Filipinas Life Assurance Co. vs. Pedroso

The acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly. Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.

FACTS: Teresita Pedroso is a policyholder of a 20-year endowment life insurance issued by Filipinas Life

Assurance Co. Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed, she initially invested and issued a post-dated check for P10,000. In return, Valle issued Pedroso his personal check for P800 for the 8% prepaid interest and a Filipinas Life Agent receipt.

Pedroso called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. She was even told she could push through with the check she issued. From the records, the check, with the endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company, Escolta Branch.

Relying on the representations made by Filipinas Life’s duly authorized representatives Apetrior and Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the maturity of her initial investment. A month after, her investment of P10,000 was returned to her after she made a written request for its refund. To collect the amount, Pedroso personally went to the Escolta branch where Alcantara gave her the P10,000 in cash. After a second investment, she made 7 to 8 more investments in varying amounts, totaling P37,000 but at a lower rate of 5% prepaid interest a month. Upon maturity of Pedroso’s subsequent investments, Valle would take back from Pedroso the corresponding agent’s receipt he issued to the latter.

Pedroso told respondent Jennifer Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio made a total investment of P49,550 but at only 5% prepaid interest. However, when Pedroso tried to withdraw her investment, Valle did not want to return some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money.

ISSUE: WON Filipinas Life is jointly and severally liable with Apetrior and Alcantara on the claim of Pedroso and Palacio or WON its agent Renato Valle is solely liable to Pedroso and Palacio

HELD: Pedroso and Palacio had invested P47,000 and P49,550, respectively. These were received by Valle and

remitted to Filipinas Life, using Filipinas Life’s official receipts. Valle’s authority to solicit and receive investments was also established by the parties. When Pedroso and Palacio sought confirmation, Alcantara, holding a supervisory position, and Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon inquiry and must discover at his own peril the agent’s authority, in this case, Pedroso and Palacio did exercise due diligence in removing all doubts and in confirming the validity of the representations made by Valle.

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter. The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to third persons. When the agent exceeds his authority, the agent becomes personally liable for the damage. But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers. The acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies them, expressly or impliedly.

Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority.

Even if Valle’s representations were beyond his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valle’s acts. Filipinas Life benefited from the investments deposited by Valle in the account of Filipinas Life.

Manila Memorial Park Inc. vs Linsangan (November 22, 2004)

Facts:

Florencia Baluyot is authorized by the Manila Memorial Park Inc. (MMPI) to sell burial lots to those interested in purchasing. Herein respondent Atty. Linsangan was approached by Florencia with an offer to

sell to the former a lot that she alleges to have already been previously sold but the owner thereof has cancelled and thus, Atty. Linsangan shall only continue the payment thereof amounting to P95,000,

Atty. Linsangan agreed and paid an initial P35, 000. Thereafter, Florencia advised Atty. Linsangan that there were changes in the contract and that she needed him to sign a new contract stipulating the total price of P132, 000 but Florencia assured Atty. Linsangan that he would only pay the agreed P95, 000. In the new contract, Atty. Linsangan acceded that he has read and understood all the stipulations therein. The payment was made in installments for two years which Atty. Linsangan completed, however, after two years, Florencia informed Linsangan that their contract was cancelled and offered a different lot, Atty. Linsangan refused the offer and filed a suit for breach of contract against MMPI and Florencia. MMPI avers that Florencia acted beyond the scope of her authority as MMPI’s agent since the latter did not allow her to renegotiate existing contracts but only to sell new contracts. Atty. Linsangan on the other hand argues that MMPI should be liable for the acts of its agents.

Issue: Whether or not MMPI is liable for the acts of Florencia

Held: NO. The SC ruled that Florencia acted outside the scope of her authority as agent of MMPI and Atty. Linsangan failed to ascertain the authority given to Florencia especially that their agreement on the second contract had a different stipulation than what he and Florencia agreed upon. Moreover, Atty. Linsangan’s signature over the new contract signifies his agreement thereto and serves as a form of ratification for the acts of Florencia which were outside the authority given her. As such, the SC ruled that the principal cannot be held liable for actions of agents outside the scope of their authority when such acts are ratified by the principal himself. On the part of MMPI, they did not ratify Florencia’s acts, nor did they know of such actions.

THE BOARD OF LIQUIDATORS1 representing THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES,plaintiff-appellant, vs.HEIRS OF MAXIMO M. KALAW,2 JUAN BOCAR, ESTATE OF THE DECEASED CASIMIRO GARCIA,3 and LEONOR MOLL, defendants-appellees.

SANCHEZ, J.:

Facts:

The National Coconut Corporation (NACOCO, for short) was chartered as a non-profit governmental organization on May 7, 1940 by Commonwealth Act 518 avowedly for the protection, preservation and development of the coconut industry in the Philippines as well as to buy, sell, barter, export, and in any other manner deal in, coconut, copra, and dessicated coconut, as well as their by-products, and to act as agent, broker or commission merchant of the producers, dealers or

merchants" thereof.

General manager and board chairman was Maximo M. Kalaw; defendants Juan Bocar and Casimiro Garcia were members of the Board; defendant Leonor Moll became director only on December 22, 1947.

NACOCO embarked on copra trading activities for the delivery of copra.

Four devastating typhoons visited the Philippines: and thus Coconut trees throughout the country suffered extensive damage. Copra production decreased.

When it became clear that the contracts would be unprofitable, Kalaw submitted them to the board for approval. It was not until December 22, 1947 when the membership was completed. Defendant Moll took her oath on that date. A meeting was then held. Kalaw made a full disclosure of the situation, apprised the board of the impending heavy losses.

They unanimously approved the contracts.

As was to be expected, NACOCO but partially performed the contracts. The buyers threatened damage suits. Some of the claims were settled.

But one buyer, Louis Dreyfus & Go. (Overseas) Ltd., did in fact sue before the Court of First Instance of Manila, upon claims as follows: For the undelivered copra under the July 30 contract (Civil Case 4459); P287,028.00; for the balance on the August 14 contract (Civil Case 4398), P75,098.63; for that per the September 12 contract reduced to judgment (Civil Case 4322, appealed to this Court in L-2829), P447,908.40.

These cases culminated in an out-of-court amicable settlement when the Kalaw management was already out. The corporation thereunder paid Dreyfus P567,024.52 representing 70% of the total claims. With particular reference to the Dreyfus claims, NACOCO put up the defenses that: (1) the contracts were void because Louis Dreyfus & Co. (Overseas) Ltd. did not have license to do business here; and (2) failure to deliver was due to force majeure, the typhoons.

All the settlements sum up to P1,343,274.52. In this suit started in February, 1949, NACOCO seeks to recover the above sum of P1,343,274.52 from general manager and board chairman Maximo M. Kalaw, and directors Juan Bocar, Casimiro Garcia and Leonor Moll. It charges Kalaw with negligence under Article 1902 of the old Civil Code (now Article 2176, new Civil Code); and defendant board members, including Kalaw, with bad faith and/or breach of trust for having approved the contracts. The fifth amended complaint, on which this case was tried, was filed on July 2, 1959. Defendants resisted the action upon defenses hereinafter in this opinion to be discussed.

The lower court came out with a judgment dismissing the complaint without costs.

Plaintiff appealed direct to this Court.

Issue/Held:

1. First of the threshold questions is that advanced by defendants that plaintiff Board of Liquidators has lost its legal personality to continue with this suit.

By Executive Order 372, the government, the sole stockholder, abolished NACOCO, and placed its assets in the hands of the Board of Liquidators. The Board of Liquidators thus became the   trustee   on behalf of the government. It was an express trust. The legal interest became vested in the trustee — the Board of Liquidators. The beneficial interest remained with the sole stockholder — the government. At no time had the government withdrawn the property, or the authority to continue the present suit, from the Board of Liquidators. If for this reason alone, we cannot stay the hand of the Board of Liquidators from prosecuting this case to its final conclusion. 16 The provisions of Section 78 of the Corporation Law — the third method of winding up corporate affairs — find application. We, accordingly, rule that the Board of Liquidators has personality to proceed as: party-plaintiff in this case.

2. Defendants' second poser is that the action is unenforceable against the heirs of Kalaw.

Plaintiffs argue with considerable cogency that contrasting the correlated provisions of the Rules of Court, those concerning claims that are barred if not filed in the estate settlement proceedings (Rule 87, sec. 5) and those defining actions that survive and may be prosecuted against the executor or administrator (Rule 88, sec. 1), it is apparent that actions for damages caused by tortious conduct of a defendant (as in the case at bar) survive the death of the latter. Under Rule 87, section 5, the actions that are abated by death are: (1) claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) "all claims for money against the decedent,   arising from contract express or implied . " None of these includes that of the plaintiffs-appellants; for it is not enough that the claim against the deceased party be for money, but it must arise from "contract express or implied", Action against the Kalaw heirs and, for the matter, against the Estate of Casimiro Garcia survives.

