Extinguishment of Agency

Diolosa v. Court of Appeals, G.R. No. L-36585, 16 July 1984

FACTS:

The plaintiff was and still is a licensed real estate broker, and as such licensed real estate broker on June 20, 1968, an agreement
was entered into between him as party of the second part and the defendants spouses as party of the first part, whereby the former
was constituted as exclusive sales agent of the defendants, its successors, heirs and assigns, to dispose of, sell, cede, transfer and
convey the lots included in VILLA ALEGRE SUBDIVISION owned by the defendants, under the terms and conditions embodied in
said agreement, the plaintiff acted for and in behalf of the defendants as their agent in the sale of the lots included in the VILLA
ALEGRE SUBDIVISION;

That on September 27, 1968, the defendants terminated the services of plaintiff as their exclusive sales agent for the reason stated
in the latter. The plaintiff filed a suit on the ground that he is entitled to a commission on the lots unsold because of the rescission of
the contract.

ISSUE:

Whether or not the spouse Diolosa could terminate the agency agreement without paying damages to plaintiff.

RULING:

Article 1920 of the Civil Code of the Philippines notwithstanding, the defendants could not terminate the agency agreement at will
without paying damages. The said agency agreement expressly stipulates … until all the subject property as subdivided is fully
disposed of …” The testimony of Roberto Malundo that the plaintiff agreed to the intention of Mrs. Diolosa to reserve some lots for
her own famay use cannot prevail over the clear terms of the agency agreement. Moreover, the plaintiff denied that there was an
agreement to reserve any of the lots for the family of the defendants.

Under the contract, herein petitioners allowed the private respondent “to dispose of, sell, cede, transfer and convey … until out the
subject property as subdivided is fully disposed of.” The authority to sell is not extinguished until all the lots have been disposed of.
When, therefore, the petitioners revoked the contract with private respondent in a letter they become liable to the private
respondent for damages for breach of contract.

And, it may be added that since the agency agreement, is a valid contract, the same may be rescinded only on grounds specified in
Articles 1381 and 1382 of the Civil Code, as follows:

ART. 1381. The following contracts are rescissible:

(1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by more than one-fourth of
the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without the knowledge and
approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the
time they were effected, are also rescissible.”

CMS Logging Inc. v. Court of Appeals, G.R. No. L-41420, 10 July 1992

FACTS:

Petitioner CMS is a forest concessionaire engaged in the logging business, while private respondent DRACOR is engaged in the
business of exporting and selling logs and lumber.

On August 28,1957, CMS and DRACOR entered into a contract of agency 1whereby the former appointed the latter as its exclusive
export and sales agent for all logs that the former may produce, for a period of five (5) years. By virtue of the aforesaid agreement,
CMS was able to sell through DRACOR a total of 77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.

About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS’s president, Atty. Carlos Moran
Sison, and general manager and legal counsel, Atty. Teodoro R. Dominguez, discovered that DRACOR had used Shinko Trading
Co.,Ltd. (Shinko for brevity) as agent, representative or liaison officer in selling CMS’s logs in Japan for which Shinko earned a
commission ofU.S. $1.00 per 1,000 board feet from the buyer of the logs. 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, 4 directly to several
firms in Japan without the aid or intervention of DRACOR. CMS sued DRACOR for the commission received by Shinko and form oral
and exemplary damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59, from the sales made by
CMS of logs to Japanese firms.
ISSUE: Whether the principal may revoke a contact of agency at will.

RULING: No.

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 as not yet expired.

As the principal has this absolute right to revoke the agency, the agent cannot 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.

In the case at bar, 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 Article 1924 of the Civil Code, which provides: Art. 1924 The agency is revoked if the
principal directly manages the business entrusted to the agent, dealing directly with third persons.

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, since
damages are generally not awarded to the agent for the revocation of the agency, and the case at bar is not one falling under the
exception mentioned, which is to evade the payment of the agent’s commission.

