72 GONZALEZ & GOMEZ V HABERER representations of Gomez.

GR # 22604
FEBRUARY 3, 1926
Topic: PRINCIPAL: OBLIGATIONS AND LIABILITIES TO THIRD PARTIES
Petitioners: GUADALUPE GONZALES and LUIS GOMEZ
Respondents: E. J. HABERER
PONENTE: OSTRAND, J.
SUMMARY: This is an action for recover of 34,260 due to the plaintiffs as per a written
conctract for the sale of a tract of land situated in Nueva Ecija. Plaintiffs ask for damages
for 10k for failure of the defendant to comply with the agreement. Defendant in his
answer admits that 31,000 remains unpaid. However, plaintiffs led him to believe that
they were in possession of the land, when in reality, the entire area of the land was
occupied by adverse claimants and the title was disputed. Because of this, he was not able
to take possession of the land which is not according to the terms of the contract. He asks
that the contract be rescinded, and plaintiffs be ordered to return 30k+ damages for
breach. RTC dismissed complaint, declared to contract void and gave defendant 30k.
Plaintiffs appealed to the SC. SC held that one of the essential conditions in the contract is
taking possession of the property and the failure to comply with this condition without
fault on the part of the defendant is ground for recission. (Agency) As to the contention
that the plaintiff Gonzalez cannot be charged with the misrepresentations of Gomez, it is
sufficient to say that the latter in negotiating for the sale of the land acted as the agent
and representative of the other plaintiff, his wife; having accepted the benefit of the land
acted as the agent and representative of the other plaintiff, his wife; having accepted the
benefit of the representations of her agent, she cannot, of course, escape liability for
them.
PETITIONER’S CONTENTIONS: Defendant does not want to pay the balance of 34,260 due to
the plaintiffs based on a written agreement for the sale of a tract of land in Nueva Ecija. They
ask to damages for 10k for failure to comply with agreement.
RESPONDENT’S CONTENTIONS: They claim that through misrepresentations, they were led
to believe that the land was unoccupied and that the title was not disputed. However, the entire
area of the land was in the possession of adverse claimants, and the plaintiffs made no efforts
to prosecute the proceedings for the registration of the land. He asks that the contract be
rescinded and plaintiffs be ordered to return to him the 30k, and pay them 25k for damages and
breach of contract.
LAW/DOCTRINE APPLIED BY THE COURT: Where a sale of land is effected on the strength of
misrepresentations of the agent of the vendor, the latter cannot accept the bene t of such
representations and at the same time deny the responsibility for them.
ANALYSIS OF THE CASE: We may say, however, that the evidence leaves no doubt that some
misrepresentations were made and that but for such misrepresentations the defendant
would not have been likely to enter into the agreement in the form it appeared. As to the
contention that the plaintiff Gonzalez cannot be charged with the misrepresentations of
Gomez, it is su cient to say that the latter in negotiating for the sale of the land acted as the
agent and representative of the other plaintiff, his wife; having accepted the bene t of the
land acted as the agent and representative of the other plaintiff, his wife; having accepted
the bene t of the representations of her agent she cannot, of course, escape liability for
them.
CONCLUSION: Gonzales could not deny responsibility as she accepted the benefit of the
representations of Gomez.

DOCTRINES: Where a sale of land is effected on the strength of misrepresentations of the

agent of the vendor, the latter cannot accept the benefit of such representations and at
the same time deny the responsibility for them.

ISSUES: W/N Gonzales, as agent-representative is liable to pay for damages? Yes.

HELD AND RATIO:

Yes, Gomez, as agent-representative is liable to pay for damages.
Where a sale of land is affected on the strength of misrepresentations of the agent of the
vendor, the latter cannot accept the benefit of such representations and at the same time deny
the responsibility for them.

In this case, since Gomez, in negotiating for the sale of the land acted as the agent and
representative of his wife Gonzales; having accepted the benefit of the land acted as the
agent and representative of the Gonzales, his wife; having accepted the benefit of the
representations of her agent she cannot, of course, escape liability for them.