3. Plaintiff levelled a major attack on the lower court's holding that Kalaw justifiedly entered into the controverted contracts without the prior approval of the corporation's directorate. Plaintiff leans heavily on NACOCO's corporate by-laws. Article IV (b), Chapter III thereof, recites, as amongst the duties of the general manager, the obligation: "(b) To perform or execute on behalf of the Corporation upon prior approval of the Board, all contracts necessary and essential to the proper accomplishment for which the Corporation was organized."

Not of de minimis importance in a proper approach to the problem at hand, is the nature of a general manager's position in the corporate structure. A rule that has gained acceptance through the years is

that a corporate officer "intrusted with the general management and control of its business, has implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. 21As such officer, "he may, without any special authority from the Board of Directors perform all acts of an ordinary nature, which by usage or necessity are incident to his office, and may bind the corporation by contracts in matters arising in the usual course of business. 22

These previous contract it should be stressed, were signed by Kalaw   without prior authority   from the board. Said contracts were known all along to the board members. Nothing was said by them. The aforesaid contracts stand to prove one thing: Obviously, NACOCO board met the difficulties attendant to forward sales by leaving the adoption of means to end, to the sound discretion of NACOCO's general manager Maximo M. Kalaw. Liberally spread on the record are instances of contracts executed by NACOCO's general manager and submitted to the board after their consummation, not before. These agreements were not Kalaw's alone.

Settled jurisprudence has it that where similar acts have been approved by the directors as a matter

of general practice, custom, and policy, the general manager may bind the company without formal authorization of the board of directors.   26   In varying language, existence of such authority is established, by proof of   the course of business , the   usage and practices   of the company and by the   knowledge   which the board of directors has, or must be presumed   to have, of acts and doings of its subordinates in and about the affairs of the corporation.   27   So also,

x x x authority to act for and bind a corporation may be presumed from acts of recognition in other instances where the power was in fact exercised.   28

x x x Thus, when, in the usual course of business of a corporation, an officer has been allowed in his official capacity to manage its affairs, his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business. 29

In the case at bar, the practice of the corporation has been to allow its general manager to negotiate and execute contracts in its copra trading activities for and in NACOCO's behalf without prior board approval. If the by-laws were to be literally followed, the board should give its stamp of prior approval on all corporate contracts. But that board itself, by its acts and through acquiescence, practically laid aside the by-law requirement of prior approval. Under the given circumstances, the Kalaw contracts are valid corporate acts.

4. But if more were required, we need but turn to the board's ratification of the contracts in dispute on January 30, 1948, though it is our (and the lower court's) belief that ratification here is nothing more than a mere formality.

Indeed, our law pronounces that "[r]atification cleanses the contract from all its defects from the moment it was constituted." 32 By corporate confirmation, the contracts executed by Kalaw are thus purged of whatever vice or defect they may have. 33

In sum, a case is here presented whereunder, even in the face of an express by-law requirement of prior approval, the law on corporations is not to be held so rigid and inflexible as to fail to recognize equitable considerations. And, the conclusion inevitably is that the embattled contracts remain valid.

5. It would be difficult, even with hostile eyes, to read the record in terms of "bad faith and/or breach of trust" in the board's ratification of the contracts without prior approval of the board. For, in reality, all that we have on the government's side of the scale is that the board knew that the contracts so confirmed would cause heavy losses.

As we have earlier expressed, Kalaw had authority to execute the contracts without need of prior approval. Everybody, including Kalaw himself, thought so, and for a long time. Doubts were first thrown on the way only when the contracts turned out to be unprofitable for NACOCO.

Rightfully had it been said that bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty thru some motive or interest or ill will; it partakes of the nature of fraud. 34   Applying this precept to the given facts

herein, we find that there was no "dishonest purpose," or "some moral obliquity," or "conscious doing of wrong," or "breach of a known duty," or "Some motive or interest or ill will" that "partakes of the nature of fraud."

6. To what then may we trace the damage suffered by NACOCO.

The typhoons were known to plaintiff. In fact, NACOCO resisted the suits filed by Louis Dreyfus & Co. by pleading in its answers force majeure as an affirmative defense and there vehemently asserted that "as a result of the said typhoons, extensive damage was caused to the coconut trees in the copra producing regions of the Philippines and according to estimates of competent authorities, it will take about one year until the coconut producing regions will be able to produce their normal coconut yield and it will take some time until the price of copra will reach normal levels;" and that "it had never been the intention of the contracting parties in entering into the contract in question that, in the event of a sharp rise in the price of copra in the Philippine market produce by force majeureor by caused beyond defendant's control, the defendant should buy the copra contracted for at exorbitant prices far beyond the buying price of the plaintiff under the contract." 40

7. On top of all these, is that no assertion is made and no proof is presented which would link Kalaw's acts — ratified by the board — to a matrix for defraudation of the government. Kalaw is clear of the stigma of bad faith. Plaintiff's corporate counsel 44 concedes that Kalaw all along thought that he had authority to enter into the contracts, that he did so in the best interests of the corporation; that he entered into the contracts in pursuance of an overall policy to stabilize prices, to free the producers from the clutches of the middlemen. The prices for which NACOCO contracted in the disputed agreements, were at a level calculated to produce profits and higher than those prevailing in the local market. Plaintiff's witness, Barretto, categorically stated that "it would be foolish to think that one would sign (a) contract when you are going to lose money" and that no contract was executed "at a price unsafe for the Nacoco." 45 Really, on the basis of prices then prevailing, NACOCO envisioned a profit of around P752,440.00. 46

Kalaw's good faith, and that of the other directors, clinch the case for defendants. 49

Viewed in the light of the entire record, the judgment under review must be, as it is hereby, affirmed.

Without costs. So ordered.

G.R. No. 137686           February 8, 2000

RURAL BANK OF MILAOR (CAMARINES SUR), petitioner, vs.FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON OCFEMIA, respondents.

Facts:

1. Several parcels of land were mortgaged by the respondents during the lifetime of the respondent’s grandparents to the Rural bank of Milaor as shown by the Deed of Real Estate Mortgage and the Promissory Note.

2. Spouses Felicisimo Ocfemia and Juanita Ocfemia, one of the respondents, were not able to redeem the mortgaged properties consisting of seven parcels of land and so the mortgage was foreclosed and thereafter ownership was transferred to the petitioner bank.

3. Out of the seven parcels of land that were foreclosed, five of them are in the possession of the respondents because these five parcels of land were sold by the petitioner bank to the respondents evidenced by a Deed of Sale.

4. However, the five parcels of land cannot be transferred in the name of the parents of Merife Nino, one of the respondents, because there is a need to have the document of sale registered. The Register of deeds, however, said that the document of sale cannot be registered without the board resolution of the petitioner bank confirming both the Deed of sale and the authority of the bank manager, Fe S. Tena, to enter such transaction.

5. The petitioner bank refused her request for a board resolution and made many alibis.6. Respondents initiated the present proceedings to transfer to their names the subject five parcel of

land and subsequently mortgage said lots and to use the loan proceeds for the medical expenses of their ailing mother.

ISSUE: May the Board of Directors of a rural banking corporation be compelled to confirm a deed of absolute sale of real property owned by the corporation which deed of sale was executed by the bank manager without prior authority of the board of directors of the rural banking corporation?

HELD: YES. The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena to enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the properties in dispute and paid the real estate taxes. If the bank management believed that it had title to the property, it should have taken measured to prevent the infringement and invasion of title thereto and possession thereof. Likewise, Tena had previously transacted business on behalf of the bank, and the latter had acknowledged her authority. A bank is liable to innocent third persons where representation is made in the course of its normal business by an agent like Manager Tena even though such agent is abusing her authority. Clearly, persons dealing with her could not be blamed for believing that she was authorized to transact business for and on behalf of the bank.

The bank is estopped from questioning the authority of the bank to enter into contract of sale. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority, it holds the agent out to the public as possessing the power to do those acts; thus, the corporation will, as against anyone who has in good faith dealt with it through such agent, be estopped from denying the agent’s authority.

G.R. No. 88539 October 26, 1993

KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner, vs.THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.

FACTS:

1. Petitioner Kue Cuison (Kue), is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap, with places of business at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates (Valiant), is a partnership duly organized and existing under the laws of the Philippines with business address at Kalookan City.

2. From December 4, 1979 to February 15, 1980, Valiant delivered various kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac (Tiac) who was then employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued nine (9) postdated checks to Valiant as payment for the paper products. Unfortunately, said checks were later dishonored by the drawee bank.

3. Thereafter, private respondent made several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with private respondent and Lilian Tan. Petitioner denied any involvement in the transaction entered into by Tiu Huy Tiac and refused to pay private respondent the amount corresponding to the selling price of the subject merchandise.

