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Nature of Agency: Purpose

G.R. No. L-24332 January 31, 1978 Deeds of Cebu, TCT No. 11118 was cancelled, and a new
transfer certificate of Title No. 12989 was issued in the named
RAMON RALLOS, Administrator of the Estate of of the vendee.
CONCEPCION RALLOS, petitioner,
vs. On May 18, 1956 Ramon Rallos as administrator of the
FELIX GO CHAN & SONS REALTY CORPORATION and Intestate Estate of Concepcion Rallos filed a complaint
COURT OF APPEALS, respondents. 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
MUOZ PALMA, J.: unenforceable, and said share be reconveyed to her estate;
(2) that the Certificate of 'title issued in the name of Felix Go
This is a case of an attorney-in-fact, Simeon Rallos, who after Chan & Sons Realty Corporation be cancelled and another
of his death of his principal, Concepcion Rallos, sold the title be issued in the names of the corporation and the
latter's undivided share in a parcel of land pursuant to a power "Intestate estate of Concepcion Rallos" in equal undivided and
of attorney which the principal had executed in favor. The (3) that plaintiff be indemnified by way of attorney's fees and
administrator of the estate of the went to court to have the sale payment of costs of suit. Named party defendants were Felix
declared uneanforceable and to recover the disposed share. Go Chan & Sons Realty Corporation, Simeon Rallos, and the
The trial court granted the relief prayed for, but upon appeal Register of Deeds of Cebu, but subsequently, the latter was
the Court of Appeals uphold the validity of the sale and the dropped from the complaint. The complaint was amended
complaint. twice; defendant Corporation's Answer contained a crossclaim
against its co-defendant, Simon Rallos while the latter filed
Hence, this Petition for Review on certiorari. third-party complaint against his sister, Gerundia Rallos While
the case was pending in the trial court, both Simon and his
The following facts are not disputed. Concepcion and sister Gerundia died and they were substituted by the
Gerundia both surnamed Rallos were sisters and registered respective administrators of their estates.
co-owners of a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer Certificate of After trial the court a quo rendered judgment with the following
Title No. 11116 of the Registry of Cebu. On April 21, 1954, the dispositive portion:
sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell for and in their A. On Plaintiffs Complaint
behalf lot 5983. On March 3, 1955, Concepcion Rallos died.
On September 12, 1955, Simeon Rallos sold the undivided (1) Declaring the deed of sale, Exh. "C", null and void
shares of his sisters Concepcion and Gerundia in lot 5983 to insofar as the one-half pro-indiviso share of Concepcion
Felix Go Chan & Sons Realty Corporation for the sum of Rallos in the property in question, Lot 5983 of the
P10,686.90. The deed of sale was registered in the Registry of Cadastral Survey of Cebu is concerned;
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Nature of Agency: Purpose

(2) Ordering the Register of Deeds of Cebu City to cancel against Josefina Rallos special administratrix of the
Transfer Certificate of Title No. 12989 covering Lot 5983 Estate of Gerundia Rallos:
and to issue in lieu thereof another in the names of FELIX
GO CHAN & SONS REALTY CORPORATION and the (1) Dismissing the third-party complaint without
Estate of Concepcion Rallos in the proportion of one-half prejudice to filing either a complaint against the regular
(1/2) share each pro-indiviso; administrator of the Estate of Gerundia Rallos or a
claim in the Intestate-Estate of Cerundia Rallos,
(3) Ordering Felix Go Chan & Sons Realty Corporation to covering the same subject-matter of the third-party
deliver the possession of an undivided one-half (1/2) share complaint, at bar. (pp. 98-100, Record on Appeal)
of Lot 5983 to the herein plaintiff;
Felix Go Chan & Sons Realty Corporation appealed in due
(4) Sentencing the defendant Juan T. Borromeo, time to the Court of Appeals from the foregoing judgment
administrator of the Estate of Simeon Rallos, to pay to insofar as it set aside the sale of the one-half (1/2) share of
plaintiff in concept of reasonable attorney's fees the sum of Concepcion Rallos. The appellate tribunal, as adverted to
P1,000.00; and earlier, resolved the appeal on November 20, 1964 in favor of
the appellant corporation sustaining the sale in question. 1 The
(5) Ordering both defendants to pay the costs jointly and appellee administrator, Ramon Rallos, moved for a reconsider
severally. of the decision but the same was denied in a resolution of
March 4, 1965. 2
B. On GO CHANTS Cross-Claim:
What is the legal effect of an act performed by an agent after
(1) Sentencing the co-defendant Juan T. Borromeo, the death of his principal? Applied more particularly to the
administrator of the Estate of Simeon Rallos, to pay to instant case, We have the query. is the sale of the undivided
defendant Felix Co Chan & Sons Realty Corporation share of Concepcion Rallos in lot 5983 valid although it was
the sum of P5,343.45, representing the price of one- executed by the agent after the death of his principal? What is
half (1/2) share of lot 5983; 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
(2) Ordering co-defendant Juan T. Borromeo, the latter? Is the fact of knowledge of the death of the principal
administrator of the Estate of Simeon Rallos, to pay in a material factor in determining the legal effect of an act
concept of reasonable attorney's fees to Felix Go Chan performed after such death?
& Sons Realty Corporation the sum of P500.00.
Before proceedings to the issues, We shall briefly restate
C. On Third-Party Complaint of defendant Juan T. certain principles of law relevant to the matter tinder
Borromeo administrator of Estate of Simeon Rallos, consideration.
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Nature of Agency: Purpose

1. It is a basic axiom in civil law embodied in our Civil Code 2. There are various ways of extinguishing agency, 7 but her
that no one may contract in the name of another without being We are concerned only with one cause death of the
authorized by the latter, or unless he has by law a right to principal Paragraph 3 of Art. 1919 of the Civil Code which was
represent him. 3 A contract entered into in the name of another taken from Art. 1709 of the Spanish Civil Code provides:
by one who has no authority or the legal representation or who
has acted beyond his powers, shall be unenforceable, unless it ART. 1919. Agency is extinguished.
is ratified, expressly or impliedly, by the person on whose
behalf it has been executed, before it is revoked by the other xxx xxx xxx
contracting party. 4 Article 1403 (1) of the same Code also
provides: 3. By the death, civil interdiction, insanity or insolvency
of the principal or of the agent; ... (Emphasis supplied)
ART. 1403. The following contracts are unenforceable,
unless they are justified: By reason of the very nature of the relationship between
Principal and agent, agency is extinguished by the death of the
(1) Those entered into in the name of another person principal or the agent. This is the law in this jurisdiction. 8
by one who hi - been given no authority or legal
representation or who has acted beyond his powers; ... Manresa commenting on Art. 1709 of the Spanish Civil Code
explains that the rationale for the law is found in the juridical
Out of the above given principles, sprung the creation and basis of agency which is representation Them being an in.
acceptance of the relationship of agency whereby one party, integration of the personality of the principal integration that of
caged the principal (mandante), authorizes another, called the the agent it is not possible for the representation to continue to
agent (mandatario), to act for and in his behalf in transactions exist once the death of either is establish. Pothier agrees with
with third persons. The essential elements of agency are: (1) Manresa that by reason of the nature of agency, death is a
there is consent, express or implied of the parties to establish necessary cause for its extinction. Laurent says that the
the relationship; (2) the object is the execution of a juridical act juridical tie between the principal and the agent is severed ipso
in relation to a third person; (3) the agents acts as a jure upon the death of either without necessity for the heirs of
representative and not for himself, and (4) the agent acts the fact to notify the agent of the fact of death of the former. 9
within the scope of his authority. 5
The same rule prevails at common law the death of the
Agency is basically personal representative, and derivative in principal effects instantaneous and absolute revocation of the
nature. The authority of the agent to act emanates from the authority of the agent unless the Power be coupled with an
powers granted to him by his principal; his act is the act of the interest. 10 This is the prevalent rule in American
principal if done within the scope of the authority. Qui facit per Jurisprudence where it is well-settled that a power without an
alium facit se. "He who acts through another acts himself". 6 interest confer. red upon an agent is dissolved by the
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Nature of Agency: Purpose

