1 | PARTNERSHIP FULLTEXT CASES
A writ of preliminary attachment for the sum of
D. Modes of Extinguishment of Agency
G.R. No. L-18616 March 31, 1964
VICENTE M. COLEONGCO, plaintiff-
appellant,
vs.
EDUARDO L. CLAPAROLS, defendant-
appellee.
San Juan, Africa and Benedicto for plaintiff-
appellant.
Alberto Jamir for defendant-appellee.
Partnership; Power of attorney coupled with
interest revocable for cause.—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, as what happened in the
case at bar.
Damages; Moral damages for maliciously
undermining plaintiff's bank credit.—Material,
moral and exemplary damages may be awarded
a plaintiff for a defendant's acts in maliciously
undermining said plaintiff's credit leading the
bank to secure an unwarranted writ of execution
against said plaintiff.
REYES, J.B.L., J.:
Appeal by plaintiff Vicente Coleongco from a
decision of the Court of First Instance of Negros
Occidental (in its Civil Case No. 4170)
dismissing plaintiff's action for damages, and
ordering him to pay defendant Eduardo
Claparols the amount of P81,387.27 plus legal
interest from the filing of the counterclaim till
payment thereof; P50,000 as moral and
compensatory damages suffered by defendant;
and costs.
P100,000 was subsequently issued against
plaintiff's properties in spite of opposition
thereto.
Plaintiff Coleongco, not being in conformity with
the judgment appealed to this Court directly, the
claims involved being in excess of P200,000.
The antecedent facts as found by the trial court
and shown by the records, are as follows:
Since 1951, defendant-appellee, Eduardo L.
Claparols, operated a factory for the
manufacture of nails in Talisay, Occidental
Negros, under the style of "Claparols Steel &
Nail Plant". The raw material, nail wire, was
imported from foreign sources, specially from
Belgium; and Claparols had a regular dollar
allocation therefor, granted by the Import
Control Commission and the Central Bank. The
marketing of the nails was handled by the
"ABCD Commercial" of Bacolod, which was
owned by a Chinaman named Kho
To.1äwphï1.ñët
Losses compelled Claparols in 1953 to look for
someone to finance his imports of nail wires. At
first, Kho To agreed to do the financing, but on
April 25, 1953, the Chinaman introduced his
compadre, appellant Vicente Coleongco, to the
appellee, recommending said appellant to be
the financier in the stead of Kho To. Claparols
agreed, and on April 25 of that year a contract
(Exhibit B) was perfected between them
whereby Coleongco undertook to finance and
put up the funds required for the importation of
the nail wire, which Claparols bound himself to
convert into nails at his plant. It was agreed that
Coleongco would have the exclusive distribution
of the product, and the "absolute care in the
marketing of these nails and the promotion of
sales all over the Philippines", except the Davao
Agency; that Coleongco would "share the
control of all the cash" from sales or deposited
in banks; that he would have a representative in
the management; that all contracts and
transactions should be jointly approved by both
parties; that proper books would be kept and
annual accounts rendered; and that profits and
2 | PARTNERSHIP FULLTEXT CASES
losses would be shared "on a 50-50 basis". The
contract was renewed from one year to year
until 1958, and Coleongco's share subsequently
increased by 5% of the net profit of the factory
(Exhibits D, E, F).
Two days after the execution of the basic
agreement, Exhibit "B", on April 27, 1953,
Claparols executed in favor of Coleongco, at the
latter's behest a special power of attorney
(Exhibit C) to open and negotiate letters of
credit, to sign contracts, bills of lading, invoices,
and papers covering transactions; to represent
appellee and the nail factory; and to accept
payments and cash advances from dealers and
distributors. Thereafter, Coleongco also
became the assistant manager of the factory,
and took over its business transactions, while
Claparols devoted most of his time to the nail
manufacture processes.
Around mid-November of 1956, appellee
Claparols was disagreeably surprised by
service of an alias writ of execution to enforce a
judgment obtained against him by the Philippine
National Bank, despite the fact that on the
preceding September he had submitted an
amortization plan to settle the account. Worried
and alarmed, Claparols immediately left for
Manila to confer with the bank authorities. Upon
arrival, he learned to his dismay that the
execution had been procured because of
derogatory information against appellee that
had reached the bank from his associate,
appellant Coleongco. On July 6, 1956, the latter,
without appellee's knowledge, had written to the
bank —
in connection with the verbal offer — for the
acquisition by me of the whole interest of Mr.
Eduardo L. Claparols in the Claparols Steel &
Nail Plant and the Claparols Hollow Blocks
Factory" (Exhibit 36);
and later, on October 29, 1956, Coleongco had
written again the bank another letter (Exhibit
35), also behind the back of appellee, wherein
Coleongco charged Claparols with taking
machines mortgaged to the bank, and added - .
In my humble personal opinion I presume that
Mr. Eduardo L. Claparols is not serious in
meeting his obligations with your bank,
otherwise he had not taken these machines and
equipments a sign of bad faith since the factory
is making a satisfactory profit of my
administration.
Fortunately, Claparols managed to arrange
matters with the bank and to have the execution
levy lifted. Incensed at what he regarded as
disloyalty of his attorney-in-fact, he consulted
lawyers. The upshot was that appellee revoked
the power of attorney (Exhibit "C"), and informed
Coleongco thereof (Exhibits T, T-1), by
registered mail, demanding a full accounting at
the same time. Coleongco, as could be
expected, protested these acts of Claparols, but
the latter insisted, and on the first of January,
1957 wrote a letter to Coleongco dismissing him
as assistant manager of the plant and asked C.
Miller & Company, auditors, to go over the
books and records of the business with a view
to adjusting the accounts of the associates.
These last steps were taken in view of the
revelation made by his machinery
superintendent, Romulo Agsam, that in the
course of the preceding New Year celebrations
Coleongco had drawn Agsam aside and
proposed that the latter should pour acid on the
machinery to paralyze the factory. The
examination by the auditors, summarized in
Exhibits 80 and 87, found that Coleongco owed
the Claparols Nail Factory the amount of
P87,387.37, as of June 30, 1957.
In the meantime, Claparols had found in the
factory files certain correspondence in
February, 1955 between Coleongco and the nail
dealer Kho To whereby the former proposed to
Kho that the latter should cut his monthly
advances to Claparols from P2,000 to P1,000 a
month, because —
I think it is time that we do our plan to take
advantage of the difficulties of Eddie with the
banks for our benefit. If we can squeeze him
more. I am sure that we can extend our contract
with him before it ends next year, and perhaps
3 | PARTNERSHIP FULLTEXT CASES
on better terms. If we play well our cards we
might yet own his factory (Exhibit 32);
and conformably to Coleongco's proposal, Kho
To had written to Claparols that "due to present
business conditions" the latter could only be
allowed to draw P1,000 a month beginning April,
1955 (Exhibit 33).
As the parties could not amicably settle their
accounts, Coleongco filed a suit against
Claparols charging breach of contract, asking
for accounting, and praying for P528,762.19 as
damages, and attorney's fees, to which
Claparols answered, denying the charge, and
counter-claiming for the rescission of the
agreement with Coleongco for P561,387.99 by
way of damages. After trial, the court rendered
judgment, as stated at the beginning of this
opinion.
In this appeal, it is first contended by the
appellant Coleongco that the power of attorney
(Exhibit "C") was made to protect his interest
under the financing agreement (Exhibit "B") and
was one coupled with an interest that the
appellee Claparols had no legal power to
revoke. This point can not be sustained. The
financing agreement itself already contained
clauses for the protection of appellant's interest,
and did not call for the execution of any power
of attorney in favor of Coleongco. But granting
appellant's view, it must not be forgotten that a
power of attorney can be made irrevocable by
contract only in the sense that the principal may
not recall it at his pleasure; but coupled with
interest or not, the authority certainly can be
revoked for a just cause, such as when the
attorney-in-fact betrays the interest of the
principal, as happened in this case. It is not open
to serious doubt that the irrevocability of the
power of attorney may not be used to shield the
perpetration of acts in bad faith, breach of
confidence, or betrayal of trust, by the agent for
that would amount to holding that a power
coupled with an interest authorizes the agent to
commit frauds against the principal.
Our new Civil Code, in Article 1172, expressly
provides the contrary in prescribing that
responsibility arising from fraud is demandable
in all obligations, and that any waiver of action
for future fraud is void. It is also on this principle
that the Civil Code, in its Article 1800, declares
that the powers of a partner, appointed as
manager, in the articles of co-partnership
are irrevocable without just or lawful cause; and
an agent with power coupled with an interest
can not stand on better ground than such a
partner in so far as irrevocability of the power is
concerned.
That the appellee Coleongco acted in bad faith
towards his principal Claparols is, on the record,
unquestionable. His letters to the Philippine
National Bank (Exhibits 35 and 36) attempting
to undermine the credit of the principal and to
acquire the factory of the latter, without the
principal's knowledge; Coleongco's letter to his
cousin, Kho To (Exhibit 32), instructing the latter
to reduce to one-half the usual monthly
advances to Claparols on account of nail sales
in order to squeeze said appellee and compel
him to extend the contract entitling Coleongco to
share in the profits of the nail factory on better
terms, and ultimately "own his factory", a plan
carried out by Kho's letter, Exhibit 33, reducing
the advances to Claparols; Coleongco's attempt
to, have Romulo Agsam pour acid on the
machinery; his illegal diversion of the profits of
the factory to his own benefit; and the
surreptitious disposition of the Yates band
resaw machine in favor of his cousin's Hong
Shing Lumber Yard, made while Claparols was
in Baguio in July and August of 1956, are plain
acts of deliberate sabotage by the agent that
fully justified the revocation of the power of
attorney (Exhibit "C") by Claparols and his
demand for an accounting from his agent
Coleongco.
Appellant attempts to justify his letter to the
Philippine National Bank (Exhibits 35 and 36),
claiming that Claparols' mal-administration of
the business endangered the security for the
advances that he had made under the financing
contract (Exhibit "B"). But if that were the case,
it is to be expected that Coleongco would have
first protested to Claparols himself, which he
never did. Appellant likewise denies the
4 | PARTNERSHIP FULLTEXT CASES
authorship of the letter to Kho (Exhibit 32) as
well as the attempt to induce Agsam to damage
the machinery of the factory. Between the
testimony of Agsam and Claparols and that of
Coleongco, the court below whose to believe
the former, and we see no reason to alter the
lower court's conclusion on the value of the
evidence before it, considering that Kho's letter
to Claparols (Exhibit 33) plainly corroborates
and dovetails with the plan outlined in
Coleongco's own letter (Exhibit 32), signed by
him, and that the credibility of Coleongco is
affected adversely by his own admission of his
having been previously convicted
of estafa (t.s.n., pp. 139, 276), a crime that
implies moral turpitude. Even disregarding
Coleongco's letter to his son-in-law (Exhibit 82)
that so fully reveals Coleongco's lack of
business scruples, the clear preponderance of
evidence is against appellant.
The same remarks apply to the finding of the
trial court that it was appellant Coleongco, and
not Claparols, who disposed of the band
resawing equipment, since said machine was
received in July, 1956 and sold in August of that
year to the Hong Shing Lumber Co., managed
by appellant's cousin Vicente Kho. The untruth
of Coleongco's charge that Claparols, upon his
return from Baguio in September, 1956,
admitted having sold the machine behind his
associate's back is further evidenced by (a)
Coleongco's letter, Exhibit "V", dated October
29, 1956, inquiring the whereabouts of the
resaw equipment from Claparols (an inquiry
incompatible with Claparols' previous
admission); (b) by the undenied fact that the
appellee was in Baguio and Coleongco was
acting for him during the months of July and
August when the machine was received and
sold; and (c) the fact that as between the two it
is Coleongco who had a clear interest in selling
the sawing machine to his cousin Kho To's
lumber yard. If Claparols wished to sell the
machine without Coleongco's knowledge, he
would not have picked the latter's cousin for a
buyer.
The action of plaintiff-appellant for damages and
lost profits due to the discontinuance of the
financing agreement, Exhibit "B", may not
prosper, because the record shows that the
appellant likewise breached his part of the
contract. It will be recalled that paragraph 2 of
the contract, Exhibit "B", it was stipulated:
That the Party of the Second Part (Coleongco)
has agreed to finance and put up all the
necessary money which may be needed to pay
for the importation of the raw materials needed
by such nail factory and allocated by the ICC
from time to time, either in cash of with whatever
suitable means which the Party of the Second
Part may be able to make by suitable
arrangements with any well-known banking
institution recognized by the Central Bank of the
Philippines.
Instead of putting up all the necessary
money needed to finance the imports of raw
material, Coleongco merely advanced 25% in
cash on account of the price and had the
balance covered by surety agreements
executed by Claparols and others as solidary,
(joint and several) guarantors (see Exhibits G,
H, I). The upshot of this arrangement was that
Claparols was made to shoulder 3/4 of the
payment for the imports, contrary to the
financing agreement. Paragraph 11 of the latter
expressly denied Coleongco any power or
authority to bind Claparols without previous
consultation and authority. When the balances
for the cost of the importations became due,
Coleongco, in some instances, paid it with the
dealers' advances to the nail factory against
future sales without the knowledge of Claparols
(Exhibits "K" to K-11, K-13). Under paragraphs
8 and 11 of the financing agreement, Coleongco
was to give preference to the operating
expenses before sharing profits, so that until the
operating costs were provided for, Coleongco
had no right to apply the factory's income to pay
his own obligations.
Again, the examination of the books by
accountant Atienza of C. Miller and Co., showed
that from 1954 onwards Coleongco (who had
the control of the factory's cash and bank
deposits, under Paragraph 11 of Exhibit "B")
never liquidated and paid in full to Claparols his
5 | PARTNERSHIP FULLTEXT CASES

half of the profits, so that by the end of 1956 have been made larger without violating the
there was due to Claparols P38,068.41 on this canons of justice, the discretion in fixing such
account (Exhibit 91). For 1957 to 1958 damages primarily lay in the trial court, and we
Claparols financed the imports of nail wire feel that the same should be respected.
without the help of appellant, and in view of the
latter's infringement of his obligations, his acts IN VIEW OF THE FOREGOING, the decision
of disloyalty previously discussed, and his appealed from is affirmed. Costs against
diversions of factory funds (he even bought two appellant Vicente Coleongco.
motor vehicles with them), we find no
justification for his insistence in sharing in the
factory's profit for those years, nor for the
restoration of the revoked power of attorney.

