G.R. No.

L-15568 November 8, 1919

W. G. PHILPOTTS, petitioner,
vs.
PHILIPPINE MANUFACTURING COMPANY and F. N. BERRY, respondents.
Lawrence and Ross for petitioner.
Crossfield and O'Brien for defendants.

STREET, J.:
The petitioner, W. G. Philpotts, a stockholder in the Philippine Manufacturing Company, one of the
respondents herein, seeks by this proceeding to obtain a writ of mandamus to compel the respondents
to permit the plaintiff, in person or by some authorized agent or attorney, to inspect and examine the
records of the business transacted by said company since January 1, 1918. The petition is filed originally
in this court under the authority of section 515 of the Code of Civil Procedure, which gives to this tribunal
concurrent jurisdiction with the Court of First Instance in cases, among others, where any corporation or
person unlawfully excludes the plaintiff from the use and enjoyment of some right to which he is entitled.
The respondents interposed a demurrer, and the controversy is now before us for the determination of
the questions thus presented.
The first point made has reference to a supposed defect of parties, and it is said that the action can not
be maintained jointly against the corporation and its secretary without the addition of the allegation that
the latter is the custodian of the business records of the respondent company.
By the plain language of sections 515 and 222 of our Code of Civil Procedure, the right of action in such a
proceeding as this is given against the corporation; and the respondent corporation in this case was the
only absolutely necessary party. In the Ohio case of Cincinnati Volksblatt Co. vs. Hoffmister (61 Ohio St.,
432; 48 L. R. A., 735), only the corporation was named as defendant, while the complaint, in language
almost identical with that in the case at bar, alleged a demand upon and refusal by the corporation.
Nevertheless the propriety of naming the secretary of the corporation as a codefendant cannot be
questioned, since such official is customarily charged with the custody of all documents, correspondence,
and records of a corporation, and he is presumably the person against whom the personal orders of the
court would be made effective in case the relief sought should be granted. Certainly there is nothing in
the complaint to indicate that the secretary is an improper person to be joined. The petitioner might have
named the president of the corporation as a respondent also; and this official might be brought in later,
even after judgment rendered, if necessary to the effectuation of the order of the court.
Section 222 of our Code of Civil Procedure is taken from the California Code, and a decision of the
California Supreme Court — Barber vs. Mulford (117 Cal., 356) — is quite clear upon the point that both
the corporation and its officers may be joined as defendants.
The real controversy which has brought these litigants into court is upon the question argued in
connection with the second ground of demurrer, namely, whether the right which the law concedes to a
stockholder to inspect the records can be exercised by a proper agent or attorney of the stockholder as
well as by the stockholder in person. There is no pretense that the respondent corporation or any of its
officials has refused to allow the petitioner himself to examine anything relating to the affairs of the
company, and the petition prays for a peremptory order commanding the respondents to place the
records of all business transactions of the company, during a specified period, at the disposal of the
plaintiff or his duly authorized agent or attorney, it being evident that the petitioner desires to exercise
said right through an agent or attorney. In the argument in support of the demurrer it is conceded by
counsel for the respondents that there is a right of examination in the stockholder granted under section
51 of the Corporation Law, but it is insisted that this right must be exercised in person.
The pertinent provision of our law is found in the second paragraph of section 51 of Act No. 1459, which
reads as follows: "The record of all business transactions of the corporation and the minutes of any
meeting shall be open to the inspection of any director, member or stockholder of the corporation at
reasonable hours."
This provision is to be read of course in connecting with the related provisions of sections 51 and 52,
defining the duty of the corporation in respect to the keeping of its records.
Now it is our opinion, and we accordingly hold, that the right of inspection given to a stockholder in the
provision above quoted can be exercised either by himself or by any proper representative or attorney in
fact, and either with or without the attendance of the stockholder. This is in conformity with the general
rule that what a man may do in person he may do through another; and we find nothing in the statute
that would justify us in qualifying the right in the manner suggested by the respondents.
This conclusion is supported by the undoubted weight of authority in the United States, where it is
generally held that the provisions of law conceding the right of inspection to stockholders of corporations
are to be liberally construed and that said right may be exercised through any other properly authorized
person. As was said in Foster vs. White (86 Ala., 467), "The right may be regarded as personal, in the sense
that only a stockholder may enjoy it; but the inspection and examination may be made by another.
Otherwise it would be unavailing in many instances." An observation to the same effect is contained in
Martin vs. Bienville Oil Works Co. (28 La., 204), where it is said: "The possession of the right in question
would be futile if the possessor of it, through lack of knowledge necessary to exercise it, were debarred
the right of procuring in his behalf the services of one who could exercise it." In Deadreck vs. Wilson (8
Baxt. [Tenn.], 108), the court said: "That stockholders have the right to inspect the books of the
corporation, taking minutes from the same, at all reasonable times, and may be aided in this by experts
and counsel, so as to make the inspection valuable to them, is a principle too well settled to need
discussion." Authorities on this point could be accumulated in great abundance, but as they may be found
cited in any legal encyclopedia or treaties devoted to the subject of corporations, it is unnecessary here
to refer to other cases announcing the same rule.
In order that the rule above stated may not be taken in too sweeping a sense, we deem it advisable to say
that there are some things which a corporation may undoubtedly keep secret, notwithstanding the right
of inspection given by law to the stockholder; as for instance, where a corporation, engaged in the
business of manufacture, has acquired a formula or process, not generally known, which has proved of
utility to it in the manufacture of its products. It is not our intention to declare that the authorities of the
corporation, and more particularly the Board of Directors, might not adopt measures for the protection
of such process form publicity. There is, however, nothing in the petition which would indicate that the
petitioner in this case is seeking to discover anything which the corporation is entitled to keep secret; and
if anything of the sort is involved in the case it may be brought out at a more advanced stage of the
proceedings.lawphil.net
The demurrer is overruled; and it is ordered that the writ of mandamus shall issue as prayed, unless within
5 days from notification hereof the respondents answer to the merits. So ordered.

