Agency (1st Batch)

Agency (1st Batch) 1
G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,
vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.
G.R. No. 76933 May 29, 1991
AMERICAN AIRLINES, INCORPORATED, petitioner,
vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, INCORPORATED,respondents.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.
PADILLA, J.:p
This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in CA-G.R. No. CV-04294,
entitled "American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc." which affirmed, with modification, the decision 2 of
the Regional Trial Court of Manila, Branch IV, which dismissed the complaint and granted therein defendant's counterclaim for agent's
overriding commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the former authorized the latter to act as its exclusive
general sales agent within the Philippines for the sale of air passenger transportation. Pertinent provisions of the agreement are reproduced,
to wit:
WITNESSETH
In consideration of the mutual convenants herein contained, the parties hereto agree as follows:
1. Representation of American by Orient Air Services
Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines, including
any United States military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for
the sale of air passenger transportation. The services to be performed by Orient Air Services shall include:
(a) soliciting and promoting passenger traffic for the services of American and, if necessary,
employing staff competent and sufficient to do so;
(b) providing and maintaining a suitable area in its place of business to be used exclusively for the
transaction of the business of American;
(c) arranging for distribution of American's timetables, tariffs and promotional material to sales agents
and the general public in the assigned territory;
(d) servicing and supervising of sales agents (including such sub-agents as may be appointed by
Orient Air Services with the prior written consent of American) in the assigned territory including if
required by American the control of remittances and commissions retained; and
(e) holding out a passenger reservation facility to sales agents and the general public in the assigned
territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air
Services nor its sub-agents will perform services for any other air carrier similar to those to be performed hereunder for
American without the prior written consent of American. Subject to periodic instructions and continued consent from
American, Orient Air Services may sell air passenger transportation to be performed within the United States by other
scheduled air carriers provided American does not provide substantially equivalent schedules between the points
involved.
xxx xxx xxx
4. Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less commissions
to which Orient Air Services is entitled hereunder, not less frequently than semi-monthly, on the 15th and last days of
each month for sales made during the preceding half month.
All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange
orders, less applicable commissions to which Orient Air Services is entitled hereunder, are the property of American and
shall be held in trust by Orient Air Services until satisfactorily accounted for to American.
5. Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its subagents as follows:
(a) Sales agency commission
American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air Services or
its sub-agents over American's services and any connecting through air transportation, when made on American's ticket
stock, equal to the following percentages of the tariff fares and charges:
(i) For transportation solely between points within the United States and between such points and
Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic Conference of America.
(ii) For transportation included in a through ticket covering transportation between points other than
those described above: 8% or such other rate(s) as may be prescribed by the International Air
Transport Association.
(b) Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff
fares and charges for all sales of transportation over American's service by Orient Air Service or its sub-agents.
xxx xxx xxx
10. Default
If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement or shall
become bankrupt or make any assignment for the benefit of or enter into any agreement or promise with its creditors or
go into liquidation, or suffer any of its goods to be taken in execution, or if it ceases to be in business, this Agreement
may, at the option of American, be terminated forthwith and American may, without prejudice to any of its rights under this
Agreement, take possession of any ticket forms, exchange orders, traffic material or other property or funds belonging to
American.
11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air Transport
Association and the Air Traffic Conference of America, and such rules or resolutions shall control in the event of any
conflict with the provisions hereof.
xxx xxx xxx
13. Termination
American may terminate the Agreement on two days' notice in the event Orient Air Services is unable to transfer to the
United States the funds payable by Orient Air Services to American under this Agreement. Either party may terminate the
Agreement without cause by giving the other 30 days' notice by letter, telegram or cable.
xxx xxx xxx 3
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of
sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of Manila,
Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order 4 averring the aforesaid
basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding
refunds of which there were available funds in the possession of the defendant, . . . to the damage and prejudice of plaintiff." 5
In its Answer 6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the complaint with respect to
plaintiff's entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that the
actions taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming
that American Air's precipitous conduct had occasioned prejudice to its business interests.
Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor, rendering a decision
dated 16 July 1984, the dispositive portion of which reads:
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and against
plaintiff dismissing the complaint and holding the termination made by the latter as affecting the GSA agreement illegal
and improper and order the plaintiff to reinstate defendant as its general sales agent for passenger tranportation in the
Philippines in accordance with said GSA agreement; plaintiff is ordered to pay defendant the balance of the overriding
commission on total flown revenue covering the period from March 16, 1977 to December 31, 1980 in the amount of
US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission per month
commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally
prevailing at the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of
payment. Further, plaintiff is directed to pay defendant the amount of One Million Five Hundred Thousand
(Pl,500,000.00) pesos as and for exemplary damages; and the amount of Three Hundred Thousand (P300,000.00)
pesos as and by way of attorney's fees.
Costs against plaintiff. 7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of
the court a quo on their material points but with some modifications with respect to the monetary awards granted. The dispositive portion of
the appellate court's decision is as follows:
WHEREFORE, with the following modifications
1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of the latter's overriding
commission covering the period March 16, 1977 to December 31, 1980, or its Philippine peso equivalent in accordance
with the official rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding commission per month starting
January 1, 1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in accordance with the official
rate of exchange legally prevailing on July 10, 1981, the date the counterclaim was filed
3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with counterclaim
was filed, until full payment;
4) American is ordered to pay Orient exemplary damages of P200,000.00;
5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.
the rest of the appealed decision is affirmed.
Costs against American. 8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and arguing for its reversal. The
appellate court's decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration of the
trial court's ruling with respect to the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied
American Air's motion and with respect to that of Orient Air, ruled thus:
Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's award of
exemplary damages and attorney's fees, but granted insofar as the rate of exchange is concerned. The decision of
January 27, 1986 is modified in paragraphs (1) and (2) of the dispositive part so that the payment of the sums mentioned
therein shall be at their Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on
the date of actual payment. 9
Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in G.R. No. 76931 and American
Air as petitioner in G.R. No. 76933. By resolution 10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the case at
bar.
The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. It is the stand of American
Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air, otherwise referred to as
"ticketed sales." As basis thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is quoted as follows:
5. Commissions
a) . . .
b) Overriding Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff
fees and charges for all sales of transportation over American's services by Orient Air Services or its subagents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents, it is
American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales. This is
supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission,
the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American
Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its
designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over American
Air's services are necessarily by Orient Air." 11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain the
meaning of its provisions. 12 The various stipulations in the contract must be read together to give effect to all. 13 After a careful examination
of the records, the Court finds merit in the contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing
principles, entitles it to the 3% overriding commission based on total revenue, or as referred to by the parties, "total flown revenue."
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American
Air's services for air passenger transportation, and the solicitation of sales therefor. In return for such efforts and services, Orient Air was to
be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of tariff fares and charges from sales by
Orient Air when made on American Air ticket stock; and second, an overriding commission of 3% of tariff fares and charges for all sales of
passenger transportation over American Air services. It is immediately observed that the precondition attached to the first type of commission
does not obtain for the second type of commissions. The latter type of commissions would accrue for sales of American Air services made
not on its ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents.
To rule otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would erase any distinction
between the two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a contract with
meaningless provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.
An additional point before finally disposing of this issue. It is clear from the records that American Air was the party responsible for the
preparation of the Agreement. Consequently, any ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e., construed
against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil
Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who caused the
obscurity. 14 To put it differently, when several interpretations of a provision are otherwise equally proper, that interpretation or construction is
to be adopted which is most favorable to the party in whose favor the provision was made and who did not cause the ambiguity. 15 We
therefore agree with the respondent appellate court's declaration that:
Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the party who
drafted it. 16
We now turn to the propriety of American Air's termination of the Agreement. The respondent appellate court, on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement,
Exh. F, which provides for remittances to American less commissions to which Orient is entitled, and from paragraph 5(d)
which specifically allows Orient to retain the full amount of its commissions. Since, as stated ante, Orient is entitled to the
3% override. American's premise, therefore, for the cancellation of the Agreement did not exist. . . ."
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding commission
based on total flown revenue. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was, in
fact, a situation where the latter acted in accordance with the Agreementthat of retaining from the sales proceeds its accrued commissions
before remitting the balance to American Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air was
clearly justified in retaining and refusing to remit the sums claimed by American Air. The latter's termination of the Agreement was, therefore,
without cause and basis, for which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court modified by reduction the trial court's award of exemplary damages and attorney's
fees. This Court sees no error in such modification and, thus, affirms the same.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court. We refer particularly to the
lower court's decision ordering American Air to "reinstate defendant as its general sales agent for passenger transportation in the Philippines
in accordance with said GSA Agreement."
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air.
Such would be violative of the principles and essence of agency, defined by law as a contract whereby "a person binds himself to render
some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER . 17 (emphasis supplied) In an agent-principal relationship, the personality of the principal is extended through the facility of the
agent. In so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such
a relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The
Agreement itself between the parties states that "either party may terminate the Agreement without cause by giving the other 30 days' notice
by letter, telegram or cable." (emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the respondent Court of Appeals, dated 27
January 1986 and 17 December 1986, respectively. Costs against petitioner American Air.
SO ORDERED.
G.R. No. 174610
July 14, 2009
SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners,

vs.
SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing business under the style PAPA TRANSPORT
SERVICES, Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, is the Decision 1dated 22 June 2006 and
Resolution2 dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987. The appellate court affirmed with modification the
Decision3 dated 22 April 2002 of the Regional Trial Court (RTC), Branch 46, of Manila, in Civil Case No. 98-89047, granting the Complaint for
Sum of Money of herein respondent Sprint Transport Services, Inc. (Sprint) after the alleged failure of herein petitioner Soriamont Steamship
Agencies, Inc. (Soriamont) to return the chassis units it leased from Sprint and pay the accumulated rentals for the same.
The following are the factual and procedural antecedents:
Soriamont is a domestic corporation providing services as a receiving agent for line load contractor vessels. Patrick Ronas (Ronas) is its
general manager.
On the other hand, Sprint is a domestic corporation engaged in transport services. Its co-respondent Ricardo Cruz Papa (Papa) is engaged
in the trucking business under the business name "Papa Transport Services" (PTS).
Sprint filed with the RTC on 2 June 1998 a Complaint 4 for Sum of Money against Soriamont and Ronas, docketed as Civil Case No. 9889047. Sprint alleged in its Complaint that: (a) on 17 December 1993, it entered into a lease agreement, denominated as Equipment Lease
Agreement (ELA) with Soriamont, wherein the former agreed to lease a number of chassis units to the latter for the transport of container
vans; (b) with authorization letters dated 19 June 1996 issued by Ronas on behalf of Soriamont, PTS and another trucker, Rebson Trucking,
were able to withdraw on 22 and 25 June 1996, from the container yard of Sprint, two chassis units (subject equipment), 5evidenced by
Equipment Interchange Receipts No. 14215 and No. 14222; (c) Soriamont and Ronas failed to pay rental fees for the subject equipment
since 15 January 1997; (d) Sprint was subsequently informed by Ronas, through a letter dated 17 June 1997, of the purported loss of the
subject equipment sometime in June 1997; and (e) despite demands, Soriamont and Ronas failed to pay the rental fees for the subject
equipment, and to replace or return the same to Sprint.
Sprint, thus, prayed for the RTC to render judgment:
1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages, in the amount of Five Hundred ThirtySeven Thousand Eight Hundred Pesos (P537,800.00) representing unpaid rentals and the replacement cost for the lost chassis
units.
2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of Fifty-Three Thousand Five Hundred Four
Pesos and Forty-Two centavos (P53,504.42) as interest and penalties accrued as of March 31, 1998 and until full satisfaction
thereof.