The accountant's reports and testimony

(specially Exhibits 80 to 87) prove that as of
June 30, 1957, Coleongco owed to Claparols
the sum of P83,466.34 that after some
adjustment was reduced to P81,387.37,
practically accepted even by appellant's auditor.
The alleged discrepancies between the general
ledger and the result thus arrived at was
satisfactorily explained by accountant Atienza in
his testimony (t.s.n., 1173-1178).

No error was, therefore, committed by the trial

court in declaring the financing contract (Exh. B)
properly resolved by Claparols or in rendering
judgment against appellant in favor of appellee
for the said amount of P81,387.37. The basic
rule of contracts requires parties to act loyally
toward each other in the pursuit of the common
end, and appellant clearly violated the rule of
good faith prescribed by Art. 1315 of the new
Civil Code.

The lower court also allowed Claparols P50,000

for damages, material, moral, and exemplary,
caused by the appellant Coleongco's acts in
maliciously undermining appellee's credit that
led the Philippine National Bank to secure a writ
of execution against Claparols. Undeniably, the
attempts of Coleongco to discredit and
"squeeze" Claparols out of his own factory and
business could not but cause the latter mental
anguish and serious anxiety, as found by the
court below, for which he is entitled to
compensation; and the malevolence that lay
behind appellee's actions justified also the
imposition of exemplary or deterrent damages
(Civ. Code, Art. 2232). While the award could
6 | PARTNERSHIP FULLTEXT CASES
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.
Ramon Duterte for private respondent.
Agency, its concept, essential elements and
characteristics.—By the relationship of agency,
one party called the principal authorizes another
called the agent to act for and in his behalf in
transactions with third persons. The essential
elements of agency are:(l) 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. 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. “He who acts through another
acts himself.”
Same: Same; Art. 1930 and Art. 1931 of the Civil
Code providing that death of principal or agent
extinguishing agency is only a general rule;
Rationale for the provision.—Reason of the very
nature of the relationship between principal and
agent, agency is extinguished by the death of
the principal. Manresa explains that the
rationale for the law is found in the juridical basis
of agency which is representation. Laurent says
that the juridical tie between the principal and
the agent is severed ipso jure upon the death of
either without necessity for the heirs of the
principal to notify the agent of the fact of death
of the former. 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 afterwards is not binding on the
heirs or representatives of the deceased.
Same; Same; Art. 1930 and Art. 1931 of the Civil
Code exceptions to general rule provided in Art.
1919 of the Civil Code, that death of principal
revokes ipso jure the agency.—Is the general
rule provided for in Art. 1919 that the death of
the principal or of the agent extinguishes the
agency, subject to any exception, and if so, is
the instant case within that exception? That is
the determinative point in issue in this litigation
x x x Articles 1930 and 1931 of the Civil Code
provide the exceptions to the general rule
aforementioned.
Same; Same; Same; Contention that despite
death of principal the act of attorney-in-fact in
selling his principal’s share of the disputed
property is valid and enforceable since the
buyer acted in good faith is untenable because
of the established knowledge of the attorney-in-
fact of the death of his principal; Requisites of
Art. 1931 that despite death of principal and of
agent is valid not complied with.—Under Art.
1931 of the Civil Code, an act done by the agent
after the death of his principal is valid and
effective only under two conditions, viz: (1) that
the agent acted without knowledge of the death
of the principal, and (2) that the third person who
contracted with the agent himself acted in good
faith. Good faith here means that the third
person was not aware of the death of the
principal at the time he contracted with said
agent. These two requisites must concur: the
absence of one will render the act of the agent
invalid and unenforceable. In the instant case, it
cannot be questioned that the agent Simeon
Rallos knew of the death of his principal at the
time he sold the latter’s share in Lot No. 5983 to
respondent corporation. x x x On the basis of the
established knowledge of Simeon Rallos
concerning the death of his principal,
Concepcion Rallos, Article 1931 of the Civil
Code is inapplicable. The law expressly requires
for its application lack of knowledge on the part
7 | PARTNERSHIP FULLTEXT CASES
of the agent of the death of his principal; it is not
enough that the third person acted in good faith.
Same; Same; Same; Same; General rule is that
an act of agent after death of his principal is void
ab initio unless the same falls under exceptions
in Arts. 1930 and 1931 of the Civil Code; Art
1931 being an exception to the general rule is to
be strictly construed.—In sustaining the validity
of the sale to respondent corporation, the Court
of Appeals reasoned out that there is no
provision in the Civil 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. We
cannot see the merits of the foregoing argument
as it ignores the existence of the general rule
enunciated in Art. 1919 that the death of the
principal extinguishes the agency. That being
the general rule it follows a fortiori that any act
of an agent after the death of his principal is void
ab initio unless the same falls under the
exceptions provided for in the aforementioned
Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly
construed; it is not to be given an interpretation
or application beyond the clear import of its
terms for otherwise the courts will be involved in
a process of legislation outside of their judicial
function.
Same; Same; Revocation by an act of the
principal as a mode of terminating agency
distinguished from revocation by operation of
law such as death of principal.—Revocation by
an act of the principal as a mode of terminating
an agency is to be distinguished from revocation
by operation of law such as death of the
principal which obtains in this case. The
decision stressed that by reason of the very
nature of the relationship between principal and
agent, agency is extinguished ipso jure upon the
death of either principal or agent. 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 by 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.
Same; Same; Law does not impose a duty on
the heirs of principal to notify agent of death of
principal; If agent dies, his heirs must notify
principal thereof.—The Civil Code does not
impose a duty on the heirs of the principal to
notify the agent of the death of said principal.
What the Code provides in Article 1932 is 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. Hence, the
fact that no notice of the death of the principal
was registered on the certificate of title of the
property in the Office of the Register of Deeds,
is not fatal to the cause of the estate of the
principal.
Same; Same; No parallel can be drawn between
the case of attorney-in-fact who after death of
his principal sold the latter’s share in the land
pursuant to a special power of attorney which
the principal had executed in his favor and that
of an innocent purchaser for value of registered
land.—Holding that the good faith of a third
person in dealing with an agent affords the
former sufficient protection, respondent court
drew a “parallel” between the instant case and
that of an innocent purchaser for value of a
registered land, stating that if a person
purchases a registered land from one who
acquired it in bad faith—even to the extent of
forging or falsifying the deed of sale in his
favor—the registered owner has no recourse
against such innocent purchaser for value but
only against the forger. To support the
correctness of this “parallelism”, respondent
corporation, in its brief, cites the case of
Blondeau, et al. vs. Nano and Vallejo, 61 Phil.
625. x x x The Blondeau decision, however, is
not on all fours with the case before Us because
here We are confronted with one who admittedly
was an agent of his sister and who sold the
property of the latter after her death with full
knowledge of such death. The situation is
8 | PARTNERSHIP FULLTEXT CASES
expressly covered by a provision of law on
agency the terms of which are clear and
unmistakable leaving no room for an
interpretation contrary to its tenor, in the same
manner that the ruling in Blondeau and the
cases cited therein found a basis in Section 55
of the Land Registration Law.
Same; Same; Conflict of legal opinion in
American jurisprudence does not hold true in
Philippine law; Civil Code of the Philippines
expressly provides for two exceptions to general
rule that death of the principal revokes the
agency; Agent’s act of executing the sale of
property despite notice of death of his principal
is unenforceable against the estate of the
principal.—One last point raised by respondent
corporation in support of the appealed decision
is an 1842 ruling of the wherein payments made
to an agent after the death of the principal were
held to be “good”, “the parties being ignorant of
the death.” Let us take note that the Opinion of
Justice Rogers was premised on the statement
that the parties were ignorant of the death of the
principal. x x x To avoid any wrong impression
which the Opinion in Cassiday v. McKenzie may
evoke, mention may be made that the above
represents the minority view in American
jurisprudence. x x x Whatever conflict of legal
opinion was generated by Cassiday v.
McKenzie in American jurisprudence, no such
conflict exists in our own for the simple reason
that our statute, the Civil Code, expressly
provides for two exceptions to the general rule
that death of the principal revokes ipso jure the
agency, to wit: (1) that the agency is coupled
with an interest (Art. 1930), and (2) that the act
of the agent was executed without knowledge of
the death of the principal and the third person
who contracted with the agent acted also in
good faith (Art. 1931). Exception No. 2 is the
doctrine followed in Cassiday, and again We
stress the indispensable requirement—that the
agent acted without knowledge or notice of the
death of the principal. In the case before Us the
agent Ramon Rallos executed the sale
notwithstanding notice of the death of his
principal. Accordingly, the agent’s act is
unenforceable against the estate of his
principal.
MUÑOZ PALMA, J.:
This is a case of an attorney-in-fact, Simeon
Rallos, who after of his death of his principal,
Concepcion Rallos, sold the latter's undivided
share in a parcel of land pursuant to a power of
attorney which the principal had executed in
favor. The administrator of the estate of the went
to court to have the sale declared
uneanforceable and to recover the disposed
share. The trial court granted the relief prayed
for, but upon appeal the Court of Appeals uphold
the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed.
Concepcion and Gerundia both surnamed
Rallos were sisters and registered co-owners of
a parcel of land known as Lot No. 5983 of the
Cadastral Survey of Cebu covered by Transfer
Certificate of Title No. 11116 of the Registry of
Cebu. On April 21, 1954, the sisters executed a
special power of attorney in favor of their
brother, Simeon Rallos, authorizing him to sell
for and in their behalf lot 5983. On March 3,
1955, Concepcion Rallos died. On September
12, 1955, Simeon Rallos sold the undivided
shares of his sisters Concepcion and Gerundia
in lot 5983 to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. The
deed of sale was registered in the Registry of
Deeds of Cebu, TCT No. 11118 was cancelled,
and a new transfer certificate of Title No. 12989
was issued in the named of the vendee.
On May 18, 1956 Ramon Rallos as
administrator of the Intestate Estate of
Concepcion Rallos filed a complaint docketed
as Civil Case No. R-4530 of the Court of First
Instance of Cebu, praying (1) that the sale of the
undivided share of the deceased Concepcion
Rallos in lot 5983 be d unenforceable, and said
share be reconveyed to her estate; (2) that the
Certificate of 'title issued in the name of Felix Go
Chan & Sons Realty Corporation be cancelled
and another title be issued in the names of the
corporation and the "Intestate estate of
Concepcion Rallos" in equal undivided and (3)
that plaintiff be indemnified by way of attorney's
9 | PARTNERSHIP FULLTEXT CASES
fees and payment of costs of suit. Named party
defendants were Felix Go Chan & Sons Realty
Corporation, Simeon Rallos, and the Register of
Deeds of Cebu, but subsequently, the latter was
dropped from the complaint. The complaint was
amended twice; defendant Corporation's
Answer contained a crossclaim against its co-
defendant, Simon Rallos while the latter filed
third-party complaint against his sister,
Gerundia Rallos While the case was pending in
the trial court, both Simon and his sister
Gerundia died and they were substituted by the
respective administrators of their estates.
After trial the court a quo rendered judgment
with the following dispositive portion:
A. On Plaintiffs Complaint —
(1) Declaring the deed of sale, Exh. "C", null and
void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question,
— Lot 5983 of the Cadastral Survey of Cebu —
is concerned;
(2) Ordering the Register of Deeds of Cebu City
to cancel Transfer Certificate of Title No. 12989
covering Lot 5983 and to issue in lieu thereof
another in the names of FELIX GO CHAN &
SONS REALTY CORPORATION and the
Estate of Concepcion Rallos in the proportion of
one-half (1/2) share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty
Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the
herein plaintiff;
(4) Sentencing the defendant Juan T.
Borromeo, administrator of the Estate of Simeon
Rallos, to pay to plaintiff in concept of
reasonable attorney's fees the sum of
P1,000.00; and
(5) Ordering both defendants to pay the costs
jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T.
Borromeo, administrator of the Estate of Simeon
Rallos, to pay to defendant Felix Co Chan &
Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of
lot 5983;
(2) Ordering co-defendant Juan T. Borromeo,
administrator of the Estate of Simeon Rallos, to
pay in concept of reasonable attorney's fees to
Felix Go Chan & Sons Realty Corporation the
sum of P500.00.
C. On Third-Party Complaint of defendant Juan
T. Borromeo administrator of Estate of Simeon
Rallos, against Josefina Rallos special
administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without
prejudice to filing either a complaint against the
regular administrator of the Estate of Gerundia
Rallos or a claim in the Intestate-Estate of
Cerundia Rallos, covering the same subject-
matter of the third-party complaint, at bar. (pp.
98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation
appealed in due time to the Court of Appeals
from the foregoing judgment insofar as it set
aside the sale of the one-half (1/2) share of
Concepcion Rallos. The appellate tribunal, as
adverted to earlier, resolved the appeal on
