1

SECOND DIVISION
[G.R. No. 76931. May 29, 1991.]
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs. COURT OF APPEALS and
AMERICAN AIRLINES INCORPORATED, respondents.
[G.R. No. 76933. May 29, 1991.]
AMERICAN AIRLINES, INCORPORATED, petitioner, vs. COURT OF APPEALS and ORIENT AIR
SERVICES & HOTEL REPRESENTATIVES, INCORPORATED, respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.
SYLLABUS
1. CIVIL LAW; INTERPRETATION OF CONTRACTS; THE ENTIRETY THEREOF, MUST BE
TAKEN INTO CONSIDERATION TO ASCERTAIN THE MEANING OF ITS PROVISIONS. It is a well
settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into
consideration to ascertain the meaning of its provisions. The various stipulations in the contract must be
read together to give effect to all. After a careful examination of the records, the Court finds merit in the
contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing
principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the
parties, "total flown revenue."
2. ID.; ID.; ID.; APPLICABLE IN CASE AT BAR. As the designated exclusive General Sales
Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's
services for air passenger transportation, and the solicitation of sales therefor. In return for such efforts
and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission,
ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air
ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of
passenger transportation over American Air services. It is immediately observed that the precondition
attached to the first type of commission does not obtain for the second type of commissions. The latter
type of commissions would accrue for sales of American Air services made not on its ticket stock but on
the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel
agents. To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from American
Air ticket stock would erase any distinction between the two (2) types of commissions and would lead to
the absurd conclusion that the parties had entered into a contract with meaningless provisions. Such an
interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.
3. ID.; ID.; AMBIGUITY THEREON, CONSTRUED AGAINST THE PARTY WHO CAUSED
THEREOF. It is clear from the records that American Air was the party responsible for the
preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken
"contra proferentem", i.e., construed against the party who caused the ambiguity and could have
avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. To put it differently, when several interpretations of a provision are otherwise equally proper,
that interpretation or construction is to be adopted which is most favorable to the party in whose favor
the provision was made and who did not cause the ambiguity.
4. ID.; TERMINATION OF CONTRACT; NOT JUSTIFIED IN CASE AT BAR. We now turn to
the propriety of American Air's termination of the Agreement. The respondent appellate court, on this
issue, ruled thus: "It is not denied that Orient withheld remittances but such action finds justification
from paragraph 4 of the Agreement, Exh. F, which provides for remittances to American less
commissions to which Orient is entitled, and from paragraph 5(d) which specifically allows Orient to
retain the full amount of its commissions. Since, as stated ante, Orient is entitled to the 3% override.
American's premise, therefore, for the cancellation of the Agreement did not exist . . ." We agree with
the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an
overriding commission based on total flown revenue. American Air's perception that Orient Air was
remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted
in accordance with the Agreement that of retaining from the sales proceeds its accrued commissions
before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of
such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by
American Air. The latter's termination of the Agreement was, therefore, without cause and basis, for
which it should be held liable to Orient Air.
5. ID.; REINSTATEMENT OF CONTRACT OF AGENCY; MUST BE WITH THE CONSENT OR
AUTHORITY OF THE PRINCIPAL. By affirming this ruling of the trial court, respondent appellate
court, in effect, compels American Air to extend its personality to Orient Air. Such would be violative of
the principles and essence of agency, defined by law as a contract 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." In an agent-principal relationship, the personality of
the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all acts which the latter would have him do. Such a
relationship can only be effected with the consent of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement itself between the parties states that "either party
may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or
cable." We, therefore, set aside the portion of the ruling of the respondent appellate court reinstating
Orient Air as general sales agent of American Air.
D E C I S I O N
PADILLA, J p:
This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of
Appeals in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel
Representatives, Inc." which affirmed, with modification, the decision 2 of the Regional Trial Court of
Manila, Branch IV, which dismissed the complaint and granted therein defendant's counterclaim for
agent's overriding commission and damages. Cdpr
The antecedent facts are as follows:
2

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier
offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel
Representatives (hereinafter referred to as Orient Air), entered into a General Sales Agency Agreement
(hereinafter referred to as the Agreement), whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air passenger transportation.
Pertinent provisions of the agreement are reproduced, to wit:
"WITNESSETH
In consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the
Philippines, including any United States military installation therein which are not serviced by an Air
Carrier Representation Office (ACRO), for the sale of air passenger transportation. The services to be
performed by Orient Air Services shall include:
(a) soliciting and promoting passenger traffic for the services of American and, if necessary,
employing staff competent and sufficient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for
the transaction of the business of American;
(c) arranging for distribution of American's timetables, tariffs and promotional material to sales
agents and the general public in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by
Orient Air Services with the prior written consent of American) in the assigned territory including if
required by American the control of remittances and commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the
assigned territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States,
neither Orient Air Services nor its sub-agents will perform services for any other air carrier similar to
those to be performed hereunder for American without the prior written consent of American. Subject to
periodic instructions and continued consent from American, Orient Air Services may sell air passenger
transportation to be performed within the United States by other scheduled air carriers provided
American does not provide substantially equivalent schedules between the points involved.
xxx xxx xxx
4. Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders,
less commissions to which Orient Air Services is entitled hereunder, not less frequently than semi-
monthly, on the 15th and last days of each month for sales made during the preceding half month.
All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock
or on exchange orders, less applicable commissions to which Orient Air Services is entitled hereunder,
are the property of American and shall be held in trust by Orient Air Services until satisfactorily
accounted for to American.
5. Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air
Services or its sub-agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales agency commission for all sales of transportation by
Orient Air Services or its sub-agents over American's services and any connecting through air
transportation, when made on American's ticket stock, equal to the following percentages of the tariff
fares and charges:
(i) For transportation solely between points within the United States and between such points
and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic Conference of America.
(ii) For transportation included in a through ticket covering transportation between points other
than those described above: 8% or such other rate(s) as may be prescribed by the International Air
Transport Association.
(b) Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of
3% of the tariff fares and charges for all sales of transportation over America's service by Orient Air
Service or its sub-agents.
xxx xxx xxx
10. Default
If Orient Air Services shall at any time default in observing or performing any of the provisions of this
Agreement or shall become bankrupt or make any assignment for the benefit of or enter into any
agreement or promise with its creditors or go into liquidation, or suffer any of its goods to be taken in
execution, or if it ceases to be in business, this Agreement may, at the option of American, be
terminated forthwith and American may, without prejudice to any of its rights under this Agreement, take
possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to
American.
11. IATA and ATC Rules
3

The provisions of this Agreement are subject to any applicable rules or resolutions of the International
Air Transport Association and the Air Traffic Conference of America, and such rules or resolutions shall
control in the event of any conflict with the provisions hereof.
xxx xxx xxx
13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable
to transfer to the United States the funds payable by Orient Air Services to American under this
Agreement. Either party may terminate the Agreement without cause by giving the other 30 days' notice
by letter, telegram or cable.
xxx xxx xxx" 3
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing
to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of
US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally
by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air
with the Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining Order, 4 averring the aforesaid basis for the
termination of the Agreement as well as therein defendant's previous record of failures "to promptly
settle past outstanding refunds of which there were available funds in the possession of the defendant, .
. . to the damage and prejudice of plaintiff." 5
In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material
allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts,
contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact
still owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that
the actions taken by American Air in the course of terminating the Agreement as well as the termination
itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned
prejudice to its business interests. llcd
Finding that the record and the evidence substantiated the allegations of the defendant, the trial court
ruled in its favor, rendering a decision dated 16 July 1984, the dispositive portion of which reads:
"WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of
defendant and against plaintiff dismissing the complaint and holding the termination made by the latter
as affecting the GSA agreement illegal and improper and order the plaintiff to reinstate defendant as its
general sales agent for passenger transportation in the Philippines in accordance with said GSA
agreement; plaintiff is ordered to pay defendant the balance of the overriding commission on total flown
revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission
per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine
peso equivalent legally prevailing at the time of payment plus legal interest to commence from the filing
of the counterclaim up to the time of payment. Further, plaintiff is directed to pay defendant the amount
of One Million Five Hundred Thousand (P1,500,000.00) pesos as and for exemplary damages; and the
amount of Three Hundred Thousand (P300,000.00) pesos as and by way of attorney's fees.
Costs against plaintiff." 7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27
January 1986, affirmed the findings of the court a quo on their material points but with some
modifications with respect to the monetary awards granted. The dispositive portion of the appellate
court's decision is as follows:
"WHEREFORE, with the following modifications
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the
latter's overriding commission covering the period March 16, 1977 to December 31, 1980, or its
Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10,
1981, the date the counterclaim was filed;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding
commission per month starting January 1, 1981 until date of termination, May 9, 1981 or its Philippine
peso equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the
date the counterclaim was filed;
3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the
answer with counterclaim was filed, until full payment;
4) American is ordered to pay Orient exemplary damages of P200,000.00;
5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American." 8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof
and arguing for its reversal. The appellate court's decision was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to
the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied
American Air's motion and with respect to that of Orient Air, ruled thus:
"Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's
award of exemplary damages and attorney's fees, but granted insofar as the rate of exchange is
concerned. The decision of January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive
part so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in
accordance with the official rate of exchange legally prevailing on the date of actual payment." 9