Therefore, Gonzales could not deny responsibility as she accepted the benefit of the
 73. Tuason v Orozco
GR L-2344
February 10, 1906
TOPIC: Principal: Obligations and Liabilities to third parties
PETITIONER: Gonzalo Tuason
RESPONDENT: Dolores Orozco
PONENTE: Mapa
LAW APPLICABLE:
Art. 1727 A debt thus incurred by the agent is binding directly upon the principal, provided
the former acted, as in the present case, within the scope of his authority
SUMMARY: In 1888, Juan Vargas as principal, husband of defendant Dolores Orozco,
executed a special power of attorney in favor of (agent) Enrique Grupe, authorizing him to;
(1) dispose of all his property, in particular a house and lot situated at 24 Calle Nueva,
Malate; and (2) to mortgage the house for the purpose of securing the payment of any
amount advanced to Dolores Orozco. One January 21, 1980, Enrique Grupe and Dolores
Orozco obtained a loan from plaintiff Gonzalo Tuason secured by a mortgage referred to in
the SPA. The instrument evidencing the debt was duly recorded in the Registry of Property
and showed Enrique Grupe, as attorney in fact for Vargas, received from the plaintiff a loan
of P2,200 and delivered the same to the defendant. That to secure the payment, he
mortgaged the property of his principal with defendant’s consent. He also received P1,300,
this amount he borrowed for his own use. Complaint refers only to P2,200 loan. Defendant
denies receiving the amount, but her denial cannot overcome the proof. Not explicitly
mentioned in case but can be inferred that RTC ruled in favor of Tuason, and so did the CA,
hence this case.
DOCTRINES:
ISSUES: W/N Principal is liable?
HELD AND RATIO: YES – Agent acted within his authority thus binding his principal
Petitioner:
• Appellant claims that the instrument is evidence of a debt personally incurred by
Grupe
• That the debt was for his own benefit, and that Grupe, by the terms of the
agreement, bound himself personally to pay the debt
Respondent:
• Respondent Dolores merely denies having received anything
Applicable Law/Doctrine:
• Art. 1727 A debt thus incurred by the agent is binding directly upon the principal,
provided the former acted, as in the present case, within the scope of his authority
Analysis:
• Orozco was one of the parties to that instrument and signed it
• This implies an admission on her part that the statements in the agreement relating
to her are true
• In addition, she wrote a letter on October 23, 1903, to the attorneys of the plaintiff
promising to pay on November 5
• She then admits the authenticity of this letter and never denied having received the
money
• The fact the defendant received the money from her husband’s agent and not from
the creditor does not affect the validity of the mortgage in view of the conditions
contained in the SPA
• The agreement, so far as the amount is concerned, was signed by Grupe as attory in
fact for vargas
• Pursuant to instructions, the money was delivered to Vargas’ wife, defendant
• To secure the payment, Vargas’ property was mortgaged
• His wife took part in the execution of the mortgages, as required in the SPA
• According to Art. 1727 of the Civil Code, a debt thus incurred by the agent is binding
directly upon the principal, provided the former acted, as in the present case, within
the scope of his authority
• The fact the agent has also bound himself to pay the debt does not relieve from
liability for whose benefit the debt was incurred
Note: SPA Agreement
1. Enrique Grupe acknowledges to have this day received from Gonzalo Tuason as a loan,
after deducting therefrom the interest agreed upon, the sum of 3,500 pesos in cash, to his
entire satisfaction, which sum he promises to pay within one year from the date hereof.
2. Grupe also declares that of the 3,500 pesos, he has delivered to Dolores Orozco the sum of
2,200 pesos, having retained the remaining 1,300 pesos for use in his business; that
notwithstanding this distribution of the amount borrowed, he assumes liability for the whole
sum of 3,500 pesos, which he promises to repay in current gold or silver coin, without
discount, in this city on the date of the maturity of the loan, he otherwise to be liable for all
expenses incurred and damages suffered by his creditor by reason of his failure to comply
with any or all of the conditions stipulated herein, and to pay further interest at the rate of 1
per cent per month from the date of default until the debt is fully paid.
3. Grupe pledges as special security for the payment of the debt 13 shares of stock in the
"Compañia de los Tranvias de Filipinas," which shares he has delivered to his creditor duly
indorsed so that the latter in case of his insolvency may dispose of the same without any
further formalities.
4. To secure the payment of the 2,200 pesos delivered to Dolores Orozco as aforesaid he
specially mortgages the house and lot No. 24, Calle Nueva, Malate, in the city of Manila (the
same house referred to in the power at attorney executed by Vargas to Grupe).
5. Dolores Orozco states that, in accordance with the requirement contained in the power of
attorney executed by Vargas to Grupe, she appears for the purpose of confirming the
mortgage created upon the property in question.
6. Gonzalo Tuason does hereby accept all rights and actions accruing to him under his
contract.
 74 PRIETO V. CA
GR# 158597
JUNE 18, 2012
TOPIC: XI. PRINCIPAL: OBLIGATIONS AND LIABILITIES TO THIRD PARTIES
PETITIONER: MARCOS V. PRIETO
RESPONDENT: CA, HON. ROSE MARY R. MOLINA-ALIM, in her capacity as Pairing Judge of Branch 67
of the RTC, First Judicial Region, Bauang, La Union, FAR EAST BANK & TRUST COMPANY, now the BANK
OF THE PHILIPPINE ISLANDS, through ATTY. EDILBERTO B. TENEFRANCIA, and SPOUSES ANTONIO and
MONETTE PRIETO
PONENTE: BERSAMIN
LAW APPLICABLE: Art. 1898. If the agent contracts in the name of the principal, exceeding the scope
of his authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal. In this case, however,
the agent is liable if he undertook to secure the principal's ratification.
SUMMARY: Spouses Marcos (Marcos) and Susan Prieto filed in the RTC a complaint against FEBTC and
Spouses Antonio (Antonio) and Monette Prieto to declare the nullity of several real estate mortgage
contracts. Marcos narrated that they executed a SPA to authorize Antonio to borrow money from
FEBTC, using a collateral their real property located in Bauag, La Union; that Antonio, using the property
as collateral, obtained from FEBTC a series of loans worth P5M, evidenced by promissory notes and
secured by separate REM contracts; Antonio failed to pay the loans, leading to FETBC to initiate the
extra-judicial foreclosure on the mortgages; the PN and REM contracts were in the name of Antonio
and Monette themselves alone, rendering the PN and the mortgage contracts null and void. RTC issued
TRO and set a preliminary hearing on the application for the issuance of a writ of preliminary injunction.
RTC denied the application. MOR denied. RTC dismissed the complaint – while the name of Marcos did
not appear in the REM, Marcos cannot be absolved of liability because he had no right of action against
the person with whom his agent had contracted; that the mortgage, even if entered in the name of
Antonio, should be deemed made in Marcos’ behalf as principal; and even assuming that Antonio
exceeded his authority as agent, Marcos ratified Antonio’s action by executing the letter of
acknowledgement making Marcos liable. MOR denied. Marcos filed a petition for certiorari in the CA
imputing grave abuse of discretion to the RTC in disallowing his appeal (which was filed 4 days beyond
the reglementary period). Marcos argued he filed only two days late due to pain and disappointment
he and his wife suffered over the failure of a recent medical procedures they had undergone. CA
dismissed the petition – Marcos failed to perfect his appeal on time and RTC did not commit any error.
MOR denied.
DOCTRINES: In agency, ratification is the adoption or confirmation by one person of an act performed
on his behalf by another without authority. The substance of ratification is the confirmation after the
act, amounting to a substitute for a prior authority.
ISSUES:
1. Whether the ratification by the petitioner/plaintiff would validate the real estate mortgage and
promissory notes and such ratification in letter of acknowledgment could be treated as a contract of
adhesion?
HELD AND RATIO:
1. YES. In agency, ratification is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. The substance of ratification is the confirmation after the act,
amounting to a substitute for a prior authority. Here, there was such a ratification by Marcos, as borne
out by his execution of the letter of acknowledgement.
A. PETITIONER’S OCNTENTIONS:
• Marcos alleged therein that his property had thereby become "unlawfully burdened by
unauthorized real estate mortgage contracts," because the loans and the mortgage contracts
had been incurred by Antonio and his wife only for themselves, to the exclusion of petitioner.
B. RESPONDENT’S CONTENTION:
• Marcos could not deny that under the express terms of the SPA, he had precisely granted to
Antonio as his agent the authority to borrow money, and to transfer and convey the property
by way of mortgage to FEBTC; to sign, execute and deliver promissory notes; and to receive the
proceeds of the loans on the former's behalf. In other words, the mortgage contracts were valid
and enforceable against Marcos, who was consequently fully bound by their terms.
C. LAW/DOCTRINE APPLIED BY THE COURT:
• Article 1898 of the Civil Code, the acts of an agent done beyond the scope of his authority do
not bind the principal unless the latter expressly or impliedly ratifies the same.
D. ANALYSIS OF THE CASE:
• Even if it was assumed that Antonio's obtaining the loans in his own name and executing the
mortgage contracts also in his own name had exceeded his express authority under the SPA,
Marcos was still liable to FEBTC by virtue of his express ratification of Antonio's act. Marcos
insists that the letter of acknowledgment was only a mere "letter (written) on a mimeographic
paper . . . a mere scrap of paper, a document by adhesion."
• The Court is confounded by Marcos' dismissal of his own express written ratification of
Antonio's act. Being himself a lawyer, Marcos was aware of the import and consequences of
the letter of acknowledgment.
• The Court cannot agree with his insistence that the letter was worthless due to its being a
contract of adhesion. The letter was not a contract, to begin with, because it was only a
unilateral act of his. Secondly, his insistence was fallacious and insincere because he knew as a
lawyer that even assuming that the letter could be treated as a contract of adhesion it was
nonetheless effective and binding like any other contract.
• The Court has consistently held that a contract of adhesion was not prohibited for that reason.
As the tenor of the acknowledgment indicated, he was fully aware of the meaning and sense of
every written word or phrase, as well as of the legal effect of his confirmation thereby of his
agent's act.
E. CONCLUSION:
• WHEREFORE, the Court AFFIRMS the resolution promulgated by the Court of Appeals and
ORDERS petitioner to pay the costs of the suit.
 75. Filipinas Life v Pedroso
GR # 159489
February 4, 2008
TOPIC: Principal – Obligations and Liabilities to Third Parties B.
PETITIONER: Filipinas Life Assurance Company (now known as Ayala Life)
RESPONDENT: Clemente Pedroso, Teresita Pedroso, Jennifer Palacio thru Attorney-in-Fact,
Ponanciano Marquez
PONENTE: Quisumbing, J.
LAW APPLICABLE:
C.
SUMMARY:
• Teresita holds a 20-year endowment life insurance issued by Filipinas.