November 20, 1964 in favor of the appellant
corporation sustaining the sale in
question. 1 The appellee administrator, Ramon
Rallos, moved for a reconsider of the decision
but the same was denied in a resolution of
March 4, 1965. 2
What is the legal effect of an act performed by
an agent after the death of his principal? Applied
more particularly to the instant case, We have
the query. is the sale of the undivided share of
Concepcion Rallos in lot 5983 valid although it
was executed by the agent after the death of his
principal? What is the law in this jurisdiction as
to the effect of the death of the principal on the
authority of the agent to act for and in behalf of
the latter? Is the fact of knowledge of the death
of the principal a material factor in determining
the legal effect of an act performed after such
death?
10 | PARTNERSHIP FULLTEXT CASES
Before proceedings to the issues, We shall
briefly restate certain principles of law relevant
to the matter tinder consideration.
1. It is a basic axiom in civil law embodied in our
Civil Code that no one may contract in the name
of another without being authorized by the latter,
or unless he has by law a right to represent
him. 3 A contract entered into in the name of
another by one who has no authority or the legal
representation or who has acted beyond his
powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is
revoked by the other contracting party.4 Article
1403 (1) of the same Code also provides:
ART. 1403. The following contracts are
unenforceable, unless they are justified:
(1) Those entered into in the name of another
person by one who hi - been given no authority
or legal representation or who has acted beyond
his powers; ...
Out of the above given principles, sprung the
creation and acceptance of the relationship of
agency whereby one party, caged the principal
(mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf
in transactions with third persons. The essential
elements of agency are: (1) there is consent,
express or implied of the parties to establish the
relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the
agents acts as a representative and not for
himself, and (4) the agent acts within the scope
of his authority. 5
Agency is basically personal representative,
and derivative in nature. The authority of the
agent to act emanates from the powers granted
to him by his principal; his act is the act of the
principal if done within the scope of the
authority. Qui facit per alium facit se. "He who
acts through another acts himself". 6
2. There are various ways of extinguishing
agency, 7 but her We are concerned only with
one cause — death of the principal Paragraph 3
of Art. 1919 of the Civil Code which was taken
from Art. 1709 of the Spanish Civil Code
provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or
insolvency of the principal or of the agent; ...
(Emphasis supplied)
By reason of the very nature of the relationship
between Principal and agent, agency is
extinguished by the death of the principal or the
agent. This is the law in this jurisdiction.8
Manresa commenting on Art. 1709 of the
Spanish Civil Code explains that the rationale
for the law is found in the juridical basis of
agency which is representation Them being an
in. integration of the personality of the principal
integration that of the agent it is not possible for
the representation to continue to exist once the
death of either is establish. Pothier agrees with
Manresa that by reason of the nature of agency,
death is a necessary cause for its
extinction. Laurent says that the juridical tie
between the principal and the agent is severed
ipso jure upon the death of either without
necessity for the heirs of the fact to notify the
agent of the fact of death of the former. 9
The same rule prevails at common law — the
death of the principal effects instantaneous and
absolute revocation of the authority of the agent
unless the Power be coupled with an
interest. 10 This is the prevalent rule in American
Jurisprudence where it is well-settled that a
power without an interest confer. red upon an
agent is dissolved by the principal's death, and
any attempted execution of the power afterward
is not binding on the heirs or representatives of
the deceased. 11
3. Is the general rule provided for in Article 1919
that the death of the principal or of the agent
extinguishes the agency, subject to any
exception, and if so, is the instant case within
that exception? That is the determinative point
in issue in this litigation. It is the contention of
respondent corporation which was sustained by
11 | PARTNERSHIP FULLTEXT CASES
respondent court that notwithstanding the death
of the principal Concepcion Rallos the act of the
attorney-in-fact, Simeon Rallos in selling the
former's sham in the property is valid and
enforceable inasmuch as the corporation acted
in good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide
the exceptions to the general rule afore-
mentioned.
ART. 1930. The agency shall remain in full force
and effect even after the death of the principal,
if it has been constituted in the common interest
of the latter and of the agent, or in the interest of
a third person who has accepted the stipulation
in his favor.
ART. 1931. Anything done by the agent, without
knowledge of the death of the principal or of any
other cause which extinguishes the agency, is
valid and shall be fully effective with respect to
third persons who may have contracted with him
in good. faith.
Article 1930 is not involved because admittedly
the special power of attorney executed in favor
of Simeon Rallos was not coupled with an
interest.
Article 1931 is the applicable law. Under this
provision, an act done by the agent after the
death of his principal is valid and effective only
under two conditions, viz: (1) that the agent
acted without knowledge of the death of the
principal and (2) that the third person who
contracted with the agent himself acted in good
faith. Good faith here means that the third
person was not aware of the death of the
principal at the time he contracted with said
agent. These two requisites must concur the
absence of one will render the act of the agent
invalid and unenforceable.
In the instant case, it cannot be questioned that
the agent, Simeon Rallos, knew of the death of
his principal at the time he sold the latter's share
in Lot No. 5983 to respondent corporation. The
knowledge of the death is clearly to be inferred
from the pleadings filed by Simon Rallos before
the trial court. 12 That Simeon Rallos knew of the
death of his sister Concepcion is also a finding
of fact of the court a quo 13 and of respondent
appellate court when the latter stated that Simon
Rallos 'must have known of the death of his
sister, and yet he proceeded with the sale of the
lot in the name of both his sisters Concepcion
and Gerundia Rallos without informing appellant
(the realty corporation) of the death of the
former. 14
On the basis of the established knowledge of
Simon Rallos concerning the death of his
principal Concepcion Rallos, Article 1931 of the
Civil Code is inapplicable. The law expressly
requires for its application lack of knowledge on
the part of the agent of the death of his principal;
it is not enough that the third person acted in
good faith. Thus in Buason & Reyes v. Panuyas,
the Court applying Article 1738 of the old Civil
rode now Art. 1931 of the new Civil Code
sustained the validity , of a sale made after the
death of the principal because it was not shown
that the agent knew of his principal's
demise. 15 To the same effect is the case
of Herrera, et al., v. Luy Kim Guan, et al., 1961,
where in the words of Justice Jesus Barrera the
Court stated:
... even granting arguemendo that Luis Herrera
did die in 1936, plaintiffs presented no proof and
there is no indication in the record, that the
agent Luy Kim Guan was aware of the death of
his principal at the time he sold the property. The
death 6f the principal does not render the act of
an agent unenforceable, where the latter had no
knowledge of such extinguishment of the
agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to
respondent consideration the Court of Appeals
reasoned out that there is no provision in the
Code which provides that whatever is done by
an agent having knowledge of the death of his
principal is void even with respect to third
persons who may have contracted with him in
good faith and without knowledge of the death
of the principal. 16
We cannot see the merits of the foregoing
argument as it ignores the existence of the
12 | PARTNERSHIP FULLTEXT CASES
general rule enunciated in Article 1919 that the
death of the principal extinguishes the agency.
That being the general rule it follows
a fortiorithat any act of an agent after the death
of his principal is void ab initio unless the same
fags under the exception provided for in the
aforementioned Articles 1930 and 1931. Article
1931, being an exception to the general rule, is
to be strictly construed, it is not to be given an
interpretation or application beyond the clear
import of its terms for otherwise the courts will
be involved in a process of legislation outside of
their judicial function.
5. Another argument advanced by respondent
court is that the vendee acting in good faith
relied on the power of attorney which was duly
registered on the original certificate of title
recorded in the Register of Deeds of the
province of Cebu, that no notice of the death
was aver annotated on said certificate of title by
the heirs of the principal and accordingly they
must suffer the consequences of such
omission. 17
To support such argument reference is made to
a portion in Manresa's Commentaries which We
quote:
If the agency has been granted for the purpose
of contracting with certain persons, the
revocation must be made known to them. But if
the agency is general iii nature, without
reference to particular person with whom the
agent is to contract, it is sufficient that the
principal exercise due diligence to make the
revocation of the agency publicity known.
In case of a general power which does not
specify the persons to whom represents' on
should be made, it is the general opinion that all
acts, executed with third persons who
contracted in good faith, Without knowledge of
the revocation, are valid. In such case, the
principal may exercise his right against the
agent, who, knowing of the revocation,
continued to assume a personality which he no
longer had. (Manresa Vol. 11, pp. 561 and 575;
pp. 15-16, rollo)
The above discourse however, treats of
revocation by an act of the principal as a mode
of terminating an agency which is to be
distinguished from revocation by operation of
law such as death of the principal which obtains
in this case. On page six of this Opinion We
stressed that by reason of the very nature of the
relationship between principal and agent,
agency is extinguished ipso jure upon the death
of either principal or agent. Although a
revocation of a power of attorney to be effective
must be communicated to the parties
concerned, 18 yet a revocation by operation of
law, such as by death of the principal is, as a
rule, instantaneously effective inasmuch as "by
legal fiction the agent's exercise of authority is
regarded as an execution of the
principal's continuing will. 19 With death, the
principal's will ceases or is the of authority is
extinguished.
The Civil Code does not impose a duty on the
heirs to notify the agent of the death of the
principal What the Code provides in Article 1932
is that, if the agent die his heirs must notify the
principal thereof, and in the meantime adopt
such measures as the circumstances may
demand in the interest of the latter. Hence, the
fact that no notice of the death of the principal
was registered on the certificate of title of the
property in the Office of the Register of Deeds,
is not fatal to the cause of the estate of the
principal
6. Holding that the good faith of a third person in
said with an agent affords the former sufficient
protection, respondent court drew a "parallel"
between the instant case and that of an innocent
purchaser for value of a land, stating that if a
person purchases a registered land from one
who acquired it in bad faith — even to the extent
of foregoing or falsifying the deed of sale in his
favor — the registered owner has no recourse
against such innocent purchaser for value but
only against the forger. 20
To support the correctness of this respondent
corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil.
625. We quote from the brief:
13 | PARTNERSHIP FULLTEXT CASES
In the case of Angel Blondeau et al. v. Agustin
Nano et al., 61 Phil. 630, one Vallejo was a co-
owner of lands with Agustin Nano. The latter had
a power of attorney supposedly executed by
Vallejo Nano in his favor. Vallejo delivered to
Nano his land titles. The power was registered
in the Office of the Register of Deeds. When the
lawyer-husband of Angela Blondeau went to
that Office, he found all in order including the
power of attorney. But Vallejo denied having
executed the power The lower court sustained
Vallejo and the plaintiff Blondeau appealed.
Reversing the decision of the court a quo, the
Supreme Court, quoting the ruling in the case
of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the
defenses of the defendant- appellee must be
overruled. Agustin Nano had possession of
Jose Vallejo's title papers. Without those title
papers handed over to Nano with the
acquiescence of Vallejo, a fraud could not have
been perpetuated. When Fernando de la
Canters, a member of the Philippine Bar and the
husband of Angela Blondeau, the principal
plaintiff, searched the registration record, he
found them in due form including the power of
attorney of Vallajo in favor of Nano. If this had
not been so and if thereafter the proper notation
of the encumbrance could not have been made,
Angela Blondeau would not have sent
P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by
the registered owner thereof in the hands of
another operates as a representation to a third
party that the holder of the transfer is authorized
to deal with the land.
As between two innocent persons, one of whom
must suffer the consequence of a breach of
trust, the one who made it possible by his act of
coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all
fours with the case before Us because here We
are confronted with one who admittedly was an
agent of his sister and who sold the property of
the latter after her death with full knowledge of
such death. The situation is expressly covered
by a provision of law on agency the terms of
which are clear and unmistakable leaving no
room for an interpretation contrary to its tenor, in
the same manner that the ruling in Blondeau
and the cases cited therein found a basis in
Section 55 of the Land Registration Law which
in part provides:
xxx xxx xxx
The production of the owner's duplicate
certificate whenever any voluntary instrument is
presented for registration shall be conclusive
authority from the registered owner to the
register of deeds to enter a new certificate or to
make a memorandum of registration in
accordance with such instruments, and the new
certificate or memorandum Shall be binding
upon the registered owner and upon all persons
claiming under him in favor of every purchaser
