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 codefendant, 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, 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 IntestateEstate 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
1
sale in question. The appellee administrator, Ramon Rallos, moved
for a reconsider of the decision but the same was denied in a
2
resolution of March 4, 1965.
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
3
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
4
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
5
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
6
through another acts himself".
7

2. 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.

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
12
before the trial court. That Simeon Rallos knew of the death of his
13
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
14
the death of the former.

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
8
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 thejuridical 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
9
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
10
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 confer. red upon an agent is dissolved by the
principal's death, and any attempted execution of the power afterward
11
is not binding on the heirs or representatives of the deceased.
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.
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

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
15
agent knew of his principal's demise. 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
16
the death of the principal.
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 fortiorithat 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
17
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
18
to be effective must be communicated to the parties concerned, 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
19
principal's continuing will. 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
20
the forger.
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:
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 lawyerhusband 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 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 ofCassiday 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
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.

WHEREFORE, all premises considered,

the plaintiff having established by preponderance
of evidence its claims against defendant Glodel
Brokerage Corporation, judgment is hereby
rendered ordering the latter:

3.

1.

To pay plaintiff R&B Insurance Corporation the sum

of P1,896,789.62 as actual and compensatory damages,
with interest from the date of complaint until fully paid;

2.

To pay plaintiff R&B Insurance Corporation the amount

equivalent to 10% of the principal amount recovered as
and for attorneys fees plusP1,500.00 per appearance in
Court;
To pay plaintiff R&B Insurance Corporation the sum
of P22,427.18 as litigation expenses.

WHEREAS, the defendant Loadmasters Customs

Services, Inc.s counterclaim for damages and attorneys fees
against plaintiff are hereby dismissed.

So Ordered.
Loadmaster Customs Services v. Glodel Brokerage Corp. and R&B
Insurance Corporation
This is a petition for review on certiorari under Rule 45 of the Revised
[1]
Rules of Court assailing the August 24, 2007 Decision of the Court of
Appeals (CA) in CA-G.R. CV No. 82822, entitled R&B Insurance
Corporation v. Glodel Brokerage Corporation and Loadmasters
Customs Services, Inc., which held petitioner Loadmasters Customs
Services, Inc. (Loadmasters) liable to respondent Glodel Brokerage
Corporation (Glodel) in the amount of P1,896,789.62 representing the
insurance indemnity which R&B Insurance Corporation (R&B
Insurance) paid to the insured-consignee, Columbia Wire and Cable
Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN00105/2001 in favor of Columbia to insure the shipment of 132 bundles
of electric copper cathodes against All Risks. On August 28, 2001, the
cargoes were shipped on board the vessel Richard Rey from
Isabela, Leyte, to Pier 10, North Harbor,Manila. They arrived on the
same date.
Columbia engaged the services of Glodel for the release and
withdrawal of the cargoes from the pier and the subsequent delivery to
its warehouses/plants.Glodel, in turn, engaged the services of
Loadmasters for the use of its delivery trucks to transport the cargoes
to Columbias warehouses/plants in Bulacan andValenzuela City.
The goods were loaded on board twelve (12) trucks owned
by Loadmasters, driven by its employed drivers and accompanied by
its employed truck helpers. Six (6) truckloads of copper cathodes were
to be delivered to Balagtas, Bulacan, while the other six (6) truckloads
were destined for Lawang Bato,Valenzuela City. The cargoes in six
truckloads for Lawang Bato were duly delivered in Columbias
warehouses there. Of the six (6) trucks en route to Balagtas, Bulacan,
however, only five (5) reached the destination. One (1) truck, loaded
with 11 bundles or 232 pieces of copper cathodes, failed to deliver its
cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was
recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of P1,903,335.39. After the requisite
investigation and adjustment, R&B Insurance paid Columbia the
amount of P1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages
against both Loadmasters and Glodel before the Regional Trial Court,
Branch 14, Manila (RTC), docketed as Civil Case No. 02-103040. It
sought reimbursement of the amount it had paid to Columbia for the
loss of the subject cargo. It claimed that it had been subrogated to the
right of the consignee to recover from the party/parties who may be
[2]
held legally liable for the loss.
[3]

On November 19, 2003, the RTC rendered a decision holding Glodel

liable for damages for the loss of the subject cargo and dismissing
Loadmasters counterclaim for damages and attorneys fees against
R&B Insurance. The dispositive portion of the decision reads:

With costs against defendant Glodel

Brokerage Corporation.
[4]
SO ORDERED.
Both R&B Insurance and Glodel appealed the RTC decision
to the CA.
On August 24, 2007, the CA rendered the assailed decision
which reads in part:
Considering that appellee is an agent of
appellant Glodel, whatever liability the latter owes
to appellant R&B Insurance Corporation as
insurance indemnity must likewise be the amount
it shall be paid by appellee Loadmasters.
WHEREFORE,
the
foregoing
considered, the appeal is PARTLY GRANTED in
that the appellee Loadmasters is likewise held
liable to appellant Glodel in the amount
of P1,896,789.62 representing the insurance
indemnity appellant Glodel has been held liable to
appellant R&B Insurance Corporation.
Appellant Glodels appeal to absolve it
from any liability is herein DISMISSED.
SO ORDERED.

[5]

Hence, Loadmasters filed the present petition for review on

certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to
Respondent Glodel in spite of the fact that the
latter respondent Glodel did not file a crossclaim against it (Loadmasters)?
2. Under the set of facts established and
undisputed in the case, can petitioner
Loadmasters be legally considered as an
[6]
Agent of respondent Glodel?

To totally exculpate itself from responsibility for the lost

goods, Loadmasters argues that it cannot be considered an agent of
Glodel because it never represented the latter in its dealings with the
consignee. At any rate, it further contends that Glodel has no recourse
against it for its (Glodels) failure to file a cross-claim pursuant to
Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
[7]

Glodel, in its Comment, counters that Loadmasters is liable to it

under its cross-claim because the latter was grossly negligent in the
transportation of the subject cargo. With respect to Loadmasters claim
that it is already estopped from filing a cross-claim, Glodel insists that it
can still do so even for the first time on appeal because there is no rule
that provides otherwise. Finally, Glodel argues that its relationship with
Loadmasters is that of Charter wherein the transporter (Loadmasters)
is only hired for the specific job of delivering the merchandise. Thus,

the diligence required in this case is merely ordinary diligence or that

of a good father of the family, not the extraordinary diligence required
of common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have
interposed a cross-claim against Loadmasters because it was not
prevented from presenting evidence to prove its position even without
amending its Answer. As to the relationship between Loadmasters and
Glodel, it contends that a contract of agency existed between the two
[8]
corporations.
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he who is
substituted succeeds to the rights of the other in relation to a debt or
[9]
claim, including its remedies or securities. Doubtless, R&B Insurance
is subrogated to the rights of the insured to the extent of the amount it
paid the consignee under the marine insurance, as provided under
Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiffs property has been insured, and
he has received indemnity from the insurance company for the injury
or loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrong-doer or the person who has violated the
contract. If the amount paid by the insurance company does not fully
cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B
Insurance has the right to seek reimbursement from either
Loadmasters or Glodel or both for breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to
pay R&B Insurance for the amount of the indemnity it paid Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters
and Glodel are common carriers to determine their liability for the loss
of the subject cargo.Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or associations engaged in
the business of carrying or transporting passenger or goods, or both by
land, water or air for compensation, offering their services to the public.
Based on the aforecited definition, Loadmasters is a
common carrier because it is engaged in the business of transporting
goods by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is generally
undertaken by special agreement and it does not hold itself out to carry
[10]
goods for the general public. The distinction is significant in the
sense that the rights and obligations of the parties to a contract of
private carriage are governed principally by their stipulations, not by
[11]
the law on common carriers.
In the present case, there is no indication that the
undertaking in the contract between Loadmasters and Glodel was
private in character. There is no showing that Loadmasters solely and
exclusively rendered services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.

[12]

In the same vein, Glodel is also considered a common

[13]
carrier within the context of Article 1732. In its Memorandum, it
states that it is a corporation duly organized and existing under the
laws of the Republic of the Philippines and is engaged in the business
of customs brokering. It cannot be considered otherwise because as
held by this Court in Schmitz Transport & Brokerage Corporation v.
[14]
Transport Venture, Inc., a customs broker is also regarded as a
common carrier, the transportation of goods being an integral part of
its business.

be rebutted by proof that the common carrier has observed

extraordinary diligence over the goods.
With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are
unconditionally placed in the possession of, and received by, the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who
[18]
has a right to receive them.
Premises considered, the Court is of the view that both
Loadmasters and Glodel are jointly and severally liable to R & B
Insurance for the loss of the subject cargo. Under Article 2194 of the
New Civil Code, the responsibility of two or more persons who are
liable for a quasi-delict is solidary.
Loadmasters claim that it was never privy to the contract
entered into by Glodel with the consignee Columbia or R&B Insurance
as subrogee, is not a valid defense. It may not have a direct
contractual relation with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-delicts which
expressly provide:
ART. 2176. Whoever by act or omission
causes damage to another, there being fault or
negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is
called a quasi-delict and is governed by the
provisions of this Chapter.
Pertinent is the ruling enunciated in the case of Mindanao
Terminal and Brokerage Service, Inc. v. Phoenix Assurance Company
[19]
of New York,/McGee & Co., Inc. where this Court held that a tort
may arise despite the absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed
by Phoenix and McGee against Mindanao Terminal, from
which the present case has arisen, states a cause of action.
The present action is based on quasi-delict, arising from the
negligent and careless loading and stowing of the cargoes
belonging to Del Monte Produce. Even assuming that both
Phoenix and McGee have only been subrogated in the rights
of Del Monte Produce, who is not a party to the contract of
service between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of the
Courts consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort may
arise even under a contract, where tort is that which breaches
the contract. In the present case, Phoenix and McGee are not
suing for damages for injuries arising from the breach of
the contract of service but from the alleged negligent
manner by which Mindanao Terminal handled the cargoes
belonging to Del Monte Produce. Despite the absence of
contractual relationship between Del Monte Produce and
Mindanao Terminal, the allegation of negligence on the part
of the defendant should be sufficient to establish a cause of
action arising from quasi-delict. [Emphases supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by
Article 2176 is demandable not only for ones own
acts or omissions, but also for those of persons for
whom one is responsible.
xxxx

Loadmasters and Glodel, being both common carriers, are

mandated from the nature of their business and for reasons of public
policy, to observe the extraordinary diligence in the vigilance over the
goods transported by them according to all the circumstances of such
case, as required by Article 1733 of the Civil Code. When the Court
speaks of extraordinary diligence, it is that extreme measure of care
and caution which persons of unusual prudence and circumspection
observe for securing and preserving their own property or
[15]
rights. This exacting standard imposed on common carriers in a
contract of carriage of goods is intended to tilt the scales in favor of the
shipper who is at the mercy of the common carrier once the goods
[16]
have been lodged for shipment. Thus, in case of loss of the goods,
the common carrier is presumed to have been at fault or to have acted
[17]
negligently. This presumption of fault or negligence, however, may

Employers shall be liable for the

damages caused by their employees and
household helpers acting within the scope of their
assigned tasks, even though the former are not
engaged in any business or industry.
It is not disputed that the subject cargo was lost while in the
custody of Loadmasters whose employees (truck driver and helper)
were instrumental in the hijacking or robbery of the shipment. As
employer, Loadmasters should be made answerable for the damages
caused by its employees who acted within the scope of their assigned
task of delivering the goods safely to the warehouse.

