ORIENT AIR SERVICES & HOTEL REPRESENTATIVES vs.

COURT OF APPEALS and

AMERICAN AIR-LINES 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.

FACTS:
On 15 January 1977, American Airlines, Inc. and Orient Air Services and Hotel Representatives
entered into a General Sales Agency Agreement, whereby American Air authorized Orient Ait 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:
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
American'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.
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

x x x3

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.
Finding that the record and the evidence substantiated the allegations of the defendant, the trial
court ruled in its favor, 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 tranportation in the Philippines in accordance
with said GSA agreement...
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.

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.
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 of this
Court dated 25 March 1987 both petitions were consolidated, hence, the case at bar.

ISSUE:
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
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.
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."
RULING:
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."
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.
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.

ISSUE:
We now turn to the propriety of American Air's termination of the Agreement.
RULING:
We agree with the findings of the respondent appellate court.
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. . . ."
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
Agreementthat 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.

ISSUE:
WON the 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 defendant as its
general sales agent for passenger transportation in the Philippines in accordance with said GSA
Agreement."

RULING:
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the
trial court.
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." (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.

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.

FACTS:
This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal,
Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of

attorney which the principal had executed in favor.

The administrator of the estate of the went to court to have the sale declared uneanforceable and
to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the
Court of Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed.
Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a
parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.
On April 21, 1954, the sisters executed a special power of attorney in favor of their brother,
Simeon Rallos, authorizing him to sell for and in their behalf lot 5983.
On March 3, 1955, Concepcion Rallos died.
On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion and
Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The
deed of sale was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a
new transfer certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that
the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and
said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be
indemnified by way of attorney's fees and payment of costs of suit.
Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the
Register of Deeds of Cebu, but subsequently, the latter was dropped from the complaint. The complaint
was amended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant,
Simon Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the
case was pending in the trial court, both Simon and his sister Gerundia died and they were substituted
by the respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the onehalf pro-indiviso share of Concepcion Rallos in the property in question,
Lot 5983 of the Cadastral Survey of Cebu is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer
Certificate of Title No. 12989 covering Lot 5983 and to issue in lieu

thereof another in the names of FELIX GO CHAN & SONS REALTY

CORPORATION and the Estate of Concepcion Rallos in the proportion
of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the
possession of an undivided one-half (1/2) share of Lot 5983 to the herein
plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the
Estate of Simeon Rallos, to pay to plaintiff in concept of reasonable
attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the
Estate of Simeon Rallos, to pay to defendant Felix Co Chan & Sons
Realty Corporation the sum of P5,343.45, representing the price of onehalf (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate
of Simeon Rallos, to pay in concept of reasonable attorney's fees to Felix
Go Chan & Sons Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of
Simeon Rallos, against Josefina Rallos special administratrix of the Estate of Gerundia
Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint
against the regular administrator of the Estate of Gerundia Rallos or a claim in the
Intestate-Estate of Cerundia Rallos, covering the same subject-matter of the third-party
complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the
foregoing judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion
Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964
in favor of the appellant corporation sustaining the sale in question. 1
The appellee administrator, Ramon Rallos, moved for a reconsider of the decision but the same was denied in a
resolution of March 4, 1965.

ISSUE:
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?

