
respondent, Tourist World Service, Inc.’s Ermita office,
she must have done so pursuant to a contract of
agency. It is the essence of this contract that the agent
renders services “in representation or on behalf of
another.” In the case at bar, Sevilla solicited airline
fares, but she did so for and on behalf of her principal,
Tourist World Service, Inc. As compensation, she
received 4% of the proceeds in the concept of
commissions. And as we said, Sevilla herself, based on
her letter of November 28, 1961, presumed her
principal’s authority as owner of the business
undertaking. We are convinced, considering the
circumstances and from the respondent Court’s recital
of facts, that the parties had contemplated a principal-
agent relationship, rather than a joint management or
a partnership.
The agency that we hereby declare to be compatible
with the intent of the parties, cannot be revoked at
will. The reason is that it is one coupled with an
interest, the agency having been created for the
mutual interest of the agent and the principal.
Accordingly, the revocation complained of should
entitle the petitioner, Lina Sevilla, to damages.
And apparently, Sevilla herself did not recognize the
existence of such a relation. In her letter of November
28, 1961, she expressly “concedes your [Tourist World
Service, Inc.’s] right to stop the operation of your
branch office,” in effect, accepting Tourist World
Service, Inc.’s control over the manner in which the
business was run. A joint venture, including a
partnership, presupposes generally a parity of standing
between the joint co-venturers or partners, in which
each party has an equal proprietary interest in the
capital or property contributed and where each party
exercises equal rights in the conduct of the business.
Furthermore, the parties did not hold themselves out
as partners, and the building itself was embellished
with the electric sign “Tourist World Service, Inc.,” in
lieu of a distinct partnership name.

