APT- AGENCY 1
Nature of Agency: Purpose
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.
MUOZ PALMA, J.:
This is a case of an attorney-in-fact, Simeon Rallos, who after
of his death of his principal, Concepcion Rallos, sold the
latter's undivided share in a parcel of land pursuant to a power
of attorney which the principal had executed in favor. The
administrator of the estate of the went to court to have the sale
declared uneanforceable and to recover the disposed share.
The trial court granted the relief prayed for, but upon appeal
the Court of Appeals uphold the validity of the sale and the
complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and
Gerundia both surnamed Rallos were sisters and registered
co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer Certificate of
Title No. 11116 of the Registry of Cebu. On April 21, 1954, the
sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell for and in their
behalf lot 5983. On March 3, 1955, Concepcion Rallos died.
On September 12, 1955, Simeon Rallos sold the undivided
shares of his sisters Concepcion and Gerundia in lot 5983 to
Felix Go Chan & Sons Realty Corporation for the sum of
P10,686.90. The deed of sale was registered in the Registry of
Deeds of Cebu, TCT No. 11118 was cancelled, and a new
transfer certificate of Title No. 12989 was issued in the named
of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the
Intestate Estate of Concepcion Rallos filed a complaint
docketed as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the undivided
share of the deceased Concepcion Rallos in lot 5983 be d
unenforceable, and said share be reconveyed to her estate;
(2) that the Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled and another
title be issued in the names of the corporation and the
"Intestate estate of Concepcion Rallos" in equal undivided and
(3) that plaintiff be indemnified by way of attorney's fees and
payment of costs of suit. Named party defendants were Felix
Go Chan & Sons Realty Corporation, Simeon Rallos, and the
Register of Deeds of Cebu, but subsequently, the latter was
dropped from the complaint. The complaint was amended
twice; defendant Corporation's Answer contained a crossclaim
against its co-defendant, Simon Rallos while the latter filed
third-party complaint against his sister, Gerundia Rallos While
the case was pending in the trial court, both Simon and his
sister Gerundia died and they were substituted by the
respective administrators of their estates.
After trial the court a quo rendered judgment with the following
dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void
insofar as the one-half pro-indiviso share of Concepcion
Rallos in the property in question, Lot 5983 of the
Cadastral Survey of Cebu is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel
Transfer Certificate of Title No. 12989 covering Lot 5983
and to issue in lieu thereof another in the names of FELIX
GO CHAN & SONS REALTY CORPORATION and the
Estate of Concepcion Rallos in the proportion of one-half
(1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to
deliver the possession of an undivided one-half (1/2) share
of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo,
administrator of the Estate of Simeon Rallos, to pay to
plaintiff in concept of reasonable attorney's fees the sum of
P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and
severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo,
administrator of the Estate of Simeon Rallos, to pay to
defendant Felix Co Chan & Sons Realty Corporation
the sum of P5,343.45, representing the price of one-
half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo,
administrator of the Estate of Simeon Rallos, to pay in
concept of reasonable attorney's fees to Felix Go Chan
& Sons Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T.
Borromeo administrator of Estate of Simeon Rallos,
APT- AGENCY 2
Nature of Agency: Purpose
against Josefina Rallos special administratrix of the
Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without
prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a
claim in the Intestate-Estate of Cerundia Rallos,
covering the same subject-matter of the third-party
complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due
time to the Court of Appeals from the foregoing judgment
insofar as it set aside the sale of the one-half (1/2) share of
Concepcion Rallos. The appellate tribunal, as adverted to
earlier, resolved the appeal on November 20, 1964 in favor of
the appellant corporation sustaining the sale in question. 1 The
appellee administrator, Ramon Rallos, moved for a reconsider
of the decision but the same was denied in a resolution of
March 4, 1965. 2
What is the legal effect of an act performed by an agent after
the death of his principal? Applied more particularly to the
instant case, We have the query. is the sale of the undivided
share of Concepcion Rallos in lot 5983 valid although it was
executed by the agent after the death of his principal? What is
the law in this jurisdiction as to the effect of the death of the
principal on the authority of the agent to act for and in behalf of
the latter? Is the fact of knowledge of the death of the principal
a material factor in determining the legal effect of an act
performed after such death?
Before proceedings to the issues, We shall briefly restate
certain principles of law relevant to the matter tinder
consideration.

1. It is a basic axiom in civil law embodied in our Civil Code
that no one may contract in the name of another without being
authorized by the latter, or unless he has by law a right to
represent him. 3 A contract entered into in the name of another
by one who has no authority or the legal representation or who
has acted beyond his powers, shall be unenforceable, unless it
is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other
contracting party. 4 Article 1403 (1) of the same Code also
provides:
ART. 1403. The following contracts are unenforceable,
unless they are justified:
(1) Those entered into in the name of another person
by one who hi - been given no authority or legal
representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and
acceptance of the relationship of agency whereby one party,
caged the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions
with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish
the relationship; (2) the object is the execution of a juridical act
in relation to a third person; (3) the agents acts as a
representative and not for himself, and (4) the agent acts
within the scope of his authority. 5
Agency is basically personal representative, and derivative in
nature. The authority of the agent to act emanates from the
powers granted to him by his principal; his act is the act of the
principal if done within the scope of the authority. Qui facit per
alium facit se. "He who acts through another acts himself". 6
APT- AGENCY 3
Nature of Agency: Purpose
2. There are various ways of extinguishing agency, 7 but her
We are concerned only with one cause death of the
principal Paragraph 3 of Art. 1919 of the Civil Code which was
taken from Art. 1709 of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency
of the principal or of the agent; ... (Emphasis supplied)
By reason of the very nature of the relationship between
Principal and agent, agency is extinguished by the death of the
principal or the agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code
explains that the rationale for the law is found in the juridical
basis of agency which is representation Them being an in.
integration of the personality of the principal integration that of
the agent it is not possible for the representation to continue to
exist once the death of either is establish. Pothier agrees with
Manresa that by reason of the nature of agency, death is a
necessary cause for its extinction. Laurent says that the
juridical tie between the principal and the agent is severed ipso
jure upon the death of either without necessity for the heirs of
the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law the death of the
principal effects instantaneous and absolute revocation of the
authority of the agent unless the Power be coupled with an
interest. 10 This is the prevalent rule in American
Jurisprudence where it is well-settled that a power without an
interest confer. red upon an agent is dissolved by the

principal's death, and any attempted execution of the power
afterward is not binding on the heirs or representatives of the
deceased. 11
3. Is the general rule provided for in Article 1919 that the death
of the principal or of the agent extinguishes the agency,
subject to any exception, and if so, is the instant case within
that exception? That is the determinative point in issue in this
litigation. It is the contention of respondent corporation which
was sustained by respondent court that notwithstanding the
death of the principal Concepcion Rallos the act of the
attorney-in-fact, Simeon Rallos in selling the former's sham in
the property is valid and enforceable inasmuch as the
corporation acted in good faith in buying the property in
question.
Articles 1930 and 1931 of the Civil Code provide the
exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and
effect even after the death of the principal, if it has
been constituted in the common interest of the latter
and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any other
cause which extinguishes the agency, is valid and shall
be fully effective with respect to third persons who may
have contracted with him in good. faith.
Article 1930 is not involved because admittedly the special
power of attorney executed in favor of Simeon Rallos was not
coupled with an interest.
APT- AGENCY 4
Nature of Agency: Purpose
Article 1931 is the applicable law. Under this provision, an act
done by the agent after the death of his principal is valid and
effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal and (2)
that the third person who contracted with the agent himself
acted in good faith. Good faith here means that the third
person was not aware of the death of the principal at the time
he contracted with said agent. These two requisites must
concur the absence of one will render the act of the agent
invalid and unenforceable.
In the instant case, it cannot be questioned that the agent,
Simeon Rallos, knew of the death of his principal at the time
he sold the latter's share in Lot No. 5983 to respondent
corporation. The knowledge of the death is clearly to be
inferred from the pleadings filed by Simon Rallos before the
trial court. 12 That Simeon Rallos knew of the death of his
sister Concepcion is also a finding of fact of the court a
quo 13 and of respondent appellate court when the latter stated
that Simon Rallos 'must have known of the death of his sister,
and yet he proceeded with the sale of the lot in the name of
both his sisters Concepcion and Gerundia Rallos without
informing appellant (the realty corporation) of the death of the
former. 14
On the basis of the established knowledge of Simon Rallos
concerning the death of his principal Concepcion
Rallos, Article 1931 of the Civil Code is inapplicable. The law
expressly requires for its application lack of knowledge on the
part of the agent of the death of his principal; it is not enough
that the third person acted in good faith. Thus in Buason &
Reyes v. Panuyas, the Court applying Article 1738 of the old
Civil rode now Art. 1931 of the new Civil Code sustained the
validity , of a sale made after the death of the
principal because it was not shown that the agent knew of his

