Orient Air v CA American Air may not be compelled by the courts to reinstate Orient Air as its agent as it

would be violative of the principles and essence of agency (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).

American Air and Orient Air entered into a General Sales Agency Agreement where the latter would
serve as the former's exclusive sales agent. American Air alleged that Orient Air breached their contract
as its manner of remittance was not in accord with their contract (when in fact, it had the right to remit
less its commission and reatin the same in full). CA ruled in favor of Orient Air, among its orders was
to reinstate Orient Air as American Air's agent. This was struck down by the SC.

PADILLA, J.:

FACTS:

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), where American Air authorized Orient Air to be its exclusive
general sales agent within the Philippines for the sale of air passenger transportation. Pertinent provisions
of the agreement are reproduced, to wit:

WITNESSETH

In consideration of the mutual 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
sales agents and the general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may be
appointed by Orient Air Services with the prior written consent of American) in the assigned
territory including if required by American the control of remittances and commissions
retained; and

(e) holding out a passenger reservation facility to sales agents and the general public in the
assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within the United
States, neither Orient Air Services nor its sub-agents will perform services for any other air
carrier similar to those to be performed hereunder for American without the prior written
consent of American. Subject to periodic instructions and continued consent from American,
Orient Air Services may sell air passenger transportation to be performed within the United States
by other scheduled air carriers provided American does not provide substantially equivalent
schedules between the points involved.

xxx xxx xxx

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock or exchange
orders, less commissions to which Orient Air Services is entitled hereunder, not less frequently than
semi-monthly, on the 15th and last days of each month for sales made during the preceding half
month.

All monies collected by Orient Air Services for transportation sold hereunder on American's ticket
stock or on exchange orders, less applicable commissions to which Orient Air Services is entitled
hereunder, are the property of American and shall be held in trust by Orient Air Services until
satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder by Orient Air
Services or its sub-agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all sales of transportation by
Orient Air Services or its sub-agents over American's services and any connecting through air
transportation, when made on American's ticket stock, equal to the following percentages of the
tariff fares and charges:

(i) For transportation solely between points within the United States and between such
points and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic
Conference of America.

(ii) For transportation included in a through ticket covering transportation between points
other than those described above: 8% or such other rate(s) as may be prescribed by the
International Air Transport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services an overriding
commission of 3% of the tariff fares and charges for all sales of transportation over 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 x x x3

On 11 May 1981, American Air alleged that Orient Air had reneged on its obligations under the Agreement
by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the
amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold
originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the
Court of First Instance of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment,
Mandatory Injunction and Restraining Order 4 averring the aforesaid basis for the termination of the
Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding
refunds of which there were available funds in the possession of the defendant, . . . to the damage and
prejudice of plaintiff." 5

In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations
of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending
that after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed
Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that the actions
taken by American Air in the course of terminating the Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its
business interests.

RTC decided in favor of Orient Air and ordered the same's reinstatement as general sales agent and pay
the balance of the commission.

CA affirmed with modifications.

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. CA denied American Air's motion but partially modified the decision based on Orient Air's
motion.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that such commission is based only on sales of its services
actually negotiated or transacted by Orient Air, otherwise referred to as "ticketed sales." As basis thereof,
primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:
 5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an overriding
commission of 3% of the tariff fees and charges for all sales of transportation over American's
services by Orient Air Servicesor its sub-agents. (Emphasis supplied)

Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted
to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the
disputed overriding commission based only on ticketed sales. This is supposed to be the clear meaning of
the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission,
the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket
stocks.

On the other hand, Orient Air contends that 3% overriding commission covers the total revenue of
American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter
claims that as the exclusive General Sales Agent of American Air, with the corresponding obligations
arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect,
by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily
by Orient Air." 11

It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken
into consideration to ascertain the meaning of its provisions. 12 The various stipulations in the contract must
be read together to give effect to all. 13 After a careful examination of the records, the Court finds merit in
the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing
principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the
parties, "total flown revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for air passenger transportation, and the solicitation of
sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two (2)
kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by
Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of
tariff fares and charges for all sales of passenger transportation over American Air services. It is
immediately observed that the precondition attached to the first type of commission does not obtain for the
second type of commissions. The latter type of commissions would accrue for sales of American Air
services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or
other authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from American Air ticket stock would erase any distinction between the two
(2) types of commissions and would lead to the absurd conclusion that the parties had entered into a
contract with meaningless provisions. Such an interpretation must at all times be avoided with every effort
exerted to harmonize the entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that American Air was
the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of
adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity
and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code
provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity. 14 To put it differently, when several interpretations of a provision are otherwise
equally proper, that interpretation or construction is to be adopted which is most favorable to the party in
whose favor the provision was made and who did not cause the ambiguity. 15 We therefore agree with the
respondent appellate court's declaration that:

Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read
against the party who drafted it. 16

We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate
court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds justification from paragraph 4
of the Agreement, Exh. F, which provides for remittances to American less commissions to which
Orient is entitled, and from paragraph 5(d) which specifically allows Orient to retain the full
amount of its commissions. Since, as stated ante, Orient is entitled to the 3% override.
American's premise, therefore, for the cancellation of the Agreement did not exist. . . ."

We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled
to an overriding commission based on total flown revenue. American Air's perception that Orient Air was
remiss or in default of its obligations under the Agreement was, in fact, a situation where the latter acted in
accordance with the 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.

PERTINENT ISSUE: It is believed, however, that respondent appellate court erred in affirming the rest of
the decision of the trial court. We refer particularly to the lower court's decision ordering American Air to
1wphi1

"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
Agreement without cause by giving the other 30 days' notice by letter, telegram or cable."

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.
Rallos v CA: When an agency relationship is established, and the agent acts for the principal, he is insofar as
the world is concerned essentially the principal acting in the particular contract or transaction on hand.
Consequently, the acts of the agent on behalf of the principal within the scope of the authority have the same
legal effect and consequence as though the principal had been the one so acting in the given situation.

Brother received SPOA from sisters. One of the principals died, agent brother subsequently sells parcel
including undivided share of deceased. Estate of deceased prayed for reconveyance and assailed validity
of sale. Doctrine: Death of principal terminates agency by operation of law. Exception: Sale is valid when
1) Agent had no knowledge; and 2) third party vendee in good faith.

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 unenforceable 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.

