31.

G.R. No. 45985 May 18, 1990

CHINA AIR LINES, LTD., petitioner, 

vs.
COURT OF APPEALS, JOSE PAGSIBIGAN, PHILIPPINE AIR LINES, INC. and ROBERTO
ESPIRITU, respondents.

G.R. No. 46036 May 18, 1990

PHILIPPINE AIR LINES, INC. and ROBERTO ESPIRITU, petitioners, 

vs.
COURT OF APPEALS, JOSE PAGSIBIGAN and CHINA AIR LINES, LTD., respondents.

FACTS:

Jose Pagsibigan purchased a plane ticket for a Manila-Taipei-Hongkong-Manila flight

from the Transaire Travel Agency. The said agency contacted Philippine Airlines (PAL)
which at that time was a sales and ticketing agent of China Airlines (CAL).PAL, through
its ticketing agent Roberto Espiritu, issued to Pagsibigan the plane ticket which showed
that the latter had been booked at the June 10, 1968 5:20 PM flight of China Airlines,
departing from Manila for Taipei.

When Pagisibigan showed up at the airport an hour before the supposed scheduled time
of departure, he was informed that the CAL plane he was supposed to take for Taipei
had left at 10:20 AM that day. The PAL employees then made appropriate arrangements
so that he could take the PAL’s flight to Taipei the following day. Pagsibigan took the re-
scheduled flight.A few months after, he filed a complaint for moral damages and
attorney’s fees against PAL. He alleged that Espiritu had been grossly negligent in
his duties.In its defense, PAL alleged that: (1) the departure time indicated on
Pagsibigan’s plane ticket was furnished and confirmed by CAL; and (2) CAL did not
inform the issuing PAL branch of the revised timetable of CAL flights. Hence, PAL
asserted a cross-claim against CAL.CAL, for its part, averred that: (1) all airlines,
including PAL, were informed of the revised schedule of flights; (2) notices of these
revised schedule were furnished to all sales agent; and (3) the issuing PAL branch had in
fact been issuing and selling tickets based on the revised time schedule. Thus, CAL also
asserted a cross claim against PAL.

The trial court found PAL and Roberto Espiritu jointly and severally liable by way
of exemplary damages. It did not award moral damages. CAL was exonerated.CA ruled
out the claim for moral and exemplary damages, and instead awarded
nominal damages.

 
ISSUE: Who should be held liable?

HELD:

The SC noted that Pagsibigan has opted to seek redress by pursuing two remedies at the
same time, that is, to enforce the civil liability of CAL for breach of contract and,
likewise, to recover from PAL and Espiritu for tort or culpa aquiliana.A perusal of the
complaint of Pagisbigan will disclose that the allegations therein make out a case for
a quasi-delict. Had Pagisibigan intended to maintain an action based on breach of
contract, he could have sued CAL alone considering that PAL is not a real party to the
contractIt is thus evident that when Pagsibigan sensed that he cannot hold CAL liable on
a quasi-delict, he made a detour on appeal, by claiming that his action against CAL is
based on breach of contract of carriage.SC did not allow Pagsibigan to change his theory
at this stage because it would be unfair for CAL as it would have no opportunity to
present further evidence material to the new theory.But there is no basis to hold CAL
liable on a quasi-delict, hence its exoneration from any liability for fault or negligence.

            With respect to PAL and Espiritu, PAL’s main defense is that is only an agent. As
a general proposition, an agent who duly acts as such is not personally liable to third
persons. However, there are admitted exceptions, as in this case where the agent is
being sued for damages arising from a tort committed by his employee. In an action
premised on the employee’s negligence, whereby Pagsibigan seeks recovery for
the damages from both PAL and Espiritu without qualification, what is sought to be
imposed is the direct and primary liability of PAL as an employer. When an injury is
caused by the negligence of an employee, there instantly arises a presumption of law
that there was negligence on the part of the employer. This presumption, however, may
be rebutted by clear showing on the part of the employer that it has exercised the care
and diligence of a good father of a family in the selection and supervision of his
employee. PAL failed to overcome such presumption. As found by CA, PAL was duly
informed of CAL’s revised schedule, and in fact, PAL had been issuing
and selling ticket based on said revised time schedule. For his negligence, Espiritu is
primarily liable to Pagisbigan under Article 2176 of the CC. For the failure of PAL to
rebut the legal presumption of negligence, it is also primarily liable under Article 2180
of CC. Under Article 2180, all that is required is that the employee, by his negligence,
committed a quasi-delict which caused damage to another, and this suffices to hold the
employer primarily and solidarily liable for the tortious act of the employee. PAL,
however, can demand from Espiritu reimbursement of the amount which it will have to
pay the offended party’s claim.

WHEREFORE, the decision of respondent Court of Appeals is MODIFIED accordingly. China Air
Lines, Ltd. is hereby absolved from liability. Philippine Air Lines, Inc. and Roberto Espiritu are
declared jointly and severally liable to pay the sum of P10,000.00 by way of nominal damages,
without prejudice to the right of Philippine Air Lines, Inc. to recover from Roberto Espiritu
reimbursement of the damages that it may pay respondent Jose Pagsibigan.
SO ORDERED.

31.

G.R. No. L-49188               January 30, 1990

PHILIPPINE AIRLINES, INC., petitioner, 

vs.
HON. COURT OF APPEALS, HON. JUDGE RICARDO D. GALANO, Court of First Instance of
Manila, Branch XIII, JAIME K. DEL ROSARIO, Deputy Sheriff, Court of First Instance, Manila,
and AMELIA TAN, respondents.

Amelia Tan commenced a complaint for damages before the Court of First Instance against Philippine
Airlines, Inc. (PAL). The Court rendered a judgment in favor of the former and against the latter.

PAL filed its appeal with the Court of Appeals (CA), and the appellate court affirmed the judgment of the
lower court with the modification that PAL is condemned to pay the latter the sum of P25, 000.00 as
damages and P5, 000.00 as attorney’s fee.

Judgment became final and executory and was correspondingly entered in the case, which was
remanded to the trial court for execution. The trial court upon the motion of Amelia Tan issued an order
of execution with the corresponding writ in favor of the respondent. Said writ was duly referred to
Deputy Sheriff Reyes for enforcement.

Four months later, Amelia Tan moved for the issuance of an alias writ of execution, stating that the
judgment rendered by the lower court, and affirmed with modification by the CA, remained unsatisfied.
PAL opposed the motion, stating that it had already fully paid its obligation to plaintiff through the
issuance of checks payable to the deputy sheriff who later did not appear with his return and instead
absconded.

The CA denied the issuance of the alias writ for being premature. After two months the CA granted her
an alias writ of execution for the full satisfaction of the judgment rendered, when she filed another
motion. Deputy Sheriff del Rosario is appointed special sheriff for enforcement thereof.
PAL filed an urgent motion to quash the alias writ of execution stating that no return of the writ had as
yet been made by Deputy Sheriff Reyes and that judgment debt had already been fully satisfied by the
former as evidenced by the cash vouchers signed and received by the executing sheriff.

Deputy Sheriff del Rosario served a notice of garnishment on the depository bank of PAL, through its
manager and garnished the latter’s deposit. Hence, PAL brought the case to the Supreme Court and filed
a petition for certiorari.

Issue: WON payment of judgment to the implementing officer as directed in the writ of execution
constitutes satisfaction of judgment.

Held: Negative.

Under the peculiar circumstances of this case, the payment to the absconding sheriff by check in his
name did not operate as a satisfaction of the judgment debt.

In general, a payment, in order to be effective to discharge an obligation, must be made to the

proper person. Article 1240 of the Civil Code provides:

Payment shall be made to the person in whose favor the obligation has been constituted, or
his successor in interest, or any person authorized to receive it. (Emphasis supplied)

Thus, payment must be made to the obligee himself or to an agent having authority, express or
implied, to receive the particular payment (Ulen v. Knecttle 50 Wyo 94, 58 [2d] 446, 111 ALR 65).
Payment made to one having apparent authority to receive the money will, as a rule, be treated as
though actual authority had been given for its receipt. Likewise, if payment is made to one who by
law is authorized to act for the creditor, it will work a discharge (Hendry v. Benlisa 37 Fla. 609, 20
SO 800,34 LRA 283). The receipt of money due on ajudgment by an officer authorized by law to
accept it will, therefore, satisfy the debt (See 40 Am Jm 729, 25; Hendry v. Benlisa supra; Seattle v.
Stirrat 55 Wash. 104 p. 834,24 LRA [NS] 1275).

The theory is where payment is made to a person authorized and recognized by the creditor, the
payment to such a person so authorized is deemed payment to the creditor. Under ordinary
circumstances, payment by the judgment debtor in the case at bar, to the sheriff should be valid
payment to extinguish the judgment debt.

There are circumstances in this case, however, which compel a different conclusion.

The payment made by the petitioner to the absconding sheriff was not in cash or legal tender but in
checks. The checks were not payable to Amelia Tan or Able Printing Press but to the absconding
sheriff.
31.

G.R. No. 75640               April 5, 1990

NATIONAL FOOD AUTHORITY, (NFA), petitioner, 

vs.
INTERMEDIATE APPELLATE COURT, SUPERIOR (SG) SHIPPING
CORPORATION, respondents.

FACTS:

Medalla, as commission agent of the plaintiff Superior Shipping Corporation, entered into a contract for
hire of ship known as MV Sea Runner with NFA (then National Grain Authority). Under the said contract
Medalla obligated to transport on the "MV Sea Runner" 8,550 sacks of rice belonging to defendant
National Grains Authority from the port of San Jose, Occidental Mindoro, to Malabon, Metro Manila.
Upon completion of the delivery, Superior Shipping wrote a letter requesting NGA that it be allowed to
collect the amount for the transaction. Superior Shipping wrote another letter to NGA, this time
specifically requesting that the payment for freightage and other charges be made to it and not to
defendant Medalla because plaintiff was the owner of the vessel "MV Sea Runner". In reply, NGA
informed Superior Shipping that it could not grant its request because the contract to transport the rice
was entered into by NGA and Medalla who did not disclose that he was acting as a mere agent of
Superior Shipping. NGA then made the payment to Medalla. Superior shipping demandad Medalla to
turn over to it the payment by NGA but Medalla did not do so.

ISSUE:

won NFA is liable to Superior Shipping.

HELD:

Yes. It is contended by petitioner NFA that it is not liable under the exception to the rule (Art. 1883)
since it had no knowledge of the fact of agency between respondent Superior Shipping and Medalla at
the time when the contract was entered into between them (NFA and Medalla). Petitioner submits that
"(A)n undisclosed principal cannot maintain an action upon a contract made by his agent unless such
principal was disclosed in such contract. One who deals with an agent acquires no right against the
undisclosed principal." Art. 1883. If an agent acts in his own name, the principal has no right of action
against the persons with whom the agent has contracted; neither have such persons against the
principal. In such case the agent is the one directly bound in favor of the person with whom he has
contracted, as if the transaction were his own, except when the contract involves things belonging to
the principal. Consequently, when things belonging to the principal (in this case, Superior Shipping
Corporation) are dealt with, the agent is bound to the principal although he does not assume the
character of such agent and appears acting in his own name. In other words, the agent's apparent
representation yields to the principal's true representation and that, in reality and in effect, the contract
must be considered as entered into between the principal and the third person (Sy Juco and Viardo v. Sy
Juco, 40 Phil. 634). Corollarily, if the principal can be obliged to perform his duties under the contract,
then it can also demand the enforcement of its rights arising from the contract.
32.

G.R. No. 123560             March 27, 2000

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, 

vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA
CANILAO and CLAUDIA TAGUNICAR, respondents.

FACTS:
 Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with his business, he travels from
time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, petitioners bought plane tickets from Claudia Tagunicar
who represented herself to be an agent of Tourist World Services, Inc. (TWSI). The destinations are Hongkong, Tokyo, San
Francisco, U.S.A., for the amount of P25,000.00. The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to buy to 2
lines of infrared heating system processing textured plastic article.
 On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. The flight from Tokyo to San
Francisco was on “RQ” status, meaning “on request”. Per instruction of Tagunicar, petitioners returned after a few days for the
confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of TWSI, Tagunicar told petitioners that
their flight is now confirmed all the way. Thereafter, she attached the confirmation stickers on the plane tickets.
 On July 23, 1978, plaintiffs left for Hongkong and stayed there for 5 days. Upon their arrival in Tokyo, they called up Pan-Am
office for reconfirmation of their flight to San Francisco. Said office, however, informed them that their names are not in the
manifest. Since petitioners were supposed to leave on the 29th of July, and could not remain in Japan for more than 72 hours,
they were constrained to agree to accept airline tickets for Taipei instead, per advice of Japan Air Lines officials. This is the
only option left to them because Northwest Airlines was then on strike, hence, there was no chance for the petitioners to obtain
airline seats to the United States within 72 hours. Petitioners paid for these tickets.
 Upon reaching Taipei, there were no flights available for petitioners, thus, they were forced to return back to Manila on August
3, 1978, instead of proceeding to the United States. Japan Air Lines refunded the petitioners the difference of the price for
Tokyo-Taipei and Tokyo-San Francisco.
 In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho’s option to buy the
two lines of infra-red heating system. The agreement was for him to inspect the equipment and make final arrangements with
the said company not later than August 7, 1978. From this business transaction, Yu Eng Cho expected to realize a profit of
P300,000.00 to P400,000.00.
 Note: Tagunicar is an independent travel solicitor (not an agent of Pan Am or TWSI), for the purchase of their plane tickets.
As such travel solicitor, she helps in the processing of travel papers like passport, plane tickets, booking of passengers and
some assistance at the airport. She is known to Pan-Am, TWSI/Julieta Canilao, because she has been dealing with them in the
past years.
 CA found Tagunicar not a duly authorized agent or representative of either Pan Am or TWSI. It held that their business
transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and TWSI as its agent and sub-agent,
respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue validation stickers to,
herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions.

ISSUE: WON Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am

HELD: No.
 By the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of
another, with the consent or authority of the latter. The elements 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. It is a settled rule that persons dealing
with an assumed agent are bound at their peril, if they would hold the principal liable, to ascertain not only the fact of agency
but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it.
 Tagunicar testified that when she pays TWSI, she already deducts in advance her commission and merely gives the net amount
to TWSI. From all sides of the legal prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets
from TWSI and then sells it at a premium to her clients. There is nothing in the records to show that respondent Tagunicar has
been employed by Pan Am as its agent, except the bare allegation of petitioners.

32.

G.R. No. 130148 December 15, 1997

JOSE BORDADOR and LYDIA BORDADOR, petitioners, 
vs.
BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents.

FACTS:

Petitioners Bordador spouses were engaged in the business of purchase and sale of jewelry, while
respondent Brigida Luz was their regular customer. Respondent Narciso Deganos, Luz's brother,
received several pieces of jewelry from the Bordadors amounting to P382,816.00, which items were
indicated in 17 receipts covering the same--11 of the receipts stated that they were received by Deganos
for a certain Evelyn Aquino, while the remaining 6 indicated that they were received by Deganos for Luz.
Deganos was supposed to sell the items at a profit and remit the proceeds and return the unsold items
to the Bordadors. Deganos remitted only P53,207.00. He neither paid the balance of the sales proceeds,
nor did he return any unsold item to the Bordadors, which led them to file an action for recovery of a
sum of money and damages against Deganos and Luz with the RTC. The Bordadors claimed that Deganos
acted as the agent of Luz when he received the items of jewelry, and because he failed to pay for the
same, Luz, as principal, became solidarily liable with him.Deganos asserted that it was he alone who was
involved in the transaction with the Bordadors; that he neither acted as agent for nor was he authorized
to act as an agent by Luz, notwithstanding the fact that 6 of the receipts indicated that the items were
received by him for Luz. He added that he never delivered any of the items to Luz. Luz corroborated the
claims of Deganos.The RTC found that only Deganos was liable to the Bordados. It further found that it
was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for
Evelyn Aquino and for Luz. It said that it was "persuaded that Brigida D. Luz was behind Deganos," but
because there was no memorandum to this effect, the agreement between the parties was
unenforceable under the Statute of Frauds. Absent the required memorandum or any written document
connecting Luz with the subject receipts or authorizing Deganos to act on her behalf, the alleged
agreement between the Bordadors and Luz was unenforceable.The Bordadors elevated the case to the
CA which affirmed said judgment, hence the instant petition.

ISSUE:Whether Luz is liable to the Bordadors for the latter's claim for money and damages despite the
fact that Luz did not sign any of the subject receipts or authorized Deganos to receive the items of
jewelry on her behalf

HELD:No, Luz is not liable to the Bordadors.

RATIO:THE BASIS FOR AGENCY IS REPRESENTATION. The basis for agency is representation. Here, there
is no showing that Luz consented to the acts of Deganos or authorized him to act on her behalf, much
less with respect to the particular transactions involved. The Bordadors' attempt to foist liability on Luz
through the supposed agency relation with Deganos is groundless and illadvised. A PERSON DEALING
WITH AN AGENT IS PUT UPON INQUIRY AND MUST DISCOVER UPON HIS PERIL THE AUTHORITY OF THE
AGENT. Besides, it was grossly and inexcusably negligent of the Bordadors to entrust to Deganos, not
once or twice but on at least 6 occasions as evidenced by 6 receipts, several pieces of jewelry of
substantial value without requiring a written authorization from his alleged principal. A person dealing
with an agent is put upon inquiry and must discover upon his peril the authority of the agent.

33.

G.R. No. L-49101 October 24, 1983

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners,
vs. CA and THE PHILIPPINE BANK OF COMMERCE, respondents.

FACTS: Bonnevie filed on January 26, 1971 a complaint with CFI against Philippine Bank of
Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 executed in
favor of the Philippine Bank of Commerce by the spouses Jose and Josefa Lozano as security
for a loan obtained by the spouses from the bank as well as the extrajudicial foreclosure made
on September 4, 1968. It alleged among others that (a) the Deed of Mortgage lacks
consideration and (b) the mortgage was executed by one who was not the owner of the
mortgaged property. Respondents specifically denied most of the allegations. The lower court
dismissed the compliant. CA affirmed the decision of the lower court.

ISSUE/s: Whether the real estate mortgage executed by the spouses Lozano in favor of
respondent bank was validly and legally executed. Whether petitioners had a right to redeem
the foreclosed property.

HELD: From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed
was executed for and on condition of the loan granted to the Lozano spouses. The fact that the
latter did not collect from the respondent Bank the consideration of the mortgage on the date it
was executed is immaterial. A contract of loan being a consensual contract, the herein contract
of loan was perfected at the same time the contract of mortgage was executed. The promissory
note executed on December 12, 1966 is only an evidence of indebtedness and does not
indicate lack of consideration of the mortgage at the time of its execution.

The lack of notice of the foreclosure sale on petitioners is a flimsy ground. Respondent Bank not
being a party to the Deed of Sale with Assumption of Mortgage, it can validly claim that it was
not aware of the same and hence, it may not be obliged to notify petitioners. Secondly,
petitioner Honesto Bonnevie was not entitled to any notice because as of May 14, 1968, he had
transferred and assigned all his rights and interests over the property in favor of intervenor
Raoul Bonnevie and respondent Bank not likewise informed of the same. For the same reason,
Raoul Bonnevie is not entitled to notice. Most importantly, Act No. 3135 does not require
personal notice on the mortgagor.

On the question of whether or not the petitioners had a right to redeem the property, We hold
that the Court of Appeals did not err in ruling that they had no right to redeem. No consent
having been secured from respondent Bank to the sale with assumption of mortgage by
petitioners, the latter were not validly substituted as debtors. In fact, their rights were never
recorded and hence, respondent Bank is charged with the obligation to recognize the right of
redemption only of the Lozano spouses. But even granting that as purchaser or assignee of the
property, as the case may be, the petitioners had acquired a right to redeem the property,
petitioners failed to exercise said right within the period granted by law. Thru certificate of sale in
favor of appellee was registered on September 2, 1968 and the one year redemption period
expired on September 3, 1969. It was not until September 29, 1969 that petitioner Honesto
Bonnevie first wrote respondent and offered to redeem the property. Moreover, on September
29, 1969, Honesto had at that time already transferred his rights to intervenor Raoul Bonnevie.

WHEREFORE, the appeal being devoid of merit, the decision of the Court of Appeals is hereby
AFFIRMED. Costs against petitioners.
34.

G.R. No. L-41420 July 10, 1992

CMS LOGGING, INC., petitioner, 

vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.
SUMMARY: DRACOR is the exclusive export and sales agent of CMS for all logs that CMS may produce for a period
of 5 years. However, CMS learned that DRACOR used Shinko Trading Co. as agent in selling CMS' logs in Japan for
which Shinko earned a commission from the buyer. After this discovery, CMS sold and shipped logs directly to
several firms in Japan without the aid of DRACOR. CMS then sued DRACOR for the commission received by Shinko.
DRACOR filed a counterclaim for its commission from the sales made by CMS of logs directly to Japanese firms.
HELD: CMS is not entitled to recovery of Shinko’s alleged commission because it adduced no evidence to show that
Shinko did receive the commission and even if shown, it is still not entitled as these were paid by the buyers to
Shinko for arranging the sale and not part of the gross sales of CMS's logs. DRACOR is also not entitled to a
commission from the direct sale made by CMS to the Japanese firms since the contract of agency was impliedly
revoked by CMS when it sold its logs to Japanese firms without the intervention of DRACOR. Neither would
DRACOR be entitled to collect damages from CMS as it was not made in order to evade the payment of DRACOR's
commission.
DOCTRINE: The principal may revoke a contract of agency at will, and such revocation may be express, or implied,
and may be availed of even if the period fixed in the contract of agency has not yet expired.  As the principal has this
absolute right to revoke the agency, the agent can not object thereto; neither may he claim damages arising from
such revocation, unless it is shown that such was done in order to evade the payment of agent's commission. NCC
1924 is an implied revocation of the contract of agency in which “the agency is revoked if the principal directly
manages the business entrusted to the agent, dealing directly with third persons”.
FACTS:
 CMS: Forest concessionaire engaged in the logging business
 DRACOR (D.R. Aguinaldo Corp.): Engaged in the business of exporting and selling logs and lumber.
 Aug. 28, ’57: CMS (principal) and DRACOR (agent) entered into a contract of agency whereby DRACOR is
appointed as CMS’ exclusive export and sales agent for all logs that CMS may produce, for a period of 5
years.
 Portions of the agreement (drawn up by DRACOR)
o 1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export sales agent with full
authority, subject to the conditions and limitations hereinafter set forth, to sell and export under a
firm sales contract acceptable to SISON, all logs produced by SISON for a period of 5 years
commencing upon the execution of the agreement and upon the terms and conditions hereinafter
provided and DRACOR hereby accepts such appointment;
o 3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of all export sales of
SISON with the buyers and arrange the procurement and schedules of the vessel or vessels for the
shipment of SISON's logs in accordance with SISON's written requests, but DRACOR shall not in any
way be liable or responsible for any delay, default or failure of the vessel or vessels to comply with the
schedules agreed upon;
o 9. It is expressly agreed by the parties hereto that DRACOR shall receive 5% commission of the
gross sales of logs of SISON based on F.O.B. invoice value which commission shall be deducted
from the proceeds of any and/or all moneys received by DRACOR for and in behalf and for the account
of SISON;
 CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from Sept. 20, ‘57 to
Apr. 4, ‘62.
 While on a trip to Tokyo, CMS's president, Atty. Sison, and Gen. Mgr. & legal counsel, Atty. Dominguez,
discovered that DRACOR had used Shinko Trading Co. as agent, representative or liaison officer, in selling
CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00 per 1,000 board feet from the buyer
of the logs.
o Under this arrangement, Shinko was able to collect a total of U.S. $77,264.67.
 After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90, directly to
several firms in Japan without the aid or intervention of DRACOR.
 CMS sued DRACOR for the commission received by Shinko and for moral and exemplary damages
o Commission paid to Shinko was in violation of the agreement and CMS is entitled to this amount as part
of the proceeds of the sale of the logs.
o Since DRACOR had been paid the 5% commission under the agreement, it is no longer entitled to the
additional commission paid to Shinko as this is tantamount to DRACOR receiving double compensation
for the services it rendered.
 DRACOR counterclaimed for its commission , amounting to P144,167.59, from the sales made by CMS of
logs to Japanese firms.
 CMS averred as a defense to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of
its commission for the sales made by CMS (w/out DRACOR’s help).
o As counterclaim to DRACOR's counterclaim, CMS demanded DRACOR to return the amount it
unlawfully retained.
 DRACOR later filed an amended counterclaim, alleging that the balance of its commission on the sales made by
CMS was P42,630.82, thus impliedly admitting that it retained the amount alleged by CMS.
 CFI: Dismissed complaint and counterclaim. No evidence was presented to show that Shinko received the
commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan
o Though it also stated that "Shinko was able to collect the total amount of $77,264.67 US Dollars”
o As to counterclaim, it was shown that DRACOR had waived its rights to the balance of its commission in
a letter (Feb. 2, ’63) to Atty. Sison. 
 Only CMS appealed to CA
 CA (3 to 2 decision): Affirmed dismissal.
o CMS failed to prove by competent evidence its claims as to the commissions received by Shinko
o However, it also held that there is reason to believe that Shinko was paid by DRACOR out of its own
commission of 5%.
 Letter to Sison and in the Agreement bet. Aguinaldo Development Corp. (ADECOR) and
Shinko.
 Daniel R. Aguinaldo (Pres of DRACOR) stated: I informed you that if you wanted to pay me for
the service, then it would be no more than at the standard rate of 5% commission because in
our own case, we pay our Japanese agents 2-1/2%. Accordingly, we would only add a
similar amount of 2-1/2% for the service which we would render you in the Philippines.
 CMS appealed to SC by way of a petition for review on certiorari, alleging:
o Testimony of Atty Dominguez, regarding the admission by Shinko's president and director that it
collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is
admissible against DRACOR
o Statement of DRACOR's chief legal counsel is an admission that Shinko was able to collect the
commission in question
o The fact that Shinko received the questioned commissions is deemed admitted by DRACOR by its
silence under Sec. 23, Rule 130 of ROC when it failed to reply to Atty. Carlos Moran Sison's letter
o DRACOR is not entitled to its 5% commission arising from the direct sales made by CMS to
buyers in Japan
o DRACOR is guilty of fraud and bad faith in its dealings with CMS.
ISSUES:
1) Whether CMS is entitled to recover the commissions paid to Shinko? (NO)
2) Whether DRACOR is entitled to commission from the direct sales made by CMS to Japanese buyers? (NO)
RATIO:
I. CMS was not able to prove payment of commission to Shinko
 CMS: Shinko received the commission in question; recovery is proper.
 SC: Unmeritorious. These arguments question the findings of fact made by CA which are final and conclusive
and cannot be reviewed on appeal to SC (Amigo vs. Teves)
 Evidence adduced establishes the fact that Shinko is DRACOR's agent or liaison in Japan;
HOWEVER, there is no evidence which established the fact that Shinko did receive the amount of U.S.
$77,264.67 as commission arising from the sale of CMS's logs to various Japanese firms.
 Testimony of Atty. Dominguez: Shinko's president and director told him that Shinko received a commission of
U.S. $1.00 for every 1,000 board feet of logs sold,
o SC: This is hearsay.
 Letter of Mr. K. Shibata of Toyo Menka Kaisha
o SC: Also hearsay since Mr. Shibata was not presented to testify on his letter.
 Statements in memorandum of Atty. Ciocon to DRACOR (May 31, 1965): “xxx our shipment of logs to Toyo
Menka Kaisha, Ltd., is only for a net volume of 67,747,732 board feet which should enable Shinko to collect a
commission of US $67,747.73 only
o SC: This cannot be categorized as admissions that Shinko did receive the commissions in question
since the statement was made in the context of questioning CMS's tally of logs delivered to various
Japanese firms.
 Statement of Daniel R. Aguinaldo, president of DRACOR: xxx it is obvious that Toyo paid Shinko for certain
services which Shinko must have satisfactorily performed for them in Japan otherwise they would not have paid
Shinko
 And reply-letter by DRACOR's counsel Atty. Del Rosario to CMS's demand letter: It does not seem proper, for
CMS Logging, Inc., as principal, to concern itself with, much less question, the right of Shinko, with which our
client debt directly, to whatever benefits it might have derived from the ultimate consumer/buyer of these logs,
Toyo Menka Kaisha, Ltd. There appears to be no justification for your client's contention that these benefits,
whether they can be considered as commissions paid by Toyo to Shinko, are to be regarded part of the gross
sales.
 o SC: This cannot be categorized as admissions that Shinko did receive the commissions in question
since neither statements declared categorically that Shinko did in fact receive the commissions and that
these arose from the sale of CMS's logs.
 It is a rule that "a statement is not competent as an admission where it does not, under a reasonable
construction, appear to admit or acknowledge the fact which is sought to be proved by it". An admission or
declaration to be competent must have been expressed in definite, certain and unequivocal language
(BPI vs. Fidelity). 
 CMS: DRACOR had admitted by its silence the allegation that Shinko received the commissions in question
when it failed to respond to Atty. Sison's letter
 SC: DRACOR did reply to the letter of Atty. Sison, through a letter of a certain F.A. Novenario which stated: We
have no record or knowledge of any such payment of commission made by Toyo Menka to Shinko. If the
payment was made by Toyo Menka to Shinko, as stated in your letter, we knew nothing about it and had nothing
to do with it.
o TC finding that "Shinko was able to collect $77,264.67 US Dollars," cannot be given weight since this
was based on the summary prepared by CMS itself.
 Even if it was shown that Shinko did in fact receive the commissions in question, CMS is not entitled
thereto since these were apparently paid by the buyers to Shinko for arranging the sale. This is therefore
not part of the gross sales of CMS's logs.
II. DRACOR is not entitled to commission for direct sales made by CMS
 CMS: CA erred in holding that DRACOR was entitled to its commission from the sales made by CMS to
Japanese firms.
 SC: There is merit to this contention.
 The principal may revoke a contract of agency at will, and such revocation may be express, or implied,
(Art.1920) and may be availed of even if the period fixed in the contract of agency has not yet expired (Barretto
vs. Santa Marina). 
 As the principal has this absolute right to revoke the agency , the agent can not object thereto; neither may
he claim damages arising from such revocation (Padilla, Civil Law),  unless it is shown that such was done in
order to evade the payment of agent's commission (Infante vs. Cunanan).
 CAB: CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms. Yet, during the existence
of the contract of agency, DRACOR admitted that CMS sold its logs directly to several Japanese firms.
 This act constituted an implied revocation of the contract of agency under NCC 1924.
o Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.
 New Manila Lumber Company vs. RP: The act of a contractor, who, after executing powers of attorney in favor
of another empowering the latter to collect whatever amounts may be due to him from the Government, and
thereafter demanded and collected from the government the money the collection of which he entrusted
to his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact.
 CAB: Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without the
intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of such sale and is
not entitled to retain whatever moneys it may have received as its commission for said transactions.
 Neither would DRACOR be entitled to collect damages from CMS.
When Entitled to Damages for Revocation of Agency
 GEN: Damages are generally not awarded to the agent for the revocation of the agency
 EX: Damages awarded if act of revocation is to evade the payment of the agent's commission.
 CAB: Not falling under exception
III. No Fraud and Bad faith by DRACOR
 CMS: CA erred in not finding that DRACOR had committed acts of fraud and bad faith
 SC: Unmeritorious. Like the contention involving Shinko and the questioned commissions, CA findings on the
matter were based on its appreciation of the evidence, and these findings are binding on SC.
DISPOSITIVE: Decision appealed from is hereby MODIFIED.
 AFFIRMED: CA ruling that there is no evidence to support CMS's contention that Shinko earned a separate
commission of U.S. $1.00 for every 1,000 board feet of logs from the buyer of CMS's logs.
 REVERSED: CA ruling with regard to DRACOR's right to retain the amount of P101,536.77 as part of its
commission from the sale of logs by CMS. DRACOR has no right to its commission.
 Consequently, DRACOR ordered to remit to CMS the amount of P101,536.77.
34.

VICENTA REYES, ET AL., PETITIONERS

VS.
GUARDALINO C. MOSQUEDA AND THE COURT OF APPEALS, RESPONDENTS.

Facts:

1. Plaintiff Vicenta Reyes alleges that on February 16, 1949, she was contracted by defendant
Guardalino Mosqueda to sell the land of the latter, with a commission of 5 per cent on the total
purchase price (Exhibits A and D).

She offered the sale of the land to Jose Marquez Lim who was willing to buy the land for a lower price. On
this occasion, Reyes told Mosqueda that inasmuch as the purchase price has already been
settled, she was now free to disclose, as she did that her buyer was Jose Marquez Lim who
would see Mosqueda personally about the consummation of the sale.

2. Appellant Mosqueda said that on February 16, 1949, he went to see Jose Marquez Lim, Manager
of the Philippine-American Insurance Co. in Iloilo City, about a loan offering his land covered by
transfer certificate of title 2794 as security but to no avail.

Lim, however, offered to buy Mosqueda's land as it adjoined his own land. Mosqueda replied that he was
willing to sell his land to him at P8 per square meter. Anxious to buy the land, Lim requested Vicente
Reyes, who, together with her husband, were employees in his office, to approach Mosqueda on his behalf
and exact from him the last price he could offer for his land.

Reyes went to see Dr. Mosqueda and told him that she had1 a buyer for his land without
divulging the identity of her said buyer, resulting in the execution of Exhibits A and D. Also
on that same day, Vicenta Reyes informed Lim that the price on Mosqueda was now P7.30 per square
meter. Apparently, Lim was still not agreeable to the price of P7.30 per square meter, so that
he told Vicenta Reyes to desist from further contracting Mosqueda on his behalf as he,
himself, would deal directly with Mosqueda as he had initially done earlier on the same
day.

The following day, February 18, Lim went personally to the clinic of Dr. Mosqueda,
resulting in the execution of the deed of sale (Exhibit 1 or F)."

3. She commenced this action in the Court of First Instance of Iloilo to recover from Mosqueda the
sura of P3,280.25 representing 5 per cent of the sales price with interest from the date of the filing
of the complaint. After hearing, the trial court rendered judgment in her favor ordering defendant
Mosqueda to pay to her P3,280-25 with interest of 6 per cent from March 7, 1949, with costs. On
appeal to the Court of Appeals, said Tribunal reversed the appealed decision and dismissed the
complaint without costs. Plaintiff Reyes is now petitioning for the revision of said decision of the
Court of Appeals.

Issue: w/n reyes is entitled of the said commission?

Held: No

Vicente Reyes was hired as a broker, not as commercial agent. At the time the contract of sale
(Exhibit 1 or F) was signed by the parties on February 18, 1949, the authority of Reyes as a broker for
Mosqueda has already been withdrawn by the latter.

According to Danon vs Brimo that "The broker must be the efficient agent or the procuring cause of the
sale. The means employed by him and his efforts must result in the sale. He must find the purchaser, and
the sale must proceed from his efforts acting as a broker. (Cases cited.)
According to the findings of the Court of Appeals, the actual sale was perfected and consummated without
the intervention of plaintiff Reyes, and what is more, before that, her authority to sell the property had
been withdrawn, at a time when there was still no meeting of the minds of buyer and seller.
We realize that there are times when the owner of a property for sale may not legally cancel or revoke the
authority given by him to a broker when the negotiations through the broker's efforts have reached such a
stage that it would be unfair to deny the commission earned, especially when the property owner acts in
bad faith and cancels the authority only to evade the payment of said commission. Such was our holding
in the same case of Danon vs. Brimo & Co.
In the present case, there is nothing to show that bad faith was involved in the cancellation of the
authority of plaintiff Reyes before the consummation of the sale. Not only this, but the actuations of
plaintiff Reyes are not entirely above suspicion. As observed by the Court of Appeals she did not explain
how she came to know that defendant Mosqueda was interested in selling his land and was looking for a
buyer thereof. It is highly possible that after Reyes was commissioned by her employer Lim to approached
Mosqueda with a view to reducing the price of P8 per square meter, it was then and only then that Reyes
came to know about the desire of Mosqueda to sell his land to cover his obligations with the bank
inasmuch as he failed to secure a loan from the Insurance Company, and as said by the Court of Appeals
"* * *, Perhaps, when she was requested by Lim to intercede in his behalf with respect to the sale of
Mosqueda's land, Vicenta Reyes grabbed this opportunity to make spare money as a sideline."

35.

CONSEJO INFANTE, petitioner, 
vs.
JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND
DIVISION, respondents.

Topic: Modes of Extinguishment of Agency

Nature: Petition for review by certiorari of a decision of the Court of Appeals

Facts:
Consejo Infante owned two parcels of land with a house built there. She asked the respondents
Cunanan and Mijares to sell these properties on the condition that the buyer would assume the existing
mortgage on these properties. She would give them a 5% commission plus the overprice they might
obtain from the sale. Noche agreed to purchase the properties on these conditions. After knowing this,
Infante revoked the agency and stated she was no longer interested in selling her properties. She then
asked Cunanan and Mijares to sign a written document revoking the authority she gave them. Later on,
she directly sold the properties to Noche. Upon learning this, Cunanan and Mijares filed an action to
recover the sum for their commission.
Infante admitted she contracted their services but stated that she revoked them because they did not
follow through with her instructions. When she asked them to sell her properties, she also asked them
to buy her a new one along Taft Avenue. Instead, they sold the property on Taft Avenue to another
person.
The RTC ruled in favor of the agents and the CA affirmed it in toto.

Issue:
WON the herein petitioner should pay the respondents the commission agreed in the agency though it
was already revoked prior to the sale made

Held:
YES

Rationale:
That the petitioner had changed her mind even if the respondents had found her a buyer who was
willing to close the deal, is a matter that would not give rise to a legal consequence if the respondents
agree to call off the transaction in deference to the request of the petitioner. But the situation varies if
one of the parties takes advantage of the benevolence of the other and acts in a manner that would
promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot be
sanctioned without according to the party prejudiced the reward which is due him. This is the situation
in which the respondents were placed by the petitioner. Petitioner took advantage of the services
rendered by the respondents, but believing that she could evade payment of their commission, she
made use of a ruse by inducing them to sign the deed of cancellation. This act of subversion cannot be
sanctioned and cannot serve as basis for petitioner to escape payment of the commission agreed upon.

36.

G.R. No. L-40681             October 2, 1934

DY BUNCIO & COMPANY, INC., plaintiff-appelle, 
vs.
ONG GUAN CAN, ET AL., defendants. 
JUAN TONG and PUA GIOK ENG, appellants.

HULL, J.:

THE FACTS:

Plaintiff claims that the property belongs to its judgment debtor, Ong Guan Can, while defendants
Juan Tong and Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July
31, 1931, by Ong Guan Can, Jr.

Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor of the commercial firm of Ong Guan
Can & Sons, sells the rice-mill and camarin for P13,000 and gives as his authority the power of
attorney dated the 23d of May, 1928, a copy of this public instrument being attached to the deed and
recorded with the deed in the office of the register of deeds of Capiz. The receipt of the money
acknowledged in the deed was to the agent, and the deed was signed by the agent in his own name
and without any words indicating that he was signing it for the principal.

The trial court held that the deed was invalid and that the property was subject to the execution
which has been levied on the properties by the judgment creditor. Furthermore, leaving aside the
irregularities of the deed, the power of attorney referred to in the deed and registered therewith is not
a general power of attorney but a limited one and does not give the express power to alienate the
properties in question. Appellants claim that this defect is cured by a general power of attorney given
to the same agent in 1920.

THE ISSUE:

Whether the general power of attorney first issued cures the defect on the limited power of attorney
subsequently issued.

THE RULING:

No, the general power of attorney issued in 1920 does not cure the defect on the limited power of
attorney. Article 1732 of the Civil Code is silent over the partial termination of an agency. 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 does not revoke the general power of
attorney, the execution of the second power of attorney would be a mere futile gesture. Thus, the
power of attorney used by Ong Guan Can, Jr. does not give the power to alienate the property
making the sale in 1928 invalid.

37.

EULOGIO DEL ROSARIO, AURELIO DEL ROSARIO, BENITO DEL ROSARIO, BERNARDO DEL
ROSARIO, ISIDRA DEL ROSARIO, DOMINGA DEL ROSARIO and CONCEPCION
BORROMEO, plaintiff-appellees, 
vs.
PRIMITIVO ABAD and TEODORICO ABAD, defendants-appellants

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 too 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.

RATIO: 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.

38.

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, 

vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
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: [Plaintiff’s 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 ½ share each pro-indiviso and the payment of attorney’s 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 ½ share of the land (P5,343.45) plus attorney’s 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 Concepcion’s 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 agent’s knowledge of the principal’s 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
-agent’s acts are acts of the principal

 Essential Elements:
(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. 

 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 pricipal’s 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). 
 Simon’s authority as agent was extinguished upon Concolacion’s death

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
Concepcion’s death
 For Art 1931 to apply, both requirements must be present

3) Yes, agent’s knowledge of principal’s 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
1
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
 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 principal’s death at
that time (exception under Art. 1931)

Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.

39.
SAFIC ALCAN & CIE, petitioner, 
vs.
IMPERIAL VEGETABLE OIL CO., INC., respondent.

Facts:

In July and September 1986 Safic placed purchase orders with IVO for 2,000 long tons of crude
coconut oil, valued at US$222.50 per ton, covered by Purchase Contract Nos. A601446 and A601655,
respectively, to be delivered within the month of January 1987. IVO, however, failed to deliver the said
coconut oil and, instead, offered a wash out settlement, whereby the coconut oil subject of the
purchase contracts were to be sold back to IVO at the prevailing price in the international market at the
time of wash out. Thus, IVO bound itself to pay to Safic the difference between the said prevailing price
and the contract price of the 2,000 long tons of crude coconut oil, which amounted to
US$293,500.00. IVO failed to pay this amount despite repeated oral and written demands.

Safic also alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed
purchase orders with IVO for a total of 4,750 tons of crude coconut oil, covered by Purchase Contract
Nos. A601297A/B, A601384, A601385, A601391, A601415, A601681, A601683 and
A601770A/B/C/. When IVO failed to honor its obligation under the wash out settlement narrated above,
Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase
contracts in amounts equivalent to the difference between the contract price and the market price of
the coconut oil, to compensate it for the damages it suffered when it was forced to acquire coconut oil
at a higher price. IVO failed to make the prescribed marginal deposits on the eight contracts, in the
aggregate amount of US$391,593.62, despite written demand therefor.

In its answer, IVO raised the following special affirmative defenses: Safic had no legal capacity to
sue because it was doing business in the Philippines without the requisite license or authority; the
subject contracts were speculative contracts entered into by IVOs then President, Dominador
Monteverde, in contravention of the prohibition by the Board of Directors against engaging in
speculative paper trading, and despite IVOs lack of the necessary license from Central Bank to engage
in such kind of trading activity; and that under Article 2018 of the Civil Code, if a contract which
purports to be for the delivery of goods, securities or shares of stock is entered into with the intention
that the difference between the price stipulated and the exchange or market price at the time of the
pretended delivery shall be paid by the loser to the winner, the transaction is null and void.

During the trial, the lower court found that in 1985, prior to the date of the contracts sued upon,
the parties had entered into and consummated a number of contracts for the sale of crude coconut
oil. In those transactions, Safic placed several orders and IVO faithfully filled up those orders by shipping
out the required crude coconut oil to Safic, totalling 3,500 metric tons. Anent the 1986 contracts being
sued upon, the trial court refused to declare the same as gambling transactions, as defined in Article
2018 of the Civil Code, although they involved some degree of speculation. After all, the court noted,
every business enterprise carries with it a certain measure of speculation or risk.  However, the contracts
performed in 1985, on one hand, and the 1986 contracts subject of this case, on the other hand, differed
in that under the 1985 contracts, deliveries were to be made within two months. This, as alleged by
Safic, was the time needed for milling and building up oil inventory. Meanwhile, the 1986 contracts
stipulated that the coconut oil were to be delivered within period ranging from eight months to eleven
to twelve months after the placing of orders. The coconuts that were supposed to be milled were in all
likelihood not yet growing when Dominador Monteverde sold the crude coconut oil. As such, the 1986
contracts constituted trading in futures or in mere expectations.

The lower court further held that the subject contracts were ultra vires  and were entered into by
Dominador Monteverde without authority from the Board of Directors. It distinguished between the
1985 contracts, where Safic likewise dealt with Dominador Monteverde, who was presumably
authorized to bind IVO, and the 1986 contracts, which were highly speculative in character.  Moreover,
the 1985 contracts were covered by letters of credit, while the 1986 contracts were payable by
telegraphic transfers, which were nothing more than mere promises to pay once the shipments became
ready. For these reasons, the lower court held that Safic cannot invoke the 1985 contracts as an implied
corporate sanction for the high-risk 1986 contracts, which were evidently entered into by Monteverde
for his personal benefit.

Issue:

W/N IVOs President, Dominador Monteverde, validly entered into the 1986 contracts
for and on behalf of IVO.
Ruling:
NO. Article III, Section 3 [g] of the By-Law of IVO provides, among others, that

Section 3. Powers and Duties of the President. The President shall be elected by the Board of
Directors from their own number.

He shall have the following duties:

x x x 

[g] Have direct and active management of the business and operation of the corporation,
conducting the same according to the orders, resolutions and instruction of the Board of
Directors and according to his own discretion whenever and wherever the same is not expressly
limited by such orders, resolutions and instructions.

It can be clearly seen from the foregoing provision of IVOs By-laws that Monteverde had
no blanket authority to bind IVO to any contract. He must act according to the instructions of
the Board of Directors. Even in instances when he was authorized to act according to his
discretion, that discretion must not conflict with prior Board orders, resolutions and
instructions. The evidence shows that the IVO Board knew nothing of the 1986 contracts and
that it did not authorize Monteverde to enter into speculative contracts. In fact, Monteverde
had earlier proposed that the company engage in such transactions but the IVO Board rejected
his proposal. Since the 1986 contracts marked a sharp departure from past IVO transactions,
Safic should have obtained from Monteverde the prior authorization of the IVO Board.Safic
cannot rely on the doctrine of implied agency because before the controversial 1986 contracts,
IVO did not enter into identical contracts with Safic. The basis for agency is representation and
a person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent.[9] In the case of Bacaltos Coal Mines v. Court of Appeals, we elucidated
the rule on dealing with an agent thus:

Every person dealing with an agent is put upon inquiry and must discover upon his peril the
authority of the agent. If he does not make such inquiry, he is chargeable with knowledge of the
agents authority, and his ignorance of that authority will not be any excuse. Persons dealing
with an assumed agent, whether the assumed agency be a general or special one, are bound at
their peril, if they would hold the principal, to ascertain not only the fact of the agency but also
the nature and extent of the authority, and in case either is controverted, the burden of proof is
upon them to establish it.

The most prudent thing petitioner should have done was to ascertain the extent of the
authority of Dominador Monteverde. Being remiss in this regard, petitioner cannot seek relief
on the basis of a supposed agency.
Under Article 1898 of the Civil Code, the acts of an agent beyond the scope of his authority
do not bind the principal unless the latter ratifies the same expressly or impliedly. It also bears
emphasizing that when the third person knows that the agent was acting beyond his power or
authority, the principal can not be held liable for the acts of the agent. If the said third person is
aware of such limits of authority, he is to blame, and is not entitled to recover damages from
the agent, unless the latter undertook to secure the principals ratification.
There was no such ratification in this case. When Monteverde entered into the speculative
contracts with Safic, he did not secure the Boards approval. He also did not submit the
contracts to the Board after their consummation so there was, in fact, no occasion at all for
ratification. The contracts were not reported in IVOs export sales book and turn-out
book. Neither were they reflected in other books and records of the corporation. It must be
pointed out that the Board of Directors, not Monteverde, exercises corporate power. Clearly,
Monteverdes speculative contracts with Safic never bound IVO and Safic cannot therefore
enforce those contracts against IVO.

39.
G.R. No. 122544 January 28, 1999

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BLAZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and JOSE A. DIZON,
JR., petitioners, 
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.

G.R. No. 124741 January 28, 1999

REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON, GERARD A. DIZON, and Jose A. DIZON,
JR., petitioners, 
vs.
COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS LINES,
INC., respondents.

FACTS:
 Overland Express Lines, Inc. entered into a Contract of Lease with Option to Buy with petitioners involving a 1,755.80 square
meter parcel of land situated at corner MacArthur Highway and South “H” Street, Diliman, Quezon City. The term of the lease
was for 1 year commencing from May 16, 1974 up to May 15, 1975. During this period, Overland Express Lines was granted
an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the lease shall be on a per month basis with a
monthly rental of P3,000.00.
 For failure of Overland Express Lines to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed
an action for ejectment against it. The lower court rendered judgment ordering Overland Express Lines to vacate the leased
premises and to pay the sum of P624,000.00 representing rentals in arrears and/or as damages in the form of reasonable
compensation for the use and occupation of the premises during the period of illegal detainer from June 1976 to November
1982 at the monthly rental of P8,000.00, less payments made, plus 12% interest per annum from November 18, 1976, the date
of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting December 1982, until Overland Express
Lines fully vacates the premises, and to pay P20,000.00 as and by way of attorney’s fees.

ISSUE: WON Overland Express Lines actually paid the alleged P300,000.00 to Fidela Dizon, as representative (agent) of
petitioners in consideration of the option

HELD: No.
 CA opined that the payment by Overland Express Lines of P300,000.00 as partial payment for the leased property, which
petitioners accepted (through Alice A. Dizon) and for which an official receipt was issued, was the operative act that gave rise
to a perfected contract of sale, and that for failure of petitioners to deny receipt thereof, Overland Express Lines can therefore
assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to receive the money in their behalf. CA
went further by stating that in fact, what was entered into was a “conditional contract of sale” wherein ownership over the
leased property shall not pass to the Overland Express Lines until it has fully paid the purchase price. Since Overland Express
Lines did not consign to the court the balance of the purchase price and continued to occupy the subject premises, it had the
obligation to pay the amount of P1,700.00 in monthly rentals until full payment of the purchase price.
 In an attempt to resurrect the lapsed option, Overland Express Lines gave P300,000.00 to petitioners (thru Alice A. Dizon) on
the erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract
of lease with option to buy. There was no valid consent by the petitioners (as co-owners of the leased premises) on the
supposed sale entered into by Alice A. Dizon, as petitioners’ alleged agent, and Overland Express Lines. The basis for agency
is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the
agent. As provided in Article 1868 of the New Civil Code, there was no showing that petitioners consented to the act of Alice
A. Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. The most prudent
thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in
this regard, private respondent cannot seek relief on the basis of a supposed agency.
 Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. If he does
not make such inquiry, he is chargeable with knowledge of the agent’s authority, and his ignorance of that authority will not be
any excuse. Persons dealing with an assumed agency, whether the assumed agency be a general or special one, are bound at
their peril, if they would hold the principal, to ascertain not only the fact of the agency but also the nature and extent of the
authority, and in case either is controverted, the burden of proof is upon them to establish it.
40.

NICHOLAS Y. CERVANTES, petitioner, 
vs.
COURT OF APPEALS AND THE PHILIPPINE AIR LINES, INC., respondent.

Facts:

On March 27, 1989, the private respondent, Philippines Air Lines, Inc. (PAL), issued to
the herein petitioner, Nicholas Cervantes (Cervantes), a round trip plane ticket for Manila-
Honolulu-Los Angeles-Honolulu-Manila, which ticket expressly provided an expiry of date of
one year from issuance, i.e., until March 27, 1990.

On March 23, 1990, four days before the expiry date of subject ticket, the petitioner used
it. Upon his arrival in Los Angeles on the same day, he immediately booked his Los Angeles-
Manila return ticket with the PAL office, and it was confirmed for the April 2, 1990 flight. On
April 2, 1990 when petitioner tried to board the plane, he was denied by PAL for the reason that
the said ticket had expired. As a result petitioner filed a complaint against PAL.

The trial court dismissed the complaint and upon appeal to the CA, the dismissal was
affirmed and hence this appeal.

Issue:
Whether or not the act of the PAL agents in confirming subject ticket extended the period of validity of
petitioners ticket

Held:
The Court ruled in favor of PAL. The court held that the ticket issued by PAL constituted the contract
between the parties. It was clear and undisputed as to the expiration date of the ticket. The main issue is whether the
validity became extended by the act of the PAL agents. The court ruled in the negative.
Under Article 1898[11] of the New Civil Code, the acts of an agent beyond the scope of his authority do not bind the
principal, unless the latter ratifies the same expressly or impliedly. Furthermore, when the third person (herein
petitioner) knows that the agent was acting beyond his power or authority, the principal cannot be held liable for the
acts of the agent. If the said third person is aware of such limits of authority, he is to blame, and is not entitled to
recover damages from the agent, unless the latter undertook to secure the principals ratification.
From appellants own testimony, it is clear that he knew from the start that said agents had no authority to
extend the validity of the tickets. He himself testified that he was informed by the Legal Department of PAL before
he left the Philippines that to secure an extension, he would have to file a written request at the PAL’s office.
Despite this knowledge, he still persisted to use the ticket in question.
Since the PAL agents are not privy to the said Agreement and petitioner knew that a written request to the legal
counsel of PAL was necessary, he cannot use what the PAL agents did to his advantage. The said agents, according
to the Court of Appeals,[10] acted without authority when they confirmed the flights of the petitioner.