A.
NATURE, FORMS AND FEATURES OF within the Philippines, including any
AGENCY (ART. 1319, 1868, 1870, 1871,
1872, 1873.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES &
HOTEL REPRESENTATIVES,
INCORPORATED, respondents.
This case is a consolidation of two (2) petitions for
review on certiorari of a decision1 of the Court of
Appeals in CA-G.R. No. CV-04294, entitled
"American Airlines, Inc. vs. Orient Air Services and
Hotel Representatives, Inc." which affirmed, with
modification, the decision2 of the Regional Trial
Court of Manila, Branch IV, which dismissed the
complaint and granted therein defendant's
counterclaim for agent's overriding commission
and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc.
(hereinafter referred to as American Air), an air
carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air
Services and Hotel Representatives (hereinafter
referred to as Orient Air), entered into a General
Sales Agency Agreement (hereinafter referred to
as the Agreement), whereby the former
authorized the latter to act as its exclusive general
sales agent within the Philippines for the sale of air
passenger transportation. Pertinent provisions of
the agreement are reproduced, to wit:
WITNESSETH
In consideration of the mutual convenants
herein contained, the parties hereto agree
as follows:
1. Representation of American by Orient
Air Services
Orient Air Services will act on American's
behalf as its exclusive General Sales Agent
1|Page
United States military installation therein
which are not serviced by an Air Carrier
Representation Office (ACRO), for the sale
of air passenger transportation. The
services to be performed by Orient Air
Services shall include:
(a) soliciting and promoting
passenger traffic for the services
of American and, if necessary,
employing staff competent and
sufficient to do so;
(b) providing and maintaining a
suitable area in its place of
business to be used exclusively
for the transaction of the
business of American;
(c) arranging for distribution of
American's timetables, tariffs and
promotional material to sales
agents and the general public in
the assigned territory;
(d) servicing and supervising of
sales agents (including such sub-
agents as may be appointed by
Orient Air Services with the prior
written consent of American) in
the assigned territory including if
required by American the control
of remittances and commissions
retained; and
(e) holding out a passenger
reservation facility to sales agents
and the general public in the
assigned territory.
In connection with scheduled or non-
scheduled air passenger transportation
within the United States, neither Orient
Air Services nor its sub-agents will perform
services for any other air carrier similar to
those to be performed hereunder for
American without the prior written
consent of American. Subject to periodic
instructions and continued consent from
 American, Orient Air Services may sell air
passenger transportation to be performed
within the United States by other
scheduled air carriers provided American
does not provide substantially equivalent
schedules between the points involved.
xxx xxx xxx
4. Remittances
Orient Air Services shall remit in United
States dollars to American the ticket stock
or exchange orders, less commissions to
which Orient Air Services is entitled
hereunder, not less frequently than semi-
monthly, on the 15th and last days of each
month for sales made during the
preceding half month.
All monies collected by Orient Air Services
for transportation sold hereunder on
American's ticket stock or on exchange
orders, less applicable commissions to
which Orient Air Services is entitled
hereunder, are the property of American
and shall be held in trust by Orient Air
Services until satisfactorily accounted for
to American.
5. Commissions
American will pay Orient Air Services
commission on transportation sold
hereunder by Orient Air Services or its
sub-agents as follows:
(a) Sales agency commission
American will pay Orient Air Services a
sales agency commission for all sales of
transportation by Orient Air Services or its
sub-agents over American's services and
any connecting through air transportation,
when made on American's ticket stock,
equal to the following percentages of the
tariff fares and charges:
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(i) For transportation solely
between points within the United
States and between such points
and Canada: 7% or such other
rate(s) as may be prescribed by
the Air Traffic Conference of
America.
(ii) For transportation included in
a through ticket covering
transportation between points
other than those described
above: 8% or such other rate(s) as
may be prescribed by the
International Air Transport
Association.
(b) Overriding commission
In addition to the above commission
American will pay Orient Air Services an
overriding commission of 3% of the tariff
fares and charges for all sales of
transportation over American's service by
Orient Air Service or its sub-agents.
xxx xxx xxx
10. Default
If Orient Air Services shall at any time
default in observing or performing any of
the provisions of this Agreement or shall
become bankrupt or make any assignment
for the benefit of or enter into any
agreement or promise with its creditors or
go into liquidation, or suffer any of its
goods to be taken in execution, or if it
ceases to be in business, this Agreement
may, at the option of American, be
terminated forthwith and American may,
without prejudice to any of its rights
under this Agreement, take possession of
any ticket forms, exchange orders, traffic
material or other property or funds
belonging to American.
11. IATA and ATC Rules
 The provisions of this Agreement are
subject to any applicable rules or
resolutions of the International Air
Transport Association and the Air Traffic
Conference of America, and such rules or
resolutions shall control in the event of
any conflict with the provisions hereof.
xxx xxx xxx
13. Termination
American may terminate the Agreement
on two days' notice in the event Orient Air
Services is unable to transfer to the United
States the funds payable by Orient Air
Services to American under this
Agreement. Either party may terminate
the Agreement without cause by giving
the other 30 days' notice by letter,
telegram or cable.
xxx xxx x x x3
On 11 May 1981, alleging that Orient Air had
reneged on its obligations under the Agreement by
failing to promptly remit the net proceeds of sales
for the months of January to March 1981 in the
amount of US $254,400.40, American Air by itself
undertook the collection of the proceeds of tickets
sold originally by Orient Air and terminated
forthwith the Agreement in accordance with
Paragraph 13 thereof (Termination). Four (4) days
later, or on 15 May 1981, American Air instituted
suit against Orient Air with the Court of First
Instance of Manila, Branch 24, for Accounting with
Preliminary Attachment or Garnishment,
Mandatory Injunction and Restraining
Order4 averring the aforesaid basis for the
termination of the Agreement as well as therein
defendant's previous record of failures "to
promptly settle past outstanding refunds of which
there were available funds in the possession of the
defendant, . . . to the damage and prejudice of
plaintiff."5
In its Answer6 with counterclaim dated 9 July 1981,
defendant Orient Air denied the material
allegations of the complaint with respect to
plaintiff's entitlement to alleged unremitted
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amounts, contending that after application thereof
to the commissions due it under the Agreement,
plaintiff in fact still owed Orient Air a balance in
unpaid overriding commissions. Further, the
defendant contended that the actions taken by
American Air in the course of terminating the
Agreement as well as the termination itself were
untenable, Orient Air claiming that American Air's
precipitous conduct had occasioned prejudice to
its business interests.
Finding that the record and the evidence
substantiated the allegations of the defendant, the
trial court ruled in its favor, rendering a decision
dated 16 July 1984, the dispositive portion of
which reads:
WHEREFORE, all the foregoing premises
considered, judgment is hereby rendered
in favor of defendant and against plaintiff
dismissing the complaint and holding the
termination made by the latter as
affecting the GSA agreement illegal and
improper and order the plaintiff to
reinstate defendant as its general sales
agent for passenger tranportation in the
Philippines in accordance with said GSA
agreement; plaintiff is ordered to pay
defendant the balance of the overriding
commission on total flown revenue
covering the period from March 16, 1977
to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount
of US$8,000.00 by way of proper 3%
overriding commission per month
commencing from January 1, 1981 until
such reinstatement or said amounts in its
Philippine peso equivalent legally
prevailing at the time of payment plus
legal interest to commence from the filing
of the counterclaim up to the time of
payment. Further, plaintiff is directed to
pay defendant the amount of One Million
Five Hundred Thousand (Pl,500,000.00)
pesos as and for exemplary damages; and
the amount of Three Hundred Thousand
(P300,000.00) pesos as and by way of
attorney's fees.
Costs against plaintiff.7
On appeal, the Intermediate Appellate Court (now
Court of Appeals) in a decision promulgated on 27
January 1986, affirmed the findings of the court a
quo on their material points but with some
modifications with respect to the monetary awards
granted. The dispositive portion of the appellate
court's decision is as follows:
WHEREFORE, with the following
modifications —
1) American is ordered to pay Orient the
sum of US$53,491.11 representing the
balance of the latter's overriding
commission covering the period March
16, 1977 to December 31, 1980, or its
Philippine peso equivalent in accordance
with the official rate of exchange legally
prevailing on July 10, 1981, the date the
counterclaim was filed;
2) American is ordered to pay Orient the
sum of US$7,440.00 as the latter's
overriding commission per month starting
January 1, 1981 until date of termination,
May 9, 1981 or its Philippine peso
equivalent in accordance with the official
rate of exchange legally prevailing on July
10, 1981, the date the counterclaim was
filed
3) American is ordered to pay interest of
12% on said amounts from July 10, 1981
the date the answer with counterclaim
was filed, until full payment;
4) American is ordered to pay
Orient exemplary damages of
P200,000.00;
5) American is ordered to pay Orient the
sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is
affirmed.
Costs against American.8
4|Page
American Air moved for reconsideration of the
aforementioned decision, assailing the substance
thereof and arguing for its reversal. The appellate
court's decision was also the subject of a Motion
for Partial Reconsideration by Orient Air which
prayed for the restoration of the trial court's ruling
with respect to the monetary awards. The Court of
Appeals, by resolution promulgated on 17
December 1986, denied American Air's motion and
with respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration
is denied insofar as it prays for affirmance
of the trial court's award of exemplary
damages and attorney's fees, but granted
insofar as the rate of exchange is
concerned. The decision of January 27,
1986 is modified in paragraphs (1) and (2)
of the dispositive part so that the payment
of the sums mentioned therein shall be at
their Philippine peso equivalent in
accordance with the official rate of
exchange legally prevailing on the date of
actual payment.9
Both parties appealed the aforesaid resolution and
decision of the respondent court, Orient Air as
petitioner in G.R. No. 76931 and American Air as
petitioner in G.R. No. 76933. By resolution10 of this
Court dated 25 March 1987 both petitions were
consolidated, hence, the case at bar.
The principal issue for resolution by the Court is
the extent of Orient Air's right to the 3% overriding
commission. It is the stand of American Air that
such commission is based only on sales of its
services actually negotiated or transacted by
Orient Air, otherwise referred to as "ticketed
sales." As basis thereof, primary reliance is placed
upon paragraph 5(b) of the Agreement which, in
reiteration, is quoted as follows:
5. Commissions
a) . . .
b) Overriding Commission
 In addition to the above commission,
American will pay Orient Air Services an
overriding commission of 3% of the tariff
fees and charges for all sales of
transportation over American's services by
Orient Air Services or its sub-
agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the
ticket stocks of American Air, and the former not
having opted to appoint any sub-agents, it is
American Air's contention that Orient Air can claim
entitlement to the disputed overriding commission
based only on ticketed sales. This is supposed to be
the clear meaning of the underscored portion of
the above provision. Thus, to be entitled to the 3%
overriding commission, the sale must be made by
Orient Air and the sale must be done with the use
of American Air's ticket stocks.
On the other hand, Orient Air contends that the
contractual stipulation of a 3% overriding
commission covers the total revenue of American
Air and not merely that derived from ticketed sales
undertaken by Orient Air. The latter, in justification
of its submission, invokes its designation as
the exclusive General Sales Agent of American Air,
with the corresponding obligations arising from
such agency, such as, the promotion and
solicitation for the services of its principal. In
effect, by virtue of such exclusivity, "all sales of
transportation over American Air's services are
necessarily by Orient Air."11
It is a well settled legal principle that in the
interpretation of a contract, the entirety thereof
must be taken into consideration to ascertain the
meaning of its provisions.12 The various stipulations
in the contract must be read together to give
effect to all.13 After a careful examination of the
records, the Court finds merit in the contention of
Orient Air that the Agreement, when interpreted
in accordance with the foregoing principles,
entitles it to the 3% overriding commission based
on total revenue, or as referred to by the parties,
"total flown revenue."
As the designated exclusive General Sales Agent of
American Air, Orient Air was responsible for the
promotion and marketing of American Air's
5|Page
services for air passenger transportation, and the
solicitation of sales therefor. In return for such
efforts and services, Orient Air was to be paid
commissions of two (2) kinds: first, a sales agency
commission, ranging from 7-8% of tariff fares and
charges from sales by Orient Air when made on
American Air ticket stock; and second, an
overriding commission of 3% of tariff fares and
charges for all sales of passenger transportation
over American Air services. It is immediately
observed that the precondition attached to the
first type of commission does not obtain for the
second type of commissions. The latter type of
commissions would accrue for sales of American
Air services made not on its ticket stock but on the
ticket stock of other air carriers sold by such
carriers or other authorized ticketing facilities or
travel agents. To rule otherwise, i.e., to limit the
basis of such overriding commissions to sales from
American Air ticket stock would erase any
distinction between the two (2) types of
commissions and would lead to the absurd
conclusion that the parties had entered into a
contract with meaningless provisions. Such an
interpretation must at all times be avoided with
every effort exerted to harmonize the entire
Agreement.
An additional point before finally disposing of this
issue. It is clear from the records that American Air
was the party responsible for the preparation of
the Agreement. Consequently, any ambiguity in
this "contract of adhesion" is to be taken "contra
proferentem", i.e., construed against the party who
caused the ambiguity and could have avoided it by
the exercise of a little more care. Thus, Article
1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a
contract shall not favor the party who caused the
obscurity.14 To put it differently, when several
interpretations of a provision are otherwise
equally proper, that interpretation or construction
is to be adopted which is most favorable to the
party in whose favor the provision was made and
who did not cause the ambiguity.15 We therefore
agree with the respondent appellate court's
declaration that:
Any ambiguity in a contract, whose terms
are susceptible of different
 interpretations, must be read against the
party who drafted it.16
We now turn to the propriety of American Air's
termination of the Agreement. The respondent
appellate court, on this issue, ruled thus:
It is not denied that Orient withheld
remittances but such action finds
justification from paragraph 4 of the
Agreement, Exh. F, which provides for
remittances to American less
commissions to which Orient is entitled,
and from paragraph 5(d) which specifically
allows Orient to retain the full amount of
its commissions. Since, as stated ante,
Orient is entitled to the 3% override.
American's premise, therefore, for the
cancellation of the Agreement did not
exist. . . ."
We agree with the findings of the respondent
appellate court. As earlier established, Orient Air
was entitled to an overriding commission based on
total flown revenue. American Air's perception
that Orient Air was remiss or in default of its
obligations under the Agreement was, in fact, a
situation where the latter acted in accordance with
the Agreement—that of retaining from the sales
proceeds its accrued commissions before remitting
the balance to American Air. Since the latter was
still obligated to Orient Air by way of such
commissions. Orient Air was clearly justified in
retaining and refusing to remit the sums claimed
by American Air. The latter's termination of the
Agreement was, therefore, without cause and
basis, for which it should be held liable to Orient
Air.
On the matter of damages, the respondent
appellate court modified by reduction the trial
court's award of exemplary damages and
attorney's fees. This Court sees no error in such
modification and, thus, affirms the same.
It is believed, however, that respondent appellate
court erred in affirming the rest of the decision of
the trial court. We refer particularly to the lower
1âwphi1
court's decision ordering American Air to
"reinstate defendant as its general sales agent for
6|Page
passenger transportation in the Philippines in
accordance with said GSA Agreement."
By affirming this ruling of the trial court,
respondent appellate court, in effect, compels
American Air to extend its personality to Orient
Air. Such would be violative of the principles and
essence of agency, defined by law as a contract
whereby "a person binds himself to render some
service or to do something in representation or on
behalf of another, WITH THE CONSENT OR
AUTHORITY OF THE LATTER .17 (emphasis supplied)
In an agent-principal relationship, the personality
of the principal is extended through the facility of
the agent. In so doing, the agent, by legal fiction,
becomes the principal, authorized to perform all
acts which the latter would have him do. Such a
relationship can only be effected with the consent
of the principal, which must not, in any way, be
compelled by law or by any court. The Agreement
itself between the parties states that "either party
may terminate the Agreement without cause by
giving the other 30 days' notice by letter, telegram
or cable." (emphasis supplied) We, therefore, set
aside the portion of the ruling of the respondent
appellate court reinstating Orient Air as general
sales agent of American Air.
WHEREFORE, with the foregoing modification, the
Court AFFIRMS the decision and resolution of the
respondent Court of Appeals, dated 27 January
1986 and 17 December 1986, respectively. Costs
against petitioner American Air.
SO ORDERED.
Melencio-Herrera, and Regalado, JJ., concur.
Paras, J., took no part. Son is a partner in one of
the counsel.
Sarmiento, J., is on leave.
G.R. No. 83897 November 9, 1990
ESTEBAN B. UY JR. and NILO S.