Valenzuela v. Court of Appeals, G.R. No. 83122, 19 October 1990

FACTS:

Petitioner Arturo P. Valenzuela is a General Agent of private respondent Philippine American General Insurance Company, Inc.
since 1965. As such, he was authorized to solicit and sell in behalf of Philamgen all kinds of non-life insurance, and in consideration
of services rendered was entitled to receive the full agent’s commission of 32.5% from Philamgen under the scheduled commission
rates. From 1973 to 1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc. in the amount of P4.4
Million from which he was entitled to a commission of 32% . However, Valenzuela did not receive his full commission which
amounted to P1.6 Million from the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to 1978, premium
payments amounting to P1,946,886.00 were paid directly to Philamgen and Valenzuela’s commission to which he is entitled
amounted to P632,737.00.

In 1977, Philamgen started to become interested in and expressed its intent to share in the commission due Valenzuela on a fifty-
fifty basis. Valenzuela refused.

On June 16,1978, Valenzuela firmly reiterated his objection to the proposals of respondents stating that: “It is with great reluctance
that I have to decline upon request to signify my conformity to your alternative proposal regarding the payment of the commission
due me. However, I have no choice for to do otherwise would be violative of the Agency Agreement executed between our
goodselves.”

Because of the refusal of Valenzuela, Philamgen and its officers took drastic action against Valenzuela. They:

(a) reversed the commission due him by not crediting in his account the commission earned from the Delta Motors, Inc. insurance;
(b) placed agency transactions on a cash and carry basis;
(c) threatened the cancellation of policies issued by his agency; and
(d) started to leak out news that Valenzuela has a substantial account with Philamgen. All of these acts resulted in the decline of his
business as insurance agent. Then on December 27, 1978, Philamgen terminated the General Agency Agreement of Valenzuela.

The petitioners sought relief by filing the complaint against the private respondents in the court a quo.

ISSUE: Whether or not Philamgen could continue to hold Valenzuela jointly and severally liable with the insured for unpaid
premiums.

RULING:

We agree with the court a quo that the principal cause of the termination of Valenzuela as General Agent of Philamgen arose from
his refusal to share his Delta commission. The records sustain the conclusions of the trial court on the apparent bad faith of the
private respondents in terminating the General Agency Agreement of petitioners.
As to the issue of whether or not the petitioners are liable to Philamgen for the unpaid and uncollected premiums which the
respondent court ordered Valenzuela to pay Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five
Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon until fully paid, we rule that the respondent court
erred in holding Valenzuela liable. We find no factual and legal basis for the award. Under Section 77 of the Insurance Code, the
remedy for the non-payment of premiums is to put an end to and render the insurance policy not binding

Sec. 77 … [N]otwithstanding any agreement to the contrary, no policy or contract of insurance is valid and binding unless and until
the premiums thereof have been paid except in the case of a life or industrial life policy whenever the grace period provision applies
(P.D. 612, as amended otherwise known as the Insurance Code of 1974).

Bacaling v. Muya, G.R. Nos. 148404-05, 11 April 2002

FACTS:

Sps. Bacaling were the owners of 3 parcels of land in Iloilo City. Thereafter, the landholding was subdivided into 110 sub-lots. A real
estate loan of 600k was granted to Sps. Bacaling by the GSIS. To secure the repayment of the loan, Sps. Bacalings executed in favor
of the GSIS a real estate mortgage over their parcels of land including the 110 sub-lots. Sps. Bacaling failed to pay the amortizations
on the loan and consequently the mortgage constituted on the 110 sub-lots was foreclosed by the GSIS.

Therafter, Nelita Bacaling (widow of Ramon Bacaling) was eventually able to restore to herself the ownership of the 110 sub-lots.
Muya et al, sowed the lots as if the same were their own, and altered the roads, drainage, boundaries and monuments established
thereon. Muya et al claimed that they were legally instituted by Sps. Bacaling’s administrator as tenant-tillers of the land. After
some time, their relationship with the landowner was changed to one of leasehold. They delivered their rental payments to
Bacaling as agricultural lessor. In 1980, they secured certificates of land transfer in their names for the 110 sub-lots.

Nelita Bacaling was able to register the subject property with the National Housing Authority and obtained therefrom a license to
sell the subject 110 sub-lots. Tong et al. bought from Nelita Bacaling the subject 110 sub-lots. The sale was effected after Bacaling
has repurchased the subject property from the GSIS. To secure performance of the contract of absolute sale and facilitate the
transfer of title of the lost to Tong, Bacaling appointed Tong as her attorney-in-fact, under an IRREVOCABLE SPECIAL POWER OF
ATTORNEY.