DISPOSITIVE PORTION:
WHEREFORE, the Decision promulgated on January 23,
1975 as well as the Resolution issued on July 31, 1975,
by the respondent Court of Appeals is hereby
REVERSED and SET ASIDE. The private respondent,
Tourist World Service, Inc., and Eliseo Canilao, are
ORDERED jointly and severally to indemnify the
petitioner, Lina Sevilla, the sum of P25,000.00 as and
for moral damages, the sum of P10,000.00, as and for
exemplary damages, and the sum of P5,000.00, as and
for nominal and/or temperate damages.
DE LA PENA V. HIDALGO
FACTS:
1887-1893 (1st period) FEDERICO
1893-1902 (2nd period)ANTONIO
1902-1904 (3rd period) FRANCISCO
 Before DE LA PENA went to Spain, he executed a
power of attorney in favor of FEDERICO and 3 other
people. Their task is to represent him and
administer various properties he owned in Manila.
FEDERICO took charge in Nov. 1887.
 After a few years, FEDERICO wrote a letter to DE LA
PENA. It contains a request that DE LA PENA assign
a person who might substitute FEDERICO in the
event that he leaves the Philippines because one of
the agents died and the other 2 are unwilling to
take charge.
 DE LA PENA did not answer the letter –there was
neither approval nor objection on the accounts and
no appointment of another person who might
substitute FEDERICO.
 Because of health reasons, FEDERICO went to
Spain. Before he departed, he sent another letter
to DE LA PENA a summary of accounts and
informing that he will be leaving the Philippines
and that he turned over the administration to
ANTONIO (though FEDERICO stated that if DE LA
 PENA is not happy with this, DE LA PENA must send
ANTONIO a new power of attorney).
 DE LA PENA files in court for the collection of
revenue from his accounts which was handled by
FEDERICO. DE LA PENA alleges that FEDERICO has
only remitted 1.2k and still owes him roughly 72k.
Furthermore, DE LA PENA seeks to hold FEDERICO
liable for the administration from the period of
1887 until 1904.
 FEDERICO asserts that he cannot be liable for the
period after he renounced his agency. Furthermore
FEDERICO argues that his renunciation and
appointment of a substitute was legal for there was
no objection on the part of DE LA PENA.
ISSUE:
 Whether there was a valid agency in the case of
ANTONIO (2nd period) and as such FEDERICO
should not be held liable for those said period.
HELD: YES
  There was an implied agency in the case of
ANTONIO. DE LA PENA created an implied agency
in favor of ANTONIO because of his silence on the
matter for a number of 9 years.
 There was a valid renunciation in the case of
FEDERICO. His reason for leaving the country is
legitimate. Furthermore, he gave notice to DE LA
PENA about his situation in which the latter failed
to give his objection.
 Being a valid agency on the part of ANTONIO and a
valid renunciation on the party of FEDERICO, it
must follow that the liability of FEDERICO only
extends up to the point before his renunciation of
the agency (1st period).
DOCTRINE: The implied agency is founded on the lack
of contradiction or opposition, which constitutes
simultaneous agreement on the part of the presumed
principal to the execution of the contract. The agent
and administrator who was obliged to leave his charge
for a legitimate cause and who duly informed his
principal, is thenceforward released and freed from the
results and consequences of the management of the
person who substituted him with the consent, even
tacit though it be, of his principal.
SIDE NOTE ON POWER OF ATTORNEY:It was also
argued by DE LA PENA that there was no authority on
the part of FEDERICO to appoint a substitute. The
COURT ruled that the power of attorney given by DE LA
PENA to FEDERICO did not include a power to appoint
a substitute. Nevertheless, it was pointed out that the
appointment made by FEDERICO was not based on the
power of attorney of DE LA PENA. The appointment
was grounded on a new power of attorney FEDERICO
himself executed in favor of ANTONIO. Thus, there was
no violation incurred by FEDERICO. And as stated in the
case, DE LA PENA was duly informed of this but
nevertheless kept his silence on the matter.
Green Valley Poultry and Allied Products, Inc. v.
Intermediate Appellate Court
FACTS:
 E.R. Squib entered into an letter agreement with
Green Valley which appointed Green Valley as an
non-exclusive distributor for Squib Veterinary
Products.
 The goods were delivered to Green Valley but
remained unpaid, Squib filed a suit to collect.
 Green Valley claimed that the contract with Squib
was an agency to sell; that they never purchased
goods; that the products received were on
consignment only with the obligation to turn over
proceeds less commission or to return unsold
goods and since it has sold the goods but had not
been able to collect from the purchasers the action
was premature.
 Squib claimed that the contract was a contract to
sell so that Green Valley was obligated to pay for
the goods upon expiration of the 60 day period.
  The Trial Court and the Court of Appeals ruled in
favor of Squib saying the agreement was a sales
contract and ordering Green Valley to pay Squib.
ISSUE:
 Whether or not the agreement was a contract of
agency and if so, does it relieve Green Valley of any
liability?
RULING:
 The Supreme court held that, they do not have to
categorize the contract. Whether viewed as an
agency to sell or as a contract of sale, the liability
of Green Valley is indubitable. Adopting Green
Valley's theory that the contract is an agency to
sell, it is liable because it sold on credit without
authority from its principal. The Civil Code has a
provision exactly in point. It reads:
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.
WHEREFORE, the petition is hereby dismissed; the
judgment of the defunct Court of Appeals is affirmed
with costs against the petitioner.

