Joe Miguel, a well-known treasure hunter in Mindanao, executed a Special Power of Attorney (SPA)

appointing his nephew, John Paul, as his attorney-infact. John Paul was given the power to deal
with treasure-hunting activities on Joe Miguel’s land and to file charges against those who may enter
it without the latter’s authority. Joe Miguel agreed to give John Paul forty percent (40%) of the
treasure that may be found on the land. 19 Thereafter, John Paul filed a case for damages and
injunction against Lilo for illegally entering Joe Miguel’s land. Subsequently, he hired the legal
services of Atty. Audrey agreeing to give the latter thirty percent (30%) of Joe Miguel’s share in
whatever treasure that may be found in the land. Dissatified however with the strategies
implemented by John Paul, Joe Miguel unilaterally revoked the SPA granted to John Paul. Is the
revocation proper? (4%)
SUGGESTED ANSWER:
No, the revocation was not proper. As a rule, a contract of agency may be revoked by the principal at
will.8 However, an agency ceases to be revocable at will if it is coupled with an interest or if it is a
means of fulfilling an obligation already contracted. (Article 1922). In the case at bar, the agency
may be deemed an agency coupled with an interest not only because of the fact that John Paul
expects to receive 40% of whatever treasure may be found but also because he also contracted the
services of a lawyer pursuant to his mandate under the contract of agency and he therefore stands to
be liable to the lawyer whose services he has contracted. (Sevilla v. Tourist World Service)
Agency; Guarantee Commission (2004)

As an agent, AL was given a guarantee commission, in addition to his regular commission, after he
sold 20 units of refrigerators to a customer, HT Hotel. The customer, however, failed to pay for the
units sold. AL’s principal, DRBI, demanded from AL payment for the customer’s accountability. AL
objected, on the ground that his job was only to sell and not to collect payment for units bought by the
customer.

Is AL’s objection valid? Can DRBI collect from him or not? Reason.

SUGGESTED ANSWER:

No, AL’s objection is not valid and DRBI can collect from AL. Since AL accepted a guarantee
commission, in addition to his regular commission, he agreed to bear the risk of collection and to pay
the principal the proceeds of the sale on the same terms agreed upon with the purchaser
(Article 1907, Civil Code)

Agency; Real Estate Mortgage (2004)

CX executed a special power of attorney authorizing DY to secure a loan from any bank and to
mortgage his property covered by the owner’s certificate of title. In securing a loan from MBank,
DY did not specify that he was acting for CX in the transaction with said bank.

Is CX liable for the bank loan? Why or why not? Justify your answer.

SUGGESTED ANSWER:

CX is liable for the bank loan because he authorized the mortgage on his property to secure the loan
contracted by DY. If DY later defaults and fails to pay the loan, CX is liable to pay. However, his
liability is limited to the extent of the value of the said property.

ALTERNATIVE ANSWER:

CX is not personally liable to the bank loan because it was contracted by DY in his personal cap
acity. Only the property of CX is liable. Hence, while CX has authorized the mortgage on his
property to secure the loan of DY, the bank cannot sue CX to collect the loan in case DY defaults
thereon. The bank can only foreclose the property of CX.

And if the proceeds of the foreclosure are not sufficient to pay the loan in full, the bank cannot run
after CX for the deficiency.

ALTERNATIVE ANSWER:

While as a general rule the principal is not liable for the contract entered into by his agent in case
the agent acted in his own name without disclosing his principal, such rule does not apply if the
contract involves a thing belonging to the principal. In such case, the principal is liable under
Article 1883 of the Civil Code. The contract is deemed made on his behalf (Sy-juco v. Sy-
juco, 40 Phil. 634 [1920]).
 Appointment of Sub-Agent (1999) General Agency vs. Special Agency (199
2)
X appoints Y as his agent to sell his produc
ts in Cebu City. Can Y appoint a sub- A as principal appointed B as his agent grantin
agent and if he does, what are the effects of g him general and unlimited management over
such appointment? A’s properties, stating that A withholds no
power from B and that the agent may execute
SUGGESTED ANSWER: such acts as he may consider appropriate.

Yes, the agent may appoint a substitute or Accordingly, B leased A’s parcel of land in
sub-agent if the principal has not Manila to C for four (4) years at P60,000.00
prohibited him from doing so, but he shall per year, payable annually in advance.
be responsible for the acts of the substitute:
B leased another parcel of land of A in Caloocan
(1) when he was not given the power to ap City to D without a fixed term at P3,000.00 per
point one; month payable monthly.

(2) when he was given such power, but B sold to E a third parcel of land belonging to A
without designating the person, and the located in Quezon City for three (3) times the
person appointed was notoriously price that was listed in the inventory by A to B.
incompetent or insolvent.
All those contracts were executed by B whi
le A was confined due to illness in the Makati
Medical Center. Rule on the validity and
binding effect of each of the above contracts
Termination; Effect of Death of upon A the principal. Explain your answers.
Agent (1997)
SUGGESTED ANSWER:
Stating briefly the thesis to support your ans
wer to each of the following cases, will the The agency couched in general terms
death – (c) of an agent end an agency? comprised only acts of administration (Art.
1877, Civil Code). The lease contract on the
SUGGESTED ANSWER: Manila parcel is not valid, not enforceable and
not binding upon A. For B to lease the property
Yes. The death of an agent extinguishes the to C, for more than one (1) year, A must provide
agency, by express provision of par. 3, Art B with a special power of attorney (Art. 1878.
1919 of the Civil Code. Civil Code).

