CASE NO. 1Eurotech Industrial Technologies, Inc. v. Edwin Cuizon, Erwin CuizonG.R. No. 167552, April 23, 2007

FACTS Petitioner is engaged in the importation and distribution of various European industrial equipment for customers in the Philippines. One of petitioners customers is Impact Systems Sales (ISS), a sole proprietorship owned by respondent Erwin Cuizon (ERWIN) (NOTE: since its a sole proprietorship, the principal may be ERWIN or ISS). EDWIN is the manager of ISS and was impleaded in the court in that capacity. January to April 1995: petitioner soled to ISS various products allegedly amounting to P91,338. Respondents also sought to buy from petitioner on unit of sludge pump valued at P250K. Respondents made a down payment of P50K for said sludge pump. Petitioner refused to deliver the sludge pump to respondents without the latter first having settled their indebtedness. June 28, 1995, respondent EDWIN and Alberto the Jesus, general manager of petitioner, executed an Assignment of receivables in favor of petitioner. The document stated that the assignor (EDWIN in his capacity as manager of ISS) had oustanding receivables from Toledo Power Corp amounting to P365K and that it conveyed said receivables to assignee (petitioner). Following the assignment, the sludge pump was delivered to respondents. Respondents, despite the Deed of Assignment, proceeded to collect from Toledo Power Corp the amount of P365K (evidenced by a Check Voucher and an official receipt dated August 15, 1995). This was done without the knowledge of petitioner. Petitioner made several demands upon respondents to pay their obligation. Respondents were only able to make partial payments. June 11, 1996: Through counsel, petitioner sent a final demand letter stating that respondents obligations stood at P295K excluding interests and attorneys fees. Petitioner filed a complaint for sum of money, damages, with application for preliminary attachment with the RTC, Cebu City. The RTC granted the prayer for the issuance of writ of preliminary attachment. CONTENTION OF RESPONDENT: EDWIN alleged that he is not a real party of interest because he was acting as a mere agent of his principal (ISS) and that in his transactions with the petitioner, the latter was aware of that fact. CONTENTION OF PETITIONER: EDWIN exceeded his authority as an agent and should bear the effect of the deed of assignment RTC: January 29, 2002 dropped respondent EDWIN as a party defendant on the ground that he was acting on behalf of ISS in the June 28, 1995 transaction, that the principal (ISS) ratified the act and that petitioner knew about said ratification. Petitioner cannot claim that the subject contract was entered into by EDWIN in excess of his powers since ISS made a down payment of P50K two days later (implied ratification). CA: Affirmed decision of RTC

ISSUES- W/N respondent EDWIN was an agent acting on behalf of ISS, incurred no personal liability and should be dropped as defendant from the instant case.

RULINGThe petition is DENIED and the decision of the RTC is AFFIRMED.

EDWIN acted within his authority as an agent. He did not acquire or incur any liability arising from the Deed of Assignment. Therefore, he is not a real party in interest in this case. The SC sustain his exclusion from the suit.

(NOTE: the parties admit of the existence of the agency and all its elements: (1) consent of the parties to establish the relationship, (2) 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)

In a contract of agency, an agent is not personally liable to the party with whom he contracts. However, there are two instances when an agent is personally liable to a third person: (a) when he expressly binds himself to the obligation or (b) when he exceeds his authority and he does not give the other party sufficient notice of his powers. EDWIN does not fall within either instance. The Deed of Assignment clearly stated that EDWIN signed thereon as the sales manager of ISS. The position of sales managers presupposes the grant of broad powers necessary to conduct the business of the principal. In the absence of a contrary agreement, a managing agent can enter into contracts that he deems reasonably necessary for the protection of the interests of the principal entrusted to him.

EDWIn acted within his authority when he signed the Deed of Assignment. Petitioner had refused to deliver the sludge pump until full payment. It can be assumed that ISS needed the pump for its business since it paid the down payment of P50K and persisted in negotiating with the petitioner (culminating in the execution of the Deed ofi Assignment). EDWINs participation in the deed was reasonably necessary in order for him to protect the business of ISS. Had he not acted in the way he did, the business of ISS would have been adversely affected.

It was also noted that petitioner sought to recover from both ERWIN and EDWIN (agent). Under Art. 1897, NCC, a party may recover from the principal if the agent acted within his authority, or from the agent in the instances mentioned above. However, the law does not provide that, in case of excess authority by the agent, the third party can recover from both principal and agent.

CASE NO. 2RALLOS v FELIX GO CHAN & SONS REALTY CORPORATIONG.R. No. L-24332, January 31, 1978

FACTS:1. Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land.2. In 1954, they executed an SPA in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the said parcel of land.3. On March 1955, Concepcion died.4. On September 1955, Simeon sold the undivided shares of his sisters to Felix Go Chan and Sons realty Corp.5. The deed of sale was registered and the previous TCT was cancelled.6. On May 1956, Ramon Rallos, as administrator of the Intestate Estate of Concepcion, filed a complaint with the CFI of Cebu, praying:a. that the sale be declared unenforceable, and said share be reconveyed to the deceased estate;b. that the TCT issued in the name of Felix Go Chan and Sons Realty Corporation be cancelled; andc. that the plaintiff be indemnified by way of attorneys fees and payment of costs of suit.7. The Trial Court- declared that the absolute sale is null and void, insofar as the pro-indiviso share of Concepcion in the property, cancel the TCT issued to Felix Go Chan and Sons Realty Corp., and sentencing the defendant Juan Borromeo, the administrator of the estate of Simeon Rallos, to pay the plaintiff (estate of Concepcion).8. Felix Go Chan and Sons Realty Corp, appealed to the CA, and resolved in favor of the corporation.9. Ramon Rallos filed MR but was denied, hence this petition.

ISSUE:WON the sale of the undivided share of Concepcion Rallos valid when it was executed by her agent after Concepcions (principal) death.

HELD:NO. The sale is null and void.

Extinguishment of Agency:The general rule in Article 1919 of the NCC is that death is one of the causes for the extinguishment of agency. There being an integration of the personality of the principal into that of the agent, it is not possible for the representation to continue once the death of either is established.

There are certain exceptions, a. that the agency is couple with an interest (Article 1930)b. the agent acted without knowledge of the death of the principal, and that the 3rd person who contracted with the agent acted in good faith. (Article 1931)In this case, Article 1930 is not involved because admittedly the SPA executed in favor of Simeon was not coupled with an interest. However, under Article 1931, an act done by the agent after the death of the principal is valid and effective if the 2 conditions mentioned concur. It was established that Simeon Rallos had knowledge of his principals death (Concepcion) when he made the sale, Article 1931 will not apply. The general rule shall apply then that any act of an agent after the death of the principal is void ab initio. Simeons act of selling the share of Concepcion after her death is therefore null and void.

Revocation by principal distinguished from revocation by operation of law:The respondent argued that no notice of the death was annotated on the OCT regarding the death of Concepcion hence the heirs must suffer the consequences of such omission. The SC ruled that although a revocation of a power of attorney to be effective must be communicated to the parties concerned, yet a revocation by operation of law, such as death of the principal is, as a rule, instantaneously effective inasmuch as by legal fiction the agents exercise of authority is regarded as an execution of the principals continuing will. With death, the principals will ceases or is terminated; the source of authority is extinguished.

Agency:The relationship of agency is whereby one party called the principal (mandate), authorizes another, called the agent (mandatario), to act for and his behalf in transactions with 3rd persons.

The essential elements of agency are:a. there is consent, express or implied, of the parties to establish the relationship;b. the object is the execution of a juridical act in relation to a third person;c. the agent acts as a representative and not for himself; andd. the agent acts within the scope of his authority.Agency is basically personal, representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit per se. He who acts through another acts himself.

DISPOSITION:in view of all the foregoing, we set aside the decision of respondent appellate court, and affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the CFI of Cebu, quoted in pages 2 and 3 of this Opinion, with cost against respondent corporation at all instances. So ordered.

