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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
The theory of imputed knowledge ascribes the knowledge of the agent to the principal. (Sunace International Management Services, Inc. v. NLRC, G.R. No. 161757, January 25, 2006)
This rule is intended to protect those who exercise good faith and not as a shield for unfair dealings.” (Cosmic Lumber Corporation v. Court of Appeals and Isidro Perez, G.R. No. 114311, November 29, 1996)
General Rule: Notice to the Agent is Notice the Principal
The Theory of Imputed Knowledge is a doctrine in agency which provides that the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such.
Applying this concept to the relationship between a foreign employer (as principal) and the local private recruitment agency, the case of Sunace International Management Services, Inc. v. National Labor Relations Commission (G.R. No. 161757, January 25, 2006) is instructive, to wit:
“The Theory of Imputed Knowledge ascribes the knowledge of the agent to the principal, and not the other way around. The knowledge of the principal-foreign employer cannot, therefore, be imputed to its agent.”
Further, knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. (Trinidad Francisco v. Government Service Insurance System, G.R. No. L-18287, March 30, 1963)
Exceptions to the General Rule: Where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy
While it is established that the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such, it cannot be presumed, much less expected that the agent would communicate the fact of fraud to the principal.
This is the ruling of the Supreme Court in the case of Cosmic Lumber Corporation v. Court of Appeals and Isidro Perez (G.R. No. 114311, November 29, 1996), viz:
“The general rule [that notice to the agent is considered notice to the principal] is intended to protect those who exercise good faith and not as a shield for unfair dealings.”
The Supreme Court further held that such exception stems from the fact that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate such fact to the principal.
The Supreme Court explained:
“It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. The logical reason for this exception is that where the agent is committing a fraud, it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is engaged in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really acting for himself, entirely outside the scope of his agency. Indeed, the basic tenets of agency rest on the highest considerations of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act in secret hostility to the interests of his principal transcends the power afforded him.” (Cosmic Lumber Corporation v. Court of Appeals and Isidro Perez, G.R. No. 114311, November 29, 1996)
From the foregoing, it can be concluded that other instances where presumption that the agent would not communicate knowledge acquired by virtue of the relationship arises include: (1) when the agent maintains interest adverse to that of the principal; and (2) when the agent receives confidential information.
Moreover, notice to the agent cannot be considered as knowledge of the principal when the person invoking the theory of imputed knowledge is in collision with the agent for the purpose of defrauding the principal.
Related Articles:
What is the Theory of Imputed Knowledge?
What you should know about engaging in recruitment business
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding taxation and taxpayer’s remedies, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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