Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 108957 June 14, 1993

PRUDENTIAL BANK, petitioner,
vs.
THE COURT OF APPEALS, AURORA CRUZ, respondents.
Monique Q. Ignacio for petitioner.
Eduardo C. Tutaan for private respondent.

CRUZ, J.:
We deal here with another controversy involving the integrity of a bank.
The complaint in this case arose when private respondent Aurora F.
Cruz, * with her sister as co-depositor, invested P200,000.00 in Central Bank bills with the Prudential Bank at its branch in Quezon Avenue,
Quezon City, on June 23, 1986. The placement was for 63 days at 13.75% annual interest. For this purpose, the amount of P196,122.88 was
withdrawn from the depositors' Savings Account No. 2546 and applied to the investment. The difference of P3,877.07 represented the prepaid interest.
1

delivered to Cruz two days later, together with a Debit Memo

in the amount withdrawn and applied to the confirmed sale. These documents were issued by Susan
Quimbo, the employee of the bank to whom Cruz was referred and who was apparently in charge of such
transactions. 3
The transaction was evidenced by a Confirmation of Sale
2

Upon maturity of the placement on August 25, 1986, Cruz returned to the bank to "roll-over" or renew her
investment. Quimbo, who again attended to her, prepared a Credit Memo 4 crediting the amount of
P200,000.00 in Cruz's savings account passbook. She also prepared a Debit Memo for the amount of
P196,122.88 to cover the re-investment of P200,000.00 minus the prepaid interest of P3,877.02. 5
This time, Cruz was asked to sign a Withdrawal Slip 6 for P196,122.98, representing the amount to be reinvested after deduction of the prepaid interest. Quimbo explained this was a new requirement of the
bank. Several days later, Cruz received another Confirmation of Sale 7 and a copy of the Debit Memo. 8
On October 27, 1986, Cruz returned to the bank and sought to withdraw her P200,000.00. After
verification of her records, however, she was informed that the investment appeared to have been already
withdrawn by her on August 25, 1986. There was no copy on file of the Confirmation of Sale and the Debit
Memo allegedly issued to her by Quimbo. Quimbo herself was not available for questioning as she had
not been reporting for the past week. Shocked by this information, Cruz became hysterical and burst into
tears. The branch manager, Roman Santos, assured her that he would look into the matter. 9

Every day thereafter, Cruz went to the bank to inquire about her request to withdraw her investment. She
received no definite answer, not even to the letter she wrote the bank which was received by Santos
himself. 10 Finally, Cruz sent the bank a demand letter dated November 12, 1986 for the amount of
P200,000.00 plus interest. 11 In a reply dated November 20, 1986, the bank's Vice President Lauro J.
Jocson said that there appeared to be an anomaly
and requested Cruz to defer court action as they hoped to settle the matter amicably. 12 Increasingly
worried, Cruz sent another letter reiterating her demand. 13 This time the reply of the bank was
unequivocal and negative. She was told that her request had to be denied because she had already
withdrawn the amount she was claiming. 14
Cruz's reaction was to file a complaint for breach of contract against Prudential Bank in the Regional Trial
Court of Quezon City. She demanded the return of her money with interest, plus damages and attorney's
fees. In its answer, the bank denied liability, insisting that Cruz had withdrawn her investment. The bank
also instituted a third-party complaint against Quimbo, who did not file an answer and was declared in
default. 15 The bank, however, did not present any evidence against her.
After trial, Judge Rodolfo A. Ortiz rendered judgment in favor of the plaintiffs and disposed as follows:
ACCORDINGLY, judgment is hereby rendered ordering the defendant/third-party plaintiff
to pay to the plaintiffs the following amounts:
1. P200,000.00, plus interest thereon at the rate of 13.75% per annum from October 27,
1986, until fully paid;
2. P30,000.00, as moral damages;
3. P20,000.00, as exemplary damages; and
4. P25,000.00, as reasonable attorney's fees.
The counterclaim and the third-party complaint of the defendant/third-party plaintiff are
dismissed.
With costs against the defendant/third-party plaintiff.
The decision was affirmed in toto on appeal to the respondent court.
The judgment of the Court of Appeals 16 is now faulted in this petition, mainly on the ground that the bank
should not have been found liable for a quasi-delict when it was sued for breach of contract.
The petition shall fail. The petitioner is quibbling. It appears to be merely temporizing to delay
enforcement of the liability clearly established against it.
The basic issues are factual. The private respondent claims she has not yet collected her investment of
P200,000.00 and has submitted in proof of their contention the Confirmation of Sale and the Debit Memo
issued to her by Quimbo on the official forms of the bank. The petitioner denies her claim and points to
the Withdrawal Slip, which it says Cruz has not denied having signed. It also contends that the

Confirmation of Sale and the Debit Memo are fake and should not have been given credence by the lower
courts.
The findings of the trial court on these issues have been affirmed by the respondent court and we see no
reason to disturb them. The petitioner has not shown that they have been reached arbitrarily or in
disregard of the evidence of record. On the contrary, we find substantial basis for the conclusion that the
private respondents signed the Withdrawal Slip only as part of the bank's new procedure of reinvestment. She did not actually receive the amount indicated therein, which she was made to understand
was being re-invested in her name. The bank itself so assured her in the Confirmation of Sale and the
Debit Memo later issued to her by Quimbo.
Especially persuasive are the following observations of the trial court:

17

What is more, it could not be that plaintiff Aurora F. Cruz withdrew only the amount of
P196,122.98 from their savings account, if her only intention was to make such a
withdrawal. For, if, indeed, it was the desire of the plaintiffs to withdraw their money from
the defendant/third-party plaintiff, they could have withdrawn an amount in round figures.
Certainly, it is unbelievable that their withdrawal was in the irregular amount of
P196,122.98 if they really received it. On the contrary, this amount, which is the price of
the Central Bank bills rolled over, indicates that, as claimed by plaintiff Aurora F. Cruz,
she did not receive this money, but it was left by her with the defendant/third-party plaintiff
in order to buy Central Bank bills placement for another sixty-three (63) days, for which
she signed a withdrawal slip at the instance of third-party defendant Susan Quimbo who
told her that it was a new bank requirement for the roll-over of a matured placement
which she trustingly believed.
Indeed, the bank has not explained the remarkable coincidence that the amount indicated in the
withdrawal slip is exactly the same amount Cruz was re-investing after deducting therefrom the pre-paid
interest.
The bank has also not, succeeded in impugning the authenticity of the Confirmation of Sale and the Debit
Memo which were made on its official, forms. These are admittedly not available to the general public or
even its depositors and are handled only by its personnel. Even assuming that they were not signed by its
authorized officials, as it claims, there was no obligation on the part of Cruz to verify their authority
because she had the right to presume it. The documents had been issued in the office of the bank itself
and by its own employees with whom she had previously dealt. Such dealings had not been questioned
before, much leas invalidated. There was absolutely no reason why she should not have accepted their
authority to act on behalf of their employer.
It is also worthy of note and wonder that although the bank impleaded Quimbo in a third-party
complaint, it did not pursue its suit even when she failed to answer and was declared in default. The bank
did not introduce evidence against her although it could have done so under the rules. No less
remarkably, it did not call on her to testify on its behalf, considering that under the circumstances claimed
by it, she would have been the best witness to show that Cruz had actually withdrawn her P200,000.00
placement. Instead, the bank chose to rely on its other employees whose testimony was less direct and
categorical than the testimony Quimbo could have given.

