G.R. No.

95909 August 16, 1991

the amount of P23,900,000.00. Said bid was

thus rejected by DBP.

UNILAND RESOURCES, petitioner,

vs.
DEVELOPMENT BANK OF THE PHILIPPINES,* respondent.
Romeo G. Roxas for petitioner.
GANCAYCO, J.:p
In the law on agency, it is elementary that when the main
transaction between the principal parties does not
materialize, the claim for commission of the duly authorized
broker is disallowed. 1 How about the instance when the
sale was eventually consummated between parties
introduced by a middleman who, in the first place, had
no authority, express or implied, from the seller to
broker the transaction? Should the interloper be
allowed a commission? On these simplified terms rests
the nature of the controversy on which this case turns.
As stated by the respondent Court of Appeals,
circumstances of this case are as follows:

the ambient

(1) [Petitioner] Uniland Resources is a private

corporation engaged in real estate brokerage and
licensed as such (p. 2, Rec.), while [respondent] DBP,
as we all know [sic], is a government corporation
engaged in finance and banking in a proprietary
capacity.
(2) Long before this case arose, Marinduque Mining
Corporation obtained a loan from the DBP and as
security therefor, mortgaged certain real properties
to the latter, among them two lots located in Makati,
M.M., described as follows:
(a) Corner lot, covered by TCT No. 114138, located at
Pasong Tamo, Makati with an area of 3,330 sq. mts.
on which is constructed a [four]-story concrete
building, etc., which, for brevity, shall be called the
office building lot; and
(b) Lot covered by TCT No. 16279 with 12,355 sq.
mts located at Pasong Tamo, Makati, on which is
constructed a concrete/steel warehouse, etc., which,
for brevity, shall be called the warehouse lot.
The aforesaid lots had, however, been
previously mortgaged by Marinduque Mining
Corp., to Caltex, and the mortgage in favor
of DBP was entered on their titles as a
second mortgage (Pre-Trial Order, p. 37,
Rec.).
The account of the Marinduque Mining
Corp., with the DBP was later transferred to
the Assets Privatization Trust (APT) pursuant
to Proclamation No. 50.
(3) For failure of the Marinduque
Mining Corp. to pay its obligations to
Caltex,
the
latter
foreclosed
its
mortgage on the aforesaid two lots (pp.
37-38, Rec.). APT on the other hand, to
recover its investment on the Marinduque
Account, offered for sale to the public
through DBP its right of redemption on said
two lots by public bidding (Exhs. "1" and
"2").
(4) Considering, however, that Caltex had
required that both lots be redeemed, the
bidding guidelines set by DBP provided that
any bid to purchase either of the two lots
would be considered only should there be
two bids or a bid for the two items which,
when combined, would fully cover the sale
of the two lots in question (Exh. "1").
(5) The aforesaid bidding was held on May
5, 1987 with only one bidder, the Counsel
Realty Corp. [an affiliate of Glaxo,
Philippines, the client of petitioner], which
offered a bid only for the warehouse lot in

(6) Seeing, however, that it would make a profit if

it redeemed the two lots and then offer them for
sale, and as its right to redeem said lots from
Caltex would expire on May 8, 1987, DBP retrieved
the account from APT and, on the last day for the
exercise of its right of redemption, May 8, 1987,
redeemed said lots from Caltex for P33,096,321.62
(Exh. "5"), thus acquiring them as its physical
assets.
(7) In preparation for the sale of the two lots in
question, DBP called a pre-bidding conference
wherein a new set of bidding guidelines were
formulated (Exh. "3"). Then, on July 30,1987, the
public bidding for the sale of the two lots was held
and again, there was only one bidder, the Charges
Realty
Corp.
[another
affiliate
of
Glaxo,
Philippines], for only the warehouse lot and for the
amount of P24,070,000.00, which is slightly higher
than the amount previously offered by Counsel
Realty Corp., therefor at the May 5, 1987 bidding
(see Exh. "5," p. 1 00, Rec.). No bid was submitted
for the office building lot (id.).
(8) Notwithstanding that there was no bidder for
the office building lot, the DBP approved the
sale of the warehouse lot to Charges Realty
Corp., and on November 23, 1987, the proper
documentation of the sale was made (Exh.
"D"). As for the office building lot, it was later sold
by DBP in a negotiated sale to the Bank of P.I. as
trustee for the "Perpetual Care Fund of the Manila
Memorial Park" for P17,460,000.00, and proper
documentation of the sale was made on November
17, 1987 (Exh. "E" and submarkings). The DBP
admittedly paid the (five percent) broker's
fee on this sale to the DBP Management
Corporation, which acted as broker for said
negotiated sale (p. 15, Appellant DBP's brief).
(9) After the aforesaid sale, [petitioner], through its
President, wrote two letters to [respondent DBP],
the first through its Senior Vice President (Exh.
"C"), and, the second through its Vice Chairman
(Exh. "4" [sic], asking for the payment of its
broker's fee in instrumenting the sale of its
(DBP's) warehouse lot to Charges Realty
Corp. The claim was referred to the Bidding
Committee chaired by Amanda S. Guiam
which met on November 9, 1987, and which,
on November 18, 1987, issued a decision
denying [petitioner's] claim (Exh. "5"). Hence,
the instant case filed by [petitioner] to recover
from [respondent] DBP the aforesaid broker's fee.
After trial, the lower court, on October 25, 1988,
rendered judgment
ORDERING [respondent DBP] to pay [petitioner]
the sum of P1,203,500,00 which is the equivalent
of [five percent] broker's fee plus legal interest
thereto (sic) from the filing of the complaint on
February 18, 1988 until fully paid and the sum of
P50,000.00 as and for attorney's fees. Costs
against [respondent DBP]. (p. 122, Rec.). 3
On appeal, the Court of Appeals reversed the judgment of the
lower court 4 and dismissed the complaint. The motion for
reconsideration filed by petitioner was also subsequently
denied. 5
Petitioner is now before this Court alleging that the petition
"RAISES A QUESTION OF LAW IN THE SENSE THAT THE
RESPONDENT COURT OF APPEALS BASED ITS DECISION ONLY
ON THE CONTROVERSIAL FACTS FAVORABLE TO THE PRIVATE
RESPONDENT DBP, 6 primarily making capital of the disparity
between the factual conclusions of the trial court and of the
appellate court. Petitioner asserts that the respondent Court
of Appeals disregarded evidence in its favor consisting of its
letters to respondent DBP's higher officers sent prior to the
bidding and sale, wherein petitioner requested accreditation
as a broker and, in the process of informing that it had offered
the DBP properties for sale, also volunteered the name of its
client, Glaxo, Philippines, as an interested prospective buyer. 7

The rule is that in petitions for certiorari as a mode of appeal,

only questions of law distinctly set forth may be raised. 8 Such
questions have been defined as those that do not call for any
examination of the probative value of the evidence presented
by the parties. 9 Petitioner's singular assignment of error
would, however, have this Court go over the facts of this case
because it necessarily involves the examination of the
evidence and its subsequent reevaluation. Under the present
proceeding, the same, therefore, cannot be done.
It bears emphasizing that mere disagreement between the
Court of Appeals and the trial court as to the facts of a case
does not of itself warrant this Court's review of the same. It
has been held that the doctrine that the findings of fact made
by the Court of Appeals, being conclusive in nature, are
binding on this Court, applies even if the Court of Appeals was
in disagreement with the lower court as to the weight of
evidence with a consequent reversal of its findings of fact, so
long as the findings of the Court of Appeals are borne out by
the record or based on substantial evidence. 10 while the
foregoing doctrine is not absolute, petitioner has not
sufficiently proved that his case falls under the known
exceptions. 11
Be that as it may, the Court has perused the assailed decision
of the Court of Appeals and still finds the primary assertion of
petitioner to be unfounded. The Court of Appeals has
addressed all the factual contentions of petitioner and chose
not to give credence to petitioner's version. Moreover, the
findings of the Court of Appeals are consistent with, and
sufficiently supported by, the records of this case.
It is obvious that petitioner was never able to secure the
required accreditation from respondent DBP to transact
business on behalf of the latter. The letters sent by
petitioner to the higher officers of the DBP and the APT
are merely indicative of petitioner's desire to secure
such accreditation. At best these missives are self-serving;
the most that they prove is that they were sent by petitioner
and received by respondent DBP, which clearly never agreed
to be bound thereto. As declared by the trial court even when
it found in favor of petitioner, there was no express reply from
the DBP or the APT as to the accreditation sought by
petitioner. 12 From the very beginning, therefore, petitioner
was aware that it had no express authority from DBP to find
buyers of its properties.
In its reply submitted pursuant to the resolution requiring the
same 13 petitioner also invokes Article 1869 of the new Civil
Code 14 in contending that an implied agency existed.
Petitioner argues that it "should have been stopped,
disauthorized and outrightly prevented from dealing the
12,355 sq. m (with warehouse) [sic] by the DBP from the
inception."15 On the contrary, these steps were never
necessary. In the course of petitioner's dealings with the DBP,
it was always made clear to petitioner that only accredited
brokers may look for buyers on behalf of respondent DBP. This
is not a situation wherein a third party was prejudiced by the
refusal of respondent DBP to recognize petitioner as its broker.
The controversy is only between the DBP and
petitioner, to whom it was emphasized in no uncertain
terms that the arrangement sought did not exist.
Article 1869, therefore, has no room for operation in
this case.
Petitioner would also disparage the formality of accreditation
as merely a mechanical act, which requires not much
discretion, as long as a person or entity looks for a buyer
[and] initiate or promote [sic] the interests of the
seller. 16Being engaged in business, petitioner should do
better to adopt the opposite attitude and appreciate that
formalities, such as the need for accreditation, result from the
evolution of sound business practices for the protection and
benefit of all parties concerned. They are designed and
adopted specifically to prevent the occurrence of situations
similar to that obtaining in this case.
More importantly, petitioner's stance goes against the
basic axiom in Civil Law that no one may contract in
the name of another without being authorized by the
latter, unless the former has by law a right to
represent him. 17 From this principle, among others,
springs the relationship of agency which, as with other
contracts, is one founded on mutual consent: the
principal agrees to be bound by the acts of the agent
and the latter in turn consents to render service on
behalf or in representation of the principal. 18

Petitioner, however, also invokes equity considerations, and in

equity, the Court recognizes the efforts of petitioner in
bringing together respondent DBP and an interested and
financially-able buyer. While not actively involved in the
actual bidding and transfer of ownership of the
warehouse property, petitioner may be said to have
initiated,
albeit
without
proper
authority,
the
transaction that eventually took place. The Court is also
aware that respondent DBP was able to realize a substantial
profit from the sale of its two properties. While purely
circumstantial, there is sufficient reason to believe that the
DBP became more confident to venture and redeem the
properties from the APT due to the presence of a ready and
willing buyer, as communicated and assured by petitioner.
In Prats v. Court of Appeals, 19 there was a finding that the
petitioner therein as the agent was no longer the
efficient procuring cause in bringing about the sale
proceeding from the fact of expiration of his exclusive
authority. There was therefore no basis in law to grant the
relief sought. Nevertheless, this Court in equity granted the
sum of P100,000.00, out of the P1,380,000.00 claimed as
commission, by way of compensation for the efforts and
assistance rendered by the agent in the transaction prior to
the expiration of his authority. These consist in offering the lot
for sale to the eventual buyer, sending follow-up letters,
inviting the buyer to dinner and luncheon meetings, etc.
Parallel circumstances obtain in the case at bar. It was
petitioner who advised Glaxo, Philippines of the availability of
the warehouse property and aroused its interest over the
same. Through petitioner, respondent DBP was directly
informed of the existence of an interested buyer. Petitioner's
persistence in communicating with respondent DBP reinforced
the seriousness of the offer. This piece of information no doubt
had a bearing on the subsequent decisions made by
respondent DBP as regards the disposition of its properties.
Petitioner claims the amount of P1,203,500.00 awarded by the
trial court as commission computed at five percent of the sale
price of the warehouse property. Under the foregoing
disquisition and following the precedent, as well as roughly
the proportion, set in Prats, the Court in equity grants
petitioner the sum of One Hundred Thousand Pesos
(Pl00,000.00) for the role it played in the transaction between
respondent DBP and buyer Glaxo, Philippines. It is
emphasized, however, that the circumstances that
came into play in this case do not meet the minimum
legal standards required for the existence of an agency
relationship and that the award is based purely on
equity considerations. Accordingly, petitioner's other
arguments need not now be discussed.
WHEREFORE, the decision appealed from is hereby AFFIRMED,
with the MODIFICATION that in equity respondent DBP is
ordered to pay petitioner the amount of One Hundred
Thousand Pesos (P100,000.00). No pronouncement as to
costs.
SO ORDERED.
Narvasa (Chairman), Cruz, Grio-Aquino and Medialdea, JJ.,
concur.