4

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as
petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution 10 of this
Court dated 25 March 1987 both petitions were consolidated, hence, the case at bar. prLL
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that such commission is based only on sales of its services
actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis
thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted
as follows:
"5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of
3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air
Services or its sub-agents." (emphasis supplied).
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having
opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to
the disputed overriding commission based only on ticketed sales. This is supposed to be the clear
meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding
commission, the sale must be made by Orient Air and the sale must be done with the use of American
Air's ticket stocks. cdphil
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission
covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by
Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General
Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all
sales of transportation over American Air's services are necessarily by Orient Air." 11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be
taken into consideration to ascertain the meaning of its provisions. 12 The various stipulations in the
contract must be read together to give effect to all. 13 After a careful examination of the records, the
Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance
with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as
referred to by the parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for air passenger transportation, and the solicitation
of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two
(2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by
Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of
tariff fares and charges for all sales of passenger transportation over American Air services. It is
immediately observed that the precondition attached to the first type of commission does not obtain for
the second type of commissions. The latter type of commissions would accrue for sales of American Air
services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or
other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from American Air ticket stock would erase any distinction between the
two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into
a contract with meaningless provisions. Such an interpretation must at all times be avoided with every
effort exerted to harmonize the entire Agreement. LLpr
An additional point before finally disposing of this issue. It is clear from the records that American Air
was the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this
"contract of adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused
the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the
Civil Code provides that the interpretation of obscure words or stipulations in a contract shall not favor
the party who caused the obscurity. 14 To put it differently, when several interpretations of a provision
are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable
to the party in whose favor the provision was made and who did not cause the ambiguity. 15 We
therefore agree with the respondent appellate court's declaration that:
"Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read
against the party who drafted it." 16
We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate
court, on this issue, ruled thus:
"It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of
the Agreement, Exh. F, which provides for remittances to American less commissions to which Orient is
entitled, and from paragraph 5(d) which specifically allows Orient to retain the full amount of its
commissions. Since, as stated ante, Orient is entitled to the 3% override. American's premise,
therefore, for the cancellation of the Agreement did not exist . . ."
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was
entitled to an overriding commission based on total flown revenue. American Air's perception that
Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where
the latter acted in accordance with the Agreement that of retaining from the sales proceeds its
accrued commissions before remitting the balance to American Air. Since the latter was still obligated to
Orient Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit
the sums claimed by American Air. The latter's termination of the Agreement was, therefore, without
cause and basis, for which it should be held liable to Orient Air. LibLex
On the matter of damages, the respondent appellate court modified by reduction the trial court's award
of exemplary damages and attorney's fees. This Court sees no error in such modification and, thus,
affirms the same.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the
trial court. We refer particularly to the lower court's decision ordering American Air to "reinstate
5

defendant as its general sales agent for passenger transportation in the Philippines in accordance with
said GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to
extend its personality to Orient Air. Such would be violative of the principles and essence of agency,
defined by law as a contract 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." 17 (emphasis supplied) In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be compelled by law or by any
court. The Agreement itself between the parties states that "either party may terminate the Agreement
without cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We,
therefore, set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as
general sales agent of American Air. prLL
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the
respondent Court of Appeals, dated 27 January 1986 and 17 December 1986, respectively. Costs
against petitioner American Air.
SO ORDERED.

FIRST DIVISION
[G.R. No. L-24332. January 31, 1978.]
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, vs. FELIX GO
CHAN & SONS REALTY CORPORATION and COURT OF APPEALS respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
SYNOPSIS
After the death of his principal and with full knowledge of such death, the attorney-in-fact sold his
principal's undivided share in a parcel of land pursuant to a special power of attorney which the
principal had executed in his favor. The administrator of the estate of the deceased principal went to
court to have the sale declared unenforceable and to recover the disposed share. The trial court
granted the relief prayed for, but on appeal, the Court of Appeals upheld the validity of the sale and
dismissed the complaint.
On review the Supreme Court held that the sale was null and void because, although the buyer may
have been a purchaser in good faith, said sale was made with the agent's knowledge of his principal's
death. The general rule is that death of the principal or the agent extinguishes the agency and this case
does not fall under any of the exceptions to the general rule.
Appealed decision set aside and judgment of the lower court affirmed on toto.
SYLLABUS
1. AGENCY; DEFINED. Agency is a relationship between two parties whereby one party,
called the principal, authorizes another, called the agent, to act for and in his behalf on transactions with
third persons.
2. ID.; ELEMENTS. The essential elements of agency are: (1) there is consent, express or
implied, of the parties to establish the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and not for himself; and (4) the agent
acts within the scope of his authority.
3. ID.; DEATH AS MODE OF EXTINGUISHMENT; EXCEPTIONS. By reason of the very
nature of the relationship between principal and agent, agency is extinguished by the death of the
principal or of the agent and any act of an agent after the death of his principal is void ab initio, except
as explicitly provided for in the New Civil Code: (1) when the agency is coupled with an interest (Art.
1930); and (2) when the agent performed an act for the principal without knowledge of the principal's
death and the third person who contracted with him acted in good faith. (Art. 1931)
4. ID.; REVOCATION BY PRINCIPAL DISTINGUISHED FROM REVOCATION BY
OPERATION OF LAW. Although a revocation of a power of attorney to be effective must be
communicated to the parties concerned, yet a revocation by operation of law, such as death of the
principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's continuing will." With death, the principal's will
ceases or is terminated; the source of authority is extinguished.
5. ID.; AGENT'S HEIRS MUST NOTIFY PRINCIPAL OF AGENT'S DEATH. The heirs of the
agent who dies must notify the principal of his death and in the meantime adopt such measures as
circumstances may demand in the interest of the latter, but the heirs of the principal are not duty-bound
to give notice of the principal's death to the agent.
D E C I S I O N
MUOZ PALMA, J p:
This is a case of an attorney-in-fact, Simeon Rallos, who after the death of his principal, Concepcion
Rallos, sold the latter's undivided share in a parcel of Land pursuant to a special power of attorney
which the principal had executed in his favor. The administrator of the estate of the deceased principal
went to court to have the sale declared unenforceable and to recover the disposed share. The trial court
granted the relief prayed for, but upon appeal, the Court of Appeals upheld the validity of the sale and
dismissed the complaint.
Hence, this Petition for Review on certiorari.
6

The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and
registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu
covered by Transfer Certificate of Title No. 11118 of the Registry of Cebu. On April 21, 1954, the sisters
executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for
and in their behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955,
Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go
Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the
Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new Transfer Certificate of Title No.
12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the
sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be declared 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 shares; and (3) that
plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named party defendants
were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but
subsequently, the latter dropped from the complaint. The complaint was amended twice; defendant
Corporation's Answer contained a cross-claim against its co-defendant, Simeon Rallos, while the latter
filed third-party complaint against his sister, Gerundia Rallos. While the case was pending in the trial
court, both Simeon and his sister Gerundia died and they were substituted by the respective
administrators of their estates.
After trial, the court a quo rendered judgment with the following dispositive portion:
"A. On Plaintiff's Complaint
(1) Declaring the deed of sale, Exh. 'C', null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question, - Lot 5983 of the Cadastral Survey of Cebu is
concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989
covering Lot 5983 and to issue in lieu thereof another in the names of FELIX Go CHAN & SONS
REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion of one-half (1/2) share
each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided
one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
"B. On GO CHAN'S Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo administrator of the Estate of Simeon Rallos;
to pay to defendant Felix Go Chan & Sons Realty Corporation the sum of P5,343.45, representing the
price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of
P500.00.
"C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon
Rallos, against Josefina Rallos, special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the
regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate of Gerundia Rallos,
covering the same subject-matter of the third-party complaint, at bar." (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the
foregoing judgment insofar as it set aside the sale of the one half (1/2) share of Concepcion Rallos. The
appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the
appellant corporation sustaining the sale in question. 1 The appellee-administrator, Ramon Rallos,
moved for a reconsideration of the decision but the same was denied in a resolution of March 4, 1965.
2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more
particularly to the instant case, We have the query: is the sale of the undivided share of Concepcion
Rallos in lot 5983 valid although it was executed by the agent after the death of his principal? What is
the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act
for and in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in
determining the legal effect of an act performed after such death?
Before proceeding to the issues, We shall briefly restate certain principles of law relevant to the matter
under consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the
name of another without being authorized by the latter, or unless he has by law a right to represent him.
3 A contract entered into in the name of another by one who has no authority or legal representation, or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been executed, before it is revoked by the other contracting party.
4 Article 1403 (1) of the same also provides:
"ART. 1403. The following contracts are unenforceable, unless they are justified:
"(1) Those entered into in the name of another person by one who has been given no authority or
legal representation or who has acted beyond his powers; . . . ."
Out of the above given principles, sprung the creation an acceptance of the relationship of agency
whereby one party, called the principal (mandante), authorizes another, called the agent (mandatario),
to act for him in his behalf in transactions with third persons. The essential elements of agency are: (1)
7