principal's demise. 15 To the same effect is the case
of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the
words of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in
1936, plaintiffs presented no proof and there is no
indication in the record, that the agent Luy Kim Guan was
aware of the death of his principal at the time he sold the
property. The death 6f the principal does not render the act
of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency. (1 SCRA
406, 412)
4. In sustaining the validity of the sale to respondent
consideration the Court of Appeals reasoned out that there is
no provision in the Code which provides that whatever is done
by an agent having knowledge of the death of his principal is
void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the
death of the principal. 16
We cannot see the merits of the foregoing argument as it
ignores the existence of the general rule enunciated in Article
1919 that the death of the principal extinguishes the agency.
That being the general rule it follows a 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.
APT- AGENCY 5
Nature of Agency: Purpose
5. Another argument advanced by respondent court is that the
vendee acting in good faith relied on the power of attorney
which was duly registered on the original certificate of title
recorded in the Register of Deeds of the province of Cebu, that
no notice of the death was aver annotated on said certificate of
title by the heirs of the principal and accordingly they must
suffer the consequences of such omission. 17
To support such argument reference is made to a portion
in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of
contracting with certain persons, the revocation must be
made known to them. But if the agency is general iii
nature, without reference to particular person with whom
the agent is to contract, it is sufficient that the principal
exercise due diligence to make the revocation of the
agency publicity known.
In case of a general power which does not specify the
persons to whom represents' on should be made, it is the
general opinion that all acts, executed with third persons
who contracted in good faith, Without knowledge of the
revocation, are valid. In such case, the principal may
exercise his right against the agent, who, knowing of the
revocation, continued to assume a personality which he no
longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16,
rollo)
The above discourse however, treats of revocation by an act
of the principal as a mode of terminating an agency which is to
be distinguished from revocation by operation of law such as
death of the principal which obtains in this case. On page six
of this Opinion We stressed that by reason of the very nature
of the relationship between principal and agent, agency is

extinguished ipso jure upon the death of either principal or
agent. Although a revocation of a power of attorney to be
effective must be communicated to the parties
concerned, 18 yet a revocation by operation of law, such as by
death of the principal is, as a rule, instantaneously effective
inasmuch as "by legal fiction the agent's exercise of authority
is regarded as an execution of the principal's continuing
will. 19 With death, the principal's will ceases or is the of
authority is extinguished.
The Civil Code does not impose a duty on the heirs to notify
the agent of the death of the principal What the Code provides
in Article 1932 is that, if the agent die his heirs must notify the
principal thereof, and in the meantime adopt such measures
as the circumstances may demand in the interest of the latter.
Hence, the fact that no notice of the death of the principal was
registered on the certificate of title of the property in the Office
of the Register of Deeds, is not fatal to the cause of the estate
of the principal
6. Holding that the good faith of a third person in said with an
agent affords the former sufficient protection, respondent court
drew a "parallel" between the instant case and that of an
innocent purchaser for value of a land, stating that if a person
purchases a registered land from one who acquired it in bad
faith even to the extent of foregoing or falsifying the deed of
sale in his favor the registered owner has no recourse
against such innocent purchaser for value but only against the
forger. 20
To support the correctness of this respondent corporation, in
its brief, cites the case of Blondeau, et al., v. Nano and Vallejo,
61 Phil. 625. We quote from the brief:
APT- AGENCY 6
Nature of Agency: Purpose
In the case of Angel Blondeau et al. v. Agustin Nano et al.,
61 Phil. 630, one Vallejo was a co-owner of lands with
Agustin Nano. The latter had a power of attorney
supposedly executed by Vallejo Nano in his favor. Vallejo
delivered to Nano his land titles. The power was registered
in the Office of the Register of Deeds. When the lawyer-
husband of Angela Blondeau went to that Office, he found
all in order including the power of attorney. But Vallejo
denied having executed the power The lower court
sustained Vallejo and the plaintiff Blondeau appealed.
Reversing the decision of the court a quo, the Supreme
Court, quoting the ruling in the case of Eliason v.
Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of
the defendant- appellee must be overruled. Agustin Nano
had possession of Jose Vallejo's title papers. Without
those title papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of
the Philippine Bar and the husband of Angela Blondeau,
the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of
Vallajo in favor of Nano. If this had not been so and if
thereafter the proper notation of the encumbrance could
not have been made, Angela Blondeau would not have
sent P12,000.00 to the defendant Vallejo.' An executed
transfer of registered lands placed by the registered owner
thereof in the hands of another operates as a
representation to a third party that the holder of the
transfer is authorized to deal with the land.
As between two innocent persons, one of whom must
suffer the consequence of a breach of trust, the one who

made it possible by his act of coincidence bear the loss.
(pp. 19-21)
The Blondeau decision, however, is not on all fours with the
case before Us because here We are confronted with one who
admittedly was an agent of his sister and who sold the
property of the latter after her death with full knowledge of
such death. The situation is expressly covered by a provision
of law on agency the terms of which are clear and
unmistakable leaving no room for an interpretation contrary to
its tenor, in the same manner that the ruling in Blondeau and
the cases cited therein found a basis in Section 55 of the Land
Registration Law which in part provides:
xxx xxx xxx
The production of the owner's duplicate certificate
whenever any voluntary instrument is presented for
registration shall be conclusive authority from the
registered owner to the register of deeds to enter a new
certificate or to make a memorandum of registration in
accordance with such instruments, and the new certificate
or memorandum Shall be binding upon the registered
owner and upon all persons claiming under him in favor of
every purchaser for value and in good faith: Provided
however, That in all cases of registration provided by fraud,
the owner may pursue all his legal and equitable remedies
against the parties to such fraud without prejudice,
however, to the right, of any innocent holder for value of a
certificate of title. ... (Act No. 496 as amended)
7. One last point raised by respondent corporation in support
of the appealed decision is an 1842 ruling of the Supreme
Court of Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of the principal
APT- AGENCY 7
Nature of Agency: Purpose
were held to be "good", "the parties being ignorant of the
death". Let us take note that the Opinion of Justice Rogers
was premised on the statement that the parties were ignorant
of the death of the principal. We quote from that decision the
following:
... Here the precise point is, whether a payment to an
agent when the Parties are ignorant of the death is a
good payment. in addition to the case in Campbell
before cited, the same judge Lord Ellenboruogh, has
decided in 5 Esp. 117, the general question that a
payment after the death of principal is not good. Thus,
a payment of sailor's wages to a person having a
power of attorney to receive them, has been held void
when the principal was dead at the time of the
payment. If, by this case, it is meant merely to decide
the general proposition that by operation of law the
death of the principal is a revocation of the powers of
the attorney, no objection can be taken to it. But if it
intended to say that his principle applies where there
was 110 notice of death, or opportunity of twice I must
be permitted to dissent from it.
... That a payment may be good today, or bad
tomorrow, from the accident circumstance of the death
of the principal, which he did not know, and which by
no possibility could he know? It would be unjust to the
agent and unjust to the debtor. In the civil law, the acts
of the agent, done bona fide in ignorance of the death
of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish
law, and I cannot believe the common law is so
unreasonable... (39 Am. Dec. 76, 80, 81; emphasis
supplied)

