RALLOS v FELIX GO CHAN & REALTY COPR.

, Munoz-Palma
Plaintiff: Ramon Rallos
Defendant: Felix Go Chan & Sons Realty Corporation
Facts:

Concepcion and Gerundia Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of Cebu.
They executed a special power of attorney in favor of their brother, Simeon Rallos,
authorizing him to sell such land for and in their behalf.
After Concepcion died, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of
P10,686.90. New TCTs were issued to the latter.
Petitioner Ramon Rallos, administrator of the Intestate Estate of Concepcion filed a
complaint praying (1) that the sale of the undivided share of the deceased
Concepcion Rallos in lot 5983 be unenforceable, and said share be reconveyed to her
estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the names of the
corporation and the "Intestate estate of Concepcion Rallos" in equal undivided and
(3) that plaintiff be indemnified by way of attorney's fees and payment of costs of
suit.

CFI: [Plaintiffs Complaint]

Sale of land was null and void insofar as the one-half pro-indiviso share of Concepcion
Rallos
Ordered the issuance of new TCTs to respondent corporation and the estate of
Concepcion in the proportion of share each pro-indiviso and the payment of
attorneys fees and cost of litigation
[Respondent filed cross claim against Simon Rallos(*Simon and Gerundia died during
pendency of case)]
Juan T. Borromeo, administrator of the Estate of Simeon Rallos was ordered to pay
defendant the price of the share of the land (P5,343.45) plus attorneys fees
[Borromeo filed a third party complaint against Josefina Rallos, special administratrix of the
Estate of Gerundia]
Dismissed without prejudice to filing either a complaint against the regular
administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of
Cerundia Rallos, covering the same subject-matter
CA: CFI Decision reversed, upheld the sale of Concepcions share.
MR: denied.
Issues:
1) WON sale was valid although it was executed after the death of the principal,
Concepcion.
2) WON sale fell within the exception to the general rule that death extinguishes the
authority of the agent
3) WON agents knowledge of the principals death is a material factor.
4) WON petitioner must suffer the consequence of failing to annotate a notice of death
in the title (thus there was good faith on the part of the Respondent vendee)

5) WON good faith on the part of the respondent in this case should be treated parallel
to that of an innocent purchaser for a value of a land.
Held/Ratio:
(Court discussed relevant principles first)
Relationship of Agency (concept arising from principles under Art 13171 and 14032)- one
party, caged the principal (mandante), authorizes another, called the agent (mandatario), to
act for and in his behalf in transactions with third persons.
-derivative in nature, power emanating from principal
-agents acts are acts of the principal

(1)
(2)
(3)
(4)

Essential Elements:
there is consent, express or implied of the parties to establish the relationship;
the object is the execution of a juridical act in relation to a third person;
the agents acts as a representative and not for himself, and
the agent acts within the scope of his authority.
Extinguishment
o Generally: among others3, By the death, civil interdiction, insanity or
insolvency of the principal or of the agent
- death of the principal effects instantaneous and absolute revocation
of the authority of the agent
o Exceptions:
(Art. 1930) if it has been constituted in the common interest of the
latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor.
(Art. 1931) agent acted without knowledge of the pricipals death
and that the third person was in good faith (both these reqs should be
present)

IN THE CASE AT BAR:

1) Sale was void.
No one may contract in the name of another without being authorized by the latter,
or unless he has by law a right to represent him (Art. 1317 of the Civil Code).
Simons authority as agent was extinguished upon Concolacions death
2) The sale did not fall under the exceptions to the general rule that death ipso jure
extinguishes the authority of the agent
o Art. 1930 inapplicable: SPA in favor of Simon Rallos was not coupled with
interest
o Art. 1931 inapplicable:

no one may contract in the name of another without being authorized by the latter, or unless he has
by law a right to represent him. A contract entered into in the name of another by one who has no
authority or the legal representation or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has been executed, before
it is revoked by the other contracting party.
2

The following contracts are unenforceable, unless they are justified: (1) Those entered into in the
name of another person by one who hi - been given no authority or legal representation or who has
acted beyond his powers; ...
3
See Art. 1919

Simon Rallos knew (as can be inferred from his pleadings) of principal
Concepcions death
For Art 1931 to apply, both requirements must be present

3) Yes, agents knowledge of principals death is material.

Respondent asserts that: there is no provision in the Code which provides that
whatever is done by an agent having knowledge of the death of his principal is void
even with respect to third persons who may have contracted with him in good faith
and without knowledge of the death of the principal
Court says: this contention ignored the ignores the existence of the general rule
enunciated in Article 1919 that the death of the principal extinguishes the agency.
Article 1931, being an exception to the general rule, is to be strictly construed.
4) NO, the Civil Code does not impose a duty upon the heirs to notify the agent or
others of the death of the principal.
If revocation was by the act of the principal: a general power which does not
specify the persons to whom represents' on should be made, it is the general
opinion that all acts, executed with third persons who contracted in good faith,
Without knowledge of the revocation, are valid.
BUT, if revocation was due to death of the principal: extinguishment, by operation
of law, is instantaneous without the need for notification to the parties concerned.
5) No.

Laws on agency, the terms of which are clear and unmistakable leaving no room
for an interpretation contrary to its tenor, should apply, the law provides that
death of the principal ipso jure extinguishes the authority of the agent to sell
rendering the sale to a third person in good faith unenforceable unless at the
agent had no knowledge of the principals death at that time (exception under
Art. 1931)

Dispositive: CA Decision reversed, CFI decision affirmed. Sale was null and void.
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 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. CSC surrendered the SLDR No. 1214M
and to VMCs 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 STMs 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 STMs 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, 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 presumption of agency and it is always a fact to be proved, 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 STMs 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.

Tuazon, et. Al. vs. Heirs of Bartolome Ramos. G.R. No. 156262, July 14, 2005
Facts: Heirs of Bartolome Ramos alleged that spouses Leonilo and Maria Tuazon purchased a
total of 8,326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest
of respondents]. That of this [quantity,] . . . only 4,437 cavans [have been paid for so far],
leaving unpaid 3,889 cavans valued at P1,211,919.00. In payment therefor, the spouses
Tuazon issued several Traders Royal Bank checks. But when these checks were encashed, all
of the checks bounced due to insufficiency of funds. [Respondents] advanced that before
issuing said checks[,] spouses Tuazon already knew that they had no available fund to
support the checks, and they failed to provide for the payment of these despite repeated
demands made on them.
For their part, defendants denied having purchased rice from [Bartolome] Ramos. They
alleged that it was Magdalena Ramos, wife of said deceased, who owned and traded the
merchandise and Maria Tuazon was merely her agent. They argued that it was Evangeline
Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments
therefor. In good faith[,] the checks were received [by petitioner] from Evangeline Santos
and turned over to Ramos without knowing that these were not funded.
Issue: WON there was a contract of agency between spouses Tuazon and spouses Ramos
Held: there was no contract of Agency
Ratio: In a contract of agency, one binds oneself to render some service or to do something
in representation or on behalf of another, with the latter's consent or authority. 9 The
following are the elements of agency: (1) the parties' consent, express or implied, to
establish the relationship; (2) the object, which is the execution of a juridical act in relation
to a third person; (3) the representation, by which the one who acts as an agent does so, not
for oneself, but as a representative; (4) the limitation that the agent acts within the scope of
his or her authority. 10 As the basis of agency is representation, there must be, on the part
of the principal, an actual intention to appoint, an intention naturally inferable from the
principal's words or actions. In the same manner, there must be an intention on the part of
the agent to accept the appointment and act upon it. Absent such mutual intent, there is
generally no agency. 11
This Court finds no reversible error in the findings of the courts a quo that petitioners were
the rice buyers themselves; they were not mere agents of respondents in their rice
dealership. The question of whether a contract is one of sale or of agency depends on the
intention of the parties.
The Court notes that petitioners, on their own behalf, sued Evangeline Santos for collection
of the amounts represented by the bounced checks, in a separate civil case that they sought
to be consolidated with the current one. If, as they claim, they were mere agents of
respondents, petitioners should have brought the suit against Santos for and on behalf of
their alleged principal, in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure.
15 Their filing a suit against her in their own names negates their claim that they acted as
mere agents in selling the rice obtained from Bartolome Ramos.

Relation of third party with principal and agent

G.R. No. 120465. September 9, 1999 WILLIAM UY and RODEL ROXAS,
petitioners,vs. COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY,

respondents
.
KAPUNAN,J
.: FACTS:
William Uy and Rodel Roxas (petitioners) are agents authorized to sell 8 parcels of land in
Benguet.
Uy and Roxas offered to sell the parcels of land to NHA for a housing project. 1989, NHA
passed a resolution approving the acquisition of said lands, and they executed Deeds of
Absolute Sale.
HOWEVER, only 5 out of 8 lands were paid for by NHA because of a report from DENR that
the remaining area is located at an active landslide area and are therefore not conducive for
housing.
1991, NHA issued a resolution canceling the sale of the remaining lands and offered
P1.225 million to the landowners as daos perjuicios
1992, Uy and Roxas filed a complaint for damages against NHA.
RTC: cancellation was justified, but awarded the amount offered by NHA as damages.
CA: affirmed the decision, but deleted the award.
ISSUE/S: Whether or not Uy and Roxas are real parties in interest;
Whether or not, as agents, Uy and Roxas can maintain an action against a third party.
HELD: No, they are not parties in interest because theyre merely agents of their principal.
RATIO:An action shall be prosecuted in the name of the party who, by the substantive law,
has the right sought to be enforced. Uy and Roxas are not parties to the contract of sale
between their principals and NHA. They are mere agents of the owners of the land subject of
the sale. As agents, they only render some service or do something in representation or on
behalf of their principals. The rendering of such service did not make them parties to the
contracts of sale executed in behalf of the latter. Since a contract may be violated only by
the parties thereto as against each other, the real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract must, generally, either be parties to said
contract. Uy and Roxas, likewise, have not shown that they are assignees of their principals
to the subject contracts.
NOTE:
It is only when an agent is constituted as an assignee that he, in his own behalf, may sue on
a contract made for his principal.
Jocelyn B. Doles vs. Ma. Aura Tina Angeles
G.R. No. 149353. June 26, 2006.
Facts:
Petitioner executed a Deed of Absolute Sale ceding a parcel of land in favor of respondent to
satisfy the alleged indebtedness of the former in the amount of P405,430.00. Since the said
land was mortgaged to the National Home Mortgage Finance Corporation, they further
agreed that respondent assume the remaining balance of the loan. Learning that the
petitioner still has arrearages, respondent demanded that the arrearages be paid first.
Petitioner did not heed, thus a case was filed by the respondent.

In answer, the petitioner alleged that sale was void for lack of consideration and that she
was not indebted to the respondent as she only referred her friends to respondent whom she
knew to be engaged in the business of lending money in exchange for personal checks
through her capitalist Arsenio Pua. Further petitioner contended that since the respondent is
also an agent, she does not have the capacity to sue her.
It is an admitted fact by both petitioner and defendant, based on their testimonies, that
respondent knew that the money will be used by the friends of the petitioner; that the
respondent was merely representing Arsenio Pua; and that before the supposed friends of
the petitioner defaulted in payment, each issued their personal checks in the name of
Arsenio Pua for the payment of their debt.
Issue/s:
Whether or not petitioner and respondent were acting on their personal capacity or as mere
agents.
Ruling:
The question whether an agency has been created is ordinarily a question which may be
established in the same was as any other fact, either by direct or circumstantial evidence.
Agency may be implied from the words and conduct of the parties and the circumstances of
the particular case. Though the fact or extent of authority of the agents may not, as a
general rule, be established from the declarations of the agents alone, if one professed to
act as agent for another, she may be stopped to deny her agency both as against the
asserted principal and the third persons interested in the transaction in which he or she is
engaged.
In this case, petitioner knew that the financier of the respondent is Pua, and respondent
knew that the borrowers are friends of petitioner. It is sufficient that petitioner disclosed to
respondent that the former was acting in behalf of her principals, her friends. For an agency
to arise, it is not necessary that the principal personally encounter the third person with
whom the agent interacts.
Here, both petitioner and respondent have undeniably disclosed to each other that they are
representing someone else and so both of them are estopped to deny the same.
That both parties acted as mere agents is shown by the undisputed fact that the friends of
the petitioner issued checks in payment of the loan in the name of Arsenio Pua.