We do not find that the Court of Appeals held the bank liable on a quasi-delict. The argument of the
petitioner on this issue is pallid, to say the least, consisting as it does only of the observation that the
article cited by the respondent court on the agent's liability falls under the heading in the Civil Code on
quasi-delicts. On the other hand, the respondent court clearly declared that:
The defendant/third-party plaintiff being liable for the return of the P200,000.00
placement of the plaintiffs, the extent of the liability of the defendant/third-party plaintiff for
damages resultant thereof, which is contractual, is for all damages which may be
reasonably attributed to the non-performance of the obligation, . . .
xxx xxx xxx
Because of the bad faith of the defendant/third-party plaintiff in its breach of its contract
with the plaintiffs, the latter are, therefore, entitled to an award of moral damages . . .
(Emphasis supplied)
There is no question that the petitioner was made liable for its failure or refusal to deliver to Cruz the
amount she had deposited with it and which she had a right to withdraw upon its maturity. That investment
was acknowledged by its own employees, who had the apparent authority to do so and so could legally
bind it by its acts vis-a-vis Cruz. Whatever might have happened to the investment whether it was lost
or stolen by whoever was not the concern of the depositor. It was the concern of the bank.
As far as Cruz was concerned, she had the right to withdraw her P200,000.00 placement when it matured
pursuant to the terms of her investment as acknowledged and reflected in the Confirmation of Sale. The
failure of the bank to deliver the amount to her pursuant to the Confirmation of Sale constituted its breach
of their contract, for which it should be held liable.
The liability of the principal for the acts of the agent is not even debatable. Law and jurisprudence are
clearly and absolutely against the petitioner.
Such liability dates back to the Roman Law maxim, Qui per alium facit per seipsum facere videtur. "He
who does a thing by an agent is considered as doing it himself." This rule is affirmed by the Civil Code
thus:
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.
Conformably, we have declared in countless decisions that the principal is liable for
obligations contracted by the agent. The agent's apparent representation yields to the
principal's true representation and the contract is considered as entered into between the
principal and the third person. 18
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the
course of dealings of the officers in their representative capacity but not for acts outside
the scope of their authority. (9 c.q.s. p. 417) A bank holding out its officers and agent as

worthy of confidence will not be permitted to profit by the frauds they may thus be
enabled to perpetrate in the apparent scope of their employment; nor will it be permitted
to shirk its responsibility for such frauds, even though no benefit may accrue to the bank
therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is liable to innocent
third persons where the representation is made in the course of its business by an agent
acting within the general scope of his authority even though, in the particular case, the
agent is secretly abusing his authority and attempting to perpetrate a fraud upon his
principal or some other person, for his own ultimate benefit (McIntosh v. Dakota Trust
Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)
Application of these principles in especially necessary because banks have a fiduciary relationship with
the public and their stability depends on the confidence of the people in their honesty and efficiency. Such
faith will be eroded where banks do not exercise strict care in the selection and supervision of its
employees, resulting in prejudice to their depositors.
It would appear from the facts established in the case before us that the petitioner was less than eager to
present Quimbo at the trial or even to establish her liability although it made the initial effort which it did
not pursue to hold her answerable in the third-party complaint. What ever happened to her does not
appear in the record. Her absence from the proceedings feeds the suspicion of her possible misdeed,
which the bank seems to have studiously ignored by its insistence that the missing money had been
actually withdrawn by Cruz. By such insistence, the bank is absolving not only itself but also, in effect and
by extension, the disappeared Quimbo who apparently has much to explain.
We agree with the lower courts that the petitioner acted in bad faith in denying Cruz the obligation she
was claiming against it. It was obvious that an irregularity had been committed by the bank's personnel,
but instead of repairing the injury to Cruz by immediately restoring her money to her, it sought to gloss
over the anomaly in its own operations.
Cruz naturally suffered anxious moments and mental anguish over the loss of the investment. The
amount of P200,000.00 is not small even by present standards. By unjustly withholding it from her on the
unproved defense that she had already withdrawn it, the bank violated the trust she had reposed in it and
thus subjected itself to further liability for moral and exemplary damages.
If a person dealing with a bank does not read the fine print in the contract, it is because he trusts the bank
and relies on its integrity. The ordinary customer applying for a loan or even making a deposit (and so
himself extending the loan to the bank) does not bother with the red tape requirements and the finicky
conditions in the documents he signs. His feeling is that he does not have to be wary of the bank because
it will deal with him fairly and there is no reason to suspect its motives. This is an attitude the bank must
justify.
While this is not to say that bank regulations are meaningless or have no binding effect, they should,
however, not be used for covering up the fault of bank employees when they blunder or, worse,
intentionally cheat him. The misdeeds of such employees must be readily acknowledged and rectified
without delay. The bank must always act in good faith. The ordinary customer does not feel the need for a
lawyer by his side every time he deals with a bank because he is certain that it is not a predator or a
potential adversary. The bank should show that there is really no reason for any apprehension because it
truly deserves his faith in it.

WHEREFORE, the petition is DENIED and the appealed decision is AFFIRMED, with costs against the
petitioner. It is so ordered.
Grio-Aquino, Bellosillo and Quiason, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 88539 October 26, 1993

KUE CUISON, doing business under the firm name and style"KUE CUISON PAPER SUPPLY," petitioner,
vs.
THE COURT OF APPEALS, VALIANT INVESTMENT ASSOCIATES, respondents.
Leighton R. Siazon for petitioner.
Melanio L. Zoreta for private respondent.

BIDIN, J.:
This petition for review assails the decision of the respondent Court of Appeals ordering petitioner to pay private respondent, among others,
the sum of P297,482.30 with interest. Said decision reversed the appealed decision of the trial court rendered in favor of petitioner.
The case involves an action for a sum of money filed by respondent against petitioner anchored on the following antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of newsprint, bond paper and scrap, with places of business
at Baesa, Quezon City, and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates, on the other hand, is a
partnership duly organized and existing under the laws of the Philippines with business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered various kinds of paper products amounting to P297,487.30 to a
certain Lilian Tan of LT Trading. The deliveries were made by respondent pursuant to orders allegedly placed by Tiu Huy Tiac who was then
employed in the Binondo office of petitioner. It was likewise pursuant to Tiac's instructions that the merchandise was delivered to Lilian Tan.
Upon delivery, Lilian Tan paid for the merchandise by issuing several checks payable to cash at the specific request of Tiu Huy Tiac. In turn,
Tiac issued nine (9) postdated checks to private respondent as payment for the paper products. Unfortunately, sad checks were later
dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay for the merchandise in question, claiming that Tiu Huy Tiac was
duly authorized by petitioner as the manager of his Binondo office, to enter into the questioned transactions with private respondent and
Lilian Tan. Petitioner denied any involvement in the transaction entered into by Tiu Huy Tiac and refused to pay private respondent the
amount corresponding to the selling price of the subject merchandise.
Left with no recourse, private respondent filed an action against petitioner for the collection of P297,487.30 representing the price of the
merchandise. After due hearing, the trial court dismissed the complaint against petitioner for lack of merit. On appeal, however, the decision
of the trial court was modified, but was in effect reversed by the Court of Appeals, the dispositive portion of which reads:

WHEREFORE, the decision appealed from is MODIFIED in that defendant-appellant Kue Cuison is hereby ordered to
pay plaintiff-appellant Valiant Investment Associates the sum of P297,487.30 with 12% interest from the filing of the
complaint until the amount is fully paid, plus the sum of 7% of the total amount due as attorney's fees, and to pay the
costs. In all other respects, the decision appealed from is affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN FINDING TIU HUY TIAC AGENT OF DEFENDANT-APPELLANT CONTRARY
TO THE UNDISPUTED/ESTABLISHED FACTS AND CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT LIABLE FOR AN OBLIGATION
UNDISPUTEDLY BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED DECISION OF THE TRIAL COURT, (Rollo, p, 19)
The issue here is really quite simple whether or not Tiu Huy Tiac possessed the required authority from petitioner sufficient to hold the
latter liable for the disputed transaction.
This petition ought to have been denied outright, forin the final analysis, it raises a factual issue. It is elementary that in petitions for review
under Rule 45, this Court only passes upon questions of law. An exception thereto occurs where the findings of fact of the Court of Appeals
are at variance with the trial court, in which case the Court reviews the evidence in order to arrive at the correct findings based on the
records.
As to the merits of the case, it is a well-established rule that one who clothes another with apparent authority as his agent and holds him out
to the public as such cannot be permitted to deny the authority of such person to act as his agent, to the prejudice of innocent third parties
dealing with such person in good faith and in the honest belief that he is what he appears to be (Macke, et al, v. Camps, 7 Phil. 553 (1907];
Philippine National Bank. v Court of Appeals, 94 SCRA 357 [1979]). From the facts and the evidence on record, there is no doubt that this
rule obtains. The petition must therefore fail.
It is evident from the records that by his own acts and admission, petitioner held out Tiu Huy Tiac to the public as the manager of his store in
Sto. Cristo, Binondo, Manila. More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino Villanueva, respondent's manager,
as his (petitioner's) branch manager as testified to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the manager of petitioner's Sto. Cristo, Binondo branch. This
general perception of Tiu Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by the fact that Tiu Huy Tiac is
known in the community to be the "kinakapatid" (godbrother) of petitioner. In fact, even petitioner admitted his close relationship with Tiu Huy
Tiac when he said that they are "like brothers" (Rollo, p. 54). There was thus no reason for anybody especially those transacting business
with petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto. Cristo Binondo branch.
In a futile attempt to discredit Villanueva, petitioner alleges that the former's testimony is clearly self-serving inasmuch as Villanueva worked
for private respondent as its manager.
We disagree, The argument that Villanueva's testimony is self-serving and therefore inadmissible on the lame excuse of his employment with
private respondent utterly misconstrues the nature of "'self-serving evidence" and the specific ground for its exclusion. As pointed out by this
Court in Co v. Court of Appeals et, al., (99 SCRA 321 [1980]):
Self-serving evidence is evidence made by a party out of court at one time; it does not include a party's testimony as a
witness in court. It is excluded on the same ground as any hearsay evidence, that is the lack of opportunity for crossexamination by the adverse party, and on the consideration that its admission would open the door to fraud and to
fabrication of testimony. On theother hand, a party's testimony in court is sworn and affords the other party the
opportunity for cross-examination (emphasis supplied)
Petitioner cites Villanueva's failure, despite his commitment to do so on cross-examination, to produce the very first invoice of the transaction
between petitioner and private respondent as another ground to discredit Villanueva's testimony. Such failure, proves that Villanueva was not
only bluffing when he pretended that he can produce the invoice, but that Villanueva was likewise prevaricating when he insisted that such
prior transactions actually took place. Petitioner is mistaken. In fact, it was petitioner's counsel himself who withdrew the reservation to have
Villanueva produce the document in court. As aptly observed by the Court of Appeals in its decision:
. . . However, during the hearing on March 3, 1981, Villanueva failed to present the document adverted to because
defendant-appellant's counsel withdrew his reservation to have the former (Villanueva) produce the document or
invoice, thus prompting plaintiff-appellant to rest its case that same day (t.s.n., pp. 39-40, Sess. of March 3, 1981).

Now, defendant-appellant assails the credibility of Villanueva for having allegedly failed to produce even one single
document to show that plaintiff-appellant have had transactions before, when in fact said failure of Villanueva to
produce said document is a direct off-shoot of the action of defendant-appellant's counsel who withdrew his reservation
for the production of the document or invoice and which led plaintiff-appellant to rest its case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of Lilian Tan by alleging that Tan was part of an intricate plot to defraud him. However,
petitioner failed to substantiate or prove that the subject transaction was designed to defraud him. Ironically, it was even the testimony of
petitioner's daughter and assistant manager Imelda Kue Cuison which confirmed the credibility of Tan as a witness. On the witness stand,
Imelda testified that she knew for a fact that prior to the transaction in question, Tan regularly transacted business with her father (petitioner
herein), thereby corroborating Tan's testimony to the same effect. As correctly found by the respondent court, there was no logical
explanation for Tan to impute liability upon petitioner. Rather, the testimony of Imelda Kue Cuison only served to add credence to Tan's
testimony as regards the transaction, the liability for which petitioner wishes to be absolved.
But of even greater weight than any of these testimonies, is petitioner's categorical admission on the witness stand that Tiu Huy Tiac was the
manager of his store in Sto. Cristo, Binondo, to wit:
Court:
xxx xxx xxx
Q And who was managing the store in Sto. Cristo?
A At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the exact year.
Q So, Mr. Tiu Huy Tiac took over the management,.
A Not that was because every afternoon, I was there, sir.
Q But in the morning, who takes charge?
A Tiu Huy Tiac takes charge of management and if there (sic) orders for newsprint or bond
papers they are always referred to the compound in Baesa, sir. (t.s.n., p. 16, Session of January
20, 1981, CA decision, Rollo, p. 50, emphasis supplied).
Such admission, spontaneous no doubt, and standing alone, is sufficient to negate all the denials made by petitioner regarding the capacity
of Tiu Huy Tiac to enter into the transaction in question. Furthermore, consistent with and as an obvious indication of the fact that Tiu Huy
Tiac was the manager of the Sto. Cristo branch, three (3) months after Tiu Huy Tiac left petitioner's employ, petitioner even sent,
communications to its customers notifying them that Tiu Huy Tiac is no longer connected with petitioner's business. Such undertaking spoke
unmistakenly of Tiu Huy Tiac's valuable position as petitioner's manager than any uttered disclaimer. More than anything else, this act taken
together with the declaration of petitioner in open court amount to admissions under Rule 130 Section 22 of the Rules of Court, to wit : "The
act, declaration or omission of a party as to a relevant fact may be given in evidence against him." For well-settled is the rule that "a man's
acts, conduct, and declaration, wherever made, if voluntary, are admissible against him, for the reason that it is fair to presume that they
correspond with the truth, and it is his fault if they do not. If a man's extrajudicial admissions are admissible against him, there seems to be
no reason why his admissions made in open court, under oath, should not be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583
[1912];).
Moreover, petitioner's unexplained delay in disowning the transactions entered into by Tiu Huy Tiac despite several attempts made by
respondent to collect the amount from him, proved all the more that petitioner was aware of the questioned commission was tantamount to
an admission by silence under Rule 130 Section 23 of the Rules of Court, thus: "Any act or declaration made in the presence of and within
the observation of a party who does or says nothing when the act or declaration is such as naturally to call for action or comment if not true,
may be given in evidence against him."
All of these point to the fact that at the time of the transaction Tiu Huy Tiac was admittedly the manager of petitioner's store in Sto. Cristo,
Binondo. Consequently, the transaction in question as well as the concomitant obligation is valid and binding upon petitioner.
By his representations, petitioner is now estopped from disclaiming liability for the transaction entered by Tiu Huy Tiac on his behalf. It
matters not whether the representations are intentional or merely negligent so long as innocent, third persons relied upon such
representations in good faith and for value As held in the case of Manila Remnant Co. Inc. v. Court of Appeals, (191 SCRA 622 [1990]):

More in point, we find that by the principle of estoppel, Manila Remnant is deemed to have allowed its agent to act as
though it had plenary powers. Article 1911 of the Civil Code provides:
"Even when the agent has exceeded his authority, the principal issolidarily liable with the agent if
the former allowed the latter to act as though he had full powers." (Emphasis supplied).
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a situation, both the
principal and the agent may be considered as joint tortfeasors whose liability is joint and solidary.
Authority by estoppel has arisen in the instant case because by its negligence, the principal, Manila Remnant, has
permitted its agent, A.U. Valencia and Co., to exercise powers not granted to it. That the principal might not have had
actual knowledge of theagent's misdeed is of no moment.
Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations, became an agent of petitioner by estoppel, an admission or
representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon
(Article 1431, Civil Code of the Philippines). A party cannot be allowed to go back on his own acts and representations to the prejudice of the
other party who, in good faith, relied upon them (Philippine National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).
Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy Tiac on his behalf. Thus, even when the agent has exceeded
his authority, the principal is solidarily liable with the agent if the former allowed the latter to fact as though he had full powers (Article 1911
Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner) in not turning over the proceeds of the transaction to the
latter, such fact cannot in any way relieve nor exonerate petitioner of his liability to private respondent. For it is an equitable maxim that as
between two innocent parties, the one who made it possible for the wrong to be done should be the one to bear the resulting loss (Francisco
vs. Government Service Insurance System, 7 SCRA 577 [1963]).
Inasmuch as the fundamental issue of the capacity or incapacity of the purported agent Tiu Huy Tiac, has already been resolved, the Court
deems it unnecessary to resolve the other peripheral issues raised by petitioner.
WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
Feliciano, Romero, Melo and Vitug, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
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.

MUOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his
principal, Concepcion Rallos, sold the latter's undivided share in a parcel of land
pursuant to a power of attorney which the principal had executed in favor. The
administrator of the estate of the went to court to have the sale declared uneanforceable
and to recover the disposed share. The trial court granted the relief prayed for, but upon
appeal the Court of Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos
were sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the
Registry of Cebu. On April 21, 1954, the sisters executed a special power of attorney in
favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot
5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon
Rallos sold the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to
Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale
was registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a
new transfer certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be d unenforceable, and said share be reconveyed to her
estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and (3)
that plaintiff be indemnified by way of attorney's fees and payment of costs of suit.
Named party defendants were Felix Go Chan & Sons Realty Corporation, Simeon
Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped
from the complaint. The complaint was amended twice; defendant Corporation's Answer
contained a crossclaim against its co-defendant, Simon Rallos while the latter filed thirdparty 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.

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 defendantappellee 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.
Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36585 July 16, 1984
MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA, petitioners,
vs.
THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and
proprietor of QUIN BATERNA REALTY), respondents.
Enrique L. Soriano for petitioners.
Domingo Laurea for private respondent.

RELOVA, J.:
Appeal by certiorari from a decision of the then Court of Appeals ordering herein
petitioners to pay private respondent "the sum of P10,000.00 as damages and the sum
of P2,000.00 as attorney's fees, and the costs."
This case originated in the then Court of First Instance of Iloilo where private
respondents instituted a case of recovery of unpaid commission against petitioners over
some of the lots subject of an agency agreement that were not sold. Said complaint,
docketed as Civil Case No. 7864 and entitled: "Quirino Baterna vs. Mariano Diolosa and

Alegria Villanueva-Diolosa", was dismissed by the trial court after hearing. Thereafter,
private respondent elevated the case to respondent court whose decision is the subject
of the present petition.
The parties petitioners and respondents-agree on the findings of facts made by
respondent court which are based largely on the pre-trial order of the trial court, as
follows:
PRE-TRIAL ORDER
When this case was called for a pre-trial conference today, the plaintiff,
assisted by Atty. Domingo Laurea, appeared and the defendants, assisted
by Atty. Enrique Soriano, also appeared.
A. During the pre-trial conference the parties, in addition to what have
been admitted in the pleadings, have agreed and admitted that the
following facts are attendant in this case and that they will no longer
adduce evidence to prove them:
1. That the plaintiff was and still is a licensed real estate
broker, and as such licensed real estate broker on June 20,
1968, an agreement was entered into between him as party
of the second part and the defendants spouses as party of
the first part, whereby the former was constituted as
exclusive sales agent of the defendants, its successors,
heirs and assigns, to dispose of, sell, cede, transfer and
convey the lots included in VILLA ALEGRE SUBDIVISION
owned by the defendants, under the terms and conditions
embodied in Exhibit "A", and pursuant to said agreement
(Exhibit "A"), the plaintiff acted for and in behalf of the
defendants as their agent in the sale of the lots included in
the VILLA ALEGRE SUBDIVISION;
2. That on September 27, 1968, the defendants terminated
the services of plaintiff as their exclusive sales agent per
letter marked as Exhibit "B", for the reason stated in the
latter.
B. During the trial of this case on the merit, the plaintiff will adduce by
competent evidence the following facts:

1. That as a real estate broker, he had sold the lots

comprised in several subdivisions, to wit: Greenfield
Subdivision, the Villa Beach Subdivision, the Juntado
Subdivision, the St. Joseph Village, the Ledesma
Subdivision, the Brookside Subdivision, the Villa Alegre
Subdivision, and Cecilia Subdivision, all in the City of Iloilo
except St. Joseph which is in Pavia Iloilo.
2. That the plaintiff, as a licensed real estate broker, has
been seriously damaged by the action of the defendants in
rescinding, by Exhibit "B", the contract (Exhibit "A") for which
the plaintiff suffered moral damages in the amount of
P50,000.00, damages to his good will in the amount of
P100,000.00, for attorney's fees in the amount of P10,000.00
to protect his rights and interests, plus exemplary damages
to be fixed by the Court.
3. That the plaintiff is entitled to a commission on the lots
unsold because of the rescission of the contract.
C. The defendants during the trial will ill prove by competent evidence
the following:
1. That the plaintiff's complaint was filed to make money out
of the suit from defendants, to harrass and to molest
defendants;
2. That because of the unjustified and unfounded complaint
of the plaintiff, the defendants suffered moral damages in the
amount of P50,000.00, and that for the public good, the court
may order the plaintiff to pay the defendants exemplary
damages in the amount of P20,000.00, plus attorney's fees
of P10,000.00.
D. Contentions of the parties:
1. The plaintiff contends:
(a) That under the terms of the contract (Exhibit
"A") the plaintiff had unrevocable authority to
sell all the lots included in the Villa Alegre

Subdivision and to act as exclusive sales agent

of the defendants until all the lots shall have
been disposed of;
(b) That the rescission of the contract under
Exhibit "B", contravenes the agreement of the
parties.
2. The defendants contend:
(a) That they were within their legal right to
terminate the agency on the ground that they
needed the undisposed lots for the use of the
family;
(b) That the plaintiff has no right in law to case
for commission on lots that they have not sold.
E. The parties hereby submit to the Court the following issues:
1. Whether under the terms of Exhibit "A" the plaintiff has the
irrevocable right to sen or dispose of all the lots included
within Villa Alegre Subdivision;
2. Can the defendants terminate their agreement with the
plaintiff by a letter like Exhibit "B"?
F. The plaintiff submitted the following exhibits which were admitted by
the defendants:
Exhibit "A" agreement entered into between the parties on
June 20, 1968 whereby the plaintiff had the authority to sell
the subdivision lots included in Villa Alegre subdivision;
Exhibit "B" Letter of the defendant Alegria V. Diolosa
dated September 27, 1968 addressed to the plaintiff
terminating the agency and rescinding Exhibit "A" for the
reason that the lots remained unsold lots were for
reservation for their grandchildren.
The Court will decide this case based on the facts admitted in the
pleadings, those agreed by the parties during the pre-trial conference, and

those which they can prove during the trial of this case, in accordance with
the contention of the parties based on the issues submitted by them
during the pre-trial conference.
SO ORDERED.
Iloilo City, Philippines, August 14, 1969.
(SGD)
VALE
RIO V.
ROVI
RA
Judge
(pp.
22-25,
Rollo)
The only issue in this case is whether the petitioners could terminate the agency
agreement, Exhibit "A", without paying damages to the private respondent. Pertinent
portion of said Exhibit "A" reads:
That the PARTY OF THE FIRST PART is the lawful and absolute owner in
fee simple of VILLA ALEGRE SUBDIVISION situated in the District of
Mandurriao, Iloilo City, which parcel of land is more particularly described
as follows, to wit:
A parcel of land, Lot No. 2110-b-2-C, PSD 74002, Transfer
Certificate of Title No. T_____ situated in the District of
Mandurriao, Iloilo, Philippines, containing an area of 39016
square meters, more or less, with improvements thereon.
That the PARTY OF THE FIRST PART by virtue of these presents, to
enhance the sale of the lots of the above-described subdivision, is
engaging as their EXCLUSIVE SALES AGENT the PARTY OF THE
SECOND PART, its successors, heirs and assigns to dispose of, sell,
cede, transfer and convey the above-described property in whatever
manner and nature the PARTY OF THE SECOND PART, with the
concurrence of the PARTY OF THE FIRST PART, may deem wise and
proper under the premises, whether it be in cash or installment basis, until