RULING:
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter
tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the
name of another without being authorized by the latter, or unless he has by law a right to
represent him.
A contract entered into in the name of another by one who has no authority or the legal representation
or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly,
by the person on whose behalf it has been executed, before it is revoked by the other contracting party.
Article 1403 (1) of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no
authority or legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of
agency whereby one party, caged the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons.
The essential elements of agency are:
(1) there is consent, express or implied of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agents acts as a representative and not for himself, and
(4) the agent acts within the scope of his authority.
Agency is basically personal representative, and derivative in nature. The authority of the agent to
act emanates from the powers granted to him by his principal; his act is the act of the principal if
done within the scope of the authority. Qui facit per alium facit se. "He who acts through another
acts himself".
There are various ways of extinguishing agency, but her We are concerned only with one cause
death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709
of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of the
agent; ... (Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the
law is found in the juridical basis of agency which is representation. Them being an integration of
the personality of the principal and that of the agent, it is not possible for the representation to
continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason
of the nature of agency, death is a necessary cause for its extinction. Laurent says that the
juridical tie between the principal and the agent is severed ipso jure upon the death of either
without necessity for the heirs of the fact to notify the agent of the fact of death of the former.
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. 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 afterward is not binding on the heirs or representatives of the deceased.
Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that
exception?
That is the determinative point in issue in this litigation. It is the contention of respondent
corporation which was sustained by respondent court that notwithstanding the death of the
principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in selling the former's
sham in the property is valid and enforceable inasmuch as the corporation acted in good faith in
buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule 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 of the death of the
principal or of any other cause which extinguishes the agency, is valid and shall be
fully effective with respect to third persons who may have contracted with him in
good faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of
Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death
of his principal is valid and effective only under two conditions, viz: (1) that the agent acted
without knowledge of the death of the principal and (2) that the third person who contracted with
the agent himself acted in good faith.
Good faith here means that the third person was not aware of the death of the principal at the
time he contracted with said agent. These two requisites must concur the absence of one will
render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before
the trial court.
That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a
quo and of respondent appellate court when the latter stated that Simon Rallos 'must have known of the
death of his sister, and yet he proceeded with the sale of the lot in the name of both his sisters
Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the death of
the former.
On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable.
The law expressly requires for its application lack of knowledge on the part of the agent of the
death of his principal; it is not enough that the third person acted in good faith. Thus in Buason &
Reyes v. Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil
Code sustained the validity of a sale made after the death of the principal because it was not shown that
the agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim
Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no
proof and there is no indication in the record, that the agent Luy Kim Guan was aware of
the death of his principal at the time he sold the property. The death 6f the principal does
not render the act of an agent unenforceable, where the latter had no knowledge of such
extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out
that there is no provision in the Code which provides that whatever is done by an agent having
knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the
general rule it follows a fortiori that any act of an agent after the death of his principal is void ab
initio unless the same fags under the exception provided for in the aforementioned Articles 1930
and 1931. Article 1931, being an exception to the general rule, is to be strictly construed, it is not

to be given an interpretation or application beyond the clear import of its terms for otherwise the
courts will be involved in a process of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the
power of attorney which was duly registered on the original certificate of title recorded in the Register
of Deeds of the province of Cebu, that no notice of the death was aver annotated on said certificate of
title by the heirs of the principal and accordingly they must suffer the consequences of such omission.
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the
principal exercise due diligence to make the revocation of the agency publicity known.
In case of a general power which does not specify the persons to whom represents'
on should be made, it is the general opinion that all acts, executed with third
persons who contracted in good faith, Without knowledge of the revocation, are
valid. In such case, the principal may exercise his right against the agent, who, knowing
of the revocation, continued to assume a personality which he no longer had. (Manresa
Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of
terminating an agency which is to be distinguished from revocation by operation of law such as
death of the principal which obtains in this case.
On page six of this Opinion We stressed that by reason of the very nature of the relationship
between principal and agent, agency is extinguished ipso jure upon the death of either principal
or agent. Although a revocation of a power of attorney to be effective must be communicated to
the parties concerned, 18 yet a revocation by operation of law, such as by death of the principal
is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's continuing will. 19 With death, the
principal's will ceases or is the of authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the
principal What the Code provides in Article 1932 is that, if the agent die his heirs must notify the
principal thereof, and in the meantime adopt such measures as the circumstances may demand in
the interest of the latter. Hence, the fact that no notice of the death of the principal was registered
on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the
cause of the estate of the principal.

[G.R. No. 130148. December 15, 1997]

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

FACTS:
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.
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.
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. 785M-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 attorneys 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.

ISSUE:
WON respondent spouses are liable to petitioners for the latters claim for money and damages in the
sum of P725,463.98, plus interests and attorneys 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.

RULING:
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).
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 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 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.
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.
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.

G.R. No. L-28740 February 24, 1981

FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent.

FACTS:
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- appellants; Tampino (Mansaca), et al. Intervenorsappellants," affirming the decision of the Court of First Instance of Davao in Civil Case No. 3083.
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.
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.
Since June 10, 1945, the plaintiff Laureta had been and is stin 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.

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.
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.
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 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, did 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.
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 in favor of Laurel.
The defendants appealed from the judgment to the Court of Appeals.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial
court.
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.

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 a 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.

ISSUE:
WON IRESPE AND APORTADERA WERE ATTORNEYS-IN-FACT OF PETITIONER
CARAM FOR THE PURPOSE OF BUYING THE PROPERTY IN QUESTION.
RULING:
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
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
Leaning 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. Ining Mansaca
was with the two Irespe and Mata to engage the services 6f Atty. Aportadera
in the annulment of the sale of his land to Laureta. When Leaning 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 occassion 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 of 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
Leaning 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. RA 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 an 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 registerable. Obviously, Aportadera and
Irespe knew that even if Mata previously had sold the Disputed such sale could not have been
registered.

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 recordered it in the Registry of Property.
Should there be no inscription, the ownership shag 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. (1473)
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.

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.

FACTS:
In this petition for review on certiorari, petitioner AIR FRANCE assails the Decision of then
respondent Court of Appeals 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 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 valuable apres de (meaning, "not valid after the").
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 "Reevaluated 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 Frights 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 wen 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:
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
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
7. 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 Reno, 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.
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.
The SAS validating sticker for the Osaka/Tokyo flight affixed by Era 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.

The circumstances 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 in 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 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.
FIRST DIVISION

[G.R. No. 120465. September 9, 1999]

WILLIAM UY and RODEL ROXAS, petitioners, vs. COURT OF APPEALS, HON. ROBERT
BALAO and NATIONAL HOUSING AUTHORITY, respondents.

FACTS:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the
owners thereof.
By virtue of such authority, petitioners offered to sell the lands, located in Tuba, Tadiangan,
Benguet to respondent National Housing Authority (NHA) to be utilized and developed as a
housing project.
On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of
said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands.
Of the eight parcels of land, however, only five were paid for by the NHA because of the report it
received from the Land Geosciences Bureau of the Department of Environment and Natural
Resources (DENR) that the remaining area is located at an active landslide area and therefore,
not suitable for development into a housing project.

On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three
parcels of land. The NHA, through Resolution No. 2394, subsequently offered the amount of
P1.225 million to the landowners as daos perjuicios.
On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a
Complaint for Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified. The
trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same amount
initially offered by NHA to petitioners as damages.
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and entered a
new one dismissing the complaint. It held that since there was sufficient justifiable basis in cancelling
the sale, it saw no reason for the award of damages. The Court of Appeals also noted that petitioners
were mere attorneys-in-fact and, therefore, not the real parties-in-interest in the action before the
trial court.
xxx In paragraph 4 of the complaint, plaintiffs alleged themselves to be sellers agents for several
owners of the 8 lots subject matter of the case. Obviously, William Uy and Rodel Roxas in filing
this case acted as attorneys-in-fact of the lot owners who are the real parties in interest but who
were omitted to be pleaded as party-plaintiffs in the case. This omission is fatal. Where the action
is brought by an attorney-in-fact of a land owner in his name, (as in our present action) and not
in the name of his principal, the action was properly dismissed (Ferrer vs. Villamor, 60 SCRA 406
[1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the rule is that every action must be
prosecuted in the name of the real parties-in-interest (Section 2, Rule 3, Rules of Court).
When plaintiffs Uy and Roxas sought payment of damages in their favor in view of the partial
rescission of Resolution No. 1632 and the Deed of Absolute Sale covering TCT Nos. 10998, 10999
and 11292 (Prayer complaint, page 5, RTC records), it becomes obviously indispensable that the
lot owners be included, mentioned and named as party-plaintiffs, being the real party-in-interest.
Uy and Roxas, as attorneys-in-fact or apoderados, cannot by themselves lawfully commence this
action, more so, when the supposed special power of attorney, in their favor, was never presented
as an evidence in this case. Besides, even if herein plaintiffs Uy and Roxas were authorized by the
lot owners to commence this action, the same must still be filed in the name of the pricipal,
(Filipino Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). As such indispensable
party, their joinder in the action is mandatory and the complaint may be dismissed if not so
impleaded (NDC vs. CA, 211 SCRA 422 [1992]).[2]
Their motion for reconsideration having been denied, petitioners seek relief from this Court,

ISSUE:
III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT COMPLAINT FINDING
THAT THE PETITIONERS FAILED TO JOIN AS INDISPENSABLE PARTY PLAINTIFF THE
SELLING LOT-OWNERS.