Whenever an employees negligence causes damage or

injury to another, there instantly arises a presumption juris tantum that
the employer failed to exercise diligentissimi patris families in the
selection (culpa in eligiendo) or supervision (culpa in vigilando) of its
[20]
employees. To avoid liability for a quasi-delict committed by its
employee, an employer must overcome the presumption by presenting
convincing proof that he exercised the care and diligence of a good
[21]
father of a family in the selection and supervision of his employee. In
this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise
extraordinary diligence. It failed to ensure that Loadmasters would fully
comply with the undertaking to safely transport the subject cargo to the
designated destination. It should have been more prudent in entrusting
the goods to Loadmasters by taking precautionary measures, such as
providing escorts to accompany the trucks in delivering the
cargoes. Glodel should, therefore, be held liable with Loadmasters.Its
defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no
principal-agent relationship between Glodel and Loadmasters, as
erroneously found by the CA.Article 1868 of the Civil Code provides:
By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another,
with the consent or authority of the latter. The elements of a 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
[22]
not for himself; (4) the agent acts within the scope of his authority.
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation. It is a settled rule that the
basis for 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. On the part of the principal, there must be
an actual intention to appoint or an intention naturally inferable from his
words or actions, while on the part of the agent, there must be an
[23]
intention to accept the appointment and act on it. Such mutual intent
is not obtaining in this case.
What then is the extent of the respective liabilities of
Loadmasters and Glodel? Each wrongdoer is liable for the total
damage suffered by R&B Insurance. Where there are several causes
for the resulting damages, a party is not relieved from liability, even
partially. It is sufficient that the negligence of a party is an efficient
cause without which the damage would not have resulted. It is no
defense to one of the concurrent tortfeasors that the damage would
not have resulted from his negligence alone, without the negligence or
wrongful acts of the other concurrent tortfeasor. As stated in the case
[24]
of Far Eastern Shipping v. Court of Appeals,
X x x. Where several causes producing
an injury are concurrent and each is an efficient
cause without which the injury would not have
happened, the injury may be attributed to all or
any of the causes and recovery may be had
against any or all of the responsible persons
although under the circumstances of the case, it
may appear that one of them was more culpable,
and that the duty owed by them to the injured
person was not the same. No actor's negligence
ceases to be a proximate cause merely because it
does not exceed the negligence of other actors.
Each wrongdoer is responsible for the entire result
and is liable as though his acts were the sole
cause of the injury.
There is no contribution between joint
tortfeasors whose liability is solidary since both of
them are liable for the total damage. Where the
concurrent or successive negligent acts or
omissions of two or more persons, although acting
independently, are in combination the direct and
proximate cause of a single injury to a third
person, it is impossible to determine in what
proportion each contributed to the injury
and either of them is responsible for the whole
injury.Where their concurring negligence resulted
in injury or damage to a third party, they become
joint tortfeasors and are solidarily liable for the
resulting damage under Article 2194 of the Civil
Code. [Emphasis supplied]

The Court now resolves the issue of whether Glodel can

collect from Loadmasters, it having failed to file a cross-claim against
the latter.
Undoubtedly, Glodel has a definite cause of action against
Loadmasters for breach of contract of service as the latter is primarily
liable for the loss of the subject cargo. In this case, however, it cannot
succeed in seeking judicial sanction against Loadmasters because the
records disclose that it did not properly interpose a cross-claim against
the latter. Glodel did not even pray that Loadmasters be liable for any
and all claims that it may be adjudged liable in favor of R&B
Insurance. Under the Rules, a compulsory counterclaim, or a cross[25]
claim, not set up shall be barred. Thus, a cross-claim cannot be set
up for the first time on appeal.
For the consequence, Glodel has no one to blame but
itself. The Court cannot come to its aid on equitable
grounds. Equity, which has been aptly described as a justice outside
legality, is applied only in the absence of, and never against, statutory
[26]
law or judicial rules of procedure. The Court cannot be a lawyer and
take the cudgels for a party who has been at fault or negligent.
WHEREFORE, the
petition
is PARTIALLY
GRANTED. The August 24, 2007 Decision of the Court of Appeals
is MODIFIED to read as follows:
WHEREFORE, judgment is rendered declaring petitioner
Loadmasters Customs Services, Inc. and respondent Glodel
Brokerage Corporation jointly and severally liable to respondent R&B
Insurance Corporation for the insurance indemnity it paid to
consignee Columbia Wire & Cable Corporation and ordering both
parties to pay, jointly and severally, R&B Insurance Corporation a] the
amount of P1,896,789.62 representing the insurance indemnity; b] the
amount equivalent to ten (10%) percent thereof for attorneys fees;
and c] the amount of P22,427.18 for litigation expenses.
The cross-claim belatedly prayed for by respondent Glodel
Brokerage Corporation against petitioner Loadmasters Customs
Services, Inc. is DENIED.
SO ORDERED.

MANILA

MEMORIAL
PARK
CEMETERY,
INC., petitioner,
vs. PEDRO L. LINSANGAN, respondent.

For resolution in this case is a classic and interesting texbook

question in the law on agency.
[1]

This is a petition for review assailing the Decision of the Court

[2]
of Appeals dated 22 June 2001, and its Resolution dated 12
December 2001 in CA G.R. CV No. 49802 entitled Pedro L. Linsangan
v. Manila Memorial Cemetery, Inc. et al., finding Manila Memorial Park
Cemetery, Inc. (MMPCI) jointly and severally liable with Florencia C.
Baluyot to respondent Atty. Pedro L. Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L.
Linsangan a lot called Garden State at the Holy Cross Memorial Park
owned by petitioner (MMPCI). According to Baluyot, a former owner of
a memorial lot under Contract No. 25012 was no longer interested in
acquiring the lot and had opted to sell his rights subject to
reimbursement of the amounts he already paid. The contract was
for P95,000.00. Baluyot reassured Atty. Linsangan that once
reimbursement is made to the former buyer, the contract would be
transferred to him. Atty. Linsangan agreed and gave
Baluyot P35,295.00 representing the amount to be reimbursed to the
[3]
original buyer and to complete the down payment to MMPCI. Baluyot
[4]
issued handwritten and typewritten receipts for these payments.
Sometime in March 1985, Baluyot informed Atty. Linsangan that
he would be issued Contract No. 28660, a new contract covering the
subject lot in the name of the latter instead of old Contract No. 25012.
Atty. Linsangan protested, but Baluyot assured him that he would still
be paying the old price of P95,000.00 with P19,838.00 credited as full
[5]
down payment leaving a balance of about P75,000.00.
Subsequently, on 8 April 1985, Baluyot brought an Offer to
Purchase Lot No. A11 (15), Block 83, Garden Estate I denominated as
Contract No. 28660 and the Official Receipt No. 118912 dated 6 April
1985 for the amount of P19,838.00. Contract No. 28660 has a listed
price of P132,250.00. Atty. Linsangan objected to the new contract
price, as the same was not the amount previously agreed upon. To

[6]

convince Atty. Linsangan, Baluyot executed a document confirming

that while the contract price isP132,250.00, Atty. Linsangan would pay
only the original price of P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount
of P1,800.00 and the difference will be issued as discounted to
conform to the previous price as previously agreed upon. --P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under
Contract No. 28660 states that the total price of P132,250.00 your
undertaking is to pay only the total sum ofP95,000.00 under the old
price. Further the total sum of P19,838.00 already paid by you under
O.R. # 118912 dated April 6, 1985 has been credited in the total
purchase price thereby leaving a balance of P75,162.00 on a monthly
installment of P1,800.00 including interests (sic) charges for a period
of five (5) years. (Signed) FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No.
28660 and accepted Official Receipt No. 118912. As requested by
Baluyot, Atty. Linsangan issued twelve (12) postdated checks
of P1,800.00 each in favor of MMPCI. The next year, or on 29 April
1986, Atty. Linsangan again issued twelve (12) postdated checks in
favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that
Contract No. 28660 was cancelled for reasons the latter could not
explain, and presented to him another proposal for the purchase of an
equivalent property. He refused the new proposal and insisted that
Baluyot and MMPCI honor their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their
[7]
agreement, Atty. Linsangan filed a Complaint for Breach of Contract
and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI
alleged that Contract No. 28660 was cancelled conformably with the
[8]
terms
of
the
contract because
of
non-payment
of
[9]
arrearages. MMPCI stated that Baluyot was not an agent but an
independent contractor, and as such was not authorized to represent
MMPCI or to use its name except as to the extent expressly stated in
[10]
the Agency Manager Agreement. Moreover, MMPCI was not aware
of the arrangements entered into by Atty. Linsangan and Baluyot, as it
in fact received a down payment and monthly installments as indicated
[11]
in the contract. Official receipts showing the application of payment
were turned over to Baluyot whom Atty. Linsangan had from the
beginning allowed to receive the same in his behalf. Furthermore,
whatever misimpression that Atty. Linsangan may have had must have
been rectified by the Account Updating Arrangement signed by Atty.
Linsangan which states that he expressly admits that Contract No.
28660 on account of serious delinquencyis now due for cancellation
[12]
under its terms and conditions.
The trial court held MMPCI and Baluyot jointly and severally
[13]
liable. It found that Baluyot was an agent of MMPCI and that the
latter was estopped from denying this agency, having received and
enchased the checks issued by Atty. Linsangan and given to it by
Baluyot. While MMPCI insisted that Baluyot was authorized to receive
only the down payment, it allowed her to continue to receive postdated
[14]
checks from Atty. Linsangan, which it in turn consistently encashed.
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby
rendered in favor of plaintiff declaring Contract No. 28660 as valid and
subsisting and ordering defendants to perform their undertakings
thereof which covers burial lot No. A11 (15), Block 83, Section Garden
I, Holy Cross Memorial Park located at Novaliches, Quezon City. All
payments made by plaintiff to defendants should be credited for his

accounts. NO DAMAGES, NO ATTORNEYS FEES but with costs

against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated
as against defendant Baluyot is GRANTED up to the extent of the
costs.
SO ORDERED.

[15]

MMPCI appealed the trial courts decision to the Court of

[16]
Appeals. It claimed that Atty. Linsangan is bound by the written
contract with MMPCI, the terms of which were clearly set forth therein
[17]
and read, understood, and signed by the former. It also alleged that
Atty. Linsangan, a practicing lawyer for over thirteen (13) years at the
time he entered into the contract, is presumed to know his contractual
obligations and is fully aware that he cannot belatedly and unilaterally
change the terms of the contract without the consent, much less the
knowledge of the other contracting party, which was MMPCI. And in
this case, MMPCI did not agree to a change in the contract and in fact
implemented the same pursuant to its clear terms. In view thereof,
because of Atty. Linsangans delinquency, MMPCI validly cancelled the
contract.
MMPCI further alleged that it cannot be held jointly and solidarily
liable with Baluyot as the latter exceeded the terms of her agency,
neither did MMPCI ratify Baluyots acts. It added that it cannot be
charged with making any misrepresentation, nor of having allowed
Baluyot to act as though she had full powers as the written contract
expressly stated the terms and conditions which Atty. Linsangan
accepted and understood. In canceling the contract, MMPCI merely
[18]
enforced the terms and conditions imposed therein.
Imputing negligence on the part of Atty. Linsangan, MMPCI
claimed that it was the formers obligation, as a party knowingly dealing
with an alleged agent, to determine the limitations of such agents
authority, particularly when such alleged agents actions were patently
questionable. According to MMPCI, Atty. Linsangan did not even
bother to verify Baluyots authority or ask copies of official receipts for
[19]
his payments.
The Court of Appeals affirmed the decision of the trial court. It
upheld the trial courts finding that Baluyot was an agent of MMPCI at
the time the disputed contract was entered into, having represented
MMPCIs interest and acting on its behalf in the dealings with clients
and customers. Hence, MMPCI is considered estopped when it
allowed Baluyot to act and represent MMPCI even beyond her
[20]
authority. The appellate court likewise found that the acts of Baluyot
bound MMPCI when the latter allowed the former to act for and in its
behalf and stead. While Baluyots authority may not have been
expressly conferred upon her, the same may have been derived
impliedly by habit or custom, which may have been an accepted
[21]
practice in the company for a long period of time. Thus, the Court of
Appeals noted, innocent third persons such as Atty. Linsangan should
not be prejudiced where the principal failed to adopt the needed
measures to prevent misrepresentation. Furthermore, if an agent
misrepresents to a purchaser and the principal accepts the benefits of
such misrepresentation, he cannot at the same time deny
[22]
responsibility for such misrepresentation. Finally, the Court of
Appeals declared:
There being absolutely nothing on the record that would show that the
court a quo overlooked, disregarded, or misinterpreted facts of weight
and significance, its factual findings and conclusions must be given
great weight and should not be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED
and the appealed decision in Civil Case No. 88-1253 of the Regional
Trial Court, National Capital Judicial Region, Branch 57 of Makati, is
hereby AFFIRMED in toto.
SO ORDERED.