The lease of the Caloocan City property to D is

valid and binding upon A. Since the lease is
without a fixed term, it is understood to be
from month to month, since the rental is
payable monthly (Art. 1687, Civil Code).

The sale of the Quezon City parcel to E is not

valid and not binding upon A. B needed a
special power of attorney to validly sell the land
(Arts. 1877 and 1878, Civil Code). The sale of
the land at a very good price does not cure the
defect of the contract arising from lack of
authority.
 Powers of the Agent (1994)

Prime Realty Corporation appointed Nestor the exclusive agent in the sale of lots of its newly
developed subdivision. Prime Realty told Nestor that he could not collect or receive payments
from the buyers. Nestor was able to sell ten lots to Jesus and to collect the down payments for
said lots. He did not turn over the collections to Prime Realty. Who shall bear the loss for
Nestor’s defalcation, Prime Realty or Jesus?

SUGGESTED ANSWER:

a) The general rule is that a person dealing with an agent must inquire into the authority of
that agent. In the present case, if Jesus did not inquire into that authority, he is liable for the
loss due to Nestor’s defalcation unless Article 1900, Civil Code governs, in which case the
developer corporation bears the loss.

Art. 1900 Civil Code provides: “So far as third persons are concerned, an act is deemed to have
been performed within the scope of the agent’s authority, if such act is within the terms of the
power of attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent.

However, if Jesus made due inquiry and he was not informed by the principal Prime
Realty of the limits of Nestor’s authority. Prime Realty shall bear the loss.

b) Considering that Prime Realty Corporation only “told” Nestor that he could not receive or
collect payments, it appears that the limitation does not appear in his written authority or
power of attorney. In this case, insofar as Jesus,
who is a third person is concerned, Nestor’s acts of collecting payments is deemed to have
been was
A lawyer performed
given anwithin the by
authority scope
meansof his
of a authority {Article
Special Power 1900. Civil
of Attorney by hisCode). Hence,
client to sell a the
principal
parcel of landisfor
liable.
the amount of P3 Million. Since the client owed the lawyer P1 Million in
attorney’s fees in a prior case he handled, the client agreed that if the property is sold, the lawyer
wasHowever,
entitled toif get
Jesus
5%was aware
agent’s feeofplus
theP1
limitation of payment
Million as Nestor’s power
for hisas an agent,
unpaid and Prime
attorney’s fees. Realty
The
Corporation does not ratify the sale contract, then Jesus shall be liable (Article
client, however, subsequently found a buyer of his own who was willing to buy the property 1898.for
Civil
a
Code).
higher amount. Can the client unilaterally rescind the authority he gave in favor of his lawyer? Why
or why not? (4%)
SUGGESTED ANSWER
No, the client cannot unilaterally rescind the authority he gave in favor of , his lawyer because the
agency is coupled with interest, the interest being the attorney’s fees which the client owed the
lawyer. Under Art. 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 the 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. In this case, if the lawyer could sell his client’s property, the lawyer
will be entitled not only to his commission, but also to his attorney’s fees. These attorney’s fees
were already owed by the client to his lawyer before the SPA was executed. The agency is a means
of fulfilling an obligation already contracted.
Agency (2003) Agency vs. Sale (2000)

JoAnn asked her close friend, Aissa, to bu A foreign manufacturer of computers and a
y some groceries for her in the Philippine distributor entered into a contract
supermarket. Was there a nominate whereby the distributor agreed to order 1,000 units
contract entered between Jo-Ann and of the manufacturer’s computers every month and
Aissa? In the affirmative, what was it? to resell them in the Philippines at the
Explain. manufacturer’s suggested prices plus 10%. All
unsold units at the end of the year shall be bought
SUGGESTED ANSWER: back by the manufacturer at the same price they
were ordered. The manufacturer shall hold the
Yes, there was a nominate contract. On distributor free and harmless from any claim for
the assumption that Aissa accepted the defects in the units. Is the agreement one for sale
request of her close friend Jo-Ann to but or agency?
some groceries for her in the supermarket,
what they entered into was a nominate SUGGESTED ANSWER:
contract of Agency.
Article 1868 of the New Civil Code provid The contract is one of agency, not sale. The notion of
es that by the contract of agency a person sale is negated by the following indicia:
binds himself to render some service or to
do something in representation or on (1) the price is fixed by the manufacturer with the
behalf of another, with the consent or 10% mark-up constituting the commission;
authority of the latter.
(2) the manufacturer reacquires the unsold units
ALTERNATIVE ANSWER: at exactly the same price; and

Yes, (3) warranty for the units was borne by

they entered into a nominate contract of l the manufacturer. The foregoing indicia negate sale
ease to service in the absence of a relation because they indicate that ownership over the units
of principal and agent between them was never intended to transfer to the distributor.
(Article 1644, New Civil Code).

Agency; coupled with an interest (2001)

Richard sold a large parcel of land in Cebu to Leo for P100 million payable in annual installments over a
period of ten years, but title will remain with Richard until the purchase price is fully paid. To enable Leo
to pay the price, Richard gave him a power-of-attorney authorizing him to subdivide the land, sell the
individual lots, and deliver the proceeds to Richard, to be applied to the purchase price. Five years later,
Richard revoked the power of attorney and took over the sale of the subdivision lots himself. Is the
revocation valid or not? Why?

SUGGESTED ANSWER:

The revocation is not valid. The power of attorney given to the buyer is irrevocable because it is coupled
with an interest: the agency is the means of fulfilling the obligation of the buyer to pay the price of the
land (Article 1927, CC). In other words, a bilateral contract (contract to buy and sell the land) is
dependent on the agency.