ii. Withdrawal par.

2
ART. 1919. Agency is extinguished:
(2) By the withdrawal of the agent;
Presumption of continuance of agency.
When once shown to have existed, an agency relation will be presumed to have
continued, in the absence of anything to show its termination; and the burden of
proving a revocation or other termination of an agency is on the party asserting it.
(3 Am. Jur. 2d 440.)
Modes of extinguishing an agency.
An agency does not last forever. Like most consensual agreements, the relationship
usually comes to an end at some point. Termination can take place because of
something done by the parties themselves or of something beyond their control,
i.e., by operation of law. Under the law, agency may be terminated:
(1) by agreement (Nos. 5, 6.); or
(2) by the subsequent acts of the parties which may be either:
(a) by the act of both parties or by mutual consent; or
(b) by the unilateral act of one of them (Nos. 1, 2.); or
(3) by operation of law. (Nos. 3, 4.)
iii. Death, Civil Interdiction, insanity or insolvency - par. 3 coupled with interest;
stipulation pour atrui.
Stipulation Pour Autrui - : a contract or provision in a contract that confers a benefit
on a third-party beneficiary NOTE: A stipulation pour autrui gives the third-party
beneficiary a cause of action against the promisor for specific performance. In order
for a third party to be a third-party beneficiary of a stipulation pour autrui there
usually has to be a legal or factual relationship between the stipulator and the
beneficiary
Article 1311, referred to as a stipulation pour autrui, may demand its fulfillment, the
following requisites must concur: (1) There is a stipulation in favor of a third person;
(2) The stipulation is a part, not the whole, of the contract; (3) The contracting
parties clearly and deliberately conferred a favor to the third person the favor is
not merely incidental; (4) The favor is unconditional and uncompensated; (5) The
third person communicated his or her acceptance of the favor before its revocation;
and (6) The contracting parties do not represent, or are not authorized, by the third
party.
(3) By the death, civil interdiction, insanity or insolvency of the principal
or of the agent;
Presence, capacity, and solvency of parties essential for continuance of
agency.
Agency requires the presence, capacity, and solvency of both the principal and
agent. Consequently, the death, civil interdiction, insanity, or insolvency1 of either

party terminates the agency (see Arts. 39, 1327.) and this is true notwithstanding
that the agency period has not yet expired.
(1) Whether the death of one of two or more principals or of one of two or more
agents terminates the agency depends upon the intention of the parties. Generally,
the death of one of several principals does not revoke the agents authority nor
does the death of one of several agents put an end to the agency of all, whether the
responsibility of the several principals or agents is joint or solidary. (see Arts. 18441895, 1915.) The intention of the parties controls except as otherwise provided by
law. (infra.)
(2) Civil interdiction deprives the offender during the period of his sentence of the
right to manage his property and dispose of such property by any act or any
conveyance inter vivos. (Art 34, Revised Penal Code.) A person under civil
interdiction cannot validly give consent. (Art. 1327.)
(3) As by an act of insolvency the principal loses control of the subject matter of the
agency, the authority of the agent to act for his principal generally ceases by
operation of law upon an adjudication of the principals insolvency. The insolvency
of the agent will also ordinarily put an end to the agency, at least if it is in any way
connected with the agents business which has caused his failure. But the
insolvency of the agent will not destroy any right he may have under a power
coupled with interest. (2 C.J.S. 177-178.)
Death of the principal or agent.
(1) General rule. By reason of the very nature of the relationship between the
principal and agent, agency is extinguished ipso jure upon the death of either
principal or agent.
(a) Although a revocation of a power of attorney to be effective must be
communicated by the parties concerned (see Arts. 1921 and 1922.), yet a
revocation by operation of law, such as by death of the principal is, as a rule,
instantaneously effective inasmuch as by legal fiction the agents exercise of
authority is regarded as an execution of the principals continuing will. (2 C.J.S.
1174.) With death, the principals will ceases or is terminated; the source of
authority is extinguished. (Rallos vs. Felix Go Chan & Sons Realty Corp., 81 SCRA
251 [1978].) Thus, the death of a client divests his lawyer of authority to represent
him as counsel. A dead client has no personality and cannot be represented by an
attorney. (Lavia vs. Court of Appeals, 171 SCRA 691 [1989].)
(b) On the other hand, if the agent dies (see Art. 1932.), he can no longer act for the
benefit and representation of the principal. It is obvious that there can be no
principal where there is no agent.
(2) Exceptions. The Civil Code expressly provides for two exceptions to the
general rule that the death of the principal or the agent revokes or terminates ipso
jure the agency, to wit:
(a) That the agency is coupled with an interest (Art. 1930.); and
(b) That the act of the agent was executed without knowledge of the death of the
principal and the third person who contracted with the agent acted in good faith.
(Art. 1931.)
Power to foreclose survives death of mortgagor.
(1) Under Act No. 3135. The power of sale in a deed of mortgage is not revoked
by the death of the principal (mortgagor) as it is not an ordinary agency that
contemplates exclusively the representation of the principal by the agent but is

primarily an authority conferred upon the mortgagee for the latters own protection.
It is an ancillary stipulation supported by the same cause or consideration for the
mortgage and forms an essential and inseparable part of that bilateral agreement.
That power survives the death of the mortgagor. (Perez vs. Phil. National
Bank, 17 SCRA 833 [1966]; see Del Rosario vs. Abad and Abad, 104 Phil. 648
[1958], under Art. 1927.)
(2) Under the Rules of Court. In fact, the right of the mortgagee to extrajudicially
foreclose the mortgage after the death of the mortgagor does not depend on the
authorization in the deed of mortgage executed by the latter. The right exists
independently of said stipulation and is clearly recognized in Section 7, Rule 86 of
the Rules of Court which grants to a mortgagee three remedies that can be
alternatively pursued in case the mortgagor dies, to wit:
(a) to waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary action;
(b) to foreclose the mortgage judicially and prove any deficiency as an ordinary
claim; and
(c) to rely on the mortgage exclusively, foreclosing the same at any time before it is
barred by prescription without right to fi le a claim for any deficiency. (Bicol Savings
and Loan Assn. vs. Court of Appeals, 171 SCRA 630 [1989].)
- Ching v. Bantolo, 687 SCRA 134 [2012]
G.R. No. 177086
December 5, 2012
ALBERT M. CHING and ROMEO J. BAUTISTA, Petitioners, vs. FELIX M.
BANTOLO, ANTONIO O. ADRIANO and EULOGIO STA. CRUZ JR., substituted
by his children, represented by RAUL STA. CRUZ JR., Respondents.
Facts: Respondents Felix M. Bantolo (Bantolo), Antonio O. Adriano and Eulogio Sta
Cruz,5 Jr. are owners of several parcels of land situated in Tagaytay City.
On April 3, 2000, respondents executed in favor of petitioners Albert Ching (Ching)
and Romeo J. Bautista a Special Power of Attorney (SPA) 7 authorizing petitioners to
obtain a loan using respondents properties as collateral.
Without notice to petitioners, respondents executed a Revocation of Power of
Attorney9 effective at the end of business hours of July 17, 2000. 10
On July 18, 2000, the Philippine Veterans Bank (PVB) approved the loan application
of petitioner Ching in the amount of P25 million for a term of five years subject to
certain conditions
On July 31, 2000, petitioner Ching thru a letter 12 informed respondents of the
approval of the loan.13
Sometime in the first week of August 2000, petitioners learned about the revocation
of the SPA.14 Consequently, petitioners sent a letter15 to respondents demanding
that the latter comply with the agreement by annulling the revocation of the SPA. 16

On September 8, 2000, petitioners filed before the Regional Trial Court for
Annulment of Revocation of SPA, Enforcement of SPA and/or interest in the
properties covered by said SPA and Damages against respondents. Petitioners later
amended18 the Complaint to include an alternative prayer to have them declared as
the owners of one-half of the properties covered by the SPA. 19
Petitioners alleged that the SPA is irrevocable because it is a contract of agency
coupled with interest.20According to them, they agreed to defray the costs or
expenses involved in processing the loan because respondents promised that they
would have an equal share in the proceeds of the loan or the subject properties. 21
In their Answer,22 respondents contended that petitioners have no cause of
action.23 Respondents alleged that they executed the SPA in favor of petitioners
because of their assurance that they would be able to get a loan in the amount of
P50 million and that P30 million would be given to respondents within a months
time.24 When the one-month period expired, respondents complained to petitioner
Ching and asked him to advance the amount of P500,000.00. 25 Petitioner Ching
acceded to their request on the condition that they hand over to him the original
titles for safekeeping.26 Respondents, in turn, asked petitioner Ching to give them P1
million in exchange for the titles. 27 Petitioner Ching agreed and so they gave him the
titles.28 However, he never gave them the money. 29They asked him to return the
titles, but he refused.30 Later, they were informed that the loan was approved in the
amount of P25 million and that their share would be P6 million. 31 Since it was not
the amount agreed upon, respondents revoked the SPA and demanded the return of
the titles.32
On December 18, 2002, the RTC rendered a Decision 33 in favor of petitioners
On June 15, 2004, the CA issued a Resolution 44 denying the Motion for Intervention
for being filed out of time.
Petitioners moved for reconsideration but the CA denied the same in a
Resolution49 dated March 12, 2007. Hence, this petition raising the following issues:
Issues:
WHETHER X X X THE [CA] ERRED IN RULING THAT PETITIONERS RECOVERY OF THE
ACTUAL DAMAGES IN THE AMOUNT OF PHP500,000.00 BE MADE CONTINGENT UPON
THE OBTENTION OF A LOAN THROUGH THE SUBJECT SPECIAL POWER OF ATTORNEY,
WHICH THE RESPONDENTS, IN THE FIRST PLACE, REFUSED TO HONOR AND
REVOKED IN BAD FAITH AND ILLEGALLY.
WHETHER X X X THE [CA] ERRED IN RULING THAT THE PETITIONERS ARE NOT
ENTITLED TO ONE-HALF OF THE RESPONDENTS PROPERTIES DESPITE THE FINDING
OF THE [RTC] THAT THE CONSIDERATION THEREFOR WAS THAT THE PETITIONERS
SHALL PAY FOR THE LOAN TO BE OBTAINED UTILIZING THE RESPONDENTS
PROPERTIES AND THE FINDING OF THE [RTC] THAT PETITIONER CHING, TO HIS
GRAVE PREJUDICE, FAILED TO UTILIZE THE PROCEEDS OF THE LOAN FOR THE

LATTERS BUSINESS PLAN AS WELL AS TO RECOVER HIS SHARE IN THE EXPENSES,

WHICH PETITIONER CHING ADVANCED IN PROCURING THE LOAN.
WHETHER X X X THE [CA] ERRED IN RULING THAT THE EXPENSES INCURRED AND
TO BE INCURRED BY THE PETITIONERS IN APPLYING FOR A LOAN THROUGH THE SPA
SHOULD BE BORNE BY THE PETITIONER[S] DESPITE THE EXISTENCE OF AN
AGREEMENT TO THE CONTRARY BETWEEN THE PETITIONERS AND RESPONDENTS,
THE EXISTENCE OF WHICH AGREEMENT WAS DULY FOUND BY THE [RTC].
WHETHER X X X THE [CA] ERRED IN RULING THAT RESPONDENTS ARE NOT LIABLE
TO PAY EXEMPLARY DAMAGES FOR REVOKING THE SPA IN BAD FAITH ON THE
RATIOCINATION THAT THE RESPONDENTS DID NOT ACT IN A WANTON, FRAUDULENT,
RECKLESS, OPPRESSIVE OR MALEVOLENT MANNER BECAUSE THE RESPONDENTS
WERE PURPORTEDLY UNSATISFIED WITH THE AMOUNT OF THE LOAN APPROVED. 50
Held: The petition is partly meritorious.
There is no question that the SPA executed by respondents in favor of petitioners is
a contract of agency coupled with interest. 61 This is because their bilateral contract
depends upon the agency. 62 Hence, it "cannot be revoked at the sole will of the
principal."63
The only issue therefore is the extent of the liability of respondents and the
damages to be awarded to petitioners.
Petitioner Ching is entitled to actual
P500,000.00 without any condition.

damages

in

the

amount

of

In exchange for his possession of the titles, petitioner Ching advanced the amount
of P500,000.00 to respondents. Considering that the loan application with PVB did
not push through, respondents are liable to return the said amount to petitioner
Ching.
In ordering the award of P500,000.00, the CA decreed:
2. The amount of P500,000.00 paid by the [petitioner] Ching to the [respondents]
should be deducted from the amount to be loaned; 64
Petitioners are not entitled to one-half of the subject properties.
As to petitioners claim to one-half of the subject properties, we agree with the CA
that:

x x x it is far from human experience that a person will give half of his property to
another person whom he barely knows. It is clear from the records of the case that
the [respondents] do not know [petitioner] Ching. It was [petitioner] Bautista who
introduced him to [respondent] Bantolo. The [respondents] agreed to give an SPA to
Ching, because they were informed that the latter could help them secure a loan
with their pieces of property as collateral. No one in his right mind would definitely
agree to give half of his property to another. It is certain that they agreed that they
would share in the proceeds of the loan but not in the property. Hence,
[petitioners] are not entitled to one-half of the property.[66 (Emphasis
supplied)
Petitioners are not entitled to reimbursement of all the expenses incurred
in obtaining a loan.
Petitioner Ching testified in court that he agreed to shoulder all the expenses, to wit:
A - I asked them about that but they told me that they dont have money to pay
me, so I shouldered all the expenses. I took the risk of shouldering all the
expenses.
Atty. Figueroa:
You said you took the risk.1wphi1 Will you be more specific what do you mean by
this risk that you took, as far as the expenses are concerned?
A - What I mean, sir, is that I will not be able to recover all my expenses if the
loan is not granted by the Philippine Veterans Bank.[68 (Emphasis supplied)
For this reason, we find that petitioners are not entitled to the reimbursement of the
expenses they have incurred in applying for the loan.
Petitioners are not entitled to exemplary damages.
Neither are petitioners entitled to exemplary damages.
Article 222971 of the Civil Code provides that exemplary damages may be imposed
"by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages." They are, however, not
recoverable as a matter of right.72 They are awarded only if the guilty party acted in
a wanton, fraudulent, reckless, oppressive or malevolent manner. 73
Sarsaba vs. vda De Te, 594 SCRA 410 [2009]

G.R. No. 175910 ATTY. ROGELIO E. SARSABA, Petitioner, - versus - FE VDA.

DE TE, represented by her Attorney-in-Fact, FAUSTINO CASTAEDA,
Respondents. Promulgated July 30, 2009

Sarsaba vs Vda dela Torre 594 SCRA 410

Facts:
Respondent Fe Vda. de Te, represented by her attorney-in-fact, Faustino Castaeda,
filed with the RTC, a Complaint for recovery of motor vehicle, damages with prayer for
the delivery of the truck pendente lite against petitioner (Atty. Sarsaba), Sereno,
Lavarez and the NLRC of Davao City.
Respondent alleged, among others, that: (1) she is the wife of the late Pedro Te, the
registered owner of the truck, as evidenced by the Official Receipt and Certificate of
Registration.
Petitioner Sarsaba alleges that that there was no showing that the heirs have filed an
intestate estate proceedings of the estate of Pedro Te, or that respondent was duly
authorized by her co-heirs to file the case; and that the truck was already sold to
Gasing on March 11, 1986 by one Jesus Matias, who bought the same from the
Spouses Te. Corollarily, Gasing was already the lawful owner of the truck when it was
levied on execution and, later on, sold at public auction.

On October 17, 2005, petitioner Sarsaba filed an Omnibus Motion to Dismiss the
Case on the following grounds: (1) lack of jurisdiction over one of the principal
defendants; and (2) to discharge respondent's attorney-in-fact for lack of legal
personality to sue.

It appeared that the respondent, Fe Vda. de Te, died on April 12, 2005.
Respondent, through her lawyer, argues that respondent's death did not render
functus officio her right to sue since her attorney-in-fact, Faustino Castaeda, had
long testified on the complaint on March 13, 1998 for and on her behalf and,
accordingly, submitted documentary exhibits in support of the complaint.
Issue: What is the legal effect of death of the plaintiff during the pendency of the case?
Held:
When a party to a pending action dies and the claim is not extinguished, the Rules of
Court require a substitution of the deceased.
Section 1, Rule 87 of the Rules of Court enumerates the actions that survived and
may be filed against the decedent's representatives as follows:
o (1) actions to recover real or personal property or an interest thereon;
o (2) actions to enforce liens thereon, and
o (3) actions to recover damages for an injury to a person or a property.
o In such cases, a counsel is obliged to inform the court of the death of his
client and give the name and address of the latter's legal representative.

The rule on substitution of parties is governed by Section 16, 46 Rule 3 of the 1997
Rules of Civil Procedure, as amended.

The rule on substitution by heirs is not a matter of jurisdiction, but a requirement of

due process.
The rule on substitution was crafted to protect every party's right to due process.
It was designed to ensure that the deceased party would continue to be properly
represented in the suit through his heirs or the duly appointed legal representative of
his estate.

It is only when there is a denial of due process, as when the deceased is not
represented by any legal representative or heir, that the court nullifies the trial
proceedings and the resulting judgment therein.

In the case before Us, it appears that respondent's counsel did not make any
manifestation before the RTC as to her death. In fact, he had actively participated in
the proceedings. Neither had he shown any proof that he had been retained by
respondent's legal representative or any one who succeeded her.

However, such failure of counsel would not lead Us to invalidate the proceedings that
have long taken place before the RTC. The Court has repeatedly declared that failure
of the counsel to comply with his duty to inform the court of the death of his client,
such that no substitution is effected, will not invalidate the proceedings and the
judgment rendered thereon if the action survives the death of such party. The trial
court's jurisdiction over the case subsists despite the death of the party.

The purpose behind this rule is the protection of the right to due process of every
party to the litigation who may be affected by the intervening death. The deceased
litigants are themselves protected as they continue to be properly represented in the
suit through the duly appointed legal representative of their estate.

Despite the special power of attorney given to Castaneda by Fe Vda. De Te has been
extinguished due to the death of the principal, the case at hand is an action for the
recovery of a personal property, a motor vehicle, is an action that survives and is not
extinguished by the death of a party.

Facts: On February 14, 1995, a Decision was rendered in NLRC Case No. RAB-11-0700608-93 entitled, Patricio Sereno v. Teodoro Gasing/Truck Operator, finding Sereno
to have been illegally dismissed and ordering Gasing to pay him his monetary
claims in the amount of P43,606.47. After the Writ of Execution was returned
unsatisfied,
Execution

[3]

Labor

Arbiter

Newton

R.

Sancho

issued

an

Alias

Writ

of

on June 10, 1996, directing Fulgencio R. Lavarez, Sheriff II of the

National Labor Relations Commission (NLRC), to satisfy the judgment award. On July
23, 1996, Lavarez, accompanied by Sereno and his counsel, petitioner Atty. Rogelio
E. Sarsaba, levied a Fuso Truck bearing License Plate No. LBR-514, which at that
time was in the possession of Gasing. On July 30, 1996, the truck was sold at public
auction, with Sereno appearing as the highest bidder. [4]
Meanwhile, respondent Fe Vda. de Te, represented by her attorney-in-fact, Faustino
Castaeda, filed with the RTC, Branch 18, Digos, Davao del Sur, a Complaint [5] for
recovery of motor vehicle, damages with prayer for the delivery of the
truck pendente lite against petitioner, Sereno, Lavarez and the NLRC of Davao City,
docketed as Civil Case No. 3488.

Respondent alleged that: (1) she is the wife of the late Pedro Te, the registered
owner of the truck, as evidenced by the Official Receipt [6] and Certificate of
Registration;[7] (2) Gasing merely rented the truck from her; (3) Lavarez erroneously
assumed that Gasing owned the truck because he was, at the time of the taking,
[8]

in possession of the same; and (4) since neither she nor her husband were parties

to the labor case between Sereno and Gasing, she should not be made to answer
for the judgment award, much less be deprived of the truck as a consequence of the
levy in execution.
Petitioner filed a Motion to Dismiss [9] on the following grounds: (1) respondent has
no legal personality to sue, having no real interests over the property subject of the
instant complaint; (2) the allegations in the complaint do not sufficiently state that
the respondent has cause of action; (3) the allegations in the complaint do not
contain sufficient cause of action as against him; and (4) the complaint is not
accompanied by an Affidavit of Merit and Bond that would entitle the respondent to
the delivery of the tuck pendente lite.
Issue: The first issue involves the jurisdiction of the court over the person of one of
the defendants, who was not served with summons on account of his death. The
second issue, on the other hand, pertains to the legal effect of death of the plaintiff
during the pendency of the case.
Held: Anent the first issue, petitioner argues that, since Sereno died before
summons was served on him, the RTC should have dismissed the complaint against
all the defendants and that the same should be filed against his estate.
The Sheriff's Return of Service [39] dated May 19, 1997 states that Sereno
could not be served with copy of the summons, together with a copy of the
complaint, because he was already dead.
In view of Sereno's death, petitioner asks that the complaint should be
dismissed, not only against Sereno, but as to all the defendants, considering that
the RTC did not acquire jurisdiction over the person of Sereno.
Jurisdiction over a party is acquired by service of summons by the sheriff, his
deputy or other proper court officer, either personally by handing
a copy thereof to the defendant orby substituted service.[40] On the other hand,
summons is a writ by which the defendant is notified of the action brought against
him. Service of such writ is the means by which the court may acquire jurisdiction
over his person.[41] Records show that petitioner had filed a Motion to Dismiss on the
grounds of lack of legal personality of respondent; the allegations in the complaint

did not sufficiently state that respondent has a cause of action or a cause of action
against the defendants; and, the complaint was not accompanied by an affidavit of
merit and bond. The RTC denied the motion and held therein that, on the basis of
the allegations of fact in the complaint, it can render a valid judgment. Petitioner,
subsequently, filed his answer by denying all the material allegations of the
complaint. And by way of special and affirmative defenses, he reiterated that
respondent had no legal personality to sue as she had no real interest over the
property and that while the truck was still registered in Pedro Te's name, the same
was already sold to Gasing.
Significantly, a motion to dismiss may be filed within the time for but before the
filing of an answer to the complaint or pleading asserting a claim.[42] Among the
grounds mentioned is the court's lack of jurisdiction over the person of the
defending party.
As a rule, all defenses and objections not pleaded, either in a motion to dismiss or in
an answer, are deemed waived. [43] The exceptions to this rule are: (1) when the
court has no jurisdiction over the subject matter, (2) when there is another action
pending between the parties for the same cause, or (3) when the action is barred by
prior judgment or by statute of limitations, in which cases, the court may dismiss
the claim.
In the case before Us, petitioner raises the issue of lack of jurisdiction over the
person of Sereno, not in his Motion to Dismiss or in his Answer but only in his
Omnibus Motion to Dismiss. Having failed to invoke this ground at the proper time,
that is, in a motion to dismiss, petitioner cannot raise it now for the first time on
appeal.
In fine, We cannot countenance petitioner's argument that the complaint against
the other defendants should have been dismissed, considering that the RTC never
acquired jurisdiction over the person of Sereno. The court's failure to acquire
jurisdiction over one's person is a defense which is personal to the person claiming
it. Obviously, it is now impossible for Sereno to invoke the same in view of his
death. Neither can petitioner invoke such ground, on behalf of Sereno, so as to reap
the benefit of having the case dismissed against all of the defendants. Failure to
serve summons on Sereno's person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have been served
with copies of the summons and complaints and have long submitted their
respective responsive pleadings. In fact, the other defendants in the complaint were
given the chance to raise all possible defenses and objections personal to them in
their respective motions to dismiss and their subsequent answers.
Anent the second issue, petitioner moves that respondent's attorney-in-fact,
Faustino Castaeda, be discharged as he has no more legal personality to sue on
behalf of Fe Vda. de Te, who passed away on April 12, 2005, during the pendency of
the case before the RTC.

When a party to a pending action dies and the claim is not extinguished, the Rules
of Court require a substitution of the deceased. [44] Section 1, Rule 87 of the Rules of
Court enumerates the actions that survived and may be filed against the decedent's
representatives as follows: (1) actions to recover real or personal property or an
interest thereon, (2) actions to enforce liens thereon, and (3) actions to recover
damages for an injury to a person or a property. In such cases, a counsel is obliged
to inform the court of the death of his client and give the name and address of the
latter's legal representative.[45]
The rule on substitution of parties is governed by Section 16, [46] Rule 3 of the 1997
Rules of Civil Procedure, as amended.
Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but
a requirement of due process. The rule on substitution was crafted to protect every
party's right to due process. It was designed to ensure that the deceased party
would continue to be properly represented in the suit through his heirs or the duly
appointed legal representative of his estate. Moreover, non-compliance with the
Rules results in the denial of the right to due process for the heirs who, though not
duly notified of the proceedings, would be substantially affected by the decision
rendered therein. Thus, it is only when there is a denial of due process, as when the
deceased is not represented by any legal representative or heir, that the court
nullifies the trial proceedings and the resulting judgment therein. [47]
In the case before Us, it appears that respondent's counsel did not make any
manifestation before the RTC as to her death. In fact, he had actively participated in
the proceedings.Neither had he shown any proof that he had been retained by
respondent's legal representative or any one who succeeded her.
However, such failure of counsel would not lead Us to invalidate the proceedings
that have long taken place before the RTC. The Court has repeatedly declared that
failure of the counsel to comply with his duty to inform the court of the death of his
client, such that no substitution is effected, will not invalidate the proceedings and
the judgment rendered thereon if the action survives the death of such party. The
trial court's jurisdiction over the case subsists despite the death of the party. [48]
The purpose behind this rule is the protection of the right to due process of every
party to the litigation who may be affected by the intervening death. The deceased
litigants are themselves protected as they continue to be properly represented in
the suit through the duly appointed legal representative of their estate. [49]
Anent the claim of petitioner that the special power of attorney [50] dated March 4,
1997 executed by respondent in favor of Faustino has become functus officio and
that the agency constituted between them has been extinguished upon the death of
respondent, corollarily, he had no more personality to appear and prosecute the
case on her behalf.

Agency is extinguished by the death of the principal. [51] The only exception where
the agency shall remain in full force and effect even after the death of the principal
is when 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.[52]
A perusal of the special power of attorney leads us to conclude that it was
constituted for the benefit solely of the principal or for respondent Fe Vda. de
Te. Nowhere can we infer from the stipulations therein that it was created for the
common interest of respondent and her attorney-in-fact. Neither was there any
mention that it was to benefit a third person who has accepted the stipulation in his
favor.
On this ground, We agree with petitioner. However, We do not believe that such
ground would cause the dismissal of the complaint. For as We have said, Civil Case
No. 3488, which is an action for the recovery of a personal property, a motor
vehicle, is an action that survives pursuant to Section 1, Rule 87 of the Rules of
Court. As such, it is not extinguished by the death of a party.
In Gonzalez v. Philippine Amusement and Gaming Corporation,[53] We have laid down
the criteria for determining whether an action survives the death of a plaintiff or
petitioner, to wit:
x x x The question as to whether an action survives or not depends on
the nature of the action and the damage sued for. If the causes of
action which survive the wrong complained [of] affects primarily and
principally property and property rights, the injuries to the person
being merely incidental, while in the causes of action which do not
survive the injury complained of is to the person the property and
rights of property affected being incidental. x x x
Estate of the Late Juliana Diez vda. De Gabriel vs. CIR, 421 SCRA 266

[G.R. No. 155541. January 27, 2004]

ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL, petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
FACTS: During the lifetime of the decedent Juliana vda. De Gabriel, her business
affairs were managed by the Philippine Trust Company (PhilTrust). The decedent
died on April 3, 1979 but two days after her death, PhilTrust filed her income tax
return for 1978 not indicating that the decedent had died. The BIR conducted an
administrative investigation of the decedents tax liability and found a deficiency
income tax for the year 1997 in the amount of P318,233.93. Thus, in November 18,
1982, the BIR sent by registered mail a demand letter and assessment notice
addressed to the decedent c/o PhilTrust, Sta. Cruz, Manila, which was the address
stated in her 1978 income tax return. On June 18, 1984, respondent Commissioner
of Internal Revenue issued warrants of distraint and levy to enforce the collection of

decedents deficiency income tax liability and serve the same upon her heir,
Francisco Gabriel. On November 22, 1984, Commissioner filed a motion to allow his
claim with probate court for the deficiency tax. The Court denied BIRs claim against
the estate on the ground that no proper notice of the tax assessment was made on
the proper party. On appeal, the CA held that BIRs service on PhilTrust of the notice
of assessment was binding on the estate as PhilTrust failed in its legal duty to inform
the respondent of antecedents death. Consequently, as the estate failed to
question the assessment within the statutory period of thirty days, the assessment
became final, executory, and incontestable.
ISSUES:
(1) Whether or not the CA erred in holding that the service of deficiency tax
assessment on Juliana through PhilTrust was a valid service as to bind the estate.
(2) Whether or not the CA erred in holding that the tax assessment had become
final, executory, and incontestable.
HELD:
(1) Since the relationship between PhilTrust and the decedent was automatically
severed the moment of the taxpayers death, none of the PhilTrusts acts or
omissions could bind the estate of the taxpayer. Although the administrator of the
estate may have been remiss in his legal obligation to inform respondent of the
decedents death, the consequence thereof merely refer to the imposition of certain
penal sanction on the administrator. These do not include the indefinite tolling of
the prescriptive period for making deficiency tax assessment or waiver of the notice
requirement for such assessment.
(2) The assessment was served not even on an heir or the estate but on a
completely disinterested party. This improper service was clearly not binding on the
petitioner. The most crucial point to be remembered is that PhilTust had absolutely
no legal relationship with the deceased or to her Estate. There was therefore no
assessment served on the estate as to the alleged underpayment of tax. Absent this
assessment, no proceeding could be initiated in court for collection of said tax;
therefore, it could not have become final, executory and incontestable.
Respondents claim for collection filed with the court only on November 22, 1984
was barred for having been made beyond the five-year prescriptive period set by
law.
Facts: During the lifetime of the decedent, Juliana Vda. De Gabriel, her business
affairs were managed by the Philippine Trust Company (Philtrust). The decedent
died on April 3, 1979. Two days after her death, Philtrust, through its Trust Officer,
Atty. Antonio M. Nuyles, filed her Income Tax Return for 1978. The return did not
indicate that the decedent had died.

On May 22, 1979, Philtrust also filed a verified petition for appointment as Special
Administrator with the Regional Trial Court of Manila, Branch XXXVIII, docketed as
Sp. Proc. No. R-82-6994. The court a quo appointed one of the heirs as Special
Administrator. Philtrusts motion for reconsideration was denied by the probate
court.
On January 26, 1981, the court a quo issued an Order relieving Mr. Diez of his
appointment, and appointed Antonio Lantin to take over as Special
Administrator. Subsequently, on July 30, 1981, Mr. Lantin was also relieved of his
appointment, and Atty. Vicente Onosa was appointed in his stead.
In the meantime, the Bureau of Internal Revenue conducted an administrative
investigation on the decedents tax liability and found a deficiency income tax for
the year 1977 in the amount of P318,233.93. Thus, on November 18, 1982, the BIR
sent by registered mail a demand letter and Assessment Notice No. NARD-78-8200501 addressed to the decedent c/o Philippine Trust Company, Sta. Cruz, Manila
which was the address stated in her 1978 Income Tax Return. No response was
made by Philtrust. The BIR was not informed that the decedent had actually passed
away.
In an Order dated September 5, 1983, the court a quo appointed Antonio Ambrosio
as the Commissioner and Auditor Tax Consultant of the Estate of the decedent.
On June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of
distraint and levy to enforce collection of the decedents deficiency income tax
liability, which were served upon her heir, Francisco Gabriel. On November 22,
1984, respondent filed a Motion for Allowance of Claim and for an Order of Payment
of Taxes with the court a quo. On January 7, 1985, Mr. Ambrosio filed a letter of
protest with the Litigation Division of the BIR, which was not acted upon because
the assessment notice had allegedly become final, executory and incontestable.
On May 16, 1985, petitioner, the Estate of the decedent, through Mr. Ambrosio, filed
a formal opposition to the BIRs Motion for Allowance of Claim based on the ground
that there was no proper service of the assessment and that the filing of the
aforesaid claim had already prescribed. The BIR filed its Reply, contending that
service to Philippine Trust Company was sufficient service, and that the filing of the
claim against the Estate on November 22, 1984 was within the five-year prescriptive
period for assessment and collection of taxes under Section 318 of the 1977
National Internal Revenue Code (NIRC).
On November 19, 1985, the court a quo issued an Order denying respondents claim
against the Estate,[2] after finding that there was no notice of its tax assessment on
the proper party.[3]

On July 2, 1986, respondent filed an appeal with the Court of Appeals. On

September 30, 2002, the Court of Appeals rendered a decision in favor of the
respondent.
Issue/s: 1. Whether or not the Court of Appeals erred in holding that the service of
deficiency tax assessment against Juliana Diez Vda. de Gabriel through the
Philippine Trust Company was a valid service in order to bind the Estate;
2. Whether or not the Court of Appeals erred in holding that the deficiency tax
assessment and final demand was already final, executory and incontestable.
Held: We find in favor of the petitioner.
The first point to be considered is that the relationship between the decedent and
Philtrust was one of agency, which is a personal relationship between agent and
principal. Under Article 1919 (3) of the Civil Code, death of the agent or principal
automatically terminates the agency. In this instance, the death of the decedent on
April 3, 1979 automatically severed the legal relationship between her and Philtrust,
and such could not be revived by the mere fact that Philtrust continued to act as her
agent when, on April 5, 1979, it filed her Income Tax Return for the year 1978.
Since the relationship between Philtrust and the decedent was automatically
severed at the moment of the Taxpayers death, none of Philtrusts acts or omissions
could bind the estate of the Taxpayer. Service on Philtrust of the demand letter and
Assessment Notice No. NARD-78-82-00501 was improperly done.
It must be noted that Philtrust was never appointed as the administrator of the
Estate of the decedent, and, indeed, that the court a quo twice rejected Philtrusts
motion to be thus appointed.As of November 18, 1982, the date of the demand
letter and Assessment Notice, the legal relationship between the decedent and
Philtrust had already been non-existent for three years.
Respondent claims that Section 104 of the National Internal Revenue Code of 1977
imposed the legal obligation on Philtrust to inform respondent of the decedents
death. The said Section reads:
SEC. 104. Notice of death to be filed. In all cases of transfers subject to tax or
where, though exempt from tax, the gross value of the estate exceeds three
thousand pesos, the executor, administrator, or any of the legal heirs, as the case
may be, within two months after the decedents death, or within a like period after
qualifying as such executor or administrator, shall give written notice thereof to the
Commissioner of Internal Revenue.
The foregoing provision falls in Title III, Chapter I of the National Internal Revenue
Code of 1977, or the chapter on Estate Tax, and pertains to all cases of transfers
subject to tax or where the gross value of the estate exceeds three thousand
pesos. It has absolutely no applicability to a case for deficiency income tax, such as