• Teresita claims that Renato was her insurance agent since 1972 and Renato collected her
monthly premiums.
• Renato informed her that Filipinas was holding a promotional investment program.
Teresita, enticed, invested and issued a post-dated check for P10k.
• Renato issued Teresita his personal check for the prepaid interest and a Filipinas’ “Agent’s
Receipt.”
• Teresita called Filipinas and talked to Francisco, the administrative assistant, who referred
her to the branch manager, Angel.
• Teresita inquired about the promo and Angel confirmed such inquiry. Teresita was even
informed that she could push through with the check she gave.
D.
• The check has the endorsement of Francisco and was deposited in the account of Filipinas.
Relying on Filipinas’ representatives, Teresita waited for the maturity of her investment.
• Teresita went to Filipinas where Francisco gave her the 10k she invested after requesting
for it. Teresita made 7 to 8 more investments after.
• At maturity of the investments, Renato took back the yellow-colored Agent’s Receipt from
Teresita.
• Teresita told Palacio, another Filipinas customer, about the investment plan. Palacio also
made the same investment. However, then Teresita tried to withdraw, Renato did not want
to return the amount demanded. Palacio also failed to withdraw her due to Filipinas’
refusal.
• Renato, according to Teresita, had disappeared. Hence, they filed an action for recovery.
• RTC: Filipinas and its representatives, Renato, Francisco, and Angel are jointly and solidarily
liable.
• CA: Affirmed RTC. E.
DOCTRINES: Qui per alium facit per seipsum facere videtur – He who does a thing by an agent is
considered as doing it himself.
ISSUES:
ONE ISSUE ONLY – W/N CA erred in affirming the RTC in holding Filipinas to be jointly and severally liable
with its representatives instead of holding its agent, Renato, solely liable?
HELD AND RATIO:
1. NO – CA did not err. Renato’s authority to solicit and receive investments is clear. Filipinas, as
principal, is liable for obligations contracted by its agent, Renato.
A. PETITIONER’S CONTENTIONS:
a. Filipinas does not dispute that Renato was its agent, but claims it was only a life
insurance company and was not engaged in collecting investment money.
b. The investment scheme offered by Renato, Francisco, and Angel was outside the
scope of their authority as agents. Therefore, Filipinas cannot be held liable.
RESPONDENT’S CONTENTIONS:
a. Filipinas authorized Renato to solicit investments.
b. Filipinas official documents were used in consummating the transactions. The
transactions were confirmed by Filipinas officers, Francisco and Angel.
c. They assert that they exercised the diligence required in ascertaining the authority
of the alleged agents and Filipinas failed in its duty to ensure that its agents acted
within their authority.
LAW/DOCTRINE APPLIED BY THE COURT
a. By contract of agency, a person binds himself to render some service in
representation or on behalf of another, with the consent of the latter.
b. General Rule: Principal is responsible for the acts of its agent done within the scope
of its authority and bears the damages to third person. When the agent exceeds its
authority, agent becomes liable. But even when the agent exceeds, the principal is
still solidarily liable with the agent if the principal allowed the agent to act as though
the latter had full powers.
c. In other words, the acts of an agent beyond the scope of his authority do not bind
the principal, unless the principal ratifies expressly or impliedly.
d. Innocent third persons should not be prejudiced if the principal failed to adopt the
needed measures to prevent misrepresentation, much more if the principal ratified
the agent’s acts.
ANALYSIS OF THE CASE
a. The investments were solicited and received by Renato, who remitted to Filipinas
using Filipinas’ official receipts. Renatos authority to solicit and receive was
established by the parties. When Respondents sought such confirmation, Franciso
and Angel confirmed that Renato had such authority.
b. While it is true that a person dealing with an agent is put upon inquiry and must
discover at his own peril the agent’s authority, Respondents in this case exercised
due diligence in removing all doubts in confirming the validity of Renato as an agent.
c. Filipinas, as principal, is liable.
d. Filipinas cannot profess ignorance of its agent’s acts. Even if Renator’s acts were
beyond his authority as an insurance agent, Filipinas, through Francisco and Angel,
ratified such acts. It cannot be denied that Filipinas denied from the investments.
Hence, Filipinas, in this view, clothed Renato with apparent authority; it is now
estopped to deny.
CONCLUSION
a. WHEREFORE, petition is denied for lack of merit.
 76 COUNTRY BANKERS v KEPPEL
GRN 166044
JUNE 18, 2012
TOPIC: Principal: Obligations and Liabilities to third parties
PETITIONER: Country Bankers Insurance Corporation
RESPONDENT: Keppel Cebu Shipyard, Unimarine Shipping Lines, Inc., Paul Rodriguez
PONENTE: Leonardo-De Castro, J.
LAW APPLICABLE:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his authority, and the
principal does not ratify the contract, it shall be void if the party with whom the agent contracted is aware
of the limits of the powers granted by the principal. In this case, however, the agent is liable if he undertook
to secure the principal's ratification. (n)
Art. 1910. The principal must comply with all the obligations which the agent may have contracted within
the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when
he ratifies it expressly or tacitly. (1727)
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent
if the former allowed the latter to act as though he had full powers. (n)
SUMMARY: Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the shipping industry,
contracted the services of Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering Works,
Inc. (Cebu Shipyard) for dry docking and ship repair works on its vessel, the M/V Pacific Fortune. In
compliance with the agreement, Unimarine secured from Country Bankers Insurance Corp. (CBIC), through
the latter’s agent, Bethoven Quinain. Unimarine failed to settle its obligations so Cebu Shipyard, wrote the
sureties CBIC [to inform them of Unimarine’s nonpayment, and to ask them to fulfill their obligations as
sureties. However, even the sureties failed to discharge their obligations, and so Cebu Shipyard filed a
Complaint RTC. CBIC, in its Answer said that Cebu Shipyard’s complaint states no cause of action. CBIC
alleged that the surety bond was issued by its agent, Quinain, in excess of his authority. The RTC applied
Articles 1900 and 1911 of the Civil Code in holding CBIC liable for the surety bond. It held that CBIC could
not be allowed to disclaim liability because Quinain’s actions were within the terms of the special power
of attorney given to him. The Court of Appeals agreed that CBIC could not be permitted to abandon its
obligation especially since third persons had relied on Quinain’s representations.
SC granted the petition and the complaint against CBIC is dismissed for lack of merit. CBIC is not liable for
the unauthorized acts of its Agent.
DOCTRINES:
For an agency by estoppel to exist, the following must be established:
1. The principal manifested a representation of the agent’s authority or knowingly allowed the agent to
assume such authority;
2. The third person, in good faith, relied upon such representation
3. Relying upon such representation, such third person has changed his position to his detriment.
ISSUES: WON the provisions of Article 1911 of the Civil Code is applicable in the present case to hold
petitioner liable for the acts done by its agent in excess of authority.
HELD AND RATIO:
(1) YES. CBIC IS LIABLE FOR THE SURETY BOND.
A. PETITIONER’S CONTENTIONS:
• Third persons seeking to hold the principal liable for transactions entered into by an agent
should establish the following, in case the same is controverted: 6.6.1. The fact or
existence of the agency; 6.6.2. The nature and extent of authority.
• CBIC said that the correct Civil Code provision to apply in this case is Article 1898. CBIC
asserts that "Cebu Shipyard was charged with knowledge of the extent of the authority
conferred on Mr. Quinain by its failure to perform due diligence investigation
B. DOCTRINE:
• Under Articles 1898 and 1910, an agent’s act, even if done beyond the scope of his
authority, may bind the principal if he ratifies them, whether expressly or tacitly. It must
be stressed though that only the principal, and not the agent, can ratify the unauthorized
acts, which the principal must have knowledge of.
• Article 1911, on the other hand, is based on the principle of estoppel, which is necessary
for the protection of third persons. It states that the principal is solidarily liable with the
agent even when the latter has exceeded his authority, if the principal allowed him to act
as though he had full powers. However, for an agency by estoppel to exist, the following
must be established:
o (1) The principal manifested a representation of the agent’s authority or
knowingly allowed the agent to assume such authority;
o (2) The third person, in good faith, relied upon such representation; and
o (3) Relying upon such representation, such third person has changed his
position to his detriment.
C. APPLICATION:
• This Court cannot agree with the Court of Appeals’ pronouncement of negligence on
CBIC’s part. CBIC not only clearly stated the limits of its agents’ powers in their contracts,
it even stamped its surety bonds with the restrictions, in order to alert the concerned
parties.
o Moreover, its company procedures, such as reporting requirements, show that
it has designed a system to monitor the insurance contracts issued by its
agents. CBIC cannot be faulted for Quinain’s deliberate failure to notify it of
his transactions with Unimarine. In fact, CBIC did not even receive the
premiums paid by Unimarine to Quinain.
o Furthermore, nowhere in the decisions of the lower courts was it stated that
CBIC let the public, or specifically Unimarine, believe that Quinain had the
authority to issue a surety bond in favor of companies other than the
Department of Public Works and Highways, the National Power Corporation,
and other government agencies.
o Neither was it shown that CBIC knew of the existence of the surety bond
before the endorsement extending the life of the bond, was issued to
Unimarine.
o For one to successfully claim the benefit of estoppel on the ground that he has
been misled by the representations of another, he must show that he was not
misled through his own want of reasonable care and circumspection.
D. CONCLUSION: Therefore, CBIC is not liable for the surety bond.
DISPOSITION: WHEREFORE, this petition is hereby GRANTED and the complaint against CBIC is DISMISSED
for lack of merit. The January 29, 2004 Decision and October 28, 2004 Resolution of the Court of Appeals
in CA-G.R. CV No. 58001 is MODIFIED insofar as it affirmed CBIC’s liability on Surety Bond No. G (16) 29419
and Endorsement No. 33152.
 77. Rural Bank of Milaor v Ocfemia infringement and invasion of title thereto and possession thereof. Likewise, Tena had
GRN 137686 previously transacted business on behalf of the bank, and the latter had acknowledged
Feb 8, 2000 her authority. A bank is liable to innocent third persons where representation is made in
the course of its normal business by an agent like Manager Tena even though such agent
is abusing her authority. Clearly, persons dealing with her could not be blamed for
TOPIC: Obligations and Liabilities to third parties
PETITIONER: RURAL BANK OF MILAOR (CAMARINES SUR) believing that she was authorized to transact business for and on behalf of the bank.

RESPONDENT: FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO
OCFEMIA, RENATO OCFEMIA JR, and WINSTON OCFEMIA B. The bank is estopped from questioning the authority of the bank to enter into contract of
PONENTE: Panganiban sale. If a corporation knowingly permits one of its officers or any other agent to act within
the scope of an apparent authority, it holds the agent out to the public as possessing the
power to do those acts; thus, the corporation will, as against anyone who has in good faith
SUMMARY Several parcels of land were mortgaged by the respondents during the lifetime dealt with it through such agent, be estopped from denying the agent’s authority.
of the respondent’s grandparents to the Rural bank of Milaor as shown by the Deed of Real
Estate Mortgage and the Promissory Note. Spouses Felicisimo Ocfemia and Juanita Ocfemia,
one of the respondents, were not able to redeem the mortgaged properties consisting of
seven parcels of land and so the mortgage was foreclosed and thereafter ownership was
transferred to the petitioner bank. Out of the seven parcels of land that were foreclosed,
five of them are in the possession of the respondents because these five parcels of land were
sold by the petitioner bank to the respondents as evidenced by a Deed of Sale. However, the
five parcels of land cannot be transferred in the name of the parents of Merife Nino, one of
the respondents, because there is a need to have the document of sale registered. The
Register of deeds, however, said that the document of sale cannot be registered without the
board resolution of the petitioner bank confirming both the Deed of sale and the authority
of the bank manager, Fe S. Tena, to enter such transaction.

The petitioner bank refused
her request for a board resolution and made many alibis. Respondents initiated the present
proceedings so that they could transfer to their names the subject five parcel of land and
subsequently mortgage said lots and to use the loan proceeds for the medical expenses of
their ailing mother.

DOCTRINE: A bank is liable to innocent third persons where representation is made in the
course of its normal business by an agent like Manager Tena even though such agent is
abusing her authority

ISSUES: WON the Board of Directors of a rural banking corporation be compelled to confirm a
deed of absolute sale of real property owned by the corporation which deed of sale was
executed by the bank manager without prior authority of the board of directors of the rural
banking corporation

HELD AND RATIO:

A. YES. The bank acknowledges, by its own acts or failure to act, the authority of Fe S. Tena
to enter into binding contracts. After the execution of the Deed of Sale, respondents
occupied the properties in dispute and paid the real estate taxes. If the bank management
believed that it had title to the property, it should have taken measured to prevent the
 79. BA Finance Corporation vs. Court of Appeals
G.R. No. 94566
July 3, 1992
TOPIC: Rights and duties of third parties dealing with agent.
PETITIONER: BA FINANCE CORPORATION
RESPONDENT: HON. COURT OF APPEALS and TRADERS ROYAL BANK,
PONENTE: MEDIALDEA, J.
SUMMARY:
Renato Gaytano, doing business under the name Gebbs International, applied for and was
granted a loan with respondent Traders Royal Bank in the amount of P60,000.00. As security
for the payment of said loan, the Gaytano spouses executed a deed of suretyship whereby
they agreed to pay jointly and severally to respondent bank the amount of the loan
including interests, penalty and other bank charges. In a letter dated December 5, 1980
addressed to respondent bank, Philip Wong as credit administrator of BA Finance
Corporation for and in behalf of the latter, undertook to guarantee the loan of the Gaytano
spouses. Partial payments were made on the loan leaving an unpaid balance in the amount
of P85,807.25. Upon complaint by respondent, petitioner refused to pay because Wong has
no authority to answer for guaranty.
Held:
Respondent cannot collect from petitioner because what was conducted by Wong is
considered an ultra vires act and cannot bind the petitioner corporation.
DOCTRINES:
1. Authority given to officer to approve loans does not include power to issue
guarantees to 3rd persons in principal’s name.
2. It is a settled rule that persons dealing with an assumed agent, whether the
assumed agency be a general or special one are bound at their peril, if they would
hold the principal liable, to ascertain not only the fact of agency but also the
nature and extent of authority, and in case either is controverted, the burden of
proof is upon them to establish it (Harry Keeler v. Rodriguez, 4 Phil. 19). Hence,
the burden is on respondent bank to satisfactorily prove that the credit
administrator with whom they transacted acted within the authority given to him
by his principal, petitioner corporation.
ISSUES & HELD AND RATIO:
Whether the act of Wong binds petitioner.
[Petitioner’s argument]
1. the letter guaranty is ultra vires, and therefore unenforceable
[Answer] No.
[Law]
1. It is a settled rule that persons dealing with an assumed agent, whether the assumed
agency be a general or special one are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent
of authority, and in case either is controverted, the burden of proof is upon them to
establish it.
2. the burden is on respondent bank to satisfactorily prove that the credit administrator
with whom they transacted acted within the authority given to him by his principal,
petitioner corporation.
[Application]
1. The only evidence presented by respondent bank was the testimony of Philip Wong,
credit administrator, who testified that he had authority to issue guarantees as can
be deduced from the wording of the memorandum given to him by petitioner
corporation on his lending authority.
2. Although Wong was clearly authorized to approve loans even up to P350,000.00
without any security requirement, which is far above the amount subject of the
guaranty in the amount of P60,000.00, nothing in the said memorandum expressly
vests on the credit administrator power to issue guarantees
[Conclusion]
1. The act of Wong does not bind petitioner.
Whether the word “contingent commitment” constitutes guaranty.
[Respondent’s argument]
1. The phrase “contingent commitment” set forth in the memorandum means
guarantees. To wit:
Total loans and/or credits [combination of (a) thru (f) extended to any
one borrower including parents, affiliates and/or subsidiaries, should not
exceed P750,000.00. In exercising the limits aforementioned, both direct
and contingent commitments to the borrower(s) should be considered.
[Answer] No.
[Law]
1. It has been held that a power of attorney or authority of an agent should not be
inferred from the use of vague or general words.
2. Guaranty is not presumed, it must be expressed and cannot be extended beyond
its specified limits
[Application]
1. There was no specific authority granting the power to guaranty in the letter.
[Conclusion]
1. The SC cannot agree with respondent’s contention.
Whether SC should give weight on Wong’s sole allegation.
[Answer] No.
[Law]
1. The representation of one who acts as agent cannot by itself serve as proof of his
authority to act as agent or of the extent of his authority as agent.
[Application]
1. Wong’s testimony that he had entered into similar transactions of guaranty in the
past for and in behalf of the petitioner, lacks credence due to his failure to show
documents or records of the alleged past transactions.
[Conclusion]
 1. The sole allegation of the credit administrator in the absence of any other proof that
he is authorized to bind petitioner in a contract of guaranty with third persons should
not be given weight.

Whether petitioner corporation is estopped.

[Petitioner’s argument]
1. it is not guilty of estoppel to make it liable under the letter-guaranty because
petitioner had no knowledge or notice of such letter-guaranty;
2. that the allegation of Philip Wong, credit administrator, that there was an audit was
not supported by evidence of any audit report or record of such transaction in the
office files.
[CA’s decision]
1. petitioner is estopped from alleging lack of authority due to its failure to cancel or
disallow the guaranty.
[Answer] No. The said conclusion has no basis.
[Law]
1. Rule of estoppel not applicable where no proof of knowledge of principal on
transaction shown in evidence.
[Application]
1. Respondent bank had not shown any evidence aside from the testimony of the credit
administrator that the disputed transaction of guaranty was in fact entered into the
official records or files of petitioner corporation, which will show notice or
knowledge on the latter’s part and its consequent ratification of the said transaction.
[Conclusion]
1. In the absence of clear proof, it would be unfair to hold petitioner corporation guilty
of estoppel in allowing its credit administrator to act as though the latter had power
to guarantee.
 80 CMS LOGGING. v. CA
G.R. No. L-41420 July 10, 1992 Trial Court and CA held that CMS is laiable for the commission to DRACOR.
DPA
Decision:
Topic: AGENCY EXTINGUISHED We find merit in CMS's contention that the appellate court erred in holding that DRACOR was
Petitioners: CMS LOGGING. entitled to its commission from the sales made by CMS to Japanese firms.
Respondents: THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION
Ponente: J. NOCON The principal may revoke a contract of agency at will, and such revocation may be express, or
implied, and may be availed of even if the period fixed in the contract of agency as not yet
Issue: Whether or not the special civil action for certiorari is the proper remedy expired. As the principal has this absolute right to revoke the agency, the agent can not object
Whether or not RTC has jurisdiction over Manuel thereto; neither may he claim damages arising from such revocation, unless it is shown that
Whether or not such was done in order to evade the payment of agent's commission.

Facts:
CMS is a forest concessionaire engaged in the logging business, while DRACOR is engaged in
the business of exporting and selling logs and lumber. CMS and DRACOR entered into a
contract of agency whereby the former appointed the latter as its exclusive export and sales
agent for all logs that the former may produce, for a period of five (5) years.
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of
77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan,
CMS discovered that DRACOR had used Shinko Trading Co., Ltd. as agent, representative or
liaison officer in selling CMS's logs in Japan for which Shinko earned a commission of U.S. $1.00
per 1,000 board feet from the buyer of the logs. Under this arrangement, Shinko was able to
collect a total of U.S. $77,264.67.
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it
(CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended
that since DRACOR had been paid the 5% commission under the agreement, it is no longer
entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving
double compensation for the services it rendered.
In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms.
Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs
directly to several Japanese firms. This act constituted an implied revocation of the contract of
agency under Article 1924 of the Civil Code, which provides:
Art. 1924 The agency is revoked if the principal directly manages the business entrusted to the
agent, dealing directly with third persons.
Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms
without the intervention of DRACOR, the latter is no longer entitled to its commission from the
proceeds of such sale and is not entitled to retain whatever moneys it may have received as
its commission for said transactions. Neither would DRACOR be entitled to collect damages
from CMS, since damages are generally not awarded to the agent for the revocation of the
agency, and the case at bar is not one falling under the exception mentioned, which is to evade
the payment of the agent's commission.

After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or P2,883,351.90,
directly to several firms in Japan without the aid or intervention of DRACOR.

CMS sued DRACOR for the commission received by Shinko and for moral and exemplary
damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59,
from the sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a defense
to the counterclaim that DRACOR had retained the sum of P101,167.59 as part of its
commission for the sales made by CMS. Thus, as its counterclaim to DRACOR's counterclaim,
CMS demanded DRACOR return the amount it unlawfully retained. DRACOR later filed an
amended counterclaim, alleging that the balance of its commission on the sales made by CMS
was P42,630.82, thus impliedly admitting that it retained the amount alleged by CMS.
 81 LUSTAN v. CA
GR #111924
JANUARY 27, 1997
TOPIC: EXTINGUISHMENT OF AGENCY – REVOCATION; AGENCY COUPLED WITH INTEREST
PETITIONER: ADORACION LUSTAN
RESPONDENT: COURT OF APPEALS, NICOLAS PARANGAN and SOLEDAD PARANGAN, PHILIPPINE
NATIONAL BANK
PONENTE: FRANCISCO, J.
SUMMARY: Lustan owns a parcel of land in Iloilo. Lustan leased the property to Parangan. During the
period of lease, Parangan was regularly extending loans in small amounts to Lustan. Lustan executed a
Special Power of Attorney (SPA) in favor of Parangan to secure an agricultural loan from PNB with the
aforesaid lot as collateral. A second SPA was executed by Lustan, by virtue of which, Parangan was able
to secure 4 additional loans. The last 3 loans were without the knowledge of Lustan and all the proceeds
therefrom were used by Parangan for his own benefit. Lustan signed a Deed of Definite Sale in favor of
Parangan, upon the latter’s representation that the same merely evidences the loans extended by him.
For fear that her property might be prejudiced, Lustan demanded the return of her certificate of title.
Instead of complying, Parangan asserted his rights over the property. Lustan filed an action for
cancellation of liens, quieting of title, recovery of possession and damages against Parangan and PNB.
RTC ruled in favor of Lustan. Upon appeal, CA reversed RTC’s decision.
DOCTRINES: In this case, the SPAs are a continuing one and absent a valid revocation duly furnished to
the mortgagee, the same continues to have force and effect as against third persons who had no
knowledge of such lack of authority.
ISSUES:
1. WON the Deed of Definite Sale is in reality an equitable mortgage – YES.
2. WON Lustan's property is liable to PNB for the loans contracted by Parangan by virtue of the special
power of attorney. – YES.
HELD AND RATIO:
1. YES. The Deed of Definite Sale is in reality an equitable mortgage.
• Rule: a contract of sale is perfected at the moment there is a meeting of minds. This meeting
of the minds speaks of the intent of the parties in entering into the contract. If the words of the
contract appear to be contrary to the evident intention of the parties, the latter shall prevail
over the former.
o Application: Lustan and Parangan merely intended to consolidate the former's
indebtedness to the latter in a single instrument and to secure the same with the
subject property. Even when a document appears on its face to be a sale, the owner
of the property may prove that the contract is really a loan with mortgage.
• Rule: Article 1602(6) of the CC provides that, "The contract shall be presumed to be an
equitable mortgage in any of the following cases: (6) In any other case where it may be fairly
inferred that the real intention of the parties is that the transaction shall secure the payment
of a debt or the performance of any other obligation."
o Application: The case clearly falls under this category. Lustan had no knowledge that
the contract she signed is a deed of sale.Lustan is illiterate and her condition
constrained her to merely rely on Parangan's assurance that the contract only
evidences her indebtedness to the latter.
• Rule: When one of the contracting parties is unable to read and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been fully explained to
the former.
o Application: This burden has not been satisfactorily discharged. We do not find the
testimony of Parangan and Cabial that the contract was duly read and explained to
Lustan worthy of credit. There are noted major contradictions between the
testimonies of Cabial and Judge Lebaquin, who notarized the purported Deed of
Definite Sale. The former testified that receipts were presented before Judge
Lebaquin, who in turn made an accounting to determine the price of the land, the
latter categorically denied the allegation.
2. YES. Lustan's property is liable to PNB for the loans contracted by Parangan by virtue of the special
power of attorney.
• Rule: Third persons who are not parties to a loan may secure the latter by mortgaging their
own property.
o Application: So long as valid consent was given, the fact that the loans were solely
for the bene t of Parangan would not invalidate the mortgage with respect to
petitioner's property. In consenting thereto, her property shall nevertheless secure
and respond for the performance of the principal obligation.
o Lustan failed to consider that said SPAs are a continuing one and absent a valid
revocation duly furnished to the mortgagee, the same continues to have force and
effect as against third persons who had no knowledge of such lack of authority.
• Rule: Art. 1921 of the CC provides that, “If the agency has been entrusted for the purpose of
contracting with specified persons, its revocation shall not prejudice the latter if they were not
given notice thereof."
o Application: The SPA executed by Lustan in favor of Parangan duly authorized the
latter to represent and act on behalf of the former. Having done so, Lustan clothed
Parangan with authority to deal with PNB on her behalf and in the absence of any
proof that the bank had knowledge that the last 3 loans were without the express
authority of Lustan, it cannot be prejudiced thereby.
• Rule: As far as third persons are concerned, an act is deemed to have been performed within
the scope of the agent's authority if such is within the terms of the power of attorney as written.
o Application: The SPA particularly provides that the same is good not only for the
principal loan but also for subsequent commercial, industrial, agricultural loan or
credit accommodation that the attorney-in-fact may obtain and until the power of
attorney is revoked in a public instrument and a copy of which is furnished to PNB.
• Rule: Art. 1911 of the CC provides that, “Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the latter to act as though he
had full powers.”
o Application: The property of third persons which has been expressly mortgaged to
guarantee an obligation to which the said persons are foreign, is directly and jointly
liable for the fulfillment thereof; it is therefore subject to execution and sale for the
purpose of paying the amount of the debt for which it is liable. However, Lustan has
an unquestionable right to demand proportional indemnification from Parangan
with respect to the sum paid to PNB from the proceeds of the sale of her property
in case the same is sold to satisfy the unpaid debts.
 82. REPUBLIC v. EVANGELISTA
GR # 156015
August 11, 2005
TOPIC: Extinguishment of Agency (Revocation)
PETITIONER: REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in
his capacity as former Chief of the Intelligence Service, Armed Forces of the Philippines
(ISAFP), and former Commanding General, Presidential Security Group (PSG), and MAJ.
DAVID B. DICIANO, in his capacity as an Officer of ISAFP and former member of the PSG
RESPONDENT: HON. VICTORINO EVANGELISTA, in his capacity as Presiding Judge, Regional
Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his attorney-in-
fact, Paul Gutierrez
PONENTE: Puno
SUMMARY: Calimlim, the head of the Intelligence Services of the AFP, entered into a MOA
with Reyes to permit the latter to hunt for treasure in a land in Bulacan owned by Legaspi.
Reyes started digging, tunneling and blasting works on the land, and 80 military personnel
guarded the area to intimidate Legaspi from going near the land. Legaspi executed an SPA,
appointing his nephew Gutierrez as his atty-in-fact. Gutierrez was given the power to deal
with the treasure hunting activities on Legaspi’s land and to file charges against those who
may enter it without the latters authority. Legaspi agreed to give Gutierrez 40% of the
treasure that may be found in the land. Gutierrez filed a case for damages and injunction
against petitioners for illegally entering Legaspi’s land. He hired the legal services of Atty.
Adaza. Their contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of
Legaspi’s share in whatever treasure may be found. The Exec. Judge then issued a 72-hour
TRO against the petitioners. Petitioners filed MTD, stating that first, there is no real party-
in-interest as the SPA of Gutierrez to bring the suit was already revoked by Legaspi on March
7, 2000, as evidenced by a Deed of Revocation; and, second, Gutierrez failed to establish
that the alleged armed men guarding the area were acting on orders of petitioners. TC
granted the writ of preliminary injunction by Gutierrez. CA affirmed.
DOCTRINES: A contract of agency is generally revocable as it is a personal contract of
representation based on trust and confidence reposed by the principal on his agent. As the
power of the agent to act depends on the will and license of the principal he represents,
the power of the agent ceases when the will or permission is withdrawn by the principal.
Thus, generally, the agency may be revoked by the principal at will. However, an exception
to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral
contract depends upon the agency. The reason for its irrevocability is because the agency
becomes part of another obligation or agreement. It is not solely the rights of the principal
but also that of the agent and third persons which are affected. Hence, the law provides
that in such cases, the agency cannot be revoked at the sole will of the principal.
ISSUES: 1. W/N THE CONTRACT OF AGENCY BETWEEN LEGASPI AND GUTIERREZ HAS BEEN
EFFECTIVELY REVOKED BY LEGASPI - NO
2. W/N THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED - NO
3. W/N RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER
PROCEEDING WITH THE CASE - NO
HELD AND RATIO:
1. No, the contract of agency between Legaspi and Gutierrez cannot be revoked because it
is coupled with interest.
F. PETITIONER’S CONTENTIONS: The special power of attorney of Gutierrez to
represent Legaspi has already been revoked by the latter.
G. RESPONDENT’S CONTENTIONS: Gutierrez invokes that the unilateral revocation is
invalid as his agency is coupled with interest.
H. LAW/DOCTRINE APPLIED: A contract of agency is generally revocable as it is a
personal contract of representation based on trust and confidence reposed by the
principal on his agent.
- Generally, the agency may be revoked by the principal at will.
- An exception to the revocability of a contract of agency is when it is coupled
with interest—i.e., if a bilateral contract depends upon the agency—because
the agency becomes part of another obligation or agreement. It is not solely the
rights of the principal but also that of the agent and third persons which are
affected.
o When an agency is constituted as a clause in a bilateral contract, that
is, when the agency is inserted in another agreement, the agency
ceases to be revocable at the pleasure of the principal as the agency
shall now follow the condition of the bilateral agreement.
I. ANALYSIS OF THE CASE: The agency granted by Legaspi to Gutierrez is coupled with
interest as a bilateral contract depends on it.
a. Gutierrez was given by Legaspi the power to manage the treasure
hunting activities in the subject land; to file any case against anyone who
enters the land without authority from Legaspi; to engage the services of
lawyers to carry out the agency; and, to dig for any treasure within the
land and enter into agreements relative thereto.
b. Pursuant to this authority, agent Gutierrez hired the services of Atty. Adaza
to prosecute the case for damages and injunction against petitioners.
i. As payment for legal services, Gutierrez agreed to assign to
Atty. Adaza 30% of Legaspis share in whatever treasure may be
recovered in the subject land.
c. It is clear that the treasure that may be found in the land is the subject
matter of the agency; that under the SPA, Gutierrez can enter into contract
for the legal services of Atty. Adaza; and, thus Gutierrez and Atty. Adaza
have an interest in the subject matter of the agency, i.e., in the treasures
that may be found in the land.
i. This bilateral contract depends on the agency and thus renders
it as one coupled with interest, irrevocable at the sole will of the
principal Legaspi.
d. Consequently, the Deed of Revocation executed by Legaspi has no effect.
The authority of Gutierrez to file and continue with the prosecution of the
case at bar is unaffected.

2. Yes, the issuance of writ of preliminary injunction is justified.
A. LAW/DOCTRINE APPLIED: A writ of preliminary injunction is an ancilliary or
preventive remedy that is resorted to by a litigant to protect or preserve his rights or
interests and for no other purpose during the pendency of the principal action.
- It is issued by the court to prevent threatened or continuous irremediable injury
to the applicant before his claim can be thoroughly studied and adjudicated.
- Its aim is to preserve the status quo ante until the merits of the case can be
heard fully, upon the applicants showing of two important conditions, viz.: (1)
the right to be protected prima facie exists; and, (2) the acts sought to be
enjoined are violative of that right.
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of
preliminary injunction may be issued when it is established:
(a) that the applicant is entitled to the relief demanded, the whole or part of such relief
consists in restraining the commission or continuance of the act or acts complained
of, or in requiring the performance of an act or acts, either for a limited period or
perpetually;
(b) that the commission, continuance or non-performance of the act or acts complained
of during the litigation would probably work injustice to the applicant; or
(c) that a party, court, agency or a person is doing, threatening, or is attempting to do,
or is procuring or suffering to be done, some act or acts probably in violation of the
rights of the applicant respecting the subject of the action or proceeding, and tending
to render the judgment ineffectual.
B. LAW/DOCTRINE APPLIED: Webb v. People: the adverse and erroneous rulings of a
judge on the various motions of a party do not sufficiently prove bias and prejudice
to disqualify him. To be disqualifying, it must be shown that the bias and prejudice
stemmed from an extrajudicial source and result in an opinion on the merits on some
basis other than what the judge learned from his participation in the case. Opinions
formed in the course of judicial proceedings, although erroneous, as long as based
on the evidence adduced, do not prove bias or prejudice.
C. ANALYSIS OF THE CASE: There is no discernible pattern of bias on the rulings of the
respondent judge. Bias and partiality can never be presumed. Bare allegations of
partiality will not suffice in an absence of a clear showing that will overcome the
presumption that the judge dispensed justice without fear or favor.
- A judge’s appreciation or misappreciation of the sufficiency of evidence
adduced by the parties, or the correctness of a judges orders or rulings on the
objections of counsels during the hearing, without proof of malice on the part
of respondent judge, is not sufficient to show bias or partiality.
- The inhibition of respondent judge in hearing the case for damages has become
moot and academic in view of the latters death during the pendency of the case.

