Short answer. It can be. If the agent did not know the principal had died, what he did is valid and fully effective as to a third person who dealt with him in good faith. The protection needs both halves: the agent's ignorance and the outsider's good faith.
What the law says
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.
Civil Code, Article 1931 — Acts in Good Faith After the Principal's Death. Read the full provision →
The rule, and how wide it reaches
Death normally ends an agency, and the authority given to the agent ends with it. Article 1931 softens what would otherwise be a trap for outsiders: 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. Notice that it covers more than death. Any other cause which extinguishes the agency brings in an authority that lapsed, or that was revoked without anyone telling the agent.
A rule that allocates a loss between innocent people
It helps to see what this provision actually does. The heirs did nothing wrong. The buyer or lender on the other side did nothing wrong either. Yet someone must carry the consequences of an act nobody realised was no longer authorised. The Code places it on the side of the estate, because an outsider had no way of knowing that a person he never met had died, while the family is closest to the event and best placed to recall the agent. Read as a judgment on anybody's behaviour, the article makes no sense; read as an allocation of risk, it is straightforward.
Two conditions, and both must hold
The protection is not automatic. First, the agent must have acted without knowledge of the death. An agent who knew and carried on regardless falls outside the article, and the heirs may look to him personally for what his conduct cost them. Second, the outsider must have contracted with him in good faith — genuinely unaware of the death or of whatever else ended the authority. A person who knew the principal had died, or who had been told the authority was withdrawn, cannot rely on this rule. Good faith is a question of fact, judged on what that person knew at the time.
What families and counterparties should do
After a death, find out at once whether anyone held a written authority; tell that person in writing that it has ended; and where the authority was lodged with a bank, registry or company, notify the institution too. Every day of silence widens the window this article protects. Anyone about to transact through an attorney-in-fact should ask to see the original authority, confirm it is still current, and keep a record of what he was told. Where an act done after a death is already disputed, the estate's position belongs in the settlement proceedings, and advice should be taken early.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Marcelino E. Lopez, et al. vs. The Hon. Court Appeals and Primex Corporation/Marcelino E. Lopez, et al. vs. The Honorable Court of Appeals and Primex Corporation, G.R. No. 163959 / G.R. No. 177855, August 1, 2018 — read the decision on LawPhil →