To avoid any wrong impression which the Opinion in Cassiday
v. McKenzie may evoke, mention may be made that the above
represents the minority view in American jurisprudence. Thus
in Clayton v. Merrett, the Court said.
There are several cases which seem to hold that although,
as a general principle, death revokes an agency and
renders null every act of the agent thereafter performed,
yet that where a payment has been made in ignorance of
the death, such payment will be good. The leading case so
holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa)
282, 39 Am. 76, where, in an elaborate opinion, this view ii
broadly announced. It is referred to, and seems to have
been followed, in the case of Dick v. Page, 17 Mo. 234, 57
AmD 267; but in this latter case it appeared that the estate
of the deceased principal had received the benefit of the
money paid, and therefore the representative of the estate
might well have been held to be estopped from suing for it
again. . . . These cases, in so far, at least, as they
announce the doctrine under discussion, are exceptional.
The Pennsylvania Case, supra (Cassiday v. McKenzie 4
Watts & S. 282, 39 AmD 76), is believed to stand almost, if
not quite, alone in announcing the principle in its broadest
scope. (52, Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v.
McKenzie, and pointing out that the opinion, except so far as it
related to the particular facts, was a mere dictum, Baldwin J.
said:
The opinion, therefore, of the learned Judge may be
regarded more as an extrajudicial indication of his
views on the general subject, than as the adjudication
of the Court upon the point in question. But accordingly
all power weight to this opinion, as the judgment of a of
APT- AGENCY 8
Nature of Agency: Purpose
great respectability, it stands alone among common
law authorities and is opposed by an array too
formidable to permit us to following it. (15 Cal. 12,17,
cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday
v. McKenzie in American jurisprudence, no such conflict exists
in our own for the simple reason that our statute, the Civil
Code, expressly provides for two exceptions to the general
rule that death of the principal revokes ipso jure the agency, to
wit: (1) that the agency is coupled with an interest (Art 1930),
and (2) that the act of the agent was executed without
knowledge of the death of the principal and the third person
who contracted with the agent acted also in good faith (Art.
1931). Exception No. 2 is the doctrine followed in Cassiday,
and again We stress the indispensable requirement that the
agent acted without knowledge or notice of the death of the
principal In the case before Us the agent Ramon Rallos
executed the sale notwithstanding notice of the death of his
principal Accordingly, the agent's act is unenforceable against
the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision
of respondent appellate court, and We affirm en toto the
judgment rendered by then Hon. Amador E. Gomez of the
Court of First Instance of Cebu, quoted in pages 2 and 3 of
this Opinion, with costs against respondent realty corporation
at all instances.
So Ordered.

SECOND DIVISION
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF
APPEALS and CONSOLIDATED SUGAR
CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review on certiorari under Rule 45 of
the Rules of Court assailing the decision of the Court of
Appeals dated February 24, 1994, in CA-G.R. CV No. 31717,
as well as the respondent court's resolution of September 30,
1994 modifying said decision. Both decision and resolution
amended the judgment dated February 13, 1991, of the
Regional Trial Court of Makati City, Branch 147, in Civil Case
No. 90-118.
The facts of this case as found by both the trial and appellate
courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought
sugar from petitioner Victorias Milling Co., Inc., (VMC). In the
course of their dealings, petitioner issued several Shipping
List/Delivery Receipts (SLDRs) to STM as proof of purchases.
Among these was SLDR No. 1214M, which gave rise to the
instant case. Dated October 16, 1989, SLDR No. 1214M
covers 25,000 bags of sugar. Each bag contained 50
kilograms and priced at P638.00 per bag as "per sales order
VMC Marketing No. 042 dated October 16, 1989."[1] The
transaction it covered was a "direct sale."[2] The SLDR also
APT- AGENCY 9
Nature of Agency: Purpose
contains an additional note which reads: "subject for (sic)
availability of a (sic) stock at NAWACO (warehouse)."[3]
On October 25, 1989, STM sold to private respondent
Consolidated Sugar Corporation (CSC) its rights in SLDR No.
1214M for P 14,750,000.00. CSC issued one check dated
October 25, 1989 and three checks postdated November 13,
1989 in payment. That same day, CSC wrote petitioner that it
had been authorized by STM to withdraw the sugar covered by
SLDR No. 1214M. Enclosed in the letter were a copy of SLDR
No. 1214M and a letter of authority from STM authorizing CSC
"to withdraw for and in our behalf the refined sugar covered by
Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214
dated October 16, 1989 in the total quantity of 25,000 bags."[4]
On October 27, 1989, STM issued 16 checks in the total
amount of P31,900,000.00 with petitioner as payee. The latter,
in turn, issued Official Receipt No. 33743 dated October 27,
1989 acknowledging receipt of the said checks in payment of
50,000 bags. Aside from SLDR No. 1214M, said checks also
covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the
petitioner's NAWACO warehouse and was allowed to withdraw
sugar. However, after 2,000 bags had been released,
petitioner refused to allow further withdrawals of sugar against
SLDR No. 1214M. CSC then sent petitioner a letter dated
January 23, 1990 informing it that SLDR No. 1214M had been
"sold and endorsed" to it but that it had been refused further
withdrawals of sugar from petitioner's warehouse despite the
fact that only 2,000 bags had been withdrawn.[5] CSC thus
inquired when it would be allowed to withdraw the remaining
23,000 bags.

On January 31, 1990, petitioner replied that it could not allow
any further withdrawals of sugar against SLDR No. 1214M
because STM had already dwithdrawn all the sugar covered
by the cleared checks.[6]
On March 2, 1990, CSC sent petitioner a letter demanding the
release of the balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar
corresponding to the amount of STM's cleared checks had
been fully withdrawn and hence, there would be no more
deliveries of the commodity to STM's account. Petitioner also
noted that CSC had represented itself to be STM's agent as it
had withdrawn the 2,000 bags against SLDR No. 1214M "for
and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for specific
performance, docketed as Civil Case No. 90-1118. Defendants
were Teresita Ng Sy (doing business under the name of St.
Therese Merchandising) and herein petitioner. Since the
former could not be served with summons, the case
proceeded only against the latter. During the trial, it was
discovered that Teresita Ng Go who testified for CSC was the
same Teresita Ng Sy who could not be reached through
summons.[7] CSC, however, did not bother to pursue its case
against her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for
the sugar covered by SLDR No. 1214M. Therefore, the latter
had no justification for refusing delivery of the sugar. CSC
prayed that petitioner be ordered to deliver the 23,000 bags
covered by SLDR No. 1214M and sought the award of
P1,104,000.00 in unrealized profits, P3,000,000.00 as
exemplary damages, P2,200,000.00 as attorney's fees and
litigation expenses.
APT- AGENCY 10
Nature of Agency: Purpose
Petitioner's primary defense a quo was that it was an unpaid
seller for the 23,000 bags.[8] Since STM had already drawn in
full all the sugar corresponding to the amount of its cleared
checks, it could no longer authorize further delivery of sugar to
CSC. Petitioner also contended that it had no privity of
contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were
not documents of title, but mere delivery receipts issued
pursuant to a series of transactions entered into between it
and STM. The SLDRs prescribed delivery of the sugar to the
party specified therein and did not authorize the transfer of
said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and
was actually STM's co-conspirator to defraud it through a
misrepresentation that CSC was an innocent purchaser for
value and in good faith. Petitioner then prayed that CSC be
ordered to pay it the following sums: P10,000,000.00 as moral
damages; P10,000,000.00 as exemplary damages; and
P1,500,000.00 as attorney's fees. Petitioner also prayed that
cross-defendant STM be ordered to pay it P10,000,000.00 in
exemplary damages, and P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court
heard the case on the merits.
As earlier stated, the trial court rendered its judgment favoring
private respondent CSC, as follows:
"WHEREFORE, in view of the foregoing, the Court hereby
renders judgment in favor of the plaintiff and against
defendant Victorias Milling Company:

"1) Ordering defendant Victorias Milling Company to
deliver to the plaintiff 23,000 bags of refined sugar due
under SLDR No. 1214;
"2) Ordering defendant Victorias Milling Company to
pay the amount of P920,000.00 as unrealized profits,
the amount of P800,000.00 as exemplary damages
and the amount of P1,357,000.00, which is 10% of the
acquisition value of the undelivered bags of refined
sugar in the amount of P13,570,000.00, as attorney's
fees, plus the costs.
"SO ORDERED."[9]
It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go,
that she had fully paid the purchase price of
P15,950,000.00 of the 25,000 bags of sugar bought by
her covered by SLDR No. 1214 as well as the
purchase price of P15,950,000.00 for the 25,000 bags
of sugar bought by her covered by SLDR No. 1213 on
the same date, October 16, 1989 (date of the two
SLDRs) is duly supported by Exhibits C to C-15
inclusive which are post-dated checks dated October
27, 1989 issued by St. Therese Merchandising in favor
of Victorias Milling Company at the time it purchased
the 50,000 bags of sugar covered by SLDR No. 1213
and 1214. Said checks appear to have been honored
and duly credited to the account of Victorias Milling
Company because on October 27, 1989 Victorias
Milling Company issued official receipt no. 34734 in
favor of St. Therese Merchandising for the amount of
P31,900,000.00 (Exhibits B and B-1). The testimony of
Teresita Ng Go is further supported by Exhibit F, which
APT- AGENCY 11
Nature of Agency: Purpose
is a computer printout of defendant Victorias Milling
Company showing the quantity and value of the
purchases made by St. Therese Merchandising, the
SLDR no. issued to cover the purchase, the official
reciept no. and the status of payment. It is clear in
Exhibit 'F' that with respect to the sugar covered by
SLDR No. 1214 the same has been fully paid as
indicated by the word 'cleared' appearing under the
column of 'status of payment.'
"On the other hand, the claim of defendant Victorias
Milling Company that the purchase price of the 25,000
bags of sugar purchased by St. Therese
Merchandising covered by SLDR No. 1214 has not
been fully paid is supported only by the testimony of
Arnulfo Caintic, witness for defendant Victorias Milling
Company. The Court notes that the testimony of
Arnulfo Caintic is merely a sweeping barren assertion
that the purchase price has not been fully paid and is
not corroborated by any positive evidence. There is an
insinuation by Arnulfo Caintic in his testimony that the
postdated checks issued by the buyer in payment of
the purchased price were dishonored. However, said
witness failed to present in Court any dishonored check
or any replacement check. Said witness likewise failed
to present any bank record showing that the checks
issued by the buyer, Teresita Ng Go, in payment of the
purchase price of the sugar covered by SLDR No.
1214 were dishonored."[10]
Petitioner appealed the trial courts decision to the Court of
Appeals.
On appeal, petitioner averred that the dealings between it and
STM were part of a series of transactions involving only one

account or one general contract of sale. Pursuant to this
contract, STM or any of its authorized agents could withdraw
bags of sugar only against cleared checks of STM. SLDR No.
21214M was only one of 22 SLDRs issued to STM and since
the latter had already withdrawn its full quota of sugar under
the said SLDR, CSC was already precluded from seeking
delivery of the 23,000 bags of sugar.
Private respondent CSC countered that the sugar purchases
involving SLDR No. 1214M were separate and independent
transactions and that the details of the series of purchases
were contained in a single statement with a consolidated
summary of cleared check payments and sugar stock
withdrawals because this a more convenient system than
issuing separate statements for each purchase.
The appellate court considered the following issues: (a)
Whether or not the transaction between petitioner and STM
involving SLDR No. 1214M was a separate, independent, and
single transaction; (b) Whether or not CSC had the capacity to
sue on its own on SLDR No. 1214M; and (c) Whether or not
CSC as buyer from STM of the rights to 25,000 bags of sugar
covered by SLDR No. 1214M could compel petitioner to
deliver 23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its
decision modifying the trial court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed
judgment and orders defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar
covered by SLDR No. 1214M;
APT- AGENCY 12
Nature of Agency: Purpose
" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of
the value of the undelivered bags of refined sugar, as
attorneys fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate motions for
reconsideration.
In its resolution dated September 30, 1994, the appellate court
modified its decision to read:
"WHEREFORE, the Court hereby modifies the assailed
judgment and orders defendant-appellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined
sugar under SLDR No. 1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the modification
as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of
sugar which remained undelivered as 12,586 cannot be
made the basis for such a finding. The rule is explicit that
courts should consider the evidence only for the purpose
for which it was offered. (People v. Abalos, et al, 1 CA Rep

783). The rationale for this is to afford the party against
whom the evidence is presented to object thereto if he
deems it necessary. Plaintiff-appellee is, therefore, correct
in its argument that Exhibit F' which was offered to prove
that checks in the total amount of P15,950,000.00 had
been cleared. (Formal Offer of Evidence for Plaintiff,
Records p. 58) cannot be used to prove the proposition
that 12,586 bags of sugar remained undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN,
10 October 1990, p. 33] and Marianito L. Santos [TSN, 17
October 1990, pp. 16, 18, and 36]) presented by plaintiff-
appellee was to the effect that it had withdrawn only 2,000
bags of sugar from SLDR after which it was not allowed to
withdraw anymore. Documentary evidence (Exhibit I, Id., p.
78, Exhibit K, Id., p. 80) show that plaintiff-appellee had
sent demand letters to defendant-appellant asking the
latter to allow it to withdraw the remaining 23,000 bags of
sugar from SLDR 1214M. Defendant-appellant, on the
other hand, alleged that sugar delivery to the STM
corresponded only to the value of cleared checks; and that
all sugar corresponded to cleared checks had been
withdrawn. Defendant-appellant did not rebut plaintiff-
appellee's assertions. It did not present evidence to show
how many bags of sugar had been withdrawn against
SLDR No. 1214M, precisely because of its theory that all
sales in question were a series of one single transaction
and withdrawal of sugar depended on the clearing of
checks paid therefor.
"After a second look at the evidence, We see no reason to
overturn the findings of the trial court on this point."[13]
Hence, the instant petition, positing the following errors as
grounds for review:
APT- AGENCY 13
Nature of Agency: Purpose
"1. The Court of Appeals erred in not holding that STM's
and private respondent's specially informing petitioner that
respondent was authorized by buyer STM to withdraw
sugar against SLDR No. 1214M "for and in our (STM)
behalf," (emphasis in the original) private respondent's
withdrawing 2,000 bags of sugar for STM, and STM's
empowering other persons as its agents to withdraw sugar
against the same SLDR No. 1214M, rendered respondent
like the other persons, an agent of STM as held in Rallos v.
Felix Go Chan & Realty Corp., 81 SCRA 252, and
precluded it from subsequently claiming and proving being
an assignee of SLDR No. 1214M and from suing by itself
for its enforcement because it was conclusively presumed
to be an agent (Sec. 2, Rule 131, Rules of Court) and
estopped from doing so. (Art. 1431, Civil Code).
" 2. The Court of Appeals erred in manifestly and arbitrarily
ignoring and disregarding certain relevant and undisputed
facts which, had they been considered, would have shown
that petitioner was not liable, except for 69 bags of sugar,
and which would justify review of its conclusion of facts by
this Honorable Court.
" 3. The Court of Appeals misapplied the law on
compensation under Arts. 1279, 1285 and 1626 of the Civil
Code when it ruled that compensation applied only to
credits from one SLDR or contract and not to those
from two or more distinct contracts between the same
parties; and erred in denying petitioner's right to setoff all
its credits arising prior to notice of assignment from other
sales or SLDRs against private respondent's claim as
assignee under SLDR No. 1214M, so as to extinguish or
reduce its liability to 69 bags, because the law on
compensation applies precisely to two or more distinct