the case at bar. It further lacks applicability since Philtrust was never the executor,
administrator of the decedents estate, and, as such, never had the legal obligation,
based on the above provision, to inform respondent of her death.
Thus, as of November 18, 1982, the date of the demand letter and Assessment
Notice No. NARD-78-82-00501, there was absolutely no legal obligation on the part
of Philtrust to either (1) respond to the demand letter and assessment notice, (2)
inform respondent of the decedents death, or (3) inform petitioner that it had
received said demand letter and assessment notice. This lack of legal obligation was
implicitly recognized by the Court of Appeals, which, in fact, rendered its assailed
decision on grounds of equity.[17]
Respondent argues that an assessment is deemed made for the purpose of giving
effect to such assessment when the notice is released, mailed or sent to the
taxpayer to effectuate the assessment, and there is no legal requirement that the
taxpayer actually receive said notice within the five-year period.[18] It must be
noted, however, that the foregoing rule requires that the notice be sent to the
taxpayer, and not merely to a disinterested party. Although there is no specific
requirement that the taxpayer should receive the notice within the said period, due
process requires at the very least that such notice actually be
received. In Commissioner of Internal Revenue v. Pascor Realty and Development
Corporation,[19] we had occasion to say:
An assessment contains not only a computation of tax liabilities, but also a demand
for payment within a prescribed period. It also signals the time when penalties and
interests begin to accrue against the taxpayer. To enable the taxpayer to determine
his remedies thereon, due process requires that it must be served on and received
by the taxpayer.
In Republic v. De le Rama,[20] we clarified that, when an estate is under
administration, notice must be sent to the administrator of the estate, since it is the
said administrator, as representative of the estate, who has the legal obligation to
pay and discharge all debts of the estate and to perform all orders of the court. In
that case, legal notice of the assessment was sent to two heirs, neither one of
whom had any authority to represent the estate. We said:
The notice was not sent to the taxpayer for the purpose of giving effect to the
assessment, and said notice could not produce any effect. In the case of Bautista
and Corrales Tan v. Collector of Internal Revenue this Court had occasion to state
that the assessment is deemed made when the notice to this effect is released,
mailed or sent to the taxpayer for the purpose of giving effect to said assessment. It
appearing that the person liable for the payment of the tax did not receive the
assessment, the assessment could not become final and executory. (Citations
omitted, emphasis supplied.)

In this case, the assessment was served not even on an heir of the Estate, but on a
completely disinterested third party. This improper service was clearly not binding
on the petitioner.
Rallos vs. Felix Go Chan Realty Corp., 81 SCRA 251 (1978);
G.R. No. L-24332 January 31, 1978

RAMON
RALLOS,
Administrator
of
the
Estate
of
CONCEPCION
RALLOS, petitioner, vs. FELIX GO CHAN & SONS REALTY CORPORATION and
COURT OF APPEALS, respondents.
When an agency relationship is established, and the agent acts for the principal, he is insofar as the
world is concerned essentially the principal acting in the particular contract or transaction on hand.
Consequently, the acts of the agent on behalf of the principal within the scope of the authority have
the same legal effect and consequence as though the principal had been the one so acting in the given
situation. Rallos v. Felix Go Chan & Sons Realty Corp., 81 SCRA 251 (1978)

Plaintiff: Ramon Rallos

Defendant: Felix Go Chan & Sons Realty Corporation
Facts: Concepcion and Gerundia Rallos were sisters and registered co-owners of the parcel
of land in issue. 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.
Issues: Whether or not the sale fell within the exception to the general rule that death
extinguishes the authority of the agent
Held/Ratio: Yes the sale is void. The court held that no one may contract in the name of
another without being authorized by the latter, or unless he has by law a right to represent
him (Art. 1317 of the Civil Code). Simons authority as agent was extinguished upon
Concolacions death. The sale did not fall under the exceptions to the general rule that
death ipso jure extinguishes the authority of the agent. Art. 1930 inapplicable since SPA in
favor of Simon Rallos was not coupled with interest and Art. 1931 inapplicable because
Rallos knew of principal Concepcions death. For Art 1931 to apply, both requirements must
be present
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.

(Court discussed relevant principles first)

Relationship of Agency (concept arising from principles under Art 1317 and 1403)- 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

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 others, 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)

Facts: Concepcion and Gerundia both surnamed Rallos were sisters and registered
co-owners of a parcel of land known as Lot No. 5983 of the Cadastral Survey of
Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On
April 21, 1954, the sisters executed a special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On
March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold
the undivided shares of his sisters Concepcion and Gerundia in lot 5983 to Felix Go
Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was
registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a
new transfer certificate of Title No. 12989 was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of
Concepcion Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court
of First Instance of Cebu, praying (1) that the sale of the undivided share of the
deceased Concepcion Rallos in lot 5983 be d unenforceable, and said share be
reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix
Go Chan & Sons Realty Corporation be cancelled and another title be issued in the
names of the corporation and the "Intestate estate of Concepcion Rallos" in equal
undivided and (3) that plaintiff be indemnified by way of attorney's fees and
payment of costs of suit. Named party defendants were Felix Go Chan & Sons Realty
Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently,
the latter was dropped from the complaint. The complaint was amended twice;

defendant Corporation's Answer contained a crossclaim against its co-defendant,

Simon Rallos while the latter filed third-party complaint against his sister, Gerundia
Rallos While the case was pending in the trial court, both Simon and his sister
Gerundia died and they were substituted by the respective administrators of their
estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half proindiviso share of Concepcion Rallos in the property in question, Lot 5983 of the
Cadastral Survey of Cebu is concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title
No. 12989 covering Lot 5983 and to issue in lieu thereof another in the names of
FELIX GO CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos
in the proportion of one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay to plaintiff in concept of reasonable attorney's fees the sum of
P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of
Simeon Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the
sum of P5,343.45, representing the price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay in concept of reasonable attorney's fees to Felix Go Chan & Sons
Realty Corporation the sum of P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate
of Simeon Rallos, against Josefina Rallos special administratrix of the Estate of
Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a
complaint against the regular administrator of the Estate of Gerundia Rallos or a
claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter
of the third-party complaint, at bar. (pp. 98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of
Appeals from the foregoing judgment insofar as it set aside the sale of the one-half
(1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier,
resolved the appeal on November 20, 1964 in favor of the appellant corporation
sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved
for a reconsider of the decision but the same was denied in a resolution of March 4,
1965. 2
Issue: What is the legal effect of an act performed by an agent after the death of his
principal? Applied more particularly to the instant case, We have the query. is the
sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was
executed by the agent after the death of his principal? What is the law in this
jurisdiction as to the effect of the death of the principal on the authority of the
agent to act for and in behalf of the latter? Is the fact of knowledge of the death of
the principal a material factor in determining the legal effect of an act performed
after such death?
Held: 1. It is a basic axiom in civil law embodied in our Civil Code that no one may
contract in the name of another without being authorized by the latter, or unless he
has by law a right to represent him. 3 A contract entered into in the name of
another by one who has no authority or the legal representation or who has acted
beyond his powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed, before it is revoked
by the other contracting party. 4 Article 1403 (1) of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no
authority or legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of
the relationship of agency whereby one party, caged the principal (mandante),
authorizes another, called the agent (mandatario), to act for and in his behalf in
transactions with third persons. The essential elements of agency are: (1) there is
consent, express or implied of the parties to establish the relationship; (2) the
object is the execution of a juridical act in relation to a third person; (3) the agents
acts as a representative and not for himself, and (4) the agent acts within the scope
of his authority. 5
Agency is basically personal representative, and derivative in nature. The authority
of the agent to act emanates from the powers granted to him by his principal; his
act is the act of the principal if done within the scope of the authority. Qui facit per
alium facit se. "He who acts through another acts himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned only
with one cause death of the principal Paragraph 3 of Art. 1919 of the Civil Code
which was taken from Art. 1709 of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the
agent; ... (Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent,
agency is extinguished by the death of the principal or the agent. This is the law in
this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the
rationale for the law is found in thejuridical basis of agency which
is representation Them being an in. integration of the personality of the principal
integration that of the agent it is not possible for the representation to continue to
exist once the death of either is establish. Pothier agrees with Manresa that by
reason of the nature of agency, death is a necessary cause for its
extinction. Laurent says that the juridical tie between the principal and the agent is
severed ipso jure upon the death of either without necessity for the heirs of the fact
to notify the agent of the fact of death of the former. 9
The same rule prevails at common law the death of the principal effects
instantaneous and absolute revocation of the authority of the agent unless the
Power be coupled with an interest. 10 This is the prevalent rule in American
Jurisprudence where it is well-settled that a power without an interest confer. red
upon an agent is dissolved by the principal's death, and any attempted execution of
the power afterward is not binding on the heirs or representatives of the
deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of
the agent extinguishes the agency, subject to any exception, and if so, is the instant
case within that exception? That is the determinative point in issue in this litigation.
It is the contention of respondent corporation which was sustained by respondent
court that notwithstanding the death of the principal Concepcion Rallos the act of
the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is
valid and enforceable inasmuch as the corporation acted in good faith in buying the
property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule
afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of
the principal, if it has been constituted in the common interest of the latter and of

the agent, or in the interest of a third person who has accepted the stipulation in his
favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the
principal or of any other cause which extinguishes the agency, is valid and shall be
fully effective with respect to third persons who may have contracted with him in
good. faith.
Article 1930 is not involved because admittedly the special power of attorney
executed in favor of Simeon Rallos was not coupled with an interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent
after the death of his principal is valid and effective only under two conditions, viz:
(1) that the agent acted without knowledge of the death of the principal and (2) that
the third person who contracted with the agent himself acted in good faith. Good
faith here means that the third person was not aware of the death of the principal at
the time he contracted with said agent. These two requisites must concur the
absence of one will render the act of the agent invalid and unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of
the death of his principal at the time he sold the latter's share in Lot No. 5983 to
respondent corporation. The knowledge of the death is clearly to be inferred from
the pleadings filed by Simon Rallos before the trial court. 12 That Simeon Rallos
knew of the death of his sister Concepcion is also a finding of fact of the court a
quo 13 and of respondent appellate court when the latter stated that Simon Rallos
'must have known of the death of his sister, and yet he proceeded with the sale of
the lot in the name of both his sisters Concepcion and Gerundia Rallos without
informing appellant (the realty corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of
his principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The
law expressly requires for its application lack of knowledge on the part of the agent
of the death of his principal; it is not enough that the third person acted in good
faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old
Civil rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made
after the death of the principal because it was not shown that the agent knew of his
principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim
Guan, et al., 1961, where in the words of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented
no proof and there is no indication in the record, that the agent Luy Kim Guan was
aware of the death of his principal at the time he sold the property. The death 6f the
principal does not render the act of an agent unenforceable, where the latter had no
knowledge of such extinguishment of the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of

Appeals reasoned out that there is no provision in the Code which provides that
whatever is done by an agent having knowledge of the death of his principal is void
even with respect to third persons who may have contracted with him in good faith
and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of
the general rule enunciated in Article 1919 that the death of the principal
extinguishes the agency. That being the general rule it follows a fortiorithat any act
of an agent after the death of his principal is void ab initio unless the same fags
under the exception provided for in the aforementioned Articles 1930 and 1931.
Article 1931, being an exception to the general rule, is to be strictly construed, it is
not to be given an interpretation or application beyond the clear import of its terms
for otherwise the courts will be involved in a process of legislation outside of their
judicial function.
5. Another argument advanced by respondent court is that the vendee acting in
good faith relied on the power of attorney which was duly registered on the original
certificate of title recorded in the Register of Deeds of the province of Cebu, that no
notice of the death was aver annotated on said certificate of title by the heirs of the
principal and accordingly they must suffer the consequences of such omission. 17
To
support
such
argument
reference
in Manresa's Commentaries which We quote:

is

made

to

portion

If the agency has been granted for the purpose of contracting with certain persons,
the revocation must be made known to them. But if the agency is general iii nature,
without reference to particular person with whom the agent is to contract, it is
sufficient that the principal exercise due diligence to make the revocation of the
agency publicity known.
In case of a general power which does not specify the persons to whom represents'
on should be made, it is the general opinion that all acts, executed with third
persons who contracted in good faith, Without knowledge of the revocation, are
valid. In such case, the principal may exercise his right against the agent, who,
knowing of the revocation, continued to assume a personality which he no longer
had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The Civil Code does not impose a duty on the heirs to notify the agent of the death
of the principal What the Code provides in Article 1932 is that, if the agent die his
heirs must notify the principal thereof, and in the meantime adopt such measures
as the circumstances may demand in the interest of the latter. Hence, the fact that
no notice of the death of the principal was registered on the certificate of title of the
property in the Office of the Register of Deeds, is not fatal to the cause of the estate
of the principal

6. Holding that the good faith of a third person in said with an agent affords the
former sufficient protection, respondent court drew a "parallel" between the instant
case and that of an innocent purchaser for value of a land, stating that if a person
purchases a registered land from one who acquired it in bad faith even to the
extent of foregoing or falsifying the deed of sale in his favor the registered owner
has no recourse against such innocent purchaser for value but only against the
forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo
was a co-owner of lands with Agustin Nano. The latter had a power of attorney
supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land
titles. The power was registered in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to that Office, he found all in order
including the power of attorney. But Vallejo denied having executed the power The
lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the
decision of the court a quo, the Supreme Court, quoting the ruling in the case
of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant- appellee
must be overruled. Agustin Nano had possession of Jose Vallejo's title papers.
Without those title papers handed over to Nano with the acquiescence of Vallejo, a
fraud could not have been perpetuated. When Fernando de la Canters, a member of
the Philippine Bar and the husband of Angela Blondeau, the principal plaintiff,
searched the registration record, he found them in due form including the power of
attorney of Vallajo in favor of Nano. If this had not been so and if thereafter the
proper notation of the encumbrance could not have been made, Angela Blondeau
would not have sent P12,000.00 to the defendant Vallejo.' An executed transfer of
registered lands placed by the registered owner thereof in the hands of another
operates as a representation to a third party that the holder of the transfer is
authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a
breach of trust, the one who made it possible by his act of coincidence bear the
loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because
here We are confronted with one who admittedly was an agent of his sister and who
sold the property of the latter after her death with full knowledge of such death. The
situation is expressly covered by a provision of law on agency the terms of which
are clear and unmistakable leaving no room for an interpretation contrary to its
tenor, in the same manner that the ruling in Blondeau and the cases cited therein
found a basis in Section 55 of the Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary
instrument is presented for registration shall be conclusive authority from the
registered owner to the register of deeds to enter a new certificate or to make a
memorandum of registration in accordance with such instruments, and the new
certificate or memorandum Shall be binding upon the registered owner and upon all
persons claiming under him in favor of every purchaser for value and in good
faith: Provided however, That in all cases of registration provided by fraud, the
owner may pursue all his legal and equitable remedies against the parties to such
fraud without prejudice, however, to the right, of any innocent holder for value of a
certificate of title. ... (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed
decision is an 1842 ruling of the Supreme Court of Pennsylvania in Cassiday v.
McKenzie wherein payments made to an agent after the death of the principal were
held to be "good", "the parties being ignorant of the death". Let us take note that
the Opinion of Justice Rogers was premised on the statement that the parties were
ignorant of the death of the principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are
ignorant of the death is a good payment. in addition to the case in Campbell before
cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117, the general
question that a payment after the death of principal is not good. Thus, a payment of
sailor's wages to a person having a power of attorney to receive them, has been
held void when the principal was dead at the time of the payment. If, by this case, it
is meant merely to decide the general proposition that by operation of law the
death of the principal is a revocation of the powers of the attorney, no objection can
be taken to it. But if it intended to say that his principle applies where there was
110 notice of death, or opportunity of twice I must be permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident
circumstance of the death of the principal, which he did not know, and which by no
possibility could he know? It would be unjust to the agent and unjust to the debtor.
In the civil law, the acts of the agent, done bona fide in ignorance of the death of his
principal are held valid and binding upon the heirs of the latter. The same rule holds
in the Scottish law, and I cannot believe the common law is so unreasonable... (39
Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may
evoke, mention may be made that the above represents the minority view in
American jurisprudence. Thus in Clayton v. Merrett, the Court said.
There are several cases which seem to hold that although, as a general principle,
death revokes an agency and renders null every act of the agent thereafter
performed, yet that where a payment has been made in ignorance of the death,

such payment will be good. The leading case so holding is that of Cassiday v.
McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76, where, in an elaborate opinion, this
view ii broadly announced. It is referred to, and seems to have been followed, in the
case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in this latter case it appeared that
the estate of the deceased principal had received the benefit of the money paid,
and therefore the representative of the estate might well have been held to be
estopped from suing for it again. . . . These cases, in so far, at least, as they
announce the doctrine under discussion, are exceptional. The Pennsylvania
Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to
stand almost, if not quite, alone in announcing the principle in its broadest scope.
(52, Misc. 353, 357, cited in 2 C.J. 549)

but see Arts. 1930 and 1931; 1932

Art. 1930. The agency shall remain in full force and effect even after the
death of the principal, if it has been constituted in the common interest of
the latter and of the agent, or in the interest of a third person who has
accepted the stipulation in his favor. (n)
When death of principal does not terminate agency.
Agency is terminated instantly by the death of the principal. (Art. 1919[3].) The
reason is obvious. In agency, being based on representation, there is no one to be
represented where the principal is already dead. However, there are exceptions to
this rule. In the following cases, the agency remains in full force and effect even
after the death of the principal:
(1) if the agency has been constituted in the common interest of the principal and
the agent (see Art. 1927.); and
(2) if it has been constituted in the interest of a third person who has accepted the
stipulation in his favor.9
Art. 1931. Anything done by the agent, without knowledge of the death of
the principal or of any other cause which extinguishes the agency, is valid
and shall be fully effective with respect to third persons who may have
contracted with him in good faith. (1738)
Nature of agents authority after death of principal.
Normally, the death of the principal will terminate the agency. However, the agent is
required to finish the business already begun on the death of the principal should
delay entail any danger. (Art. 1884, par. 2.)
In the case where the principals affairs must be wound up, or even in rare cases,
carried on for a time by the agent after the death of the principal, the agent acts
because of a prior and not a presently existing relation with the creator of the
authority; but the agents duty is no longer to the deceased but to a quasientity
the principals estate. Hence, it is for the personal representative (executor or
administrator) vested by law with the authority to administer the liquidation of the
principals affairs to say what shall be done about the business originally delegated

by the principal to the agent. If the agent has to continue the business, it must be
by the personal representatives authority and as his agent. (see Mechem, pp. 183184.)
Validity of acts of agent after termination of agency.
The death of the principal extinguishes the agency; but in the same way that
revocation of the agency does not prejudice third persons who have dealt with the
agent in good faith without notice of the revocation (Arts. 1921, 1922.), such third
persons are protected where it is not shown that the agent had knowledge of the
termination of the agency because of the death of the principal or of any other
cause which extinguishes the agency. (Herrera vs. Luy Kim Guan, 1 SCRA 406
[1961]; Buason and Reyes vs. Panuyas, 105 Phil. 795 [1959].) This rule, it is
argued, will best subserve the condition and wants of the people and enable them
to transact the business of expanding commercial life with a proper sense of safety
and security. (3 Am. Jur. 2d 456.) A contrary rule would operate very unjustly and
produce very great hardships. Thus: A party dealing with an insolvent agent, upon
the faith of his well-known authority from a wealthy and distant principal, is
suddenly confronted with the fact that the authority had ceased by the death of the
principal, a day or perhaps one hour before the transaction occurred. (Mechem on
Agency, Sec. 665, cited in Teller, p. 111.)
The common law doctrine is that the acts of agency done after the death of the
principal are void, even though the death is unknown to the agent. Many of the
cases and text writers have regarded the doctrine as harsh and unjust, and in view
of the apparent hardship, the rule has been modified by statute in some
jurisdictions in conformity to the civil law rule. (2 C.J. 598.)
Note that Article 1931 speaks of knowledge of death of the principal or of any
other cause and requires not only the third persons to be in good faith but also the
agent.
EXAMPLE:
P authorized A to sell the formers land. Subsequently, P died. Without the knowledge of Ps
death, A sold the land to T.
Can the heirs of P recover the land from T? No, if both A and T acted in good faith. Yes, if
either A or T acted in bad faith.

Art. 1932. If the agent dies, his heirs must notify the principal thereof, and
in the meantime adopt such measures as the circumstances may demand
in the interest of the latter. (1739)
Duty of agents heirs to protect interest of principal.
If the agent dies, the agency is also extinguished. (Art. 1919[3].) In such case, the
law imposes upon the heirs of the deceased agent not only the obligation to notify
the principal to enable the latter reasonable opportunity to take such steps as may
be necessary to meet the situation (Art.1929.) but also to adopt such measures as
the circumstances may demand in the interest of the principal.
Article 1932 does not impose a duty on the heirs of the principal to notify the agent
of the death of the principal. (Rallos vs. Felix Go Chan, supra.)
Continuation by agents heirs of agency.

(1) General rule. An agency calls for personal services. Ordinarily, therefore, the
agents duties cannot be performed by his personal representatives, and in case of
his death, the agency is generally thereby terminated. (2 C.J.S. 185.)
Since the death of the agent ends his ability to perform the duties of the agency,
the event of the agents death terminates the agency relationship at least in those
instances where personal services and skill are required or cannot be performed by
the agents representative and this is true, even though the agency is for a specified
period which has not yet expired.(12C.J.S.1178.)
The rights and obligations of the agent arising from the contract are not
transmissible to his heirs. (see Art. 1311; Terrado vs. Court of Appeals, 131 SCRA
371 [1984].)
(2) Exceptions. There are cases when the authority conferred may pass to the
agents heirs.
(a) The heirs duty to continue the agency after the death of the agent arises from
what may be termed as an agency by operation of law or a presumed or tacit
agency. (see 11 Manresa 588; see also Arts. 1884, par. 2, 1885, 1929, and 1931.) Of
course, the heirs can continue the agency only temporarily for, as we have seen,
the essence of the contract is personal confidence. The principal has a right to an
agent of his choice. There is nothing to suggest that he would or should expect the
authority to pass to the agents heirs or personal representatives.
(b) Where the agency is one coupled with an interest in the subject matter of the
agency (like the power of sale in a mortgage), the death of the agent will not
instantly end the relationship, and consequently, his heirs or representatives may
subsequently exercise the power conferred at least insofar as may be necessary to
protect the interests of the estate of the agent. (see 2 C.J.S. 1178.) An agency
coupled with an interest survives the death of the agent. It is transmitted to his
heirs or representatives.