G.R. No. 118375, 3 October 2003


Queaño applied with Naguiat for a loan in the amount of which Naguiat granted. Naguiat indorsed to Queaño Associated Bank which was earlier issued to Naguiat by the Corporate Resources Financing Corporation. She also issued her own Filmanbank Check, to the order of Queaño. The proceeds of these checks were to constitute the loan granted by Naguiat to Queaño.

To secure the loan, Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and surrendered to the latter the owner’s duplicates of the titles covering the mortgaged properties. Upon presentment on its maturity date, the Security Bank check was dishonored for insufficiency of funds. Queaño received a letter from Naguiat’s lawyer, demanding settlement of the loan. Queaño and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queaño told Naguiat that she did not receive the proceeds of the loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent. Naguiat applied for the extrajudicial foreclosure of the mortgage. Before the scheduled sale, Queaño filed annulment of the mortgage deed.


Whether or not there is an agency relationship between petitioner and Ruebenfeldt.


The existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. Naguiat instructed Ruebenfeldt to withhold from Queaño the checks she issued or indorsed to Queaño, pending delivery by the latter of additional collateral. It was also Ruebenfeldt who accompanied Queaño in her meeting with Naguiat. There is an existence of an “agency by estoppel citing Article 1873 of the Civil Code. Apparently, it considered that at the very least, as a consequence of the interaction between Naguiat and Ruebenfeldt, Queaño got the impression that Ruebenfeldt was the agent of Naguiat, but Naguiat did nothing to correct Queaño’s impression. In that situation, the rule is clear. 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.

*Case digest by Sherl Dianne S. Estoque, JD-3, Andres Bonifacio Law School, SY 2019-2020