4. Left with no recourse, private respondent filed an action against petitioner for the collection of P297,487.30 representing the price of the merchandise. After due hearing, the trial court dismissed the complaint against petitioner for lack of merit. On appeal, however, the decision of the trial court was modified, but was in effect reversed by the Court of Appeals

ISSUE: WON Tiac possessed the required authority from petitioner sufficient to hold the petitioner liable for the dispute transaction.

HELD: Yes, under the doctrine of apparent authority.

1. It is a well-established rule that one who clothes another with apparent authority as his agent and holds him out to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties dealing with such person in good faith and in the honest belief that he is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553 (1907]; Philippine National Bank. v Court of Appeals, 94 SCRA 357 [1979]). From the facts and the evidence on record, there is no doubt that this rule obtains. The petition must therefore fail.

2. From the records, Cue by his own acts and admission held out Tiac to the public as the manager of his Binondo store, as shown in the following:

a. Cue expressly introduced Tiac to Bernardino Villanueva, manager of Valiant, as his branch manager, as testified by Villanueva.

b. Lilian Tan also testified that she knew Tiac to be the manager of Cue’s store.

c. Tiac is known in the community as “kinakapatid” of Cue

d. Cue admitted in open court that they were like brothers and that Tiac was the manager of his Binondo store.

Thus, there was no reason for anybody especially those transacting business with Cue to even doubt the authority of Tiac as his manager.

3. When Tiac left the store, Cue even informed the customers of the business that Tiac is no longer connected with the business. Such undertaking spoke unmistakenly of Tiac’s valuable position as manager.

4. Cue’s unexplained delay in disowning the transactions entered into by Tiac, despite several attempts by Valiant to collect the amount from him, proved all the more that Cue was aware of the questioned transactions.

5. "Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the latter to act as though he had full powers.

6. Although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over the proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss (Francisco vs. Government Service Insurance System, 7 SCRA 577 [1963]).

Dispositive: WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against petitioner.

G.R. No. L-39037             October 30, 1933

THE PHILIPPINE NATIONAL BANK, plaintiff-appellee, vs.PAZ AGUDELO Y GONZAGA, ET AL., defendants. PAZ AGUDELO Y GONZAGA, appellant.

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

FACTS: VILLA-REAL:

On November 9, 1920, the defendant-appellant Paz Agudelo y Gonzaga executed in favor of her nephew, Mauro A. Garrucho, the document conferring upon him a special power of attorney sufficiently broad in scope to enable him to sell, alienate and mortgage in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bacolod,

Occidental Negros, consisting in lots Nos. 61 and 207 of the cadastral survey of Bacolod, Occidental Negros, together with the improvement thereon.

On December 22, 1920, Amparo A. Garrucho executed the document whereby she conferred upon her brother Mauro A Garrucho a special power of attorney sufficiently broad in scope to enable him to sell, alienate, mortgage or otherwise encumber, in the manner and form he might deem convenient, all her real estate situated in the municipalities of Murcia and Bago, Occidental Negros, known as Lot No. 878.

Nothing in the aforesaid powers of attorney expressly authorized Mauro A. Garrucho to contract any loan nor to constitute a mortgage on the properties belonging to the respective principals, to secure his obligations.

Mauro Garrucho constituted a mortgage of P6,000 on Lot No. 878 and P16,000 on Lots Nos. 61 and 207 in favor of Philippine National Bank (PNB). They were executed in his own name and signed by him in his personal capacity, authorizing PNB to take possession, by means of force of the mortgaged properties, if necessary, in case he failed to comply with any of the conditions stipulated in the agreement.

Since he was not able to pay the loans, Mauro executed a promissory note for P21,000 as a novation of the former promissory notes for P6,000 and P16,000 respectively.

Amparo Garrucho sold her Lot No. 878 to Paz Agudelo. Hence, a new TCT was issued in the name of Paz, with the lien of the mortgage with PNB annotated therein.

ISSUE:

Is Paz Agudelo liable for the payment of the loans obtained by Mauro Garrucho from PNB for the security of which he constituted a mortgage on the aforesaid real estate belonging to Agudelo?

HELD: No. She is not liable.

1.  Aside from the phrases "attorney in fact of his sister, Amparo A. Garrucho, as evidenced by the power of attorney attached hereto" and "attorney in fact of Paz Agudelo y Gonzaga" written after the name of Mauro A. Garrucho in the mortgage deeds, there is nothing in the said mortgage deeds to show that Mauro A. Garrucho is attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, and that he obtained the loans mentioned in the aforesaid mortgage deeds and constituted said mortgages as security for the payment of said loans, for the account and at the request of said Amparo A. Garrucho and Paz Agudelo y Gonzaga. The above-quoted phrases which simply described his legal personality, did not mean that Mauro A. Garrucho obtained the said loans and constituted the mortgages in question for the account, and at the request, of his principals. From the titles as well as from the signatures therein, Mauro A. Garrucho, appears to have acted in his personal capacity. In the aforesaid mortgage deeds, Mauro A. Garrucho, in his capacity as mortgage debtor, appointed the mortgage creditor Philippine National Bank as his attorney in fact so that it might take actual and full possession of the mortgaged properties by means of force in case of violation of any of the conditions stipulated in the respective mortgage contracts. If Mauro A. Garrucho acted in his capacity as mere attorney in fact of Amparo A. Garrucho and of Paz Agudelo y Gonzaga, he could not delegate his power, in view of the legal principle of "delegata potestas delegare non potest"   (a delegated power cannot be delegated), inasmuch as there is nothing in the records to show that he has been expressly authorized to do so.

2.   He executed the promissory notes evidencing the aforesaid loans, under his own signature, without authority from his principal and, therefore, were not binding upon the latter . Neither is there anything to show that he executed the promissory notes in question for the account, and at the request, of his respective principals .

 3. It is noted that in the novated mortgage deeds, there is absolutely no mention of Mauro A. Garrucho being attorney in fact of anybody, and which shows that he obtained such credit for himself in his personal capacity and secured the payment thereof by mortgage constituted by him in his personal capacity, although on properties belonging to his principal Paz Agudelo y Gonzaga.

 4. The promissory notes executed by Mauro A. Garrucho in favor of the Philippine National Bank, evidencing loans of P6,000 and P16,000 have been novated by the promissory notes for P21,000 executed by Mauro A.

Garrucho, not only without express authority from his principal, Paz Agudelo y Gonzaga but also under his own signature.

5.   The records do not show that the loan obtained by Mauro A. Garrucho, evidenced by the promissory note, was for his principal Paz Agudelo y Gonzaga. The special power of attorney, does not authorize Mauro A. Garrucho to constitute a mortgage on the real estate of his principal to secure his personal obligations. Therefore, in doing so, he exceeded the scope of his authority and his principal is not liable for his acts.

6. It is further claimed that inasmuch as the properties mortgaged by Mauro A. Garrucho belong to Paz Agudelo y Gonzaga, the latter is responsible for the acts of the former although he acted in his own name, in accordance with the exception contained in article 1717 of the Civil Code. It would be an exception with the properties of his own name in connection with the properties of his principal, does so within the scope of his authority. It is noted that Mauro A. Garrucho was not authorized to execute promissory notes even in the name of his principal Paz Agudelo y Gonzaga, nor to constitute a mortgage on her real properties to secure such promissory notes. The plaintiff Philippine National Bank should know this inasmuch as it is in duty bound to ascertain the extent of the agent's authority before dealing with him. Therefore, Mauro A. Garrucho and not Paz Agudelo y Gonzaga is personally liable for the amount of the promissory note .

Dispositive:   Wherefore, it is hereby held that the liability constructed by the aforesaid defendant-appellant Paz Agudelo y Gonzaga is merely subsidiary to that of Mauro A. Garrucho, limited lot No. 878 of the cadastral survey of Murcia, Occidental Negros, described in Torrens title No. 2415. However, inasmuch as the principal obligator, Mauro A. Garrucho, has been absolved from the complaint and the plaintiff- appellee has not appealed from the judgment absolving him, the law does not afford any remedy whereby Paz Agudelo y Gonzaga may be required to comply with the said subsidiary obligation in view of the legal maxim that the accessory follows the principal. Wherefore, the defendant herein should also be absolved from the complaint which is hereby dismissed, with the costs against the appellee. So ordered.

[G.R. No. 19001. November 11, 1922.]

HARRY E. KEELER ELECTRIC CO., INC., plaintiff-appellant, vs. DOMINGO RODRIGUEZ, defendant-appellee.

Doctrine: 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.

Facts:

1. 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

2. Defendant is a resident of Talisay, Occidental Negros, and A. C. Montelibano was a resident of Iloilo.3. 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.4. He 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. 5. Among other persons, 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.

6. 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.

7. Defendant admits the corporation of the plaintiff, and denies all other material allegations of the complaint, and, as an affirmative defense, alleges "that on or about the 18th of August, 1920, the plaintiff sold and delivered to the defendant a certain electric plant and that the defendant paid the plaintiff the value of said electric plant, to wit: P2,513.55."