for value and in good faith: Provided however,
That in all cases of registration provided by
fraud, the owner may pursue all his legal and
equitable remedies against the parties to such
fraud without prejudice, however, to the right, of
any innocent holder for value of a certificate of
title. ... (Act No. 496 as amended)
7. One last point raised by respondent
corporation in support of the appealed decision
is an 1842 ruling of the Supreme Court of
Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of
the principal were held to be "good", "the parties
being ignorant of the death". Let us take note
that the Opinion of Justice Rogers was premised
on the statement that the parties were ignorant
of the death of the principal. We quote from that
decision the following:
... Here the precise point is, whether a payment
to an agent when the Parties are ignorant of the
death is a good payment. in addition to the case
in Campbell before cited, the same judge Lord
Ellenboruogh, has decided in 5 Esp. 117, the
general question that a payment after the death
of principal is not good. Thus, a payment of
sailor's wages to a person having a power of
attorney to receive them, has been held void
when the principal was dead at the time of the
payment. If, by this case, it is meant merely to
14 | PARTNERSHIP FULLTEXT CASES
decide the general proposition that by operation
of law the death of the principal is a revocation
of the powers of the attorney, no objection can
be taken to it. But if it intended to say that his
principle applies where there was 110 notice of
death, or opportunity of twice I must be
permitted to dissent from it.
... That a payment may be good today, or bad
tomorrow, from the accident circumstance of the
death of the principal, which he did not know,
and which by no possibility could he know? It
would be unjust to the agent and unjust to the
debtor. In the civil law, the acts of the agent,
done bona fide in ignorance of the death of his
principal are held valid and binding upon the
heirs of the latter. The same rule holds in the
Scottish law, and I cannot believe the common
law is so unreasonable... (39 Am. Dec. 76, 80,
81; emphasis supplied)
To avoid any wrong impression which the
Opinion in Cassiday v. McKenzie may evoke,
mention may be made that the above
represents the minority view in American
jurisprudence. Thus in Clayton v. Merrett, the
Court said.—
There are several cases which seem to hold that
although, as a general principle, death revokes
an agency and renders null every act of the
agent thereafter performed, yet that where a
payment has been made in ignorance of the
death, such payment will be good. The leading
case so holding is that of Cassiday v. McKenzie,
4 Watts & S. (Pa) 282, 39 Am. 76, where, in an
elaborate opinion, this view ii broadly
announced. It is referred to, and seems to have
been followed, in the case of Dick v. Page, 17
Mo. 234, 57 AmD 267; but in this latter case it
appeared that the estate of the deceased
principal had received the benefit of the money
paid, and therefore the representative of the
estate might well have been held to be estopped
from suing for it again. . . . These cases, in so
far, at least, as they announce the doctrine
under discussion, are exceptional. The
Pennsylvania Case, supra (Cassiday v.
McKenzie 4 Watts & S. 282, 39 AmD 76), is
believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope.
(52, Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking
of Cassiday v. McKenzie, and pointing out that
the opinion, except so far as it related to the
particular facts, was a mere dictum, Baldwin J.
said:
The opinion, therefore, of the learned Judge
may be regarded more as an extrajudicial
indication of his views on the general subject,
than as the adjudication of the Court upon the
point in question. But accordingly all power
weight to this opinion, as the judgment of a of
great respectability, it stands alone among
common law authorities and is opposed by an
array too formidable to permit us to following it.
(15 Cal. 12,17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was
generated by Cassiday v. McKenzie in
American jurisprudence, no such conflict exists
in our own for the simple reason that our statute,
the Civil Code, expressly provides for two
exceptions to the general rule that death of the
principal revokes ipso jure the agency, to wit: (1)
that the agency is coupled with an interest (Art
1930), and (2) that the act of the agent was
executed without knowledge of the death of the
principal and the third person who contracted
with the agent acted also in good faith (Art.
1931). Exception No. 2 is the doctrine followed
in Cassiday, and again We stress the
indispensable requirement that the agent acted
without knowledge or notice of the death of the
principal In the case before Us the agent Ramon
Rallos executed the sale notwithstanding notice
of the death of his principal Accordingly, the
agent's act is unenforceable against the estate
of his principal.
IN VIEW OF ALL THE FOREGOING, We set
aside the ecision of respondent appellate court,
and We affirm en toto the judgment rendered by
then Hon. Amador E. Gomez of the Court of
First Instance of Cebu, quoted in pages 2 and 3
of this Opinion, with costs against respondent
realty corporation at all instances.
So Ordered.
15 | PARTNERSHIP FULLTEXT CASES
16 | PARTNERSHIP FULLTEXT CASES
G.R. No. L-36585 July 16, 1984
MARIANO DIOLOSA and ALEGRIA
VILLANUEVA-DIOLOSA, petitioners,
vs.
THE HON. COURT OF APPEALS, and
QUIRINO BATERNA (As owner and
proprietor of QUIN BATERNA
REALTY), respondents.
Agency; Contracts; Where the agency contract
stipulated that the agent is authorized to dispose
the subdivided property until the same is fully
disposed of, the authority to sell continuous until
all lots are sold. The contract cannot be
terminated by landowner before then.—Under
the contract, Exhibit “A”, herein petitioners
allowed the private respondent “to dispose of,
sell, cede, transfer and convey x x x 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, Exhibit “B” x
x x x x x they become liable to the private
respondent for damages for breach of contract.
Same; Same; Agency agreement can be
terminated only on the grounds specified by Art.
1381 N.C.C.—And, it may be added that since
the agency agreement, Exhibit “A”, is a valid
contract, the same may be rescinded only on
grounds specified in Articles 1381 and 1382 of
the Civil Code, as follows: x x x. Diolosa vs.
Court of Appeals, 130 SCRA 350, No. L-36585
July 16, 1984
RELOVA, J.:
Appeal by certiorari from a decision of the then
Court of Appeals ordering herein petitioners to
pay private respondent "the sum of P10,000.00
as damages and the sum of P2,000.00 as
attorney's fees, and the costs."
This case originated in the then Court of First
Instance of Iloilo where private respondents
instituted a case of recovery of unpaid
commission against petitioners over some of the
lots subject of an agency agreement that were
not sold. Said complaint, docketed as Civil Case
No. 7864 and entitled: "Quirino Baterna vs.
Mariano Diolosa and Alegria Villanueva-
Diolosa", was dismissed by the trial court after
hearing. Thereafter, private respondent
elevated the case to respondent court whose
decision is the subject of the present petition.
The parties — petitioners and respondents-
agree on the findings of facts made by
respondent court which are based largely on the
pre-trial order of the trial court, as follows:
PRE-TRIAL ORDER
When this case was called for a pre-trial
conference today, the plaintiff, assisted by Atty.
Domingo Laurea, appeared and the defendants,
assisted by Atty. Enrique Soriano, also
appeared.
A. — During the pre-trial conference the parties,
in addition to what have been admitted in the
pleadings, have agreed and admitted that the
following facts are attendant in this case and
that they will no longer adduce evidence to
prove them:
1. That the plaintiff was and still is a licensed real
estate broker, and as such licensed real estate
broker on June 20, 1968, an agreement was
entered into between him as party of the second
part and the defendants spouses as party of the
first part, whereby the former was constituted as
exclusive sales agent of the defendants, its
successors, heirs and assigns, to dispose of,
sell, cede, transfer and convey the lots included
in VILLA ALEGRE SUBDIVISION owned by the
defendants, under the terms and conditions
embodied in Exhibit "A", and pursuant to said
agreement (Exhibit "A"), the plaintiff acted for
and in behalf of the defendants as their agent in
the sale of the lots included in the VILLA
ALEGRE SUBDIVISION;
2. That on September 27, 1968, the defendants
terminated the services of plaintiff as their
exclusive sales agent per letter marked as
Exhibit "B", for the reason stated in the latter.
17 | PARTNERSHIP FULLTEXT CASES
B. — During the trial of this case on the merit,
the plaintiff will adduce by competent evidence
the following facts:
1. That as a real estate broker, he had sold the
lots comprised in several subdivisions, to wit:
Greenfield Subdivision, the Villa Beach
Subdivision, the Juntado Subdivision, the St.
Joseph Village, the Ledesma Subdivision, the
Brookside Subdivision, the Villa Alegre
Subdivision, and Cecilia Subdivision, all in the
City of Iloilo except St. Joseph which is in Pavia
Iloilo.
2. That the plaintiff, as a licensed real estate
broker, has been seriously damaged by the
action of the defendants in rescinding, by Exhibit
"B", the contract (Exhibit "A") for which the
plaintiff suffered moral damages in the amount
of P50,000.00, damages to his good will in the
amount of P100,000.00, for attorney's fees in
the amount of P10,000.00 to protect his rights
and interests, plus exemplary damages to be
fixed by the Court.
3. That the plaintiff is entitled to a commission
on the lots unsold because of the rescission of
the contract.
C. — The defendants during the trial will ill prove
by competent evidence the following:
1. That the plaintiff's complaint was filed to make
money out of the suit from defendants, to
harrass and to molest defendants;
2. That because of the unjustified and
unfounded complaint of the plaintiff, the
defendants suffered moral damages in the
amount of P50,000.00, and that for the public
good, the court may order the plaintiff to pay the
defendants exemplary damages in the amount
of P20,000.00, plus attorney's fees of
P10,000.00.
D.— Contentions of the parties:
1. The plaintiff contends:
(a) That under the terms of the contract (Exhibit
"A") the plaintiff 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;
(b) That the rescission of the contract under
Exhibit "B", contravenes the agreement of the
parties.
2. The defendants contend:
(a) 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;
(b) That the plaintiff has no right in law to case
for commission on lots that they have not sold.
E. — The parties hereby submit to the Court the
following issues:
1. Whether under the terms of Exhibit "A" the
plaintiff has the irrevocable right to sen or
dispose of all the lots included within Villa Alegre
Subdivision;
2. Can the defendants terminate their
agreement with the plaintiff by a letter like
Exhibit "B"?
F. — The plaintiff submitted the following
exhibits which were admitted by the
defendants:
Exhibit "A" — agreement entered into between
the parties on June 20, 1968 whereby the
plaintiff had the authority to sell the subdivision
lots included in Villa Alegre subdivision;
Exhibit "B" — Letter of the defendant Alegria V.
Diolosa dated September 27, 1968 addressed
to the plaintiff terminating the agency and
rescinding Exhibit "A" for the reason that the lots
remained unsold lots were for reservation for
their grandchildren.
The Court will decide this case based on the
facts admitted in the pleadings, those agreed by
the parties during the pre-trial conference, and
those which they can prove during the trial of
18 | PARTNERSHIP FULLTEXT CASES
this case, in accordance with the contention of
the parties based on the issues submitted by
them during the pre-trial conference.
SO ORDERED.
Iloilo City, Philippines, August 14, 1969.
(SGD) VALERIO V. ROVIRA
Judge
(pp. 22-25, Rollo)
The only issue in this case is whether the
petitioners could terminate the agency
agreement, Exhibit "A", without paying damages
to the private respondent. Pertinent portion of
said Exhibit "A" reads:
That the PARTY OF THE FIRST PART is the
lawful and absolute owner in fee simple of VILLA
ALEGRE SUBDIVISION situated in the District
of Mandurriao, Iloilo City, which parcel of land is
more particularly described as follows, to wit:
A parcel of land, Lot No. 2110-b-2-C, PSD
74002, Transfer Certificate of Title No. T_____
situated in the District of Mandurriao, Iloilo,
Philippines, containing an area of 39016 square
meters, more or less, with improvements
thereon.
That the PARTY OF THE FIRST PART by virtue
of these presents, to enhance the sale of the lots
of the above-described subdivision, is engaging
as their EXCLUSIVE SALES AGENT the
PARTY OF THE SECOND PART, its
successors, heirs and assigns to dispose of,
sell, cede, transfer and convey the above-
described property in whatever manner and
nature the PARTY OF THE SECOND PART,
with the concurrence of the PARTY OF THE
FIRST PART, may deem wise and proper under
the premises, whether it be in cash or
installment basis, until all the subject property
as subdivided is fully disposed of. (p. 7 of
Petitioner's brief. Emphasis supplied).
Respondent court, in its decision which is the
subject of review said:
Article 1920 of the Civil Code of the Philippines
notwithstanding, the defendants could not
terminate the agency agreement, Exh. "A", at
will without paying damages. The said agency
agreement expressly stipulates ... until all the
subject property as subdivided is fully disposed
of ..." The testimony of Roberto Malundo(t.s.n.
p. 99) that the plaintiff agreed to the intention of
Mrs. Diolosa to reserve some lots for her own
famay use cannot prevail over the clear terms of
the agency agreement. Moreover, the plaintiff
denied that there was an agreement to reserve
any of the lots for the family of the defendants.
(T.s.n. pp. 16).
There are twenty seven (27) lots of the
subdivision remaining unsold on September 27,
1968 when the defendants rescinded the
agency agreement, Exhibit "A". On that day the
defendants had only six grandchildren. That the
defendants wanted to reserve the twenty seven
remaining lots for the six grandchildren is not a
legal reason for defendants rescind the agency
agreement. Even if the grandchildren were to be
given one lot each, there would still be twenty-
one lots available for sale. Besides it is
undisputed that the defendants have other lands
which could be reserved for their grandchildren.
(pp. 26-27, Rollo)
The present appeal is manifestly without merit.
Under the contract, Exhibit "A", herein
petitioners allowed the private respondent "to
dispose of, sell, cede, transfer and convey ...
until out 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, Exhibit "B" —
Dear Mr. Baterna:
Please be informed that we have finally decided
to reserve the remaining unsold lots, as of this
date of our VILLA ALEGRE Subdivision for our
grandchildren.
In view thereof, notice is hereby served upon
you to the effect that our agreement dated June
19 | PARTNERSHIP FULLTEXT CASES