all the subject property as subdivided is fully disposed of. (p. 7 of

Petitioner's brief. Emphasis supplied).
Respondent court, in its decision which is the subject of review said:
Article 1920 of the Civil Code of the Philippines notwithstanding, the
defendants could not terminate the agency agreement, Exh. "A", at will
without paying damages. The said agency agreement expressly stipulates
... until all the subject property as subdivided is fully disposed of ..." The
testimony of Roberto Malundo(t.s.n. p. 99) that the plaintiff agreed to the
intention of Mrs. Diolosa to reserve some lots for her own famay use
cannot prevail over the clear terms of the agency agreement. Moreover,
the plaintiff denied that there was an agreement to reserve any of the lots
for the family of the defendants. (T.s.n. pp. 16).
There are twenty seven (27) lots of the subdivision remaining unsold on
September 27, 1968 when the defendants rescinded the agency
agreement, Exhibit "A". On that day the defendants had only six
grandchildren. That the defendants wanted to reserve the twenty seven
remaining lots for the six grandchildren is not a legal reason for
defendants rescind the agency agreement. Even if the grandchildren were
to be given one lot each, there would still be twenty-one lots available for
sale. Besides it is undisputed that the defendants have other lands which
could be reserved for their grandchildren. (pp. 26-27, Rollo)
The present appeal is manifestly without merit.
Under the contract, Exhibit "A", herein petitioners allowed the private respondent "to
dispose of, sell, cede, transfer and convey ... until out the subject property as
subdivided is fully disposed of." The authority to sell is not extinguished until all the lots
have been disposed of. When, therefore, the petitioners revoked the contract with
private respondent in a letter, Exhibit "B"
Dear Mr. Baterna:
Please be informed that we have finally decided to reserve the remaining
unsold lots, as of this date of our VILLA ALEGRE Subdivision for our
grandchildren.

In view thereof, notice is hereby served upon you to the effect that our
agreement dated June 20, 1968 giving you the authority to sell as
exclusive sales agent of our subdivision is hereby rescinded.
Please be duly guided.
Very
truly
yours,
(SGD) ALEGRIA V.
DIOLOSA
Subdivision Owner
(p. 11 of Petitioner's Brief)
they become liable to the private respondent for damages for breach of contract.
And, it may be added that since the agency agreement, Exhibit "A", is a valid contract,
the same may be rescinded only on grounds specified in Articles 1381 and 1382 of the
Civil Code, as follows:
ART. 1381. The following contracts are rescissible:
(1) Those which are entered in to by guardians whenever the
wards whom they represent suffer lesion by more than onefourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the
latter suffer the lesion stated in the preceding number;
(3) Those undertaken in fraud of creditors when the latter
cannot in any other name collect the claims due them;
(4) Those which refer to things under litigation if they have
been entered into by the defendant without the knowledge
and approval of the litigants or of competent judicial
authority;
(5) All other contracts specially declared by law to be subject
to rescission.

ART. 1382. Payments made in a state of insolvency for obligations to

whose fulfillment the debtor could not be compelled at the time they were
effected, are also rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be the
subject of an action of rescission, much less can petitioners say that the private
respondent violated the terms of their agreement-such as failure to deliver to them
(Subdivision owners) the proceeds of the purchase price of the lots.
ACCORDINGLY, the petition is hereby dismissed without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and Dela Fuente, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-40681

October 2, 1934

DY BUNCIO & COMPANY, INC., plaintiff-appelle,

vs.
ONG GUAN CAN, ET AL., defendants.
JUAN TONG and PUA GIOK ENG, appellants.
Pedro Escolin for appellants.
G. Viola Fernando for appellee.

HULL, J.:
This is a suit over a rice mill and camarin situated at Dao, Province of Capiz. Plaintiff claims
that the property belongs to its judgment debtor, Ong Guan Can, while defendants Juan Tong and
Pua Giok Eng claim as owner and lessee of the owner by virtue of a deed dated July 31, 1931, by
Ong Guan Can, Jr.

After trial the Court of First Instance of Capiz held that the deed was invalid and that the
property was subject to the execution which has been levied on said properties by the judgment
creditor of the owner. Defendants Juan Tong and Pua Giok bring this appeal and insist that the
deed of the 31st of July, 1931, is valid.
The first recital of the deed is that Ong Guan Can, Jr., as agent of Ong Guan Can, the proprietor
of the commercial firm of Ong Guan Can & Sons, sells the rice-mill and camarin for P13,000
and gives as his authority the power of attorney dated the 23d of May, 1928, a copy of this public
instrument being attached to the deed and recorded with the deed in the office of the register of
deeds of Capiz. The receipt of the money acknowledged in the deed was to the agent, and the
deed was signed by the agent in his own name and without any words indicating that he was
signing it for the principal.
Leaving aside the irregularities of the deed and coming to the power of attorney referred to in the
deed and registered therewith, it is at once seen that it is not a general power of attorney but a
limited one and does not give the express power to alienate the properties in question. (Article
1713 of the Civil Code.)
Appellants claim that this defect is cured by Exhibit 1, which purports to be a general power of
attorney given to the same agent in 1920. Article 1732 of the Civil Code is silent over the partial
termination of an agency. The making and accepting of a new power of attorney, whether it
enlarges or decreases the power of the agent under a prior power of attorney, must be held to
supplant and revoke the latter when the two are inconsistent. If the new appointment with limited
powers does not revoke the general power of attorney, the execution of the second power of
attorney would be a mere futile gesture.lawphi1.net
The title of Ong Guan Can not having been divested by the so-called deed of July 31, 1931, his
properties are subject to attachment and execution.
The judgment appealed from is therefore affirmed. Costs against appellants. So ordered.
Avancea, C.J., Abad Santos, Vickers and Diaz, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-5180

August 31, 1953

CONSEJO INFANTE, petitioner,

vs.
JOSE CUNANAN, JUAN MIJARES and THE COURT OF APPEALS, SECOND
DIVISION, respondents.
Yuseco, Abdon & Yuseco for petitioner.
Jose E. Erfe and Maria Luisa Gomez for respondents.
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the Court of appeals affirming the judgement of the
court of origin which orders the defendant to pay the plaintiffs the sum of P2,500 with legal
interest thereon from February 2,1949 and the costs of action.
Consejo Infante, defendant herein, was the owner of two parcels of land, together with a house
built thereon, situated in the City of Manila and covered by Transfer Certificate of Title No.
61786. On or before November 30, 1948, she contracted the services of Jose Cunanan and Juan
Mijares, plaintiff herein, to sell the above-mentioned property for a price of P30,000 subject to
the condition that the purchaser would assume the mortgage existing thereon in the favor of the
Rehabilitation Finance Corporation. She agreed to pay them a commission of 5 per cent on the
purchase price plus whatever overprice they may obtain for the property. Plaintiffs found one Pio
S. Noche who was willing to buy the property under the terms agreed upon with defendant, but
when they introduced him to defendant, the latter informed them that she was no longer
interested in selling the property and succeeded in making them sign a document stating therein
that the written authority she had given them was already can-celled. However, on December 20,
1948, defendant dealt directly with Pio S. Noche selling to him the property for P31,000. Upon
learning this transaction, plaintiffs demanded from defendant the payment of their commission,
but she refused and so they brought the present action.
Defendant admitted having contracted the services of the plaintiffs to sell her property as set
forth in the complaint, but stated that she agreed to pay them a commission of P1,200 only on
condition that they buy her a property somewhere in Taft Avenue to where she might transfer
after selling her property. Defendant avers that while plaintiffs took steps to sell her property as
agreed upon, they sold the property at Taft Avenue to another party and because of this failure it
was agreed that the authority she had given them be cancelled.
The lower court found that the preponderance of evidence was in favor of the plaintiffs and
rendered judgement sentensing the defendant to pay the plaintiff the sum of P2,500 with legal
interest thereon from February 2,1949 plus the costs of action. This decision was affirmed in toto
by the Court of Appeals.
There is no dispute that respondents were authorized by petitioner to sell her property for the
sum of P30,000 with the understanding that they will be given a commission of 5 percent plus
whatever overprice they may obtain for the property. Petitioner, however, contends that authority
has already been withdrawn on November 30, 1948 when, by the voluntary act of respondents,
they executed a document stating that said authority shall be considered cancelled and without