3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount equivalent to twenty-five percent (25%) of the
total amount claimed for and as attorneys fees plus Two Thousand Pesos (P2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the cost of the suit. 6
Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim. 7 Soriamont admitted therein to having a lease
agreement with Sprint, but only for the period 21 October 1993 to 21 January 1994. It denied entering into an ELA with respondent Sprint on
17 December 1993 as alleged in the Complaint. Soriamont further argued that it was not a party-in-interest in Civil Case No. 98-89047, since
it was PTS and Rebson Trucking that withdrew the subject equipment from the container yard of Sprint. Ronas was likewise not a party-ininterest in the case since his actions, assailed in the Complaint, were executed as part of his regular functions as an officer of Soriamont.
Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint 8 against Papa, who was doing business under the name
PTS. Soriamont and Ronas averred in their Third-Party Complaint that it was PTS and Rebson Trucking that withdrew the subject
equipments from the container yard of Sprint, and failed to return the same. Since Papa failed to file an answer to the Third-Party Complaint,
he was declared by the RTC to be in default.9
After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, finding Soriamont liable for the claim of Sprint, while
absolving Ronas and Papa from any liability. According to the RTC, Soriamont authorized PTS to withdraw the subject equipment. The
dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered in favor of [herein respondent] Sprint Transport Services, Inc. and against [herein petitioner]
Soriamont Steamship Agencies, Inc., ordering the latter to pay the former the following:
Three hundred twenty thousand pesos (P320,000) representing the value of the two chassis units with interest at the legal rate
from the filing of the complaint;
Two hundred seventy thousand one hundred twenty four & 42/100 pesos (P270,124.42) representing unpaid rentals with interest at
the legal rate from the filing of the complaint;
P20,000.00 as attorneys fees.
The rate of interest shall be increased to 12% per annum once this decision becomes final and executory.
Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability. 10
Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as CA-G.R. CV No. 74987.
The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne out by the records: (1) Sprint and Soriamont
entered into an ELA whereby the former leased chassis units to the latter for the specified daily rates. The ELA covered the period 21
October 1993 to 21 January 1994, but it contained an "automatic" renewal clause; (2) on 22 and 25 June 1996, Soriamont, through PTS and
Rebson Trucking, withdrew Sprint Chassis 2-07 with Plate No. NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-55 with Plate No.
NUP-533 Serial MOTZ-160080, from the container yard of Sprint; (3) Soriamont authorized the withdrawal by PTS and Rebson Trucking of
the subject equipment from the container yard of Sprint; and (4) the subject pieces of equipment were never returned to Sprint. In a letter to
Sprint dated 19 June 1997, Soriamont relayed that it was still trying to locate the subject equipment, and requested the former to refrain from
releasing more equipment to respondent PTS and Rebson Trucking.
Hence, the Court of Appeals decreed:
WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject to the modification that the specific rate of
legal interest per annum on both the P320,000.00 representing the value of the two chassis units, and on the P270,124.42 representing the
unpaid rentals, is six percent (6%), to be increased to twelve percent (12%) from the finality of this Decision until its full satisfaction. 11
In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion for Reconsideration of Soriamont for failing to present any
cogent and substantial matter that would warrant a reversal or modification of its earlier Decision.
Aggrieved, Soriamont12 filed the present Petition for Review with the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS SOLE ISSUE FOR RESOLUTION OF
WHETHER OR NOT AN AGENCY RELATIONSHIP EXISTED BETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN
PETITIONERS SORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA TRUCKING BUT TOTALLY DISREGARDING
AND FAILING TO RULE ON THE LIABILITY OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY
OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF THE THIRD-PARTY COMPLAINT WAS
TOTALLY IGNORED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING HEREIN PETITIONERS STEAMSHIP AGENCIES
SOLELY LIABLE. EVIDENCE ON RECORD SHOW THAT IT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW THE
SUBJECT CHASSIS. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN POSSESSION OF THE SAID SUBJECT CHASSIS
AND IT SHOULD BE HELD SOLELY LIABLE FOR THE LOSS THEREOF;
III.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT IGNORED A MATERIAL INCONSISTENCY IN THE
TESTIMONY OF PRIVATE RESPONDENT SPRINT TRANSPORTS WITNESS, MR. ENRICO G. VALENCIA. THE TESTIMONY OF MR.
VALENCIA WAS ERRONEOUSLY MADE THE BASIS FOR HOLDING HEREIN PETITIONERS LIABLE FOR THE LOSS OF THE SUBJECT
CHASSIS.
We find the Petition to be without merit.
The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized by Soriamont to secure possession of the
subject equipment from Sprint, pursuant to the existing ELA between Soriamont and Sprint. The authorization issued by Soriamont to PTS
established an agency relationship, with Soriamont as the principal and PTS as an agent. Resultantly, the actions taken by PTS as regards
the subject equipment were binding on Soriamont, making the latter liable to Sprint for the unpaid rentals for the use, and damages for the
subsequent loss, of the subject equipment.
Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw the subject equipment from the container yard
of Sprint. Although Soriamont admits that the authorization letter dated 19 June 1996 was under its letterhead, said letter was actually meant
for and sent to Harman Foods as shipper. It was then Harman Foods that tasked PTS to withdraw the subject equipment from Sprint.
Soriamont insists that the Court of Appeals merely presumed that an agency relationship existed between Soriamont and PTS, since there
was nothing in the records to evidence the same. Meanwhile, there is undisputed evidence that it was PTS that withdrew and was last in
possession of the subject equipment. Soriamont further calls attention to the testimony of Enrico Valencia (Valencia), a witness for Sprint,
actually supporting the position of Soriamont that PTS did not present any authorization from Soriamont when it withdrew the subject
equipment from the container yard of Sprint. Assuming, for the sake of argument that an agency relationship did exist between Soriamont
and PTS, the latter should not have been exonerated from any liability. The acts of PTS that resulted in the loss of the subject equipment
were beyond the scope of its authority as supposed agent of Soriamont. Soriamont never ratified, expressly or impliedly, such acts of PTS.
Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appeals based its conclusion that PTS withdrew
the subject equipment from the container yard of Sprint as an agent of Soriamont. In effect, Soriamont is raising questions of fact, the
resolution of which requires us to re-examine and re-evaluate the evidence presented by the parties below.
Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for review under Rule 45 of the Revised Rules of
Court. The jurisdiction of the Supreme Court in cases brought to it from the Court of Appeals is limited to reviewing errors of law, the findings
of fact of the appellate court being conclusive. We have emphatically declared that it is not the function of this Court to analyze or weigh such
evidence all over again, its jurisdiction being limited to reviewing errors of law that may have been committed by the lower court. 13
These questions of fact were threshed out and decided by the trial court, which had the firsthand opportunity to hear the parties conflicting
claims and to carefully weigh their respective sets of evidence. The findings of the trial court were subsequently affirmed by the Court of
Appeals. Where the factual findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. We stress
that, subject to some exceptional instances, only questions of law not questions of fact may be raised before this Court in a petition for
review under Rule 45 of the Revised Rules of Court. 14
Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the Court of Appeals are premised on the
absence of evidence and are contradicted by the evidence on record, 15 we accommodate Soriamont by going over the same evidence
considered by the Court of Appeals and the RTC.
In Republic v. Court of Appeals,16 we explained that:
In civil cases, the party having the burden of proof must establish his case by a preponderance of evidence. Stated differently, the general
rule in civil cases is that a party having the burden of proof of an essential fact must produce a preponderance of evidence thereon (I Moore
on Facts, 4, cited in Vicente J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, p. 542, 1973 Edition). By
preponderance of evidence is meant simply evidence which is of greater weight, or more convincing than that which is offered in opposition
to it (32 C.J.S., 1051), The term 'preponderance of evidence' means the weight, credit and value of the aggregate evidence on either side
and is usually considered to be synonymous with the terms `greater weight of evidence' or 'greater weight, of the credible evidence.'
Preponderance of the evidence is a phrase which, in the last analysis, means probability of the truth. Preponderance of the evidence means
evidence which is more convincing to the court as worthy of belief than that which is offered in opposition thereto. x x x." (20 Am. Jur., 11001101)
After a review of the evidence on record, we rule that the preponderance of evidence indeed supports the existence of an agency
relationship between Soriamont and PTS.
It is true that a person dealing with an agent is not authorized, under any circumstances, to trust blindly the agents statements as to the
extent of his powers. Such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent
acts within the scope of his authority. The settled rule is that persons dealing with an assumed agent are bound at their peril; and if they
would hold the principal liable, they must 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 prove it. Sprint has successfully discharged this burden.
The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, of chassis units, explicitly authorized the
latter to appoint a representative who shall withdraw and return the leased chassis units to Sprint, to wit:
EQUIPMENT LEASE AGREEMENT
between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And
SORIAMONT STEAMSHIP AGENCIES, INC.
(LESSEE)
TERMS and CONDITIONS
xxxx
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished every time a chassis is withdrawn and returned to
a designated depot. The EIR relates the condition of the chassis at the point of on-hire/off-hire duly acknowledged by the LESSOR, Property
Custodian and the LESSEES authorized representative.
xxxx
5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE authorizes his representative to withdraw/return
the chassis on his behalf. Only persons with a duly accomplished and signed authorization slip shall be entertained by the LESSOR for
purposes of withdrawal/return of the chassis. The signatory in the Withdrawal/Return Slip has to be the signatory of the corresponding Lease
Agreement or the LESSEEs duly authorized representative(s). 17(Emphases ours.)
Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January 1994, and no longer in effect at the time the
subject pieces of equipment were reportedly withdrawn and lost by PTS. This contention of Soriamont is without merit, given that the same
ELA expressly provides for the "automatic" renewal thereof in paragraph 24, which reads:
There shall be an automatic renewal of the contract subject to the same terms and conditions as stipulated in the original contract unless
terminated by either party in accordance with paragraph no. 23 hereof. However, in this case, termination will take effect immediately. 18
There being no showing that the ELA was terminated by either party, then it was being automatically renewed in accordance with the aforequoted paragraph 24.
It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking should appear before Sprint in June 1996 with
authorization letters, issued by Soriamont, for the withdrawal of the subject equipment. 19 On the witness stand, Valencia testified, as the
operations manager of Sprint, as follows:
Atty. Porciuncula:
Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint Transport Services, Inc. and the
defendant Soriamont Steamship Agencies, Inc.?
A. Yes, Sir.
Q. What transactions are these, Mr. Witness?

A. They got from us chassis, Sir.
Court:
Q. Who among the two, who withdrew?
A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.
Atty. Porciuncula:
Q. And when were these chassis withdrawn, Mr. Witness?
A. June 1996, Sir.
Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis units from your container yard?
Witness:
Before they can withdraw the chassis they have to present withdrawal authority, Sir.
Atty. Porciuncula:
And what is this withdrawal authority?
A. This is to prove that they are authorizing their representative to get from us a chassis unit.
Q. And who is this authorization send to you, Mr. Witness?
A. Sometime a representative bring to our office the letter or the authorization or sometime thru fax, Sir.
Q. In this particular incident, Mr. Witness, how was it sent?
A. By fax, Sir.
Q. Is this standard operating procedure of Sprint Transport Services, Inc.?
A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorization they have to send us thru fax, but the
original copy of the authorization will be followed.
Atty. Porciuncula:
Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc. letter head with the headings
Authorization, are these the same withdrawal authority that you mentioned awhile ago?
A. Yes, Sir.
Atty. Porciuncula:
Your Honor, at this point may we request that these documents identified by the witness be marked as Exhibits JJ and KK, Your
Honor.