principal's death, and any attempted execution of the power Article 1931 is the applicable law. Under this provision, an act
afterward is not binding on the heirs or representatives of the done by the agent after the death of his principal is valid and
deceased. 11 effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal and (2)
3. Is the general rule provided for in Article 1919 that the death that the third person who contracted with the agent himself
of the principal or of the agent extinguishes the agency, acted in good faith. Good faith here means that the third
subject to any exception, and if so, is the instant case within person was not aware of the death of the principal at the time
that exception? That is the determinative point in issue in this he contracted with said agent. These two requisites must
litigation. It is the contention of respondent corporation which concur the absence of one will render the act of the agent
was sustained by respondent court that notwithstanding the invalid and unenforceable.
death of the principal Concepcion Rallos the act of the
attorney-in-fact, Simeon Rallos in selling the former's sham in In the instant case, it cannot be questioned that the agent,
the property is valid and enforceable inasmuch as the Simeon Rallos, knew of the death of his principal at the time
corporation acted in good faith in buying the property in he sold the latter's share in Lot No. 5983 to respondent
question. corporation. The knowledge of the death is clearly to be
inferred from the pleadings filed by Simon Rallos before the
Articles 1930 and 1931 of the Civil Code provide the trial court. 12 That Simeon Rallos knew of the death of his
exceptions to the general rule afore-mentioned. sister Concepcion is also a finding of fact of the court a
quo 13 and of respondent appellate court when the latter stated
ART. 1930. The agency shall remain in full force and that Simon Rallos 'must have known of the death of his sister,
effect even after the death of the principal, if it has and yet he proceeded with the sale of the lot in the name of
been constituted in the common interest of the latter both his sisters Concepcion and Gerundia Rallos without
and of the agent, or in the interest of a third person informing appellant (the realty corporation) of the death of the
who has accepted the stipulation in his favor. former. 14

ART. 1931. Anything done by the agent, without On the basis of the established knowledge of Simon Rallos
knowledge of the death of the principal or of any other concerning the death of his principal Concepcion
cause which extinguishes the agency, is valid and shall Rallos, Article 1931 of the Civil Code is inapplicable. The law
be fully effective with respect to third persons who may expressly requires for its application lack of knowledge on the
have contracted with him in good. faith. 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 &
Article 1930 is not involved because admittedly the special Reyes v. Panuyas, the Court applying Article 1738 of the old
power of attorney executed in favor of Simeon Rallos was not Civil rode now Art. 1931 of the new Civil Code sustained the
coupled with an interest. validity , of a sale made after the death of the
principal because it was not shown that the agent knew of his
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Nature of Agency: Purpose

principal's demise. 15 To the same effect is the case 5. Another argument advanced by respondent court is that the
of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the vendee acting in good faith relied on the power of attorney
words of Justice Jesus Barrera the Court stated: which was duly registered on the original certificate of title
recorded in the Register of Deeds of the province of Cebu, that
... even granting arguemendo that Luis Herrera did die in no notice of the death was aver annotated on said certificate of
1936, plaintiffs presented no proof and there is no title by the heirs of the principal and accordingly they must
indication in the record, that the agent Luy Kim Guan was suffer the consequences of such omission. 17
aware of the death of his principal at the time he sold the
property. The death 6f the principal does not render the act To support such argument reference is made to a portion
of an agent unenforceable, where the latter had no in Manresa's Commentaries which We quote:
knowledge of such extinguishment of the agency. (1 SCRA
406, 412) If the agency has been granted for the purpose of
contracting with certain persons, the revocation must be
4. In sustaining the validity of the sale to respondent made known to them. But if the agency is general iii
consideration the Court of Appeals reasoned out that there is nature, without reference to particular person with whom
no provision in the Code which provides that whatever is done the agent is to contract, it is sufficient that the principal
by an agent having knowledge of the death of his principal is exercise due diligence to make the revocation of the
void even with respect to third persons who may have agency publicity known.
contracted with him in good faith and without knowledge of the
death of the principal. 16 In case of a general power which does not specify the
persons to whom represents' on should be made, it is the
We cannot see the merits of the foregoing argument as it general opinion that all acts, executed with third persons
ignores the existence of the general rule enunciated in Article who contracted in good faith, Without knowledge of the
1919 that the death of the principal extinguishes the agency. revocation, are valid. In such case, the principal may
That being the general rule it follows a fortiori that any act of exercise his right against the agent, who, knowing of the
an agent after the death of his principal is void ab initio unless revocation, continued to assume a personality which he no
the same fags under the exception provided for in the longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16,
aforementioned Articles 1930 and 1931. Article 1931, being an rollo)
exception to the general rule, is to be strictly construed, it is
not to be given an interpretation or application beyond the The above discourse however, treats of revocation by an act
clear import of its terms for otherwise the courts will be of the principal as a mode of terminating an agency which is to
involved in a process of legislation outside of their judicial be distinguished from revocation by operation of law such as
function. 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
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Nature of Agency: Purpose

extinguished ipso jure upon the death of either principal or In the case of Angel Blondeau et al. v. Agustin Nano et al.,
agent. Although a revocation of a power of attorney to be 61 Phil. 630, one Vallejo was a co-owner of lands with
effective must be communicated to the parties Agustin Nano. The latter had a power of attorney
concerned, 18 yet a revocation by operation of law, such as by supposedly executed by Vallejo Nano in his favor. Vallejo
death of the principal is, as a rule, instantaneously effective delivered to Nano his land titles. The power was registered
inasmuch as "by legal fiction the agent's exercise of authority in the Office of the Register of Deeds. When the lawyer-
is regarded as an execution of the principal's continuing husband of Angela Blondeau went to that Office, he found
will. 19 With death, the principal's will ceases or is the of all in order including the power of attorney. But Vallejo
authority is extinguished. denied having executed the power The lower court
sustained Vallejo and the plaintiff Blondeau appealed.
The Civil Code does not impose a duty on the heirs to notify Reversing the decision of the court a quo, the Supreme
the agent of the death of the principal What the Code provides Court, quoting the ruling in the case of Eliason v.
in Article 1932 is that, if the agent die his heirs must notify the Wilborn, 261 U.S. 457, held:
principal thereof, and in the meantime adopt such measures
as the circumstances may demand in the interest of the latter. But there is a narrower ground on which the defenses of
Hence, the fact that no notice of the death of the principal was the defendant- appellee must be overruled. Agustin Nano
registered on the certificate of title of the property in the Office had possession of Jose Vallejo's title papers. Without
of the Register of Deeds, is not fatal to the cause of the estate those title papers handed over to Nano with the
of the principal acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of
6. Holding that the good faith of a third person in said with an the Philippine Bar and the husband of Angela Blondeau,
agent affords the former sufficient protection, respondent court the principal plaintiff, searched the registration record, he
drew a "parallel" between the instant case and that of an found them in due form including the power of attorney of
innocent purchaser for value of a land, stating that if a person Vallajo in favor of Nano. If this had not been so and if
purchases a registered land from one who acquired it in bad thereafter the proper notation of the encumbrance could
faith even to the extent of foregoing or falsifying the deed of not have been made, Angela Blondeau would not have
sale in his favor the registered owner has no recourse sent P12,000.00 to the defendant Vallejo.' An executed
against such innocent purchaser for value but only against the transfer of registered lands placed by the registered owner
forger. 20 thereof in the hands of another operates as a
representation to a third party that the holder of the
To support the correctness of this respondent corporation, in transfer is authorized to deal with the land.
its brief, cites the case of Blondeau, et al., v. Nano and Vallejo,
61 Phil. 625. We quote from the brief: As between two innocent persons, one of whom must
suffer the consequence of a breach of trust, the one who
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Nature of Agency: Purpose

made it possible by his act of coincidence bear the loss. were held to be "good", "the parties being ignorant of the
(pp. 19-21) death". Let us take note that the Opinion of Justice Rogers
was premised on the statement that the parties were ignorant
The Blondeau decision, however, is not on all fours with the of the death of the principal. We quote from that decision the
case before Us because here We are confronted with one who following:
admittedly was an agent of his sister and who sold the
property of the latter after her death with full knowledge of ... Here the precise point is, whether a payment to an
such death. The situation is expressly covered by a provision agent when the Parties are ignorant of the death is a
of law on agency the terms of which are clear and good payment. in addition to the case in Campbell
unmistakable leaving no room for an interpretation contrary to before cited, the same judge Lord Ellenboruogh, has
its tenor, in the same manner that the ruling in Blondeau and decided in 5 Esp. 117, the general question that a
the cases cited therein found a basis in Section 55 of the Land payment after the death of principal is not good. Thus,
Registration Law which in part provides: a payment of sailor's wages to a person having a
power of attorney to receive them, has been held void
xxx xxx xxx when the principal was dead at the time of the
payment. If, by this case, it is meant merely to decide
The production of the owner's duplicate certificate the general proposition that by operation of law the
whenever any voluntary instrument is presented for death of the principal is a revocation of the powers of
registration shall be conclusive authority from the the attorney, no objection can be taken to it. But if it
registered owner to the register of deeds to enter a new intended to say that his principle applies where there
certificate or to make a memorandum of registration in was 110 notice of death, or opportunity of twice I must
accordance with such instruments, and the new certificate be permitted to dissent from it.
or memorandum Shall be binding upon the registered
owner and upon all persons claiming under him in favor of ... That a payment may be good today, or bad
every purchaser for value and in good faith: Provided tomorrow, from the accident circumstance of the death
however, That in all cases of registration provided by fraud, of the principal, which he did not know, and which by
the owner may pursue all his legal and equitable remedies no possibility could he know? It would be unjust to the
against the parties to such fraud without prejudice, agent and unjust to the debtor. In the civil law, the acts
however, to the right, of any innocent holder for value of a of the agent, done bona fide in ignorance of the death
certificate of title. ... (Act No. 496 as amended) of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish
7. One last point raised by respondent corporation in support law, and I cannot believe the common law is so
of the appealed decision is an 1842 ruling of the Supreme unreasonable... (39 Am. Dec. 76, 80, 81; emphasis
Court of Pennsylvania in Cassiday v. McKenzie wherein supplied)
payments made to an agent after the death of the principal
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Nature of Agency: Purpose

To avoid any wrong impression which the Opinion in Cassiday great respectability, it stands alone among common
v. McKenzie may evoke, mention may be made that the above law authorities and is opposed by an array too
represents the minority view in American jurisprudence. Thus formidable to permit us to following it. (15 Cal. 12,17,
in Clayton v. Merrett, the Court said. cited in 2 C.J. 549)

There are several cases which seem to hold that although, Whatever conflict of legal opinion was generated by Cassiday
as a general principle, death revokes an agency and v. McKenzie in American jurisprudence, no such conflict exists
renders null every act of the agent thereafter performed, in our own for the simple reason that our statute, the Civil
yet that where a payment has been made in ignorance of Code, expressly provides for two exceptions to the general
the death, such payment will be good. The leading case so rule that death of the principal revokes ipso jure the agency, to
holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) wit: (1) that the agency is coupled with an interest (Art 1930),
282, 39 Am. 76, where, in an elaborate opinion, this view ii and (2) that the act of the agent was executed without
broadly announced. It is referred to, and seems to have knowledge of the death of the principal and the third person
been followed, in the case of Dick v. Page, 17 Mo. 234, 57 who contracted with the agent acted also in good faith (Art.
AmD 267; but in this latter case it appeared that the estate 1931). Exception No. 2 is the doctrine followed in Cassiday,
of the deceased principal had received the benefit of the and again We stress the indispensable requirement that the
money paid, and therefore the representative of the estate agent acted without knowledge or notice of the death of the
might well have been held to be estopped from suing for it principal In the case before Us the agent Ramon Rallos
again. . . . These cases, in so far, at least, as they executed the sale notwithstanding notice of the death of his
announce the doctrine under discussion, are exceptional. principal Accordingly, the agent's act is unenforceable against
The Pennsylvania Case, supra (Cassiday v. McKenzie 4 the estate of his principal.
Watts & S. 282, 39 AmD 76), is believed to stand almost, if
not quite, alone in announcing the principle in its broadest IN VIEW OF ALL THE FOREGOING, We set aside the ecision
scope. (52, Misc. 353, 357, cited in 2 C.J. 549) of respondent appellate court, and We affirm en toto the
judgment rendered by then Hon. Amador E. Gomez of the
So also in Travers v. Crane, speaking of Cassiday v. Court of First Instance of Cebu, quoted in pages 2 and 3 of
McKenzie, and pointing out that the opinion, except so far as it this Opinion, with costs against respondent realty corporation
related to the particular facts, was a mere dictum, Baldwin J. at all instances.
said:
So Ordered.
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
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Nature of Agency: Purpose

SECOND DIVISION contains an additional note which reads: "subject for (sic)
availability of a (sic) stock at NAWACO (warehouse)."[3]
[G.R. No. 117356. June 19, 2000]
On October 25, 1989, STM sold to private respondent
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF Consolidated Sugar Corporation (CSC) its rights in SLDR No.
APPEALS and CONSOLIDATED SUGAR 1214M for P 14,750,000.00. CSC issued one check dated
CORPORATION, respondents. October 25, 1989 and three checks postdated November 13,
1989 in payment. That same day, CSC wrote petitioner that it
DECISION had been authorized by STM to withdraw the sugar covered by
SLDR No. 1214M. Enclosed in the letter were a copy of SLDR
QUISUMBING, J.: No. 1214M and a letter of authority from STM authorizing CSC
"to withdraw for and in our behalf the refined sugar covered by
Before us is a petition for review on certiorari under Rule 45 of Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214
the Rules of Court assailing the decision of the Court of dated October 16, 1989 in the total quantity of 25,000 bags."[4]
Appeals dated February 24, 1994, in CA-G.R. CV No. 31717,
as well as the respondent court's resolution of September 30, On October 27, 1989, STM issued 16 checks in the total
1994 modifying said decision. Both decision and resolution amount of P31,900,000.00 with petitioner as payee. The latter,
amended the judgment dated February 13, 1991, of the in turn, issued Official Receipt No. 33743 dated October 27,
Regional Trial Court of Makati City, Branch 147, in Civil Case 1989 acknowledging receipt of the said checks in payment of
No. 90-118. 50,000 bags. Aside from SLDR No. 1214M, said checks also
covered SLDR No. 1213.
The facts of this case as found by both the trial and appellate
courts are as follows: Private respondent CSC surrendered SLDR No. 1214M to the
petitioner's NAWACO warehouse and was allowed to withdraw
sugar. However, after 2,000 bags had been released,
St. Therese Merchandising (hereafter STM) regularly bought
sugar from petitioner Victorias Milling Co., Inc., (VMC). In the petitioner refused to allow further withdrawals of sugar against
course of their dealings, petitioner issued several Shipping SLDR No. 1214M. CSC then sent petitioner a letter dated
List/Delivery Receipts (SLDRs) to STM as proof of purchases. January 23, 1990 informing it that SLDR No. 1214M had been
Among these was SLDR No. 1214M, which gave rise to the "sold and endorsed" to it but that it had been refused further
instant case. Dated October 16, 1989, SLDR No. 1214M withdrawals of sugar from petitioner's warehouse despite the
covers 25,000 bags of sugar. Each bag contained 50 fact that only 2,000 bags had been withdrawn.[5] CSC thus
kilograms and priced at P638.00 per bag as "per sales order inquired when it would be allowed to withdraw the remaining
VMC Marketing No. 042 dated October 16, 1989."[1] The 23,000 bags.
transaction it covered was a "direct sale."[2] The SLDR also
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Nature of Agency: Purpose

On January 31, 1990, petitioner replied that it could not allow Petitioner's primary defense a quo was that it was an unpaid
any further withdrawals of sugar against SLDR No. 1214M seller for the 23,000 bags.[8] Since STM had already drawn in
because STM had already dwithdrawn all the sugar covered full all the sugar corresponding to the amount of its cleared
by the cleared checks.[6] checks, it could no longer authorize further delivery of sugar to
CSC. Petitioner also contended that it had no privity of
On March 2, 1990, CSC sent petitioner a letter demanding the contract with CSC.
release of the balance of 23,000 bags.
Petitioner explained that the SLDRs, which it had issued, were
Seven days later, petitioner reiterated that all the sugar not documents of title, but mere delivery receipts issued
corresponding to the amount of STM's cleared checks had pursuant to a series of transactions entered into between it
been fully withdrawn and hence, there would be no more and STM. The SLDRs prescribed delivery of the sugar to the
deliveries of the commodity to STM's account. Petitioner also party specified therein and did not authorize the transfer of
noted that CSC had represented itself to be STM's agent as it said party's rights and interests.
had withdrawn the 2,000 bags against SLDR No. 1214M "for
and in behalf" of STM. Petitioner also alleged that CSC did not pay for the SLDR and
was actually STM's co-conspirator to defraud it through a
On April 27, 1990, CSC filed a complaint for specific misrepresentation that CSC was an innocent purchaser for
performance, docketed as Civil Case No. 90-1118. Defendants value and in good faith. Petitioner then prayed that CSC be
were Teresita Ng Sy (doing business under the name of St. ordered to pay it the following sums: P10,000,000.00 as moral
Therese Merchandising) and herein petitioner. Since the damages; P10,000,000.00 as exemplary damages; and
former could not be served with summons, the case P1,500,000.00 as attorney's fees. Petitioner also prayed that
proceeded only against the latter. During the trial, it was cross-defendant STM be ordered to pay it P10,000,000.00 in
discovered that Teresita Ng Go who testified for CSC was the exemplary damages, and P1,500,000.00 as attorney's fees.
same Teresita Ng Sy who could not be reached through
summons.[7] CSC, however, did not bother to pursue its case Since no settlement was reached at pre-trial, the trial court
against her, but instead used her as its witness. heard the case on the merits.

CSC's complaint alleged that STM had fully paid petitioner for As earlier stated, the trial court rendered its judgment favoring
the sugar covered by SLDR No. 1214M. Therefore, the latter private respondent CSC, as follows:
had no justification for refusing delivery of the sugar. CSC
prayed that petitioner be ordered to deliver the 23,000 bags "WHEREFORE, in view of the foregoing, the Court hereby
covered by SLDR No. 1214M and sought the award of renders judgment in favor of the plaintiff and against
P1,104,000.00 in unrealized profits, P3,000,000.00 as defendant Victorias Milling Company:
exemplary damages, P2,200,000.00 as attorney's fees and
litigation expenses.
APT- AGENCY 11
Nature of Agency: Purpose

"1) Ordering defendant Victorias Milling Company to is a computer printout of defendant Victorias Milling
deliver to the plaintiff 23,000 bags of refined sugar due Company showing the quantity and value of the
under SLDR No. 1214; purchases made by St. Therese Merchandising, the
SLDR no. issued to cover the purchase, the official
"2) Ordering defendant Victorias Milling Company to reciept no. and the status of payment. It is clear in
pay the amount of P920,000.00 as unrealized profits, Exhibit 'F' that with respect to the sugar covered by
the amount of P800,000.00 as exemplary damages SLDR No. 1214 the same has been fully paid as
and the amount of P1,357,000.00, which is 10% of the indicated by the word 'cleared' appearing under the
acquisition value of the undelivered bags of refined column of 'status of payment.'
sugar in the amount of P13,570,000.00, as attorney's
fees, plus the costs. "On the other hand, the claim of defendant Victorias
Milling Company that the purchase price of the 25,000
"SO ORDERED."[9] bags of sugar purchased by St. Therese
Merchandising covered by SLDR No. 1214 has not
It made the following observations: been fully paid is supported only by the testimony of
Arnulfo Caintic, witness for defendant Victorias Milling
"[T]he testimony of plaintiff's witness Teresita Ng Go, Company. The Court notes that the testimony of
that she had fully paid the purchase price of Arnulfo Caintic is merely a sweeping barren assertion
P15,950,000.00 of the 25,000 bags of sugar bought by that the purchase price has not been fully paid and is
her covered by SLDR No. 1214 as well as the not corroborated by any positive evidence. There is an
purchase price of P15,950,000.00 for the 25,000 bags insinuation by Arnulfo Caintic in his testimony that the
of sugar bought by her covered by SLDR No. 1213 on postdated checks issued by the buyer in payment of
the same date, October 16, 1989 (date of the two the purchased price were dishonored. However, said
SLDRs) is duly supported by Exhibits C to C-15 witness failed to present in Court any dishonored check
inclusive which are post-dated checks dated October or any replacement check. Said witness likewise failed
27, 1989 issued by St. Therese Merchandising in favor to present any bank record showing that the checks
of Victorias Milling Company at the time it purchased issued by the buyer, Teresita Ng Go, in payment of the
the 50,000 bags of sugar covered by SLDR No. 1213 purchase price of the sugar covered by SLDR No.
and 1214. Said checks appear to have been honored 1214 were dishonored."[10]
and duly credited to the account of Victorias Milling
Company because on October 27, 1989 Victorias Petitioner appealed the trial courts decision to the Court of
Milling Company issued official receipt no. 34734 in Appeals.
favor of St. Therese Merchandising for the amount of
P31,900,000.00 (Exhibits B and B-1). The testimony of On appeal, petitioner averred that the dealings between it and
Teresita Ng Go is further supported by Exhibit F, which STM were part of a series of transactions involving only one
APT- AGENCY 12
Nature of Agency: Purpose

account or one general contract of sale. Pursuant to this " 2) Pay to plaintiff-appellee P792,918.00 which is 10% of
contract, STM or any of its authorized agents could withdraw the value of the undelivered bags of refined sugar, as
bags of sugar only against cleared checks of STM. SLDR No. attorneys fees;
21214M was only one of 22 SLDRs issued to STM and since
the latter had already withdrawn its full quota of sugar under "3) Pay the costs of suit.
the said SLDR, CSC was already precluded from seeking
delivery of the 23,000 bags of sugar. "SO ORDERED."[11]

Private respondent CSC countered that the sugar purchases Both parties then seasonably filed separate motions for
involving SLDR No. 1214M were separate and independent reconsideration.
transactions and that the details of the series of purchases
were contained in a single statement with a consolidated In its resolution dated September 30, 1994, the appellate court
summary of cleared check payments and sugar stock modified its decision to read:
withdrawals because this a more convenient system than
issuing separate statements for each purchase. "WHEREFORE, the Court hereby modifies the assailed
judgment and orders defendant-appellant to:
The appellate court considered the following issues: (a)
Whether or not the transaction between petitioner and STM "(1) Deliver to plaintiff-appellee 23,000 bags of refined
involving SLDR No. 1214M was a separate, independent, and sugar under SLDR No. 1214M;
single transaction; (b) Whether or not CSC had the capacity to
sue on its own on SLDR No. 1214M; and (c) Whether or not
"(2) Pay costs of suit.
CSC as buyer from STM of the rights to 25,000 bags of sugar
covered by SLDR No. 1214M could compel petitioner to
deliver 23,000 bags allegedly unwithdrawn. "SO ORDERED."[12]