Philpotts vs. Philippine Manufacturing Co. and Berry (DIGEST)

W.G. Philpotts (Petitioner) , a stockholder in Philippine Manufacturing Company sought to compel

respondents to permit plaintiff, a person or by some authorized agent or attorney to inspect and examine
the records of the business transacted by said company since January 1, 1918.

Respondent corporation or any of its officials has refused to allow the petitioner himself to examine
anything relating to the affairs of the company, and the petitioner prays for an order commanding
respondents to place records of all business transactions of the company, during a specific period, at the
disposal of the plaintiff or his duly authorized agent or attorney. Petitioner desires to exercise said right
through agent or attorney.

Petition is filed originally in the Supreme Court under authority of Section 515of Code of Civil Procedure,
which gives SC concurrent jurisdiction with then Court of First Instance in cases where any corporation or
person unlawfully excludes the plaintiff from use and enjoyment and some right he is entitled.

ISSUE:
Whether the right which the law concedes to a stockholder to inspect the records can be exercised by a
proper agent or attorney of the stockholder as well as by stockholder in person.

HELD:
Yes. Right of inspection of records can be exercised by proper agent or attorney of the stockholder as
well as by stockholder in person. The right of inspection / examination into corporate affairs given to a
stockholder in section 51 of the Corporation Law which states: “The records of all business transactions
of the corporation and the minutes of any meeting shall be open to the inspection of any director,
member, or stockholder of the corporation at reasonable hour” can be exercised either by himself
or by any duly authorized representative or attorney in fact, and either with or without the
attendance of the stockholder. This is in conformity with the general rule that what a man may do
in person he may do through another.

W.G. Philpotts vs. Philippine Manufacturing Co. (DIGEST)

Facts:
The petitioner seeks to compel the respondent to permit the plaintiff in person or an authorized agent/
attorney to inspect and examine the records of the business transacted by the company.

Issue:
Whether the right to inspect the records can be exercised by a proper agent or attorney of the stockholder
as well as the stockholder

Held:
YES. The right of inspection given to a stockholder can be exercised either by himself or by any proper
representative or atty-in-fact, and either with or without the attendance of the stockholder. GR: What a man
may do in person, he may do through another. The right of inspection to stockholders of corporations are
to be liberally construed and that said right may be exercised through any other properly authorized person.
 G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.

MUÑOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion
Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the
principal had executed in favor. The administrator of the estate of the went to court to have the sale
declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for,
but upon appeal the Court of Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and
registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of Cebu covered
by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On April 21, 1954, the sisters executed
a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their
behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold
the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of Deeds of Cebu,
TCT No. 11118 was cancelled, and a new transfer certificate of Title No. 12989 was issued in the named
of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 of the Court of First Instance of Cebu, praying (1) that the
sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be d unenforceable, and said
share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan &
Sons Realty Corporation be cancelled and another title be issued in the names of the corporation and the
"Intestate estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of
attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty
Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped
from the complaint. The complaint was amended twice; defendant Corporation's Answer contained a
crossclaim against its co-defendant, Simon Rallos while the latter filed third-party complaint against his
sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his sister Gerundia
died and they were substituted by the respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint —
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question, — Lot 5983 of the Cadastral Survey of Cebu — is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989 covering
Lot 5983 and to issue in lieu thereof another in the names of FELIX GO CHAN & SONS REALTY
CORPORATION and the Estate of Concepcion Rallos in the proportion of one-half (1/2) share each pro-
indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided one-half
(1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to
plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay
to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45, representing the price of
one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in
concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos,
against Josefina Rallos special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos,
covering the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing
judgment insofar as it set aside the sale of the one-half (1/2) share of Concepcion Rallos. The appellate
tribunal, as adverted to earlier, resolved the appeal on November 20, 1964 in favor of the appellant
corporation sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a
reconsider of the decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more
particularly to the instant case, We have the query. is the sale of the undivided share of Concepcion Rallos
in lot 5983 valid although it was executed by the agent after the death of his principal? What is the law in
this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and
in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in
determining the legal effect of an act performed after such death?
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter
tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent him. 3 A
contract entered into in the name of another by one who has no authority or the legal representation or
who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by
the person on whose behalf it has been executed, before it is revoked by the other contracting party.4
Article 1403 (1) of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no authority or legal
representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of agency
whereby one party, caged the principal (mandante), authorizes another, called the agent (mandatario),
to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1)
there is consent, express or implied of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not for
himself, and (4) the agent acts within the scope of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the agent to act
emanates from the powers granted to him by his principal; his act is the act of the principal if done within
the scope of the authority. Qui facit per alium facit se. "He who acts through another acts himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause —
death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken from Art. 1709 of the
Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis
supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished by
the death of the principal or the agent. This is the law in this jurisdiction.8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is
found in the juridical basis of agency which is representation Them being an in. integration of the
personality of the principal integration that of the agent it is not possible for the representation to
continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of the
nature of agency, death is a necessary cause for its extinction. Laurent says that the juridical tie between
the principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of
the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law — the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the
prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer.
red upon an agent is dissolved by the principal's death, and any attempted execution of the power
afterward is not binding on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that exception? That
is the determinative point in issue in this litigation. It is the contention of respondent corporation which
was sustained by respondent court that notwithstanding the death of the principal Concepcion Rallos the
act of the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid and
enforceable inasmuch as the corporation acted in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has
been constituted in the common interest of the latter and of the agent, or in the interest of a third person
who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other
cause which extinguishes the agency, is valid and shall be fully effective with respect to third persons who
may have contracted with him in good. faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon
Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his
principal is valid and effective only under two conditions, viz: (1) that the agent acted without knowledge
of the death of the principal and (2) that the third person who contracted with the agent himself acted in
good faith. Good faith here means that the third person was not aware of the death of the principal at
the time he contracted with said agent. These two requisites must concur the absence of one will render
the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his
principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation. The knowledge
of the death is clearly to be inferred from the pleadings filed by Simon Rallos before the trial court. 12 That
Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo 13 and
of respondent appellate court when the latter stated that Simon Rallos 'must have known of the death of
his sister, and yet he proceeded with the sale of the lot in the name of both his sisters Concepcion and
Gerundia Rallos without informing appellant (the realty corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal
Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his principal; it is not enough that
the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738
of the old Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made after the
death of the principal because it was not shown that the agent knew of his principal's demise. 15 To the
same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus
Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is
no indication in the record, that the agent Luy Kim Guan was aware of the death of his principal at the
time he sold the property. The death 6f the principal does not render the act of an agent unenforceable,
where the latter had no knowledge of such extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out
that there is no provision in the Code which provides that whatever is done by an agent having knowledge
of the death of his principal is void even with respect to third persons who may have contracted with him
in good faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency. That being the general
rule it follows a fortiori that any act of an agent after the death of his principal is void ab initio unless the
same fags under the exception provided for in the aforementioned Articles 1930 and 1931. Article 1931,
being an exception to the general rule, is to be strictly construed, it is not to be given an interpretation or
application beyond the clear import of its terms for otherwise the courts will be involved in a process of
legislation outside of their judicial function.
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.
 Rallos vs. Felix Go Chan & Realty Corp., Munoz-Palma
Plaintiff: Ramon Rallos
Defendant: Felix Go Chan & Sons Realty Corporation
(DIGEST)