DOMINGO v. DOMINGO G.R. No. L-30573 │ October

29, 1971
FACTS:
On June 2, 1956, Vicente M. Domingo granted Gregorio
Domingo, a real estate broker, the exclusive agency to
sell his lot No. 883 of Piedad Estate with an area of
about 88,477 square meters at the rate of P2.00 per
square meter (or for P176,954.00) with a commission
of 5% on the total price, if the property is sold by
Vicente or by anyone else during the 30-day duration
of the agency or if the property is sold by Vicente
within three months from the termination of the
agency to a purchaser to whom it was submitted by
Gregorio during the continuance of the agency with
notice to Vicente. The said agency contract was in
triplicate, one copy was given to Vicente, while the
original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor
Teofilo P. Purisima to look for a buyer, promising him
one-half of the 5% commission. Thereafter, Teofilo
Purisima introduced Oscar de Leon to Gregorio as a
prospective buyer.
Oscar de Leon submitted a written offer which was
very much lower than the price of P2.00 per square
meter. Vicente directed Gregorio to tell Oscar de Leon
to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer
to P109,000.00 on June 20 and Vicente agreed.
Upon demand of Vicente, Oscar de Leon issued to him
a check in the amount of P1,000.00 as earnest money,
after which Vicente advanced to Gregorio the sum of
P300.00. Oscar de Leon confirmed his former offer to
pay for the property at P1.20 per square meter in
another letter. Subsequently, Vicente asked for an
additional amount of P1,000.00 as earnest money,
which Oscar de Leon promised to deliver to him.
Pursuant to his promise to Gregorio, Oscar gave him as
a gift or propina the sum of 1,000.00 for succeeding in
persuading Vicente to sell his lot at P1.20 per square
meter or a total in round figure of P109,000.00. This
gift of P1,000.00 was not disclosed by Gregorio to
Vicente. Neither did Oscar pay Vicente the additional
amount of P1,000.00 by way of earnest money.
When the deed of sale was not executed on August 1,
1956 as stipulated nor on August 16, 1956 as extended
by Vicente, Oscar told Gregorio that he did not receive
his money from his brother in the United States, for
which reason he was giving up the negotiation
including the amount of P 1,000 given as earnest
money to Vicente and the P 1,000 given to Gregorio as
propina or gift.
When Oscar did not see him after several weeks,
Gregorio sensed something fishy. So, he went to
Vicente and read a portion to the effect that Vicente
was still committed to pay him 5% commission. Vicente
grabbed the original of the document and tore it to
pieces.
From his meeting with Vicente, Gregorio proceeded to
the office of the Register of Deeds of Quezon City,
where he discovered a deed of sale executed on
September 17, 1956 by Amparo Diaz.
Upon thus learning that Vicente sold his property to
the same buyer, Oscar de Leon and his wife, he
demanded in writing payment of his commission on
the sale price of P109,000.00.
Vicente stated that Gregorio is not entitled to the 5%
commission because he sold the property not to
Gregorio's buyer, Oscar de Leon, but to another buyer,
Amparo Diaz, wife of Oscar de Leon

ISSUE:
Whether Gregorio was entitled to receive the 5%
commission

RULING:
No, Gregorio is not entitled to receive the 5%
commission.
The Supreme Court held that the law imposes upon the
agent the absolute obligation to make a full disclosure
or complete account to his principal of all his
transactions and other material facts relevant to the
agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from
such an obligation and considers such an exemption as
void.
Hence, by taking such profit or bonus or gift or propina
from the vendee, the agent thereby assumes a position
wholly inconsistent with that of being an agent for his
principal, who has a right to treat him, insofar as his
Commission is concerned, as if no agency had existed.
The fact that the principal may have been benefited by
the valuable services of the said agent does not
exculpate the agent who has only himself to blame for
such a result by reason of his treachery or perfidy.
SYLLABUS
1. CIVIL LAW; AGENCY; ARTICLES 1891 AND 1909 OF
THE NEW CIVIL CODE; DUTY OF AGENT TO PRINCIPAL.
— The duties and liabilities of a broker to his employer
are essentially those which an agent owes to his
principal. Consequently, the decisive legal provisions
are found in Articles 1891 and 1909 of the New Civil
Code. The aforecited provisions demand the utmost
good faith, fidelity, honesty, candor and fairness on the
part of the agent, the real estate broker in this case, to
his principal, the vendor. The law imposes upon the
agent the absolute obligation to make a full disclosure
or complete account to his principal of all his
transactions and other material facts relevant to the
agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from
such an obligation and considers such an exemption as
void. The duly of an agent is likened to that of a
trustee. This is not a technical or arbitrary rule but a
rule founded on the highest and truest principle of
morality as well as of the strictest justice.

2. ID.; ID.; ID.; ID.; EFFECT OF BREACH OF LOYALTY. —

An agent who takes a secret profit in the nature of a
bonus, gratuity or personal benefit from the vendee,
without revealing the same to his principal, the vendor,
is guilty of a breach of his loyalty to the principal and
forfeits his right to collect the commission from his
principal, even if the principal does not suffer any
injury by reason of such breach of fidelity, or that he
obtained better results or that the agency is a
gratuitous one, or that usage or custom allows it,
because the rule is to prevent the possibility of any
wrong, not to remedy or repair an actual damage.