[23]

MMPCI filed its Motion for Reconsideration,

[25]
denied for lack of merit.

[24]

but the same was

In the instant Petition for Review, MMPCI claims that the Court
of Appeals seriously erred in disregarding the plain terms of the written
contract and Atty. Linsangans failure to abide by the terms thereof,
which justified its cancellation. In addition, even assuming that Baluyot
was an agent of MMPCI, she clearly exceeded her authority and Atty.
Linsangan knew or should have known about this considering his

status as a long-practicing lawyer. MMPCI likewise claims that the

Court of Appeals erred in failing to consider that the facts and the
applicable law do not support a judgment against Baluyot only up to
[26]
the extent of costs.
Atty. Linsangan argues that he did not violate the terms and
conditions of the contract, and in fact faithfully performed his
contractual obligations and complied with them in good faith for at least
[27]
two years. He claims that contrary to MMPCIs position, his
profession as a lawyer is immaterial to the validity of the subject
[28]
contract and the case at bar. According to him, MMPCI had
practically admitted in its Petition that Baluyot was its agent, and thus,
the only issue left to be resolved is whether MMPCI allowed Baluyot to
act as though she had full powers to be held solidarily liable with the
[29]
latter.
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review
under Rule 45 of the Rules of Court is limited to reviewing only errors
of law, not fact, unless the factual findings complained of are devoid of
support by the evidence on record or the assailed judgment is based
[30]
on misapprehension of facts. In BPI Investment Corporation v. D.G.
[31]
Carreon Commercial Corporation, this Court ruled:
There are instances when the findings of fact of the trial court and/or
Court of Appeals may be reviewed by the Supreme Court, such as (1)
when the conclusion is a finding grounded entirely on speculation,
surmises and conjectures; (2) when the inference made is manifestly
mistaken, absurd or impossible; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of
facts; (5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and
appellee; (7) when the findings are contrary to those of the trial court;
(8) when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the
petition as well as in the petitioners main and reply briefs are not
disputed by the respondents; and (10) the findings of fact of the Court
of Appeals are premised on the supposed absence of evidence and
[32]
contradicted by the evidence on record.
In the case at bar, the Court of Appeals committed several errors
in the apprehension of the facts of the case, as well as made
conclusions devoid of evidentiary support, hence we review its findings
of fact.
By the contract of agency, a person binds himself to render
some service or to do something in representation or on behalf of
[33]
another, with the consent or authority of the latter. Thus, the
elements of agency are (i) consent, express or implied, of the parties
to establish the relationship; (ii) the object is the execution of a juridical
act in relation to a third person; (iii) the agent acts as a representative
and not for himself; and (iv) the agent acts within the scope of his
[34]
authority.
In an attempt to prove that Baluyot was not its agent, MMPCI
pointed out that under its Agency Manager Agreement; an agency
manager such as Baluyot is considered an independent contractor and
[35]
not an agent. However, in the same contract, Baluyot as agency
manager was authorized to solicit and remit to MMPCI offers to
purchase interment spaces belonging to and sold by the
[36]
latter. Notwithstanding the claim of MMPCI that Baluyot was an
independent contractor, the fact remains that she was authorized to
solicit solely for and in behalf of MMPCI. As properly found both by the
trial court and the Court of Appeals, Baluyot was an agent of MMPCI,
having represented the interest of the latter, and having been allowed
by MMPCI to represent it in her dealings with its clients/prospective
buyers.
Nevertheless, contrary to the findings of the Court of Appeals,
MMPCI cannot be bound by the contract procured by Atty. Linsangan
and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to
purchase interment spaces obtained on forms provided by MMPCI.
The terms of the offer to purchase, therefore, are contained in such
forms and, when signed by the buyer and an authorized officer of
MMPCI, becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and
accepted and validated by MMPCI showed a total list price
of P132,250.00. Likewise, it was clearly stated therein that Purchaser
agrees that he has read or has had read to him this agreement, that
he understands its terms and conditions, and that there are no

covenants, conditions, warranties or representations other than

[37]
those contained herein. By signing the Offer to Purchase, Atty.
Linsangan signified that he understood its contents. That he and
Baluyot had an agreement different from that contained in the Offer to
Purchase is of no moment, and should not affect MMPCI, as it was
obviously made outside Baluyots authority. To repeat, Baluyots
authority was limited only to soliciting purchasers. She had no authority
to alter the terms of the written contract provided by MMPCI. The
document/letter confirming the agreement that Atty. Linsangan would
have to pay the old price was executed by Baluyot alone. Nowhere is
there any indication that the same came from MMPCI or any of its
officers.
It is a settled rule that persons dealing with an agent are bound
at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to
[38]
establish it. The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must discover upon his
[39]
peril the authority of the agent. If he does not make such an inquiry,
he is chargeable with knowledge of the agents authority and his
[40]
ignorance of that authority will not be any excuse.
As noted by one author, the ignorance of a person dealing with
an agent as to the scope of the latters authority is no excuse to such
[41]
person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent.
He cannot charge the principal by relying upon the agents assumption
of authority that proves to be unfounded. The principal, on the other
hand, may act on the presumption that third persons dealing with his
agent will not be negligent in failing to ascertain the extent of his
[42]
authority as well as the existence of his agency.
In the instant case, it has not been established that Atty.
Linsangan even bothered to inquire whether Baluyot was authorized to
agree to terms contrary to those indicated in the written contract, much
less bind MMPCI by her commitment with respect to such agreements.
Even if Baluyot was Atty. Linsangans friend and known to be an agent
of MMPCI, her declarations and actions alone are not sufficient to
[43]
establish the fact or extent of her authority. Atty. Linsangan as a
practicing lawyer for a relatively long period of time when he signed the
contract should have been put on guard when their agreement was not
reflected in the contract. More importantly, Atty. Linsangan should
have been alerted by the fact that Baluyot failed to effect the transfer of
rights earlier promised, and was unable to make good her written
commitment, nor convince MMPCI to assent thereto, as evidenced by
several attempts to induce him to enter into other contracts for a higher
consideration. As properly pointed out by MMPCI, as a lawyer, a
greater degree of caution should be expected of Atty. Linsangan
especially in dealings involving legal documents. He did not even
bother to ask for official receipts of his payments, nor inquire from
MMPCI directly to ascertain the real status of the contract, blindly
relying on the representations of Baluyot. A lawyer by profession, he
knew what he was doing when he signed the written contract, knew
the meaning and value of every word or phrase used in the contract,
and more importantly, knew the legal effects which said document
produced. He is bound to accept responsibility for his negligence.
The trial and appellate courts found MMPCI liable based on
ratification and estoppel. For the trial court, MMPCIs acts of accepting
and encashing the checks issued by Atty. Linsangan as well as
allowing Baluyot to receive checks drawn in the name of MMPCI
confirm and ratify the contract of agency. On the other hand, the Court
of Appeals faulted MMPCI in failing to adopt measures to prevent
misrepresentation, and declared that in view of MMPCIs acceptance of
the benefits of Baluyots misrepresentation, it can no longer deny
responsibility therefor.
The Court does not agree. Pertinent to this case are the
following provisions of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding
the scope of his authority, and the principal does not ratify the contract,
it shall be void if the party with whom the agent contracted is aware of
the limits of the powers granted by the principal. In this case, however,
the agent is liable if he undertook to secure the principals ratification.
Art. 1910. The principal must comply with all the obligations that the
agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers.
Thus, the acts of an agent beyond the scope of his authority do
not bind the principal, unless he ratifies them, expressly or impliedly.
Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the
[44]
acts he is to ratify.
Ratification in agency is the adoption or confirmation by one
person of an act performed on his behalf by another without authority.
The substance of the doctrine is confirmation after conduct, amounting
to a substitute for a prior authority. Ordinarily, the principal must have
full knowledge at the time of ratification of all the material facts and
circumstances relating to the unauthorized act of the person who
assumed to act as agent. Thus, if material facts were suppressed or
unknown, there can be no valid ratification and this regardless of the
purpose or lack thereof in concealing such facts and regardless of the
parties between whom the question of ratification may
[45]
arise. Nevertheless, this principle does not apply if the principals
ignorance of the material facts and circumstances was willful, or that
[46]
the principal chooses to act in ignorance of the facts. However, in
the absence of circumstances putting a reasonably prudent man on
inquiry, ratification cannot be implied as against the principal who is
[47]
ignorant of the facts.
No ratification can be implied in the instant case.
[48]

A perusal of Baluyots Answer reveals that the real

arrangement between her and Atty. Linsangan was for the latter to pay
a monthly installment of P1,800.00 whereas Baluyot was to shoulder
the counterpart amount of P1,455.00 to meet the P3,255.00 monthly
installments as indicated in the contract. Thus, every time an
installment falls due, payment was to be made through a check from
Atty. Linsangan for P1,800.00 and a cash component of P1,455.00
[49]
from Baluyot. However, it appears that while Atty. Linsangan issued
the post-dated checks, Baluyot failed to come up with her part of the
[50]
bargain. This was supported by Baluyots statements in her letter to
Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she
received the copy of the Complaint. In the letter, she admitted that she
was remiss in her duties when she consented to Atty. Linsangans
proposal that he will pay the old price while the difference will be
shouldered by her. She likewise admitted that the contract suffered
arrearages because while Atty. Linsangan issued the agreed checks,
she was unable to give her share of P1,455.00 due to her own
financial difficulties. Baluyot even asked for compassion from MMPCI
for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the
arrangement. As far as MMPCI is concerned, the contract price
was P132,250.00, as stated in the Offer to Purchase signed by Atty.
Linsangan and MMPCIs authorized officer. The down payment
of P19,838.00 given by Atty. Linsangan was in accordance with the
contract as well. Payments of P3,235.00 for at least two installments
were likewise in accord with the contract, albeit made through a check
and partly in cash. In view of Baluyots failure to give her share in the
payment, MMPCI received only P1,800.00 checks, which were clearly
insufficient payment. In fact, Atty. Linsangan would have incurred
arrearages that could have caused the earlier cancellation of the
contract, if not for MMPCIs application of some of the checks to his
account. However, the checks alone were not sufficient to cover his
obligations.
If MMPCI was aware of the arrangement, it would have refused
the latters check payments for being insufficient. It would not have
applied to his account theP1,800.00 checks. Moreover, the fact that
Baluyot had to practically explain to MMPCIs Sales Manager the
details of her arrangement with Atty. Linsangan and admit to having
made an error in entering such arrangement confirm that MMCPI had
no knowledge of the said agreement. It was only when Baluyot filed
her Answer that she claimed that MMCPI was fully aware of the
agreement.
Neither is there estoppel in the instant case. The essential
elements of estoppel are (i) conduct of a party amounting to false
representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and
inconsistent with, those which the party subsequently attempts to
assert; (ii) intent, or at least expectation, that this conduct shall be
acted upon by, or at least influence, the other party; and (iii)
[51]
knowledge, actual or constructive, of the real facts.
While there is no more question as to the agency relationship
between Baluyot and MMPCI, there is no indication that MMPCI let the