contracts between the same parties (emphasis in the
original).
"4. The Court of Appeals erred in concluding that the
settlement or liquidation of accounts in Exh. F between
petitioner and STM, respondent's admission of its balance,
and STM's acquiescence thereto by silence for almost one
year did not render Exh. `F' an account stated and its
balance binding.
"5. The Court of Appeals erred in not holding that the
conditions of the assigned SLDR No. 1214, namely, (a) its
subject matter being generic, and (b) the sale of sugar
being subject to its availability at the Nawaco warehouse,
made the sale conditional and prevented STM or private
respondent from acquiring title to the sugar; and the non-
availability of sugar freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the
"clean hands" doctrine precluded respondent from seeking
judicial reliefs (sic) from petitioner, its only remedy being
against its assignor."[14]
Simply stated, the issues now to be resolved are:
(1)....Whether or not the Court of Appeals erred in not
ruling that CSC was an agent of STM and hence, estopped
to sue upon SLDR No. 1214M as an assignee.
(2)....Whether or not the Court of Appeals erred in applying
the law on compensation to the transaction under SLDR
No. 1214M so as to preclude petitioner from offsetting its
credits on the other SLDRs.
APT- AGENCY 14
Nature of Agency: Purpose
(3)....Whether or not the Court of Appeals erred in not
ruling that the sale of sugar under SLDR No. 1214M was a
conditional sale or a contract to sell and hence freed
petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an
error of law in not applying the "clean hands doctrine" to
preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner
raised this issue for the first time on appeal. It is settled that an
issue which was not raised during the trial in the court below
could not be raised for the first time on appeal as to do so
would be offensive to the basic rules of fair play, justice, and
due process.[15] Nonetheless, the Court of Appeals opted to
address this issue, hence, now a matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing
CSC to withdraw sugar against SLDR No. 1214M to show that
the latter was STM's agent. The pertinent portion of said letter
reads:
"This is to authorize Consolidated Sugar Corporation or its
representative to withdraw for and in our behalf (stress
supplied) the refined sugar covered by Shipping
List/Delivery Receipt = Refined Sugar (SDR) No. 1214
dated October 16, 1989 in the total quantity of 25, 000
bags."[16]
The Civil Code defines a contract of agency as follows:

"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."
It is clear from Article 1868 that the basis of agency is
representation.[17] On the part of the principal, there must be
an actual intention to appoint[18] or an intention naturally
inferable from his words or actions;[19] and on the part of the
agent, there must be an intention to accept the appointment
and act on it,[20] and in the absence of such intent, there is
generally no agency.[21] One factor which most clearly
distinguishes agency from other legal concepts is control; one
person - the agent - agrees to act under the control or direction
of another - the principal. Indeed, the very word "agency" has
come to connote control by the principal.[22] The control factor,
more than any other, has caused the courts to put contracts
between principal and agent in a separate category.[23] The
Court of Appeals, in finding that CSC, was not an agent of
STM, opined:
"This Court has ruled that where the relation of agency is
dependent upon the acts of the parties, the law makes no
presumption of agency, and it is always a fact to be
proved, with the burden of proof resting upon the persons
alleging the agency, to show not only the fact of its
existence, but also its nature and extent (Antonio vs.
Enriquez [CA], 51 O.G. 3536]. Here, defendant-appellant
failed to sufficiently establish the existence of an agency
relation between plaintiff-appellee and STM. The fact alone
that it (STM) had authorized withdrawal of sugar by
plaintiff-appellee "for and in our (STM's) behalf" should not
be eyed as pointing to the existence of an agency relation
...It should be viewed in the context of all the
circumstances obtaining. Although it would seem STM
APT- AGENCY 15
Nature of Agency: Purpose
represented plaintiff-appellee as being its agent by the use
of the phrase "for and in our (STM's) behalf" the matter
was cleared when on 23 January 1990, plaintiff-appellee
informed defendant-appellant that SLDFR No. 1214M had
been "sold and endorsed" to it by STM (Exhibit I, Records,
p. 78). Further, plaintiff-appellee has shown that the 25,
000 bags of sugar covered by the SLDR No. 1214M were
sold and transferred by STM to it ...A conclusion that there
was a valid sale and transfer to plaintiff-appellee may,
therefore, be made thus capacitating plaintiff-appellee to
sue in its own name, without need of joining its imputed
principal STM as co-plaintiff."[24]
In the instant case, it appears plain to us that private
respondent CSC was a buyer of the SLDFR form, and not an
agent of STM. Private respondent CSC was not subject to
STM's control. The question of whether a contract is one of
sale or agency depends on the intention of the parties as
gathered from the whole scope and effect of the language
employed.[25] That the authorization given to CSC contained
the phrase "for and in our (STM's) behalf" did not establish an
agency. Ultimately, what is decisive is the intention of the
parties.[26] That no agency was meant to be established by the
CSC and STM is clearly shown by CSC's communication to
petitioner that SLDR No. 1214M had been "sold and
endorsed" to it.[27] The use of the words "sold and endorsed"
means that STM and CSC intended a contract of sale, and not
an agency. Hence, on this score, no error was committed by
the respondent appellate court when it held that CSC was not
STM's agent and could independently sue petitioner.
On the second issue, proceeding from the theory that the
transactions entered into between petitioner and STM are but
serial parts of one account, petitioner insists that its debt has
been offset by its claim for STM's unpaid purchases, pursuant

to Article 1279 of the Civil Code.[28]However, the trial court
found, and the Court of Appeals concurred, that the purchase
of sugar covered by SLDR No. 1214M was a separate and
independent transaction; it was not a serial part of a single
transaction or of one account contrary to petitioner's
insistence. Evidence on record shows, without being rebutted,
that petitioner had been paid for the sugar purchased under
SLDR No. 1214M. Petitioner clearly had the obligation to
deliver said commodity to STM or its assignee. Since said
sugar had been fully paid for, petitioner and CSC, as assignee
of STM, were not mutually creditors and debtors of each other.
No reversible error could thereby be imputed to respondent
appellate court when, it refused to apply Article 1279 of the
Civil Code to the present case.
Regarding the third issue, petitioner contends that the sale of
sugar under SLDR No. 1214M is a conditional sale or a
contract to sell, with title to the sugar still remaining with the
vendor. Noteworthy, SLDR No. 1214M contains the following
terms and conditions:
"It is understood and agreed that by payment by
buyer/trader of refined sugar and/or receipt of this
document by the buyer/trader personally or through a
representative, title to refined sugar is transferred to
buyer/trader and delivery to him/it is deemed effected and
completed (stress supplied) and buyer/trader assumes full
responsibility therefore"[29]
The aforequoted terms and conditions clearly show that
petitioner transferred title to the sugar to the buyer or his
assignee upon payment of the purchase price. Said terms
clearly establish a contract of sale, not a contract to sell.
Petitioner is now estopped from alleging the contrary. The
contract is the law between the contracting parties.[30] And
APT- AGENCY 16
Nature of Agency: Purpose
where the terms and conditions so stipulated are not contrary
to law, morals, good customs, public policy or public order, the
contract is valid and must be upheld.[31] Having transferred title
to the sugar in question, petitioner is now obliged to deliver it
to the purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private
respondent CSC have entered into a conspiracy to defraud it
of its sugar. This conspiracy is allegedly evidenced by: (a) the
fact that STM's selling price to CSC was below its purchasing
price; (b) CSC's refusal to pursue its case against Teresita Ng
Go; and (c) the authority given by the latter to other persons to
withdraw sugar against SLDR No. 1214M after she had sold
her rights under said SLDR to CSC. Petitioner prays that the
doctrine of "clean hands" should be applied to preclude CSC
from seeking judicial relief. However, despite careful scrutiny,
we find here the records bare of convincing evidence
whatsoever to support the petitioner's allegations of fraud. We
are now constrained to deem this matter purely speculative,
bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit.
Costs against petitioner.
SO ORDERED.
 APT- AGENCY 17
Nature of Agency: Purpose