Facts: Concepcion and Gerundia 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.They executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell such land for and in their behalf. After Concepcion
died, Simeon Rallos sold the undivided shares of his sisters Concepcion and Gerundia to Felix Go
Chan & Sons Realty Corporation for the sum of P10,686.90. New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a complaint
praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be
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 issuedin
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.
Issues:
1) WON sale was valid although it was executed after the death of the principal, Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the authority of
the agent
3) WON agent’s knowledge of the principal’s death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of death in the
title (thus there was good faith on the part of the Respondent vendee)
5) WON good faith on the part of the respondent in this case should be treated parallel to that
of an agent

CFI: Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate of Concepcion in
theproportion of ½ share each pro-indiviso and the payment of attorney’s fees and cost of
litigation Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during
pendency of case) juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered
to pay defendant the price of the ½ share of the land (P5,343.45) plus attorney’s fees [Borromeo
filed a third party complaint against Josefina Rallos, special administratrix of the Estate
of Gerundia] Dismissed without prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia
Rallos, covering the same subject-matter

CA: CFI Decision reversed, upheld the sale of Concepcion’s share.MR: denied.innocent purchaser
for a value of a land.
RAMON RALLOS v. FELIX GO CHAN AND SONS REALTY CORPORATION
(1978)
J. Muñoz Palma
Under what topic: Death; agency coupled with an interest
Petitioner: Ramon Rallos, administrator of the estate of Concepcion Rallos
Respondent: Felix Go Chan and Sons Realty Corporation and CA

Synopsis: This is a case of an attorney-in-fact, Simeon Rallos, who after of the 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 his favor. The administrator of the estate of Concepcion went to court
to have the sale declared unenforceable and to recover the disposed share. The trial court granted the
relief prayed for, and nullified the sale with respect to the ½ pro indiviso share of Concepcion; but upon
appeal the Court of Appeals upheld the validity of the sale. SC reversed the CA ruling and reinstated the
trial court decision. The agency was extinguished by operation of law because of the death of the principal
and this case does not fall under any of the exceptions.

Doctrine:
General Rule: Agency is extinguished by the death of the principal
Exceptions:
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.

Requisites: (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 onewill render the act of the agent invalid and unenforceable.

Facts:
 Concepcion and Gerundia Rallos were sisters and co-owners of a parcel of land in Cebu. On
April 1954, the sisters executed a special power of attorney (SPA) in favor of their brother Simeon,
authorizing him to sell for and in their behalf said lot. On March 1955, Concepcion died. Simeon sold
the undivided shares of the sisters in the lot to Respondent Felix Go Chan and Sons Realty
Corporation (FGC) for ₱ 10 686.90. Petitioner Ramon Rallos, the administrator of Concepcion’s
intestate estate, filed a complaint before CFI Cebu, praying that: 1.) the sale of Concepcion’s undivided
share be declared unenforceable and that the same be reconveyed to her estate; 2.) the TCT issued in
favor of FGC be cancelled and new one be issued in the names of the corporation (FGC) and the
“Intestate Estate of Concepcion Rallos” in equal undivided shares; and 3.) he be indemnified by way
of attorney’s fees and payment of costs. The CFI ruled in favor of Ramon and ordered FGC to
deliver the possession of the undivided one-half share of the lot to the former. CA granted FGC’s
appeal, sustaining the validity of the sale in question. MR was denied. Hence, this Petition for Review
on certiorari.

Issue: WON the sale conducted after Concepcion’s death was valid.
Ruling:
NO. CA REVERSED.
Extinguishment of agency by cause of death General Rule NCC 1919. Agency is extinguished xxx (3) By
the death, civil interdiction, insanity or insolvency of the principal or agent; xxx By the very nature
of the relationship between the principal and the agent, agency is extinguished by the death of either
one of them Manresa: the juridical basis of agency is representation, there being an integration of
the personality of the principal into that of the agent. Therefore, it is impossible for
representation to continue to exist once the death of either is established Exceptions NCC 1930
and 1931 provide for the exceptions. Under NCC 1931, an act done by the agent after the principal’s
death is valid if: 1) the agent acted without knowledge of the 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. Death of the principal; and 2) the third person who contracted with the
agent acted in good faith (third person not aware of the principal’s death at the time he contracted
with the agent)

Application to the case

The SC found that Simeon was aware of Concepcion’s death when he sold the lot, This can be inferred
from the pleadings he filed before the CFI. This is also a finding of fact made by the CFI and the CA.
Thus, NCC 1931 is inapplicable to this case. 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. The general rule is that the death of the principal extinguishes the agency. Thus,
any act of an agent after the death of the principal is void ab initio unless the same falls under the
exceptions provided for under NCC 1930 and 1931. Being an exception to the general rule, NCC
1931must be strictly construed. Good faith of the vendee. The CA upheld the sale because it found
that FGC acted in good faith, relying on: 1) the power of attorney which was duly registered on the
original certificate of title; and 2) the absence of notice of death on the certificate of title. The SC held
that revocation by an act of the principal as a mode of terminating an agency must be
distinguished from revocation by operation of law, such as death.
2. Art. 1931. Anything done by the agent, without the 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 person who may have contracted with him in good faith. Although a revocation of a power of
attorney to be effective must be communicated to the parties concerned, a revocation by operation
of law (ipso jure), such as the 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.” The NCC does not impose a duty on the heirs to notify the agent of the death of
the principal. NCC 1932 only requires the agent’s heirs to notify the principal of the agent’s death.
Thus, the fact that no notice of death of the principal was registered on the certificate of title in the
Office of the Register of Deeds is not fatal to the Petitioner’s cause.