Court:
Mark them.
xxxx
Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?
A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.
Q. And are these trucking companies authorized to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal authority.
Atty. Porciuncula:
Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ and KK, could you please go over the same
and tell this Honorable Court where states there that the trucking companies which you mentioned awhile ago authorized to
withdraw?
A. Yes, Sir, it is stated in this withdrawal authority.
Atty. Porciuncula:
At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking identified by the witness be bracketed
and mark as our Exhibits JJ-1 and KK-1, Your Honor.
Court:
Mark them. Are these documents have dates?
Atty. Porciuncula:
Yes, Your Honor, both documents are dated June 19, 1996.
Q. Mr. Witness, after this what happened next?
A. After they presented to us the withdrawal authority, we called up Soriamont Steamship Agencies, Inc. to verify whether the one
sent to us through truck and the one sent to us through fax are one and the same.
Q. Then what happened next, Mr. Witness?
A. Then after the verification whether it is true, then we asked them to choose the chassis units then my checker would see to it
whether the chassis units are in good condition, then after that we prepared the outgoing Equipment Interchange Receipt, Sir.
Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment Interchange Receipt means?
A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc. really withdraw (sic) the chassis units,
Sir.
xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoing Equipment Interchange Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange Receipt Mr. Witness?

A. We have not made Incoming Equipment Interchange Receipt with respect to Soriamont Steamship Agencies, Inc., Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two chassis units. 20
In his candid and straightforward testimony, Valencia was able to clearly describe the standard operating procedure followed in the
withdrawal by Soriamont or its authorized representative of the leased chassis units from the container yard of Sprint. In the transaction
involved herein, authorization letters dated 19 June 1996 in favor of PTS and Rebson Trucking were faxed by Sprint to Soriamont, and were
further verified by Sprint through a telephone call to Soriamont. Valencias testimony established that Sprint exercised due diligence in its
dealings with PTS, as the agent of Soriamont.
Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the withdrawal of the subject equipment was not
authorized by it, but by the shipper/consignee, Harman Foods, which actually designated PTS and Rebson Trucking as truckers. However, a
scrutiny of the Equipment Interchange Receipts will show that these documents merely identified Harman Foods as the shipper/consignee,
and the location of said shipping line. It bears to stress that it was Soriamont that had an existing ELA with Sprint, not Harman Foods, for the
lease of the subject equipment. Moreover, as stated in the ELA, the outgoing Equipment Interchange Receipts shall be signed, upon the
withdrawal of the leased chassis units, by the lessee, Soriamont, or its authorized representative. In this case, we can only hold that the
driver of PTS signed the receipts for the subject equipment as the authorized representative of Soriamont, and no other.
Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, which stated:
As we are currently having a problem with regards to the whereabouts of the subject trailers, may we request your kind assistance in
refraining from issuing any equipment to the above trucking companies.
reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis units from Sprint, hence, necessitating an
express request from Soriamont for Sprint to discontinue recognizing said authority.1avvphi1
Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of the subject equipment, since PTS acted
beyond its authority as agent. Soriamont cites Article 1897 of the Civil Code, which provides:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers.
The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner in excess of its authority as agent, thus,
resulting in the loss of the subject equipment. To recall, the subject equipment was withdrawn and used by PTS with the authority of
Soriamont. And for PTS to be personally liable, as agent, it is vital that Soriamont be able to prove that PTS damaged or lost the said
equipment because it acted contrary to or in excess of the authority granted to it by Soriamont. As the Court of Appeals and the RTC found,
however, Soriamont did not adduce any evidence at all to prove said allegation. Given the lack of evidence that PTS was in any way
responsible for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even to Soriamont as its agent. In the absence of
evidence showing that PTS acted contrary to or in excess of the authority granted to it by its principal, Soriamont, this Court cannot merely
presume PTS liable to Soriamont as its agent. The only thing proven was that Soriamont, through PTS, withdrew the two chassis units from
Sprint, and that these have never been returned to Sprint.
Considering our preceding discussion, there is no reason for us to depart from the general rule that the findings of fact of the Court of
Appeals and the RTC are already conclusive and binding upon us.
Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal interest on theP320,000.00, representing the value
of the subject equipment, and on the P270,124.42, representing the unpaid rentals awarded in favor of Sprint, is proper and with legal basis.
Under Article 2209 of the Civil Code, when an obligation not constituting a loan or forbearance of money is breached, then an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. Clearly, the monetary judgment in
favor of Sprint does not involve a loan or forbearance of money; hence, the proper imposable rate of interest is six (6%) percent. Further, as
declared in Eastern Shipping Lines, Inc. v. Court of Appeals, 22 the interim period from the finality of the judgment awarding a monetary claim
until payment thereof is deemed to be equivalent to a forbearance of credit. Eastern Shipping Lines, Inc. v. Court of Appeals 23 explained, to
wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in determining
the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall
be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
Consistent with the foregoing jurisprudence, and later on affirmed in more recent cases, 24 when the judgment awarding a sum of money
becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent of a forbearance of credit. Thus, from the time the judgment becomes final until its full satisfaction,
the applicable rate of legal interest shall be twelve percent (12%).
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby DENIED. The Decision dated 22 June 2006 and
Resolution dated 7 September 2006 of the Court of Appeals in CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs against petitioner
Soriamont Steamship Agencies, Inc.
SO ORDERED.
SECOND DIVISION
[G.R. No. 175366, August 11, 2008]
J-PHIL MARINE, INC. AND/OR JESUS CANDAVA AND NORMAN SHIPPING SERVICES, PETITIONERS, VS. NATIONAL LABOR
RELATIONS COMMISSION AND WARLITO E. DUMALAOG, RESPONDENTS
DECISION
CARPIO MORALES, J.:
Warlito E. Dumalaog (respondent), who served as cook aboard vessels plying overseas, filed on March 4, 2002 before the National Labor
Relations Commission (NLRC) a pro-forma complaint[1] against petitioners manning agency J-Phil Marine, Inc. (J-Phil), its then president
Jesus Candava, and its foreign principal Norman Shipping Services for unpaid money claims, moral and exemplary damages, and attorney's
fees.
Respondent thereafter filed two amended pro forma complaints [2] praying for the award of overtime pay, vacation leave pay, sick leave pay,
and disability/medical benefits, he having, by his claim, contracted enlargement of the heart and severe thyroid enlargement in the discharge
of his duties as cook which rendered him disabled.
Respondent's total claim against petitioners was P864,343.30 plus P117,557.60 representing interest and P195,928.66 representing
attorney's fees.[3]
By Decision[4] of August 29, 2003, Labor Arbiter Fe Superiaso-Cellan dismissed respondent's complaint for lack of merit.
On appeal,[5] the NLRC, by Decision of September 27, 2004, reversed the Labor Arbiter's decision and awarded US$50,000.00 disability
benefit to respondent. It dismissed respondent's other claims, however, for lack of basis or jurisdiction. [6]Petitioners' Motion for
Reconsideration[7] having been denied by the NLRC,[8] they filed a petition for certiorari[9] before the Court of Appeals.
By Resolution[10] of September 22, 2005, the Court of Appeals dismissed petitioners' petition for, inter alia, failure to attach to the petition all
material documents, and for defective verification and certification. Petitioners' Motion for Reconsideration of the appellate court's Resolution
was denied;[11] hence, they filed the present Petition for Review on Certiorari.
During the pendency of the case before this Court, respondent, against the advice of his counsel, entered into a compromise agreement with
petitioners. He thereupon signed a Quitclaim and Release subscribed and sworn to before the Labor Arbiter. [12]
On May 8, 2007, petitioners filed before this Court a Manifestation [13] dated May 7, 2007 informing that, inter alia, they and respondent had
forged an amicable settlement.
On July 2, 2007, respondent's counsel filed before this Court a Comment and Opposition (to Petitioners' Manifestation of May 7, 2007)
[14]
interposing no objection to the dismissal of the petition but objecting to "the absolution" of petitioners from paying respondent the total
amount of Fifty Thousand US Dollars (US$50,000.00) or approximately P2,300,000.00, the amount awarded by the NLRC, he adding that:
There being already a payment of P450,000.00, and invoking the doctrine of parens patriae, we pray then [to] this Honorable Supreme
Court that the said amount be deducted from the [NLRC] judgment award of US$50,000.00, or approximately P2,300,000.00, and petitioners
be furthermore ordered to pay in favor of herein respondent [the] remaining balance thereof.
x x x x[15] (Emphasis in the original; underscoring supplied)
Respondent's counsel also filed before this Court, purportedly on behalf of respondent, a Comment[16] on the present petition.
The parties having forged a compromise agreement as respondent in fact has executed a Quitclaim and Release, the Court dismisses the
petition.
Article 227 of the Labor Code provides:
Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of
the Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or any court shall not
assume jurisdiction over issues involved therein except in case of non-compliance thereof or if there is prima facie evidence that the
settlement was obtained through fraud, misrepresentation, or coercion . (Emphasis and underscoring supplied)
In Olaybar v. NLRC,[17] the Court, recognizing the conclusiveness of compromise settlements as a means to end labor disputes, held that
Article 2037 of the Civil Code, which provides that "[a] compromise has upon the parties the effect and authority ofres judicata," applies
suppletorily to labor cases even if the compromise is not judicially approved. [18]
That respondent was not assisted by his counsel when he entered into the compromise does not render it null and void. Eurotech Hair
Systems, Inc. v. Go[19] so enlightens:
A compromise agreement is valid as long as the consideration is reasonable and the employee signed the waiver voluntarily, with a full
understanding of what he was entering into. All that is required for the compromise to be deemed voluntarily entered into is personal and
specific individual consent. Thus, contrary to respondent's contention, the employee's counsel need not be present at the time of the signing
of the compromise agreement.[20] (Underscoring supplied)
It bears noting that, as reflected earlier, the Quitclaim and Waiver was subscribed and sworn to before the Labor Arbiter.
Respondent's counsel nevertheless argues that "[t]he amount of Four Hundred Fifty Thousand Pesos (P450,000.00) given to respondent on
April 4, 2007, as `full and final settlement of judgment award,' is unconscionably low, and un-[C]hristian, to say the least." [21] Only respondent,
however, can impugn the consideration of the compromise as being unconscionable.
The relation of attorney and client is in many respects one of agency, and the general rules of agency apply to such relation. [22] The acts of an
agent are deemed the acts of the principal only if the agent acts within the scope of his authority. [23] The circumstances of this case indicate
that respondent's counsel is acting beyond the scope of his authority in questioning the compromise agreement.
That a client has undoubtedly the right to compromise a suit without the intervention of his lawyer [24] cannot be gainsaid, the only qualification
being that if such compromise is entered into with the intent of defrauding the lawyer of the fees justly due him, the compromise must be
subject to the said fees.[25] In the case at bar, there is no showing that respondent intended to defraud his counsel of his fees. In fact, the
Quitclaim and Release, the execution of which was witnessed by petitioner J-Phil's president Eulalio C. Candava and one Antonio C. Casim,
notes that the 20% attorney's fees would be "paid 12 April 2007 - P90,000."
WHEREFORE, the petition is, in light of all the foregoing discussion, DISMISSED.
Let a copy of this Decision be furnished respondent, Warlito E. Dumalaog, at his given address at No. 5-B Illinois Street, Cubao, Quezon
City.
SO ORDERED.
Quisumbing, (Chairperson), Corona, Velasco, Jr., and Brion, JJ., concur.
G.R. No. 159489
February 4, 2008
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,
vs.
CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her Attorney-in-Fact PONCIANO C.
