W. G. PHILPOTTS vs. PHILIPPINE MANUFACTURING COMPANY and F. N.

BERRY
G.R.No. L-15568
November 8, 1919

FACTS:
The petitioner, W. G. Philpotts, a stockholder of respondent company, ask to obtain a writ of mandamus to compel the
respondents to permit him or by some authorized agent or attorney, to inspect and examine the records of the business transacted by
said company since January 1, 1918. The respondents interposed a demurrer, and the controversy is now before us for the
determination of the questions thus presented. The propriety of naming the secretary of the corporation as a codefendant cannot be
questioned, since such official is customarily charged with the custody of all documents, correspondence, and records of a corporation,
and he is presumably the person against whom the personal orders of the court would be made effective in case the relief sought
should be granted.
The respondent corporation or any of its officials has refused to allow the petitioner himself to examine anything relating to the affairs
of the company. As a consequence the petition prays for a peremptory order commanding the respondents to place the records of all
business transactions of the company, during a specified period, at the disposal of the petitioner or his duly authorized agent or
attorney, it being evident that the petitioner desires to exercise said right through an agent or attorney. In the argument in support of
the demurrer it is conceded by counsel for the respondents that there is a right of examination in the stockholder granted under
section 51 of the Corporation Law, but it is insisted that this right must be exercised in person
nd

Governing law: Section 51(2 paragraph) of Act No. 1459(Corporation Law) : "The record of all business transactions of the corporation
and the minutes of any meeting shall be open to the inspection of any director, member or stockholder of the corporation at
reasonable hours." This provision is to be read of course in connecting with the related provisions of sections 51 and 52, defining the
duty of the corporation in respect to the keeping of its records.
ISSUE:
Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a proper agent or
attorney of the stockholder as well as by the stockholder in person?
HELD:
YES. The Supreme Court held that the right of inspection given to a stockholder can be exercised either by himself or by any
proper representative or attorney in fact, and either with or without the attendance of the stockholder. This is in conformity with the
general rule that what a man may do in person he may do through another and there was nothing in the statute that would justify us in
qualifying the right in the manner suggested by the respondents.
RULING: The writ of mandamus is granted.

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs.

COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED
G.R. No. 76931 May 29, 1991
FACTS:
The respondent American Air, an air carrier offering passenger and air cargo transportation in the Philippines, and petitioner,
Orient Air, entered into a General Sales Agency Agreement whereby the former authorized the latter to act as its exclusive general sales
agent within the Philippines for the sale of air passenger transportation.
------------------------------------------------------

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-1

General Sales Agency Agreement:

Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines, including any United States
military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for the sale of air passenger
transportation. The services to be performed by Orient Air Services shall include:
(a) soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff competent and
sufficient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the business
of American;
(c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents and the general public
in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with the
prior written consent of American) in the assigned territory including if required by American the control of remittances and
commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air
Services nor its sub-agents will perform services for any other air carrier similar to those to be performed hereunder for American
without the prior written consent of American. Subject to periodic instructions and continued consent from American, Orient Air
Services may sell air passenger transportation to be performed within the United States by other scheduled air carriers provided
American does not provide substantially equivalent schedules between the points involved.
13. Termination: American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to transfer to
the United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate the
Agreement without cause by giving the other 30 days' notice by letter, telegram or cable.
-----------------------------------------------------------Respondent (American Air)s contention: It alleged that Orient Air had reneged on its obligations under the Agreement by failing to
promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by
itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in
accordance with Paragraph 13 thereof . Subsequently, American Air instituted suit against Orient Air with the lower court of Manila for
Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order averring the basis for the
termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of
which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff.
Petitioner (Orient Air)s defense: Orient Air denied the material allegations of the complaint with respect to American Air entitlement
to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, the latter in
fact still owed Orient Air a balance in unpaid overriding commissions.
Basis: American will pay Orient Air Services an overriding commission of 3% of the tariff fares and charges for all sales of transportation
over American's service by Orient Air Service or its sub-agents (Agreement).
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents,
it is American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales.
This is supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding
commission, the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks.
ISSUES:
(1) Whether or not the Orient Air Services & et. al., as agent of respondent American Air acted within the scope of his authority?;
(2) Whether the termination made by respondent, American Air, as affecting the General Sales Agency Agreement (GSA) is
legal?

