(China Airlines vs. Chiok, 407 SCRA 432 [2003].

)
Airline passenger sued for damages both the ticket-issuing airline and the airline that performed the
actual carriage although the breach of the contract of air transportation occurred on the ight of the
latter airline.
Facts:
Respondent Daniel Chiok purchased from petitioner China Airlines, Ltd. (CAL) airline passenger ticket
for air transportation covering Manila-Taipei-Hongkong-Manila. Said ticket was exclusively
endorseable to Philippine Airlines, Ltd. (PAL). In a complaint for damages against CAL and PAL,
Chiok alleged that despite several conrmations of his ight PAL refused to accommodate him in
Flight No. 307 for which reason he failed to arrive in Manila on his scheduled date and he lost a
business option which he had to execute on said date; that a PALs personnel ridiculed and humiliated
him in the presence of so many people; and that CAL and PAL are solidarily liable for the damages he
suffered including personal belongings he lost. Afrming the Regional Trial Court, the Court of
Appeals ruled that under the contract of transportation, CAL, as the ticket-issuing carrier was liable
regardless of the fact that PAL was to perform or had performed the actual carriage.
Issue:
Is CAL liable for damages? YES
(1) Contract of carriage treated as single operation.
The contract of air transportation was between petitioner and respondent, with the former endorsing
to PAL the Hongkong-Manila segment of the journey. Such contract of carriage has always been treated
in this jurisdiction as a single operation. This jurisprudence rule is supported by the Warsaw
Convention, to which the Philippines is a party, and by the existing practices of the International Air
Transport Association (IATA).
(2) PAL acted as carrying agent of CAL.
Under a general pool partnership agreement, the ticket-issuing airline is the principal in a contract of
carriage, while the indorsee-airline is the agent.
Members of the IATA are under a general pool partnership agreement wherein they act as agent of each
other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same
time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the
world. Booking and reservation among airline members are allowed even by telephone and it has
become an accepted practice among them. A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different carriers is authorized to receive the fare for
the whole trip and through the required process of interline settlement of accounts by way of the IATA
clearing house an airline is duly compensated for the segment of the trip serviced. In the instant case,
following cited jurisprudence, PAL acted as carrying agent of CAL and CAL cannot evade liability
to Chiok even though it may have been only a ticket issuer for the Hongkong-Manila sector.
(3) PALs gross and reckless negligence amounted to bad faith.
Due to the nature of their business, airline companies must not merely give cursory instructions to
their personnel to be more accommodating towards customers, passengers and the general public; they
must require them to be so. In the present case, respondent had repeatedly secured confirmations of his
PR 311 ight on November 24, 1981 initially from CAL and subsequently from the PAL ofce in
Hong Kong. The status of this ight was marked OK on a validating sticker placed on his ticket. That

sticker also contained the entry RMN6V. Ms Chan explicitly acknowledged that such entry was a
computer reference that meant that respondents name had been entered in PALs computer. Since the
status of respondent on Flight PR 311 was OK, as a matter of right testied to by PALs witness, he
should have been automatically transferred to and allowed to board Flight 307 the following day.
Clearly resulting from negligence on the part of PAL was its claim that his name was not included in its
list of passengers for the November 24, 1981 PR 311 ight and, consequently, in the list of the
replacement ight PR 307. Since he had secured conrmation of his ight not only once, but twice
by personally going to the carriers ofces where he was consistently assured of a seat thereon
PALs negligence was so gross and reckless that it amounted to bad faith.
In view of the foregoing, moral and exemplary damages were properly awarded by the lower courts.

(Cuison vs. Court of Appeals, 227 SCRA 391 [1993].)