MARQUEZ, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision 1 and Resolution,2 dated November 29, 2002 and August 5, 2003,
respectively, of the Court of Appeals in CA-G.R. CV No. 33568. The appellate court had affirmed the Decision 3 dated October 10, 1989 of the
Regional Trial Court (RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants below jointly and severally liable to the
plaintiffs, now herein respondents.
Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance
Company (Filipinas Life). Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the
first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for
policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed, she initially invested
and issued a post-dated check dated January 7, 1977 for P10,000.4 In return, Valle issued Pedroso his personal check forP800 for the
8%5 prepaid interest and a Filipinas Life "Agents Receipt" No. 807838. 6
Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the branch
manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. She
was even told she could "push through with the check" she issued. From the records, the check, with the endorsement of Alcantara at the
back, was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch.
Relying on the representations made by the petitioners duly authorized representatives Apetrior and Alcantara, as well as having known
agent Valle for quite some time, Pedroso waited for the maturity of her initial investment. A month after, her investment of P10,000 was
returned to her after she made a written request for its refund. The formal written request, dated February 3, 1977, was written on an interoffice memorandum form of Filipinas Life prepared by Alcantara. 7 To collect the amount, Pedroso personally went to the Escolta branch
where Alcantara gave her the P10,000 in cash. After a second investment, she made 7 to 8 more investments in varying amounts,
totaling P37,000 but at a lower rate of 5%8 prepaid interest a month. Upon maturity of Pedrosos subsequent investments, Valle would take
back from Pedroso the corresponding yellow-colored agents receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio made a total
investment of P49,5509 but at only 5% prepaid interest. However, when Pedroso tried to withdraw her investment, Valle did not want to return
some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money. With the
assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their respective investments, and to inquire why they had not
seen Valle for quite some time. But their attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the
respondents.
On appeal, the Court of Appeals affirmed the trial courts ruling and subsequently denied the motion for reconsideration.
Petitioner now comes before us raising a single issue:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS
DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND
SEVERALLY LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OF HOLDING ITS AGENT,
RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS.10
Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally liable to the herein respondents?
Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurance company and was not engaged in the
business of collecting investment money. It contends that the investment scheme offered to respondents by Valle, Apetrior and Alcantara was
outside the scope of their authority as agents of Filipinas Life such that, it cannot be held liable to the respondents. 11
On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments from them. In fact, Filipinas Lifes official
documents and facilities were used in consummating the transactions. These transactions, according to respondents, were confirmed by its
officers Apetrior and Alcantara. Respondents assert they exercised all the diligence required of them in ascertaining the authority of
petitioners agents; and it is Filipinas Life that failed in its duty to ensure that its agents act within the scope of their authority.
Considering the issue raised in the light of the submissions of the parties, we find that the petition lacks merit. The Court of Appeals
committed no reversible error nor abused gravely its discretion in rendering the assailed decision and resolution.
It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and P49,550, respectively. These were received by
Valle and remitted to Filipinas Life, using Filipinas Lifes official receipts, whose authenticity were not disputed. Valles authority to solicit and
receive investments was also established by the parties. When respondents sought confirmation, Alcantara, holding a supervisory position,
and Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon inquiry
and must discover at his own peril the agents authority, in this case, respondents did exercise due diligence in removing all doubts and in
confirming the validity of the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. 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. 12 The general
rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to
third persons.13 When the agent exceeds his authority, the agent becomes personally liable for the damage. 14 But even when the agent
exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent
had full powers.15 In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies
them, expressly or impliedly.16 Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority.17
Filipinas Life cannot profess ignorance of Valles acts. Even if Valles representations were beyond his authority as a debit/insurance agent,
Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valles acts. It cannot even be denied that Filipinas Life benefited
from the investments deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas Life had clothed Valle with apparent
authority; hence, it is now estopped to deny said authority. Innocent third persons should not be prejudiced if the principal failed to adopt the
needed measures to prevent misrepresentation, much more so if the principal ratified his agents acts beyond the latters authority. The act of
the agent is considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He who does a thing by an agent is
considered as doing it himself."18
WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated November 29, 2002 and August 5, 2003,
respectively, of the Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.
Costs against the petitioner.
SO ORDERED.
G.R. No. 159489
February 4, 2008
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,
vs.
CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her Attorney-in-Fact PONCIANO C.
MARQUEZ, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision 1 and Resolution,2 dated November 29, 2002 and August 5, 2003,
respectively, of the Court of Appeals in CA-G.R. CV No. 33568. The appellate court had affirmed the Decision 3 dated October 10, 1989 of the
Regional Trial Court (RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants below jointly and severally liable to the
plaintiffs, now herein respondents.
Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance
Company (Filipinas Life). Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. In the
first week of January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for
policyholders. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. Enticed, she initially invested
and issued a post-dated check dated January 7, 1977 for P10,000.4 In return, Valle issued Pedroso his personal check forP800 for the
8%5 prepaid interest and a Filipinas Life "Agents Receipt" No. 807838. 6
Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative assistant, who referred her to the branch
manager, Angel Apetrior. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. She
was even told she could "push through with the check" she issued. From the records, the check, with the endorsement of Alcantara at the
back, was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC), Escolta Branch.
Relying on the representations made by the petitioners duly authorized representatives Apetrior and Alcantara, as well as having known
agent Valle for quite some time, Pedroso waited for the maturity of her initial investment. A month after, her investment of P10,000 was
returned to her after she made a written request for its refund. The formal written request, dated February 3, 1977, was written on an interoffice memorandum form of Filipinas Life prepared by Alcantara. 7 To collect the amount, Pedroso personally went to the Escolta branch
where Alcantara gave her the P10,000 in cash. After a second investment, she made 7 to 8 more investments in varying amounts,
totaling P37,000 but at a lower rate of 5%8 prepaid interest a month. Upon maturity of Pedrosos subsequent investments, Valle would take
back from Pedroso the corresponding yellow-colored agents receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about the investment plan. Palacio made a total
investment of P49,5509 but at only 5% prepaid interest. However, when Pedroso tried to withdraw her investment, Valle did not want to return
some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands, refused to return her money. With the
assistance of their lawyer, they went to Filipinas Life Escolta Office to collect their respective investments, and to inquire why they had not
seen Valle for quite some time. But their attempts were futile. Hence, respondents filed an action for the recovery of a sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and Alcantara jointly and solidarily liable to the
respondents.
On appeal, the Court of Appeals affirmed the trial courts ruling and subsequently denied the motion for reconsideration.
Petitioner now comes before us raising a single issue:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS
DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND
SEVERALLY LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OF HOLDING ITS AGENT,
RENATO VALLE, SOLELY LIABLE TO THE RESPONDENTS.10
Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally liable to the herein respondents?
Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurance company and was not engaged in the
business of collecting investment money. It contends that the investment scheme offered to respondents by Valle, Apetrior and Alcantara was
outside the scope of their authority as agents of Filipinas Life such that, it cannot be held liable to the respondents. 11
On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments from them. In fact, Filipinas Lifes official
documents and facilities were used in consummating the transactions. These transactions, according to respondents, were confirmed by its
officers Apetrior and Alcantara. Respondents assert they exercised all the diligence required of them in ascertaining the authority of
petitioners agents; and it is Filipinas Life that failed in its duty to ensure that its agents act within the scope of their authority.
Considering the issue raised in the light of the submissions of the parties, we find that the petition lacks merit. The Court of Appeals
committed no reversible error nor abused gravely its discretion in rendering the assailed decision and resolution.
It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and P49,550, respectively. These were received by
Valle and remitted to Filipinas Life, using Filipinas Lifes official receipts, whose authenticity were not disputed. Valles authority to solicit and
receive investments was also established by the parties. When respondents sought confirmation, Alcantara, holding a supervisory position,
and Apetrior, the branch manager, confirmed that Valle had authority. While it is true that a person dealing with an agent is put upon inquiry
and must discover at his own peril the agents authority, in this case, respondents did exercise due diligence in removing all doubts and in
confirming the validity of the representations made by Valle.
Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. 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. 12 The general
rule is that the principal is responsible for the acts of its agent done within the scope of its authority, and should bear the damage caused to
third persons.13 When the agent exceeds his authority, the agent becomes personally liable for the damage. 14 But even when the agent
exceeds his authority, the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent
had full powers.15 In other words, the acts of an agent beyond the scope of his authority do not bind the principal, unless the principal ratifies
them, expressly or impliedly.16 Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by
another without authority.17
Filipinas Life cannot profess ignorance of Valles acts. Even if Valles representations were beyond his authority as a debit/insurance agent,
Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valles acts. It cannot even be denied that Filipinas Life benefited
from the investments deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas Life had clothed Valle with apparent
authority; hence, it is now estopped to deny said authority. Innocent third persons should not be prejudiced if the principal failed to adopt the
needed measures to prevent misrepresentation, much more so if the principal ratified his agents acts beyond the latters authority. The act of
the agent is considered that of the principal itself. Qui per alium facit per seipsum facere videtur. "He who does a thing by an agent is
considered as doing it himself."18
WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated November 29, 2002 and August 5, 2003,
respectively, of the Court of Appeals in CA-G.R. CV No. 33568 are AFFIRMED.
SO ORDERED.
G.R. No. 153057 August 7, 2006
MR. & MRS. GEORGE R. TAN, Petitioners,
vs.
G.V.T. ENGINEERING SERVICES, Acting through its Owner/ Manager GERINO V. TACTAQUIN, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Assailed in the present petition for review on certiorari under Rule 45 of the Rules of Court is the June 29, 2001 Decision 1 of the Court of
Appeals (CA) in CA-G.R. CV No. 59699 affirming with modification the Decision of the Regional Trial Court (RTC) of Quezon City, Branch 81
in Civil Case No. Q-90-7405; and its Resolution 2promulgated on April 10, 2002 denying petitioners Motion for Partial Reconsideration.
The facts are as follows:
On October 18, 1989, the spouses George and Susan Tan (spouses Tan) entered into a contract with G.V.T. Engineering Services (G.V.T.),
through its owner/manager Gerino Tactaquin (Tactaquin) for the construction of their residential house at Ifugao St., La Vista, Quezon City.
The contract price was P1,700,000.00. Since the spouses Tan have no knowledge about building construction, they hired the services of
Engineer Rudy Cadag (Cadag) to supervise the said construction. In the course of the construction, the spouses Tan caused several
changes in the plans and specifications and ordered the deletion of some items in G.V.T.s scope of work. This brought about differences
between the spouses Tan and Cadag, on one hand, and Tactaquin, on the other. Subsequently, the latter stopped the construction of the
subject house.
On December 4, 1990, G.V.T., through Tactaquin, filed a Complaint for specific performance and damages against the spouses Tan and
Cadag with the RTC of Quezon City contending that by reason of the changes in the plans and specifications of the construction project
ordered by Cadag and the spouses Tan, it was forced to borrow money from third persons at exorbitant interest; that several portions of their
contract were deleted but only to be awarded later to other contractors; that it suffered tremendous delay in the completion of the project
brought about by the spouses Tans delay in the delivery of construction materials on the jobsite; that all the aforementioned acts caused
undue prejudice and damage to it.
In their Answer with Counterclaims, the spouses Tan and Cadag alleged, among others, that G.V.T. performed several defective works; that
to avert further losses, the spouses Tan deleted some portions of the project covered by G.V.T.s contract and awarded other portions to
another contractor; that the changes ordered by the spouses Tan were agreed upon by the parties; that G.V.T., being a mere single
proprietorship has no legal personality and cannot be a party in a civil action.