any effect, so that when petitioner sold the property to Pio S. Noche on December 20, 1948, she
was already free from her commitment with respondents and, therefore, was not in duty bound to
pay them any commission for the transaction..
If the facts were as claimed by petitioner, there is in-deed no doubt that she would have no
obligation to pay respondents the commission which was promised them under the original
authority because, under the old Civil Code, her right to withdraw such authority is recognized.
A principal may withdraw the authority given to an agent at will. (Article 1733.) But this fact is
disputed. Thus, respondents claim that while they agreed to cancel the written authority given to
them, they did so merely upon the verbal assurance given by petitioner that, should the property
be sold to their own buyer, Pio S. Noche, they would be given the commission agreed upon.
True, this verbal assurance does not appear in the written cancellation, Exhibit 1, and, on the
other hand, it is disputed by petitioner, but respondents were allowed to present oral evidence to
prove it, and this is now assigned as error in this petition for review.
The plea that oral evidence should not have been allowed to prove the alleged verbal assurance is
well taken it appearing that the written authority given to respondents has been cancelled in a
written statement. The rule on this matter is that "When the terms of an agreement have been
reduced to writing, it is to be considered as containing all those terms, and, therefore, there can
be, between parties and their successors in interest, no evidence of the terms of the agreement
other than the contents of the writing." (Section 22, Rule 123, Rules of Court.) The only
exceptions to this rule are: "(a)Where a mistake or imperfection of the writing, or its failure to
express the true intent and agreement of the parties, or the validity of the agreement is put in
issue by the pleadings"; and "(b) Where there is an intrinsic ambiguity in the writing." (Ibid.)
There is no doubt that the point raised does not come under any of the cases excepted, for there is
nothing therein that has been put in issue by respondents in their complaint. The terms of the
document, Exhibit 1, seem to be clear and they do not contain any reservation which may in any
way run counter to the clear intention of the parties.
But even disregarding the oral evidence adduced by respondents in contravention of the parole
evidence rule, we are, however, of the opinion that there is enough justification for the
conclusion reached by the lower court as well as by the Court of Appeals to the effect that
respondents are entitled to the commission originally agreed upon. It is a fact found by the Court
of Appeals that after petitioner had given the written authority to respondents to sell her land for
the sum of P30,000, respondents found a buyer in the person of one Pio S. Noche who was
willing to buy the property under the terms agreed upon, and this matter was immediately
brought to the knowledge of petitioner. But the latter, perhaps by way of strategem, advised
respondents that she was no longer interested in the deal and was able to prevail upon them to
sign a document agreeing to the cancellation of the written authority.
That petitioner had changed her mind even if respondents had found a buyer who was willing to
close the deal, is a matter that would not give rise to a legal consequence if respondents agree to
call off the transaction in deference to the request of the petitioner. But the situation varies if one
of the parties takes advantage of the benevolence of the other and acts in a manner that would
promote his own selfish interest. This act is unfair as would amount to bad faith. This act cannot
be sanctioned without ac-cording to the party prejudiced the reward which is due him. This is the

situation in which respondents were placed by petitioner. Petitioner took advantage of the
services rendered by respondents, but believing that she could evade payment of their
commission, she made use of a ruse by inducing them to sign the deed of cancellation Exhibit 1.
This act of subversion cannot be sanctioned and cannot serve as basis for petitioner to escape
payment of the commission agreed upon.
Wherefore, the decision appealed from is hereby affirmed, with costs against petitioner.
Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Monte-mayor, Reyes, and Jugo, JJ., concur.

Separate Opinions
LABRADOR, J., concurring and dissenting:
I concur in the result. I can not agree, however, to the ruling made in the majority decision that
the petitioners can not introduce evidence of the circumstances under which the document was
signed, i.e. upon promise by respondent that should the property be sold to petitioner's buyer
they would nevertheless be entitled to the commission agreed upon. Such evidence is not
excluded by the parole evidence rule, because it does not tend to alter or vary the terms of the
document. This document was merely a withdrawal of the authority granted the petitioner to sell
the property, not an agreement that they shall not be paid their commission.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-17043

January 31, 1961

NATIVIDAD HERRERA, assisted by her husband EMIGDIO SALAZAR, plaintiffsappellants,

vs.
LUY KIM GUAN and LINO BANGAYAN, defendants-appellees.
T. de los Santos for plaintiffs-appellants.
Rafael C. Climaco and Abelardo S. Fernandez for defendants-appellees.
BARRERA, J.:
This is an appeal from the decision of the Court of First Instance of Zamboanga City (a)
dismissing plaintiff-appellant's complaint for the recovery of three (3) parcels of land and their
produce in the sum of P320,000.00; and (b) instead, sentencing plaintiff to pay P2,000.00 for
attorney's fees and P1,000.00 for expenses of litigation, to defendant Lino Bangayan, and

P2,000.00 as attorney's fees and P500.00 as expenses of litigation, to the other defendant Luy
Kim Guan.
The pertinent facts as found by the trial court and upon which its decision was predicated are set
forth in the following portion of the decision appealed from:
The Plaintiff Natividad Herrera is the legitimate daughter of Luis Herrera, now deceased
and who died in China sometime after he went to that country in the last part of 1931 or
early part of 1932. The said Luis Herrera in his lifetime was the owner of three (3)
parcels of land and their improvements, known as Lots 1740, 4465 and 4467 of
Expediente No. 5, G.L.R.O. Record 477 and the area, nature, improvements and bound of
each and every of these three (3) lots are sufficiently described in the complaint filed by
the plaintiffs.
Before leaving for China, however, Luis Herrera executed on December 1, 1931, a deed
of General Power of Attorney, Exhibit 'B', which authorized and empowered the
defendant Kim Guan, among others to administer and sell the properties of said Luis
Herrera.
Lot 1740 was originally covered by Original Certificate Title 8601 registered in the name
of Luis Herrera, married to GO Bang. This lot was sold by the defendant Luy Kim in his
capacity as attorney-in-fact of the deceased Luis Her to Luy Chay on September 11,
1939, as shown in Exhibit "2", corresponding deed of sale. Transfer Certificate of Title
3162, Exhibit "3", was issued to Luy Chay by virtue of deed of sale. On August 28, 1941,
to secure a loan of P2,00 a deed of mortgage to the Zamboanga Mutual Building and
Association was executed by Luy Chay, Exhibit "4". On January 31, 1947, the said Luy
Chay executed a deed of sale, Exhibit "E", in favor of Lino Bangayan. By virtue of this
Transfer Certificate of Title T-2567 was issued to Lino Bangayan on June 24, 1949,
Exhibit "1":
Lots 4465 and 4467 were originally registered in the of Luis Herrera, married to Go
Bang, under Original Certificate of Title No. 0-14360, Exhibit "5". On December 1,
1931, Luis Herrera sold one-half () undivided share and to Herrera and Go Bang, the
other half (), as shown by Exhibit "12" and Exhibit "12-A", the latter an annotation
made the Register of Deeds of the City of Zamboanga, in which stated as follows:
Cancelado el presente Certificado en virtud de una escritura de traspaso y en su lugar se
ha expedido el Certificado de T No. 494-(T-13045) del Tomo 2 del Libro de Certificado
de Transferencias.

(Fdo) R. D. MACROHON
Registrador de Titulos
Ciudad de Zamboanga

On July 23, 1937, Luis Herrera thru his attorney-in-fact Luy Kim Guan, one of the
defendants, sold to Nicomedes Salazar his one half () participation in these two (2) lots,
as shown in Exhibit "C", the corresponding deed of sale for P3,000.00 Transfer
Certificate of Title No. T-494-(T-13045) was is to Nicomedes Salazar and to the
defendant Luy Kim Guan, Exhibit '7'. On August 4, 1937, the defendant Luy Kim Guan
Nicomedes Salazar executed a deed of mortgage in favor of Bank of the Philippine
Islands to secure a loan of P3,500.00, Exhibit '6'. On August 17, 1937, the defendant Luy
Kim Guan and Nicomedes Salazar sold Lot 4465 to Carlos Eijansantos for the sum of
P100.00 as shown in Exhibit "9", the corresponding deed of sale, and Transfer Certificate
of Title No. T-2653 was issued on September 7, 1939 to Carlos Eijansantos, Exhibit "10".
Nicomedes Salazar sold his one half () interest on Lot 4467 to the defendant Lino
Bangayan for P3,000.00 on February 22, 1949, Exhibit 'B', and the corresponding
Transfer Certificate of Title T-2654 was issued to Lino Bangayan and to Luy Kim Guan,
both are co-owners in equal shares, Exhibit "8". Opinion of the City Attorney, Exhibit
"p", and an affidavit of Atty. Jose T. Atilano, Exhibit "O", state that Lino Bangayan is a
Filipino citizen.
As admitted by both parties (plaintiffs and defendants), Luis Herrera is now deceased, but
as to the specific and precise date of his death the evidence of both parties failed to show.
It is the contention of plaintiff-appellant that all the transactions mentioned in the preceding
quoted portion of the decision were fraudulent and were executed after the death of Luis Herrera
and, consequently, when the power of attorney was no longer operative. It is also claimed that
the defendants Lino Bangayan and Luy Kim Guan who now claim to be the owners of Lots Nos.
1740 and 4467 are Chinese by nationality and, therefore, are disqualified to acquire real
properties. Plaintiff-appellant, in addition, questions the supposed deed of sale allegedly
executed by Luis Herrera on December 1, 1931 in favor of defendant Luy Kim Guan, conveying
one-half interest on the two lots, Nos. 4465 and 4467, asserting that what was actually executed
on that date, jointly with the general power of attorney, was a lease contract over the same
properties for a period of 20 years for which Luy Kim Guan paid the sum of P2,000.00.
We find all the contentions of plaintiff-appellant untenable. Starting with her claim that the
second deed executed on December 1, 1931 by Luis Herrera was a lease contract instead of a
deed of sale as asserted by defendant Luy Kim Guan, we find that the only evidence in support
of her contention is her own testimony and that of her husband to the effect that the deceased
Luis Herrera showed the said document to them, and they remembered the same to be a lease
contract on the three properties for a period of 20 years in consideration of P2,000.00. Their
testimony was sought to be corroborated by the declaration of the clerk of Atty. Enrique A.
Fernandez, who allegedly notarized the document. Outside of this oral testimony, given more
than 23 years after the supposed instrument was read by them, no other evidence was adduced.
On the other hand, defendant Luy Kim Gua produced in evidence a certification1 signed by the
Register of Deeds of Dipolog, Zamboanga (Exh. 11) to the effect that a deed of sale, dated
December 1, 1931, was execute by Luis Herrera in favor of Luy Kim Guan and entered in the
Primary Book No. 4 as duly registered on September 30, 1936 under Original Certificate of Title
No. 14360. It is to be noted that the deed of sale was registered shortly after the issuance in the
name of Luis Herrera of Origin Certificate of Title No. 14360 pursuant to Decree No. 59093,

covering the two lots, Nos. 4465 and 4467 (Exh. 5) dated April 7, 1936. In virtue of said deed of
sale of December 1, 1931, Original Certificate of Title No. 1436 was cancelled and Transfer
Certificate of Title No. 1304 (Exh. 12) in the names of the conjugal partnership of the spouses
Luis Herrera and Go Bang, one-half share, an Luy Kim Guan, single, one-half share, was issued
on September 30, 1936. Later, or on July 23, 1937, Luy Kim Guan, in his capacity as attorney-infact of Luis Herrera, sold the half interest of the latter in the two parcels o land, in favor of
Nicomedes Salazar, whereupon TCT No. 13045 was cancelled and TCT No. RT-657 (494-T13045 (Exh. 7) was issued in the names of Luy Kim Guan an Nicomedes Salazar in undivided
equal shares. On August 4, 1937, both Luy Kim Guan and Nicomedes Salazar mortgaged the two
parcels in favor of the Bank of the Philippine Islands for the sum of P3,500.00 (Exh. 6). On
August 17, 1937, Nicomedes Salazar and Luy Kim Gua sold their respective shares in Lot No.
4465 to Carlo Eijansantos (Exh. 9), subject to the mortgage, resulting in the issuance of TCT No.
2653 (Exh. 10) covering the entire lot No. 4465 in the name of said Carlos Eijansantos. On
February 23, 1949, Nicomedes Salazar sold his shall share in Lot No. 4467 to Lino Bangayan, as
a consequence of which, TCT No. 2654 (Exh. B) was issued covering said Lot No. 4467 in the
names of Luy Kim Guan and Lino Bangayan in undivided equal shares.
With respect to Lot No. 1740, the same was sold by Luy Kim Guan, in his capacity as attorneyin-fact of Luis Herrera, on September 11, 1939 to Luy Chay (See Exh. 2) who, in August, 1941,
mortgaged the same (Exh. 4) to the Zamboanga Mutual Loan and Building Association (See TCT
No. 3162 [Exh. 3] issued in the name of Luy Chay). Later on, Luy Chay sold the entire lot to
defendant Lino Bangayan by virtue of the deed of sale dated January 31, 1947 (Exh. E), and as a
consequence thereof, TCT No. 2567 was issued in the name of said vendee. (See Exh. 1). As a
result of these various transactions, duly recorded in the corresponding office of the Register of
Deeds, and covered by appropriate transfer certificates of title, the properties are now registered
in the following manner: Lot No. 1740, in the name of Lino Bangayan; Lot No. 4465, in the
name of Carlos Eijansantos; and Lot No. 4467, in the names of Lino Bangayan and Luy Kim
Guan in undivided equal shares.
In the face of these documentary evidence presented by the defendants, the trial court correctly
upheld the contention of the defendants as against that of plaintiff-appellant who claims that the
second deed executed by Luis Herrera in 1931 was a lease contract. It is pertinent to note what
the lower court stated in this regard, that is, if the second deed executed by Luis Herrera was a
lease contract covering, the 3 lots in question for a period of twenty (20) years, there would have
been no purpose for him to constitute Luy Kim Guan as. his attorney-in-fact to administer and
take charge of the same properties already covered by the lease contract.
Coming now to the contention that these transactions are null and void and of no effect because
they were executed by the attorney-in-fact after the death of his Principal, suffice it to say that as
found by the lower court, the date of death of Luis Herrera has not been satisfactorily proven.
The only evidence presented by the Plaintiff-appellant in this respect is a supposed letter
received from a certain "Candi", dated at Amoy in November, 1936, purporting to give
information that Luis Herrera (without mentioning his name) had died in August of that year.
This piece of evidence was properly rejected by the lower court for lack of identification. the
other hand, we have the testimony of the witness Chung Lian to the effect that when he was in
Amoy the year 1940, Luis Herrera visited him and had a conversation with him, showing that the