THIRD DIVISION The Case

MARIA TUAZON, ALEJANDRO G.R. No. 156262 Before us is a Petition for Review[1] under Rule 45 of the Rules
P. TUAZON, MELECIO P. of Court, challenging the July 31, 2002 Decision[2] of the Court
TUAZON, Spouses ANASTACIO Present: of Appeals (CA) in CA-GR CV No. 46535. The decretal portion
and MARY T. BUENAVENTURA, of the assailed Decision reads:
Petitioners, Panganiban, J.,
Chairman, WHEREFORE, the appeal is DISMISSED and
Sandoval-Gutierrez, the appealed decision is AFFIRMED.
Corona,
- versus - Carpio Morales, and
Garcia, JJ On the other hand, the affirmed Decision[3] of Branch 34 of the
Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed
HEIRS OF BARTOLOME RAMOS, Promulgated: as follows:
Respondents. July 14, 2005
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --- -- -- -- -- x WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and against the
DECISION defendants, ordering the defendants spouses
Leonilo Tuazon and Maria Tuazon to pay the
PANGANIBAN, J.: plaintiffs, as follows:

Stripped of nonessentials, the present case involves the 1. The sum of P1,750,050.00,
collection of a sum of money. Specifically, this case arose from with interests from the filing of
the failure of petitioners to pay respondents predecessor-in- the second amended complaint;
interest. This fact was shown by the non-encashment of
checks issued by a third person, but indorsed by herein 2. The sum of P50,000.00, as
Petitioner Maria Tuazon in favor of the said predecessor. attorneys fees;
Under these circumstances, to enable respondents to collect
on the indebtedness, the check drawer need not be impleaded 3. The sum of P20,000.00, as
in the Complaint. Thus, the suit is directed, not against the moral damages
drawer, but against the debtor who indorsed the checks in
payment of the obligation. 4. And to pay the costs of suit.

x x x x x x x x x[4]

The Facts
The facts are narrated by the CA as follows:
[Respondents] alleged that between the
period of May 2, 1988 and June 5, 1988,
spouses Leonilo and Maria Tuazon purchased
a total of 8,326 cavans of rice from [the
deceased Bartolome] Ramos [predecessor-in-
interest of respondents]. That of this [quantity,]
x x x only 4,437 cavans [have been paid for so
far], leaving unpaid 3,889 cavans valued
at P1,211,919.00. In payment therefor, the
spouses Tuazon issued x x x [several] Traders
Royal Bank checks.
xxxxxxxxx
[B]ut when these [checks] were encashed, all of
the checks bounced due to insufficiency of
funds. [Respondents] advanced that before
issuing said checks[,] spouses Tuazon already
knew that they had no available fund to support
the checks, and they failed to provide for the
payment of these despite repeated demands
made on them.
[Respondents] averred that because spouses
Tuazon anticipated that they would be sued,
they conspired with the other [defendants] to
defraud them as creditors by executing x x x
fictitious sales of their properties. They
executed x x x simulated sale[s] [of three lots] in
favor of the x x x spouses Buenaventura x x x[,]
as well as their residential lot and the house
thereon[,] all located at Nueva Ecija, and
APT- AGENCY 18
Nature of Agency: Purpose
another simulated deed of sale dated July 12,
1988 of a Stake Toyota registered with the
Land Transportation Office of Cabanatuan City
on September 7, 1988. [Co-petitioner] Melecio
Tuazon, a son of spouses Tuazon, registered a
fictitious Deed of Sale on July 19, 1988 x x x
over a residential lot located at Nueva Ecija.
Another simulated sale of a Toyota Willys was
executed on January 25, 1988 in favor of their
other son, [co-petitioner] Alejandro Tuazon x x
x. As a result of the said sales, the titles of
these properties issued in the names of
spouses Tuazon were cancelled and new ones
were issued in favor of the [co-]defendants
spouses Buenaventura, Alejandro Tuazon and
Melecio Tuazon. Resultantly, by the said ante-
dated and simulated sales and the
corresponding transfers there was no more
property left registered in the names of spouses
Tuazon answerable to creditors, to the damage
and prejudice of [respondents].
For their part, defendants denied having
purchased x x x rice from [Bartolome] Ramos.
They alleged that it was Magdalena Ramos,
wife of said deceased, who owned and traded
the merchandise and Maria Tuazon was merely
her agent. They argued that it was Evangeline
Santos who was the buyer of the rice and
issued the checks to Maria Tuazon as
payments therefor. In good faith[,] the checks
were received [by petitioner] from Evangeline
Santos and turned over to Ramos without
knowing that these were not funded. And it is
for this reason that [petitioners] have been

insisting on the inclusion of Evangeline Santos
as an indispensable party, and her non-
inclusion was a fatal error. Refuting that the
sale of several properties were fictitious or
simulated, spouses Tuazon contended that
these were sold because they were then
meeting financial difficulties but the disposals
were made for value and in good faith and done
before the filing of the instant suit. To dispute
the contention of plaintiffs that they were the
buyers of the rice, they argued that there was
no sales invoice, official receipts or like
evidence to prove this. They assert that they
were merely agents and should not be held
answerable.[5]
The corresponding civil and criminal cases were filed by
respondents against Spouses Tuazon. Those cases were later
consolidated and amended to include Spouses Anastacio and
Mary Buenaventura, with Alejandro Tuazon and Melecio
Tuazon as additional defendants. Having passed away before
the pretrial, Bartolome Ramos was substituted by his heirs,
herein respondents.
Contending that Evangeline Santos was an indispensable
party in the case, petitioners moved to file a third-party
complaint against her. Allegedly, she was primarily liable to
respondents, because she was the one who had purchased
the merchandise from their predecessor, as evidenced by the
fact that the checks had been drawn in her name. The RTC,
however, denied petitioners Motion.
APT- AGENCY 19
Nature of Agency: Purpose
Since the trial court acquitted petitioners in all three of the
consolidated criminal cases, they appealed only its decision
finding them civilly liable to respondents.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioners had failed to
prove the existence of an agency between respondents and
Spouses Tuazon. The appellate court disbelieved petitioners
contention that Evangeline Santos should have been
impleaded as an indispensable party. Inasmuch as all the
checks had been indorsed by Maria Tuazon, who thereby
became liable to subsequent holders for the amounts stated in
those checks, there was no need to implead Santos.
Hence, this Petition.[6]
Issues
Petitioners raise the following issues for our consideration:
1. Whether or not the Honorable Court of
Appeals erred in ruling that petitioners are not
agents of the respondents.
2. Whether or not the Honorable Court of
Appeals erred in rendering judgment against
the petitioners despite x x x the failure of the
respondents to include in their action
Evangeline Santos, an indispensable party to
the suit.[7]

The Courts Ruling
The Petition is unmeritorious.
First Issue:
Agency
Well-entrenched is the rule that the Supreme Courts role in a
petition under Rule 45 is limited to reviewing errors of law
allegedly committed by the Court of Appeals. Factual findings
of the trial court, especially when affirmed by the CA, are
conclusive on the parties and this Court.[8] Petitioners have not
given us sufficient reasons to deviate from this rule.
In a contract of agency, one binds oneself to render
some service or to do something in representation or on behalf
of another, with the latters consent or authority.[9] The following
are the elements of agency: (1) the parties consent, express or
implied, to establish the relationship; (2) the object, which is
the execution of a juridical act in relation to a third person; (3)
the representation, by which the one who acts as an agent
does so, not for oneself, but as a representative; (4)
the limitation that the agent acts within the scope of his or her
authority.[10] As the basis of agency is representation, there
must be, on the part of the principal, an actual intention to
appoint, an intention naturally inferable from the principals
words or actions. In the same manner, there must be an
intention on the part of the agent to accept the appointment
and act upon it. Absent such mutual intent, there is generally
no agency.[11]
This Court finds no reversible error in the findings of
the courts a quo that petitioners were the rice buyers
themselves; they were not mere agents of respondents in their
APT- AGENCY 20
Nature of Agency: Purpose
rice dealership. The question of whether a contract is one of
sale or of agency depends on the intention of the parties.[12]
The declarations of agents alone are generally
insufficient to establish the fact or extent of their
authority.[13] The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person
alleging it.[14] In the present case, petitioners raise the fact of
agency as an affirmative defense, yet fail to prove its
existence.
The Court notes that petitioners, on their own behalf,
sued Evangeline Santos for collection of the amounts
represented by the bounced checks, in a separate civil case
that they sought to be consolidated with the current one. If, as
they claim, they were mere agents of respondents, petitioners
should have brought the suit against Santos for and on behalf
of their alleged principal, in accordance with Section 2 of Rule
3 of the Rules on Civil Procedure.[15] Their filing a suit against
her in their own names negates their claim that they acted as
mere agents in selling the rice obtained from Bartolome
Ramos.
Second Issue:
Indispensable Party
Petitioners argue that the lower courts erred in not allowing
Evangeline Santos to be impleaded as an indispensable party.
They insist that respondents Complaint against them is based
on the bouncing checks she issued; hence, they point to her
as the person primarily liable for the obligation.
We hold that respondents cause of action is clearly founded
on petitioners failure to pay the purchase price of the rice. The
trial court held that Petitioner Maria Tuazon had indorsed the
 APT- AGENCY 21
Nature of Agency: Purpose