Trial ensued and the court a quo made the following factual findings:
To begin with, it is not disputed that there was delay in the delivery of the needed construction materials which in turn caused tremendous
delay in project completion. The documentary evidence on record shows that plaintiff, practically during the entire period that he was working
on the project, complained to defendants about the non-delivery on time of the materials on the project site (Exhs. D, G, H, H-1, H-2, H-3, H4, and H-5). Plaintiffs request for prompt delivery of materials fell on deaf ears.
xxxx
Plaintiffs losses as a result of the delay were aggravated by cancellation by defendants of major portions of the project such as skylight
roofing, installation of cement tiles, soil poisoning and finishing among others, which were all included in the construction agreement but
were assigned to other contractors (TSN, 9/6/91); Exh. I).
In his testimony, defendant Cadag declared that thirteen (13) items in the construction agreement were deleted mainly due to the lack of
technical know-how of the plaintiff, coupled with lack of qualified personnel; that he immediately notified the plaintiff upon discovering the
defective workmanship (TSN, 5/26/93); and that he became aware of the imperfection in plaintiffs work as early as during the plastering of
the walls (TSN, 10/12/97). The evidence is clear however that plaintiffs attention about the alleged faulty work was called for the first time
only on November 16, 1990 when plaintiff was furnished with defendants letter bearing date of November 10, 1990 (Exh. 20) as their reply to
plaintiffs letter of even date.
xxxx
It bears pointing out that defendant Cadag testified that during the construction of the house of defendant spouses he was at the job site
everyday to see to it that the construction was being done according to the plans and specifications (TSN, 9/31/94). He was assisted in the
project by the other supervising representatives of defendants spouses, namely, Engr. Rogelio Menguito, Engr. Armando Menguito and Arch.
Hans Palma who went to the project site to attend the weekly meetings. It thus appears that there was a close monitoring by the defendant of
the construction by the plaintiff. 3
On the basis of the foregoing findings, the trial court concluded thus:
It is therefore the finding of this Court that defendants conclusions as to the workmanship and competence of plaintiff are unsupported and
without basis and that their act of deleting several major items from plaintiffs scope of work was uncalled for, if not done in bad faith.
Defendantss [sic] acts forced plaintiff to withdraw from the project. 4
Accordingly, the RTC rendered a Decision 5 with the following dispositive portion:
WHEREFORE, judgment is hereby rendered as follows:
1. Ordering defendants Rodovaldo Cadag and spouses George and Susan Tan to pay plaintiff, jointly and severally:
a) the sum of P366,340.00 representing the balance of the contract price;
b) the amount of P49,578.56 representing the 5% retention fee;
c) the amount of P45,000.00 as moral damages;
d) the amount of P100,000.00 for and as attorneys fees; and

e) the amount of P17,000.00 as litigation expenses.
2. Dismissing defendants counterclaims.
Costs against defendants.
IT IS ORDERED. 6
Aggrieved by the trial courts decision, the spouses Tan filed an appeal with the CA contending that the trial court erred in not dismissing the
complaint on the ground that G.V.T. has no legal capacity to sue; in not finding that it was G.V.T. which caused the delay in the construction
of the subject residential house; in awarding amounts in favor of G.V.T. representing the balance of the contract price, retention fee, moral
damages and attorneys fees; and in finding Cadag jointly and severally liable with the spouses Tan.
In its Decision of June 29, 2001, the CA affirmed with modification the judgment of the trial court, to wit:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED by deleting the awards for moral damages, attorneys fees
and litigation expenses and dismissing the case against appellant Rodovaldo Cadag. In all other respect, the challenged judgment
is AFFIRMED. Costs against the appellant-spouses George and Susan Tan.
SO ORDERED. 7
Both parties filed their respective Motions for Partial Reconsideration but these were denied by the CA in its Resolution of April 10, 2002.
Hence, herein petition by the spouses Tan based on the following assignments of errors:
1. RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS DID NOT VIOLATE THEIR CONSTRUCTION
AGREEMENT WITH THE PRIVATE RESPONDENT; HENCE, THEY CANNOT BE REQUIRED TO PAY THE AMOUNTS OF P366,340.00
REPRESENTING THE BALANCE OF THE CONTRACT PRICE OFP1,700,000.00 AND P49,578.56 REPRESENTING 5 PERCENT
RETENTION FEE.
xxxx
2. RESPONDENT COURT OF APPEALS LIKEWISE ERRED IN NOT ABSOLVING THE PETITIONERS FROM LIABILITY TO PRIVATE
RESPONDENT.
xxxx
3. RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING THE DISMISSAL OF CIVIL CASE NO. Q-90-7405 FOR LACK
OF JURISDICTION ON THE PART OF THE LOWER COURT. 9
Petitioners contend that since Tactaquin consented and acquiesced to the changes and alterations made in the plan of the subject house he
cannot complain and discontinue the construction of the said house. Petitioners assert that it would be highly unfair and unjust for them to be
required to pay the amount representing the cost of the remaining unfinished portion of the house after it was abandoned by Tactaquin, for to
do so would enable the latter to unjustly enrich himself at their expense. With respect to the retention fee, petitioners argue that this amount
is payable only after the house is completed and turned over to them. Since respondent never completed the construction of the subject
house, petitioners claim that they should not be required to pay the retention fee. Petitioners also contend that respondent failed to prove that
it is entitled to actual damages.
As to the second assigned error, petitioners contend that since the CA dismissed the complaint against Cadag it follows that they should not
also be held liable because they merely relied upon and followed the advice and instructions of Cadag whom they hired to supervise the
construction of their house.
Anent the last assigned error, petitioners argue that G.V.T., being a sole proprietorship, is not a juridical person and, hence, has no legal
personality to institute the complaint with the trial court. Consequently, the trial court did not acquire jurisdiction over the case and all
proceedings conducted by it are null and void. Petitioners contend that they raised this issue in their Answer to the Complaint and in their
appeal to the CA.
In their Supplemental Petition, petitioners contend that under their contract with G.V.T., the latter agreed to employ only labor in the
construction of the subject house and that petitioners shall supply the materials; that it was error on the part of the CA and the trial court to
award the remaining balance of the contract price in favor of respondent despite the fact that some items from the latters scope of work
were deleted with its consent. Petitioners argue that since the above-mentioned items were deleted, it follows that respondent should not be
compensated for the work which it has not accomplished. Petitioners went further to claim that the value of the deleted items should, in fact,
be deducted from the original contract price. As to the delay in the construction of the subject house, petitioners assert that said delay was
attributable to respondent which failed to pay the wages of its workers who, in turn, refused to continue working; that petitioners were even
forced to pay the workers wages for the construction to continue.
In its Comment, respondent contends that the CA and the trial court are one in finding that petitioners are the ones responsible for breach of
contract, for unjustifiably deleting items agreed upon and delaying delivery of construction materials, and that these findings were never
rebutted by contrary evidence. Respondent asserts that findings of fact of the trial court especially when affirmed by the CA are conclusive
on the Supreme Court when supported by the evidence on record and that the Supreme Courts jurisdiction in cases brought before it from
the CA via Rule 45 of the Rules of Court is limited to reviewing errors of law.
As to the second assigned error, respondent asserts that petitioners argument is fallacious because the courts ruling absolving Cadag from
liability is based on the fact that the there is no privity of contract between him and respondent. This, respondent argues, cannot be said with
respect to it and petitioners.
As to the last assigned error, respondent quoted portions of this Courts ruling in the case of Yao Ka Sin Trading v. Court of Appeals [10], as
cited by the CA in its challenged Decision. In the said case, the Court basically held that no one has been misled by the error in the name of
the party plaintiff and to send the case back to the trial court for amendment and new trial for the simple purpose of changing the name of the
plaintiff is not justified considering that there would be, on re-trial, the same complaint, answer, defense, interests, witnesses and evidence.
The Court finds the petition without merit.
The Court finds it proper to discuss first the issue regarding G.V.T.s lack of legal personality to sue.
Petitioners raised the issue of G.V.T.s lack of legal personality to be a party in a civil action as a defense in their Answer with Counterclaims
and, thus, are not estopped from raising this issue before the CA or this Court. 11 It is true that G.V.T. Engineering Services, being a sole
proprietorship, is not vested with a legal personality to bring suit or defend an action in court. A perusal of the records of the present case
shows that respondents complaint filed with the trial court as well as its Appellees Brief submitted to the CA and its Comment filed before
this Court are all captioned as "G.V.T. Engineering Services acting through its owner/manager Gerino V. Tactaquin". In fact, the first
paragraph of the complaint refers to G.V.T. as the plaintiff. On this basis, it can be inferred that G.V.T. was the one which filed the complaint
and that it is only acting through its proprietor. However, subsequent allegations in the complaint show that the suit is actually brought by
Tactaquin. Averments therein refer to the plaintiff as a natural person. In fact, one of the prayers in the complaint is for the recovery of moral
damages by reason of "his sufferings, mental anguish, moral shock, sleepless nights, serious anxiety and besmirch[ed] reputation as an
Engineer and Contractor." It is settled that, as a rule, juridical persons are not entitled to moral damages because, unlike a natural person, it
cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental anguish or moral shock. 12 From
these, it can be inferred that it was actually Tactaquin who is the complainant. As such, the proper caption should have been "Gerino
Tactaquin doing business under the name and style of G.V.T. Engineering Services", as is usually done in cases filed involving sole
proprietorships. Nonetheless, these are matters of form and the Court finds the defect merely technical, which does not, in any way, affect its
jurisdiction.
This Court has held time and again that rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just and
inexpensive determination of the cases before them. 13 Liberal construction of the rules and the pleadings is the controlling principle to effect
substantial justice. 14 In fact, this Court is not impervious to instances when rules of procedure must yield to the loftier demands of substantial
justice and equity.15 Citing Aguam v. Court of Appeals [16], this Court held in Barnes v. Quijano [17] that:
The law abhors technicalities that impede the cause of justice. The court's primary duty is to render or dispense justice. "A litigation is not a
game of technicalities." "Lawsuits unlike duels are not to be won by a rapier's thrust. Technicality, when it deserts its proper office as an aid to
justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts." Litigations must be decided on their
merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the proper and just determination of his
cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid,
technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better and more prudent course of
action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than
dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice. 18
More importantly, there is no showing that respondents failure to place the correct caption in the complaint or to amend the same later
resulted in any prejudice on the part of petitioners. Thus, this Court held as early as the case of Alonso v. Villamor, 19 that:
No one has been misled by the error in the name of the party plaintiff. If we should by reason of this error send this case back for
amendment and new trial, there would be on the retrial the same complaint, the same answer, the same defense, the same interests, the
same witnesses, and the same evidence. The name of the plaintiff would constitute the only difference between the old trial and the new. In
our judgment there is not enough in a name to justify such action. 20
In the same manner, it would be an unjustifiable abandonment of the principles laid down in the above-mentioned cases if the Court would
nullify the proceedings had in the present case by the lower and appellate courts on the simple ground that the complaint filed with the trial
court was not properly captioned.
Coming to the merits of the case, the Court finds for the respondent.
As to the first assigned error, respondent did not refute petitioners contention that he gave his consent and acquiesced to the decision of
petitioners to change or alter the construction plan of the subject house. However, respondent contends that he did not agree to the deletions
made by petitioners of some of the items of work covered by their contract. Both the trial and appellate courts gave credence to respondents
contention when they ruled that petitioners were guilty of "deleting several major items from plaintiffs (herein respondents) scope of
work" 21 or "of unjustifiably deleting items agreed upon in the construction agreement and delaying the delivery of construction
materials" 22 thereby forcing respondent to withdraw from the project. From these acts of petitioners, both the trial and appellate courts made
categorical findings that petitioners are the ones guilty of breach of contract.