3. ID.; ID.; ID.; ID.; ID.; TAKING OF SECRET PROFIT,

TANTAMOUNT TO BREACH. — By taking such profit or
bonus or gift or propina from the vendee, the agent
thereby assumes a position wholly inconsistent with
that of being an agent for his principal, who has a right
to treat him, insofar as his commission is concerned, as
if no agency had existed. The fact that the principal
may have been benefited by the valuable services of
the said agent does not exculpate the agent who has
only himself to blame for such a result by reason of his
treachery or perfidy.

4. ID.; ID.; ID.; ID.; ID.; LIABILITY FOR ESTAFA. —

Because of his responsibility under the aforecited
Article 1720, an agent is likewise liable for estafa for
failure to deliver to his principal the total amount
collected by him in behalf of his principal and cannot
retain the commission pertaining to him by subtracting
the same from his collections.
5. PRINCIPAL ENTITLED TO RECOVERY OF
COMMISSIONS PAID. — Where a principal has paid an
agent or broker a commission while ignorant of the
fact that the latter has been unfaithful, the principal
may recover back the commission paid, since an agent
or broker who has been unfaithful is not entitled to any
compensation. If the agent does not conduct himself
with entire fidelity towards his principal, but is guilty of
taking a secret profit or commission in regard the
matter in which he is employed, he loses his right to
compensation on the ground that he has taken a
position wholly inconsistent with that of agent for his
employer, and which gives his employer, upon
discovering it, the right to treat him so far as
compensation, at least, is concerned as if no agency
had existed. This may operate to give to the principal
the benefit of valuable services rendered by the agent,
but the agent has only himself to blame for that result.
6. ACCOUNTABILITY OF AGENT FOR ALL PROFITS
RECEIVED. — As a general rule, it is a breach of good
faith and loyalty to his principal for an agent, while the
agency exists, so to deal with the subject matter
thereof, or with information acquired during the
course of the agency, as to make a profit out of it for
himself in excess of his lawful compensation; and if he
does so he may be held as a trustee and may be
compelled to account to his principal for all profits,
advantages, rights, or privileges acquired by him in
such dealings, whether in performance or in violation
of his duties, and be required to transfer them to his
principal upon being reimbursed for his expenditures
for the same, unless the principal has consented to or
ratified the transaction knowing that benefit or profit
would accrue, or had accrued, to the agent, or unless
with such knowledge he has allowed the agent so as to
change his condition that he cannot be put in status
quo. The application of this rule is not affected by the
fact that the principal did not suffer any injury by
reason of the agent’s dealings, or that he in fact
obtained better results; nor is it affected by the fact
that there is a usage or custom to the contrary, or that
the agency is a gratuitous one.

7. WHEN INAPPLICABLE. — The duty embodied in

Article 1891 of the New Civil Code will not apply if the
agent or broker acted only as a middleman with the
task of merely bringing together the vendor and
vendee, who themselves thereafter will negotiate on
the terms and conditions of the transaction. Neither
would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not
object thereto. Herein defendant-appellee Gregorio
Domingo was not merely a middleman of the
petitioner-appellant Vicente Domingo and the buyer
Oscar de Leon. He was the broker and agent of said
petitioner-appellant only. And herein petitioner-
appellant was not aware of the gift of One Thousand
Pesos (P1,000.00) received by Gregorio Domingo form
the prospective buyer; much less did he consent to his
agent’s accepting such a gift.

AGUNA V LARENA
Facts
This action is brought to recover the sum of P29,600 on
two cause against the administrator. The plaintiff
claims the sum of P9,600, the alleged value of the
services rendered by him to said deceased as his agent
in charge of the deceased's houses situated in Manila.
From the evidence it appears undisputed that from
February, 1922, to February, 1930, the plaintiff
rendered services to the deceased, consisting in the
collection of the rents due from the tenants occupying
the deceased's houses in Manila and attending to the
repair of said houses when necessary.
The evidencealso shows that during the time the
plaintiff rendered his services, he did not receive any
compensation. It is, however, a fact admitted that
during said period the plaintiff occupied a house
belonging to the deceased without paying any rent at
all.
The plaintiff-appellant insists that, the services having
been rendered, an obligation to compensate them
must necessarily arise.
Issue:
WON there was a contract of agency between Aguna
and the deceased entitling him to compensation.
Ruling:
The service rendered by the agent was deemed to be
gratuitous.
The trial court held that the compensation for the
services of the plaintiff was the gratuitous use and
occupation of some of the houses of the deceased by
the plaintiff and his family. This conclusion is correct, if
it were true that the plaintiff and the deceased had an
understanding to the effect that the plaintiff was to
receive compensation aside from the use and
occupation of the houses of the deceased, it cannot be
explained how the plaintiff could have rendered
services as he did for eight years without receiving and
claiming any compensation from the deceased.