questioned checks in favor of respondents, in accordance with

Sections 31 and 63 of the Negotiable Instruments Law.[16] That
Santos was the drawer of the checks is thus immaterial to the
respondents cause of action.

As indorser, Petitioner Maria Tuazon warranted that upon due

presentment, the checks were to be accepted or paid, or both,
according to their tenor; and that in case they were
dishonored, she would pay the corresponding amount.[17] After
an instrument is dishonored by nonpayment, indorsers cease
to be merely secondarily liable; they become principal debtors
whose liability becomes identical to that of the original obligor.
The holder of a negotiable instrument need not even proceed
against the maker before suing the indorser.[18] Clearly,
Evangeline Santos -- as the drawer of the checks -- is not an
indispensable party in an action against Maria Tuazon, the
indorser of the checks.

Indispensable parties are defined as parties in interest without

whom no final determination can be had.[19] The instant case
was originally one for the collection of the purchase price of
the rice bought by Maria Tuazon from respondents
predecessor. In this case, it is clear that there is no privity of
contract between respondents and Santos. Hence, a final
determination of the rights and interest of the parties may be
made without any need to implead her.

WHEREFORE, the Petition is DENIED and the

assailed Decision AFFIRMED. Costs against petitioners.

SO ORDERED.
 APT- AGENCY 22
Nature of Agency: Purpose

THIRD DIVISION Petitioner is engaged in the business of importation and

distribution of various European industrial equipment for
customers here in the Philippines. It has as one of its
EUROTECH INDUSTRIAL G.R. No. 167552 customers Impact Systems Sales (Impact Systems) which is a
TECHNOLOGIES, INC., sole proprietorship owned by respondent ERWIN Cuizon
Petitioner, Present: (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said
YNARES- capacity.
SANTIAGO, J.,
- versus - Chairperson, From January to April 1995, petitioner sold to Impact Systems
AUSTRIA-MARTINEZ, various products allegedly amounting to ninety-one thousand
CALLEJO, SR., three hundred thirty-eight (P91,338.00) pesos. Subsequently,
CHICO-NAZARIO, and respondents sought to buy from petitioner one unit of sludge
NACHURA, JJ. pump valued at P250,000.00 with respondents making a down
EDWIN CUIZON and ERWIN payment of fifty thousand pesos (P50,000.00).[4] When the
CUIZON, Promulgated: sludge pump arrived from the United Kingdom, petitioner
Respondents. refused to deliver the same to respondents without their
April 23, 2007 having fully settled their indebtedness to petitioner. Thus,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x on 28 June 1995, respondent EDWIN and Alberto de Jesus,
DECISION general manager of petitioner, executed a Deed of Assignment
of receivables in favor of petitioner, the pertinent part of which
CHICO-NAZARIO, J.: states:

Before Us is a petition for review by certiorari assailing the 1.) That ASSIGNOR[5] has an
Decision[1] of the Court of Appeals dated 10 August 2004 and outstanding receivables from Toledo Power
its Resolution[2]dated 17 March 2005 in CA-G.R. SP No. 71397 Corporation in the amount of THREE
entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio HUNDRED SIXTY FIVE THOUSAND
T. Echavez. The assailed Decision and Resolution affirmed (P365,000.00) PESOS as payment for the
the Order[3] dated 29 January 2002 rendered by Judge Antonio purchase of one unit of Selwood Spate 100D
T. Echavez ordering the dropping of respondent EDWIN Sludge Pump;
Cuizon (EDWIN) as a party defendant in Civil Case No. CEB- 2.) That said ASSIGNOR does hereby
19672. ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE[6] the said receivables from Toledo
The generative facts of the case are as follows: Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND

(P365,000.00) PESOS which receivables the
ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby
accept this assignment.[7]
Following the execution of the Deed of Assignment, petitioner
delivered to respondents the sludge pump as shown by
Invoice No. 12034 dated 30 June 1995.[8]
Allegedly unbeknownst to petitioner, respondents,
despite the existence of the Deed of Assignment, proceeded
to collect from Toledo Power Company the amount
of P365,135.29 as evidenced by Check Voucher No.
0933[9] prepared by said power company and an official receipt
dated 15 August 1995 issued by Impact Systems.[10] Alarmed
by this development, petitioner made several demands upon
respondents to pay their obligations. As a result, respondents
were able to make partial payments to petitioner. On 7
October 1996, petitioners counsel sent respondents a final
demand letter wherein it was stated that as of 11 June 1996,
respondents total obligations stood at P295,000.00 excluding
interests and attorneys fees.[11] Because of respondents failure
to abide by said final demand letter, petitioner instituted a
complaint for sum of money, damages, with application for
preliminary attachment against herein respondents before
the Regional Trial Court of Cebu City.[12]
On 8 January 1997, the trial court granted petitioners
prayer for the issuance of writ of preliminary attachment.[13]
On 25 June 1997, respondent EDWIN filed his
Answer[14] wherein he admitted petitioners allegations with
respect to the sale transactions entered into by Impact
Systems and petitioner between January and April
1995.[15] He, however, disputed the total amount of Impact
APT- AGENCY 23
Nature of Agency: Purpose
Systems indebtedness to petitioner which, according to him,
amounted to only P220,000.00.[16]
By way of special and affirmative defenses, respondent
EDWIN alleged that he is not a real party in interest in this
case. According to him, he was acting as mere agent of his
principal, which was the Impact Systems, in his transaction
with petitioner and the latter was very much aware of this
fact. In support of this argument, petitioner points to
paragraphs 1.2 and 1.3 of petitioners Complaint stating
1.2. Defendant Erwin H. Cuizon, is of legal age,
married, a resident of Cebu City. He is the
proprietor of a single proprietorship business
known as Impact Systems Sales (Impact
Systems for brevity), with office located at 46-A
del Rosario Street, Cebu City, where he may be
served summons and other processes of the
Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age,
Filipino, married, a resident of Cebu City. He is
the Sales Manager of Impact Systems and is
sued in this action in such capacity.[17]
On 26 June 1998, petitioner filed a Motion to Declare
Defendant ERWIN in Default with Motion for Summary
Judgment. The trial court granted petitioners motion to declare
respondent ERWIN in default for his failure to answer within
the prescribed period despite the opportunity granted[18] but it
denied petitioners motion for summary judgment in its Order
of 31 August 2001 and scheduled the pre-trial of the case
on 16 October 2001.[19] However, the conduct of the pre-trial
conference was deferred pending the resolution by the trial
 APT- AGENCY 24
Nature of Agency: Purpose

court of the special and affirmative defenses raised by ratification. Plaintiff could not say that the
respondent EDWIN.[20] subject contract was entered into by Edwin B.
Cuizon in excess of his powers since [Impact]
After the filing of respondent EDWINs Systems Sales made a down payment
Memorandum[21] in support of his special and affirmative of P50,000.00 two days later.
defenses and petitioners opposition[22] thereto, the trial court
rendered its assailed Order dated 29 January 2002 dropping In view of the Foregoing, the Court
respondent EDWIN as a party defendant in this directs that defendant Edwin B. Cuizon be
case. According to the trial court dropped as party defendant.[23]