FACTS: Sisters Concepcion and Gerundia both surnamed Rallos were registered co-owners of a parcel of
land in Cebu. On April 21, 1954, the sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell the lot in their behalf. 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. TCT was
issued in the name of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983
be declared unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title
issued in the name of Felix Go Chan & Sons Realty Corporation be cancelled and another title be issued in
the names of the corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3)
that plaintiff be indemnified by way of attorney's fees and payment of costs of suit.

RTC: Sale was null and void; that TCT be cancelled and new one be issued 50-50 between estate of
Concepcion and Felix Go Chan and to deliver the same to plaintiff.

CA: Reversed

ISSUE: W/N the sale of Simeon of the lot is valid.

HELD: NO

RATIO:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who having 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, called the principal (mandante), authorizes another, called the agent (mandatario), to
act for and in his behalf in transactions with third persons.

The essential elements of agency are: (1) there is consent, express or implied of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agents acts as a representative and not for himself, and (4) the agent acts within the scope of his
authority.

Agency is basically personal representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within
the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself".

2. ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.

Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found
in 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 notify the agent of
the fact of death of the former. 9

The same rule prevails at common law the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the
prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer. red upon
an agent is dissolved by the principal's death, and any attempted execution of the power afterward is not binding
on the heirs or representatives of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes
the agency, subject to any exception, and if so, is the instant case within that exception? That is the
determinative point in issue in this litigation. It is the contention of respondent corporation which was
sustained by respondent court that notwithstanding the death of the principal Concepcion Rallos the act of
the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable
inasmuch as the corporation acted in good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or
in the interest of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good. faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon
Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his
principal is valid and effective only under two conditions, viz: (1) that the agent acted without
knowledge of the death of the principal and (2) that the third person who contracted with the agent himself
acted in good faith. Good faith here means that the third person was not aware of the death of the principal
at the time he contracted with said agent. These two requisites must concur the absence of one will render
the act of the agent invalid and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial
court.

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.

4. Articles 1930 and 1931 are exceptions to Article 1919. Article 1931, being an exception to the general
rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear
import of its terms for otherwise the courts will be involved in a process of legislation outside of their judicial
function.

5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the
power of attorney which was duly registered on the original certificate of title recorded in the
Register of Deeds of the province of Cebu, that no notice of the death was aver annotated on said
certificate of title by the heirs of the principal and accordingly they must suffer the consequences of such
omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries which We quote:

If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the
principal exercise due diligence to make the revocation of the agency publicity known.

In case of a general power which does not specify the persons to whom represents' on
should be made, it is the general opinion that all acts, executed with third persons who
contracted in good faith, Without knowledge of the revocation, are valid. In such case, the
principal may exercise his right against the agent, who, knowing of the revocation,
continued to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and
575; pp. 15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode of terminating an
agency which is to be distinguished from revocation by operation of law such as death of the
principal which obtains in this case. On page six of this Opinion We stressed that by reason of the very
nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death of
either principal or agent. Although a revocation of a power of attorney to be effective must be
communicated to the parties concerned, 18 yet a revocation by operation of law, such as by death of the
principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of authority is
regarded as an execution of the principal's continuing will. 19 With death, the principal's will ceases or is the of
authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal
What the Code provides in Article 1932 is that, if the agent die his heirs must notify the principal thereof,
and in the meantime adopt such measures as the circumstances may demand in the interest of the latter.
Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the
property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal

6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection,
respondent court drew a "parallel" between the instant case and that of an innocent purchaser for value of
a land, stating that if a person purchases a registered land from one who acquired it in bad faith even to
the extent of foregoing or falsifying the deed of sale in his favor the registered owner has no recourse
against such innocent purchaser for value but only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v.
Nano and Vallejo, 61 Phil. 625. We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a
co-owner of lands with Agustin Nano. The latter had a power of attorney supposedly
executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power
was registered in the Office of the Register of Deeds. When the lawyer-husband of Angela
Blondeau went to that Office, he found all in order including the power of attorney. But
Vallejo denied having executed the power The lower court sustained Vallejo and the plaintiff
Blondeau appealed. Reversing the decision of the court a quo, the Supreme Court, quoting
the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of the defendant-

appellee must be overruled. Agustin Nano had possession of Jose Vallejo's
title papers. Without those title papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have been perpetuated. When
Fernando de la Canters, a member of the Philippine Bar and the husband of
Angela Blondeau, the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of Vallajo in favor of
Nano. If this had not been so and if thereafter the proper notation of the
encumbrance could not have been made, Angela Blondeau would not have
sent P12,000.00 to the defendant Vallejo.' An executed transfer of registered
lands placed by the registered owner thereof in the hands of another
operates as a representation to a third party that the holder of the transfer is
authorized to deal with the land.

As between two innocent persons, one of whom must suffer the

consequence of a breach of trust, the one who made it possible by his act of
coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here We are
confronted with one who admittedly was an agent of his sister and who sold the property of the latter after
her death with full knowledge of such death. The situation is expressly covered by a provision of law on
agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its
tenor, in the same manner that the ruling in Blondeau and the cases cited therein found a basis in Section
55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the
register of deeds to enter a new certificate or to make a memorandum of registration in
accordance with such instruments, and the new certificate or memorandum Shall be binding
upon the registered owner and upon all persons claiming under him in favor of every
purchaser for value and in good faith: Provided however, That in all cases of registration
provided by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the right, of any innocent holder for
value of a certificate of title. ... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of
the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the
death of the principal were held to be "good", "the parties being ignorant of the death". Let us take note that
the Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the death of
the principal. We quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of
the death is a good payment. in addition to the case in Campbell before cited, the same
judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment
after the death of principal is not good. Thus, a payment of sailor's wages to a person
having a power of attorney to receive them, has been held void when the principal was
dead at the time of the payment. If, by this case, it is meant merely to decide the general
proposition that by operation of law the death of the principal is a revocation of the powers
of the attorney, no objection can be taken to it. But if it intended to say that his principle
applies where there was 110 notice of death, or opportunity of twice I must be permitted to
dissent from it.

... That a payment may be good today, or bad tomorrow, from the accident circumstance of
the death of the principal, which he did not know, and which by no possibility could he
know? It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of
the agent, done bona fide in ignorance of the death of his principal are held valid and
binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot
believe the common law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be
made that the above represents the minority view in American jurisprudence. Thus in Clayton v. Merrett,
the Court said.