We first resolve the issue raised in the third assignment of error.

Petitioners claim that they lodged the complaint not in behalf of their principles but in their own name
as agents directly damaged by the termination of the contract. The damages prayed for were intended
not for the benefit of their principals but to indemnify petitioners for the losses they themselves
allegedly incurred as a result of such termination. These damages consist mainly of unearned income
and advances.[4] Petitioners, thus, attempt to distinguish the case at bar from those involving agents or
apoderados instituting actions in their own name but in behalf of their principals.[5] Petitioners in this
case purportedly brought the action for damages in their own name and in their own behalf.
RULING:
We find this contention unmeritorious.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and
defended in the name of the real party-in-interest. The real party-in-interest is the party who
stands to be benefited or injured by the judgment or the party entitled to the avails of the suit.
Interest, within the meaning of the rule, means material interest, an interest in the issue and to be
affected by the decree, as distinguished from mere interest in the question involved, or a mere
incidental interest.[6]
Cases construing the real party-in-interest provision can be more easily understood if it is borne in
mind that the true meaning of real party-in-interest may be summarized as follows: An action shall be
prosecuted in the name of the party who, by the substantive law, has the right sought to be
enforced.[7]
Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the
negative.
The applicable substantive law in this case is Article 1311 of the Civil Code, which states:
Contracts take effect only between the parties, their assigns, and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or by stipulation, or by
provision of law. x x x.
If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental
benefit or interest of a person is not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person. (Underscoring supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA. They are
mere agents of the owners of the land subject of the sale. As agents, they only render some service
or do something in representation or on behalf of their principals. The rendering of such service
did not make them parties to the contracts of sale executed in behalf of the latter. Since a contract
may be violated only by the parties thereto as against each other, the real parties-in-interest,
either as plaintiff or defendant, in an action upon that contract must, generally, either be parties
to said contract.

Neither has there been any allegation, much less proof, that petitioners are the heirs of their principals.
Are petitioners assignees to the rights under the contracts of sale?
In McMicking vs. Banco Espaol-Filipino, we held that the rule requiring every action to be prosecuted
in the name of the real party-in-interest
x x x recognizes the assignments of rights of action and also recognizes that when one has a right of
action assigned to him he is then the real party in interest and may maintain an action upon such claim
or right. The purpose of [this rule] is to require the plaintiff to be the real party in interest, or, in other
words, he must be the person to whom the proceeds of the action shall belong, and to prevent actions
by persons who have no interest in the result of the same. xxx
Thus, an agent, in his own behalf, may bring an action founded on a contract made for his
principal, as an assignee of such contract.
We find the following declaration in Section 372 (1) of the Restatement of the Law on Agency
(Second):
Section 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who acquires an interest in a contract which he makes
on behalf of his principal can, although not a promisee, maintain such action thereon as might a
transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract on behalf of another may become an assignee of
the contract and bring suit against the other party to it, as any other transferee. The customs of business
or the course of conduct between the principal and the agent may indicate that an agent who ordinarily
has merely a security interest is a transferee of the principals rights under the contract and as such is
permitted to bring suit. If the agent has settled with his principal with the understanding that he is to
collect the claim against the obligor by way of reimbursing himself for his advances and commissions,
the agent is in the position of an assignee who is the beneficial owner of the chose in action. He has an
irrevocable power to sue in his principals name. x x x. And, under the statutes which permit the real
party in interest to sue, he can maintain an action in his own name. This power to sue is not affected by
a settlement between the principal and the obligor if the latter has notice of the agents interest. x x x.
Even though the agent has not settled with his principal, he may, by agreement with the principal, have
a right to receive payment and out of the proceeds to reimburse himself for advances and commissions
before turning the balance over to the principal. In such a case, although there is no formal assignment,
the agent is in the position of a transferee of the whole claim for security; he has an irrevocable power
to sue in his principals name and, under statutes which permit the real party in interest to sue, he can
maintain an action in his own name.
Petitioners, however, have not shown that they are assignees of their principals to the subject
contracts. While they alleged that they made advances and that they suffered loss of commissions,
they have not established any agreement granting them the right to receive payment and out of