CASE NO. 3Inland Reality Investment Service, Inc. vs. CAG.R. No. 76969, June 9, 1997

FACTS:Herein petitioner, Inland Reality Investment Service, Inc., was engaged in a real estate business and brokerage. Herein respondent, Araneta Inc., was selling its 9,800 shares in Archeticts Building, Inc. The latter, thru its assistant general manager, herein co-respondent, J. Armando Eduque, granted to petitioners a 30-day authority to sell said stocks at P1,500 per share or for a total of P9,800,000. Petitioners were able to look for prospective buyers, among them was Stanford Microsystems, Inc. which counter-proposed that the stocks should be sold to them at P1,000 per share payable in five years with an interest of 12% per annum. Upon petitioners receipt of the counter-proposal, Inland Reality notified the respondents. However, the latter replied that the price was too low and suggested that plaintiffs see if the price and terms of payment could be improved upon by Stanford. Thereafter, the authority to sell was extended several times: (1) October, 2, 1975 for 30 days from said date, (2) October 28, 1975 for 30 days from said date, and (3) December 2, 1975 for 30 days from said date. On July 8, 1977, petitioner finally sold the 9,800 shares of stock in Architects' Bldg., Inc. to Stanford Microsystems, Inc. forP13,500,000.00. On September 6, 1977, plaintiffs demanded formally from respondents, through a letter of demand, for payment of their 5% broker's commission atP13,500,000.00 or a total amount ofP675,000.00 x x x which was declined by respondents on the ground that the claim has no factual or legal basis. Respondents contend that, after their authority to sell expired thirty (30) days from December 2, 1975, or on January 1, 1976, petitioners abandoned the sales transaction and were no longer privy to the consummation and documentation thereof. Petitioners interposed that Greogorio Araneta III, in behalf of Araneta, Inc., renewed that authority to sell granted to the petitioners for another 30 days after the last extension stated above. RTC: Dismissed the petitioners complaint for collection of unpaid brokers commission. CA: Dismissed the petioners appeal. CA found the contention of the respondents meritorious. There was nothing in the record or in the testimonial evidence that the authority extended 30 days from the last date of extension was ever reserved nor extended, nor has there been any communication made to defendants that the plaintiff was actually negotiating with Stanford a better price than what was previously offered by it.ISSUE: Whether or not plaintiffs are entitled to brokers commission regardless of the expiration of their contract of agency and their authority to sell. RULING:SC ruled in favor of the respondents. .From September 16, 1975 to January 1, 1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to show that they actively served their principal's interests, pursued to sell the shares in accordance with their principal's terms and conditions, and performed substantial acts that proximately and causatively led to the consummation of the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale to Stanford, to be a significant index of petitioners' non-participation in the really critical events leading to the consummation of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking price, the finalization of the terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent documents, and the delivery of the shares of stock to Stanford.Certainly, when the lapse of the period of more than one (1) year and five (5) months between the expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of evidence of petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that period and in the subsequent processing of the documents pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err in affirming the trial court's dismissal of petitioners' claim for unpaid brokerage commission.

CASE NO. 4Doles v. Angeles, 492 SCRA 607 (2006); AGENCY IS A PREPARATORY CONTRACT

Facts:Angeles filed a complaint on April 1, 1997 for Specific Performance with Damages against Doles, alleging that Doles was indebted to her by personal loan in the amount of P405,430.00. On October 5, 1996, by virtue of a Deed of Absolute Sale, Doles ceded to Angeles a parcel of land in order to satisfy her loan, and that this was mortgaged to National Home Mortgaged Finance Corporation (NHMFC) to secure another loan of Doles to the entity, with the condition that Angeles shall assume the undue balance and pay the monthly amortization. Angeles then learned that Doles had incurred arrearages but denied and refused to pay the same. Angeles also alleged that Doles refused to remit the rent collected from the tenant occupying the property, and also refused to cooperate with NHMFC for the transfer of the title of the property.

Doles denied that she borrowed money from Angeles, but only that she referred her friends to Angeles whom she knew to be engaged in the business of lending money in exchange of personal checks through her capitalist Arsenio Pua. She also averred that some of her friends borrowed money from Angeles and issued personal checks in payment of the loans, but the checks bounced for insufficiency of funds. Although she tried to assist Angeles to collect from the borrowers, she could no longer locate them. Because of this, Angeles became furious and threatened her with a criminal case. Thus, Doles alleged that she was forced to issue eight checks amounting to P350,000 to answer to the bounced checks of the borrowers she referred, and although she informed Angeles that they were not sufficiently funded, the latter still deposited the checks and such were dishonored. Under the threat of a criminal case for violation of BP 22, Doles alleged that she was forced to execute the Absolute Deed of Sale over her property, that there was no valid consideration, that she did not appear before a notary public, and that the CTC on the deed was not hers.

RTC Ruling: Sale was void for lack of cause or consideration. Angeles admission that the borrowers are friends of Doles and that the checks issued by them in payment of the loan negates the cause or consideration of the contract of sale between Angeles and Doles. Moreover, property is not solely owned by Doles.

CA Ruling: RTC decision is reversed and set aside. Doles is really the borrower and in turn would re-lend the amount to her friends. Hence, the deed of absolute sale was supported by valid consideration. All transactions were made by and between Doles and Angeles, and Doles friends never presented themselves to respondent. In fact, the money borrowed was deposited in Doles bank account, and payments for the loan were deposited by Doles to the bank account of Angeles. Doles herself admitted that she was re-lending the money loaned from Angeles to other individuals for profit.

Doles filed for Motion for Reconsideration with the CA, arguing that Angeles categorically admitted in open court that she acted only as agent of Arsenio Pua, the principal financier, and hence she has no legal capacity to sue Doles. Motion was denied.

Issue:Whether or not the Deed of Absolute Sale was supported by valid cause or consideration

Held:No, the deed was not supported by valid cause or consideration.

Doles is merely the agent of the debtors, some of whom are her friends and others were merely referred. On the other hand, Angeles is estopped to deny that she herself acted only as an agent of Arsenio Pua, her disclosed principal. In this case, Doles knew that the financier of Angeles is Pua; and Angeles knew that the borrowers are friends of Doles.

The CA is incorrect when it considered the fact that the "supposed friends of Doles, the actual borrowers, did not present themselves to Angeles" as evidence that negates the agency relationshipit is sufficient that Doles disclosed to Angeles that the former was acting in behalf of her principals, her friends whom she referred.

With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for profit, it must be stressed that the manner in which the parties designate the relationship is not controlling. It will be an agency whether the parties understood the exact nature of the relation or not. That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment of the loan in the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her name and not directly paid to Pua.

The finding of the CA that the disbursements and payments for the loan were made through the bank accounts of Doles and Angeles, it is merely for reasons of convenience and practical utility.

With regards to the conveyance of the property and the condition that Angeles shall assume the balance of the mortgage loan, the petitioner nor her father did not hold any direct interest on the property in question so as to validly constitute a mortgage thereon and to effect the delivery of the object of the sale. What is worse, there is a notation that the TCT itself has been "cancelled."

WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED and SET ASIDE. The complaint is DISMISSED.