There are several cases which seem to hold that although, as a general principle, death
revokes an agency and renders null every act of the agent thereafter performed, yet that
where a payment has been made in ignorance of the death, such payment will be good. The
leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76,
where, in an elaborate opinion, this view ii broadly announced. It is referred to, and seems
to have been followed, in the case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in this latter
case it appeared that the estate of the deceased principal had received the benefit of the
 money paid, and therefore the representative of the estate might well have been held to be
estopped from suing for it again. . . . These cases, in so far, at least, as they announce the
doctrine under discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v.
McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so
far as it related to the particular facts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon the
point in question. But accordingly all power weight to this opinion, as the judgment of a of
great respectability, it stands alone among common law authorities and is opposed by an
array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no
such conflict exists in our own for the simple reason that our statute, the Civil Code, expressly provides for
two exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1) that
the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed without
knowledge of the death of the principal and the third person who contracted with the agent acted also in
good faith (Art. 1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the
indispensable requirement that the agent acted without knowledge or notice of the death of the principal In
the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his
principal Accordingly, the agent's act is unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm
en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of First Instance of Cebu,
quoted in pages 2 and 3 of this Opinion, with costs against respondent realty corporation at all instances.

So Ordered.

Air France v CA Notice to agent is notice to principal

MELENCIO-HERRERA, J.:

FACTS: Sometime in February, 1970, the late Jose G. Gana and his family, numbering nine (the GANAS),
purchased from AIR FRANCE through Imperial Travels, Incorporated, a duly authorized travel agent, nine
(9) "open-dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route. The GANAS paid a total of
US$2,528.85 for their economy and first class fares. Said tickets were bought at the then prevailing
exchange rate of P3.90 per US$1.00. The GANAS also paid travel taxes of P100.00 for each passenger.

On 24 April 1970, AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for
the same route. At this time, the GANAS were booked for the Manila/Osaka segment on AIR FRANCE
Flight 184 for 8 May 1970, and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May
1970. The aforesaid tickets were valid until 8 May 1971, the date written under the printed words "Non
valuable apres de (meaning, "not valid after the").

The GANAS did not depart on 8 May 1970.

Sometime in January, 1971, Jose Gana sought the assistance of Teresita Manucdoc, a Secretary of the
Sta. Clara Lumber Company where Jose Gana was the Director and Treasurer, for the extension of the
validity of their tickets, which were due to expire on 8 May 1971. Teresita enlisted the help of Lee Ella
Manager of the Philippine Travel Bureau, who used to handle travel arrangements for the personnel of
the Sta. Clara Lumber Company. Ella sent the tickets to Cesar Rillo, Office Manager of AIR FRANCE.
The tickets were returned to Ella who was informed that extension was not possible unless the fare
differentials resulting from the increase in fares triggered by an increase of the exchange rate of the US
dollar to the Philippine peso and the increased travel tax were first paid. Ella then returned the tickets
to Teresita and informed her of the impossibility of extension.

In the meantime, the GANAS had scheduled their departure on 7 May 1971 or one day before the expiry
date. In the morning of the very day of their scheduled departure on the first leg of their trip, Teresita
requested travel agent Ella to arrange the revalidation of the tickets. Ella gave the same negative answer
and warned her that although the tickets could be used by the GANAS if they left on 7 May 1971, the
tickets would no longer be valid for the rest of their trip because the tickets would then have expired on 8
May 1971. Teresita replied that it will be up to the GANAS to make the arrangements. With that assurance,
Ella on his own, attached to the tickets validating stickers for the Osaka/Tokyo flight, one a JAL. sticker and
the other an SAS (Scandinavian Airways System) sticker. The SAS sticker indicates thereon that it was
"Reevaluated by: the Philippine Travel Bureau, Branch No. 2" (as shown by a circular rubber stamp)
and signed "Ador", and the date is handwritten in the center of the circle. Then appear under printed
headings the notations: JL. 108 (Flight), 16 May (Date), 1040 (Time), OK (status). Apparently, Ella made no
more attempt to contact AIR FRANCE as there was no more time.

Notwithstanding the warnings, the GANAS departed from Manila in the afternoon of 7 May 1971 on board
AIR FRANCE Flight 184 for Osaka, Japan. There is no question with respect to this leg of the trip.

However, for the Osaka/Tokyo flight on 17 May 1971, Japan Airlines refused to honor the tickets because of
their expiration, and the GANAS had to purchase new tickets. They encountered the same difficulty with
respect to their return trip to Manila as AIR FRANCE also refused to honor their tickets. They were able to
return only after pre-payment in Manila, through their relatives, of the readjusted rates. They finally flew
back to Manila on separate Air France Frights on 19 May 1971 for Jose Gana and 26 May 1971 for the rest
of the family.

On 25 August 1971, the GANAS commenced before the then Court of First Instance of Manila, Branch III,
Civil Case No. 84111 for damages arising from breach of contract of carriage.

AIR FRANCE traversed the material allegations of the Complaint and alleged that the GANAS brought
upon themselves the predicament they found themselves in and assumed the consequential risks; that
travel agent Ella's affixing of validating stickers on the tickets without the knowledge and consent
of AIR FRANCE, violated airline tariff rules and regulations and was beyond the scope of his
authority as a travel agent; and that AIR FRANCE was not guilty of any fraudulent conduct or bad
faith.

RTC dismissed.

CA set aside, ordered Air France to pay P90,000.00

Reconsideration sought by AIR FRANCE was denied, hence, petitioner's recourse before this instance, to
which we gave due course.

ISSUE: whether or not, under the environmental milieu the GANAS have made out a case for breach of
contract of carriage entitling them to an award of damages. NO

Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA), included in
paragraphs 9, 10, and 11 of the Stipulations of Fact between the parties in the Trial Court, dated 31 March
1973, an airplane ticket is valid for one year. "The passenger must undertake the final portion of his
journey by departing from the last point at which he has made a voluntary stop before the expiry of this
limit (parag. 3.1.2. ) ... That is the time allowed a passenger to begin and to complete his trip (parags. 3.2
and 3.3.). ... A ticket can no longer be used for travel if its validity has expired before the passenger
completes his trip (parag. 3.5.1.) ... To complete the trip, the passenger must purchase a new ticket for the
remaining portion of the journey" (ibid.) 3

From the foregoing rules, it is clear that AIR FRANCE cannot be faulted for breach of contract when
it dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on said date; nor when
it required the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila segment of
their trip. Neither can it be said that, when upon sale of the new tickets, it imposed additional charges
representing fare differentials, it was motivated by self-interest or unjust enrichment considering that an
increase of fares took effect, as authorized by the Civil Aeronautics Board (CAB) in April, 1971. This
procedure is well in accord with the IATA tariff rules which provide:

6. TARIFF RULES

7. APPLICABLE FARE ON THE DATE OF DEPARTURE

3.1 General Rule.

All journeys must be charged for at the fare (or charge) in effect on the date on which
transportation commences from the point of origin. Any ticket sold prior to a change of fare
or charge (increase or decrease) occurring between the date of commencement of the
journey, is subject to the above general rule and must be adjusted accordingly. A new ticket
must be issued and the difference is to be collected or refunded as the case may be. No
adjustment is necessary if the increase or decrease in fare (or charge) occurs when the
journey is already commenced. 4

The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out
that Teresita, who handled travel arrangements for the GANAS, was duly informed by travel agent Ella of
the advice of Reno, the Office Manager of Air France, that the tickets in question could not be extended
beyond the period of their validity without paying the fare differentials and additional travel taxes
brought about by the increased fare rate and travel taxes.

ATTY. VALTE

Q What did you tell Mrs. Manucdoc, in turn after being told this by Mr. Rillo?

A I told her, because that is the reason why they accepted again the tickets
when we returned the tickets spin, that they could not be extended. They
could be extended by paying the additional fare, additional tax and additional
exchange during that time.

Q You said so to Mrs. Manucdoc?

A Yes, sir." ... 5

The ruling relied on by respondent Appellate Court, therefore, in KLM. vs. Court of Appeals, 65 SCRA 237
(1975), holding that it would be unfair to charge respondents therein with automatic knowledge or notice of
conditions in contracts of adhesion, is inapplicable. To all legal intents and purposes, Teresita was the
agent of the GANAS and notice to her of the rejection of the request for extension of the validity of
the tickets was notice to the GANAS, her principals.

The SAS validating sticker for the Osaka/Tokyo flight affixed by Era showing reservations for JAL. Flight
108 for 16 May 1971, without clearing the same with AIR FRANCE allegedly because of the imminent
departure of the GANAS on the same day so that he could not get in touch with Air France 6 was certainly in
contravention of IATA rules although as he had explained, he did so upon Teresita's assurance that for the
onward flight from Osaka and return, the GANAS would make other arrangements.

Q Referring you to page 33 of the transcript of the last session, I had this
question which reads as follows: 'But did she say anything to you when you
said that the tickets were about to expire?' Your answer was: 'I am the one
who asked her. At that time I told her if the tickets being used ... I was telling
her what about their bookings on the return. What about their travel on the
return? She told me it is up for the Ganas to make the arrangement.' May I
know from you what did you mean by this testimony of yours?

A That was on the day when they were asking me on May 7, 1971 when they
were checking the tickets. I told Mrs. Manucdoc that I was going to get the
tickets. I asked her what about the tickets onward from the return from
Tokyo, and her answer was it is up for the Ganas to make the arrangement,
because I told her that they could leave on the seventh, but they could take
care of that when they arrived in Osaka.

Q What do you mean?

A The Ganas will make the arrangement from Osaka, Tokyo and Manila.

Q What arrangement?

A The arrangement for the airline because the tickets would expire on May 7,
and they insisted on leaving. I asked Mrs. Manucdoc what about the return
onward portion because they would be travelling to Osaka, and her answer
was, it is up to for the Ganas to make the arrangement.

Q Exactly what were the words of Mrs. Manucdoc when you told her that? If
you can remember, what were her exact words?

A Her words only, it is up for the Ganas to make the arrangement.

Q This was in Tagalog or in English?

A I think it was in English. ... 7

The circumstances that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to
leave is not tantamount to an implied ratification of travel agent Ella's irregular actuations. It should
be recalled that the GANAS left in Manila the day before the expiry date of their tickets and that "other
arrangements" were to be made with respect to the remaining segments. Besides, the validating stickers
that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not
legally serve to extend the validity of a ticket or revive an expired one.

The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for
having insisted on using tickets that were due to expire in an effort, perhaps, to beat the deadline and in the
thought that by commencing the trip the day before the expiry date, they could complete the trip even
thereafter. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL.
stickers that Ella had affixed spuriously. Consequently, Japan Air Lines and AIR FRANCE merely acted
within their contractual rights when they dishonored the tickets on the remaining segments of the trip and
when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila
flight.

WHEREFORE, the judgment under review is hereby reversed and set aside, and the Amended Complaint
filed by private respondents hereby dismissed.

No costs.

SO ORDERED.

SANTOS V BUENCONSEJO

CONCEPCION, J.:

Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First Instance of Albay,
denying his petition, filed in Cadastral Case No. M-2197, LRC Cad. Rec. No. 1035, for the cancellation of
original certificate of title No. RO-3848 (25322), issued in the name of Anatolio Buenconsejo, Lorenzo Bon
and Santiago Bon, and covering Lot No. 1917 of the Cadastral Survey of Tabaco, Albay, and the issuance
in lieu thereof, of a separate transfer certificate of title in his name, covering part of said Lot No. 1917,
namely Lot No. 1917-A of Subdivision Plan PSD-63379.

The main facts are not disputed. They are set forth in the order appealed from, from which we quote:

It appears that the aforementioned Lot No. 1917 covered by Original Certificate of Title No. RO-
3848 (25322) was originally owned in common by Anatolio Buenconsejo to the extent of
undivided portion and Lorenzo Bon and Santiago Bon to the extent of the other (Exh. B);
that Anatolio Buenconsejo's rights, interests and participation over the portion abovementioned
were on January 3, 1961 and by a Certificate of Sale executed by the Provincial Sheriff of Albay,
transferred and conveyed to Atty. Tecla San Andres Ziga, awardee in the corresponding auction
sale conducted by said Sheriff in connection with the execution of the decision of the Juvenile
Delinquency and Domestic Relations Court in Civil Case No. 25267, entitled "Yolanda
Buenconsejo, et al. vs. Anatolio Buenconsejo"; that on December 26, 1961 and by a certificate of
redemption issued by the Provincial Sheriff of Albay, the rights, interest, claim and/or or participation
which Atty. Tecla San Andres Ziga may have acquired over the property in question by reason of the
aforementioned auction sale award, were transferred and conveyed to the herein petitioner in his
capacity as Attorney-in-fact of the children of Anatolio Buenconsejo, namely, Anastacio
Buenconsejo, Elena Buenconsejo and Azucena Buenconsejo (Exh. C).

