G.R. No.

118347 October 24, 1996

VICENTE LIM and MICHAEL, LIM, petitioners, vs. COURT OF APPEALS and LIBERTY H. LUNA, respondents.

Private respondent Liberty Luna is the owner of a piece of land located at the corner of G. Araneta
Avenue and Quezon Avenue in Quezon City. The land, consisting of 1,013.6 square meters, is covered by
TCT No. 193230 of Registry of Deeds of Quezon City. On September 2, 1988 private respondent sold the
land to petitioners Vicente and Michael Lim for P3,547,600.00. As prepared by petitioners' broker, Atty.
Rustico Zapata of the Zapata Realty Company, the receipt embodying the agreement as follows

(3)The seller assumes full responsibility to eject the squatters/occupants within said
period of sixty (60) days, from the date of receipt of the earnest money; and in case the seller
shall fail in her commitment to ejct the squatters/occupants within said period, the seller shall
refund to the buyer this sum of P200,000.00[plus another sum of ONE HUNDRED THOUSAND
(P100,000.00) PESOS as liquidated damages]; however, if the buyer shall fail to pay the balance
after the seller has ejected the squatters/occupants, this sum of P200,000.00 shall be forfeited
by the seller;

Private respondent Luna failed to eject the squatters from the land despite her alleged efforts to do so.
It appears that private respondent asked the help of a building official and a city engineer to effect
ejectment. 2 Nonetheless, petitioners did not demand the return of their earnest money.

Private respondent alleged that it was her obligation to return the earnest money under paragraph 3 of
the receipt since the condition of ejecting the squatters had not been fulfilled but petitioners unjustly
refused to accept the refund. She claimed that although she tried her best to eject the squatters, she
failed in her efforts.

On December 28, 1992 the trial court 8 rendered a decision holding that there was a perfected contract
of sale between the parties and that pursuant to Art. 1545 of the Civil Code, although the failure of
private respondent to eject the squatters was a breach of warranty, the performance of warranty could
be waived by the buyer, as petitioners did in this case. It found private respondent to have acted in bad
faith by not exerting earnest efforts to eject the squatters, in order to get out of the contract.

ISSUE: WHETHER OR NOT THE IS A CONTRACT OF AGNECY? YES

Private respondent Luna contends that as condition of ejecting the squatters was not met, she no longer
has an obligation to proceed with the sale of her lot. This contention is erroneous. Private respondent
fails to distinguish between a condition imposed on the perfection of the contract and a condition
imposed on the performance of an obligation. Failure to comply with first condition results in the failure
of a contract, while failure to comply with the second condition only gives the other party the option
either to refuse to proceed with the sale or to waive the condition.

In this case, there is already a perfected contract. The condition was imposed only on the performance
of the obligation. Hence, petitioners have the right to choose whether to demand the return of
P200,000.00 which they have paid as earnest money or to proceed with the sale. They have chosen to
proceed with the sale and private respondent cannot refuse to do so.
G.R. No. 130148 December 15, 1997
JOSE BORDADOR and LYDIA BORDADOR, petitioners, vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO
DEGANOS, respondents

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. 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

Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the
unsold items to petitioners. 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. By January 1990, the total of his
unpaid account to petitioners, including interest, reached the sum of P725,463.98. 3 Petitioners
eventually filed a complaint in the barangay court against Deganos to recover said amount

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. 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

Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent
authority as her agent and held him out to the public as such, hence Brigida can not be permitted to
deny said authority to innocent third parties who dealt with Deganos under such belief. 13 Petitioners
further represent that the Court of Appeals recognized in its decision that Deganos was an agent of
Brigida.

ISSUE: WHETHER OR NOT THERE IS A CONTRACT OFAGENCY BETWEEN DEGANOS AND LUZ? NO

The Civil Code provides: Art. 1868. By the contract of agency 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.

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.

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. 145817 October 19, 2011
URBAN BANK, INC, Petitioner, vs. MAGDALENO M. PEÑA, Respondent.

Urban Bank, Inc. (both petitioner and respondent in these two consolidated cases),4 was a domestic
Philippine corporation, engaged in the business of banking.5 The eight individual respondents in G. R.
No. 162562 were officers and members of Urban Bank’s board of directors, who were sued in their
official and personal capacities.6 On the other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr., and
Eric L. Lee, (hereinafter the de Leon Group), are the petitioners in G. R. No. 145822 and are three of the
same bank officers and directors, who had separately filed the instant Petition before the Court.
Petitioner-respondent Atty. Magdaleno M. Peña (Peña)7 is a lawyer by profession and was formerly a
stockholder, director and corporate secretary of Isabel Sugar Company, Inc. (ISCI).8 ISCI owned a parcel
of land9 located in Pasay City (the Pasay property).10 In 1984, ISCI leased the Pasay property for a
period of 10 years.11 Without its consent12 and in violation of the lease contract,13 the lessee
subleased the land to several tenants, who in turn put up 23 establishments, mostly beer houses and
night clubs, inside the compound.14 In 1994, a few months before the lease contract was to expire, ISCI
informed the lessee15 and his tenants16 that the lease would no longer be renewed and that it
intended to take over the Pasay property17 for the purpose of selling it

"The SELLER (ISCI) agrees that from the proceeds of the purchase prices of the subject Property (Pasay
property), the BUYER (Urban Bank) shall withhold the amount of PHP 25,000,000.00 by way of escrow
and shall release this amount to the SELLER only upon its delivery to the BUYER of the full and actual
possession and control of the Subject Property, free from tenants, occupants, squatters or other
structures or from any liens, encumbrances, easements or any other obstruction or impediment to the
free use and occupancy by the buyer of the subject Property or its exercise of the rights to ownership
over the subject Property, within a period of sixty (60) days from the date of payment by the BUYER of
the purchase price of the subject Property net of the amounts authorized to be deducted or withheld
under Item II (a) of this Contract.21 (Emphasis supplied) ISCI then instructed Peña, who was its director
and corporate secretary, to take over possession of the Pasay property22 against the tenants upon the
expiration of the lease. ISCI’s president, Mr. Enrique G. Montilla III (Montilla), faxed a letter to Peña,
confirming the latter’s engagement as the corporation’s agent to handle the eviction of the tenants from
the Pasay property…

In the same telephone conversation, respondent Borlongan allegedly asked Peña to maintain possession
of the Pasay property and to represent Urban Bank in any legal action that might be instituted relative
to the property. Peña supposedly demanded 10% of the market value of the property as compensation
and attorney’s fees and reimbursement for all the expenses incurred from the time he took over land
until possession was turned over to Urban Bank. Respondent Borlongan purportedly agreed on
condition that possession would be turned over to the bank, free of tenants, not later than four months;
otherwise, Peña would lose the 10% compensation and attorney’s fees. 51 Later that afternoon, Peña
received the bank’s letter dated 19 December 1994, which was signed by respondents Bejasa and
Manuel, and is quoted below:

This is to confirm the engagement of your services as the authorized representative of

Urban Bank, specifically to hold and maintain possession of our abovecaptioned property [Pasay
property] and to protect the same from former tenants, occupants or any other person who are
 threatening to return to the said property and/or interfere with your possession of the said
property for and in our behalf. You are likewise authorized to represent Urban Bank in any court
action that you may institute to carry out the aforementioned duties, and to prevent any
intruder, squatter or any other person not otherwise authorized in writing by Urban [B]ank from
entering or staying in the premises.52 (Emphasis supplied)

ISSUE: WHETHER OR NOT PENA IS AN AGENT OF UNION BANK? YES

In a contract of agency, agents bind themselves to render some service or to do something in

representation or on behalf of the principal, with the consent or authority of the latter.250 The basis of
the civil law relationship of agency is representation, 251 the elements of which include the following:
(a) the relationship is established by the parties’ consent, express or implied; (b) the object is the
execution of a juridical act in relation to a third person; (c) agents act as representatives and not for
themselves; and (d) agents act within the scope of their authority.252 Whether or not an agency has
been created is determined by the fact that one is representing and acting for another.253 The law
makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person
alleging it.254

Urban Bank’s letter dated 19 December 1994 confirmed in no uncertain terms Peña’s designation as its
authorized representative to secure and maintain possession of the Pasay property against the tenants.
Under the terms of the letter, petitioner-respondent bank confirmed his engagement (a) "to hold and
maintain possession" of the Pasay property; (b) "to protect the same from former tenants, occupants or
any other person who are threatening to return to the said property and/or interfere with your
possession of the said property for and in our behalf"; and (c) to represent the bank in any instituted
court action intended to prevent any intruder from entering or staying in the premises.264

These three express directives of petitioner-respondent bank’s letter admits of no other construction
than that a specific and special authority was given to Peña to act on behalf of the bank with respect to
the latter’s claims of ownership over the property against the tenants. Having stipulated on the due
execution and genuineness of the letter during pretrial,265 the bank is bound by the terms thereof and
is subject to the necessary consequences of Peña’s reliance thereon. No amount of denial can overcome
the presumption that we give this letter – that it means what it says. In any case, the subsequent actions
of Urban Bank resulted in the ratification of Peña’s authority as an agent acting on its behalf with
respect to the Pasay property. By ratification, even an unauthorized act of an agent becomes an
authorized act of the principal.266

In all these instances, petitioner-respondent bank did not repudiate the actions of Peña, even if it was
fully aware of his representations to third parties on its behalf as owner of the Pasay property. Its tacit
acquiescence to his dealings with respect to the Pasay property and the tenants spoke of its intent to
ratify his actions, as if these were its own. Even assuming arguendo that it issued no written authority,
and that the oral contract was not substantially established, the bank duly ratified his acts as its agent by
its acquiescence and acceptance of the benefits, namely, the peaceful turnover of possession of the
property free from sub-tenants.
G.R. No. 163928 January 21, 2015
MANUEL JUSAYAN, ALFREDO JUSAYAN, AND MICHAEL JUSAYAN Petitioners, vs. JORGE SOMBILLA,
Respondent.

Wilson Jesena (Wilson) owned four parcels of land situated in New Lucena, Iloilo. On June 20, 1970,
Wilson entered into an agreement with respondent Jorge Sombilla (Jorge),3 wherein Wilson designated
Jorge as his agent to supervise the tilling and farming of his riceland in crop year 1970-1971. On August
20, 1971, before the expiration of the agreement, Wilson sold the four parcels of land to Timoteo
Jusayan (Timoteo).4 Jorge and Timoteo verbally agreed that Jorge would retain possession of the parcels
of land and would deliver 110 cavans of palay annually to Timoteo without need for accounting of the
cultivation expenses provided that Jorge would pay the irrigation fees. From 1971 to 1983, Timoteo and
Jorge followed the arrangement. In 1975, the parcels of land were transferred in the names of Timoteo’s
sons, namely; Manuel, Alfredo and Michael (petitioners). In 1984, Timoteo sent several letters to Jorge
terminating his administration and demanding the return of the possession of the parcels of land.5 Due
to the failure of Jorge to render accounting and to return the possession of the parcels of land despite
demands, Timoteo filed on June 30, 1986 a complaint for recovery of possession and accounting against
Jorge in the RTC (CAR Case No. 17117). Following Timoteo’s death on October 4, 1991, the petitioners
substituted him as the plaintiffs. In his answer,6 Jorge asserted that he enjoyed security of tenure as the
agricultural lessee of Timoteo; and that he could not be dispossessed of his landholding without valid
cause.

ISSUE: WHETHER OR NOT THE RELATIONSHIP BETWEEN THE PETITIONERS AND RESPONDENT IS THAT OF
AGENCY OR AGRICULTURAL LEASEHOLD?

In agency, the agent binds himself to render some service or to do something in representation or on
behalf of the principal, with the consent or authority of the latter.10 The basis of the civil law
relationship of agency is representation,11 the elements of which are, namely: (a) the relationship is
established by the parties’ consent, express or implied; (b) the object is the execution of a juridical act in
relation to a third person; (c) the agent acts as representative and not for himself; and (d) the agent acts
within the scope of his authority.12 Whether or not an agency has been created is determined by the
fact that one is representing and acting for another.13 The law does not presume agency; hence,
proving its existence, nature and extent is incumbent upon the person alleging it.

In the civil law lease, one of the parties binds himself to give to another the enjoyment or use ofa thing
for a price certain, and for a period that may be definite or indefinite.17 In the agricultural lease, also
termed as a lease hold tenancy, the physical possession of the land devoted to agriculture is given by its
owner or legal possessor (landholder) to another (tenant) for the purpose of production through labor
of the latter and of the members of his immediate farm household, in consideration of which the latter
agrees to share the harvest with the landholder, or to pay a price certain or ascertainable, either in
produce or in money, or in both.
G.R. No. 199990 February 4, 2015
SPOUSES ROLANDO and HERMINIA SALVADOR, Petitioners, vs. SPOUSES ROGELIO AND ELIZABETH RABAJA
and ROSARIO GONZALES, Respondents

This case stemmed from a dispute involving the sellers, petitioner spouses Rolando and Herminia Salvador
(Spouses Salvador); the sellers' agent, Rosario Gonzales (Gonzales),· and the buyers, respondent Spouses
Rogelio and Elizabeth Rabaja (Spouses Rabaja), over a parcel of land situated at No. 25, Merryland Village,
375 Jose Rizal Street, Mandaluyong City (subject property),covered by Transfer Certificate of Title (TCT) No.
13426 and registered in the names of Spouses Salvador. From 1994 until 2002, Spouses Rabaja were leasing
an apartment in the subject lot.

Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did not receive
any payment from Gonzales. This prompted Spouses Rabaja to suspend further payment of the purchase
price; and as a consequence, they received a notice to vacate the subject property from Spouses Salvador for
non-payment of rentals. Thereafter, Spouses Salvador instituted an action for ejectment against Spouses
Rabaja. In turn, Spouses Rabaja filed an action for rescission of contract against Spouses Salvador and
Gonzales, the subject matter of the present petition.

Spouses Salvador filed their answer with counterclaim and cross-claim 12 contending that there was no
meeting of the minds between the parties and that the SPA in favor of Gonzales was falsified

ISSUE: WHETHER OR NOT THERE IS CONTRACT TO SELL AND CAN BE VALIDLY RESCINDED? YES

Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with the
courts below in finding that the contract entered into by the parties was essentially a contract of sale
which could be validly rescinded. Spouses Salvador insist that they did not receive the payments made
by Spouses Rabaja from Gonzales which totalled ₱950,000.00 and that Gonzales was not their duly
authorized agent. These contentions, however, must fail in light of the applicable provisions of the New
Civil Code which state:

Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent's authority, if such act is within the terms of the power
of attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent.

xxxx

Art. 1902. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as regards
the agency. Private or secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions shown them.

xxxx

Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent
of the agent’s authority. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as regards the
agency. The basis for agency is representation and a person dealing with an agent is put upon inquiry
and must discover on his own peril the authority of the agent.

According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written. In this case, Spouses Rabaja did not recklessly enter into a
contract to sell with Gonzales. They required her presentation of the power of attorney before they
transacted with her principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had
no reason not to rely on it.

The law mandates an agent to act within the scope of his authority which what appears in the written
terms of the power of attorney granted upon him.36 The Court holds that, indeed, Gonzales acted
within the scope of her authority. The SPA precisely stated that she could administer the property,
negotiate the sale and collect any document and all payments related to the subject property.37 As the
agent acted within the scope of his authority, the principal must comply with all the obligations.38 As
correctly held by the CA, considering that it was not shown that Gonzales exceeded her authority or that
she expressly bound herself to be liable, then she could not be considered personally and solidarily
liable with the principal, Spouses Salvador.39
G.R. No. 166044 June 18, 2012
COUNTRY BANKERS INSURANCE CORPORATION, Petitioner, vs. KEPPEL CEBU SHIPYARD, UNIMARINE
SHIPPING LINES, INC., PAUL RODRIGUEZ, PETER RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN
QUINAIN, Respondents

On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the shipping
industry, contracted the services of Keppel Cebu Shipyard, formerly known as Cebu Shipyard and
Engineering Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its vessel, the M/V
Pacific Fortune.5 On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to Unimarine in
consideration for its services, which amounted to ₱4,486,052.00.6 Negotiations between Cebu Shipyard
and Unimarine led to the reduction of this amount to ₱3,850,000.00. The terms of this agreement were
embodied in Cebu Shipyard’s February 18, 1992 letter to the President/General Manager of Unimarine,
Paul Rodriguez, who signed his conformity to said letter.

In compliance with the agreement, Unimarine, through Paul Rodriguez, secured from Country Bankers
Insurance Corp. (CBIC), through the latter’s agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G
(16) 294198 (the surety bond) on January 15, 1992 in the amount of ₱3,000,000.00. The expiration of
this surety bond was extended to January 15, 1993, through Endorsement No. 331529 (the
endorsement), which was later on attached to and formed part of the surety bond. In addition to this,
Unimarine, on February 19, 1992, obtained another bond from Plaridel Surety and Insurance Co.
(Plaridel), PSIC Bond No. G (16)-0036510 in the amount of ₱1,620,000.00.

Due to Unimarine’s failure to heed Cebu Shipyard’s repeated demands, Cebu Shipyard, through counsel,
wrote the sureties CBIC18 on November 18, 1992, and Plaridel,19 on November 19, 1992, to inform
them of Unimarine’s nonpayment, and to ask them to fulfill their obligations as sureties, and to respond
within seven days from receipt of the demand. However, even the sureties failed to discharge their
obligations, and so Cebu Shipyard filed a Complaint dated January 8, 1993, before the RTC, Branch 18 of
Cebu City, against Unimarine, CBIC, and Plaridel. This was docketed as Civil Case No. CBB-1344

CBIC avers that the Court of Appeals erred in interpreting and applying the rules governing the contract
of agency. It argued that the Special Power of Attorney granted to Quinain clearly set forth the extent
and limits of his authority with regard to businesses he can transact for and in behalf of CBIC. CBIC
added that it was incumbent upon Cebu Shipyard to inquire and look into the power of authority
conferred to Quinain. CBIC said:

The authority to bind a principal as a guarantor or surety is one of those powers which
requires a Special Power of Attorney pursuant to Article 1878 of the Civil Code. Such power
could not be simply assumed or inferred from the mere existence of an agency. A person who
enters into a contract of suretyship with an agent without confirming the extent of the latter’s
authority does so at his peril. x x x.52

CBIC claims that the foregoing is true even if Quinain was granted the authority to transact in the
business of insurance in general, as "the authority to bind the principal in a contract of suretyship could
nonetheless never be presumed."53 Thus, CBIC claims, that:
 [T]hird persons seeking to hold the principal liable for transactions entered into by an
agent should establish the following, in case the same is controverted:

1. The fact or existence of the agency.

2. The nature and extent of authority.

To go a little further, CBIC said that the correct Civil Code provision to apply in this case is Article 1898.
CBIC asserts that "Cebu Shipyard was charged with knowledge of the extent of the authority conferred
on Mr. Quinain by its failure to perform due diligence investigations.

ISSUE: WHETHER OR NOT QUINAIN ACTED WITHIN HIS AUTHORITY?

In a contract of agency, a person, the agent, binds himself to represent another, the principal, with the
latter’s consent or authority.57 Thus, agency is based on representation, where the agent acts for and in
behalf of the principal on matters within the scope of the authority conferred upon him.58 Such "acts
have the same legal effect as if they were personally done by the principal. By this legal fiction of
representation, the actual or legal absence of the principal is converted into his legal or juridical
presence."

Pertinent to this case are the following provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with whom
the agent contracted is aware of the limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the principal’s ratification.

Art. 1900. So far as third persons are concerned, an act is deemed to have been
performed within the scope of the agent’s authority, if such act is within the terms of the power
of attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent.

Art. 1902. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as regards
the agency. Private or secret orders and instructions of the principal do not prejudice third
persons who have relied upon the power of attorney or instructions shown to them. Art. 1910.
The principal must comply with all the obligations which the agent may have contracted within
the scope of his authority. As for any obligation wherein the agent has exceeded his power, the
principal is not bound except when he ratifies it expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.

Our law mandates an agent to act within the scope of his authority.62 The scope of an agent’s authority
is what appears in the written terms of the power of attorney granted upon him.63 Under Article
1878(11) of the Civil Code, a special power of attorney is necessary to obligate the principal as a
guarantor or surety. In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of
his authority only if Quinain’s act of issuing Surety Bond No. G (16) 29419 is deemed to have been
performed within the written terms of the power of attorney he was granted.

Under Articles 1898 and 1910, an agent’s act, even if done beyond the scope of his authority, may bind
the principal if he ratifies them, whether expressly or tacitly. It must be stressed though that only the
principal, and not the agent, can ratify the unauthorized acts, which the principal must have knowledge
of.66 Expounding on the concept and doctrine of ratification in agency, this Court said:

Ratification in agency is the adoption or confirmation by one person of an act performed

on his behalf by another without authority. The substance of the doctrine is confirmation after
conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full
knowledge at the time of ratification of all the material facts and circumstances relating to the
unauthorized act of the person who assumed to act as agent. Thus, if material facts were
suppressed or unknown, there can be no valid ratification and this regardless of the purpose or
lack thereof in concealing such facts and regardless of the parties between whom the question
of ratification may arise. Nevertheless, this principle does not apply if the principal’s ignorance
of the material facts and circumstances was willful, or that the principal chooses to act in
ignorance of the facts. However, in the absence of circumstances putting a reasonably prudent
man on inquiry, ratification cannot be implied as against the principal who is ignorant of the
facts.67 (Emphases supplied.)
G.R. No. 169442
REPUBLIC OF THE PHILIPPINES, represented by the PRIVATIZATION AND MANAGEMENT OFFICE (PMO),
Petitioner vs. ANTONIO V. BANEZ, LUISITA BANEZ VALERA, NENA BANEZ HOJILLA, and EDGARDO B.
HOJILLA, JR., Respondents

In 1976, Antonio V. Bañez, Luisita Bañez Valera, and Nena Bañez Hojilla (collectively, respondents)
offered for sale a parcel of land (subject property), with an area of 20,000 sq m in Barangay Calaba,
Bangued, Abra to Cellophil Resources Corporation (CRC). Pursuant to the offer to sell on 7 December
1981, respondents executed a Letter Agreement irrevocably giving CRC the option to purchase the
subject property, which CRC accepted. The pertinent portion of the Letter Agreement (hereinafter
referred to as Contract), to wit: