ETRIII Civil Law Review Lecture
Series
OUTLINE/ LECTURE ON
AGENCY
By: Atty. Eduardo T. Reyes, III
(Prepared for Law 4-A,
Univ. of San Agustin Law School,
Civil Law Review II, SY 2017-2018)
I. AGENCY. 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[1].
1.1. Extension of Personality. 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 acts which the latter would have him do.[2]
1.2. Legal Presence. In agency, by legal fiction, the
actual or real absence of the principal is converted into his legal or
juridical presence- qui facit per alium facit per se.[3]
1.3. Elements of Agency.
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; and,
1.4. Lawyer-Client Relationship is
Founded on Agency; Limitations on the Binding Effect of Attorney’s
Representation of his client
“Case
law instructs that when a client is represented by a counsel, notice to counsel
is notice to client. In the absence of a notice of withdrawal or substitution
of counsel, the court will rightly assume that the counsel of record continues
to represent his client[5].”
· Admissions by counsel. General Rule- “admissions by a
counsel are generally conclusive upon a client(DE Garcia v. Court of Appeals,
37 SCRA 129). Even the negligence of counsel binds the client (Sarraga v. Banco
Filipino Savings & Mortgage Bank, 393 SCRA 566).
· Exception. “In cases where reckless or gross
negligence of counsel deprives the client of due process of law, or when its
application will result in outright deprivation of the client’s liberty or
property, or when the interests of justice so require, relief is accorded the
client who suffered by reason of the lawyer’s gross or palpable mistake or
negligence (Salazar v. Court of Appeals, 376 SCRA 459; Silot v. de la Rosa, 543
SCRA 533)[6]”.
1.5. Express v. Implied Agency.
1.5.1. Express Agency. It is expressly
agreed upon by the parties.
1.5.2. Implied Agency. Presumed from the
acts 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.
- Doctrine of Ostensible Authority.
- In Megan Sugar
Corporation v. Regional Trial Court of Iloilo, Branch 68, Dumangas[7], the
Court ruminated on the doctrine of apparent authority or ostensible authority
in this fashion, viz:
“The doctrine of estoppel is based
upon the grounds of public policy, fair dealing, good faith and justice, and
its purpose is to forbid one to speak against his own act, representations, or
commitments to the injury of one to whom they were directed and who reasonably
relied thereon. The doctrine of estoppel springs from equitable principles
and the equities in the case. It is designed to aid the law in the
administration of justice where without its aid injustice might result. It has
been applied by this Court wherever and whenever special circumstances of a
case so demand.
Based on the events and
circumstances surrounding the issuance of the assailed orders, this Court rules
that MEGAN is estopped from assailing both the authority of Atty. Sabig and the
jurisdiction of the RTC. While it is true, as claimed by MEGAN, that Atty.
Sabig said in court that he was only appearing for the hearing of Passi Sugars
motion for intervention and not for the case itself, his subsequent acts,
coupled with MEGANs inaction and negligence to repudiate his authority,
effectively bars MEGAN from assailing the validity of the RTC proceedings under
the principle of estoppel.
In the first place, Atty. Sabig is
not a complete stranger to MEGAN. As a matter of fact, as manifested by EPCIB,
Atty. Sabig and his law firm SABIG SABIG & VINGCO Law Office has
represented MEGAN in other case where the opposing
parties involved were also CIMICO and EPCIB. As such, contrary to MEGANs claim,
such manifestation is neither immaterial nor irrelevant,because at the very
least, such fact shows that MEGAN knew Atty. Sabig.
MEGAN can no longer deny the
authority of Atty. Sabig as they have already clothed him with apparent
authority to act in their behalf. It must be remembered that when Atty. Sabig
entered his appearance, he was accompanied by Concha, MEGANs director and general
manager. Concha himself attended several court hearings, and
on December 17, 2002, even sent a letter to the RTC
asking for the status of the case. A corporation may be held in estoppel from
denying as against innocent third persons the authority of its officers or
agents who have been clothed by it with ostensible or apparent authority.Atty.
Sabig may not have been armed with a board resolution, but the appearance of
Concha made the parties assume that MEGAN had knowledge of Atty. Sabigs actions
and, thus, clothed Atty. Sabig with apparent authority such that the parties
were made to believe that the proper person and entity to address was Atty.
Sabig. Apparent authority, or what is sometimes referred to as the
"holding out" theory, or doctrine of ostensible agency, imposes
liability, not as the result of the reality of a contractual
relationship, but rather because of the actions of a principal or an
employer in somehow misleading the public into believing that the relationship
or the authority exists.
Like the CA, this Court notes that
MEGAN never repudiated the authority of Atty. Sabig when all the motions,
pleadings and court orders were sent not to the office of Atty. Sabig but to
the office of MEGAN, who in turn, would forward all of the same to Atty. Sabig,
to wit:
x
x x All the motions, pleadings and other notices in the civil case were mailed
to Atty. Reuben Mikhail P. Sabig, Counsel for Megan Sugar, NFSC Compound,
Barangay Man-it, Passi, Iloilo City which is the address of the Sugar Central
being operated by Megan Sugar. The said address is not the real office address
of Atty. Sabig. As pointed out by private respondent Equitable PCI Bank, the
office address of Atty. Sabig is in Bacolod City. All orders,
pleadings or motions filed in Civil Case 02-243 were received in the sugar
central being operated by Megan Central and later forwarded by Megan Sugar to
Atty. Sabig who is based in Bacolod City. We find it incredible that,
granting that there was no authority given to said counsel, the record shows
that it was received in the sugar mill operated by Megan and passed on to Atty.
Sabig. At any stage, petitioner could have repudiated Atty. Sabig when it
received the court pleadings addressed to Atty. Sabig as their counsel.
One of the instances of estoppel is
when the principal has clothed the agent with indicia of authority as to lead a
reasonably prudent person to believe that the agent actually has such
authority. With the case of MEGAN, it had all the opportunity to repudiate
the authority of Atty. Sabig since all motions, pleadings and court orders were
sent to MEGANs office. However, MEGAN never questioned the acts of Atty. Sabig
and even took time and effort to forward all the court documents to him.”
Requisites for Doctrine of Ostensible/ Apparent Authority
“Arma Traders is
liable to pay the
loans on the basis of the doctrine of
apparent authority.
loans on the basis of the doctrine of
apparent authority.
The doctrine of
apparent authority provides that a corporation will be estopped from denying
the agent’s authority if it knowingly permits one of its officers or any other
agent to act within the scope of an apparent authority, and it holds him out to
the public as possessing the power to do those acts.76 The doctrine of apparent authority does
not apply if the principal did not commit any acts or conduct which a third
party knew and relied upon in good faith as a result of the exercise of
reasonable prudence. Moreover, the agent’s acts or conduct must have produced a
change of position to the third party’s detriment.77
In Inter-Asia
Investment Industries v. Court of Appeals,78 we explained:
Under this provision
[referring to Sec. 23 of the Corporation Code], the power and responsibility to
decide whether the corporation should enter into a contract that will bind the
corporation is lodged in the board, subject to the articles of incorporation,
bylaws, or relevant provisions of law. However, just as a natural
person who may authorize another to do certain acts for and on his behalf, the
board of directors may validly delegate some of its functions and powers to
officers, committees or agents. The authority of such individuals to bind the
corporation is generally derived from law, corporate bylaws or authorization
from the board, either expressly or impliedly by habit, custom or acquiescence
in the general course of business, viz.:
A corporate officer
or agent may represent and bind the corporation in transactions with third
persons to the extent that [the] authority to do so has been conferred upon
him, and this includes powers as, in the usual course of the particular
business, are incidental to, or may be implied from, the powers intentionally
conferred, powers added by custom and usage, as usually pertaining to the
particular officer or agent, and such apparent powers as the corporation has
caused person dealing with the officer or agent to believe that it has
conferred.
[A]pparent authority
is derived not merely from practice. Its existence may be ascertained
through (1)
the general manner in which the corporation holds out an officer or agent as
having the power to act or, in other words the apparent authority to act in
general, with which it clothes him; or (2) the acquiescence in his acts
of a particular nature, with actual or constructive knowledge thereof, within
or beyond the scope of his ordinary powers. It requires presentation of
evidence of similar act(s) executed either in its favor or in favor of other
parties. It is not the quantity of similar acts which establishes apparent
authority, but the vesting of a corporate officer with the power to bind the
corporation. [emphases and underscores ours]
In People’s
Aircargo and Warehousing Co., Inc. v. Court of Appeals,79 we ruled that the doctrine of apparent
authority is applied when the petitioner, through its president Antonio
Punsalan Jr., entered into the First Contract without first securing board
approval. Despite such lack of board approval, petitioner did not object to or
repudiate said contract, thus "clothing" its president with the power
to bind the corporation.
"Inasmuch as a
corporate president is often given general supervision and control over
corporate operations, the strict rule that said officer has no inherent power
to act for the corporation is slowly giving way to the realization that such
officer has certain limited powers in the transaction of the usual and ordinary
business of the corporation."80 "In the absence of a charter or
bylaw provision to the contrary, the president is presumed to have the
authority to act within the domain of the general objectives of its business
and within the scope of his or her usual duties."81
In the present
petition, we do not agree with the CA’s findings that Arma Traders is not
liable to pay the loans due to the lack of board resolution authorizing Tan and
Uy to obtain the loans. To begin with, Arma Traders’ Articles of Incorporation82 provides that the corporation may
borrow or raise money to meet the financial requirements of its business by
the issuance of bonds, promissory notes and other evidence of
indebtedness. Likewise, it states that Tan and Uy are not
just ordinary corporate officers and authorized bank signatories because they
are also Arma Traders’ incorporators along with respondents Ng
and Ting, and Pedro Chao. Furthermore, the respondents, through Ng who is Arma
Traders’ corporate secretary, incorporator, stockholder and director, testified
that the sole management of Arma Traders was left to Tan and Uy and
that he and the other officers never dealt with the business and management of
Arma Traders for 14 years. He also confirmed that since 1984 up to the filing
of the complaint against Arma Traders, its stockholders and board of directors
never had its meeting.83
Thus, Arma Traders
bestowed upon Tan and Uy broad powers by allowing them to transact with third
persons without the necessary written authority from its non-performing board
of directors. Arma Traders failed to take precautions to prevent its own
corporate officers from abusing their powers. Because of its own laxity in its
business dealings, Arma Traders is now estopped from denying Tan and Uy’s
authority to obtain loan from Advance Paper. (G.R. No.176897
December 11, 2013, ADVANCE PAPER CORPORATION and
GEORGE HAW, in his capacity as President of Advance Paper Corporation, Petitioners,
vs.
ARMA TRADERS CORPORATION, MANUEL TING, CHENG GUI and BENJAMIN NG, Respondents.)
vs.
ARMA TRADERS CORPORATION, MANUEL TING, CHENG GUI and BENJAMIN NG, Respondents.)
1.6. Verbal v. Formal
a. Oral- No written proof of the agency.
b. Formal- The law requires a specific
form.
- Authority to sell a piece of land
must be in writing.
1.7. Contractual v. Legal
a. Contractual agency or Agency by
Contract- Created through agreement of parties
b. Legal or Created by Law
1.8. General v. Special
a. General- The agency comprises all the
business of the principal.
b. Special- The agency is for one or
more specific transactions.
b.1. When Special Powers of
Attorney needed. ~ See Article 1878, NCC.
b.2. Power to Sell. ~ A special power to sell
excludes the power to mortgage; and a special power to mortgage does not
include the power to sell.[8]
b.3. Power to
Compromise. A special power to compromise does not authorize
submission to arbitration.[9]
1.9. Requisites of Agency.
The case of Sps.
Fernando and Lourdes Viloria v. Continental Airlines, Inc.[10] teaches
on the nature and requisites of an agency relationship, to wit:
“I.
A principal-agent relationship exists between CAI and Holiday Travel
With respect to the first issue,
which is a question of fact that would require this Court to review and
re-examine the evidence presented by the parties below, this Court takes
exception to the general rule that the CA’s findings of fact are conclusive
upon Us and our jurisdiction is limited to the review of questions of law. It
is well-settled to the point of being axiomatic that this Court is authorized
to resolve questions of fact if confronted with contrasting factual findings of
the trial court and appellate court and if the findings of the CA are
contradicted by the evidence on record.17
According to the CA, agency is never
presumed and that he who alleges that it exists has the burden of proof.
Spouses Viloria, on whose shoulders such burden rests, presented evidence that
fell short of indubitably demonstrating the existence of such agency.
We disagree. The CA failed to
consider undisputed facts, discrediting CAI’s denial that Holiday Travel is one
of its agents. Furthermore, in erroneously characterizing the contractual
relationship between CAI and Holiday Travel as a contract of sale, the CA
failed to apply the fundamental civil law principles governing agency and
differentiating it from sale.
In Rallos v. Felix Go Chan
& Sons Realty Corporation,18 this
Court explained the nature of an agency and spelled out the essential elements
thereof:
Out of the above given principles,
sprung the creation and acceptance of the relationship of agency whereby
one party, called the principal (mandante), authorizes another, called
the agent (mandatario), to act for and in his behalf in transactions
with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to
a third person; (3) the agent acts as a representative and not for himself, and
(4) 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 se. "He who acts through
another acts himself."19
Contrary to the findings of the CA,
all the elements of an agency exist in this case. The first and second elements
are present as CAI does not deny that it concluded an agreement with Holiday
Travel, whereby Holiday Travel would enter into contracts of carriage with
third persons on CAI’s behalf. The third element is also present as it is
undisputed that Holiday Travel merely acted in a representative capacity and it
is CAI and not Holiday Travel who is bound by the contracts of carriage entered
into by Holiday Travel on its behalf. The fourth element is also present
considering that CAI has not made any allegation that Holiday Travel exceeded
the authority that was granted to it. In fact, CAI consistently maintains the
validity of the contracts of carriage that Holiday Travel executed with Spouses
Viloria and that Mager was not guilty of any fraudulent misrepresentation. That
CAI admits the authority of Holiday Travel to enter into contracts of carriage
on its behalf is easily discernible from its February 24, 1998 and March 24,
1998 letters, where it impliedly recognized the validity of the contracts
entered into by Holiday Travel with Spouses Viloria. When Fernando informed CAI
that it was Holiday Travel who issued to them the subject tickets, CAI did not
deny that Holiday Travel is its authorized agent.
Prior to Spouses Viloria’s filing of
a complaint against it, CAI never refuted that it gave Holiday Travel the power
and authority to conclude contracts of carriage on its behalf. As clearly
extant from the records, CAI recognized the validity of the contracts of
carriage that Holiday Travel entered into with Spouses Viloria and considered
itself bound with Spouses Viloria by the terms and conditions thereof; and this
constitutes an unequivocal testament to Holiday Travel’s authority to act as
its agent. This Court cannot therefore allow CAI to take an altogether different
position and deny that Holiday Travel is its agent without condoning or giving
imprimatur to whatever damage or prejudice that may result from such denial or
retraction to Spouses Viloria, who relied on good faith on CAI’s acts in
recognition of Holiday Travel’s authority. Estoppel is primarily based on the
doctrine of good faith and the avoidance of harm that will befall an innocent
party due to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.20 Estoppel
bars CAI from making such denial.
As categorically provided under
Article 1869 of the Civil Code, “[a]gency may be express, or implied from
the acts 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.”
Considering that the fundamental
hallmarks of an agency are present, this Court finds it rather peculiar that
the CA had branded the contractual relationship between CAI and Holiday Travel
as one of sale. The distinctions between a sale and an agency are not difficult
to discern and this Court, as early as 1970, had already formulated the
guidelines that would aid in differentiating the two (2) contracts. In Commissioner
of Internal Revenue v. Constantino,21 this
Court extrapolated that the primordial differentiating consideration between
the two (2) contracts is the transfer of ownership or title over the property
subject of the contract. In an agency, the principal retains ownership and
control over the property and the agent merely acts on the principal’s behalf
and under his instructions in furtherance of the objectives for which the
agency was established. On the other hand, the contract is clearly a sale if
the parties intended that the delivery of the property will effect a
relinquishment of title, control and ownership in such a way that the recipient
may do with the property as he pleases.
Since the company retained ownership
of the goods, even as it delivered possession unto the dealer for resale to
customers, the price and terms of which were subject to the company's control,
the relationship between the company and the dealer is one of agency, tested
under the following criterion:
“The difficulty in distinguishing
between contracts of sale and the creation of an agency to sell has led to the
establishment of rules by the application of which this difficulty may be
solved. The decisions say the transfer of title or agreement to transfer it for
a price paid or promised is the essence of sale. 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; while the essence of
an agency to sell is the delivery to an agent, not as his property, but as the
property of the principal, who remains the owner and has the right to control
sales, fix the price, and terms, demand and receive the proceeds less the
agent's commission upon sales made. 1 Mechem on Sales, Sec. 43; 1 Mechem on
Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1.” (Salisbury v.
Brooks, 94 SE 117, 118-119)22
As to how the CA have arrived at the
conclusion that the contract between CAI and Holiday Travel is a sale is
certainly confounding, considering that CAI is the one bound by the contracts
of carriage embodied by the tickets being sold by Holiday Travel on its behalf.
It is undisputed that CAI and not Holiday Travel who is the party to the
contracts of carriage executed by Holiday Travel with third persons who desire
to travel via Continental Airlines, and this conclusively indicates the
existence of a principal-agent relationship. That the principal is bound by all
the obligations contracted by the agent within the scope of the authority
granted to him is clearly provided under Article 1910 of the Civil Code and
this constitutes the very notion of agency.”
1.10.Consideration. Agency may be onerous or
gratuitous. Agency is presumed to be for a compensation, unless there is proof
to the contrary[11].
1.10.1. Procuring
cause rule. The agent is entitled to the stipulated
compensation in the execution of the powers granted to him if the act of the
agent is the procuring cause of the transaction. Thus, in an agency to sell,
the agent is entitled to a commission if he is the procuring cause of the sale.
This means that the sale must be concluded through the measures that the agent
employed and the efforts that he exerted.[12]
-This is
akin to the PROXIMATE CAUSE RULE in torts. “A cause which starts a series of
events and results, without break in their continuity in the accomplishment of
a broker’s prime objective of procuring a purchaser who is ready, willing, and
able to buy on the owner’s terms.[13]”
1.10.2. Agent’s
Compensation v. Broker’s Commission; When can agency be deemed IRREVOCABLE.
· “The Court affirms the appellate
courts finding that the agency was not revoked since Ybaez requested that Lim
make stop payment orders for the checks payable to Saban only after the
consummation of the sale on March 10, 1994. At that time, Saban had already
performed his obligation as Ybaezs agent when, through his (Sabans) efforts,
Ybaez executed the Deed of Absolute Sale of the lot with Lim
and the Spouses Lim.
To
deprive Saban of his commission subsequent to the sale which was consummated
through his efforts would be a breach of his contract of agency with Ybaez
which expressly states that Saban would be entitled to any excess in the
purchase price after deducting the P200,000.00 due to Ybaez and the
transfer taxes and other incidental expenses of the sale.
In Macondray
& Co. v. Sellner, the Court recognized the right
of a broker to his commission for finding a suitable buyer for the sellers
property even though the seller himself consummated the sale with the buyer.The
Court held that it would be in the height of injustice to permit the principal
to terminate the contract of agency to the prejudice of the broker when he had
already reaped the benefits of the brokers efforts.
In Infante
v. Cunanan, et al., the Court upheld the right of the brokers to
their commissions although the seller revoked their authority to act in his
behalf after they had found a buyer for his properties and negotiated the sale
directly with the buyer whom he met through the brokers efforts. The Court
ruled that the sellers withdrawal in bad faith of the brokers authority cannot
unjustly deprive the brokers of their commissions as the sellers duly
constituted agents.
The
pronouncements of the Court in the aforecited cases are applicable to the
present case, especially considering that Saban had completely performed his
obligations under his contract of agency with Ybaez by finding a suitable buyer
to preparing the Deed of Absolute Sale between Ybaez and Lim
and her co-vendees. Moreover, the contract of agency very clearly states that
Saban is entitled to the excess of the mark-up of the price of the lot after
deducting Ybaezs share of P200,000.00 and the taxes and other
incidental expenses of the sale.
However,
the Court does not agree with the appellate courts pronouncement that Sabans
agency was one coupled with an interest. Under Article 1927 of the Civil Code,
an agency cannot be revoked if a bilateral contract depends upon it, or if it
is the means of fulfilling an obligation already contracted, or if a partner is
appointed manager of a partnership in the contract of partnership and his
removal from the management is unjustifiable. Stated differently, an agency is
deemed as one coupled with an interest where it is established for the mutual
benefit of the principal and of the agent, or for the interest of the principal
and of third persons, and it cannot be revoked by the principal so long as the
interest of the agent or of a third person subsists. In an agency coupled with
an interest, the agents interest must be in the subject matter of the power
conferred and not merely an interest in the exercise of the power because it
entitles him to compensation. When an agents interest is confined to earning
his agreed compensation, the agency is not one coupled with an interest, since
an agents interest in obtaining his compensation as such agent is an ordinary
incident of the agency relationship.
Sabans
entitlement to his commission having been settled, the Court must now determine
whether Lim is the proper party against whom Saban should address his claim.
Sabans
right to receive compensation for negotiating as broker for Ybaez arises from
the Agency Agreement between them. Lim is not a party to the contract. However,
the record reveals that she had knowledge of the fact that Ybaez set the price
of the lot at P200,000.00 and that the P600,000.00the price agreed upon by
her and Sabanwas more than the amount set by Ybaez because it included the
amount for payment of taxes and for Sabans commission as broker for Ybaez.
According
to the trial court, Lim made the following payments for the lot: P113,257.00
for taxes, P50,000.00 for her broker, and P400.000.00
directly to Ybaez, or a total of Five Hundred Sixty Three Thousand Two Hundred
Fifty Seven Pesos (P563,257.00).[27] Lim,
on the other hand, claims that on March 10, 1994, the date of execution of
the Deed of Absolute Sale, she paid directly to Ybaez the
amount of One Hundred Thousand Pesos (P100,000.00) only, and gave to
Saban P113,257.00 for payment of taxes and P50,000.00
as his commission,[28] and
One Hundred Thirty Thousand Pesos (P130,000.00) on June 28, 1994,[29] or
a total of Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393,257.00).
Ybaez, for his part, acknowledged that Lim and her co-vendees paid him P400,000.00
which he said was the full amount for the sale of the lot.[30] It thus appears that he received P100,000.00
on March 10, 1994, acknowledged receipt (through Saban) of the P113,257.00
earmarked for taxes and P50,000.00 for commission, and received the
balance of P130,000.00 on June 28, 1994. Thus, a total of P230,000.00
went directly to Ybaez. Apparently, although the amount actually paid by Lim
was P393,257.00, Ybaez rounded off the amount to P400,000.00
and waived the difference.
Lims
act of issuing the four checks amounting to P236,743.00 in
Sabans favor belies her claim that she and her co-vendees did not agree to
purchase the lot at P600,000.00. If she did not agree thereto,
there would be no reason for her to issue those checks which is the balance
of P600,000.00 less the amounts of P200,000.00 (due to
Ybaez), P50,000.00 (commission), and the P113,257.00
(taxes). The only logical conclusion is that Lim changed her mind about
agreeing to purchase the lot at P600,000.00 after talking to Ybaez
and ultimately realizing that Sabans commission is even more than what Ybaez
received as his share of the purchase price as vendor. Obviously, this change
of mind resulted to the prejudice of Saban whose efforts led to the completion
of the sale between the latter, and Lim and her co-vendees. This the Court
cannot countenance.
The
ruling of the Court in Infante v. Cunanan, et al., cited
earlier, is enlightening for the facts therein are similar to the circumstances
of the present case. In that case, Consejo Infante asked Jose Cunanan and Juan
Mijares to find a buyer for her two lots and the house built thereon for Thirty
Thousand Pesos (P30,000.00) . She promised to pay them five percent (5%)
of the purchase price plus whatever overprice they may obtain for the property.
Cunanan and Mijares offered the properties to Pio Noche who in turn expressed
willingness to purchase the properties. Cunanan and Mijares thereafter
introduced Noche to Infante. However, the latter told Cunanan and Mijares that
she was no longer interested in selling the property and asked them to sign a
document stating that their written authority to act as her agents for the sale
of the properties was already cancelled. Subsequently, Infante sold the
properties directly to Noche for Thirty One Thousand Pesos (P31,000.00).
The Court upheld the right of Cunanan and Mijares to their commission,
explaining that
[Infante] had changed her mind even
if respondent had found a buyer who was willing to close the deal, is a matter
that would not give rise to a legal consequence if [Cunanan and Mijares] agreed
to call off the transaction in deference to the request of [Infante]. But the
situation varies if one of the parties takes advantage of the benevolence of
the other and acts in a manner that would promote his own selfish interest.
This act is unfair as would amount to bad faith. This act cannot be sanctioned
without according the party prejudiced the reward which is due him. This is the
situation in which [Cunanan and Mijares] were placed by [Infante]. [Infante]
took advantage of the services rendered by [Cunanan and Mijares], but believing
that she could evade payment of their commission, she made use of a ruse by
inducing them to sign the deed of cancellation.This act of subversion cannot be
sanctioned and cannot serve as basis for [Infante] to escape payment of the
commission agreed upon.[31]
The
appellate court therefore had sufficient basis for concluding that Ybaez and
Lim connived to deprive Saban of his commission by dealing with each other
directly and reducing the purchase price of the lot and leaving nothing to
compensate Saban for his efforts.
Considering
the circumstances surrounding the case, and the undisputed fact that Lim had
not yet paid the balance of P200,000.00 of the purchase price
of P600,000.00, it is just and proper for her to pay Saban the
balance of P200,000.00.
Furthermore,
since Ybaez received a total of P230,000.00 from Lim, or an excess
of P30,000.00 from his asking price of P200,000.00,
Saban may claim such excess from Ybaezs estate, if that remedy is still
available,[32] in
view of the trial courts dismissal of Sabans complaint as against Ybaez, with
Sabans express consent, due to the latters demise on November 11, 1994.[33]
The
appellate court however erred in ruling that Lim is liable on the checks
because she issued them as an accommodation party. Section 29 of the Negotiable
Instruments Law defines an accommodation party as a person who has signed the
negotiable instrument as maker, drawer, acceptor or indorser, without receiving
value therefor, for the purpose of lending his name to some other person. The
accommodation party is liable on the instrument to a holder for value even
though the holder at the time of taking the instrument knew him or her to be
merely an accommodation party. The accommodation party may of course seek
reimbursement from the party accommodated.[34]
As
gleaned from the text of Section 29 of the Negotiable Instruments Law, the
accommodation party is one who meets all these three requisites, viz:
(1) he signed the instrument as maker, drawer, acceptor, or indorser; (2) he
did not receive value for the signature; and (3) he signed for the purpose of
lending his name to some other person. In the case at bar, while Lim signed as
drawer of the checks she did not satisfy the two other remaining requisites.
The
absence of the second requisite becomes pellucid when it is noted at the outset
that Lim issued the checks in question on account of her transaction, along
with the other purchasers, with Ybaez which was a sale and, therefore, a
reciprocal contract. Specifically, she drew the checks in payment of the
balance of the purchase price of the lot subject of the transaction. And she
had to pay the agreed purchase price in consideration for the sale of the lot
to her and her co-vendees. In other words, the amounts covered by the checks
form part of the cause or consideration from Ybaezs end, as vendor, while the
lot represented the cause or consideration on the side of Lim, as vendee.[35] Ergo,
Lim received value for her signature on the checks.
Neither
is there any indication that Lim issued the checks for the purpose of enabling
Ybaez, or any other person for that matter, to obtain credit or to raise money,
thereby totally debunking the presence of the third requisite of an
accommodation party.[14]”
BROKER’S COMMISSION v. AGENT’S
COMMISSION
· “Besides,
assuming that the evidence an oriented to a revocation of Jusean Realty’s
authority to sell, the Court has always recognized the broker’s right to his
commission, although the owner revoked his authority and directly negotiated
with the buyer when he went through the broker’s efforts. It would be unfair
not to give the broker the reward he had earned for helping the owner find a
buyer who would pay the price.[15]”
· “Unlike agents, brokers do not
represent a principal. A broker is one whose occupation is to bring the parties
together in matters of trade, commerce or navigation.[16] With
respect to compensation of brokers, the action of the agent must also be
the procuring cause which is the cause originating a series of
events which, without break in their continuity, result in the accomplishment
of the prime objective of the employment of the broker – the broker’s efforts
must have been the foundation on which the negotiations resulting in a sale
began.[17]”
1.10. Duties of Agent.
a) Obedience-Agent must at within the scope of his authority or
even those which were not expressly authorized but are CONDUCIVE to the
accomplishment of the purpose of the agency.
b) Diligence-Agent is bound by his acceptance to carry out the
agency, and is liable for the damages which, through his non-performance, the
principal may suffer.
c) Loyalty- The relationship between the agent and his or her
principal is fiduciary in nature. It is based on trust and confidence.
1.11. Modes of Extinguishment of Agency
1.11.1.-Article 1920, NCC- Agency is extinguished by its revocation, express
or implied- may be done at will or at anytime by the principal.
-Exceptions:
a) If a bilateral contract depends upon it
b) If it is a means of fulfilling an obligation
already contracted, or
c) If a partner is appointed manager of a partnership
in the contract of partnership and his removal from the management is
unjustifiable.
d) Agency coupled with interest.
-See Lim v. Saban.
- If a land owner executes an SPA in favor of another
person who is authorized to obtain a loan and from the proceeds thereof, the
latter is entitled to a share. The agreement stipulates that the costs for
processing the loan shall be borne by the agent. Can the SPA be revoked at
will?
NO, as it is one coupled with an interest. “There
is no question that the SPA executed by respondents in favor of petitioners is
a contract of agency coupled with interest. This is because their bilateral
contract depends upon the agency. Hence, it “cannot be revoked at the sole will
of the principal”[18].
· Art. 1868 of the Civil Code provides that by the
contract of agency, an agent binds himself to render some service or do
something in representation or on behalf of another, known as the principal,
with the consent or authority of the latter.[13]
A contract of agency is generally
revocable as it is a personal contract of representation based on trust and
confidence reposed by the principal on his agent. As the power of the agent to
act depends on the will and license of the principal he represents, the power
of the agent ceases when the will or permission is withdrawn by the principal.
Thus, generally, the agency may be revoked by the principal at will.[14]
However, an exception to the revocability of a contract
of agency is when it is coupled with interest, i.e., if a
bilateral contract depends upon the agency.[15] The reason for its
irrevocability is because the agency becomes part of another obligation or
agreement. It is not solely the rights of the principal but also that of the
agent and third persons which are affected. Hence, the law provides that in
such cases, the agency cannot be revoked at the sole will of the principal.
In the case at bar, we agree with
the finding of the trial and appellate courts that the agency granted by
Legaspi to Gutierrez is coupled with interest as a bilateral contract depends
on it. It is clear from the records that Gutierrez was given by
Legaspi, inter alia, the power to manage the treasure hunting
activities in the subject land; to file any case against anyone who enters the
land without authority from Legaspi; to engage the services of lawyers to carry
out the agency; and, to dig for any treasure within the land and enter into
agreements relative thereto. It was likewise agreed upon that Gutierrez
shall be entitled to 40% of whatever treasure may be found in the land.
Pursuant to this authority and to protect Legaspis land from the alleged
illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza
to prosecute the case for damages and injunction against petitioners. As
payment for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of
Legaspis share in whatever treasure may be recovered in the subject land.
It is clear that the treasure that may be found in the land is the subject
matter of the agency; that under the SPA, Gutierrez can enter into contract for
the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza have an
interest in the subject matter of the agency, i.e., in the
treasures that may be found in the land. This bilateral contract depends on the
agency and thus renders it as one coupled with interest, irrevocable at the sole
will of the principal Legaspi.[16] When an agency is constituted as a clause in
a bilateral contract, that is, when the agency is inserted in another agreement,
the agency ceases to be revocable at the pleasure of the principal as the
agency shall now follow the condition of the bilateral agreement.[17] Consequently,
the Deed of Revocation executed by Legaspi has no effect. The authority of
Gutierrez to file and continue with the prosecution of the case at bar is
unaffected[19]”.
1.11.2. DEATH of either principal or agent EXTINGUISHES THE AGENCY.
-HOWEVER, Anything done by the agent , without the knowledge
of the death of the principal or any other cause which extinguishes the agency,
is valid and shall be fully effective with respect to third persons who may
have contracted with him in good faith[20].
-Exception: In a
Real Estate Mortgage constituted pursuant to Act 3135, whereby the mortgagor
appoints the mortgagee as attorney-in-fact as follows:
“at its
election, to foreclose this mortgage judicial or extrajudicially under Act No.
3135, as amended, or/ and under Act 1508, as amended, and for this purpose, the
Mortgagor hereby appoints the Mortgagees as their Attorney-In-Fact with full
power of substitution to enter upon and take possession of the mortgaged
property without the Order of any Court or any authority other than herein
granted, and to sell and dispose of the same to the highest bidder at public
auction after the publication of notice in accordance with the provisions of
Act No. 3135, as amended, and the Mortgagees are further authorized, in such
case and until said property is sold, (a) to hold and retain possession of said
property, (b) to collect all debts due on the same, and ( c ) to perform all
other acts of administration and management in the manner most advantageous to
and for the interest of the Mortgagees”.
“The authority to sell is not
extinguished by the death of the mortgagor (or mortgagee) as it is an essential
and inseparable part of a bilateral agreement (Perez v. PNB, GR No. L-21813,
July 30, 1966)
[3] p. 669, Reviewer on Civil Law, Timoteo B. Aquino,
citing Eurotech Industrial Technologies, Inc. v. Cuizon, G.R. No. 167552, April
23, 2007, Country Bankers Insurance Corp., v. Keppel Cebu Shipyard, 673 SCRA
427 (2012)
[5] Jose Romullo L. Francisco v. Loyola Plans
Consolidated, Inc., Jesusa Conception and Gerardo B. Monzon, G.R. No.
194134,February 1, 2016
[15] Oriented
Petroleum and Minerals Corporation v. Jusean Realty, Inc., G.R. No. 195-481,
July 10, 2013
[19] REPUBLIC OF THE PHILIPPINES, represented by
LT. GEN. JOSE M. CALIMLIM, in his capacity as former Chief of the Intelligence
Service, Armed Forces of the Philippines (ISAFP), and former Commanding
General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his
capacity as an Officer of ISAFP and former member of the PSG, petitioners,
vs. HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge,
Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented
by his attorney-in-fact, Paul Gutierrez, respondents. [G.R.
No. 156015. August 11, 2005]
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