20, 1968 giving you the authority to sell as In the case at bar, not one of the grounds
exclusive sales agent of our subdivision is mentioned above is present which may be the
hereby rescinded. subject of an action of rescission, much less can
petitioners say that the private respondent
Please be duly guided. violated the terms of their agreement-such as
failure to deliver to them (Subdivision owners)
Very truly yours, the proceeds of the purchase price of the lots.
(SGD) ALEGRIA V. DIOLOSA ACCORDINGLY, the petition is hereby
Subdivision Owner dismissed without pronouncement as to costs.
(p. 11 of Petitioner's Brief) SO ORDERED.
they become liable to the private respondent for
damages for breach of contract.

And, it may be added that since the agency

agreement, Exhibit "A", is a valid contract, the
same may be rescinded only on grounds
specified in Articles 1381 and 1382 of the Civil
Code, as follows:

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.

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."
20 | PARTNERSHIP FULLTEXT CASES
G.R. No. 66715 September 18, 1990
PHILIPPINE NATIONAL BANK, petitioner,
vs.
THE HONORABLE INTERMEDIATE
APPELLATE COURT (First Civil Cases
Division) and ROMEO
ALCEDO, respondents.
Juan D. Diaz, Benjamin C. Del Rosario and
Pedro R. Lazo for petitioner.
Carlos S. Ayeng, Augustus C. Rallos and
Orlando S. Ayeng for private respondent.
Civil Law; Estoppel; A party may not go back on
his own acts and representations to the
prejudice of the other party who relied upon
them.—We agree with the opinion of the
appellate court that under the doctrine of
promissory estoppel enunciated in the case of
Republic Flour Mills, Inc. vs. Central Bank, L-
23542, August 11, 1979, the act and assurance
given by the PNB to Alcedo “that we shall
exclude the aforementioned lot [Lot No. 1402]
as a collateral of Leticia de la VinaSepe in our
recommendation for her 1971-72 sugar crop
loan” (p. 37, Rollo) is binding on the bank.
Having given that assurance, the bank may not
turn around and do the exact opposite of what it
said it would not do. One may not take
inconsistent positions (Republic vs. Court of
Appeals, 133 SCRA 505). A party may not go
back on his own acts and representations to the
prejudice of the other party who relied upon
them (Lazo vs. Republic Surety & Insurance
Co., Inc., 31 SCRA 329.)
Same; Agency; Special Power of Attorney; The
revocation of a special power of attorney,
although embodied in a private writing, is valid
and binding between the parties.—While Article
1358 of the New Civil Code requires that the
revocation of Alcedo’s Special Power of
Attorney to mortgage his property should
appear in a public instrument: x x x
nevertheless, a revocation embodied in a
private writing is valid and binding between the
parties (Doliendo v. Depino, 12 Phil. 758;
Hawaiian-Philippines Co. vs. Hernaez, 45 Phil.
746) for—“The legalization by a public writing
and the recording of the same in the registry are
not essential requisites of a contract entered
into, as between the parties, but mere
conditions of form or solemnities which the law
imposes in order that such contract may be valid
as against third persons, and to insure that a
publicly executed and recorded agreement shall
be respected by the latter.” (Alano, et al. vs.
Babasa, 10 Phil. 511.)
GRIÑO-AQUINO, J.:
This is a petition for certiorari which seeks to set
aside: (a) the decision dated November 29,
1983 of the Intermediate Appellate Court (now
Court of Appeals) in
CA-G.R. CV No. 68021 which affirmed the
decision of the Court of First Instance of Negros
Occidental (now Regional Trial Court), Branch
IV, Bacolod City, in Civil Case No. 11393; and
(b) respondent court's resolution dated February
29, 1984 denying petitioner Philippine National
Bank's (PNB for short) motion for
reconsideration.
The facts of the case are the following:
On March 20, 1968, Leticia de la Vina-Sepe
executed a real estate mortgage in favor of
PNB, San Carlos Branch, over a lot registered
in her name under TCT No.
T-31913 to secure the payment of a sugar crop
loan of P3,400. Later, Leticia Sepe, acting as
attorney-in-fact for her brother-in-law, private
respondent Romeo Alcedo, executed an
amended real estate mortgage to include his
(Alcedo's) Lot No. 1626 (being a portion of Lot
No. 1402, covered by TCT 52705 of the Isabela
Cadastre) as additional collateral for Sepe's
increased loan of P16,500 (pp. 5-6, PNB's Brief,
p. 74, Rollo). Leticia Sepe and private
respondent Alcedo verbally agreed to split fifty-
fifty (50-50) the proceeds of the loan (p. 94,
Rollo) but failing to receive his one-half share
from her, Alcedo wrote a letter on May 12, 1970
to the PNB, San Carlos Branch, revoking the
Special Power of Attorney which he had given
to Leticia Sepe to mortgage his Lot No. 1626 (p.
95, Rollo).
21 | PARTNERSHIP FULLTEXT CASES
Replying on May 22, 1970, the PNB Branch
Manager, Jose T. Gellegani advised Alcedo that
his land had already been included as collateral
for Sepe's 1970-71 sugar crop loan, which the
latter had already availed of, nevertheless, he
assured Alcedo that the bank would exclude his
lot as collateral for Sepe's forthcoming (1971-
72) sugar crop loan (p. 95, Rollo). The letter
reads:
May 22, 1970
Mr. Romeo Alcedo
Mamballo, M. Padilla
Negros Occidental
Dear Mr. Alcedo:
This is to acknowledge receipt of your letter
dated May 12, 1970, requesting us to revoke the
'Special Power of Attorney' you have executed
in favor of Mrs. Leticia de la Vina-Sepe, on
February 18, 1969, on Lot No. 1402, Isabela
Cadastre, covered by Transfer Certificate of
Title No. 52705, with an area of 20.9200
hectares.
In this connection, we wish to advise you that
the aforementioned parcel of land had been
included as collateral to secure the 1970-71
sugar crop loan of Mrs. Leticia de la Vina-Sepe,
which she had already availed of. In view of your
late request, please be advised and assured
that we shall exclude the aforementioned lot as
a collateral of Leticia de la Vina-Sepe in our
recommendation for her 1971-72 sugar crop
loan.
For your information, we enclose a copy of our
letter to Mrs. Sepe, which is self-explanatory,
Thank you.
Very truly yours,
(Sgd.) JOSE T. GELLEGANI Manager
(pp. 6-7, Record on Appeal, p. 75, Rollo.)
On the same day, May 22, 1970, PNB advised
Sepe in writing to replace Lot No. 1402 with
another collateral of equal or higher value.
May 22, 1970
Mrs. Leticia de la Vina-Sepe
Canla-on City
Dear Mrs. Sepe:
We wish to advice you that Mr. Romeo Alcedo,
in a letter written to us, has plans to revoke the
'Special Power of Attorney' he executed in 1969
in your favor, affecting Lot No. 1402, Isabela
Cadastre, covered by Transfer Certificate of
Title No. 52705 with an area of 20.9200
Hectares. Our record shows that this parcel of
land is mortgaged to us to secure the
agricultural sugar crop loans we have granted
you.
Mr. Alcedo made us understand that this said
property shall serve as security for your 1969/70
sugar crop loan only. As it already secures your
1970-71 crop loan, which you have already
availed, the same may be excluded as security
for future crop loans. In the meantime, it is
requested that you replace Lot No. 1402, above-
mentioned, with the same or more appraised
value.
Kindly call on us regarding this matter at your
earliest convenience.
Thank you.
Very truly yours,
(Sgd.) JOSE T. GELLEGANI
Manager
(pp. 7-8, Record on Appeal, p. 75, Rollo.)
Despite the above advice from PNB, Sepe was
still able to obtain an additional loan from PNB
increasing her debt of P 16,500 to P56,638.69
on the security of Alcedo's property as collateral.
On January 15, 1974, Alcedo received two (2)
letters from PNB: (1) informing him of Sepe's
22 | PARTNERSHIP FULLTEXT CASES
failure to pay her loan in the total amount of P
56,638.69; and (2) giving him six (6) days to
settle Sepe's outstanding obligation, as
otherwise, foreclosure proceedings would be
commenced against his property (p. 33, Rollo).
Alcedo requested Sepe to pay her accounts to
forestall foreclosure proceedings against his
property, but to no avail (p. 15, Rollo).
On April 17, 1974, Alcedo sued Sepe and PNB
in the Court of First Instance of Negros
Occidental for collection and injunction with
damages (p. 33, Rollo).
During the pendency of the case, PNB filed in
the Office of the Sheriff at Pasig, Metro Manila,
a petition for extrajudicial foreclosure of its real
estate mortgage on Alcedo's land. On
November 19, 1974, the property was sold to
PNB as the highest bidder in the sale. The
corresponding Sheriffs Certificate of Sale was
issued to the Bank (p. 33, Rollo).
On October 18, 1975, Alcedo filed an amended
complaint against Leticia and her husband Elias
Sepe, and the Provincial Sheriff of Negros
Occidental praying additionally for annulment of
the extrajudicial foreclosure sale and
reconveyance of the land to him free from liens
and encumbrances, with damages.
With leave of court, Alcedo filed a second
amended complaint withdrawing his action to
collect his one-half share (amounting to
P28,319.34) out of the proceeds of the sugar
crop loans obtained by Sepe (p. 34, Rollo).
In its answer, PNB alleged that it had no
knowledge of the agreement between Mrs.
Sepe and Alcedo to split the crop loan proceeds
between them. It required Sepe to put up other
collaterals when it granted her an additional loan
because Alcedo informed the Bank that he was
revoking the Special Power of Attorney he gave
Sepe; that the revocation was not formalized in
accordance with law; and that in any event, the
revocation of the Special Power of Attorney on
May 12, 1970 by Alcedo did not impair the real
estate mortgage earlier executed on April 28,
1969 by Sepe in favor of the Bank (p. 36, Rollo).
On March 14, 1980, the trial court rendered
judgment in favor of Alcedo-
1. Declaring the public auction sale and the
certificate of sale executed by the Provincial
Sheriff of Negros Occidental relative to Lot No.
1626, Isabela Cadastre (TCT No. T-52705), as
null and void;
2. Ordering the defendant Philippine National
Bank to reconvey to plaintiff the title to aforesaid
Lot No. 1626 free from all liens and
encumbrances relative to the loans obtained by
defendant Leticia de la Vina-Sepe;
3. Ordering defendant spouses Leticia de la
Vina-Sepe and Elias Sepe and the Philippine
National Bank, in solidum, to pay to the plaintiff
moral damages in the sum of Pl 0,000.00, and
another sum of P5,000.00 as attorney's fees
and expenses of litigation;
4. On the cross-claim of defendant PNB against
Leticia de la Vina-Sepe, considering that no
evidence has been adduced regarding the
updated actual accountability of the latter with
the former, it is hereby directed that PNB
proceed to collect against the cross-defendant
whatever outstanding obligation the latter owes
the former arising from transactions in
connection with the instant case.
No pronouncement as to costs. (pp. 10-11,
Rollo.)
The bank appealed but to no avail for on
November 29,1983, the Intermediate Appellate
Court affirmed in toto the judgment of the trial
court (p. 54, Rollo.) The appellate court
reasoned out that the Bank was estopped from
foreclosing the mortgage on Alcedo's lot to pay
Sepe's 1971-72 sugar crop loan, after having
assured Alcedo on May 22, 1970 "that we shall
exclude the aforementioned lot as a collateral of
Leticia de la Vina-Sepe in our recommendation
for her 1971-72 sugar crop loan" (p. 37, Rollo).
The Court of Appeals held:
... Plaintiff-appellee's letter was unequivocal and
clear to the effect that defendant Leticia de la
Vina Sepe was no longer empowered to bind,
23 | PARTNERSHIP FULLTEXT CASES
encumber or mortgage his property. Although
We may not hold this revocation to retroact to
April 28, 1969 which was the date of the original
mortgage, We can neither interpret it in any
other way than that from the moment of notice
to the PNB, it was the absolute intention of the
owner to withdraw all authority from said
defendant to further bind or encumber his
property. This was clearly understood by the
defendant-appellant PNB. There was no
question on its part that Leticia de la Vina Sepe
was no longer authorized to offer plaintiff-
appellee's property as collateral for her contract
of mortgage with the PNB. Defendant-appellant,
therefore, acknowledged this revocation of the
agency and in no uncertain terms assured the
plaintiff-appellee that indeed, the latter's
property will no longer be accepted by it as
collateral for the sugar crop loan of the
aforementioned defendant for the year 1971 to
1972. This meeting of the minds between the
plaintiff-appellee and defendant-appellant took
place not through verbal communications only,
but in writing, as shown by their letters dated
May 12, 1970 and May 22, 1970, respectively.
...
xxx xxx xxx
... To Our minds, the aforementioned act and
declaration of defendant-appellant PNB as
embodied in said letter binds said bank under
the principle of estoppel by deed and defined as
follows:
A doctrine in American jurisprudence whereby a
party creating an appearance of fact which is not
true is held bound by that appearance as
against another person who has acted on the
faith of it. (Strong v. Gutierrez Repide, 6 Phil.
685).
which is provided for in Articles 1431 and 1433
of the New Civil Code in conjunction with
Section 3, paragraph (a), Rule 131 of the Rules
of Court, all of which provide:
Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon the
person making it, and cannot be denied or
disproved as against the person relying
thereon.' '
Art. 1433. Estoppel may be in pais or by deed.
Sec. 3. Conclusive presumptions. The following
are instances of conclusive presumptions:
(a) Whenever a party has,by his own
declaration, act, or omission, intentionally and
deliberately led another to believe a particular
thing true, and to act upon such belief, he
cannot, in any litigation arising out of such
declaration, act, or omission, be permitted to
falsify it.
and which was enunciated in the following
decisions of the Supreme Court:
Whenever a party has, by his own declaration,
act or omission intentionally and deliberately led
another to believe a particular thing true and to
act upon such belief, he cannot, in any litigation
arising out of such declaration, act, or omission,
be permitted to falsify it.
Estoppel arises when one, by his acts,
representations, or admissions, or by his silence
when he ought to speak out, intentionally or
through culpable negligence induces another to
believe certain facts to exist and such other
rightfully relies and acts on such belief, so that
he will be prejudiced if the former is permitted to
deny the existence of such facts (Huyatid v.
Huyatid 47265-R, Jan. 4, 1978).
The doctrine of estoppel is based upon the
grounds of public policy, fair dealing, good faith
and justice, and its purpose is to forbid one to
speak against his own act, representations, or
commitments to the injury of one to whom they
were directed and who reasonably relied
thereon. Said doctrine springs from equitable
principles and the equities of the case. It is
designed to aid the law in the administration of
justice where without its aid injustice might
result.' (Philippine National Bank v. Court of
Appeals, L-30831, November 21, 1979, 94
SCRA 368)
24 | PARTNERSHIP FULLTEXT CASES
By its letter dated May 22, 1970, defendant-
appellant PNB led plaintiff-appellee to believe
that his property covered by TCT T-52705 would
no longer be included as collateral in the sugar
crop loan of defendant Leticia de la Vina Sepe
for the year 1971-72. It led said plaintiff-appellee
to believe that his property as of said year will
no longer be encumbered and will be free from
any lien or mortgage. Plaintiff-appellee had the
light to rely on said belief, because of the
aforementioned act and declaration of
defendant-appellant bank. Under the laws and
jurisprudence aforequoted, defendant-appellant
bank can no longer be allowed to deny or falsify
its act or declaration, or to renege from it. This
is one of the conclusive presumptions provided
for by the Rules of Court. (pp. 37, 38-39, Rollo.)
PNB seeks a review of that decision on the
grounds that:
1. the doctrine of promissory estoppel does not
apply to this case;
2. PNB was a mortgagee in good faith and for
value; and
3. PNB adduced substantial evidence in support
of its cross-claim against defendant Leticia
Sepe (p. 15, Rollo).
These issues boil down to whether or not PNB
validly foreclosed the real estate mortgage on
Alcedo's property despite notice of Alcedo's
revocation of the Special Power of Attorney
authorizing Leticia Sepe to mortgage his
property as security for her sugar crop loans and
despite the Bank's written assurance to Alcedo
that it would exclude his property as collateral
for Sepe's future loan obligations.
After careful deliberation, the Court is not
persuaded to disturb the decisions of the trial
court and the Court of Appeals in this case.
We agree with the opinion of the appellate court
that under the doctrine of promissory estoppel
enunciated in the case of Republic Flour Mills
Inc. vs. Central Bank, L-23542, August 11,
1979, the act and assurance given by the PNB
to Alcedo "that we shall exclude the
aforementioned lot [Lot No. 1402] as a collateral
of Leticia de la Vina-Sepe in our
recommendation for her 1971-72 sugar crop
loan" (p. 37, Rollo) is binding on the bank.
Having given that assurance, the bank may not
turn around and do the exact opposite of what it
said it would not do. One may not take
inconsistent positions (Republic vs. Court of
Appeals, 133 SCRA 505). A party may not go
back on his own acts and representations to the
prejudice of the other party who relied upon
them (Lazo vs. Republic Surety & Insurance
Co., Inc., 31 SCRA 329.)
In the case of Philippine National Bank vs. Court
of Appeals (94 SCRA 357), where the bank
manager assured the heirs of the debtor-
mortgagor that they would be allowed to pay the
remaining obligation of their deceased parents,
the Supreme Court held that the bank must
abide by its representations.
On equitable principles, particularly on the
ground of estoppel, we must rule against
petitioner Bank. The doctrine of estoppel is
based upon the grounds of public policy, fair
dealing, good faith and justice, and its purpose
is to forbid one to speak against its own act,
representations, or commitments to the injury of
one to whom they were directed and who
reasonably relied thereon. The doctrine of
estoppel springs from equitable principles and
the equities in the case. It is designed to aid the
law in the administration of justice where without
its aid injustice might result. It has been applied
by this Court wherever and whenever the
special circumstances of a case so demands.
In the case at bar, since PNB had promised to
exclude Alcedo's property as collateral for
Sepe's 1971-72 sugar crop loan, it should have
released the property to Alcedo. The mortgage
which Sepe gave to the bank on Alcedo's lot as
collateral for her 1971-72 sugar crop loan was
null and void for having been already
disauthorized by Alcedo. Since Alcedo's
property secured only P13,100.00 of Sepe's
1970-71 sugar crop loan of P16,500.00
(because P3,400 was secured by Sepe's own
property), Alcedo's property may be held to
25 | PARTNERSHIP FULLTEXT CASES