Dispositive:
CA decision dismissed; CFI decision reinstated
 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 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATED,
respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:
This case is a consolidation of two (2) petitions for review on certiorari of a decision1 of the Court of
Appeals in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air Services and Hotel
Representatives, Inc." which affirmed, with modification, the decision2 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:
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, 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 Order4 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 Answer6 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.7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27
January 1986, affirmed the findings of the court a quo on their material points but with some
modifications with respect to the monetary awards granted. The dispositive portion of the appellate
court's decision is as follows:
WHEREFORE, with the following modifications —
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's
overriding commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso
equivalent in accordance with the official rate of exchange legally prevailing on July 10, 1981, the date the
counterclaim was filed;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per
month starting January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in
accordance with the official rate of exchange legally prevailing on July 10, 1981, the date the counterclaim
was filed
3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer
with counterclaim was filed, until full payment;
4) American is ordered to pay Orient exemplary damages of P200,000.00;
5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American.8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof
and arguing for its reversal. The appellate court's decision was also the subject of a Motion for Partial
Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to
the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied
American Air's motion and with respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's
award of exemplary damages and attorney's fees, but granted insofar as the rate of exchange is
concerned. The decision of January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive part
so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in
accordance with the official rate of exchange legally prevailing on the date of actual payment.9
Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as
petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By resolution10 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:
5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of
3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air
Services or its sub-agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having
opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to
the disputed overriding commission based only on ticketed sales. This is supposed to be the clear meaning
of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission,
the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission
covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by
Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General
Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales
of transportation over American Air's services are necessarily by Orient Air."11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken
into consideration to ascertain the meaning of its provisions.12 The various stipulations in the contract
must be read together to give effect to all.13 After a careful examination of the records, the Court finds
merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the
foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as referred to
by the parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the
promotion and marketing of American Air's services for air passenger transportation, and the solicitation
of sales therefor. In return for such efforts and services, Orient Air was to be paid commissions of two (2)
kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient
Air when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares
and charges for all sales of passenger transportation over American Air services. It is immediately
observed that the precondition attached to the first type of commission does not obtain for the second
type of commissions. The latter type of commissions would accrue for sales of American Air services made
not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized
ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such overriding commissions
to sales from American Air ticket stock would erase any distinction between the two (2) types of
commissions and would lead to the absurd conclusion that the parties had entered into a contract with
meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to
harmonize the entire Agreement.
An additional point before finally disposing of this issue. It is clear from the records that American Air was
the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract
of adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the
ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil
Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.14 To put it differently, when several interpretations of a provision are
otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to
the party in whose favor the provision was made and who did not cause the ambiguity.15 We therefore
agree with the respondent appellate court's declaration that:
Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read
against the party who drafted it.16
We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate
court, on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of
the Agreement, Exh. F, which provides for remittances to American less commissions to which Orient is
entitled, and from paragraph 5(d) which specifically allows Orient to retain the full amount of its
commissions. Since, as stated ante, Orient is entitled to the 3% override. American's premise, therefore,
for the cancellation of the Agreement did not exist. . . ."
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was
entitled to an overriding commission based on total flown revenue. American Air's perception that Orient
Air was remiss or in default of its obligations under the Agreement was, in fact, a situation where the
latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accrued
commissions before remitting the balance to American Air. Since the latter was still obligated to Orient
Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums
claimed by American Air. The latter's termination of the Agreement was, therefore, without cause and
basis, for which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court modified by reduction the trial court's award
of exemplary damages and attorney's fees. This Court sees no error in such modification and, thus, affirms
the same.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the
trial court. We refer particularly to the lower court's decision ordering American Air to "reinstate
1âwphi1

defendant as its general sales agent for passenger transportation in the Philippines in accordance with
said GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to
extend its personality to Orient Air. Such would be violative of the principles and essence of agency,
defined by law as a contract whereby "a person binds himself to render some service or to do something
in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER .17
(emphasis supplied) In an agent-principal relationship, the personality of the principal is extended through
the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to
perform all acts which the latter would have him do. Such a relationship can only be effected with the
consent of the principal, which must not, in any way, be compelled by law or by any court. The Agreement
itself between the parties states that "either party may terminate the Agreement without cause by giving
the other 30 days' notice by letter, telegram or cable." (emphasis supplied) We, therefore, set aside the
portion of the ruling of the respondent appellate court reinstating Orient Air as general sales agent of
American Air.
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.

RIENT AIR SERVICES & HOTEL REPRESENTATIVES vs. COURT OF APPEALS and AMERICAN AIRLINES
INCORPORATED
G.R. No. 76931. May 29, 1991
(DIGEST)
Principal:
AMERICAN AIRLINES INCORPORATED
Agent:
ORIENT AIR SERVICES & HOTEL REPRESENTATIVES

FACTS:
The respondent, American Air, is an air carrier offering passenger and air cargo transportation in the
Philippines, and Orient Air & et. al., entered into a General Sales Agency Agreement (GSA) whereby the
former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale
of air passenger transportation.
-----------------------------------
General Sales Agency Agreement (GSA):
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.

5. Commissions:
(b)Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of
3% of the tariff fares and charges for all sales of transportation over American’s service by Orient Air
Service or its sub-agents.

