RALLOS v FELIX GO CHANG.R. No. L-24332 January 31, 1978

Facts: This is a case of an attorney-in-fact, Simeon Rallos, who after of the 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 thewent to court to have the sale declared unenforceable and to recover the disposed share. The trial court granted the relief prayed for, but upon appeal the Court of Appeals upheld the validity of the sale and the complaint.

Facts: Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land. They 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 name 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 that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be declared unenforceable, and said share be reconveyed to her estate, certificate of title be reissued in their name, and for damages and attorney’s fees. 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. RTC declared the sale of the ½ part of the land that belonged to Concepcion as null and void. CA upheld the validity of the sale.

Issue/Held: 1. What is the legal effect of an act performed by an agent after the death of his

principal? DEATH EXTINGUISHES AGENCY. 2. 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? YES. 3. Is the sale of the undivided share of Concepcion Rallos in the Lot valid although it

was executed by the agent after the death of his principal? NO.

Ratio: 1. General Rule: Death extinguishes agency.

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

ART. 1919. Agency is extinguished. xxx xxx xxx

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.

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 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.

2. Exceptions: Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned. Article 1931 is the one applicable to the case at bar.

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. NOT APPLICABLE as the special power of attorney executed in favor of Simeon Rallos was not coupled with an interest.

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.

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.

3. The sale is invalid as the case does not comply with first requisite.

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. 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.

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.

Other relevant information:

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.

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. The agent acted fraudulently. When he transacted with vendee, he already knew the certificate of title was in the name of a dead person and without personality.

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 in 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. 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 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. 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 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

LEASE OF WORKArt. 1644. In the lease of work or service, one of the parties binds himself to execute a piece of work or to render to the other some service for a price certain, but the relation of principal and agent does not exist between them. (1544a)

Orient Air Services vs CA197 SCRA 645 May 29, 1991

Padilla,J;

1. On 15 January 1977, American Airlines, Inc. an air carrier offering passenger and air cargo transportation in the Philippines, and Orient Air Services and Hotel Representatives , entered into a General Sales Agency Agreement whereby the

former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation.

2. On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement.

3. Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the CFI of Manila, Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order averring the aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff."

4. defendant Orient Air:

- denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions

- . Further, the defendant contended that the actions taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its business interests.

5. TC ruled in favor of ORIENT AIR- dismissing the complaint and holding the termination made by the plaintiff

American Airlines as affecting the GSA agreement illegal and improper and - order the plaintiff American Airlines to reinstate defendant as its general sales

agent for passenger tranportation in the Philippines in accordance with said GSA agreement;

- plaintiff is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of payment.

6. Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of the court a quo on their material points but with some modifications with respect to the monetary awards granted.

7. Both appealed the decision of the CA

ISSUE #1 WON American Air can be ordered by the court to "reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement.

HELD: NO

RATIO:

- By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air.

- Such would be violative of the principles and essence of agency, defined by law as a contract whereby "a person binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER .

- In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court.

- The Agreement itself between the parties states that "either party may terminate the Agreement without cause by giving the other 30 days' notice by letter, telegram or cable."

ISSUE#2 WON Orient Air is entitled to the 3% overriding commission. YES and it must be based on TOTAL REVENUE.

HELD: YES

RATIO:

- paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air Services or its sub-agents .

- AMERICAN AIR : Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents, it is American Air's contention that Orient Air can claim entitlement to the disputed

overriding commission based only on ticketed sales This is supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks.

- Orient Air: contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American Air's services are necessarily by Orient Air."

- SC: It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the meaning of its provisions. The various stipulations in the contract must be read together to give effect to all. After a careful examination of the records, the Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue."

- As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American Air's services for air passenger transportation, and the solicitation of sales therefor.

- In return for such efforts and services, Orient Air was to be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services.

- It is immediately observed that the precondition attached to the first type of commission does not obtain for the second type of commissions. The latter type of commissions would accrue for sales of American Air services made not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents.

- To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would erase any distinction between the two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a contract with meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.

RE: contract of adhesion

An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible for the preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e., construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused theobscurity. 14 To put it differently, when several interpretations of a provision are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the party in whose favor the provision was made and who did not cause the ambiguity.

Bordador vs Luz

1. Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was their regular customer.

2. On several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the brother to Brigida D. Luz, received several pieces of gold and jewelry from petitioner amounting to P382,816.00. 1 These items and their prices were indicated in seventeen receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated that they were received for Brigida D. Luz.

3. Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners.