BICOL SAVINGS AND LOAN vs CA

FACTS:
Juan de Jesus was the owner of a parcel of land
situated in Naga City. He executed a Special Power of
Attorney in favor of his son, Jose de Jesus, to negotiate,
mortgage his real property in any bank either private
or public entity preferably in the Bicol Savings Bank,
Naga City, in any amount that may be agreed upon
between the bank and the attorney-in-fact. By virtue
thereof, Jose de Jesus obtained a loan of P20,000 from
petitioner bank and executed a deed of mortgage on
the real property. Juan de Jesus died at an unknown
date. By reason of his failure to pay the loan obligation
even during his lifetime, petitioner bank caused the
mortgage to be extrajudicially foreclosed. In the
subsequent public auction, the mortgaged property
was sold to the bank as the highest bidder. Private
respondents herein, including Jose de Jesus, who are
all the heirs of the late Juan de Jesus, failed to redeem
the property within one year from the date of the
registration of the Provisional Certificate of Sale.
Nonetheless, the private respondents still negotiated
for the repurchase of the property but were
unsuccessful despite offers and counter-offers.
Private respondents filed a complaint with the trial
court, praying for the annulment of the deed of sale
but the complaint was dismissed by the trial court
ruling that the deed became absolute. Upon appeal,
the CA reversed the ruling o the trial court, ruling that
Article 1879 of the Civil Code and stated that since the
special power to mortgage granted to Jose de Jesus did
not include the power to sell, it was error for the lower
Court not to have declared the foreclosure
proceedings, and the auction sale held in null and void
because the Special Power of Attorney given by Juan
de Jesus to Jose de Jesus was merely to mortgage his
property, and not to extrajudicially foreclose the
mortgage and sell the mortgaged property in the said
extrajudicial foreclosure.

ISSUE:
Whether or not the agent-son exceeded the scope of
his authority in agreeing to a stipulation in the
mortgage deed that petitioner bank could
extrajudicially foreclose the mortgaged property.

HELD:
The sale proscribed by a special power to mortgage
under Article 1879 is a voluntary and independent
contract, and not an auction sale resulting from
extrajudicial foreclosure, which is precipitated by the
default of a mortgagor. The stipulation granting an
authority to extrajudicially foreclose a mortgage is an
ancillary stipulation supported by the same cause or
consideration for the mortgage and forms an essential
or inseparable part of that bilateral agreement.

