agency wk7 cases

8/17/2019 Agency Wk7 Cases

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G.R. No. L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCIONRALLOS, petitioner,vs.FELIX GO CHAN & SONS REALTY CORPORATION and COURTOF APPEALS, respondents.

MUÑOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of hisdeath of his principal, Concepcion Rallos, sold the latter's undividedshare in a parcel of land pursuant to a power of attorney which theprincipal had executed in favor. The administrator of the estate of thewent to court to have the sale declared uneanforceable and to recoverthe disposed share. The trial court granted the relief prayed for, butupon appeal the Court of Appeals uphold the validity of the sale andthe complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia bothsurnamed Rallos were sisters and registered co-owners of a parcel ofland known as Lot No. 5983 of the Cadastral Survey of Cebu coveredby Transfer Certificate of Title No. 11116 of the Registry of Cebu. On

April 21, 1954, the sisters executed a special power of attorney in favorof their brother, Simeon Rallos, authorizing him to sell for and in theirbehalf lot 5983. On March 3, 1955, Concepcion Rallos died. OnSeptember 12, 1955, Simeon Rallos sold the undivided shares of hissisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & SonsRealty Corporation for the sum of P10,686.90. The deed of sale wasregistered in the Registry of Deeds of Cebu, TCT No. 11118 wascancelled, and a new transfer certificate of Title No. 12989 was issuedin the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the IntestateEstate of Concepcion Rallos filed a complaint docketed as Civil CaseNo. R-4530 of the Court of First Instance of Cebu, praying (1) that thesale of the undivided share of the deceased Concepcion Rallos in lot5983 be d unenforceable, and said share be reconveyed to her estate;(2) that the Certificate of 'title issued in the name of Felix Go Chan &

Sons Realty Corporation be cancelled and another title be issued inthe names of the corporation and the "Intestate estate of ConcepcionRallos" in equal undivided and (3) that plaintiff be indemnified by wayof attorney's fees and payment of costs of suit. Named partydefendants were Felix Go Chan & Sons Realty Corporation, SimeonRallos, and the Register of Deeds of Cebu, but subsequently, the latterwas dropped from the complaint. The complaint was amended twice;defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter filed third-party complaintagainst his sister, Gerundia Rallos While the case was pending in thetrial court, both Simon and his sister Gerundia died and they weresubstituted by the respective administrators of their estates.

After trial the court a quo rendered judgment with the followingdispositive portion:

A. On Plaintiffs Complaint —

(1) Declaring the deed of sale, Exh. "C", null and void insofaras the one-half pro-indiviso share of Concepcion Rallos in theproperty in question, — Lot 5983 of the Cadastral Survey ofCebu — is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancelTransfer Certificate of Title No. 12989 covering Lot 5983 andto issue in lieu thereof another in the names of FELIX GOCHAN & SONS REALTY CORPORATION and the Estate ofConcepcion Rallos in the proportion of one-half (1/2) shareeach pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation todeliver the possession of an undivided one-half (1/2) share ofLot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administratorof the Estate of Simeon Rallos, to pay to plaintiff in concept ofreasonable attorney's fees the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly andseverally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo,administrator of the Estate of Simeon Rallos, to pay todefendant Felix Co Chan & Sons Realty Corporation the sumof P5,343.45, representing the price of one-half (1/2) share oflot 5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator ofthe Estate of Simeon Rallos, to pay in concept of reasonableattorney's fees to Felix Go Chan & Sons Realty Corporationthe sum of P500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeoadministrator of Estate of Simeon Rallos, against JosefinaRallos special administratrix of the Estate of GerundiaRallos:

(1) Dismissing the third-party complaint without prejudice tofiling either a complaint against the regular administrator ofthe Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter

of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to theCourt of Appeals from the foregoing judgment insofar as it set asidethe sale of the one-half (1/2) share of Concepcion Rallos. Theappellate tribunal, as adverted to earlier, resolved the appeal onNovember 20, 1964 in favor of the appellant corporation sustaining thesale in question.

1 The appellee administrator, Ramon Rallos, moved

for a reconsider of the decision but the same was denied in aresolution of March 4, 1965.

2

What is the legal effect of an act performed by an agent after the deathof his principal? Applied more particularly to the instant case, We havethe query. is the sale of the undivided share of Concepcion Rallos in

lot 5983 valid although it was executed by the agent after the death ofhis principal? What is the law in this jurisdiction as to the effect of thedeath of the principal on the authority of the agent to act for and inbehalf of the latter? Is the fact of knowledge of the death of theprincipal a material factor in determining the legal effect of an actperformed after such death?

Before proceedings to the issues, We shall briefly restate certainprinciples of law relevant to the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no onemay contract in the name of another without being authorized by thelatter, or unless he has by law a right to represent him.

3 A contract

entered into in the name of another by one who has no authority or thelegal representation or who has acted beyond his powers, shall beunenforceable, unless it is ratified, expressly or impliedly, by theperson on whose behalf it has been executed, before it is revoked bythe other contracting party.

4 Article 1403 (1) of the same Code also

provides:

ART. 1403. The following contracts are unenforceable, unless theyare justified:

(1) Those entered into in the name of another person by one who hi -been given no authority or legal representation or who has actedbeyond his powers; ...

Out of the above given principles, sprung the creation and acceptanceof the relationship of agency whereby one party, caged the principal(mandante), authorizes another, called the agent (mandatario), to act

for and in his behalf in transactions with third persons. The essentialelements of agency are: (1) there is consent, express or implied of theparties to establish the relationship; (2) the object is the execution of a

juridical act in relation to a third person; (3) the agents acts as arepresentative and not for himself, and (4) the agent acts within thescope of his authority.

5


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Agency is basically personal representative, and derivative in nature.The authority of the agent to act emanates from the powers granted tohim by his principal; his act is the act of the principal if done within thescope of the authority. Qui facit per alium facit se. "He who actsthrough another acts himself".

6

2. There are various ways of extinguishing agency,7 but her We are

concerned only with one cause — death of the principal Paragraph 3of Art. 1919 of the Civil Code which was taken from Art. 1709 of theSpanish Civil Code provides:

ART. 1919. Agency is extinguished .

xxx xxx xxx

3. By the death, civil interdiction, insanity orinsolvency of the principal or of the agent; ...(Emphasis supplied)

By reason of the very nature of the relationship between Principal andagent, agency is extinguished by the death of the principal or theagent. This is the law in this jurisdiction.

8

Manresa commenting on Art. 1709 of the Spanish Civil Code explainsthat the rationale for the law is found in the juridical basis of agency

which is representation Them being an in. integration of the personalityof the principal integration that of the agent it is not possible for therepresentation to continue to exist once the death of either isestablish. Pothier agrees with Manresa that by reason of the nature ofagency, death is a necessary cause for its extinction. Laurent says thatthe juridical tie between the principal and the agent is severed ipso jureupon the death of either without necessity for the heirs of the fact tonotify the agent of the fact of death of the former.

9

The same rule prevails at common law — the death of the principaleffects instantaneous and absolute revocation of the authority of theagent unless the Power be coupled with an interest.

10 This is the

prevalent rule in American Jurisprudence where it is well-settled that apower without an interest confer. red upon an agent is dissolved by theprincipal's death, and any attempted execution of the power afterward

is not binding on the heirs or representatives of the deceased.

11

3. Is the general rule provided for in Article 1919 that the death of theprincipal or of the agent extinguishes the agency, subject to anyexception, and if so, is the instant case within that exception? That isthe determinative point in issue in this litigation. It is the contention ofrespondent corporation which was sustained by respondent court thatnotwithstanding the death of the principal Concepcion Rallos the act ofthe attorney-in-fact, Simeon Rallos in selling the former's sham in theproperty is valid and enforceable inasmuch as the corporation acted ingood faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to thegeneral rule afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even afterthe death of the principal, if it has been constituted in the commoninterest of the latter and of the agent, or in the interest of a third personwho has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of thedeath of the principal or of any other cause which extinguishes theagency, is valid and shall be fully effective with respect to thirdpersons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power ofattorney executed in favor of Simeon Rallos was not coupled with aninterest.

Article 1931 is the applicable law. Under this provision, an act done bythe agent after the death of his principal is valid and effective onlyunder two conditions, viz: (1) that the agent acted without knowledgeof the death of the principal and (2) that the third person whocontracted with the agent himself acted in good faith. Good faith heremeans that the third person was not aware of the death of the principalat the time he contracted with said agent. These two requisites must

concur the absence of one will render the act of the agent invalid andunenforceable.

In the instant case, it cannot be questioned that the agent, SimeonRallos, knew of the death of his principal at the time he sold the latter'sshare in Lot No. 5983 to respondent corporation. The knowledge of thedeath is clearly to be inferred from the pleadings filed by Simon Rallosbefore the trial court.

12 That Simeon Rallos knew of the death of his

sister Concepcion is also a finding of fact of the court a quo13

and ofrespondent appellate court when the latter stated that Simon Rallos'must have known of the death of his sister, and yet he proceeded with

the sale of the lot in the name of both his sisters Concepcion andGerundia Rallos without informing appellant (the realty corporation) ofthe death of the former.

14

On the basis of the established knowledge of Simon Rallos concerningthe death of his principal Concepcion Rallos, Article 1931 of the CivilCode is inapplicable. The law expressly requires for its application lackof knowledge on the part of the agent of the death of his principal; it isnot enough that the third person acted in good faith. Thus in Buason &Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rodenow Art. 1931 of the new Civil Code sustained the validity , of a salemade after the death of the principal because it was not shown that theagent knew of his principal's demise.

15 To the same effect is the case

of Herrera, et al., v. Luy Kim Guan, et al. , 1961, where in the words ofJustice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936,plaintiffs presented no proof and there is no indication in therecord, that the agent Luy Kim Guan was aware of the death of hisprincipal at the time he sold the property. The death 6f the principaldoes not render the act of an agent unenforceable, where the latterhad no knowledge of such extinguishment of the agency. (1 SCRA406, 412)

4. In sustaining the validity of the sale to respondent consideration theCourt of Appeals reasoned out that there is no provision in the Codewhich provides that whatever is done by an agent having knowledge ofthe death of his principal is void even with respect to third persons whomay have contracted with him in good faith and without knowledge ofthe death of the principal.

16

We cannot see the merits of the foregoing argument as it ignores theexistence of the general rule enunciated in Article 1919 that the deathof the principal extinguishes the agency. That being the general rule itfollows a fortiori that any act of an agent after the death of his principalis void ab initio unless the same fags under the exception provided forin the aforementioned Articles 1930 and 1931. Article 1931, being anexception to the general rule, is to be strictly construed, it is not to begiven an interpretation or application beyond the clear import of itsterms for otherwise the courts will be involved in a process oflegislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendeeacting in good faith relied on the power of attorney which was dulyregistered on the original certificate of title recorded in the Register ofDeeds of the province of Cebu, that no notice of the death was aver

annotated on said certificate of title by the heirs of the principal andaccordingly they must suffer the consequences of such omission.

17

To support such argument reference is made to a portionin Manresa's Commentaries which We quote:

If the agency has been granted for the purpose of contracting withcertain persons, the revocation must be made known to them. But ifthe agency is general iii nature, without reference to particularperson with whom the agent is to contract, it is sufficient that theprincipal exercise due diligence to make the revocation of theagency publicity known.

In case of a general power which does not specify the persons towhom represents' on should be made, it is the general opinion thatall acts, executed with third persons who contracted in good faith,Without knowledge of the revocation, are valid. In such case, theprincipal may exercise his right against the agent, who, knowing ofthe revocation, continued to assume a personality which he nolonger had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)


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The above discourse however, treats of revocation by an act of theprincipal as a mode of terminating an agency which is to bedistinguished from revocation by operation of law such as death of theprincipal which obtains in this case. On page six of this Opinion Westressed that by reason of the very nature of the relationship betweenprincipal and agent, agency is extinguished ipso jure upon the death ofeither principal or agent. Although a revocation of a power of attorneyto be effective must be communicated to the parties concerned,

18 yet

a revocation by operation of law, such as by death of the principal is,as a rule, instantaneously effective inasmuch as "by legal fiction theagent's exercise of authority is regarded as an execution of theprincipal's continuing will.

19 With death, the principal's will ceases or is

the of authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agentof the death of the principal What the Code provides in Article 1932 isthat, if the agent die his heirs must notify the principal thereof , and inthe meantime adopt such measures as the circumstances maydemand in the interest of the latter. Hence, the fact that no notice ofthe death of the principal was registered on the certificate of title of theproperty in the Office of the Register of Deeds, is not fatal to the causeof the estate of the principal

6. Holding that the good faith of a third person in said with an agentaffords the former sufficient protection, respondent court drew a"parallel" between the instant case and that of an innocent purchaserfor value of a land, stating that if a person purchases a registered land

from one who acquired it in bad faith — even to the extent of foregoingor falsifying the deed of sale in his favor — the registered owner hasno recourse against such innocent purchaser for value but only againstthe forger.

20

To support the correctness of this respondent corporation, in its brief,cites the case of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625.We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil.630, one Vallejo was a co-owner of lands with Agustin Nano. Thelatter had a power of attorney supposedly executed by Vallejo Nanoin his favor. Vallejo delivered to Nano his land titles. The power wasregistered in the Office of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he found all in

order including the power of attorney. But Vallejo denied havingexecuted the power The lower court sustained Vallejo and theplaintiff Blondeau appealed. Reversing the decision of the court aquo, the Supreme Court, quoting the ruling in the case of Eliason v.Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of thedefendant- appellee must be overruled. Agustin Nano hadpossession of Jose Vallejo's title papers. Without those title papershanded over to Nano with the acquiescence of Vallejo, a fraud couldnot have been perpetuated. When Fernando de la Canters, amember of the Philippine Bar and the husband of Angela Blondeau,the principal plaintiff, searched the registration record, he found themin due form including the power of attorney of Vallajo in favor ofNano. If this had not been so and if thereafter the proper notation ofthe encumbrance could not have been made, Angela Blondeauwould not have sent P12,000.00 to the defendant Vallejo.' Anexecuted transfer of registered lands placed by the registered ownerthereof in the hands of another operates as a representation to athird party that the holder of the transfer is authorized to deal with theland.

As between two innocent persons, one of whom must suffer theconsequence of a breach of trust, the one who made it possible byhis act of coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the casebefore Us because here We are confronted with one who admittedlywas an agent of his sister and who sold the property of the latter afterher death with full knowledge of such death. The situation is expresslycovered by a provision of law on agency the terms of which are clear

and unmistakable leaving no room for an interpretation contrary to itstenor, in the same manner that the ruling in Blondeau and the casescited therein found a basis in Section 55 of the Land Registration Lawwhich in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever anyvoluntary instrument is presented for registration shall be conclusiveauthority from the registered owner to the register of deeds to enter anew certificate or to make a memorandum of registration in accordancewith such instruments, and the new certificate or memorandum Shall bebinding upon the registered owner and upon all persons claiming underhim in favor of every purchaser for value and in good faith: Providedhowever , That in all cases of registration provided by fraud, the ownermay pursue all his legal and equitable remedies against the parties tosuch fraud without prejudice, however, to the right, of any innocentholder for value of a certificate of title. ... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of theappealed decision is an 1842 ruling of the Supreme Court ofPennsylvania in Cassiday v. McKenzie wherein payments made to anagent after the death of the principal were held to be "good", "theparties being ignorant of the death". Let us take note that the Opinionof Justice Rogers was premised on the statement that the parties wereignorant of the death of the principal. We quote from that decision thefollowing:

... Here the precise point is, whether a payment to an agent when theParties are ignorant of the death is a good payment. in addition to thecase in Campbell before cited, the same judge Lord Ellenboruogh, hasdecided in 5 Esp. 117, the general question that a payment after thedeath of principal is not good. Thus, a payment of sailor's wages to aperson having a power of attorney to receive them, has been held void

when the principal was dead at the time of the payment. If, by thiscase, it is meant merely to decide the general proposition that byoperation of law the death of the principal is a revocation of the powersof the attorney, no objection can be taken to it. But if it intended to saythat his principle applies where there was 110 notice of death, oropportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from theaccident circumstance of the death of the principal, which he did notknow, and which by no possibility could he know? It would be unjust tothe agent and unjust to the debtor. In the civil law, the acts of theagent, done bona fide in ignorance of the death of his principal areheld valid and binding upon the heirs of the latter. The same rule holdsin the Scottish law, and I cannot believe the common law is sounreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v.McKenzie may evoke, mention may be made that the aboverepresents the minority view in American jurisprudence. Thusin Clayton v. Merrett , the Court said.—

There are several cases which seem to hold that although, as ageneral principle, death revokes an agency and renders null everyact of the agent thereafter performed, yet that where a payment hasbeen made in ignorance of the death, such payment will be good.The leading case so holding is that of Cassiday v. McKenzie, 4 Watts& S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this view iibroadly announced. It is referred to, and seems to have beenfollowed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; butin this latter case it appeared that the estate of the deceasedprincipal had received the benefit of the money paid, and thereforethe representative of the estate might well have been held to beestopped from suing for it again. . . . These cases, in so far, at least,as they announce the doctrine under discussion, are exceptional.The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S.282, 39 AmD 76), is believed to stand almost, if not quite, alone inannouncing the principle in its broadest scope. (52, Misc. 353, 357,cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, andpointing out that the opinion, except so far as it related to the particularfacts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded moreas an extrajudicial indication of his views on the general subject,than as the adjudication of the Court upon the point in question. But

accordingly all power weight to this opinion, as the judgment of a ofgreat respectability, it stands alone among common law authoritiesand is opposed by an array too formidable to permit us to following it.(15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v.McKenzie in American jurisprudence, no such conflict exists in our own


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for the simple reason that our statute, the Civil Code, expresslyprovides for two exceptions to the general rule that death of theprincipal revokes ipso jure the agency, to wit: (1) that the agency iscoupled with an interest (Art 1930), and (2) that the act of the agentwas executed without knowledge of the death of the principal and thethird person who contracted with the agent acted also in good faith(Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, andagain We stress the indispensable requirement that the agent actedwithout knowledge or notice of the death of the principal In the casebefore Us the agent Ramon Rallos executed the sale notwithstandingnotice of the death of his principal Accordingly, the agent's act isunenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision ofrespondent appellate court, and We affirm en toto the judgmentrendered by then Hon. Amador E. Gomez of the Court of First Instanceof Cebu, quoted in pages 2 and 3 of this Opinion, with costs againstrespondent realty corporation at all instances.

So Ordered.

Loadmaster Customs Services v. Glodel Brokerage Corp. and R&BInsurance Corporation

This is a petition for review on certiorari under Rule 45 of the RevisedRules of Court assailing the August 24, 2007 Decision

[1] of the Court of

Appeals (CA) in CA-G.R. CV No. 82822, entitled R&B InsuranceCorporation v. Glodel Brokerage Corporation and LoadmastersCustoms Services, Inc ., which held petitioner Loadmasters CustomsServices, Inc. (Loadmasters) liable to respondent Glodel BrokerageCorporation (Glodel) in the amount of P1,896,789.62 representing theinsurance indemnity which R&B Insurance Corporation (R&BInsurance) paid to the insured-consignee, Columbia Wire and CableCorporation (Columbia).

THE FACTS:

On August 28, 2001, R&B Insurance issued Marine Policy No. MN-00105/2001 in favor of Columbia to insure the shipment of 132 bundlesof electric copper cathodes against All Risks. On August 28, 2001, thecargoes were shipped on board the vessel Richard Rey fromIsabela, Leyte, to Pier 10, North Harbor,Manila. They arrived on thesame date.

Columbia engaged the services of Glodel for the release andwithdrawal of the cargoes from the pier and the subsequent delivery toits warehouses/plants.Glodel, in turn, engaged the services ofLoadmasters for the use of its delivery trucks to transport the cargoesto Columbias warehouses/plants in Bulacan andValenzuela City.

The goods were loaded on board twelve (12) trucks ownedby Loadmasters, driven by its employed drivers and accompanied byits employed truck helpers. Six (6) truckloads of copper cathodes wereto be delivered to Balagtas, Bulacan, while the other six (6) truckloadswere destined for Lawang Bato,Valenzuela City. The cargoes in sixtruckloads for Lawang Bato were duly delivered in Columbiaswarehouses there. Of the six (6) trucks en route to Balagtas, Bulacan,however, only five (5) reached the destination. One (1) truck, loadedwith 11 bundles or 232 pieces of copper cathodes, failed to deliver itscargo.

Later on, the said truck, an Isuzu with Plate No. NSD-117, wasrecovered but without the copper cathodes. Because of thisincident, Columbia filed with R&B Insurance a claim for insuranceindemnity in the amount of P1,903,335.39. After the requisiteinvestigation and adjustment, R&B Insurance paid Columbia theamount of P1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint for damagesagainst both Loadmasters and Glodel before the Regional Trial Court,Branch 14, Manila (RTC ), docketed as Civil Case No. 02-103040. Itsought reimbursement of the amount it had paid to Columbia for theloss of the subject cargo. It claimed that it had been subrogated to the

right of the consignee to recover from the party/parties who may beheld legally liable for the loss.

[2]

On November 19, 2003, the RTC rendered a decision[3]

holding Glodelliable for damages for the loss of the subject cargo and dismissingLoadmasters counterclaim for damages and attorneys fees againstR&B Insurance. The dispositive portion of the decision reads:

WHEREFORE, all premises considered,the plaintiff having established by preponderanceof evidence its claims against defendant GlodelBrokerage Corporation, judgment is herebyrendered ordering the latter:

1. To pay plaintiff R&B Insurance Corporation the sumof P1,896,789.62 as actual and compensatory damages,with interest from the date of complaint until fully paid;

2. To pay plaintiff R&B Insurance Corporation the amount

equivalent to 10% of the principal amount recovered asand for attorneys fees plusP1,500.00 per appearance inCourt;

3. To pay plaintiff R&B Insurance Corporation the sumof P22,427.18 as litigation expenses.

WHEREAS, the defendant Loadmasters CustomsServices, Inc.s counterclaim for damages and attorneys feesagainst plaintiff are hereby dismissed.

With costs against defendant GlodelBrokerage Corporation.

SO ORDERED.[4]

Both R&B Insurance and Glodel appealed the RTC decision

to the CA.

On August 24, 2007, the CA rendered the assailed decisionwhich reads in part:

Considering that appellee is an agent ofappellant Glodel, whatever liability the latter owesto appellant R&B Insurance Corporation asinsurance indemnity must likewise be the amountit shall be paid by appellee Loadmasters.

WHEREFORE, the foregoingconsidered, the appeal is PARTLY GRANTED inthat the appellee Loadmasters is likewise heldliable to appellant Glodel in the amountof P1,896,789.62 representing the insuranceindemnity appellant Glodel has been held liable to

appellant R&B Insurance Corporation.

Appellant Glodels appeal to absolve itfrom any liability is herein DISMISSED.

SO ORDERED.[5]

Hence, Loadmasters filed the present petition for review oncertiorari before this Court presenting the following

ISSUES

1. Can Petitioner Loadmasters be held liable toRespondent Glodel in spite of the fact that thelatter respondent Glodel did not file a cross-

claim against it (Loadmasters)?

2. Under the set of facts established andundisputed in the case, can petitionerLoadmasters be legally considered as anAgent of respondent Glodel?[6]

To totally exculpate itself from responsibility for the lostgoods, Loadmasters argues that it cannot be considered an agent ofGlodel because it never represented the latter in its dealings with theconsignee. At any rate, it further contends that Glodel has no recourseagainst it for its (Glodels) failure to file a cross-claim pursuant toSection 2, Rule 9 of the 1997 Rules of Civil Procedure.

Glodel, in its Comment,

[7]

counters that Loadmasters is liable to itunder its cross-claim because the latter was grossly negligent in thetransportation of the subject cargo. With respect to Loadmasters claimthat it is already estopped from filing a cross-claim, Glodel insists that itcan still do so even for the first time on appeal because there is no rulethat provides otherwise. Finally, Glodel argues that its relationship withLoadmasters is that of Charter wherein the transporter (Loadmasters)is only hired for the specific job of delivering the merchandise. Thus,


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the diligence required in this case is merely ordinary diligence or thatof a good father of the family, not the extraordinary diligence requiredof common carriers.

R&B Insurance, for its part, claims that Glodel is deemed to haveinterposed a cross-claim against Loadmasters because it was notprevented from presenting evidence to prove its position even withoutamending its Answer. As to the relationship between Loadmasters andGlodel, it contends that a contract of agency existed between the twocorporations.

[8]

Subrogation is the substitution of one person in the place of

another with reference to a lawful claim or right, so that he who issubstituted succeeds to the rights of the other in relation to a debt orclaim, including its remedies or securities.

[9] Doubtless, R&B Insurance

is subrogated to the rights of the insured to the extent of the amount itpaid the consignee under the marine insurance, as provided under

Article 2207 of the Civil Code, which reads:

ART. 2207. If the plaintiffs property has been insured, andhe has received indemnity from the insurance company for the injuryor loss arising out of the wrong or breach of contract complained of,the insurance company shall be subrogated to the rights of theinsured against the wrong-doer or the person who has violated thecontract. If the amount paid by the insurance company does not fullycover the injury or loss, the aggrieved party shall be entitled torecover the deficiency from the person causing the loss or injury.

As subrogee of the rights and interest of the consignee, R&BInsurance has the right to seek reimbursement from eitherLoadmasters or Glodel or both for breach of contract and/or tort.

The issue now is who, between Glodel and Loadmasters, is liable topay R&B Insurance for the amount of the indemnity it paid Columbia.

At the outset, it is well to resolve the issue of whether Loadmastersand Glodel are common carriers to determine their liability for the lossof the subject cargo.Under Article 1732 of the Civil Code, commoncarriers are persons, corporations, firms, or associations engaged inthe business of carrying or transporting passenger or goods, or both byland, water or air for compensation, offering their services to the public.

Based on the aforecited definition, Loadmasters is acommon carrier because it is engaged in the business of transporting

goods by land, through its trucking service. It is a common carrier asdistinguished from a private carrier wherein the carriage is generallyundertaken by special agreement and it does not hold itself out to carrygoods for the general public.

[10] The distinction is significant in the

sense that the rights and obligations of the parties to a contract ofprivate carriage are governed principally by their stipulations, not bythe law on common carriers.

[11]

In the present case, there is no indication that theundertaking in the contract between Loadmasters and Glodel wasprivate in character. There is no showing that Loadmasters solely andexclusively rendered services to Glodel.

In fact, Loadmasters admitted that it is a common carrier.[12]

In the same vein, Glodel is also considered a common

carrier within the context of Article 1732. In its Memorandum,[13]

itstates that it is a corporation duly organized and existing under thelaws of the Republic of the Philippines and is engaged in the businessof customs brokering. It cannot be considered otherwise because asheld by this Court in Schmitz Transport & Brokerage Corporation v.Transport Venture, Inc.,

[14] a customs broker is also regarded as a

common carrier, the transportation of goods being an integral part ofits business.

Loadmasters and Glodel, being both common carriers, aremandated from the nature of their business and for reasons of publicpolicy, to observe the extraordinary diligence in the vigilance over thegoods transported by them according to all the circumstances of suchcase, as required by Article 1733 of the Civil Code. When the Courtspeaks of extraordinary diligence, it is that extreme measure of careand caution which persons of unusual prudence and circumspection

observe for securing and preserving their own property orrights.[15]

This exacting standard imposed on common carriers in acontract of carriage of goods is intended to tilt the scales in favor of theshipper who is at the mercy of the common carrier once the goodshave been lodged for shipment.

[16] Thus, in case of loss of the goods,

the common carrier is presumed to have been at fault or to have actednegligently.

[17] This presumption of fault or negligence, however, may

be rebutted by proof that the common carrier has observedextraordinary diligence over the goods.

With respect to the time frame of this extraordinaryresponsibility, the Civil Code provides that the exercise ofextraordinary diligence lasts from the time the goods areunconditionally placed in the possession of, and received by, thecarrier for transportation until the same are delivered, actually orconstructively, by the carrier to the consignee, or to the person whohas a right to receive them.

[18]

Premises considered, the Court is of the view that both

Loadmasters and Glodel are jointly and severally liable to R & BInsurance for the loss of the subject cargo. Under Article 2194 of theNew Civil Code, the responsibility of two or more persons who areliable for a quasi-delict is solidary.

Loadmasters claim that it was never privy to the contractentered into by Glodel with the consignee Columbia or R&B Insuranceas subrogee, is not a valid defense. It may not have a directcontractual relation with Columbia, but it is liable for tort under theprovisions of Article 2176 of the Civil Code on quasi-delicts whichexpressly provide:

ART. 2176. Whoever by act or omissioncauses damage to another, there being fault ornegligence, is obliged to pay for the damagedone. Such fault or negligence, if there is no pre-

existing contractual relation between the parties, iscalled a quasi-delict and is governed by theprovisions of this Chapter.

Pertinent is the ruling enunciated in the case of MindanaoTerminal and Brokerage Service, Inc. v. Phoenix Assurance Companyof New York,/McGee & Co., Inc.

[19] where this Court held that a tort

may arise despite the absence of a contractual relationship, to wit:

We agree with the Court of Appeals that the complaint filedby Phoenix and McGee against Mindanao Terminal, fromwhich the present case has arisen, states a cause of action.The present action is based on quasi-delict, arising from thenegligent and careless loading and stowing of the cargoesbelonging to Del Monte Produce. Even assuming that bothPhoenix and McGee have only been subrogated in the rights

of Del Monte Produce, who is not a party to the contract ofservice between Mindanao Terminal and Del Monte, still theinsurance carriers may have a cause of action in light of theCourts consistent ruling that the act that breaks thecontract may be also a tort. In fine, a liability for tort mayarise even under a contract, where tort is that which breachesthe contract. In the present case, Phoenix and McGee are notsuing for damages for injuries arising from the breach ofthe contract of service but from the alleged negligentmanner by which Mindanao Terminal handled the cargoesbelonging to Del Monte Produce. Despite the absence ofcontractual relationship between Del Monte Produce andMindanao Terminal, the allegation of negligence on the partof the defendant should be sufficient to establish a cause ofaction arising from quasi-delict. [Emphases supplied]

In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones ownacts or omissions, but also for those of persons forwhom one is responsible.

x x x x

Employers shall be liable for thedamages caused by their employees andhousehold helpers acting within the scope of theirassigned tasks, even though the former are notengaged in any business or industry.

It is not disputed that the subject cargo was lost while in thecustody of Loadmasters whose employees (truck driver and helper)were instrumental in the hijacking or robbery of the shipment. Asemployer, Loadmasters should be made answerable for the damagescaused by its employees who acted within the scope of their assignedtask of delivering the goods safely to the warehouse.


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Whenever an employees negligence causes damage orinjury to another, there instantly arises a presumption juris tantum thatthe employer failed to exercise diligentissimi patris families in theselection (culpa in eligiendo) or supervision (culpa in vigilando) of itsemployees.

[20] To avoid liability for a quasi-delict committed by its

employee, an employer must overcome the presumption by presentingconvincing proof that he exercised the care and diligence of a goodfather of a family in the selection and supervision of his employee.

[21] In

this regard, Loadmasters failed.

Glodel is also liable because of its failure to exerciseextraordinary diligence. It failed to ensure that Loadmasters would fully

comply with the undertaking to safely transport the subject cargo to thedesignated destination. It should have been more prudent in entrustingthe goods to Loadmasters by taking precautionary measures, such asproviding escorts to accompany the trucks in delivering thecargoes. Glodel should, therefore, be held liable with Loadmasters.Itsdefense of force majeure is unavailing.

At this juncture, the Court clarifies that there exists noprincipal-agent relationship between Glodel and Loadmasters, aserroneously found by the CA.Article 1868 of the Civil Code provides:By the contract of agency a person binds himself to render someservice or to do something in representation or on behalf of another,with the consent or authority of the latter. The elements of a contract ofagency are: (1) consent, express or implied, of the parties to establishthe relationship; (2) the object is the execution of a juridical act inrelation to a third person; (3) the agent acts as a representative and

not for himself; (4) the agent acts within the scope of his authority. [22]

Accordingly, there can be no contract of agency between theparties. Loadmasters never represented Glodel. Neither was it everauthorized to make such representation. It is a settled rule that thebasis for agency is representation, that is, the agent acts for and onbehalf of the principal on matters within the scope of his authority andsaid acts have the same legal effect as if they were personallyexecuted by the principal. On the part of the principal, there must bean actual intention to appoint or an intention naturally inferable from hiswords or actions, while on the part of the agent, there must be anintention to accept the appointment and act on it.

[23] Such mutual intent

is not obtaining in this case.

What then is the extent of the respective liabilities ofLoadmasters and Glodel? Each wrongdoer is liable for the total

damage suffered by R&B Insurance. Where there are several causesfor the resulting damages, a party is not relieved from liability, evenpartially. It is sufficient that the negligence of a party is an efficientcause without which the damage would not have resulted. It is nodefense to one of the concurrent tortfeasors that the damage wouldnot have resulted from his negligence alone, without the negligence orwrongful acts of the other concurrent tortfeasor. As stated in the caseof Far Eastern Shipping v. Court of Appeals,

[24]

X x x. Where several causes producingan injury are concurrent and each is an efficientcause without which the injury would not havehappened, the injury may be attributed to all orany of the causes and recovery may be hadagainst any or all of the responsible personsalthough under the circumstances of the case, itmay appear that one of them was more culpable,and that the duty owed by them to the injuredperson was not the same. No actor's negligenceceases to be a proximate cause merely because itdoes not exceed the negligence of other actors.Each wrongdoer is responsible for the entire resultand is liable as though his acts were the solecause of the injury.

There is no contribution between jointtortfeasors whose liability is solidary since both ofthem are liable for the total damage. Where theconcurrent or successive negligent acts oromissions of two or more persons, although actingindependently, are in combination the direct andproximate cause of a single injury to a third

person, it is impossible to determine in whatproportion each contributed to the injuryand either of them is responsible for the wholeinjury.Where their concurring negligence resultedin injury or damage to a third party, they become

joint tortfeasors and are solidarily liable for theresulting damage under Article 2194 of the CivilCode. [Emphasis supplied]

The Court now resolves the issue of whether Glodel cancollect from Loadmasters, it having failed to file a cross-claim againstthe latter.

Undoubtedly, Glodel has a definite cause of action againstLoadmasters for breach of contract of service as the latter is primarilyliable for the loss of the subject cargo. In this case, however, it cannotsucceed in seeking judicial sanction against Loadmasters because therecords disclose that it did not properly interpose a cross-claim againstthe latter. Glodel did not even pray that Loadmasters be liable for anyand all claims that it may be adjudged liable in favor of R&B

Insurance. Under the Rules, a compulsory counterclaim, or a cross-claim, not set up shall be barred .

[25] Thus, a cross-claim cannot be set

up for the first time on appeal.

For the consequence, Glodel has no one to blame butitself. The Court cannot come to its aid on equitablegrounds. Equity, which has been aptly described as a justice outsidelegality, is applied only in the absence of, and never against, statutorylaw or judicial rules of procedure.

[26] The Court cannot be a lawyer and

take the cudgels for a party who has been at fault or negligent.

WHEREFORE, the petition is PARTIALLYGRANTED. The August 24, 2007 Decision of the Court of Appealsis MODIFIED to read as follows:

WHEREFORE, judgment is rendered declaring petitionerLoadmasters Customs Services, Inc. and respondent GlodelBrokerage Corporation jointly and severally liable to respondent R&BInsurance Corporation for the insurance indemnity it paid toconsignee Columbia Wire & Cable Corporation and ordering bothparties to pay, jointly and severally, R&B Insurance Corporation a] theamount of P1,896,789.62 representing the insurance indemnity; b] theamount equivalent to ten (10%) percent thereof for attorneys fees;and c] the amount of P22,427.18 for litigation expenses.

The cross-claim belatedly prayed for by respondent GlodelBrokerage Corporation against petitioner Loadmasters CustomsServices, Inc. is DENIED.

SO ORDERED.

MANILA MEMORIAL PARK CEMETERY, INC., petitioner,vs. PEDRO L. LINSANGAN, respondent.

For resolution in this case is a classic and interesting texbookquestion in the law on agency.

This is a petition for review assailing the Decision[1]

of the Courtof Appeals dated 22 June 2001, and its Resolution

[2] dated 12

December 2001 in CA G.R. CV No. 49802 entitled Pedro L. Linsanganv. Manila Memorial Cemetery, Inc. et al ., finding Manila Memorial ParkCemetery, Inc. (MMPCI) jointly and severally liable with Florencia C.Baluyot to respondent Atty. Pedro L. Linsangan.

The facts of the case are as follows:

Sometime in 1984, Florencia Baluyot offered Atty. Pedro L.

Linsangan a lot called Garden State at the Holy Cross Memorial Parkowned by petitioner (MMPCI). According to Baluyot, a former owner ofa memorial lot under Contract No. 25012 was no longer interested inacquiring the lot and had opted to sell his rights subject toreimbursement of the amounts he already paid. The contract wasfor P95,000.00. Baluyot reassured Atty. Linsangan that oncereimbursement is made to the former buyer, the contract would betransferred to him. Atty. Linsangan agreed and gaveBaluyot P35,295.00 representing the amount to be reimbursed to theoriginal buyer and to complete the down payment to MMPCI.

[3] Baluyot

issued handwritten and typewritten receipts for these payments.[4]

Sometime in March 1985, Baluyot informed Atty. Linsangan thathe would be issued Contract No. 28660, a new contract covering thesubject lot in the name of the latter instead of old Contract No. 25012.

Atty. Linsangan protested, but Baluyot assured him that he would stillbe paying the old price of P95,000.00 with P19,838.00 credited as fulldown payment leaving a balance of about P75,000.00.[5]

Subsequently, on 8 April 1985, Baluyot brought an Offer toPurchase Lot No. A11 (15), Block 83, Garden Estate I denominated asContract No. 28660 and the Official Receipt No. 118912 dated 6 April1985 for the amount of P19,838.00. Contract No. 28660 has a listedprice of P132,250.00. Atty. Linsangan objected to the new contractprice, as the same was not the amount previously agreed upon. To


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status as a long-practicing lawyer. MMPCI likewise claims that theCourt of Appeals erred in failing to consider that the facts and theapplicable law do not support a judgment against Baluyot only up tothe extent of costs.

[26]

Atty. Linsangan argues that he did not violate the terms andconditions of the contract, and in fact faithfully performed hiscontractual obligations and complied with them in good faith for at leasttwo years.

[27] He claims that contrary to MMPCIs position, his

profession as a lawyer is immaterial to the validity of the subjectcontract and the case at bar.

[28] According to him, MMPCI had

practically admitted in its Petition that Baluyot was its agent, and thus,

the only issue left to be resolved is whether MMPCI allowed Baluyot toact as though she had full powers to be held solidarily liable with thelatter.

[29]

We find for the petitioner MMPCI.

The jurisdiction of the Supreme Court in a petition for reviewunder Rule 45 of the Rules of Court is limited to reviewing only errorsof law, not fact, unless the factual findings complained of are devoid ofsupport by the evidence on record or the assailed judgment is basedon misapprehension of facts.

[30] In BPI Investment Corporation v. D.G.

Carreon Commercial Corporation,[31]

this Court ruled:

There are instances when the findings of fact of the trial court and/orCourt of Appeals may be reviewed by the Supreme Court, such as (1)when the conclusion is a finding grounded entirely on speculation,

surmises and conjectures; (2) when the inference made is manifestlymistaken, absurd or impossible; (3) where there is a grave abuse ofdiscretion; (4) when the judgment is based on a misapprehension offacts; (5) when the findings of fact are conflicting; (6) when the Court of

Appeals, in making its findings, went beyond the issues of the caseand the same is contrary to the admissions of both appellant andappellee; (7) when the findings are contrary to those of the trial court;(8) when the findings of fact are conclusions without citation of specificevidence on which they are based; (9) when the facts set forth in thepetition as well as in the petitioners main and reply briefs are notdisputed by the respondents; and (10) the findings of fact of the Courtof Appeals are premised on the supposed absence of evidence andcontradicted by the evidence on record.

[32]

In the case at bar, the Court of Appeals committed several errorsin the apprehension of the facts of the case, as well as made

conclusions devoid of evidentiary support, hence we review its findingsof fact.

By the contract of agency, a person binds himself to rendersome service or to do something in representation or on behalf ofanother, with the consent or authority of the latter.

[33] Thus, the

elements of agency are (i) consent, express or implied, of the partiesto establish the relationship; (ii) the object is the execution of a juridicalact in relation to a third person; (iii) the agent acts as a representativeand not for himself; and (iv) the agent acts within the scope of hisauthority.

[34]

In an attempt to prove that Baluyot was not its agent, MMPCIpointed out that under its Agency Manager Agreement; an agencymanager such as Baluyot is considered an independent contractor andnot an agent.

[35] However, in the same contract, Baluyot as agency

manager was authorized to solicit and remit to MMPCI offers topurchase interment spaces belonging to and sold by thelatter.

[36] Notwithstanding the claim of MMPCI that Baluyot was an

independent contractor, the fact remains that she was authorized tosolicit solely for and in behalf of MMPCI. As properly found both by thetrial court and the Court of Appeals, Baluyot was an agent of MMPCI,having represented the interest of the latter, and having been allowedby MMPCI to represent it in her dealings with its clients/prospectivebuyers.

Nevertheless, contrary to the findings of the Court of Appeals,MMPCI cannot be bound by the contract procured by Atty. Linsanganand solicited by Baluyot.

Baluyot was authorized to solicit and remit to MMPCI offers topurchase interment spaces obtained on forms provided by MMPCI.The terms of the offer to purchase, therefore, are contained in such

forms and, when signed by the buyer and an authorized officer ofMMPCI, becomes binding on both parties.

The Offer to Purchase duly signed by Atty. Linsangan, andaccepted and validated by MMPCI showed a total list priceof P132,250.00. Likewise, it was clearly stated therein that Purchaseragrees that he has read or has had read to him this agreement, thathe understands its terms and conditions, and that there are no

covenants, conditions, warranties or representations other thanthose contained herein.[37] By signing the Offer to Purchase, Atty.Linsangan signified that he understood its contents. That he andBaluyot had an agreement different from that contained in the Offer toPurchase is of no moment, and should not affect MMPCI, as it wasobviously made outside Baluyots authority. To repeat, Baluyotsauthority was limited only to soliciting purchasers. She had no authorityto alter the terms of the written contract provided by MMPCI. Thedocument/letter confirming the agreement that Atty. Linsangan wouldhave to pay the old price was executed by Baluyot alone. Nowhere isthere any indication that the same came from MMPCI or any of itsofficers.

It is a settled rule that persons dealing with an agent are boundat their peril, if they would hold the principal liable, to ascertain not onlythe fact of agency but also the nature and extent of authority, and incase either is controverted, the burden of proof is upon them toestablish it.

[38] The basis for agency is representation and a person

dealing with an agent is put upon inquiry and must discover upon hisperil the authority of the agent.

[39] If he does not make such an inquiry,

he is chargeable with knowledge of the agents authority and hisignorance of that authority will not be any excuse.

[40]

As noted by one author, the ignorance of a person dealing withan agent as to the scope of the latters authority is no excuse to suchperson and the fault cannot be thrown upon the principal.

[41] A person

dealing with an agent assumes the risk of lack of authority in the agent.He cannot charge the principal by relying upon the agents assumption

of authority that proves to be unfounded. The principal, on the otherhand, may act on the presumption that third persons dealing with hisagent will not be negligent in failing to ascertain the extent of hisauthority as well as the existence of his agency.

[42]

In the instant case, it has not been established that Atty.Linsangan even bothered to inquire whether Baluyot was authorized toagree to terms contrary to those indicated in the written contract, muchless bind MMPCI by her commitment with respect to such agreements.Even if Baluyot was Atty. Linsangans friend and known to be an agentof MMPCI, her declarations and actions alone are not sufficient toestablish the fact or extent of her authority.

[43] Atty. Linsangan as a

practicing lawyer for a relatively long period of time when he signed thecontract should have been put on guard when their agreement was notreflected in the contract. More importantly, Atty. Linsangan shouldhave been alerted by the fact that Baluyot failed to effect the transfer ofrights earlier promised, and was unable to make good her written

commitment, nor convince MMPCI to assent thereto, as evidenced byseveral attempts to induce him to enter into other contracts for a higherconsideration. As properly pointed out by MMPCI, as a lawyer, agreater degree of caution should be expected of Atty. Linsanganespecially in dealings involving legal documents. He did not evenbother to ask for official receipts of his payments, nor inquire fromMMPCI directly to ascertain the real status of the contract, blindlyrelying on the representations of Baluyot. A lawyer by profession, heknew what he was doing when he signed the written contract, knewthe meaning and value of every word or phrase used in the contract,and more importantly, knew the legal effects which said documentproduced. He is bound to accept responsibility for his negligence.

The trial and appellate courts found MMPCI liable based onratification and estoppel. For the trial court, MMPCIs acts of acceptingand encashing the checks issued by Atty. Linsangan as well as

allowing Baluyot to receive checks drawn in the name of MMPCIconfirm and ratify the contract of agency. On the other hand, the Courtof Appeals faulted MMPCI in failing to adopt measures to preventmisrepresentation, and declared that in view of MMPCIs acceptance ofthe benefits of Baluyots misrepresentation, it can no longer denyresponsibility therefor.

The Court does not agree. Pertinent to this case are thefollowing provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal, exceedingthe 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 ofthe limits of the powers granted by the principal. In this case, however,the agent is liable if he undertook to secure the principals ratification.

Art. 1910. The principal must comply with all the obligations that theagent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, theprincipal is not bound except when he ratifies it expressly or tacitly.


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Art. 1911. Even when the agent has exceeded his authority, theprincipal is solidarily liable with the agent if the former allowed thelatter to act as though he had full powers.

Thus, the acts of an agent beyond the scope of his authority donot bind the principal, unless he ratifies them, expressly or impliedly.Only the principal can ratify; the agent cannot ratify his ownunauthorized acts. Moreover, the principal must have knowledge of theacts he is to ratify.

[44]

Ratification in agency is the adoption or confirmation by oneperson of an act performed on his behalf by another without authority.The substance of the doctrine is confirmation after conduct, amountingto a substitute for a prior authority. Ordinarily, the principal must havefull knowledge at the time of ratification of all the material facts andcircumstances relating to the unauthorized act of the person whoassumed to act as agent. Thus, if material facts were suppressed orunknown, there can be no valid ratification and this regardless of thepurpose or lack thereof in concealing such facts and regardless of theparties between whom the question of ratification mayarise.

[45] Nevertheless, this principle does not apply i f the principals

ignorance of the material facts and circumstances was willful, or thatthe principal chooses to act in ignorance of the facts.

[46] However, in

the absence of circumstances putting a reasonably prudent man oninquiry, ratification cannot be implied as against the principal who isignorant of the facts.

[47]

No ratification can be implied in the instant case.

A perusal of Baluyots Answer [48]

reveals that the realarrangement between her and Atty. Linsangan was for the latter to paya monthly installment of P1,800.00 whereas Baluyot was to shoulderthe counterpart amount of P1,455.00 to meet the P3,255.00 monthlyinstallments as indicated in the contract. Thus, every time aninstallment falls due, payment was to be made through a check from

Atty. Linsangan for P1,800.00 and a cash component of P1,455.00from Baluyot.

[49] However, it appears that while Atty. Linsangan issued

the post-dated checks, Baluyot failed to come up with her part of thebargain. This was supported by Baluyots statements in her letter

[50] to

Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after shereceived the copy of the Complaint . In the letter, she admitted that shewas remiss in her duties when she consented to Atty. Linsangansproposal that he will pay the old price while the difference will beshouldered by her. She likewise admitted that the contract suffered

arrearages because while Atty. Linsangan issued the agreed checks,she was unable to give her share of P1,455.00 due to her ownfinancial difficulties. Baluyot even asked for compassion from MMPCIfor the error she committed.

Atty. Linsangan failed to show that MMPCI had knowledge of thearrangement. As far as MMPCI is concerned, the contract pricewas P132,250.00, as stated in the Offer to Purchase signed by Atty.Linsangan and MMPCIs authorized officer. The down paymentof P19,838.00 given by Atty. Linsangan was in accordance with thecontract as well. Payments of P3,235.00 for at least two installmentswere likewise in accord with the contract, albeit made through a checkand partly in cash. In view of Baluyots failure to give her share in thepayment, MMPCI received only P1,800.00 checks, which were clearlyinsufficient payment. In fact, Atty. Linsangan would have incurredarrearages that could have caused the earlier cancellation of thecontract, if not for MMPCIs application of some of the checks to hisaccount. However, the checks alone were not sufficient to cover hisobligations.

If MMPCI was aware of the arrangement, it would have refusedthe latters check payments for being insufficient. It would not haveapplied to his account theP1,800.00 checks. Moreover, the fact thatBaluyot had to practically explain to MMPCIs Sales Manager thedetails of her arrangement with Atty. Linsangan and admit to havingmade an error in entering such arrangement confirm that MMCPI hadno knowledge of the said agreement. It was only when Baluyot filedher Answer that she claimed that MMCPI was fully aware of theagreement.

Neither is there estoppel in the instant case. The essentialelements of estoppel are (i) conduct of a party amounting to falserepresentation or concealment of material facts or at least calculated to

convey the impression that the facts are otherwise than, andinconsistent with, those which the party subsequently attempts toassert; (ii) intent, or at least expectation, that this conduct shall beacted upon by, or at least influence, the other party; and (iii)knowledge, actual or constructive, of the real facts.

[51]

While there is no more question as to the agency relationshipbetween Baluyot and MMPCI, there is no indication that MMPCI let the

public, or specifically, Atty. Linsangan to believe that Baluyot had theauthority to alter the standard contracts of the company. Neither isthere any showing that prior to signing Contract No. 28660, MMPCIhad any knowledge of Baluyots commitment to Atty. Linsangan. Onewho claims the benefit of an estoppel on the ground that he has beenmisled by the representations of another must not have been misledthrough his own want of reasonable care and circumspection.

[52] Even

assuming that Atty. Linsangan was misled by MMPCIs actuations, hestill cannot invoke the principle of estoppel, as he was clearly negligentin his dealings with Baluyot, and could have easily determined, had heonly been cautious and prudent, whether said agent was clothed withthe authority to change the terms of the principals written contract.

Estoppel must be intentional and unequivocal, for when misapplied, itcan easily become a most convenient and effective means ofinjustice.

[53] In view of the lack of sufficient proof showing estoppel, we

refuse to hold MMPCI liable on this score.

Likewise, this Court does not find favor in the Court of Appealsfindings that the authority of defendant Baluyot may not have beenexpressly conferred upon her; however, the same may have beenderived impliedly by habit or custom which may have been anaccepted practice in their company in a long period of time. A perusalof the records of the case fails to show any indication that there wassuch a habit or custom in MMPCI that allows its agents to enter intoagreements for lower prices of its interment spaces, nor to assume aportion of the purchase price of the interment spaces sold at suchlower price. No evidence was ever presented to this effect.

As the Court sees it, there are two obligations in the instantcase. One is the Contract No. 28660 between MMPCI and by Atty.Linsangan for the purchase of an interment space in the formerscemetery. The other is the agreement between Baluyot and Atty.Linsangan for the former to shoulder the amount P1,455.00, or thedifference between P95,000.00, the original price, and P132,250.00,the actual contract price.

To repeat, the acts of the agent beyond the scope of hisauthority do not bind the principal unless the latter ratifies the same. Italso bears emphasis that when the third person knows that the agentwas acting beyond his power or authority, the principal cannot be heldliable for the acts of the agent. If the said third person was aware ofsuch limits of authority, he is to blame and is not entitled to recoverdamages from the agent, unless the latter undertook to secure theprincipals ratification.

[54]

This Court finds that Contract No. 28660 was validly entered intoboth by MMPCI and Atty. Linsangan. By affixing his signature in thecontract, Atty. Linsangan assented to the terms and conditions thereof.When Atty. Linsangan incurred delinquencies in payment, MMCPImerely enforced its rights under the said contract by canceling thesame.

Being aware of the limits of Baluyots authority, Atty. Linsangancannot insist on what he claims to be the terms of Contract No. 28660.The agreement, insofar as theP95,000.00 contract price is concerned,is void and cannot be enforced as against MMPCI. Neither can he holdBaluyot liable for damages under the same contract, since there is noevidence showing that Baluyot undertook to secure MMPCIsratification. At best, the agreement between Baluyot and Atty.Linsangan bound only the two of them. As far as MMPCI is concerned,it bound itself to sell its interment space to Atty. Linsangan

for P132,250.00 under Contract No. 28660, and had in fact receivedseveral payments in accordance with the same contract. If the contractwas cancelled due to arrearages, Atty. Linsangans recourse shouldonly be against Baluyot who personally undertook to pay the differencebetween the true contract price of P132,250.00 and the originalproposed price of P95,000.00. To surmise that Baluyot was acting onbehalf of MMPCI when she promised to shoulder the said differencewould be to conclude that MMPCI undertook to pay itself thedifference, a conclusion that is very illogical, if not antithetical to itsbusiness interests.

However, this does not preclude Atty. Linsangan from institutinga separate action to recover damages from Baluyot, not as an agent ofMMPCI, but in view of the latters breach of their separate agreement.To review, Baluyot obligated herself to pay P1,455.00 in addition to

Atty. Linsangans P1,800.00 to complete the monthly installmentpayment under the contract, which, by her own admission, she wasunable to do due to personal financial difficulties. It is undisputed that

Atty. Linsangan issued the P1,800.00 as agreed upon, and were it notfor Baluyots failure to provide the balance, Contract No. 28660 wouldnot have been cancelled. Thus, Atty. Linsangan has a cause of actionagainst Baluyot, which he can pursue in another case.

WHEREFORE, the instant petition is GRANTED.The Decision of the Court of Appeals dated 22 June 2001 and


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its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, aswell as the Decision in Civil Case No. 88-1253 of the Regional TrialCourt, Makati City Branch 57, are hereby REVERSED and SET

ASIDE. TheComplaint in Civil Case No. 88-1253 is DISMISSED forlack of cause of action. No pronouncement as to costs.

SO ORDERED.

G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,vs.EDWIN CUIZON and ERWIN CUIZON, Respondents.

Before Us is a petition for review by certiorari assailing the Decision1 of

the Court of Appeals dated 10 August 2004 and its Resolution2 dated

17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech IndustrialTechnologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decisionand Resolution affirmed the Order

3 dated 29 January 2002 rendered

by Judge Antonio T. Echavez ordering the dropping of respondentEDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution ofvarious European industrial equipment for customers here in thePhilippines. It has as one of its customers Impact Systems Sales("Impact Systems") which is a sole proprietorship owned byrespondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the salesmanager of Impact Systems and was impleaded in the court a quo insaid capacity.

From January to April 1995, petitioner sold to Impact Systems variousproducts allegedly amounting to ninety-one thousand three hundredthirty-eight (P91,338.00) pesos. Subsequently, respondents sought tobuy from petitioner one unit of sludge pump valued at P250,000.00with respondents making a down payment of fifty thousand pesos(P50,000.00).

4 When the sludge pump arrived from the United

Kingdom, petitioner refused to deliver the same to respondents withouttheir having fully settled their indebtedness to petitioner. Thus, on 28June 1995, respondent EDWIN and Alberto de Jesus, generalmanager of petitioner, executed a Deed of Assignment of receivablesin favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR5 has an outstanding receivables from Toledo

Power Corporation in the amount of THREE HUNDRED SIXTYFIVE THOUSAND (P365,000.00) PESOS as payment for thepurchase of one unit of Selwood Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, andCONVEY unto the ASSIGNEE

6 the said receivables from Toledo

Power Corporation in the amount of THREE HUNDRED SIXTYFIVE THOUSAND (P365,000.00) PESOS which receivables the

ASSIGNOR is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.7

Following the execution of the Deed of Assignment, petitionerdelivered to respondents the sludge pump as shown by Invoice No.12034 dated 30 June 1995.

8

Allegedly unbeknownst to petitioner, respondents, despite theexistence of the Deed of Assignment, proceeded to collect from ToledoPower Company the amount of P365,135.29 as evidenced by CheckVoucher No. 0933

9prepared by said power company and an official

receipt dated 15 August 1995 issued by Impact Systems.10 Alarmed by

this development, petitioner made several demands upon respondentsto pay their obligations. As a result, respondents were able to make

partial payments to petitioner. On 7 October 1996, petitioner’s counselsent respondents a final demand letter wherein it was stated that as of11 June 1996, respondents’ total obligations stood at P295,000.00excluding interests and attorney’s fees.

11 Because of respondents’

failure to abide by said final demand letter, petitioner instituted acomplaint for sum of money, damages, with application for preliminaryattachment against herein respondents before the Regional Trial Courtof Cebu City.

12

On 8 January 1997, the trial court granted petitioner’s prayer for theissuance of writ of preliminary attachment.

13

On 25 June 1997, respondent EDWIN filed his Answer 14

wherein headmitted petitioner’s allegations with respect to the sale transactionsentered into by Impact Systems and petitioner between January and

April 1995.15

He, however, disputed the total amount of ImpactSystems’ indebtedness to petitioner which, according to him,amounted to only P220,000.00.

16

By way of special and affirmative defenses, respondent EDWIN

alleged that he is not a real party in interest in this case. According tohim, he was acting as mere agent of his principal, which was theImpact Systems, in his transaction with petitioner and the latter wasvery much aware of this fact. In support of this argument, petitionerpoints to paragraphs 1.2 and 1.3 of petitioner’s Complaint stating –

1.2. Defendant Erwin H. Cuizon, is of legal age, married, aresident of Cebu City. He is the proprietor of a singleproprietorship business known as Impact Systems Sales("Impact Systems" for brevity), with office located at 46-A delRosario Street, Cebu City, where he may be servedsummons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino,married, a resident of Cebu City. He is the Sales Manager of

Impact Systems and is sued in this action in such capacity.17

On 26 June 1998, petitioner filed a Motion to Declare DefendantERWIN in Default with Motion for Summary Judgment. The trial courtgranted petitioner’s motion to declare respondent ERWIN in default"for his failure to answer within the prescribed period despite theopportunity granted"

18 but it denied petitioner’s motion for summary

judgment in its Order of 31 August 2001 and scheduled the pre-trial ofthe case on 16 October 2001.

19 However, the conduct of the pre-trial

conference was deferred pending the resolution by the trial court of thespecial and affirmative defenses raised by respondent EDWIN.

20

After the filing of respondent EDWIN’s Memorandum21

in support of hisspecial and affirmative defenses and petitioner’s opposition

22 thereto,

the trial court rendered its assailed Order dated 29 January 2002

dropping respondent EDWIN as a party defendant in this case. According to the trial court –

A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of orrepresented [Impact] Systems Sales; that [Impact] Systems Sale is asingle proprietorship entity and the complaint shows that defendantErwin H. Cuizon is the proprietor; that plaintiff corporation isrepresented by its general manager Alberto de Jesus in the contractwhich is dated June 28, 1995. A study of Annex "H" to the complaintreveals that [Impact] Systems Sales which is owned solely bydefendant Erwin H. Cuizon, made a down payment of P50,000.00 that

Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G", thereby showing that [Impact] Systems Sales ratified theact of Edwin B. Cuizon; the records further show that plaintiff knew that[Impact] Systems Sales, the principal, ratified the act of Edwin B.Cuizon, the agent, when it accepted the down payment of P50,000.00.Plaintiff, therefore, cannot say that it was deceived by defendant EdwinB. Cuizon, since in the instant case the principal has ratified the act ofits agent and plaintiff knew about said ratification. Plaintiff could notsay that the subject contract was entered into by Edwin B. Cuizon inexcess of his powers since [Impact] Systems Sales made a downpayment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B.Cuizon be dropped as party defendant.

23

Aggrieved by the adverse ruling of the trial court, petitioner brought thematter to the Court of Appeals which, however, affirmed the 29January 2002 Order of the court a quo. The dispositive portion of thenow assailed Decision of the Court of Appeals states:

WHEREFORE, finding no viable legal ground to reverse or modify theconclusions reached by the public respondent in his Order datedJanuary 29, 2002, it is hereby AFFIRMED.

24


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Petitioner’s motion for reconsideration was denied by the appellatecourt in its Resolution promulgated on 17 March 2005. Hence, thepresent petition raising, as sole ground for its allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERRORWHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENTOF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOTPERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTEDBEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATEIN THE PERPETUATION OF A FRAUD.

25

To support its argument, petitioner points to Article 1897 of the NewCivil Code which states:

Art. 1897. The agent who acts as such is not personally liable to theparty with whom he contracts, unless he expressly binds himself orexceeds the limits of his authority without giving such party sufficientnotice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate theeffect of ERWIN’s act of collecting the receivables from the ToledoPower Corporation notwithstanding the existence of the Deed of

Assignment signed by EDWIN on behalf of Impact Systems. Whilesaid collection did not revoke the agency relations of respondents,petitioner insists that ERWIN’s action repudiated EDWIN’s power tosign the Deed of Assignment. As EDWIN did not sufficiently notify it of

the extent of his powers as an agent, petitioner claims that he shouldbe made personally liable for the obligations of his principal.

26

Petitioner also contends that it fell victim to the fraudulent scheme ofrespondents who induced it into selling the one unit of sludge pump toImpact Systems and signing the Deed of Assignment. Petitionerdirects the attention of this Court to the fact that respondents arebound not only by their principal and agent relationship but are in factfull-blooded brothers whose successive contravening acts bore theobvious signs of conspiracy to defraud petitioner.

27

In his Comment,28

respondent EDWIN again posits the argument thathe is not a real party in interest in this case and it was proper for thetrial court to have him dropped as a defendant. He insists that he wasa mere agent of Impact Systems which is owned by ERWIN and that

his status as such is known even to petitioner as it is alleged in theComplaint that he is being sued in his capacity as the sales managerof the said business venture. Likewise, respondent EDWIN points tothe Deed of Assignment which clearly states that he was acting as arepresentative of Impact Systems in said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some serviceor to do something in representation or on behalf of another with thelatter’s consent.

29 The underlying principle of the contract of agency is

to accomplish results by using the services of others – to do a greatvariety of things like selling, buying, manufacturing, andtransporting.

30 Its purpose is to extend the personality of the principal

or the party for whom another acts and from whom he or she derives

the authority to act.31

It is said that the basis of agency isrepresentation, that is, the agent acts for and on behalf of the principalon matters within the scope of his authority and said acts have thesame legal effect as if they were personally executed by theprincipal.

32 By this legal fiction, the actual or real absence of the

principal is converted into his legal or juridical presence – qui facit peralium facit per se.

33

The elements of the contract of agency are: (1) consent, express orimplied, of the parties to establish the relationship; (2) the object is theexecution of a juridical act in relation to a third person; (3) the agentacts as a representative and not for himself; (4) the agent acts withinthe scope of his authority.

34

In this case, the parties do not dispute the existence of the agency

relationship between respondents ERWIN as principal and EDWIN asagent. The only cause of the present dispute is whether respondentEDWIN exceeded his authority when he signed the Deed of

Assignment thereby binding himself personally to pay the obligationsto petitioner. Petitioner firmly believes that respondent EDWIN actedbeyond the authority granted by his principal and he should thereforebear the effect of his deed pursuant to Article 1897 of the New CivilCode.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts assuch, is not personally liable to the party with whom he contracts. Thesame provision, however, presents two instances when an agentbecomes personally liable to a third person. The first is when heexpressly binds himself to the obligation and the second is when heexceeds his authority. In the last instance, the agent can be held liableif he does not give the third party sufficient notice of his powers. Wehold that respondent EDWIN does not fall within any of the exceptionscontained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signedthereon as the sales manager of Impact Systems. As discussedelsewhere, the position of manager is unique in that it presupposes thegrant of broad powers with which to conduct the business of theprincipal, thus:

The powers of an agent are particularly broad in the case of one actingas a general agent or manager; such a position presupposes a degreeof confidence reposed and investiture with liberal powers for theexercise of judgment and discretion in transactions and concernswhich are incidental or appurtenant to the business entrusted to hiscare and management. In the absence of an agreement to thecontrary, a managing agent may enter into any contracts that hedeems reasonably necessary or requisite for the protection of the

interests of his principal entrusted to his management. x x x.

35

Applying the foregoing to the present case, we hold that Edwin Cuizonacted well-within his authority when he signed the Deed of

Assignment. To recall, petitioner refused to deliver the one unit ofsludge pump unless it received, in full, the payment for ImpactSystems’ indebtedness.

36 We may very well assume that Impact

Systems desperately needed the sludge pump for its business sinceafter it paid the amount of fifty thousand pesos (P50,000.00) as downpayment on 3 March 1995,

37 it still persisted in negotiating with

petitioner which culminated in the execution of the Deed of Assignmentof its receivables from Toledo Power Company on 28 June 1995.

38 The

significant amount of time spent on the negotiation for the sale of thesludge pump underscores Impact Systems’ perseverance to get holdof the said equipment. There is, therefore, no doubt in our mind thatrespondent EDWIN’s participation in the Deed of Assignment was

"reasonably necessary" or was required in order for him to protect thebusiness of his principal. Had he not acted in the way he did, thebusiness of his principal would have been adversely affected and hewould have violated his fiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seekingto recover both from respondents ERWIN, the principal, and EDWIN,the agent. It is well to state here that Article 1897 of the New CivilCode upon which petitioner anchors its claim against respondentEDWIN "does not hold that in case of excess of authority, both theagent and the principal are liable to the other contracting party."

39 To

reiterate, the first part of Article 1897 declares that the principal isliable in cases when the agent acted within the bounds of his authority.Under this, the agent is completely absolved of any liability. Thesecond part of the said provision presents the situations when theagent himself becomes liable to a third party when he expressly bindshimself or he exceeds the limits of his authority without giving notice ofhis powers to the third person. However, it must be pointed out that incase of excess of authority by the agent, like what petitioner claimsexists here, the law does not say that a third person can recover fromboth the principal and the agent.

40

As we declare that respondent EDWIN acted within his authority as anagent, who did not acquire any right nor incur any liability arising fromthe Deed of Assignment, it follows that he is not a real party in interestwho should be impleaded in this case. A real party in interest is onewho "stands to be benefited or injured by the judgment in the suit, orthe party entitled to the avails of the suit."

41 In this respect, we sustain

his exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED

and the Decision dated 10 August 2004 and Resolution dated 17March 2005 of the Court of Appeals in CA-G.R. SP No. 71397,affirming the Order dated 29 January 2002 of the Regional Trial Court,Branch 8, Cebu City, is AFFIRMED.


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Let the records of this case be remanded to the Regional Trial Court,Branch 8, Cebu City, for the continuation of the proceedings againstrespondent Erwin Cuizon.

SO ORDERED.

Tuazon v. Heirs of Ramos

tripped of nonessentials, the present case involves the

collection of a sum of money. Specifically, this case arose from thefailure of petitioners to pay respondents predecessor-in-interest.This fact was shown by the non-encashment of checks issued by athird person, but indorsed by herein Petitioner Maria Tuazon infavor of the said predecessor. Under these circumstances, toenable respondents to collect on the indebtedness, the checkdrawer need not be impleaded in the Complaint. Thus, the suit isdirected, not against the drawer, but against the debtor whoindorsed the checks in payment of the obligation.

The Case

Before us is a Petition for Review[1]

under Rule 45 of the Rules ofCourt, challenging the July 31, 2002 Decision

[2] of the Court of Appeals

(CA) in CA-GR CV No. 4

agency wk7 cases

Documents