CASE NO. 5The Shell Company of the Philippines, LTD. vs. Firemens Insurance Company Newark, New Jersey Commercial Casualty Insurance Co., Salvador Sision, Porfirio de la Fuente & CAFACTS:On September 3, 1947, Salvador Sison brought his Plymouth car to the Shell Gasoline and Service Station for washing, greasing and spraying. After more than an hour of washing and greasing, the job was about to be completed except for an ungreased portion underneath the vehicle which could not be reached. So, the lifter was lowered a little by Alfonso Adriano and while doing so, the car for unknown reason accidentally fell and suffered damage.The owner of the car forth with notified the insurers who ordered their adjustor to investigate the said incident and was brought to the Philippine Motors Inc. The car was restored to running condition after repairs which amounted to P 1651.88 and returned to the owner who assigned his right to collect to the Firemens Insurance Company and the Commercial Casualty Insurance Company.On December 6, 1947 the owners and the insurers brought an action against Shell and Porfirio de la fuente (operator) in the Court of First Instance to recover from them, jointly and severally the sum mentioned above.The Trial court dismissed the complaint but the CA reversed and sentenced the defendant to pay the sum with legal interests and costs.ISSUE:WON the CA was correct in concluding that Porfirio Dela Fuente is an agent and not an independent contractor of the Shell Company.RULING:Yes. The court assented to the reasoning given by the CA. As explained, where the operator of a gasoline and service station owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator; and that the receipts signed by the operator indicated that he was a mere agent. The operator is an agent of the company and not an independent contractor.

Applying the law on agency, it was stated that the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by the agent, in the case, is one for which the principal is answerable. Moreover, the company undertook to "answer and see to it that the equipments are in good running order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to do its job or was negligent so the company must answer for the negligent act of its mechanic which was the cause of the fall of the car from the hydraulic lifter. So here the court affirmed the judgment of the CA .On the other note, it is noteworthy to include that in determining the nature of a contracts, courts are not bound to rely upon the name or title given by the contracting parties. Should there be a controversy as to what they really had intended to enter into and should performance conflict with the name or title given the contract by the parties, the former must prevail over the later.

CASE NO. 6QUIROGA VS PARSONS (AGENCY DIFFERENTIATED FROM SALE)Facts:1. CONTENTS OF THE CONTRACT On January 24, 1911, in the City of Manila, a contract in the following tenor was entered into by and between the plaintiff, as party of the first part, and J. Parsons (to whose rights and obligations the present defendant later subrogated itself), as party of the second part:CONTRACT EXECUTED BY AND BETWEEN ANDRES QUIROGA AND J. PARSONS, BOTH MERCHANTS ESTABLISHED IN MANILA, FOR THE EXCLUSIVE SALE OF "QUIROGA" BEDS IN THE VISAYAN ISLANDS.ARTICLE 1. Don Andres Quiroga grants the exclusive right to sell his beds in the Visayan Islands to J. Parsons under the following conditions:(A) Mr. Quiroga shall furnish beds of his manufacture to Mr. Parsons for the latter's establishment in Iloilo, and shall invoice them at the same price he has fixed for sales, in Manila, and, in the invoices, shall make and allowance of a discount of 25 per cent of the invoiced prices, as commission on the sale; and Mr. Parsons shall order the beds by the dozen, whether of the same or of different styles.(B) Mr. Parsons binds himself to pay Mr. Quiroga for the beds received, within a period of sixty days from the date of their shipment.(C) The expenses for transportation and shipment shall be borne by M. Quiroga, and the freight, insurance, and cost of unloading from the vessel at the point where the beds are received, shall be paid by Mr. Parsons.(D) If, before an invoice falls due, Mr. Quiroga should request its payment, said payment when made shall be considered as a prompt payment, and as such a deduction of 2 per cent shall be made from the amount of the invoice.The same discount shall be made on the amount of any invoice which Mr. Parsons may deem convenient to pay in cash.(E) Mr. Quiroga binds himself to give notice at least fifteen days before hand of any alteration in price which he may plan to make in respect to his beds, and agrees that if on the date when such alteration takes effect he should have any order pending to be served to Mr. Parsons, such order shall enjoy the advantage of the alteration if the price thereby be lowered, but shall not be affected by said alteration if the price thereby be increased, for, in this latter case, Mr. Quiroga assumed the obligation to invoice the beds at the price at which the order was given.(F) Mr. Parsons binds himself not to sell any other kind except the "Quiroga" beds.ART. 2. In compensation for the expenses of advertisement which, for the benefit of both contracting parties, Mr. Parsons may find himself obliged to make, Mr. Quiroga assumes the obligation to offer and give thepreference to Mr. Parsons in case anyone should apply for the exclusive agency for any island not comprisedwith the Visayan group.

ART. 3. Mr. Parsons may sell, or establish branches of his agency for the sale of "Quiroga" beds in all the towns of the Archipelago where there are no exclusive agents, and shall immediately report such action to Mr. Quiroga for his approval.ART. 4. This contract is made for an unlimited period, and may be terminated by either of the contracting parties on a previous notice of ninety days to the other party.

2. VIOLATIONS OF THE CONTRACTOf the three causes of action alleged by the plaintiff in his complaint, only two of them constitute the subject matter of this appeal and both substantially amount to the averment that the defendant violated the following obligations: a. not to sell the beds at higher prices than those of the invoices; b. to have an open establishment in Iloilo; c. itself to conduct the agency; d. to keep the beds on public exhibition, ande. to pay for the advertisement expenses for the same; f. and to order the beds by the dozen and in no other manner.

As may be seen, with the exception of the obligation on the part of the defendant to order the beds by the dozen and in no other manner, none of the obligations imputed to the defendant in the two causes of action are expressly set forth in the contract. But the plaintiff alleged that the defendant was his agent for the sale of his beds in Iloilo, and that said obligations are implied in a contract of commercial agency.ISSUE: Whether or not the defendant, by reason of the contract transcribed was a purchaser or an agent of the plaintiff for the sale of his beds.HELD: In order to classify a contract, due regard must be given to its essential clauses. In the contract in question, what was essential, as constituting its cause and subject matter, is that the plaintiff was to furnish the defendant with the beds which the latter might order, at the price stipulated, and that the defendant was to pay the price in the manner stipulated. The price agreed upon was the one determined by the plaintiff for the sale of these beds in Manila, with a discount of from 20 to 25 per cent, according to their class. Payment was to be made at the end of sixty days, or before, at the plaintiff's request, or in cash, if the defendant so preferred, and in these last two cases an additional discount was to be allowed for prompt payment. These are precisely the essential features of a contract of purchase and sale. There was the obligation on the part of the plaintiff to supply the beds, and, on the part of the defendant, to pay their price. These features exclude the legal conception of an agency or order to sell whereby the mandatory or agent received the thing to sell it, and does not pay its price, but delivers to the principal the price he obtains from the sale of the thing to a third person, and if he does not succeed in selling it, he returns it. By virtue of the contract between the plaintiff and the defendant, the latter, on receiving the beds, was necessarily obliged to pay their price within the term fixed, without any other consideration and regardless as to whether he had or had not sold the beds.It would be enough to hold, as we do, that the contract by and between the defendant and the plaintiff is one of purchase and sale, in order to show that it was not one made on the basis of a commission on sales, as the plaintiff claims it was, for these contracts are incompatible with each other. But, besides, examining the clauses of this contract, none of them is found that substantially supports the plaintiff's contention. Not a single one of these clauses necessarily conveys the idea of an agency. The words commission on sales used in clause (A) of article 1 mean nothing else, as stated in the contract itself, than a mere discount on the invoice price. The word agency, also used in articles 2 and 3, only expresses that the defendant was the only one that could sell the plaintiff's beds in the Visayan Islands. With regard to the remaining clauses, the least that can be said is that they are not incompatible with the contract of purchase and sale.The plaintiff calls attention to the testimony of Ernesto Vidal, a former vice-president of the defendant corporation and who established and managed the latter's business in Iloilo. It appears that this witness, prior to the time of his testimony, had serious trouble with the defendant, had maintained a civil suit against it, and had even accused one of its partners, Guillermo Parsons, of falsification. He testified that it was he who drafted the contract Exhibit A, and, when questioned as to what was his purpose in contracting with the plaintiff, replied that it was to be an agent for his beds and to collect a commission on sales. However, according to the defendant's evidence, it was Mariano Lopez Santos, a director of the corporation, who prepared Exhibit A. But, even supposing that Ernesto Vidal has stated the truth, his statement as to what was his idea in contracting with the plaintiff is of no importance, inasmuch as the agreements contained in Exhibit A which he claims to have drafted, constitute, as we have said, a contract of purchase and sale, and not one of commercial agency. This only means that Ernesto Vidal was mistaken in his classification of the contract. But it must be understood that a contract is what the law defines it to be, and not what it is called by the contracting parties.The plaintiff also endeavored to prove that the defendant had returned beds that it could not sell; that, without previous notice, it forwarded to the defendant the beds that it wanted; and that the defendant received its commission for the beds sold by the plaintiff directly to persons in Iloilo. But all this, at the most only shows that, on the part of both of them, there was mutual tolerance in the performance of the contract in disregard of its terms; and it gives no right to have the contract considered, not as the parties stipulated it, but as they performed it. Only the acts of the contracting parties, subsequent to, and in connection with, the execution of the contract, must be considered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as inconsidered for the purpose of interpreting the contract, when such interpretation is necessary, but not when, as in the instant case, its essential agreements are clearly set forth and plainly show that the contract belongs to a certain kind and not to another. Furthermore, the return made was of certain brass beds, and was not effected in exchange for the price paid for them, but was for other beds of another kind; and for the letter Exhibit L-1, requested the plaintiff's prior consent with respect to said beds, which shows that it was not considered that the defendant had a right, by virtue of the contract, to make this return. As regards the shipment of beds without previous notice, it is insinuated in the record that these brass beds were precisely the ones so shipped, and that, for this very reason, the plaintiff agreed to their return. And with respect to the so-called commissions, we have said that they merely constituted a discount on the invoice price, and the reason for applying this benefit to the beds sold directly by the plaintiff to persons in Iloilo was because, as the defendant obligated itself in the contract to incur the expenses of advertisement of the plaintiff's beds, such sales were to be considered as a result of that advertisement.In respect to the defendant's obligation to order by the dozen, the only one expressly imposed by the contract, the effect of its breach would only entitle the plaintiff to disregard the orders which the defendant might place under other conditions; but if the plaintiff consents to fill them, he waives his right and cannot complain for having acted thus at his own free will.For the foregoing reasons, we are of opinion that the contract by and between the plaintiff and the defendant was one of purchase and sale, and that the obligations the breach of which is alleged as a cause of action are not imposed upon the defendant, either by agreement or by law.

CASE NO. 7Schmid and Oberly, Inc. v. RJL Martinez Fishing Corp.G.R. No. 75198, October 18, 1988

Facts:There was a misapprehension of facts in the RTC and CA, so SC reopened the facts again. (SC facts nani). RJL Martinez Fishing Corp (RJL Martinez) is engaged in deep-sea fishing, and in the course of its business needed electrical generators for the operation of its business.It then negotiated with Schmid&Oberly (Schmid) who is engaged in the business of selling electric generators of different brands. The two parties had two different transactions. The first transaction resulted in the sale of 3 Nagata generators which came from Schmids stockroom. Schmid invoiced the said sale.The second transaction involves 12 Nagata generators which give rise to the controversy. As RJL Martinez was canvassing for generators, Schmid gave the former a quotation for 12 Nagata generators. The parties agreed that the mode of payment would be through an irrevocable letter of credit in favor of Nagata, Co. (the manufacturer of the generators). Accordingly, on November 20,1975, SCHMID transmitted to NAGATA CO. an orderfor the twelve (12) generators to be shipped directly to RJL MARTINEZ. NAGATA CO. thereafter sent RJL MARTINEZ the bill of lading and its own invoiceand, in accordance with the order, shipped the generators directly to RJL MARTINEZ. The invoice states that "one (1) case of 'NAGATA' AC Generators" consisting of twelve sets wasbought by order and for account risk of Messrs. RJL Martinez Fishing Corporation.For its efforts, SCHMID received from NAGATA CO. a commission of $1,752.00 for the sale of the twelve generators to RJL MARTINEZ.All fifteen (15) generators subject of the two transactions burned out after continuous use. RJL MARTINEZ informed SCHMID about this development. In turn, SCHMID brought the matter to the attention of NAGATA CO. In July 1976, NAGATA CO. sent two technical representatives who made an ocular inspection and conducted tests on some of the burned out generators, which by then had been delivered to the premises of SCHMID. It was found out that the description of the generators (in the quotation and invoice) was 5 KVA, but the generators turned out to be actually only 4 KVA.SCHMID replaced the three (3) generators subject of the first sale with generators of a different brand. As for the 12 others, Nagata, Co. only repaired 3, while the remaining 9 remained unrepaired. As a result, RJL Martinez sued Schmid. In its defense, Schmid refuses liability on the account that it was not the seller for the 12 generators. Both the trial court and the Court of Appeals upheld the contention of RJL MARTINEZ that SCHMID was the vendor in the second transaction and was liable under its warranty. Accordingly, the courts a quo rendered judgment in favor of RJL MARTINEZ. Hence, the instant recourse to this Court.Issue:WON the second transaction between RJL Martinez and Schmid was a sale, or Schmid was merely an indent (broker/ intermediary) of RJL Martinez and Nagata, Co. Held: SCHMID was merely an indentor, not a vendor in the second transaction. Nature of SaleAt the outset, it must be understood that a contract is what the law defines it to be, considering its essential elements, and not what it is caged by the contracting parties. It has been said that the essence of the contract of sale is transfer of title or agreement to transfer it for a price paid or promised. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is, a sale.What is an Indentor:On the other hand, there is no statutory definition of "indent" in this jurisdiction. However, the Rules and Regulations to Implement Presidential Decree No. 1789 (the Omnibus Investments Code) lumps "indentors" together with "commercial brokers" and "commission merchants" in this manner:... A foreign firm which does business through themiddlemenacting in their own names, such asindentors, commercial brokers or commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or commission merchants shall be the ones deemed to be doing business in the Philippines.Therefore, an indentor is a middlemen in the same class as commercial brokers and commission merchants. To get an Idea of what an indentor is, a look at the definition of those in his class may prove helpful.Abrokeris generally defined as one who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties, never acting in his own name but in the name of those who employed him; he is strictly a middleman and for some purpose the agent of both parties.A broker is one whose occupation it is to bring parties together to bargain, or to bargain for them, in matters of trade, commerce or navigation.Judge Storey, in his work on Agency, defines a broker as an agent employed to make bargains and contracts between other persons, in matters of trade, commerce or navigation, for compensation commonly called brokerage.Commission Merchant:Acommission merchantis one engaged in the purchase or sale for another of personal property which, for this purpose, is placed in his possession and at his disposal. He maintains a relation not only with his principal and the purchasers or vendors, but also with the property which is subject matter of the transaction.Thus, the chief feature of a commercial broker and a commercial merchant is that in effecting a sale, they are merely intermediaries or middle-men, and act in a certain sense as the agent of both parties to the transaction.Indent RelationshipsWebster defines anindentas "a purchase order for goods especially when sent from a foreign country. It would appear that there are three parties to an indent transaction, namely, the buyer, the indentor, and the supplier who is usually a non-resident manufacturer residing in the country where the goods are to be bought. An indentor may therefore be best described as one who, for compensation, acts as a middleman in bringing about a purchase and sale of goods between a foreign supplier and a local purchaser.In the case at bar:The evidences show that RJL Martinez admitted that Schmid was merely an indent for the purchase of the 12 generators. The evidence also show that RJL MARTINEZ paid directly NAGATA CO, for the generators, and that the latter company itself invoiced the sale, and shipped the generators directly to the former. The only participation of SCHMID was to act as an intermediary or middleman between NAGATA CO. and RJL MARTINEZ, by procuring an order from RJL MARTINEZ and forwarding the same to NAGATA CO. for which the company received a commission from NAGATA CO.The above transaction is significantly different from the first transaction wherein SCHMID delivered the goods from its own stock (which it had itself imported from NAGATA CO.), issued its own invoice, and collected payment directly from the purchaser.RJL Martinez still insists that Schmid was a seller, and not a mere broker because when the latter was informed of the defects, it acted immediately, provided tools, labor, and equipment to resolve the matter. The SC however said that: no indentor will just fold its hands when a client complains about the goods it has bought upon the indentor's mediation. In its desire to promote the product of the seller and to retain the goodwill of the buyer, a prudent indentor desirous of maintaining his business would have to act considerably towards his clients.Note that in contrast to its act of replacing the three (3) generators subject of the first transaction, SCHMID did not replace any of the twelve (12) generators, but merely rendered assistance to both RJL TINES and NAGATA CO. so that the latter could repair the defective generators.Liability for WarrantyHowever, even as SCHMID was merely an indentor, there was nothing to prevent it from voluntarily warranting that twelve (12) generators subject of the second transaction are free from any hidden defects. In other words, SCHMID may be held answerable for some other contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to some extent an agent of both the vendor and the vendee. As such agent, therefore, he may expressly obligate himself to undertake the obligations of his principal. In this case however, there was no express agreement between the parties that Schmid warrants in anyway the condition of the generators, hence the court did not make the latter liable for any warranty.

CASE NO. 8HARRY E. KEELER ELECTRIC CO., INC.,vs. DOMINGO RODRIGUEZ

1. BURDEN OF PROOF. The defendant, having alleged that the plaintiffsold and delivered the plant to him, and that he paid the purchase price to the plaintiff, it devolved upon him to prove such payment by a preponderance of the evidence.

2. TO WHOM PAYMENT SHOULD BE MADE. Payment must be made to the person in whose favor the obligation is constituted, or to another authorized to receive it in his name. (Article 1162, Civil Code.)

3. ID. The repayment of a debt must be made to the person in whose favor the obligation is constituted, to another expressly authorized to receive the payment, in his name. (Ormachea Tin-Congco vs. Trillana, 13 Phil., 194.)

4. DUTIES OF PERSONS DEALING WITH AN ASSUMED AGENT. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, rare bound at their peril, if they would, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

5. AGENT ALONE CANNOT ENLARGE HIS AUTHORITY. The agent alone remove limitations or waive conditions imposed by his principal. To charge the principal in such a case, the principal's consent or concurrence must be shown.

6. PAYMENT AT OWN RISK. Where a person in making payment solely relied upon the representation of an agent a to his authority to receive and receipt for the money, such payment is made at his own risk, and where the agent was not so authorized, such payment is not a valid defense against the principal.

The plaintiff is a domestic corporation with its principal office in the city of Manila and engaged in the electrical business, and among other things in the sale of what is known as the "Matthews" electric plant, and the defendant is a resident of Talisay, Occidental Negros, and A. C. Montelibano was a resident of Iloilo.

Montelibano approached plaintiff at its Manila office, claiming that he was from Iloilo and lived with Governor Yulo; 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 be paid a commission of 10 per cent for his services, if the sale was consummated. Montelibano interviews the defendant, and, through his efforts, one of the "Matthews" plants was sold by the plaintiff to the defendant, and was shipped from Manila to Iloilo, and later installed on defendant's premises after which, without the knowledge of the plaintiff, the defendant paid the purchase price to Montelibano. As a result, plaintiff commenced this action against the defendant, alleging that about August 18, 1920, it sold and delivered to the defendant the electric plant at the agreed price of P2,513.55 no part of which has been paid, the demands judgment for the amount with interest from October 20, 1920.

It appears from the testimony of H. E. Keeler that he was president of the plaintiff company and that the plant in question was shipped from Manila to Iloilo and consigned to the plaintiff itself, and that at the time of the shipment the plaintiff sent Juan Cenar, one of its employees, with the shipment, for the purpose of installing the plant on defendant's premises. That plaintiff gave Cenar a statement of the account, including some extras and the expenses of the mechanic, making a total of P2,563,95. That Montelibano had no authority from the plaintiff to receive or receipt for money. That in truth and in fact his services were limited and confined to the finding of purchasers for the "Matthews" plant to whom the plaintiff would later make and consummate the sale. That Montelibano was not an electrician, could not install the plant and did not know anything about its mechanism.

Cenar, testified that he went with shipment of the plant from Manila to Iloilo, for the purpose of installing, testing it, and to see that everything was satisfactory. That he was there about nine days, and that he installed the plant, and that it was tested and approved by the defendant. He also says that he personally took with him the statement of account of the plaintiff against the defendant. That after the plant was installed and approved, he delivered it to the defendant and returned to Manila.

The only testimony on the part of the defendant is that of himself in the form of a deposition in which he says that Montelibano sold and delivered the plant to him, and "was the one who ordered the installation of that electrical plant," and he introduced in evidence as part of his deposition a statement and receipt which Montelibano signed to whom he paid the money.

There is nothing on the face of the receipt to show that Montelibano was the agent of, or that he was acting for, the plaintiff. It was his personal receipt and his own personal signature. Outside of the fact that Montelibano received the money and signed this receipt, there is no evidence that he had any authority, real or apparent, to receive or receipt for the money. Neither is there any evidence that the plaintiff ever delivered the statement to Montelibano, or authorized anyone to deliver it to him, and it is very apparent that the statement in question is the one which was delivered by the plaintiff to Cenar, and is the one which Cenar delivered to the defendant at the request of the defendant.

This claim must be for the expenses of Cenar in going to Iloilo from Manila and return, to install the plant, and is strong evidence that it was Cenar and not Montelibano who installed the plant. If Montelibano installed the plant, as defendant claims, there would not have been any necessity for Cenar to make this trip at the expense of the defendant. After Cenar's return to Manila, the plaintiff wrote a letter to the defendant requesting the payment of its account.

This is in direct conflict with the receipted statement, which the defendant offered in evidence, signed by Montelibano. That shows upon its face that it was an itemized statement of the account of plaintiff with the defendant. Again, it will be noted that the receipt which Montelibano signed is not dated, and it does not show when the money was paid: Speaking of Montelibano, the defendant also testified: "and he assured me that he was duly authorized to collect the value of the electrical plant." This shows upon its face that the question of Montelibano's authority to receive the money must have been discussed between them, and that, in making the payment, defendant relied upon Montelibano's own statements and representation, as to his authority, to receipt for the money.

In the final analysis, the plant was sold by the plaintiff to the defendant, and was consigned by the plaintiff to the plaintiff at Iloilo where it was installed by Cenar, acting for, and representing, the plaintiff, whose expense for the trip is included in, and made a part of, the bill which was receipted by Montelibano.

There is no evidence that the plaintiff ever delivered any statements to Montelibano, or that he was authorized to receive or receipt for the money, and defendant's own telegram shows that the plaintiff "did not present bill" to defendant. He now claims that at the very time this telegram was sent, he had the receipt of Montelibano for the money upon the identical statement of account which it is admitted the plaintiff did render to the defendant.

Article 1162 of the Civil Code provides:Payment must be made to the persons in whose favor the obligation is constituted, or to another authorized to receive it in his name.

And article 1727 provides:The principal shall be liable as to matters with respect to which the agent has exceeded his authority only when he ratifies the same expressly or by implication.

Applying the above rules, the testimony is conclusive that the plaintiff never authorized Montelibano to receive or receipt for money in its behalf, and that the defendant had no right to assume by any act or deed of the plaintiff that Montelibano was authorized to receive the money, and that the defendant made the payment at his own risk and on the sole representations of Montelibano that he was authorized to receipt for the money.