It would appear, also, that petitioner Santos had redeemed the aforementioned share of Anatolio
Buenconsejo, upon the authority of a special power of attorney executed in his favor by the children
of Anatolio Buenconsejo; that relying upon this power of attorney and redemption made by him, Santos
now claims to have acquired the share of Anatolio Buenconsejo in the aforementioned Lot No. 1917; that
as the alleged present owner of said share, Santos caused a subdivision plan of said Lot No. 1917 to be
made, in which the portion he claims as his share thereof has been marked as Lot No. 1917-A; and that he
wants said subdivision at No. 1917-A to be segregated from Lot No. 1917 and a certificate of title issued
in his name exclusively for said subdivision Lot No. 1917-A.
As correctly held by the lower court, petitioner's claim is clearly untenable, for: (1) said special power of
attorney authorized him to act on behalf of the children of Anatolio Buenconsejo, and, hence, it could
not have possibly vested in him any property right in his own name; (2) the children of Anatolio
Buenconsejo had no authority to execute said power of attorney, because their father is still alive
and, in fact, he and his wife opposed the petition of Santos; (3) in consequence of said power of attorney (if
valid) and redemption, Santos could have acquired no more than the share pro indiviso of Anatolio
Buenconsejo in Lot No. 1917, so that petitioner cannot without the conformity of the other co-owners
(Lorenzo and Santiago Bon), or a judicial decree of partition issued pursuant to the provisions of Rule 69 of
the new Rules of Court (Rule 71 of the old Rules of Court) which have not been followed By Santos
adjudicate to himself in fee simple a determinate portion of said Lot No. 1917, as his share therein, to the
exclusion of the other co-owners.

Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby affirmed, with treble
cost against petitioner-appellant Jose A. Santos y Diaz. It is so ordered.

ALBALADEJADO v PRC

STREET, J.:

This action was instituted in the Court of First Instance of the Province of Albay by Albaladejo y Cia., S. en
C., to recover a sum of money from the Philippine Refining Co., as successor to the Visayan Refining Co.,
two causes of action being stated in the complaint. Upon hearing the cause the trial judge absolved the
defendant from the first cause of action but gave judgment for the plaintiff to recover the sum of
P49,626.68, with costs, upon the second cause of action. From this judgment the plaintiff appealed with
respect to the action taken upon the first cause of action, and the defendant appealed with respect to the
action taken upon the second cause of action. It results that, by the appeal of the two parties, the decision
of the lower court is here under review as regards the action taken upon both grounds of action set forth in
the complaint.

It appears that Albaladejo y Cia. is a limited partnership, organized in conformity with the laws of these
Islands, and having its principal place of business at Legaspi, in the Province of Albay; and during the
transactions which gave origin to this litigation said firm was engaged in the buying and selling of the
products of the country, especially copra, and in the conduct of a general mercantile business in Legaspi
and in other places where it maintained agencies, or sub-agencies, for the prosecution of its commercial
enterprises.

The Visayan Refining Co. is a corporation organized under the laws of the Philippine Islands; and prior to
July 9, 1920, it was engaged in operating its extensive plant at Opon, Cebu, for the manufacture of coconut
oil.

On August 28, 1918, the plaintiff made a contract with the Visayan Refining Co., the material parts of which
are as follows:

Memorandum of Agreement Re Purchase of Copra. This memorandum of agreement, made and

entered into by and between Albaladejo y Compania, S. en C., of Legaspi, Province of Albay,
Philippine Islands, party of the first part, and the Visayan Refining Company, Inc., of Opon, Province
of Cebu, Philippine Islands, party of the second part,

Witnesseth That. Whereas, the party of the first part is engaged in the purchase of copra in the
Province of Albay; and Whereas, the party of the second part is engaged in the business of the
 manufacture of coconut oil, or which purpose it must continually purchase large quantities of copra;
Now, Therefore, in consideration of the premises and covenants hereinafter set forth, the said
parties have agreed and do hereby contract and agree as follows, to wit:

1. The party of the first part agrees and binds itself to sell to the party of the second part, and the
party of the second part agrees and binds itself to buy from the party of the first part, for a period of
one (1) year from the date of these presents, all the copra purchased by the party of the first part in
Province of Albay.

2. The party of the second part agrees to pay the party of the first part for the said copra the market
price thereof in Cebu at date (of) purchase, deducting, however, from such price the cost of
transportation by sea to the factory of the party of second part at Opon, Cebu, the amount deducted
to be ascertained from the rates established, from time to time, by the public utility commission, or
such entity as shall succeed to its functions, and also a further deduction for the shrinkage of the
copra from the time of its delivery to the party of the second part to its arrival at Opon, Cebu, plus
one-half of a real per picul in the event the copra is delivered to boats which will unload it on the
pier of the party of the second part at Opon, Cebu, plus one real per picul in the event that the party
of the first part shall employ its own capital exclusively in its purchase.

3. During the continuance of this contract the party of the second part will not appoint any other
agent for the purchase of copra in Legaspi, nor buy copra from any vendor in Legaspi.

4. The party of the second part will, so far as practicable, keep the party of the first part advised of
the prevailing prices paid for copra in the Cebu market.

5. The party of the second part will provide transportation by sea to Opon, Cebu, for the copra
delivered to it by the party of the first part, but the party of the first part must deliver such copra to
the party of the second part free on board the boats of the latter's ships or on the pier alongside the
latter's ships, as the case may be.

Pursuant to this agreement the plaintiff, during the year therein contemplated, bought copra extensively for
the Visayan Refining Co. At the end of said year both parties found themselves satisfied with the existing
arrangement, and they therefore continued by tacit consent to govern their future relations by the same
agreement. In this situation affairs remained until July 9, 1920, when the Visayan Refining Co. closed down
its factory at Opon and withdrew from the copra market.

When the contract above referred to was originally made, Albaladejo y Cia. apparently had only one
commercial establishment, i.e., that at Legaspi; but the large requirements of the Visayan Refining Co. for
copra appeared so far to justify the extension of the plaintiff's business that during the course of the next
two or three years it established some twenty agencies, or subagencies, in various ports and places of the
Province of Albay and neighboring provinces.