the proceeds to reimburse [themselves] for advances and commissions before turning the balance
over to the principal[s].
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the
second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the
Deeds of Absolute Sale clearly and deliberately conferring a favor to any third person.
That petitioners did not obtain their commissions or recoup their advances because of the nonperformance of the contract did not entitle them to file the action below against respondent NHA.
Section 372 (2) of the Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle him to maintain an action at
law upon it in his own name merely because he is entilted to a portion of the proceeds as
compensation for making it or because he is liable for its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal will gain or suffer loss by the performance
or nonperformance of the contract by the principal or by the other party thereto does not entitle him to
maintain an action on his own behalf against the other party for its breach. An agent entitled to receive
a commission from his principal upon the performance of a contract which he has made on his
principals account does not, from this fact alone, have any claim against the other party for breach of
the contract, either in an action on the contract or otherwise. An agent who is not a promisee cannot
maintain an action at law against a purchaser merely because he is entitled to have his compensation or
advances paid out of the purchase price before payment to the principal. x x x.
Thus, in Hopkins vs. Ives,[12] the Supreme Court of Arkansas, citing Section 372 (2) above, denied the
claim of a real estate broker to recover his alleged commission against the purchaser in an agreement to
purchase property.
In Goduco vs. Court of Appeals,[13] this Court held that:
x x x granting that appellant had the authority to sell the property, the same did not make the buyer
liable for the commission she claimed. At most, the owner of the property and the one who promised to
give her a commission should be the one liable to pay the same and to whom the claim should have
been directed. xxx
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under
the contracts of sale, they do not, under substantive law, possess the right they seek to enforce.
Therefore, they are not the real parties-in-interest in this case.

G.R. No. L-20136

June 23, 1965

IN RE: PETITION FOR ISSUANCE OF SEPARATE CERTIFICATE OF TITLE.

JOSE A. SANTOS Y Diaz, petitioner-appellant,
vs.
ANATOLIO BUENCONSEJO, ET AL., respondents-appellees.
Segundo C. Mastrili for petitioner-appellant.
Manuel Calleja Rafael S. Lucila and Jose T. Rubio for respondents-appellees.
FACTS:
It appears that the aforementioned Lot No. 1917 covered by Original Certificate of Title No.
RO-3848 (25322) was originally owned in common by Anatolio Buenconsejo to the extent of
undivided portion and Lorenzo Bon and Santiago Bon to the extent of the other (Exh.
B); that Anatolio Buenconsejo's rights, interests and participation over the portion
abovementioned were on January 3, 1961 and by a Certificate of Sale executed by the
Provincial Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres Ziga,
awardee in the corresponding auction sale conducted by said Sheriff in connection with the
execution of the decision of the Juvenile Delinquency and Domestic Relations Court in Civil
Case No. 25267, entitled "Yolanda Buenconsejo, et al. vs. Anatolio Buenconsejo"; that on
December 26, 1961 and by a certificate of redemption issued by the Provincial Sheriff of
Albay, the rights, interest, claim and/or or participation which Atty. Tecla San Andres Ziga
may have acquired over the property in question by reason of the aforementioned auction
sale award, were transferred and conveyed to the herein petitioner in his capacity as
Attorney-in-fact of the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo,
Elena Buenconsejo and Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the aforementioned share of
Anatolio Buenconsejo, upon the authority of a special power of attorney executed in his
favor by the children of Anatolio Buenconsejo; that relying upon this power of attorney and
redemption made by him, Santos now claims to have acquired the share of Anatolio
Buenconsejo in the aforementioned Lot No. 1917; that as the alleged present owner of said
share, Santos caused a subdivision plan of said Lot No. 1917 to be made, in which the
portion he claims as his share thereof has been marked as Lot No. 1917-A; and that he
wants said subdivision at No. 1917-A to be segregated from Lot No. 1917 and a certificate of
title issued in his name exclusively for said subdivision Lot No. 1917-A.
Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First Instance of
Albay, denying his petition, filed in Cadastral Case No. M-2197, LRC Cad. Rec. No. 1035, for
the cancellation of original certificate of title No. RO-3848 (25322), issued in the name of