The Court upholds the factual findings of the trial and appellate courts with respect to petitioners liability for breach of their contract with
respondent. Questions of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for review may only raise questions of
law. 23 Moreover, factual findings of the trial court, particularly when affirmed by the Court of Appeals, are generally binding on this
Court. 24 More so, as in this case, where petitioners have failed to show that the courts below overlooked or disregarded certain facts or
circumstances of such import as would have altered the outcome of the case. 25 The Court, thus, finds no reason to set aside the lower
courts factual findings.
An examination of the records shows that respondent, indeed, refused to give his consent to the abovementioned deletions as evidenced by
his letters dated November 10, 1990 26 and November 23, 1990 27 addressed to the spouses Tan. Moreover, petitioners delay in the delivery
of construction materials is also evidenced by the minutes of the meeting held among the representatives of petitioners and respondent on
May 5, 1990 28 as well as the letter of respondent to petitioners dated June 15, 1990. 29
Having resolved that petitioners are guilty of breach of contract, the next question is whether they are liable to pay the amounts
of P366,340.00 and P49,578.56, which supposedly represent the balance of the price of their contract with respondent and 5% retention fee,
respectively.
There is no question that petitioners are liable for damages for having breached their contract with respondent. Article 1170 of the Civil Code
provides that 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. Moreover, the Court agrees with the trial court that under Article 1234 of the Civil Code,
if the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete
fulfillment less damages suffered by the obligee. In the present case, it is not disputed that respondent withdrew from the project on
November 23, 1990. Prior to such withdrawal, respondents gave to petitioners its 22nd Billing, dated October 29, 1990, where the
approximated percentage of work completed as of that date was 74% and the portion of the contract paid by petitioners so far
was P1,265,660.60. 30 This was not disputed by petitioners. Hence, respondent was able to establish that he has substantially performed his
obligation in good faith.
It is also established that a substantial part of the remaining items of work which were supposed to be done by respondent were deleted by
petitioners from his scope of work and awarded to other contractors, thus, forcing him to withdraw from the contract. These works include the
following: 1) soil poisoning; 2) T & G ceiling and flooring; 3) wood parquet; 4) vitrified floor tiles; 5) glazed and unglazed tiles; 6) washout; 7)
marble flooring; 8) vinyl flooring; 9) plywood sheeting; 10) plain GI sheets; 11) cement tiles; 12) skylights; 13) Fixtures electrical works; and,
14) Fixtures and accessories and plumbing works. 31
The Court finds no cogent reason to depart from the ruling of the trial court, as affirmed by the CA, that since petitioners are guilty of breach
of contract by deleting the above-mentioned items from respondents scope of work, the value of the said items should be credited in
respondents favor. It is established that if the above-mentioned deleted items would have been performed by respondent, as it should have
been pursuant to their contract, the construction is already 96% completed. 32 Hence, respondent should be paid 96% of the total contract
price of P1,700,000, or P1,632,000.00. The Court agrees with the trial court that since petitioners already paid respondent the total amount
of P1,265,660.00, the former should be held liable to pay the balance ofP366,340.00.
As to the 5% retention fee which respondent seeks to recover, petitioners do not deny that they have retained the same in their custody. The
only contention petitioners advance is that respondent is not entitled to recover this fee because it is stipulated under their contract that
petitioners shall only give them to respondent upon completion of the project and the same is turned over to them. In the present case,
respondent was not able to complete the project. However, his failure to complete his obligation under the contract was not due to his fault
but because he was forced to withdraw therefrom by reason of the breach committed by petitioners. Nonetheless, as earlier discussed, at the
time that respondent withdrew from the contract, he has already performed in good faith a substantial portion of his obligation. Considering
that he was not at fault, the law provides that he is entitled to recover as though there has been a strict and complete fulfillment of his
obligation. 33 On this basis, the Court finds no error in the ruling of the trial and appellate courts that respondent is entitled to the recovery of
5% retention fee.
The Court finds that respondent was only able to establish the amount of P20,772.05, which is the sum of all the retention fees appearing in
the bills presented by respondent in evidence. 34 Settled is the rule that actual or compensatory damages cannot be presumed but must be
proved with reasonable degree of certainty. 35 A court cannot rely on speculations, conjectures or guesswork as to the fact of damage but
must depend upon competent proof that they have indeed been suffered by the injured party and on the basis of the best evidence
obtainable as to the actual amount thereof. 36 It must point out specific facts that could provide the gauge for measuring whatever
compensatory or actual damages were borne. 37 Considering that the documentary evidence presented by respondent to prove the sum of
retention fees sought to be recovered totals an amount which is less than that granted by the trial court, it is only proper to reduce such
award in accordance with the evidence presented.
As to the second assigned error, it is wrong for petitioners to argue that since Cadag, whom they hired to supervise the construction of their
house, was absolved by the court from liability, they should not also be held liable.
The Court finds no error on the part of the CA in ruling that it is a basic principle in civil law, on relativity of contracts, that contracts can only
bind the parties who had entered into it and it cannot favor or prejudice third persons. Contracts take effect only between the parties, their
successors in interest, heirs and assigns. 38Moreover, every cause of action ex contractu must be founded upon a contract, oral or written,
either express or implied. 39 In the present case, the complaint for specific performance filed by herein respondent with the trial court was
based on the failure of the spouses Tan to faithfully comply with the provisions of their contract. In other words, respondents cause of action
was the breach of contract committed by the spouses Tan. Cadag is not a party to this contract. Neither did he enter into any contract with
respondent regarding the construction of the subject house. Hence, considering that respondents cause of action was breach of contract
and since there is no privity of contract between him and Cadag, there is no obligation or liability to speak about and thus no cause of action
arises. Clearly, Cadag, not being privy to the transaction between respondent and the spouses Tan, should not be made to answer for the
latters default.
Furthermore, Cadag was employed by the spouses Tan to supervise the construction of their house. Acting as such, his role is merely that of
an agent. The essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of the
principal. 40 A consequence of this representation is the liability of the principal for the acts of his agent performed within the limits of his
authority that is equivalent to the performance by the principal himself who should answer therefor. 41 In the present case, since there is
neither allegation nor evidence that Cadag exceeded his authority, all his acts are considered as those of his principal, the spouses Tan, who
are, therefore, the ones answerable for such acts.
WHEREFORE, the petition is partly GRANTED. The appealed Decision and Resolution of the Court of Appeals
areAFFIRMED with MODIFICATION whereby the amount of retention fee which petitioners are ordered to pay is reduced from P49,578.56
to P20,772.05.
No costs.
SO ORDERED.
G.R. No. 149353
June 26, 2006
JOCELYN B. DOLES, Petitioner,

vs.
MA. AURA TINA ANGELES, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the Decision 1dated April 30, 2001 of the
Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC),
Branch 21, City of Manila; and the CA Resolution 2 dated August 6, 2001 which denied petitioners Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific Performance with Damages against Jocelyn
B. Doles (petitioner), docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was indebted to the former in the concept of a
personal loan amounting to P405,430.00 representing the principal amount and interest; that on October 5, 1996, by virtue of a "Deed of
Absolute Sale",3 petitioner, as seller, ceded to respondent, as buyer, a parcel of land, as well as the improvements thereon, with an area of
42 square meters, covered by Transfer Certificate of Title No. 382532, 4 and located at a subdivision project known as Camella Townhomes
Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this property was mortgaged to National Home
Mortgage Finance Corporation (NHMFC) to secure petitioners loan in the sum of P337,050.00 with that entity; that as a condition for the
foregoing sale, respondent shall assume the undue balance of the mortgage and pay the monthly amortization of P4,748.11 for the
remainder of the 25 years which began on September 3, 1994; that the property was at that time being occupied by a tenant paying a
monthly rent of P3,000.00; that upon verification with the NHMFC, respondent learned that petitioner had incurred arrearages amounting
to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears, petitioner denied that she incurred them
and refused to pay the same; that despite repeated demand, petitioner refused to cooperate with respondent to execute the necessary
documents and other formalities required by the NHMFC to effect the transfer of the title over the property; that petitioner collected rent over
the property for the month of January 1997 and refused to remit the proceeds to respondent; and that respondent suffered damages as a
result and was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she borrowed money from respondent, and
averred that from June to September 1995, she referred her friends to respondent whom she knew to be engaged in the business of lending
money in exchange for personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo, Theresa
Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money from respondent and issued personal checks in payment
of the loan; that the checks bounced for insufficiency of funds; that despite her efforts to assist respondent to collect from the borrowers, she
could no longer locate them; that, because of this, respondent became furious and threatened petitioner that if the accounts were not settled,
a criminal case will be filed against her; that she was forced to issue eight checks amounting to P350,000 to answer for the bounced checks
of the borrowers she referred; that prior to the issuance of the checks she informed respondent that they were not sufficiently funded but the
latter nonetheless deposited the checks and for which reason they were subsequently dishonored; that respondent then threatened to initiate
a criminal case against her for violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute Deed of
Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed had no valid consideration; that she did not
appear before a notary public; that the Community Tax Certificate number on the deed was not hers and for which respondent may be
prosecuted for falsification and perjury; and that she suffered damages and lost rental as a result.
The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if valid, whether petitioner is obliged to
sign and execute the necessary documents to effect the transfer of her rights over the property to the respondent; and third, whether
petitioner is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:
WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for insufficiency of evidence. With costs against
plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or consideration: 5
Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and further admission that the checks issued by these
borrowers in payment of the loan obligation negates [sic] the cause or consideration of the contract of sale executed by and between plaintiff
and defendant. Moreover, the property is not solely owned by defendant as appearing in Entry No. 9055 of Transfer Certificate of Title No.
382532 (Annex A, Complaint), thus:
"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico Doles on the parcel of land described in
this certificate of title by virtue of the special power of attorney to mortgage, executed before the notary public, etc."
The rule under the Civil Code is that contracts without a cause or consideration produce no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF SALE BETWEEN THE
PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE. 6
On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower court dated July 29, 1998 is
REVERSED and SET ASIDE. A new one is entered ordering defendant-appellee to execute all necessary documents to effect transfer of
subject property to plaintiff-appellant with the arrearages of the formers loan with the NHMFC, at the latters expense. No costs.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount borrowed from the respondent to her friends.
Hence, the Deed of Absolute Sale was supported by a valid consideration, which is the sum of money petitioner owed respondent amounting
to P405,430.00, representing both principal and interest.
The CA took into account the following circumstances in their entirety: the supposed friends of petitioner never presented themselves to
respondent and that all transactions were made by and between petitioner and respondent; 7 that the money borrowed was deposited with
the bank account of the petitioner, while payments made for the loan were deposited by the latter to respondents bank account; 8 that
petitioner herself admitted in open court that she was "re-lending" the money loaned from respondent to other individuals for profit; 9 and that
the documentary evidence shows that the actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. 10
Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent, since the same is considered just or
legal if made to enforce ones claim through competent authority under Article 1335 11of the Civil Code;12 that with respect to the arrearages of
petitioner on her monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed part of the balance of
petitioners loan with the NHMFC which respondent agreed to assume; and that the amount of P3,000.00 representing the rental for January
1997 supposedly collected by petitioner, as well as the claim for damages and attorneys fees, is denied for insufficiency of evidence. 13
On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent categorically admitted in open court
that she acted only as agent or representative of Arsenio Pua, the principal financier and, hence, she had no legal capacity to sue petitioner;
and that the CA failed to consider the fact that petitioners father, who co-owned the subject property, was not impleaded as a defendant nor
was he indebted to the respondent and, hence, she cannot be made to sign the documents to effect the transfer of ownership over the entire
property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing matters had already been passed
upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner filed the present Petition and raised the
following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT.
II.
WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN HIS BEHALF
COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.
III.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14
Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower courts, jurisprudence has recognized
several exceptions, at least three of which are present in the instant case, namely: when the judgment is based on a misapprehension of
facts; when the findings of facts of the courts a quo are conflicting; and when the CA manifestly overlooked certain relevant facts not disputed
by the parties, which, if properly considered, could justify a different conclusion. 15 To arrive at a proper judgment, therefore, the Court finds it
necessary to re-examine the evidence presented by the contending parties during the trial of the case.
The Petition is meritorious.
The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then she is not a party to the loan; and that
the Deed of Sale executed between her and the respondent in their own names, which was predicated on that pre-existing debt, is void for
lack of consideration.
Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price certain in money 16 and that this sum
indisputably pertains to the debt in issue. This Court has consistently held that a contract of sale is null and void and produces no effect
whatsoever where the same is without cause or consideration. 17 The question that has to be resolved for the moment is whether this debt
can be considered as a valid cause or consideration for the sale.
To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends" the amount borrowed from respondent to
her friends: first, the friends of petitioner never presented themselves to respondent and that all transactions were made by and between
petitioner and respondent;18 second; the money passed through the bank accounts of petitioner and respondent; 19 third, petitioner herself
admitted that she was "re-lending" the money loaned to other individuals for profit; 20 and fourth, the documentary evidence shows that the
actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent. 21
On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant, during her cross-examination: 22
Atty. Diza:
q. You also mentioned that you were not the one indebted to the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they
are your friends?
witness:
a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred.
Atty. Diza:
q. And you have transact[ed] with the plaintiff?
witness:
a. Yes, sir.
Atty. Diza:
q. What is that transaction?
witness:
a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?
witness:
a. No, sir.
Atty. Diza:
q. Your friends and the plaintiff did not meet personally?
witness:
a. Yes, sir.
Atty. Diza:
q. You are intermediaries?
witness:
a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the name of Arsenio Pua
because the money came from Arsenio Pua.
xxxx
Atty. Diza:
q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you mentioned [a] while ago?
witness:
a. Yes, she knows the money will go to those persons.
Atty. Diza:
q. You are re-lending the money?
witness:
a. Yes, sir.
Atty. Diza:
q. What profit do you have, do you have commission?

witness:
a. Yes, sir.
Atty. Diza:
q. How much?
witness:
a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent, the real lender.
But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her cross examination: 23
Atty. Villacorta:
q. Who is this Arsenio Pua?
witness:
a. Principal financier, sir.
Atty. Villacorta:
q. So the money came from Arsenio Pua?
witness:
a. Yes, because I am only representing him, sir.
Other portions of the testimony of respondent must likewise be considered: 24
Atty. Villacorta:
q. So it is not actually your money but the money of Arsenio Pua?
witness:
a. Yes, sir.
Court:
q. It is not your money?
witness:
a. Yes, Your Honor.
Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are you aware of that?
witness:
a. I am aware of that.
Atty. Villacorta:
q. More or less she [accommodated] several friends of the defendant?
witness:
a. Yes, sir, I am aware of that.
xxxx
Atty. Villacorta:
q. And these friends of the defendant borrowed money from you with the assurance of the defendant?
witness:
a. They go direct to Jocelyn because I dont know them.
xxxx
Atty. Villacorta:
q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from you her friends who [are] in
need of money issued check[s] to you? There were checks issued to you?
witness:
a. Yes, there were checks issued.
Atty. Villacorta:
q. By the friends of the defendant, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of your assistance, the friends of the defendant who are in need of money were able to obtain loan to [sic] Arsenio
Pua through your assistance?
witness:
a. Yes, sir.
Atty. Villacorta:
q. So that occasion lasted for more than a year?

witness:
a. Yes, sir.
Atty. Villacorta:
q. And some of the checks that were issued by the friends of the defendant bounced, am I correct?
witness:
a. Yes, sir.
Atty. Villacorta:
q. And because of that Arsenio Pua got mad with you?
witness:
a. Yes, sir.
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed principal. She is also estopped to
deny that petitioner acted as agent for the alleged debtors, the friends whom she (petitioner) referred.
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is representation. 25 The question of whether an agency
has been created is ordinarily a question which may be established in the same way as any other fact, either by direct or circumstantial
evidence. The question is ultimately one of intention. 26Agency may even be implied from the words and conduct of the parties and the
circumstances of the particular case.27 Though the fact or extent of authority of the agents may not, as a general rule, be established from
the declarations of the agents alone, if one professes to act as agent for another, she may be estopped to deny her agency both as against
the asserted principal and the third persons interested in the transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual borrowers, did not present themselves to
[respondent]" as evidence that negates the agency relationshipit is sufficient that petitioner disclosed to respondent that the former was
acting in behalf of her principals, her friends whom she referred to respondent. For an agency to arise, it is not necessary that the principal
personally encounter the third person with whom the agent interacts. The law in fact contemplates, and to a great degree, impersonal
dealings where the principal need not personally know or meet the third person with whom her agent transacts: precisely, the purpose of
agency is to extend the personality of the principal through the facility of the agent. 29
In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they are representing someone else, and so
both of them are estopped to deny the same. It is evident from the record that petitioner merely refers actual borrowers and then collects and
disburses the amounts of the loan upon which she received a commission; and that respondent transacts on behalf of her "principal
financier", a certain Arsenio Pua. If their respective principals do not actually and personally know each other, such ignorance does not affect
their juridical standing as agents, especially since the very purpose of agency is to extend the personality of the principal through the facility
of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent to other individuals for profit, it must be
stressed that the manner in which the parties designate the relationship is not controlling. If an act done by one person in behalf of another is
in its essential nature one of agency, the former is the agent of the latter notwithstanding he or she is not so called. 30 The question is to be
determined by the fact that one represents and is acting for another, and if relations exist which will constitute an agency, it will be an agency
whether the parties understood the exact nature of the relation or not. 31
That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner issued checks in payment of the loan in
the name of Pua. If it is true that petitioner was "re-lending", then the checks should have been drawn in her name and not directly paid to
Pua.
With respect to the second point, particularly, the finding of the CA that the disbursements and payments for the loan were made through the
bank accounts of petitioner and respondent,
suffice it to say that in the normal course of commercial dealings and for reasons of convenience and practical utility it can be reasonably
expected that the facilities of the agent, such as a bank account, may be employed, and that a sub-agent be appointed, such as the bank
itself, to carry out the task, especially where there is no stipulation to the contrary. 32
In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan between their principals. Since the sale
is predicated on that loan, then the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been backed up by another consideration that is separate and
distinct from the debt: respondent averred in her complaint and testified that the parties had agreed that as a condition for the conveyance of
the property the respondent shall assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC. 33 This Court in
the recent past has declared that an assumption of a mortgage debt may constitute a valid consideration for a sale. 34
Although the record shows that petitioner admitted at the time of trial that she owned the property described in the TCT, 35 the Court must
stress that the Transfer Certificate of Title No. 382532 36 on its face shows that the owner of the property which admittedly forms the subject
matter of the Deed of Absolute Sale refers neither to the petitioner nor to her father, Teodorico Doles, the alleged co-owner. Rather, it states
that the property is registered in the name of "Household Development Corporation." Although there is an entry to the effect that the
petitioner had been granted a special power of attorney "covering the shares of Teodorico Doles on the parcel of land described in this
certificate,"37 it cannot be inferred from this bare notation, nor from any other evidence on the record, that the petitioner or her father held any
direct interest on the property in question so as to validly constitute a mortgage thereon 38 and, with more reason, to effect the delivery of the
object of the sale at the consummation stage.39 What is worse, there is a notation that the TCT itself has been "cancelled." 40
In view of these anomalies, the Court cannot entertain the
possibility that respondent agreed to assume the balance of the mortgage loan which petitioner allegedly owed to the NHMFC, especially
since the record is bereft of any factual finding that petitioner was, in the first place, endowed with any ownership rights to validly mortgage
and convey the property. As the complainant who initiated the case, respondent bears the burden of proving the basis of her complaint.
Having failed to discharge such burden, the Court has no choice but to declare the sale void for lack of cause. And since the sale is void, the
Court finds it unnecessary to dwell on the issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the
sale.
Moreover, even assuming the mortgage validly exists, the Court notes respondents allegation that the mortgage with the NHMFC was for 25
years which began September 3, 1994. Respondent filed her Complaint for Specific Performance in 1997. Since the 25 years had not
lapsed, the prayer of respondent to compel petitioner to execute necessary documents to effect the transfer of title is premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are REVERSED andSET ASIDE. The complaint
of respondent in Civil Case No. 97-82716 is DISMISSED.
SO ORDERED.
G.R. No. 152613 & No. 152628
June 23, 2006
APEX MINING CO., INC., petitioner,

vs.
SOUTHEAST MINDANAO GOLD MINING CORP., the mines adjudication board, provincial mining regulatory board (PMRB-DAVAO),
MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR, BALITE COMMUNAL PORTAL
MINING COOPERATIVE, DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS
COOPERATIVE, ROMEO ALTAMERA, THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO
GLORIA, EDWIN ASION, MACARIO HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO
CASTILLO, JOSE REA, GIL GANADO, PRIMITIVA LICAYAN, LETICIA ALQUEZA and joel brillantes management mining
corporation, Respondents.
x--------------------------------------x
G.R. No. 152619-20
June 23, 2006
BALITE COMMUNAL PORTAL MINING COOPERATIVE, petitioner,

vs.
SOUTHEAST MINDANAO GOLD MINING CORPORATION, APEX MINING CO., INC., the mines adjudication board, provincial mining
regulatory board (PMRB-DAVAO), MONKAYO INTEGRATED SMALL SCALE MINERS ASSOCIATION, INC., ROSENDO VILLAFLOR,
DAVAO UNITED MINERS COOPERATIVE, ANTONIO DACUDAO, PUTING-BATO GOLD MINERS COOPERATIVE, ROMEO ALTAMERA,
THELMA CATAPANG, LUIS GALANG, RENATO BASMILLO, FRANCISCO YOBIDO, EDUARDO GLORIA, EDWIN ASION, MACARIO
HERNANDEZ, REYNALDO CARUBIO, ROBERTO BUNIALES, RUDY ESPORTONO, ROMEO CASTILLO, JOSE REA, GIL GANADO,
PRIMITIVA LICAYAN, LETICIA ALQUEZA and joel brillantes management mining corporation,Respondents.
x--------------------------------------x
G.R. No. 152870-71
June 23, 2006
THE MINES ADJUDICATION BOARD AND ITS MEMBERS, THE HON. VICTOR O. RAMOS (Chairman), UNDERSECRETARY VIRGILIO
MARCELO (Member) and DIRECTOR HORACIO RAMOS (Member), petitioners,
vs.
SOUTHEAST MINADANAO GOLD MINING CORPORATION, Respondent.
DECISION
CHICO-NAZARIO, J.:
On 27 February 1931, Governor General Dwight F. Davis issued Proclamation No. 369, establishing the Agusan-Davao-Surigao Forest
Reserve consisting of approximately 1,927,400 hectares. 1
The disputed area, a rich tract of mineral land, is inside the forest reserve located at Monkayo, Davao del Norte, and Cateel, Davao Oriental,
consisting of 4,941.6759 hectares.2 This mineral land is encompassed by Mt. Diwata, which is situated in the municipalities of Monkayo and
Cateel. It later became known as the "Diwalwal Gold Rush Area." It has since the early 1980s been stormed by conflicts brought about by
the numerous mining claimants scrambling for gold that lies beneath its bosom.
