Business Org. Lectures Atty.

Boyet Medina August 4, 2017 Doc Jim Notes

Midterm Exam Instructions

1. If you failed to answer question no. 1 about agency will automatically failed
and not any more continue checking the exam booklet answers.
2. When you answer only use one side of the booklet.
3. My exam can only be answered to 2-3 sentences only.
4. One question one page only
5. 20 item exams, 20 pages.
6. If possible write every other line.
7. All questions will be based on the cases.
8. Codals will help you understand all questions based purely on cases
9. Agency is the first question.
10.Be ready to answer fill-in the blanks. Is sentence makes sense or non-sense
11.True or False?

AGENCY (10 points)

Article 1868 by the contract of agency a person binds himself to render some service
or to do something in representation or on behalf of another, with the consent or
authority of the latter.

The essential elements of agency are:

(1) there is CONSENT, express or implied, of the parties to establish the

relationship;
(2) the OBJECT is the execution of a juridical act in relation to a third person;
(3) the agents acts as a REPRESENTATIVE and not for himself; and
(4) the agent acts within the SCOPE of his authority.

Agency is basically personal, representative, and derivative in nature. The authority

of the agent to act emanates from the powers granted to him by his principal; his act
is the act of the principal if done within the scope of the authority. Qui facit per
alium facit per se. "He who acts through another acts himself."
JURISPRUDENCE BASIS:

Bordador vs. Luz

G.R. No. 130148. December 15, 1997

The basis for agency is representation. Here, there is no showing that Brigida consented to the
acts of Deganos or authorized him to act on her behalf, much less with respect to the particular
transactions involved.

Doles vs. Angeles

G.R. No. 149353. June 26, 2006

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation. The question of whether an agency has been created is ordinarily a question
which may be established in the same way as any other fact, either by direct or circumstantial
evidence. The question is ultimately one of intention. Agency may even be implied from the
words and conduct of the parties and the circumstances of the particular case. Though the fact
or extent of authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another, she may be
estopped to deny her agency both as against the asserted principal and the third persons
interested in the transaction in which he or she is engaged.

For an agency to arise, it is not necessary that the principal personally encounter the third
person with whom the agent interacts. The law in fact contemplates, and to a great degree,
impersonal dealings where the principal need not personally know or meet the third person with
whom her agent transacts: precisely, the purpose of agency is to extend the personality of the
principal through the facility of the agent.

If an act done by one person in behalf of another is in its essential nature one of agency, the
former is the agent of the latter notwithstanding he or she is not so called. The question is to be
determined by the fact that one represents and is acting for another, and if relations exist which
will constitute an agency, it will be an agency whether the parties understood the exact nature of
the relation or not.

Atty.edina Lecture:

Agency

Object - Authority - Consent

Express - ordinary - general compensation -

conversation/verbal

Implied- writing- special specific - gratuitous

Prohibition- power to sell vs. power to mortgage

What is a 'Power Of Sale'

A clause written into a mortgage authorizing the mortgagee (lender) to sell the

property in the event of default, in order to repay the mortgage debt. As a mortgage
term, power of sale is equivalent to the term foreclosure.

BREAKING DOWN 'Power Of Sale'

The power of sale is language added to a mortgage document that allows the lender
to sell the property if the mortgage payments are not met, thereby permitting the
lender to repay the mortgage debt. A property that is foreclosed is sold by the lender
(usually a bank) in order to recover losses incurred by the loan default. 

In addition to a mortgage term, power of sale also refers to the power expressed or
implied in a trust agreement permitting the trustee to sell the investments comprising
the trust. 

Mortgage rates are the rate of interest charged on a mortgage. They are determined
by the lender in most cases, and can be either fixed, stay the same for the term of
the mortgage, or variable, fluctuate with a benchmark interest rate. Mortgage rates
rise and fall with interest rates and can drastically affect the homebuyers' market.

BREAKING DOWN 'Mortgage Rate'

A mortgage is the loan taken out to finance a home. It consists of multiple parts,
including collateral, principal, interest, taxes and insurance. The collateral on a
mortgage is the house itself, and the principal is the initial amount for the loan.
Taxes and insurance vary according to the location of the home and are usually an
estimated figure until the time of purchase. The interest charged is known as the
mortgage rate.

Article 1879. A special power to sell excludes the power to mortgage; and a special
power to mortgage does not include the power to sell. (n)

Bucton Vs. Rural Bank Of El Salvador, Inc.,

G.R. No. 179625. February 24, 2014.

A mortgage executed by an authorized agent who signed in his own name without indicating
that he acted for and on behalf of his principal binds only the agent and not the principal.

As early as the case of Philippine Sugar Estates Development Co. v. Poizat, we already ruled
that "in order to bind the principal by a deed executed by an agent, the deed must upon its face
purport to be made, signed and sealed in the name of the principal." In other words, the mere
fact that the agent was authorized to mortgage the property is not sufficient to bind the principal,
unless the deed was executed and signed by the agent for and on behalf of his principal. This
ruling was adhered to and reiterated with consistency in the cases of Rural Bank of Bombon
(Camarines Sur), Inc. v. Court of Appeals, Gozun v. Mercado, and Far East Bank and Trust
Company (Now Bank of the Philippine Island) v. Cayetano.
In Philippine Sugar Estates Development Co., the wife authorized her husband to obtain a loan
and to secure it with mortgage on her property. Unfortunately, although the real estate mortgage
stated that it was executed by the husband in his capacity as attorney-in-fact of his wife, the
husband signed the contract in his own name without indicating that he also signed it as the
attorney-in-fact of his wife.

In Rural Bank of Bombon, the agent contracted a loan from the bank and executed a real estate
mortgage. However, he did not indicate that he was acting on behalf of his principal.

In Gozun, the agent obtained a cash advance but signed the receipt in her name alone, without
any indication that she was acting for and on behalf of her principal.

In Far East Bank and Trust Company, the mother executed an SPA authorizing her daughter to
contract a loan from the bank and to mortgage her properties. The mortgage, however, was
signed by the daughter and her husband as mortgagors in their individual capacities, without
stating that the daughter was executing the mortgage for and on behalf of her mother. IASCTD

Similarly, in this case, the authorized agent failed to indicate in the mortgage that she was
acting for and on behalf of her principal. The Real Estate Mortgage, explicitly shows on its face,
that it was signed by Concepcion in her own name and in her own personal capacity. In fact,
there is nothing in the document to show that she was acting or signing as an agent of
petitioner. Thus, consistent with the law on agency and established jurisprudence, petitioner
cannot be bound by the acts of Concepcion.

In light of the foregoing, there is no need to delve on the issues of forgery of the SPA and the
nullity of the foreclosure sale. For even if the SPA was valid, the Real Estate Mortgage would
still not bind petitioner as it was signed by Concepcion in her personal capacity and not as an
agent of petitioner. Simply put, the Real Estate Mortgage is void and unenforceable against
petitioner.

Bicol Savings and Loan Association v. Court of Appeals,

G.R. No. 85302, March 31, 1989.

"Art. 1879. A special power to sell excludes the power to mortgage; and a
special power to mortgage does not include the power to sell."

The sale proscribed by a special power to mortgage under Article 1879 is a voluntary
and independent contract, and not an auction sale resulting from extrajudicial
foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no
foreclosure results. The stipulation granting an authority to extrajudicially foreclose a
mortgage is an ancillary stipulation supported by the same cause or consideration for
the mortgage and forms an essential or inseparable part of that bilateral agreement
(Perez v. Philippine National Bank, No. L-21813, July 30, 1966, 17 SCRA 833, 839).

Agency vs. Sale

Article 1466. In construing a contract containing provisions

characteristic of both the contract of sale and of the contract of
 agency to sell, the essential clauses of the whole instrument shall be
considered.

(Atty Medina Lecture) - Power to sell - because you want to have more money
instantly. If you sell it that’s finial. The suddenly the price gets up the following
day you lost. Talo ka!

Tha’s the basic reason why the power to sell you can not mortgage.

Power to Mortgage- when your mortgage pwede ka pang habulin sa utang lalo na
sa balance ng utang mo.

If you do not pay the power to sell tapos nag mortgage ka yung pobreng mama na
may ari ng lupa masisira ung credit line niya pag hindi ka nagbayad.

Jurisprudence Basis: The distinctions between a sale and an agency are not
difficult to discern and this Court, as early as 1970, had already formulated the
guidelines that would aid in differentiating the two (2) contracts. In
Commissioner of Internal Revenue v. Constantino, this Court extrapolated that
the primordial differentiating consideration between the two (2) contracts is the
transfer of ownership or title over the property subject of the contract. In an
agency, the principal retains ownership and control over the property and the
agent merely acts on the principal’s behalf and under his instructions in
furtherance of the objectives for which the agency was established. On the other
hand, the contract is clearly a sale if the parties intended that the delivery of
the property will effect a relinquishment of title, control and ownership in such
a way that the recipient may do with the property as he pleases.

-Fiduciary-trust and confidence (root of pharses of agency

-Everything you do as an agent must be for the benefit of the principal.

Agency - Agent - Principal

As an agent you never sign for yourself for and in behalf of the principal. If you
sign in your name that is not the principal that’s the problem of the agent.

Agent with authority – Big Check!

 Agent without authority is subject to ratification – example sale of a parcel of
land.

Modes of Extinguishment of Agency

Article 1919. Agency is extinguished:

(1) By its revocation;

Bacaling v. Muya,
G.R. Nos. 148404-05, April 11, 2002.

Substantively, we rule that Bacaling cannot revoke at her whim and pleasure the
irrevocable special power of attorney which she had duly executed in favor of petitioner
Jose Juan Tong and duly acknowledged before a notary public. The agency, to stress, is
one coupled with interest which is explicitly irrevocable since the deed of agency was
prepared and signed and/or accepted by petitioner Tong and Bacaling with a view to
completing the performance of the contract of sale of the one hundred ten (110) sub-lots.
It is for this reason that the mandate of the agency constituted Tong as the real party-in-
interest to remove all clouds on the title of Bacaling and that, after all these cases are
resolved, to use the irrevocable special power of attorney to ultimately "cause and effect
the transfer of the aforesaid lots in the name of the vendees [Tong with two (2) other
buyers] and execute and deliver document/s or instrument of whatever nature necessary
to accomplish the foregoing acts and deeds." The fiduciary relationship inherent in
ordinary contracts of agency is replaced by material consideration which in the type of
agency herein established bars the removal or dismissal of petitioner

Rallos v. Yangco
G.R. No. 6906, September 27, 1911.

The general rule is that, when the relationship of principal and agent is established, and
the principal gives notice of the agency and holds out the agent as his authorized
representative, upon the termination of the agency it is the duty of the principal to give
due and timely notice thereof, otherwise, he will be held liable to third parties acting in
good faith and properly relying upon such agency.|| 

(2) By the withdrawal of the agent;

(3) By the death, civil interdiction, insanity or insolvency of the principal or of the
agent;
 (4) By the dissolution of the firm or corporation which entrusted or accepted the
agency;

(5) By the accomplishment of the object or purpose of the agency;

(6) By the expiration of the period for which the agency was constituted. (1732a)

Atty. Medina Lecture: MEMORIZE IT! (EDWARD)

E – XPIRATION OF THE PERIOD

D – EATH OR CIVIL INTERDICTION

W – WITHDRAWAL

A – ACCOMPLISHMENT

R – EVOCATION – MAY EXCEMPTION

D – ISSOLUTION OF A CORPORATION

Agency coupled with interest!

- Ehen authority exceed? Pag nakalamang and principal nakalamang na ba?

- When should the money should go?

How to rendered in account including responsibility of the agent. Understood it!

-Employer- employee relationship?

-Revocation-how to revoke and when it is revoke?

-Fill in the blanks

Sentence makes sense or not sense

True or false - explain

Read transit – Carpio 2016 Decision written by Justice carpio.

- Read also Murao vs. republic

 - Agency vs. Employment
Some employment agencies also act as staffing agencies: offering candidates
to fill temporary positions, with the possibility of becoming permanent. When
anemployee is placed by an employment agency, the agency or the hiring
company could employ them depending on the terms agreed upon by both
parties
- Royal Homes vs. Marketing

Facts: On December 17, 2003, Alcantara filed a Complaint for Illegal

Dismissal9 against Royale Homes and its President Matilde Robles, Executive Vice-
President for Administration and Finance Ma. Melinda Bernardino, and Executive Vice-
President for Sales Carmina Sotto. Alcantara alleged that he is a regular employee of
Royale Homes since he is performing tasks that are necessary and desirable to its
business; that in 2003 the company gave him ₱1.2 million for the services he rendered
to it; that in the first week of November 2003, however, the executive officers of
Royale Homes told him that they were wondering why he still had the gall to come to
office and sit at his table; 10 and that the actsof the executive officers of Royale
Homes amounted to his dismissal from work without any valid or just cause and in
gross disregard of the proper procedure for dismissing employees. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad
faith and in an oppressive manner.

Alcantara prayed to be reinstated tohis former position without loss of seniority rights
and other privileges, as well as to be paid backwages, moral and exemplary damages,
and attorney’s fees. He further sought that the ownership of the Mitsubishi Adventure
with Plate No. WHD-945 be transferred to his name.

Issue: however, Alcantara announced publicly and openly that he would leave the
company by the end of October 2003 and that he would no longer finish the unexpired
term of his contract.

Held:  September 7, 2005,the Labor Arbiter rendered a Decision 11 holding that

Alcantara is an employee of Royale Homes with a fixed-term employment period from
January 1 to December 31, 2003 and that the pre-termination of his contract was
against the law.Hence, Alcantara is entitled to an amount which he may have earned
on the average for the unexpired portion of the contract. With regard to the
impleaded corporate officers, the Labor Arbiter absolved them from any liability.

-  
G.R. No. 167622 June 29, 2010
 
GREGORIO V. TONGKO,
 Petitioner,vs.
THE MANUFACTURERS LIFE INSURANCE CO. (PHILS.), INC. and RENATO A.
VERGEL DEDIOS,
Respondents.
 FACTS:
Petitioner Gregorio Tongko entered into a Career Agent’s Agreement with
respondent Manulife. As an agent,his duties consisted of, among others,
canvassing for applications for group policies and other products of the
company. Subsequently, Tongko was named unit manager, branch manager,
and regional sales manager. But when he failed to comply with policies of
Manulife, his Agency Agreement was terminated. Tongko filed a complaint
with the NLRC Arbitration Branch. He essentially alleged despite the clear
terms of the letter terminating his Agency Agreement that he was Manulife’s
employee before he was illegally dismissed. The labor arbiter decreed that no
employer-employee relationship existed between the parties. However, the
NLRC reversed the labor arbiter’s decision on appeal. When the case went to
the CA, it sustained the labor Arbiter’s decision.
 Manulife asserts that the labor tribunals have no jurisdiction over Tongko’s
claim as he was not its employee as characterized in the four fold test.

ISSUE:
Has the labor arbiter jurisdiction over his complaint for illegal dismissal?

HELD:
No. Given the anemic state of the evidence, particularly on the requisite
confluence of the factors that would show an employer-employee relationship,
the court cannot conclusively find that the relationship exists in the present
case, even if such relationship only refers to Tongko’s additional functions.
While a rough deduction can be made, the answer will not be fully supported
by the substantial evidence needed. Under this legal situation, the only
conclusion that can be made is that the absence of evidence showing
Manulife’scontrol over Tongko’s contractual duties points to the absence of any
employer -employee relationship between Tongko and Manulife. In the context
of the established evidence, Tongko remained an agent all along; although his
subsequent duties made him a lead agent with leadership role, he was
nevertheless only an agent whose basic contract yields no evidence of means-
and-manner control. In the case, it is a matter that the labor tribunals cannot
rule upon in the absence of an employer-employee relationship. Jurisdiction
over the matter belongs to the courts applying the laws of insurance, agency
and contracts

- Understand the basic rules

- Rules in substitute
- Liability of principals
- Scope of authority
- How to render in account
- Obligations of the Agent
-
- Article 1884. The agent is bound by his acceptance to carry out the agency, and is
liable for the damages which, through his non-performance, the principal may
suffer.
-
 - He must also finish the business already begun on the death of the principal,
should delay entail any danger.
-
- BA Finance Corp. v. Court of Appeals
- G.R. No. 82040, August 27, 1991
-
- Under the deed of chattel mortgage, B.A. Finance Corporation was constituted attorney-
in-fact with full power and authority to file, follow-up, prosecute, compromise or settle
insurance claims; to sign, execute and deliver the corresponding papers, receipts and
documents to the Insurance Company as may be necessary to prove the claim, and to
collect from the latter the proceeds of insurance to the extent of its interests, in the event
that the mortgaged car suffers any loss or damage. In granting B.A. Finance Corporation
the aforementioned powers and prerogatives, the Cuady spouses created in the former's
favor an agency. Thus, under Article 1884 of the Civil Code of the Philippines, B.A.
Finance Corporation is bound by its acceptance to carry out the agency, and is liable for
damages which, through its non-performance, the Cuadys, the principal in the case at
bar, may suffer. 
-
-
- International Exchange Bank v. Spouses Briones
- G.R. No. 205657, March 29, 2017
-
- Upon accepting an agency, the agent becomes bound to carry out the agency and shall
be held liable for the damages, which the principal may incur due to the agent's non-
performance.
-
- As the agent, petitioner was mandated to look after the interests of the Spouses Briones.
However, instead of going after the insurance proceeds, as expected of it as the agent,
petitioner opted to claim the full amount from the Spouses Briones, disregard the
established principal-agency relationship, and put its own interests before those of its
principal.
-
- The facts show that the insurance policy was valid when the vehicle was lost, and that
the insurance claim was only denied because of the belated filing. Having been
negligent in its duties as the duly constituted agent, petitioner must be held liable for the
damages suffered by the Spouses Briones because of non-performance of its obligation
as the agent, and because it prioritized its interests over that of its principal.

Siasat vs. IAC

G.R. No. L-67889 October 10, 1985

There are several kinds of agents. To quote a commentator on the matter:

An agent may be (1) universal: (2) general, or (3) special.

A universal agent is one authorized to do all acts for his principal which can lawfully be
delegated to an agent. So far as such a condition is possible, such an agent may be
said to have universal authority. (Mec. Sec. 58).

A general agent is one authorized to do all acts pertaining to a business of a certain

kind or at a particular place, or all acts pertaining to a business of a particular class or
series. He has usually authority either expressly conferred in general terms or in effect
 made general by the usages, customs or nature of the business which he is authorized
to transact.

An agent, therefore, who is empowered to transact all the business of his principal of a
particular kind or in a particular place, would, for this reason, be ordinarily deemed a
general agent. (Mec Sec. ,30).

A special agent is one authorized to do some particular act or to act upon some
particular occasion. lie acts usually in accordance with specific instructions or under
limitations necessarily implied from the nature of the act to be done. (Mec. Sec. 61)
(Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).

One does not have to undertake a close scrutiny of the document embodying the agreement
between the petitioners and the respondent to deduce that the 'latter was instituted as a general
agent. Indeed, it can easily be seen by the way general words were employed in the agreement
that no restrictions were intended as to the manner the agency was to be carried out or in the
place where it was to be executed. The power granted to the respondent was so broad that it
practically covers the negotiations leading to, and the execution of, a contract of sale of
petitioners' merchandise with any entity or organization.

In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this
Court held:

"We do not mean to question the general doctrine as to the power of a principal to
revoke the authority of his agent at will, in the absence of a contract fixing the duration
of the agency (subject, however, to some well defined exceptions). Our ruling is that at
the time fixed by the manager of the plaintiff company for the termination of the
negotiations, the defendant real estate agent had already earned the commissions
agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff
company in declining to execute the contract of sale for some reason personal to
itself.".

The principal cannot deprive his agent of the commission agreed upon by cancelling
the agency and, thereafter, dealing directly with the buyer. (Infante v. Cunanan, 93 Phil.
691).

The appellate court's citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G.
1507) is correct:

"The appellee is entitled to recovery. No citation is necessary to show that the general
law of contracts the equitable principle of estoppel, and the expense of another, uphold
payment of compensation for services rendered."
-

Obligations of the Principal

Article 1910. The principal must comply with all the obligations which the agent may
have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is
not bound except when he ratifies it expressly or tacitly. (1727)
In essence, therefore, the basis for Manila Remnant's solidary liability is estoppel which,
in turn, is rooted in the principal's neglectfulness in failing to properly supervise and
control the affairs of its agent and to adopt the needed measures to prevent further
misrepresentation. As a consequence, Manila Remnant is considered estopped from
pleading the truth that it had no direct hand in the deception employed by its agent. 
Article 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.
(n)

The Manila Remnant Co., Inc., vs. CA.

G.R. No. 82978. November 22, 1990

There is no question that the contracts to sell in favor of the Ventanilla spouses are valid and
subsisting. The only issue remaining is whether or not petitioner Manila Remnant should be held
solidarily liable together with A.U. Valencia and Co. and Carlos Crisostomo for the payment of
moral, exemplary damages and attorney's fees in favor of the Ventanillas. 
While petitioner Manila Remnant has not refuted the legality of the award of damages per se, it
believes that it cannot be made jointly and severally liable with its agent A.U. Valencia and Co.
since it was not aware of the illegal acts perpetrated nor did it consent or ratify said acts of its
agent.
In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its authority as
agent — and for that matter, even the law — when it undertook the double sale of the disputed
lots. Such being the case, the principal, Manila Remnant, would have been in the clear pursuant
to Article 1897 of the Civil Code which states that "(t)he agent who acts as such is not
personally liable to that party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers." 
However, the unique relationship existing between the principal and the agent at the time of the
dual sale must be underscored. Bear in mind that the president then of both firms was Artemio
U. Valencia, the individual directly responsible for the sale scam. Hence, despite the fact that
the double sale was beyond the power of the agent, Manila Remnant as principal was
chargeable with the knowledge or constructive notice of that fact and not having done anything
to correct such an irregularity was deemed to have ratified the same. 
More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have
allowed its agent to act as though it had plenary powers. Article 1911 of the Civil Code provides:
"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."(Emphasis supplied)
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such
a situation, both the principal and the agent may be considered as joint feasors whose liability is
joint and solidary. 
Authority by estoppel has arisen in the instant case because by its negligence, the principal,
Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not
granted to it. That the principal might not have had actual knowledge of the agent's misdeed is
of no moment. Consider the following circumstances:
Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the
sale and disposition of the subdivision lots. As a disclosed principal in the contracts to sell in
favor of the Ventanilla couple, there was no doubt that they were in fact contracting with
the principal.
Secondly, it is evident from the records that Manila Remnant was less than prudent in the
conduct of its business as a subdivision owner. For instance, Manila Remnant failed to take
immediate steps to avert any damage that might be incurred by the lot buyers as a result of its
unilateral abrogation of the agency contract. The publication of the cancelled contracts to sell in
the Times Journal came three years after Manila Remnant had revoked its agreement with A.U.
Valencia and Co. 
Moreover, Manila Remnant also failed to check the records of its agent immediately after the
revocation of the agency contract despite the fact that such revocation was due to reported
anomalies in Valencia's collections. Altogether, as pointed out by the counsel for the
Ventanillas, Manila Remnant could and should have devised a system whereby it could monitor
and require a regular accounting from A.U. Valencia and Co., its agent. Not having done so,
Manila Remnant has made itself liable to those who have relied on its agent and the
representation that such agent was clothed with sufficient powers to act on behalf of
the principal.
Even assuming that Manila Remnant was as much a victim as the other innocent lot buyers, it
cannot be gainsaid that it was precisely its negligence and laxity in the day to day operations of
the real estate business which made it possible for the agent to deceive unsuspecting vendees
like the Ventanillas.

Article 1912. The principal must advance to the agent, should the latter so request, the
sums necessary for the execution of the agency.

Should the agent have advanced them, the principal must reimburse him therefor,
even if the business or undertaking was not successful, provided the agent is free from
all fault.

The reimbursement shall include interest on the sums advanced, from the day on
which the advance was made. (1728)