Friday, April 29, 2016
Agency by Estoppel
Art. 1911. The principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers.
What is an agency by estoppel?
When a person, who is not really an agent, represents himself or is represented as such.
There is really no agency at all, but the alleged agent seemed to have apparent or ostensible, although no real authority to represent another.
1.) Estoppel of Agent – One professing to act as agent for another may be estopped to deny his agency both as against his asserted principal and the third persons interested in the transaction in which he is engaged.
2.) Estoppel of Principal –
a.) As to Agent – One who knows that another is acting as his agent and fails to repudiate his acts, or accept the benefits of them, will be estopped to deny the agency as against such other.
b.) As to sub-agent – To estop the principal from denying his liability to a third person, he must have known or be charged with knowledge of the fact of the transmission and the terms of the agreement between the agent and sub-agent.
c.) As to third persons – One who knows that another is acting as his agent or permitted another to appear as his agent, to the injury of third persons who have dealt with the apparent agent as such in good faith and in the exercise of reasonable prudence, is estopped to deny the agency.
3.) Estoppel of tirrd Persons – A third person, having dealt with one as an agent may be estopped to deny the agency as against the principal, agent or third persons in interest.
4.) Estoppel of the government – The government is neither estopped by the mistake or error on the part of its agents. But it may be estopped through affirmative acts of its officers acting within the scope of their authority.
Jurisprudence:
Requisites for an agency by estoppel to exist
Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of third persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he had full powers. However, for an agency by estoppel to exist, the following must be established:
1. The principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority;
2. The third person, in good faith, relied upon such representation; and
3. Relying upon such representation, such third person has changed his position to his detriment.
In Litonjua, Jr. v. Eternit Corp., this Court said that [a]n agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance. (Country Bankers Insurance Corporation vs Keppel Cebu Shipyard, G.R. No. 166044, June 18, 2012)
Agency Requiring Special Power of Attorney
Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of administration;
(2) To effect novations which put an end to obligations already in existence at the time the agency was constituted;
(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired;
(4) To waive any obligation gratuitously;
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration;
(6) To make gifts, except customary ones for charity or those made to employees in the business managed by the agent;
(7) To loan or borrow money, unless the latter act be urgent and indispensable for the preservation of the things which are under administration;
(8) To lease any real property to another person for more than one year;
(9) To bind the principal to render some service without compensation;
(10) To bind the principal in a contract of partnership;
(11) To obligate the principal as a guarantor or surety;
(12) To create or convey real rights over immovable property;
(13) To accept or repudiate an inheritance;
(14) To ratify or recognize obligations contracted before the agency;
(15) Any other act of strict dominion. (Art. 1878, CC)
May an agent specifically authorized to sell a property empowered to mortgage said property?
No, the agent is not empowered to mortgage the property. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the power to sell. (Art. 1879, CC) If the agent mortgage the property, the contract is unenforceable.
May an agent specifically authorized to compromise submit to arbitration?
No. A special power to compromise does not authorize submission to arbitration. (Art. 1880, CC)
Rationale: A principal may authorize his agent to compromise because of absolute confidence in the latter’s judgment and discretion to protect the former’s rights and obtain for him the best bargain in the transaction. If the transaction would be left in the hands of an arbitrator, said arbitrator may not enjoy the trust of the principal.
What happens if the agent is specifically authorized to submit to arbitration?
Then the arbitration award binds the principal, provided that the agent acted within the scope of his authority.
Jurisprudence:
● The right to commence action for collection of debts owing to principal is not an incident of strict ownership, which must be conferred upon express terms. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)
The power to legally compel the payment of debts owing to the principal is an express grant of the right to bring suit for the collection of such debts. (Germann & Co vs. Donaldson, G.R. No. L-439, November 11, 1901)
● Unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual means of carrying the agency into effect. (Macke vs. Camps, G.R. No. 2962, February 27, 1907)
● A power of attorney “to loan and borrow money” and to mortgage the principal’s property does not carry with it or imply that that the agent has a legal right to make the principal liable for the personal debts of the agent. (BPI vs De Coster, G.R. Nos. 25642 & 25643. November 12, 1926)
● Although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely unenforceable. (Dungo vs Lopena, G.R. No. L-18377, December 29, 1962)
● Special power of the attorney to mortgage real estate is limited to such authority and does not bind the grantor personally to other obligations contracted by the grantee. (PNB vs. Sta. Maria, G.R. No. L-24765, August 29, 1969)
● There was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required. (Bravo-Guerrero vs Bravo, G.R. No. 152658, July 29, 2005)
Agency by Operation of Law
1.) The agent must act within the scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. (Art. 1881, CC)
2.) The limits of the agent’s authority shall not be considered exceeded should it have been performed in a manner more advantageous to the principal than that specified by him. (Art. 1882, CC)
3.) The agent must finish the business already begun on the death of the principal, should delay entail any danger. (Art. 1884, CC)
4.) In case a person declines an agency, he is bound to observe the diligence of a good father of a family in the custody and preservation of the goods forwarded to him by the owner until the latter should appoint an agent or take charge of the goods. (Art. 1885, CC)
5.) The agent, even if he should withdraw from the agency for a valid reason, must continue to act until the principal has had reasonable opportunity to take the necessary steps to meet the situation. (Art. 1929, CC)
6.) 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. 1930, CC)
7.) 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. (Art. 1931, CC)
8.) If the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of the latter. (Art. 1932, CC)
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