10 years after the perfection and execution of the sale, Bacaling filed a complaint to nullify the contract of sale. Thereafter, Tong
together with Bacaling filed a petition for cancellation of the certificates of land transfer against Muya et al. DAR dismissed the
petition. Appeal was filed but was rejected.

Office of the President reversed DAR. Muya et al appealed to the CA but before the petition was resolved, Nelita Bacaling
manifested to the CA that she was revoking the irrevocable power of attorney in favor of Tong and that she was admitting Muya
and the others as her tenants. CA reversed OP.

ISSUE: Whether Bacaling can revoke the irrevocable power of attorney executed.

RULING:

No. Bacaling cannot revoke at her whim and pleasure the irrevocable special power of attorney which she had duly executed in
favor of petitioner Jose Juan Tong and duly acknowledged before a notary public. The agency, to stress, is one coupled with interest
which is explicitly irrevocable since the deed of agency was prepared and signed and/or accepted by Tong and Bacaling with a view
to completing the performance of the contract of sale.

The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration which in the type of agency
herein established bars the removal or dismissal of petitioner Tong as Bacaling’s attorney-in-fact on the ground of alleged loss of
trust and confidence.

Dela Pena v. Hidalgo, 16 phil 450

Facts

De la Pena y de Ramon and De Ramon, in her own behalf and as the legal guardian of her son Roberto De la Pena, filed in the CFI a
written complaint against Hidalgos De La Pena y de Ramon, as the judicial administrator of the estate of the deceased De la Pena y
Gomiz, with the consent of the court filed a second amended complaint prosecuting his action solely against Frederico Hidalgo
CFI ruled in favor of plainiff-administrator for the sum of P13,606.19 and legal interest from the date of the filing of the complaint
and the costs of the trial. De la Pena y Ramon filed a third amended complaint with the permission of the court alleging, among
other things, as a first cause of action, when Frederico Hidalgo had possession of and administered the following properties to wit,
1 house and lot; at Calle San Luis; another house and lot at Calle Cortada; another house and lot at Calle San Luis, and a fenced lot
on the same street, all of the district of Ermita, and another house and lot at Calle Looban de Paco, belonging to his principal, Dela
Pena y Gomiz, according to the power of attorey executed in his favor

Hidalgo, as such agent, collected the rents and income from said properties, amounting to P50, 244, which sum, collected in
partial amounts and on different dates, he should have deposited, in accordance with the verbal agreement between the
deceased and himself in the general treasury of the Spanish Government at an interest of 5% per annum, which interest on accrual
was likewise to be deposited in order that it also might bear interest; that Hidalgo did not remit or pay to Gomiz, during his
lifetime, nor to any representative of the said Gomiz, the sum aforestated nor any part thereof with the sole exception of
P1,289.03, nor has he deposited the unpaid balance of said sum in the treasury, according to agreement, wherefore he has
become liable to his principal and to the administrator for the said sum, together with its interest amounting to P72,548.24

The court ruled in favor of De la Pena and said that Hidalgo, as administrator of the estate of deceased Gomiz, actually owed De la
Pena

ISSUE: W/N Hidalgo is considered an agent of Gomiz and as such must reimburse present administrator, De la Pena

RULING: No
Gomiz, before embarking for Spain, executed before a notary a power of attorney in favor of Hidalgo as his agent and that he
should represent him and administer various properties he owned and possessed in Manila.

After Hidalgo occupied the position of agent and administrator of De la Pena y Gomiz’s property for several years, the former
wrote to the latter requesting him to designate a person who might substitute him in his said position in the event of his being
obliged to absent himself from these Islands.

From the procedure followed by the agent, Hidalgo, it is logically inferred that he had definitely renounced his agency and that the
agency was duly terminated according to the provisions of art 1782

Although the word “Renounce” was not employed in connection with the agency executed in his favor, yet when the agent
informs his principal that for reasons of health and by medical advice he is about to depart from the place where he is exercising
his trust and where the property subject to his administration is situated, abandons the property, turns it over to a third party, and
transmits to his principal a general statement which summarizes and embraces all the balances of his accounts since he began to
exercise his agency to the date when he ceased to hold his trust, it then reasonable and just to conclude that the said agent
expressly and definitely renounced his agency.

Sarsaba v. Vda. De Te, 594 410

Facts:

a Decision was rendered in NLRC Case No. RAB-11-07-00608-93 entitled, Patricio Sereno v. Teodoro Gasing/Truck Operator, finding
Sereno to have been illegally dismissed and ordering Gasing to pay him his monetary claims in the amount of P43,606.47. After the
Writ of Execution was returned unsatisfied, Labor Arbiter Newton R. Sancho issued an Alias Writ of Execution 3 on June 10, 1996,
directing Fulgencio R. Lavarez, Sheriff II of the National Labor Relations Commission (NLRC), to satisfy the judgment award. On
July 23, 1996, Lavarez, accompanied by Sereno and his counsel, petitioner Atty. Rogelio E. Sarsaba, levied a Fuso Truck bearing
License Plate No. LBR-514, which at that time was in the possession of Gasing. On July 30, 1996, the truck was sold at public
auction, with Sereno appearing as the highest bidder. 4

Meanwhile, respondent Fe Vda. de Te, represented by her attorney-in-fact, Faustino Castañeda, filed with the RTC, Branch 18,
Digos, Davao del Sur, a Complaint5 for recovery of motor vehicle, damages with prayer for the delivery of the truck pendente lite
against petitioner, Sereno, Lavarez and the NLRC of Davao City, docketed as Civil Case No. 3488.

Respondent alleged that: (1) she is the wife of the late Pedro Te, the registered owner of the truck, as evidenced by the Official
Receipt6 and Certificate of Registration;7 (2) Gasing merely rented the truck from her; (3) Lavarez erroneously assumed that Gasing
owned the truck because he was, at the time of the "taking,"8 in possession of the same; and (4) since neither she nor her husband
were parties to the labor case between Sereno and Gasing, she should not be made to answer for the judgment award, much less
be deprived of the truck as a consequence of the levy in execution.
Petitioner filed a Motion to Dismiss9 on the following grounds: (1) respondent has no legal personality to sue, having no real
interests over the property subject of the instant complaint; (2) the allegations in the complaint do not sufficiently state that the
respondent has cause of action; (3) the allegations in the complaint do not contain sufficient cause of action as against him; and (4)
the complaint is not accompanied by an Affidavit of Merit and Bond that would entitle the respondent to the delivery of the tuck
pendente lite.

The NLRC also filed a Motion to Dismiss10 on the grounds of lack of jurisdiction and lack of cause of action.

Meanwhile, Lavarez filed an Answer with Compulsory Counterclaim and Third-Party Complaint. 11 By way of special and affirmative
defenses, he asserted that the RTC does not have jurisdiction over the subject matter and that the complaint does not state a cause
of action.

On January 21, 2000, the RTC issued an Order12 denying petitioner's Motion to Dismiss for lack of merit.

In his Answer,13 petitioner denied the material allegations in the complaint. Specifically, he cited as affirmative defenses that:
respondent had no legal personality to sue, as she had no interest over the motor vehicle; that there was no showing that the heirs
have filed an intestate estate proceedings of the estate of Pedro Te, or that respondent was duly authorized by her co-heirs to file
the case; and that the truck was already sold to Gasing on March 11, 1986 by one Jesus Matias, who bought the same from the
Spouses Te. Corollarily, Gasing was already the lawful owner of the truck when it was levied on execution and, later on, sold at
public auction.

Incidentally, Lavarez filed a Motion for Inhibition, 14 which was opposed15 by respondent.

On October 13, 2000, RTC Branch 18 issued an Order16 of inhibition and directed the transfer of the records to Branch 19. RTC
Branch 19, however, returned the records back to Branch 18 in view of the appointment of a new judge in place of Judge-designate
Rodolfo A. Escovilla. Yet, Branch 19 issued another Order17 dated November 22, 2000 retaining the case in said branch.

Eventually, the RTC issued an Order18 dated May 19, 2003 denying the separate motions to dismiss filed by the NLRC and Lavarez,
and setting the Pre-Trial Conference on July 25, 2003.

On October 17, 2005, petitioner filed an Omnibus Motion to Dismiss the Case on the following grounds: 19 (1) lack of jurisdiction over
one of the principal defendants; and (2) to discharge respondent's attorney-in-fact for lack of legal personality to sue.

It appeared that the respondent, Fe Vda. de Te, died on April 12, 2005. 20

Respondent, through her lawyer, Atty. William G. Carpentero, filed an Opposition, 21 contending that the failure to serve summons
upon Sereno is not a ground for dismissing the complaint, because the other defendants have already submitted their respective
responsive pleadings. He also contended that the defendants, including herein petitioner, had previously filed separate motions to
dismiss the complaint, which the RTC denied for lack of merit. Moreover, respondent's death did not render functus officio her right
to sue since her attorney-in-fact, Faustino Castañeda, had long testified on the complaint on March 13, 1998 for and on her behalf
and, accordingly, submitted documentary exhibits in support of the complaint.

On March 22, 2006, the RTC issued the assailed Order22 denying petitioner's aforesaid motion.

Petitioner then filed a Motion for Reconsideration with Motion for Inhibition,23 in which he claimed that the judge who issued the
Order was biased and partial. He went on to state that the judge's husband was the defendant in a petition for judicial recognition
of which he was the counsel, docketed as Civil Case No. C-XXI-100, before the RTC, Branch 21, Bansalan, Davao del Sur. Thus,
propriety dictates that the judge should inhibit herself from the case.

Acting on the motion for inhibition, Judge Carmelita Sarno-Davin granted the same 24 and ordered that the case be re-raffled to
Branch 18. Eventually, the said RTC issued an Order25 on October 16, 2006 denying petitioner's motion for reconsideration for lack
of merit.

Hence, petitioner directly sought recourse from the Court via the present petition involving pure questions of law, which he claimed
were resolved by the RTC contrary to law, rules and existing jurisprudence.26

Ruling:
Anent the claim of petitioner that the special power of attorney 50 dated March 4, 1997 executed by respondent in favor of Faustino
has become functus officio and that the agency constituted between them has been extinguished upon the death of respondent,
corollarily, he had no more personality to appear and prosecute the case on her behalf.

Agency is extinguished by the death of the principal.51 The only exception where the agency shall remain in full force and effect
even after the death of the principal is when 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. 52

A perusal of the special power of attorney leads us to conclude that it was constituted for the benefit solely of the principal or for
respondent Fe Vda. de Te. Nowhere can we infer from the stipulations therein that it was created for the common interest of
respondent and her attorney-in-fact. Neither was there any mention that it was to benefit a third person who has accepted the
stipulation in his favor.

On this ground, We agree with petitioner. However, We do not believe that such ground would cause the dismissal of the
complaint. For as We have said, Civil Case No. 3488, which is an action for the recovery of a personal property, a motor vehicle, is an
action that survives pursuant to Section 1, Rule 87 of the Rules of Court. As such, it is not extinguished by the death of a party.

In Gonzalez v. Philippine Amusement and Gaming Corporation,53 We have laid down the criteria for determining whether an action
survives the death of a plaintiff or petitioner, to wit:

x x x The question as to whether an action survives or not depends on the nature of the action and the damage sued for. If the
causes of action which survive the wrong complained [of] affects primarily and principally property and property rights, the injuries
to the person being merely incidental, while in the causes of action which do not survive the injury complained of is to the person
the property and rights of property affected being incidental. x x x

Thus, the RTC aptly resolved the second issue with the following ratiocination:

While it may be true as alleged by defendants that with the death of Plaintiff, Fe Vda. de Te, the Special Power of Attorney she
executed empowering the Attorney-in-fact, Faustino Castañeda to sue in her behalf has been rendered functus officio, however,
this Court believes that the Attorney-in-fact had not lost his personality to prosecute this case.

It bears stressing that when this case was initiated/filed by the Attorney-in-fact, the plaintiff was still very much alive.

Records reveal that the Attorney-in-fact has testified long before in behalf of the said plaintiff and more particularly during the
state when the plaintiff was vehemently opposing the dismissal of the complainant. Subsequently thereto, he even offered
documentary evidence in support of the complaint, and this court admitted the same. When this case was initiated, jurisdiction was
vested upon this Court to try and hear the same to the end. Well-settled is the rule to the point of being elementary that once
jurisdiction is acquired by this Court, it attaches until the case is decided.

Thus, the proper remedy here is the Substitution of Heirs and not the dismissal of this case which would work injustice to the
plaintiff.

SEC. 16, RULE 3 provides for the substitution of the plaintiff who dies pending hearing of the case by his/her legal heirs. As to
whether or not the heirs will still continue to engage the services of the Attorney-in-fact is another matter, which lies within the sole
discretion of the heirs.

In fine, We hold that the petition should be denied as the RTC Order is interlocutory; hence, not a proper subject of an appeal
before the Court. In the same breath, We also hold that, if the petition is to be treated as a Petition for Certiorari as a relaxation of
the judicial hierarchy of courts, the same is also dismissible for being substantially insufficient to warrant the Court the nullification
of the Order of the RTC.

Let this be an occasion for Us to reiterate that the rules are there to aid litigants in prosecuting or defending their cases before the
courts. However, these very rules should not be abused so as to advance one's personal purposes, to the detriment of orderly
administration of justice. We can surmise from the present case herein petitioner's manipulation in order to circumvent the rule on
modes of appeal and the hierarchy of courts so that the issues presented herein could be settled without going through the
established procedures. In Vergara, Sr. v. Suelto,54 We stressed that this should be the constant policy that must be observed
strictly by the courts and lawyers, thus:

x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform the functions assigned to it by
the fundamental charter and immemorial tradition. It cannot and should not be burdened with the task of dealing with causes in
the first instance. Its original jurisdiction to issue the so-called extraordinary writs should be exercised only where absolutely
necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should generally be exercised relative to
actions or proceedings before the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for
some reason or another are not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the
competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the specific action for the writ's
procurement must be presented. This is and should continue to be the policy in this regard, a policy that courts and lawyers must
strictly observe.

Perez v. PNB, G.R. No. L-21813, July 30, 1966

Facts:

 Vicente Perez mortgaged Lot No. 286-E of the Kabankalan Cadastre, with Transfer certificate of Title No. 29530, to the appellant
Philippine National Bank, Bacolod Branch, in order to secure payment of a loan of P2,500, plus interest, payable in yearly
installments. On October 7, 1942, Vicente Perez, mortgagor, died intestate, survived by his widow and children (appellees herein).
At that time, there was an outstanding balance of P1,917.00, and corresponding interest, on the mortgage indebtedness.

On October 18, 1956, the widow of Perez instituted Special Proceedings No. 512 of the Court of First Instance of Occidental Negros
for the settlement of the estate of Vicente Perez. The widow was appointed Administratrix and notice to creditors was duly
published. The Bank did not file a claim. The project of partition was submitted on July 18, 1956; it was approved and the properties
distributed accordingly. Special Proceedings No. 512 was then closed.

It appears also that, as early as March of 1947, the widow of the late Vicente Perez inquired by letter from the Bank the status of her
husband's account; and she was informed that there was an outstanding balance thereon of P2,758.84 earning a daily interest of
P0.4488. She was furnished a copy of the mortgage and, on April 2, 1947, a copy of the Tax Declaration (Rec. App. pp. 45-48).

On January 2, 1963, the Bank, pursuant to authority granted it in the mortgage deed, caused the mortgaged properties to be
extrajudicially foreclosed. The Provincial Sheriff accordingly sold Lot No. 286-E at auction, and it was purchased by the Bank. In the
ordinary course after the lapse of the year of redemption, Certificate of Title No. T-29530 in the name of Vicente Perez was
cancelled, and Certificate T-32066, dated May 11, 1962, was issued in the name of the Bank. The widow and heirs were not notified.

Three months later, on August 15, 1962, the widow and heirs of Vicente Perez instituted this case against the Bank in the court
below, seeking to annul the extra-judicial foreclosure sale and the transfer of the Certificate of Title as well as to recover damages,
claiming that the Bank had acted illegally and in bad faith. The Bank answered, denying the charges. After trial, the court a quo, on
December 15, 1962, rendered judgment holding that, according to the doctrine of this Supreme Court in Pasno vs. Ravina 54 Phil.
382, the Bank should have foreclosed its mortgage in court; that the power to sell contained in the deed of mortgage had
terminated upon the death of the mortgagor, Vicente Perez. Wherefore, the trial court declared null and void the extra-judicial
foreclosure sale to the Bank, as well as the cancellation of the Certificate of Title of Vicente Perez and issuance in it's stead of a new
certificate in the name of the Bank, and ordered the latter to pay the plaintiffs P3,000 damages and P2,000 attorney's fees and cost.

Ruling:

The argument that foreclosure by the Bank under its power of sale is barred upon death of the debtor, because agency is
extinguished by the death of the principal, under Article 1732 of the Civil Code of 1889 and Article 1919 of the Civil Code of the
Philippines, neglects to take into account that the power to foreclose is not an ordinary agency that contemplates exclusively the
representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own
protection. It is, in fact, an ancillary stipulation supported by the same causa or consideration for the mortgage and forms an
essential and inseparable part of that bilateral agreement. As can be seen in the preceding quotations from Pasno vs. Ravina, 54
Phil. 382, both the majority and the dissenting opinions conceded that the power to foreclose extrajudicially survived the death of
the mortgagor, even under the law prior to the Civil Code of the Philippines now in force.

Nevertheless, while upholding the validity of the appellant Bank's foreclosure, We can not close our eyes to the fact that the Bank
was apprised since 1947 of the death of its debtor, Vicente Perez, yet it failed and neglected to give notice of the foreclosure to the
latter's widow and heirs as expressly found by the court a quo. Such failure, in effect, prevented them from blocking the foreclosure
through seasonable payment, as well as impeded their effectuating a seasonable redemption. In view of these circumstances, it is
our view that both justice and equity would be served by permitting herein appellees to redeem the foreclosed property within a
reasonable time, by paying the capital and interest of the indebtedness up to the time of redemption, plus foreclosure and useful
expenses, less any rents and profits obtained by the Bank from and after the same entered into its possession.
Rallos vs. Felix Go Chan & Realty Corp., G.R. No. L-24332 January 31, 1978

Doctrine:

• Agency is extinguished by the death of the principal or of the agent. However, if the agent acted without the knowledge of the
death of the principal and the third person that contracted the agent himself acted in good faith, the sale is enforceable.

Facts:

Sisters Concepcion and Gerundia Rallos were registered co-owners of a parcel of land (Lot No. 5938) located in Cebu. They
executed a special power of attorney in favor of their brother Simeon. They authorized Simeon to sell the lot in their behalf.
Concepcion died.

After Concepcion’s death, Simeon sold the undivided shares to Felix Go Chan & Sons Realty Corporation (Felix Corp.) for
P10,686.90. The old TCT was cancelled and a new one was created in the name of Felix Corp. The administrator of the estate,
Ramon Rallos, filed a complaint in the RTC. He prayed the sale of Concepcion’s share be declared unenforceable, the TCT in Felix
Corp’s name be cancelled and for indemnity. While the case was pending in the RTC, both Simeon and Gerundia died. The
respective administrators of their estates substituted them. The trial court ruled in favor of Ramon Rallos.

Felix Corp. appealed the decision to the CA. The CA upheld the validity of the sale as to Concepcion’s share.

Issues:

1. W/N the agent’s sale of the undivided share of the principal’s lot is valid although it was executed after the death of the principal.

Held/Ratio:

1.

NO. Agency is personal, representative and derivative in nature. The authority of the agent to act emanates from the powers
granted to him by the principal. “He who acts through another acts himself.

General rule: agency is extinguished by the death of the principal or of the agent. (Art. 1919)

Exceptions:

a. If it has been constituted in the common interest of the principal and of the agent, or in the interest of a third
person who has accepted the stipulation in his favor. (Art. 1930)

b. a. The agent acted without the knowledge of the death of the principal, and b. The third person that contracted
the agent himself acted in good faith. Good faith means that the third person was not aware of the death of the principal.
(Art. 1931)

The 2 requisites must concur; the absence of one will render the act of the agent invalid and unenforceable.

Art. 1930 is not applicable because the special power of attorney executed in favor of Simeon was not coupled with interest.

Art. 1931 is also inapplicable. Under the law, the agent must have acted without knowledge of the death of the principal.