Anatolio Buenconsejo, Lorenzo Bon and Santiago Bon, and covering Lot No. 1917 of the
Cadastral Survey of Tabaco, Albay, and the issuance in lieu thereof, of a separate transfer
certificate of title in his name, covering part of said Lot No. 1917, namely Lot No. 1917-A of
Subdivision Plan PSD-63379.
ISSUE:
WON a separate transfer certificate of Lot No. 1917-A, the subject property of this case can be
issued in his name
RULING:
NO.
As correctly held by the lower court, petitioner's claim is clearly untenable, for:
(1) said special power of attorney authorized him to act on behalf of the children of Anatolio
Buenconsejo, and, hence, it could not have possibly vested in him any property right in his
own name;
(2) the children of Anatolio Buenconsejo had no authority to execute said power of attorney,
because their father is still alive and, in fact, he and his wife opposed the petition of Santos;
(3) in consequence of said power of attorney (if valid) and redemption, Santos could have
acquired no more than the share pro indiviso of Anatolio Buenconsejo in Lot No. 1917, so that
petitioner cannot without the conformity of the other co-owners (Lorenzo and Santiago Bon),
or a judicial decree of partition issued pursuant to the provisions of Rule 69 of the new Rules of
Court (Rule 71 of the old Rules of Court) which have not been followed By Santos adjudicate
to himself in fee simple a determinate portion of said Lot No. 1917, as his share therein, to the
exclusion of the other co-owners.

[G.R. No. 102784. February 28, 1996]

ROSA LIM, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
SYLLABUS
2. ID.; ID.; CONTRACT OF AGENCY; NO FORMALITIES REQUIRED. - There are some
provisions of the law which require certain formalities for particular contracts. The first is when the
form is required for the validity of the contract; the second is when it is required to make the contract
effective as against the third parties such as those mentioned in Articles 1357 and 1358; and the third is
when the form is required for the purppose of proving the existence of the contract, such as those
provided in the Statute of Frauds in Article 1403. A contract of agency to sell on commission basis does
not belong to any of these three categories, hence, it is valid and enforceable in whatever form it may
be entered into.

FACTS:
This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No. 10290, entitled
People v. Rosa Lim, promulgated on August 30, 1991.
On January 26, 1989, an Information for Estafa was filed against petitioner Rosa Lim before
Branch 92 of the Regional Trial Court of Quezon City. The Information reads:
On or about the 8th day of October 1987, in Quezon City, Philippines the said accused with intent to
gain, with unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and
feloniously defraud one VICTORIA SUAREZ, in the following manner, to wit:
on the date and place aforementioned said accused got and received in trust from said
complainant one (1) ring 3.35 solo worth P169,000.00, Philippine Currency, with the obligation to
sell the same on commission basis and to turn over the proceeds of the sale to said complainant or
to return said jewelry if unsold, but the said accused once in possession thereof and far from
complying with her obligation despite repeated demands therefor, misapplied, misappropriated
and converted the same to her own personal use and benefit, to the damage and prejudice of the
said offended party in the amount aforementioned and in such other amount as may be awarded
under the provisions of the Civil Code.
CONTRARY TO LAW.[2]
After arraignment and trial on the merits, the trial court rendered judgment, the dispositive portion of
which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa as defined and
penalized under Article 315, paragraph 1(b) of the Revised Penal Code;
2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of
prision correccional as minimum, to TEN (10) YEARS of prision mayor as maximum;
3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its value in the amount
of P169,000 without subsidiary imprisonment in case of insolvency; and
4. To pay costs.[3]
On appeal, the Court of Appeals affirmed the Judgment of conviction with the modification that the
penalty imposed shall be six (6) years, eight (8) months and twenty- one (21) days to twenty (20) years
in accordance with Article 315, paragraph 1 of the Revised Penal Code.[4]
Petitioner filed a motion for reconsideration before the appellate court on September 20, 1991, but the
motion was denied in a Resolution dated November 11, 1991.
In her final bid to exonerate herself, petitioner filed the instant petition for review.
Herein the pertinent facts as alleged by the prosecution.
On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received from
private respondent Victoria Suarez the following two pieces of jewelry: one (1) 3.35 carat
diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold on
commission basis. The agreement was reflected in a receipt marked as Exhibit A[6] for the
prosecution. The transaction took place at the Sir Williams Apartelle in Timog Avenue, Quezon City,
where Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the
diamond ring or to turn over the proceeds thereof if sold. As a result, private complainant, aside
from making verbal demands, wrote a demand letter[7] to petitioner asking for the return of said ring or
the proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter[8] to private
respondents counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez
sometime in September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez
insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under
Article 315, par. 1(b) of the Revised Penal Code for which the petitioner herein stands convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987,
together with one Aurelia Nadera, who introduced petitioner to private respondent, and that they
were lodged at the Williams Apartelle in Timog, Quezon City. Petitioner denied that the
transaction was for her to sell the two pieces of jewelry on commission basis.
She told Mrs. Suarez that she would consider buying the pieces of jewelry for her own use and
that she would inform the private complainant of such decision before she goes back to Cebu.
Thereafter, the petitioner took the pieces of jewelry and told Mrs. Suarez to prepare the