CABANG, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, WILSON
TING, and YU HON. respondents.
This is a petition for review on certiorari seeking to
reverse the decision ** which dismissed CA-G.R. No. SP-05659
for certiorari and Prohibition with Preliminary Injunction and/or
Restraining Order filed by petitioner seeking to annul and set aside the
two Orders dated August 24, 1982 and October 10, 1983 issued by the
then Court of First Instance of Rizal Branch LII *** (now Regional Trial
Court of Quezon City Branch XCLVll ****) in Civil Case No. Q-35128,
granting a writ of preliminary attachment and directing the sheriff
assigned therein to attach the properties of defendants Uy and Cabang
(herein petitioners); and denying defendants' motion to dismiss.
The antecedent facts of the case as found by the
Court of Appeals are as follows:
On March 24, 1982, Esteban B.
Uy, Jr. (herein petitioner) filed a
complaint against Sy Yuk Tat for
sum of money, damages, with
preliminary attachment, docketed
as Civil Case No. Q-34782 ("the
first case" for short) in the then
Court of First Instance of Rizal,
Branch LII, Quezon City (the case
was later assigned to the Regional
Trial Court of Quezon City, Branch
XCVII now presided over by
respondent Judge). On the same
day, upon plaintiff filing a bond of
P232,780.00 said court issued a
writ of preliminary attachment
and appointed Deputy Sheriff Nilo
S. Cabang (co-petitioner herein)
as Special Sheriff to implement
the writ. On April 6, 1982, the
same court issued a break-open
order upon motion filed by
petitioner Uy.
On the following day, April 7,
1982, petitioner Cabang began to
implement the writ of preliminary
attachment as the Special Sheriff
on the case.
On April 19, 1982, petitioner Cabang filed a Partial
Sheriffs Return, stating, inter alia:
xxx xxx xxx
That in the afternoon of April 12,
1982, the undersigned together
with Atty. Lupino Lazaro,
7|Page
plaintiff's counsel and the
members of the same team
proceeded to No. 65 Speaker
Perez St., Quezon City, and
effected a physical and actual
count of the items and
merchandise pointed to by the
Ting family as having been taken
from the Mansion Emporium and
nearby bodega which are as
follows:
a) 329 boxes of "GE" Flat Iron,
each box containing 6 pcs. each;
b) 229 boxes of Magnetic Blank
Tapes with 48 pcs. each;
c) 239 boxes of floor polishers
marked "Sanyo"
d) 54 boxes of floor polishers
marked "Ronson"
xxx xxx xxx
On April 12, 1982, a third party
claim was filed by Wilson Ting and
Yu Hon (private respondents
herein) in the same Civil Case No.
Q-34782, addressed to petitioner
Cabang asserting ownership over
the properties attached at No. 65
Speaker Perez St., Quezon City
(other than those attached at No.
296 Palanca St., Manila). The
third party claim specifically
enumerated the properties, as
reflected in the Partial Sheriffs
Return dated April 1 3, 1 982,
belonging to the plaintiffs (private
respondents herein).
On the same day that petitioner
Cabang filed his Partial Sheriffs
Return (April 19, 1982) the third
party claimants and Yu filed a
motion to dissolve the
aforementioned writ of
 preliminary attachment in the Preliminary
same Civil Case No. Q-34782; Injunction, the
alleging among others, that being parties are
the absolute owners of the hereby ordered
personal properties listed in their to maintain the
third party claim which were STATUS QUO in
illegally seized from them they this case with
were willing to file a counterbond respect to the
for the return thereof; which properties
motion was opposed by plaintiff attached and
Uy. subject of this
action alleged to
On April 29, 1982, then CFI Judge belong to the
Jose P. Castro rendered judgment plaintiffs" (Rollo,
by default in said Civil Case No. Q- p. 133)
34782 in favor of plaintiff Uy.
Meanwhile, in
Meanwhile, on May 5, 1982, third the first case,
party claimants Wilson Ting and where a
Yu Hon filed a complaint for judgment by
Damages with application for default had been
preliminary injunction against rendered, the
Esteban Uy and Nilo Cabang (co- first court issued
petitioners herein) in the then an order striking
Court of First Instance of Rizal, off from the
Branch 52, Quezon City ('the records all
court a quo' for short) which case pleadings filed
was docketed as Civil Case No. Q- by the third
35128 ('the second case' for party claimants.
short). The complaint
alleged inter alia that the With respect to
plaintiffs are the owners of the the case in the
personal properties reflected in court a quo,
the Partial Sheriffs Return dated defendants Uy
April 13, 1983 which have been and Cabang filed
attached and seized by defendant their answer
Cabang. In this second civil case, with
the court a quo (then presided counterclaim.
over by CFI Judge Concepcion B.
Buencamino) issued an order on Meanwhile, in
May 5, 1982, stating among other the first case,
things, the following: plaintiff Uy on
June 7, 1982,
Considering that filed an ex-parte
it will take time motion for writ
before this Court of execution
could act upon which was
said prayers for granted the
the issuance of a following day,
Writ of June 8, 1982.

8|Page
 On the same day especially those
(June 7, 1982) taken from No.
that plaintiff Uy 65 Speaker
filed his exparte Perez, Quezon
motion for writ City.
of execution he
and Cabang filed Subsequently,
a motion to on July 2, 1982,
quash or in the case a
dissolve status quo the court
quo order in the denied
case a quo as defendants', Uy
defendants and Cabang,
therein on the motion to quash
ground that the or dissolve the
court "has no status quo
jurisdiction to order.
interfere with
properties Meanwhile, the
under custodia first case on July
legis on orders 12, 1982,
of a court of co- Cabang filed
equal and co- another partial
ordinate sheriffs return
jurisdiction" and this time stating
that plaintiffs' among others
complaint is not that the
for recovery of judgment in that
properties in case had been
question. partially
satisfied, and
On June 24, that in the public
1982, plaintiff auction sale held
Uy in the first on July 6, 1982,
case filed his ex certain personal
parte motion to properties had
authorize Sheriff been sold to
to sell the plaintiff Esteban
attached Uy, Jr., the
properties winning bidder
enumerated in for P15,000.00
Sheriff Cabang's while the other
partial return properties were
filed on April 19, sold in the
1982, on the amount of
ground that the P200,000.00 in
properties cash with
under custodia Bernabe Ortiz of
legis were No. 97 Industrial
perishable Avenue,

9|Page
 Northern Hill, granting the writ
Malabon Manila of preliminary
as the highest attachment
bidder. prayed for by
the plaintiffs
Back to the (Wilson Ting and
case a quo, on Yu Hon), stating
August 23, 1982, that:
plaintiffs Ting
and Yu Hon filed Let a writ of
a motion for preliminary
preliminary attachment
attachment issue upon the
alleging this plaintiffs putting
ground: "In the up a bond in the
case at bar, amount of
which, is one 'to P1,430,070.00,
recover which shall be
possession of furnished to
personal each of the
properties defendants with
unjustly copies of the
detained, ... the verified
property... has application
been ... removed therewith, and
... (and) the sheriff
disposed of to assigned to this
prevent its being court, Danilo Del
found or taken Mundo, shall
by the applicant forthwith attach
or an officer" such properties
and/or said of the
defendants are defendants not
guilty of fraud in exempt from
disposing of the execution,
property for the sufficient to
taking, (or) satisfy the
detention ... of applicants'
which the action demand. (Rollo,
is brought (Sec. p. 247)
1(c) and (d), Rule
57, Rules of On August 31,
Court) 1982, in the
same case a
Acting on such quo, defendant
motion the Uy filed an
court a quo, on urgent motion
August 24, 1 to quash and/or
982, issued the dissolve
disputed order preliminary

10 | P a g e
 attachment reconsideration.
which motion (CA decision,
was opposed by Rollo, p. 109-
plaintiffs Ting 122)
and Yu Hon.
Thereafter, petitioners Esteban Uy, Jr. and Nilo
About half a Cabang filed with the Court of Appeals a petition
year later, on for Certiorari and Prohibition with prayer for a Writ
February 21, of Preliminary Injunction or a Restraining Order to
1982, in the annul and set aside the two orders issued by the
case a quo, then CFI of Rizal Branch 52.
defendant Uy
filed a motion In its decision, the Court of Appeals dismissed the
for preliminary petition, the dispositive portion of which reads:
hearing on
affirmative WHEREFORE, finding respondent
defenses as Judge not to have committed a
motion to grave abuse of discretion
dismiss. amounting to lack or excess of
Following an jurisdiction in issuing the order
exchange of dated August 24, 1982, denying
subsequent petitioners' motion to quash the
papers between writ of preliminary attachment,
the parties, the and the order dated October 10,
court a quo 1983, denying petitioners' motion
issued the other to dismiss the complaint a quo,
disputed order we hereby deny the instant
which denied petition, and therefore dismiss
defendant Uy's the same. No pronouncement as
motion to to cost. (Rollo, pp. 132-133)
dismiss on
October 10, Hence, the instant petition.
1983. The
motion to quash In the resolution of October 16, 1989, the Court
was also denied gave due course to the petition and required both
by the court a parties to submit simultaneous memoranda within
quo on thirty days from notice (Rollo, p. 190). Private
December 9, respondents filed their memorandum on
1983. Defendant December 6, 1989 (Ibid., p. 192) while petitioners
Uy filed a filed their memorandum on January 5, 1990 (Ibid.,
motion for p. 208)
reconsideration
on both Orders.
The main issue in this case is whether or not
Finally, on
properties levied and seized by virtue of a writ of
February 15,
attachment and later by a writ of execution, were
1985,
under custodia legis and therefore not subject to
respondent
the jurisdiction of another co-equal court where a
Judge issued two
third party claimant claimed ownership of the
Orders denying
same properties.
both motions for

11 | P a g e
The issue has long been laid to rest in the case of
Manila Herald Publishing Co. Inc. v. Ramos (88 Phil.
94 [1951]) where the Court filed that while it is
true that property in custody of the law may not
be interfered with, without the permission of the
proper court, this rule is confined to cases where
the property belongs to the defendant or one in
which the defendant has proprietary interests. But
when the Sheriff, acting beyond the bounds of his
office seizes a stranger's property, the rule does
not apply and interference with his custody is not
interference with another court's order of
attachment.
Under the circumstances, this Court categorically
stated:
It has been seen that a separate
action by the third party who
claims to be the owner of the
property attached is appropriate.
If this is so, it must be admitted
that the judge trying such action
may render judgment ordering
the sheriff or whoever has in
possession of the attached
property to deliver it to the
plaintiff claimant or desist from
seizing it. It follows further that
the court may make an
interlocutory order, upon the
filing of such bond as may be
necessary, to release the
property pending final
adjudication of the title.
Jurisdiction over an action
includes jurisdiction on
interlocutory matter incidental to
the cause and deemed necessary
to preserve the subject matter of
the suit or protect the parties'
interests. This is self-evident.
(Manila Herald Publishing Co. Inc.
v. Ramos, supra).
The foregoing ruling was reiterated in the later
case of Traders Royal Bank v. IAC (133 SCRA 141
[1984]) and even more recently in the case of
Escovilla v. C.A. G.R. No. 84497, November 6,
1989, where this Court stressed:
12 | P a g e
The power of the court in the
execution of judgments extends
only over properties
unquestionably belonging to the
judgment debtor. The levy by the
sheriff of a property by virtue of a
writ of attachment may be
considered as made under the
authority of the court only when
the property levied upon belongs
to the defendant. If he attaches
properties other than those of
the defendant, he acts beyond
the limits of this authority. The
court issuing a writ of execution is
supposed to enforce its authority
only over properties of the
judgment debtor. Should a third
party appear to claim the
property levied upon by the
sheriff, the procedure laid down
by the Rules is that such claim
should be the subject of a
separate and independent action.
Neither can petitioner complain that they were
denied their day in court when the Regional Trial
Court issued a writ of preliminary attachment
without hearing as it is well settled that its
issuance may be made by the court ex parte. As
clearly explained by this Court, no grave abuse of
discretion can be ascribed to respondent Judge in
the issuance of a writ of attachment without
notice to petitioners as there is nothing in the
Rules of Court which makes notice and hearing
indispensable and mandatory requisites in its
issuance. (Filinvest Credit Corp. v. Relova, 117
SCRA 420 [1982]; Belisle Investment & Finance Co.
Inc. v. State Investment House, Inc. 151 SCRA 631
[1987]; Toledo v. Burgos, 168 SCRA 513 [1988]).
In addition, petitioner's motion to quash or
discharge the questioned attachment in the court
a quo is in effect a motion for reconsideration
which cured any defect of absence of notice.
(Dormitorio v. Fernandez, 72 SCRA 388 [1976]).
Estoppel is likewise unavailing in the case at bar by
the mere fact that private respondent Ting
(complainant in the court a quo) pointed the items
and merchandise taken from the Mansion House
and nearby Bodega which were levied and hauled
by Special Sheriff Cabang, where in the report of
said Sheriff made earlier on April 6, 1982, he
stated that on the same occasion referred to in his
Partial Return, private respondents denied Sy Yuk
Tat's ownership over the goods in question. (Rollo,
pp. 203-204).
In like manner, the sale of the disputed properties
at the public auction, in satisfaction of a judgment
of a co-equal court does not render the case moot
and academic. The undeviating ruling of this Court
in such cases is that attachment and sale of
properties belonging to a third person is void
because such properties cannot be attached and
sold at public auction for the purpose of enforcing
a judgment against the judgment debtor. (Orosco
v. Nepomuceno, 57 Phil. 1007 [1932-33]).
The other issues in this case deserve scant
consideration.
On the issue of the expiration of the restraining
order, there is no argument that the life span of
the status quo order automatically expires on the
20th day and no judicial declaration to that effect
is necessary (Paras v. Roura, 163 SCRA 1 [1988]).
But such fact is of no consequence in so far as the
propriety of the questioned attachment is
concerned. As found by the Court of Appeals, the
grounds invoked by respondents for said
attachment did not depend at all upon the
continuing efficacy of the restraining order.
As to petitioner's contention that the complaint
filed by private respondent in the lower court is
JOSE BORDADOR v. BRIGIDA D. LUZ, GR No. 130148, 1997-
12-15
Facts:
Petitioners were engaged in the business of purchase and
sale of jewelry and respondent... was their regular
customer.
respondent Narciso Deganos, the brother... of Brigida D.
Luz, received several pieces of gold and jewelry from
petitioners amounting to P382,816.00.
These items and their prices were indicated in seventeen
receipts covering the same.
13 | P a g e
merely seeking an ancillary remedy of injunction
which is not a cause of action itself, the Court of
Appeals correctly observed that the object of
private respondents' complaint is injunction
although the ancillary remedy of preliminary
injunction was also prayed for during the
pendency of the proceeding.
Finally, the non-joinder of the husband of private
respondent, Yu Hon as well as her failure to verify
the complaint does not warrant dismissal of the
complaint for they are mere formal requirements
which could be immediately cured without
prejudice to the rights of the petitioners. This
Court frowns on the resort to technicalities to
defeat substantial justice. Thus, the Court states
that the rules of procedure are intended to
promote not to defeat substantial justice, and
therefore, they should not be applied in a very
rigid and technical sense. (Angel v. Inopiquez, G.R.
66712, January 13, 1989). Again on another
occasion where an appeal should have been
dismissed for non-compliance with the Rules, the
Court relaxed the rigid interpretation of the Rules
holding that a straight-jacket application will do
more injustice. (Pan-Am Airways v. Espiritu, 69
SCRA 45 [1976]).
PREMISES CONSIDERED, the petition is hereby
DENIED and the assailed decision of the Court of
Appeals is hereby AFFIRMED.
SO ORDERED.
Eleven of the receipts stated that they were received for...
a niece of Deganos, and the remaining six indicated that
they were received for Brigida D. Luz.
Deganos was supposed to sell the items at a profit and
thereafter remit the proceeds and return the unsold items
to petitioners. Deganos remitted only the sum of
P53,207.00. He neither paid the balance of the sales
proceeds, nor did he return any unsold item to petitioners.
Petitioners eventually filed a complaint in the barangay
court against Deganos to recover said amount.
Brigida D. Luz, who was not impleaded in the case,
appeared as a witness for Deganos and ultimately, she and
her husband, together with Deganos, signed a compromise
agreement with petitioners. In that compromise
agreement, Deganos obligated himself... to pay petitioners,
on installment basis... petitioners instituted Civil Case...
against Deganos and Brigida D. Luz for recovery of a sum of
money and damages
Four years later
Deganos and Brigida D. Luz were charged with estafa
During the trial of the civil case, petitioners claimed that
Deganos acted as the agent of Brigida D. Luz when he
received the subject items of jewelry and, because he failed
to pay for the same, Brigida, as principal, and her spouse
are solidarily liable with him... therefor.
Deganos admitted that he had an unpaid obligation to
petitioners
He further asserted that it was he alone who was involved
in the transaction with the petitioners;
Brigida, on her part, denied that she had anything to do
with the transactions between petitioners and Deganos.
the court below found that only Deganos was liable to
petitioners for the amount and damages claimed.
Absent the required memorandum or any written
document connecting the respondent Luz spouses with the
subject receipts, or... authorizing Deganos to act on their
behalf, the alleged agreement between petitioners and
Brigida D. Luz was unenforceable.
Court of Appeals which affirmed said judgment.
Issues:
whether or not herein respondent spouses are liable to
petitioners for the latter's claim for money and damages
Ruling:
evidence does not support the theory of petitioners that
Deganos was an agent of Brigida D. Luz
"(Brigida Luz) never authorized her brother (Deganos) to
act for and in her behalf in any transaction with
Petitioners x x x."... therefore, that even assuming
arguendo that Deganos acted as an agent of Brigida, the
latter never authorized him to act on her behalf with
regard to the transactions subject of this case.
The Civil Code provides:
Art. 1868. By the contract of agency a person binds himself
to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
14 | P a g e
The basis for agency is representation. Here, there is no
showing that Brigida consented to the acts of Deganos or
authorized him to act on her behalf, much less with respect
to the particular transactions involved.
it was grossly and inexcusably negligent of petitioners to
entrust to Deganos, not once or twice but on at least six
occasions
A person dealing with an agent is put upon inquiry and
must discover upon his peril the authority of the agent.
Principles:
Art. 1868. By the contract of agency a person binds himself
to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter.
G.R. No. 123560 March 27, 2000
SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,
vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD
SERVICES, INC., JULIETA CANILAO and CLAUDIA
TAGUNICAR, respondents.
PUNO, J.:
This petition for review seeks a reversal of the 31 August
1995 Decision 1 and 11 January 1998 Resolution 2 of the
Court of Appeals holding private respondent Claudia
Tagunicar solely liable for moral and exemplary damages
and attorney's fees, and deleting the trial court's award for
actual damages.
The facts as found by the trial court are as follows:
Plaintiff Yu Eng Cho is the owner of Young
Hardware Co. and Achilles Marketing. In
connection with [this] business, he travels from
time to time to Malaysia, Taipei and Hongkong.
On July 10, 1976, plaintiffs bought plane tickets
(Exhs. A & B) from defendant Claudia Tagunicar
who represented herself to be an agent of
defendant Tourist World Services, Inc. (TWSI).
The destination[s] are Hongkong, Tokyo, San
Francisco, U.S.A., for the amount of P25,000.00
per computation of said defendant Claudia
Tagunicar (Exhs. C & C-1). The purpose of this trip
is to go to Fairfield, New Jersey, U.S.A. to buy to
two (2) lines of infrared heating system
processing textured plastic article (Exh. K).
On said date, only the passage from Manila to
Hongkong, then to Tokyo, were confirmed. [PAA]
Flight 002 from Tokyo to San Francisco was on
"RQ" status, meaning "on request". Per
 instruction of defendant Claudia Tagunicar,
plaintiffs returned after a few days for the
confirmation of the Tokyo-San Francisco segment
of the trip. After calling up Canilao of TWSI,
defendant Tagunicar told plaintiffs that their
flight is now confirmed all the way. Thereafter,
she attached the confirmation stickers on the
plane tickets (Exhs. A & B).
A few days before the scheduled flight of
plaintiffs, their son, Adrian Yu, called the Pan Am
office to verify the status of the flight. According
to said Adrian Yu, a personnel of defendant Pan
Am told him over the phone that plaintiffs'
booking[s] are confirmed.
On July 23, 1978, plaintiffs left for Hongkong and
stayed there for five (5) days. They left Hongkong
for Tokyo on July 28, 1978. Upon their arrival in
Tokyo, they called up Pan-Am office for
reconfirmation of their flight to San Francisco.
Said office, however, informed them that their
names are not in the manifest. Since plaintiffs
were supposed to leave on the 29th of July, 1978,
and could not remain in Japan for more than 72
hours, they were constrained to agree to accept
airline tickets for Taipei instead, per advise of JAL
officials. This is the only option left to them
because Northwest Airlines was then on strike,
hence, there was no chance for the plaintiffs to
obtain airline seats to the United States within 72
hours. Plaintiffs paid for these tickets.
Upon reaching Taipei, there were no flight[s]
available for plaintiffs, thus, they were forced to
return back to Manila on August 3, 1978, instead
of proceeding to the United States. [Japan] Air
Lines (JAL) refunded the plaintiffs the difference
of the price for Tokyo-Taipei [and] Tokyo-San
Francisco (Exhs. I & J) in the total amount of
P2,602.00.
In view of their failure to reach Fairfield, New
Jersey, Radiant Heat Enterprises, Inc. cancelled
Yu Eng Cho's option to buy the two lines of infra-
red heating system (Exh. K). The agreement was
for him to inspect the equipment and make final
arrangement[s] with the said company not later
than August 7, 1978. From this business
transaction, plaintiff Yu Eng Cho expected to
realize a profit of P300,000.00 to P400,000.00.
[A] scrutiny of defendants' respective evidence
reveals the following:
Plaintiffs, who were intending to go to the United
States, were referred to defendant Claudia
15 | P a g e
Tagunicar, an independent travel solicitor, for the
purchase of their plane tickets. As such travel
solicitor, she helps in the processing of travel
papers like passport, plane tickets, booking of
passengers and some assistance at the airport.
She is known to defendants Pan-Am, TWSI/Julieta
Canilao, because she has been dealing with them
in the past years. Defendant Tagunicar advised
plaintiffs to take Pan-Am because Northwest
Airlines was then on strike and plaintiffs are
passing Hongkong, Tokyo, then San Francisco and
Pan-Am has a flight from Tokyo to San Francisco.
After verifying from defendant TWSI, thru Julieta
Canilao, she informed plaintiffs that the fare
would be P25,093.93 giving them a discount of
P738.95 (Exhs. C, C-1). Plaintiffs, however, gave
her a check in the amount of P25,000.00 only for
the two round trip tickets. Out of this transaction,
Tagunicar received a 7% commission and 1%
commission for defendant TWSI.
Defendant Claudia Tagunicar purchased the two
round-trip Pan-Am tickets from defendant Julieta
Canilao with the following schedules:
Origin Destination Airline Date Time/Travel
Manila Hongkong CX900 7-23-78 1135/1325hrs
Hongkong Tokyo CS500 7-28-78 1615/2115hrs
Tokyo San Francisco PA002 7-29-78 1930/1640hrs
The use of another airline, like in this case it is
Cathay Pacific out of Manila, is allowed, although
the tickets issued are Pan-Am tickets, as long as it
is in connection with a Pan-Am flight. When the
two (2) tickets (Exhs. A & B) were issued to
plaintiffs, the letter "RQ" appears below the
printed word "status" for the flights from Tokyo
to San Francisco which means "under request,"
(Exh. 3-A, 4-A Pan-Am). Before the date of the
scheduled departure, defendant Tagunicar
received several calls from the plaintiffs inquiring
about the status of their bookings. Tagunicar in
turn called up TWSI/Canilao to verify; and if
Canilao would answer that the bookings are not
yet confirmed, she would relate that to the
plaintiffs.
Defendant Tagunicar claims that on July 13, 1978,
a few days before the scheduled flight, plaintiff
Yu Eng Cho personally went to her office,
pressing her about their flight. She called up
defendant Julieta Canilao, and the latter told her
"o sige Claudia, confirm na." She even noted this
in her index card (Exh. L), that it was Julieta who
 confirmed the booking (Exh. L-1). It was then that
she allegedly attached the confirmation stickers
(Exhs. 2, 2-B TWSI) to the tickets. These stickers
came from TWSI.
Defendant Tagunicar alleges that it was only in
the first week of August, 1978 that she learned
from Adrian Yu, son of plaintiffs, that the latter
were not able to take the flight from Tokyo to
San Francisco, U.S.A. After a few days, said Adrian
Yu came over with a gentleman and a lady, who
turned out to be a lawyer and his secretary.
Defendant Tagunicar claims that plaintiffs were
asking for her help so that they could file an
action against Pan-Am. Because of plaintiffs'
promise she will not be involved, she agreed to
sign the affidavit (Exh. M) prepared by the
lawyer.
Defendants TWSI/Canilao denied having
confirmed the Tokyo-San Francisco segment of
plaintiffs' flight because flights then were really
tight because of the on-going strike at Northwest
Airlines. Defendant Claudia Tagunicar is very
much aware that [said] particular segment was
not confirmed, because on the very day of
plaintiffs' departure, Tagunicar called up TWSI
from the airport; defendant Canilao asked her
why she attached stickers on the tickets when in
fact that portion of the flight was not yet
confirmed. Neither TWSI nor Pan-Am confirmed
the flight and never authorized defendant
Tagunicar to attach the confirmation stickers. In
fact, the confirmation stickers used by defendant
Tagunicar are stickers exclusively for use of Pan-
Am only. Furthermore, if it is the travel agency
that confirms the booking, the IATA number of
said agency should appear on the validation or
confirmation stickers. The IATA number that
appears on the stickers attached to plaintiffs'
tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A
TWSI), when in fact TWSI's IATA number is 2-83-
0770 (Exhs. 5, 5-A TWSI). 3
A complaint for damages was filed by petitioners against
private respondents Pan American World Airways, Inc. (Pan
Am), Tourist World Services, Inc. (TWSI), Julieta Canilao
(Canilao), and Claudia Tagunicar (Tagunicar) for expenses
allegedly incurred such as costs of tickets and hotel
accommodations when petitioners were compelled to stay
in Hongkong and then in Tokyo by reason of the non-
confirmation of their booking with Pan-Am. In a Decision
dated November 14, 1991, the Regional Trial Court of
Manila, Branch 3, held the defendants jointly and severally
liable, except defendant Julieta Canilao, thus:
16 | P a g e
WHEREFORE, judgment is hereby rendered for
the plaintiffs and ordering defendants Pan
American World Airways, Inc., Tourist World
Services, Inc. and Claudia Tagunicar, jointly and
severally, to pay plaintiffs the sum of
P200,000.00 as actual damages, minus P2,602.00
already refunded to the plaintiffs; P200,000.00 as
moral damages; P100,000.00 as exemplary
damages; an amount equivalent to 20% of the
award for and as attorney's fees, plus the sum of
P30,000.00 as litigation expenses.
Defendants' counterclaims are hereby dismissed
for lack of merit.
SO ORDERED.
Only respondents Pan Am and Tagunicar appealed to the
Court of Appeals. On 11 August 1995, the appellate court
rendered judgment modifying the amount of damages
awarded, holding private respondent Tagunicar solely liable
therefor, and absolving respondents Pan Am and TWSI
from any and all liability, thus:
PREMISES CONSIDERED, the decision of the
Regional Trial Court is hereby SET ASIDE and a
new one entered declaring appellant Tagunicar
solely liable for:
1) Moral damages in the amount of
P50,000.00;
2) Exemplary damages in the amount
of P25,000.00; and
3) Attorney's fees in the amount of
P10,000.00 plus costs of suit.
The award of actual damages is hereby DELETED.
SO ORDERED.
In so ruling, respondent court found that Tagunicar is an
independent travel solicitor and is not a duly authorized
agent or representative of either Pan Am or TWSI. It held
that their business transactions are not sufficient to
consider Pan Am as the principal, and Tagunicar and TWSI
as its agent and sub-agent, respectively. It further held that
Tagunicar was not authorized to confirm the bookings of,
nor issue validation stickers to, herein petitioners and
hence, Pan Am and TWSI cannot be held responsible for
her actions. Finally, it deleted the award for actual damages
for lack of proof.
Hence this petition based on the following assignment of
errors:
1. the Court of Appeals, in reversing the decision
of the trial court, misapplied the ruling in Nicos
Industrial Corporation vs. Court of Appeals, et. al.
[206 SCRA 127]; and
2. the findings of the Court of Appeals that
petitioners' ticket reservations in question were
not confirmed and that there is no agency
relationship among PAN-AM, TWSI and Tagunicar
are contrary to the judicial admissions of PAN-
AM, TWSI and Tagunicar and likewise contrary to
the findings of fact of the trial court.
We affirm.
I. The first issue deserves scant consideration. Petitioners
contend that contrary to the ruling of the Court of Appeals,
the decision of the trial court conforms to the standards of
an ideal decision set in Nicos Industrial
Corporation, et. al. vs. Court of Appeals, et. al., 4 as "that
which, with welcome economy of words, arrives at the
factual findings, reaches the legal conclusions, renders its
ruling and, having done so, ends." It is averred that the trial
court's decision contains a detailed statement of the
relevant facts and evidence adduced by the parties which
thereafter became the bases for the court's conclusions.
A careful scrutiny of the decision rendered by the trial
court will show that after narrating the evidence of the
parties, it proceeded to dispose of the case with a one-
paragraph generalization, to wit:
On the basis of the foregoing facts, the Court is
constrained to conclude that defendant Pan-Am
is the principal, and defendants TWSI and
Tagunicar, its authorized agent and sub-agent,
respectively. Consequently, defendants Pan-Am,
TWSI and Claudia Tagunicar should be held jointly
and severally liable to plaintiffs for damages.
Defendant Julieta Canilao, who acted in her
official capacity as Office Manager of defendant
TWSI should not be held personally liable. 5
The trial court's finding of facts is but a summary of the
testimonies of the witnesses and the documentary
evidence presented by the parties. It did not distinctly and
clearly set forth, nor substantiate, the factual and legal
bases for holding respondents TWSI, Pan Am and Tagunicar
jointly and severally liable. In Del Mundo vs. CA, et
al. 6 where the trial court, after summarizing the conflicting
asseverations of the parties, disposed of the kernel issue in
just two (2) paragraphs, we held:
17 | P a g e
It is understandable that courts, with their heavy
dockets and time constraints, often find
themselves with little to spare in the preparation
of decisions to the extent most desirable. We
have thus pointed out that judges might learn to
synthesize and to simplify their pronouncements.
Nevertheless, concisely written such as they may
be, decisions must still distinctly and clearly
express, at least in minimum essence, its factual
and legal bases.
For failing to explain clearly and well the factual and legal
bases of its award of moral damages, we set it aside in said
case. Once more, we stress that nothing less than Section
14 of Article VIII of the Constitution requires that "no
decision shall be rendered by any court without expressing
therein clearly and distinctly the facts and the law on which
it is based." This is demanded by the due process clause of
the Constitution. In the case at bar, the decision of the trial
court leaves much to be desired both in form and
substance. Even while said decision infringes the
Constitution, we will not belabor this infirmity and rather
examine the sufficiency of the evidence submitted by the
petitioners.
II. Petitioners assert that Tagunicar is a sub-agent of TWSI
while TWSI is a duly authorized ticketing agent of Pan Am.
Proceeding from this premise, they contend that TWSI and
Pan Am should be held liable as principals for the acts of
Tagunicar. Petitioners stubbornly insist that the existence
of the agency relationship has been established by the
judicial admissions allegedly made by respondents herein,
to wit: (1) the admission made by Pan Am in its Answer that
TWSI is its authorized ticket agent; (2) the affidavit
executed by Tagunicar where she admitted that she is a
duly authorized agent of TWSI; and (3) the admission made
by Canilao that TWSI received commissions from ticket
sales made by Tagunicar.
We do not agree. By the contract of agency, a person binds
himself to render some service or to do something in
representation or on behalf of another, with the consent or
authority of the latter. 7 The elements of agency are: (1)
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; (4) the agent acts
within the scope of his authority. 8 It is a settled rule that
persons dealing with an assumed agent are bound at their
peril, if they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of
proof is upon them to establish it. 9
In the case at bar, petitioners rely on the affidavit of
respondent Tagunicar where she stated that she is an
authorized agent of TWSI. This affidavit, however, has weak
probative value in light of respondent Tagunicar's
testimony in court to the contrary. Affidavits, being
taken ex parte, are almost always incomplete and often
inaccurate, sometimes from partial suggestion, or for want
of suggestion and inquiries. Their infirmity as a species of
evidence is a matter of judicial experience and are thus
considered inferior to the testimony given in
court. 10 Further, affidavits are not complete reproductions
of what the declarant has in mind because they are
generally prepared by the administering officer and the
affiant simply signs them after the same have been read to
her. 11 Respondent Tagunicar testified that her affidavit was
prepared and typewritten by the secretary of petitioners'
lawyer, Atty. Acebedo, who both came with Adrian Yu, son
of petitioners, when the latter went to see her at her office.
This was confirmed by Adrian Yu who testified that Atty.
Acebedo brought his notarial seal and notarized the
affidavit of the same day. 12 The circumstances under which
said affidavit was prepared put in doubt petitioners' claim
that it was executed voluntarily by respondent Tagunicar. It
appears that the affidavit was prepared and was based on
the answers which respondent Tagunicar gave to the
questions propounded to her by Atty. Acebedo. 13 They
never told her that the affidavit would be used in a case to
be filed against her. 14 They even assured her that she
would not be included as defendant if she agreed to
execute the affidavit. 15 Respondent Tagunicar was
prevailed upon by petitioners' son and their lawyer to sign
the affidavit despite her objection to the statement therein
that she was an agent of TWSI. They assured her that "it is
immaterial"16 and that "if we file a suit against you we
cannot get anything from you." 17 This purported admission
of respondent Tagunicar cannot be used by petitioners to
prove their agency relationship. At any rate, even if such
affidavit is to be given any probative value, the existence of
the agency relationship cannot be established on its sole
basis. The declarations of the agent alone are generally
insufficient to establish the fact or extent of his
authority. 18 In addition, as between the negative allegation
of respondents Canilao and Tagunicar that neither is an
agent nor principal of the other, and the affirmative
allegation of petitioners that an agency relationship exists,
it is the latter who have the burden of evidence to prove
their allegation, 19 failing in which, their claim must
necessarily fail.
We stress that respondent Tagunicar categorically denied
in open court that she is a duly authorized agent of TWSI,
and declared that she is an independent travel agent. 20 We
have consistently ruled that in case of conflict between
statements in the affidavit and testimonial declarations, the
latter command greater weight. 21
As further proofs of agency, petitioners call our attention to
TWSI's Exhibits "7", "7-A", and "8" which show that
Tagunicar and TWSI received sales commissions from Pan
Am. Exhibit "7" 22 is the Ticket Sales Report submitted by
TWSI to Pan Am reflecting the commissions received by
18 | P a g e
TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of
the routes taken by passengers who were audited to
TWSI's sales report. Exhibit "8" 24 is a receipt issued by TWSI
covering the payment made by Tagunicar for the tickets
she bought from TWSI. These documents cannot justify the
decision that Tagunicar was paid a commission either by
TWSI or Pan Am. On the contrary, Tagunicar testified that
when she pays TWSI, she already deducts in advance her
commission and merely gives the net amount to
TWSI. 25 From all sides of the legal prism, the transaction is
simply a contract of sale wherein Tagunicar buys airline
tickets from TWSI and then sells it at a premium to her
clients.
III. Petitioners included respondent Pan Am in the
complainant on the supposition that since TWSI is its duly
authorized agent, and respondent Tagunicar is an agent of
TWSI, then Pan Am should also be held responsible for the
acts of respondent Tagunicar. Our disquisitions above show
that this contention lacks factual and legal bases. Indeed,
there is nothing in the records to show that respondent
Tagunicar has been employed by Pan Am as its agent,
except the bare allegation of petitioners. The real motive of
petitioners in suing Pan Am appears in its Amended
Complaint that "[d]efendants TWSI, Canilao and Tagunicar
may not be financially capable of paying plaintiffs the
amounts herein sought to be recovered, and in such event,
defendant Pan Am, being their ultimate principal, is
primarily and/or subsidiary liable to pay the said amounts
to plaintiffs." 26 This lends credence to respondent
Tagunicar's testimony that she was persuaded to execute
an affidavit implicating respondents because petitioners
knew they would not be able to get anything of value from
her. In the past, we have warned that this Court will not
tolerate an abuse of judicial process by passengers in order
to pry on international airlines for damage awards, like
"trophies in a safari." 27
This meritless suit against Pan Am becomes more glaring
with petitioner' inaction after they were bumped off in
Tokyo. If petitioners were of the honest belief that Pan Am
was responsible for the misfortune which beset them,
there is no evidence to show that they lodged a protest
with Pan Am's Tokyo office immediately after they were
refused passage for the flight to San Francisco, or even
upon their arrival in Manila. The testimony of petitioner Yu
Eng Cho in this regard is of title value, viz:
Atty. Jalandoni: . . .
q Upon arrival at the Tokyo airport, what did you
do if any in connection with your schedule[d]
trip?
a I went to the Hotel, Holiday Inn and from there
I immediately called up Pan Am office in Tokyo to
reconfirm my flight, but they told me that our
 names were not listed in the manifest, so next
morning, very early in the morning I went to the
airport, Pan Am office in the airport to verify and
they told me the same and we were not allowed
to leave.
q You were scheduled to be in Tokyo for how
long Mr. Yu?
a We have to leave the next day 29th.
q In other words, what was your status as a
passenger?
a Transient passengers. We cannot stay for more
than 72 hours.
xxx xxx xxx
q As a consequence of the fact that you claimed
that the Pan Am office in Tokyo told you that
your names were not in the manifest, what did
you do, if any?
a I ask[ed] them if I can go anywhere in the
State? They told me I can go to LA via Japan
Airlines and I accepted it.
q Do you have the tickets with you that they
issued for Los Angels?
a It was taken by the Japanese Airlines instead
they issue[d] me a ticket to Taipei.
xxx xxx xxx
q Were you able to take the trip to Los Angeles
via Pan Am tickets that was issued to you in lieu
of the tickets to San Francisco?
a No, sir.
q Why not?
a The Japanese Airlines said that there were no
more available seats.
q And as a consequence of that, what did you do,
if any?
a I am so much scared and worried, so the
Japanese Airlines advised us to go to Taipei and I
accepted it.
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xxx xxx xxx
q Why did you accept the Japan Airlines offer for
you to go to Taipei?
a Because there is no chance for us to go to the
United States within 72 hours because during
that time Northwest Airlines [was] on strike so
the seats are very scarce. So they advised me
better left (sic) before the 72 hours otherwise
you will have trouble with the Japanese
immigration.
q As a consequence of that you were force[d] to
take the trip to Taipei?
a Yes, sir. 28 (emphasis supplied)
It grinds against the grain of human experience that
petitioners did not insist that they be allowed to board,
considering that it was then doubly difficult to get seats
because of the ongoing Northwest Airlines strike. It is also
perplexing that petitioners readily accepted whatever the
Tokyo office had to offer as an alternative. Inexplicably too,
no demand letter was sent to respondents TWSI and
Canilao. 29 Nor was a demand letter sent to respondent Pan
Am. To say the least, the motive of petitioners in suing Pan
Am is suspect.
We hasten to add that it is not sufficient to prove that Pan
Am did not allow petitioners to board to justify petitioners'
claim for damages. Mere refusal to accede to the
passenger's wishes does not necessarily translate into
damages in the absence of bad faith. 30 The settled rule is
that the law presumes good faith such that any person who
seeks to be awarded damages due to acts of another has
the burden of proving that the latter acted in bad faith or
with ill motive. 31 In the case at bar, we find the evidence
presented by petitioners insufficient to overcome the
presumption of good faith. They have failed to show any
wanton, malevolent or reckless misconduct imputable to
respondent Pan Am in its refusal to accommodate
petitioners in its Tokyo-San Francisco flight. Pan Am could
not have acted in bad faith because petitioners did not
have confirmed tickets and more importantly, they were
not in the passenger manifest.
In not a few cases, this Court did not hesitable to hold an
airline liable for damages for having acted in bad faith in
refusing to accommodate a passenger who had a
confirmed ticket and whose name appeared in the
passenger manifest. In Ortigas Jr. v. Lufthansa German
Airlines Inc., 32 we ruled that there was a valid and binding
contract between the airline and its passenger after finding
that validating sticker on the passenger's ticket had the
letters "O.K." appearing in the "Res. Status" box which
means "space confirmed" and that the ticket is confirmed
or validated. In Pan American World Airways Inc. v. IAC, et
al. 33 where a would-be-passenger had the necessary ticket,
baggage claim and clearance from immigration all clearly
showing that she was a confirmed passenger and included
in the passenger manifest and yet was denied
accommodation in said flight, we awarded damages.
In Armovit, et al. v. CA, et al., 34 we upheld the award of
damages made against an airline for gross negligence
committed in the issuance of tickets with erroneous entries
as to the time of flight. In Alitalia Airways v. CA, et al., 35 we
held that when airline issues a ticket to a passenger
confirmed on a particular flight, on a certain date, a
contract of carriage arises, and the passenger has every
right to expect that he would fly on that flight and on that
date. If he does not, then the carrier opens itself to a suit
for breach of contract of carriage. And finally, an award of
damages was held proper in the case of Zalamea, et
al. v. CA, et al., 36 where a confirmed passenger included in
the manifest was denied accommodation in such flight.
On the other hand, the respondent airline
in Sarreal, Sr. v. Japan Airlines Co., Ltd., 37 was held not
liable for damages where the passenger was not allowed to
board the plane because his ticket had not been confirmed.
We ruled that "[t]he stub that the lady employee put on
the petitioner's ticket showed among other coded items,
under the column "status" the letters "RQ" — which was
understood to mean "Request." Clearly, this does not mean
a confirmation but only a request. JAL Traffic Supervisor
explained that it would have been different if what was
written in the stub were the letter "ok" in which case the
petitioner would have been assured of a seat on said flight.
But in this case, the petitioner was more of a wait-listed
passenger than a regularly booked passenger."
In the case at bar, petitioners' ticket were on "RQ" status.
They were not confirmed passengers and their names were
not listed in the passenger manifest. In other words, this is
not a case where Pan Am bound itself to transport
petitioners and thereafter reneged on its obligation. Hence,
respondent airline cannot be held liable for damages.
IV. We hold that respondent Court of Appeals correctly
rules that the tickets were never confirmed for good
reasons: (1) The persistent calls made by respondent
WHEREFORE, the decision appealed from is hereby
AFFIRMED. Cost against petitioners.1âwphi1.nêt
SO ORDERED.
VICTORIAS MILLING CO. vs. COURT OF APPEALS
FACTS:
St. Therese Merchandising (STM) regularly bought
sugar from Victorias Milling Co (VMC). In the course of their
20 | P a g e
Tagunicar to Canilao, and those made by petitioners at the
Manila, Hongkong and Tokyo offices in Pan Am, are
eloquent indications that petitioners knew that their tickets
have not been confirmed. For, as correctly observed by Pan
Am, why would one continually try to have one's ticket
confirmed if it had already been confirmed? (2) The
validation stickers which respondent Tagunicar attached to
petitioners' tickets were those intended for the exclusive
use of airline companies. She had no authority to use them.
Hence, said validation stickers, wherein the word "OK"
appears in the status box, are not valid and binding. (3) The
names of petitioners do not appear in the passengers
manifest. (4) Respondent Tagunicar's "Exhibit 1" 38 shows
that the status of the San Francisco-New York segment was
"Ok", meaning it was confirmed, but that the status of the
Tokyo-San Francisco segment was still "on request". (5)
Respondent Canilao testified that on the day that
petitioners were to depart for Hongkong, respondent
Tagunicar called her from the airport asking for
confirmation of the Tokyo-San Francisco flight, and that
when she told respondent Tagunicar that she should not
have allowed petitioners to leave because their tickets have
not been confirmed, respondent Tagunicar merely said
"Bahala na." 39 This was never controverted nor refuted by
respondent Tagunicar. (6) To prove that it really did not
confirm the bookings of petitioners, respondent Canilao
pointed out that the validation stickers which respondent
Tagunicar attached to the tickets of petitioners had IATA
No. 2-82-0770 stamped on it, whereas the IATA number of
TWSI is 28-30770. 40
Undoubtedly, respondent Tagunicar should be liable for
having acted in bad faith in misrepresenting to petitioners
that their tickets have been confirmed. Her culpability,
however, was properly mitigated. Petitioner Yu Eng Cho
testified that he repeatedly tried to follow up on the
confirmation of their tickets with Pan Am because he
doubted the confirmation made by respondent
Tagunicar. 41 This is clear proof that petitioners knew that
they might be bumped off at Tokyo when they decided to
proceed with the trip. Aware of this risk, petitioners
exerted efforts to confirm their tickets in Manila, then in
Hongkong, and finally in Tokyo. Resultantly, we find the
modification as to the amount of damages awarded just
and equitable under the circumstances.
dealings, VMC issued several Shipping List/Delivery Receipts
(SLDRs) to STM as proof of purchases. Among these
was SLDR No. 1214M. SLDR No. 1214M, dated October 16,
1989, covers 25,000 bags of sugar. Each bag contained 50 kg
and priced at P638.00 per bag. The transaction covered was
a “direct sale”.
On October 25, 1989, STM sold to private respondent
Consolidated Sugar Corporation (CSC) its rights in the same
SLDR for P14,750,000.00. CSC issued checks in payment.
That same day, CSC wrote petitioner that it had been
authorized by STM to withdraw the sugar covered by the
said SLDR. Enclosed in the letter were a copy of SLDR No.
1214M and a letter of authority from STM authorizing CSC
to “withdraw for and in our behalf the refined sugar covered
by the SLDR” 
On Oct. 27, 1989, STM issued checks to VMC
as payment for 50,000 bags, covering SLDR No. 1214M. 
 presumption of agency and it is always a fact to be proved,
CSC surrendered the SLDR No. 1214M and to VMC’s
NAWACO Warehouse and was allowed to withdraw sugar.
But only 2,000 bags had been released because VMC refused
to release the other 23,000 bags.
Therefore, CSC informed VMC that SLDR No. 1214M
had been “sold and endorsed” to it. But VMC replied that it
could not allow any further withdrawals of sugar against
SLDR No. 1214M because STM had already withdrawn all the
sugar covered by the cleared checks. VMC also claimed that
CSC was only representing itself as STM’s agent as it had
withdrawn the 2,000 bags against SLDR No. 1214M “for and
in behalf” of STM. Hence, CSC filed a complaint for specific
performance against Teresita Ng Sy (doing business under
STM's name) and VMC. However, the suit against Sy was
discontinued because later became a witness. RTC ruled in
favor of CSC and ordered VMC to deliver the 23,000 bags
left. CA concurred. Hence this appeal.
ISSUES:
W/N CA erred in not ruling that CSC was an agent of STM
and hence, estopped to sue upon SLDR No. 1214M as
assignee.
HELD:
NO. CSC was not an agent of STM. VMC heavily relies on
STM’s letter of authority that said CSC is authorized to
withdraw sugar “for and in our behalf”. It is clear from Art.
1868 that the: basis of agency is representation. On the part
of the principal, there must be an actual intention to appoint
or an intention naturally inferable from his words or actions,
and on the part of the agent, there must be an intention to
accept the appointment and act on it, and in the absence of
such intent, there is generally NO agency. One factor, which
most clearly distinguishes agency from other legal concepts,
21 | P a g e
is control; one person – the agent – agrees to act under the
control or direction of another – the principal. Indeed, the
very word “agency” has come to connote control by the
principal. The control factor, more than any other, has
caused the courts to put contracts between principal and
agent in a separate category. Where the relation of agency
is dependent upon the acts of the parties, the law makes no
with the burden of proof resting upon the persons alleging
the agency, to show not only the fact of its existence but also
its nature and extent. It appears that CSC was a buyer and
not an agent of STM. CSC was not subject to STM’s control.
The terms “for and in our behalf” should not be eyed as
pointing to the existence of an agency relation. Whether or
not a contract is one of sale or agency depends on the
intention of the parties as gathered from the whole scope and
effect of the language employed. Ultimately, what is decisive
is the intention of the parties. (In fact, CSC even informed
VMC that the SLDR was sold and endorsed to it.)
Agency distinguished from sale.
In an agency to sell, the agent, in dealing with the thing
received, is bound to act according to the instructions of his
principal, while in a sale, the buyer can deal with the thing
as he pleases, being the owner. The elementary notion of
sale is the transfer of title to a thing from one to another,
while the essence of agency involves the idea of an
appointment of one to act for another. Agency is a
relationship which often results in a sale, but the sale is a
subsequent step in the transaction. (Teller, op. cit., p. 26; see
Commissioner of Internal Revenue vs. Manila Machinery &
Supply Co., 135 SCRA 8 [1985].) An authorization given to
another containing the phrase “for and in our behalf’’ does
not necessarily establish an agency, as ultimately what is
decisive is the intention of the parties. Thus, the use of the
words “sold and endorsed’’ may mean that the parties
intended a contract of sale, and not a contract of agency.
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