public, or specifically, Atty. Linsangan to believe that Baluyot had the

authority to alter the standard contracts of the company. Neither is
there any showing that prior to signing Contract No. 28660, MMPCI
had any knowledge of Baluyots commitment to Atty. Linsangan. One
who claims the benefit of an estoppel on the ground that he has been
misled by the representations of another must not have been misled
[52]
through his own want of reasonable care and circumspection. Even
assuming that Atty. Linsangan was misled by MMPCIs actuations, he
still cannot invoke the principle of estoppel, as he was clearly negligent
in his dealings with Baluyot, and could have easily determined, had he
only been cautious and prudent, whether said agent was clothed with
the authority to change the terms of the principals written contract.
Estoppel must be intentional and unequivocal, for when misapplied, it
can easily become a most convenient and effective means of
[53]
injustice. In view of the lack of sufficient proof showing estoppel, we
refuse to hold MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals
findings that the authority of defendant Baluyot may not have been
expressly conferred upon her; however, the same may have been
derived impliedly by habit or custom which may have been an
accepted practice in their company in a long period of time. A perusal
of the records of the case fails to show any indication that there was
such a habit or custom in MMPCI that allows its agents to enter into
agreements for lower prices of its interment spaces, nor to assume a
portion of the purchase price of the interment spaces sold at such
lower price. No evidence was ever presented to this effect.
As the Court sees it, there are two obligations in the instant
case. One is the Contract No. 28660 between MMPCI and by Atty.
Linsangan for the purchase of an interment space in the formers
cemetery. The other is the agreement between Baluyot and Atty.
Linsangan for the former to shoulder the amount P1,455.00, or the
difference between P95,000.00, the original price, and P132,250.00,
the actual contract price.
To repeat, the acts of the agent beyond the scope of his
authority do not bind the principal unless the latter ratifies the same. It
also bears emphasis that when the third person knows that the agent
was acting beyond his power or authority, the principal cannot be held
liable for the acts of the agent. If the said third person was aware of
such limits of authority, he is to blame and is not entitled to recover
damages from the agent, unless the latter undertook to secure the
[54]
principals ratification.
This Court finds that Contract No. 28660 was validly entered into
both by MMPCI and Atty. Linsangan. By affixing his signature in the
contract, Atty. Linsangan assented to the terms and conditions thereof.
When Atty. Linsangan incurred delinquencies in payment, MMCPI
merely enforced its rights under the said contract by canceling the
same.
Being aware of the limits of Baluyots authority, Atty. Linsangan
cannot insist on what he claims to be the terms of Contract No. 28660.
The agreement, insofar as theP95,000.00 contract price is concerned,
is void and cannot be enforced as against MMPCI. Neither can he hold
Baluyot liable for damages under the same contract, since there is no
evidence showing that Baluyot undertook to secure MMPCIs
ratification. At best, the agreement between Baluyot and Atty.
Linsangan bound only the two of them. As far as MMPCI is concerned,
it bound itself to sell its interment space to Atty. Linsangan
for P132,250.00 under Contract No. 28660, and had in fact received
several payments in accordance with the same contract. If the contract
was cancelled due to arrearages, Atty. Linsangans recourse should
only be against Baluyot who personally undertook to pay the difference
between the true contract price of P132,250.00 and the original
proposed price of P95,000.00. To surmise that Baluyot was acting on
behalf of MMPCI when she promised to shoulder the said difference
would be to conclude that MMPCI undertook to pay itself the
difference, a conclusion that is very illogical, if not antithetical to its
business interests.
However, this does not preclude Atty. Linsangan from instituting
a separate action to recover damages from Baluyot, not as an agent of
MMPCI, but in view of the latters breach of their separate agreement.
To review, Baluyot obligated herself to pay P1,455.00 in addition to
Atty. Linsangans P1,800.00 to complete the monthly installment
payment under the contract, which, by her own admission, she was
unable to do due to personal financial difficulties. It is undisputed that
Atty. Linsangan issued the P1,800.00 as agreed upon, and were it not
for Baluyots failure to provide the balance, Contract No. 28660 would
not have been cancelled. Thus, Atty. Linsangan has a cause of action
against Baluyot, which he can pursue in another case.
WHEREFORE,
the
instant
petition
is
GRANTED.
The Decision of the Court of Appeals dated 22 June 2001 and

its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as

well as the Decision in Civil Case No. 88-1253 of the Regional Trial
Court, Makati City Branch 57, are hereby REVERSED and SET
ASIDE. TheComplaint in Civil Case No. 88-1253 is DISMISSED for
lack of cause of action. No pronouncement as to costs.
SO ORDERED.

G.R. No. 167552

On 8 January 1997, the trial court granted petitioners prayer for the
13
issuance of writ of preliminary attachment.
14

On 25 June 1997, respondent EDWIN filed his Answer wherein he

admitted petitioners allegations with respect to the sale transactions
entered into by Impact Systems and petitioner between January and
15
April 1995. He, however, disputed the total amount of Impact
Systems indebtedness to petitioner which, according to him,
16
amounted to only P220,000.00.

April 23, 2007

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,

vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
1

Before Us is a petition for review by certiorari assailing the Decision of

2
the Court of Appeals dated 10 August 2004 and its Resolution dated
17 March 2005 in CA-G.R. SP No. 71397 entitled, "Eurotech Industrial
Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision
3
and Resolution affirmed the Order dated 29 January 2002 rendered
by Judge Antonio T. Echavez ordering the dropping of respondent
EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No. CEB19672.

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
17
Impact Systems and is sued in this action in such capacity.

The generative facts of the case are as follows:

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 customers Impact Systems Sales
("Impact Systems") which is a sole proprietorship owned by
respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales
manager of Impact Systems and was impleaded in the court a quo in
said capacity.
From January to April 1995, petitioner sold to Impact Systems various
products allegedly amounting to ninety-one thousand three hundred
thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to
buy from petitioner one unit of sludge pump valued at P250,000.00
with respondents making a down payment of fifty thousand pesos
4
(P50,000.00). When the sludge pump arrived from the United
Kingdom, petitioner refused to deliver the same to respondents without
their having fully settled their indebtedness to petitioner. Thus, on 28
June 1995, respondent EDWIN and Alberto de Jesus, general
manager of petitioner, executed a Deed of Assignment of receivables
in favor of petitioner, the pertinent part of which states:
5

1.) That ASSIGNOR has an outstanding receivables from Toledo

Power Corporation in the amount of THREE HUNDRED SIXTY
FIVE THOUSAND (P365,000.00) PESOS as payment for the
purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and
6
CONVEY unto the ASSIGNEE the said receivables from Toledo
Power Corporation in the amount of THREE HUNDRED SIXTY
FIVE THOUSAND (P365,000.00) PESOS which receivables the
ASSIGNOR is the lawful recipient;
7

3.) That the ASSIGNEE does hereby accept this assignment.

Following the execution of the Deed of Assignment, petitioner

delivered to respondents the sludge pump as shown by Invoice No.
8
12034 dated 30 June 1995.
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
9
Voucher No. 0933 prepared by said power company and an official
10
receipt dated 15 August 1995 issued by Impact Systems. 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
11
excluding interests and attorneys fees. 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
12
of Cebu City.

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
18
opportunity granted" but it denied petitioners motion for summary
judgment in its Order of 31 August 2001 and scheduled the pre-trial of
19
the case on 16 October 2001. However, the conduct of the pre-trial
conference was deferred pending the resolution by the trial court of the
20
special and affirmative defenses raised by respondent EDWIN.
21

After the filing of respondent EDWINs Memorandum in support of his

22
special and affirmative defenses and petitioners opposition thereto,
the trial court rendered its assailed Order dated 29 January 2002
dropping respondent EDWIN as a party defendant in this case.
According to the trial court
A study of Annex "G" to the complaint shows that in the Deed of
Assignment, defendant Edwin B. Cuizon acted in behalf of or
represented [Impact] Systems Sales; that [Impact] Systems Sale is a
single proprietorship entity and the complaint shows that defendant
Erwin H. Cuizon is the proprietor; that plaintiff corporation is
represented by its general manager Alberto de Jesus in the contract
which is dated June 28, 1995. A study of Annex "H" to the complaint
reveals that [Impact] Systems Sales which is owned solely by
defendant Erwin H. Cuizon, made a down payment of P50,000.00 that
Annex "H" is dated June 30, 1995 or two days after the execution of
Annex "G", thereby showing that [Impact] Systems Sales ratified the
act of Edwin B. Cuizon; the records further show that plaintiff knew that
[Impact] Systems Sales, the principal, ratified the act of Edwin B.
Cuizon, the agent, when it accepted the down payment of P50,000.00.
Plaintiff, therefore, cannot say that it was deceived by defendant Edwin
B. Cuizon, since in the instant case the principal has ratified the act of
its agent and plaintiff knew about said ratification. Plaintiff could not
say that the subject contract was entered into by Edwin B. Cuizon in
excess of his powers since [Impact] Systems Sales made a down
payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B.
23
Cuizon be dropped as party defendant.
Aggrieved by the adverse ruling of the trial court, petitioner brought the
matter to the Court of Appeals which, however, affirmed the 29
January 2002 Order of the court a quo. The dispositive portion of the
now assailed Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the
conclusions reached by the public respondent in his Order dated
24
January 29, 2002, it is hereby AFFIRMED.

Petitioners motion for reconsideration was denied by the appellate

court in its Resolution promulgated on 17 March 2005. Hence, the
present petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT
OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS NOT
PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED
BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE
25
IN THE PERPETUATION OF A FRAUD.
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
26
be made personally liable for the obligations of his principal.
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
27
obvious signs of conspiracy to defraud petitioner.
28

In his Comment, 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
29
latters consent. 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
30
transporting. Its purpose is to extend the personality of the principal
or the party for whom another acts and from whom he or she derives
31
the authority to act. 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
32
principal. By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence qui facit per
33
alium facit per se.
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
34
the scope of his authority.
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 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
35
interests of his principal entrusted to his management. x x x.
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
36
Systems indebtedness. 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
37
payment on 3 March 1995, it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment
38
of its receivables from Toledo Power Company on 28 June 1995. 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 Article 1897 of the New Civil
Code upon which petitioner anchors its claim against respondent
EDWIN "does not hold that in case of excess of authority, both the
39
agent and the principal are liable to the other contracting party." 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
40
both the principal and the agent.
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
41
the party entitled to the avails of the suit." 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.
SO ORDERED.