answer for only the unpaid balance, if any, of

Sepe's 1970-71 loan, but not the 1971-72 crop
loan.

While Article 1358 of the New Civil Code

requires that the revocation of Alcedo's Special
Power of Attorney to mortgage his property
should appear in a public instrument:

Art. 1358. The following must appear in a public

document:

(1) Acts or contracts which have for their object

the creation, transmission, modification or
extinguishment of real rights over immovable
property; sales of real property or of an interest
therein are governed by Articles 1403, No. 2 and
1405.

nevertheless, a revocation embodied in a

private writing is valid and binding between the
parties (Doliendo v. Depino, 12 Phil. 758;
Hawaiian-Philippines Co. vs. Hernaez, 45 Phil.
746) for —

The legalization by a public writing and the

recording of the same in the registry are not
essential requisites of a contract entered into, as
between the parties, but mere conditions of form
or solemnities which the law imposes in order
that such contract may be valid as against third
persons, and to insure that a publicly executed
and recorded agreement shall be respected by
the latter. (Alano, et al. vs. Babasa, 10 Phil.
511.)

The PNB acted with bad faith in proceeding

against Alcedo's property to satisfy Sepe's
unpaid 1971-72 sugar crop loan. The
extrajudicial foreclosure being null and void ab
initio, the certificate of sale which the Sheriff
delivered to PNB as the highest bidder at the
sale is also null and void.

WHEREFORE, finding no reversible error in the

decision of the Court of Appeals, the petition for
review is denied for lack of merit.

SO ORDERED.
26 | PARTNERSHIP FULLTEXT CASES
G.R. No. L-40681 October 2, 1934
DY BUNCIO & COMPANY, INC., plaintiff-
appelle,
vs.
ONG GUAN CAN, ET AL., defendants.
JUAN TONG and PUA GIOK ENG, appellants.
Pedro Escolin for appellants.
G. Viola Fernando for appellee.
PRINCIPAL AND AGENT; TERMINATION OP
POWEB OF ATTORNEY.—Article 1732 of the
Civil Code is silent over the partial termination of
an agency. The making and accepting of a new
power of attorney, whether it enlarges or
decreases the power of the agent under a prior
power of attorney, must be held to supplant and
revoke the latter when the two are inconsistent.
If the new appointment with limited powers does
not revoke the general power of attorney, the
execution of the second power of attorney would
be a mere futile gesture.
HULL, J.:
This is a suit over a rice mill
and camarin situated at Dao, Province of Capiz.
Plaintiff claims that the property belongs to its
judgment debtor, Ong Guan Can, while
defendants Juan Tong and Pua Giok Eng claim
as owner and lessee of the owner by virtue of a
deed dated July 31, 1931, by Ong Guan Can, Jr.
After trial the Court of First Instance of Capiz
held that the deed was invalid and that the
property was subject to the execution which has
been levied on said properties by the judgment
creditor of the owner. Defendants Juan Tong
and Pua Giok bring this appeal and insist that
the deed of the 31st of July, 1931, is valid.
The first recital of the deed is that Ong Guan
Can, Jr., as agent of Ong Guan Can, the
proprietor of the commercial firm of Ong Guan
Can & Sons, sells the rice-mill and camarin for
P13,000 and gives as his authority the power of
attorney dated the 23d of May, 1928, a copy of
this public instrument being attached to the
deed and recorded with the deed in the office of
the register of deeds of Capiz. The receipt of the
money acknowledged in the deed was to the
agent, and the deed was signed by the agent in
his own name and without any words indicating
that he was signing it for the principal.
Leaving aside the irregularities of the deed and
coming to the power of attorney referred to in the
deed and registered therewith, it is at once seen
that it is not a general power of attorney but a
limited one and does not give the express power
to alienate the properties in question. (Article
1713 of the Civil Code.)
Appellants claim that this defect is cured by
Exhibit 1, which purports to be a general power
of attorney given to the same agent in 1920.
Article 1732 of the Civil Code is silent over the
partial termination of an agency. The making
and accepting of a new power of attorney,
whether it enlarges or decreases the power of
the agent under a prior power of attorney, must
be held to supplant and revoke the latter when
the two are inconsistent. If the new appointment
with limited powers does not revoke the general
power of attorney, the execution of the second
power of attorney would be a mere futile
gesture.lawphi1.net
The title of Ong Guan Can not having been
divested by the so-called deed of July 31, 1931,
his properties are subject to attachment and
execution.
The judgment appealed from is therefore
affirmed. Costs against appellants. So ordered.
27 | PARTNERSHIP FULLTEXT CASES
G.R. No. L-5180 August 31, 1953
CONSEJO INFANTE, petitioner,
vs.
JOSE CUNANAN, JUAN MIJARES and THE
COURT OF APPEALS, SECOND
DIVISION, respondents.
Yuseco, Abdon & Yuseco for petitioner.
Jose E. Erfe and Maria Luisa Gomez for
respondents.
1.Evidence; Parole Evidence Rule; Contracts
and Obligations; Principal and Agent; Agent's
Commission.—Oral evidence is presented to
the effect that while the agents agreed to cancel
the written authority given them by their
principal, they did so merely upon the principal's
verbal assurance that, should the property
subject of .their contract of agency be sold to
their own buyer, they would b giveil the
commission agreed upon. Held: The
cancellation of the written authority being in
writing, parole evidence is not admissible under
section 22 of Rule 123.
2.Id ; Id.; Id.; Id. —If there is other evidence
which would justify the agents' claim for
commission, even if such parol evidence is
disregarded, they are entitled to such
commission.
3.Principal and Agent Agent's Commission
Cancellation of Agents' Authority; Effect of
Concellation on Commission.—The principal
took advantage of the agents' services
consisting in locating a buyer for the principal's
land. The principal, perhaps by stratagem
advised the agents that she was no longer
interested in the deal and was able to prevail
upon them to sign a document agreeing to the
cancellation of the written authority she had
originally given the agents, believing that she
could evade payment of their commission. Then
she sold the property to the buyer found by the
agents. Held: The principal's act is unfair as
would amount to bad faith, and cannot be
sanctioned without according to the agents the
reward which is due them.
BAUTISTA ANGELO, J.:
This is a petition for review of a decision of the
Court of appeals affirming the judgement of the
court of origin which orders the defendant to pay
the plaintiffs the sum of P2,500 with legal
interest thereon from February 2,1949 and the
costs of action.
Consejo Infante, defendant herein, was the
owner of two parcels of land, together with a
house built thereon, situated in the City of
Manila and covered by Transfer Certificate of
Title No. 61786. On or before November 30,
1948, she contracted the services of Jose
Cunanan and Juan Mijares, plaintiff herein, to
sell the above-mentioned property for a price of
P30,000 subject to the condition that the
purchaser would assume the mortgage existing
thereon in the favor of the Rehabilitation
Finance Corporation. She agreed to pay them a
commission of 5 per cent on the purchase price
plus whatever overprice they may obtain for the
property. Plaintiffs found one Pio S. Noche who
was willing to buy the property under the terms
agreed upon with defendant, but when they
introduced him to defendant, the latter informed
them that she was no longer interested in selling
the property and succeeded in making them
sign a document stating therein that the written
authority she had given them was already can-
celled. However, on December 20, 1948,
defendant dealt directly with Pio S. Noche
selling to him the property for P31,000. Upon
learning this transaction, plaintiffs demanded
from defendant the payment of their
commission, but she refused and so they
brought the present action.
Defendant admitted having contracted the
services of the plaintiffs to sell her property as
set forth in the complaint, but stated that she
agreed to pay them a commission of P1,200
only on condition that they buy her a property
somewhere in Taft Avenue to where she might
transfer after selling her property. Defendant
avers that while plaintiffs took steps to sell her
property as agreed upon, they sold the property
at Taft Avenue to another party and because of
28 | PARTNERSHIP FULLTEXT CASES
this failure it was agreed that the authority she
had given them be cancelled.
The lower court found that the preponderance of
evidence was in favor of the plaintiffs and
rendered judgement sentensing the defendant
to pay the plaintiff the sum of P2,500 with legal
interest thereon from February 2,1949 plus the
costs of action. This decision was affirmed in
toto by the Court of Appeals.
There is no dispute that respondents were
authorized by petitioner to sell her property for
the sum of P30,000 with the understanding that
they will be given a commission of 5 percent
plus whatever overprice they may obtain for the
property. Petitioner, however, contends that
authority has already been withdrawn on
November 30, 1948 when, by the voluntary act
of respondents, they executed a document
stating that said authority shall be considered
cancelled and without any effect, so that when
petitioner sold the property to Pio S. Noche on
December 20, 1948, she was already free from
her commitment with respondents and,
therefore, was not in duty bound to pay them
any commission for the transaction..
If the facts were as claimed by petitioner, there
is in-deed no doubt that she would have no
obligation to pay respondents the commission
which was promised them under the original
authority because, under the old Civil Code, her
right to withdraw such authority is recognized. A
principal may withdraw the authority given to an
agent at will. (Article 1733.) But this fact is
disputed. Thus, respondents claim that while
they agreed to cancel the written authority given
to them, they did so merely upon the verbal
assurance given by petitioner that, should the
property be sold to their own buyer, Pio S.
Noche, they would be given the commission
agreed upon. True, this verbal assurance does
not appear in the written cancellation, Exhibit 1,
and, on the other hand, it is disputed by
petitioner, but respondents were allowed to
present oral evidence to prove it, and this is now
assigned as error in this petition for review.
The plea that oral evidence should not have
been allowed to prove the alleged verbal
assurance is well taken it appearing that the
written authority given to respondents has been
cancelled in a written statement. The rule on this
matter is that "When the terms of an agreement
have been reduced to writing, it is to be
considered as containing all those terms, and,
therefore, there can be, between parties and
their successors in interest, no evidence of the
terms of the agreement other than the contents
of the writing." (Section 22, Rule 123, Rules of
Court.) The only exceptions to this rule are:
"(a)Where a mistake or imperfection of the
writing, or its failure to express the true intent
and agreement of the parties, or the validity of
the agreement is put in issue by the pleadings";
and "(b) Where there is an intrinsic ambiguity in
the writing." (Ibid.) There is no doubt that the
point raised does not come under any of the
cases excepted, for there is nothing therein that
has been put in issue by respondents in their
complaint. The terms of the document, Exhibit
1, seem to be clear and they do not contain any
reservation which may in any way run counter to
the clear intention of the parties.
But even disregarding the oral evidence
adduced by respondents in contravention of the
parole evidence rule, we are, however, of the
opinion that there is enough justification for the
conclusion reached by the lower court as well as
by the Court of Appeals to the effect that
respondents are entitled to the commission
originally agreed upon. It is a fact found by the
Court of Appeals that after petitioner had given
the written authority to respondents to sell her
land for the sum of P30,000, respondents found
a buyer in the person of one Pio S. Noche who
was willing to buy the property under the terms
agreed upon, and this matter was immediately
brought to the knowledge of petitioner. But the
latter, perhaps by way of strategem, advised
respondents that she was no longer interested
in the deal and was able to prevail upon them to
sign a document agreeing to the cancellation of
the written authority.
That petitioner had changed her mind even if
respondents had found a buyer who was willing
29 | PARTNERSHIP FULLTEXT CASES

