Filipinas Life Assurance Company vs. Pedroso

A principal is solidarily liable with its agent for obligations contracted by the agent even beyond the scope of authority, where the principal knowingly ratifies the agent's acts or clothes the agent with apparent authority, thereby estopping the principal from denying such authority to the prejudice of innocent third persons.

Respondent Teresita O. Pedroso was a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance Company (later Ayala Life Assurance, Inc.). Respondent Jennifer N. Palacio was likewise a Filipinas Life insurance policyholder. Renato Valle served as Pedroso's insurance agent since 1972, collecting her monthly premiums. The dispute arose from an investment scheme that Valle represented as a promotional program of Filipinas Life's Escolta office, offering prepaid monthly interest to policyholders who deposited funds.

Respondent Teresita O. Pedroso was a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance Company. Renato Valle had been her insurance agent since 1972, collecting her monthly premiums. In the first week of January 1977, Valle informed Pedroso that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders, offering 8% prepaid interest per month on amounts deposited monthly. Enticed, Pedroso invested an initial ₱10,000 by issuing a post-dated check dated January 7, 1977. In return, Valle issued Pedroso his personal check for ₱800 representing the 8% prepaid interest, together with a Filipinas Life "Agent's Receipt" No. 807838.

Pedroso sought confirmation of the promotional investment by calling the Escolta office. She spoke with Francisco Alcantara, the administrative assistant, who referred her to branch manager Angel Apetrior. Apetrior confirmed the existence of the promotion and told her she could "push through with the check." The check, bearing Alcantara's endorsement at the back, was deposited into the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch. Relying on these representations by the petitioner's authorized representatives, Pedroso awaited the maturity of her investment. A month later, her ₱10,000 was returned to her after she made a written request for refund, dated February 3, 1977, written on a Filipinas Life inter-office memorandum form prepared by Alcantara. Pedroso personally collected the ₱10,000 in cash from Alcantara at the Escolta branch. Thereafter, she made seven to eight more investments in varying amounts totaling ₱37,000, at a reduced rate of 5% prepaid interest per month. Upon maturity of these subsequent investments, Valle would retrieve from Pedroso the corresponding yellow-colored agent's receipts he had issued.

Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life policyholder, about the investment plan. Palacio invested a total of ₱49,550 at 5% prepaid interest. When Pedroso attempted to withdraw her investment, Valle refused to return approximately ₱17,000 of it. Palacio likewise tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money. With the assistance of their lawyer, the respondents went to the Filipinas Life Escolta office to collect their respective investments and to inquire about Valle's whereabouts, but their efforts were unsuccessful. Respondents thereafter filed an action for recovery of a sum of money. The RTC found Filipinas Life and its co-defendants Valle, Apetrior, and Alcantara jointly and solidarily liable to the respondents. The Court of Appeals affirmed this ruling and denied the motion for reconsideration.

• Scope of Agent's Authority: Petitioner argued that it was only a life insurance company and was not engaged in the business of collecting investment money. The investment scheme offered to respondents by Valle, Apetrior, and Alcantara was outside the scope of their authority as agents of Filipinas Life, such that the company could not be held liable to the respondents.
• Sole Liability of Agent: Petitioner contended that its agent Renato Valle should be held solely liable to the respondents, rather than Filipinas Life being held jointly and solidarily liable with its co-defendants.

• Authorization of Agents: Respondents contended that Filipinas Life authorized Valle to solicit investments from them, pointing to the use of Filipinas Life's official documents and facilities in consummating the transactions.
• Confirmation by Officers: Respondents asserted that the transactions were confirmed by Filipinas Life's officers Apetrior and Alcantara, who held supervisory and managerial positions.
• Due Diligence: Respondents maintained that they exercised all the diligence required of them in ascertaining the authority of petitioner's agents, and that it was Filipinas Life which failed in its duty to ensure that its agents acted within the scope of their authority.

• Liability of Principal for Acts of Agent: Whether the Court of Appeals committed reversible error in holding Filipinas Life jointly and severally liable with its co-defendants on the claims of respondents, instead of holding its agent Renato Valle solely liable.

• Liability of Principal for Acts of Agent: No. The Court of Appeals committed no reversible error. Filipinas Life was properly held solidarily liable because its officers expressly and knowingly ratified Valle's acts, the company benefited from the investments deposited in its account, and it clothed Valle with apparent authority, thereby estopping it from denying such authority.

• Liability of Principal for Acts of Agent: By the contract of agency under Article 1868 of the Civil Code, a person binds himself to render service in representation of another with the latter's consent or authority. The general rule is that the principal is responsible for acts of its agent done within the scope of authority and should bear damage caused to third persons. While an agent who exceeds his authority becomes personally liable, Article 1911 provides that even when the agent exceeds his authority, the principal is solidarily liable if the principal allowed the agent to act as though the agent had full powers. Moreover, under Article 1910, acts of an agent beyond the scope of authority bind the principal if the principal ratifies them expressly or tacitly. In this case, respondents exercised due diligence in confirming Valle's authority: they consulted Alcantara, a supervisory officer, and Apetrior, the branch manager, both of whom confirmed the promotional investment program. Filipinas Life's official receipts of undisputed authenticity were used, and the investment funds were deposited into Filipinas Life's own bank account. Even if Valle's representations were beyond his authority as a debit/insurance agent, Filipinas Life through Alcantara and Apetrior expressly and knowingly ratified Valle's acts and benefited from the deposits. The company thus clothed Valle with apparent authority and was estopped from denying such authority. Innocent third persons should not be prejudiced by the principal's failure to prevent misrepresentation, much more so when the principal ratified the agent's unauthorized acts.

• Liability of Principal for Acts of Agent — Under the Civil Code, the principal is responsible for obligations contracted by the agent within the scope of authority. When the agent exceeds his authority, the agent becomes personally liable, but the principal remains solidarily liable if it allowed the agent to act as though fully empowered (Article 1911). The principal is also bound by unauthorized acts if it ratifies them expressly or tacitly (Article 1910). In this case, Filipinas Life was held solidarily liable because its officers ratified Valle's unauthorized solicitation of investments, the company benefited from the deposits, and it clothed Valle with apparent authority.
• Ratification in Agency — Ratification is the adoption or confirmation by one person of an act performed on his behalf by another without authority. Ratification may be express or implied. Filipinas Life, through Alcantara and Apetrior, expressly and knowingly confirmed and adopted Valle's acts of soliciting investments from respondents.
• Apparent Authority and Estoppel — When a principal clothes its agent with apparent authority, it is estopped from denying such authority as against innocent third persons who relied on the appearance of authority. The principal's failure to adopt measures to prevent misrepresentation, coupled with ratification, renders the agent's acts those of the principal itself, under the maxim Qui per alium facit per seipsum facere videtur — "He who does a thing by an agent is considered as doing it himself."

• "But even when the agent exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers." — This passage articulates the rule under Article 1911 of the Civil Code, which was the controlling basis for holding Filipinas Life solidarily liable despite the agent's possible lack of authority.
• "Filipinas Life had clothed Valle with apparent authority; hence, it is now estopped to deny said authority. Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation, much more so if the principal ratified his agent's acts beyond the latter's authority." — This states the ratio decidendi: the principal's estoppel arising from apparent authority and ratification, protecting innocent third persons from the principal's negligence.
• "Qui per alium facit per seipsum facere videtur. 'He who does a thing by an agent is considered as doing it himself.'" — This maxim encapsulates the doctrinal foundation for imputing the agent's acts to the principal, underscoring that ratification renders unauthorized acts binding on the principal.

• Lopez vs. Hon. Alvendia, et al., 120 Phil. 1424 (1964) — Cited as authority for the general rule that the principal is responsible for acts of its agent done within the scope of authority and should bear damage caused to third persons.
• BA Finance Corporation vs. Court of Appeals, G.R. No. 94566, July 3, 1992, 211 SCRA 112 — Cited for the proposition that when an agent exceeds his authority, the agent becomes personally liable for the damage caused.
• Manila Memorial Park Cemetery, Inc. vs. Linsangan, G.R. No. 151319, November 22, 2004, 443 SCRA 377 — Cited for the definition of ratification in agency as the adoption or confirmation by one person of an act performed on his behalf by another without authority.
• Prudential Bank vs. Court of Appeals, G.R. No. 108957, June 14, 1993, 223 SCRA 350 — Cited for the maxim Qui per alium facit per seipsum facere videtur, affirming that the act of the agent is considered that of the principal itself.

• Article 1868, Civil Code — Defines 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. Applied to establish that Valle acted as agent of Filipinas Life.
• Article 1910, Civil Code — Provides that the principal must comply with obligations contracted by the agent within the scope of authority; as for obligations wherein the agent exceeded his power, the principal is not bound except when he ratifies expressly or tacitly. Applied to hold Filipinas Life liable through ratification.
• Article 1911, Civil Code — Provides that even when the agent exceeds his authority, the principal is solidarily liable with the agent if the principal allowed the agent to act as though the agent had full powers. Applied as the primary basis for solidary liability, since Filipinas Life allowed Valle to operate with apparent full authority.

Justice Antonio T. Carpio, Justice Conchita Carpio Morales, Justice Dante O. Tinga, and Justice Presbitero J. Velasco, Jr. concurred.