Avenue with
meters.
G.R. No. 138639

an area of 9,192 square

February 10, 2000

CITY-LITE REALTY CORPORATION, petitioner,

vs.
COURT OF APPEALS and F.P. HOLDINGS & REALTY
CORP., METRO DRUG INC., MELDIN AL G. ROY,
VIEWMASTER CONSTRUCTION CORP., and the REGISTER
OF DEEDS OF QUEZON CITY, respondent.
BELLOSILLO, J.:
This is a petition for review on certiorari filed by CITY-LITE
REALTY CORPORATION (CITY-LITE) seeking to annul the 20
October 1998 Decision of the Court of Appeals 1 which
reversed the Decision of the Regional Trial Court of Quezon
City in its Civil Case No. Q-92-11068 declaring that a contract
of sale over the subject property was perfected and that Metro
Drug Inc. and Meldin Al G. Roy had the authority to sell the
property.2
Private respondent F. P. HOLDINGS AND REALTY CORPORATION
(F.P. HOLDINGS), formerly the Sparta Holdings (Inc., was the
registered owner of a parcel of land situated along E.
Rodriguez Avenue, Quezon City, also known as the "Violago
Property" or the "San Lorenzo Ruiz Commercial Center," with
an area of 71,754 square meters, more or less, and covered
by Transfer Certificate of Title No. T-19599. The property was
offered for sale to the general public through the circulation of
a sales brochure containing the following information:
A parcel of land including buildings and other
improvements thereon located along E. Rodriguez
Avenue, Quezon City, with a total lot area of 71,754
square meters 9,192 square meters in front,
23,332 square meters in the middle, and 39,230
square meters at the back. But the total area for sale
excludes 5,000 square meters covering the existing
chapel and adjoining areas which be donated to the
Archdiocese of Manila thus reducing the total
saleable area to 66,754 square meters. Asking price
was P6,250.00/square meter with terms of payment
negotiable. Broker's commission was 2.0% of selling
price, net of withholding taxes and other charges. As
advertised, contact person was Meldin Al G. Roy,
Metro Drug Inc., with address at 5/F Metro House,
345 Sen. Gil Puyat Avenue, Makati City.
The front portion consisting of 9,192 square meters is the
subject of this litigation.
On 22 August 1991 respondent Meldin Al G. Roy sent a
sales brochure, together with the location plan and
copy of the Transfer Certificate of Title No. T-19599 of
the Register of Deeds of Quezon City, to Atty. Gelacio
Mamaril, a practicing lawyer and a licensed real estate
broker. Atty. Mamaril in turn passed on these
documents to Antonio Teng, Executive Vice-President,
and Atty. Victor P. Villanueva, Legal Counsel, of CITYLITE.
In a letter dated 19 September 1991 sent to Metro Drug
(ATTN: MELDIN AL ROY) after an initial meeting with Meldin Al
Roy that day, CITY-LITE conveyed its interest to purchase a
portion or one-half (1/2) of the front lot of the "Violago
Property. Apparently, Roy subsequently informed CITYLITE's representative that it would take time to
subdivide the lot and respondent F.P. HOLDINGS was
not receptive to the purchase of only half of the front
lot. After a few days, Atty. Mamaril wrote Metro Drug (ATTN:
MELDIN AL ROY) expressing CITY-LITE's desire to buy the
entire front lot of the subject property instead of only half
thereof provided the asking price of P6,250.00/square meter
was reduced and that payment be in installment for a certain
period. Roy made a counter offer dated 25 September 1991
as follows:
Dear Atty. Mamaril,
This has reference to your letter dated
September 24, 1991 in connection with the
interest of your clients, Mr. Antonio
Teng/City-Lite Realty Corporation and/or any
of their subsidiaries to buy a portion of the
Violago Property fronting E. Rodriguez Sr.

We are pleased to inform you that we are

prepared to consider the above offer subject
to the following major terms and conditions:
1. The price shall be P6,250.00/square
meter or a total of P57,450,000.00; 2. The
above purchase price shall be paid to the
owner as follows: (a) P15.0 Million
downpayment; (b) balance payable within
six (6) months from date of downpayment
without interest. Should your client find the
above
major
terms
and
conditions
acceptable, please advise us in writing by
tomorrow, September 26, 1991, so that we
can start formal discussions on the
matter . . . .
Very truly yours,
MELDIN AL G. ROY

On 26 September 1991 CITY-LITE's officers and Atty. Mamaril

met with Roy at the Manila Mandarin Hotel in Makati to
consummate the transaction. After some discussions, the
parties finally reached an agreement and Roy agreed to sell
the property to CITY-LITE provided only that the latter submit
its acceptance in writing to the terms and conditions of the
sale as contained in his letter of 25 September 1991. Later
that afternoon after meeting with Roy at the Manila Mandarin
Hotel, Atty. Mamaril and Antonio Teng of CITY-LITE conveyed
their formal acceptance of the terms and conditions set forth
by Roy in separate letters both dated 26 September 1991.
However, for some reason or another and despite demand,
respondent F.P. HOLDINGS refused to execute the
corresponding deed of sale in favor of CITY-LITE of the
front lot of the property. Upon its claim of protecting its
interest as vendee of the property in suit, CITY-LITE registered
an adverse claim to the title of the property with the Register
of Deeds of Quezon City which was annotated in the
Memorandum of Encumbrance of Transfer Certificate of Title
No. T-19599 under Entry No. PE-1001 dated 27 September
1991.
On 30 September 1991 CITY-LITE's counsel demanded in
writing that Metro Drug (ATTN: MELDIN AL G. ROY) comply
with its commitment to CITY-LITE by executing the proper
deed of conveyance of the property under pain of court
action. On 4 October 1991 F.P. HOLDINGS filed a petition for
the cancellation of the adverse claim against CITY-LITE with
the Regional Trial Court of Quezon City, docketed as LRC Case
No. 91-10257, which was raffled to Br. 84.
On 8 October 1991 Edwin Fernandez, President of F.P.
HOLDINGS, in a move to amicably settle with CITY-LITE, met
with the latter's officers during which he offered properties
located in Caloocan City and in Quezon Boulevard, Quezon
City, as substitute for the property, but CITY-LITE refused the
offer because "it did not suit its business needs." With the
filing of the petition of F.P. HOLDINGS for the cancellation of
the adverse claim, CITY-LITE caused the annotation of the first
notice of lis pendens which was recorded in the title of the
property under Entry No. 4605.
On 2 December 1991 the RTC-Br. 84 of Quezon City dismissed
F.P. HOLDINGS' petition declaring that CITY-LITE's adverse
claim had factual basis and was not "sham and frivolous."
Meanwhile, F.P. HOLDINGS caused the resurvey and
segregation of the property and asked the Register of Deeds
of Quezon City to issue separate titles which the latter did on
17 January 1992 by issuing Transfer Certificate of Title No. T51671.
Following the dismissal of F.P. HOLDINGS' petition for the
cancellation of the adverse claim, CITY-LITE instituted a
complaint against F.P. HOLDINGS originally for specific
performance and damages and caused the annotation of the
second notice of lis pendens on the new certificate of title.
After the annotation of the second lis pendens, the property
was transfered to defendant VIEWMASTER CONSTRUCTION
CORP. (VIEWMASTER) for which Transfer Certificate of Title No.
T-52398 was issued. However the notice of lis pendens was
carried over and annotated on the new certificate of title.

In view of the conveyance during the pendency of the suit, the

original complaint for specific performance and damages was
amended with leave of court to implead VIEWMASTER as a
necessary party and the Register of Deeds of Quezon City as
nominal defendant with the additional prayer for the
cancellation of VIEWMASTER's certificate of title. The case was
thereafter raffled to Br. 85 of the Regional Trial Court of
Quezon City.
On 4 October 1995 the court a quo rendered its decision in
favor of CITY-LITE ordering F.P. HOLDINGS to execute a deed of
sale of the property in favor of CITY-LITE for the total
consideration of P55,056,250.00 payable as follows: P15
Million as downpayment to be payable immediately upon
execution of the deed of sale and the balance within six (6)
months from downpayment, without interest. The court also
directed the Register of Deeds of of Quezon City to cancel
Transfer Certificate of Title No. T-52398 or any subsequent
title it had issued affecting the subject property, and to issue
a new one in the name of CITY-LITE upon the presentation of
the deed of sale and other requirements for the transfer. It
likewise ordered the defendants, except VIEWMASTER and the
Register of Deeds of Quezon City, to pay CITY-LITE jointly and
severally P800,000.00 by way of nominal damage,
P250,000.00 for attorney's fees, and to pay the costs.
On 30 October 1995 VIEWMASTER filed a motion for
reconsideration of the decision of the lower court questioning
its ruling that a perfected contract of sale existed between
CITY-LITE and F.P. HOLDINGS as there was no definite
agreement over the manner of payment of the purchase
price, citing in support thereof Toyota Shaw Inc. v. Court of
Appeals.3 However the motion for reconsideration was denied.
In the challenged Decision of 20 October 1998 the Court of
Appeals reversed and set aside the judgment of the Regional
Trial Court of Quezon City. On 10 May 1999 the Court of
Appeals denied CITY-LITE's motion to reconsider its decision.
Petitioner CITY-LITE is now before us assailing the Court of
Appeals for declaring that no contract of sale was perfected
between it and respondent F.P. HOLDINGS because of lack of a
definite agreement on the manner of paying the purchase
price and that respondents Metro Drug and Meldin Al G.
Roy were not authorized to sell the property to CITYLITE, and that the authority of Roy was only limited to
that of a mere liaison or contact person.
We cannot sustain petitioner. On the issue of whether a
contract of sale was perfected between petitioner CITY-LITE
and respondent F.P. HOLDINGS acting through its agent Meldin
Al G. Roy of Metro Drug, Art. 1874 of the Civil Code provides:
"When the sale of a piece of land or any interest
therein is through an agent, the authority of the latter
shall be in writing; otherwise, the sale shall be void."
Petitioner anchors the authority of Metro Drug and
Meldin Al G. Roy on (a) the testimonies of petitioner's
three (3) witnesses and the admissions of Roy and the
lawyer of Metro Drug; (b) the sales brochure specifying
Meldin Al G. Roy as a contact person; (c) the guard
posted at the property saying that Metro Drug was the
authorized agent; and, (d) the common knowledge
among brokers that Metro Drug through Meldin Al G.
Roy was the authorized agent of F.P. HOLDINGS to sell
the property.
However, and more importantly, the Civil Code requires that
an authority to sell a piece of land shall be in writing. The
absence of authority to sell can be determined from the
written memorandum issued by respondent F.P. HOLDINGS'
President requesting Metro Drug's assistance in finding buyers
for the property. The memorandum in part stated: "We will
appreciate Metro Drug's assistance in referring to us buyers
for the property. Please proceed to hold preliminary
negotiations with interested buyers and endorse formal offers
to us for our final evaluation and appraisal." This obviously
meant that Meldin Al G. Roy and/or Metro Drug was only to
assist F.P. HOLDINGS in looking for buyers and referring to
them possible prospects whom they were supposed to
endorse to F.P. HOLDINGS.
But the final evaluation, appraisal and acceptance of
the transaction could be made only by F.P. HOLDINGS.
In other words, Meldin Al G. Roy and/or Metro Drug
was only a contact person with no authority to
conclude a sale of the property. In fact, a witness for
petitioner even admitted that Roy and/or Metro Drug was a
mere broker,4 and Roy's only job was to bring the parties

together for a possible transaction. 5 Consequently, we hold

that for lack of a written authority to sell the "Violago
Property" on the part of Meldin Al G. Roy and/or Metro Drug,
the sale should be as it is declared null and void. Therefore
the sale could not produce any legal effect as to transfer the
subject property from its lawful owner, F.P. HOLDINGS, to any
interested party including petitioner CITY-LITE.
WHEREFORE, the appealed Decision of the Court of Appeals
being in accord with law and the evidence is AFFIRMED. Costs
against
petitioner
CITY-LITE
REALTY
CORPORATION.1wphi1.nt
SO ORDERED.
Mendoza, Quisumbing, Buena and De Leon, Jr., JJ., concur.

FIRST DIVISION
[G. R. No. 129919. February 6, 2002]
DOMINION INSURANCE CORPORATION, petitioner,
vs. COURT OF APPEALS, RODOLFO S.
GUEVARRA, and FERNANDO
AUSTRIA, respondents.

been repeatedly postponed on motion of the defendant

Corporation, the defendant Dominion Insurance Corporation is
hereby declared (as) in default and plaintiff is allowed to
present his evidence on June 16, 1992 at 9:00 oclock in the
morning.
The plaintiff and his counsel are notified of this order in open
court.

DECISION

SO ORDERED.

PARDO, J.:

Plaintiff presented his evidence on June 16, 1992. This was

followed by a written offer of documentary exhibits on July 8
and a supplemental offer of additional exhibits on July 13,
1992. The exhibits were admitted in evidence in an order
dated July 17, 1992.

