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SPOUSES VILORIA v.

CONTINENTAL AIRLINES
G.R. No. 188288
January 16, 2012
Reyes, J.

Note: Sale v. Agency


In Commissioner of Internal Revenue v. Constantino, this Court extrapolated that the primordial
differentiating consideration between the two (2) contracts is the transfer of ownership or title over the
property subject of the contract. In an agency, the principal retains ownership and control over the
property and the agent merely acts on the principal’s behalf and under his instructions in furtherance of
the objectives for which the agency was established. On the other hand, the contract is clearly a sale if
the parties intended that the delivery of the property will effect a relinquishment of title, control and
ownership in such a way that the recipient may do with the property as he pleases.

Facts: Fernando purchased for himself and his wife, Lourdes, two (2) round trip airline tickets from San
Diego, California to Newark, New Jersey on board Continental Airlines. Fernando purchased the tickets
from a travel agency called “Holiday Travel” and was attended to by a certain Margaret Mager (Mager).

Fernando requested Mager to reschedule their flight to an earlier date. However, Mager informed him
that flights to Newark via Continental Airlines were already fully booked, Fernando opted to request for
a refund. But his request was denied as the subject tickets are non-refundable.

Thereafter, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets he found
when he went to Greyhound Station, telling her that she had misled them by misrepresenting that
Amtrak was already fully booked. Fernando reiterated his demand for a refund but Mager was firm in
her position that the tickets are non-refundable. Resulting for Fernando to send a letter to CAI
demanding a refund and the alleged misrepresentation involving the subject tickets.

Issues: Whether a principal-agent relationship exist between CAI and Holiday Travel?

Held: Yes, a principal-agent relationship exists between CAI and Holiday Travel. All the essential
elements for such relationship are present in this case.

In Rallos v. Felix Go Chan & Sons Realty Corporation, this Court explained the nature of an agency and
spelled out the essential elements thereof:

Whereby one party, called the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons. The essential
elements of agency are: (1) there is consent, express or implied of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself, and (4) the agent acts within the scope of his
authority.

In this case, the first and second elements are present as CAI does not deny that it concluded an
agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third
persons on CAI’s behalf. The third element is also present as it is undisputed that Holiday Travel merely
acted in a representative capacity and it is CAI and not Holiday Travel who is bound by the contracts of
carriage entered into by Holiday Travel on its behalf. The fourth element is also present considering
that CAI has not made any allegation that Holiday Travel exceeded the authority that was granted to it.
In fact, CAI consistently maintains the validity of the contracts of carriage that Holiday Travel executed
with Spouses Viloria and that Mager was not guilty of any fraudulent misrepresentation.

As categorically provided under Article 1869 of the Civil Code, “[a]gency may be express, or implied from
the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf without authority.”
ROSA LIM v. COURT OF APPEALS
G.R. No. 102784
February 28, 1996
Hermosisima, Jr., J.

Note: Contract of Agency; No formalities required. - There are some provisions of the law which require
certain formalities for particular contracts. The first is when the form is required for the validity of the
contract; the second is when it is required to make the contract effective as against the third parties
such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the
purppose of proving the existence of the contract, such as those provided in the Statute of Frauds in
Article 1403. A contract of agency to sell on commission basis does not belong to any of these three
categories, hence, it is valid and enforceable in whatever form it may be entered into.

Facts: On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received from private
respondent Victoria Suarez the following two pieces of jewelry: one diamond ring worth P169,000.00
and one (1) bracelet worth P170,000.00, to be sold on commission basis. The agreement was reflected
in a receipt.

On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the
diamond ring or to turn over the proceeds thereof if sold. As a result, private complainant, aside from
making verbal demands, wrote a demand letter to petitioner asking for the return of said ring or the
proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter to private respondents
counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in
September, 1987, for which reason, petitioner had no longer any liability to Mrs. Suarez insofar as the
pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par.
1(b) of the Revised Penal Code for which the petitioner herein stands convicted.

Petitioner, on the other hand, denied that the transaction was for her to sell the two pieces of jewelry
on commission basis. She told Mrs. Suarez that she would consider buying the pieces of jewelry for her
own use and that she would inform the private complainant of such decision before she goes back to
Cebu. Thereafter, the petitioner took the pieces of jewelry and told Mrs. Suarez to prepare the
necessary paper for me to sign because I was not yet prepared to buy it.