CASE NO. 9Bad Faith of an AgentColeongco vs. Claparols

Facts: Eduardo L. Claparols, operated a factory for the manufacture of nails in Talisay, Occidental Negros, under the style of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign sources, specially from Belgium; and Claparols had a regular dollar allocation therefor, granted by the Import Control Commission and the Central Bank. The marketing of the nails was handled by the "ABCD Commercial" of Bacolod, which was owned by a Chinaman named Kho To.1wph1 Losses compelled Claparols in 1953 to look for someone to finance his imports of nail wires. At first, Kho To agreed to do the financing, but on April 25, 1953, the Chinaman introduced his compadre, appellant Vicente Coleongco, to the appellee, recommending said appellant to be the financier in the stead of Kho To. . Claparols agreed, and on April 25 of that year a contract (Exhibit B) was perfected between them whereby Coleongco undertook to finance and put up the funds required for the importation of the nail wire, which Claparols bound himself to convert into nails at his plant. . It was agreed that Coleongco would have the exclusive distribution of the product, and the "absolute care in the marketing of these nails and the promotion of sales all over the Philippines", except the Davao Agency; that Coleongco would "share the control of all the cash" from sales or deposited in banks; that he would have a representative in the management; that all contracts and transactions should be jointly approved by both parties; that proper books would be kept and annual accounts rendered; and that profits and losses would be shared "on a 50-50 basis". The contract was renewed from one year to year until 1958, and Coleongco's share subsequently increased by 5% of the net profit of the factory. Two days after the execution of the basic agreement, Exhibit "B", on April 27, 1953, Claparols executed in favor of Coleongco, at the latter's behest a special power of attorney (Exhibit C) to open and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers covering transactions; to represent appellee and the nail factory; and to accept payments and cash advances from dealers and distributors. Thereafter, Coleongco also became the assistant manager of the factory, and took over its business transactions, while Claparols devoted most of his time to the nail manufacture processes. Around mid-November of 1956- Claparols was disagreeably surprised by service of an alias writ of execution to enforce a judgment obtained against him by the Philippine National Bank, despite the fact that on the preceding September he had submitted an amortization plan to settle the account. Worried and alarmed, Claparols immediately left for Manila to confer with the bank authorities. Upon arrival, he learned to his dismay that the execution had been procured because of derogatory information against appellee that had reached the bank from his associate, appellant Coleongco. On July 6, 1956, Coleongco , without Claparols knowledge, had written to the bank in connection with the verbal offer for the acquisition by me of the whole interest of Mr. Eduardo L. Claparols in the Claparols Steel & Nail Plant and the Claparols Hollow Blocks Factory" (Exhibit 36); and later, on October 29, 1956, Coleongco had written again the bank another letter (Exhibit 35), also behind the back of appellee, wherein Coleongco charged Claparols with taking machines mortgaged to the bank, and addedIn my humble personal opinion I presume that Mr. Eduardo L. Claparols is not serious in meeting his obligations with your bank, otherwise he had not taken these machines and equipments a sign of bad faith since the factory is making a satisfactory profit of my administration In the meantime, Claparols had found in the factory files certain correspondence in February, 1955 between Coleongco and the nail dealer Kho To whereby the former proposed to Kho that the latter should cut his monthly advances to Claparols from P2,000 to P1,000 a month, because I think it is time that we do our plan to take advantage of the difficulties of Eddie with the banks for our benefit. If we can squeeze him more. I am sure that we can extend our contract with him before it ends next year, and perhaps on better terms. If we play well our cards we might yet own his factory (Exhibit 32);and conformably to Coleongco's proposal, Kho To had written to Claparols that "due to present business conditions" the latter could only be allowed to draw P1,000 a month beginning April, 1955 (Exhibit 33). As the parties could not amicably settle their accounts, Coleongco filed a suit against Claparols charging breach of contract, asking for accounting, and praying for P528,762.19 as damages, and attorney's fees, to which Claparols answered, denying the charge, and counter-claiming for the rescission of the agreement with Coleongco for P561,387.99 by way of damages. After trial, the court rendered judgment, as stated at the beginning of this opinion. RULING og CFI of Negros Occidental (in its Civil Case No. 4170) dismissed plaintiff's action for damages, and ordered him to pay defendant Eduardo Claparols the amount of P81,387.27 plus legal interest from the filing of the counterclaim till payment thereof; P50,000 as moral and compensatory damages suffered by defendant; and cost.

Coleongco appeled and contended that the power of attorney (Exhibit "C") was made to protect his interest under the financing agreement (Exhibit "B") and was one coupled with an interest that the appellee Claparols had no legal power to revoke.ISSUE: Whether or not the Claparols has legal basis to revoke the power of attorney. HELD:Yes . The financing agreement itself already contained clauses for the protection of appellant's interest, and did not call for the execution of any power of attorney in favor of Coleongco. But granting appellant's view, it must not be forgotten that a power of attorney can be made irrevocable by contract only in the sense that the principal may not recall it at his pleasure; but coupled with interest or not, the authority certainly can be revoked for a just cause, such as when the attorney-in-fact betrays the interest of the principal, as happened in this case. It is not open to serious doubt that the irrevocability of the power of attorney may not be used to shield the perpetration of acts in bad faith, breach of confidence, or betrayal of trust, by the agent for that would amount to holding that a power coupled with an interest authorizes the agent to commit frauds against the principal.Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that responsibility arising from fraud is demandable in all obligations, andthat any waiver of action for future fraud is void. It is also on this principle that the Civil Code, in its Article 1800, declares that the powers of a partner, appointed as manager, in the articles of co-partnership areirrevocable without just or lawful cause; and an agent with power coupled with an interest can not stand on better ground than such a partner in so far as irrevocability of the power is concerned.That the appellee Coleongco acted in bad faith towards his principal Claparols is, on the record, unquestionable. His letters to the Philippine National Bank (Exhibits 35 and 36) attempting to undermine the credit of the principal and to acquire the factory of the latter, without the principal's knowledge; Coleongco's letter to his cousin, Kho To (Exhibit 32), instructing the latter to reduce to one-half the usual monthly advances to Claparols on account of nail sales in order to squeeze said appellee and compel him to extend the contract entitling Coleongco to share in the profits of the nail factory on better terms, and ultimately "own his factory", a plan carried out by Kho's letter, Exhibit 33, reducing the advances to Claparols; Coleongco's attempt to, have Romulo Agsam pour acid on the machinery; his illegal diversion of the profits of the factory to his own benefit; and the surreptitious disposition of the Yates band resaw machine in favor of his cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and August of 1956, are plain acts of deliberate sabotage by the agent that fully justified the revocation of the power of attorney (Exhibit "C") by Claparols and his demand for an accounting from his agent Coleongco.Appellant attempts to justify his letter to the Philippine National Bank (Exhibits 35 and 36), claiming that Claparols' mal-administration of the business endangered the security for the advances that he had made under the financing contract (Exhibit "B"). But if that were the case, it is to be expected that Coleongco would have first protested to Claparols himself, which he never did. Appellant likewise denies the authorship of the letter to Kho (Exhibit 32) as well as the attempt to induce Agsam to damage the machinery of the factory. Between the testimony of Agsam and Claparols and that of Coleongco, the court below whose to believe the former, and we see no reason to alter the lower court's conclusion on the value of the evidence before it, considering that Kho's letter to Claparols (Exhibit 33) plainly corroborates and dovetails with the plan outlined in Coleongco's own letter (Exhibit 32), signed by him, and that the credibility of Coleongco is affected adversely by his own admission of his having been previously convicted ofestafa(t.s.n., pp. 139, 276), a crime that implies moral turpitude. Even disregarding Coleongco's letter to his son-in-law (Exhibit 82) that so fully reveals Coleongco's lack of business scruples, the clear preponderance of evidence is against appellant.

CASE NO. 10 This is an appeal that seeks to determine whether a trader tax paid by the appellant under oath was legally enforceable. Plaintiff offered a price to Shaw Wallace & Co. of Calcutta for a certain merchandize; The latter accepted the offer; Subsequently, plaintiff entered into a contract of sale with home buyers where the former fixed a price higher than that agreed upon by the former with Calcutta; After the contract was entered into, Calcutta instructed plaintiff to send the goods to, and draw a draft on the home buyers. The draft contains the price agreed between the plaintiff and home buyers, which was drawn against the local bank in accordance with the letter of guarantee executed by the plaintiff and the home buyers. After receiving the draft and the shipping documents, the local bank released the merchandise to the buyer by virtue of a trust receipt. The draft was paid by the buyers to the bank, and the proceeds of the draft were received by Calcutta. Calcutta paid the plaintiff the difference between the price agreed upon between the latter and plaintiff, and that price for which the merchandise was sold to the home buyers. The Court decided the case stating that the appellant in the above transactions should be considered as a trader, in accordance with the provisions of Article 1459 of the Revised Administrative Code, which provides:

. "SEC 1459. Percentage sales tax on merchants. - All merchants HEREIN Specifically Exempted Shall not pay a tax of one per centum on the gross value of the commodities in money, goods, wares, and merchandise sold, bartered, Exchanged, or consigned abroad by them, Such tax to be based on the current selling price or value of the things in question at the time They are disposed of or consigned, Whether Consisting of raw materials or of manufactured or partially manufactured products, and Whether of domestic or foreign origin. The tax upon things consigned abroad Shall be refunded upon satisfactory proof of the return thereof to the Philippine Islands unsold."Merchants, as used here, means a person engaged in the sale, barter, or exchange of personal property of whatever character. Except as specially provided, the term includes manufacturers of articles Who Sell Their Own production, and commission merchants Having establishments of Their own for the keeping and disposal of goods Of which sales or exchanges are effected, but does not include merchandise brokers. The appellant contends that the Court erred in failing to declare that she had bought the goods of Shaw Wallace & Co. of Calcutta, India, and had sold to local buyers on their own, and they acted as merchant transactions above and as such should pay tax. The contention of the appellant is that she acted in such transactions as a trade corridor.

ISSUE: In what capacity the appellant made the sales of the subject merchandise to local buyers. To address this question, we must consider not the legal relationship between the appellant and local buyers but the relationships mediated between the appellant and Shaw Wallace & Co. Of Calcutta, because transactions with that firm began and ended the same. The contention of the appellant is that she acted in such transactions as a broker.

HELD: The broker never hires in name but in that of his client. In this case, Kerr & Company entered into a contract of sale when it offered to buy certain goods at a price that Shaw Wallace & Co. of Calcutta accepted. Never mind that the goods have not passed into the possession of Kerr & Company because the what is necessary is the consent given for the contract of sale to be perfected being a consensual contract. After the contract of sale, Kerr & Company, on its own behalf, agreed to sell to the home buyers. Therefore, Kerr & Company, contracts with local merchants on its own name independently, after the transaction with Shaw Wallace. Evidenced by the fact that the former offers to the home buyers a price different from that it offered to Shaw Wallace. The broker executes the transaction with a third party on behalf of his client, based on a fixed commission determined. In this case, Kerr & Company and Shaw Wallace & Company at no time had set a commission which would effect the sale of goods to local merchants. Kerr & Company made after the sale of goods to local buyers for a higher price than had been agreed with Shaw Wallace & Company, charging the difference to their advantage, a difference that can not be conceptualized as a commission because he amount charged depended solely from Kerr & Company, according to the price she had set for it to goods sold. A commission is a bit of money to be concluded between the broker and the client, which is not true in this case because the price difference inures to the benefit of Kerr solely to the exclusion of Shaw Wallace. The broker does not guarantee payment of the goods it sells to a third party, because it's only a mediator who deals in getting the concerned parties are understood in a business or trade or business navigation issues. In the present case, Kerr & Company guarantee to Shaw Wallace & Company to pay drafts drawn by this company against 108 local buyers. In addition, in the case of breach of Kerr & Company the contract awarded to local buyers, they would have no recourse whatsoever to go against Shaw Wallace & Company to require this company to fulfill the contract. The facts show that Kerr & Company first contract in its own name with Shaw Wallace & Company, and later also contract in its own name with local buyers. All these considerations demonstrate the same and only one proposition: Kerr & Company contract in its own name and for its own account with Shaw Wallace & Company as a trader, and sold as a merchant in his own name; and therefore is subject to tax trader.

CASE NO. 11EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners, vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY, Facts:The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it had been engaged in the manufacture of roofing materials and pipe products. Its manufacturing operations were conducted on eight parcels of land. The properties, located in Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title under the name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and registered under the laws of Belgium. Jack Glanville, an Australian citizen, was the General Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices in Belgium.The management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of the eight parcels of land. Adams engaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers. Glanville later showed the properties to Marquez.Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a letter, Marquez declared that he was authorized to sell the properties for P27,000,000.00 and that the terms of the sale were subject to negotiation. Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings offer and relayed the same to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation." Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter that the Litonjua siblings had accepted the counter-proposal of Delsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days after execution and preparation of all documents of sale, together with the necessary governmental clearances The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company. Marquez and the Litonjua brothers inquired from Glanville when the sale would be implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer, which had given him the impression that "he is prepared to press for a satisfactory conclusion to the sale." He also emphasized to Delsaux that the buyers were concerned because they would incur expenses in bank commitment fees as a consequence of prolonged period of inaction. Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the political situation in the Philippines had improved. Marquez received a telephone call from Glanville, advising that the sale would no longer proceed. Glanville followed it up with a Letter dated May 7, 1987, confirming that he had been instructed by his principal to inform Marquez that "the decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is situated." Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed with the sale of the subject land, to wit: The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the Philippines are (sic) concerned. Considering [the] new political situation since the departure of MR. MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our operations in Manila. In fact, production has started again last week When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for damages they had suffered on account of the aborted sale. EC, however, rejected their demand.The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and ESAC In their answer to the complaint, EC and ESAC alleged that the Board and stockholders of EC never approved any resolution to sell subject properties nor authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.RTC: The trial court rendered judgment in favor of defendants and dismissed the amended complaint. The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not merely unenforceable, and as such, could not have been ratified by the principal. The Litonjuas appealed the decision to the CA, alleging that Marquez acted merely as a broker or go-between and not as agent of the corporation; hence, it was not necessary for him to be empowered as such by any written authority. They further claimed that an agency by estoppel was created when the corporation clothed Marquez with apparent authority to negotiate for the sale of the properties. However, since it was a bilateral contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was obliged to consummate. CA rendered judgment affirming the decision of the RTCPetitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his authority was of a special and limited character in most respects. His only job as a broker was to look for a buyer and to bring together the parties to the transaction. He was not authorized to sell the properties or to make a binding contract to respondent EC; Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who was the President and General Manager of respondent EC, and Delsaux, who was the Managing Director for ESAC Asia, had the necessary authority to sell the subject property or, at least, had been allowed by respondent EC to hold themselves out in the public as having the power to sell the subject properties. Ruling: The petition has no merit. While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority. By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either in words or conduct between them. An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without authority. Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Agency may be oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be void. In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent EC including the improvements thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that he had likewise been authorized by respondent EC to sell the parcels of land.While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere formality but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another, or even all of such shares of stocks, taken alone, will not justify their being treated as one corporation. In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said properties to the petitioners. A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. Persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, the burden of proof is upon them to prove it. In this case, the petitioners failed to discharge their burden; hence, petitioners are not entitled to damages from respondent EC.More so, Marquez had no authority to bind respondent EC to sell the subject properties. A real estate broker is one who negotiates the sale of real properties. His business, generally speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to bind the principal by signing a contract of sale. Indeed, an authority to find a purchaser of real property does not include an authority to sell. Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence of a principal-agency relationship between it and Glanville or Delsaux. For an agency by estoppel to exist, the following must be established: (1) the principal manifested a representation of the agents authority or knowlingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon such representation, such third person has changed his position to his detriment. An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance. Such proof is lacking in this caseNeither may respondent EC be deemed to have ratified the transactions between the petitioners and respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the various communications inter se were never submitted to the Board of Directors of respondent EC for ratification.

