G.R. No.

L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCION

RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF
APPEALS, respondents.

Seno, Mendoza & Associates for petitioner.

MUÑOZ PALMA, J.:

FACTS

Concepcion (Concepcion) Rallos and Gerundia (Gerundia) Rallos were sisters and
registered co-owners of a parcel of land known in Cebu. They executed a special
power of attorney in favor of their brother, Simeon Rallos (Simeon), authorizing him to
sell for and in their behalf of the said land.

When Concepcion died, Simeon sold the undivided share lot of Concepcion and
Gerundia to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. This
caused to issuance of a new certificate of title in the name of the latter.

Ramon Rallos (Ramon) as administrator of the Intestate Estate of Concepcion Rallos

filed a complaint that the sale of the undivided share of Concepcion be declared
unenforceable, that said share be reconveyed to the estate of Concepcion and the title
issued to Felix Go Chan & Sons Realty be cancelled.

ISSUE

Whether or not the sale of undivided share of Concepcion is valid although it was
executed by the agent after the death of his principal

RULING

The sale is not valid. Agency is basically personal representative, and derivative in

nature. The authority of the agent to act emanates from the powers granted to him by
his principal; his act is the act of the principal if done within the scope of the
authority. However, agency is extinguished upon the death of the principal or of the
agent. As provided in Article 1919 of the New Civil Code.
By reason of the very nature of the relationship between principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.

The same rule prevails at common law — the death of the principal effects
instantaneous and absolute revocation of the authority of the agent unless the power be
coupled with an interest. This is the prevalent rule in American Jurisprudence where it is
well-settled that a power without an interest conferred upon an agent is dissolved by the
principal's death, and any attempted execution of the power afterward is not binding on
the heirs or representatives of the deceased. 

However, this general rule of extinguishment of agency upon the death of principal or
agent is subject to exception as the tenor of Articles 1930 and 1931 of the New Civil
Code expressly provided below:

ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent,
or in the interest of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal
or of any other cause which extinguishes the agency, is valid and shall be fully effective
with respect to third persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed
in favor of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after
the death of his principal is valid and effective only under two conditions, viz: (1) that the
agent acted without knowledge of the death of the principal and (2) that the third person
who contracted with the agent himself acted in good faith. Good faith here means that
the third person was not aware of the death of the principal at the time he contracted
with said agent. These two requisites must concur the absence of one will render the
act of the agent invalid and unenforceable.

Since Simeon Rallos knew the death of his principal at the time he sold the subject lot to
the said corporation, Article 1931 cannot be applied even if the third party acted in good
faith.

 PRINCIPLE/S ENUNCIATED BY THE SUPREME COURT

1. Agency is extinguished by the death of the principal or agent.

This has expressly provided in Article 1919 (3) “By the death, civil interdiction,
insanity or insolvency of the principal or of the agent.”
 By reason of the very nature of the relationship between principal and agent, agency
is extinguished by the death of the principal or of the agent and any act of an agent
after the death of his principal is void ab initio, except as explicitly provided for in the
New Civil Code: (1) when the agency is coupled with an interest (Art. 1930); and (2)
when the agent performed an act for the principal without knowledge of the
principal’s death and the third person who contracted with him acted in good faith.
(Art. 1931)

2. Revocation by principal distinguished from revocation by operation of law.

Although a revocation of a power of attorney to be effective must be communicated

to the parties concerned, yet a revocation by operation of law, such as death of the
principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the
agent’s exercise of authority is regarded as an execution of the principal’s continuing
will." With death, the principal’s will ceases or is terminated; the source of authority is
extinguished.

3. Agent’s heirs must notify principal of agent’s death.

The heirs of the agent who dies must notify the principal of his death and in the
meantime adopt such measures as circumstances may demand in the interest of the
latter, but the heirs of the principal are not duty-bound to give notice of the principal’s
death to the agent.

Article 1932 of the New Civil Code states that “If the agent dies, his heirs must notify
the principal thereof, and in the meantime, adopt such measures as the
circumstances may demand in the interest of the latter.

COMMENTS/OBSERVATIONS/REALIZATIONS

There are conflicting legal opinions cited in this case especially American jurisprudence
which for me is significant in order to substantiate the ruling of the case. Like for
instance the reliance of the respondent of this case to the case of Cassiday v Mckenzie
wherein payments made to an agent after the death of the principal were held to be
"good", "the parties being ignorant of the death. The respondent is misplaced on this
premise since our statutes expressly provides for two exceptions to the general rule that
death of the principal revokes ipso jure the agency as provided in Articles 1930 and
1931 of the New Civil Code.

I also learned in this case that good faith alone cannot be invoked at all times in order
for the contract to be valid. The failure disregard of the clear import and language of the
statute as to the extinguishment of agency caused by death creates unfavorable
situation which opens to different interpretation putting the judiciary system in chaos.

This case has taught me the following important lessons with regards to the
extinguishment of agency:

1. Article 1930 and 1931 of the New Civil Code as exceptions to the rule of
extinguishment of agency upon the death of principal or agent must be strictly
construed and not be given an interpretation or application beyond the clear
import of its terms for otherwise the courts will be involved in a process of
legislation outside of their judicial function

2. The heirs of the principal are not duty bound to notify the agent of the death of
the principal, rather it is heirs of the agent that must notify the principal as
provided in Article 1932 of the New Civil Code.

3. As a general principle, death revokes an agency and renders null every act of the
agent thereafter performed, yet that where a payment has been made in
ignorance of the death, such payment will be good