latter was still alive at the time. Since the documents had been executed the attorney-in-fact one
in 1937 and the other in 1939, it is evident, if we are to believe this testimony, that the documents
were executed during the lifetime of the principal. Be that as it may, even granting arguendo that
Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the
record, that the age Luy Kim Guan was aware of the death of his prince at the time he sold the
property. The death of the principal does not render the act of an agent unenforceable, where the
latter had no knowledge of such extinguishment the agency.2
Appellants also raise the question of the legality of the titles acquired by Luy Chay and Lino
Bangayan, on ground that they are disqualified to acquire real properties in the Philippines. This
point is similarly without me because there is no evidence to support the claim. In fact, in the
deed of sale as well as in TCT No. 3162 issued to Luy Chay, the latter was referred to as a citizen
of the Philippines. Nevertheless, the lower court acknowledged the probability that Luy Chay
could have been actually a Chinese citizens.3 At any rate, the property was subsequently
purchased by Lino Bangayan, as a result which TCT No. 3162 in the name of Luy Chay was
cancelled and another certificate (TCT No. T-2567) was issued in favor of said vendee.
As to Bangayan's qualification, the lower court held that said defendant had sufficiently
established his Philippine citizenship through Exhibit P, concurred in by the Secretary of Justice.
We find no reason to disturb such ruling.
With respect to Luy Kim Guan, while it is true that he is a Chinese citizen, nevertheless,
inasmuch as he acquired his one-half share in Lot No. 4467 in 1931, long before the Constitution
was adopted, his ownership can not be attacked on account of his citizenship.
Appellants, in this appeal, contest the judgment of the court a quo awarding defendants Lino
Bangayan and Luy Kim Guan attorney's fees in the sum of P2,000.00 each, and expenses of
litigation in the amounts of P1,000.00 and P500.00, respectively. We agree with the appellant in
this regard.
This Court has laid down the rule that in the absence of stipulation, a winning party may be
awarded attorney's fees only in case plaintiff's action or defendant's stand is so untenable as to
amount to gross and evident bad faith.4 The same thing however, can not be said of the case at
bar. As a matter of fact, the trial court itself declared that the complaint was filed in good faith.
Attorney's fees, therefore, can not be awarded to defendants simply because the judgment was
favorable to them and adverse to plaintiff, for it may amount to imposing a premium on the right
to redress grievances in court. And so with expenses of litigation. A winning party may be
entitled to expenses of litigation only where he, by reason of plaintiff's clearly unjustifiable
claims or defendant's unreasonable refusal to his demands, was compelled to incur said
expenditures. Evidently, the facts of this case do not warrant the granting of such litigation
expenses to defendants. In the absence of proof that the action was intended for reasons other
than honest, we may agree with the trial court that the same must have been instituted by
plaintiffs in their belief that they have a valid cause against the defendants.
WHEREFORE, and with the above modification, the decision appealed from is hereby affirmed
in all other respects without prejudice to appellants' right to demand from the agent (Luy Kim

Guan) an accounting of proceeds of the agency, if such right is still available. No costs. So
ordered.
Paras, C.J., Bengzon, Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes
and Dizon, concur.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-11415

May 25, 1959

MANUEL BUASON and LOLITA M. REYES, plaintiffs-appellants,

vs.
MARIANO PANUYAS, defendant-appellee.
Garcia and Jacinto, for appellants.
Servando Cleto for appellee.
PADILLA, J.:
This is an appeal from a judgment of the Court of First Instance of Nueva Ecija dismissing an
action brought by the spouses Manuel Buason and Lolita M. Reyes for annulment of a deed of
sale in favor of the defendant, cancellation of transfer certificate of title No. 8419 issued in the
name of the defendant and his wife, declaration that the sale in their favor is valid, recovery of
possession of the parcel of land described in the complaint from the defendant, damages,
attorney's fees and costs. (Civil No. 2144.)
In their lifetime the spouses Buenaventura Dayao and Eugenia Vega acquired by homestead
patent a parcel of land situated at barrio Gabaldon, municipality of Muoz, province of Nueva
Ecija, containing an area of 14.8413 hectares covered by original certificate of title No. 1187
(Exhibit C). On 29 October 1930 they executed a power of attorney authorizing Eustaquio
Bayuga to engage the services of an attorney to prosecute their case against Leonardo Gambito
for annulment of a contract of sale of the parcel of land (civil No. 5787 of the same court) and
after the termination of the case in their favor to sell it, and from the proceeds of the sale to
deduct whatever expenses he had incurred in the litigation (Exhibit B). On 14 March 1934
Buenaventura Dayao died leaving his wife Eugenia Vega and children Pablo, Teodoro, Fortunata
and Juliana, all surnamed Dayao. On 21 march 1939 his four children executed a deed of sale
conveying 12.8413 hectares of the parcel of land to the appellants, the spouses Manuel Buason
and Lolita M. Reyes (Exhibit A). Their mother Eugenia Vega affixed her thumbmark to the deed

of sale as witness (Exhibit A). The appellants took possession of the parcel of land through their
tenants in 1939. On 18 July 1944 Eustaquio Bayuga sold 8 hectares of the same parcel of land to
the spouses Mariano Panuyas (appellee herein) and Sotera B. Cruz (Exhibit D). Eustaquio
Bayuga died on 25 March 1946 and Eugenia Vega in 1954.
The appellants and the appellee claim ownership to the same parcel of land. In their complaint
the appellants prayed that the appellee be ordered to deliver possession of the part of the parcel
of land held by him; that the deed of sale of that part of the parcel of land held by the appellee
executed by Eustaquio Bayuga in his favor and of his wife (Exhibit D) be declared null and void
and that transfer certificate of title No. 8419 issued in their name be cancelled; that the deed of
sale of the parcel of land executed by the children and heirs of Buenaventura Dayao in their
favor (Exhibit A) be declared valid; that the appellee be ordered to pay them damages and
attorney's fees in the sum of P9,600; and that he ordered to pay the costs of the suit. The
appellees affirmative defenses are that he and his wife were buyers in good faith and for valuable
consideration; that appellant's causes of action are barred by the statute of limitations; that the
complaint states no cause of action; that the claim on which their action is based is unenforceable
under the statute of frauds; and that the appellants are guilty of laches. By way of counterclaim,
he prayed that for bringing a clearly unfounded suit against him which depreciated the value of
the land and injured his good reputation, the appellants be ordered to pay him the sums of P5,000
as actual damages and P10,000 as moral damages.
After trial on 20 August 1956 the Court rendered judgment holding that the appellants' action is
barred by the statute of limitations and dismissing their complaint. Their motion for
reconsideration filed on 23 August 1956. Hence this appeal upon questions of law.
It appears that the appellants did not register the sale of 12.8413 hectares of the parcel of land in
question executed in their favor by the Dayao children on 21 March 1939 after the death of their
father Buenaventura Dayao. On the other hand, the power of attorney executed by Buenaventura
Dayao on 29 October 1930 authorizing Eustaquio Bayuga to sell the parcel of land (Exhibit B)
was annotated or inscribed on the back of the original certificate of title No. 1187 (Exhibit C) as
Entry No. 16836/H-1187, and the sale executed by Eustaquio Bayuga in favor of the appellee
Mariano Panuyas and his wife Sotera B. Cruz under the aforesaid power of attorney was
annotated or inscribed on the back of the same original certificate of title (Exhibit C) as Entry No
778/H-1187. It does not appear that the appellee and his wife had actual knowledge of the
previous sale. In the absence of such knowledge, they had a right to rely on the face of the
certificate of title of the registered owners and of the authority conferred by them upon the agent
also recorded on the back of the certificate of title. As this is a case of double sale of land
registered under the Land Registration Act, he who recorded the sale in the Registry of Deeds
has a better right than he who did not.1

As to the appellants' contention that, as the death of the principal on 14 March 1934 ended the
authority of the agent,2 the sale of 8 hectares of the parcel of land by the agent to the appellee
Mariano Panuyas and his wife Sotera B. Cruz was null and void, suffice it to state that is has not
been shown that the agent knew of his principal's demise, and for that reason article 1738, old
Civil code or 1931, new Civil Code, which provides:
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 is the law applicable to the point raised
by the appellants.
The judgment appealed from is affirmed, with costs against the appellants.
Paras, C.J., Bengzon, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcion and
Endencia, JJ., concur.