B. ANALYSIS OF THE CASE: Respondent judge had sufficient basis to issue the writ of
preliminary injunction.
a. It was established that Legaspi has a right to peaceful possession of his
land, pendente lite. Legaspi had title to the subject land.
b. It was likewise established that the diggings were conducted by petitioners
in the enclosed area of Legaspi’s land.
i. Whether the land fenced by Gutierrez and claimed to be
included in the land of Legaspi covered an area beyond that
which is included in the title of Legaspi is a factual issue still
subject to litigation and proof by the parties in the main case
for damages.
ii. It was necessary for the trial court to issue the writ of preliminary
injunction during the pendency of the main case in order to
preserve the rights and interests of private respondents Legaspi
and Gutierrez.

3. No, there is no basis to hold that respondent judge should have recused himself from
hearing the case.
A. PETITIONER’S CONTENTIONS: Respondent judge lacked the impartiality of an
impartial judge. He did not give credence to the testimony of their surveyor that the
diggings were conducted outside the land of Legaspi.
 83. Barretto v. Sta. Marina
GR # 8169
December 29, 1913
TOPIC: Extinguishment of Agency - Revocation
PETITIONER: Antonio M.A Barretto
RESPONDENT: Jose Santa Marina
PONENTE: J. Torres
LAW APPLICABLE: Article 1733 of the Civil Code, applicable to the case at bar, according to the
provisions of article 2 of the Code of Commerce, prescribes: "The principal may, at his will, revoke the
power and compel the agent to return the instrument containing the same in which the authority was
given”
Article 279 of the Code of Commerce provides: "The principal may revoke the commission entrusted to
an agent at any stage of the transaction, advising him thereof, but always being liable for the result of
the transactions which took place before the latter was informed of the revocation."
SUMMARY: The plaintiff, Antonio M.A. Barretto, was an agent and manager of Jose Santa Marina and
the business “La Insular”, the defendant, a resident of Spain and the owner and proprietor of the
business known as the La Insular Cigar and Cigarette Factory. That the plaintiff's services were rendered
in pursuance of a contract whereby the defendant obligated himself in writing to hire the said services
for so long a time as the plaintiff should not show discouragement and to compensate such services.The
petitioner alleged that the defendant, without reason, justification, or pretext and in violation of the
contract of agency, summarily and arbitrarily dispensed with the plaintiff's services and removed him
from the management of the business. (without just cause) Defendant argued that the plaintiff had no
contract whatever with the defendant in which any period of time was stipulated during which the
former was to render his services as manager of the La Insular factory
The evidence showed that the plaintiff Barretto's renunciation or registration of the position he held as
agent and manager of the said factory was freely and voluntarily made by him on the occasion of the
insolvency and disappearance of a Chinese man who had bought from the factory products and, without
paying this large debt, disappeared and has not been seen since. Barretto sent a letter of resignation to
Santa Marina and Santa Marina did not immediately reply and tell him of his decision on the matter.
After several months, Barretto was informed that the power conferred upon him by the defendant has
been revoked and the latter had already appointed J. McGavin to substitute him.
1.YES. The contract of agency between the plaintiff and the defendant is validy revoked. Barretto was not
really dismissed or removed by Santa Marina. Rather, Barretto resigned as the defendant’s agent and
manager as evidenced by the letter he sent to the defendant. Article 1733 of the civil Code, applicable to
the case at bar, according to the provisions of article 2 of the Code of Commerce, prescribes: "The principal
may, at his will, revoke the power and compel the agent to return the instrument containing the same in
which the authority was given.” Article 279 of the Code of Commerce provides: "The principal may revoke
the commission intrusted to an agent at any stage of the transaction, advising him thereof, but always
being liable for the result of the transactions which took place before the latter was informed of the
revocation.” The contract of agency can subsist only so long as the principal has confidence in his agent,
because, from the moment such confidence disappears and although there be a fixed period for the
exercise of the office of agent, the principal has a perfect right to revoke the power that he had conferred
upon the agent owing to the confidence he had in him and which for sound reasons had ceased to exist
The fixing of the period by the Courts in their contracts cannot be invoked since the rights and obligations
existing between Barretto and Santa Marina are absolutely different from those to which it refers, for,
according to article 1732 of the Civil Code, agency is terminated:
1. By revocation.
2. By withdrawal of the agent.
3. By death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
It is not incumbent upon the courts to fix the period during which contracts for services shall last. Their
duration is understood to be implicity fixed, in default of express stipulation, by the period for the payment
of the salary of the employee.
Article 302 of the Code of Commerce reads thus:
In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may
dissolve it, advising the other party thereof one month in advance.
The factor or shop clerk shall be entitled, in such case, to the salary due for one month.
From the mere fact that the principal no longer had confidence in the agent, he is entitled to withdraw it
and to revoke the power he conferred upon the latter, even before the expiration of the period of the
engagement or of the agreement made between them; but, in the present case, once it has been shown
that, between the deceased Joaquin Santa Marina and the latter's heir, now the defendant, on the one
hand, and the plaintiff Barretto, on the other, no period whatever was stipulated during which the last-
named should hold the office and manager of the said factory, it is unquestionable that the defendant,
even without good reasons, could lawfully revoke the power conferred upon the plaintiff and appoint in
his place Mr. McGavin, and thereby contracted no liability whatever other than the obligation to pay the
plaintiff the salary pertaining to one month and some odd days.

DOCTRINES: The time during which the agent may hold his position is indefinite or undetermined, when
no period has been fixed in his commission and so long as the confidence reposed in him by the principal
exists; but as soon as this confidence disappears the principal has a right to revoke the power he
conferred upon the agent, especially when the latter has resigned his position for good reasons.

ISSUES:
W/N the contract of agency was validly revoked.

HELD AND RATIO:

 84 Diolosa vs CA
GR # L-36585 Also since the said agency agreement is a valid contract, it can only be rescinded in accordance to the
July 16, 1984 grounds specified in Articles 1381 and 1382 of the Civil Code.

TOPIC: Revocation; Agency Coupled with Interest
PETITIONER: MARIANO DIOLOSA and ALEGRIA VILLANUEVA-DIOLOSA
RESPONDENT: THE HON. COURT OF APPEALS, and QUIRINO BATERNA (As owner and proprietor of
QUIN BATERNA REALTY)
PONENTE: J Relova
SUMMARY: On June 20, 1968 private respondent Baterna, a real estate broker, was constituted as
exclusive sales agent of the Petitioners, spouses Diolosa, its successors, heirs and assigns, to dispose
of, sell, cede, transfer and convey the lots included in VILLA ALEGRE SUBDIVISION owned by the
defendants, as embodied in their agreement. On September 27, 1968, in a letter, Petitioners
terminated the Baterna’s services.
ART. 1381. The following contracts are rescissible:
(1) Those which are entered in to by guardians whenever the wards whom they represent suffer lesion by
more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding
number;
(3) Those undertaken in fraud of creditors when the latter cannot in any other name collect the claims due
them;
(4) Those which refer to things under litigation if they have been entered into by the defendant without
the knowledge and approval of the litigants or of competent judicial authority;
(5) All other contracts specially declared by law to be subject to rescission.

Baterna filed a complaint of recovery of unpaid commission.
Baterna contended that 1) he had unrevocable authority to sell all the lots included in the Villa Alegre
Subdivision and to act as exclusive sales agent of the defendants until all the lots shall have been
disposed of and 2) That the rescission of the contract under Exhibit "B", contravenes the agreement of
the parties.
Spouses DIolosa on the other hand, contended that 1) That they were within their legal right to
terminate the agency on the ground that they needed the undisposed lots for the use of the family and
2) that the plaintiff has no right in law to case for commission on lots that they have not sold.
ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could
not be compelled at the time they were effected, are also rescissible."
In the case at bar, not one of the grounds mentioned above is present which may be the subject of an
action of rescission, much less can petitioners say that the private respondent violated the terms of their
agreement-such as failure to deliver to them (Subdivision owners) the proceeds of the purchase price of
the lots.

RTC dismissed Baterna’s complaint. Baterna appealed to CA. CA reversed the decision.

DOCTRINES: Under the said agreement, herein petitioners allowed the private respondent "to dispose
of, sell, cede; transfer and convey . . . until all the subject property as subdivided is fully disposed of."
The authority to sell is not extinguished until all the lots have been disposed of. When, therefore, the
petitioners revoked the contract with private respondent in a letter, they become liable to the private
respondent for damages for breach of contract.

It may be added that since the subject agency agreement is a valid contract, the same may be rescinded
only on grounds specified in Articles 1381 and 1382 of the Civil Code. In the case at bar, not one of the
grounds mentioned is present which may be the subject of an action of rescission, much less can
petitioners say that the private respondent violated the terms of their agreement — such as failure to
deliver to them (Subdivision owners) the proceeds of the purchase price of the lots.

ISSUES: Whether or not Spouses Diolosa can terminate he agency agreement without paying damages to
the private respondent. (No)

HELD AND RATIO:

No. Under the contract, it was found that the spouses allowed Baterna "to dispose of, sell, cede, transfer
and convey . . . until all the subject property as subdivided is fully disposed of." The authority to sell is not
extinguished until all the lots have been disposed of.

When, therefore, the petitioners revoked the contract with private respondent in a letter, they become
liable to the private respondent for damages for breach of contract.
 85. Coleongco V. Calparols
G.R. L-18616
March 31, 1964
TOPIC: Extinguishment of Agency
PETITIONER: Vicente M. Coleongco
RESPONDENT: Eduardo L. Claparols
PONENTE: J. Reyes
LAW APPLICABLE:
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage
and law.
Art. 1800. The partner who has been appointed manager in the articles of partnership may
execute all acts of administration despite the opposition of his partners, unless he should
act in bad faith; and his power is irrevocable without just or lawful cause. The vote of the
partners representing the controlling interest shall be necessary for such revocation of
power.
SUMMARY:
• Since 1951, Claparols operated a factory for the manufacture of nails under the
name of Claparols Steel & Nail Plant
• Claparols had trouble financing his imports of nail wires for which Coleongco
became the financer
• A SPA was executed authorizing Coleongco to open and negotiate letters of
credit, to sign contracts, bills of lading, invoices, and papers covering transactions
and to represent the company
• Coleongco became the assistant manager of the factory
• Claparols later on received a writ of execution from PNB and soon later found out
that Coleongco has been acting adversely to the interest of his principal
• Coleongco even executed a letter to his cousin Kho To instructing Kho to
“squeeze” Calparols to reduce to ½ the usual monthly advance on account of nail
sales thereby entitling Coleongco to share in the profits of the nail factory and
ultimately own the factory
• Lastly, Coleongco even attempted to doctor the accountings of the factory by
diverting the profits of the factory to his own benefit and even pour acid on the
machinery
• Upon knowledge of Coleongco’s evil machinations, Claparols revoked the SPA,
demanded a full accounting which showed that Coleongco owed the factory an
amount of P87,387.37
• This prompted Coleongco to file a suit against Claparols for breach of contract
• RTC dismissed the petition
• Hence, this petition to the SC
• Coleongco’s contention: Contended that the SPA was coupled with interest and
that Claparol had no legal power to revoke such agreement
• Claparol’s contention: Argued that such agreement didn’t vest any interest to
Coleongco
DOCTRINES: A power of attorney although coupled with interest in a partnership can be
revoked for a just cause, such as when the attorney-in-fact betrays the interest of the
principal
ISSUES:
1) Whether the contract of agency between Claparol and Coleongco was one coupled with
interest
2) Whether a contract of agency when coupled with an interest may be validly revoked by the
principal
HELD AND RATIO
1) No! The Supreme Court held that by looking at the stipulations of the contract and SPA
between Coleongco and Claparol, there were no statements granting Coleongco such interest.
Claparols only stipulated that such agreement is for the protection of Coleongco only and that
there was no couple interest given to Coleongco.
2) Yes! The Supreme Court held that the SPA may be made irrevocable by contract only in the
sense that the principal may not recall it at his pleasure; but couple with interest or not, the
authority certainly can be revoked for a just cause. Especially in this case wherein it was
sufficiently proven that Coleongco was indeed acting adversely to his principal’s interest. The
Supreme Court further ratiocinated that the irrevocability of the SPA may not be used as a
shield for perpetrations of acts in bad faith, breach of confidence or betrayal of trust even
though such SPA is coupled with interest. Art. 1315 of the NCC even provides that
responsibilities arising from fraud are demandable in all obligations. Art. 1800 also provides
that when a partner acted in bad faith, the consequence is that the other partners may revoke
such agreement coupled with interest since the partner in bad faith is not anymore
representing his partners’ interest. Since it was evident that Coleongco acted in bad faith,
Claparols is therefore given a right to revocation of such agreement between them.
 86 Valera v. Velasco
51 Phil. 695 (1928)
March 13, 1928
TOPIC: ATP- Extinguishment of Agency- Withdrawal
Petitioner: Federico Valera
Respondent: Miguel Velasco
Ponente: Villa-real. J.
Law Applicable Article 1732 of the Civil Code reads as follows:
Art. 1732. Agency is terminated:
1. By revocation;
2. By the withdrawal of the agent;
3. By the death, interdiction, bankruptcy, or insolvency of the principal or of the agent.
And article 1736 of the same Code provides that:
Art. 1736. An agent may withdraw from the agency by giving notice to the principal. Should
the latter suffer any damage through the withdrawal, the agent must indemnify him
therefore, unless the agent's reason for his withdrawal should be the impossibility of
continuing to act as such without serious detriment to himself.
SUMMARY: By virtue of the powers of attorney, executed by Petitioner Valera on April 11,
1919, and on August 8, 1922, Respondent Velasco was appointed attorney-in-fact of Valera
with authority to manage his property in the Philippines, consisting of the usufruct of a real
property located of Echague Street, City of Manila.
Velasco accepted both powers of attorney, managed Valera’s property, reported his
operations, and rendered accounts of his administration; and on March 31, 1923 presented
the final account of his administration for said month, wherein it appears that there is a
balance of P3,058.33 in favor of Valera.
The liquidation of accounts revealed that Valera owed Velasco P1,100, and as
misunderstanding arose between them, Velasco brought suit against the Valera. Judgment
was rendered in his favor on March 28, 1923, and after the writ of execution was issued, the
sheriff levied upon the Valera's right of usufruct, sold it at public auction and adjudicated it to
Valera in payment of all of his claim.
Subsequently, on May 11, 1923, Valera sold his right of redemption to one Eduardo
Hernandez, for the sum of P200. On September 4, 1923, this purchaser conveyed the same
right of redemption, for the sum of P200 to Federico Valera.
After the Valera had recovered his right of redemption, one Salvador Vallejo, who had an
execution upon a judgment against the plaintiff rendered in a civil case against the latter,
levied upon said right of redemption, which was sold by the sheriff at public auction to
Salvador Vallejo for P250 and was definitely adjudicated to him. Later, he transferred said
right of redemption to the defendant Velasco. This is how the title to the right of usufruct to
the aforementioned property later came to vest the said defendant.
Doctrine: Summarizing, the conclusion is reached that the disagreements between an agent
and his principal with respect to the agency, and the filing of a civil action by the former
against the latter for the collection of the balance in favor of the agent, resulting from a
liquidation of the agency accounts, are facts showing a rupture of relations, and the
complaint is equivalent to an express renunciation of the agency, and is more expressive than
if the agent had merely said, "I renounce the agency."
ISSUE: W/N agency was terminated?
RULING:
• YES. The misunderstanding between the plaintiff and the defendant over the
payment of the balance of P1,000 due the latter, as a result of the liquidation of the
accounts between them arising from the collections by virtue of the former's
usufructuary right, who was the principal, made by the latter as his agent, and the
fact that the said defendant brought suit against the said principal on March 28,
1928 for the payment of said balance, more than prove the breach of the juridical
relation between them
• When the agent filed a complaint against his principal for recovery of a sum of
money arising from the liquidation of the accounts between them in connection
with the agency, Federico Valera could not have understood otherwise than that
Miguel Velasco renounced the agency; because his act was more expressive than
words and could not have caused any doubt.
• Briefly, then, the fact that an agent institutes an action against his principal for the
recovery of the balance in his favor resulting from the liquidation of the accounts
between them arising from the agency, and renders and final account of his
operations, is equivalent to an express renunciation of the agency, and terminates
the juridical relation between them.
• the defendant-appellee Miguel Velasco, in adopting a hostile attitude towards his
principal, suing him for the collection of the balance in his favor, resulting from the
liquidation of the agency accounts, ceased ipso facto to be the agent of the
plaintiff-appellant, said agent's purchase of the aforesaid principal's right of
usufruct at public auction held by virtue of an execution issued upon the judgment
rendered in favor of the former and against the latter, is valid and legal, and the
lower court did not commit the fourth and fifth assignments of error attributed to
it by the plaintiff-appellant.
• Summarizing, the conclusion is reached that the disagreements between an agent
and his principal with respect to the agency, and the filing of a civil action by the
former against the latter for the collection of the balance in favor of the agent,
resulting from a liquidation of the agency accounts, are facts showing a rupture of
relations, and the complaint is equivalent to an express renunciation of the agency,
and is more expressive than if the agent had merely said, "I renounce the agency."
 #87 RALLOS v FELIX GO CHAN
GR # L-24332
January 31, 1978
TOPIC: Death – Extinguishment of Agency
PETITIONER: Ramon Rallos, Administrator of the Estate of Concepcion Rallos
RESPONDENT: Felix Go Chan & Sons Realty Corporation and Court of Appeals
PONENTE: J. Muñoz Palma
LAW APPLICABLE:
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.
SUMMARY:
• Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a
parcel of land
• The sisters executed a SPECIAL POWER OF ATTORNEY in favor of their brother, Simeon
Rallos, authorizing him to sell for and in their behalf the said lot
• Concepcion Rallos died, Simeon sold the lot to Felix Go Chan- deed registered in the Registry
of Deeds and TCT was issued in the name of Felix Go Chan
• Ramon Rallos, administrator of the Intestate estate of Concepcion filed a complaint praying
that the sale be declared UNENFORCEABLE and the share of Concepcion in the lot be
reconveyed to her estate and that TCT in the name of Felix Go Chan be cancelled and a new
one be issued in the name of the corporation and the Intestate estate of Concepcion
• TC: in favor of Ramon – deed of sale –declared null and void insofar as the share of
Concepcion, and ordered Register of Deeds to issue new TCT in the name of corporation
and estate
• CA: in favor of Felix Go Chan – sales is VALID
• SC: Sale was null and void
DOCTRINES:
GENERAL RULE:
The death of the principal effects instantaneous and absolute revocation of the authority of the agent
unless the power be coupled with an interest
EXCEPTION:
An act done by the agent after the death of his principal is valid and effective only under two conditions:
(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
ISSUES:
1) W/N sale was valid although it was executed after the death of the principal, Concepcion (SALE
WAS NULL AND VOID)
2) W/N sale fell within the exception to the general rule that death extinguishes the authority of
the agent (NO)
3) W/N agent’s knowledge of the principal’s death is a material factor (YES)
4) W/N 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) (NO)
5) W/N 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 (NO)
HELD AND RATIO
1) Sale was null and 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).
• Simon’s authority as agent was extinguished upon Concepcion’s death
2) NO. 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:
§ Simon Rallos knew (as can be inferred from his pleadings) of
principal Concepcion’s death
§ For Art 1931 to apply, both requirements must be present
3) YES. Agent’s knowledge of principal’s 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
SC: Contention ignored 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 principal’s death at that
time (exception under Art. 1931)
 88.Pasno v Ravina
GR NO. 31581
February 3,1930
MJB
Topic: Extinguishment of Agency – DEATH
Petitioners: Enrique Pasno
Respondents: Fortunato Ravina and Philippine National Bank
Ponente: Malcolm, J
Summary: Si Labitoria may 3 parcels of land nanaka mortgage sa PNB para sa utang na 1.6k
nung namatay siya prinesent yung last will and testament niya during sa case yung special
administrator nag-appoint ng isang tao na custodio legis daw mga lupa niya pati yung 3
lands nan aka mortgaged sa PNB, Yung Respondent inask sa sheriff ibenta yung sale ng
lands pero yung mga Petitioner nag filed ng motion sa court na ivacate yung attachment
ng mortgage property sabi ng LOWER COURT tama yung mga petitioner so sabi ng SC na It
would be preferable to reach the conclusion that the mortgagee with a power of sale
should be made to foreclose the mortgage in conformity with the procedure pointed out
in section 708 of the Code of Civil Procedure. That would safeguard the interests of the
estate by putting the estate on notice while it would not jeopardize any rights of the
mortgagee. The only result is to suspend temporarily the power to sell so as not to
interfere with the orderly administration of the estate of a decedent.
DOCTRINES:
• Will:The law does not require that a will shall be dated. A will without a date is valid. An
erroneous date will not defeat a will.
• Real Estate Mortgages – Sale of Mortgage (Act 3135 and Sec 78 of Civil Procedure) : The
power of sale given in a real estate mortgage is a power coupled with an interest which
survives the death of the grantor. The mortgagee with a power of sale should, on the
death of the mortgagor, foreclose the mortgage in accordance with the procedure
pointed out in section 708 of the Code of Civil Procedure
FACTS: ( Facts for the 2nd issue) – For the first issue wala naman sinabi dinecide lang kagad
SEE RATIO
• During Gabina Labitoria’s lifetime mortgaged 3 parcels of land to the Philippine National
Bank (PNB) to secure an indebtedness of Php 1,600.00.
• It was stipulated in the mortgage that the mortgagee “may remove, sell or dispose of the
mortgaged property or any buildings, improvements, or other property in, on or attached
to it and belonging to the mortgagor in accordance with the provisions of Act No. 3135 or
take other legal action that it may deem necessary.”
• The mortgagor died and a petition was presented in court for the probate of her last will
and testament.
• During the pendency of these proceedings, a special administrator was appointed by the
lower court who took possession of the estate of deceased, including the 3 parcels of land
mortgaged to PNB.
v Respondent
• The estate having failed to comply with the conditions of the mortgage, PNB, pursuant
to the stipulations contained in the same, asked the sheriff of Tayabas to proceed with
the sale of the parcels of land.
v Petitioner
• When the attorney for the special administrator received notice of the proposed action,
he filed a motion in court in which an order was asked requiring the sheriff to vacate the
attachment over the mortgaged properties and to abstain from selling the same.
v Lower Court
• Granted the petition in an order of February 14, 1929 and later denied a motion for
reconsideration presented on behalf of the PNB.
• The mortgage makes special reference to Act. No. 3135. That Act regulates the sale of
property under special powers inserted in or annexed to real estate mortgages.
o It fails to make provision regarding the sale of the mortgaged property which is
in custodia legis.
o Under the circumstances, it would be logical to suppose that general provisions
of Philippine law would govern this latter contingency.
o It is a familiar rule that the statutes in pari materia are to be read together. The
legislative body which enacted Act. No. 3135 must be presumed to have been
seen acquainted with the provisions of such a well known law as the Code of
Civil Procedure and to have passed Act. No. 3135 with reference thereto.
ISSUE:
1st Issue (About the Will) - W/ N the Will is Valid? – YES
2nd Issue (About Mortgage) - W/N the right of sale of the mortgaged property can survive and
can be enforced under special power while mortgaged property is in Custodia Legis (the taking,
seizing or holding of something by lawful authority.) - NO
HELD/RATIO:
1st Issue:
• Section 618, as amended, of the Code of Civil Procedure prescribes the requisites
necessary to the execution of a valid will.
• The law does not require that the will shall be dated. Accordingly, a will without a date is
valid. So likewise, an erroneous date will not defeat a will.
2nd Issue:
• The appellant practically concedes that the law applicable to the case is section 708 of the
Code of Civil Procedure. The cited section reads: "A creditor holding a claim against the
deceased, secured by mortgage or other collateral security, may abandon the security and
prosecute his claim before the committee, and share in the general distribution of the
assets of the estate; or he may foreclose his mortgage or realize upon his security, by
ordinary action in court, making the executor or administrator a party defendant; and if
there is a judgment for a deficiency, after the sale of the mortgaged premises, or the
property pledged, in the foreclosure or other proceeding to realize upon the security, he
may prove his deficiency judgment before the committee against the estate of the
deceased; or he may rely upon his mortgage or other security alone, and foreclose the
 same at any time, within the period of the statute of limitations, and in that event he shall
not be admitted as a creditor, and shall receive no share in the distribution of the other
assets of the estate; but nothing herein contained shall prohibit the executor or
administrator from redeeming the property mortgaged or pledged, by paying the debt for
which it is held as security, under the direction of the court, if the court shall adjudge it to
be for the best interest of the estate that such redemption shall be made."
• In this connection, it is to be noted that the law provides two remedies (Osorio vs, San
Agustin [1913], 25 Phil., 404). The creditor here is not taking advantage of the first remedy
for the mortgage security has not been abandoned. Rather is the second remedy invoked
but until now unsuccessfully since the mortgagee has not begun an ordinary action in
court to foreclose the mortgage making the special administrator a party defendant.
• The special administrator a party defendant. The power of sale given in a mortgage
is a power coupled with an interest, which survives the death of the grantor. One
case that of Carter vs. Slocomb has gone so far as to hold that a sale after the death
of the mortgagor is valid without notice to the heirs of the mortgagor.
o However that may be, conceding that the power of sale is not revoked by
the death of the mortgagor, nevertheless in view of the silence of Act No.
3135 and in view of what is found in section 708 of the Code of Civil
Procedure,
• It would be preferable to reach the conclusion that the mortgagee with a power
of sale should be made to foreclose the mortgage in conformity with the procedure
pointed out in section 708 of the Code of Civil Procedure. That would safeguard the
interests of the estate by putting the estate on notice while it would not jeopardize
any rights of the mortgagee. The only result is to suspend the power to sell so as
not to interfere with the orderly administration of the estate of a decedent. A
contrary holding would be inconsistent with the portion of our law governing the
settlement of estates of deceased persons.
 89 Herrea v Luy Kim Guan of an agent unenforceable, where the latter had no knowledge of such extinguishment the
1 SCRA 106 agency
1961
A. Natividad Herrera contended that Luis Herrera was long dead when the sales took place
TOPIC: Death as a means to extinguish agency
B. Luy however averred that he had no knowledge what so ever, and that he only came to
PETITIONER: Luis Herrera
RESPONDENT: Luy Kim Guan find his principal dead when this case had arose.
PONENTE: Barrera
C. The acts of the agent still bind the principal in the absence of his knowledge of the death
of the principal.
SUMMARY: Natividad Herrera is a legitimate daughter of Luis Herrera Luis Herrera owned
three (3) parcels of land and before leaving for China, he executed a Deed of General Power
of Attorney in favor Luy Kim Guan authorizing him to administer and sell the properties of
the latter. Luy Kim Guan, in his capacity as an attorney-in-fact for Luis Herrera sold the lot
1740 to Luy chay. Luy Chay then executed a deed of sale in favor of one Lino Bangayan. Luy
Kim Guan, acting again as an attorney-in-fact for Luis Herrera sold to Nicomedes Salazar ½
of the two lots. Luy Kim Guan Nicomedes Salazar executed a deed of mortgage in favor of
Bank of the Philippines Islands. Luy Kim Guan and Salazar sold part of the remaining lot to
Carlos Cizantos. Salazar then sold his remaining interest to Lino Bangayan and Luy Kim Guan,
both are as co-owners. Both Natividad Herrera and Luy Kim Guan admitted that Luis Herrera
is now deceased. The appellants contend that the abovementioned transactions were
fraudulent and were executed after the death of Luis Herrera (principal) when the power of
attorney was no longer operative.

DOCTRINES: The death of the principal does not render the act of an agent unenforceable,
where the latter had no knowledge of such extinguishment.

ISSUES: W/N The transactions were null and void because they are executed after the death of
the principal?

HELD AND RATIO:

1. No, it does not follow. In the case at bar the time of death of the principal was not
satisfactorily proven to be in direct conflict with the actions of the agent. The only evidence
presented by the Plaintiff-appellant in this respect is a supposed letter received from a
certain "Candi", dated at Amoy in November, 1936, purporting to give information that Luis
Herrera (without mentioning his name) had died in August of that year. This piece of
evidence was properly rejected by the lower court for lack of identification. the other hand,
we have the testimony of the witness Chung Lian to the effect that when he was in Amoy
the year 1940, Luis Herrera visited him and had a conversation with him, showing that the
latter was still alive at the time. Since the documents had been executed the attorney-in-
fact one in 1937 and the other in 1939, it is evident, if we are to believe this testimony, that
the documents were executed during the lifetime of the principal. Be that as it may, even
granting arguendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there
is no indication in the record, that the age Luy Kim Guan was aware of the death of his
prince at the time he sold the property. The death of the principal does not render the act