The Case

This is an appeal via certiorari[1] from the decision of the

Court of Appeals[2] affirming the decision[3] of the Regional Trial
Court, Branch 44, San Fernando, Pampanga, which ordered
petitioner Dominion Insurance Corporation (Dominion)
to pay Rodolfo S. Guevarra (Guevarra) the sum of
P156,473.90 representing the total amount advanced
by Guevarra in the payment of the claims of
Dominions clients.

The Facts

The facts, as found by the Court of Appeals, are as

follows:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted
Civil Case No. 8855 for sum of money against defendant
Dominion Insurance Corporation. Plaintiff sought to
recover thereunder the sum of P156,473.90 which he claimed
to have advanced in his capacity as manager of defendant to
satisfy certain claims filed by defendants clients.
In its traverse, defendant denied any liability to plaintiff and
asserted a counterclaim for P249,672.53, representing
premiums that plaintiff allegedly failed to remit.
On August 8, 1991, defendant filed a third-party complaint
against Fernando Austria, who, at the time relevant to the
case, was its Regional Manager for Central Luzon area.
In due time, third-party defendant Austria filed his answer.
Thereafter the pre-trial conference was set on the following
dates: October 18, 1991, November 12, 1991, March 29,
1991, December 12, 1991, January 17, 1992, January 29,
1992, February 28, 1992, March 17, 1992 and April 6, 1992, in
all of which dates no pre-trial conference was held. The record
shows that except for the settings on October 18,
1991, January 17, 1992 and March 17, 1992 which were
cancelled at the instance of defendant, third-party defendant
and plaintiff, respectively, the rest were postponed upon joint
request of the parties.

On August 7, 1992 defendant corporation filed a MOTION TO

LIFT ORDER OF DEFAULT. It alleged therein that the failure of
counsel to attend the pre-trial conference was due to an
unavoidable circumstance and that counsel had sent his
representative on that date to inform the trial court of his
inability to appear. The Motion was vehemently opposed by
plaintiff.
On August 25, 1992 the trial court denied defendants
motion for reasons, among others, that it was neither verified
nor supported by an affidavit of merit and that it further failed
to allege or specify the facts constituting his meritorious
defense.
On September
28,
1992 defendant
moved
for
reconsideration of the aforesaid order. For the first time
counsel revealed to the trial court that the reason for his
nonappearance at the pre-trial conference was his illness. An
Affidavit of Merit executed by its Executive Vice-President
purporting to explain its meritorious defense was attached to
the said Motion. Just the same, in an Order dated November
13, 1992, the trial court denied said Motion.
On November 18, 1992, the court a quo rendered judgment
as follows:
WHEREFORE, premises considered, judgment is hereby
rendered ordering:
1. The defendant Dominion Insurance Corporation to pay
plaintiff the sum of P156,473.90 representing the total
amount advanced by plaintiff in the payment of the claims of
defendants clients;
2. The defendant to pay plaintiff P10,000.00 as and by way
of attorneys fees;
3. The dismissal of the counter-claim of the defendant and
the third-party complaint;
4. The defendant to pay the costs of suit. [4]
On December 14, 1992, Dominion appealed the decision
to the Court of Appeals.[5]

On May 22, 1992 the case was again called for pre-trial
conference. Only plaintiff and counsel were present. Despite
due notice, defendant and counsel did not appear, although a
messenger, Roy Gamboa, submitted to the trial court a
handwritten note sent to him by defendants counsel which
instructed him to request for postponement. Plaintiffs counsel
objected to the desired postponement and moved to have
defendant declared as in default. This was granted by the trial
court in the following order:

On July 19, 1996, the Court of Appeals promulgated a

decision affirming that of the trial court. [6] On September 3,
1996, Dominion filed with the Court of Appeals a motion for
reconsideration.[7] On July 16, 1997, the Court of Appeals
denied the motion.[8]

ORDER

The Issues

When this case was called for pre-trial this afternoon only
plaintiff and his counsel Atty. Romeo Maglalang appeared.
When shown a note dated May 21, 1992 addressed to a
certain Roy who was requested to ask for postponement,
Atty.Maglalang vigorously objected to any postponement on
the ground that the note is but a mere scrap of paper and
moved that the defendant corporation be declared as in
default for its failure to appear in court despite due notice.
Finding the verbal motion of plaintiffs counsel to be
meritorious and considering that the pre-trial conference has

Hence, this appeal.[9]

The
issues
raised
are:
(1)
whether
respondent Guevarra acted within his authority as
agent
for
petitioner,
and
(2)
whether
respondent Guevarra is entitled to reimbursement of
amounts he paid out of his personal money in settling
the claims of several insured.

The Court's Ruling

The petition is without merit.

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.[10] The basis for agency is representation.[11] On
the part of the principal, there must be an actual intention to
appoint[12] or an intention naturally inferrable from his words or
actions;[13] and on the part of the agent, there must be an
intention to accept the appointment and act on it, [14] and in
the absence of such intent, there is generally no agency. [15]
A perusal of the Special Power of Attorney [16] would show
that petitioner (represented by third-party defendant Austria)
and respondent Guevarra intended to enter into a principalagent relationship. Despite the word special in the title
of the document, the contents reveal that what was
constituted was actually a general agency. The terms of
the agreement read:
That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC.,
[17]
a corporation duly organized and existing under and by
virtue of the laws of the Republic of the Philippines, xxx
represented by the undersigned as Regional Manager, xxx
do hereby
appoint
RSG Guevarra Insurance
Services
represented by Mr. Rodolfo Guevarra xxx to be our Agency
Manager in San Fdo., for our place and stead, to do and
perform the following acts and things:
1. To conduct, sign, manager (sic), carry on and
transact Bonding and Insurance business as
usually pertain to a Agency Office, or FIRE,
MARINE, MOTOR CAR, PERSONAL ACCIDENT,
and BONDING with the right, upon our prior
written consent, to appoint agents and subagents.
2. To accept, underwrite and subscribed (sic)
cover notes or Policies of Insurance and Bonds
for and on our behalf.
3. To demand, sue, for (sic) collect, deposit,
enforce payment, deliver and transfer for and
receive and give effectual receipts and
discharge for all money to which the FIRST
CONTINENTAL ASSURANCE COMPANY, INC.,
[18]
may hereafter become due, owing payable
or transferable to said Corporation by reason of
or in connection with the above-mentioned
appointment.
4. To receive notices, summons, and legal
processes for and in behalf of the FIRST
CONTINENTAL ASSURANCE COMPANY, INC., in
connection
with
actions
and
all
legal
proceedings
against
the
said
Corporation.[19] [Emphasis supplied]
The agency comprises all the business of the principal,
but, couched in general terms, it is limited only to acts of
administration.[21]

scope of respondent Guevarras duties and responsibilities as

agency manager for San Fernando, Pampanga, as follows:
xxx xxx xxx
1. You are hereby given authority to settle and dispose of all
motor car claims in the amount of P5,000.00 with prior
approval of the Regional Office.
2. Full authority is given you on TPPI claims settlement.
xxx xxx xxx[24]
In
settling
the
claims
mentioned
above,
respondent Guevarras authority is further limited by the
written standard authority to pay,[25] which states that the
payment shall come from respondent Guevarras revolving
fund or collection. The authority to pay is worded as follows:
This is to authorize you to withdraw from your revolving
fund/collection the amount of PESOS __________________ (P )
representing the payment on the _________________ claim of
assured _______________ under Policy No. ______ in that
accident of ___________ at ____________.
It is further expected, release papers will be signed and
authorized by the concerned and attached to the
corresponding claim folder after effecting payment of the
claim.
(sgd.) FERNANDO C. AUSTRIA
Regional Manager[26]
[Emphasis supplied]
The instruction of petitioner as the principal could not be
any clearer. Respondent Guevarra was authorized to pay
the claim of the insured, but the payment shall come
from the revolving fund or collection in his possession.
Having deviated from the instructions of the principal,
the expenses that respondent Guevarra incurred in the
settlement of the claims of the insured may not be
reimbursed from petitioner Dominion. This conclusion is in
accord with Article 1918, Civil Code, which states that:
The principal is not liable for the expenses incurred by the
agent in the following cases:
(1) If the agent acted in contravention of the principals
instructions, unless the latter should wish to avail himself of
the benefits derived from the contract;

[20]

A general power permits the agent to do all acts

for which the law does not require a special power.
[22]
Thus, the acts enumerated in or similar to those
enumerated in the Special Power of Attorney do not require a
special power of attorney.
Article 1878, Civil Code, enumerates the instances when
a special power of attorney is required. The pertinent portion
that applies to this case provides that:
Article 1878. Special powers of attorney are necessary in the
following cases:
(1) To make such payments as are not usually
considered as acts of administration;
xxx xxx xxx
(15) Any other act of strict dominion.
The payment of claims is not an act of administration.
The settlement of claims is not included among the acts
enumerated in the Special Power of Attorney, neither is it of a
character similar to the acts enumerated therein. A special
power
of
attorney
is
required
before
respondent Guevarra could settle the insurance claims of the
insured.
Respondent Guevarras authority to settle claims is
embodied
in
the
Memorandum
of
Management
Agreement[23] dated February 18, 1987 which enumerates the

xxx xxx xxx

However, while the law on agency prohibits
respondent Guevarra from obtaining reimbursement, his right
to recover may still be justified under the general law on
obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
Whoever pays for another may demand from the debtor what
he has paid, except that if he paid without the knowledge or
against the will of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor.
In this case, when the risk insured against occurred,
petitioners liability as insurer arose. This obligation was
extinguished when respondent Guevarra paid the claims and
obtained Release of Claim Loss and Subrogation Receipts from
the insured who were paid.
Thus, to the extent that the obligation of the petitioner
has been extinguished, respondent Guevarra may demand for
reimbursement from his principal. To rule otherwise would
result in unjust enrichment of petitioner.
The extent to which petitioner was benefited by the
settlement of the insurance claims could best be proven by
the Release of Claim Loss and Subrogation Receipts [27] which
were attached to the original complaint as Annexes C-2, D-1,
E-1, F-1, G-1, H-1, I-1 and J-l, in the total amount of
P116,276.95.

However, the amount of the revolving fund/collection

that was then in the possession of respondent Guevarra as
reflected in the statement of account dated July 11,
1990 would be deducted from the above amount.
The outstanding balance and the production/remittance
for the period corresponding to the claims was P3,604.84.
Deducting this from P116,276.95, we get P112,672.11. This is
the amount that may be reimbursed to respondent Guevarra.

The Fallo

IN VIEW WHEREOF, we DENY the Petition. However, we

MODIFY the decision of the Court of Appeals [28] and that of the
Regional Trial Court, Branch 44, San Fernando, Pampanga,
[29]
in
that
petitioner
is
ordered
to
pay
respondent Guevarra the amount of P112,672.11 representing
the total amount advanced by the latter in the payment of the
claims of petitioners clients.
No costs in this instance.
SO ORDERED.
Davide,
Jr.,
Santiago, JJ., concur

(Chairman), Puno, Kapunan, and Ynares-

SECOND DIVISION

b. The balance of FOUR MILLION THREE HUNDRED THOUSAND

PESOS (P4,300,000.00) shall be paid by defendant ANACLETO
as follows:

[G.R. No. 131411. August 29, 2000]

Second payment - ONE MILLION THREE HUNDRED THOUSAND

PESOS (P11,300,000.00) within sixty (60) days after the date
of the first payment.
Third payment - ONE MILLION PESOS (P1,000,000.00) within
forty-five (45) days after the date of the second payment.

GLORIA A. ANACLETO, petitioner, vs. ALEXANDER VAN

TWEST and/or EUROCEANIC RAINBOW
ENTERPRISES PHILIPPINES, INC., respondents.

Fourth payment - ONE MILLION PESOS (P1,000,000.00) within

forty-five (45) days after the date of the third payment.

DECISION

Fifth payment - ONE MILLION PESOS (P1,000,000.00) within

forty-five (45) days after the date of the fourth payment.

MENDOZA, J.:
This is a petition for review on certiorari of the decision
of the Court of Appeals, dated June 20, 1997. The facts are
not disputed. They are as follows:
On February 6, 1995, a complaint for reconveyance of
title was filed in the name of Alexander Van Twest and
Euroceanic Rainbow Enterprises Philippines, Inc. (Euroceanic)
against petitioner Gloria A. Anacleto and Isaias M.
Bongar. The complaint filed by Atty. Ernesto V. Perez stated
that Alexander Van Twest has been reported missing since
June 16, 1992 but is duly represented herein by undersigned
counsel as his agent and/or general counsel.
On March 31, 1995, Atty. Perez, in representation of Van
Twest, entered into a compromise agreement with Anacleto
and Bongar, then represented by Atty. Diosdado M.
Allado. The text of the agreement reads:[1]
COMPROMISE AGREEMENT
This Agreement executed this 31st day of March, 1995 at
Makati, Metro Manila, by and between:
ALEXANDER VAN TWEST, Belizean, of legal age with address
at 29 Montclair Street, Merville Park, Paraaque, Metro Manila,
represented herein by Atty. Ernesto V. Perez (hereinafter
referred to as the plaintiff).
-andGLORIA A. ANACLETO and ISAIAS M. BONGAR, Filipinos, of
legal age with address at c/o 3rd Floor, Tower B, Gold Loop
Twin Towers, #1 Gold Loop Street, Ortigas Center, Pasig, Metro
Manila, represented herein by Atty. Diosdado Jose M. Allado
(hereinafter referred to as the defendants).
WITNESSETH: That WHEREAS, the plaintiff Van Twest and defendant Anacleto
have instituted several actions against each other in the past.
WHEREAS, the plaintiff Van Twest instituted the present action
for reconveyance of real property, annulment of deed of sale
and accounting of income of property.
WHEREAS, the parties desire to buy peace and wish to avoid a
protracted litigation in this case.
NOW THEREFORE, in consideration of the foregoing and the
further covenants hereinafter set forth, the parties agree as
follows:
1. Plaintiff shall be paid the sum of FOUR MILLION EIGHT
HUNDRED THOUSAND PESOS (P4,800,000.00) in accordance
with the following schedule:
a. Initial payment - FIVE HUNDRED THOUSAND PESOS
(P500,000.00) shall be paid to the plaintiff by defendant
BONGAR upon the signing and due execution of this
Compromise Agreement, Provided, however, that the initial
payment by defendant BONGAR shall be delivered into the
custody and possession of a third party, Atty. Crispulo C.
Rosacia, who shall act as escrow-trustee of the parties and
who shall only deliver the said initial payment to the plaintiff
through plaintiffs counsel upon the filing in Court of this
Compromise Agreement.

2. The initial payment by defendant BONGAR shall be made in

cash. The five payments on the balance shall be covered by
post-dated checks drawn by defendant ANACLETO as payable
to ATTY. ERNESTO V. PEREZ who shall hold and account for
said payments in trust for plaintiff Van Twest.
3. This Compromise Agreement shall not affect nor prejudice
any case or cases between the parties not specifically referred
to herein.
4. Upon delivery of the initial payment made by defendant
BONGAR and delivered to the escrow-trustee of the parties,
the parties shall seek Court approval of this Compromise
Agreement and the cancellation or lifting of the notice of lis
pendens issued by the Court over the property subject of the
action.
5. The signatories to this Agreement hereby represent and
warrant that they are duly authorized to execute this
Agreement.
6. The parties or their assigns hereby waive, renounce and
forever quitclaim all their respective claims and counterclaims
subject of the instant action as well as those that may arise
therefrom, in connection therewith or in relation thereto.
7. The foregoing covenants are not contrary to law, morals, or
public policy and the parties bind themselves to comply
strictly with their undertakings.
On April 6, 1995, the trial court rendered judgment
based on the compromise agreement. Petitioner later filed a
manifestation, submitting a copy of a special power of
attorney (SPA).
On June 2, 1995, petitioner, represented by new counsel,
Atty. Marvin L. Herrera, filed an urgent omnibus motion asking
the court to order Atty. Perez to submit an SPA and, in the
meantime, to defer petitioners compliance with her obligation
under the compromise agreement.
In his comment dated June 23, 1995, Atty. Perez
admitted he had no SPA from Van Twest to enter into a
compromise
agreement. However,
he
claimed
that
petitioners former counsel, the law firm of Salonga,
Hernandez and Allado, had been informed of this fact.
In an order dated March 17, 1996, the trial court denied
petitioners motion on the ground that she was estopped to
question the validity of the compromise agreement
considering that, during the negotiations which led to the
signing of the compromise agreement, Atty. Perez had
disclosed the fact that he had no SPA.
On May 10, 1996, petitioner filed a motion to vacate the
judgment, but her motion was denied by the trial court. Her
motion for reconsideration was likewise denied. She then filed
a notice of appeal, but it was denied by the trial court on the
ground that the notice of appeal was filed twelve days
late. Petitioner filed a petition for certiorari in the Court of
Appeals questioning the denial of her notice of appeal and
asking that the order of the trial court denying her motion to
vacate the compromise agreement be set aside. As her
petition was dismissed by the appellate court, petitioner filed
this petition for review on certiorari.
We find the petition meritorious.
The basic issue to be resolved here is whether a party
who enters into a compromise agreement with another
allegedly represented by a lawyer who has no authority to

institute a litigation, much less enter into a compromise

agreement, is estopped from questioning the validity of such
agreement.

Indeed, a special power of attorney constituting Atty.

Perez as attorney-in-fact is necessary. Art. 1878 of the Civil
Code provides:

Under the facts of this case, and for reasons to be

hereafter discussed, we hold that she is not.

ART. 1878. Special powers of attorney are necessary in the

following cases:

First. A compromise is a contract whereby parties, by

making reciprocal concessions, avoid a litigation or put an end
to one already commenced.[2] Like any other contract,
therefore, it must comply with the requisites provided in Art.
1318 of the Civil Code, to wit: (1) consent of the contracting
parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation which is established.

(1) To make such payments as are not usually considered as

acts of administration;
(2) To effect novations which put an end to obligations
already in existence at the time the agency was constituted;

[3]

(3) To compromise, to submit questions to arbitration, to

renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;

Now, it is admitted by Atty. Perez that his only authority

to represent Van Twest and Euroceanic is the retainer
agreement he had with Van Twest. This agreement reads:[4]

1 July 1990

....
It is noteworthy that the action for reconveyance filed by
Atty. Perez was brought not only in behalf of Van Twest but
also of Euroceanic, a juridical person from which he should
have secured the necessary authority to institute this case
and enter into a compromise agreement. The law specifically
requires that juridical persons may enter into a compromise
only in the form and with the requisites which may be
necessary to alienate their property. [5] The power to
compromise or settle claims in favor of or against the
corporation is vested in the board of directors. [6] Hence, in the
absence of any authorization from the board of directors of
Euroceanic, Atty. Perez could not file any suit in its behalf,
regardless of the fact that Van Twest was the former chairman
of its board.

MR. ALEXANDER VAN TWEST

Manila
Dear. Mr. Van Twest:
Thank you for deciding to retain our law firm as general
counsel to handle your civil and criminal cases.
The retainer will amount to P7,500.00 per month. In order to
facilitate your account, we shall bill this retainer monthly,
starting July, 1990, if agreeable to you.
The retainer will cover office conferences, drawing of ordinary
business documents, contracts, deeds, and the like as well as
legal advise not requiring substantial time expense on our
part. The retainer will not cover the trial of any litigated
matters in court or before any administrative body. The cases
that we will handle for you shall be subject of a separate
progressive billings. In such cases we cannot usually
determine in advance the amount of work that will be
required. However, any extraordinary matters will be
discussed with you in advance so that you may have an
estimate of the amount that might be involved before making
any commitments.

As Atty. Perez had no authority to litigate or enter into a

compromise agreement in behalf of Van Twest or Euroceanic,
the compromise agreement is void. In Quiban v. Butalid,[7] it
was held that a compromise agreement entered into by a
person not duly authorized to do so by the principal is void
and has no legal effect.
The same is true as regards the judgment based on the
compromise agreement. In Alviar v. Court of First Instance of
La Union,[8] it was held that a judgment based upon a
compromise entered by an attorney without a special
authority from the client is null and void. Such judgment may
be impugned and its execution may be enjoined in any
proceeding by the party against whom it is sought to be
enforced. This principle was reiterated in Jacinto v.
Montesa[9] and Cosmic Lumber Corporation v. Court of
Appeals.[10]

If the above arrangement is acceptable to you, please sign,

date and return the enclosed duplicate copy of this letter for
our file.
V
ery truly yours,
M
ARTINEZ & PEREZ
LAW OFFICES
b
y:

Second. The Court of Appeals held that petitioner is

estopped to deny the authority of Atty. Perez to represent Van
Twest because petitioner knew from the start of the
negotiations for the compromise agreement that Atty. Perez
had no special power of attorney.
The appellate court appears to have based its finding on
the affidavit of Atty. Crispulo C. Rosacia, the lawyer who
mediated the compromise agreement between Atty. Perez and
petitioners former counsel, Atty. Diosdado M. Allado. The
affidavit states:[11]
AFFIDAVIT

(Signed)
RNESTO V. PEREZ
The above arrangement is acceptable:
(Signed)
10 July 1990
It is clear from this agreement that Atty. Perezs authority
to represent Van Twest does not include a special authority to
enter into the questioned compromise agreement as required
by Rule 138, 23 which provides:
Authority of attorneys to bind clients. -Attorneys have
authority to bind their clients in any case by any agreement in
relation thereto made in writing, and in taking appeals, and in
all matters of ordinary judicial procedure. But they cannot,
without special authority, compromise their clients litigation,
or receive anything in discharge of a clients claim but the full
amount in cash.

I, CRISPULO C. ROSACIA, Filipino, of legal age and with offices

at Penthouse, Northeast Tower, the Goldloop towers, One
Goldloop Plaza, Ortigas Center, Pasig City, after being duly
sworn, depose and state that:
1. I was served a subpoena from Branch 7 of the Regional
Trial Court of Manila to appear and testify in the case
entitled: Alexander Van Twest vs. Gloria Anacleto and Isaias
Bongar, Civil Case No. 95-72826 pending before said Court. In
obedience to the subpoena, I appeared before the said Court
on December 6, 1995 and learned that I was subpoenaed to
attest regarding the events and discussions prior to the
execution of the compromise agreement among the parties in
said case, particularly on the matter of the representation of
the plaintiff by Atty. Ernesto V. Perez. I have been asked to
execute an affidavit in lieu of testimony regarding the
aforesaid matter. Hence, this affidavit.
2. I am a practicing lawyer and partner at the Villareal
Rosacia Dio Samson and Patag Law Offices with offices at the

Penthouse, Northeast Tower, the Goldloop

Goldloop Plaza, Ortigas Center, Pasig City.

Towers, One

3. Sometime around February or March 1995, I was requested

by Atty. Ernesto V. Perez, counsel of Alexander Van Twest, to
check with Atty. Roberto L. Mendoza, a partner of the Salonga
Hernandez and Allado Law Offices if their clients, Gloria
Anacleto and Isaias Bongar, would consider amicable
settlement in the case of Alexander Van Twest vs. Gloria
Anacleto and Isaias Bongar, Civil Case No. 95-72826 of the
Regional Trial Court of Manila.
4. Atty. Mendoza informed me over the telephone that they
are open to settlement and Atty. Allado came up to our office
to discuss it. I then set up a meeting between Atty. Perez and
Atty. Allado at my office.
5. During the initial meeting in my office, Atty. Allado asked
Atty. Perez as to the person he would be talking to regarding
settlement. Atty. Perez said that his client Van Twest is
missing as he alleged in the complaint and that he is the
representative of Van Twest as to the latters properties in the
Philippines involved in pending litigation. Asked if he holds a
special power of attorney, Atty. Perez said that he does not
have one and that he acts on the basis of his retainer
agreement as legal counsel but he could secure a special
power of attorney from the heirs of Van Twest if such is
required by the defendants for the settlement. Atty. Allado
replied that a special power of attorney from the heirs would
be an admission that Van Twest is dead. Atty. Perez insisted
that he is the only general counsel or representative as
regards Van Twests properties in the Philippines involved in
litigation and could warrant that his acts will not be
repudiated especially if the terms of the settlement are
reasonable, the same is approved by the court and judgment
based on compromise is issued. With the assurances made
by Atty. Perez that his acts will not be repudiated by Van Twest
or his heirs, Atty. Allado appeared satisfied and we proceeded
to discuss the terms of the settlement.
6. Atty. Allado later suggested that the terms of settlement be
discussed with his clients, Ms. Anacleto and Engr.
Bongar. Attys. Perez, Allado and myself met with Ms. Anacleto
and Engr. Bongar. Ms. Anacleto and Engr. Bongar also
inquired as to the authority of Atty. Perez. Atty. Perez told Ms.
Anacleto and Engr. Bongar the same explanation he gave to
Atty. Allado. Apparently satisfied, the terms of settlement
were discussed. No agreement came out of the first meeting.
Another meeting was held at which Atty. Perez, Atty. Allado,
Ms. Anacleto and myself were present. Atty. Perez and Ms.
Anacleto were not able to agree on the terms during the
second meeting.
7. After another meeting between Atty. Perez and Ms.
Anacleto, I was informed that the talks bogged down.
8. Atty. Perez called later and asked me to make another
proposal with Atty. Allado, more particularly on the amount,
terms and manner of payment. The proposal was eventually
accepted and the Compromise Agreement was executed by
Attys. Allado and Perez on behalf of their respective clients.
9. I execute this affidavit to attest to the truth of the
foregoing.
19 January 1996 at Makati City, Philippines.

(SGD.) CRISPULO C. ROSACIA, JR.

We hold that estoppel does not apply. The affidavit of
Atty. Rosacia shows that although petitioners former counsel
knew that Atty. Perez had no SPA, said counsel nonetheless
negotiated with him because of his representation that he was
the representative of Van Twest as to the latters properties in
the Philippines and that he could secure an SPA from the heirs
of Van Twest. This is why the negotiations did not fall
through. Petitioner was thus well within her right in relying
upon this representation of Atty. Perez.
Of importance is paragraph 5 of the compromise
agreement which provides that [t]he signatories to this
Agreement hereby represent and warrant that they are duly
authorized to execute this Agreement. By virtue of this
provision, petitioner had the right to require Atty. Perez to
secure the necessary authority from Van Twest or the latters
heirs as well as from Euroceanic. Indeed, petitioner cannot be

faulted for treating this warranty as a condition precedent to

her compliance with the compromise agreement since the
requirement of special authority is mandatory [12] and a
lawyers authority to compromise cannot simply be presumed.
[13]
This is the thrust of the urgent omnibus motion [14] filed by
petitioner in the trial court in which she asked that the court
require Atty. Perez to show an SPA in accordance with
paragraph 5 of their agreement. That this was done by
petitioner after the compromise agreement was approved by
the court is of no moment for, as just stated, it was the nullity
of the judgment itself that was put in issue by petitioner.
Indeed, it may be asked, what injury will result in
nullifying a contract in which one of the parties is not
represented and where the only claim of the opposing counsel
is that the contracting party knew of such fact and belatedly
raised such issue? Equity, on which the principle of estoppel
is based, is simply not on the side of Atty. Perez. The risk of
sustaining the decision of the Court of Appeals is that of
requiring petitioner to pay a debt to a stranger, [15] and we
cannot just rely on the guaranty of Atty. Perez that he would
hold any money he receives in the cases he has filed in trust
for Van Twest and/or Euroceanic. In addition, there is no
stopping Van Twest and/or Euroceanic from suing petitioner
again for the same cause of action if they are unable to
recover the money from Atty. Perez. In fact, the law does not
even require them to recognize the trust unilaterally created
by Atty. Perez or first seek to recover from him.
Third. It is nonetheless contended that, under the law,
the compromise agreement, once approved by the court,
becomes executory in the absence of a motion to set aside
the judgment thereon on the ground of fraud, mistake, etc.
and that a party questioning the judgment on compromise
must not only move to set aside the judgment but must also
move to set aside or annul the compromise agreement itself.
[16]

This contention has no merit. The principles cited refer

to the annulment of voidable compromise agreements. But
here, the compromise agreement is void. A void contract
does not become valid and enforceable merely because it is
based on a judgment upon compromise, and, as we have
held, can be impugned in any proceeding. We see no need for
petitioner to wait until a writ of execution is issued against her
before resorting to certiorari or petition for annulment of
judgment to impugn the validity of the compromise
agreement.
Fourth. It is true that petitioner tried to appeal to the
Court of Appeals from the order of the trial court denying her
motion to vacate the judgment based on the compromise
agreement and that petitioners notice of appeal was filed
twelve days late. It was for this reason that the trial court
denied petitioners appeal. Petitioner, therefore, filed a
petition for certiorari.
It is within the inherent power of the Court to suspend its
own rules in a particular case in order to do justice.
[17]
Considering the obvious merit of petitioners cause and the
unusual circumstances present in this case, the procedural
miscalculation on the part of petitioner may be
overlooked. For equitable considerations, we have relaxed the
application of otherwise stringent rules by giving due course
to
appeals
filed
out
of
time, [18]treating
petitions
for certiorari as petitions for review, [19] and remanding cases
for trial even though their previous dismissal had become
final.[20] In the case at bar, the fact that, for all intents and
purposes, this case has been litigated up to this Court with
only one party being properly represented and the alleged
counsel for the other admits he has no authority to litigate
this case is a good reason for a liberal application of the rules.
WHEREFORE, the decision of the Court of Appeals
dismissing
petitioners
action
for certiorari is
hereby
REVERSED and, consequently, the decision of the Regional
Trial Court, Branch 7, Manila, based on the compromise
agreement of the parties, is ANNULLED and SET ASIDE and
the compromise agreement itself is declared without force
and effect.
SO ORDERED.
Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Bellosillo, (Chairman), J., no part. Related to one of
parties.

SECOND DIVISION

b. The balance of FOUR MILLION THREE HUNDRED THOUSAND

PESOS (P4,300,000.00) shall be paid by defendant ANACLETO
as follows:

[G.R. No. 131411. August 29, 2000]

Second payment - ONE MILLION THREE HUNDRED THOUSAND

PESOS (P11,300,000.00) within sixty (60) days after the date
of the first payment.
Third payment - ONE MILLION PESOS (P1,000,000.00) within
forty-five (45) days after the date of the second payment.

GLORIA A. ANACLETO, petitioner, vs. ALEXANDER VAN

TWEST
and/or
EUROCEANIC
RAINBOW
ENTERPRISES PHILIPPINES, INC., respondents.

Fourth payment - ONE MILLION PESOS (P1,000,000.00) within

forty-five (45) days after the date of the third payment.

DECISION

Fifth payment - ONE MILLION PESOS (P1,000,000.00) within

forty-five (45) days after the date of the fourth payment.

MENDOZA, J.:
This is a petition for review on certiorari of the decision
of the Court of Appeals, dated June 20, 1997. The facts are
not disputed. They are as follows:
On February 6, 1995, a complaint for reconveyance of
title was filed in the name of Alexander Van Twest and
Euroceanic Rainbow Enterprises Philippines, Inc. (Euroceanic)
against petitioner Gloria A. Anacleto and Isaias M.
Bongar. The complaint filed by Atty. Ernesto V. Perez stated
that Alexander Van Twest has been reported missing since
June 16, 1992 but is duly represented herein by undersigned
counsel as his agent and/or general counsel.
On March 31, 1995, Atty. Perez, in representation of Van
Twest, entered into a compromise agreement with Anacleto
and Bongar, then represented by Atty. Diosdado M.
Allado. The text of the agreement reads:[1]
COMPROMISE AGREEMENT
This Agreement executed this 31st day of March, 1995 at
Makati, Metro Manila, by and between:
ALEXANDER VAN TWEST, Belizean, of legal age with address
at 29 Montclair Street, Merville Park, Paraaque, Metro Manila,
represented herein by Atty. Ernesto V. Perez (hereinafter
referred to as the plaintiff).
-andGLORIA A. ANACLETO and ISAIAS M. BONGAR, Filipinos, of
legal age with address at c/o 3rd Floor, Tower B, Gold Loop
Twin Towers, #1 Gold Loop Street, Ortigas Center, Pasig, Metro
Manila, represented herein by Atty. Diosdado Jose M. Allado
(hereinafter referred to as the defendants).
WITNESSETH: That WHEREAS, the plaintiff Van Twest and defendant Anacleto
have instituted several actions against each other in the past.
WHEREAS, the plaintiff Van Twest instituted the present action
for reconveyance of real property, annulment of deed of sale
and accounting of income of property.
WHEREAS, the parties desire to buy peace and wish to avoid a
protracted litigation in this case.
NOW THEREFORE, in consideration of the foregoing and the
further covenants hereinafter set forth, the parties agree as
follows:
1. Plaintiff shall be paid the sum of FOUR MILLION EIGHT
HUNDRED THOUSAND PESOS (P4,800,000.00) in accordance
with the following schedule:
a. Initial payment - FIVE HUNDRED THOUSAND PESOS
(P500,000.00) shall be paid to the plaintiff by defendant
BONGAR upon the signing and due execution of this
Compromise Agreement, Provided, however, that the initial
payment by defendant BONGAR shall be delivered into the
custody and possession of a third party, Atty. Crispulo C.
Rosacia, who shall act as escrow-trustee of the parties and
who shall only deliver the said initial payment to the plaintiff
through plaintiffs counsel upon the filing in Court of this
Compromise Agreement.

2. The initial payment by defendant BONGAR shall be made in

cash. The five payments on the balance shall be covered by
post-dated checks drawn by defendant ANACLETO as payable
to ATTY. ERNESTO V. PEREZ who shall hold and account for
said payments in trust for plaintiff Van Twest.
3. This Compromise Agreement shall not affect nor prejudice
any case or cases between the parties not specifically referred
to herein.
4. Upon delivery of the initial payment made by defendant
BONGAR and delivered to the escrow-trustee of the parties,
the parties shall seek Court approval of this Compromise
Agreement and the cancellation or lifting of the notice of lis
pendens issued by the Court over the property subject of the
action.
5. The signatories to this Agreement hereby represent and
warrant that they are duly authorized to execute this
Agreement.
6. The parties or their assigns hereby waive, renounce and
forever quitclaim all their respective claims and counterclaims
subject of the instant action as well as those that may arise
therefrom, in connection therewith or in relation thereto.
7. The foregoing covenants are not contrary to law, morals, or
public policy and the parties bind themselves to comply
strictly with their undertakings.
On April 6, 1995, the trial court rendered judgment
based on the compromise agreement. Petitioner later filed a
manifestation, submitting a copy of a special power of
attorney (SPA).
On June 2, 1995, petitioner, represented by new counsel,
Atty. Marvin L. Herrera, filed an urgent omnibus motion asking
the court to order Atty. Perez to submit an SPA and, in the
meantime, to defer petitioners compliance with her obligation
under the compromise agreement.
In his comment dated June 23, 1995, Atty. Perez
admitted he had no SPA from Van Twest to enter into a
compromise
agreement. However,
he
claimed
that
petitioners former counsel, the law firm of Salonga,
Hernandez and Allado, had been informed of this fact.
In an order dated March 17, 1996, the trial court denied
petitioners motion on the ground that she was estopped to
question the validity of the compromise agreement
considering that, during the negotiations which led to the
signing of the compromise agreement, Atty. Perez had
disclosed the fact that he had no SPA.
On May 10, 1996, petitioner filed a motion to vacate the
judgment, but her motion was denied by the trial court. Her
motion for reconsideration was likewise denied. She then filed
a notice of appeal, but it was denied by the trial court on the
ground that the notice of appeal was filed twelve days
late. Petitioner filed a petition for certiorari in the Court of
Appeals questioning the denial of her notice of appeal and
asking that the order of the trial court denying her motion to
vacate the compromise agreement be set aside. As her
petition was dismissed by the appellate court, petitioner filed
this petition for review on certiorari.
We find the petition meritorious.
The basic issue to be resolved here is whether a party
who enters into a compromise agreement with another
allegedly represented by a lawyer who has no authority to

institute a litigation, much less enter into a compromise

agreement, is estopped from questioning the validity of such
agreement.

Indeed, a special power of attorney constituting Atty.

Perez as attorney-in-fact is necessary. Art. 1878 of the Civil
Code provides:

Under the facts of this case, and for reasons to be

hereafter discussed, we hold that she is not.

ART. 1878. Special powers of attorney are necessary in the

following cases:

First. A compromise is a contract whereby parties, by

making reciprocal concessions, avoid a litigation or put an end
to one already commenced.[2] Like any other contract,
therefore, it must comply with the requisites provided in Art.
1318 of the Civil Code, to wit: (1) consent of the contracting
parties; (2) object certain which is the subject matter of the
contract; and (3) cause of the obligation which is established.

(1) To make such payments as are not usually considered as

acts of administration;
(2) To effect novations which put an end to obligations
already in existence at the time the agency was constituted;

[3]

(3) To compromise, to submit questions to arbitration, to

renounce the right to appeal from a judgment, to waive
objections to the venue of an action or to abandon a
prescription already acquired;

Now, it is admitted by Atty. Perez that his only authority

to represent Van Twest and Euroceanic is the retainer
agreement he had with Van Twest. This agreement reads:[4]

1 July 1990

....
It is noteworthy that the action for reconveyance filed by
Atty. Perez was brought not only in behalf of Van Twest but
also of Euroceanic, a juridical person from which he should
have secured the necessary authority to institute this case
and enter into a compromise agreement. The law specifically
requires that juridical persons may enter into a compromise
only in the form and with the requisites which may be
necessary to alienate their property. [5] The power to
compromise or settle claims in favor of or against the
corporation is vested in the board of directors. [6] Hence, in the
absence of any authorization from the board of directors of
Euroceanic, Atty. Perez could not file any suit in its behalf,
regardless of the fact that Van Twest was the former chairman
of its board.

MR. ALEXANDER VAN TWEST

Manila
Dear. Mr. Van Twest:
Thank you for deciding to retain our law firm as general
counsel to handle your civil and criminal cases.
The retainer will amount to P7,500.00 per month. In order to
facilitate your account, we shall bill this retainer monthly,
starting July, 1990, if agreeable to you.
The retainer will cover office conferences, drawing of ordinary
business documents, contracts, deeds, and the like as well as
legal advise not requiring substantial time expense on our
part. The retainer will not cover the trial of any litigated
matters in court or before any administrative body. The cases
that we will handle for you shall be subject of a separate
progressive billings. In such cases we cannot usually
determine in advance the amount of work that will be
required. However, any extraordinary matters will be
discussed with you in advance so that you may have an
estimate of the amount that might be involved before making
any commitments.

As Atty. Perez had no authority to litigate or enter into a

compromise agreement in behalf of Van Twest or Euroceanic,
the compromise agreement is void. In Quiban v. Butalid,[7] it
was held that a compromise agreement entered into by a
person not duly authorized to do so by the principal is void
and has no legal effect.
The same is true as regards the judgment based on the
compromise agreement. In Alviar v. Court of First Instance of
La Union,[8] it was held that a judgment based upon a
compromise entered by an attorney without a special
authority from the client is null and void. Such judgment may
be impugned and its execution may be enjoined in any
proceeding by the party against whom it is sought to be
enforced. This principle was reiterated in Jacinto v.
Montesa[9] and Cosmic Lumber Corporation v. Court of
Appeals.[10]

If the above arrangement is acceptable to you, please sign,

date and return the enclosed duplicate copy of this letter for
our file.
V
ery truly yours,
M
ARTINEZ & PEREZ
LAW OFFICES
b
y:

Second. The Court of Appeals held that petitioner is

estopped to deny the authority of Atty. Perez to represent Van
Twest because petitioner knew from the start of the
negotiations for the compromise agreement that Atty. Perez
had no special power of attorney.
The appellate court appears to have based its finding on
the affidavit of Atty. Crispulo C. Rosacia, the lawyer who
mediated the compromise agreement between Atty. Perez and
petitioners former counsel, Atty. Diosdado M. Allado. The
affidavit states:[11]
AFFIDAVIT

(Signed)
RNESTO V. PEREZ
The above arrangement is acceptable:
(Signed)
10 July 1990
It is clear from this agreement that Atty. Perezs authority
to represent Van Twest does not include a special authority to
enter into the questioned compromise agreement as required
by Rule 138, 23 which provides:
Authority of attorneys to bind clients. -Attorneys have
authority to bind their clients in any case by any agreement in
relation thereto made in writing, and in taking appeals, and in
all matters of ordinary judicial procedure. But they cannot,
without special authority, compromise their clients litigation,
or receive anything in discharge of a clients claim but the full
amount in cash.

I, CRISPULO C. ROSACIA, Filipino, of legal age and with offices

at Penthouse, Northeast Tower, the Goldloop towers, One
Goldloop Plaza, Ortigas Center, Pasig City, after being duly
sworn, depose and state that:
1. I was served a subpoena from Branch 7 of the Regional
Trial Court of Manila to appear and testify in the case
entitled: Alexander Van Twest vs. Gloria Anacleto and Isaias
Bongar, Civil Case No. 95-72826 pending before said Court. In
obedience to the subpoena, I appeared before the said Court
on December 6, 1995 and learned that I was subpoenaed to
attest regarding the events and discussions prior to the
execution of the compromise agreement among the parties in
said case, particularly on the matter of the representation of
the plaintiff by Atty. Ernesto V. Perez. I have been asked to
execute an affidavit in lieu of testimony regarding the
aforesaid matter. Hence, this affidavit.
2. I am a practicing lawyer and partner at the Villareal
Rosacia Dio Samson and Patag Law Offices with offices at the

Penthouse, Northeast Tower, the Goldloop

Goldloop Plaza, Ortigas Center, Pasig City.

Towers, One

3. Sometime around February or March 1995, I was requested

by Atty. Ernesto V. Perez, counsel of Alexander Van Twest, to
check with Atty. Roberto L. Mendoza, a partner of the Salonga
Hernandez and Allado Law Offices if their clients, Gloria
Anacleto and Isaias Bongar, would consider amicable
settlement in the case of Alexander Van Twest vs. Gloria
Anacleto and Isaias Bongar, Civil Case No. 95-72826 of the
Regional Trial Court of Manila.
4. Atty. Mendoza informed me over the telephone that they
are open to settlement and Atty. Allado came up to our office
to discuss it. I then set up a meeting between Atty. Perez and
Atty. Allado at my office.
5. During the initial meeting in my office, Atty. Allado asked
Atty. Perez as to the person he would be talking to regarding
settlement. Atty. Perez said that his client Van Twest is
missing as he alleged in the complaint and that he is the
representative of Van Twest as to the latters properties in the
Philippines involved in pending litigation. Asked if he holds a
special power of attorney, Atty. Perez said that he does not
have one and that he acts on the basis of his retainer
agreement as legal counsel but he could secure a special
power of attorney from the heirs of Van Twest if such is
required by the defendants for the settlement. Atty. Allado
replied that a special power of attorney from the heirs would
be an admission that Van Twest is dead. Atty. Perez insisted
that he is the only general counsel or representative as
regards Van Twests properties in the Philippines involved in
litigation and could warrant that his acts will not be
repudiated especially if the terms of the settlement are
reasonable, the same is approved by the court and judgment
based on compromise is issued. With the assurances made
by Atty. Perez that his acts will not be repudiated by Van Twest
or his heirs, Atty. Allado appeared satisfied and we proceeded
to discuss the terms of the settlement.
6. Atty. Allado later suggested that the terms of settlement be
discussed with his clients, Ms. Anacleto and Engr.
Bongar. Attys. Perez, Allado and myself met with Ms. Anacleto
and Engr. Bongar. Ms. Anacleto and Engr. Bongar also
inquired as to the authority of Atty. Perez. Atty. Perez told Ms.
Anacleto and Engr. Bongar the same explanation he gave to
Atty. Allado. Apparently satisfied, the terms of settlement
were discussed. No agreement came out of the first meeting.
Another meeting was held at which Atty. Perez, Atty. Allado,
Ms. Anacleto and myself were present. Atty. Perez and Ms.
Anacleto were not able to agree on the terms during the
second meeting.
7. After another meeting between Atty. Perez and Ms.
Anacleto, I was informed that the talks bogged down.
8. Atty. Perez called later and asked me to make another
proposal with Atty. Allado, more particularly on the amount,
terms and manner of payment. The proposal was eventually
accepted and the Compromise Agreement was executed by
Attys. Allado and Perez on behalf of their respective clients.
9. I execute this affidavit to attest to the truth of the
foregoing.
19 January 1996 at Makati City, Philippines.

(SGD.) CRISPULO C. ROSACIA, JR.

We hold that estoppel does not apply. The affidavit of
Atty. Rosacia shows that although petitioners former counsel
knew that Atty. Perez had no SPA, said counsel nonetheless
negotiated with him because of his representation that he was
the representative of Van Twest as to the latters properties in
the Philippines and that he could secure an SPA from the heirs
of Van Twest. This is why the negotiations did not fall
through. Petitioner was thus well within her right in relying
upon this representation of Atty. Perez.
Of importance is paragraph 5 of the compromise
agreement which provides that [t]he signatories to this
Agreement hereby represent and warrant that they are duly
authorized to execute this Agreement. By virtue of this
provision, petitioner had the right to require Atty. Perez to
secure the necessary authority from Van Twest or the latters
heirs as well as from Euroceanic. Indeed, petitioner cannot be

faulted for treating this warranty as a condition precedent to

her compliance with the compromise agreement since the
requirement of special authority is mandatory [12] and a
lawyers authority to compromise cannot simply be presumed.
[13]
This is the thrust of the urgent omnibus motion [14] filed by
petitioner in the trial court in which she asked that the court
require Atty. Perez to show an SPA in accordance with
paragraph 5 of their agreement. That this was done by
petitioner after the compromise agreement was approved by
the court is of no moment for, as just stated, it was the nullity
of the judgment itself that was put in issue by petitioner.
Indeed, it may be asked, what injury will result in
nullifying a contract in which one of the parties is not
represented and where the only claim of the opposing counsel
is that the contracting party knew of such fact and belatedly
raised such issue? Equity, on which the principle of estoppel
is based, is simply not on the side of Atty. Perez. The risk of
sustaining the decision of the Court of Appeals is that of
requiring petitioner to pay a debt to a stranger, [15] and we
cannot just rely on the guaranty of Atty. Perez that he would
hold any money he receives in the cases he has filed in trust
for Van Twest and/or Euroceanic. In addition, there is no
stopping Van Twest and/or Euroceanic from suing petitioner
again for the same cause of action if they are unable to
recover the money from Atty. Perez. In fact, the law does not
even require them to recognize the trust unilaterally created
by Atty. Perez or first seek to recover from him.
Third. It is nonetheless contended that, under the law,
the compromise agreement, once approved by the court,
becomes executory in the absence of a motion to set aside
the judgment thereon on the ground of fraud, mistake, etc.
and that a party questioning the judgment on compromise
must not only move to set aside the judgment but must also
move to set aside or annul the compromise agreement itself.
[16]

This contention has no merit. The principles cited refer

to the annulment of voidable compromise agreements. But
here, the compromise agreement is void. A void contract
does not become valid and enforceable merely because it is
based on a judgment upon compromise, and, as we have
held, can be impugned in any proceeding. We see no need for
petitioner to wait until a writ of execution is issued against her
before resorting to certiorari or petition for annulment of
judgment to impugn the validity of the compromise
agreement.
Fourth. It is true that petitioner tried to appeal to the
Court of Appeals from the order of the trial court denying her
motion to vacate the judgment based on the compromise
agreement and that petitioners notice of appeal was filed
twelve days late. It was for this reason that the trial court
denied petitioners appeal. Petitioner, therefore, filed a
petition for certiorari.
It is within the inherent power of the Court to suspend its
own rules in a particular case in order to do justice.
[17]
Considering the obvious merit of petitioners cause and the
unusual circumstances present in this case, the procedural
miscalculation on the part of petitioner may be
overlooked. For equitable considerations, we have relaxed the
application of otherwise stringent rules by giving due course
to
appeals
filed
out
of
time, [18]treating
petitions
for certiorari as petitions for review, [19] and remanding cases
for trial even though their previous dismissal had become
final.[20] In the case at bar, the fact that, for all intents and
purposes, this case has been litigated up to this Court with
only one party being properly represented and the alleged
counsel for the other admits he has no authority to litigate
this case is a good reason for a liberal application of the rules.
WHEREFORE, the decision of the Court of Appeals
dismissing
petitioners
action
for certiorari is
hereby
REVERSED and, consequently, the decision of the Regional
Trial Court, Branch 7, Manila, based on the compromise
agreement of the parties, is ANNULLED and SET ASIDE and
the compromise agreement itself is declared without force
and effect.
SO ORDERED.
Quisumbing, Buena, and De Leon, Jr., JJ., concur.
Bellosillo, (Chairman), J., no part. Related to one of
parties.

G.R. No. 140667

August 12, 2004

WOODCHILD HOLDINGS, INC., petitioner, vs.

ROXAS ELECTRIC AND CONSTRUCTION COMPANY,
INC., respondent.
D E C I S I O N : CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision 1 of the
Court of Appeals in CA-G.R. CV No. 56125 reversing the
Decision2 of the Regional Trial Court of Makati, Branch 57,
which ruled in favor of the petitioner.
The Antecedents
The respondent Roxas Electric and Construction Company,
Inc. (RECCI), formerly the Roxas Electric and Construction
Company, was the
owner of two parcels of land, identified as Lot No. 491-A-3-B-1
covered by Transfer Certificate of Title (TCT) No. 78085 and
Lot No. 491-A-3-B-2 covered by TCT No. 78086. A portion of
Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a
dirt road accessing to the Sumulong Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondent's Board
of Directors approved a resolution authorizing the corporation,
through its president, Roberto B. Roxas, to sell Lot No. 491-A3-B-2 covered by TCT No. 78086, with an area of 7,213 square
meters, at a price and under such terms and conditions which
he deemed most reasonable and advantageous to the
corporation; and to execute, sign and deliver the pertinent
sales documents and receive the proceeds of the sale for and
on behalf of the company. 3
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot
No. 491-A-3-B-2 covered by TCT No. 78086 on which it
planned to construct its warehouse building, and a portion of
the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-foot
container van would be able to readily enter or leave the
property. In a Letter to Roxas dated June 21, 1991, WHI
President Jonathan Y. Dy offered to buy Lot No. 491-A-3-B-2
under stated terms and conditions for P1,000 per square
meter or at the price of P7,213,000.4 One of the terms
incorporated in Dy's offer was the following provision:
5. This Offer to Purchase is made on the
representation and warranty of the OWNER/SELLER,
that he holds a good and registrable title to the
property, which shall be conveyed CLEAR and FREE
of all liens and encumbrances, and that the area of
7,213 square meters of the subject property already
includes the area on which the right of way traverses
from the main lot (area) towards the exit to the
Sumulong Highway as shown in the location plan
furnished by the Owner/Seller to the buyer.
Furthermore, in the event that the right of way is
insufficient for the buyer's purposes (example: entry
of a 45-foot container), the seller agrees to sell
additional square meter from his current adjacent
property to allow the buyer to full access and full use
of the property.5
Roxas indicated his acceptance of the offer on page 2 of the
deed. Less than a month later or on July 1, 1991, Roxas, as
President of RECCI, as vendor, and Dy, as President of WHI, as
vendee, executed a contract to sell in which RECCI bound and
obliged itself to sell to Dy Lot No. 491-A-3-B-2 covered by TCT
No. 78086 for P7,213,000.6On September 5, 1991, a Deed of
Absolute Sale7 in favor of WHI was issued, under which Lot No.
491-A-3-B-2 covered by TCT No. 78086 was sold for
P5,000,000, receipt of which was acknowledged by Roxas
under the following terms and conditions:
The Vendor agree (sic), as it hereby agrees and binds
itself to give Vendee the beneficial use of and a right
of way from Sumulong Highway to the property
herein conveyed consists of 25 square meters wide
to be used as the latter's egress from and ingress to
and an additional 25 square meters in the corner of
Lot No. 491-A-3-B-1, as turning and/or maneuvering
area for Vendee's vehicles.

The Vendor agrees that in the event that the right of

way is insufficient for the Vendee's use (ex entry of a
45-foot container) the Vendor agrees to sell
additional square meters from its current adjacent
property to allow the Vendee full access and full use
of the property.

The Vendor hereby undertakes and agrees, at its

account, to defend the title of the Vendee to the
parcel of land and improvements herein conveyed,
against all claims of any and all persons or entities,
and that the Vendor hereby warrants the right of the
Vendee to possess and own the said parcel of land
and improvements thereon and will defend the
Vendee against all present and future claims and/or
action
in
relation
thereto,
judicial
and/or
administrative. In particular, the Vendor shall eject all
existing squatters and occupants of the premises
within two (2) weeks from the signing hereof. In case
of failure on the part of the Vendor to eject all
occupants and squatters within the two-week period
or breach of any of the stipulations, covenants and
terms and conditions herein provided and that of
contract to sell dated 1 July 1991, the Vendee shall
have the right to cancel the sale and demand
reimbursement for all payments made to the Vendor
with interest thereon at 36% per annum.8
On September 10, 1991, the Wimbeco Builder's, Inc. (WBI)
submitted its quotation for P8,649,000 to WHI for the
construction of the warehouse building on a portion of the
property with an area of 5,088 square meters. 9 WBI proposed
to start the project on October 1, 1991 and to turn over the
building to WHI on February 29, 1992.10
In a Letter dated September 16, 1991, Ponderosa Leather
Goods Company, Inc. confirmed its lease agreement with WHI
of a 5,000-square-meter portion of the warehouse yet to be
constructed at the rental rate of P65 per square meter.
Ponderosa emphasized the need for the warehouse to be
ready for occupancy before April 1, 1992. 11 WHI accepted the
offer. However, WBI failed to commence the construction of
the warehouse in October 1, 1991 as planned because of the
presence of squatters in the property and suggested a
renegotiation of the contract after the squatters shall have
been evicted.12 Subsequently, the squatters were evicted from
the property.
On March 31, 1992, WHI and WBI executed a Letter-Contract
for the construction of the warehouse building for
P11,804,160.13 The contractor started construction in April
1992 even before the building officials of Antipolo City issued
a building permit on May 28, 1992. After the warehouse was
finished, WHI issued on March 21, 1993 a certificate of
occupancy by the building official. Earlier, or on March 18,
1993, WHI, as lessor, and Ponderosa, as lessee, executed a
contract of lease over a portion of the property for a monthly
rental of P300,000 for a period of three years from March 1,
1993 up to February 28, 1996.14
In the meantime, WHI complained to Roberto Roxas that the
vehicles of RECCI were parked on a portion of the property
over which WHI had been granted a right of way. Roxas
promised to look into the matter. Dy and Roxas discussed the
need of the WHI to buy a 500-square-meter portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085 as provided for in the
deed of absolute sale. However, Roxas died soon thereafter.
On April 15, 1992, the WHI wrote the RECCI, reiterating its
verbal requests to purchase a portion of the said lot as
provided for in the deed of absolute sale, and complained
about the latter's failure to eject the squatters within the
three-month period agreed upon in the said deed.
The WHI demanded that the RECCI sell a portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085 for its beneficial use
within 72 hours from notice thereof, otherwise the appropriate
action would be filed against it. RECCI rejected the demand of
WHI. WHI reiterated its demand in a Letter dated May 29,
1992. There was no response from RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI
with the Regional Trial Court of Makati, for specific
performance and damages, and alleged, inter alia, the
following in its complaint:
5. The "current adjacent property" referred to in the
aforequoted paragraph of the Deed of Absolute Sale

pertains to the property covered by Transfer

Certificate of Title No. N-78085 of the Registry of
Deeds of Antipolo, Rizal, registered in the name of
herein defendant Roxas Electric.

b) to sell to Woodchild Holdings additional 25 and

100 square meters to allow it full access and use of
the purchased property pursuant to para. 5 of the
Deed of Absolute Sale;

6. Defendant Roxas Electric in patent violation of the

express and valid terms of the Deed of Absolute Sale
unjustifiably refused to deliver to Woodchild Holdings
the stipulated beneficial use and right of way
consisting of 25 square meters and 55 square meters
to the prejudice of the plaintiff.

c) to cause annotation on Transfer Certificate of Title

No. N-78085 the beneficial use and right of way
granted to Woodchild Holdings under the Deed of
Absolute Sale;

7. Similarly, in as much as the 25 square meters and

55 square meters alloted to Woodchild Holdings for
its beneficial use is inadequate as turning and/or
maneuvering area of its 45-foot container van,
Woodchild Holdings manifested its intention pursuant
to para. 5 of the Deed of Sale to purchase additional
square meters from Roxas Electric to allow it full
access and use of the purchased property, however,
Roxas Electric refused and failed to merit Woodchild
Holdings' request contrary to defendant Roxas
Electric's obligation under the Deed of Absolute Sale
(Annex "A").
8. Moreover, defendant, likewise, failed to eject all
existing squatters and occupants of the premises
within the stipulated time frame and as a
consequence thereof, plaintiff's planned construction
has been considerably delayed for seven (7) months
due to the squatters who continue to trespass and
obstruct the subject property, thereby Woodchild
Holdings incurred substantial losses amounting to
P3,560,000.00 occasioned by the increased cost of
construction materials and labor.
9. Owing further to Roxas Electric's deliberate refusal
to comply with its obligation under Annex "A,"
Woodchild Holdings suffered unrealized income of
P300,000.00 a month or P2,100,000.00 supposed
income from rentals of the subject property for seven
(7) months.
10. On April 15, 1992, Woodchild Holdings made a
final demand to Roxas Electric to comply with its
obligations and warranties under the Deed of
Absolute Sale but notwithstanding such demand,
defendant Roxas Electric refused and failed and
continue to refuse and fail to heed plaintiff's demand
for compliance.
Copy of the demand letter dated April 15, 1992 is
hereto attached as Annex "B" and made an integral
part hereof.
11. Finally, on 29 May 1991, Woodchild Holdings
made a letter request addressed to Roxas Electric to
particularly annotate on Transfer Certificate of Title
No. N-78085 the agreement under Annex "A" with
respect to the beneficial use and right of way,
however, Roxas Electric unjustifiably ignored and
disregarded the same.
Copy of the letter request dated 29 May 1992 is
hereto attached as Annex "C" and made an integral
part hereof.
12. By reason of Roxas Electric's continuous refusal
and failure to comply with Woodchild Holdings' valid
demand for compliance under Annex "A," the latter
was constrained to litigate, thereby incurring
damages as and by way of attorney's fees in the
amount of P100,000.00 plus costs of suit and
expenses of litigation.15
The WHI prayed that, after due proceedings, judgment be
rendered in its favor, thus:
WHEREFORE, it is respectfully prayed that judgment
be rendered in favor of Woodchild Holdings and
ordering Roxas Electric the following:
a) to deliver to Woodchild Holdings the beneficial use
of the stipulated 25 square meters and 55 square
meters;

d) to pay Woodchild Holdings the amount of

P5,660,000.00, representing actual damages and
unrealized income;
e) to pay attorney's
P100,000.00; and

fees

in

the

amount

of

f) to pay the costs of suit.

Other reliefs just and equitable are prayed for. 16
In its answer to the complaint, the RECCI alleged that it never
authorized its former president, Roberto Roxas, to grant the
beneficial use of any portion of Lot No. 491-A-3-B-1, nor
agreed to sell any portion thereof or create a lien or burden
thereon. It alleged that, under the Resolution approved on
May 17, 1991, it merely authorized Roxas to sell Lot No. 491A-3-B-2 covered by TCT No. 78086. As such, the grant of a
right of way and the agreement to sell a portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085 in the said deed
are ultra vires. The RECCI further alleged that the provision
therein that it would sell a portion of Lot No. 491-A-3-B-1 to
the WHI lacked the essential elements of a binding contract. 17
In its amended answer to the complaint, the RECCI alleged
that the delay in the construction of its warehouse building
was due to the failure of the WHI's contractor to secure a
building permit thereon.18
During the trial, Dy testified that he told Roxas that the
petitioner was buying a portion of Lot No. 491-A-3-B-1
consisting of an area of 500 square meters, for the price of
P1,000 per square meter.
On November 11, 1996, the trial court rendered judgment in
favor of the WHI, the decretal portion of which reads:
WHEREFORE, judgment is hereby rendered directing
defendant:
(1) To allow plaintiff the beneficial use of the existing
right of way plus the stipulated 25 sq. m. and 55 sq.
m.;
(2) To sell to plaintiff an additional area of 500 sq. m.
priced at P1,000 per sq. m. to allow said plaintiff full
access and use of the purchased property pursuant
to Par. 5 of their Deed of Absolute Sale;
(3) To cause annotation on TCT No. N-78085 the
beneficial use and right of way granted by their Deed
of Absolute Sale;
(4) To pay plaintiff the amount of P5,568,000
representing
actual
damages
and
plaintiff's
unrealized income;
(5) To pay plaintiff P100,000 representing attorney's
fees; and
To pay the costs of suit.
SO ORDERED.19
The trial court ruled that the RECCI was estopped from
disowning the apparent authority of Roxas under the May 17,
1991 Resolution of its Board of Directors. The court reasoned
that to do so would prejudice the WHI which transacted with
Roxas in good faith, believing that he had the authority to
bind the WHI relating to the easement of right of way, as well
as the right to purchase a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085.
The RECCI appealed the decision to the CA, which rendered a
decision on November 9, 1999 reversing that of the trial court,
and ordering the dismissal of the complaint. The CA ruled
that, under the resolution of the Board of Directors of the
RECCI, Roxas was merely authorized to sell Lot No. 491-A-3-B2 covered by TCT No. 78086, but not to grant right of way in
favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to
grant an option to the petitioner to buy a portion thereof. The
appellate court also ruled that the grant of a right of way and
an option to the respondent were so lopsided in favor of the

respondent because the latter was authorized to fix the

location as well as the price of the portion of its property to be
sold to the respondent. Hence, such provisions contained in
the deed of absolute sale were not binding on the RECCI. The
appellate court ruled that the delay in the construction of
WHI's warehouse was due to its fault.
The Present Petition
The petitioner now comes to this Court asserting that:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT
THE DEED OF ABSOLUTE SALE (EXH. "C") IS ULTRA
VIRES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE RULING OF THE COURT A QUO
ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL
USE OF THE EXISTING RIGHT OF WAY PLUS THE
STIPULATED 25 SQUARE METERS AND 55 SQUARE
METERS BECAUSE THESE ARE VALID STIPULATIONS
AGREED BY BOTH PARTIES TO THE DEED OF
ABSOLUTE SALE (EXH. "C").
III.
THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE
COURT
OF
APPEALS
TO
RULE
THAT
THE
STIPULATIONS OF THE DEED OF ABSOLUTE SALE
(EXH. "C") WERE DISADVANTAGEOUS TO THE
APPELLEE, NOR WAS APPELLEE DEPRIVED OF ITS
PROPERTY WITHOUT DUE PROCESS.
IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED
OF PROPERTY WITHOUT DUE PROCESS BY THE
ASSAILED DECISION.
V.
THE DELAY IN THE CONSTRUCTION WAS DUE TO THE
FAILURE OF THE APPELLANT TO EVICT THE
SQUATTERS ON THE LAND AS AGREED IN THE DEED
OF ABSOLUTE SALE (EXH. "C").
VI.
THE COURT OF APPEALS GRAVELY ERRED IN
REVERSING THE RULING OF THE COURT A QUO
DIRECTING THE DEFENDANT TO PAY THE PLAINTIFF
THE AMOUNT OF P5,568,000.00 REPRESENTING
ACTUAL DAMAGES AND PLAINTIFF'S UNREALIZED
INCOME AS WELL AS ATTORNEY'S FEES.20
The threshold issues for resolution are the following: (a)
whether the respondent is bound by the provisions in the
deed of absolute sale granting to the petitioner beneficial use
and a right of way over a portion of Lot
No. 491-A-3-B-1 accessing to the Sumulong Highway and
granting the option to the petitioner to buy a portion thereof,
and, if so, whether such agreement is enforceable against the
respondent; (b) whether the respondent failed to eject the
squatters on its property within two weeks from the execution
of the deed of absolute sale; and, (c) whether the respondent
is liable to the petitioner for damages.
On the first issue, the petitioner avers that, under its
Resolution of May 17, 1991, the respondent authorized Roxas,
then its president, to grant a right of way over a portion of Lot
No. 491-A-3-B-1 in favor of the petitioner, and an option for
the respondent to buy a portion of the said property. The
petitioner contends that when the respondent sold Lot No.
491-A-3-B-2 covered by TCT No. 78086, it (respondent) was
well aware of its obligation to provide the petitioner with a
means of ingress to or egress from the property to the
Sumulong Highway, since the latter had no adequate outlet to
the public highway. The petitioner asserts that it agreed to

buy the property covered by TCT No. 78085 because of the

grant by the respondent of a right of way and an option in its
favor to buy a portion of the property covered by TCT No.
78085. It contends that the respondent never objected to
Roxas' acceptance of its offer to purchase the property and
the terms and conditions therein; the respondent even
allowed Roxas to execute the deed of absolute sale in its
behalf. The petitioner asserts that the respondent even
received the purchase price of the property without any
objection to the terms and conditions of the said deed of sale.
The petitioner claims that it acted in good faith, and contends
that after having been benefited by the said sale, the
respondent is estopped from assailing its terms and
conditions. The petitioner notes that the respondent's Board
of Directors never approved any resolution rejecting the deed
of absolute sale executed by Roxas for and in its behalf. As
such, the respondent is obliged to sell a portion of Lot No.
491-A-3-B-1 covered by TCT No. 78085 with an area of 500
square meters at the price of P1,000 per square meter, based
on its evidence and Articles 649 and 651 of the New Civil
Code.
For its part, the respondent posits that Roxas was not so
authorized under the May 17, 1991 Resolution of its Board of
Directors to impose a burden or to grant a right of way in
favor of the petitioner on Lot No. 491-A-3-B-1, much less
convey a portion thereof to the petitioner. Hence, the
respondent was not bound by such provisions contained in the
deed of absolute sale. Besides, the respondent contends, the
petitioner cannot enforce its right to buy a portion of the said
property since there was no agreement in the deed of
absolute sale on the price thereof as well as the specific
portion and area to be purchased by the petitioner.
We agree with the respondent.
In San Juan Structural and Steel Fabricators, Inc. v. Court of
Appeals,21 we held that:
A corporation is a juridical person separate and
distinct from its stockholders or members.
Accordingly, the property of the corporation is not
the property of its stockholders or members and may
not be sold by the stockholders or members without
express authorization from the corporation's board of
directors. Section 23 of BP 68, otherwise known as
the Corporation Code of the Philippines, provides:
"SEC. 23. The Board of Directors or Trustees.
Unless otherwise provided in this Code,
the corporate powers of all corporations
formed under this Code shall be exercised,
all business conducted and all property of
such corporations controlled and held by the
board of directors or trustees to be elected
from among the holders of stocks, or where
there is no stock, from among the members
of the corporation, who shall hold office for
one (1) year and until their successors are
elected and qualified."
Indubitably, a corporation may act only through its
board of directors or, when authorized either by its
by-laws or by its board resolution, through its officers
or agents in the normal course of business. The
general principles of agency govern the relation
between the corporation and its officers or agents,
subject to the articles of incorporation, by-laws, or
relevant provisions of law. 22
Generally, the acts of the corporate officers within the scope
of their authority are binding on the corporation. However,
under Article 1910 of the New Civil Code, acts done by such
officers beyond the scope of their authority cannot bind the
corporation unless it has ratified such acts expressly or tacitly,
or is estopped from denying 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.
Thus, contracts entered into by corporate officers
beyond the scope of authority are unenforceable

against the corporation

corporation.23

unless

ratified

by

the

In BA Finance Corporation v. Court of Appeals,24 we also ruled

that persons dealing with an assumed agency, whether the
assumed agency be a general or special one, are bound at
their peril, if they would hold the principal liable, to ascertain
not only the fact of agency but also the nature and extent of
authority, and in case either is controverted, the burden of
proof is upon them to establish it.
In this case, the respondent denied authorizing its then
president Roberto B. Roxas to sell a portion of Lot No. 491-A-3B-1 covered by TCT No. 78085, and to create a lien or burden
thereon. The petitioner was thus burdened to prove that the
respondent so authorized Roxas to sell the same and to create
a lien thereon.
Central to the issue at hand is the May 17, 1991 Resolution of
the Board of Directors of the respondent, which is worded as
follows:
RESOLVED, as it is hereby resolved, that the
corporation, thru the President, sell to any interested
buyer, its 7,213-sq.-meter property at the Sumulong
Highway, Antipolo, Rizal, covered by Transfer
Certificate of Title No. N-78086, at a price and on
terms and conditions which he deems most
reasonable and advantageous to the corporation;
FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS,
President of the corporation, be, as he is hereby
authorized to execute, sign and deliver the pertinent
sales documents and receive the proceeds of sale for
and on behalf of the company.25
Evidently, Roxas was not specifically authorized under the
said resolution to grant a right of way in favor of the petitioner
on a portion of Lot No. 491-A-3-B-1 or to agree to sell to the
petitioner a portion thereof. The authority of Roxas, under the
resolution, to sell Lot No. 491-A-3-B-2 covered by TCT No.
78086 did not include the authority to sell a portion of the
adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real
rights thereon. Neither may such authority be implied from
the authority granted to Roxas to sell Lot No. 491-A-3-B-2 to
the petitioner "on such terms and conditions which he deems
most reasonable and advantageous." Under paragraph 12,
Article 1878 of the New Civil Code, a special power of attorney
is required to convey real rights over immovable
property.26 Article 1358 of the New Civil Code requires that
contracts which have for their object the creation of real rights
over immovable property must appear in a public
document.27 The petitioner cannot feign ignorance of the need
for Roxas to have been specifically authorized in writing by
the Board of Directors to be able to validly grant a right of
way and agree to sell a portion of Lot No. 491-A-3-B-1. The
rule is that if the act of the agent is one which requires
authority in writing, those dealing with him are charged with
notice of that fact.28
Powers of attorney are generally construed strictly and courts
will not infer or presume broad powers from deeds which do
not sufficiently include property or subject under which the
agent is to deal.29 The general rule is that the power of
attorney must be pursued within legal strictures, and the
agent can neither go beyond it; nor beside it. The act done
must be legally identical with that authorized to be done. 30 In
sum, then, the consent of the respondent to the assailed
provisions in the deed of absolute sale was not obtained;
hence, the assailed provisions are not binding on it.
We reject the petitioner's submission that, in allowing Roxas
to execute the contract to sell and the deed of absolute sale
and failing to reject or disapprove the same, the respondent
thereby gave him apparent authority to grant a right of way
over Lot No. 491-A-3-B-1 and to grant an option for the
respondent to sell a portion thereof to the petitioner. Absent
estoppel or ratification, apparent authority cannot remedy the
lack of the written power required under the statement of
frauds.31 In addition, the petitioner's fallacy is its wrong
assumption of the unproved premise that the respondent had
full knowledge of all the terms and conditions contained in the
deed of absolute sale when Roxas executed it.
It bears stressing that apparent authority is based on estoppel
and can arise from two instances: first, the principal may
knowingly permit the agent to so hold himself out as having

such authority, and in this way, the principal becomes

estopped to claim that the agent does not have such
authority; second, the principal may so clothe the agent with
the indicia of authority as to lead a reasonably prudent person
to believe that he actually has such authority. 32 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. The apparent power of an
agent is to be determined by the acts of the principal and not
by the acts of the agent.33
For the principle of apparent authority to apply, the petitioner
was burdened to prove the following: (a) the acts of the
respondent justifying belief in the agency by the petitioner;
(b) knowledge thereof by the respondent which is sought to
be held; and, (c) reliance thereon by the petitioner consistent
with ordinary care and prudence.34 In this case, there is no
evidence on record of specific acts made by the
respondent35 showing or indicating that it had full knowledge
of any representations made by Roxas to the petitioner that
the respondent had authorized him to grant to the respondent
an option to buy a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085, or to create a burden or lien thereon, or that
the respondent allowed him to do so.
The petitioner's contention that by receiving and retaining the
P5,000,000 purchase price of Lot No. 491-A-3-B-2, the
respondent effectively and impliedly ratified the grant of a
right of way on the adjacent lot, Lot No. 491-A-3-B-1, and to
grant to the petitioner an option to sell a portion thereof, is
barren of merit. It bears stressing that the respondent sold Lot
No. 491-A-3-B-2 to the petitioner, and the latter had taken
possession of the property. As such, the respondent had the
right to retain the P5,000,000, the purchase price of the
property it had sold to the petitioner. For an act of the
principal to be considered as an implied ratification of an
unauthorized act of an agent, such act must be inconsistent
with any other hypothesis than that he approved and
intended to adopt what had been done in his
name.36 Ratification is based on waiver the intentional
relinquishment of a known right. Ratification cannot be
inferred from acts that a principal has a right to do
independently of the unauthorized act of the agent. Moreover,
if a writing is required to grant an authority to do a particular
act, ratification of that act must also be in writing. 37 Since the
respondent had not ratified the unauthorized acts of Roxas,
the same are unenforceable.38 Hence, by the respondent's
retention of the amount, it cannot thereby be implied that it
had ratified the unauthorized acts of its agent, Roberto Roxas.
On the last issue, the petitioner contends that the CA erred in
dismissing its complaint for damages against the respondent
on its finding that the delay in the construction of its
warehouse was due to its (petitioner's) fault. The petitioner
asserts that the CA should have affirmed the ruling of the trial
court that the respondent failed to cause the eviction of the
squatters from the property on or before September 29, 1991;
hence, was liable for P5,660,000. The respondent, for its part,
asserts that the delay in the construction of the petitioner's
warehouse was due to its late filing of an application for a
building permit, only on May 28, 1992.
The petitioner's contention is meritorious. The respondent
does not deny that it failed to cause the eviction of the
squatters on or before September 29, 1991. Indeed, the
respondent does not deny the fact that when the petitioner
wrote the respondent demanding that the latter cause the
eviction of the squatters on April 15, 1992, the latter were still
in the premises. It was only after receiving the said letter in
April 1992 that the respondent caused the eviction of the
squatters, which thus cleared the way for the petitioner's
contractor to commence the construction of its warehouse
and secure the appropriate building permit therefor.
The petitioner could not be expected to file its application for
a building permit before April 1992 because the squatters
were still occupying the property. Because of the respondent's
failure to cause their eviction as agreed upon, the petitioner's
contractor failed to commence the construction of the
warehouse in October 1991 for the agreed price of
P8,649,000. In the meantime, costs of construction materials
spiraled. Under the construction contract entered into
between the petitioner and the contractor, the petitioner was
obliged to pay P11,804,160,39including the additional work
costing P1,441,500, or a net increase of P1,712,980. 40 The
respondent is liable for the difference between the original

cost of construction and the increase thereon, conformably to

Article 1170 of the New Civil Code, which reads:
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay
and those who in any manner contravene the tenor
thereof, are liable for damages.
The petitioner, likewise, lost the amount of P3,900,000 by way
of unearned income from the lease of the property to the
Ponderosa Leather Goods Company. The respondent is, thus,
liable to the petitioner for the said amount, under Articles
2200 and 2201 of the New Civil Code:
Art. 2200. Indemnification for damages shall
comprehend not only the value of the loss suffered,
but also that of the profits which the obligee failed to
obtain.
Art. 2201. In contracts and quasi-contracts, the
damages for which the obligor who acted in good
faith is liable shall be those that are the natural and
probable consequences of the breach of the
obligation, and which the parties have foreseen or
could have reasonably foreseen at the time the
obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude,
the obligor shall be responsible for all damages
which may be reasonably attributed to the nonperformance of the obligation.
In sum, we affirm the trial court's award of damages and
attorney's fees to the petitioner.
IN LIGHT OF ALL THE FOREGOING, judgment is hereby
rendered AFFIRMING the assailed Decision of the Court of
Appeals WITH MODIFICATION. The respondent is ordered to
pay to the petitioner the amount of P5,612,980 by way of
actual damages and P100,000 by way of attorney's fees. No
costs.
SO ORDERED.
Puno, J., Chairman, Austria-Martinez, Tinga, and ChicoNazario, JJ., concur.