Debtor raises as defense against liability the fraud of its former ofcers.
Facts:
Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and
scrap. Private respondent Valiant Investment Associates, on the other hand, is a partnership duly
organized and existing under the laws of the Philippines with business address at Kalookan City.
Valiant Investment Associates delivered various kinds of paper products to a certain Tan. The deliveries
were made by Valiant pursuant to orders allegedly placed by Tiac who was then employed in the
Binondo office of petitioner (Cuison). Upon delivery, Tan paid for the merchandise by issuing several
checks payable to cash at the specific request of Tiac. In turn, Tiac issued nine (9) postdated checks to
Valiant as payment for the paper products. Unfortunately, sad checks were later dishonored by the
drawee bank.
Thereafter, Valiant made several demands upon petitioner to pay for the merchandise in question,
claiming that Tiac was duly authorized by petitioner as the manager of his Binondo office, to enter into
the questioned transactions with Valiant and Tan. Petitioner denied any involvement in the transaction
entered into by Tiac and refused to pay Valiant.
Left with no recourse, private respondent filed an action against petitioner for the collection of sum of
money representing the price of the merchandise. After due hearing, the trial court dismissed the
complaint against petitioner for lack of merit. On appeal, however, the decision of the trial court was
modified, but was in effect reversed by the CA. CA ordered petitioner to pay Valiant with the sum plus
interest, AF and costs.
ISSUE:
WON Tiac possessed the required authority from petitioner sufficient to hold the latter liable for the
disputed transaction
HELD:
YES
As to the merits of the case, it is a well-established rule that 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
It matters not whether the representations are intentional or merely negligent so long as innocent, third
persons relied upon such representations in good faith and for value. 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.
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 tortfeasors whose liability
is joint and solidary.
It is evident from the records that by his own acts and admission, petitioner held out Tiac to the public
as the manager of his store in Binondo. More particularly, petitioner explicitly introduced to
Villanueva, Valiants manager, as his (petitioners) branch manager as testified to by Villanueva.
Secondly, Tan, who has been doing business with petitioner for quite a while, also testified that she

knew Tiac to be the manager of the Binondo branch. Even petitioner admitted his close relationship
with Tiu Huy Tiac when he said that they are like brothers There was thus no reason for anybody
especially those transacting business with petitioner to even doubt the authority of Tiac as his manager
in the Binondo branch.
Tiac, therefore, by petitioners own representations and manifestations, became an agent of petitioner
by estoppel, an admission or representation is rendered conclusive upon the person making it, and
cannot be denied or disproved as against the person relying thereon (Article 1431, Civil Code of the
Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice
of the other party who, in good faith, relied upon them. Taken in this light,. petitioner is liable for the
transaction entered into by Tiac on his behalf. Thus, even when the agent has exceeded his authority,
the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had
full powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiac defrauded his principal (petitioner) in not turning over the
proceeds of the transaction to the latter, such fact cannot in any way relieve nor exonerate petitioner of
his liability to private respondent. For it is an equitable maxim that as between two innocent parties, the
one who made it possible for the wrong to be done should be the one to bear the resulting loss.

Dy Peh vs. Collector of Internal Revenue, 28 SCRA 216 [1969]

Agent applied portion of amounts given to him by principal in payment of the latters taxes, to tax
obligations of other taxpayers.
Facts:
DY PEH made payments of his taxes through TAN CHUAN LIONG, his business agent. The originals
of the ofcial receipts issued by the City Treasurer of CEBU shows that the full amount of the taxes
due from DY PEH had been paid. Investigations disclose, however, that the amounts of the taxes
allegedly paid by him as appearing in the original of every ofcial receipt were bigger than the amounts
appearing in the corresponding copies thereof kept in the ofce of the City Treasurer. As a result,
DY PEH was assessed for the deciencies. It appeared that TAN CHUAN LIONG applied a
portion of the amounts given to him by DY PEH to pay tax obligations of other taxpayers, also TAN
CHUAN LIONGs clients.
Issue:
Since the checks issued by DY PEH covered in full the taxes due, should the anomaly in the application
of the amounts be held against him?
Held:
Yes. When a contract of agency exists, the agents acts bind his principal, without prejudice to the latter
seeking recourse against the agent in an appropriate civil or criminal action.

AREOLA v. CA and PRUDENTIAL GUARANTEE & ASSURANCE, INC.

G. R. No. 95641. September 22, 1994.
Romero, J.
Facts:
Santos Areola, a lawyer from Dagupan City, bought on November 1984 a Personal Accident
Insurance Policy which covered a period of one year from Prudential Guarantee & Assurance, Inc.
through its Baguio City branch. He was to pay a total amount of 1, 609.65 Php for the said insurance
policy's premiums as indicated in the statement of account issued to him by Prudential. The same
statement contained a legibly printed note that said it shall not be considered as a receipt for an official
receipt shall be issued upon payment of the account. Also, that if such payment is made to a
representative of Prudential the payee must demand for a provisional receipt.
On December 17, 1984, Areola was issued a provisional receipt for the amount of 1, 609.65
Php. It contained a note which states that an official receipt shall be issued within 7 days and that upon
failure to receive such, Prudential should be notified. Areola received no official receipt from
Prudential.
On June 29, 1985, Areola received an endorsement from Prudential through Teofilo Malapit,
manager of the Baguio City branch, canceling his insurance policy for non-payment of premium.
Areola then confronted Carlito Ang, an agent of Prudential, and demanded that he be issued an official
receipt. He was still not issued one so on July 15, 1985 he wrote a letter to Prudential demanding that
he be insured under the terms and conditions of the insurance he bought or that the current commercial
rate of increase on the payment he made be returned to him within 5 days. He also warned that if his
demands are not met he would sue for damages.
On July 25, 1985, Assistant Vice-President Mariano M. Ampil III of Prudential wrote to Areola
stating that the company was verifying Areola's payment because the absence of an official receipt is a
cause to believe that no payment had been made. Subsesquently, on August 3, 1985 another letter was
sent to Areola by Ampil confirming the former's payment and informing him that Prudential would be
amenable to extending the coverage of his policy to December instead of November. Unfortunately at
the time the letter was received, Areola and his wife had already filed a complaint in the RTC of
Dagupan City for breach of contract with damages. Prudential later admitted that the cancellation of
Areola's policy was because of Malapit's failure to remit the premiums collected.
Issue:
Whether or not the erroneous cancellation of Areola's insurance policy due to Malapit's
fraudulent act entitled the former to payment of damages and whether or not the reinstatement of said
policy absolves Prudential from its liability for damages.
Held:
The Supreme Court held that yes, the erroneous cancellation of Areola's insurance policy
entitled him to payment of damages. Malapit's fraudulent act of misappropriating the premiums
collected from Areola is directly imputable to Prudential. As a corporation it acts solely thru its
employees and the latter's acts are considered its own for which it can be held to account. Under the
first paragraph of Article 1910 of the Civil Code, The principal must comply with all the obligations
which the agent may have contracted within the scope of his authority. The fact that Prudential was
itself defrauded does not free it of its obligation to Areola. In the ruling of the Supreme Court in
Prudential Bank v. Court of Appeals it held that; A bank is liable for wrongful acts of its officers done

in the interests of the bank or in the course of dealings of the officers in their representative capacity. A
banking corporation is liable to innocent third persons where the representation is made in the course of
its business by an agent acting within the general scope of his authority even though the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit.
Consequently, no, Prudential's subsequent actions did not absolve it from its liability for
damages. Prudential should be reminded that a contract of insurance creates reciprocal obligations for
both insurer and insured. Reciprocal Obligations are those which arise from the same cause and in
which each party is both a debtor and a creditor of the other, such that the obligation of one is
dependent upon the obligation of the other. Under the second paragraph of Article 1191 of the Civil
Code governing reciprocal obligations, The injured party may choose between the fulfillment and the
rescission of the obligation, with the payment of damages in either case. Xxx In the case at hand,
Areola is given a choice between fulfillment and rescission due to Prudential's failure to comply with
what is incumbent upon it. However, he is still entitled to payment of damages regardless of whether he
demands fulfillment or rescission of the obligation. Untenable then is Prudential's claim that its
reinstatement of Areola's policy absolves it from liability for damages.

(Ortigas, Jr. vs. Lufthansa German Airlines, 64 SCRA 610 [1975].)

Employee of an airline company committed an error in validating reservation of plaintiff who could
only be waitlisted.
Facts:
LUFTHANSA GERMAN AIRLINES (an international airline company) was ordered by the lower
court to pay damages for the formers failure to comply with its obligation to give rst class
accommodation to FRANCISCO ORTIGAS JR., a (Filipino) passenger holding a rst class ticket,
aggravated by the giving of the space instead to a Belgian and the improper conduct of its agents in
dealing with him during the occasion of such discriminatory violation of its contract of carriage.
LUFTHANSA claimed that the employee of ALITALIA (another international airline company) who
validated and conrmed ORTIGAS reservation must have made a mistake because he was allegedly
informed by LUFTHANSA Rome ofce that ORTIGAS could only be waitlisted.
Issue:
Whether LUFTHANSA bound by the mistake commited by the emolyee of ALITALIA?
Held:
Yes. It has been indisputably proven under the so called pool arrangement among different airline
companies pursuant to the International Air Transport Association (IATA) agreement of which Alitalia
and Lufthansa are signatories, both companies are constituted thereby as agents of each other in the
issuing of tickets and other matters pertaining to their relations with those who would need their
services. Besides, it appears that when ORITGAS checked in at the airport, a lady employee thereat of
LUFTHANSA told him, after making the proper verication, that the reservation was correct.

(Phil. National Bank vs. Bagamaspad and Ferrer, 89 Phil. 365 [1951].)
Principal collected part of a loan made without authority by its agents to unqualied borrowers merely
to diminish its loss and the nancial responsibility of its agents.
Facts:
The evidence showed that in violation of regulations and instructions of the Phil. National Bank,
BERNARDO BAGAMASPAD and BIENVENIDO FERRER, its agent and assistant agent,
respectively, in its Cotabato Agency, released large crop loans to manifestly insolvent and unqualied
borrowers. Phil. National Bank led suits against the borrowers which suits resulted in the payment of
part of the loans.
Issue:
Should the ling of the suits be interpreted and considered as a ratication of the acts of
BAGAMASPAD and FERRER?
Held:
No. Ordinarily, a principal who collects either judicially or extrajudicially a loan made by an agent
without authority thereby raties the said act of the agent. In the present case, however, there was no
intention on the part of the Phil. National Bank to ratify the acts of BAGASMASPAD and FERRER. It
was merely trying to diminish as much as possible the loss to itself and automatically decrease the
nancial liability of BAGAMASPAD and FERRER who were not in position to pay the large amount for
which they were found liable. The act of the Phil. National Bank was really benecial to
BAGAMASPAD and FERRER.

GUTIERREZ HERMANOS vs ORENSE G.R. No. 9188 December 4, 1914

FACTS:
On and before Februaru 14, 1907, Engracio Orense had been the owner of a parcel of land in
Guinobatan, Albay.
On February 14, 1907, Jose Duran, a nephew of Orense, sold the property for P1,500 to Gutierrez
Hermanos, with Orenses knowledge and consent, executed before a notary a public instrument. The
said public instrument contained a provision giving Duran the right to repurchase it for the same price
within a period of four years from the date of the said instrument.
Orense continued occupying the land by virtue of a contract of lease.
After the lapse of four years, Gutierrez asked Orense to deliver the property to the company and to pay
rentals for the use of the property.
Orense refused to do so. He claimed that the sale was void because it was done without his authority
and that he did not authorize his nephew to enter into such contract.
During trial, Orense was presented as witness of the defense. He states that the sale was done with his
knowledge and consent. Because of such testimony, it was ascertained that he did give his nephew,
Duran, authority to convey the land. Duran was acquitted of criminal charges and the company
demanded that Orense execute the proper deed of conveyance of the property.
ISSUE:
Whether or not Orense is bound by Durans act of selling the formers property?
HELD:
Yes. It was proven during trial that he gave his consent to the sale. Such act of Orense impliedly
conferred to Duran the power of agency. The principal must therefore fulfill all the obligations
contracted by the agent, who acted within the scope of his jurisdiction.

(Central Surety & Insurance Co. vs. C.N. Hodges, 38 SCRA 159 [1971].)
No notice was given to a regular customer of the revocation of a branch managers authority to issue
surety bonds, the company, furthermore, having honored surety bonds issued after such revocation.
Facts:
It is not disputed that CENTRAL SURETY AND INSURANCE CO. (surety company) has not caused
to be published any notice of revocation of ROSITA MESAs authority to issue surety bonds on its
behalf, notwithstanding the fact that the powers of ROSITA MESA, as its branch manager in Iloilo
City, were of a general nature, for she had exclusive authority, in said place, to represent CENTRAL
SURETY AND INS. CO., not with a particular person, but with the public in general, in all
negotiations, transactions, and business wherein the company may lawfully transact or engage in
subject only to the restrictions speci ed in their agreement. When the surety bond in question was
executed in favor of HIDGES, CENTRAL SURETY INS. CO. had already withdrawn the authority of
ROSITA MESA to issue, inter alia, surety bonds. It appeared that some surety bonds issued by ROSITA
MESA in favor of HODGES after her authority had allegedly been curtailed, on March 15, 1952, were
honored by CENTRAL SURETY despite the fact that these were not reported to CENTRAL
SURETYs main ofce at the time of their issuance.
Issue:
Is Article 1922 applicable? (ART. 1922. If the agent had general powers, revocation of the agency does
not prejudice third persons who acted in good faith and without knowledge of the revocation. Notice of
the revocation in a newspaper of general circulation is a sufcient warning to third persons. (n))
Held:
Yes. The opening of CENTRAL SURETYs branch ofce amounted to a publication of the grant of
powers to ROSITA MESA, as manager of said ofce. Furthermore, by honoring several surety bonds
issued in its behalf subsequently to March 15, 1952, CENTRAL SURETY induced the public to
believe that ROSITA MESA had authority to issue such bonds. As a consequence, CENTRAL
SURETY is now estopped from pleading, particularly against a regular customer thereof, like
HODGES, the absence of said authority.

Dy Buncio and Co v Ong Guan Gan

Property was sold under a special power of attorney not giving authority to sell, executed after a
general power was previously granted.
Facts:
ONG GUAN GAN SR. gave a general power of attorney to his son, ONG GUAN GAN JR. About
eight (8) years later, OGG SR. executed in favor of OGG JR. a special power of attorney which did not
give OGG JR. the express power to alienate the properties of OGG SR.. Thereafter, OGG JR. sold
certain properties of OGG SR. to Juan Tong and Pua Giok Eng . DY BUNCIO subsequently obtained
attachment and execution against the same properties for a judgment debt against OGG SR. Juan Tong
and Pua Giok bring this appeal and insist that the deed of the 31st of July, 1931, is valid.
Issue:
Whether Ong Guan Can jr is authorized to sell the rice mill owned by his father? Not authorized.
Held:
Not authorized. The making and accepting of a new power of attorney, whether it enlarges or
decreases the power of the agent under a prior power of attorney, must be held to supplant and revoke
the latter when the two are inconsistent. If the new appointment with limited powers did not revoke the
general power of attorney, the execution of the second power of attorney would have been a mere futile
gesture. The properties in question were subject to attachment and execution, the title of OGG SR. not
having been divested by the sale made by OGG JR

(Garcia vs. De Manzano, 39 Phil. 577 [1919].)

Property was sold under a general power of attorney by agent without notice of a second general power
of attorney given later to another.
Facts:
Narciso Lopez Manzano was a merchant in Atimonan, Tayabas, who went to Spain in May, 1910, and
died there the 8th of September, 1913. He gave a general power-of-attorney to his son, Angel L.
Manzano on the 9th of February, 1910, and on the 25th of March a second general power-of-attorney to
his wife, Josefa Samson.
Narciso L. Manzano had various commercial dealings before leaving for Spain.
ANGEL MANZANO, acting under his general power of attorney, sold the halfinterest of NARCISO
LOPEZ MANZANO in a steamer. There was no proof that ANGEL MANZANO knew of the power of
attorney to JOSEFA SAMSON.
Issue:
Whether the power of attorney to JOSEFA SAMSON revoke that given to ANGEL MANZANO?
Held:
No, and therefore, the sale made by ANGEL MANZANO was valid. In the absence of proof that
ANGEL MANZANO had notice of the second power of attorney, it must be considered that ANGEL
MANZANO acted under a valid power of attorney from NARCISO which had not been legally
revoked at the date of the sale.

(Del Rosario vs. Abad and Abad, 104 Phil. 648 [1958].)
Mortgagor authorized mortgagee in a separate instrument termed irrevocable power of attorney
coupled with an interest to sell mortgaged property.
FACTS:
1) On December 1936, the Secretary of Agriculture and Commerce issued under the provisions of the
Public Land Act a homestead patent situated in Nueva Ecija to Tiburcio del Rosario.
2) On February 1937, the Registrar of Deeds issued to him an original certificate of title.
3) On February 24, 1937, del Rosario obtained a loan from Primitivo Abad in the sum of P2000 with
interest payable on December 3, 1941. Del Rosario executed an irrevocable special power of attorney
coupled with interest in favor of the mortgagee, authorizing him to sell and convey the parcel of land.
4) Del Rosario died in December 1945 leaving the debt unpaid/
5) Primitivo Abad, acting as attorney-in-fact of Del rosario sold the parcel of land to his son Teodorico
Abad in consideration of the token sum of P1.00 and the payment of the mortgage debt of the late del
Rosario.
6) Teodorico took possession of the land, cancelled the original certificate of title and reigistered the
land under his name in a transfer certificate of title.
7) The heirs of Del Rosario filed this case to recover the possession and ownership of the parcel of
land, damages, etc.
8) The lower court ruled for del Rosario.
ISSUES:
1) WON the mortgage executed was valid. YES.
2) WON the power of attorney executed by Del Rosario was coupled with interest that will not
terminate the agency upon the death of the principal. NO.
HELD:
1) The mortgage on the improvements of the parcel of land executed by del Rosario is valid as
provided for in the Public Land Act. What is prohibited is the encumbrance or alienation of lands
acquired by free patent or homestead.
2) The power of attorney executed by del Rosario in favor of Primitivo Abad providing, among others,
that it is coupled with an interest in the subject matter thereof and are therefore irrevocable, and
conferring upon my said attorney full and ample power and authority to do and perform all things
reasonably necessary and proper for the due carrying out of the said powers according to the true tenor
and purport of the same does not create an agency coupled with an interest nor does it clothe the
agency with an irrevocable character.
A mere statement like such is not enough. In what does such interest consist must be stated in the
power of attorney. The fact that Tiburcio del Rosario, the principal had mortgaged the improvements
of the parcel of land to Abad, the agent is not such an interest as could render irrevocable the power of
attorney executed by the principal in favor of the agent. As the agency was not coupled with interest, it
was terminated upon the death of del Reosario, the principal, sometime in December 1945, and
Primitivo Abad, the agent could no longer validly convey the parcel of land to Teodorico Abad on June
9, 1947. The sale, therefore was null and void.

RALLOS v FELIX GO CHAN & REALTY COPR.,

Plaintiff: Ramon Rallos
Defendant: Felix Go Chan & Sons Realty Corporation
Facts:

Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of land
known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title
No. 11116 of the Registry of Cebu.
They executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing
him to sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters Concepcion and
Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. New TCTs
were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a complaint
praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983
be unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title
issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title
be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos" in
equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment of
costs of suit.

CFI: [Plaintiffs Complaint]

Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate of Concepcion in
the proportion of share each pro-indiviso and the payment of attorneys fees and cost of
litigation
[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during pendency of
case)]
Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay defendant
the price of the share of the land (P5,343.45) plus attorneys fees
[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of the Estate of
Gerundia]
Dismissed without prejudice to filing either a complaint against the regular administrator of the
Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the
same subject-matter
CA: CFI Decision reversed, upheld the sale of Concepcions share.
MR: denied.
Issues:
1) WON sale was valid although it was executed after the death of the principal, Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the authority of
the agent
3) WON agents knowledge of the principals death is a material factor.

4) WON petitioner must suffer the consequence of failing to annotate a notice of death in the title
(thus there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated parallel to that of an
innocent purchaser for a value of a land.
Held/Ratio:
(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art 13171 and 14032)- one party, caged
the principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf
in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal

(1)
(2)
(3)
(4)

Essential Elements:
there is consent, express or implied of the parties to establish the relationship;
the object is the execution of a juridical act in relation to a third person;
the agents acts as a representative and not for himself, and
the agent acts within the scope of his authority.
Extinguishment
o Generally: among others3, By the death, civil interdiction, insanity or insolvency of the
principal or of the agent
- death of the principal effects instantaneous and absolute revocation of the
authority of the agent
o Exceptions:
(Art. 1930) 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. 1931) agent acted without knowledge of the pricipals death and that the
third person was in good faith (both these reqs should be present)

IN THE CASE AT BAR:

1) Sale was void.
No one may contract in the name of another without being authorized by the latter, or unless he
has by law a right to represent him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon Concepcions death

no one may contract in the name of another without being authorized by the latter, or unless he has by law
a right to represent him. A contract entered into in the name of another by one who has no authority or the
legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose behalf it has been executed, before it is revoked by the other
contracting party.
2

The following contracts are unenforceable, unless they are justified: (1) Those entered into in the name of
another person by one who hi - been given no authority or legal representation or who has acted beyond his
powers; ...
3
See Art. 1919

2) The sale did not fall under the exceptions to the general rule that death ipso jure extinguishes
the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with interest
o Art. 1931 inapplicable:
Simon Rallos knew (as can be inferred from his pleadings) of principal
Concepcions death
For Art 1931 to apply, both requirements must be present:
1. that the agent acted without the knowledge of the death of the principal.
2. that the 3rd person contracted with the agent himself acted in good faith.
Good faith here means that the 3rd person was not aware of the death of the principal at the time
he contracted with the said agent. These two requisites must concur; the absence of one will
render the acts of the agent invalid and unenforceable.
3) Yes, agents knowledge of principals death is material.
Respondent asserts that: there is no provision in the Code which provides that whatever is done
by an agent having knowledge of the death of his principal is void even with respect to third
persons who may have contracted with him in good faith and without knowledge of the death of
the principal
Court says: this contention ignored the ignores the existence of the general rule enunciated in
Article 1919 that the death of the principal extinguishes the agency. Article 1931, being an
exception to the general rule, is to be strictly construed.
4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or others of the
death of the principal.
If revocation was by the act of the principal: a general power which does not specify the
persons to whom represents' on should be made, it is the general opinion that all acts,
executed with third persons who contracted in good faith, Without knowledge of the
revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by operation of law, is
instantaneous without the need for notification to the parties concerned.
5) No.
Laws on agency, the terms of which are clear and unmistakable leaving no room for an
interpretation contrary to its tenor, should apply, the law provides that death of the
principal ipso jure extinguishes the authority of the agent to sell rendering the sale to a
third person in good faith unenforceable unless at the agent had no knowledge of the
principals death at that time (exception under Art. 1931)
Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.