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.
-------------------------------------
:
Respondent (American Air)’s contention:
It 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. American Air instituted
suit against Orient Air for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction
and Restraining Order, averring the 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.
G.R. No. 144805 June 8, 2006

EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, vs. ETERNIT CORPORATION (now ETERTON
MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY,

DECISION

CALLEJO, SR., J.:

On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R.
CV No. 51022, which affirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil
Case No. 54887, as well as the Resolution2 of the CA denying the motion for reconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since
1950, it had been engaged in the manufacture of roofing materials and pipe products. Its manufacturing
operations were conducted on eight parcels of land with a total area of 47,233 square meters. The
properties, located in Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos.
451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank
& Trust Company, as trustee. Ninety (90%) percent of the shares of stocks of EC were owned by
Eteroutremer S.A. Corporation (ESAC), a corporation organized and registered under the laws of Belgium.3
Jack Glanville, an Australian citizen, was the General Manager and President of EC, while Claude Frederick
Delsaux was the Regional Director for Asia of ESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation in the Philippines and
wanted to stop its operations in the country. The Committee for Asia of ESAC instructed Michael Adams,
a member of EC’s Board of Directors, to dispose of the eight parcels of land. Adams engaged the services
of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers.
Glanville later showed the properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr.
of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was
authorized to sell the properties for P27,000,000.00 and that the terms of the sale were subject to
negotiation.4

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and
his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20,000,000.00 cash.
Marquez apprised Glanville of the Litonjua siblings’ offer and relayed the same to Delsaux in Belgium, but
the latter did not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his
position/ counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that
Delsaux sent a telex to Glanville stating that, based on the "Belgian/Swiss decision," the final offer was
"US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation."5

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted
the counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter dated February 26,
1987, confirmed that the Litonjua siblings had accepted the counter-proposal of Delsaux. He also stated
that the Litonjua siblings would confirm full payment within 90 days after execution and preparation of
all documents of sale, together with the necessary governmental clearances.6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company,
Ermita Branch, and drafted an Escrow Agreement to expedite the sale.7

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the buyer,
which had given him the impression that "he is prepared to press for a satisfactory conclusion to the
sale."8 He also emphasized to Delsaux that the buyers were concerned because they would incur expenses
in bank commitment fees as a consequence of prolonged period of inaction.9

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the
political situation in the Philippines had improved. Marquez received a telephone call from Glanville,
advising that the sale would no longer proceed. Glanville followed it up with a Letter dated May 7, 1987,
confirming that he had been instructed by his principal to inform Marquez that "the decision has been
taken at a Board Meeting not to sell the properties on which Eternit Corporation is situated."10

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had
decided not to proceed with the sale of the subject land, to wit:

May 22, 1987

Mr. L.G. Marquez

L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines

Dear Sir:

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land which
was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined the position
as far as the Philippines are (sic) concerned. Considering [the] new political situation since the departure
of MR. MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our
operations in Manila. In fact, production has started again last week, and (sic) to recognize the
participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy would change at a later
state, we would consult you again.

xxx

Yours sincerely,
(Sgd.)
C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)11

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for
damages they had suffered on account of the aborted sale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton
Multi-Resources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City.
An amended complaint was filed, in which defendant EC was substituted by Eterton Multi-Resources
Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded
as additional defendants on account of their purchase of ESAC shares of stocks and were the controlling
stockholders of EC.

In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in
the Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board and stockholders of
EC never approved any resolution to sell subject properties nor authorized Marquez to sell the same; and
the telex dated October 28, 1986 of Jack Glanville was his own personal making which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended
complaint.12 The fallo of the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and
Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale between the plaintiffs
and said defendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A.
is also dismissed for lack of merit.13

The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void
and not merely unenforceable, and as such, could not have been ratified by the principal. In any event,
such ratification cannot be given any retroactive effect. Plaintiffs could not assume that defendants had
agreed to sell the property without a clear authorization from the corporation concerned, that is, through
resolutions of the Board of Directors and stockholders. The trial court also pointed out that the supposed
sale involves substantially all the assets of defendant EC which would result in the eventual total cessation
of its operation.14

The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that
the real estate broker in the instant case needed a written authority from appellee corporation and/or
that said broker had no such written authority; and (2) the lower court committed grave error of law in
holding that appellee corporation is not legally bound for specific performance and/or damages in the
absence of an enabling resolution of the board of directors."15 They averred that Marquez acted merely
as a broker or go-between and not as agent of the corporation; hence, it was not necessary for him to be
empowered as such by any written authority. They further claimed that an agency by estoppel was
created when the corporation clothed Marquez with apparent authority to negotiate for the sale of the
properties. However, since it was a bilateral contract to buy and sell, it was equivalent to a perfected
contract of sale, which the corporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither
were Glanville and Delsaux authorized by its board of directors to offer the property for sale. Since the
sale involved substantially all of the corporation’s assets, it would necessarily need the authority from the
stockholders.

16
On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. The Litonjuas filed a
motion for reconsideration, which was also denied by the appellate court.

The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article
1874 of the New Civil Code. Under Section 23 of the Corporation Code, he needed a special authority from
EC’s board of directors to bind such corporation to the sale of its properties. Delsaux, who was merely the
representative of ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA pointed
out that Delsaux was not even a member of the board of directors of EC. Moreover, the Litonjuas failed
to prove that an agency by estoppel had been created between the parties.

In the instant petition for review, petitioners aver that

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A
WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE NECESSARY
AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED
BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD
THEM OUT TO THE PUBLIC AS POSSESSING POWER TO SELL THE SAID PROPERTIES.17

Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the
parcels of land and the improvements thereon for "US$1,000,000.00 plus P2,500,000.00 to cover
obligations prior to final liquidation." Petitioners insist that they had accepted the counter-offer of
respondent EC and that before the counter-offer was withdrawn by respondents, the acceptance was
made known to them through real estate broker Marquez.

Petitioners assert that there was no need for a written authority from the Board of Directors of EC for
Marquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary agent
because his authority was of a special and limited character in most respects. His only job as a broker was
to look for a buyer and to bring together the parties to the transaction. He was not authorized to sell the
properties or to make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the
New Civil Code does not apply.