Tuazon v. Heirs of Ramos

S tripped of nonessentials, the present case involves the
collection of a sum of money. Specifically, this case arose from the
failure of petitioners to pay respondents predecessor-in-interest.
This fact was shown by the non-encashment of checks issued by a
third person, but indorsed by herein Petitioner Maria Tuazon in
favor of the said predecessor. Under these circumstances, to
enable respondents to collect on the indebtedness, the check
drawer need not be impleaded in the Complaint. Thus, the suit is
directed, not against the drawer, but against the debtor who
indorsed the checks in payment of the obligation.
The Case
[1]

Before us is a Petition for Review under Rule 45 of the Rules of

[2]
Court, challenging the July 31, 2002 Decision of the Court of Appeals
(CA) in CA-GR CV No. 46535. The decretal portion of the assailed
Decision reads:
WHEREFORE, the
is DISMISSED and
the
appealed
is AFFIRMED.

appeal
decision

[3]

On the other hand, the affirmed Decision of Branch 34 of the

Regional Trial Court (RTC) of Gapan, Nueva Ecija, disposed as
follows:
WHEREFORE, judgment is hereby rendered in
favor of the plaintiffs and against the defendants,
ordering the defendants spouses Leonilo Tuazon
and Maria Tuazon to pay the plaintiffs, as follows:
1. The sum of P1,750,050.00, with interests from the filing
of the second amended complaint;
2. The sum of P50,000.00, as attorneys fees;
3. The sum of P20,000.00, as moral damages
4. And to pay the costs of suit.
xxxxxxxxx

[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.

Buenaventura x x x[,] as well as their residential

lot and the house thereon[,] all located at Nueva
Ecija, and 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, [copetitioner] 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
[5]
not be held answerable.
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.
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.

xxxxxxxxx

Ruling of the Court of Appeals

[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.

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.

[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

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
[7]
Santos, an indispensable party to the suit.
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
[8]
Court. 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,
[9]
with the latters consent or authority. 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
[10]
authority. 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
[11]
generally no agency.
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 rice dealership. The
question of whether a contract is one of sale or of agency depends on
[12]
the intention of the parties.
The declarations of agents alone are generally insufficient to
[13]
establish the fact or extent of their authority. The law makes no
presumption of agency; proving its existence, nature and extent is
[14]
incumbent upon the person alleging it. 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
[15]
Section 2 of Rule 3 of the Rules on Civil Procedure. 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 questioned checks
in favor of respondents, in accordance with Sections 31 and 63 of the
[16]
Negotiable Instruments Law. 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
[17]
would pay the corresponding amount. 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
[18]
indorser. 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
[19]
no final determination can be had. 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.

[G.R. No. 123560. March 27, 2000]

SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners, vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD
SERVICES, INC., JULIETA CANILAO and CLAUDIA
TAGUNICAR, respondents.
DECISION
PUNO, J.:
This petition for review seeks a reversal of the 31 August 1995
[1]
[2]
Decision and 11 January 1998 Resolution of the Court of Appeals
holding private respondent Claudia Tagunicar solely liable for moral
and exemplary damages and attorneys fees, and deleting the trial
courts award for actual damages.
The facts as found by the trial court are as follows: Kycalr
"Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and
Achilles Marketing. In connection with [this] business, he travels
from time to time to Malaysia, Taipei and Hongkong. On July 10,
1976, plaintiffs bought plane tickets (Exhs. A & B) from defendant
Claudia Tagunicar who represented herself to be an agent of
defendant Tourist World Services, Inc. (TWSI). The destination[s]
are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of
P25,000.00 per computation of said defendant Claudia Tagunicar
(Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New
Jersey, U.S.A. to buy two (2) lines of infrared heating system
processing textured plastic article (Exh. K).
"On said date, only the passage from Manila to Hongkong, then
to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to San
Francisco was on "RQ" status, meaning "on request". Per
instruction of defendant Claudia Tagunicar, plaintiffs returned
after a few days for the confirmation of the Tokyo-San Francisco
segment of the trip. After calling up Canilao of TWSI, defendant
Tagunicar told plaintiffs that their flight is now confirmed all the
way. Thereafter, she attached the confirmation stickers on the
plane tickets (Exhs. A & B).

"A few days before the scheduled flight of plaintiffs, their son,
Adrian Yu, called the Pan Am office to verify the status of the
flight. According to said Adrian Yu, a personnel of defendant Pan
Am told him over the phone that plaintiffs booking[s] are
confirmed.
"On July 23, 1978, plaintiffs left for Hongkong and stayed there
for five (5) days. They left Hongkong for Tokyo on July 28, 1978.
Upon their arrival in Tokyo, they called up Pan-Am office for
reconfirmation of their flight to San Francisco. Said office,
however, informed them that their names are not in the manifest.
Since plaintiffs were supposed to leave on the 29th of July,
1978, and could not remain in Japan for more than 72 hours,
they were constrained to agree to accept airline tickets for Taipei
instead, per advise of JAL officials. This is the only option left to
them because Northwest Airlines was then on strike, hence,
there was no chance for the plaintiffs to obtain airline seats to
the United States within 72 hours. Plaintiffs paid for these tickets.
"Upon reaching Taipei, there were no flight[s] available for
plaintiffs, thus, they were forced to return back to Manila on
August 3, 1978, instead of proceeding to the United States.
[Japan] Air Lines (JAL) refunded the plaintiffs the difference of
the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I &
J) in the total amount of P2,602.00.
"In view of their failure to reach Fairfield, New Jersey, Radiant
Heat Enterprises, Inc. cancelled Yu Eng Chos option to buy the
two lines of infra-red heating system (Exh. K). The agreement
was for him to inspect the equipment and make final
arrangement[s] with the said company not later than August 7,
1978. From this business transaction, plaintiff Yu Eng Cho
expected to realize a profit of P300,000.00 to P400,000.00."
"[A] scrutiny of defendants respective evidence reveals the
following:
"Plaintiffs, who were intending to go to the United States, were
referred to defendant Claudia Tagunicar, an independent travel
solicitor, for the purchase of their plane tickets. As such travel
solicitor, she helps in the processing of travel papers like
passport, plane tickets, booking of passengers and some
assistance at the airport. She is known to defendants Pan-Am,
TWSI/Julieta Canilao, because she has been dealing with them
in the past years. Defendant Tagunicar advised plaintiffs to take
Pan-Am because Northwest Airlines was then on strike and
plaintiffs are passing Hongkong, Tokyo, then San Francisco and
Pan-Am has a flight from Tokyo to San Francisco. After verifying
from defendant TWSI, thru Julieta Canilao, she informed
plaintiffs that the fare would be P25,093.93 giving them a
discount of P738.95 (Exhs. C, C-1). Plaintiffs, however, gave her
a check in the amount of P25,000.00 only for the two round trip
tickets. Out of this transaction, Tagunicar received a 7%
commission and 1% commission for defendant TWSI.
Defendant Claudia Tagunicar purchased the two
round-trip Pan-Am tickets from defendant Julieta
Canilao with the following schedules:
Origin Destination Airline Date Time/Travel
Manila Hongkong CX900 7-23-78 1135/1325hrs
Hongkong Tokyo CS500 7-28-78 1615/2115hrs
Tokyo San Francisco PA002 7-29-78
1930/1640hrs
The use of another airline, like in this case it is Cathay Pacific
out of Manila, is allowed, although the tickets issued are PanAm tickets, as long as it is in connection with a Pan-Am flight.
When the two (2) tickets (Exhs. A & B) were issued to
plaintiffs, the letter "RQ" appears below the printed word
"status" for the flights from Tokyo to San Francisco which
means "under request," (Exh. 3-A, 4-A Pan-Am). Before the
date of the scheduled departure, defendant Tagunicar
received several calls from the plaintiffs inquiring about the
status of their bookings. Tagunicar in turn called up

TWSI/Canilao to verify; and if Canilao would answer that the

bookings are not yet confirmed, she would relate that to the
plaintiffs. Calrky

"PREMISES CONSIDERED, the decision of the Regional Trial

Court is hereby SET ASIDE and a new one entered declaring
appellant Tagunicar solely liable for:

"Defendant Tagunicar claims that on July 13,

1978, a few days before the scheduled flight, plaintiff Yu Eng
Cho personally went to her office, pressing her about their
flight. She called up defendant Julieta Canilao, and the latter
told her "o sige Claudia, confirm na." She even noted this in
her index card (Exh. L), that it was Julieta who confirmed the
booking (Exh. L-1). It was then that she allegedly attached the
confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These
stickers came from TWSI.

1) Moral damages in the amount of P50,000.00;

Defendant Tagunicar alleges that it was only in the first week

of August, 1978 that she learned from Adrian Yu, son of
plaintiffs, that the latter were not able to take the flight from
Tokyo to San Francisco, U.S.A. After a few days, said Adrian
Yu came over with a gentleman and a lady, who turned out to
be a lawyer and his secretary. Defendant Tagunicar claims
that plaintiffs were asking for her help so that they could file an
action against Pan-Am. Because of plaintiffs promise she will
not be involved, she agreed to sign the affidavit (Exh. M)
prepared by the lawyer. Mesm
Defendants TWSI/Canilao denied having
confirmed the Tokyo-San Francisco segment of
plaintiffs flight because flights then were really
tight because of the on-going strike at Northwest
Airlines. Defendant Claudia Tagunicar is very
much aware that [said] particular segment was not
confirmed, because on the very day of plaintiffs
departure, Tagunicar called up TWSI from the
airport; defendant Canilao asked her why she
attached stickers on the tickets when in fact that
portion of the flight was not yet confirmed. Neither
TWSI nor Pan-Am confirmed the flight and never
authorized defendant Tagunicar to attach the
confirmation stickers. In fact, the confirmation
stickers used by defendant Tagunicar are stickers
exclusively for use of Pan-Am only. Furthermore, if
it is the travel agency that confirms the booking,
the IATA number of said agency should appear on
the validation or confirmation stickers. The IATA
number that appears on the stickers attached to
plaintiffs tickets (Exhs. A & B) is 2-82-0770 (Exhs.
1, 1-A TWSI), when in fact TWSIs IATA number is
[3]
2-83-0770 (Exhs. 5, 5-A TWSI)."
A complaint for damages was filed by petitioners against private
respondents Pan American World Airways, Inc.(Pan Am), Tourist
World Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia
Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of
tickets and hotel accommodations when petitioners were compelled to
stay in Hongkong and then in Tokyo by reason of the non-confirmation
of their booking with Pan-Am. In a Decision dated November 14, 1991,
the Regional Trial Court of Manila, Branch 3, held the defendants
jointly and severally liable, except defendant Julieta Canilao,
thus: Scslx
"WHEREFORE, judgment is hereby rendered for the plaintiffs and
ordering defendants Pan American World Airways, Inc., Tourist World
Services, Inc. and Claudia Tagunicar, jointly and severally, to pay
plaintiffs the sum of P200,000.00 as actual damages, minus P2,602.00
already refunded to the plaintiffs; P200,000.00 as moral damages;
P100,000.00 as exemplary damages; an amount equivalent to 20% of
the award for and as attorneys fees, plus the sum of P30,000.00 as
litigation expenses.

2) Exemplary damages in the amount of P25,000.00; and

3) Attorneys fees in the amount of P10,000.00 plus costs of
suit.
The award of actual damages is hereby DELETED.
SO ORDERED."
In so ruling, respondent court found that Tagunicar is an independent
travel solicitor and is not a duly authorized agent or representative of
either Pan Am or TWSI. It held that their business transactions are not
sufficient to consider Pan Am as the principal, and Tagunicar and
TWSI as its agent and sub-agent, respectively. It further held that
Tagunicar was not authorized to confirm the bookings of, nor issue
validation stickers to, herein petitioners and hence, Pan Am and TWSI
cannot be held responsible for her actions. Finally, it deleted the award
for actual damages for lack of proof.
Hence this petition based on the following assignment of errors: slx
mis
1. the Court of Appeals, in reversing the decision
of the trial court, misapplied the ruling in Nicos
Industrial Corporation vs. Court of Appeals, et. al.
[206 SCRA 127]; and
2. the findings of the Court of Appeals that
petitioners ticket reservations in question were not
confirmed and that there is no agency relationship
among PAN-AM, TWSI and Tagunicar are
contrary to the judicial admissions of PAN-AM,
TWSI and Tagunicar and likewise contrary to the
findings of fact of the trial court.
We affirm.
I. The first issue deserves scant consideration. Petitioners contend that
contrary to the ruling of the Court of Appeals, the decision of the trial
court conforms to the standards of an ideal decision set in Nicos
[4]
Industrial Corporation, et. al. vs. Court of Appeals, et. al., as "that
which, with welcome economy of words, arrives at the factual findings,
reaches the legal conclusions, renders its ruling and, having done so,
ends." It is averred that the trial courts decision contains a detailed
statement of the relevant facts and evidence adduced by the parties
which thereafter became the bases for the courts conclusions.
A careful scrutiny of the decision rendered by the trial court will show
that after narrating the evidence of the parties, it proceeded to dispose
of the case with a one-paragraph generalization, to wit: Missdaa
"On the basis of the foregoing facts, the Court is constrained to
conclude that defendant Pan-Am is the principal, and defendants
TWSI and Tagunicar, its authorized agent and sub-agent,
respectively. Consequently, defendants Pan-Am, TWSI and
Claudia Tagunicar should be held jointly and severally liable to
plaintiffs for damages. Defendant Julieta Canilao, who acted in
her official capacity as Office Manager of defendant TWSI
[5]
should not be held personally liable."

Defendants counterclaims are hereby dismissed for lack of merit.

SO ORDERED."
Only respondents Pan Am and Tagunicar appealed to the Court of
Appeals. On 11 August 1995, the appellate court rendered judgment
modifying the amount of damages awarded, holding private
respondent Tagunicar solely liable therefor, and absolving respondents
Pan Am and TWSI from any and all liability, thus: Slxs c

The trial courts finding of facts is but a summary of the testimonies of

the witnesses and the documentary evidence presented by the parties.
It did not distinctly and clearly set forth, nor substantiate, the factual
and legal bases for holding respondents TWSI, Pan Am and Tagunicar
[6]
jointly and severally liable. In Del Mundo vs. CA, et al. where the trial
court, after summarizing the conflicting asseverations of the parties,
disposed of the kernel issue in just two (2) paragraphs, we held: Sda
adsc

"It is understandable that courts, with their heavy

dockets and time constraints, often find
themselves with little to spare in the preparation of
decisions to the extent most desirable. We have
thus pointed out that judges might learn to
synthesize and to simplify their pronouncements.
Nevertheless, concisely written such as they may
be, decisions must still distinctly and clearly
express, at least in minimum essence, its factual
and legal bases."
For failing to explain clearly and well the factual and legal bases of its
award of moral damages, we set it aside in said case. Once more, we
stress that nothing less than Section 14 of Article VIII of the
Constitution requires that "no decision shall be rendered by any court
without expressing therein clearly and distinctly the facts and the law
on which it is based." This is demanded by the due process clause of
the Constitution. In the case at bar, the decision of the trial court
leaves much to be desired both in form and substance. Even while
said decision infringes the Constitution, we will not belabor this infirmity
and rather examine the sufficiency of the evidence submitted by the
petitioners. Rtc spped
II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI
is a duly authorized ticketing agent of Pan Am. Proceeding from this
premise, they contend that TWSI and Pan Am should be held liable as
principals for the acts of Tagunicar. Petitioners stubbornly insist that
the existence of the agency relationship has been established by the
judicial admissions allegedly made by respondents herein, to wit: (1)
the admission made by Pan Am in its Answer that TWSI is its
authorized ticket agent; (2) the affidavit executed by Tagunicar where
she admitted that she is a duly authorized agent of TWSI; and (3) the
admission made by Canilao that TWSI received commissions from
ticket sales made by Tagunicar. Korte
We do not agree. By the contract of agency, a person binds himself to
render some service or to do something in representation or on behalf
[7]
of another, with the consent or authority of the latter. The elements of
agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in
relation to a third person; (3) the agent acts as a representative and
[8]
not for himself; (4) the agent acts within the scope of his authority. It
is a settled rule that persons dealing with an assumed agent are bound
at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to
[9]
establish it.
In the case at bar, petitioners rely on the affidavit of respondent
Tagunicar where she stated that she is an authorized agent of TWSI.
This affidavit, however, has weak probative value in light of respondent
Tagunicars testimony in court to the contrary. Affidavits, being taken ex
parte, are almost always incomplete and often inaccurate, sometimes
from partial suggestion, or for want of suggestion and inquiries. Their
infirmity as a species of evidence is a matter of judicial experience and
[10]
are thus considered inferior to the testimony given in court. Further,
affidavits are not complete reproductions of what the declarant has in
mind because they are generally prepared by the administering officer
and the affiant simply signs them after the same have been read to
[11]
her. Respondent Tagunicar testified that her affidavit was prepared
and typewritten by the secretary of petitioners lawyer, Atty. Acebedo,
who both came with Adrian Yu, son of petitioners, when the latter went
to see her at her office. This was confirmed by Adrian Yu who testified
that Atty. Acebedo brought his notarial seal and notarized the affidavit
[12]
of the same day. The circumstances under which said affidavit was
prepared put in doubt petitioners claim that it was executed voluntarily
by respondent Tagunicar. It appears that the affidavit was prepared
and was based on the answers which respondent Tagunicar gave to
[13]
the questions propounded to her by Atty. Acebedo. They never told
her that the affidavit would be used in a case to be filed against
[14]
her. They even assured her that she would not be included as
[15]
defendant if she agreed to execute the affidavit. Respondent
Tagunicar was prevailed upon by petitioners son and their lawyer to
sign the affidavit despite her objection to the statement therein that she
[16]
was an agent of TWSI. They assured her that "it is immaterial" and
that "if we file a suit against you we cannot get anything from
[17]
you." This purported admission of respondent Tagunicar cannot be
used by petitioners to prove their agency relationship. At any rate,
even if such affidavit is to be given any probative value, the existence
of the agency relationship cannot be established on its sole basis. The
declarations of the agent alone are generally insufficient to establish
[18]
the fact or extent of his authority. In addition, as between the

negative allegation of respondents Canilao and Tagunicar that neither

is an agent nor principal of the other, and the affirmative allegation of
petitioners that an agency relationship exists, it is the latter who have
[19]
the burden of evidence to prove their allegation, failing in which,
their claim must necessarily fail. Sclaw
We stress that respondent Tagunicar categorically denied in open
court that she is a duly authorized agent of TWSI, and declared that
[20]
she is an independent travel agent. We have consistently ruled that
in case of conflict between statements in the affidavit and testimonial
[21]
declarations, the latter command greater weight.
As further proofs of agency, petitioners call our attention to TWSIs
Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI
[22]
received sales commissions from Pan Am. Exhibit "7" is the Ticket
Sales Report submitted by TWSI to Pan Am reflecting the
commissions received by TWSI as an agent of Pan Am. Exhibit "7[23]
A" is a listing of the routes taken by passengers who were audited to
[24]
TWSIs sales report. Exhibit "8" is a receipt issued by TWSI covering
the payment made by Tagunicar for the tickets she bought from TWSI.
These documents cannot justify the deduction that Tagunicar was paid
a commission either by TWSI or Pan Am. On the contrary, Tagunicar
testified that when she pays TWSI, she already deducts in advance
[25]
her commission and merely gives the net amount to TWSI. From all
sides of the legal prism, the transaction is simply a contract of sale
wherein Tagunicar buys airline tickets from TWSI and then sells it at a
premium to her clients. Sc lex
III. Petitioners included respondent Pan Am in the complaint on the
supposition that since TWSI is its duly authorized agent, and
respondent Tagunicar is an agent of TWSI, then Pan Am should also
be held responsible for the acts of respondent Tagunicar. Our
disquisitions above show that this contention lacks factual and legal
bases. Indeed, there is nothing in the records to show that respondent
Tagunicar has been employed by Pan Am as its agent, except the
bare allegation of petitioners. The real motive of petitioners in suing
Pan Am appears in its Amended Complaint that "[d]efendants TWSI,
Canilao and Tagunicar may not be financially capable of paying
plaintiffs the amounts herein sought to be recovered, and in such
event, defendant Pan Am, being their ultimate principal, is primarily
[26]
and/or subsidiarily liable to pay said amounts to plaintiffs." This
lends credence to respondent Tagunicars testimony that she was
persuaded to execute an affidavit implicating respondents because
petitioners knew they would not be able to get anything of value from
her. In the past, we have warned that this Court will not tolerate an
abuse of the judicial process by passengers in order to pry on
[27]
international airlines for damage awards, like "trophies in a safari."
This meritless suit against Pan Am becomes more glaring with
petitioners inaction after they were bumped off in Tokyo. If petitioners
were of the honest belief that Pan Am was responsible for the
misfortune which beset them, there is no evidence to show that they
lodged a protest with Pan Ams Tokyo office immediately after they
were refused passage for the flight to San Francisco, or even upon
their arrival in Manila. The testimony of petitioner Yu Eng Cho in this
regard is of little value, viz.:
"Atty. Jalandoni: x x x
q Upon arrival at the Tokyo airport, what did you
do if any in connection with your schedule[d] trip?
a I went to the Hotel, Holiday Inn and from there I
immediately called up Pan Am office in Tokyo to
reconfirm my flight, but they told me that our
names were not listed in the manifest, so next
morning, very early in the morning I went to the
airport, Pan Am office in the airport to verify and
they told me the same and we were not allowed to
leave.
q You were scheduled to be in Tokyo for how long
Mr. Yu?
a We have to leave the next day 29th.
q In other words, what was your status as a
passenger?

a Transient passengers. We cannot stay there for

more than 72 hours.
xxxxxxxxx
q As a consequence of the fact that you claimed
that the Pan Am office in Tokyo told you that your
names were not in the manifest, what did you do,
if any?
a I ask[ed] them if I can go anywhere in the
States? They told me I can go to LA via Japan
Airlines and I accepted it.
q Do you have the tickets with you that they
issued for Los Angeles?
a It was taken by the Japanese Airlines instead
they issue[d] me a ticket to Taipei.
xxxxxxxxx
q Were you able to take the trip to Los Angeles via
Pan Am tickets that was issued to you in lieu of
the tickets to San Francisco?
a No, sir.

the presumption of good faith. They have failed to show any wanton,
malevolent or reckless misconduct imputable to respondent Pan Am in
its refusal to accommodate petitioners in its Tokyo-San Francisco
flight. Pan Am could not have acted in bad faith because petitioners
did not have confirmed tickets and more importantly, they were not in
the passenger manifest. Sc
In not a few cases, this Court did not hesitable to hold an airline liable
for damages for having acted in bad faith in refusing to accommodate
a passenger who had a confirmed ticket and whose name appeared in
the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines
[32]
Inc. we ruled that there was a valid and binding contract between
the airline and its passenger after finding that validating sticker on the
passengers ticket had the letters "O.K." appearing in the Res. Status
box which means "space confirmed" and that the ticket is confirmed or
[33]
validated. In Pan American World Airways Inc. v. IAC, et al. where a
would-be-passenger had the necessary ticket, baggage claim and
clearance from immigration all clearly showing that she was a
confirmed passenger and included in the passenger manifest and yet
was denied accommodation in said flight, we awarded damages.
[34]
In Armovit, et al. v. CA, et al., we upheld the award of damages
made against an airline for gross negligence committed in the
issuance of tickets with erroneous entries as to the time of flight.
[35]
In Alitalia Airways v. CA, et al., we held that when airline issues a
ticket to a passenger confirmed on a particular flight, on a certain date,
a contract of carriage arises, and the passenger has every right to
expect that he would fly on that flight and on that date. If he does not,
then the carrier opens itself to a suit for breach of contract of carriage.
And finally, an award of damages was held proper in the case
[36]
of Zalamea, et al. v. CA, et al., where a confirmed passenger
included in the manifest was denied accommodation in such
flight. Scmis

q Why not?
a The Japanese Airlines said that there were no
more available seats.
q And as a consequence of that, what did you do,
if any?
a I am so much scared and worried, so the
Japanese Airlines advised us to go to Taipei
and I accepted it.
xxxxxxxxx
q Why did you accept the Japan Airlines offer for
you to go to Taipei?
a Because there is no chance for us to go to the
United States within 72 hours because during that
time Northwest Airlines [was] on strike so the
seats are very scarce. So they advised me better
left (sic) before the 72 hours otherwise you will
have trouble with the Japanese immigration.
q As a consequence of that you were force[d] to
take the trip to Taipei?
a Yes, sir."

[28]

(emphasis supplied)

It grinds against the grain of human experience that petitioners did not
insist that they be allowed to board, considering that it was then doubly
difficult to get seats because of the ongoing Northwest Airlines strike. It
is also perplexing that petitioners readily accepted whatever the Tokyo
office had to offer as an alternative. Inexplicably too, no demand letter
[29]
was sent to respondents TWSI and Canilao. Nor was a demand
letter sent to respondent Pan Am. To say the least, the motive of
petitioners in suing Pan Am is suspect. x law
We hasten to add that it is not sufficient to prove that Pan Am did not
allow petitioners to board to justify petitioners claim for damages. Mere
refusal to accede to the passengers wishes does not necessarily
[30]
translate into damages in the absence of bad faith. The settled rule
is that the law presumes good faith such that any person who seeks to
be awarded damages due to acts of another has the burden of proving
[31]
that the latter acted in bad faith or with ill motive. In the case at bar,
we find the evidence presented by petitioners insufficient to overcome

On the other hand, the respondent airline in Sarreal, Sr. v. Japan

[37]
Airlines Co., Ltd., was held not liable for damages where the
passenger was not allowed to board the plane because his ticket had
not been confirmed. We ruled that "[t]he stub that the lady employee
put on the petitioners ticket showed among other coded items, under
the column "status" the letters "RQ" which was understood to mean
"Request." Clearly, this does not mean a confirmation but only a
request. JAL Traffic Supervisor explained that it would have been
different if what was written on the stub were the letter "ok" in which
case the petitioner would have been assured of a seat on said flight.
But in this case, the petitioner was more of a wait-listed passenger
than a regularly booked passenger." Mis sc
In the case at bar, petitioners ticket were on "RQ" status. They were
not confirmed passengers and their names were not listed in the
passenger manifest. In other words, this is not a case where Pan Am
bound itself to transport petitioners and thereafter reneged on its
obligation. Hence, respondent airline cannot be held liable for
damages.Mis spped
IV. We hold that respondent Court of Appeals correctly ruled that the
tickets were never confirmed for good reasons: (1) The persistent calls
made by respondent Tagunicar to Canilao, and those made by
petitioners at the Manila, Hongkong and Tokyo offices of Pan Am, are
eloquent indications that petitioners knew that their tickets have not
been confirmed. For, as correctly observed by Pan Am, why would one
continually try to have ones ticket confirmed if it had already been
confirmed? (2) The validation stickers which respondent Tagunicar
attached to petitioners tickets were those intended for the exclusive
use of airline companies. She had no authority to use them. Hence,
said validation stickers, wherein the word "OK" appears in the status
box, are not valid and binding. (3) The names of petitioners do not
appear in the passenger manifest. (4) Respondent Tagunicars "Exhibit
[38]
1" shows that the status of the San Francisco-New York segment
was "Ok", meaning it was confirmed, but that the status of the TokyoSan Francisco segment was still "on request". (5) Respondent Canilao
testified that on the day that petitioners were to depart for Hongkong,
respondent Tagunicar called her from the airport asking for
confirmation of the Tokyo-San Francisco flight, and that when she told
respondent Tagunicar that she should not have allowed petitioners to
leave because their tickets have not been confirmed, respondent
[39]
Tagunicar merely said "Bahala na." This was never controverted nor
refuted by respondent Tagunicar. (6) To prove that it really did not
confirm the bookings of petitioners, respondent Canilao pointed out
that the validation stickers which respondent Tagunicar attached to the
tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas
[40]
the IATA number of TWSI is 28-30770.

Undoubtedly, respondent Tagunicar should be liable for having acted

in bad faith in misrepresenting to petitioners that their tickets have
been confirmed. Her culpability, however, was properly mitigated.
Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on
the confirmation of their tickets with Pan Am because he doubted the
[41]
confirmation made by respondent Tagunicar. This is clear proof that
petitioners knew that they might be bumped off at Tokyo when they
decided to proceed with the trip. Aware of this risk, petitioners exerted
efforts to confirm their tickets in Manila, then in Hongkong, and finally
in Tokyo. Resultantly, we find the modification as to the amount of
damages awarded just and equitable under the circumstances. Spped
WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost
against petitioners. Jo spped
SO ORDERED.
G.R. No. 76931

May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,

vs.
COURT OF APPEALS and AMERICAN AIR-LINES
INCORPORATED, respondents.
G.R. No. 76933

sales agents and the general public in the

assigned territory;
(d) servicing and supervising of sales agents
(including such sub-agents as may be appointed
by Orient Air Services with the prior written
consent of American) in the assigned territory
including if required by American the control of
remittances and commissions retained; and
(e) holding out a passenger reservation facility to
sales agents and the general public in the
assigned territory.
In connection with scheduled or non-scheduled air
passenger transportation within the United States, neither
Orient Air Services nor its sub-agents will perform services
for any other air carrier similar to those to be performed
hereunder for American without the prior written consent of
American. Subject to periodic instructions and continued
consent from American, Orient Air Services may sell air
passenger transportation to be performed within the United
States by other scheduled air carriers provided American
does not provide substantially equivalent schedules between
the points involved.

May 29, 1991

xxx

AMERICAN AIRLINES, INCORPORATED, petitioner,

vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL
REPRESENTATIVES, INCORPORATED,respondents.
This case is a consolidation of two (2) petitions for review
1
on certiorari of a decision of the Court of Appeals in CA-G.R. No. CV04294, entitled "American Airlines, Inc. vs. Orient Air Services and
Hotel Representatives, Inc." which affirmed, with modification, the
2
decision of the Regional Trial Court of Manila, Branch IV, which
dismissed the complaint and granted therein defendant's counterclaim
for agent's overriding commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as
American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel
Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the
Agreement), whereby the former authorized the latter to act as its
exclusive general sales agent within the Philippines for the sale of air
passenger transportation. Pertinent provisions of the agreement are
reproduced, to wit:

xxx

xxx

4. Remittances
Orient Air Services shall remit in United States dollars to
American the ticket stock or exchange orders, less
commissions to which Orient Air Services is entitled
hereunder, not less frequently than semi-monthly, on the
15th and last days of each month for sales made during the
preceding half month.
All monies collected by Orient Air Services for transportation
sold hereunder on American's ticket stock or on exchange
orders, less applicable commissions to which Orient Air
Services is entitled hereunder, are the property of American
and shall be held in trust by Orient Air Services until
satisfactorily accounted for to American.
5. Commissions
American will pay Orient Air Services commission on
transportation sold hereunder by Orient Air Services or its
sub-agents as follows:
(a) Sales agency commission

WITNESSETH
In consideration of the mutual convenants herein contained,
the parties hereto agree as follows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalf as its
exclusive General Sales Agent within the Philippines,
including any United States military installation therein which
are not serviced by an Air Carrier Representation Office
(ACRO), for the sale of air passenger transportation. The
services to be performed by Orient Air Services shall
include:
(a) soliciting and promoting passenger traffic for
the services of American and, if necessary,
employing staff competent and sufficient to do so;
(b) providing and maintaining a suitable area in its
place of business to be used exclusively for the
transaction of the business of American;
(c) arranging for distribution of American's
timetables, tariffs and promotional material to

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.
11. IATA and ATC Rules
The provisions of this Agreement are subject to any
applicable rules or resolutions of the International Air
Transport Association and the Air Traffic Conference of
America, and such rules or resolutions shall control in the
event of any conflict with the provisions hereof.
xxx

xxx

xxx

13. Termination
American may terminate the Agreement on two days' notice
in the event Orient Air Services is unable to transfer to the
United States the funds payable by Orient Air Services to
American under this Agreement. Either party may terminate
the Agreement without cause by giving the other 30 days'
notice by letter, telegram or cable.
xxx

xxx

xxx

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
4
Order 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
5
and prejudice of plaintiff."
6

In its Answer 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, rendering a decision
dated 16 July 1984, the dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered,
judgment is hereby rendered in favor of defendant and
against plaintiff dismissing the complaint and holding the
termination made by the latter as affecting the GSA
agreement illegal and improper and order the plaintiff to
reinstate defendant as its general sales agent for passenger

tranportation in the Philippines in accordance with said GSA

agreement; plaintiff is ordered to pay defendant the balance
of the overriding commission on total flown revenue covering
the period from March 16, 1977 to December 31, 1980 in the
amount of US$84,821.31 plus the additional amount of
US$8,000.00 by way of proper 3% overriding commission
per month commencing from January 1, 1981 until such
reinstatement or said amounts in its Philippine peso
equivalent legally prevailing at the time of payment plus legal
interest to commence from the filing of the counterclaim up
to the time of payment. Further, plaintiff is directed to pay
defendant the amount of One Million Five Hundred
Thousand (Pl,500,000.00) pesos as and for exemplary
damages; and the amount of Three Hundred Thousand
(P300,000.00) pesos as and by way of attorney's fees.
Costs against plaintiff.

On appeal, the Intermediate Appellate Court (now Court of Appeals) in

a decision promulgated on 27 January 1986, affirmed the findings of
the court a quo on their material points but with some modifications
with respect to the monetary awards granted. The dispositive portion of
the appellate court's decision is as follows:
WHEREFORE, with the following modifications
1) American is ordered to pay Orient the sum
of US$53,491.11 representing the balance of the latter's
overriding commission covering the period March 16, 1977
to December 31, 1980, or its Philippine peso equivalent in
accordance with the official rate of exchange legally
prevailing on July 10, 1981, the date the counterclaim was
filed;
2) American is ordered to pay Orient the sum of
US$7,440.00 as the latter's overriding commission per
month starting January 1, 1981 until date of termination, May
9, 1981 or its Philippine peso equivalent in accordance with
the official rate of exchange legally prevailing on July 10,
1981, the date the counterclaim was filed
3) American is ordered to pay interest of 12% on said
amounts from July 10, 1981 the date the answer with
counterclaim was filed, until full payment;
4) American is ordered to pay Orient exemplary damages of
P200,000.00;
5) American is ordered to pay Orient the sum of
P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American.

American Air moved for reconsideration of the aforementioned

decision, assailing the substance thereof and arguing for its reversal.
The appellate court's decision was also the subject of a Motion for
Partial Reconsideration by Orient Air which prayed for the restoration
of the trial court's ruling with respect to the monetary awards. The
Court of Appeals, by resolution promulgated on 17 December 1986,
denied American Air's motion and with respect to that of Orient Air,
ruled thus:
Orient's motion for partial reconsideration is denied insofar
as it prays for affirmance of the trial court's award of
exemplary damages and attorney's fees, but granted insofar
as the rate of exchange is concerned. The decision of
January 27, 1986 is modified in paragraphs (1) and (2) of the
dispositive part so that the payment of the sums mentioned
therein shall be at their Philippine peso equivalent in
accordance with the official rate of exchange legally
9
prevailing on the date of actual payment.
Both parties appealed the aforesaid resolution and decision of the
respondent court, Orient Air as petitioner in G.R. No. 76931 and
10
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.
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:

the Civil Code provides that the interpretation of obscure words or

stipulations in a contract shall not favor the party who caused the
14
obscurity. To put it differently, when several interpretations of a
provision are otherwise equally proper, that interpretation or
construction is to be adopted which is most favorable to the party in
whose favor the provision was made and who did not cause the
15
ambiguity. We therefore agree with the respondent appellate court's
declaration that:
Any ambiguity in a contract, whose terms are susceptible of
different interpretations, must be read against the party who
16
drafted it.

5. Commissions
a) . . .

We now turn to the propriety of American Air's termination of the

Agreement. The respondent appellate court, on this issue, ruled thus:

b) Overriding Commission

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. . . ."

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 itssubagents. (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 subagents, 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
11
Air's services are necessarily by Orient Air."
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
12
meaning of its provisions. The various stipulations in the contract
13
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

We agree with the findings of the respondent appellate court. As

earlier established, Orient Air was entitled to an overriding commission
based on total flown revenue. American Air's perception that Orient Air
was remiss or in default of its obligations under the Agreement was, in
fact, a situation where the latter acted in accordance with the
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.
On the matter of damages, the respondent appellate court modified by
reduction the trial court's award of exemplary damages and attorney's
fees. This Court sees no error in such modification and, thus, affirms
the same.
It is believed, however, that respondent appellate court erred in
affirming the rest of the decision of the trial court.1wphi1We 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."
By affirming this ruling of the trial court, respondent appellate court, in
effect, compels American Air to extend its personality to Orient Air.
Such would be violative of the principles and essence of agency,
defined by law as a contract whereby "a person binds himself to render
some service or to do something in representation or on behalf of
another, WITH THE CONSENT OR AUTHORITY OF THE LATTER
17
. (emphasis supplied) In an agent-principal relationship, the
personality of the principal is extended through the facility of the agent.
In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such
a relationship can only be effected with the consent of the principal,
which must not, in any way, be compelled by law or by any court. The
Agreement itself between the parties states that "either party may
terminate the Agreementwithout 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.
WHEREFORE, with the foregoing modification, the Court AFFIRMS
the decision and resolution of the respondent Court of Appeals, dated
27 January 1986 and 17 December 1986, respectively. Costs against
petitioner American Air.
SO ORDERED.
JOSE

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

DECISION
REGALADO, J.:
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
[1]
and jewelry from petitioners amounting to P382,816.00. 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
[2]
indicated that they were received for Brigida D. Luz.
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 ofP53,207.00. 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
[3]
of P725,463.98. 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
[4]
application for preliminary attachment. Ernesto Luz was impleaded
therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D.
[5]
Luz were charged with estafa in the Regional Trial Court of Malolos,
Bulacan, which was docketed as Criminal Case No. 785-M-94. That
criminal case appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos
acted as the agent of Brigida D. Luz when he received the subject
items of jewelry and, because he failed to pay for the same, Brigida, as
principal, and her spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an
unpaid obligation to petitioners, he claimed that the same was only in
the sum of P382,816.00 and notP725,463.98. 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
[6]
principal account which she had previously paid for.
The trial court also found that it was petitioner Lydia Bordador
who indicated in the receipts that the items were received by Deganos
[7]
for Evelyn Aquino and Brigida D. Luz. 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

[8]

unenforceable under the Statute of Frauds. 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[9]
defendant spouse were absolved from any other or further liability.
As stated at the outset, petitioners appealed the judgment of the
court a quo to the Court of Appeals which affirmed said
[10]
judgment.
The motion for reconsideration filed by petitioners was
[11]
subsequently dismissed,
hence the present recourse to this Court.
The primary issue in the instant petition is whether or not herein
respondent spouses are liable to petitioners for the latters claim for
money and damages in the sum ofP725,463.98, 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.
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
[12]
(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
[13]
under such belief.
Petitioners further represent that the Court of
Appeals recognized in its decision that Deganos was an agent of
[14]
Brigida.
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
[15]
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
[16]
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.
Petitioners next allege that the Court of Appeals erred in ignoring
the fact that the decision of the court below, which it affirmed, is null
and void as it contradicted its ruling in CA-G.R. SP No. 39445 holding
that there is sufficient evidence/proof against Brigida D. Luz and
Deganos for estafa in the pending criminal case. They further aver that
said appellate court erred in ruling against them in this civil action
since the same would result in an inevitable conflict of decisions
should the trial court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners, herein
respondents Brigida D. Luz and Deganos had filed a demurrer to
evidence and a motion for reconsideration in the aforestated criminal
case, both of which were denied by the trial court. They then filed a
petition for certiorari in the Court of Appeals to set aside the denial of
their demurrer and motion for reconsideration but, as just stated, their
[17]
petition therefor was dismissed.
Petitioners now claim that the aforesaid dismissal by the Court of
Appeals of the petition in CA-G.R. SP No. 39445 with respect to the
criminal case is equivalent to a finding that there is sufficient evidence
in the estafa case against Brigida D. Luz and Deganos. Hence, as
already stated, petitioners theorize that the decision and resolution of
the Court of Appeals now being impugned in the case at bar would
result in a possible conflict with the prospective decision in the criminal
case. Instead of promulgating the present decision and resolution
under review, so they suggest, the Court of Appeals should have
awaited the decision in the criminal case, so as not to render academic
[18]
or preempt the same or, worse, create two conflicting rulings.
Petitioners have apparently lost sight of Article 33 of the Civil
Code which provides that in cases involving alleged fraudulent acts, a
civil action for damages, entirely separate and distinct from the criminal
action, may be brought by the injured party. Such civil action shall
proceed independently of the criminal prosecution and shall require
only a preponderance of evidence.
It is worth noting that this civil case was instituted four years
before the criminal case for estafa was filed, and that although there
was a move to consolidate both cases, the same was denied by the
trial court. Consequently, it was the duty of the two branches of the
Regional Trial Court concerned to independently proceed with the civil
and criminal cases. It will also be observed that a final judgment
rendered in a civil action absolving the defendant from civil liability is
[19]
no bar to a criminal action.
It is clear, therefore, that this civil case may proceed
[20]
independently of the criminal case
especially because while both
cases are based on the same facts, the quantum of proof required for
holding the parties liable therein differ. Thus, it is improvident of
petitioners to claim that the decision and resolution of the Court of
Appeals in the present case would be preemptive of the outcome of
the criminal case. Their fancied fear of possible conflict between the
disposition of this civil case and the outcome of the pending criminal
case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had
lost its jurisdiction to issue the denial resolution dated August 18, 1997,
as the same was tainted with irregularities and badges of fraud
[21]
perpetrated by its court officers.
They charge that said appellate
court, through conspiracy and fraud on the part of its officers, gravely
abused its discretion in issuing that resolution denying their motion for
reconsideration. They claim that said resolution was drafted by
the ponente, then signed and issued by the members of the Eleventh
Division of said court within one and a half days from the elevation
thereof by the division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in
issuing the resolution as the same was made without waiting for the
lapse of the ten-day period for respondents to file their comment and
for petitioners to file their reply. It was allegedly impossible for the
Court of Appeals to resolve the issue in just one and a half days,
especially because its ponente, the late Justice Maximiano C.

Asuncion, was then recuperating from surgery and, that, additionally,

[22]
hundreds of more important cases were pending.
These lamentable allegation of irregularities in the Court of
Appeals and in the conduct of its officers strikes us as a desperate
attempt of petitioners to induce this Court to give credence to their
arguments which, as already found by both the trial and intermediate
appellate courts, are devoid of factual and legal substance. The
regrettably irresponsible attempt to tarnish the image of the
intermediate appellate tribunal and its judicial officers through ad
hominem imputations could well be contumacious, but we are inclined
to let that pass with a strict admonition that petitioners refrain from
indulging in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this
[23]
case affirming the trial courts decision.
Petitioners moved for
reconsideration and the Court of Appeals ordered respondents to file a
[24]
comment. Respondents filed the same on August 5, 1997
and
[25]
petitioners filed their reply to said comment on August 15, 1997. The
Eleventh Division of said court issued the questioned resolution
[26]
denying petitioners motion for reconsideration on August 18, 1997.
It is ironic that while some litigants malign the judiciary for being
supposedly slothful in disposing of cases, petitioners are making a
show of calling out for justice because the Court of Appeals issued a
resolution disposing of a case sooner than expected of it. They would
even deny the exercise of discretion by the appellate court to prioritize
its action on cases in line with the procedure it has adopted in
disposing thereof and in declogging its dockets. It is definitely not for
the parties to determine and dictate when and how a tribunal should
act upon those cases since they are not even aware of the status of
the dockets and the internal rules and policies for acting thereon.
The fact that a resolution was issued by said court within a
relatively short period of time after the records of the case were
elevated to the office of the ponentecannot, by itself, be deemed
irregular. There is no showing whatsoever that the resolution was
issued without considering the reply filed by petitioners. In fact, that
brief pleading filed by petitioners does not exhibit any esoteric or
ponderous argument which could not be analyzed within an hour. It is
a legal presumption, born of wisdom and experience, that official duty
[27]
has been regularly performed;
that the proceedings of a judicial
tribunal are regular and valid, and that judicial acts and duties have
[28]
been and will be duly and properly performed.
The burden of
proving irregularity in official conduct is on the part of petitioners and
they have utterly failed to do so. It is thus reprehensible for them to
cast aspersions on a court of law on the bases of conjectures or
surmises, especially since one of the petitioners appears to be a
member of the Philippine Bar.
Lastly, petitioners fault the trial courts holding that whatever
contract of agency was established between Brigida D. Luz and
Narciso Deganos is unenforceable under the Statute of Frauds as that
[29]
aspect of this case allegedly is not covered thereby.
They proceed
on the premise that the Statute of Frauds applies only to executory
contracts and not to executed or to partially executed ones. From
there, they move on to claim that the contract involved in this case was
an executed contract as the items had already been delivered by
petitioners to Brigida D. Luz, hence, such delivery resulted in the
execution of the contract and removed the same from the coverage of
the Statute of Frauds.
Petitioners claim is speciously unmeritorious. It should be
emphasized that neither the trial court nor the appellate court
categorically stated that there was such a contractual relation between
these two respondents. The trial court merely said that if there was
such an agency existing between them, the same is unenforceable as
the contract would fall under the Statute of Frauds which requires the
presentation of a note or memorandum thereof in order to be
enforceable in court. That was merely a preparatory statement of a
principle of law. What was finally proven as a matter of fact is that
there was no such contract between Brigida D. Luz and Narciso
Deganos, executed or partially executed, and no delivery of any of the
items subject of this case was ever made to the former.
WHEREFORE, no error having been committed by the Court of
Appeals in affirming the judgment of the court a quo, its challenged
decision and resolution are hereby AFFIRMED and the instant petition
is DENIED, with double costs against petitioners
SO ORDERED.