On February 24, 1994, the Court of Appeals rendered its The appellate court explained the rationale for the modification
decision modifying the trial court's judgment, to wit: as follows:

"WHEREFORE, the Court hereby MODIFIES the assailed "There is merit in plaintiff-appellee's position.
judgment and orders defendant-appellant to:
"Exhibit F' We relied upon in fixing the number of bags of
"1) Deliver to plaintiff-appellee 12,586 bags of sugar sugar which remained undelivered as 12,586 cannot be
covered by SLDR No. 1214M; made the basis for such a finding. The rule is explicit that
courts should consider the evidence only for the purpose
for which it was offered. (People v. Abalos, et al, 1 CA Rep
APT- AGENCY 13
Nature of Agency: Purpose

783). The rationale for this is to afford the party against "1. The Court of Appeals erred in not holding that STM's
whom the evidence is presented to object thereto if he and private respondent's specially informing petitioner that
deems it necessary. Plaintiff-appellee is, therefore, correct respondent was authorized by buyer STM to withdraw
in its argument that Exhibit F' which was offered to prove sugar against SLDR No. 1214M "for and in our (STM)
that checks in the total amount of P15,950,000.00 had behalf," (emphasis in the original) private respondent's
been cleared. (Formal Offer of Evidence for Plaintiff, withdrawing 2,000 bags of sugar for STM, and STM's
Records p. 58) cannot be used to prove the proposition empowering other persons as its agents to withdraw sugar
that 12,586 bags of sugar remained undelivered. against the same SLDR No. 1214M, rendered respondent
like the other persons, an agent of STM as held in Rallos v.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, Felix Go Chan & Realty Corp., 81 SCRA 252, and
10 October 1990, p. 33] and Marianito L. Santos [TSN, 17 precluded it from subsequently claiming and proving being
October 1990, pp. 16, 18, and 36]) presented by plaintiff- an assignee of SLDR No. 1214M and from suing by itself
appellee was to the effect that it had withdrawn only 2,000 for its enforcement because it was conclusively presumed
bags of sugar from SLDR after which it was not allowed to to be an agent (Sec. 2, Rule 131, Rules of Court) and
withdraw anymore. Documentary evidence (Exhibit I, Id., p. estopped from doing so. (Art. 1431, Civil Code).
78, Exhibit K, Id., p. 80) show that plaintiff-appellee had
sent demand letters to defendant-appellant asking the " 2. The Court of Appeals erred in manifestly and arbitrarily
latter to allow it to withdraw the remaining 23,000 bags of ignoring and disregarding certain relevant and undisputed
sugar from SLDR 1214M. Defendant-appellant, on the facts which, had they been considered, would have shown
other hand, alleged that sugar delivery to the STM that petitioner was not liable, except for 69 bags of sugar,
corresponded only to the value of cleared checks; and that and which would justify review of its conclusion of facts by
all sugar corresponded to cleared checks had been this Honorable Court.
withdrawn. Defendant-appellant did not rebut plaintiff-
appellee's assertions. It did not present evidence to show " 3. The Court of Appeals misapplied the law on
how many bags of sugar had been withdrawn against compensation under Arts. 1279, 1285 and 1626 of the Civil
SLDR No. 1214M, precisely because of its theory that all Code when it ruled that compensation applied only to
sales in question were a series of one single transaction credits from one SLDR or contract and not to those
and withdrawal of sugar depended on the clearing of from two or more distinct contracts between the same
checks paid therefor. parties; and erred in denying petitioner's right to setoff all
its credits arising prior to notice of assignment from other
"After a second look at the evidence, We see no reason to sales or SLDRs against private respondent's claim as
overturn the findings of the trial court on this point."[13] assignee under SLDR No. 1214M, so as to extinguish or
reduce its liability to 69 bags, because the law on
Hence, the instant petition, positing the following errors as compensation applies precisely to two or more distinct
grounds for review:
APT- AGENCY 14
Nature of Agency: Purpose

contracts between the same parties (emphasis in the (3)....Whether or not the Court of Appeals erred in not
original). ruling that the sale of sugar under SLDR No. 1214M was a
conditional sale or a contract to sell and hence freed
"4. The Court of Appeals erred in concluding that the petitioner from further obligations.
settlement or liquidation of accounts in Exh. F between
petitioner and STM, respondent's admission of its balance, (4)....Whether or not the Court of Appeals committed an
and STM's acquiescence thereto by silence for almost one error of law in not applying the "clean hands doctrine" to
year did not render Exh. `F' an account stated and its preclude CSC from seeking judicial relief.
balance binding.
The issues will be discussed in seriatim.
"5. The Court of Appeals erred in not holding that the
conditions of the assigned SLDR No. 1214, namely, (a) its Anent the first issue, we find from the records that petitioner
subject matter being generic, and (b) the sale of sugar raised this issue for the first time on appeal. It is settled that an
being subject to its availability at the Nawaco warehouse, issue which was not raised during the trial in the court below
made the sale conditional and prevented STM or private could not be raised for the first time on appeal as to do so
respondent from acquiring title to the sugar; and the non- would be offensive to the basic rules of fair play, justice, and
availability of sugar freed petitioner from further obligation. due process.[15] Nonetheless, the Court of Appeals opted to
address this issue, hence, now a matter for our consideration.
"6. The Court of Appeals erred in not holding that the
"clean hands" doctrine precluded respondent from seeking Petitioner heavily relies upon STM's letter of authority allowing
judicial reliefs (sic) from petitioner, its only remedy being CSC to withdraw sugar against SLDR No. 1214M to show that
against its assignor."[14] the latter was STM's agent. The pertinent portion of said letter
reads:
Simply stated, the issues now to be resolved are:
"This is to authorize Consolidated Sugar Corporation or its
(1)....Whether or not the Court of Appeals erred in not representative to withdraw for and in our behalf (stress
ruling that CSC was an agent of STM and hence, estopped supplied) the refined sugar covered by Shipping
to sue upon SLDR No. 1214M as an assignee. List/Delivery Receipt = Refined Sugar (SDR) No. 1214
dated October 16, 1989 in the total quantity of 25, 000
(2)....Whether or not the Court of Appeals erred in applying bags."[16]
the law on compensation to the transaction under SLDR
No. 1214M so as to preclude petitioner from offsetting its The Civil Code defines a contract of agency as follows:
credits on the other SLDRs.
APT- AGENCY 15
Nature of Agency: Purpose