8. The lower court rendered judgment for the defendant, from which the plaintiff appeals, claiming that the court erred in holding that the payment to A. C. Montelibano would discharge the debt of

defendant, and in holding that the bill was given to Montelibano for collection purposes, and that the plaintiff had held out Montelibano to the defendant as an agent authorized to collect, and in rendering judgment for the defendant, and in not rendering judgment for the plaintiff.

 Issue: WON the payment to Montelibano discharges the debt of defendant

Ruling: NO.

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.

Electric plant accessories and installation are paid to Montelibano about three weeks Keeler Company did not present bill. (Content of the telegram)

          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.

          In the case of Ormachea Tin-Conco vs. Trillana (13 Phil., 194), this court held:

          The repayment of a debt must be made to the person in whose favor the obligation is constituted, or to another expressly authorized to receive the payment in his name.

In approaching the consideration of the inquiry whether an assumed authority exist in a given case, there are certain fundamental principles which must not be overlooked. Among these are, as has been seen:

(1) that the law indulges in no bare presumptions that an agency exists: it must be proved or presumed from facts;

(2) that the agent cannot establish his own authority, either by his representations or by assuming to exercise it;

(3) that an authority cannot be established by mere rumor or general reputation;

(4)that even a general authority is not an unlimited one; and

(5) that every authority must find its ultimate source in some act or omission of the principal. An assumption of authority to act as agent for another of itself challenges inquiry.

Like a railroad crossing, it should be in itself a sign of danger and suggest the duty to "stop, look, and listen." It is therefore declared to be a fundamental rule, never to be lost sight of and not easily to be overestimated, that persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

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.

***Evid issue:

The receipt offered in evidence is headed:

STATEMENT           Folio No. 2494

Mr. DOMINGO RODRIGUEZ, Iloilo, Iloilo, P.I.

In account with HARRY E. KEELER ELECTRIC COMPANY, INC. 221 Calle Echaque, Quiapo, Manila, P.I. MANILA, P.I., August 18, 1920.

          The answer alleges and the receipt shows upon its face that the plaintiff sold the plant to the defendant, and that he bought it from the plaintiff. The receipt is signed as follows:

Received payment HARRY E. KEELER ELECTRIC CO. Inc.,

Recibi(Sgd.) A. C. MONTELIBANO.

There is nothing on the face of this receipt to show that Montelibano was the agent of, or that he was acting for, the plaintiff. It is his own 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.

Reversed. Defendant to pay plaintiff.

GR No. 94566, July 3, 1992BA Finance Corp., petitioner vs. CA, Traders Royal Bank

FACTS: On December 17, 1980, Renato Gaytano, doing business under the name Gebbs International, applied for and was granted a loan with respondent Traders Royal Bank in the amount of Php 60, 000.00

As security for the payment of said loan the Gaytano Spouses executed a deed of suretyship whereby the agreed to pay jointly and severally to respondent bank the amount of the loan including interest, penalty, and other bank charges.

In a letter December 5, 1980 addressed to respondent bank, Philip Wong as credit administrator of BA Finance Corp. for and in behalf of the latter, undertook to guarantee the loan of the Gaytano Spouses. The letter reads and signed BA Finance Corp. signed Philip Wong – Credit Administrator.

The Gaytano Spouses refused to pay their obligation, respondent bank filed with the trial court a complaint for sum of money against the Gaytano Spouses and petitioner corp. as alternative defendant.

ISSUE: Whether the complaint against Petitioner Corporation as alternative defendant prosper.

HELD: NoRespondent bank had not shown any evidence aside from the testimony of the credit administrator

that the disputed transaction of guaranty was in fact entered into the official records or files of petitioner corp. which will show notice or knowledge on the latter’s part and its consequent ratification of the said transaction.

In the absence of clear proof, it would be unfair to hold petitioner corp. guilty of estoppel in allowing its credit administrator to act as though the latter had power to guarantee.

Notes: -- Banks; authority given to officer to approve loans does not include power to issue guarantees to 3rd

persons in principal’s name. --An agent – principal relationship can only be effected with the consent of the principal, and must not, in any way be compelled by law or by any court.

G.R. No. 114091 June 29, 1995

BACALTOS COAL MINES and GERMAN A. BACALTOS, petitioners, vs.HON. COURT OF APPEALS and SAN MIGUEL CORPORATION, respondents.

FACTS

GERMAN A. BACALTOS, proprietor of BACALTOS COAL MINES, authorized RENE R. SAVELLON to use the coal operating contract of BACALTOS COAL MINES for any legitimate purpose that it may serve namely as follows:

(1) To acquire purchase orders for and in behalf of BACALTOS COAL MINES;

(2) To engage in trading under the style of BACALTOS COAL MINES/RENE SAVELLON;

(3) To collect all receivables due or in arrears from people or companies having dealings under BACALTOS COAL MINES/RENE SAVELLON;

(4) To extend to any person or company by substitution the same extent of authority that is granted to Rene Savellon;

(5) In connection with the preceeding paragraphs to execute and sign documents, contracts, and other pertinent papers.

Further, granted RENE SAVELLON full authority to do and perform all and every lawful act requisite or necessary to carry into effect the foregoing stipulations as fully to all intents and purposes as I might or would lawfully do if personally present, with full power of substitution and revocation.

- The Trip Charter Party was executed by and between BACALTOS COAL MINES, represented by its Chief Operating Officer, RENE ROSEL SAVELLON" and private respondent San Miguel Corporation, represented by Francisco B. Manzon, Jr., its "SAVP and Director, Plant Operations-Mandaue.

- Savellon claims that Bacaltos Coal Mines is the owner of the vessel M/V Premship II and that for P650,000.00 to be paid within seven days after the execution of the contract, it "lets, demises" the vessel to charterer SMC "for three round trips to Davao."

- SMC issued a check payable to "RENE SAVELLON IN TRUST FOR BACALTOS COAL MINES" for which Savellon issued a receipt under the heading of BACALTOS COAL MINES. 

- The vessel was able to make only one trip. Its demands to comply with the contract having been unheeded, SMC filed against the petitioners and Rene Savellon the complaint in Civil Case for specific performance and damages.

- Petitioners alleged that Savellon was not their Chief Operating Officer and that the powers granted to him are only those clearly expressed in the Authorization which do not include the power to enter into any contract with SMC. They further claimed that if it is true that SMC entered into a contract with them, it should have issued the check in their favor.

- The lower court rendered the assailed decision in favor of SMC and against the petitioners and Savellon ruling that the Authorization given by German Bacaltos to Savellon necessarily included the power to enter into the Trip Charter Party. It did not give credence to the petitioners' claim that the authorization refers only to coal or coal mining and not to shipping because, according to it, "the business of coal mining may also involve the shipping of products" and "a company such as a coal mining company is not prohibited to engage in entering into a Trip Charter Party contract." It further reasoned out that even assuming that the petitioners did not intend to authorize Savellon to enter into the Trip Charter Party, they are still liable because SMC appears to be an innocent party which has no knowledge of the real intent of the parties to the Authorization and has reason to rely on the written Authorization submitted by Savellon pursuant to Articles 1900 and 1902 of the Civil Code.

- Court of Appeals affirmed in toto the judgment of the trial court.

ISSUE

Whether Savellon was duly authorized by the petitioners to enter into the Trip Charter Party under and by virtue of an Authorization?

HELD

The Court resolved to give due course to the petition.

- Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the agent's authority, and his ignorance of that authority will not be any excuse. Persons dealing with an assumed agent, whether the assumed agency be a general or special one, are bound at their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the authority, and in case either is controverted, the burden of proof is upon them to establish it.

- The foregoing conclusions of the Court of Appeals and the trial court are tenuous and farfetched, bringing to unreasonable limits the clear parameters of the powers granted in the Authorization.

- Furthermore, had SMC exercised due diligence and prudence, it should have known in no time that there is absolutely nothing on the face of the Authorization that confers upon Savellon the authority to enter into any Trip Charter Party.

- Since the principal subject of the Authorization is the coal operating contract, SMC should have required its presentation to determine what it is and how it may be used by Savellon. Such a determination is indispensable to an inquiry into the extent or scope of his authority.

- A scrutiny of the coal operating contract of Bacaltos Coal Mines would have provided SMC knowledge of the activities which are germane, related, or incident to the power to use it. But it did not even require Savellon to produce the same.

- Having thus found that SMC was the author of its own damage and that the petitioners are, therefore, free from any liability, it has become unnecessary to discuss the issue of whether Bacaltos Coal Mines is a corporation with a personality distinct and separate from German Bacaltos.

WHEREFORE, the instant petition is GRANTED and the challenged decision of the Court of Appeals is hereby REVERSED and SET ASIDE and another judgment is hereby rendered MODIFYING the judgment of the Regional Trial Court by setting aside the declaration of solidary liability, holding defendant RENE R. SAVELLON solely liable for the amounts adjudged, and ordering the dismissal of the case as against herein petitioners.

SO ORDERED.