Case 15: Country Bankers Insurance v.

Keppel Cebu Shipyard

FACTS:
Unimarine Shipping Lines, Inc. is a company engaged in the shipping industry. Unimarine
contracted the services of Keppel Cebu Shipyard for dry-docking and ship repair works of the MV
Pacific Fortune. Cebu Shipyard issued a bill to Unimarine in consideration for its services. They
negotiated to a reduction to P3.85M and terms of this agreement were embodied in Cebu
Shipyard’s letter to the President and General Manager of Unimarine. In compliance with the
agreement, Unimarine secured from Country Bankers Insurance Corp. (CBIC), through its agent,
Bethoven Quinain, a Surety Bond of P3M. The expiration of the Surety Bond was extended through
an Endorsement attached to the Surety Bond.

Cebu Shipyard sent Unimarine letters, demanding it to settle its account. Due to Unimarine’s
nonpayment, Cebu Shipyard asked the surety CBIC to fulfill their obligations as sureties. However,
CBIC alleged that the Surety Bond was issued by its agent, Quinain, in excess of his authority.

ISSUE:
WON the provisions of Article 1911 of the Civil Code is applicable in the present case to hold
petitioner liable for the acts done by its agent in excess of authority.

HELD:
YES, CBIC is liable for the surety bond. CBIC could not be allowed to disclaim liability because
Quinain’s actions were within the terms of the special power of attorney given to him. Our law
mandates an agent to act within the scope of his authority. The scope of an agent’s authority is
what appears in the written terms of the power of attorney granted upon him.

Under Articles 1898 and 1910, an agent’s act, even if done beyond the scope of his authority, may
bind the principal if he ratifies them, whether expressly or tacitly. It must be stressed though that
only the principal, and not the agent, can ratify the unauthorized acts, which the principal must
have knowledge of.

Neither Unimarine nor Cebu Shipyard was able to repudiate CBIC’s testimony that it was unaware of
the existence of Surety Bond and Endorsement. There were no allegations either that CBIC should
have been put on alert with regard to Quinain’s business transactions done on its behalf. It is clear,
and undisputed therefore, that there can be no ratification in this case, whether express or implied.

Case 16: University of Mindanao vs. Bangko Sentral ng Pilipinas, et al.

FACTS:
The University of Mindanao is an Educational Institution chaired by Sps. Torres in 1982. Before then,
the Sps. Torres incorporated and operated 2 thrift banks, FISLAI and DSLAI. In 1982, BSP issued
standby emergency credit for FISLAI and DSLAI. This credit was evidenced by 3 promissory notes
(PNs). The University of Mindanao executed a deed of real estate mortgage over its property which
served as security for the thrift banks' credit. The mortgage was signed by the Vice President of the
university who presented a secretary's certificate showing that he was authorized to enter into the
mortgages. FISLAI and DSLAI eventually had to enter rehabilitation and were merged into Mindanao
Savings and Loan Association (MSLAI). MSLAI failed to recover and was liquidated. BSP thus
informed the University of Mindanao that it would foreclose the mortgaged properties.

Thus, petitioner university filed two complaints for nullification and cancellation of mortgage: one at
the RTC of Iligan and another at Davao. The petitioner claims that they never received the proceeds
of any loan from BSP and that it never authorized the VP to mortgage any property. Both courts
ruled in favor of Petitioner and declared the Real Estate Mortgage void. On appeal, the CA
consolidated both cases and ruled in favor of respondent. The CA held that Petitioner was estopped
from denying the authority of its VP, that the annotations on the titles of Petitioner’s property
served as constructive notice and that there was implied ratification and that since the secretary’s
certificates were notarized, they enjoyed a presumption of regularity. Hence this petition for review.

ISSUE:
1. Whether or not the action had prescribed.
2. Whether or not the petitioner had validly delegated the power to mortgage to its Vice
President Petalcorin.
3. Whether or not the act of mortgaging the property was ratified by petitioner.

HELD:
1. NO. The action had not yet prescribed. Prescription is the mode of acquiring or losing rights
through the lapse of time. Its purpose is “to protect the diligent and vigilant, not those who
sleep on their rights.” The prescriptive period for actions on mortgages is ten (10) years
from the day they may be brought.

2. NO. The relationship between a corporation and its representatives is governed by the
general principles of agency. Article 1317 of the Civil Code provides that there must be
authority from the principal before anyone can act in his or her name. Hence, without
delegation by the board of directors or trustees, acts of a person—including those of the
corporation’s directors, trustees, shareholders, or officers—executed on behalf of the
corporation are generally not binding on the corporation. The effect of a lack of authority is
that under Art. 1317 and 1403, the contract becomes unenforceable.

In this case, the trial courts found that the Secretary’s Certificate and board resolution were
either non-existent or fictitious and that a board meeting giving the powers never occurred.
The court is bound by the findings of fact of the trial courts.

3. NO. Ratification converts an agents unauthorized act, into an act of the principal. It is a
voluntary and deliberate confirmation or adoption of a previously unauthorized act. No act
by petitioner can be interpreted as anything close to ratification. It was not shown that it
issued a resolution ratifying the execution of the mortgage contracts. It was not shown that
it received proceeds of the loans secured by the mortgage contracts. There was also no
showing that it received any consideration for the execution of the mortgage contracts. It
even appears that petitioner was unaware of the mortgage contracts until respondent
notified it of its desire to foreclose the mortgaged properties.

Case 17: Dy Peh vs. Commissioner of Internal Revenue

FACTS: Dy Peh employed Tan Chuan Liong as a business agent in the matter of payment of his
taxes. Tan Chuan Liong paid to the government less than the amounts of the taxes due from Dy
Peh. As a result, the CIR assessed against, and demanded from Dy Peh the payment of various
sums of money based upon short payments in connection with taxes due from Dy Peh during the
periods covered by the assessment. SC held that Dy Peh is liable for the acts of Tan Chuan Liong
and that he is estopped from questioning the misapplication of his payments. His remedy is to seek
recourse against Tan Chuan Liong in an appropriate civil or criminal action.

ISSUE/HELD: WON Dy Peh is estopped from questioning the misapplication of his payments.
HELD: YES. Dy Peh is estopped from questioning the misapplication of his payments. Tan Chuan
Liong was Dy Peh’s agent. The agent's acts bind his principal, without prejudice to the principal
seeking recourse against the agent in an appropriate civil or criminal action.

Case 18: CUISON v. CA

FACTS: Tiu Huy Tiac was the manager of the Binondo store of Cuison, who engaged in the
purchase and sale of newsprint, bond paper and scrap. Upon orders of Tiac, Valiant delivered paper
products to Lilian Tan of LT Trading. After delivery, Lilian paid for the merchandise upon the request
of Tiac. In turn, Tiac issued postdated checks to Valiant as payment for the merchandise, but said
checks were dishonored. Valiant demanded payment from Cuison, saying that the latter gave Tiac
the authority to buy the paper products from Valiant and to sell them to LT Trading. Cuison denied
such authority. SC said that Cuison was estopped from denying said authority because in many
instances, Cuison held out Tiac to the public as the manager of his Binondo store.

ISSUE: WON Tiu Huy Tiac possessed the required authority from Cuison sufficient to hold the latter
liable for the disputed transaction.

RULING: 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.

It is evident from the records that by his own acts and admission, Cuison held out Tiu Huy Tiac to
the public as the manager of his store in Binondo, Manila. More particularly, Cuison explicitly
introduced Tiu Huy Tiac to Bernardino Villanueva, Valiant’s manager, as his branch manager as
testified to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with
Cuison for quite a while, also testified that she knew Tiu Huy Tiac to be the manager of Cuison’s
Binondo branch. This general perception of Tiu Huy Tiac as the manager of petitioner's Sto. Cristo
store is even made manifest by the fact that Tiu Huy Tiac is known in the community to be the
“kinakapatid” (godbrother) of Cuison. In fact, even petitioner admitted his close relationship with
Tiu Huy Tiac when he said that they are “like brothers.” There was thus no reason for anybody
especially those transacting business with Cuison to even doubt the authority of Tiu Huy Tiac as his
manager in the Sto. Cristo Binondo branch.