In this case, Simeon Rallos knew of the death of his principal (Concepcion) at the time he sold the latter’s share to Felix Corp. This is
inferred from the pleadings he filed before the trial court. The law expressly requires lack of knowledge on the part of the agent
with regard to the death of the principal. It is not sufficient that the third person acted in good faith. Thus, the agent’s act is
unenforceable against the estate of his principal. The sale is null and void insofar as to the share of Concepcion.
Terrado v. Court of Appeals, G.R. No. L-58794 & L-64489, 24 August 1984

FACTS:

The Sanggunian Bayan of Bayambang, Pangasinan passed a Resolution establishing the Bayambang Fishery and Hunting Park and
Municipal Water Shed embracing all the vast area of the Mangabul Fisheries consisting of about 2,061 hectares. In the said
ordinance, the municipality designated appointed and constituted private respondent Geruncio Lacuesta as Manager-
Administrator for a period of 25 years, renewable for another 25 years, under the condition that said respondent shall pay the
municipality a sum equivalent to 10% of the annual gross income that may be derived from the sale of forest products, wild game
and fish, which amount shall not be less than P200,000.00 annually. He was further required to post a bond in the amount of
P200,000.00 to guaranty payment of the 10% due the municipality.

The said Ordinance was approved by the Provincial Board of Pangasinan and thereafter was forwarded to the then Secretary of
Agriculture and Natural Resources for approval pursuant to the provisions of the Fisheries Act, Act No. 4003. However, the
Secretary disapproved the Ordinance because it grants fishery privileges to respondent Lacuesta without the benefit of competitive
public hearing in contravention of the provisions of Act 4003 as amended.

The Municipality then informed respondent Lacuesta of the disapproval of the Ordinance by the Secretary and directed him to
refrain and desist from acting as Administrator-Manager under the contract but the latter refused and insisted in maintaining
possession of the fisheries. Inspite of such refusal, the Sanggunian Bayan of Bayambang, Pangasinan passed another Resolution,
resolving to advertise for public bidding all fisheries at the Mangabul area for four years and to direct the Municipal Treasurer to
prepare the necessary notices of public bidding, and accordingly, the Municipal Mayor and the Municipal Treasurer caused to issue
a Notice of Public Bidding. Among the winning bidders were the petitioners herein, the spouses Lydia Terrado and Martin Rosario
and Domingo Fernandez who were immediately placed in possession of the Mangabul.

Private respondent Lacuesta immediately filed a petition for prohibition and mandamus with damages against the Municipal
Mayor, the Municipal Treasurer, the Sanggunian Bayan and the members thereof, praying that the respondent municipal officials
named therein be prohibited from executing any contract of lease with the winning bidders and from enforcing the second
Resolution and further asked that a temporary restraining order be issued against said respondent officials from performing the
acts enjoined.

ISSUE: Whether the municipal order granting private responded Lacuesta administration is valid?

RULING:

The Ordinance is clearly against the provisions of the law for it granted exclusive fishery privileges to the private respondent
without benefit of public bidding. Under the Fisheries Act, the Municipality may not delegate to a private individual as Manager-
Administrator to “use or dispose of the fisheries portion in accordance with the general law on municipal waters” nor to charge foes
for fishing and hunting in the park, much less sell forest products, wild games and fish from the area. Neither can the Municipality
grant the exclusive privilege of fishing for a period more than five (5) years, whereas in the instant case, the period granted the
Manager-Administrator was for twenty-five (25) years, renewable for another twenty-five years.

Essentially, the contract of management and administration between the Municipality and Lacuesta is one of agency whereby 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. Here in the case at bar, Lacuesta bound himself as Manager-Administrator of the Bayambang Fishing and
Hunting Park and Municipal Watershed to render service of perform duties and responsibilities in representation or on behalf of the
Municipality of Bayambang, with the consent or authority of the latter pursuant to Ordinance No. 8 Under Article 1919, New Civil
Code, agency is extinguished by the death of the agent. His rights and obligations arising from the contract are not transmissible to
his heirs.

Since Ordinance No. 8 and the contract of management and supervision is null and void, the Alias Writ of Execution and Possession
dated November 6, 1981 and the Order of October 8, 1982 for the issuance of writ of execution and possession to place and restore
possession of the Mangabul Fisheries of portions thereof or fisheries therein to Lacuesta, his agents, men and/or representatives
under the said contract and by virtue of the ordinance are, including the writ also issued without legal force and effect.