After the Visayan Refining Co. had ceased to buy copra, as above stated, of which fact the plaintiff was
duly notified, the supplies of copra already purchased by the plaintiff were gradually shipped out and
accepted by the Visayan Refining Co., and in the course of the next eight or ten months the accounts
between the two parties were liquidated. The last account rendered by the Visayan Refining Co. to the
plaintiff was for the month of April, 1921, and it showed a balance of P288 in favor of the defendant. Under
date of June 25, 1921, the plaintiff company addressed a letter from Legaspi to the Philippine Refining Co.
(which had now succeeded to the rights and liabilities of the Visayan Refining Co.), expressing its approval
of said account. In this letter no dissatisfaction was expressed by the plaintiff as to the state of affairs
between the parties; but about six weeks thereafter the present action was begun.
Upon reference to paragraph five of the contract reproduced above it will be seen that the Visayan Refining
Co. obligated itself to provide transportation by sea to Opon, Cebu, for the copra which should be delivered
to it by the plaintiff; and the first cause of action set forth in the complaint is planted upon the alleged
negligent failure of the Visayan Refining Co. to provide opportune transportation for the copra collected by
the plaintiff and deposited for shipment at various places. In this connection we reproduce the following
allegations from the complaint:

6. That, from the month of September, 1918, until the month of June, 1920, the plaintiff opportunely
advised the Visayan of the stocks that the former had for shipment, and, from time to time,
requested the Visayan to send vessels to take up said stocks; but that the Visayan culpably and
negligently allowed a great number of days to elapse before sending the boats for the
transportation of the copra to Opon, Cebu, and that due to the fault and negligence of the Visayan,
the stocks of copra prepared for shipment by the plaintiff had to remain an unnecessary length of
time in warehouses and could not be delivered to the Visayan, nor could they be transmitted to this
latter because of the lack of boats, and that for this reason the copra gathered by the plaintiff and
prepared for delivery to the Visayan suffered the diminishment of weight herein below specified,
through shrinkage or excessive drying, and, in consequence thereof, an important diminishment in
its value.

xxx xxx xxx

8. That the diminishment in weight suffered as shrinkage through excessive drying by all the lots of
copra sold by the plaintiff to the Visayan, due to the fault and negligence of the Visayan in the
sending of boats to take up said copra, represents a total of 9,695 piculs and 56 cates, the just and
reasonable value of which, at the rates fixed by the purchaser as the price in its liquidation, is a total
of two hundred and one thousand, five hundred and ninety-nine pesos and fifty-three centavos
(P201,599.53), Philippine currency, in which amount the plaintiff has been damaged and injured by
the negligent and culpable acts and omissions of the Visayan, as herein above stated and alleged.

In the course of the appealed decision the trial judge makes a careful examination of the proof relative to
the movements of the fleet of boats maintained by the Visayan Refining Co. for the purpose of collecting
copra from the various ports where it was gathered for said company, as well as of the movements of other
boats chartered or hired by said company for the same purpose; and upon consideration of all the facts
revealed in evidence, his Honor found that the Visayan Refining Co. had used reasonable promptitude in
its efforts to get out the copra from the places where it had been deposited for shipment, notwithstanding
occasional irregularities due at times to the condition of the weather as related to transportation by sea and
at other times to the inability of the Visayan Refining Co. to dispatch boats to the more remote ports. This
finding of the trial judge, that no negligence of the kind alleged can properly be imputed to the Visayan
Refining Co., is in our opinion supported by the proof.

Upon the point of the loss of weight of the copra by shrinkage, the trial judge found that this is a product
which necessarily undergoes considerable shrinkage in the process of drying, and intelligent witnesses
who are conversant with the matter testified at the trial that shrinkage of cobra varies from twenty to thirty
per centum of the original gross weight. It is agreed that the shrinkage shown in all of the copra which the
plaintiff delivered to the Visayan Refining Co. amounted to only 8.187 per centum of the whole, an amount
which is notably below the normal. This showing was undoubtedly due in part, as the trial judge suggests,
to the fact that in purchasing the copra directly from the producers the plaintiff's buyers sometimes
estimated the picul at sixty-eight kilos, or somewhat less, but in no case at the true weight of 63.25 kilos.
The plaintiff was therefore protected in a great measure from loss by shrinkage by purchasing upon a
different basis of weight from that upon which he sold, otherwise the shrinkage shown in the result must
have been much greater than that which actually appeared. But even considering this fact, it is quite
evident that the demonstrated shrinkage of 8.187 per centum was extremely moderate average; and this
fact goes to show that there was no undue delay on the part of the Visayan Refining Co. in supplying
transportation for the copra collected by the plaintiff.

In the course of his well-reasoned opinion upon this branch of the case, the trial judge calls attention to the
fact that it is expressly provided in paragraph two of the contract that the shrinkage of copra from the time
of its delivery to the party of the second part till its arrival at Opon should fall upon the plaintiff, from whence
it is to be interfered that the parties intended that the copra should be paid for according to its weight upon
arrival at Opon regardless of its weight when first purchased; and such appears to have been the uniform
practice of the parties in settling their accounts for the copra delivered over a period of nearly two years.

From what has been said it follows that the first cause of action set forth in the complaint is not well
founded, and the trial judge committed no error in absolving the plaintiff therefrom.

It appears that in the first six months of the year 1919, the plaintiff found that its transactions with the
Visayan Refining Co. had not been productive of reasonable profit, a circumstance which the plaintiff
attributed to loss of weight or shrinkage in the copra from the time of purchase to its arrival at Opon; and
the matter was taken up with the officials of said company, with the result that a bounty amounting to
P15,610.41 was paid to the plaintiff by the Visayan Refining Co. In the ninth paragraph of the complaint the
plaintiff alleges that this payment was made upon account of shrinkage, for which the Visayan Refining Co.
admitted itself to be liable; and it is suggested that the making of this payment operated as a recognition on
the part of the Visayan refining Co. of the justice of the plaintiff's claim with respect to the shrinkage in all
subsequent transactions. With this proposition we cannot agree. At most the payment appears to have
been made in recognition of an existing claim, without involving any commitment as to liability on the part of
the defendant in the future; and furthermore it appears to have been in the nature of a mere gratuity given
by the company in order to encourage the plaintiff and to assure that the plaintiff's organization would be
kept in an efficient state for future activities. It is certain that no general liability for plaintiff's losses was
assumed for the future; and the defendant on more than one occasion thereafter expressly disclaimed
liability for such losses.

