INTERNATIONAL FILMS V.

THE LYRIC FILM EXCHANGE

November 19, 1936| En Banc
PETITIONER: INTERNATIONAL FILMS (CHINA), LTD
RESPONDENT: THE LYRIC FILM EXCHANGE, INC
SUMMARY: Bernard Gabelman was the Philippine agent of International Films by virtue of a power of attorney. International
Films, through Gabelman, leased the film “Monte Carlo Madness” to The Lyric Film Exchange to be shown in different places.
One of the conditions of the contract was that The Lyric Film Exchange would answer for the loss of the film in question whatever
the cause. Gabelman then requested Albo to permit him to deposit said film in the vault of Lyric Film Exchange, under Gabelman’s
own responsibility. (Gabelman was then succeeded by Lazarus Joseph as agent of International Films.) The bodega of Lyric Film
Exchange was burned, including the film, which was not insured. The Court ruled that Lyric Film Exchange is NOT liable to
International Films for the destruction of the film by fire.
DOCTRINE: The verbal contract between Bernard Gabelman, and the chief of the film department of the defendant company,
was a sub-agency or a submandate, the defendant company is not civilly liable for the destruction by fire of the film in question
because as a mere submandatary or subagent, it was not obliged to fulfill more than the contents of the mandate and to answer for
the damages caused to the principal by his failure to do so.
FACTS:
1. Bernard Gabelman was the Philippine agent of International Films by virtue of a power of attorney. International Films,
through Gabelman, leased the film “Monte Carlo Madness” to The Lyric Film Exchange to be shown in different places. One of
the conditions of the contract was that The Lyric Film Exchange would answer for the loss of the film in question whatever the
cause.
2. After the last showing of the said film, Vicente Albo, the Chief of the film department of The Lyric Film Exchange, called
Gabelman and inquired where he wished to have the film returned to.
3. Gabelman requested that it be deposited in the vault of The Lyric Film Exchange, because International Films did not yet
have a safety vault as required by the regulations of the fire department.
4. The chief of International Films answered that the deposit could not be made because the film would not be covered by the
insurance of Lyric Film Exchange.
5. Gabelman then requested Albo to permit him to deposit said film in the vault of Lyric Film Exchange, under Gabelman’s
own responsibility.
6. As there was a verbal contract between Gabelman and Lyric Film Exchange, whereby the film would be shown elsewhere,
the chief of International Films agreed and the film was deposited in Lyric Film Exchange’s vault under Gabelman’s responsibility.
7. Gabelman was then succeeded by Lazarus Joseph as agent of International Films. Joseph was informed of the said deposit
and and about the verbal contract entered into between Gabelman and Lyric Film Exchange, whereby Lyric Film Exchange would
act as a subagent of International Films with authority to show the said film in any theater where Lyric Film Exchange might wish
to show it.
8. Joseph asked for the return of the three films, including Monte Carlo Madness, but the said film could not be returned because
it was to be shown in Cebu.
9. Thereafter, the bodega of Lyric Film Exchange was burned, including the film, which was not insured.
ISSUE: W/N Lyric Film Exchange is liable to International Films for the destruction of the film by fire—NO.
RATIO:
· Lyric Film Exchange, as subagent of the International Films in the exhibition of the film "Monte Carlo Madness", was not
obliged to insure it against fire, not having received any express mandate to that effect, and it is not liable for the accidental
destruction thereof by fire.
· The verbal contract between Bernard Gabelman, and the chief of the film department of the defendant company, was a sub-
agency or a submandate, the defendant company is not civilly liable for the destruction by fire of the film in question because as
a mere submandatary or subagent, it was not obliged to fulfill more than the contents of the mandate and to answer for the damages
caused to the principal by his failure to do so.
· The fact that the film was not insured against fire does not constitute fraud or negligence on the part of the defendant company,
the Lyric Film Exchange, Inc., because as a subagent, it received no instruction to that effect from its principal and the insurance
of the film does not form a part of the obligation imposed upon it by law.
Baltazar v. Ombudsman (2006)
Antonio Baltazar v. Hon. Ombudsman,
Eulogio Mariano, Jose Jimenez, Toribio Ilao and Ernesto Salenga
Dec. 6, 2006 | Velasco, Jr., J. | Responsibility for Acts of Substitutes
SUMMARY: A controversy over the management of a fishpond prompted Salenga (the fishpond watchman) to file a case
before the DARAB against the lessee and sub-lessee. Later, Baltazar, the nephew of the attorney in fact of the owner of the
fishpond filed a case against the DARAB Officers for their acts in connection with the admin case. Ombudsman found
probable cause and filed the information at the Sb. Upon reinvestigation, Omb recommended dismissal. Thus Baltazar filed
a petition with the SC. SC held that Baltazar had no legal standing to file the petition as he was not a real party in interest,
and his delegation by the agent (re-delegation) is not valid.
DOCTRINE: The legal maxim potestas delegata non delegare potest; a power once delegated cannot be re-delegated, while
applied primarily in political law to the exercise of legislative power, is a principle of agency. An agent cannot delegate to
another the same agency. Re-delegation of the agency would be detrimental to the principal as the second agent has no
privity of contract with the former.
FACTS:

- This case stemmed from a controversy involving fishpond in Sasmuan, Pampanga. A complaint was filed by fishpond
watchman Salenga against Rafael Lopez and Lourdes lapid for “Maintenance of Peaceful Possession, Collection of Sum of Money
and Supervision of Harvest” before the Provincial Agrarian Reform Adjudication Board (PARAB), Region III, San Fernando,
Pampanga.
-Facts:
1. Owner of fishpond: Paciencia Regala
2. Ragala’s Atty.-in-fact: Faustino Mercado
3. Mercado leased fishpond to: Eduardo Lapid (3 years, Aug 7, 1990 to Aug 7, 1993)
4. Lapid sub-leased to: Rafel Lopez (during last 7 mos. Of original lease)
5. Lapid hired as fishpond watchman (bante-encargado): Ernesto Salenga
6. Salenga, thru a certain Lagman, then sent a letter to Lapid and Lopez for unpaid salaries and non-payment of the 10%
share in the harvest.
7. Lopez informed Salenga that he had already given the rights of the fishpond to a certain Palad and Perez.
8. Thus, Salenga filed the said complaint (see above.) Salenga later amended his complaint and prayed for a TRO and later
filed a Motion to Maintain Status Quo and to Issue Restraining Order. After ex parte presentation of evidence by Salenga,
Ilao, the Provincial Adjudicator of DARAB Pampanga, issued the TRO. Thereafter, respondent Salenga asked for supervision
of the harvest, which the board sheriff did. Accordingly, defendants Lopez and Lapid received their respective shares while
respondent Salenga was given his share under protest. In the subsequent hearing for the issuance of a preliminary
injunction, again, only respondent Salenga appeared and presented his evidence for the issuance of the writ.
9. Pending resolution of the case, Mercado filed a motion to intervene.
10. In 1995, Ilao dismissed Salenga’s complaint. Salenga appealed with the DARAB Appellate Board.
11. In 1994, pending the resolution of the case with the DARAB, Antonio Baltazar filed the present case against private
respondents before the Office of the Ombudsman (Antonio B. Baltazar v. Eulogio Mariano, Jose Jimenez, Jr., Toribio Ilao, Jr.
and Ernesto Salenga for violation of RA 3019). He was an alleged nephew of Mercado. Petitioner charged private
respondents of conspiracy through the issuance of the TRO in allowing respondent Salenga to retain possession of the
fishpond, operate it, harvest the produce, and keep the sales under the safekeeping of other private respondents. Moreover,
petitioner maintains that respondent Ilao, Jr. had no jurisdiction to hear and act on DARAB Case No. 552-P93 filed by
respondent Salenga as there was no tenancy relation between respondent Salenga and Rafael L. Lopez, and thus, the
complaint was dismissible on its face.
12. Ombudsman found probable cause. Information was filed against the respondents before the Sandiganbayan.
13. Upon motion of Ilao, a reinvestigation was granted. The Ombudsman, after reinvestigation, recommended the dismissal
of the complaint against all private respondents.
Thus Baltazar’s petition before the SC.
PERTINENT ISSUE/HELD:

1. WON Baltazar has legal standing? No

I. Rules on Legal Standing:
a. Locus Standi: right of appearance in a court of justice x x x on a given question.
b. In private suits, standing is governed by the real-parties-in interest rule found in Section 2, Rule 3 of the 1997 Rules of
Civil Procedure which provides that every action must be prosecuted or defended in the name of the real party in interest.
Accordingly, the real-party-in interest is the party who stands to be benefited or injured by the judgment in the suit or the
party entitled to the avails of the suit. Succinctly put, the plaintiffs standing is based on their own right to the relief sought.
c. The records show that petitioner is a non-lawyer appearing for himself and conducting litigation in person. Petitioner
instituted the instant case before the Ombudsman in his own name. In so far as the Complaint-Affidavit filed before the
Office of the Ombudsman is concerned, there is no question on his authority and legal standing. Indeed, the Office of the
Ombudsman is mandated to investigate and prosecute on its own or on complaint by any person, any act or omission of any
public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient
(emphasis supplied). The Ombudsman can act on anonymous complaints and motu proprio inquire into alleged improper
official acts or omissions from whatever source, e.g., a newspaper. Thus, any complainant may be entertained by the
Ombudsman for the latter to initiate an inquiry and investigation for alleged irregularities.
d. However, filing the petition in person before this Court is another matter. The Rules allow a non-lawyer to conduct
litigation in person and appear for oneself only when he is a party to a legal controversy. Section 34 of Rule 138 pertinently
provides, thus:
i. SEC. 34. By whom litigation conducted. In the court of a justice of the peace a party may conduct his
litigation in person, with the aid of an agent or friend appointed by him for that purpose, or with the aid of an attorney. In
any other court, a party may conduct his litigation personally or by aid of an attorney, and his appearance must be either
personal or by a duly authorized member of the bar (emphases supplied).
II. Is petitioner a party or a real party in interest to have the locus standi to pursue the instant petition? No
a. Section 2, Rule 3 of the 1997 Rules of Civil Procedure stipulates, thus:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be
prosecuted or defended in the name of the real party in interest.
The same concept is applied in criminal and administrative cases.
b. In the case at bar, it is clear that petitioner is not a real party in interest. Except being the complainant in the Ombudsman
case, the records show that petitioner is a stranger to the agrarian case.
c. Petitioner asserts that he is duly authorized by Faustino Mercado to institute the suit and presented a Special Power of
Attorney (SPA) from Faustino Mercado. However, such SPA is unavailing for petitioner. For one, petitioners principal,
Mercado, is an agent himself and as such cannot further delegate his agency to another. Otherwise put, an agent cannot
delegate to another the same agency. The legal maxim potestas delegata non delegare potest; a power once delegated cannot
be re-delegated, while applied primarily in political law to the exercise of legislative power, is a principle of agency. For
another, a re-delegation of the agency would be detrimental to the principal as the second agent has no privity of contract
with the former. In the instant case, petitioner has no privity of contract with Paciencia Regala, owner of the fishpond and
principal of Faustino Mercado.
c. Moreover, while the Civil Code under Article 1892 allows the agent to appoint a substitute, such is not the situation in
the instant case. The SPA clearly delegates the agency to petitioner to pursue the case and not merely as a substitute.
Besides, it is clear in the aforecited Article that what is allowed is a substitute and not a delegation of the agency.
Clearly, petitioner is neither a real party in interest with regard to the agrarian case, nor is he a real party in interest in the
criminal proceedings conducted by the Ombudsman as elevated to the Sandiganbayan. He is not a party who will be
benefited or injured by the results of both cases.
Based on the foregoing discussion, petitioner indubitably does not have locus standi to pursue this action and the instant
petition must be forthwith dismissed on that score. Even granting arguendo that he has locus standi, nonetheless, petitioner
fails to show grave abuse of discretion of respondent Ombudsman. (It was the Sandiganbayan that ordered re-investigation;
Re-investigation is upon the sound discretion of the graft court; Court will not review prosecutors’ determination of
probable cause for no showing of grave abuse of discretion)
Dispositive Petition DENIED.
VIRGIE SERONA vs. HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES
November 18, 2002 | YNARES-SANTIAGO, J. | Responsibility for acts of substitutes | RAYMUNDO

SUMMARY: Quilatan delivered pieces of jewelry to Serona to be sold on commission basis. Serona gave the
jewelry to Labrador under the same terms and conditions. The buyer of Labrador absconded. Labrador was
not able to pay Serona and Serona was not able to pay Quilatan. Quilatan filed an estafa case against Serona and
RTC convicted her for estafa. The SC held that the second element of estafa (misappropriation/conversion) was
missing and acquitted Serona. There was no misappropriation as Serona was justified in entrusting her
obligation to a sub-agent absent an agreement to the contrary. There was no conversion because it was under
the same terms and there was no personal benefit. However, she is still civilly liable to pay.

DOCTRINE: An agent who is not prohibited from appointing a sub-agent but does so without express authority
is responsible for the acts of the sub-agent.

FACTS
1. From July 1992 to September 1992, Leonida Quilatan delivered pieces of jewelry to Serona Virgie Serona
to be sold on commission basis. By oral agreement of the parties, Serona shall remit payment or return the
pieces of jewelry if not sold to Quilatan, both within 30 days from receipt of the items.
2. Upon Seronas failure to pay, on September 24, 1992, Quilatan required her to execute an acknowledgment
receipt indicating their agreement and the total amount due.
3. Unknown to Quilatan, Serona had entrusted the jewelry to one Marichu Labrador for the latter to sell on
commission basis. Serona was not able to collect payment from Labrador, which caused her to likewise fail to
pay her obligation to Quilatan.
4. Quilatan, through counsel, sent a formal letter of demand to Serona for failure to settle her obligation. Then,
an information for estafa under Article 315, paragraph 1(b) of the Revised Penal Code was filed against Serona.
5. Quilatan testified that Serona was able to remit P100,000.00 and returned P43,000.00 worth of jewelry
and still owed her in the amount of P424,750.00. Marichu Labrador confirmed that she received pieces of
jewelry from Serona worth P441,035.00 and testified that she sold the jewelry to a person who absconded
without paying her. Labrador also explained that in the past, she too had directly transacted with Quilatan for
the sale of jewelry on commission basis; however, due to her outstanding account with the latter, she got
jewelry from Serona instead.
6. Trial court rendered a decision finding Serona guilty of estafa. Serona appealed to the Court of Appeals,
which affirmed the judgment of conviction but modified the penalty, increasing the maximum penalty from ten
years and one day of prision mayor to twenty years of reclusion temporal. Upon denial of her motion for
reconsideration, Serona filed the instant petition under Rule 45
7. Serona argues that the prosecution failed to establish the elements of estafa. In particular, she submits that
she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the subject
jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her
undertaking with Quilatan. Moreover, Serona delivered the jewelry to Labrador under the same terms upon
which it was originally entrusted to her and that Serona had not derived any personal benefit from the loss of
the jewelry. Consequently, it cannot be said that she misappropriated or converted the same.

RATIO
1. Elements of estafa through misappropriation or conversion as defined in Article 315, par. 1(b) of the
Revised Penal Code are:
(1) that the money, good or other personal property is received by the offender in trust, or on commission, or
for administration, or under any other obligation involving the duty to make delivery of, or to return, the same;
(2) that there be misappropriation or conversion of such money or property by the offender or denial on his
part of such receipt;
(3) that such misappropriation or conversion or denial is to the prejudice of another; and
(4) that there is a demand made by the offended party on the offender.
2. The second element of misappropriation or conversion is lacking. To misappropriate for one’s own use
includes not only conversion to one’s personal advantage, but also every attempt to dispose of the property of
another without right.
3. It cannot be said that Serona misappropriated the jewelry or delivered them to Labrador without right. The
law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absence
of an express agreement to the contrary between the agent and the principal. The appointment of Labrador as
Seronas sub-agent was not expressly prohibited by Quilatan, as the acknowledgment receipt does not contain
any such limitation. Neither does it appear that Serona was verbally forbidden by Quilatan from passing on the
jewelry to another. It is also consistent with usual practice for the seller to necessarily part with the valuables
in order to find a buyer and allow inspection of the items for sale.
4. There is no conversion since the pieces of jewelry were not devoted to a purpose or use different from that
agreed upon. The pieces of jewelry were given by Serona to Labrador to achieve the very same end for which
they were delivered to her in the first place.
5. There is no showing that Serona derived personal benefit from or conspired with Labrador to deprive
Quilatan of the jewelry or its value.
5. In cases of estafa, the profit or gain must be obtained by the accused personally, through his own acts, and
his mere negligence in permitting another to take advantage or benefit from the entrusted chattel cannot
constitute estafa under Article 315, paragraph 1-b, of the Revised Penal Code; unless of course the evidence
should disclose that the agent acted in conspiracy or connivance with the one who carried out the actual
misappropriation, then the accused would be answerable for the acts of his co-conspirators. If there is no such
evidence, direct or circumstantial, and if the proof is clear that the accused herself was the innocent victim of
her sub-agents faithlessness, her acquittal is in order.
6. The rule is that an accused acquitted of estafa may nevertheless be held civilly liable where the facts
established by the evidence so warrant. Then too, an agent who is not prohibited from appointing a sub-agent
but does so without express authority is responsible for the acts of the sub-agent. Considering that the civil
action for the recovery of civil liability arising from the offense is deemed instituted with the criminal action,
Serona is liable to pay complainant Quilatan the value of the unpaid pieces of jewelry.