In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate
both the offer and counter-offer and their acceptance of respondent EC’s counter-offer, resulting in a
perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville,
who was the President and General Manager of respondent EC, and Delsaux, who was the Managing
Director for ESAC Asia, had the necessary authority to sell the subject property or, at least, had been
allowed by respondent EC to hold themselves out in the public as having the power to sell the subject
properties. Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President and General
Manager of Eternit, to sell the properties of said corporation to any interested party, which
authority, as hereinabove discussed, need not be in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL
MONTHS, from 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the
Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternit’s offer to sell the properties as evidenced
by the Petitioners’ ACCEPTANCE of the counter-offer;

5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and
that an ESCROW agreement was drafted over the subject properties;

6. Glanville’s telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO

BUY AND SELL";

7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that
Petitioners’ offer was allegedly REJECTED by both Glanville and Delsaux.18

Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners’
offer and thereafter reject such offer unless they were authorized to do so by respondent EC. Petitioners
insist that Delsaux confirmed his authority to sell the properties in his letter to Marquez, to wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land which
was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position
as far as the Philippines are (sic) concerned. Considering the new political situation since the departure of
MR. MARCOS and a certain stabilization in the Philippines, the Committee has decided not to stop our
operations in Manila[.] [I]n fact production started again last week, and (sic) to reorganize the
participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy would change at a later
stage we would consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX19

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties within the scope of an apparent authority. Petitioners
insist that respondents held themselves to the public as possessing power to sell the subject properties.

By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are
proscribed by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (now EMC) and
ESAC reiterate their submissions in the CA. They maintain that Glanville, Delsaux and Marquez had no
authority from the stockholders of respondent EC and its Board of Directors to offer the properties for
sale to the petitioners, or to any other person or entity for that matter. They assert that the decision and
resolution of the CA are in accord with law and the evidence on record, and should be affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux,
conformed to the written authority of Marquez to sell the properties. The authority of Glanville and
Delsaux to bind respondent EC is evidenced by the fact that Glanville and Delsaux negotiated for the sale
of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their positions
and their duties in respondent EC at the time of the transaction, and the fact that respondent ESAC owns
90% of the shares of stock of respondent EC, a formal resolution of the Board of Directors would be a
mere ceremonial formality. What is important, petitioners maintain, is that Marquez was able to
communicate the offer of respondent EC and the petitioners’ acceptance thereof. There was no time that
they acted without the knowledge of respondents. In fact, respondent EC never repudiated the acts of
Glanville, Marquez and Delsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in
this case are factual. Whether or not Marquez, Glanville, and Delsaux were authorized by respondent EC
to act as its agents relative to the sale of the properties of respondent EC, and if so, the boundaries of
their authority as agents, is a question of fact. In the absence of express written terms creating the
relationship of an agency, the existence of an agency is a fact question.20 Whether an agency by estoppel
was created or whether a person acted within the bounds of his apparent authority, and whether the
principal is estopped to deny the apparent authority of its agent are, likewise, questions of fact to be
resolved on the basis of the evidence on record.21 The findings of the trial court on such issues, as affirmed
by the CA, are conclusive on the Court, absent evidence that the trial and appellate courts ignored,
misconstrued, or misapplied facts and circumstances of substance which, if considered, would warrant a
modification or reversal of the outcome of the case.22

It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court
because the Court is not a trier of facts. It is not to re-examine and assess the evidence on record, whether
testimonial and documentary. There are, however, recognized exceptions where the Court may delve into
and resolve factual issues, namely:

(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when
the inference made is manifestly mistaken, absurd, or impossible; (3) when there is 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 of the
Court of Appeals 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 Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify
a different conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record.23

We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant
case falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of Appeals is
supported by the evidence on record and the law.

It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that
it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to prospective
buyers and to accept any counter-offer. Petitioners likewise failed to prove that their counter-offer had
been accepted by respondent EC, through Glanville and Delsaux. It must be stressed that when specific
performance is sought of a contract made with an agent, the agency must be established by clear, certain
and specific proof.24

Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines,
provides:

SEC. 23. The Board of Directors or Trustees. – Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees to be elected from
among the holders of stocks, or where there is no stock, from among the members of the corporation,
who shall hold office for one (1) year and until their successors are elected and qualified.

Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is
not affected by the personal rights,

obligations and transactions of the latter.25 It may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents in the normal
course of business. The general principles of agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law.26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to
the limitations prescribed by law and the Constitution, as follows:

SEC. 36. Corporate powers and capacity. – Every corporation incorporated under this Code has the power
and capacity:

xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with
such real and personal property, including securities and bonds of other corporations, as the transaction
of a lawful business of the corporation may reasonably and necessarily require, subject to the limitations
prescribed by the law and the Constitution.

The property of a corporation, however, is not the property of the stockholders or members, and as such,
may not be sold without express authority from the board of directors.27 Physical acts, like the offering of
the properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of
such properties and the execution of the deed of sale covering such property, can be performed by the
corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific
acts of the board of directors.28 Absent such valid delegation/authorization, the rule is that the
declarations of an individual director relating to the affairs of the corporation, but not in the course of, or
connected with, the performance of authorized duties of such director, are not binding on the
corporation.29

While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will
have to be with the board of directors through its officers and agents as authorized by a board resolution
or by its by-laws.30 An unauthorized act of an officer of the corporation is not binding on it unless the latter
ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation
by a person purporting to be an agent thereof but without written authority from the corporation is null
and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of
his/her authority.31

By the contract of agency, a person binds himself to render some service or to do something in
representation on behalf of another, with the consent or authority of the latter.32 Consent of both
principal and agent is necessary to create an agency. The principal must intend that the agent shall act for
him; the agent must intend to accept the authority and act on it, and the intention of the parties must
find expression either in words or conduct between them.33

An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or
his failure to repudiate the agency knowing that another person is acting on his behalf without authority.
Acceptance by the agent may be expressed, or implied from his acts which carry out the agency, or from
his silence or inaction according to the circumstances.34 Agency may be oral unless the law requires a
specific form.35 However, to create or convey real rights over immovable property, a special power of
attorney is necessary.36 Thus, when a sale of a piece of land or any portion thereof is through an agent,
the authority of the latter shall be in writing, otherwise, the sale shall be void.37

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of
Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer
for sale, for and in its behalf, the eight parcels of land owned by respondent EC including the
improvements thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the
shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners’ claim that
he had likewise been authorized by respondent EC to sell the parcels of land.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux,
who, in turn, acted on the authority of respondent ESAC, through its Committee for Asia,38 the Board of
Directors of respondent ESAC,39 and the Belgian/Swiss component of the management of respondent
ESAC.40 As such, Adams and Glanville engaged the services of Marquez to offer to sell the properties to
prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized
to offer for sale the property for P27,000,000.00 and the other terms of the sale subject to negotiations.
When petitioners offered to purchase the property for P20,000,000.00, through Marquez, the latter
relayed petitioners’ offer to Glanville; Glanville had to send a telex to Delsaux to inquire the position of
respondent ESAC to petitioners’ offer. However, as admitted by petitioners in their Memorandum,
Delsaux was unable to reply immediately to the telex of Glanville because Delsaux had to wait for
confirmation from respondent ESAC.41 When Delsaux finally responded to Glanville on February 12, 1987,
he made it clear that, based on the "Belgian/Swiss decision" the final offer of respondent ESAC was
US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior to final liquidation.42 The offer
of Delsaux emanated only from the "Belgian/Swiss decision," and not the entire management or Board of
Directors of respondent ESAC. While it is true that petitioners accepted the counter-offer of respondent
ESAC, respondent EC was not a party to the transaction between them; hence, EC was not bound by such
acceptance.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were
members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of respondent EC; a board resolution evincing the grant of such authority is needed to
bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90%
of the shares of stocks of respondent EC; however, the mere fact that a corporation owns a majority of
the shares of stocks of another, or even all of such shares of stocks, taken alone, will not justify their being
treated as one corporation.43

It bears stressing that 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.44

The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC
empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said properties to
the petitioners. A person dealing with a known agent is not authorized, under any circumstances, blindly
to trust the agents; statements as to the extent of his powers; such person must not act negligently but
must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his
authority.45 The settled rule is that, persons dealing with an assumed agent are bound at their peril, and
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 prove it. 46 In
this case, the petitioners failed to discharge their burden; hence, petitioners are not entitled to damages
from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As
gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed, for and in behalf of
the petitioners, that the latter had accepted such offer to sell the land and the improvements thereon.
However, we agree with the ruling of the appellate court that Marquez had no authority to bind
respondent EC to sell the subject properties. A real estate broker is one who negotiates the sale of real
properties. His business, generally speaking, is only to find a purchaser who is willing to buy the land upon
terms fixed by the owner. He has no authority to bind the principal by signing a contract of sale. Indeed,
an authority to find a purchaser of real property does not include an authority to sell.47

Equally barren of merit is petitioners’ contention that respondent EC is estopped to deny the existence of
a principal-agency relationship between it and Glanville or Delsaux. For an agency by estoppel to exist,
the following must be established: (1) the principal manifested a representation of the agent’s authority
or knowlingly allowed the agent to assume such authority; (2) the third person, in good faith, relied upon
such representation; (3) relying upon such representation, such third person has changed his position to
his detriment.48 An agency by estoppel, which is similar to the doctrine of apparent authority, requires
proof of reliance upon the representations, and that, in turn, needs proof that the representations
predated the action taken in reliance.49 Such proof is lacking in this case. In their communications to the
petitioners, Glanville and Delsaux positively and unequivocally declared that they were acting for and in
behalf of respondent ESAC.

Neither may respondent EC be deemed to have ratified the transactions between the petitioners and
respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the various
communications inter se were never submitted to the Board of Directors of respondent EC for ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.

SO ORDERED.

Eduardo Litonjua, Jr. and Antonio Litonjua v. Eternit Corp, and Eteroutremer S.A. & Far East Bank &
Trust Co. (2006)
Callejo, Sr., J.
(DIGEST)

Facts:
 Eternit Corp. is in the manufacture of roofing materials and pipes. It conducted manufacturing
operations on 8 parcels of land in Mandaluyong, with Far East Bank as trustee. 90% of the shares of stocks
of Eternit Corp. were owned by Eteroutremer Corp (ESAC) - a corp organized and registered under the
laws of Belgium. ESAC management grew concerned about the political situation in the Philippines
and wanted to stop its operations here. [ martial law,1986] properties for P27mil and that the terms
of the sale were subject to negotiation. He showed the land + improvements to Eduardo Litonjua, Jr., and
his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for P20mil cash. Marquez
apprised the General Manager/President of Eternit Corp (Jack Glanville) and Regional Director for Asia of
ESAC (Claude Delsaux) of the Litonjua siblings’ offer. Delsaux did not respond. Glanville telexed Delsaux
in Belgium, inquiring on his position to the offer. Delsaux answered that based on the “Belgian/Swiss
decision,” (meaning: the Belgian/Swiss component of ESAC) the final offer was $1mil and P2.5mil for all
existing obligations prior to final liquidation. Litonjua, Jr. accepted the counterproposal. Broker Marquez
stated that the Litonjua siblings would confirm full payment within 90 days after execution of all
documents of sale, with the governmental clearances. The Litonjua brothers deposited the amount of
$1mil with Security Bank and drafted an Escrow Agreement to expedite the sale. Later on, with Cory as
President, the political situation in the Philippines improved. President Glanville told Broker Marquez that
the sale would not push through. Tthe decision has been taken at a Board Meeting not to sell the
properties. The Litonjuas wrote Eternit demanding payment for damages they had suffered because of
the aborted sale. Eternit rejected this.

Issue:
Were Broker Marquez, Pres Glanville, and Reg Dir Delsaux authorized by Eternit to act as its agents in the
sale of the properties of Eternit?