As already stated purchases of copra by the defendant were suspended in the month of July, 1920. At this
time the plaintiff had an expensive organization which had been built up chiefly, we suppose, with a view to
the buying of copra; and this organization was maintained practically intact for nearly a year after the
suspension of purchases by the Visayan Refining Co. Indeed in October, 1920, the plaintiff added an
additional agency at Gubat to the twenty or more already in existence. As a second cause of action the
plaintiff seeks to recover the sum of P110,000, the alleged amount expended by the plaintiff in maintaining
and extending its organization as above stated. As a basis for the defendant's liability in this respect it is
alleged that said organization was maintained and extended at the express request, or requirement, of the
defendant, in conjunction with repeated assurances that the defendant would soon resume activity as a
purchaser of copra.

With reference to this cause of action the trial judge found that the plaintiff, as claimed, had incurred
expenses at the request of the defendant and upon its representation that the plaintiff would be fully
compensated therefor in the future. Instead, however, of allowing the plaintiff the entire amount claimed, his
Honor gave judgment for only thirty per centum of said amount, in view of the fact that the plaintiff's
transactions in copra had amounted in the past only to about thirty per centum of the total business
transacted by it. Estimated upon this basis, the amount recognized as constituting a just claim was found to
be P49,626.68, and for this amount judgment was rendered against the defendant.

The discussion of this branch of the appeal involves the sole question whether the plaintiff's expense in
maintaining and extending its organization for the purchase of copra in the period between July, 1920, to
July, 1921, were incurred at the instance and request of the defendant, or upon any promise of the
defendant to make the expenditure good. A careful examination of the evidence, mostly of a documentary
character, is, in our opinion, convincing that the supposed liability does not exist.

By recurring to paragraph four of the contract between the plaintiff and the Visayan Refining Co. it will be
seen that the latter agreed to keep the plaintiff advised of the prevailing prices paid for the copra in the
Cebu market. In compliance with this obligation the Visayan Refining Co. was accustomed to send out
"trade letters" from time to time its various clients in the southern provinces of whom the plaintiff was one.
In these letters the manager of the company was accustomed to make comment upon the state of the
market and to give such information as might be of interest or value to the recipients of the letters. From the
series of letters thus sent to Albaladejo y Cia. during the latter half of 1920, we here reproduce the following
excerpts:

(Letter of July 2, 1920, from K.B. Day, General Manager of the Visayan Refining Co., to Albaladejo y Cia.)

The copra market is still very weak. I have spent the past two weeks in Manila studying conditions
and find that practically no business at all is being done. A few of the mills having provincial agents
are accepting small deliveries, but I do not suppose that 500 piculs of copra are changing hands a
day. Buyers are offering from P13 to P15, depending on quality, and sellers are offering to sell at
anywhere from P16 to P18, but no business can be done for the simple reason that the banks will
not lend the mills any money to buy copra with at this time.

Reports from the United States are to the effect that the oil market is in a very serious and
depressed condition and that large quantities of oil cannot be disposed of at any price.

xxx xxx xxx

Under this conditions it is imperative that this mill buy no more copra than it can possibly help at the
present time. We are not anxious to compete, nor do we wish to purchase same in competition with
others. We do, however, desire to keep our agents doing business and trust that they will continue
to hold their parroquianos (customers), buying only minimum quantities at present.

The local market has not changed since last week, and our liquidating price is P14.

(Letter of July 9, 1920, from Visayan Refining Co. to Albaladejo y Cia.)

Notify your subagents to drop out of the market temporarily. We do not desire to purchase at
present.

(Letter of July 10, 1920, from K. B. Day, General Manager, to Albaladejo y Cia.)

The market continues to grow weaker. Conditions are so uncertain that this company desires to
drop out of the copra market until conditions have a chance to readjust themselves. We request
therefore that our agents drop out of active competition for copra temporarily. Stocks that are at
present on hand will, of course, be liquidated, but no new stocks should be acquired. Agents should
do their best to keep their organizations together temporarily, for we expect to be in the market
again soon stronger than ever. We expect the cooperation of agents in making this effective; and if
they give us this cooperation, we will endeavor to see that they do not lose by the transaction in the
long run. This company has been receiving copra from its agents for a long time at prices which
 have netted it a loss. The company has been supporting its agents during this period. It now
expects the same support from its agents. Agents having stocks actually on hand in their bodegas
should telegraph us the quantity immediately and we will protect same. But stocks not actually in
bodegas cannot be considered.

(Letter of July 17, 1920, from K.B. Day to Albaladejo y Cia.)

Conditions have changed very little in the copra market since last reports. . . . We are in the same
position as last week and are out of the market.

For the benefit of our agents, we wish to explain in a few words just why we are have been forced
to close down our mill until the arrival of a boat to load some of our stocks on hand. We have large
stocks of copra. The market for oil is so uncertain that we do not care to increase these stocks until
such time as we know that the market has touched the bottom. As soon as this period of uncertainty
is over, we expect to be in the market again stronger than ever, but it is only the part of business
wisdom to play safe at such times as these.

Owing to the very small amounts of copra now in the provinces, we do not think that our agents will
lose anything by our being out of the market. On the contrary, the producers of copra will have a
chance to allow their nuts to mature on the trees so that the quality of copra which you will receive
when we again are in the market should be much better than what you have been receiving in the
past. Due to the high prices and scarcity of copra a large proportion of the copra we have received
has been made from unripe coconuts and in order to keep revenue coming in the producers have
kept harvesting these coconuts without giving them a chance to reach maturity. This period now
should give them the chance to let their nuts ripen and should give you a better copra in the future
which will shrink less and be more satisfactory both from your standpoint and ours. Please do all
you can to assist us at this time. We shall greatly appreciate your cooperation.lawphi1.net

(Letter of August 7, 1920, from H.U. Umstead, Assistant General Manager, to Albaladejo y Cia.)

The copra situation in Manila remains unchanged and the outlook is still uncertain. Arrivals continue
small.

We are still out of the market and are not yet in a position to give you buying orders. We trust,
however, that within the next few days weeks we may be able to reenter the market and resume our
former activity.

xxx xxx xxx

While we are not of the market we have no objection whatever to our agents selling copra to other
purchasers, if by doing so they are able to keep themselves in the market and retain
their parroquianos(customers). We do not, however, wish you to use our money, for this purpose,
nor do we want you to buy copra on speculation with the idea in mind that we will take it off of your
hands at high prices when we reenter the market. We wish to warn you against this now so that you
will not be working under any misapprehension.

In this same mail, we are sending you a notice of change of organization. In your dealings with us
hereafter, will you kindly address all communications to the Philippine Refining Corporation, Cebu,
which you will understand will be delivered to us.

(Letter of August 21, 1920, from Philippine Refining Corporation, by K.B. Day, to Albaladejo y Cia.)

We are not yet in the market, but, as we have indicated before, are hopeful of renewing our
 activities soon. We shall advise all our agents seasonably of our return to the market. . . .

We are preparing new form of agreement between ourselves and our agents and hope to have
them completed in time to refer them to our agents in the course of the next week or ten days.

All agents should endeavor to liquidate outstanding advances at this time because this is a
particularly good time to clean out old accounts and be on a business basis when we return to the
market. We request that our agents concentrate their attention on this point during the coming
week. lawphi1 .net

(Letter of October 16, 1920, from K.B. Day, Manager, to Albaladejo y Cia.)

Copra in Manila and coconut oil in the United States have taken a severe drop during the past
week. The Cebu price seems to have remained unchanged, but we look for an early drop in the
local market.

We have received orders from our president in New York to buy no more copra until the situation
becomes more favorable. We had hoped and expected to be in the market actively before this time,
but this most unexpected reaction in the market makes the date of our entry in it more doubtful.

With this in view, we hereby notify our agents that we can accept no more copra and advance no
more money until we have permission from our president to do so. We request, therefore, that you
go entirely out of the market, so far as we are concerned, with the exception of receiving copra
against outstanding accounts.

In case any agent be compelled to take in copra and desire to send same to us, we will be glad to
sell same for him to the highest bidder in Cebu. We will make no charge for our services in this
connection, but the copra must be forwarded to us on consignment only so that we will not appear
as buyers and be required to pay the internal-revenue tax.

We are extremely sorry to be compelled to make the present announcement to you, but the market
is such that our president does not deem it wise for us to purchase copra at present, and, with this
in view, we have no alternative other than to comply with his orders. We hope that our agents will
realize the spirit in which these orders are given, and will do all they can to remain faithful to us until
such time as we can reenter the market, which we hope and believe will be within a comparatively
short time.

(Special Letter of October 16, 1920, from Philippine Refining Corporation, by K.B. Day, to Albaladejo y
Cia.)

We have received very strict instructions from New York temporarily to suspend the purchase of
copra, and of course we must comply therewith. However, should you find yourselves obliged to
buy copra in connection with your business activities, and cannot dispose of it advantageously in
Cebu, we shall be glad to receive your copra under the condition that we shall sell it in the market
on your account to the highest bidder, or, in other words, we offer you our services free, to sell your
copra to the best possible advantages that the local market may offer, provided that, in doing so, we
be not obliged to accept your copra as a purchase when there be no market for this product.

Whenever you find yourselves obliged to buy copra in order to liquidate pending advances, we can
accept it provided that, so long as present conditions prevail, we be not required to make further
cash advances.

We shall quote no further from letters written by the management of the Philippine Refining Corporation to
the plaintiff, as we find nothing in the correspondence which reflects an attitude different from that reflected
in the matter above quoted. It is only necessary to add that the hope so frequently expressed in the letters,
to the effect that the Philippine Refining Corporation would soon enter the market as a buyer of copra on a
more extensive scale than its predecessor, was not destined to be realized, and the factory at Opon
remained closed.

But it is quite obvious that there is nothing in these letters on which to hold the defendant liable for the
expenses incurred by the plaintiff in keeping its organization intact during the period now under
consideration. Nor does the oral testimony submitted by the plaintiff materially change the situation in any
respect. Furthermore, the allegation in the complaint that one agency in particular (Gubat) had been
opened on October 1, 1920, at the special instance and request of the defendant, is not at all sustained by
the evidence.

We note that in his letter of July 10, 1920, Mr. Day suggested that if the various purchasing agents of the
Visayan Refining Co. would keep their organization intact, the company would endeavor to see that they
should not lose by the transaction in the long run. These words afford no sufficient basis for the conclusion,
which the trial judge deduced therefrom, that the defendant is bound to compensate the plaintiff for the
expenses incurred in maintaining its organization. The correspondence sufficiently shows on its face that
there was no intention on the part of the company to lay a basis for contractual liability of any sort; and the
plaintiff must have understood the letters in that light. The parties could undoubtedly have contracted about
it, but there was clearly no intention to enter into contractual relation; and the law will not raise a contract by
implication against the intention of the parties. The inducement held forth was that, when purchasing
should be resumed, the plaintiff would be compensated by the profits then to be earned for any expense
that would be incurred in keeping its organization intact. It is needless to say that there is no proof showing
that the officials of the defendant acted in bad faith in holding out this hope.

In the appellant's brief the contention is advanced that the contract between the plaintiff and the Visayan
Refining Co. created the relation of principal and agent between the parties, and the reliance is placed
upon article 1729 of the Civil Code which requires the principal to indemnify the agent for damages
incurred in carrying out the agency. Attentive perusal of the contract is, however, convincing to the effect
that the relation between the parties was not that of principal and agent in so far as relates to the purchase
of copra by the plaintiff. It is true that the Visayan Refining Co. made the plaintiff one of its instruments for
the collection of copra; but it is clear that in making its purchases from the producers the plaintiff was
buying upon its own account and that when it turned over the copra to the Visayan Refining Co., pursuant
to that agreement, a second sale was effected. In paragraph three of the contract it is declared that during
the continuance of this contract the Visayan Refining Co. would not appoint any other agent for the
purchase of copra in Legaspi; and this gives rise indirectly to the inference that the plaintiff was considered
its buying agent. But the use of this term in one clause of the contract cannot dominate the real nature of
the agreement as revealed in other clauses, no less than in the caption of the agreement itself. In some of
the trade letters also the various instrumentalities used by the Visayan Refining Co. for the collection of
copra are spoken of as agents. But this designation was evidently used for convenience; and it is very clear
that in its activities as a buyer the plaintiff was acting upon its own account and not as agents, in the legal
sense, of the Visayan Refining Co. The title to all of the copra purchased by the plaintiff undoubtedly
remained in it until it was delivered by way of subsequent sale to said company.

For the reasons stated we are of the opinion that no liability on the part of the defendant is shown upon the
plaintiff's second cause of action, and the judgment of the trial court on this part of the case is erroneous.

The appealed judgment will therefore be affirmed in so far as it absolves the defendant from the first cause
of action and will be reversed in so far as it gives judgment against the defendant upon the second cause
of action; and the defendant will be completely absolved from the complaint. So ordered, without express
findings as to costs of either instance.

Johnson, Malcolm, Avancea, Villamor, Johns and Romualdez, JJ., concur.