It matters not that the authority to extrajudicially

foreclose was granted by an attorney-in-fact and not
by the mortgagor personally. The stipulation in that
regard, although ancillary, forms an essential part of
the mortgage contract and is inseparable therefrom.
No creditor will agree to enter into a mortgage
contract without that stipulation intended for its
protection.
Francisco Veloso vs. CA, et al., G.R. No. 102737, Aug.
21, 1996
SYLLABUS
1. CIVIL LAW; AGENCY; A SPECIAL POWER OF
ATTORNEY CAN BE INCLUDED IN THE GENERAL POWER
WHEN IT IS SPECIFIED THEREIN THE ACT OR
TRANSACTION FOR WHICH THE SPECIAL POWER IS
REQUIRED. — There was no need to execute a
separate and special power of attorney since the
general power of attorney had expressly authorized
the agent or attorney in fact the power to sell the
subject property. The special power of attorney can be
included in the general power when it is specified
therein the act or transaction for which the special
power is required.
2. ID.; SALE; PURCHASER IN GOOD FAITH; DEFINED; HIS
REMEDY IN CASE OF FRAUD. — It has been consistently
held that a purchaser in good faith is one who buys
property of another, without notice that some other
person has a right to, or interest in such property and
pays a full and fair price for the same, at the time of
such purchase, or before he has notice of the claim or
interest of some other person in the property. "The
right of an innocent purchaser for value must be
respected and protected, even if the seller obtained his
title through fraud. The remedy of the person
prejudiced is to bring an action for damages against
those who caused or employed the fraud, and if the
latter are insolvent, an action against the Treasurer of
the Philippines may be filed for recovery of damages
against the Assurance Fund."cralaw virtua1aw library
3. REMEDIAL LAW; EVIDENCE; FORGERY CANNOT BE
PRESUMED. — Mere variance of the signatures cannot
be considered as conclusive proof that the same were
forged. Forgery cannot be presumed. Forgery should
be proved by clear and convincing evidence and
whoever allege it has the burden of proving the same.
4. ID.; ID.; NOTARIZED DOCUMENTS ARE PRESUMED
TO BE VALID AND DULY EXECUTED. — Documents
acknowledged before a notary public have the
evidentiary weight with respect to their due execution.
The questioned power of attorney and deed of sale,
were notarized and therefore, presumed to be valid
and duly executed.
5. CIVIL LAW; PRINCIPLE OF EQUITABLE ESTOPPEL,
DEFINED. — The principle of equitable estoppel states
that where one or two innocent persons must suffer a
loss, he who by his conduct made the loss possible
must bear it.
FACTS:
Petitioner Francisco Veloso was the owner of a parcel
of land situated in the district of Tondo, Manila, with
an area of 177 square meters. The title was registered
in the name of Francisco A. Veloso. The said title was
subsequently cancelled and a new one issued in the
name of Aglaloma B. Escario, married to Gregorio L.
Escario, on May 24, 1988.

On August 24, 1988, petitioner Veloso filed an action

for annulment of documents, reconveyance of
property with damages and preliminary injunction
and/or restraining order. Petitioner alleged therein
that he was the absolute owner of the subject property
and he never authorized anybody, not even his wife, to
sell it. He alleged that he was in possession of the title
but when his wife, Irma, left for abroad, he found out
that his copy was missing. He then verified with the
Registry of Deeds of Manila and there he discovered
that his title was already canceled in favor of
defendant Aglaloma Escario.

The transfer of property was supported by a General

Power of Attorney dated November 29, 1985 and Deed
of Absolute Sale, dated November 2, 1987, executed by
Irma Veloso, wife of the petitioner and appearing as his
attorney-in-fact, and defendant Aglaloma Escario.

Petitioner Veloso, however, denied having executed

the power of attorney and alleged that his signature
was falsified. He also denied having seen or even
known Rosemarie Reyes and Imelda Santos, the
supposed witnesses in the execution of the power of
attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended
that the sale of the property, and the subsequent
transfer thereof, were null and void.
Defendant Aglaloma Escario in her answer alleged that
she was a buyer in good faith and denied any
knowledge of the alleged irregularity. She allegedly
relied on the general power of attorney of Irma Veloso
which was sufficient in form and substance and was
duly notarized.
ISSUE:
Whether there was a valid sale of the subject property

HELD:
Yes, the sale of the subject property is valid
The Supreme Court held that an examination of the
records showed that the assailed power of attorney
was valid and regular on its face. It was notarized and
as such, it carries the evidentiary weight conferred
upon it with respect to its due execution. While it is
true that it was denominated as a general power of
attorney, a perusal thereof revealed that it stated an
authority to sell.
Respondent Aglaloma relied on the power of attorney
presented by petitioner's wife, Irma. Being the wife of
the owner and having with her the title of the
property, there was no reason for the private
respondent not to believe, in her authority. Thus,
having had no inkling on any irregularity and having no
participation thereof, private respondent was a buyer
in good faith. It has been consistently held that a
purchaser in good faith is one who buys property of
another, without notice that some other person has a
right to, or interest in such property and pays a full and
fair price for the same, at the time of such purchase, or
before he has notice of the claim or interest of some
other person in the property.

ETERNAL GARDENS MEMORIAL PARK CORP. vs.

KATHERINE JUNETTE B. PERLAS, KATHRYN JACQUELYN
F. BOISER, AND SPOUSES G.R. No. 236126, September
07, 2020
Facts:
Respondents Katherine Junette B. Perlas (Katherine)
and Kathryn Jacquelyn F. Boiser (Kathryn; collectively,
Boiser siblings) are two (2) of the five (5) children of
Narciso C. Boiser (Narciso)and Zenaida F. Boiser
(Zenaida).

Zenaida purchased from Eternal Gardens 24 burial lots

(subject property). Zenaida died on September 13,
1999. Sometime in 2000, Boiser siblings found out that
the subject property were sold to spouses Claudio and
Rosita Bonifacio (Spouses Bonifacio) by Kathryn’s
former live-in partner, Michael Magpantay
(Magpantay). This prompted the filing of a Complaint
for nullification of contract by Boiser siblings against
Magpantay, Spouses Bonifacio, and Eternal Gardens
before the Regional Trial Court (RTC).
In their complaint, Boiser siblings averred that shortly
after their mother’s death, Kathryn instructed
Magpantay to inquire from Eternal Gardens the status
of the subject property. She was then informed by
Magpantay that Zenaida had sold the subject property
to a person who further sold them to another.

Upon conducting their own investigation with the

employees of Eternal Gardens, Boiser siblings learned
that the subject property were sold by Zenaida to
Magpantay in February 2000. The latter then sold the
lots to Spouses Bonifacio.

In its Answer, Eternal Gardens asseverated that Boiser

siblings had no cause of action against it as Kathryn
herself, together with Magpantay, submitted the
Affidavit of Loss with an Undertaking purported to be
signed by Zenaida stating that the title to the subject
property was lost. It also claimed that Kathryn had
knowledge of the Deed of Assignment covering the
subject property executed in favor of Magpantay.

The RTC held that Eternal Gardens liable to return the

amount paid by Spouses Bonifacio less the value of the
lot actually used as burial site for their grandchild. It
brushed aside Eternal Gardens’ claim that it did not
authorize or know the participation of its employees in
the transaction between Magpantay and Spouses
Bonifacio. By issuing a certificate of ownership in favor
of Spouses Bonifacio, the RTC ruled that Eternal
Gardens ratified its employees’ actions.

Aggrieved, Eternal Gardens appealed with the Court of

Appeals (CA). The CA partially granted the appeal.
Hence, this petition.

Issue:
Whether or not the principle in agency, particularly
Article 1897 of the Civil Code, despite the clear
showing that the employees of eternal gardens were
not authorized by eternal gardens to sell the memorial
lots, is applicable in this case

Ruling:
No. Article 1897 of the Civil Code provides:

Art. 1897. 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 limits of his
authority without giving such party sufficient notice of
his powers.

It should be emphasized that the principle of agency,

specifically Article 1897, finds no application in this
case. As correctly found by the CA, Balbin and Resoles
were not authorized to sell the subject property in the
name of Magpantay. A special power of attorney is
required before an agent can enter into any contract
on behalf of the principal where the ownership of an
immovable is transmitted or acquired either
gratuitously or for a valuable consideration. Here,
there was none. Both the RTC and the CA found that
no such authority was given by Magpantay to sell the
subject lots to Spouses Bonifacio.

This notwithstanding, Eternal Gardens still cannot be

absolved from liability to Spouses Bonifacio. It can no
longer deny the authority of its employees, Balbin and
Resoles, in transacting with Spouses Bonifacio under
the doctrine of apparent authority. In Engineering
Geoscience, Inc. v. Philippine Savings Bank, the Court
explained:

Under this doctrine, acts and 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. Furthermore, the
principal’s liability is limited only to third persons who
have been led reasonably to believe by the conduct of
the principal that such actual authority exists, although
none was actually given.

In this case, as aptly concluded by the CA, by issuing

the certificate of ownership to Spouses Bonifacio,
Eternal Gardens acknowledged the authority of its
employees to transact business on its behalf. It can no
longer renege on its duty when it knowingly accepted
the documents accomplished by its own employees.