RULING:

NO.
 In an agent-principal relationship, the personality of the principal is extended through the facility
of the agent. The agent, by legal fiction, becomes the principal, authorized to perform all acts
which the principal would have him do. This 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.
 A corporation is a juridical person separate and distinct from its members or stockholders. It is
not affected by the personal rights, obligations and transactions of the members/stockholders. It
may act only through its board of directors or through its officers or agents.
 The general principles of agency govern the relation between the corporation and its officers or
agents, subject to the articles of incorporation, by-laws, or relevant provisions of law.
 Section 36 of the Corporation Code: “A corporation may sell or convey its real properties, subject
to the limitations prescribed by law and the Constitution.” The property of a corporation is
not the property of the stockholders or members. These may not be sold without express
authority from the board of directors.
 Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of
a counter-offer of prospective buyers and the execution of the deed of sale, can be performed by
the corporation only by officers or agents or by specific acts of the board of directors.
 Absent such valid authorization, the rule is that the declarations of an individual director, but not
in the course of or connected with the performance of the authorized duties of the director, are
not binding on the corp.
 An agency may be expressed or implied from the act of the principal, from his silence or lack of
action, or his failure to repudiate the agency knowing that another person is acting on his behalf
without authority.
 Agency may be oral unless the law requires a specific form.
 To create or convey real rights over immovable property, a special power of attorney is necessary.
 The Litonjuas failed to produce evidence any resolution of the Board of Directors of Eternit
empowering the broker, president, or reg dir as its agents, to sell in its behalf, the property. The
bare fact that Delsaux may have been authorized to sell to a certain stockholder (Ruperto Tan)
the shares of stock cannot be used as basis for Litonjua’s claim that he had likewise been
authorized by Eternit to sell the land.
 While Glanville was the Pres and Gen Mngr of Eternit and Adams and Delsaux were members of
its Board of Directors, the three acted for and in behalf of respondent ESAC, and not as duly
authorized agents of Eternit.
  A board resolution of the grant of authority is needed to bind Eternit to any agreement on the
sale of the properties.
 The board resolution is not a mere formality but is a condition sine qua non to bind Eternit.
 Requisites of an agency by estoppels:
1. The principal manifested a representation of the agent’s authority or knowingly allowed
the agent to assume such authority;
2. The third person, in good faith, relied upon such representation;
3. Relying upon such representation, such third person has changed his position to his
detriment.
 An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance
upon the representations. Proof is lacking in this case.
 Neither may Eternit be deemed to have ratified the transactions through Glanville, Delsaux and
Marquez. The transactions and the communications were never submitted to the Board of Directors of
Eternit for ratification.

Petition denied.

Eduardo Litonjua, Jr. and Antonio Litonjua v. Eternit Corp, and Eteroutremer S.A. & Far East Bank &
Trust Co. (2006)
(DIGEST)

Facts:
The Eternit Corporation manufactures roofing materials and pipe products. 90% of the shares of
stocks of EC were owned by Eteroutreme S.A. Corporation, a corporation registered under the laws of
Belgium. Glanville was the General Manager and President of EC, while Delsaux was the Regional Director
for Asia of ESAC. In 1986, because of the political situation in the Philippines, the management of ESAC
wanted to stop its operations and to dispose the land in Mandaluyong City. They engaged the services of
realtor/broker Lauro G Marquez.

Marquez thereafter offered the land to Eduardo B. Litonjua, Jr. for Php 27,000,000.00. Litonjua counter
offered Php 20,000,000.00 cash. Marquez apprised Glanville & Delsaux of the offer. Delsaux sent a telex
stating that, based on the “Belgian/Swiss decision”, the final offer was US$1,000,000.00 and Php
2,500,000.00. The Litonjua brothers deposited US$ 1,000,000.00 with the Security Bank & Trust Company,
and drafted an Escrow Agreement to expedite the sale.

Meanwhile, with the assumption of Corazon Aquino as President, the political situation improved.
Marquez received a letter from Delsaux that the ESAC Regional Office decided not to proceed with the
sale. When informed of this, the Litonjuas filed a complaint for specific performance and payment for
damages on account of the aborted sale. Both the trial court and appellate court rendered judgment in
favour of defendants and dismissed the complaint.

The lower court declared that since the authority of the agents/realtors was not in writing, the sale is void
and not merely unenforceable.

Issue: WON the appellate court committed grave error of law in holding that Marquez needed a written
authority from respondent ETERNIT before the sale can be perfected.
Ruling:
Respondents maintain that Glanville, Delsaux and Marquez had no authority from the
stockholders of EC and its Board of Director to offer the properties for sale to the petitioners.

Petitioners assert that there was no need for a written authority from the Board of Directors of
EC for Marquez to validly act as broker. As broker, Marquez was not an ordinary agent because his only
job as a broker was to look for a buyer and to bring together the parties to the transaction. He was not
authorized to sell the properties; hence, petitioners argue, Article 1874 of the NCC does not apply.

A corporation is a juridical person separate and distinct from its stockholders and is not affected
by the personal rights, obligations and transactions of the latter. It may act only through its board of
directors or, when authorized by its board resolution, through its officers or agents. The general principles
of agency govern the relation between the corporation and its officers or agents, subject to the articles of
incorporation, by-laws, or relevant provisions of law.

Agency may be oral unless the law requires specific form. However, to create or convey real rights
over immovable property, a special power of attorney is necessary. Thus, when a sale of a piece of land
or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the
sale shall be void.

In this case, the petitioners failed to adduce in evidence any resolution of the BOD of EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its
behalf, the eight parcels of land owned by it.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of
Delsaux, who, in turn, acted on the authority of respondent ESAC, through its Committee for Asia,the
Board of Directors of respondent ESAC, and the Belgian/Swiss component of the management of
respondent ESAC. The offer of Delsaux emanated only from the "Belgian/Swiss decision," and not the
entire management or Board of Directors of respondent ESAC. While it is true that petitioners accepted
the counter-offer of respondent ESAC, respondent EC was not a party to the transaction between them;
hence, EC was not bound by such acceptance.