Spouses Fernando Viloria and Lourdes Viloria vs Continental Airlines, Inc.

Business Organization Partnership, Agency, Trust Elements of Agency Estoppel

FACTS: In 1997, while the spouses Viloria were in the United States, they approached
Holiday Travel, a travel agency working for Continental Airlines, to purchase tickets from
Newark to San Diego. The travel agent, Margaret Mager, advised the couple that they
cannot travel by train because it was already fully booked; that they must purchase
plane tickets for Continental Airlines; that if they wont purchase plane tickets; theyll
never reach their destination in time. The couple believed Magers representations and
so they purchased two plane tickets worth $800.00.
Later however, the spouses found out that the train trip wasnt really fully booked and so
they purchased train tickets and went to their destination by train instead. Then they
called up Mager to request for a refund for the plane tickets. Mager referred the couple
to Continental Airlines. As the couple were now in the Philippines, they filed their
request with Continental Airlines office in Ayala. The spouses Viloria alleged that Mager
misled them into believing that the only way to travel was by plane and so they were
fooled into buying expensive plane tickets.
Continental Airlines refused to refund the amount of the tickets and so the spouses
sued the airline company. In its defense, Continental Airlines claimed that the tickets
sold to them by Mager were non-refundable; that, if any, they were not bound by the
misrepresentations of Mager because theres no contract of agency existing between
Continental Airlines and Mager.
The trial court ruled in favor of spouses Viloria but the Court of Appeals reversed the
ruling of the RTC.
ISSUE: Whether or not a contract of agency exists between Continental Airlines and
Mager.
HELD: Yes. All the elements of agency are present, to wit:

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 agent acts as a representative and not for himself, and
4. the agent acts within the scope of his authority.

The first and second elements are present as Continental Airlines does not deny that it
concluded an agreement with Holiday Travel to which Mager is part of, whereby Holiday
Travel would enter into contracts of carriage with third persons on the airlines behalf.
The third element is also present as it is undisputed that Holiday Travel merely acted in
a representative capacity and it is Continental Airlines and not Holiday Travel who is
bound by the contracts of carriage entered into by Holiday Travel on its behalf. The
fourth element is also present considering that Continental Airlines has not made any
allegation that Holiday Travel exceeded the authority that was granted to it.
Continental Airlines also never questioned the validity of the transaction between Mager
and the spouses. Continental Airlines is therefore in estoppel. Continental Airlines
cannot be allowed to take an altogether different position and deny that Holiday Travel
is its agent without condoning or giving imprimatur to whatever damage or prejudice that
may result from such denial or retraction to Spouses Viloria, who relied on good faith on
Continental Airlines acts in recognition of Holiday Travels authority. Estoppel is
primarily based on the doctrine of good faith and the avoidance of harm that will befall
an innocent party due to its injurious reliance, the failure to apply it in this case would
result in gross travesty of justice.