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FORM OF THE CONTRACT OF AGENCY

13. AF REALTY & DEVELOPMENT, INC., vs DIESELMAN FREIGHT SERVICES,CO.

(G.R. No. 111448, January 16, 2002)

Facts of the case:

1. Dieselman Freight Service Co., is an owner of a commercial lot located inPasig City;

2. Manuel Cruz Jr., (Cruz)a member of the board of directors of Dieselmanissued a letter authorizing Cristeta N.Polintan (Polintan) to look for a buyerand negotiate the sale. Cruz Jr., has no authority from Dieselman to sell thelot;

3. In turn, Politan authorized Felicisima Noble to sell the same lot and lateroffered to AF Realty, Inc.;

4. Zenaida Ranullo, the board member and vice-president of AF Realty acceptedthe offer and issued a check which Cruz Sr., president of Dieselman,acknowledged receipt of the said money as earnest money.

5. AF Realty filed a complaint for specific performance against Dieselman andCruz Jr, and order the latter to execute and deliver a final deed of sale infavor of AF Realty;

6. In its answer, Dieselman alleged that it did not authorize any person to enterinto such transaction on its behalf;

7. Meanwhile, on 1988, Dieselman and Midas Development Corporation (Midas)executed by a Deed of Absolute Sale of the same property.

ISSUE/S:

Who between AF Realty and Midas has a right to overtake the subject lot?

RULING:

Midas Development Corporation has a better right to overtake the subject lot.Under Article 1874 of the Civil Code provides When a sale of piece of land or anyinterest therein is through an agent, the authority of the latter shall be in writing;otherwise, the sale shall be void; Considering that Cruz Jr., Politan and Noble werenot authorized by Dieselman to sell its lot, the supposed contract is void. Being avoid contract, it is not susceptible of ratification. On the other hand, the validity ofthe sale to Midas in unquestionable. As noted , the sale was authorized by a boardresolution of respondent Dieselman.

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WHO HAS THE OBLIGATION TO DETERMINE THE EXISTENCE AND SCOPE OF

AGENCY?

14. KEELER ELECTRIC CO. vs RODRIGUEZ

(44 Phil 19)

Facts of the case:

1. Keeler Electric Co., is a domestic corporation engaged in the electrical

business, and among other things in the sale of what is known as the

Matthews electric plant.

2. Montelibano approached plaintiff that he could find purchaser for the

Matthews plant, and was told by the plaintiff that for any plant that he

could sell or any customer that he could find he would paid a commission of

10% for his services, if the sale was consummated;

3. Subsequently, Montelibano through his efforts sold Matthews plants toRodriguez, and later shipped and installed on its premises, after which,

without the knowledge of Keeler Electric Co, Rodriguez paid the purchase

price to Montelibano;

4. As a result, Electric Co., commenced an action against Rodriguez alleging

that that latter did not paid the purchased plant that was already been sold

and delivered.

ISSUE/S:

Who has the obligation to determine the existence and scope of agency?

RULING:

Respondent Rodriguez has the obligation to determine the existence and

scope of agency. In the instant case, it devolved upon him to prove the payment to

the Keeler Co., by a preponderance of the evidence.

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A third person must act with ordinary prudence and reasonable diligence to

ascertain whether the agent is acting and dealing with him within the scope of his

powers. Obviously, if he knows or has good reason to believe that the agent is

exceeding his authority, he cannot claim protection. So, if the character assumed by

the agent is of such a suspicious or unreasonable nature, or if the authority which

he seeks is of such an unusual or improbable character, as would suffice to put anordinarily prudent man upon his guard, the party dealing with him may not shut his

eyes to the real state of the case but should withal refuse to deal with the agent at

all, or should ascertain from the principal the true condition of affairs.

The testimony is conclusive that the plaintiff never authorized Montelibano to

receive or receipt for money in its behalf, and that Rodriguez had no right to

assume by any act or deed of that Montelibano was authorized to receive money,

and that the defendant made the payment at his own risk and on the sole

representation of Montelibano that he was authorized to receipt for the money.

15. SPS. YU ENG CHO vs PAN AMERICAN WORLD AIRWAYS

(G.R No. 123560, March 27, 2000)

Facts of the case:

1. Plaintiff Yu Eng Cho is a businessman who travels from time to time to otherforeign countries in connection with his businesses;

2. On July 1976 Yu Eng Cho bought plane tickets from defendant ClaudiaTagunicar who represented herself to be an agent of defendant Tourist WorldServices, Inc., (TWSI);

3. A complaint for damages was filed by petitioners against private respondentsPan American, Julieta Canilao, and Claudia Tagunicar for expense allegedlyincurred such as costs of tickets and hotel accommodations when petitionerswere compelled to stay in Hongkong and then Tokyo by reason of the non-confirmation of their booking with Pan-am.

ISSUE/S:

Who has the obligation to determine that a person is an agent and that acontract of agency really existed between the parties?

RULING:

By the contract of agency, a person binds himself to render some service orto do something in representation or on behalf of another, with the consent orauthority of the latter. The elements of agency are:

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(1) Consent, express or implied, of the parties to establish the relationship;

(2) The object is the execution of a juridical act in relation 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.It is settled rule that persons dealing with an assumed agent are bound at

their peril, if they would hold the principal liable, to ascertain not only the fact ofagency but also the nature and extent of authority, and in case either iscontroverted, the burden of proof is upon them to establish it.