to close the deal, is a matter that would not give

rise to a legal consequence if respondents
agree to call off the transaction in deference to
the request of the petitioner. But the situation
varies if one of the parties takes advantage of
the benevolence of the other and acts in a
manner that would promote his own selfish
interest. This act is unfair as would amount to
bad faith. This act cannot be sanctioned without
ac-cording to the party prejudiced the reward
which is due him. This is the situation in which
respondents were placed by petitioner.
Petitioner took advantage of the services
rendered by respondents, but believing that she
could evade payment of their commission, she
made use of a ruse by inducing them to sign the
deed of cancellation Exhibit 1. This act of
subversion cannot be sanctioned and cannot
serve as basis for petitioner to escape payment
of the commission agreed upon.

Wherefore, the decision appealed from is

hereby affirmed, with costs against petitioner.
30 | PARTNERSHIP FULLTEXT CASES
G.R. No. L-17043 January 31, 1961
NATIVIDAD HERRERA, assisted by her
husband EMIGDIO SALAZAR, plaintiffs-
appellants,
vs.
LUY KIM GUAN and LINO
BANGAYAN, defendants-appellees.
T. de los Santos for plaintiffs-appellants.
Rafael C. Climaco and Abelardo S. Fernandez
for defendants-appellees.
Agency; Death of principal.—The death of the
principal does not, render the act of an agent
unenforceable, where the latter had no
knowledge of such extinguishment of the
agency.
Constitutional law; Sales; Sale of land to an
alien and then to a Filipino.—Where land was
sold to a Chinese, who later sold it to a Filipino,
the sale to the latter cannot be impugned.
Same; Sale of land before the adoption of
Constitution.—The sale of land to a Chinese
citizen before the adoption of the Constitution
cannot be assailed on account of his citizenship.
Damages; Attorney's fees; When winning party
is entitled to attorney's fees.—In the absence of
stipulation, a winning party may be awarded
attorney's fees only in case plaintiff's action or
defendant's stand is so untenable as to amount
to gross and evident bad faith.
Same.—Where the complaint was filed in good
faith, attorney's fees cannot be granted to the
defendants simply because the judgment was
favorable to them, for that may amount to
imposing a premium on the right to redress
grievances in court.
Same.—A winning party may be entitled to
litigation expenses only where he, by reason of
plaintiff's clearly unjustifiable claims or
defendant's unreasonable refusal to comply with
his demands, was compelled to incur said
expenses.
BARRERA, J.:
This is an appeal from the decision of the Court
of First Instance of Zamboanga City (a)
dismissing plaintiff-appellant's complaint for the
recovery of three (3) parcels of land and their
produce in the sum of P320,000.00; and (b)
instead, sentencing plaintiff to pay P2,000.00 for
attorney's fees and P1,000.00 for expenses of
litigation, to defendant Lino Bangayan, and
P2,000.00 as attorney's fees and P500.00 as
expenses of litigation, to the other defendant
Luy Kim Guan.
The pertinent facts as found by the trial court
and upon which its decision was predicated are
set forth in the following portion of the decision
appealed from:
The Plaintiff Natividad Herrera is the legitimate
daughter of Luis Herrera, now deceased and
who died in China sometime after he went to
that country in the last part of 1931 or early part
of 1932. The said Luis Herrera in his lifetime was
the owner of three (3) parcels of land and their
improvements, known as Lots 1740, 4465 and
4467 of Expediente No. 5, G.L.R.O. Record 477
and the area, nature, improvements and bound
of each and every of these three (3) lots are
sufficiently described in the complaint filed by
the plaintiffs.
Before leaving for China, however, Luis Herrera
executed on December 1, 1931, a deed of
General Power of Attorney, Exhibit 'B', which
authorized and empowered the defendant Kim
Guan, among others to administer and sell the
properties of said Luis Herrera.
Lot 1740 was originally covered by Original
Certificate Title 8601 registered in the name of
Luis Herrera, married to GO Bang. This lot was
sold by the defendant Luy Kim in his capacity as
attorney-in-fact of the deceased Luis Her to Luy
Chay on September 11, 1939, as shown in
Exhibit "2", corresponding deed of sale.
Transfer Certificate of Title 3162, Exhibit "3",
was issued to Luy Chay by virtue of deed of
sale. On August 28, 1941, to secure a loan of
P2,00 a deed of mortgage to the Zamboanga
Mutual Building and Association was executed
31 | PARTNERSHIP FULLTEXT CASES
by Luy Chay, Exhibit "4". On January 31, 1947,
the said Luy Chay executed a deed of sale,
Exhibit "E", in favor of Lino Bangayan. By virtue
of this Transfer Certificate of Title T-2567 was
issued to Lino Bangayan on June 24, 1949,
Exhibit "1":
Lots 4465 and 4467 were originally registered in
the of Luis Herrera, married to Go Bang, under
Original Certificate of Title No. 0-14360, Exhibit
"5". On December 1, 1931, Luis Herrera sold
one-half (½) undivided share and to Herrera and
Go Bang, the other half (½), as shown by Exhibit
"12" and Exhibit "12-A", the latter an annotation
made the Register of Deeds of the City of
Zamboanga, in which stated as follows:
Cancelado el presente Certificado en virtud de
una escritura de traspaso y en su lugar se ha
expedido el Certificado de T No. 494-(T-13045)
del Tomo 2 del Libro de Certificado de
Transferencias.
(Fdo) R. D. MACROHON
Registrador de Titulos
Ciudad de Zamboanga
On July 23, 1937, Luis Herrera thru his attorney-
in-fact Luy Kim Guan, one of the defendants,
sold to Nicomedes Salazar his one half (½)
participation in these two (2) lots, as shown in
Exhibit "C", the corresponding deed of sale for
P3,000.00 Transfer Certificate of Title No. T-
494-(T-13045) was is to Nicomedes Salazar
and to the defendant Luy Kim Guan, Exhibit '7'.
On August 4, 1937, the defendant Luy Kim
Guan Nicomedes Salazar executed a deed of
mortgage in favor of Bank of the Philippine
Islands to secure a loan of P3,500.00, Exhibit '6'.
On August 17, 1937, the defendant Luy Kim
Guan and Nicomedes Salazar sold Lot 4465 to
Carlos Eijansantos for the sum of P100.00 as
shown in Exhibit "9", the corresponding deed of
sale, and Transfer Certificate of Title No. T-2653
was issued on September 7, 1939 to Carlos
Eijansantos, Exhibit "10". Nicomedes Salazar
sold his one half (½) interest on Lot 4467 to the
defendant Lino Bangayan for P3,000.00 on
February 22, 1949, Exhibit 'B', and the
corresponding Transfer Certificate of Title T-
2654 was issued to Lino Bangayan and to Luy
Kim Guan, both are co-owners in equal shares,
Exhibit "8". Opinion of the City Attorney, Exhibit
"p", and an affidavit of Atty. Jose T. Atilano,
Exhibit "O", state that Lino Bangayan is a
Filipino citizen.
As admitted by both parties (plaintiffs and
defendants), Luis Herrera is now deceased, but
as to the specific and precise date of his death
the evidence of both parties failed to show.
It is the contention of plaintiff-appellant that all
the transactions mentioned in the preceding
quoted portion of the decision were fraudulent
and were executed after the death of Luis
Herrera and, consequently, when the power of
attorney was no longer operative. It is also
claimed that the defendants Lino Bangayan and
Luy Kim Guan who now claim to be the owners
of Lots Nos. 1740 and 4467 are Chinese by
nationality and, therefore, are disqualified to
acquire real properties. Plaintiff-appellant, in
addition, questions the supposed deed of sale
allegedly executed by Luis Herrera on
December 1, 1931 in favor of defendant Luy Kim
Guan, conveying one-half interest on the two
lots, Nos. 4465 and 4467, asserting that what
was actually executed on that date, jointly with
the general power of attorney, was a lease
contract over the same properties for a period of
20 years for which Luy Kim Guan paid the sum
of P2,000.00.
We find all the contentions of plaintiff-appellant
untenable. Starting with her claim that the
second deed executed on December 1, 1931 by
Luis Herrera was a lease contract instead of a
deed of sale as asserted by defendant Luy Kim
Guan, we find that the only evidence in support
of her contention is her own testimony and that
of her husband to the effect that the deceased
Luis Herrera showed the said document to
them, and they remembered the same to be a
lease contract on the three properties for a
period of 20 years in consideration of
P2,000.00. Their testimony was sought to be
corroborated by the declaration of the clerk of
Atty. Enrique A. Fernandez, who allegedly
32 | PARTNERSHIP FULLTEXT CASES
notarized the document. Outside of this oral
testimony, given more than 23 years after the
supposed instrument was read by them, no
other evidence was adduced. On the other
hand, defendant Luy Kim Gua produced in
evidence a certification1 signed by the Register
of Deeds of Dipolog, Zamboanga (Exh. 11) to
the effect that a deed of sale, dated December
1, 1931, was execute by Luis Herrera in favor of
Luy Kim Guan and entered in the Primary Book
No. 4 as duly registered on September 30, 1936
under Original Certificate of Title No. 14360. It is
to be noted that the deed of sale was registered
shortly after the issuance in the name of Luis
Herrera of Origin Certificate of Title No. 14360
pursuant to Decree No. 59093, covering the two
lots, Nos. 4465 and 4467 (Exh. 5) dated April 7,
1936. In virtue of said deed of sale of December
1, 1931, Original Certificate of Title No. 1436
was cancelled and Transfer Certificate of Title
No. 1304 (Exh. 12) in the names of the conjugal
partnership of the spouses Luis Herrera and Go
Bang, one-half share, an Luy Kim Guan, single,
one-half share, was issued on September 30,
1936. Later, or on July 23, 1937, Luy Kim Guan,
in his capacity as attorney-in-fact of Luis
Herrera, sold the half interest of the latter in the
two parcels o land, in favor of Nicomedes
Salazar, whereupon TCT No. 13045 was
cancelled and TCT No. RT-657 (494-T-13045
(Exh. 7) was issued in the names of Luy Kim
Guan an Nicomedes Salazar in undivided equal
shares. On August 4, 1937, both Luy Kim Guan
and Nicomedes Salazar mortgaged the two
parcels in favor of the Bank of the Philippine
Islands for the sum of P3,500.00 (Exh. 6). On
August 17, 1937, Nicomedes Salazar and Luy
Kim Gua sold their respective shares in Lot No.
4465 to Carlo Eijansantos (Exh. 9), subject to
the mortgage, resulting in the issuance of TCT
No. 2653 (Exh. 10) covering the entire lot No.
4465 in the name of said Carlos Eijansantos. On
February 23, 1949, Nicomedes Salazar sold his
shall share in Lot No. 4467 to Lino Bangayan,
as a consequence of which, TCT No. 2654 (Exh.
B) was issued covering said Lot No. 4467 in the
names of Luy Kim Guan and Lino Bangayan in
undivided equal shares.
With respect to Lot No. 1740, the same was sold
by Luy Kim Guan, in his capacity as attorney-in-
fact of Luis Herrera, on September 11, 1939 to
Luy Chay (See Exh. 2) who, in August, 1941,
mortgaged the same (Exh. 4) to the Zamboanga
Mutual Loan and Building Association (See TCT
No. 3162 [Exh. 3] issued in the name of Luy
Chay). Later on, Luy Chay sold the entire lot to
defendant Lino Bangayan by virtue of the deed
of sale dated January 31, 1947 (Exh. E), and as
a consequence thereof, TCT No. 2567 was
issued in the name of said vendee. (See Exh.
1). As a result of these various transactions, duly
recorded in the corresponding office of the
Register of Deeds, and covered by appropriate
transfer certificates of title, the properties are
now registered in the following manner: Lot No.
1740, in the name of Lino Bangayan; Lot No.
4465, in the name of Carlos Eijansantos; and
Lot No. 4467, in the names of Lino Bangayan
and Luy Kim Guan in undivided equal shares.
In the face of these documentary evidence
presented by the defendants, the trial court
correctly upheld the contention of the
defendants as against that of plaintiff-appellant
who claims that the second deed executed by
Luis Herrera in 1931 was a lease contract. It is
pertinent to note what the lower court stated in
this regard, that is, if the second deed executed
by Luis Herrera was a lease contract covering,
the 3 lots in question for a period of twenty (20)
years, there would have been no purpose for
him to constitute Luy Kim Guan as. his attorney-
in-fact to administer and take charge of the
same properties already covered by the lease
contract.
Coming now to the contention that these
transactions are null and void and of no effect
because they were executed by the attorney-in-
fact after the death of his Principal, suffice it to
say that as found by the lower court, the date of
death of Luis Herrera has not been satisfactorily
proven. 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
33 | PARTNERSHIP FULLTEXT CASES
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 of
an agent unenforceable, where the latter had no
knowledge of such extinguishment the agency.2
Appellants also raise the question of the legality
of the titles acquired by Luy Chay and Lino
Bangayan, on ground that they are disqualified
to acquire real properties in the Philippines. This
point is similarly without me because there is no
evidence to support the claim. In fact, in the
deed of sale as well as in TCT No. 3162 issued
to Luy Chay, the latter was referred to as a
citizen of the Philippines. Nevertheless, the
lower court acknowledged the probability that
Luy Chay could have been actually a Chinese
citizens.3 At any rate, the property was
subsequently purchased by Lino Bangayan, as
a result which TCT No. 3162 in the name of Luy
Chay was cancelled and another certificate
(TCT No. T-2567) was issued in favor of said
vendee.
As to Bangayan's qualification, the lower court
held that said defendant had sufficiently
established his Philippine citizenship through
Exhibit P, concurred in by the Secretary of
Justice. We find no reason to disturb such ruling.
With respect to Luy Kim Guan, while it is true
that he is a Chinese citizen, nevertheless,
inasmuch as he acquired his one-half share in
Lot No. 4467 in 1931, long before the
Constitution was adopted, his ownership can
not be attacked on account of his citizenship.
Appellants, in this appeal, contest the judgment
of the court a quo awarding defendants Lino
Bangayan and Luy Kim Guan attorney's fees in
the sum of P2,000.00 each, and expenses of
litigation in the amounts of P1,000.00 and
P500.00, respectively. We agree with the
appellant in this regard.
This Court has laid down the rule that in the
absence of stipulation, a winning party may be
awarded attorney's fees only in case plaintiff's
action or defendant's stand is so untenable as to
amount to gross and evident bad faith.4 The
same thing however, can not be said of the case
at bar. As a matter of fact, the trial court itself
declared that the complaint was filed in good
faith. Attorney's fees, therefore, can not be
awarded to defendants simply because the
judgment was favorable to them and adverse to
plaintiff, for it may amount to imposing a
premium on the right to redress grievances in
court. And so with expenses of litigation. A
winning party may be entitled to expenses of
litigation only where he, by reason of plaintiff's
clearly unjustifiable claims or defendant's
unreasonable refusal to his demands, was
compelled to incur said expenditures. Evidently,
the facts of this case do not warrant the granting
of such litigation expenses to defendants. In the
absence of proof that the action was intended
for reasons other than honest, we may agree
with the trial court that the same must have been
instituted by plaintiffs in their belief that they
have a valid cause against the defendants.
WHEREFORE, and with the above modification,
the decision appealed from is hereby affirmed in
all other respects without prejudice to
appellants' right to demand from the agent (Luy
Kim Guan) an accounting of proceeds of the
agency, if such right is still available. No costs.
So ordered.
34 | PARTNERSHIP FULLTEXT CASES
G.R. No. L-11415 May 25, 1959
MANUEL BUASON and LOLITA M.
REYES, plaintiffs-appellants,
vs.
MARIANO PANUYAS, defendant-appellee.
Garcia and Jacinto, for appellants.
Servando Cleto for appellee.
2.AGENCY; ACTS DONE BY AN AGENT
AFTER DEATH OF PRINCIPAL WITHOUT His
KNOWLEDGE OF SUCH DEATH.—The
contention that as the death of the principal
ended the authority of the agent, the sale made
by the latter of the land in question after the
death of the principal is null and void, is
untenable. it not having been shown that the
agent knew of his principal's demise, and for
that reason the sale made by the agent is valid
and effective with respect to third persons who
have contracted with him in good faith. (Art.
1723, Old Civil Code, 1931, New Civil Code).
PADILLA, J.:
This is an appeal from a judgment of the Court
of First Instance of Nueva Ecija dismissing an
action brought by the spouses Manuel Buason
and Lolita M. Reyes for annulment of a deed of
sale in favor of the defendant, cancellation of
transfer certificate of title No. 8419 issued in the
name of the defendant and his wife, declaration
that the sale in their favor is valid, recovery of
possession of the parcel of land described in the
complaint from the defendant, damages,
attorney's fees and costs. (Civil No. 2144.)
In their lifetime the spouses Buenaventura
Dayao and Eugenia Vega acquired by
homestead patent a parcel of land situated at
barrio Gabaldon, municipality of Muñoz,
province of Nueva Ecija, containing an area of
14.8413 hectares covered by original certificate
of title No. 1187 (Exhibit C). On 29 October 1930
they executed a power of attorney authorizing
Eustaquio Bayuga to engage the services of an
attorney to prosecute their case against
Leonardo Gambito for annulment of a contract
of sale of the parcel of land (civil No. 5787 of the
same court) and after the termination of the case
in their favor to sell it, and from the proceeds of
the sale to deduct whatever expenses he had
incurred in the litigation (Exhibit B). On 14 March
1934 Buenaventura Dayao died leaving his wife
Eugenia Vega and children Pablo, Teodoro,
Fortunata and Juliana, all surnamed Dayao. On
21 march 1939 his four children executed a
deed of sale conveying 12.8413 hectares of the
parcel of land to the appellants, the spouses
Manuel Buason and Lolita M. Reyes (Exhibit A).
Their mother Eugenia Vega affixed her
thumbmark to the deed of sale as witness
(Exhibit A). The appellants took possession of
the parcel of land through their tenants in 1939.
On 18 July 1944 Eustaquio Bayuga sold 8
hectares of the same parcel of land to the
spouses Mariano Panuyas (appellee herein)
and Sotera B. Cruz (Exhibit D). Eustaquio
Bayuga died on 25 March 1946 and Eugenia
Vega in 1954.
The appellants and the appellee claim
ownership to the same parcel of land. In their
complaint the appellants prayed that the
appellee be ordered to deliver possession of the
part of the parcel of land held by him; that the
deed of sale of that part of the parcel of land held
by the appellee executed by Eustaquio Bayuga
in his favor and of his wife (Exhibit D) be
declared null and void and that transfer
certificate of title No. 8419 issued in their name
be cancelled; that the deed of sale of the parcel
of land executed by the children and heirs of
Buenaventura Dayao in their favor (Exhibit A) be
declared valid; that the appellee be ordered to
pay them damages and attorney's fees in the
sum of P9,600; and that he ordered to pay the
costs of the suit. The appellees affirmative
defenses are that he and his wife were buyers
in good faith and for valuable consideration; that
appellant's causes of action are barred by the
statute of limitations; that the complaint states
no cause of action; that the claim on which their
action is based is unenforceable under the
statute of frauds; and that the appellants are
guilty of laches. By way of counterclaim, he
prayed that for bringing a clearly unfounded suit
against him which depreciated the value of the
land and injured his good reputation, the
appellants be ordered to pay him the sums of
35 | PARTNERSHIP FULLTEXT CASES

P5,000 as actual damages and P10,000 as Anything done by the agent, without knowledge
moral damages. of the death of the principal or of any other
cause which extinguishes the agency, is valid
After trial on 20 August 1956 the Court rendered and shall be fully effective with respect to third
judgment holding that the appellants' action is persons who may have contracted with him in
barred by the statute of limitations and good faith is the law applicable to the point
dismissing their complaint. Their motion for raised by the appellants.
reconsideration filed on 23 August 1956. Hence
this appeal upon questions of law. The judgment appealed from is affirmed, with
costs against the appellants.
It appears that the appellants did not register the
sale of 12.8413 hectares of the parcel of land in
question executed in their favor by the Dayao
children on 21 March 1939 after the death of
their father Buenaventura Dayao. On the other
hand, the power of attorney executed by
Buenaventura Dayao on 29 October 1930
authorizing Eustaquio Bayuga to sell the parcel
of land (Exhibit B) was annotated or inscribed on
the back of the original certificate of title No.
1187 (Exhibit C) as Entry No. 16836/H-1187,
and the sale executed by Eustaquio Bayuga in
favor of the appellee Mariano Panuyas and his
wife Sotera B. Cruz under the aforesaid power
of attorney was annotated or inscribed on the
back of the same original certificate of title
(Exhibit C) as Entry No 778/H-1187. It does not
appear that the appellee and his wife had actual
knowledge of the previous sale. In the absence
of such knowledge, they had a right to rely on
the face of the certificate of title of the registered
owners and of the authority conferred by them
upon the agent also recorded on the back of the
certificate of title. As this is a case of double sale
of land registered under the Land Registration
Act, he who recorded the sale in the Registry of
Deeds has a better right than he who did not.1

As to the appellants' contention that, as the

death of the principal on 14 March 1934 ended
the authority of the agent,2 the sale of 8 hectares
of the parcel of land by the agent to the appellee
Mariano Panuyas and his wife Sotera B. Cruz
was null and void, suffice it to state that is has
not been shown that the agent knew of his
principal's demise, and for that reason article
1738, old Civil code or 1931, new Civil Code,
which provides: