ATP Cases

A
 G.R. No. L-24332 January 31, 1978

RAMON RALLOS vs. FELIX GO CHAN

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his
principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land
pursuant to a power of attorney which the principal had executed in favor. The
administrator of the estate of the went to court to have the sale declared
uneanforceable and to recover the disposed share. The trial court granted the relief
prayed for, but upon appeal the Court of Appeals uphold the validity of the sale and the
complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed 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. On April 21, 1954, the sisters executed a special power of attorney in
favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot
5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon
Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to
Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale
was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a
new transfer certificate of Title No. 12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be d 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.
Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped
from the complaint. The complaint was amended twice; defendant Corporation's
Answer contained a crossclaim against its co-defendant, Simon Rallos while the latter
filed third-party complaint against his sister, Gerundia Rallos While the case was
pending in the trial court, both Simon and his sister Gerundia died and they were
substituted by the respective administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint —
 (1) Declaring the deed of sale, Exh. "C", null and void insofar as
the one-half pro-indiviso share of Concepcion Rallos in the
property in question, — Lot 5983 of the Cadastral Survey of
Cebu — is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel

Transfer Certificate of Title No. 12989 covering Lot 5983 and to
issue in lieu thereof another in the names of FELIX GO CHAN
& SONS REALTY CORPORATION and the Estate of
Concepcion Rallos in the proportion of one-half (1/2) share
each pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to

deliver the possession of an undivided one-half (1/2) share of
Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator

of the Estate of Simeon Rallos, to pay to plaintiff in concept of
reasonable attorney's fees the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and

severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo,

administrator of the Estate of Simeon Rallos, to pay to
defendant Felix Co Chan & Sons Realty Corporation the sum of
P5,343.45, representing the price of one-half (1/2) share of lot
5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator of

the Estate of Simeon Rallos, to pay in concept of reasonable
attorney's fees to Felix Go Chan & Sons Realty Corporation the
sum of P500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeo administrator

of Estate of Simeon Rallos, against Josefina Rallos special administratrix of
the Estate of Gerundia Rallos:

(1) Dismissing the third-party complaint 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 of the third-party complaint, at bar. (pp. 98-100, Record on
Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of
Appeals from the foregoing judgment insofar as it set aside the sale of the one-half
(1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier,
resolved the appeal on November 20, 1964 in favor of the appellant corporation
sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for
a reconsider of the decision but the same was denied in a resolution of March 4,
1965. 2

What is the legal effect of an act performed by an agent after the death of his principal?
Applied more particularly to the instant case, We have the query. is the sale of the
undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the
agent after the death of his principal? What is the law in this jurisdiction as to the effect
of the death of the principal on the authority of the agent to act for and in behalf of the
latter? Is the fact of knowledge of the death of the principal a material factor in
determining the legal effect of an act performed after such death?

Before proceedings to the issues, We shall briefly restate certain principles of law
relevant to the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that 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. 3 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.4 Article
1403 (1) of the same Code also provides:

ART. 1403. 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; ...

Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in
transactions with third persons. 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. 5

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
se. "He who acts through another acts himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned only
with one cause — death of the principal Paragraph 3 of Art. 1919 of the Civil Code
which was taken from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of

the agent; ... (Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this
jurisdiction.8

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale
for the law is found in the juridical basis of agency which is representation Them being
an in. integration of the personality of the principal integration that of the agent it is not
possible for the representation to continue to exist once the death of either is
establish. Pothier agrees with Manresa that by reason of the nature of agency, death is
a necessary cause for its extinction. Laurent says that the juridical tie between the
principal and the agent is severed ipso jure upon the death of either without necessity
for the heirs of the fact to notify the agent of the fact of death of the former. 9

The same rule prevails at common law — the death of the principal effects
instantaneous and absolute revocation of the authority of the agent unless the Power
be coupled with an interest. 10 This is the prevalent rule in American Jurisprudence
where it is well-settled that a power without an interest confer. red upon an agent is
dissolved by the principal's death, and any attempted execution of the power afterward
is not binding on the heirs or representatives of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the
agent extinguishes the agency, subject to any exception, and if so, is the instant case
within that exception? That is the determinative point in issue in this litigation. It is the
contention of respondent corporation which was sustained by respondent court that
notwithstanding the death of the principal Concepcion Rallos the act of the attorney-in-
fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable
inasmuch as the corporation acted in good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule
afore-mentioned.
 ART. 1930. The agency shall remain in full force and effect even after the
death of the principal, 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. Anything done by the agent, without knowledge of the death of
the principal or of any other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third persons who may have
contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed
in favor of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after
the death of his principal is valid and effective only under two conditions, viz: (1) that
the agent acted without knowledge of the death of the principal and (2) that the third
person who contracted with the agent himself acted in good faith. Good faith here
means that the third person was not aware of the death of the principal at the time he
contracted with said agent. These two requisites must concur the absence of one will
render the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the
death of his principal at the time he sold the latter's share in Lot No. 5983 to
respondent corporation. The knowledge of the death is clearly to be inferred from the
pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos knew of
the death of his sister Concepcion is also a finding of fact of the court a quo 13 and of
respondent appellate court when the latter stated that Simon Rallos 'must have known
of the death of his sister, and yet he proceeded with the sale of the lot in the name of
both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty
corporation) of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his
principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person acted in good faith. Thus in
Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now
Art. 1931 of the new Civil Code sustained the validity , of a sale made after the death
of the principal because it was not shown that the agent knew of his principal's
demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al.,
1961, where in the words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs
presented no proof and there is no indication in the record, that the agent
Luy Kim Guan was aware of the death of his principal at the time he sold
the property. The death 6f the principal does not render the act of an agent
 unenforceable, where the latter had no knowledge of such extinguishment
of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of

Appeals reasoned out 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. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the
general rule enunciated in Article 1919 that the death of the principal extinguishes the
agency. That being the general rule it follows a fortiorithat any act of an agent after the
death of his principal is void ab initio unless the same fags under the exception
provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly construed, it is not to be given an
interpretation or application beyond the clear import of its terms for otherwise the
courts will be involved in a process of legislation outside of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in good
faith relied on the power of attorney which was duly registered on the original certificate
of title recorded in the Register of Deeds of the province of Cebu, that no notice of the
death was aver annotated on said certificate of title by the heirs of the principal and
accordingly they must suffer the consequences of such omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries

which We quote:

If the agency has been granted for the purpose of contracting with certain
persons, the revocation must be made known to them. But if the agency is
general iii nature, without reference to particular person with whom the
agent is to contract, it is sufficient that the principal exercise due diligence
to make the revocation of the agency publicity known.

In case of 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. In such case, the principal may
exercise his right against the agent, who, knowing of the revocation,
continued to assume a personality which he no longer had. (Manresa Vol.
11, pp. 561 and 575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode
of terminating an agency which is to be distinguished from revocation by operation of
law such as death of the principal which obtains in this case. On page six of this
Opinion We stressed that by reason of the very nature of the relationship between
principal and agent, agency is extinguished ipso jure upon the death of either principal
or agent. Although a revocation of a power of attorney to be effective must be
communicated to the parties concerned, 18 yet a revocation by operation of law, such
as by death of the principal is, as a rule, instantaneously effective inasmuch as "by
legal fiction the agent's exercise of authority is regarded as an execution of the
principal's continuing will. 19 With death, the principal's will ceases or is the of authority
is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of
the principal What the Code provides in Article 1932 is that, if the agent die his heirs
must notify the principal thereof, and in the meantime adopt such measures as the
circumstances may demand in the interest of the latter. Hence, the fact that no notice
of the death of the principal was registered on the certificate of title of the property in
the Office of the Register of Deeds, is not fatal to the cause of the estate of the
principal

6. Holding that the good faith of a third person in said with an agent affords the former
sufficient protection, respondent court drew a "parallel" between the instant case and
that of an innocent purchaser for value of a land, stating that if a person purchases a
registered land from one who acquired it in bad faith — even to the extent of foregoing
or falsifying the deed of sale in his favor — the registered owner has no recourse
against such innocent purchaser for value but only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630,
one Vallejo was a co-owner of lands with Agustin Nano. The latter had a
power of attorney supposedly executed by Vallejo Nano in his favor. Vallejo
delivered to Nano his land titles. The power was registered in the Office of
the Register of Deeds. When the lawyer-husband of Angela Blondeau went
to that Office, he found all in order including the power of attorney. But
Vallejo denied having executed the power The lower court sustained
Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the
court a quo, the Supreme Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of the

defendant- appellee must be overruled. Agustin Nano had
possession of Jose Vallejo's title papers. Without those title
papers handed over to Nano with the acquiescence of Vallejo,
a fraud could not have been perpetuated. When Fernando de la
Canters, a member of the Philippine Bar and the husband of
Angela Blondeau, the principal plaintiff, searched the
registration record, he found them in due form including the
 power of attorney of Vallajo in favor of Nano. If this had not
been so and if thereafter the proper notation of the
encumbrance could not have been made, Angela Blondeau
would not have sent P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by the registered
owner thereof in the hands of another operates as a
representation to a third party that the holder of the transfer is
authorized to deal with the land.

As between two innocent persons, one of whom must suffer the

consequence of a breach of trust, the one who made it possible
by his act of coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because
here We are confronted with one who admittedly was an agent of his sister and who
sold the property of the latter after her death with full knowledge of such death. The
situation is expressly covered by a provision of law on agency the terms of which are
clear and unmistakable leaving no room for an interpretation contrary to its tenor, in the
same manner that the ruling in Blondeau and the cases cited therein found a basis in
Section 55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary

instrument is presented for registration shall be conclusive authority from
the registered owner to the register of deeds to enter a new certificate or to
make a memorandum of registration in accordance with such instruments,
and the new certificate or memorandum Shall be binding upon the
registered owner and upon all persons claiming under him in favor of every
purchaser for value and in good faith: Provided however, That in all cases
of registration provided by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a certificate of title.
... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of the appealed decision
is an 1842 ruling of the Supreme Court of Pennsylvania in Cassiday v.
McKenzie wherein payments made to an agent after the death of the principal were
held to be "good", "the parties being ignorant of the death". Let us take note that the
Opinion of Justice Rogers was premised on the statement that the parties were
ignorant of the death of the principal. We quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the
Parties are ignorant of the death is a good payment. in addition to the case
in Campbell before cited, the same judge Lord Ellenboruogh, has decided
 in 5 Esp. 117, the general question that a payment after the death of
principal is not good. Thus, a payment of sailor's wages to a person having
a power of attorney to receive them, has been held void when the principal
was dead at the time of the payment. If, by this case, it is meant merely to
decide the general proposition that by operation of law the death of the
principal is a revocation of the powers of the attorney, no objection can be
taken to it. But if it intended to say that his principle applies where there
was 110 notice of death, or opportunity of twice I must be permitted to
dissent from it.

... That a payment may be good today, or bad tomorrow, from the accident
circumstance of the death of the principal, which he did not know, and
which by no possibility could he know? It would be unjust to the agent and
unjust to the debtor. In the civil law, the acts of the agent, done bona fide in
ignorance of the death of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81;
emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may
evoke, mention may be made that the above represents the minority view in American
jurisprudence. Thus in Clayton v. Merrett, the Court said.—

There are several cases which seem to hold that although, as a general
principle, death revokes an agency and renders null every act of the agent
thereafter performed, yet that where a payment has been made in
ignorance of the death, such payment will be good. The leading case so
holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76,
where, in an elaborate opinion, this view ii broadly announced. It is referred
to, and seems to have been followed, in the case of Dick v. Page, 17 Mo.
234, 57 AmD 267; but in this latter case it appeared that the estate of the
deceased principal had received the benefit of the money paid, and
therefore the representative of the estate might well have been held to be
estopped from suing for it again. . . . These cases, in so far, at least, as
they announce the doctrine under discussion, are exceptional. The
Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39
AmD 76), is believed to stand almost, if not quite, alone in announcing the
principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that
the opinion, except so far as it related to the particular facts, was a mere dictum,
Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an

extrajudicial indication of his views on the general subject, than as the
 adjudication of the Court upon the point in question. But accordingly all
power weight to this opinion, as the judgment of a of great respectability, it
stands alone among common law authorities and is opposed by an array
too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J.
549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American

jurisprudence, no such conflict exists in our own for the simple reason that our statute,
the Civil Code, expressly provides for two exceptions to the general rule that death of
the principal revokes ipso jure the agency, to wit: (1) that the agency is coupled with an
interest (Art 1930), and (2) that the act of the agent was executed without knowledge of
the death of the principal and the third person who contracted with the agent acted also
in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and
again We stress the indispensable requirement that the agent acted without knowledge
or notice of the death of the principal In the case before Us the agent Ramon Rallos
executed the sale notwithstanding notice of the death of his principal Accordingly, the
agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate
court, and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of
the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs
against respondent realty corporation at all instances. So Ordered
 G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner, vs. MA. AURA TINA ANGELES, Respondent.

This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court
questioning the Decision1dated April 30, 2001 of the Court of Appeals (CA) in C.A.-
G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional
Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution2 dated August 6,
2001 which denied petitioner’s Motion for Reconsideration.

The antecedents of the case follow:

On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint
for Specific Performance with Damages against Jocelyn B. Doles (petitioner), docketed
as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the
former in the concept of a personal loan amounting to P405,430.00 representing the
principal amount and interest; that on October 5, 1996, by virtue of a "Deed of Absolute
Sale",3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as
the improvements thereon, with an area of 42 square meters, covered by Transfer
Certificate of Title No. 382532,4 and located at a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with
respondent; that this property was mortgaged to National Home Mortgage Finance
Corporation (NHMFC) to secure petitioner’s loan in the sum of P337,050.00 with that
entity; that as a condition for the foregoing sale, respondent shall assume the undue
balance of the mortgage and pay the monthly amortization of P4,748.11 for the
remainder of the 25 years which began on September 3, 1994; that the property was at
that time being occupied by a tenant paying a monthly rent of P3,000.00; that upon
verification with the NHMFC, respondent learned that petitioner had incurred
arrearages amounting to P26,744.09, inclusive of penalties and interest; that upon
informing the petitioner of her arrears, petitioner denied that she incurred them and
refused to pay the same; that despite repeated demand, petitioner refused to
cooperate with respondent to execute the necessary documents and other formalities
required by the NHMFC to effect the transfer of the title over the property; that
petitioner collected rent over the property for the month of January 1997 and refused to
remit the proceeds to respondent; and that respondent suffered damages as a result
and was forced to litigate.

Petitioner, then defendant, while admitting some allegations in the Complaint, denied
that she borrowed money from respondent, and averred that from June to September
1995, she referred her friends to respondent whom she knew to be engaged in the
business of lending money in exchange for personal checks through her capitalist
Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa Moratin,
Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from
respondent and issued personal checks in payment of the loan; that the checks
bounced for insufficiency of funds; that despite her efforts to assist respondent to
collect from the borrowers, she could no longer locate them; that, because of this,
respondent became furious and threatened petitioner that if the accounts were not
settled, a criminal case will be filed against her; that she was forced to issue eight
checks amounting to P350,000 to answer for the bounced checks of the borrowers she
referred; that prior to the issuance of the checks she informed respondent that they
were not sufficiently funded but the latter nonetheless deposited the checks and for
which reason they were subsequently dishonored; that respondent then threatened to
initiate a criminal case against her for violation of Batas Pambansa Blg. 22; that she
was forced by respondent to execute an "Absolute Deed of Sale" over her property in
Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid
consideration; that she did not appear before a notary public; that the Community Tax
Certificate number on the deed was not hers and for which respondent may be
prosecuted for falsification and perjury; and that she suffered damages and lost rental
as a result.

The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is
valid; second; if valid, whether petitioner is obliged to sign and execute the necessary
documents to effect the transfer of her rights over the property to the respondent; and
third, whether petitioner is liable for damages.

On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:

WHEREFORE, premises considered, the Court hereby orders the dismissal of the
complaint for insufficiency of evidence. With costs against plaintiff.

SO ORDERED.

The RTC held that the sale was void for lack of cause or consideration:5

Plaintiff Angeles’ admission that the borrowers are the friends of defendant Doles and
further admission that the checks issued by these borrowers in payment of the loan
obligation negates [sic] the cause or consideration of the contract of sale executed by
and between plaintiff and defendant. Moreover, the property is not solely owned by
defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No. 382532
(Annex A, Complaint), thus:

"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the
share of Teodorico Doles on the parcel of land described in this certificate of title by
virtue of the special power of attorney to mortgage, executed before the notary public,
etc."

The rule under the Civil Code is that contracts without a cause or consideration
produce no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole
assignment of error:

THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND
OF [sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION
OR INSUFFICIENCY OF EVIDENCE.6

On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which
reads:

WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The

Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new
one is entered ordering defendant-appellee to execute all necessary documents to
effect transfer of subject property to plaintiff-appellant with the arrearages of the
former’s loan with the NHMFC, at the latter’s expense. No costs.

SO ORDERED.

The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the Deed of Absolute
Sale was supported by a valid consideration, which is the sum of money petitioner
owed respondent amounting to P405,430.00, representing both principal and interest.

The CA took into account the following circumstances in their entirety: the supposed
friends of petitioner never presented themselves to respondent and that all
transactions were made by and between petitioner and respondent;7 that the money
borrowed was deposited with the bank account of the petitioner, while payments made
for the loan were deposited by the latter to respondent’s bank account;8 that petitioner
herself admitted in open court that she was "re-lending" the money loaned from
respondent to other individuals for profit;9 and that the documentary evidence shows
that the actual borrowers, the friends of petitioner, consider her as their creditor and
not the respondent.10

Furthermore, the CA held that the alleged threat or intimidation by respondent did not
vitiate consent, since the same is considered just or legal if made to enforce one’s
claim through competent authority under Article 133511 of the Civil Code;12 that with
respect to the arrearages of petitioner on her monthly amortization with the NHMFC in
the sum of P26,744.09, the same shall be deemed part of the balance of petitioner’s
loan with the NHMFC which respondent agreed to assume; and that the amount
of P3,000.00 representing the rental for January 1997 supposedly collected by
petitioner, as well as the claim for damages and attorney’s fees, is denied for
insufficiency of evidence.13

On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing
that respondent categorically admitted in open court that she acted only as agent or
representative of Arsenio Pua, the principal financier and, hence, she had no legal
capacity to sue petitioner; and that the CA failed to consider the fact that petitioner’s
father, who co-owned the subject property, was not impleaded as a defendant nor was
he indebted to the respondent and, hence, she cannot be made to sign the documents
to effect the transfer of ownership over the entire property.

On August 6, 2001, the CA issued its Resolution denying the motion on the ground that
the foregoing matters had already been passed upon.

On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28,
2001, petitioner filed the present Petition and raised the following issues:

I. WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A

DEBTOR OF THE RESPONDENT.

II. WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE

PRINCIPAL TO COLLECT DEBT IN HIS BEHALF COULD DIRECTLY
COLLECT PAYMENT FROM THE DEBTOR.

III. WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A

CAUSE.14

Although, as a rule, it is not the business of this Court to review the findings of fact
made by the lower courts, jurisprudence has recognized several exceptions, at least
three of which are present in the instant case, namely: when the judgment is based on
a misapprehension of facts; when the findings of facts of the courts a quo are
conflicting; and when the CA manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, could justify a different conclusion.15 To
arrive at a proper judgment, therefore, the Court finds it necessary to re-examine the
evidence presented by the contending parties during the trial of the case.

The Petition is meritorious.

The principal issue is whether the Deed of Absolute Sale is supported by a valid
consideration.

1. Petitioner argues that since she is merely the agent or representative of the alleged
debtors, then she is not a party to the loan; and that the Deed of Sale executed
between her and the respondent in their own names, which was predicated on that
pre-existing debt, is void for lack of consideration.

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the

form of a price certain in money16 and that this sum indisputably pertains to the debt in
issue. This Court has consistently held that a contract of sale is null and void and
produces no effect whatsoever where the same is without cause or
consideration.17 The question that has to be resolved for the moment is whether this
debt can be considered as a valid cause or consideration for the sale.

To restate, the CA cited four instances in the record to support its holding that
petitioner "re-lends" the amount borrowed from respondent to her friends: first, the
friends of petitioner never presented themselves to respondent and that all
transactions were made by and between petitioner and respondent;18 second; the
money passed through the bank accounts of petitioner and respondent;19 third,
petitioner herself admitted that she was "re-lending" the money loaned to other
individuals for profit;20 and fourth, the documentary evidence shows that the actual
borrowers, the friends of petitioner, consider her as their creditor and not the
respondent.21

On the first, third, and fourth points, the CA cites the testimony of the petitioner, then
defendant, during her cross-examination:22

Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria
Luisa Inocencio, Zenaida Romulo, they are your friends?
witness:
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just
referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited
to the name of Arsenio Pua because the money came from Arsenio Pua.
xxxx
Atty. Diza:
q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one
you mentioned [a] while ago?
witness:
a. Yes, she knows the money will go to those persons.
Atty. Diza:
q. You are re-lending the money?
witness:
a. Yes, sir.
Atty. Diza:
q. What profit do you have, do you have commission?
witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none,
sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the
respondent, the real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following admission
during her cross examination:23
Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal financier, sir.
Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered:24
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate
somebody, are you aware of that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
xxxx
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the assurance of the
defendant?
witness:
a. They go direct to Jocelyn because I don’t know them.
xxxx
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money
from you her friends who [are] in need of money issued check[s] to you? There were checks
issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
 witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need of money
were able to obtain loan to [sic] Arsenio Pua through your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant bounced, am I
correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.

Respondent is estopped to deny that she herself acted as agent of a certain Arsenio
Pua, her disclosed principal. She is also estopped to deny that petitioner acted as
agent for the alleged debtors, the friends whom she (petitioner) referred.

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency
is representation.25 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.26 Agency may
even be implied from the words and conduct of the parties and the circumstances of
the particular case.27Though 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.28

In this case, petitioner knew that the financier of respondent is Pua; and respondent
knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of
[petitioner], the actual borrowers, did not present themselves to [respondent]" as
evidence that negates the agency relationship—it is sufficient that petitioner disclosed
to respondent that the former was acting in behalf of her principals, her friends whom
she referred to respondent. 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.29

In the case at bar, both petitioner and respondent have undeniably disclosed to each
other that they are representing someone else, and so both of them are estopped to
deny the same. It is evident from the record that petitioner merely refers actual
borrowers and then collects and disburses the amounts of the loan upon which she
received a commission; and that respondent transacts on behalf of her "principal
financier", a certain Arsenio Pua. If their respective principals do not actually and
personally know each other, such ignorance does not affect their juridical standing as
agents, especially since the very purpose of agency is to extend the personality of the
principal through the facility of the agent.

With respect to the admission of petitioner that she is "re-lending" the money loaned
from respondent to other individuals for profit, it must be stressed that the manner in
which the parties designate the relationship is not controlling. 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.30 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.31

That both parties acted as mere agents is shown by the undisputed fact that the friends
of petitioner issued checks in payment of the loan in the name of Pua. If it is true that
petitioner was "re-lending", then the checks should have been drawn in her name and
not directly paid to Pua.

With respect to the second point, particularly, the finding of the CA that the
disbursements and payments for the loan were made through the bank accounts of
petitioner and respondent, suffice it to say that in the normal course of commercial
dealings and for reasons of convenience and practical utility it can be reasonably
expected that the facilities of the agent, such as a bank account, may be employed,
and that a sub-agent be appointed, such as the bank itself, to carry out the task,
especially where there is no stipulation to the contrary.32
In view of the two agency relationships, petitioner and respondent are not privy to the
contract of loan between their principals. Since the sale is predicated on that loan, then
the sale is void for lack of consideration.

2. A further scrutiny of the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct from the debt:
respondent averred in her complaint and testified that the parties had agreed that as a
condition for the conveyance of the property the respondent shall assume the balance
of the mortgage loan which petitioner allegedly owed to the NHMFC.33 This Court in the
recent past has declared that an assumption of a mortgage debt may constitute a valid
consideration for a sale.34

Although the record shows that petitioner admitted at the time of trial that she owned
the property described in the TCT,35 the Court must stress that the Transfer Certificate
of Title No. 38253236 on its face shows that the owner of the property which admittedly
forms the subject matter of the Deed of Absolute Sale refers neither to the petitioner
nor to her father, Teodorico Doles, the alleged co-owner. Rather, it states that the
property is registered in the name of "Household Development Corporation." Although
there is an entry to the effect that the petitioner had been granted a special power of
attorney "covering the shares of Teodorico Doles on the parcel of land described in this
certificate,"37 it cannot be inferred from this bare notation, nor from any other evidence
on the record, that the petitioner or her father held any direct interest on the property in
question so as to validly constitute a mortgage thereon38 and, with more reason, to
effect the delivery of the object of the sale at the consummation stage.39 What is worse,
there is a notation that the TCT itself has been "cancelled."40

In view of these anomalies, the Court cannot entertain the possibility that respondent
agreed to assume the balance of the mortgage loan which petitioner allegedly owed to
the NHMFC, especially since the record is bereft of any factual finding that petitioner
was, in the first place, endowed with any ownership rights to validly mortgage and
convey the property. As the complainant who initiated the case, respondent bears the
burden of proving the basis of her complaint. Having failed to discharge such burden,
the Court has no choice but to declare the sale void for lack of cause. And since the
sale is void, the Court finds it unnecessary to dwell on the issue of whether duress or
intimidation had been foisted upon petitioner upon the execution of the sale.

Moreover, even assuming the mortgage validly exists, the Court notes respondent’s
allegation that the mortgage with the NHMFC was for 25 years which began
September 3, 1994. Respondent filed her Complaint for Specific Performance in 1997.
Since the 25 years had not lapsed, the prayer of respondent to compel petitioner to
execute necessary documents to effect the transfer of title is premature.

WHEREFORE, the petition is granted. The Decision and Resolution of the Court of
Appeals are REVERSED and SET ASIDE. The complaint of respondent in Civil Case
No. 97-82716 is DISMISSED. SO ORDERED.
 G.R. No. 167552 April 23, 2007

EUROTECH INDUSTRIAL vs. CUIZON

Before Us is a petition for review by certiorari assailing the Decision1 of the Court of
Appeals dated 10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R.
SP No. 71397 entitled, "Eurotech Industrial Technologies, Inc. v. Hon. Antonio T.
Echavez." The assailed Decision and Resolution affirmed the Order3 dated 29 January
2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent
EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various

European industrial equipment for customers here in the Philippines. It has as one of
its customers Impact Systems Sales ("Impact Systems") which is a sole proprietorship
owned by respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in said capacity.

From January to April 1995, petitioner sold to Impact Systems various products
allegedly amounting to ninety-one thousand three hundred thirty-eight (₱91,338.00)
pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge
pump valued at ₱250,000.00 with respondents making a down payment of fifty
thousand pesos (₱50,000.00).4 When the sludge pump arrived from the United
Kingdom, petitioner refused to deliver the same to respondents without their having
fully settled their indebtedness to petitioner. Thus, on 28 June 1995, respondent
EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:

1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power

Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND
(₱365,000.00) PESOS as payment for the purchase of one unit of Selwood
Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto
the ASSIGNEE6 the said receivables from Toledo Power Corporation in the
amount of THREE HUNDRED SIXTY FIVE THOUSAND (₱365,000.00) PESOS
which receivables the ASSIGNOR is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.7

Following the execution of the Deed of Assignment, petitioner delivered to respondents

the sludge pump as shown by Invoice No. 12034 dated 30 June 1995.8

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of

Assignment, proceeded to collect from Toledo Power Company the amount of
₱365,135.29 as evidenced by Check Voucher No. 09339prepared by said power
company and an official receipt dated 15 August 1995 issued by Impact
Systems.10Alarmed by this development, petitioner made several demands upon
respondents to pay their obligations. As a result, respondents were able to make
partial payments to petitioner. On 7 October 1996, petitioner’s counsel sent
respondents a final demand letter wherein it was stated that as of 11 June 1996,
respondents’ total obligations stood at ₱295,000.00 excluding interests and attorney’s
fees.11 Because of respondents’ failure to abide by said final demand letter, petitioner
instituted a complaint for sum of money, damages, with application for preliminary
attachment against herein respondents before the Regional Trial Court of Cebu City.12

On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of
preliminary attachment.13

On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted

petitioner’s allegations with respect to the sale transactions entered into by Impact
Systems and petitioner between January and April 1995.15 He, however, disputed the
total amount of Impact Systems’ indebtedness to petitioner which, according to him,
amounted to only ₱220,000.00.16

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a
real party in interest in this case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction with petitioner and the
latter was very much aware of this fact. In support of this argument, petitioner points to
paragraphs 1.2 and 1.3 of petitioner’s Complaint stating –

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City.
He is the proprietor of a single proprietorship business known as Impact Systems
Sales ("Impact Systems" for brevity), with office located at 46-A del Rosario
Street, Cebu City, where he may be served summons and other processes of the
Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of

Cebu City. He is the Sales Manager of Impact Systems and is sued in this action
in such capacity.17

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with
Motion for Summary Judgment. The trial court granted petitioner’s motion to declare
respondent ERWIN in default "for his failure to answer within the prescribed period
despite the opportunity granted"18 but it denied petitioner’s motion for summary
judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001.19 However, the conduct of the pre-trial conference was deferred pending
the resolution by the trial court of the special and affirmative defenses raised by
respondent EDWIN.20
After the filing of respondent EDWIN’s Memorandum21 in support of his special and
affirmative defenses and petitioner’s opposition22 thereto, the trial court rendered its
assailed Order dated 29 January 2002 dropping respondent EDWIN as a party
defendant in this case. According to the trial court –

A study of Annex "G" to the complaint shows that in the Deed of Assignment,
defendant Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales;
that [Impact] Systems Sale is a single proprietorship entity and the complaint shows
that defendant Erwin H. Cuizon is the proprietor; that plaintiff corporation is
represented by its general manager Alberto de Jesus in the contract which is dated
June 28, 1995. A study of Annex "H" to the complaint reveals that [Impact] Systems
Sales which is owned solely by defendant Erwin H. Cuizon, made a down payment of
₱50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of
Annex "G", thereby showing that [Impact] Systems Sales ratified the act of Edwin B.
Cuizon; the records further show that plaintiff knew that [Impact] Systems Sales, the
principal, ratified the act of Edwin B. Cuizon, the agent, when it accepted the down
payment of ₱50,000.00. Plaintiff, therefore, cannot say that it was deceived by
defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of
its agent and plaintiff knew about said ratification. Plaintiff could not say that the
subject contract was entered into by Edwin B. Cuizon in excess of his powers since
[Impact] Systems Sales made a down payment of ₱50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped
as party defendant.23

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the
Court of Appeals which, however, affirmed the 29 January 2002 Order of the court a
quo. The dispositive portion of the now assailed Decision of the Court of Appeals
states:

WHEREFORE, finding no viable legal ground to reverse or modify the conclusions

reached by the public respondent in his Order dated January 29, 2002, it is hereby
AFFIRMED.24

Petitioner’s motion for reconsideration was denied by the appellate court in its
Resolution promulgated on 17 March 2005. Hence, the present petition raising, as sole
ground for its allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED

THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS
SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS
NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE
PARTICIPATE IN THE PERPETUATION OF A FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:

Art. 1897. The agent who acts as such is not personally liable to the 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.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s
act of collecting the receivables from the Toledo Power Corporation notwithstanding
the existence of the Deed of Assignment signed by EDWIN on behalf of Impact
Systems. While said collection did not revoke the agency relations of respondents,
petitioner insists that ERWIN’s action repudiated EDWIN’s power to sign the Deed of
Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as an
agent, petitioner claims that he should be made personally liable for the obligations of
his principal.26

Petitioner also contends that it fell victim to the fraudulent scheme of respondents who
induced it into selling the one unit of sludge pump to Impact Systems and signing the
Deed of Assignment. Petitioner directs the attention of this Court to the fact that
respondents are bound not only by their principal and agent relationship but are in fact
full-blooded brothers whose successive contravening acts bore the obvious signs of
conspiracy to defraud petitioner.27

In his Comment,28 respondent EDWIN again posits the argument that he is not a real
party in interest in this case and it was proper for the trial court to have him dropped as
a defendant. He insists that he was a mere agent of Impact Systems which is owned
by ERWIN and that his status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of the said
business venture. Likewise, respondent EDWIN points to the Deed of Assignment
which clearly states that he was acting as a representative of Impact Systems in said
transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do

something in representation or on behalf of another with the latter’s consent.29 The
underlying principle of the contract of agency is to accomplish results by using the
services of others – to do a great variety of things like selling, buying, manufacturing,
and transporting.30 Its purpose is to extend the personality of the principal or the party
for whom another acts and from whom he or she derives the authority to act.31 It is said
that the basis of agency is representation, that is, the agent acts for and on behalf of
the principal on matters within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the principal.32 By this legal fiction,
the actual or real absence of the principal is converted into his legal or juridical
presence – qui facit per alium facit per se.33
The elements of the contract of agency are: (1) 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 agent acts as a representative and not for himself; (4)
the agent acts within the scope of his authority.34

In this case, the parties do not dispute the existence of the agency relationship
between respondents ERWIN as principal and EDWIN as agent. The only cause of the
present dispute is whether respondent EDWIN exceeded his authority when he signed
the Deed of Assignment thereby binding himself personally to pay the obligations to
petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the authority
granted by his principal and he should therefore bear the effect of his deed pursuant to
Article 1897 of the New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
presents two instances when an agent becomes personally liable to a third person.
The first is when he expressly binds himself to the obligation and the second is when
he exceeds his authority. In the last instance, the agent can be held liable if he does
not give the third party sufficient notice of his powers. We hold that respondent EDWIN
does not fall within any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the
sales manager of Impact Systems. As discussed elsewhere, the position of manager is
unique in that it presupposes the grant of broad powers with which to conduct the
business of the principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general
agent or manager; such a position presupposes a degree of confidence reposed and
investiture with liberal powers for the exercise of judgment and discretion in
transactions and concerns which are incidental or appurtenant to the business
entrusted to his care and management. In the absence of an agreement to the
contrary, a managing agent may enter into any contracts that he deems reasonably
necessary or requisite for the protection of the interests of his principal entrusted to his
management. x x x.35

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-
within his authority when he signed the Deed of Assignment. To recall, petitioner
refused to deliver the one unit of sludge pump unless it received, in full, the payment
for Impact Systems’ indebtedness.36 We may very well assume that Impact Systems
desperately needed the sludge pump for its business since after it paid the amount of
fifty thousand pesos (₱50,000.00) as down payment on 3 March 1995,37 it still
persisted in negotiating with petitioner which culminated in the execution of the Deed of
Assignment of its receivables from Toledo Power Company on 28 June 1995.38 The
significant amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems’ perseverance to get hold of the said equipment. There
is, therefore, no doubt in our mind that respondent EDWIN’s participation in the Deed
of Assignment was "reasonably necessary" or was required in order for him to protect
the business of his principal. Had he not acted in the way he did, the business of his
principal would have been adversely affected and he would have violated his fiduciary
relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both
from respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here
that Article 1897 of the New Civil Code upon which petitioner anchors its claim against
respondent EDWIN "does not hold that in case of excess of authority, both the agent
and the principal are liable to the other contracting party."39 To reiterate, the first part of
Article 1897 declares that the principal is liable in cases when the agent acted within
the bounds of his authority. Under this, the agent is completely absolved of any liability.
The second part of the said provision presents the situations when the agent himself
becomes liable to a third party when he expressly binds himself or he exceeds the
limits of his authority without giving notice of his powers to the third person. However, it
must be pointed out that in case of excess of authority by the agent, like what petitioner
claims exists here, the law does not say that a third person can recover from both the
principal and the agent.40

As we declare that respondent EDWIN acted within his authority as an agent, who did
not acquire any right nor incur any liability arising from the Deed of Assignment, it
follows that he is not a real party in interest who should be impleaded in this case. A
real party in interest is one who "stands to be benefited or injured by the judgment in
the suit, or the party entitled to the avails of the suit."41 In this respect, we sustain his
exclusion as a defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision
dated 10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in
CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional
Trial Court, Branch 8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu
City, for the continuation of the proceedings against respondent Erwin Cuizon. SO
ORDERED.