there is consent, express or implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not
for himself; and (4) the agent acts within the scope of his authority. 5
Agency is basically personal, representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done
within the scope of the authority. Qui facit per alium facit per se. "He who acts through another acts
himself." 6
2. There are various ways of extinguishing agency, 7 but here We are concerned only with one
cause death of the principal: Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art.
1709 of the Spanish Civil Code provides:
"ART. 1919. Agency is extinguished:
"xxx xxx xxx
"3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; . . . ."
(Underline supplied)
By reason of the very nature of the relationship between principal and agent, agency is extinguished by
the death of the principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is
found in the juridical basis of agency which is representation. There being an integration of the
personality of the principal into that of the agent it is not possible for the representation to continue to
exist once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of
agency, death is a necessary cause for its extinction. Laurent says that the juridical tie between the
principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of
the principal to notify the agent of the fact of death of the former. 9
The same rule prevails at common law the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the power be coupled with an interest. 10 This is the
prevalent rule in American Jurisprudence where it is well-settled that a power without an interest
conferred upon an agent is dissolved by the principal's death, and any attempted execution of the
power afterwards is not binding on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that exception?
That is the determinative point in issue in this litigation. It is the contention of respondent corporation
which was sustained by respondent court that notwithstanding the death of the principal, Concepcion
Rallos, the act of the attorney-in-fact, Simeon Rallos, in selling the former's share in the property is valid
and enforceable inasmuch as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or in the
interest of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge the death of the principal or of any
other cause which extinguishes the agency, is valid and shall be fully effective with respect to third
persons who may have contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of
Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his
principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge
of the death of the principal, and (2) that the third person who contracted with the agent himself acted in
good faith. Good faith here means that the third son was not aware of the death of the principal at the
time he contracted with said agent. These two requisites must concur: the absence of one will render
the act of the agent invalid unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed by Simeon Rallos before the
trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of
the court a quo 13 and of respondent appellate court when the latter stated that Simeon Rallos "must
have known of the death of his sister, and yet he proceeded with the sale of the lot in the name of both
his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the
death of the former." 14
On the basis of the established knowledge of Simeon Rallos concerning the death of his principal,
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his principal; it is not enough that
the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article
1738 of the old Civil Code now Art. 1931 of the new Civil Code sustained the validity of a sale made
after the death of the principal because it was not shown that the agent knew of his principal's demise.
15 To the same effect is the case of Herrera, et al. v. Luy Kim Guan, et al., 1961, where in the words of
Justice Jesus Barrera the Court stated:
". . . even granting arguendo that Luis Herrera did die in 1936 plaintiffs presented no proof and there is
no indication in the record, that the agent Luy Kim Guan was aware of the death of his principal at the
time he sold the property. The death of the principal does not render the act of an agent unenforceable,
where the latter had no knowledge of such extinguishment of the agency." (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent corporation, the Court of Appeals reasoned
out that there is no provision in the Code which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. 16
8

We cannot see the merits of the foregoing argument as it is ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the
general rule it follows a fortiori that any act o an agent after the death of his principal is void ab initio
unless the same falls under the exceptions provided for in the aforementioned Articles 1930 and 1931.
Article 1931, being an exception to the general rule, is to be strictly construed; it is not to be given an
interpretation or application beyond the clear import of its terms for otherwise the courts will be involved
in a process of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied
on the power of attorney which was duly registered on the original certificate of title recorded in the
Register of Deeds of the Province of Cebu, that no notice of the death was ever annotated on said
certificate of title by the heirs of the principal and accordingly they must suffer the consequences of
such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
"If the agency has been granted for the purpose of contracting with certain persons, the revocation
must be made known to them. But if the agency is general in nature, without reference to particular
person with whom the agent is to contract, it is sufficient that the principal exercise due diligence to
make the revocation of the agency publicly known.
"In case of a general power which does not specify the persons to whom representation should be
made, it is the general opinion that all acts executed with third persons who contracted in good faith,
without knowledge of the revocation, are valid. In such case, the principal may exercise his right against
the agent, who, knowing of the revocation, continued to assume a personality which he no longer had."
(Manresa, Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse, however, treats of revocation by an act of the principal as a mode of terminating
an agency which is to be distinguished from revocation by operation of law such as death of the
principal which obtains in this case. On page six of this Opinion We stressed that by reason of the very
nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death
of either principal or agent. Although a revocation of a power of attorney to be effective must be
communicated to the parties concerned, 18 yet a revocation by operation of law, such as by death of
the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's continuing will." 19 With death, the principal's will
ceases or is terminated; the source of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal.
What the Code provides in Article 1932 is that, if the agent dies, his heirs must notify the principal
thereof, and in the meantime adopt such measures as the circumstances may demand in the interest of
the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of
title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the
principal.
6. Holding that the good faith of a third person in dealing with an agent affords the former
sufficient protection, respondent court drew a "parallel" between the instant case and that of an
innocent purchaser for value of a registered land, stating that if a person purchases a registered land
from one who acquired it in bad faith even to the extent of foregoing or falsifying the deed of sale in
his favor the registered owner has no recourse against such innocent purchaser for value but only
against the forger. 20
To support the correctness of this "parallelism", respondent corporation, in its brief, cites the case of
Blondeau, et al. v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
"In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of
lands with Agustin Nano. The latter had a power of attorney supposedly executed by Vallejo in his
favor. Vallejo delivered to Nano his land titles. The power was registered in the Office of the Register of
Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he found all in order
including the power of attorney. But Vallejo denied having executed the power. The lower court
sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the court a quo, the
Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:
'But there is a narrower ground on which the defenses of the defendant-appellee must be overruled.
Agustin Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to
Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated. When Fernando de la
Cantera, a member of the Philippine Bar and the husband of Angela Blondeau, the principal plaintiff,
searched the registration record, he found them in due form including the power of attorney of Vallejo in
favor of Nano. If this had not been so and if thereafter the proper notation of the encumbrance could not
have been made, Angela Blondeau would not have, lent P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by the registered owner thereof in the hands of another
operates as a representation to a third party that the holder of the transfer is authorized to deal with the
land.
'As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the
one who made it possible by his act of confidence bear the loss.'" (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are
confronted with one who admittedly was an agent of his sister and who sold the property of the latter
after her death with full knowledge of such death. The situation is expressly covered by a provision of
law on agency the terms of which are clear and unmistakable leaving no room for an interpretation
contrary to its tenor, in the same manner that the ruling in Blondeau and the cases cited therein found a
basis in Section 55 of the Land Registration Law which in part provides:
"xxx xxx xxx
"The production of the owner's duplicate certificate whenever any voluntary instrument is presented for
registration shall be conclusive authority from the registered owner to the register of deeds to enter a
certificate or to make a memorandum of registration in accordance with such instruments, and the new
certificate or memorandum shall be binding upon the registered owner and upon all persons claiming
under him in favor of every purchaser for value and in good faith: Provided, however, That in all cases
of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud, without prejudice, however, to the rights of any innocent holder for value of a
certificate of title. . . . " (Act No. 496 as amended)
9

7. One last point raised by respondent corporation in support of the appealed decision is an
1842 ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to
an agent after the death of the principal were held to be "good", "the parties being ignorant of the
death". Let us take note that the Opinion of Justice Rogers was premised on the statement that the
parties were ignorant of the death of the principal. We quote from that decision the following:
". . . Here the precise point is, whether a payment to an agent when the parties are ignorant of the
death is a good payment. In addition to the case in Campbell before cited, the same judge Lord
Ellenborough, has decided in 5 Esp. 117, the general question that a payment after the death of
principal is not good. Thus, a payment of sailor's wages to a person having a power of attorney to
receive them, has been held void when the principal was dead at the time of the payment. If, by this
case, it is meant merely to decide the general proposition that by operation of law the death of the
principal is a revocation of the powers of the attorney, no objection can be taken to it. But if it intended
to say that his principle applies where there was no notice of death, or opportunity of notice, I must be
permitted to dissent from it.
". . . That a payment may be good today, or bad tomorrow, from the accidental circumstance of the
death of the principal, which he did not know, and which by no possibility could he know? It would be
unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent, done bona fide in
ignorance of the death of his principal, are held valid and binding upon the heirs of the latter. The same
rule holds in the Scottish law, and I cannot believe the common law is so unreasonable. . . . " (39 Am.
Dec. 76. 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may
be made that the above represents the minority view in American jurisprudence. Thus in Clayton v.
Merrett, the Court said:
"'There are several cases which seem to hold that although, as a general principle, death revokes an
agency and renders null every act of the agent thereafter performed, yet that where a payment has
been made in ignorance of the death, such payment will be good. The leading case so holding is that of
Cassiday v. McKenzie, 4 Watts & S. (Pa.) 282, 39 AmD 76, where, in an elaborate opinion, this view is
broadly announced. It is referred to, and seems to have been followed, in the case of Dick v. Page, 17
Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate of the deceased principal had
received the benefit of the money paid, and therefore the representative of the estate might well have
been held to be estopped from suing for it again. . . . These cases, in so far, at least, as they announce
the doctrine under discussion, are exceptional. The Pennsylvania Case supra (Cassiday v. McKenzie, 4
Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in announcing the principal
in its broadest scope.'" (52 Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion,
except so far as it related to the particular facts, was a mere dictum, Baldwin, J. said:
"'The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his
views on the general subject, than as the adjudication of the Court upon the point in question. But
accordingly all proper weight to this opinion, as the judgment of a Court of great respectability, it stands
alone among common law authorities, and is opposed by an array too formidable to permit us to follow
it.'" (15 Cal. 12, 17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence,
no such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly
provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency,
to wit: (1) that the agency is coupled with an interest (Art. 1930), and (2) that the act of the agent was
executed without knowledge of the death of the principal and the third person who contracted with the
agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and
again We stress the indispensable requirement - that the agent acted without knowledge or notice of
the death of the principal. In the case before Us the agent Ramon Rallos executed the sale
notwithstanding notice of the death of his principal. Accordingly, the agent's act is unenforceable
against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the decision of respondent appellate court, and We
affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of
Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all
instances.
So Ordered.
SECOND DIVISION
[G.R. No. 130148. December 15, 1997.]
JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and
NARCISO DEGANOS, respondents.
Florentino V. Floro, Jr. for petitioners.
Paulino N. Lorenzo for private respondents.
SYNOPSIS
Petitioners were engaged in the business of purchase and sale of jewelry while respondent Brigida Luz
was their regular customer. On several occasions, respondent Narciso Deganos, brother of Brigida,
received several pieces of gold and jewelry from petitioners amounting to P382,816.00. The receipts
stated that some of them were received for a certain Evelyn Aquino and the rest were received for
Brigida Luz. Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and
return the unsold items to petitioners. However, Deganos remitted only the sum of P53,207.00. He
neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. Hence,
petitioners instituted an action for recovery of sum of money against Deganos and Luz claiming that
Deganos acted as agent to Brigida Luz when the former received the subject items in her behalf. And
because Deganos failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable
with him therefor. Brigida denied that she had anything to do with the transactions between petitioners
and Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her
behalf and neither did she actually receive any of the articles in question.
In the absence of consent to the acts of the supposed agent or authority therefor, no agency
whatsoever was created. Hence, the supposed principal cannot be held liable; only Deganos was liable
10

to the petitioners for the amount and damages claimed. Petitioners attempt to foist liability on the
respondent spouses Luz through the supposed agency relation with Deganos is groundless and ill-
advised
SYLLABUS
1. CIVIL LAW; AGENCY; NOT PRESENT WITHOUT AUTHORITY FROM SUPPOSED
PRINCIPAL. The actual conclusion and ruling of the Court of Appeals categorically stated that,
"(Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction
with Petitioners x x x." It is clear, therefore, that even assuming arguendo that Deganos acted as an
agent of Brigida, the latter never authorized him to act on her behalf with regard to the transaction
subject of this case. The basis for agency is representation. Petitioners' attempt to foist liability on
respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised.
It was grossly and inexcusably negligent of petitioners to entrust to Deganos, on at least six occasions,
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. Petitioners, who were negligent in their transactions with Deganos, cannot seek
relief from the effects of their negligence by conjuring a supposed agency relation between the two
respondents where no evidence supports such claim.
2. REMEDIAL LAW; CRIMINAL PROCEDURE; PROSECUTION OF CIVIL ACTION;
SEPARATE ACTION FOR DAMAGES MAY BE INSTITUTED. Article 33 of the Civil Code provides
that in cases involving alleged fraudulent acts, a civil action for damages, entirely separate and distinct
from the criminal action may be brought by the injured party. Such civil action shall proceed
independently of the criminal prosecution and shall require only a preponderance of evidence. It is
worth noting that this civil case was instituted four years before the criminal case for estafa was filed
and that although there was a move to consolidate both cases, the same was denied by the trial court.
Consequently, it was the duty of the two branches of the Regional Trial Court concerned to
independently proceed with the civil and criminal cases. It will also be observed that a final judgment
rendered in a civil action absolving the defendant from civil liability is no bar to a criminal action. It is
clear therefore, that this civil case may proceed independently of the criminal case especially because
while both cases are based on the same facts, the quantum of proof required for holding the parties
liable therein differ. Thus, it is improvident of petitioners to claim that the decision and resolution of the
Court of Appeals in the present case would be preemptive of the outcome of the criminal case. Their
fancied fear of possible conflict between the disposition of this civil case and the outcome of the
pending criminal case is illusory.
3. LEGAL ETHICS; ALLEGATION OF IRREGULARITIES IN THE COURT OF APPEALS
BECAUSE OF ITS EARLY RESOLUTION, ABHORRED. The lamentable allegation of irregularities
in the Court of Appeals and in the conduct of its officers strikes us as a desperate attempt of petitioners
to induce this Court to give credence to their arguments which, as already found by both the trial and
intermediate appellate courts, are devoid of factual and legal substance. The regrettably irresponsible
attempt to tarnish the image of the intermediate appellate tribunal and its judicial officers through ad
hominem imputations could well be contumacious, but we are inclined to let that pass with a strict
admonition that petitioners refrain from indulging in such conduct in litigations. It is ironic that while
some litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners are
making a show of calling out for justice because the Court of Appeals issued a resolution disposing of a
case sooner than expected of it. They would even deny the exercise of discretion by the appellate court
to prioritize its action on cases in line with the procedure it has adopted in disposing thereof and in
declogging its dockets. It is definitely not for the parties to determine and dictate when and how a
tribunal should act upon those cases since they are not even aware of the status of the dockets and the
internal rules and policies for acting thereon. The fact that a resolution was issued by said court within a
relatively short period of time after the records of the case were elevated to the office of the ponente
cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was issued
without considering the reply filed by petitioners. In fact, that brief pleading filed by petitioners does not
exhibit any esoteric or ponderous argument which could not be analyzed within an hour. It is a legal
presumption, born of wisdom and experience, that official duty has been regularly performed; that the
proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have been and
will be duly and properly performed. The burden of proving irregularity in official conduct is on the part
of petitioners and they have utterly failed to do so. It is thus reprehensible for them to cast aspersions
on a court of law on the bases of conjectures or surmises, especially since one of the petitioners
appears to be a member of the Philippine Bar.
D E C I S I O N
REGALADO, J p:
In this appeal by certiorari, petitioners assail the judgment of the Court of Appeals in CA-G.R. CV No.
49175 affirming the adjudication of the Regional Trial Court of Malolos, Bulacan which found private
respondent Narciso Deganos liable to petitioners for actual damages, but absolved respondent spouses
Brigida D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent resolution of
the Court of Appeals which denied their motion for reconsideration of its challenged decision. cdtai
Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D.
Luz, also known as Aida D. Luz, was their regular customer. On several occasions during the period
from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz,
received several pieces of gold and jewelry from petitioners amounting to P382,816.00. 1 These items
and their prices were indicated in seventeen receipts covering the same. Eleven of the receipts stated
that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six
indicated that they were received for Brigida D. Luz. 2
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the
unsold items to petitioners. Deganos remitted only the sum of P53,207.00. He neither paid the balance
of the sales proceeds, nor did he return any unsold item to petitioners. By January 1990, the total of his
unpaid account to petitioners, including interest, reached the sum of P725,463.98. 3 Petitioners
eventually filed a complaint in the barangay court against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a
witness for Deganos and ultimately, she and her husband, together with Deganos, signed a
compromise agreement with petitioners. In that compromise agreement, Deganos obligated himself to
pay petitioners, on installment basis, the balance of his account plus interest thereon. However, he
failed to comply with his aforestated undertakings.
11

On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos,
Bulacan against Deganos and Brigida D. Luz for recovery of a sum of money and damages, with an
application for preliminary attachment. 4 Ernesto Luz was impleaded therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were charged with estafa 5 in the
Regional Trial Court of Malolos, Bulacan, which was docketed as Criminal Case No. 785-M-94. That
criminal case appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz
when he received the subject items of jewelry and, because he failed to pay for the same, Brigida, as
principal, and her spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed
that the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was
he alone who was involved in the transaction with the petitioners; that he neither acted as agent for nor
was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts
indicated that the items were received by him for the latter. He further claimed that he never delivered
any of the items he received from petitioners to Brigida.
Brigida, on her part, denied that she had anything to do with the transactions between petitioners and
Deganos. She claimed that she never authorized Deganos to receive any item of jewelry in her behalf
and, for that matter, neither did she actually receive any of the articles in question.
After trial, the court below found that only Deganos was liable to petitioners for the amount and
damages claimed. It held that while Brigida D. Luz did have transactions with petitioners in the past, the
items involved were already paid for and all that Brigida owed petitioners was the sum of P21,483.00
representing interest on the principal account which she had previously paid for. 6
The trial court also found that it was petitioner Lydia Bordador who indicated in the receipts that the
items were received by Deganos for Evelyn Aquino and Brigida D. Luz. 7 Said court 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. 8 Absent the required
memorandum or any written document connecting the respondent Luz spouses with the subject
receipts, or authorizing Deganos to act on their behalf, the alleged agreement between petitioners and
Brigida D. Luz was unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal interest thereon from
June 25, 1990, and attorney's fees. Brigida D. Luz was ordered to pay P21,483.00 representing the
interest on her own personal loan. She and her co-defendant spouse were absolved from any other or
further liability. 9
As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals
which affirmed said judgment. 10 The motion for reconsideration filed by petitioners was subsequently
dismissed, 11 hence the present recourse to this Court.
The primary issue in the instant petition is whether or not herein respondent spouses are liable to
petitioners for the latter's claim for money and damages in the sum of P725,463.98, plus interests and
attorney's fees, despite the fact that the evidence does not show that they signed any of the subject
receipts or authorized Deganos to receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that
respondent spouses are not liable to them, as said conclusion of the trial court is contradicted by the
finding of fact of the appellate court that "(Deganos) acted as agent of his sister (Brigida Luz)." 12 In
support of this contention, petitioners quoted several letters sent to them by Brigida D. Luz wherein the
latter acknowledged her obligation to petitioners and requested for more time to fulfill the same. They
likewise aver that Brigida testified in the trial court that Deganos took some gold articles from petitioners
and delivered the same to her.
Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters
concerned the previous obligations of Brigida to petitioners, and had nothing to do with the money
sought to be recovered in the instant case. Such concurrent factual findings are entitled to great weight,
hence, petitioners cannot plausibly claim in this appellate review that the letters were in the nature of
acknowledgments by Brigida that she was the principal of Deganos in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting delivery of the gold to her, there is
no showing whatsoever that her statement referred to the items which are the subject matter of this
case. It cannot, therefore, be validly said that she admitted her liability regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent
authority as her agent and held him out to the public as such, hence Brigida can not be permitted to
deny said authority to innocent third parties who dealt with Deganos under such belief. 13 Petitioners
further represent that the Court of Appeals recognized in its decision that Deganos was an agent of
Brigida. 14
The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz
and that the latter should consequently be held solidarily liable with Deganos in his obligation to
petitioners. While the quoted statement in the findings of fact of the assailed appellate decision
mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the
Court of Appeals categorically stated that, "(Brigida Luz) never authorized her brother (Deganos) to act
for and in her behalf in any transaction with Petitioners . . ." 15 It is clear, therefore, that even assuming
arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her
behalf with regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. 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 basis for agency is representation. Here, there is no showing that Brigida consented to the acts of
Deganos or authorized him to act on her behalf, much less with respect to the particular transactions
involved. Petitioners' attempt to foist liability on respondent spouses through the supposed agency
relation with Deganos is groundless and ill-advised.
12

Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice
but on at least six occasions as evidenced by six 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. 16
The records show that neither an express nor an implied agency was proven to have existed between
Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with
Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency
relation between the two respondents where no evidence supports such claim.
Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court
below, which it affirmed, is "null and void" as it contradicted its ruling in CA-G.R. SP No. 39445 holding
that there is "sufficient evidence/proof" against Brigida D. Luz and Deganos for estafa in the pending
criminal case. They further aver that said appellate court erred in ruling against them in this civil action
since the same would result in an inevitable conflict of decisions should the trial court convict the
accused in the criminal case. LLjur
By way of backdrop for this argument of petitioners, herein respondents Brigida D. Luz and Deganos
had filed a demurrer to evidence and a motion for reconsideration in the aforestated criminal case, both
of which were denied by the trial court. They then filed a petition for certiorari in the Court of Appeals to
set aside the denial of their demurrer and motion for reconsideration but, as just stated, their petition
therefore was dismissed. 17
Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP
No. 39445 with respect to the criminal case is equivalent to a finding that there is sufficient evidence in
the estafa case against Brigida D. Luz and Deganos. Hence, as already stated, petitioners theorize that
the decision and resolution of the Court of Appeals now being impugned in the case at bar would result
in a possible conflict with the prospective decision in the criminal case. Instead of promulgating the
present decision and resolution under review, so they suggest, the Court of Appeals should have
awaited the decision in the criminal case, so as not to render academic or preempt the same or, worse,
create two conflicting rulings. 18
Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases
involving alleged fraudulent acts, a civil action for damages, entirely separate and distinct from the
criminal action, may be brought by the injured party. Such civil action shall proceed independently of
the criminal prosecution and shall require only a preponderance of evidence.
It is worth noting that this civil case was instituted four years before the criminal case for estafa was
filed, and that although there was a move to consolidate both cases, the same was denied by the trial
court. Consequently, it was the duty of the two branches of the Regional Trial Court concerned to
independently proceed with the civil and criminal cases. It will also be observed that a final judgment
rendered in a civil action absolving the defendant from civil liability is no bar to a criminal action. 19
It is clear, therefore, that this civil case may proceed independently of the criminal case 20 especially
because while both cases are based on the same facts, the quantum of proof required for holding the
parties liable therein differ. Thus, it is improvident of petitioners to claim that the decision and resolution
of the Court of Appeals in the present case would be preemptive of the outcome of the criminal case.
Their fancied fear of possible conflict between the disposition of this civil case and the outcome of the
pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial
resolution dated August 18, 1997, as the same was tainted with irregularities and badges of fraud
perpetrated by its court officers. 21 They charge that said appellate court, through conspiracy and fraud
on the part of its officers, gravely abused its discretion in issuing that resolution denying their motion for
reconsideration. They claim that said resolution was drafted by the ponente, then signed and issued by
the members of the Eleventh Division of said court within one and a half days from the elevation thereof
by the division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the resolution as the same was made
without waiting for the lapse of the ten-day period for respondents to file their comment and for
petitioners to file their reply. It was allegedly impossible for the Court of Appeals to resolve the issue in
just one and a half days, especially because its ponente, the late Justice Maximiano C. Asuncion, was
then recuperating from surgery and, that, additionally, "hundreds of more important cases were
pending." 22
These lamentable allegation of irregularities in the Court of Appeals and in the conduct of its officers
strikes us as a desperate attempt of petitioners to induce this Court to give credence to their arguments
which, as already found by both the trial and intermediate appellate courts, are devoid of factual and
legal substance. The regrettably irresponsible attempt to tarnish the image of the intermediate appellate
tribunal and its judicial officers through ad hominem imputations could well be contumacious, but we
are inclined to let that pass with a strict admonition that petitioners refrain from indulging in such
conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case affirming the trial court's decision.
23 Petitioners moved for reconsideration and the Court of Appeals ordered respondents to file a
comment. Respondent filed the same on August 5, 1997 24 and petitioners filed their reply to said
comment on August 15, 1997. 25 The Eleventh Division of said court issued the questioned resolution
denying petitioner's motion for reconsideration on August 18, 1997. 26
It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of
cases, petitioners are making a show of calling out for justice because the Court of Appeals issued a
resolution disposing of a case sooner than expected of it. They would even deny the exercise of
discretion by the appellate court to prioritize its action on cases in line with the procedure it has adopted
in disposing thereof and in declogging its dockets. It is definitely not for the parties to determine and
dictate when and how a tribunal should act upon those cases since they are not even aware of the
status of the dockets and the internal rules and policies for acting thereon.
The fact that a resolution was issued by said court within a relatively short period of time after the
records of the case were elevated to the office of the ponente cannot, by itself, be deemed irregular.
There is no showing whatsoever that the resolution was issued without considering the reply filed by
petitioners. In fact, that brief pleading filed by petitioners does not exhibit any esoteric or ponderous
argument which would not be analyzed within an hour. It is a legal presumption, born of wisdom and
experience, that official duty has been regularly performed; 27 that the proceedings of a judicial tribunal
are regular and valid, and that judicial acts and duties have been and will be duly and properly
13

performed. 28 The burden of proving irregularity in official conduct is on the part of petitioners and they
have utterly failed to do so. It is thus reprehensible for them to cast aspersions on a court of law on the
bases of conjectures or surmises, especially since one of the petitioners appears to be a member of the
Philippine Bar.
Lastly, petitioners fault the trial court's holding that whatever contract of agency was established
between Brigida D. Luz and Narciso Deganos is unenforceable under the Statute of Frauds as that
aspect of this case allegedly is not covered thereby. 29 They proceed on the premise that the Statute of
Frauds applies only to executory contracts and not to executed or to partially executed ones. From
there, they move on to claim that the contract involved in this case was an executed contract as the
items had already been delivered by petitioners to Brigida D. Luz, hence, such delivery resulted in the
execution of the contract and removed the same from the coverage of the Statute of Frauds.
Petitioners' claim is speciously unmeritorious. It should be emphasized that neither the trial court nor
the appellate court categorically stated that there was such a contractual relation between these two
respondents. The trial court merely said that if there was such an agency existing between them, the
same is unenforceable as the contract would fall under the Statute of Frauds which requires the
presentation of a note or memorandum thereof in order to be enforceable in court. That was merely a
preparatory statement of a principle of law. What was finally proven as a matter of fact is that there was
no such contract between Brigida D. Luz and Narciso Deganos, executed or partially executed, and no
delivery of any of the items subject of this case was ever made to the former.
WHEREFORE, no error having been committed by the Court of Appeals in affirming the judgment of
the court a quo, its challenged decision and resolution are hereby AFFIRMED and the instant petition is
DENIED, with double costs against petitioners. llcd
SO ORDERED.
Puno, Mendoza and Martinez, JJ ., concur
FIRST DIVISION
[G.R. No. L-28740. February 24, 1981.]
FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent.
Paredes, Poblador and Nazareno, Azada and Tomacruz for petitioner.
Andres Law Office for respondent.
D E C I S I O N
FERNANDEZ, J p:
This is a petition for certiorari to review the decision of the Court of Appeals promulgated on January
29, 1968 in CA-G.R. NO. 35721-R entitled "Claro L. Laureta, plaintiff-appellee versus Marcos Mata,
Codidi Mata and Fermin Caram, Jr., defendants-appellant; Tampino (Mansaca), et al. Intervenors-
appellants," affirming the decision of the Court of First Instance of Davao in Civil Case No. 3083. 1
On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for nullity,
recovery of ownership and/or reconveyance with damages and attorney's fees against Marcos Mata,
Codidi Mata, Fermin Z. Caram Jr. and the Register of Deeds of Davao City. 2
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original
Certificate of Title No. 3019 in favor of Claro Laureta, plaintiff, the respondent herein. The deed of
absolute sale in favor of the plaintiff was not registered because it was not acknowledged before a
notary public or any other authorized officer. At the time the sale was executed, there was no
authorized officer before whom the sale could be acknowledged inasmuch as the civil government in
Tagum, Davao was not as yet organized. However, the defendant Marcos Mata delivered to Laureta
the peaceful and lawful possession of the premises of the land together with the pertinent papers
thereof such as the Owner's Duplicate Original Certificate of Title No. 3019, sketch plan, tax
declaration, tax receipts and other papers related thereto. 3 Since June 10, 1945, the plaintiff Laureta
had been and is still in continuous, adverse and notorious occupation of said land, without being
molested, disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had
been paying realty taxes due thereon and had introduced improvements worth not less than
P20,000.00 at the time of the filing of the complaint. 4
On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos
Mata to defendant Fermin Z. Caram Jr., petitioner herein. The deed of sale in favor of Caram was
acknowledged before Atty. Abelardo Aportadera. On May 22, 1947, Marcos Mata, through Attys.
Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance of Davao a petition
for the issuance of a new Owner's Duplicate of Original Certificate of Title No. 3019, alleging as ground
therefor the loss of said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum,
Davao. On June 5, 1947, the Court of First Instance of Davao issued an order directing the Register of
Deeds of Davao to issue a new Owner's Duplicate Certificate of Title No. 3019 in favor of Marcos Mata
and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos
Mata and Fermin Caram Jr. was registered with the Register of Deeds. On the same date, Transfer
Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. 5
On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim
admitting the existence of a private absolute deed of sale of his only property in favor of Claro L.
Laureta but alleging that he signed the same as he was subjected to duress, threat and intimidation for
the plaintiff was the commanding officer of the 10th division USFIP, operating in the unoccupied areas
of Northern Davao with its headquarters at Project No. 7 (Km. 60 Davao-Agusan Highways), in the
Municipality of Tagum, Province of Davao; that Laureta's words and requests were laws; that although
the defendant Mata did not like to sell his property or sign the document without even understanding the
same, he was ordered to accept P650.00 Mindanao Emergency Notes; and that due to his fear of harm
or danger that will happen to him or to his family, if he refused, he had no other alternative but to sign
the document. 6
The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of
Deeds regarding a document allegedly signed by him in favor of his co-defendant Fermin Caram Jr. but
denies that he ever signed the document for he knew before hand that he had signed a deed of sale in
14

favor of the plaintiff and that the plaintiff was in possession of the certificate of title; that if ever his
thumb mark appeared in the document purportedly alienating the property to Fermin Caram Jr., his
consent was obtained through fraud and misrepresentation for the defendant Mata is illiterate and
ignorant and did not know what he was signing; and that he did not receive a consideration for the said
sale. 7
The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no
knowledge or information about the previous encumbrances, transactions, and alienations in favor of
plaintiff until the filing of the complaints. 8
The trial court rendered a decision dated February 29, 1964, the dispositive portion of which reads: 9
"1. Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L.
Laureta stands and prevails over the deed of sale, Exhibit F, in favor of Fermin Caram Jr.;
"2. Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram Jr.;
"3. Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor of Claro L.
Laureta;.
"4. Directing Claro L. Laureta to secure the approval of the Secretary of Agriculture and Natural
Resources on the deed, Exhibit A, after Marcos Mata shall have acknowledged the same before a
notary public;.
"5. Directing Claro L. Laureta to surrender to the Register of Deeds for the City and Province of
Davao the Owner's Duplicate of Original Certificate of Title No. 3019 and the latter to cancel the same;.
"6. Ordering the Register of Deeds for the City and Province of Davao to cancel Transfer
Certificate of Title No. T-140 in the name of Fermin Caram Jr.;
"7. Directing the Register of Deeds for the City and Province of Davao to issue a title in favor of
Claro L. Laureta, Filipino, resident of Quezon City, upon presentation of the deed executed by Marcos
Mata in his favor, Exhibit A, duly acknowledged by him and approved by the Secretary of Agriculture
and Natural Resources, and.
"8. Dismissing the counterclaim and cross claim of Marcos Mata and Codidi Mata, the
counterclaim of Caram, Jr., the answer in intervention, counterclaim and cross-claim of the Mansacas.
"The Court makes no pronouncement as to costs.
"SO ORDERED."
The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was docketed as
CA-G.R. NO. 35721-R.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial
court. LexLib
In his brief, the petitioner assigns the following errors. 11
"I
"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT IRESPE AND
APORTADERA WERE ATTORNEYS-IN-FACT OF PETITIONER CARAM FOR THE PURPOSE OF
BUYING THE PROPERTY IN QUESTION.
"II
"THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE EVIDENCE
ADDUCED IN THE TRIAL COURT CONSTITUTE LEGAL EVIDENCE OF FRAUD ON THE PART OF
IRESPE AND APORTADERA ATTRIBUTABLE TO PETITIONER.
"III
"THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN HOLDING
THAT KNOWLEDGE OF IRESPE AND APORTADERA OF A PRIOR UNREGISTERED SALE OF A
TITLED PROPERTY ATTRIBUTABLE TO PETITIONER AND EQUIVALENT IN LAW OF
REGISTRATION OF SAID SALE.
"IV
"THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT AN ACTION FOR
RECONVEYANCE ON THE GROUND OF FRAUD PRESCRIBES WITHIN FOUR (4) YEARS."
The petitioner assails the finding of the trial court that the second sale of the property was made
through his representatives, Pedro Irespe and Atty. Abelardo Aportadera. He argues that Pedro Irespe
was acting merely as broker or intermediary with the specific task and duty to pay Marcos Mata the sum
of P1,000.00 for the latter's property and to see to it that the requisite deed of sale covering the
purchase was properly executed by Marcos Mata; that the identity of the property to be bought and the
price of the purchase had already been agreed upon by the parties; and that the other alleged
representative, Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale.
The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and
Caram, the second vendee had never met. During the trial, Marcos Mata testified that he knows Atty.
Aportadera but did not know Caram. 12 Thus, the sale of the property could have only been through
Caram's representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty.
Aportadera acted as his notary public and attorney-in-fact at the same time in the purchase of the
property. 13
The petitioner contends that he cannot be considered to have acted in bad faith because there is no
direct proof showing that Irespe and Aportadera, his alleged agents, had knowledge of the first sale to
Laureta. This contention is also without merit.
The Court of Appeals, in affirming the decision of the trial court, said: 14
15

"The trial court, in holding that appellant Caram, Jr. was not a purchaser in good faith, at the time he
bought the same property from appellant Mata, on May 5, 1947, entirely discredited the testimony of
Aportadera. Thus it stated in its decision:
'The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow. There is every reason to
believe that Irespe and he had known of the sale of the property in question to Laureta on the day Mata
and Irespe, accompanied by Leoning Mansaca, went to the office of Atty. Aportadera for the sale of the
same property to Caram, Jr., represented by Irespe as attorney-in-fact. Leoning Mansaca was with the
two Irespe and Mata to engage the services of Atty. Aportadera in the annulment of the sale of his
land to Laureta. When Leoning Mansaca narrated to Atty. Aportadera the circumstances under which
his property had been sold to Laureta, he must have included in the narration the sale of the land of
Mata, for the two properties had been sold on the same occasion and under the same circumstances.
Even as early as immediately after liberation, Irespe, who was the witness in most of the cases filed by
Atty. Aportadera in his capacity as Provincial Fiscal of Davao against Laureta, must have known on the
purchases of lands made by Laureta when he was regimental commander, one of which was the sale
made by Mata. It was not a mere coincidence that Irespe was made guardian ad litem of Leoning
Mansaca, at the suggestion of Atty. Aportadera and attorney-in-fact of Caram, Jr.
'The Court cannot help being convinced that Irespe, attorney-in-fact of Caram, Jr., had knowledge of
the prior existing transaction, Exhibit A, between Mata and Laureta over the land, subject matter of this
litigation, when the deed, Exhibit F, was executed by Mata in favor of Caram, Jr. And this knowledge
has the effect of registration as to Caram, Jr.' (R.A. pp. 123-124).
"We agree with His Honor's conclusion on this particular point, on two grounds the first, the same
concerns matters affecting the credibility of a witness of which the findings of the trial court command
great weight, and second, the same is borne out by the testimony of Atty. Aportadera himself. (t.s.n. pp.
187-190, 213-215, Restauro)."
Even if Irespe and Aportadera did not have actual knowledge of the first sale, still, their actions have not
satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had
knowledge of the defect or lack of title of his vendor. In the case of Leung Yee vs. F.L. Strong
Machinery Co. and Williamson, this Court held: 15
"One who purchases real estate with knowledge of a defect or lack of title in his vendor can not claim
that he has acquired title thereto in good faith, as against the true owner of the land or of an interest
therein, and the same rule must be applied to one who has knowledge of facts which should have put
him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the
title of his vendor."
In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put
them on inquiry. Both of them knew that Mata's certificate of title together with other papers pertaining
to the land was taken by soldiers under the command of Col. Claro L. Laureta. 16 Added to this is the
fact that at the time of the second sale Laureta was already in possession of the land. Irespe and
Aportadera should have investigated the nature of Laureta's possession. If they failed to exercise the
ordinary care expected of a buyer of real estate they must suffer the consequences. The rule of caveat
emptor requires the purchaser to be aware of the supposed title of the vendor and one who buys
without checking the vendor's title takes all the risks and losses consequent to such failure. 17
The principle that a person dealing with the owner of the registered land is not bound to go behind the
certificate and inquire into transactions the existence of which is not there intimated 18 should not
apply in this case. It was of common knowledge that at the time the soldiers of Laureta took the
documents from Mata, the civil government of Tagum was not yet established and that there were no
officials to ratify contracts of sale and make them registrable. Obviously, Aportadera and Irespe knew
that even if Mata previously had sold the disputed property such sale could not have been registered.
cdrep
There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property
of Mata in bad faith. Applying the principle of agency, Caram, as principal, should also be deemed to
have acted in bad faith.
Article 1544 of the New Civil Code provides that:
"Art. 1544. If the same thing should have been sold to different vendees, the ownership shall
be transferred to the person who may have first taken possession thereof in good faith, if it should be
movable property.
"Should it be immovable property, the ownership shall belong to the person acquiring it who in good
faith first recorded it in the Registry of Property.
"Should there be no inscription, the ownership shall pertain to the person who in good faith was first in
the possession; and, in the absence thereof, to the person who presents the oldest title, provided there
is good faith. (1973)".
Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. 19
The question to be determined now is, who was first in possession in good faith? A possessor in good
faith is one who is not aware that there exists in his title or mode of acquisition any flaw which
invalidates it. 20 Laureta was first in possession of the property. He is also a possessor in good faith. It
is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. 21 Such
defect, however, was cured when, after the lapse of four years from the time the intimidation ceased,
Marcos Mata lost both his rights to file an action for annulment or to set up nullity of the contract as a
defense in an action to enforce the same.
Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit "F" is a
voidable contract. Being a voidable contract, the action for annulment of the same on the ground of
fraud must be brought within four (4) years from the discovery of the fraud. In the case at bar, Laureta is
deemed to have discovered that the land in question has been sold to Caram to his prejudice on
December 9, 1947, when the Deed of Sale, Exhibit "F" was recorded and entered in the Original
Certificate of Title by the Register of Deeds and a new Certificate of Title No. 140 was issued in the
name of Caram. Therefore, when the present case was filed on June 29, 1959, plaintiff's cause of
action had long prescribed.
The petitioner's conclusion that the second deed of sale, "Exhibit F", is a voidable contract is not
correct. In order that fraud can be a ground for the annulment of a contract, it must be employed prior to
or simultaneous to the consent or creation of the contract. The fraud or dolo causante must be that
16

which determines or is the essential cause of the contract. Dolo causante as a ground for the
annulment of contract is specifically described in Article 1338 of the New Civil Code of the Philippines
as "insidious words or machinations of one of the contracting parties" which induced the other to enter
into a contract, and "without them, he would not have agreed to."
The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was
shown that through insidious words or machinations, the representatives of Caram, Irespe and
Aportadera had induced Mata to enter into the contract.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines
which provides that the action for annulment shall be brought within four (4) years from the time of the
discovery of fraud does not apply.
Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945.
A more important reason why Laureta's action could not have prescribed is that the second contract of
sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the
Philippines provides that any action or defense for the declaration of the inexistence of a contract does
not prescribe.
In a memorandum of Authorities 22 submitted to this Court on March 13, 1978, the petitioner insists
that the action of Laureta against Caram has prescribed because the second contract of sale is not void
under Article 1409 23 of the Civil Code of the Philippines which enumerates the kinds of contracts
which are considered void. Moreover, Article 1544 of the New Civil Code of the Philippines does not
declare void a second sale of immovable registered in bad faith.
The fact that the second contract is not considered void under Article 1409 and that Article 1544 does
not declare void a deed of sale registered in bad faith does not mean that said contract is not void.
Article 1544 specifically provides who shall be the owner in case of a double sale of an immovable
property. To give full effect to this provision, the status of the two contracts must be determined and
clarified. One contract must be declared valid so that one vendee may exercise all the rights of an
owner, while the other contract must be declared void to cut off all rights which may arise from said
contract. Otherwise, Article 1544 will be meaningless. llcd
The first sale in favor of Laureta prevails over the sale in favor of Caram.
WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals sought to be
reviewed is affirmed, without pronouncement as to costs.
SO ORDERED.
Makasiar, Guerrero, De Castro and Melencio-Herrera, JJ., concur.
Teehankee (Chairman), J., took no part.
FIRST DIVISION
[G.R. No. L-57339. December 29, 1983.]
AIR FRANCE, petitioner, vs. HONORABLE COURT OF APPEALS, JOSE G. GANA, (Deceased),
CLARA A. GANA, RAMON GANA, MANUEL GANA, MARIA TERESA GANA, ROBERTO GANA,
JAIME JAVIER GANA, CLOTILDE VDA. DE AREVALO, and EMILY SAN JUAN, respondents.
Benjamin S. Valte for petitioner.
Napoleon Garcia for private respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACT; CONTRACT OF CARRIAGE; AIRPLANE
TICKET; NO LONGER VALID FOR TRAVEL IF IT HAS EXPIRED BEFORE COMPLETION OF TRIP.
Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA),
included in paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties in the Trial Court,
dated 31 March 1973, an airplane ticket is valid for one year. The passenger must undertake the final
portion of his journey by departing from the last point at which he has made a voluntary stop before the
expiry of this limit (parag. 3.1.2) That is the time allowed a passenger to begin and to complete his trip
(parags. 3.2 and 3.3). . . . A ticket can no longer be used for travel if its validity has expired before the
passenger completes his trip (parag. 3.5.1). . . . To complete the trip, the passenger must purchase a
new ticket for the remaining portion of the journey."
2. ID.; ID.; ID.; ID.; DISHONOR OF TICKET UPON EXPIRATION NOT A BREACH OF
CONTRACT. From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for breach of
contract when it dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on
said date; nor when it required the GANAS to buy new tickets or have their tickets re-issued for the
Tokyo/Manila segment of their trip. Neither can it be said that, when upon sale of the new tickets, it
imposed additional charges representing fare differentials, it was motivated by self-interest or unjust
enrichment considering that an increase of fares took effect, as authorized by the Civil Aeronautics
Board (CAB) in April, 1971. This procedure is well in accord with the IATA tariff rules.
3. ID.; AGENCY; NOTICE TO AGENT CONSIDERED NOTICE TO PRINCIPAL. The ruling
relied on by respondent Appellate Court, therefore, in KLM vs Court of Appeals, 65 SCRA 237(1975),
holding that it would be unfair to charge respondents therein with automatic knowledge or notice of
conditions in contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the rejection of the request for extension of the validity of the
tickets was notice to the GANAS, her principals.
D E C I S I O N
MELENCIO-HERRERA, J p:
In this petition for review on certiorari, petitioner AIR FRANCE assails the Decision of then respondent
Court of Appeals 1 promulgated on 15 December 1980 in CA-G.R. No. 58164-R, entitled "Jose G.
Gana, et al. vs. Sociedad Nacionale Air France", which reversed the Trial Court's judgment dismissing
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the Complaint of private respondents for damages arising from breach of contract of carriage, and
awarding instead P90,000.00 as moral damages.
Sometime in February, 1970, the late Jose G. Gana and his family, numbering nine (the GANAS),
purchased from AIR FRANCE through Imperial Travels, Incorporated, a duly authorized travel agent,
nine (9) "open-dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a
total of US$2,528.85 for their economy and first class fares. Said tickets were bought at the then
prevailing exchange rate of P3.90 per US$1.00. The GANAS also paid travel taxes of P100.00 for each
passenger.
On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets
for the same route. At this time, the GANAS were booked for the Manila/Osaka segment on AIR
FRANCE Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on
22 May 1970. The aforesaid tickets were valid until 8 May 1971, the date written under the printed
words "Non valable apres de" (meaning, "not valid after the"). LibLex
The GANAS did not depart on 8 May 1970.
Sometime in January, 1971, Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the
Sta. Clara Lumber Company where Jose Gana was the Director and Treasurer, for the extension of the
validity of their tickets, which were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella,
Manager of the Philippine Travel Bureau, who used to handle travel arrangements for the personnel of
the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE.
The tickets were returned to Ella who was informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an increase of the exchange rate of the US
dollar to the Philippine peso and the increased travel tax were first paid. Ella then returned the tickets to
Teresita and informed her of the impossibility of extension.
In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day before the
expiry date. In the morning of the very day of their scheduled departure on the first leg of their trip,
Teresita requested travel agent Ella to arrange the revalidation of the tickets. Ella gave the same
negative answer and warned her that although the tickets could be used by the GANAS if they left on 7
May 1971, the tickets would no longer be valid for the rest of their trip because the tickets would then
have expired on 8 May 1971. Teresita replied that it will be up to the GANAS to make the
arrangements. With that assurance, Ella, on his own, attached to the tickets validating stickers for the
Osaka/Tokyo flight, one a JAL sticker and the other an SAS (Scandinavian Airways System) sticker.
The SAS sticker indicates thereon that it was "Revalidated by: the Philippine Travel Bureau, Branch No.
2" (as shown by a circular rubber stamp) and signed "Ador", and the date is handwritten in the center of
the circle. Then appear under printed headings the notations: JL 108 (Flight), 16 May (Date), 1040
(Time), OK (status). Apparently, Ella made no more attempt to contact AIR FRANCE as there was no
more time.
Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7 May 1971 on
board AIR FRANCE Flight 184 for Osaka, Japan. There is no question with respect to this leg of the
trip.
However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the tickets
because of their expiration, and the GANAS had to purchase new tickets. They encountered the same
difficulty with respect to their return trip to Manila as AIR FRANCE also refused to honor their tickets.
They were able to return only after pre-payment in Manila, through their relatives, of the readjusted
rates. They finally flew back to Manila on separate Air France Flights on 19 May 1971 for Jose Gana
and 26 May 1971 for the rest of the family.
On 25 August 1971, the GANAS commenced before the then Court of First Instance of Manila, Branch
III, Civil Case No. 84111 for damages arising from breach of contract of carriage.
AIR FRANCE traversed the material allegations of the Complaint and alleged that the GANAS brought
upon themselves the predicament they found themselves in and assumed the consequential risks; that
travel agent Ella's affixing of validating stickers on the tickets without the knowledge and consent of AIR
FRANCE, violated airline tariff rules and regulations and was beyond the scope of his authority as a
travel agent; and that AIR FRANCE was not guilty of any fraudulent conduct or bad faith.
On 29 May 1975, the Trial Court dismissed the Complaint based on Partial and Additional Stipulations
of Fact as well as on the documentary and testimonial evidence.
The GANAS appealed to respondent Appellate Court. During the pendency of the appeal, Jose Gana,
the principal plaintiff, died.
On 15 December 1980, respondent Appellate Court set aside and reversed the Trial Court's judgment
in a Decision, which decreed: prLL
"WHEREFORE, the decision appealed from is set aside. Air France is hereby ordered to pay appellants
moral damages in the total sum of NINETY THOUSAND PESOS (P90,000.00) plus costs."
"SO ORDERED." 2
Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse before this instance,
to which we gave due course.
The crucial issue is whether or not, under the environmental milieu, the GANAS have made out a case
for breach of contract of carriage entitling them to an award of damages.
We are constrained to reverse respondent Appellate Court's affirmative ruling thereon.
Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA),
included in paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties in the Trial Court,
dated 31 March 1973, an airplane ticket is valid for one year. "The passenger must undertake the final
portion of his journey by departing from the last point at which he has made a voluntary stop before the
expiry of this limit (parag. 3.1.2) . . . That is the time allowed a passenger to begin and to complete his
trip (parags. 3.2 and 3.3.). . . . A ticket can no longer be used for travel if its validity has expired before
the passenger completes his trip (parag. 3.5.1). . . . To complete the trip, the passenger must purchase
a new ticket for the remaining portion of the journey" (ibid.) 3
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From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for breach of contract when it
dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on said date; nor
when it required the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila
segment of their trip. Neither can it be said that, when upon sale of the new tickets, it imposed
additional charges representing fare differentials, it was motivated by self-interest or unjust enrichment
considering that an increase of fares took effect, as authorized by the Civil Aeronautics Board (CAB) in
April, 1971. This procedure is well in accord with the IATA tariff rules which provide:
"6. TARIFF RULES
"3. APPLICABLE FARE ON THE DATE OF DEPARTURE
"3.1 General Rule.
"All journeys must be charged for at the fare (or charge) in effect on the date on which transportation
commences from the point of origin. Any ticket sold prior to a change of fare or charge (increase or
decrease) occurring between the date of commencement of the journey, is subject to the above general
rule and must be adjusted accordingly. A new ticket must be issued and the difference is to be collected
or refunded as the case may be. No adjustment is necessary if the increase or decrease in fare (or
charge) occurs when the journey is already commenced." 4
The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears
out that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent
Ella of the advice of Rillo, the Office Manager of Air France, that the tickets in question could not be
extended beyond the period of their validity without paying the fare differentials and additional travel
taxes brought about by the increased fare rate and travel taxes.
"ATTY. VALTE
"Q What did you tell Mrs. Manucdoc, in turn, after being told this by Mr. Rillo?
"A I told her, because that is the reason why they accepted again the tickets when we returned
the tickets again, that they could not be extended. They could be extended by paying the additional
fare, additional tax and additional exchange during that time.
"Q You said so to Mrs. Manucdoc?
"A Yes, sir." . . . 5
The ruling relied on by respondent Appellate Court, therefore, in KLM vs. Court of Appeals, 65 SCRA
237 (1975), holding that it would be unfair to charge respondents therein with automatic knowledge or
notice of conditions in contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita
was the agent of the GANAS and notice to her of the rejection of the request for extension of the validity
of the tickets was notice to the GANAS, her principals. LLphil
The SAS validating sticker for the Osaka/Tokyo flight affixed by Ella showing reservations for JAL Flight
108 for 16 May 1971, without clearing the same with AIR FRANCE allegedly because of the imminent
departure of the GANAS on the same day so that he could not get in touch with Air France, 6 was
certainly in contravention of IATA rules although as he had explained, he did so upon Teresita's
assurance that for the onward flight from Osaka and return, the GANAS would make other
arrangements.
"Q Referring you to page 33 of the transcript of the last session, I had this question which reads
as follows: 'But did she say anything to you when you said that the tickets were about to expire?' Your
answer was: 'I am the one who asked her. At that time I told her if the tickets being used . . . I was
telling her what about their bookings on the return. What about their travel on the return? She told me it
is up for the Ganas to make the arrangement.' May I know from you what did you mean by this
testimony of yours?
"A That was on the day when they were asking me on May 7, 1971 when they were checking
the tickets. I told Mrs. Manucdoc that I was going to get the tickets. I asked her what about the tickets
onward from the return from Tokyo, and her answer was it is up for the Ganas to make the
arrangement, because I told her that they could leave on the seventh, but they could take care of that
when they arrived in Osaka.
"Q What do you mean?
"A The Ganas will make the arrangement from Osaka, Tokyo and Manila.
"Q What arrangement?
"A The arrangement for the airline because the tickets would expire on May 7, and they insisted
on leaving. I asked Mrs. Manucdoc what about the return onward portion because they would be
traveling to Osaka, and her answer was, it is up for the Ganas to make the arrangement.
"Q Exactly what were the words of Mrs. Manucdoc when you told her that? If you can remember,
what were her exact words?
"A Her words only, it is up for the Ganas to make the arrangement.
"Q This was in Tagalog or in English?
"A I think it was in English. . . . 7
The circumstance that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS
to leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. It should
be recalled that the GANAS left Manila the day before the expiry date of their tickets and that "other
arrangements" were to be made with respect to the remaining segments. Besides, the validating
stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and
could not legally serve to extend the validity of a ticket or revive an expired one.
The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for
having insisted on using tickets that were due to expire in an effort, perhaps, to beat the deadline and in
the thought that by commencing the trip the day before the expiry date, they could complete the trip
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even thereafter. It should be recalled that AIR FRANCE was even unaware of the validating SAS and
JAL stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely
acted within their contractual rights when they dishonored the tickets on the remaining segments of the
trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the
Tokyo/Manila flight.
WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended
Complaint filed by private respondents hereby dismissed.
No costs.
SO ORDERED.