HELD: the petition is GRANTED.

 NPC v NAMERCO
OCTOBER 23, 1982 | AQUINO | OBLIGATIONS OF THE AGENT TO 3 PERSONS |MIKEE
RD

PETITIONERS: NATIONAL POWER CORPORATION

RESPONDENTS: NATIONAL MERCHANDISING CORPORATION and DOMESTIC INSURANCE
COMPANY OF THE PHILIPPINES
SUMMARY: NPC and NAMERCO, the Philippine representative of New York-based International
Commodities Corporation, executed a contract of sale of sulfur with a stipulation for liquidated
damages in case of breach. NAMERCO executed a performance bond in favor of NPC to guarantee the
seller’s obligation. In entering into the contract, Namerco, however, did not disclose to NPC that
Namerco’s principal, in a cabled instruction, stated that the sale was subject to availability of a
steamer, and contrary to its principal’s instruction, Namerco agreed that non-availability of a steamer
was not a justification for non-payment of liquidated damages. The New York supplier was not able
to deliver the sulfur due to its inability to secure shipping space. Consequently, NPC rescinded the
contract of sale due to the supplier’s non-performance of its obligations, and demanded payment of
liquidated damages from both Namerco and the surety. NPC sued for recovery of the stipulated
liquidated damages. After trial, the Court of First Instance rendered judgment ordering defendants-
appellants to pay solidarity to the NPC reduced liquidated damages with interest. SC held that
Namerco is liable for damages because under Article 1897 of the Civil Code 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. The Court, however, further reduced the solidary liability
of defendants-appellants for liquidated damages.
DOCTRINE: The rule that every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent would apply only in cases where the principal is sought to
be held liable on the contract entered into by the agent. The said rule is not applicable in the instant
case since it is the agent, not the principal, that is sought to be held liable on the contract of sale which
was expressly repudiated by the principal because the agent took chances, it exceeded its authority
and, in effect. it acted in its own name.
FACTS:
1. October 17, 1956: NAMERCO executed a contract for the purchase by the NPC from the New
York firm of 4K long tons of crude sulfur for its Maria Cristina Fertilizer Plant in Iligan City
at a total price of P450,716
2. On that same date, a performance bond in the sum of P90,143.20 was executed by the
Domestic Insurance Company in favor of the NPC to guarantee the seller’s obligations
3. It was stipulated in the contract of sale that the seller would deliver the sulfur at Iligan City
within sixty days from notice of the establishment in its favor of a letter of credit for $212,120.
a. Failure to comply = payment of liquidated damage equivalent to 2/5s of 1% of the full
contract price for 1 30 days of default and 4/5 of 1% for every day thereafter.
st

4. November 12, 1956: NPC advised NAMERCO of its opening the letter of credit ask for last Nov
8 thus deadline of delivery would be January 15, 1957.
5. The New York supplier was not able to deliver the sulfur due to its inability to secure shipping
space. During the period from January 20 to 26, 1957 there was a shutdown of the NPC’s
fertilizer plant because there was no sulfur. No fertilizer was produced
6. In a letter dated February 27, 1957, Namerco and the Domestic Insurance Company was
advised that under Article 9 of the contract of sale "non-availability of bottom or vessel" was
not a fortuitous event that would excuse non-performance and that the NPC would resort to
legal remedies to enforce its rights
7. NPC rescinded contract of sale due to non-performance of obli. They also demanded
liquidated damages explaining that time is of the essence in the contract. –A similar demand
was made upon surety.
 8. liquidated damages were computed on the basis of the 115-day period between January 15,
1957, the deadline for the delivery of the sulfur at Iligan City, and May 9, 1957 when Namerco
was notified of the rescission of the contract, or P54,085.92 for the first thirty days and
P306,486.88 for the remaining eighty-five days. Total: P360,572.80.
9. November 5, 1957, the NPC sued the New York firm, Namerco and the Domestic Insurance
Company for the recovery of the stipulated liquidated damages
10. TC: dismissed the case as to the New York firm for lack of jurisdiction because it was not doing
business in the Philippines
11. Melvin Wallick, as the assignee of the New York corporation and after the latter was dropped
as a defendant in Civil Case No. 33114, sued Namerco for damages in connection with the
same sulfur transaction
12. trial court dismissed Wallick’s action for damages against Namerco because the assignment
in favor of Wallick was champertous in character.
ISSUE: W/N NAMERCO AS AGENT IS PERSONALLY LIABLE DAMAGES. –YES, 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.
RATIO:
1. Under Article 1897 of the Civil Code 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.
a. In the present case, Namerco, the agent of a New York-based principal, entered into a
contract of sale with the National Power Corporation without disclosing to the NPC
the limits of its powers and, contrary to its principal’s prior cabled instructions that
the sale should be subject to availability of a steamer, it agreed that non-availability
of a steamer was not a justification for nonpayment of the liquidated damages.
Namerco. therefore, is liable for damages.
2. The rule that every person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent would apply only in cases where the principal
is sought to be held liable on the contract entered into by the agent. The said rule is not
applicable in the instant case since it is the agent, not the principal, that is sought to be
held liable on the contract of sale which was expressly repudiated by the principal
because the agent took chances, it exceeded its authority and, in effect. it acted in its
own name.
3. Article 1403 of the Civil Code which provides that a contract entered into in the name of
another person by one who has acted beyond his powers is unenforceable, refers to the
unenforceability of the contract against the principal. In the instant case, the contract
containing the stipulation for liquidated damages is not being enforced against its principal
but against the agent and its surety. It being enforced against the agent because Article 1897
implies that the agent who acts in excess of his authority is personally liable to the party with
whom he contracted. And that rule is complimented by Article 1898 of the Civil Code which
provides 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
never disclosed to the NPC the cabled or written instructions of its principal. For that reason
and because Namerco exceeded the limits of its authority, it virtually acted in its own name
and not as agent and it is, therefore, bound by the contract of sale which, however, it not
enforceable against its principal. If, as contemplated in Articles 1897 and 1898, Namerco is
bound under the contract of sale, then it follows that it is bound by the stipulation for
liquidated damages in that contract.
 4. Defendant’s contention that Namerco’s liability should be based on tort or quasi-delict, as
held in some American cases, like Mendelson v. Holton, 149 N.E. 38,42 ACR 1307, is not well-
taken. As correctly argued by the NPC, it would be unjust and inequitable for Namerco to
escape liability of the contract after it had deceived the NPC by not disclosing the limits of its
powers and entering into the contract with stipulations contrary to its principal’s
instructions.
5. The contention of the defendants that the Domestic Insurance Company is not liable to the
NPC because its bond was posted, not to Namerco, the agent, but for the New York firm which
is not liable on the contract of sale, cannot be sustained because it was Namerco that actually
solicited the bond from the Domestic Insurance Company and, Namerco is being held liable
under the contract of sale because it virtually acted in its own name. In the last analysis, the
Domestic Insurance Company acted as surety for Namerco. The rule is that "want of authority
of the person who executes an obligation as the agent or representative of the principal will
not, as a general rule, affect the surety thereon, especially in the absence of fraud, even though
the obligation is not binding on the principal
6. The contention of the defendants that the Domestic Insurance Company is not liable to the
NPC because its bond was posted, not to Namerco, the agent, but for the New York firm which
is not liable on the contract of sale, cannot be sustained because it was Namerco that actually
solicited the bond from the Domestic Insurance Company and, Namerco is being held liable
under the contract of sale because it virtually acted in its own name. In the last analysis, the
Domestic Insurance Company acted as surety for Namerco. The rule is that "want of authority
of the person who executes an obligation as the agent or representative of the principal will
not, as a general rule, affect the surety thereon, especially in the absence of fraud, even though
the obligation is not binding on the principal
7. No proof of pecuniary loss is required for the recovery of liquidated damages. The stipulation
for liquidated damages is intended to obviate controversy on the amount of damages. There
can be no question that the NPC suffered damages because its production of fertilizer was
disrupted or diminished by reason of the non-delivery of the sulfur. The parties foresaw that
it might be difficult to ascertain the exact amount of damages for non-delivery of the sulfur.
So, they fixed the liquidated damages to be paid as indemnity to the NPC.
RULING: WHEREFORE, the lower court’s judgment is modified and defendants National
Merchandising Corporation and Domestic Insurance Company of the Philippines are ordered to pay
solidarily to the National Power Corporation the sum of P45,100.00 as liquidated damage
Phil Products Co. v. Primateria (1965)
 PHILIPPINE PRODUCTS CO. v. PRIMATERIA
Nov. 29, 1965 | Bengzon, C.J. | Agent acting outside the scope of authority | TAN
PETITIONERS: PHILIPPINE PRODUCTS COMPANY
RESPONDENTS: PRIMATERIA SOCIETE ANONYME POUR LE COMMERCE EXTERIEUR: PRIMATERIA
(PHILIPPINES) INC., ALEXANDER G. BAYLIN and JOSE M. CRAME
SUMMARY: Primateria Zurich (whose main office is in Zurich, Switzerland) owes Philippine Products a sum of
money. Philippine Products wanted to hold the agents through which Primateria Zurich acted (Primateria
Phils., Baylin, and Crame) personally liable under the theory that Primateria Zurich is a foreign corporation
without a license and that the agents acted beyond their authority. SC disagreed saying neither was duly
proven.
DOCTRINE: Art. 1897 does not hold that in cases of excess of authority, both the agent and the principal are
liable to the other contracting party (NOT SURE).

FACTS:

1. Primateria Zurich, (a company in switzerland engaged in transactions in international trade with

agricultural products, particularly in oils, fats and oil-seeds and related products) through defendant
Alexander B. Baylin, entered into an agreement with plaintiff Philippine Products Company, whereby
the latter undertook to buy copra in the Philippines for the account of Primateria Zurich.
2. During such period, plaintiff caused the shipment of copra to foreign countries, pursuant to
instructions from defendant Primateria Zurich, thru Primateria (Phil.) Inc. acting by defendant
Alexander G. Baylin and Jose M. Crame, officers of said corporation.
3. Primateria Zurich failed to pay Philippine Products Co. so the latter filed an action to recover from
them.
4. The lower court held defendant Primateria Zurich liable to the plaintiff but it absolved its agents
Primateria (Phil.), Inc., Alexander G. Baylin, and Jose M. Crame from any and all liability.
5. Philippine Products Co. now argues that since Primateria Zurich is a foreign corporation and since it
has transacted business in the Philippines without the necessary license, as required by the provisions
of the corporation law, its agents here are personally liable for contracts made in its behalf.
6. It also argues that that the appellees as agents of Primateria Zurich are liable to it under Art. 1897 of
the New Civil Code which reads as follows:

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.
ISSUES/HELD:
W/N the agents (Primateria Philippines, Baylin, and Crame) are personally liable? NO.
RATIO:
1. It was not duly proven that Primateria Zurich is a foreign corporation. Nor was there proof that a
societe anonyme ("sociedad anomima") is a corporation. In fact, our corporation law recognized the
difference between sociedades anonimas and corporations.
2. At any rate, we do not see how the plaintiff could recover from both the principal (Primateria Zurich)
and its agents. It has been given judgment against the principal for the whole amount. It asked for such
judgment, and did not appeal from it. It clearly stated that its appeal concerned the other three
defendants.
3. There is no proof that, as agents, they exceeded the limits of their authority. In fact, the principal —
Primateria Zurich — who should be the one to raise the point, never raised it, denied its liability on the
ground of excess of authority. At any rate, the article does not hold that in cases of excess of authority,
both the agent and the principal are liable to the other contracting party.
4. This view of the cause dispenses with the necessity of deciding the other two issues, namely: whether
the agent of a foreign corporation doing business, but not licensed here is personally liable for
contracts made by him in the name of such corporation. Although, the solution should not be difficult,
since we already held that such foreign corporation may be sued here (General Corporation vs. Union
Ins., 87 Phil. 509). And obviously, liability of the agent is necessarily premised on the inability to sue
the principal or non-liability of such principal. In the absence of express legislation, of course.
DBP v. CA (1994)

SUMMARY:
76 yr old Juan Dans applied for a loan, and DBP advised Juan Dans to obtain a mortgage redemption insurance
with DP’s MRI Pool. Dans was granted the loan and applied for the said insurance, credited to the account of
DBP MRI Pool, and MRI Pool was advised of the credit. Dans died, upon which MRI Pool found out he was over
60, and as such was ineligible for the policy. DBP informed Dans’ wife and offered to reimburse. Dans’ wife filed
a complaint instead. Court ruled that DBP exceeded the scope of its authority when it accepted Dans application
by collecting the premium, and since there was no showing that Dans was informed or aware that DBP was
limited by the age restriction policy when he applied for the insurance, DBP was held liable.

DOCTRINE:
If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on
the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter is
liable for damages to him. The rule that the agent is liable when he acts without authority is founded upon the
presumption that there has been some wrong or omission on his part either in misrepresenting or concealing
his authority.

FACTS:
1. Juan Dans applied for a loan of 500K with DBP. At the time he was 76, DBP advised him to obtain a
mortgage redemption insurance(MRI) with the DBP Mortgage Redemption Insurance Pool. (DBP MRI Pool)
2. The loan, for a reduced amount of 300k was approved, less 1.4K as payment of the MRI premium. Dans
subsequently submitted the MRI Application for Insurance and “Health Statement for DPB MRI Pool.” The
premium was credited to the account of DBP MRI Pool, and MRI Pool was advised of the credit.
3. Dans then died of cardiac arrest. MRI Pool then notified DBP that Dans had passed away, but was not actually
eligible for MRI coverage as he was over the acceptance age of 60. MRI In turn, informed Dans’ wife as well as
offered to refund her of the premium. Dans’ wife declined and instead filed a complaint against DBP and the
Insurance Pool for a collection of sum of money with damages.
4. Dans’ wife alleges that Dans became insured by the MRI pool when DBP, with full knowledge of Dans age,
accepted his payment of the premium. TC found in favor of the estate, against DBP. MRI pool was however
absolved as the TC found that there was no contract between it and the deceased. It likewise found DBP was
estopped for having led Dans into applying for insurance despite knowing he was over age. CA affirmed the TC.

ISSUES/HOLDING:
1. Whether or not the MRI pool is liable to the Estate? - NO.
2. Whether or not DBP is liable to the Estate? – YES.
RATIO:
MRI POOL IS NOT LIABLE.
1. Undisputably, the power to approve MRI applications is lodged with the DBP MRI Pool. The pool, however,
did not approve the application of Dans. There is also no showing that it accepted the sum of P1,476.00, which
DBP credited to its account with full knowledge that it was payment for Dan's premium. There was, as a result,
no perfected contract of insurance; hence, the DBP MRI Pool cannot be held liable on a contract that does not
exist.

DBP IS LIABLE.
1. DBP acted in such a way as to make Dans assume that he was eligible for the insurance, and Dans had already
fulfilled all requirements for him to enjoy the benefits of the same. Article 1897 states than an “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.”
2. DBP was not authorized to accept applications for MRI when its clients are more than 60 years of age.
Knowing however that Dans was more than 60 at the time, and as such ineligible for the policy, DBP exceeded
the scope of its authority when it accepted Dans application by collecting the premium. Instead of
allowing Dans to look for his own insurance, DBP compelled him to apply with DBP MRI Pool, and is
thus from its actions can be inferred that he was an insurance agent.
3. Court likewise cited Article 1898, which quotes: “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.” Applied to the case, DBP
exceeded the scope of its authority when it accepted Dans’ application for MRI by collecting the insurance
premium, and deducting its agent’s commission and service fee. Without showing that Dans knew of the
limitation on DBP’s authority to solicit applications for MRI, DBP as the agent is liable.
4. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal
on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent, then the latter
is liable for damages to him. The rule that the agent is liable when he acts without authority is founded upon
the presumption that there has been some wrong or omission on his part either in misrepresenting or
concealing his authority.
5. DBP, however, cannot be liable for the entire value of the policy because this would assume that Dans would
have definitely secured another policy were it not for DBP’s concealment. Considering his advanced age, there
is no absolute certainty that Dans could obtain an insurance coverage from another company. It must also be
noted that Dans died almost immediately. As such, Dans’ estate is only entitled to moral damages and attorney’s
fees.
Nicholas Cervantes v. CA and PAL
March 2, 1999 | Purisima, J. | Agent acting outside scope of authority
SUMMARY: Cervantes had a roundtrip ticket ,MNL-US-MNL, which was to expire after a year. 4 days before the
expiry date, he used it. When he arrived in the US, PAL agents confirmed his return flight which was 6 days
after the expiry date. However, when he got to the check in counter, he wasn’t allowed to board as the ticket
was already expired. He filed a complaint for damages against PAL. Both RTC and CA dismissed it. The SC agreed
saying that the agents’ act of confirming the return flight ticket did not have the effect of extending the validity
of the ticket. See doctrine.
DOCTRINE: Under Article 1898, the acts of an agent beyond the scope of his authority do not bind the principal,
unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person knows that the
agent was acting beyond his power or authority, the principal cannot be held liable for the acts of the agent. If
the said third person is aware of such limits of authority, he is to blame, and is not entitled to recover damages
from the agent, unless the latter undertook to secure the principals ratification.
FACTS:
1. Pursuant to a Compromise Agreement entered into between Cervantes and PAL in two previous suits,
PAL issued a round trip plane ticket for MNL-HNL-LA-HNL-MNL. It had an expiry date of 1 year from issuance
(until March 27, 1990).
2. On March 23, 1990 (4 days before expiry), Cervantes used it. He arrived in LA on the 23 and booked his
rd

LA-MNL return ticket. PAL agents confirmed it for the Apr 2 flight.
3. Learning that the same PAL plane would make a stopover in SF and considering that he’d be there on Apr
2, he made arrangements with PAL for him to board the flight in SF instead of LA.
4. On Apr 2, when he checked in at the PAL counter in SF, he wasn’t allowed to board. A notation was marked
on his ticket: TICKET NOT ACCEPTED DUE EXPIRATION OF VALIDITY.
5. He filed a complaint for damages for breach of contract of carriage
6. RTC and CA: dismissed the case
ISSUES/HOLDING [PETITION IS DENIED]
1. Whether the act of the PAL agents in confirming the subject ticket extended the period of validity of
petitioners ticket - NO
2. Whether the defense of lack of authority was correctly ruled upon - YES
3. Whether the denial of the award of damages was proper - YES
RATIO:
Re: act of PAL agents
1. Plane ticket itself provides that it isn’t valid after Mar 27. Par 8 of the Conditions of Contract state that
“this ticket is good for carriage for one year from date of issue”.
2. Lufthansa v CA: when the terms are clear and leave no doubt as to the intention of the contracting parties,
contracts are to be interpreted according to their literal meaning
3. Cervantes had first-hand knowledge that the ticket would expire when he called PAL’s Legal Department
before he left for the US. He was fully aware that there was a need to send a letter to the legal counsel for
extension of the period. Despite this, he persisted to use the ticket
4. The two employees did not extend the validity of the ticket as they had no authority to do so.
5. The PAL agents are not privy to the Agreement.
6. SEE DOCTRINE
Re: defense of lack of authority
7. Cervantes: defense that “the PAL employees lacked authority” was deemed waived under R9, S2, ROC
(failure to put up defences in their answer/MTD is a waiver thereof)
8. Records show that the question of authority was acted upon by the RTC when Cervantes presented as
witness and the depositions of the 2 PAL employees
9. Cervantes admitted that PAL’s legal counsel told him to submit a letter requesting for an extension. This
is tantamount knowledge of Cervantes’ part that the PAL employees had no authority to extend the validity of
the subject tickets and only PAL’s legal counsel was authorized to do so
10. Notwithstanding PAL’s failure to raise the defense in its answer/MTD, that omission was cured since the
issue was litigated upon
11. Following S5, R10, ROC, when evidence is presented by one party, with the express or implied consent of
the adverse party, as to issues not alleged in the pleadings, judgment may be rendered validly as regards the
said issue, which shall be treated as if they have been raised in the pleadings.
Re: award of damages
12. Cervantes failed to show that PAL acted in bad faith in refusing to allow him to board
13. Can’t award moral damages for breach of contract of carriage. To award it, the breach must be wanton and
deliberately injurious. What the PAL employees did was one of simple negligence. No injury resulted because
Cervantes had a back up ticket should PAL refuse
14. Can’t award exemplary damages which is awarded by way of example. Wrongful act must be accompanied
with BF. No showing of BF here.
BACALTOS COAL MINES v. CA (1995)

June 29 1995 l J. Davide Jr. l Agent acting outside the scope of authority

SUMMARY: German, the proprietor of Bacaltos Coal Mines, executed an Authorization in favor of Savellon
authorizing the latter to use the coal operating contract of Bacaltos Coal Mines for any legitimate purpose it
may serve. Savellon entered into a Third Charter Party with SMC under which he, in behalf of Bacaltos Coal
Mines, undertook to lease to SMC a vessel for 3 roundtrips. However, the vessel was only able to make one
roundtrip thereby prompting SMC to sue Savellon, German, and Bacaltos Coal Mines for specific performance.
SC, overturning the decisions of TC and CA, dismissed the complaint as to German and Bacaltos Coal
Mines and held that, based on the Authorization, Savellon was not authorized to enter into the Third Party
Charter Party.
DOCTRINE: Every person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's
authority, and his ignorance of that authority will not be any excuse.
Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at
their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and
extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.
FACTS:
1. German Bacaltos (German) executed an Authorization in favor of Savellon, the pertinent potions of
which read as follows:
I. GERMAN A. BACALTOS xxx do hereby authorize RENE R. SAVELLON xxx to use the coal operating
contract of BACALTOS COAL MINES of which I am the proprietor, for any legitimate purpose that
it may serve. Namely, but not by way of limitation, as follows:
1. To acquire purchase orders for and in behalf of BACALTOS COAL MINES;
2. To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;
3. To collect all receivables due or in arrears from people or companies having dealings under
BACALTOS COAL MINES/RENE SAVELLON;
4. To extend to any person or company by substitution the same extent of authority that is granted
to Rene Savellon;
5. In connection with the preceeding paragraphs to execute and sign documents, contracts, and
other pertinent papers.
Further, I hereby give and grant to RENE SAVELLON full authority to do and perform all and every lawful
act requisite or necessary to carry into effect the foregoing stipulations as fully to all intents and purposes
as I might or would lawfully do if personally present, with full power of substitution and revocation.
2. Savellon entered into a Trip Charter Party with San Miguel Corporation (SMC). Under the Trip
Charter Party, “Bacaltos Coal Mines (Bacaltos), represented by its Chief Operating Officer, RENE ROSEL
SAVELLON” undertook to let and demise a vessel to charterer SMC for 3 round trips to Davao for P650k.
3. As payment, SMC issued a check payable to "RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES"
for which Savellon issued a receipt under the heading of BACALTOS COAL MINES.
4. However, the vessel was able to make only one trip prompting SMC to file against German, Bacaltos
and Savellon a complaint for specific performance and damages.
5. German and Bacaltos alleged that the powers granted to Savellon are only those clearly expressed in
the Authorization which do not include the power to enter into the Trip Charter Party with SMC.
6. The lower court rendered a decision in favor of SMC and held Savellon, German and Bacaltos jointy
and solidarily liable to pay SMC.
 It ruled that the Authorization given by German to Savellon necessarily included the power to
enter into the Trip Charter Party
7. The CA affirmed in toto the judgment of the trial court.
 It held that the Authorization includes the power to enter into the Trip Charter Party because
the "five prerogatives" enumerated in the former is prefaced by the phrase "but not by way of
limitation”.
8. German and Bacaltos filed the instant petition.

ISSUE: WON Savellon was duly authorized by the German and Bacaltos to enter into the Trip Charter
Party under and by virtue of an Authorization— NO

RATIO:
A. Statement of the rule
1. Every person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the
agent's authority, and his ignorance of that authority will not be any excuse.
2. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but
also the nature and extent of the authority, and in case either is controverted, the burden of proof is
upon them to establish it.
3. Since the agency of Savellon is based on a written document, the Authorization, the extent and
scope of his powers must be determined on the basis thereof. The language of the Authorization
is clear.
B. Savellon was not authorized to enter into the Third Charty Parter.
1. There is only one express power granted to Savellon, viz., to use the coal operating contract for any
legitimate purpose it may serve.
1. The enumerated "five prerogatives" — to employ the term used by the Court of Appeals — are
nothing but the specific prerogatives subsumed under or classified as part of or as examples of
the power to use the coal operating contract.
2. The clause "but not by way of limitation" which precedes the enumeration could only refer to or
contemplate other prerogatives which must exclusively pertain or relate or be germane to the power
to use the coal operating contract. The conclusion then of the Court of Appeals that the Authorization
includes the power to enter into the Trip Chapter Party because the "five prerogatives" are prefaced
by such clause, is seriously flawed.
3. What the trial court failed to consider was that there is no evidence at all that Bacaltos Coal Mines
as a coal mining company owns and operates vessels, and even if it owned any such vessels, that
it was allowed to charter or lease them. The trial court also failed to note that the Authorization is
not a general power of attorney. It is a special power of attorney for it refers to a clear mandate
specifically authorizing the performance of a specific power and of express acts subsumed therein.
C. SMC was negligent.
1. Since the principal subject of the Authorization is the coal operating contract, SMC should have
required its presentation to determine what it is and how it may be used by Savellon. Such a
determination is indispensable to an inquiry into the extent or scope of his authority. A scrutiny of the
coal operating contract of Bacaltos Coal Mines would have provided SMC knowledge of the activities
which are germane, related, or incident to the power to use it. But it did not even require Savellon
to produce the same.
1. SMC's negligence was further compounded by its failure to verify if Bacaltos Coal Mines owned a
vessel. A party desiring to charter a vessel must satisfy itself that the other party is the owner of the
vessel or is at least entitled to its possession with power to lease or charter the vessel. In the instant
case, SMC made no such attempt. It merely satisfied itself with the claim of Savellon that the vessel it
was leasing is owned by Bacaltos Coal Mines and relied on the presentation of the Authorization as
well as its test on the sea worthiness of the vessel.
2. The Authorization itself does not state that Bacaltos Coal Mines owns any vessel, and since it is clear
therefrom that it is not engaged in shipping but in coal mining or in coal business, SMC should have
required the presentation of pertinent documentary proof of ownership of the vessel to be
chartered
 3. SMC drew the check in favor of RENE SAVELLON IN TRUST FOR BACALTOS COALMINES (Exhibit
"B") and delivered it to Savellon who there upon issued a receipt (Exhibit "B1"). We agree with the
petitioners that SMC committed negligence in drawing the check in the manner aforestated
FALLO: Petition granted. CA decision reversed and set aside. RTC decision modified— Savellon is solely liable
for the amounts adjudged.
VERZOSA v. LIM
November 25, 1983 | Street, J. | Agent Acting Outside Scope of Authority | Ampil
PLAINTIFFS: Vicente Verzosa and Ruiz, Rementeria y Compania
DEFENDANTS: Silvino Lim and Siy Cong Bieng and Co., Inc.
SUMMARY: The steamer Ban Yek collided with the ship Perla in the Bicol River, causing material damage to the
latter. The owners of the Perla brought an action to recover damages against Silvino Lim and Siy Cong Bieng
and Co., Inc., as owner and agent, respectively, of the Ban Yek. The Court held that since the obligation to pay
damages arises from tort, both Lim and Siy Cong Bien & Co. should be held liable.
DOCTRINE:
[The Court is] of the opinion that both the owner and agent (naviero) should be declared to be jointly and
severally liable, since the obligation which is the subject of this action had its origin in a tortious act and did not
arise from contract. Article 1137 of the Civil Code, declaring that joint obligations shall be apportionable unless
otherwise provided, has no application to obligation arising from tort.

FACTS:

1. Vicente Verzosa and Ruiz, Rementeria y Compania, as owners of the coastwise vessel Perla, brought an action
to recover damages from Silvino Lim and Siy Cong Bieng & Co., Inc., as owner and agent, respectively, of the
steamer Ban Yek, due to a collision between the two vessels.
2. On March 9, 1921, the Ban Yek left Naga on the Bicol River and was headed to Manila. As the ship approached
the Malbong bend of the Bicol River, the Perla was sighted coming up the river on the way to Naga.
3. While the boats were still more than a kilometer apart, the Ban Yek gave two blasts with her whistle, thus
indicating an intention to pass on the left, or to her own port side. In reply to this signal the Perla gave a single
blast, thereby indicating that she disagreed with the signal given by the Ban Yek and would maintain her
position on the right (starboard). The Ban Yek did not reply to the signal of the Perla.
4. As the Perla was navigating with the current, then running in from the sea, this vessel, under paragraph 163
of Customs Marine Circular No. 53, had the right of way over the Ban Yek, and the officers of the Perla
interpreted the action of the Ban Yek in not replying to the Perla’s signal as an indication of acquiescene of the
officers of the Ban Yek in the determination of the Perla to keep to the starboard.
5. The river at this point was about 250 feet wide, and thus the courses pursued by the two vessels would have
necessarily resulted in a head-on collision. When the danger of such an occurrence became imminent, Captain
Garrido of the Perla, seeing that he was shut off by the Ban Yek from passing to the right, put his vessel to port.
At about the same time, the engine on the Ban Yek was reversed and three blasts were given by this vessel to
indicate that she was backing.
6. Thus the Ban Yek was brought to occupy an oblique position across the stream at the moment the Perla was
passing, and the bow of the Ban Yek crashed into the starboard bumpers of the Perla, inflicting material damage.
Repairs made on the Perla cost her owners P17, 827.
ISSUE/HELD:
WON Silvino Lim and Siy Cong Bieng and Co. are both liable in the instant case – YES
RATIO:
1. The Court notes that Silvino Lim is impleaded as owner and Siy Cong Bieng & Co. is impleaded as the shipping
agent (casa naviera), or person in responsible control of the Ban Yek at the time of the accident. Art. 826 of the
Code of Commerce declares that the owner of any vessel shall be liable for the indemnity due to any other vessel
injured by the fault, negligence, or lack of skill of the captain of the first.
2. It is to be observed, however, that the Spanish text itself uses the word naviero. The author of the article
under which the word naviero appears in the Enciclopedia Juridica Española tells us that in Spanish it may mean
either owner, outfitter, charterer, or agent, though he says that the fundamental and correct meaning of the
word is that of "owner”. It is therefore clear that by special provision of the Code of Commerce the owner is
made responsible for the damage caused by an accident of the kind under consideration in this case.
3. But while it is thus demonstrated that Silvino Lim is liable for these damages in the character of owner, it
does not necessarily follows that Siy Cong Bieng & Co., as character or agent (casa naviera), is exempt from
liability; and the Court is of the opinion that both the owner and agent can be held responsible where both are
impleaded together (see “Doctrine” section).
GOLD STAR MINING v LIM JIMENA

October 26, 1968 | REYES, J.B.L., J. | Agent acting in his own name

PETITIONERS: GOLD STAR MINING CO., INC.

RESPONDENTS: MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA,
DANTE JIMENA, JORGE JIMENA, JOYCE JIMENA, as legal heirs of the deceased VICTOR JIMENA, and JOSE
HIDALGO

SUMMARY: Jimena and Lincallo agreed that the former will advance the purchase price for certain mining
claims and that the latter will turn over half of the proceeds and lands. Lincallo assigned the mining rights to
Gold Star and entered into three other contracts. He was paid royalties for the mining claims. Jimena notified
Gold Star of his interests and filed a suit against Lincallo and Gold Star. Gold Star claims that Jimena has no
cause of action against it. CFI and CA both ruled in favor of Jimenez’s heirs holding that they are entitled to half
of the share of the royalties. Applying Article 1883, the SC ruled that Jimena does have a cause of action. In
transferring the mining claims without disclosing who the real owner is, Lincallo acted as Jimena's agent as
regards Jimena's share of the claims.

DOCTRINE: The principal may sue the person with whom the agent dealt with in his (agent's) own name, when
the transaction involves things belonging to the principal.

FACTS:

1. Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena half of the proceeds from all
mining claims that he would purchase with the money to be advanced by the latter. This agreement
was later on modified to include in the equal sharing agreement not only the proceeds from several
mining claims, but also the lands constituting the same, and so as to bing thereby their “heirs, assigns,
or legal representatives.”
2. Lincallo assigned the mining rights over parts of the claims to Gold Star Mining Co., Inc. and
Marinduque Iron Mines Agents.
3. Jimena repeatedly apprised both mining corporations of his interests over the mining claims assigned
and/or leased by Lincallo but Gold Star and Marinduque Iron Mines ignored his demands. Jimena also
demanded from Lincallo the payment of the P5,800 he gave Lincallo as money to purchase the mining
claims and the lands.
4. Lincallo failed to settle his accounts and transferred a majority of his share in the royalties due from
Gold Star to Gregorio Tolentino, a salaried employee for P10,000.00.
5. Jimena commenced a suit against Lincallo for recovery of his advances and his one-half share in the
royalties and impleaded Gold Star, Marinduque Iron Mines, and Tolentino. TC issued a writ of
preliminary injunction, preventing both mining companies from paying royalties during the pendency
of the case to Lincallo, his assigns or legal representatives. Nonetheless, Gold Star still paid P30,691.92
to Lincallo and Tolentino.
6. CFI: ruled in favor of Victor Jimena’s heirs (Jimena and Tolentino died during the pendency of the case
at the TC level). They are entitled to half of the shares of the royalties of Lincallo in his contracts with
Gold Star, Marinduque Iron Mines and Alejandro Marquez.
7. CA: affirmed CFI Manila’s decision

ISSUES/HELD
1. Whether the CA erred in finding that the Jimenas have a cause of action against Gold Star Mining
Co., as there is no privity of contract between Gold Star and Jimena — No
2. Whether the CA erred in condemning Gold Star to pay the sum of P30,691.92 for violation of an
allegedly non-existent injunction — No
RATIO:
1. The situation is comparable to the status of the first and second mortgagees of a duly registered real
estate mortgage. Even though there is no privity of contract between them, the existence of a common
 subject-matter supplies the juridical link. Jimena repeatedly made demands upon God Star for the
payment of his ½ share of the royalties, but he was unsuccessful. As such, he was forced to implead
Gold Star. Furthermore, under such conditions wherein Jimena was repeatedly denied of his interests,
Jimena has an action against Gold Star, pursuant to Art. 1883, which provides that the principal may
sue the person with whom the agent dealt with in his (agent’s) own name, when the transaction
‘involves things belonging to the principal.’
2. The award is not a penalty but a decree of restitution. The sum to be paid by the company to Jimena is
“to be imputed to Lincallo’s liability under this judgment”. CA thus left the way open for Gold Star to
recover later the whole amount from Lincallo, by direct action against him or by deducting it from his
royalties.
PNB v. Agudelo (1933)

PNB VS. AGUDELO

October 30, 1933 | Villa-real | Agent acting in his own name | Bayudan

SUMMARY
Mauro Garrucho executed mortgages over his sister’s (Amparo Garrucho) and his aunt’s (Paz Agudelo)
property, in his own name, to secure credit he might obtain from PNB. He issued promissory notes covering
such. When the credits became due, he executed a consolidated mortgage over the 3 lots involved. He further
issued another promissory note, which novated the previous ones he had issued. His sister then sold her lot to
their aunt. In an affidavit, Paz acknowledged the lien on Amparo’s property, which was the one sold to her. This
case is an appeal from the CFI judgment absolving Mauro from paying PNB and ordering her to pay PNB instead.
The SC held that Paz is only subsidiarily liable. Further, as PNB did not appeal from the CFI judgment absolving
Mauro, Paz should also be absolved from the complaint, on the principle that the accessory follows the
principal.

DOCTRINE
…when an agent negotiates a loan in his personal capacity and executes a promissory note under his own
signature, without express authority from his principal, giving as security therefor real estate belonging to the
letter, also in his own name and not in the name and representation of the said principal, the obligation do [sic]
constructed by him is personal and does not bind his aforesaid principal.

FACTS
1. Paz Agudelo and Amparo Garrucho executed special powers of attorney to Mauro Garrucho, to enable
him to sell, alienate, and mortgage their respectivereal estate in Murcia and Bacolod. Mauro is the
nephew of Paz, and the brother of Amparo. Nothing in the special powers of attorney authorized Mauro
to contract any loan or constitute a mortgage on the property belonging to his principals to secure his
obligations.
2. Mauro then executed the following mortgages in favor of PNB, covering:
Amparo’s property (Lot 878) Paz Agudelo’s property (Lots 61, 207)

For credits, loans, etc. which he might obtain from For credits, loans, etc. which he might obtain from
PNB, not exceeding P6,000 PNB, not exceeding P16,000

Said mortgages were executed in his name, with PNB authorized to take possession of the property should
Mauro fail to pay. Mauro also executed promissory notes for the two mortgages, signed in his own name.
1. Mauro was informed by PNB that his credit became due. He issued a promissory note for P21,000,
which was a novation of the P6,000 and P16,000 PNs he had executed. He then executed a consolidated
mortgage over the 3 lots.
1. Amparo then sold Lot 878 to her aunt, Paz. In the affidavit that Paz executed, she undertook to “do
hereby further agree to the amount of the lien thereon stated in the mortgage deed executed by Miss
Amparo A. Garrucho in favor of the Philippine National Bank.”
2. Paz thus appealed from the CFI Occidental Negros judgment absolving Mauro from the complaint, and
ordering Paz to pay PNB.

ISSUE
W/N Paz Agudelo is liable for the payment of the loans that Mauro obtained from PNB - YES, but subsidiarily
liable only. MAURO is PRIMARILY liable.

RATIO
1. RULES
 1. Art. 1709, CC. By the contract of agency, one person binds himself to render some service, or
to do something for the account or at the request of another.
2. Art. 1717, CC, When an agent acts in his own name, the principal shall have no right of action
against the persons with whom the agent has contracted, or such persons against the
principal. In such case, the agent is directly liable to the person with whom he has contracted,
as if the transaction were his own. Cases involving things belonging to the principal are
excepted.The provisions of this article shall be understood to be without prejudice to actions
between principal and agent.
2. Nothing in the said mortgage deeds show that Mauro is the attorney in fact of Amparo and of Paz, and
that he obtained the loans and constituted the mortgages at the request of Amparo and Paz. Mauro
acted in his own personal capacity. The PNs were executed in his own name and signature, and without
authority from his principal and thus not binding on them. Mauro also exceeded the scope of his
authority in constituting the mortgages. Thus, his principals are not liable.
1. National Bank vs. Palma Gil: A promissory note and two mortgages executed by the agent for
and on behalf of his principal, in accordance with a power of attorney executed by the principal
in favor of the agent, are valid, and as provided by article 1727 of contracted by the agent; but
a mortgage on real property of the principal not made and signed in the name of the principal
is not valid as to the principal.
2. It could not have been the intention of the parties that Mauro would execute the PN and the
mortgage in his capacity as attorney in fact of Paz. Manresa, in his Commentaries to the Civil
Code, says that the question of interpretation be raised in order that the intention of the
parties may prevail. Such intention must also be clear.
3. Because Mauro exceeded the authority given to him, he is deemed personally and primarily liable for
the amount as stated in the PNs.
1. Paz is subsidiarily liable, because she gave her consent to the lien on Lot 878. The
acknowledgment is only as regards Lot 878, and does not extend to Lots 61 and 207.
2. Although it is true that a mortgage is indivisible as to the contracting parties and as to their
successors in interest (article 1860, Civil Code), it is not so with respect to a third person who
did not take part in the constitution thereof either personally or through an agent, inasmuch
as he can make the acknowledgment thereof in the form and to the extent he may deem
convenient, on the ground that he is not in duty bound to acknowledge the said mortgage.
4. Because PNB did not appeal from the judgment absolving Mauro, the law does not afford any remedy
where Paz may be required with her subsidiary obligation given the principle that the accessory
follows the principal. Hence, she should also be absolved from the complaint.

Complaint dismissed, costs against appellee.

 BEAUMONT V PRIETO
March 30, 1916| Araullo, J | Agent acting in his own name
PETITIONER: HARTFORD BEAUMONT, assignee of W. Borck
RESPONDENTS: MAURO PRIETO, BENITO LEGARDA, JR., and BENITO VALDES as administrator of the estate
of Benito Legarda, deceased, and BENITO VALDES
SUMMARY: Valdes, agent of Legarda, the owner of the Nagtahan Hacienda, negotiated with Borck for the sale
of the said property, the former sent a letter to the latter which provides for and offer to sell the property for
three months. Borck accepted the offer with the condition that he be allowed to inspect the documents of title,
the defendants however failed to give him the documents thus he filed a complaint before the CFI. Among the
defense of Legarda was that Valdes was not empowered to give Borck the option/offer. The SC found however,
that although it appears that Valdes acted on his own, by virtue of the power of attorney, he is actually
empowered as an agent to give this offer option. The SC however found that there was no valid acceptance on
the part of Borck and thus there was no binding contract between them.
DOCTRINE: though the person who contracts with an agent has no action against the principal, pursuant to
article 1717 of the Civil Code, when the agent acts in his own name, as in such a case the agent would be directly
liable to the person with whom he contracted as if it were a personal matter of the agent's yet this does not
occur when the acts performed by the agent involved the principal's own things
FACTS:
1. There were negotiations between W. Borck and Benito Valdes (administrator of estate of Benito Legarda)
relative to the purchase of Nagtajan Hacienda in Sampaloc Manila belonging to Benito Legarda
2. Borck filed a complaint alleging that
a. Valdez, as attorney-in-fact of Legarda, gave him a letter which provides him an offer/option
for three months to buy the property and that he accepted said offer within the period given. (Note
that this letter was only signed by the agent Valdez)
b. that he offered to pay Valdez in cash as soon as a reasonable examination could be made of
said property titles and documents
c. that despite demand Valdez refused to deliver him said documents and by reason of such refusal,
he suffered damages in the amount of P760,000 and incurred expense in the amount of P80,000.
3. The CFI rendered judgment in favor of Borck holding that
a. The document giving Borck an option to buy constituted a contract by which Legarda
undertook to convey to Borck the property
4. Legarda assailed the judgment alleging that the CFI erred in holding that Valdes was his agent, empowered
to execute contracts in his name in respect to real property.
ISSUES/HELD: WN offer of sale constituted a binding contract between the parties - NO
RATIO:
1. Although it appears in the option to buy that the agent Valdes acted in his own name, the CFI did not
err in holding that Borck has a right of action against Legarda and his agent Valdez
1. as negotiations had been undertaken prior to the execution of the said document, between the plaintiff
Borck and Valdes with respect to the matters set forth in that document, by virtue of which Borck knew that
Valdes was Legarda's agent or attorney-in-fact
2. “xxx though the person who contracts with an agent has no action against the principal, pursuant to article
1717 of the Civil Code, when the agent acts in his own name, as in such a case the agent would be directly liable
to the person with whom he contracted as if it were a personal matter of the agent's yet this does not occur
when the acts performed by the agent involved the principal's own things, and in the option to buy, it appears
that the defendant Valdes, who signed the said document, stated that the property, the option to buy which he
gave to the plaintiff, Borck, belonged to Legarda. And as it is unquestionable that, pursuant to the above-cited
provision of law, the action was properly brought against Benito Legarda as Valdes' principal, it is also
unquestionable that Valdes was properly included in the complaint as one of the defendant xxx”
3. The power of attorney constitutes prima facie proof of the legal status of principal and agent between the
defendant which authorized Valdes to perform various acts, among them, that of selling, exchanging, ceding,
admitting in payment or by way of compensation or in any other manner acquiring or conveying all kinds of
real property for such prices and on such conditions he might deem proper, and the option to buy cannot be
considered separately.
4. Inasmuch as Valdes accepted Borck’s proposition of granting him the option to buy (and the stipulations
as to the period of three months as to the assessed value as price) through the letter, there was a meeting of
minds with regard to the stipulations in the document.
5. it is not shown that there was any cause or consideration for that agreement, and this omission is a bar
which precludes our holding that the stipulations in the letter is a contract of option, for, pursuant to article
121 of the Civil Code, there can be no contract without the requisite, among others, of the cause for the
obligation to be established.
6. The SC however agreed with the CFI that it was at least a continuing offer for three months — an offer
which it was neither alleged nor proven to have been withdrawn during that period which may be accepted by
Borck within the three month period order to convert it into a binding contract
7. Borck presented evidence in form of a letter showing the accepted the offer in writing with the condition
that he first be given the opportunity to inspect the documents/titles the property.
8. His acceptance, however, was not in accordance with the condition with regard to the payment of the price
of the property. While this payment was to be paid in cash, as the plaintiff Borck himself admitted and the
defendant Valdes positively stated in his testimony, and also a provided by law, for the reason that the time
was not fixed in said offer or option when the payment should be made in the four documents presented (these
were letters between Borck and Valdez), the plaintiff Borck made the offer to pay the said price, in the first of
them, within the period of five months from December 14, 1911; in the second, within the period of three
months from the same date, and, finally, in the other two documents, within an indefinite period which could
as well be ten days as twenty or thirty or more, counting from the date when the documents of title relative to
the said hacienda should have been placed at his disposal to be inspected and he should have found them
satisfactory
9. The SC found that there was no concurrence of the offer and the acceptance as to one of the conditions
related to the cause of the contract, to wit, the form in which the payment should be made. The expression of
Borck's will was not in accordance with all the terms of Valdes' proposal.
10. The acceptance of the said proposal on Borck's part was not unequivocal and without variance of any
sort between it and the proposal, because, in view of the terms in which the payment was offered by Borck,
there was variance from the moment in which according to said terms
11. Finally, there was no mutual conformity between the parties with respect to the form of payment, and
Borck deviated from the terms of the proposition with regard to the form of payment and the record does not
show that Valdes assented to such variance.
12. Ultimately, the proposal or offer of sale made by the defendant Valdes was not converted into a perfect
and binding contract for the, and that as Valdes did not assent to the modification introduced by Borck in the
offer of sale made by this defendant in regard to one of its terms, to with, the form of payment, the said offer
became null and void, and, consequently, Borck has no right to demand of the defendant Valdes and of the
latter's principal, the other defendant, Legarda,

E. Awad v. Filma Mercantile Co. (1926) | J. Ostrand | Bolinao

SUMMARY: Plaintiff doing business in the PH in the name of E. Awad & Co. delivered merchandise to Chua of
Hang Chua Co. Chua then sold it to Filma Mercantile who made payments only to him. E. Awad claims payments
should be made to it rather than Chua as he is merely an agent. Court held that Chua acted in his own name and
thus Filma should make payments to Chua alone.
DOCTRINE: Art. 246 of the Code of Commerce states:
“When the agent transacts business in his own name, it shall not be necessary for him to state who is the
principal and he shall be directly liable, as if the business were for his own account, to the persons with whom
he transacts the same, said persons not having any right of action against the principal, nor the latter against
the former, the liabilities of the principal and of the agent to each other always being reserved.”
FACTS:
1. Plaintiff, doing business in the PH under the name of E. Awad & Co. delivered certain merchandise of
the invoice value of P11,140 to Chua Lioc, a merchant operating under the name of Hang Chua Co. in
Manila. Said merchandise was to be sold on commission by the latter.
2. Representing himself as owner, he sold it to defendant for P12,155.60. He owed Philippine
Manufacturing Co. P3,480 which defendant agreed to pay and also indebted to the defendant itself of
 P2,017.98. The total of the 2 debts were deducted from the purchase price leaving P6,657.52 which
defendant promised to pay Chua Lioc on or before Oct 9, 1924.
3. Three days after the merchandise was purchased and delivered to the defendant, D.J. Awad,
representative of plaintiff, obtained authorization from Chua Lioc to collect P11,707 from defendant
and wrote a letter advising it to pay the purchase price but defendant responded that since the
transaction was with Chua Lioc, they can only make their payment to him.
ISSUE: WoN defendant is liable to the plaintiff and not to Chua Lioc
RULING:
1. No. Article 246 of the Code of Commerce is applicable here.
2. This is the applicable rule in the PH jurisdiction, contrary to the general rule in the US as to purchases
of merchandise from agents with undisclosed principals. There is nothing conclusive about the
circumstances referred to by the plaintiff (defendant-appellee was aware of condition under which
merchandise was entrusted to agent Chua and thus, didn’t purchase the goods in good faith) ) and not
sufficient to overcome the presumption of good faith.