4. Deganos remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners.

5. By January 1990, the total of his unpaid account to petitioners, including interest, reached the sum of P725,463.98.

6. Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount.

7. In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and ultimately, she and her husband, together with Deganos, signed a compromise agreement with petitioners.

8. In that compromise agreement, Deganos obligated himself to pay petitioners, on installment basis, the balance of his account plus interest thereon. However, he failed to comply with his aforestated undertakings.

9. On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos, Bulacan against Deganos and Brigida, D. Luz for recovery of a sum of money and damages, with an application for preliminary attachment. 4

Ernesto Luz was impleaded therein as the spouse of Brigida.10. Petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he

received the subject items of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him therefor.

11. Private Respondent: Deganos admitted that he had an unpaid obligation to petitioners, he claimed that the same was only in the sum of P382,816.00 and not P725,463.98. He further asserted that it was he alone who was involved in the transaction with the petitioners; that he neither acted as agent for nor was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items were received by him for the latter. He further

claimed that he never delivered any of the items he received from petitioners to Brigida.

12. Trial court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while Brigida D. Luz did have transactions with petitioners in the past, the items involved were already paid for and all that Brigida owed petitioners was the sum of P21,483.00 representing interest on the principal account which she had previously paid for.

13. CA AFFIRMED

ISSUE: whether or not herein respondent spouses are liable to petitioners for the latter's claim for money and damages in the sum of P725,463.98, plus interests and attorney's fees, despite the fact that the evidence does not show that they signed any of the subject receipts or authorized Deganos to received the items of jewelry on their behalf.

HELD: NO.

RATIO:

- The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. While the quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that, "(Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners . . . .

- It is clear, therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with regard to the transaction subject of this case.

- The basis for agency is representation. Here, there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved. Petitioners' attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised.

- Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as evidenced by six receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent.

- The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Luz. Evidently, petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by conjuring a supposed agency relation between the two respondents where no evidence supports such claim.

[G.R. No. 117356. June 19, 2000.]VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION, respondents. QUISUMBING, J p:

Old Buyer regularly bought sugar from petitioner (SELLER), issuing the latter Shipping List/Delivery Receipts (SLDRs) as proof of purchase.

October 16, 1989 – Subject SLDR was issued, covering 25,000 bags of sugar containing 50kg and priced at P638.00 per bag. The transaction was a direct sale, and an additional note in the SLDR said that the delivery was subject for availability of a stock at the NAWACO warehouse.

October 25, 1989 – Old Buyer sold to private respondent (NEW BUYER) its rights under subject SLDR for P14,750,000.00, the latter issuing a check of the same date and 3 checks postdated November 13, 1989 for payment. It also informed seller that the authority to withdraw sugar covered by the SLDR was already transferred to him, enclosing in the letter a copy of the SLDR and a letter of authority from the old buyer authorizing the new buyer to withdraw the sugar on their behalf.

October 27, 1989 – Old buyer issued 16 checks totaling P31,900,000.00 with the seller, the latter issuing an Official Receipt for payment of P50,000 bags covering the SLDR bought and a new SLDR.

However, when the new buyer surrendered the SLDR he bought to the NAWACO warehouse, he was released only 2,000 bags and NAWACO refused further withdrawals, saying that the old buyer already withdrew the remaining 23,000 bags.

March 2, 1990 – New buyer sent the old buyer a letter demanding the 23,000 bags withdrawn.

March 9, 1990 – Seller reiterated that all sugar corresponding to the subject SLDR was already withdrawn. Moreover, the authority given by the old buyer mentioned the new buyer as his agent, withdrawing sugar “for and in behalf” of him.

April 27, 1990 – New buyer filed a complaint for specific performance against old buyer and seller, praying the delivery of 23,000 bags of sugar plus damages. P: It was unpaid for the 23,000 bags.

SLDRs were delivery receipts and not documents of title. It did not authorize the transfer of rights for another party to withdraw sugar bags.

New buyer did not pay for the SLDR, and the buyers conspired to defraud seller of his sugar. He then posted a counterclaim for damages.

February 13, 1991 – RTC ruled for new buyer, ordering the delivery of the sugar bags due under SLDR No. 1214 and payment of damages, attorney’s fees and costs of the suit, saying that: The subject SLDR have been fully paid, as evidenced by the official receipt

issued when old buyer issued checks to pay the purchases. This evidence cannot stand against seller’s witness’ bare assertions, and inability to produce evidence that the check initially issued was dishonored.

CA P: Contends that its dealings with the old and new buyers are part of one general contract of sale. As an agent of the old buyer, the new buyer can only withdraw bags of sugar against cleared checks of the old buyer. Since the value of the cleared checks were only up to the extent of the released sugar, it cannot be ordered to release more sugar bags because they were still unpaid. R: The transaction including subject SLDR is separate and independent from

the rest of the purchases. The payment was made in a single statement for ease of transactions.

February 24, 1994 – CA modified RTC judgment, reducing the deliverable bags to P12,586 (and hence reducing the attorney’s fees to 10% of the value of the undelivered bags). This was subsequently modified to reinstate the RTC judgment relating to the quantity of deliverable sugar bags, ruling that: The increase of the deliverable bags was due to the reconsideration of the

evidence, holding that since there was evidence to the withdrawal of only 2,000 bags pursuant to the subject SLDR, the remainder is not yet withdrawn. It rejected seller’s contention that the value of the cleared checks was the already withdrawn.

Issue: WON the new buyer is an assignee of the old buyer. WON the CA erred in not applying the law on compensation to offset credits

between the buyers. WON the transaction was in the nature of a contract to sell or conditional sale. WON the CA erred in not applying the clean hands doctrine to prevent new buyer

from seeking relief.

Held:On the first issue:

This was raised only at the first time on appeal. Because of this, it will not be normally entertained because it violates the basic rules of fair play, justice and due process. However, since CA opted to address the issue, SC will now rule on it.

Contract of agency defined: Art. 1868, NCC The basis of the contract is representation, which requires, for the

principal, the intent to appoint the agent as his representative (and his control over it), and for the agent, the intent to accept the appointment and act on it.

CA Ruling: Law does not presume agency. It is a fact to be proved, the burden of which is dependent on those who allege it, who must prove its existence and the nature of extent of the powers granted.

The old buyer’s letter of authority was heavily relied to show agency between the buyers.

Despite the language of the letter that has an inkling of agency, the sale of the SLDR proves that there is no agency between the buyers.

On the second issue: P: Since the transactions between the buyers are parts of one account, its debt

has been offset by its claim for the old buyer’s unpaid purchases, according to Art. 1279 of the Civil Code

SC: The purchase of sugar contained in the subject SLDR is a separate and independent transaction, with a separate payment. Because of this, seller is under obligation to deliver it to the buyer or his assignee. No compensation is possible because buyers are not mutual debtors and creditors of each other.

On the third issue: P: The sale of sugar is a conditional sale (or a contract to sell), with title to the

sugar still remaining with the vendor. SC: Judging from the terms and conditions of the SLDR, it is a contract of sale.

It is therefore estopped from alleging the contrary as the contract is the law between the contracting parties. Because of this, seller is obliged to deliver the sugar to the buyer or its assignee.

On the fourth issue: P: Buyers entered into a conspiracy to defraud it of its sugar, evidenced by the

fact that old buyer sold the sugar below its market price; new buyer refused to pursue the case against old buyer’s owner; and the authority given by the old buyer to other person to withdraw against the subject SLDR after she sold her rights under it to new buyer.

SC: The assertions are fully speculative and bereft of direct proof.

Decision: Petition denied for lack of merit.

Yun Kwan Byung vs PAGCORDecember 11, 2009

1. PAGCOR is a government-owned and controlled corporation tasked to establish and operate gambling clubs and casinos as a means to promote tourism and generate sources of revenue for the government. To achieve these objectives, PAGCOR is vested with the power to enter into contracts of every kind and for any lawful purpose that pertains to its business.

2. Pursuant to this authority, PAGCOR launched its Foreign Highroller Marketing Program (Program). The Program aims to invite patrons from foreign countries to play at the dollar pit of designated PAGCOR-operated casinos under specified terms and conditions and in accordance with industry practice

3. The Korean-based ABS Corporation was one of the international groups that availed of the Program. In a letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard Hotel in Manila (Casino Filipino).

4. Petitioner, a Korean national, alleges that from November 1996 to March 1997, he came to the Philippines four times to play for high stakes at the Casino Filipino.

5. Petitioner claims that in the course of the games, he was able to accumulate gambling chips worth US$2.1 million. Petitioner presented as evidence during the trial gambling chips with a face value of US$1.1 million. Petitioner contends that when he presented the gambling chips for encashment with PAGCOR’s employees or agents, PAGCOR refused to redeem them

6. Petitioner brought an action against PAGCOR seeking the redemption of gambling chips valued at US$2.1 million.- claims that he won the gambling chips at the Casino Filipino, playing

continuously day and night. - alleges that every time he would come to Manila, PAGCOR would extend to

him amenities deserving of a high roller. A PAGCOR official who meets him at the airport would bring him to Casino Filipino, a casino managed and operated by PAGCOR. The card dealers were all PAGCOR employees, the gambling

chips, equipment and furnitures belonged to PAGCOR, and PAGCOR enforced all the regulations dealing with the operation of foreign exchange gambling pits.

- Petitioner states that he was able to redeem his gambling chips with the cashier during his first few winning trips. But later on, the casino cashier refused to encash his gambling chips so he had no recourse but to deposit his gambling chips at the Grand Boulevard Hotel’s deposit box, every time he departed from Manila

7. PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket player who played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR alleges that it provided ABS Corporation with distinct junket chips. ABS Corporation distributed these chips to its junket players. At the end of each playing period, the junket players would surrender the chips to ABS Corporation. Only ABS Corporation would make an accounting of these chips to PAGCOR’s casino treasury.As additional information for the junket players playing in the gaming room leased to ABS Corporation, PAGCOR posted a notice written in English and Korean languages which reads:

NOTICEThis GAMING ROOM is exclusively operated by ABS under arrangement with PAGCOR, the former is solely accountable for all PLAYING CHIPS wagered on the tables. Any financial ARRANGEMENT/TRANSACTION between PLAYERS and ABS shall only be binding upon said PLAYERS and ABS

8. PAGCOR argues that petitioner is not a PAGCOR player because under PAGCOR’s gaming rules, gambling chips cannot be brought outside the casino. The gambling chips must be converted to cash at the end of every gaming period as they are inventoried every shift. Under PAGCOR’s rules, it is impossible for PAGCOR players to accumulate two million dollars worth of gambling chips and to bring the chips out of the casino premises

9. TC: dismissed the complaint and counterclaim. ruled that based on PAGCOR’s charter PAGCOR has no authority to lease any portion of the gambling tables to a private party like ABS Corporation.

10. CA affirmed.

Issue#1. WON an implied agency was created

Held: NO. There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCOR’s actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and services.

Ratio:

- Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts

- On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority.

- In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, authority to represent another.49

- The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it.Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another.

- - The basis for agency is representation that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal.59 On the part of the principal, there must be anactual intention to appoint or an intention naturally inferable from his words or actions, while on the part of the agent, there must be an intention to accept the appointment and act on it.60 Absent such mutual intent, there is generally no agency

Issue # 2 Whether the CA erred in using intent of the contracting parties as the test for creation of agency, when such is not relevant since the instant case involves liability of the presumed principal in implied agency to a third party

HELD: NO. The Court of Appeals correctly used the intent of the contracting parties in determining whether an agency by estoppel existed in this case.

Ratio:

- An agency by estoppel, which is similar to the doctrine of apparent authority requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance.

- There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as claimant, and such must have produced a change of position to its detriment.63 Such proof is lacking in this case.

- In the entire duration that petitioner played in Casino Filipino, he was dealing only with ABS Corporation, and availing of the privileges extended only to players brought in by ABS Corporation. The facts that he enjoyed special treatment upon his arrival in Manila and special accommodations in Grand Boulevard Hotel, and that he was playing in special gaming rooms are all indications that petitioner cannot claim good faith that he believed he was dealing with PAGCOR. Petitioner cannot be considered as an innocent third party and he cannot claim entitlement to equitable relief as well

Issue#3 Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the agent, ABS Corporation

Held: NO.

The trial court has declared, and we affirm, that the Junket Agreement is void. A void or inexistent contract is one which has no force and effect from the very beginning. Hence, it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification.64 Article 1409 of the Civil Code provides that contracts expressly prohibited or declared void by law, such as gambling contracts, "cannot be ratified."

RE: VALIDITY OF AGREEMENT:

- PAGCOR has the sole and exclusive authority to operate a gambling activity. While PAGCOR is allowed under its charter to enter into operator’s or management contracts, PAGCOR is not allowed under the same charter to relinquish or share its franchise. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare non potest, inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so.41

Similarly, in this case, PAGCOR, by taking only a percentage of the earnings of ABS Corporation from its foreign currency collection, allowed ABS Corporation to operate gaming tables in the dollar pit. The Junket Agreement is in direct violation of PAGCOR’s charter and is therefore void.

Since the Junket Agreement violates PAGCOR’s charter, gambling between the junket player and the junket operator under such agreement is illegal and may not be enforced by the courts. Article 201442 of the Civil Code, which refers to illegal gambling, states that no action can be maintained by the winner for the collection of what he has won in a game of chance.