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-2

HELD:
(1) YES. The Supreme Court held that in acting for the principal, the agent, by legal fiction, becomes the principal authorized to
perform all acts which the latter would have him do. Such relationship can only be effected with the consent or authority of
the principal which cannot in any way be compelled by law or by any court.
The Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing
principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown
revenue."
(2) NO. The Supreme Court held the termination made by the latter as affecting the GSA agreement illegal and improper and
order the plaintiff to reinstate defendant as its general sales agent for passenger tranportation in the Philippines in
accordance with said GSA agreement; plaintiff is ordered to pay defendant the balance of the overriding commission on total
flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of US$84,821.31 plus the
additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981
until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal
interest to commence from the filing of the counterclaim up to the time of payment. Further, plaintiff is directed to pay
defendant the amount of One Million Five Hundred Thousand (Pl,500,000.00) pesos as and for exemplary damages; and the
amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's fees.
G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS
FACTS:
Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of in Cebu. The sisters executed a special power of
attorney (SPA) in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. Later, Concepcion Rallos
died. Subsequently, Simeon Rallos, the brother, sold the undivided shares of his sisters to respondent Corporation for the sum of
P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu and new Transfer Certificate of Title (TCT) was issued in
the name of the vendee.
Ramon Rallos, administrator of the Intestate Estate of Concepcion Rallos, filed a complaint praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be declared unenforceable, and said share be reconveyed to her estate; (2) that
the Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued in the
names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that petitioner be indemnified by
way of attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint was amended
twice; defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter filed third-party
complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his sister Gerundia died and
they were substituted by the respective administrators of their estates.
Respondent corporations contention: It is the contention of respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's sham
in the property is valid and enforceable inasmuch as the corporation acted in good faith in buying the property in question
ISSUE:
(1) Whether or not the sale of the undivided share of Concepcion Rallos in lot 5983 executed by Simeon Rallos (brother) after
the death of his principal is valid?

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-3

HELD: NO. The SupremeCourt held on the basis of Article 1919, that the death of the principal extinguishes the agency. That being
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 Articles 1930 and 1931. On the basis of the established knowledge of Simon Rallos
concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good
faith.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the
latter's share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed
by Simon Rallos before the trial court. That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court
a quo 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 sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing respondent
corporation of the death of the former.
Ruling: The Supreme Court set aside the decision of respondent appellate court, and affirmed the judgment rendered by then Hon.
Amador E. Gomez of the Court of First Instance of Cebu, which granted the relief prayed for by the petitioner. Ramon Rallos to be
deaclared the sale as un uneanforceable and to recover the disposed share.
------------------------------Governing Law: Law on Agency
Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject to any
exception.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been
constituted in the common interest of the latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.
ART. 1931. 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.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with
an interest.
Article 1931 is the applicable law.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective
only under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person
who contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of
the principal at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the
agent invalid and unenforceable.
URBAN BANK, INC, vs. MAGDALENO M. PEA
G.R. No. 145817
October 19, 2011

A petition for for payment of services rendered and for reimbursement of costs by respondent, Atty. Magdaleno Pea ,
The trial courts decision: It claims that the basis is an oral contract of agency and the award should be PhP28,5000,000;
Court of Appeals decision: The appellate court said that Atty. Pea can only be paid under the legal principle against unjust
enrichment, and the total award in his favor should only amount to PhP3,000,000. In the eyes of the trial court, the controlling finding
is that Atty. Pea should be believed when he testified that in a telephone conversation, the president of Urban Bank, Teodoro

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-4

Borlongan, a respondent herein, agreed to pay him for his services 10% of the value of the property then worth PhP240,000,000, or
PhP24,000,000. Costs and other awards additionally amount to PhP4,500,000, for a total award of PhP28,500,000 according to the trial
court. To the Court of Appeals, such an award has no basis, as in fact, no contract of agency exists between Atty. Pea and Urban Bank.
Hence, Atty. Pea should only be recompensed according to the principle of unjust enrichment, and that he should be awarded the
amount of PhP3,000,000 only for his services and reimbursements of costs.
Pea had included as co-defendants with Urban Bank in the RTC case, several officers and board directors of Urban Bank. Not all board
directors were sued, however. With respect to those included in the complaint, other than against Teodoro Borlongan, Corazon Bejasa,
and Arturo Manuel, no evidence was ever offered as to their individual actions that gave rise to Atty. Peas cause of action the
execution of the agency contract and its breach and yet, these officers and directors were made solidarily liable by the trial court with
Urban Bank for the alleged breach of the alleged corporate contract of agency. Execution pending appeal was also granted against
them for this solidary liability resulting in the levy and sale in execution pending appeal of not only corporate properties of Urban Bank
but also personal properties of the individual bank officers and directors. It would have been interesting to find out what drove Atty.
Pea to sue the bank officers and directors of Urban Bank and why he chose to sue only some, but not all of the board directors of
Urban Bank, but there is nothing on the record with which this analysis can be pursued.
FACTUAL ANTECEDENTS:
Petitioner,Urban Bank, Inc., was a domestic Philippine corporation, engaged in the business of banking. The eight individual
respondents were officers and members of Urban Banks board of directors, who were sued in their official and personal capacities. On
the other hand, respondent Atty. Pea is a lawyer by profession and was formerly a stockholder, director and corporate secretary of
Isabel Sugar Company, Inc. (ISCI).
ISCI owned a parcel of land located in Pasay City. In 1984, ISCI leased the Pasay property for a period of 10 years. Without its consent
and in violation of the lease contract, the lessee subleased the land to several tenants, who in turn put up 23 establishments, mostly
beer houses and night clubs, inside the compound. In 1994, a few months before the lease contract was to expire, ISCI informed the
17
lessee and his tenants that the lease would no longer be renewed and that it intended to take over the Pasay property for the
purpose of selling it.
ISCI and Urban Bank executed a Contract to Sell, whereby the latter would pay ISCI the amount of PhP241,612,000 in installments for
the Pasay property. Both parties agreed that the final installment of PhP25,000,000 would be released by the bank upon ISCIs delivery
of full and actual possession of the land, free from any tenants. In the meantime, the amount of the final installment would be held by
the bank in escrow.
22

ISCI then instructed Pea, who was its director and corporate secretary, to take over possession of the Pasay property against the
tenants upon the expiration of the lease. ISCIs president, Mr. Enrique G. Montilla III, faxed a letter to Pea, confirming the latters
engagement as the corporations agent to handle the eviction of the tenants from the Pasay property.
ISCI and Urban Bank executed a Deed of Absolute Sale over the Pasay property for the amount agreed upon in the Contract to Sell, but
subject to the above escrow provision. The title to the land was eventually transferred to the name of Urban Bank on 05 December
1994.
To prevent the sub-tenants from further appropriating the Pasay property, respondent Pea, as director and representative of ISCI,
filed a complaint for injunction with the RTC-Pasay City. Acting on ISCIs prayer for preliminary relief, the trial court favorably issued a
temporary restraining order which was duly implemented.At the time the First Injunction Complaint was filed, a new title to the Pasay
property had already been issued in the name of Urban Bank.
The facts regarding the following phone conversation and correspondences are highly-controverted. Immediately after talking to
respondent Bejasa, Pea got in touch with Urban Banks president, respondent Borlongan. Pea explained that the policemen in Pasay
City were sympathetic to the tenants and were threatening to force their way into the premises. He expressed his concern that violence
might erupt between the tenants, the city police, and the security guards posted in the Pasay property. Respondent Borlongan
supposedly assured him that the bank was going to retain his services, and that the latter should not give up possession of the subject

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-5

land. Nevertheless, petitioner-respondent Pea demanded a written letter of authority from the bank. Respondent Borlongan acceded
and instructed him to see respondent Bejasa for the letter.
Agreement: The respondent Borlongan allegedly asked Pea to maintain possession of the Pasay property and to represent Urban Bank
in any legal action that might be instituted relative to the property. Pea supposedly demanded 10% of the market value of the
property as compensation and attorneys fees and reimbursement for all the expenses incurred from the time he took over land until
possession was turned over to Urban Bank. Respondent Borlongan purportedly agreed on condition that possession would be turned
over to the bank, free of tenants, not later than four months; otherwise, Pea would lose the 10% compensation and attorneys fees.
Respondent (Atty. Pena)s action: Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on behalf of ISCI, on the
ground of lack of personality to continue the action, since the Pasay property, subject of the suit, had already been transferred to
Urban Bank.
67

When Urban Bank refused to pay for his services in connection with the Pasay property, Pea filed a complaint for recovery of agents
compensation and expenses, damages and attorneys fees in RTC-Bago City in the province of Negros Occidental.
Petitioner (Union Bank)s contention: Urban Bank and individual bank officers and directors argued that it was ISCI, the original owners
of the Pasay property, that had engaged the services of Pea in securing the premises; and, consequently, they could not be held liable
for the expenses Pea had incurred.
s

RTC-Bago City decision: It ruled in favor of Atty. Pea, after finding that an agency relationship had indeed been created between
him and Urban Bank. The eight directors and bank officers were found to be solidarily liable with the bank for the payment of agencys
fees. The trial court thus ordered Urban Bank and all eight defendant bank directors and officers whom Pea sued to pay the total
amount of PhP28,500,000 (excluding costs of suit).
With respect to the status of Atty. Peas relationship with Urban Bank, the trial and the appellate courts made conflicting findings that
shall be reconciled by the Court. On one end, the appellate court made a definitive ruling that no agency relationship existed at all
between Pea and the bank, despite the services performed by Pea with respect to the Pasay property purchased by the bank.
Although the Court of Appeals ruled against an award of agents compensation, it still saw fit to award Pea with Ph3,000,000 for
255
expenses incurred for his efforts in clearing the Pasay property of tenants. On the other extreme, the trial court heavily relied on the
sole telephone conversation between Pea and Urban Banks President to establish that the principal-agent relationship created
between them included an agreement to pay Pea the huge amount of PhP24,000,000. In its defense, Urban Bank insisted that Pea
was never an agent of the bank, but an agent of ISCI, since the latter, as seller of the Pasay property committed to transferring it free
from tenants. Meanwhile, Pea argues on the basis of his successful and peaceful ejectment of the sub-tenants, who previously
occupied the Pasay property.
Apparently to ensure that ISCI is able to deliver the property physically clean to Urban Bank, it was ISCIs president, Enrique Montilla
who directed on 26 November 1994 one of its directors, Pea, to immediately recover and take possession of the property upon
expiration of the contract of lease on 29 November 1994. Pea thus first came into the picture as a director of ISCI who was constituted
as its agent to recover the Pasay property against the lessee as well as the sub-tenants who were occupying the property in violation of
259
the lease agreement. He was able to obtain possession of the property from the lessee on the following day, but the unauthorized
sub-tenants refused to vacate the property.
Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company, Inc., to take charge of inspecting the tenants
-------------------------------------ISSUES:
(1) Whether or not he contract of agency would be theblegal basis for such award in favor of Atty. Pea for the services he
rendered to Urban Bank?
(2) Whether or not the officers and directors of Urban Bank would be held solidarily liable in their personal capacities for the
amount claimed by Pea?

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-6

HELD:
(1) NO. Based on the evidence on records and the proceedings below, the Court concludes that Urban Bank constituted Atty.
Pea as its agent to secure possession of the Pasay property. This conclusion, however, is not determinative of the basis of
the amount of payment that must be made to him by the bank. The context in which the agency was created lays the basis
for the amount of compensation Atty. Pea is entitled to.
(2) NO. The corporate officers and directors of Urban Bank are not solidarily or personally liable with their properties for the
corporate liability of Urban Bank to Atty. Pea. The obligation to pay Peas compensation, however, falls solely on Urban
Bank. Absent any proof that individual petitioners as bank officers acted in bad faith or with gross negligence or assented to a
patently unlawful act, they cannot be held solidarily liable together with the corporation for services performed by the
latters agent to secure possession of the Pasay property. Thus, the trial court had indeed committed grave abuse of
discretion when it issued a ruling against the eight individual defendant bank directors and officers and its Decision should be
absolutely reversed and set aside.

Ruling: Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No. 145817) and Benjamin L. de Leon, Delfin Gonzalez,
Jr., and Eric L. Lee (G. R. No. 145822) are hereby GRANTED
DOMINION INSURANCE CORPORATION vs.
COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA
G.R. No. 129919
February 6, 2002

FACTS:
The respondent Rodolfo S. Guevarra instituted Civil Case No. 8855 for sum of money against petitioner, Dominion Insurance
Corporation. The former sought to recover the sum of P156,473. 90 which he claimed to have advanced in his capacity as manager of
petitioner corporation to satisfy certain claims filed by defendants clients. The latter denied any liability to respondent herein and
asserted a counterclaim for P249,672.53, representing premiums that latter allegedly failed to remit.
The petitioner corporation filed a third-party complaint against Fernando Austria, who, at the time relevant to the case, was its
Regional Manager for Central Luzon area.
Memorandum of Management Agreement: It enumerates the scope of respondent Guevarras duties and responsibilities as agency
manager for San Fernando, Pampanga. The respondent Guevarras authority is further limited by the written standard authority to pay,
which states that the payment shall come from respondent Guevarras revolving fund or collection.
It is further expected, release papers will be signed and authorized by the concerned and attached to the corresponding claim folder
after effecting payment of the claim.
Having deviated from the instructions of the principal, the expenses that respondent Guevarra incurred in the settlement of the claims
of the insured may not be reimbursed from petitioner Dominion. This conclusion is in accord with Article 1918, Civil Code, which states
that:
"The principal is not liable for the expenses incurred by the agent in the following cases:
"(1) If the agent acted in contravention of the principals instructions, unless the latter should wish to avail himself of the benefits
derived from the contract;
"xxx
xxx
xxx"
However, while the law on agency prohibits respondent Guevarra from obtaining reimbursement, his right to recover may still be
justified under the general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
"Whoever pays for another may demand from the debtor what he has paid, except that if he paid without the knowledge or against the
will of the debtor, he can recover only insofar as the payment has been beneficial to the debtor."
In this case, when the risk insured against occurred, petitioners liability as insurer arose.1wphi1 This obligation was extinguished
when respondent Guevarra paid the claims and obtained Release of Claim Loss and Subrogation Receipts from the insured who were
paid.

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-7

Thus, to the extent that the obligation of the petitioner has been extinguished, respondent Guevarra may demand for reimbursement
from his principal. To rule otherwise would result in unjust enrichment of petitioner.
ISSUE: (1) Whether respondent Guevarra acted within his authority as agent for petitioner?
(2) Whether respondent Guevarra is entitled to reimbursement of amounts he paid out of his personal money in settling the
claims of several insured.
HELD:
(1) YES. Although the payment of claims is not an act of administration. The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, neither is it of a character similar to the acts enumerated therein. A special
power of attorney is required before respondent Guevarra could settle the insurance claims of the insured. Hoever,
23
Respondent Guevarras authority to settle claims is embodied in the Memorandum of Management Agreement dated
February 18, 1987 which enumerates the scope of respondent Guevarras duties and responsibilities as agency manager for
San Fernando, Pampanga.
(1) YES. In this case, when the risk insured against occurred, petitioners liability as insurer arose. This obligation was
extinguished when respondent Guevarra paid the claims and obtained Release of Claim Loss and Subrogation Receipts from
the insured who were paid.Thus, to the extent that the obligation of the petitioner has been extinguished, respondent
Guevarra may demand for reimbursement from his principal. To rule otherwise would result in unjust enrichment of latter.
A perusal of the Special Power of Attorney would show that petitioner (represented by third-party defendant Austria) and
respondent Guevarra intended to enter into a principal-agent relationship. Despite the word "special" in the title of the
document, the contents reveal that what was constituted was actually a general agency.
RULING:
The Supreme Court DENY the Petition. However, we MODIFY the decision of the Court of Appeals and that of the Regional Trial Court,
Branch 44, San Fernando, Pampanga, in that petitioner is ordered to pay respondent Guevarra the amount of P112,672.11
representing the total amount advanced by the latter in the payment of the claims of petitioners clients.
-----------------------------------------------------------The agency comprises all the business of the principal, but, couched in general terms, it is limited only to acts of administration.
A general power permits the agent to do all acts for which the law does not require a special power. Thus, the acts enumerated in or
similar to those enumerated in the Special Power of Attorney do not require a special power of attorney.
Article 1878, Civil Code, enumerates the instances when a special power of attorney is required. The pertinent portion that applies to
this case provides that:
"Article 1878. Special powers of attorney are necessary in the following cases:
"(1) To make such payments as are not usually considered as acts of administration;
"x x x
xxx
xxx
"(15) Any other act of strict dominion."

MARIA KATRINA S. TANJUSAY LLB-3B

BUSINESS ORGANIZATION I

-- AGENCY CASES-8