Issue: What was the real transaction between Rosa Lim and Vicky Suarez - a contract of agency to sell on
commission basis as set out in the receipt or a sale on credit?

Held: The transaction between Rosa Lim and Vicky suarez is a contract of agency to sell on commission
basis. On the receipt, Rosa Lims signature appears on the upper portion of the receipt immediately
below the description of the items taken. We find that this fact does not have the effect of altering the
terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. The
moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the
receipt. She, thus, opened herself to all the legal obligations that may arise from their breach. This is
clear from Article 1356 of the New Civil Code which provides:

Contracts shall be obligatory in whatever form they may have been entered into, provided all
the essential requisites for their validity are present.
However, there are some provisions of the law which require certain formalities for particular contracts.
The first is when the form is required for the validity of the contract; the second is when it is required to
make the contract effective as against third parties such as those mentioned in Articles 1357 and 1358;
and the third is when the form is required for the purpose of proving the existence of the contract, such
as those provided in the Statute of Frauds in Article 1403.

A contract of agency to sell on commission basis does not belong to any of these three categories, hence
it is valid and enforceable in whatever form it may be entered into.

Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of
the signature of the parties thereto. This is in the case of notarial wills found in Article 805 of the Civil
Code.

In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on
commission basis, thus making the position of petitioner’s signature thereto immaterial.
ST. MARY'S FARM v. PRIMA REAL PROPERTIES
G.R. NO. 158144
July 31, 2008
Nachura, J.

Facts: Herein plaintiff was the registered owner of a land situated at Bo. Pugad Lawin, Las Piñas City.
Plaintiff passed and approved a board resolution authorizing defendant Rodolfo A. Agana to cede to T.S.
Cruz Subdivision four thousand (4,000) square meters of the land. Allegedly, after the consummation of
this transaction, defendant Rodolfo A. Agana did not return to plaintiff the borrowed aforementioned
title and instead, allegedly forged a board resolution of the plaintiff corporation supposedly to the effect
that plaintiff had authorized him to sell the remaining square meters of the subject property.

A series of transactions thereafter took place between defendant Rodolfo A. Agana and defendant
Prima Real Properties, Inc. (Prima) which transactions resulted to an absolute deed of sale transferring
the ownership of the subject land from herein plaintiff to herein defendant Prima.

In its complaint herein plaintiff alleged that the deed of absolute sale entered into between defendants
Prima and Rodolfo A. Agana being the result of fraudulent transaction was void. That the authorization
certified to by Antonio V. Agcaoili, Corporate Secretary of the plaintiff and used by defendant Rodolfo A.
Agana in selling the subject property to defendant Prima was a forgery as the board of directors of the
plaintiff never enacted a resolution authorizing herein defendant Rodolfo A. Agana to sell herein subject
property to defendant Prima or to anyone else for that matter.

On the other hand, defendant Prima with defendant Rodolfo A. Agana in their respective answers,
sought on the dismissal of the complaint based solidly on the ground that defendant Prima acted in
good faith when it relied solely on the face of the purported authorization of defendant Rodolfo A.
Agana and entered into the deed of absolute sale.

Issue: Whether Respondent Agana is authorized to sell the subject property on behalf of Petitioner and
thus Prima is considered a buyer in good faith?

Held: Yes. When the document under scrutiny is a special power of attorney that is duly notarized, we
know it to be a public document where the notarial acknowledgment is prima facie evidence of the fact
of its due execution. A buyer presented with such a document would have no choice between knowing
and finding out whether a forger lurks beneath the signature on it. The notarial acknowledgment has
removed that choice from him and replaced it with a presumption sanctioned by law that the affiant
appeared before the notary public and acknowledged that he executed the document, understood its
import and signed it. In reality, he is deprived of such choice not because he is incapable of knowing and
finding out but because, under our notarial system, he has been given the luxury of merely relying on
the presumption of regularity of a duly notarized SPA. And he cannot be faulted for that because it is
precisely that fiction of regularity which holds together commercial transactions across borders and
time.

In sum, a person dealing with a seller who has in his possession title to the property but whose capacity
to sell is restricted, qualifies as a buyer in good faith if he proves that he inquired into the title of the
seller as well as into the latter's capacity to sell; and that in his inquiry, he relied on the notarial
acknowledgment found in the seller's duly notarized special power of attorney. He need not prove
anything more for it is already the function of the notarial acknowledgment to establish the appearance
of the parties to the document, its due execution and authenticity.