"Art. 1868. By the contract of agency a person binds represented plaintiff-appellee as being its agent by the use
himself to render some service or to do something in of the phrase "for and in our (STM's) behalf" the matter
representation or on behalf of another, with the consent or was cleared when on 23 January 1990, plaintiff-appellee
authority of the latter." informed defendant-appellant that SLDFR No. 1214M had
been "sold and endorsed" to it by STM (Exhibit I, Records,
It is clear from Article 1868 that the basis of agency is p. 78). Further, plaintiff-appellee has shown that the 25,
representation.[17] On the part of the principal, there must be 000 bags of sugar covered by the SLDR No. 1214M were
an actual intention to appoint[18] or an intention naturally sold and transferred by STM to it ...A conclusion that there
inferable from his words or actions;[19] and on the part of the was a valid sale and transfer to plaintiff-appellee may,
agent, there must be an intention to accept the appointment therefore, be made thus capacitating plaintiff-appellee to
and act on it,[20] and in the absence of such intent, there is sue in its own name, without need of joining its imputed
generally no agency.[21] One factor which most clearly principal STM as co-plaintiff."[24]
distinguishes agency from other legal concepts is control; one
person - the agent - agrees to act under the control or direction In the instant case, it appears plain to us that private
of another - the principal. Indeed, the very word "agency" has respondent CSC was a buyer of the SLDFR form, and not an
come to connote control by the principal.[22] The control factor, agent of STM. Private respondent CSC was not subject to
more than any other, has caused the courts to put contracts STM's control. The question of whether a contract is one of
between principal and agent in a separate category.[23] The sale or agency depends on the intention of the parties as
Court of Appeals, in finding that CSC, was not an agent of gathered from the whole scope and effect of the language
STM, opined: employed.[25] That the authorization given to CSC contained
the phrase "for and in our (STM's) behalf" did not establish an
"This Court has ruled that where the relation of agency is agency. Ultimately, what is decisive is the intention of the
dependent upon the acts of the parties, the law makes no parties.[26] That no agency was meant to be established by the
presumption of agency, and it is always a fact to be CSC and STM is clearly shown by CSC's communication to
proved, with the burden of proof resting upon the persons petitioner that SLDR No. 1214M had been "sold and
alleging the agency, to show not only the fact of its endorsed" to it.[27] The use of the words "sold and endorsed"
existence, but also its nature and extent (Antonio vs. means that STM and CSC intended a contract of sale, and not
Enriquez [CA], 51 O.G. 3536]. Here, defendant-appellant an agency. Hence, on this score, no error was committed by
failed to sufficiently establish the existence of an agency the respondent appellate court when it held that CSC was not
relation between plaintiff-appellee and STM. The fact alone STM's agent and could independently sue petitioner.
that it (STM) had authorized withdrawal of sugar by
plaintiff-appellee "for and in our (STM's) behalf" should not On the second issue, proceeding from the theory that the
be eyed as pointing to the existence of an agency relation transactions entered into between petitioner and STM are but
...It should be viewed in the context of all the serial parts of one account, petitioner insists that its debt has
circumstances obtaining. Although it would seem STM been offset by its claim for STM's unpaid purchases, pursuant
APT- AGENCY 16
Nature of Agency: Purpose

to Article 1279 of the Civil Code.[28]However, the trial court where the terms and conditions so stipulated are not contrary
found, and the Court of Appeals concurred, that the purchase to law, morals, good customs, public policy or public order, the
of sugar covered by SLDR No. 1214M was a separate and contract is valid and must be upheld.[31] Having transferred title
independent transaction; it was not a serial part of a single to the sugar in question, petitioner is now obliged to deliver it
transaction or of one account contrary to petitioner's to the purchaser or its assignee.
insistence. Evidence on record shows, without being rebutted,
that petitioner had been paid for the sugar purchased under As to the fourth issue, petitioner submits that STM and private
SLDR No. 1214M. Petitioner clearly had the obligation to respondent CSC have entered into a conspiracy to defraud it
deliver said commodity to STM or its assignee. Since said of its sugar. This conspiracy is allegedly evidenced by: (a) the
sugar had been fully paid for, petitioner and CSC, as assignee fact that STM's selling price to CSC was below its purchasing
of STM, were not mutually creditors and debtors of each other. price; (b) CSC's refusal to pursue its case against Teresita Ng
No reversible error could thereby be imputed to respondent Go; and (c) the authority given by the latter to other persons to
appellate court when, it refused to apply Article 1279 of the withdraw sugar against SLDR No. 1214M after she had sold
Civil Code to the present case. her rights under said SLDR to CSC. Petitioner prays that the
doctrine of "clean hands" should be applied to preclude CSC
Regarding the third issue, petitioner contends that the sale of from seeking judicial relief. However, despite careful scrutiny,
sugar under SLDR No. 1214M is a conditional sale or a we find here the records bare of convincing evidence
contract to sell, with title to the sugar still remaining with the whatsoever to support the petitioner's allegations of fraud. We
vendor. Noteworthy, SLDR No. 1214M contains the following are now constrained to deem this matter purely speculative,
terms and conditions: bereft of concrete proof.

"It is understood and agreed that by payment by WHEREFORE, the instant petition is DENIED for lack of merit.
buyer/trader of refined sugar and/or receipt of this Costs against petitioner.
document by the buyer/trader personally or through a
representative, title to refined sugar is transferred to SO ORDERED.
buyer/trader and delivery to him/it is deemed effected and
completed (stress supplied) and buyer/trader assumes full
responsibility therefore"[29]

The aforequoted terms and conditions clearly show that


petitioner transferred title to the sugar to the buyer or his
assignee upon payment of the purchase price. Said terms
clearly establish a contract of sale, not a contract to sell.
Petitioner is now estopped from alleging the contrary. The
contract is the law between the contracting parties.[30] And
APT- AGENCY 17
Nature of Agency: Purpose

THIRD DIVISION The Case

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

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

x x x x x x x x x[4]
APT- AGENCY 18
Nature of Agency: Purpose

The Facts another simulated deed of sale dated July 12,


1988 of a Stake Toyota registered with the
The facts are narrated by the CA as follows: Land Transportation Office of Cabanatuan City
[Respondents] alleged that between the on September 7, 1988. [Co-petitioner] Melecio
period of May 2, 1988 and June 5, 1988, Tuazon, a son of spouses Tuazon, registered a
spouses Leonilo and Maria Tuazon purchased fictitious Deed of Sale on July 19, 1988 x x x
a total of 8,326 cavans of rice from [the over a residential lot located at Nueva Ecija.
deceased Bartolome] Ramos [predecessor-in- Another simulated sale of a Toyota Willys was
interest of respondents]. That of this [quantity,] executed on January 25, 1988 in favor of their
x x x only 4,437 cavans [have been paid for so other son, [co-petitioner] Alejandro Tuazon x x
far], leaving unpaid 3,889 cavans valued x. As a result of the said sales, the titles of
at P1,211,919.00. In payment therefor, the these properties issued in the names of
spouses Tuazon issued x x x [several] Traders spouses Tuazon were cancelled and new ones
Royal Bank checks. were issued in favor of the [co-]defendants
spouses Buenaventura, Alejandro Tuazon and
xxxxxxxxx Melecio Tuazon. Resultantly, by the said ante-
dated and simulated sales and the
[B]ut when these [checks] were encashed, all of corresponding transfers there was no more
the checks bounced due to insufficiency of property left registered in the names of spouses
funds. [Respondents] advanced that before Tuazon answerable to creditors, to the damage
issuing said checks[,] spouses Tuazon already and prejudice of [respondents].
knew that they had no available fund to support
the checks, and they failed to provide for the For their part, defendants denied having
payment of these despite repeated demands purchased x x x rice from [Bartolome] Ramos.
made on them. They alleged that it was Magdalena Ramos,
wife of said deceased, who owned and traded
[Respondents] averred that because spouses the merchandise and Maria Tuazon was merely
Tuazon anticipated that they would be sued, her agent. They argued that it was Evangeline
they conspired with the other [defendants] to Santos who was the buyer of the rice and
defraud them as creditors by executing x x x issued the checks to Maria Tuazon as
fictitious sales of their properties. They payments therefor. In good faith[,] the checks
executed x x x simulated sale[s] [of three lots] in were received [by petitioner] from Evangeline
favor of the x x x spouses Buenaventura x x x[,] Santos and turned over to Ramos without
as well as their residential lot and the house knowing that these were not funded. And it is
thereon[,] all located at Nueva Ecija, and for this reason that [petitioners] have been
APT- AGENCY 19
Nature of Agency: Purpose

insisting on the inclusion of Evangeline Santos Since the trial court acquitted petitioners in all three of the
as an indispensable party, and her non- consolidated criminal cases, they appealed only its decision
inclusion was a fatal error. Refuting that the finding them civilly liable to respondents.
sale of several properties were fictitious or
simulated, spouses Tuazon contended that Ruling of the Court of Appeals
these were sold because they were then
meeting financial difficulties but the disposals Sustaining the RTC, the CA held that petitioners had failed to
were made for value and in good faith and done prove the existence of an agency between respondents and
before the filing of the instant suit. To dispute Spouses Tuazon. The appellate court disbelieved petitioners
the contention of plaintiffs that they were the contention that Evangeline Santos should have been
buyers of the rice, they argued that there was impleaded as an indispensable party. Inasmuch as all the
no sales invoice, official receipts or like checks had been indorsed by Maria Tuazon, who thereby
evidence to prove this. They assert that they became liable to subsequent holders for the amounts stated in
were merely agents and should not be held those checks, there was no need to implead Santos.
answerable.[5]
Hence, this Petition.[6]

The corresponding civil and criminal cases were filed by Issues


respondents against Spouses Tuazon. Those cases were later
consolidated and amended to include Spouses Anastacio and Petitioners raise the following issues for our consideration:
Mary Buenaventura, with Alejandro Tuazon and Melecio
Tuazon as additional defendants. Having passed away before 1. Whether or not the Honorable Court of
the pretrial, Bartolome Ramos was substituted by his heirs, Appeals erred in ruling that petitioners are not
herein respondents. agents of the respondents.

Contending that Evangeline Santos was an indispensable 2. Whether or not the Honorable Court of
party in the case, petitioners moved to file a third-party Appeals erred in rendering judgment against
complaint against her. Allegedly, she was primarily liable to the petitioners despite x x x the failure of the
respondents, because she was the one who had purchased respondents to include in their action
the merchandise from their predecessor, as evidenced by the Evangeline Santos, an indispensable party to
fact that the checks had been drawn in her name. The RTC, the suit.[7]
however, denied petitioners Motion.
APT- AGENCY 20
Nature of Agency: Purpose

The Courts Ruling rice dealership. The question of whether a contract is one of
sale or of agency depends on the intention of the parties.[12]
The Petition is unmeritorious.
The declarations of agents alone are generally
First Issue: insufficient to establish the fact or extent of their
Agency authority.[13] The law makes no presumption of agency; proving
its existence, nature and extent is incumbent upon the person
Well-entrenched is the rule that the Supreme Courts role in a alleging it.[14] In the present case, petitioners raise the fact of
petition under Rule 45 is limited to reviewing errors of law agency as an affirmative defense, yet fail to prove its
allegedly committed by the Court of Appeals. Factual findings existence.
of the trial court, especially when affirmed by the CA, are
conclusive on the parties and this Court.[8] Petitioners have not The Court notes that petitioners, on their own behalf,
given us sufficient reasons to deviate from this rule. sued Evangeline Santos for collection of the amounts
represented by the bounced checks, in a separate civil case
In a contract of agency, one binds oneself to render that they sought to be consolidated with the current one. If, as
some service or to do something in representation or on behalf they claim, they were mere agents of respondents, petitioners
of another, with the latters consent or authority.[9] The following should have brought the suit against Santos for and on behalf
are the elements of agency: (1) the parties consent, express or of their alleged principal, in accordance with Section 2 of Rule
implied, to establish the relationship; (2) the object, which is 3 of the Rules on Civil Procedure.[15] Their filing a suit against
the execution of a juridical act in relation to a third person; (3) her in their own names negates their claim that they acted as
the representation, by which the one who acts as an agent mere agents in selling the rice obtained from Bartolome
does so, not for oneself, but as a representative; (4) Ramos.
the limitation that the agent acts within the scope of his or her
authority.[10] As the basis of agency is representation, there Second Issue:
must be, on the part of the principal, an actual intention to Indispensable Party
appoint, an intention naturally inferable from the principals
words or actions. In the same manner, there must be an Petitioners argue that the lower courts erred in not allowing
intention on the part of the agent to accept the appointment Evangeline Santos to be impleaded as an indispensable party.
and act upon it. Absent such mutual intent, there is generally They insist that respondents Complaint against them is based
no agency.[11] on the bouncing checks she issued; hence, they point to her
as the person primarily liable for the obligation.
This Court finds no reversible error in the findings of
the courts a quo that petitioners were the rice buyers We hold that respondents cause of action is clearly founded
themselves; they were not mere agents of respondents in their on petitioners failure to pay the purchase price of the rice. The
trial court held that Petitioner Maria Tuazon had indorsed the
APT- AGENCY 21
Nature of Agency: Purpose

questioned checks in favor of respondents, in accordance with


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

As indorser, Petitioner Maria Tuazon warranted that upon due


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

Indispensable parties are defined as parties in interest without


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

WHEREFORE, the Petition is DENIED and the


assailed Decision AFFIRMED. Costs against petitioners.

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

THIRD DIVISION Petitioner is engaged in the business of importation and


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

Before Us is a petition for review by certiorari assailing the 1.) That ASSIGNOR[5] has an
Decision[1] of the Court of Appeals dated 10 August 2004 and outstanding receivables from Toledo Power
its Resolution[2]dated 17 March 2005 in CA-G.R. SP No. 71397 Corporation in the amount of THREE
entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio HUNDRED SIXTY FIVE THOUSAND
T. Echavez. The assailed Decision and Resolution affirmed (P365,000.00) PESOS as payment for the
the Order[3] dated 29 January 2002 rendered by Judge Antonio purchase of one unit of Selwood Spate 100D
T. Echavez ordering the dropping of respondent EDWIN Sludge Pump;
Cuizon (EDWIN) as a party defendant in Civil Case No. CEB- 2.) That said ASSIGNOR does hereby
19672. ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE[6] the said receivables from Toledo
The generative facts of the case are as follows: Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND
APT- AGENCY 23
Nature of Agency: Purpose

(P365,000.00) PESOS which receivables the Systems indebtedness to petitioner which, according to him,
ASSIGNOR is the lawful recipient; amounted to only P220,000.00.[16]

3.) That the ASSIGNEE does hereby By way of special and affirmative defenses, respondent
accept this assignment.[7] EDWIN alleged that he is not a real party in interest in this
Following the execution of the Deed of Assignment, petitioner case. According to him, he was acting as mere agent of his
delivered to respondents the sludge pump as shown by principal, which was the Impact Systems, in his transaction
Invoice No. 12034 dated 30 June 1995.[8] with petitioner and the latter was very much aware of this
fact. In support of this argument, petitioner points to
Allegedly unbeknownst to petitioner, respondents, paragraphs 1.2 and 1.3 of petitioners Complaint stating
despite the existence of the Deed of Assignment, proceeded
to collect from Toledo Power Company the amount 1.2. Defendant Erwin H. Cuizon, is of legal age,
of P365,135.29 as evidenced by Check Voucher No. married, a resident of Cebu City. He is the
0933[9] prepared by said power company and an official receipt proprietor of a single proprietorship business
dated 15 August 1995 issued by Impact Systems.[10] Alarmed known as Impact Systems Sales (Impact
by this development, petitioner made several demands upon Systems for brevity), with office located at 46-A
respondents to pay their obligations. As a result, respondents del Rosario Street, Cebu City, where he may be
were able to make partial payments to petitioner. On 7 served summons and other processes of the
October 1996, petitioners counsel sent respondents a final Honorable Court.
demand letter wherein it was stated that as of 11 June 1996,
respondents total obligations stood at P295,000.00 excluding 1.3. Defendant Edwin B. Cuizon is of legal age,
interests and attorneys fees.[11] Because of respondents failure Filipino, married, a resident of Cebu City. He is
to abide by said final demand letter, petitioner instituted a the Sales Manager of Impact Systems and is
complaint for sum of money, damages, with application for sued in this action in such capacity.[17]
preliminary attachment against herein respondents before
the Regional Trial Court of Cebu City.[12]
On 26 June 1998, petitioner filed a Motion to Declare
On 8 January 1997, the trial court granted petitioners Defendant ERWIN in Default with Motion for Summary
prayer for the issuance of writ of preliminary attachment.[13] Judgment. The trial court granted petitioners motion to declare
respondent ERWIN in default for his failure to answer within
On 25 June 1997, respondent EDWIN filed his the prescribed period despite the opportunity granted[18] but it
Answer[14] wherein he admitted petitioners allegations with denied petitioners motion for summary judgment in its Order
respect to the sale transactions entered into by Impact of 31 August 2001 and scheduled the pre-trial of the case
Systems and petitioner between January and April on 16 October 2001.[19] However, the conduct of the pre-trial
1995.[15] He, however, disputed the total amount of Impact conference was deferred pending the resolution by the trial
APT- AGENCY 24
Nature of Agency: Purpose

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

A study of Annex G to the complaint


shows that in the Deed of Assignment, Aggrieved by the adverse ruling of the trial court, petitioner
defendant Edwin B. Cuizon acted in behalf of or brought the matter to the Court of Appeals which, however,
represented [Impact] Systems Sales; that affirmed the 29 January 2002 Order of the court a quo. The
[Impact] Systems Sale is a single proprietorship dispositive portion of the now assailed Decision of the Court of
entity and the complaint shows that defendant Appeals states:
Erwin H. Cuizon is the proprietor; that plaintiff
corporation is represented by its general WHEREFORE, finding no viable legal ground to
manager Alberto de Jesus in the contract which reverse or modify the conclusions reached by
is dated June 28, 1995. A study of Annex H to the public respondent in his Order
the complaint reveals that [Impact] Systems dated January 29, 2002, it is
Sales which is owned solely by defendant Erwin hereby AFFIRMED.[24]
H. Cuizon, made a down payment
of P50,000.00 that Annex H is dated June 30, Petitioners motion for reconsideration was denied by the
1995 or two days after the execution of Annex appellate court in its Resolution promulgated on 17 March
G, thereby showing that [Impact] Systems 2005. Hence, the present petition raising, as sole ground for
Sales ratified the act of Edwin B. Cuizon; the its allowance, the following:
records further show that plaintiff knew that
[Impact] Systems Sales, the principal, ratified THE COURT OF APPEALS COMMITTED A
the act of Edwin B. Cuizon, the agent, when it REVERSIBLE ERROR WHEN IT RULED
accepted the down payment of P50,000.00. THAT RESPONDENT EDWIN CUIZON, AS
Plaintiff, therefore, cannot say that it was AGENT OF IMPACT SYSTEMS
deceived by defendant Edwin B. Cuizon, since SALES/ERWIN CUIZON, IS NOT
in the instant case the principal has ratified the PERSONALLY LIABLE, BECAUSE HE HAS
act of its agent and plaintiff knew about said NEITHER ACTED BEYOND THE SCOPE OF
APT- AGENCY 25
Nature of Agency: Purpose

HIS AGENCY NOR DID HE PARTICIPATE IN In his Comment,[28] respondent EDWIN again posits the
THE PERPETUATION OF A FRAUD.[25] argument that he is not a real party in interest in this case and
it was proper for the trial court to have him dropped as a
defendant. He insists that he was a mere agent of Impact
To support its argument, petitioner points to Article 1897 of the Systems which is owned by ERWIN and that his status as
New Civil Code which states: such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales
Art. 1897. The agent who acts as such is not manager of the said business venture. Likewise, respondent
personally liable to the party with whom he EDWIN points to the Deed of Assignment which clearly states
contracts, unless he expressly binds himself or that he was acting as a representative of Impact Systems in
exceeds the limits of his authority without said transaction.
giving such party sufficient notice of his
powers. We do not find merit in the petition.

Petitioner contends that the Court of Appeals failed to In a contract of agency, a person binds himself to render some
appreciate the effect of ERWINs act of collecting the service or to do something in representation or on behalf of
receivables from the Toledo Power Corporation another with the latters consent.[29] The underlying principle of
notwithstanding the existence of the Deed of Assignment the contract of agency is to accomplish results by using the
signed by EDWIN on behalf of Impact Systems. While said services of others to do a great variety of things like selling,
collection did not revoke the agency relations of respondents, buying, manufacturing, and transporting.[30] Its purpose is to
petitioner insists that ERWINs action repudiated EDWINs extend the personality of the principal or the party for whom
power to sign the Deed of Assignment. As EDWIN did not another acts and from whom he or she derives the authority to
sufficiently notify it of the extent of his powers as an agent, act.[31] It is said that the basis of agency is representation, that
petitioner claims that he should be made personally liable for is, the agent acts for and on behalf of the principal on matters
the obligations of his principal.[26] within the scope of his authority and said acts have the same
legal effect as if they were personally executed by the
Petitioner also contends that it fell victim to the fraudulent principal.[32] By this legal fiction, the actual or real absence of
scheme of respondents who induced it into selling the one unit the principal is converted into his legal or juridical presence qui
of sludge pump to Impact Systems and signing the Deed of facit per alium facit per se.[33]
Assignment. Petitioner directs the attention of this Court to the
fact that respondents are bound not only by their principal and The elements of the contract of agency are: (1) consent,
agent relationship but are in fact full-blooded brothers whose express or implied, of the parties to establish the relationship;
successive contravening acts bore the obvious signs of (2) the object is the execution of a juridical act in relation to a
conspiracy to defraud petitioner.[27] third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.[34]
APT- AGENCY 26
Nature of Agency: Purpose

and discretion in transactions and concerns


In this case, the parties do not dispute the existence of the which are incidental or appurtenant to the
agency relationship between respondents ERWIN as principal business entrusted to his care and
and EDWIN as agent. The only cause of the present dispute is management. In the absence of an agreement
whether respondent EDWIN exceeded his authority when he to the contrary, a managing agent may enter
signed the Deed of Assignment thereby binding himself into any contracts that he deems reasonably
personally to pay the obligations to petitioner. Petitioner firmly necessary or requisite for the protection of the
believes that respondent EDWIN acted beyond the authority interests of his principal entrusted to his
granted by his principal and he should therefore bear the management. x x x.[35]
effect of his deed pursuant to Article 1897 of the New Civil
Code. Applying the foregoing to the present case, we hold that
Edwin Cuizon acted well-within his authority when he signed
We disagree. the Deed of Assignment. To recall, petitioner refused to
Article 1897 reinforces the familiar doctrine that an agent, who deliver the one unit of sludge pump unless it received, in full,
acts as such, is not personally liable to the party with whom he the payment for Impact Systems indebtedness.[36] We may
contracts. The same provision, however, presents two very well assume that Impact Systems desperately needed
instances when an agent becomes personally liable to a third the sludge pump for its business since after it paid the
person. The first is when he expressly binds himself to the amount of fifty thousand pesos (P50,000.00) as down
obligation and the second is when he exceeds his authority. In payment on 3 March 1995,[37] it still persisted in negotiating
the last instance, the agent can be held liable if he does not with petitioner which culminated in the execution of the Deed
give the third party sufficient notice of his powers. We hold that of Assignment of its receivables from Toledo Power Company
respondent EDWIN does not fall within any of the exceptions on 28 June 1995.[38] The significant amount of time spent on
contained in this provision. the negotiation for the sale of the sludge pump underscores
Impact Systems perseverance to get hold of the said
The Deed of Assignment clearly states that respondent equipment. There is, therefore, no doubt in our mind that
EDWIN signed thereon as the sales manager of Impact respondent EDWINs participation in the Deed of Assignment
Systems. As discussed elsewhere, the position of manager is was reasonably necessary or was required in order for him to
unique in that it presupposes the grant of broad powers with protect the business of his principal. Had he not acted in the
which to conduct the business of the principal, thus: way he did, the business of his principal would have been
adversely affected and he would have violated his fiduciary
The powers of an agent are particularly relation with his principal.
broad in the case of one acting as a general
agent or manager; such a position presupposes We likewise take note of the fact that in this case, petitioner is
a degree of confidence reposed and investiture seeking to recover both from respondents ERWIN, the
with liberal powers for the exercise of judgment principal, and EDWIN, the agent. It is well to state here that
APT- AGENCY 27
Nature of Agency: Purpose

Article 1897 of the New Civil Code upon which petitioner


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

As we declare that respondent EDWIN acted within his


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

WHEREFORE, premises considered, the present petition


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

Let the records of this case be remanded to the


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