C. OBLIGATIONS OF THE AGENT Shocked by this information, Cruz became hysterical and burst into tears.
z became hysterical and burst into tears. The branch manager,
(Articles 1910-1918)
1. PRUDENTIAL BANK vs.THE COURT OF APPEALS
FACTS:
Aurora F.Cruz, with her sister as co-depositor, invested P200,000.00 with the
Prudential Bank on June 23, 1986. The placement was for 63 days at 13.75% annual interest.
For this purpose, the amount of P196,122.88 was withdrawn from the depositors' Savings
Account and applied to the investment. The difference of P3,877.07 represented the pre-paid
interest. The transaction was evidenced by a Confirmation of Sale1 delivered to Cruz two days
later, together with a Debit Memo2 in the amount withdrawn and applied to the confirmed sale.
These documents were issued by Susan Quimbo, the employee of the bank to whom Cruz was
referred and who was apparently in charge of such transactions.
Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to "roll-
over" or renew her investment. Quimbo, who again attended to her, prepared a Credit Memo
crediting the amount of P200,000.00 in Cruz's savings account passbook. She also prepared a
Debit Memo for the amount of P196,122.88 to cover the re-investment of P200,000.00 minus
the prepaid interest of P3,877.02. This time, Cruz was asked to sign a Withdrawal Slip for
P196,122.98, representing the amount to be re-invested after deduction of the prepaid interest.
Quimbo explained this was a new requirement of the bank. Several days later, Cruz received
another Confirmation of Sale and a copy of the Debit Memo.
On October 27, 1986, Cruz returned to the bank and sought to withdraw her
P200,000.00. After verification of her records, however, she was informed that the investment
appeared to have been already withdrawn by her on August 25, 1986. There was no copy on
file of the Confirmation of Sale and the Debit Memo allegedly issued to her by Quimbo. Quimbo
herself was not available for questioning as she had not been reporting for the past week.
Roman Santos, assured her that he would look into the matter.
Cruz's filed a complaint for breach of contract against Prudential Bank.
ISSUE: WON Prudential should be held liable for the acts of its officer (agent) against
Cruz
HELD: YES.
The liability of the principal for the acts of the agent is not even debatable. Law and
jurisprudence are clearly and absolutely against the petitioner.
Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere
videtur. "He who does a thing by an agent is considered as doing it himself." This rule is affirmed
by the Civil Code thus:
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Art. 1911. 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.
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between the
principal and the third person.
A bank is liable for wrongful acts of its officers done in the interests of the bank or in
the course of dealings of the officers in their representative capacity but not for acts outside the
scope of their authority. (9 c.q.s. p. 417) A bank holding out its officers and agent as worthy of
confidence will not be permitted to profit by the frauds they may thus be enabled to perpetrate
1
in the apparent scope of their employment; nor will it be permitted to shirk its responsibility for
such frauds, even though no benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent third persons where the representation
is made in the course of its business by an agent acting within the general scope of his authority
even though, in the particular case, the agent is secretly abusing his authority and attempting
to perpetrate a fraud upon his principal or some other person, for his own ultimate benefit
(McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)
Application of these principles in especially necessary because banks have a fiduciary
relationship with the public and their stability depends on the confidence of the people in their
honesty and efficiency. Such faith will be eroded where banks do not exercise strict care in the
selection and supervision of its employees, resulting in prejudice to their depositors.
It would appear from the facts established in the case before us that the petitioner was
less than eager to present Quimbo at the trial or even to establish her liability although it made
the initial effort which it did not pursue to hold her answerable in the third-party complaint.
What ever happened to her does not appear in the record. Her absence from the proceedings
feeds the suspicion of her possible misdeed, which the bank seems to have studiously ignored
by its insistence that the missing money had been actually withdrawn by Cruz. By such
insistence, the bank is absolving not only itself but also, in effect and by extension, the
disappeared Quimbo who apparently has much to explain.
2. CUISON vs.THE COURT OF APPEALS
FACTS:
Petitioner Kue Cuison(Cuison) is a sole proprietorship engaged in the purchase and sale
of newsprint, bond paper and scrap. Private respondent Valiant Investment Associates(Valiant),
on the other hand, is a partnership duly organized and existing under the laws of the Philippines.
From 1979 to 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 Valiant pursuant
to orders allegedly placed by Tiu Huy Tiac(Tiac) who was then employed in the Binondo office
of Cuison.
After delivery, Tiac issued nine (9) postdated checks to Valiant as payment for the paper
products. Unfortunately, said checks were later dishonored by the drawee bank.
Thereafter, Valiant made several demands to Cuison for the payment of the merchandise in
question. Valiant claims that Tiac was duly authorized by Cusion to be the manager of latter's
Binondo office. As such, Tiac was authorized to enter into the questioned transactions.
Cuison, however, denied any involvement in the transactions entered into by Tiac and refused
to pay Valiant the amount corresponding to the selling price of the subject merchandise.
Left with no recourse, respondent Valiant filed an action against petitioner Cuison for collection
of sum of money.
Trial Court: Dismissed the complaint.
Court of Appeals: Reversed the lower courts decision.
ISSUE: WoN Tiac possessed the required authority from petitioner Cuison sufficient to hold the
latter liable for the disputed transaction.
HELD: Yes.
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.
Based from the records, petitioner Cuison held out Tiac to the public as the manager of his
store in Sto. Cristo, Binondo, Manila. First, Bernardino Villanueva(respondent Valiant's
2
manager) testified that Cuison explicitly introduced Tiac to him as his (petitioner's) branch
manager. Secondly, Lilian Tan, who has been doing business with Cuison for quite a while,
also testified that she knew Tiac to be the manager of Cuison's Sto. Cristo, Binondo branch.
This general perception of Tiac as the manager of Cuison's Sto. Cristo store is even made
manifest by the fact that Tiac is known in the community to be the "kinakapatid" (godbrother) of
petitioner Cuison. In fact, even Cuison admitted his close relationship with Tiac when he said
that they are "like brothers". There was thus no reason for anybody especially those transacting
business with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto.
Cristo Binondo branch.
But of even greater weight than any of the testimonies given, is petitioner's categorical
admission on the witness stand that Tiu Huy Tiac was the manager of his store in Sto.
Cristo, Binondo, to wit:
xxx xxx xxx
Q: And who was managing the store in Sto. Cristo?
A: At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the exact
year.
Q: So, Mr. Tiu Huy Tiac took over the management,.
A: No, that was because every afternoon, I was there, sir.
Q: But in the morning, who takes charge?
A: Tiu Huy Tiac takes charge of management and if there orders for newsprint or
bond papers they are always referred to the compound in Baesa, sir.
Tiac, therefore, by petitioner Cuison's own representations and manifestations, became an
agent of the latter by estoppel. An admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying thereon
(Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own
acts and representations to the prejudice of the other party who, in good faith, relied upon them.
Taken in this light, petitioner Cuison is liable for the transaction entered into by Tiac on the
former's behalf. Thus, 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 (Article
1911 Civil Code), as in the case at bar.
3. RALLOS vs. . YANGCO
Facts:
The defendant in this case (Yangco), on the 27th day of November 1907, sent to the
plaintiff (Rallos), stating that he (Yangco) has a steamship office at No. 163 Muelle de la Reina,
Binondo, Manila, P. I., which is a shipping and commission department for buying and selling
leaf tobacco and other native products. Furthermore in the letter, it was mentioned that Mr.
Florentino Collantes, was granted by Yangco a power of attorney before the notary, Mr.
Perfecto Salas Rodriguez, dated November 16, 1907, to perform in Yangcos name and on his
behalf all acts necessary for carrying the plans of Yangcos business. Mr. Collantes signed the
power of attorney.
Accepting this invitation, Rallos proceeded to do a considerable business with the
defendant through the said Collantes, as his factor, sending to him as agent for the defendant
a good deal of produce to be sold on commission. Later, and in the month of February, 1909,
the plaintiffs sent to the said Collantes, as agent for the defendant, 218 bundles of tobacco in
the leaf to be sold on commission, as had been other produce previously. The said Collantes
received said tobacco and sold it for the sum of P1,744. The charges for such sale were
P206.96, leaving in the hands of said Collantes the sum of P1,537.08 belonging to the plaintiffs.
This sum was, apparently, converted to his own use by said agent.
The defendant refused to pay the said sum upon demand of the plaintiffs, placing such
refusal upon the ground that at the time that the said tobacco was received and sold by
Collantes he was acting personally and not as agent of the defendant. Thus, Rallos filed an
3
action to recover said sum against Yangco. The CFI rendered a decision in favor of Rallos
hence this present appeal of Yangco.
Issue: Whether or not the Rallos, having sent produce to sell on commission to the former
agent of the Yangco, can recover from the latter..
Ruling: YES
We are of the opinion that the Yangco is liable. In the present case, it appears, that
prior to the sending of said tobacco the defendant had severed his relations with Collantes and
that the latter was no longer acting as his factor. This fact was not known to the plaintiff and it
is conceded in the case that no notice of any kind was given by the defendant to the plaintiffs
of the termination of the relations between the defendant and his agent. Having advertised the
fact that Collantes was his agent and having given them a special invitation to deal with such
agent, it was the duty of the defendant on the termination of the relationship of principal and
agent to give due and timely notice thereof to the plaintiffs. Failing to do so, he is responsible
to them for whatever goods may have been in good faith and without negligence sent to the
agent without knowledge, actual or constructive, of the termination of such relationship. For
these reasons the judgment appealed from is confirmed, without special finding as to costs.
D. MODE OF EXTINGUISHMENT OF AGENCY
(Article 1919-1932)
1. RAMON RALLOS vs. FELIX GO CHAN & SONS REALTY CORPORATION and COURT
OF APPEALS
OVERVIEW: This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his
principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a
power of attorney which the principal had executed in favor. The administrator of the estate of
the went to court to have the sale declared uneanforceable and to recover the disposed share
. The trial court granted the relief prayed for, but upon appeal the Court of Appeals uphold the
validity of the sale and the complaint.
FACTS: Concepcion and Gerundia both surnamed Rallos were sisters and registered co-own
ers of a parcel of land in Cebu. On April 21, 1954, the sisters executed a special power of atto
rney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf the l
and. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold
the undivided shares of his sisters Concepcion and Gerundia to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. A new TCT was issued in the name of vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos
filed a complaint (1) that the sale of the undivided share of the deceased Concepcion Rallos in
lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the Certific
ate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelld
ISSUE: whether or not the sale is binding despite the death of one of the principals. No
HELD: There are various ways of extinguishing agency, but her We are concerned only with o
ne cause death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken
from Art. 1709 of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
4
 Article 1930 is not involved because admittedly the special power of attorney executed in favo
r of Simeon Rallos was not coupled with an interest.
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ..
. (Emphasis supplied)

Article 1931 is the applicable law. Under this provision, an act done by the agent after the deat
h of his principal is valid and effective only under two conditions, viz: (1) that the agent acted w
By reason of the very nature of the relationship between Principal and agent, agency is exting
ithout knowledge of the death of the principal and (2) that the third person who contracted with
uished by the death of the principal or the agent. This is the law in this jurisdiction.
the agent himself acted in good faith. Good faith here means that the third person was not aw
are of the death of the principal at the time he contracted with said agent. These two requisite
s must concur the absence of one will render the act of the agent invalid and unenforceable.
Is the general rule provided for in Article 1919 that the death of the principal or of the agent ex
tinguishes the agency, subject to any exception, and if so, is the instant case within that excep
tion? That is the determinative point in issue in this litigation. It is the contention of respondent
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death o
corporation which was sustained by respondent court that notwithstanding the death of the pr
f his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation.
incipal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's
The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos b
sham in the property is valid and enforceable inasmuch as the corporation acted in good faith
efore the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also
in buying the property in question.
a finding of fact of the court a quo 13 and of respondent appellate court when the latter stated
that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the s
ale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informin
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-ment
g appellant (the realty corporation) of the death of the former. 14
ioned.

On the basis of the established knowledge of Simon Rallos concerning the death of his princip
ART. 1930. The agency shall remain in full force and effect even after the death of the princip
al Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly require
al, if it has been constituted in the common interest of the latter and of the agent, or in the inte
s for its application lack of knowledge on the part of the agent of the death of his principal; it is
rest of a third person who has accepted the stipulation in his favor.
not enough that the third person acted in good faith.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal
In sustaining the validity of the sale to respondent consideration the Court of Appeals reasone
or of any other cause which extinguishes the agency, is valid and shall be fully effective with r
d out that there is no provision in the Code which provides that whatever is done by an agent
espect to third persons who may have contracted with him in good. faith.
having knowledge of the death of his principal is void even with respect to third persons who m