A study of Annex G to the complaint

shows that in the Deed of Assignment, Aggrieved by the adverse ruling of the trial court, petitioner
defendant Edwin B. Cuizon acted in behalf of or brought the matter to the Court of Appeals which, however,
represented [Impact] Systems Sales; that affirmed the 29 January 2002 Order of the court a quo. The
[Impact] Systems Sale is a single proprietorship dispositive portion of the now assailed Decision of the Court of
entity and the complaint shows that defendant Appeals states:
Erwin H. Cuizon is the proprietor; that plaintiff
corporation is represented by its general WHEREFORE, finding no viable legal ground to
manager Alberto de Jesus in the contract which reverse or modify the conclusions reached by
is dated June 28, 1995. A study of Annex H to the public respondent in his Order
the complaint reveals that [Impact] Systems dated January 29, 2002, it is
Sales which is owned solely by defendant Erwin hereby AFFIRMED.[24]
H. Cuizon, made a down payment
of P50,000.00 that Annex H is dated June 30, Petitioners motion for reconsideration was denied by the
1995 or two days after the execution of Annex appellate court in its Resolution promulgated on 17 March
G, thereby showing that [Impact] Systems 2005. Hence, the present petition raising, as sole ground for
Sales ratified the act of Edwin B. Cuizon; the its allowance, the following:
records further show that plaintiff knew that
[Impact] Systems Sales, the principal, ratified THE COURT OF APPEALS COMMITTED A
the act of Edwin B. Cuizon, the agent, when it REVERSIBLE ERROR WHEN IT RULED
accepted the down payment of P50,000.00. THAT RESPONDENT EDWIN CUIZON, AS
Plaintiff, therefore, cannot say that it was AGENT OF IMPACT SYSTEMS
deceived by defendant Edwin B. Cuizon, since SALES/ERWIN CUIZON, IS NOT
in the instant case the principal has ratified the PERSONALLY LIABLE, BECAUSE HE HAS
act of its agent and plaintiff knew about said NEITHER ACTED BEYOND THE SCOPE OF

HIS AGENCY NOR DID HE PARTICIPATE IN
THE PERPETUATION OF A FRAUD.[25]
To support its argument, petitioner points to Article 1897 of the
New Civil Code which states:
Art. 1897. The agent who acts as such is not
personally liable to the party with whom he
contracts, unless he expressly binds himself or
exceeds the limits of his authority without
giving such party sufficient notice of his
powers.
Petitioner contends that the Court of Appeals failed to
appreciate the effect of ERWINs act of collecting the
receivables from the Toledo Power Corporation
notwithstanding the existence of the Deed of Assignment
signed by EDWIN on behalf of Impact Systems. While said
collection did not revoke the agency relations of respondents,
petitioner insists that ERWINs action repudiated EDWINs
power to sign the Deed of Assignment. As EDWIN did not
sufficiently notify it of the extent of his powers as an agent,
petitioner claims that he should be made personally liable for
the obligations of his principal.[26]
Petitioner also contends that it fell victim to the fraudulent
scheme of respondents who induced it into selling the one unit
of sludge pump to Impact Systems and signing the Deed of
Assignment. Petitioner directs the attention of this Court to the
fact that respondents are bound not only by their principal and
agent relationship but are in fact full-blooded brothers whose
successive contravening acts bore the obvious signs of
conspiracy to defraud petitioner.[27]
APT- AGENCY 25
Nature of Agency: Purpose
In his Comment,[28] respondent EDWIN again posits the
argument that he is not a real party in interest in this case and
it was proper for the trial court to have him dropped as a
defendant. He insists that he was a mere agent of Impact
Systems which is owned by ERWIN and that his status as
such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales
manager of the said business venture. Likewise, respondent
EDWIN points to the Deed of Assignment which clearly states
that he was acting as a representative of Impact Systems in
said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some
service or to do something in representation or on behalf of
another with the latters consent.[29] The underlying principle of
the contract of agency is to accomplish results by using the
services of others to do a great variety of things like selling,
buying, manufacturing, and transporting.[30] Its purpose is to
extend the personality of the principal or the party for whom
another acts and from whom he or she derives the authority to
act.[31] It is said that the basis of agency is representation, that
is, the agent acts for and on behalf of the principal on matters
within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the
principal.[32] By this legal fiction, the actual or real absence of
the principal is converted into his legal or juridical presence qui
facit per alium facit per se.[33]
The elements of the contract of agency are: (1) consent,
express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.[34]

In this case, the parties do not dispute the existence of the
agency relationship between respondents ERWIN as principal
and EDWIN as agent. The only cause of the present dispute is
whether respondent EDWIN exceeded his authority when he
signed the Deed of Assignment thereby binding himself
personally to pay the obligations to petitioner. Petitioner firmly
believes that respondent EDWIN acted beyond the authority
granted by his principal and he should therefore bear the
effect of his deed pursuant to Article 1897 of the New Civil
Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who
acts as such, is not personally liable to the party with whom he
contracts. The same provision, however, presents two
instances when an agent becomes personally liable to a third
person. The first is when he expressly binds himself to the
obligation and the second is when he exceeds his authority. In
the last instance, the agent can be held liable if he does not
give the third party sufficient notice of his powers. We hold that
respondent EDWIN does not fall within any of the exceptions
contained in this provision.
The Deed of Assignment clearly states that respondent
EDWIN signed thereon as the sales manager of Impact
Systems. As discussed elsewhere, the position of manager is
unique in that it presupposes the grant of broad powers with
which to conduct the business of the principal, thus:
The powers of an agent are particularly
broad in the case of one acting as a general
agent or manager; such a position presupposes
a degree of confidence reposed and investiture
with liberal powers for the exercise of judgment
APT- AGENCY 26
Nature of Agency: Purpose
and discretion in transactions and concerns
which are incidental or appurtenant to the
business entrusted to his care and
management. In the absence of an agreement
to the contrary, a managing agent may enter
into any contracts that he deems reasonably
necessary or requisite for the protection of the
interests of his principal entrusted to his
management. x x x.[35]
Applying the foregoing to the present case, we hold that
Edwin Cuizon acted well-within his authority when he signed
the Deed of Assignment. To recall, petitioner refused to
deliver the one unit of sludge pump unless it received, in full,
the payment for Impact Systems indebtedness.[36] We may
very well assume that Impact Systems desperately needed
the sludge pump for its business since after it paid the
amount of fifty thousand pesos (P50,000.00) as down
payment on 3 March 1995,[37] it still persisted in negotiating
with petitioner which culminated in the execution of the Deed
of Assignment of its receivables from Toledo Power Company
on 28 June 1995.[38] The significant amount of time spent on
the negotiation for the sale of the sludge pump underscores
Impact Systems perseverance to get hold of the said
equipment. There is, therefore, no doubt in our mind that
respondent EDWINs participation in the Deed of Assignment
was reasonably necessary or was required in order for him to
protect the business of his principal. Had he not acted in the
way he did, the business of his principal would have been
adversely affected and he would have violated his fiduciary
relation with his principal.
We likewise take note of the fact that in this case, petitioner is
seeking to recover both from respondents ERWIN, the
principal, and EDWIN, the agent. It is well to state here that
 APT- AGENCY 27
Nature of Agency: Purpose

Article 1897 of the New Civil Code upon which petitioner

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

As we declare that respondent EDWIN acted within his

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

WHEREFORE, premises considered, the present petition

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

Let the records of this case be remanded to the

Regional Trial Court, Branch 8, Cebu City, for the continuation
of the proceedings against respondent ERWIN CUIZON.