necessary paper for me to sign because I was not yet prepare(d) to buy it.
After the document was prepared, petitioner signed it. To prove that she did not agree to the
terms of the receipt regarding the sale on commission basis, petitioner insists that she signed the
aforesaid document on the upper portion thereof and not at the bottom where a space is provided
for the signature of the person(s) receiving the jewelry.
On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by telephone in
order to inform her that she was no longer interested in the ring and bracelet. Mrs. Suarez
replied that she was busy at the time and so, she instructed the petitioner to give the pieces of
jewelry to Aurelia Nadera who would in turn give them back to the private complainant. The
petitioner did as she was told and gave the two pieces of jewelry to Nadera as evidenced by a
handwritten receipt, dated October 12, 1987.

ISSUE:
What was the real transaction between Rosa Lim and Vicky Suarez - a contract of agency
to sell on commission basis as set out in the receipt or a sale on credit?
Petitioner maintains that she cannot be liable for estafa since she never received the jewelries in trust or
on commission basis from Vicky Suarez. The real agreement between her and the private respondent
was a sale on credit with Mrs. Suarez as the owner-seller and petitioner as the buyer, as indicated by the
fact that petitioner did not sign on the blank space provided for the signature of the person receiving the
jewelry but at the upper portion thereof immediately below the description of the items taken.

RULING:
The contention is far from meritorious.
Rosa Lims signature indeed appears on the upper portion of the receipt immediately below the
description of the items taken.
We find that this fact does not have the effect of altering the terms of the transaction from a
contract of agency to sell on commission basis to a contract of sale.
Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which
would make the contract void or voidable. The moment she affixed her signature thereon,
petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all
the legal obligations that may arise from their breach.
This is clear from Article 1356 of the New Civil Code which provides:
Contracts shall be obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. x x x.
However, there are some provisions of the law which require certain formalities for particular
contracts. The first is when the form is required for the validity of the contract; the second is
when it is required to make the contract effective as against third parties such as those mentioned

in Articles 1357 and 1358; and the third is when the form is required for the purpose of proving
the existence of the contract, such as those provided in the Statute of Frauds in Article 1403.

A contract of agency to sell on commission basis does not belong to any of these
three categories, hence it is valid and enforceable in whatever form it may be
entered into.
Furthermore, there is only one type of legal instrument where the law strictly prescribes the
location of the signature of the parties thereto. This is in the case of notarial wills found in Article
805 of the Civil Code, to wit:
Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself
x x x.
The testator or the person requested by him to write his name and the instrumental witnesses of the
will, shall also sign, as aforesaid, each and every page thereof, except the last, on the left margin x x x.
In the case before us, the parties did not execute a notarial will but a simple contract of agency to
sell on commission basis, thus making the position of petitioners signature thereto immaterial.