5
ay have contracted with him in good faith and without knowledge of the death of the principal.
16
We cannot see the merits of the foregoing argument as it ignores the existence of the general
rule enunciated in Article 1919 that the death of the principal extinguishes the agency. That be
ing the general rule it follows a fortiori that any act of an agent after the death of his principal is
void ab initio unless the same fags under the exception provided for in the aforementioned Ar
ticles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly cons
trued, it is not to be given an interpretation or application beyond the clear import of its terms f
or otherwise the courts will be involved in a process of legislation outside of their judicial functi
on.
2. MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners,
vs.THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor
of QUIN BATERNA REALTY), respondents.
FACTS:
in the amount of P50,000.00, damages to his good will in the amount of P100,000.00, for
attorney's fees in the amount of P10,000.00 to protect his rights and interests, plus exemplary
damages to be fixed by the Court. He further alleged that he is entitled to a commission on the
lots unsold because of the rescission of the contract.
On the other hand, the defendants averred that the complaint was filed to make money
out of the suit from defendants, and to harrass and to molest defendants, that because of the
unjustified and unfounded complaint of the plaintiff, the defendants suffered moral damages in
the amount of P50,000.00, and that for the public good, the court may order the plaintiff to pay
the defendants exemplary damages in the amount of P20,000.00, plus attorney's fees of
P10,000.00
The plaintiff contends:
(a) That under the terms of the contract, the plaintiff had unrevocable authority to sell all
the lots included in the Villa Alegre Subdivision and to act as exclusive sales agent of the
defendants until all the lots shall have been disposed of;

(b) That the rescission of the contract contravenes the agreement of the parties.
The plaintiff (Baterna) is a licensed real estate broker, and as such licensed real estate
broker on June 20, 1968, an agreement was entered into between him and the spouses
The defendants contend:
Diolosa, whereby the former was constituted as exclusive sales agent of the spouses, its
successors, heirs and assigns, to dispose of, sell, cede, transfer and convey the lots included
(a) That they were within their legal right to terminate the agency on the ground that they
in VILLA ALEGRE SUBDIVISION owned by the defendants. On September 27, 1968, the
needed the undisposed lots for the use of the family;
spuses terminated the services of Baterna.

(b) That the plaintiff has no right in law to case for commission on lots that they have not
According to Baterna, as a real estate broker, he had sold the lots comprised in several
sold.
subdivisions, to wit: Greenfield Subdivision, the Villa Beach Subdivision, the Juntado
Subdivision, the St. Joseph Village, the Ledesma Subdivision, the Brookside Subdivision, the
ISSUE: Whether or not the defendants can terminate the agency agreement with the plaintiff
Villa Alegre Subdivision, and Cecilia Subdivision, all in the City of Iloilo except St. Joseph which
without paying damages.
is in Pavia Iloilo. And as a licensed real estate broker, he has been seriously damaged by the
action of the defendants in rescinding the contract for which the plaintiff suffered moral damages
RULING: NO. they became liable to the respondent for damages for breach of contract.
6

Under the contract, herein petitioners allowed the private respondent "to dispose of,
sell, cede, transfer and convey ... until out the subject property as subdivided is fully disposed
of." The authority to sell is not extinguished until all the lots have been disposed of. When,
therefore, the petitioners revoked the contract with private respondent in a letter, they become
liable to the private respondent for damages for breach of contract.
And, it may be added that since the agency agreement is a valid contract, the same may be
rescinded only on grounds specified in Articles 1381 and 1382 of the Civil Code, as follows:
ART. 1381. The following contracts are rescissible:
(1) Those which are entered in to by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated
in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect
the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the
defendant without the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.
ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment
the debtor could not be compelled at the time they were effected, are also rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be
the subject of an action of rescission, much less can petitioners say that the private respondent
violated the terms of their agreement-such as failure to deliver to them (Subdivision owners)
the proceeds of the purchase price of the lots.
3.PHILIPPINE NATIONAL BANK vs. THE HONORABLE INTERMEDIATE APPELLATE
COURT (First Civil Cases Division) and ROMEO ALCEDO G.R. No. 66715 September 18,
1990 GRI O-AQUINO, J.:
FACTS:
On March 20, 1968, Leticia de la Vina-Sepe executed a real estate mortgage in favor of PNB
over a lot registered in her name to secure the payment of a sugar crop loan of P3,400.
Later, Leticia Sepe, acting as attorney-in-fact for her brother-in-law, private respondent Romeo
Alcedo, executed an amended real estate mortgage to include his (Alcedo's) Lot as additional
collateral for Sepe's increased loan of P16,500. Leticia Sepe and private respondent Alcedo
verbally agreed to split fifty-fifty (50-50) the proceeds of the loan but failing to receive his one-
half share from her, Alcedo wrote a letter on May 12, 1970 to the PNB, San Carlos Branch,
revoking the Special Power of Attorney which he had given to Leticia Sepe to mortgage his Lot.
PNB Branch Manager, Jose T. Gellegani advised Alcedo that his land had already been
included as collateral for Sepe's 1970-71 sugar crop loan, which the latter had already availed.
Alcedo requested Sepe to pay her accounts to forestall foreclosure proceedings against his
property, but to no avail. Alcedo filed a complaint against Sepe and PNB while the latter filed a
case for extrajudicial foreclosure. PNB alleged that it had no knowledge of the agreement
between Mrs. Sepe and Alcedo to split the crop loan proceeds between them. PNB said that
the revocation was not formalized in accordance with law.
ISSUE: Whether or not Special Power of Attorney given to Sepe was validly revoked by Alcedo
thereby nullifying the act of PNB in proceeding against Alcedo's property to satisfy Sepe's
unpaid 1971-72 sugar crop loan?
HELD: YES.
In Agency, the revocation of a special power of attorney, although embodied in a private writing
is valid and binding between the parties. While Article 1358 of the New Civil Code requires that
the revocation of Alcedos Special Power of Attorney to mortgage his property should appear
in a public instrument:
7
Art. 1358. The following must appear in a public document: (1) Acts or contracts which have
for their object the creation, transmission, modification or extinguishment of real rights over
immovable property; sales of real property or of an interest therein are governed by Articles
1403, No. 2 and 1405.
Nevertheless, a revocation embodied in a private writing is valid and binding between the
parties. The legalization by a public writing and the recording of the same in the registry are not
essential requisites of a contract entered into, as between the parties, but mere conditions of
form solemnities which the law imposes in order that such contract may be valid as against third
persons, and to insure that a publicly executed and recorded agreement shall be respected by
the latter. As such, The PNB acted with bad faith in proceeding against Alcedo's property to
satisfy Sepe's unpaid 1971-72 sugar crop loan.
4. DY BUNCIO V ONG GUAN CAN (ART. 1926)
FACTS:
Ong Guan Can Jr. (son), as agent of Ong Guan Can (father), sold the rice-mill and camarin for
P13,000 and gives as his authority the power of attorney on May 1928. The receipt of the money
acknowledged in the deed was to the agent, and the deed was signed by the agent in his own
name and without any words indicating that he was signing it for the principal.
Now, Dy Buncio Co. claims that the property belongs to its judgment debtor, Ong Guan Can,
while defendants Juan Tong and Pua Giok Eng are claiming to be the owner and lessee by
virtue of the deed executed by Ong Guan Can, Jr.
After trial the CFI held that the deed was invalid and that the property was subject to the
execution which has been levied on said properties by the judgment creditor(Dy Buncio) of Ong
Guan Can. Defendants Juan Tong and Pua Giok bring this appeal and insist that the deed of
the 31st of July, 1931, is valid.
The power of attorney referred to in the deed, however, is not a general power of attorney but
a limited one and does not give the express power to alienate the properties in question.
Appellants claim that this defect is cured by Exhibit 1, which purports to be a general power of
attorney given to the same agent in 1920.
ISSUES: W/N the deed of sale executed by Ong Guan Can Jr. was valid. NO
W/N the second power of attorney supplanted the first. YES
HELD:
Article 1732 of the Civil Code is silent over the partial termination of an agency. The making
and accepting of a new power of attorney, whether it enlarges or decreases the power of the
agent under a prior power of attorney, must be held to supplant and revoke the latter when the
two are inconsistent. If the new appointment with limited powers does not revoke the general
power of attorney, the execution of the second power of attorney would be a mere futile gesture.
The properties in question were subject to attachment nd execution, the title of Ong Guan Can
not having been divested by the sale made by Ong Guan Can Jr.
5. INFANTE vs. CUNANAN
FACTS:
8
INFANTE: Seller of parcels of Land
CUNANAN: Agent to sell for Infante
As agent, Cunanan is to receive commission of 5 per cent on the
purchase price plus whatever overprice they may obtain for the property.
The purchaser will however shoulder the mortgage existing thereon in
the favor of the Rehabilitation Finance Corporation
On November 30, 1948,when Cunanan introduced the prospective buyers (Pio S.
Noche) to Infante, the latter informed them that she was no longer interested in
selling the property and succeeded in making them sign a document stating therein
that the written authority she had given them was already cancelled.
However, on a December 20, 1948, INFANTE dealt directly with Pio S. Noche selling
to him the property for P31,000. Upon learning this transaction, CUNANAN
demanded from INFANTE the payment of their commission, but she refused and so
they brought the present action.
ISSUE:
Are the agents entitled to their commission DESPITE the fact that their authority to
sell was cancelled?
RULING:
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 ac-
cording to the party prejudiced the reward which is due him. This is the situation in
which respondents were placed by petitioner. Petitioner took advantage of the
services rendered by respondents, 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 petitioner to escape payment of the commission agreed upon.
__________________________________________________________________________
6. VICENTE M. COLEONGCO, plaintiff-appellant, vs. EDUARDO L. CLAPAROLS, defendant-
appellee.
FACTS:
o Since 1951, Claparols operated a factory for the manufacture of nails under the style
of "Claparols Steel & Nail Plant". The raw material, nail wire, was imported from foreign
sources
o Losses compelled Claparols in 1953 to look for someone to finance his imports of nail
wires. Coleongco became his financier.

o A financing agreement was perfected .

YES.

o In addition, a special power of attorney was executed authorizing Coleongco to open

The seller could NOT have been liable with respect to the commission to his agents
and negotiate letters of credit, to sign contracts, bills of lading, invoices, and papers
provided that the agents agreed to call off the transaction in deference to the
covering transactions; to represent appellee and the nail factory; and to accept
request of the seller.
payments and cash advances from dealers and distributors.

In this case however, there was BAD FAITH.

9
 o Thereafter, Coleongco also became the assistant manager of the factory.,
o 1956, Claparols was surprised by service of an alias writ of execution to enforce a
judgment obtained against him by the Philippine National Bank, despite the fact that
on the preceding September he had submitted an amortization plan to settle the
account.
o He learned that the execution had been procured because of derogatory information
against appellee that had reached the bank Coleongco. His letters to the Philippine
National attempting to undermine the credit of the principal and to acquire the factory
of the latter, without the principal's knowledge. Fortunately, Claparols managed to
arrange matters with the bank and to have the execution levy lifted.
o He further discovered the following acts of disloyalty of Coleongco:
A letter to his cousin, Kho To , instructing the latter to reduce to one-half the usual
monthly advances to Claparols on account of nail sales in order to squeeze said
appellee and compel him to extend the contract entitling Coleongco to share in the
profits of the nail factory on better terms, and ultimately "own his factory", a plan carried
out by Kho's letter, ,reducing the advances to Claparols;
Coleongco's attempt to, have Romulo Agsam pour acid on the machinery;
His illegal diversion of the profits of the factory to his own benefit;
And the surreptitious disposition of the Yates band resaw machine in favor of his
cousin's Hong Shing Lumber Yard, made while Claparols was in Baguio in July and
August of 1956,
Instead of putting up all the necessary money needed to finance the imports of raw
material, Coelongco merely advanced 25% in cash on account of the price and had
the balance covered by surety agreements with Claparols and others as solidary
guarantors.
o Claparols consequently revoked the power of attorney, and informed Coleongco
by registered mail, demanding a full accounting at the same time. Coleongco
protested. Claparols requested external auditors, examination showed that Coleongco
owed the Claparols Nail Factory the amount of P87,387.37, as of June 30, 1957.
The Complaint: Coleongco field a suit against Claparols charging breach of contract asking
for accounting plus damages.
His Argument: He contended that the power of attorney was made to protect his interest under
the financing agreement and was one coupled with an interest that the appellee Claparols had
no legal power to revoke. Caparols' mal-administration of the business endangered the security
for the advances that he had made under the financing contract Appellant likewise denies the
authorship of the letter to Kho as well as the attempt to induce Agsam to damage the machinery
of the factory.
RTC: Dismiss action for damages and order him to pay Claparols P81,387.27 as per audit as
adjusted plus damages.
ISSUES:
1.) WON the contract of agency between Claparols and Coleongco was one coupled with
interest. NO
2.) WON a contract of agency when coupled with an interest may be validly revoked by the
principal. YES
RULING:
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 1.) The financing agreement itself already contained clauses for the protection of
appellant's interest, and did not call for the execution of any power of attorney in favor
of Coleongco.
2.) (But) Granting appellant's view, it must not be forgotten that a power of attorney can
be made irrevocable by contract only in the sense that the principal may not recall it
at his pleasure; but coupled with interest or not, the authority certainly can be revoked
for a just cause, such as when the attorney-in-fact betrays the interest of the principal,
as happened in this case. It is not open to serious doubt that the irrevocability of the
power of attorney may not be used to shield the perpetration of acts in bad faith, breach
of confidence, or betrayal of trust, by the agent for that would amount to holding that
a power coupled with an interest authorizes the agent to commit frauds against the
principal.
Our new Civil Code, in Article 1172, expressly provides the contrary in prescribing that
responsibility arising from fraud is demandable in all obligations, and that any waiver
of action for future fraud is void. It is also on this principle that the Civil Code, in its
Article 1800, declares that the powers of a partner, appointed as manager, in the
articles of co-partnership are irrevocable without just or lawful cause; and an agent
with power coupled with an interest cannot stand on better ground than such a partner
in so far as irrevocability of the power is concerned.
That the appellee Coleongco acted in bad faith towards his principal Claparols is, on
the record, unquestionable.
The facts mentioned acts of deliberate sabotage by the agent that fully justified the
revocation of the power of attorney.
7. NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR vs .LUY KIM
GUAN and LINO BANGAYAN
FACTS: The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now
deceased and who died in China sometime after he went to that country in the last part of 1931
or early part of 1932. The said Luis Herrera in his lifetime was the owner of three (3) parcels of
land and their improvements. Before leaving for China, however, Luis Herrera executed a deed
of General Power of Attorney, Exhibit 'B', which authorized and empowered the defendant Kim
Guan, among others to administer and sell the properties of said Luis Herrera.
Lot 1740 lot was sold by the defendant Luy Kim in his capacity as attorney-in-fact of
the deceased Luis Her to Luy Chay on September 11, 1939. On August 28, 1941, to secure a
loan of P2,00 a deed of mortgage to the Zamboanga Mutual Building and Association was
executed by Luy Chay. On January 31, 1947, the said Luy Chay executed a deed of sale,
Exhibit "E", in favor of Lino Bangayan. By virtue of this Transfer Certificate of Title T-2567 was
issued to Lino Bangayan.
On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the
defendants, sold to Nicomedes Salazar his one half () participation in these two (2) lots (Lots
4465 and 4467). On August 4, 1937, the defendant Luy Kim Guan and Nicomedes Salazar
executed a deed of mortgage in favor of Bank of the Philippine Islands to secure a loan of
P3,500.00. On August 17, 1937, the defendant Luy Kim Guan and Nicomedes Salazar sold Lot
4465 to Carlos Eijansantos. Nicomedes Salazar sold his one half () interest on Lot 4467 to
the defendant Lino Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the
corresponding Transfer Certificate of Title T-2654 was issued to Lino Bangayan and to Luy Kim
Guan, both are co-owners in equal shares.
As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased,
but as to the specific and precise date of his death the evidence of both parties failed to show.
It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding
quoted portion of the decision were fraudulent and were executed after the death of Luis
Herrera and, consequently, when the power of attorney was no longer operative. It is also
claimed that the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners
of Lots Nos. 1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire
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real properties. Plaintiff-appellant, in addition, questions the supposed deed of sale allegedly
executed by Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying
one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed
on that date, jointly with the general power of attorney, was a lease contract over the same
properties for a period of 20 years for which Luy Kim Guan paid the sum of P2,000.00.
WHEREFORE, and with the above modification, the decision appealed from is hereby
affirmed in all other respects without prejudice to appellants' right to demand from the agent
(Luy Kim Guan) an accounting of proceeds of the agency, if such right is still available. No
costs. So ordered.

ISSUE: WHETHER OR NOT THE TRANSACTIONS WERE NULL AND VOID BECAUSE
8. Manuel Buason and Lolita Reyes vs Mariano Panuyas
THEY ARE EXECUTED AFTER THE DEATH OF THE PRINCIPAL.

Facts: In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by
RULING: NO. The transactions are not null and void and of no effect.
homestead patent a parcel of land.On 29 October 1930 they executed a power of attorney
authorizing Eustaquio Bayuga to engage the services of an attorney to prosecute their case
against Leonardo Gambito for annulment of a contract of sale of the parcel of land and after
Coming now to the contention that these transactions are null and void and of no effect
the termination of the case in their favor to sell it, and from the proceeds of the sale to deduct
because they were executed by the attorney-in-fact after the death of his Principal, suffice it to
whatever expenses he had incurred in the litigation.
say that as found by the lower court, the date of death of Luis Herrera has not been satisfactorily
proven. The only evidence presented by the Plaintiff-appellant in this respect is a supposed
letter received from a certain "Candi", dated at Amoy in November, 1936, purporting to give
On 14 March 1934 Buenaventura Dayao died leaving his wife Eugenia Vega and children. On
information that Luis Herrera (without mentioning his name) had died in August of that year.
21 march 1939 his four children executed a deed of sale conveying the land to the appellants,
This piece of evidence was properly rejected by the lower court for lack of identification. the
the spouses Manuel Buason and Lolita M. Reyes. Their mother Eugenia Vega affixed her
other hand, we have the testimony of the witness Chung Lian to the effect that when he was in
thumbmark to the deed of sale as witness The appellants took possession of the parcel of
Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that
land through their tenants.
the latter was still alive at the time. Since the documents had been executed the attorney-in-
fact one in 1937 and the other in 1939, it is evident, if we are to believe this testimony, that the
documents were executed during the lifetime of the principal. Be that as it may, even
Subsequently Eustaquio Bayuga (the agent) sold 8 hectares of the same parcel of land to the
granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is
spouses Mariano Panuyas (appellee herein) and Sotera B. Cruz. The appellants and the
no indication in the record, that the age Luy Kim Guan was aware of the death of his prince at
appellee claim ownership to the same parcel of land. In their complaint the appellants prayed
the time he sold the property. The death of the principal does not render the act of an agent
that the appellee be ordered to deliver possession of the part of the parcel of land held by
unenforceable, where the latter had no knowledge of such extinguishment the agency.
him; that the deed of sale of that part of the parcel of land held by the appellee executed by

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Eustaquio Bayuga be declared null and void that the deed of sale of the parcel of land Yes.
executed by the children and heirs of Buenaventura Dayao in their favor be declared valid.

The appellees affirmative defenses are that he and his wife were buyers in good faith and for
valuable consideration.
Issue: 1. W/N the death of the principal ended the authority of the agent to sell the
land? (NO)
2. W/N the sale by the agent, Bayuga, to the appelee, Panuyas, was valid? (YES)
Held: No.
It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of land
in question. On the other hand, the power of attorney executed by Buenaventura Dayao
authorizing Eustaquio Bayuga to sell the parcel of land was annotated or inscribed on the back
of the original certificate of title and the sale executed by Eustaquio Bayuga in favor of the
appellee Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of attorney
was annotated or inscribed on the back of the same original certificate of title.
It does not appear that the appellee and his wife had actual knowledge of the previous sale. In
the absence of such knowledge, they had a right to rely on the face of the certificate of
title of the registered owners and of the authority conferred by them upon the agent also
recorded on the back of the certificate of title. As this is a case of double sale of land registered
under the Land Registration Act, he who recorded the sale in the Registry of Deeds has a better
right than he who did not.1

As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the
authority of the agent,the sale of 8 hectares of the parcel of land by the agent to the appellee
Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state that is has
not been shown that the agent knew of his principal's demise, and for that reason article
1738, old Civil code or 1931, new Civil Code, which provides:

Anything done by the agent, without knowledge of the death of the principal or of 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 is the law
applicable to the point raised by the appellants.

2nd issue:

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