CASE NO. 12LILLIAN N. MERCADO, CYNTHIA M. FEKARIS, and JULIAN MERCADO, JR., represented by their Attorney-In-Fact, ALFREDO M. PEREZ, Petitioners, vs.ALLIED BANKING CORPORATION, Respondent.G.R. No. 171460 July 24, 2007

Facts:Perla executed a Special Power of Attorney (SPA) in favor of her husband, Julian D. Mercado (Julian) over several pieces of real property registered under her name, authorizing the latter to perform the following acts:1. To act in my behalf, to sell, alienate, mortgage, lease and deal otherwise over the different parcels of land described hereinafter x xx2. To sign for and in my behalf any act of strict dominion or ownership any sale, disposition, mortgage, lease or any other transactions including quit-claims, waiver and relinquishment of rights x xx3. To exercise any or all acts of strict dominion or ownership over the above-mentioned properties, rights and interest therein.

On the strength of the aforesaid SPA, Julian obtained a loan from the respondent. Still using the subject property as security, Julian obtained an additional loan from the respondent.It appears, however, that there was no property identified in the SPA and registered with the Registry of Deeds. What was identified in the SPA instead was the property different from the one used as security for loan.

Julian defaulted on the payment of his loan obligations. Thus, respondent initiated extra-judicial foreclosure proceedings over the subject property which was subsequently sold at public auction wherein the respondent was declared as the highest bidder.Petitioners initiated an action for the annulment of REM constituted over the subject property on the ground that the same was not covered by the SPA and that the said SPA, at the time the loan obligations were contracted, no longer had force and effect since it was previously revoked by Perla. In the absence of authority to do so, the REM constituted by Julian over the subject property was null and void; thus, petitioners likewise prayed that the subsequent extra-judicial foreclosure proceedings and the auction sale of the subject property be also nullified.

Issues: (1) Whether or not there was a valid mortgage constituted over subject property.(2) Whether or not there was a valid revocation of SPA.(3) Construction of powers of attorney.

Rulings:(1) In the case at bar, it was Julian who obtained the loan obligations from respondent which he secured with the mortgage of the subject property. The property mortgaged was owned by his wife, Perla, considered a third party to the loan obligations between Julian and respondent. It was, thus, a situation recognized by the last paragraph of Article 2085 of the Civil Code that third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property.There is no question therefore that Julian was vested with the power to mortgage the pieces of property identified in the SPA, however, the subject property was not among those enumerated therein.Julian was not conferred by Perla with the authority to mortgage the subject property under the terms of the SPA, the real estate mortgages Julian executed over the said property are therefore unenforceable.

(2) The said SPA was revoked by virtue of a public instrument executed by Perla. To address respondents assertion that the said revocation was unenforceable against it as a third party to the SPA and as one who relied on the same in good faith, the rule is that an agency is extinguished, among others, by its revocation (Article 1999, New Civil Code of the Philippines). The principal may revoke the agency at will, and compel the agent to return the document evidencing the agency. Such revocation may be express or implied (Article 1920, supra).

(3) Rule of strict construction- where the terms of the contract are clear as to leave no room for interpretation, resort to circumstantial evidence to ascertain the true intent of the parties, is not countenanced. The law is that if the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. The clear terms of the contract should never be the subject matter of interpretation. Equally relevant is the rule that a power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified therein, and the agent may neither go beyond nor deviate from the power of attorney.Where powers and duties are specified and defined in an instrument, all such powers and duties are limited and are confined to those which are specified and defined, and all other powers and duties are excluded.

Qualification of the rule- this is but in accord with the disinclination of courts to enlarge the authority granted beyond the powers expressly given and those which incidentally flow or derive therefrom as being usual and reasonably necessary and proper for the performance of such express powers.

CASE NO. 13

NELITA M. BACALING, represented by her attorney-in-fact JOSE JUAN TONG, and JOSE JUAN TONG, in his personal capacity, petitioners, vs. FELOMINO MUYA, CRISPIN AMOR, WILFREDO JEREZA, RODOLFO LAZARTE and NEMESIO TONOCANTE, respondents .Petition for Review of the of the Court of Appeals and of its Resolutions reversing the Decisions and of the Office of the President.

FACTS:Petitioner Nelita M. Bacaling and her spouse Ramon Bacaling were the owners of three (3) parcels of land in Iloilo City. In 1955 the landholding was subdivided into one hundred ten (110) sub-lots covered and was processed and approved as "residential" or "subdivision" by the National Urban Planning Commission (NUPC). 7 On May 24, 1955 the Bureau of Lands approved the corresponding subdivision plan for purposes of developing the said property into a low-cost residential community which the spouses referred to as the Bacaling-Moreno Subdivision. In 1957, a real estate was granted to the spouses Bacaling by the Government Service Insurance System (GSIS) for the development of the subdivision secured by a real estate mortgage over their parcels of land including the 110 sub-lots. The Bacalings failed to pay and the mortgage was foreclosed by the GSIS. Nelita Bacaling in 1989 was able to restore to herself ownership of the sub-lots. According to the ndings of the Oce of the President, in 1972 and thereafter, respondents Felomino Muya, Crispin Amor, Wilfredo Jereza, Rodolfo Lazarte and Nemesio Tonocante clandestinely entered and occupied the entire one hundred ten (110) sub-lots and sowed the lots as if the same were their own, and altered the roads, drainage, boundaries and monuments established thereon. Respondents, on the other hand, claim that in 1964 they were legally instituted by Bacaling's administrator/overseer as tenant-tillers of the subject parcels of land on sharing basis. In 1974, their relationship with the landowner was changed to one of leasehold. They religiously delivered their rental payments to Bacaling as agricultural lessor. In 1980, they secured certicates of land transfer in their names for the 110 sub-lots. They have made various payments to the Land Bank of the Philippines as amortizing owners-cultivators of their respective tillage.In 1977, the City Council of Iloilo enacted Zoning Ordinance No. 212 declaring the one hundred ten (110) sub-lots as "residential" and "nonagricultural,"which was consistent with the conversion eected in 1955 by the NUPC and the Bureau of Lands. In 1978, Nelita Bacaling was able to register the subject property as the Bacaling-Moreno Subdivision with the National Housing Authority and to obtain therefrom a license to sell the subject 110 sub-lots comprising the said subdivision to consummate the original and abiding design to develop a low-cost residential community. In August 21, 1990, petitioner Jose Juan Tong, together with Vicente Juan and Victoria Siady, bought from Nelita Bacaling the subject 110 sub- lots. The said sale was eected after Bacaling has repurchased the subject property from the GSIS. To secure performance of the contract of absolute sale and facilitate the transfer of title of the lots to Jose Juan Tong, Bacaling appointed him in 1992 as her attorney-in-fact, under an irrevocable special power of attorney. Following the sale, petitioner Tong (together with Bacaling) led an action against respondents for allegedly entering and occupying the lots. Respondents in their answer alleged that they were instituted as tenant-tillers before the property was subdivided into 110 sub-lots and that they have in their possession certicates of land transfer. The DAR dismissed the petition on the ground that there had been no legitimate conversion of the classication of the 110 sub-lots from agricultural to residential prior to October 21, 1972 when Operation Land Transfer under P.D. No. 72 took eect. Bacaling and Tong appealed to the DAR Central Oce but their appeal was similarly rejected. Bacaling and Tong appealed to the Oce of the President (OP) which reversed them in toto. The order of the Regional Director, DAR Region VI, as well as the orders of the DAR Secretary were REVERSED AND SET ASIDE and subject landholdings declared exempt from coverage of the CARL. The Certicates of Land Transfer (CLTs) issued to the appellees are hereby cancelled. Respondents elevated the OP Decision to th