On 21 November 1983, Camilo Banad and his group, who claimed to have first discovered traces of gold in Mount Diwata, filed a Declaration
of Location (DOL) for six mining claims in the area.
Camilo Banad and some other natives pooled their skills and resources and organized the Balite Communal Portal Mining Cooperative
(Balite).3
On 12 December 1983, Apex Mining Corporation (Apex) entered into operating agreements with Banad and his group.
From November 1983 to February 1984, several individual applications for mining locations over mineral land covering certain parts of the
Diwalwal gold rush area were filed with the Bureau of Mines and Geo-Sciences (BMG).
On 2 February 1984, Marcopper Mining Corporation (MMC) filed 16 DOLs or mining claims for areas adjacent to the area covered by the
DOL of Banad and his group. After realizing that the area encompassed by its mining claims is a forest reserve within the coverage of
Proclamation No. 369 issued by Governor General Davis, MMC abandoned the same and instead applied for a prospecting permit with the
Bureau of Forest Development (BFD).
On 1 July 1985, BFD issued a Prospecting Permit to MMC covering an area of 4,941.6759 hectares traversing the municipalities of Monkayo
and Cateel, an area within the forest reserve under Proclamation No. 369. The permit embraced the areas claimed by Apex and the other
individual mining claimants.
On 11 November 1985, MMC filed Exploration Permit Application No. 84-40 with the BMG. On 10 March 1986, the BMG issued to MCC
Exploration Permit No. 133 (EP 133).
Discovering the existence of several mining claims and the proliferation of small-scale miners in the area covered by EP 133, MMC thus filed
on 11 April 1986 before the BMG a Petition for the Cancellation of the Mining Claims of Apex and Small Scale Mining Permit Nos. (x-1)-04
and (x-1)-05 which was docketed as MAC No. 1061. MMC alleged that the areas covered by its EP 133 and the mining claims of Apex were
within an established and existing forest reservation (Agusan-Davao-Surigao Forest Reserve) under Proclamation No. 369 and that pursuant
to Presidential Decree No. 463,4 acquisition of mining rights within a forest reserve is through the application for a permit to prospect with the
BFD and not through registration of a DOL with the BMG.
On 23 September 1986, Apex filed a motion to dismiss MMCs petition alleging that its mining claims are not within any established or
proclaimed forest reserve, and as such, the acquisition of mining rights thereto must be undertaken via registration of DOL with the BMG and
not through the filing of application for permit to prospect with the BFD.
On 9 December 1986, BMG dismissed MMCs petition on the ground that the area covered by the Apex mining claims and MMCs permit to
explore was not a forest reservation. It further declared null and void MMCs EP 133 and sustained the validity of Apex mining claims over
the disputed area.
MMC appealed the adverse order of BMG to the Department of Environment and Natural Resources (DENR).
On 15 April 1987, after due hearing, the DENR reversed the 9 December 1996 order of BMG and declared MMCs EP 133 valid and
subsisting.
Apex filed a Motion for Reconsideration with the DENR which was subsequently denied. Apex then filed an appeal before the Office of the
President. On 27 July 1989, the Office of the President, through Assistant Executive Secretary for Legal Affairs, Cancio C. Garcia, 5 dismissed
Apexs appeal and affirmed the DENR ruling.
Apex filed a Petition for Certiorari before this Court. The Petition was docketed as G.R. No. 92605 entitled, "Apex Mining Co., Inc. v.
Garcia."6 On 16 July 1991, this Court rendered a Decision against Apex holding that the disputed area is a forest reserve; hence, the proper
procedure in acquiring mining rights therein is by initially applying for a permit to prospect with the BFD and not through a registration of DOL
with the BMG.
On 27 December 1991, then DENR Secretary Fulgencio Factoran, Jr. issued Department Administrative Order No. 66 (DAO No. 66)
declaring 729 hectares of the areas covered by the Agusan-Davao-Surigao Forest Reserve as non-forest lands and open to small-scale
mining purposes.
As DAO No. 66 declared a portion of the contested area open to small scale miners, several mining entities filed applications for Mineral
Production Sharing Agreement (MPSA).
On 25 August 1993, Monkayo Integrated Small Scale Miners Association (MISSMA) filed an MPSA application which was denied by the
BMG on the grounds that the area applied for is within the area covered by MMC EP 133 and that the MISSMA was not qualified to apply for
an MPSA under DAO No. 82,7 Series of 1990.
On 5 January 1994, Rosendo Villaflor and his group filed before the BMG a Petition for Cancellation of EP 133 and for the admission of their
MPSA Application. The Petition was docketed as RED Mines Case No. 8-8-94. Davao United Miners Cooperative (DUMC) and Balite
intervened and likewise sought the cancellation of EP 133.
On 16 February 1994, MMC assigned EP 133 to Southeast Mindanao Gold Mining Corporation (SEM), a domestic corporation which is
alleged to be a 100% -owned subsidiary of MMC.
On 14 June 1994, Balite filed with the BMG an MPSA application within the contested area that was later on rejected.
On 23 June 1994, SEM filed an MPSA application for the entire 4,941.6759 hectares under EP 133, which was also denied by reason of the
pendency of RED Mines Case No. 8-8-94. On 1 September 1995, SEM filed another MPSA application.
On 20 October 1995, BMG accepted and registered SEMs MPSA application and the Deed of Assignment over EP 133 executed in its favor
by MMC. SEMs application was designated MPSA Application No. 128 (MPSAA 128). After publication of SEMs application, the following
filed before the BMG their adverse claims or oppositions:
a) MAC Case No. 004 (XI) JB Management Mining Corporation;
b) MAC Case No. 005(XI) Davao United Miners Cooperative;

c) MAC Case No. 006(XI) Balite Integrated Small Scale Miners Cooperative;
d) MAC Case No. 007(XI) Monkayo Integrated Small Scale Miners Association, Inc. (MISSMA);
e) MAC Case No. 008(XI) Paper Industries Corporation of the Philippines;
f) MAC Case No. 009(XI) Rosendo Villafor, et al.;
g) MAC Case No. 010(XI) Antonio Dacudao;
h) MAC Case No. 011(XI) Atty. Jose T. Amacio;
i) MAC Case No. 012(XI) Puting-Bato Gold Miners Cooperative;
j) MAC Case No. 016(XI) Balite Communal Portal Mining Cooperative;
k) MAC Case No. 97-01(XI) Romeo Altamera, et al. 8
To address the matter, the DENR constituted a Panel of Arbitrators (PA) to resolve the following:
(a) The adverse claims on MPSAA No. 128; and
(b) The Petition to Cancel EP 133 filed by Rosendo Villaflor docketed as RED Case No. 8-8-94. 9
On 13 June 1997, the PA rendered a resolution in RED Mines Case No. 8-8-94. As to the Petition for Cancellation of EP 133 issued to MMC,
the PA relied on the ruling in Apex Mining Co., Inc. v. Garcia, 10and opined that EP 133 was valid and subsisting. It also declared that the BMG
Director, under Section 99 of the Consolidated Mines Administrative Order implementing Presidential Decree No. 463, was authorized to
issue exploration permits and to renew the same without limit.
With respect to the adverse claims on SEMs MPSAA No. 128, the PA ruled that adverse claimants petitions were not filed in accordance
with the existing rules and regulations governing adverse claims because the adverse claimants failed to submit the sketch plan containing
the technical description of their respective claims, which was a mandatory requirement for an adverse claim that would allow the PA to
determine if indeed there is an overlapping of the area occupied by them and the area applied for by SEM. It added that the adverse
claimants were not claim owners but mere occupants conducting illegal mining activities at the contested area since only MMC or its
assignee SEM had valid mining claims over the area as enunciated in Apex Mining Co., Inc. v. Garcia. 11 Also, it maintained that the adverse
claimants were not qualified as small-scale miners under DENR Department Administrative Order No. 34 (DAO No. 34), 12 or the
Implementing Rules and Regulation of Republic Act No. 7076 (otherwise known as the "Peoples Small-Scale Mining Act of 1991"), as they
were not duly licensed by the DENR to engage in the extraction or removal of minerals from the ground, and that they were large-scale
miners. The decretal portion of the PA resolution pronounces:
VIEWED IN THE LIGHT OF THE FOREGOING, the validity of Expoloration Permit No. 133 is hereby reiterated and all the adverse claims
against MPSAA No. 128 are DISMISSED.13
Undaunted by the PA ruling, the adverse claimants appealed to the Mines Adjudication Board (MAB). In a Decision dated 6 January 1998,
the MAB considered erroneous the dismissal by the PA of the adverse claims filed against MMC and SEM over a mere technicality of failure
to submit a sketch plan. It argued that the rules of procedure are not meant to defeat substantial justice as the former are merely secondary
in importance to the latter. Dealing with the question on EP 133s validity, the MAB opined that said issue was not crucial and was irrelevant
in adjudicating the appealed case because EP 133 has long expired due to its non-renewal and that the holder of the same, MMC, was no
longer a claimant of the Agusan-Davao-Surigao Forest Reserve having relinquished its right to SEM. After it brushed aside the issue of the
validity of EP 133 for being irrelevant, the MAB proceeded to treat SEMs MPSA application over the disputed area as an entirely new and
distinct application. It approved the MPSA application, excluding the area segregated by DAO No. 66, which declared 729 hectares within the
Diwalwal area as non-forest lands open for small-scale mining. The MAB resolved:
WHEREFORE, PREMISES CONSIDERED, the decision of the Panel of Arbitrators dated 13 June 1997 is hereby VACATED and a new one
entered in the records of the case as follows:
1. SEMs MPSA application is hereby given due course subject to the full and strict compliance of the provisions of the Mining Act
and its Implementing Rules and Regulations;
2. The area covered by DAO 66, series of 1991, actually occupied and actively mined by the small-scale miners on or before
August 1, 1987 as determined by the Provincial Mining Regulatory Board (PMRB), is hereby excluded from the area applied for by
SEM;
3. A moratorium on all mining and mining-related activities, is hereby imposed until such time that all necessary procedures,
licenses, permits, and other requisites as provided for by RA 7076, the Mining Act and its Implementing Rules and Regulations and
all other pertinent laws, rules and regulations are complied with, and the appropriate environmental protection measures and
safeguards have been effectively put in place;
4. Consistent with the spirit of RA 7076, the Board encourages SEM and all small-scale miners to continue to negotiate in good
faith and arrive at an agreement beneficial to all. In the event of SEMs strict and full compliance with all the requirements of the
Mining Act and its Implementing Rules and Regulations, and the concurrence of the small-scale miners actually occupying and
actively mining the area, SEM may apply for the inclusion of portions of the areas segregated under paragraph 2 hereof, to its
MPSA application. In this light, subject to the preceding paragraph, the contract between JB [JB Management Mining Corporation]
and SEM is hereby recognized.14
Dissatisfied, the Villaflor group and Balite appealed the decision to this Court. SEM, aggrieved by the exclusion of 729 hectares from its
MPSA application, likewise appealed. Apex filed a Motion for Leave to Admit Petition for Intervention predicated on its right to stake its claim
over the Diwalwal gold rush which was granted by the Court. These cases, however, were remanded to the Court of Appeals for proper
disposition pursuant to Rule 43 of the 1997 Rules of Civil Procedure. The Court of Appeals consolidated the remanded cases as CA-G.R. SP
No. 61215 and No. 61216.
In the assailed Decision15 dated 13 March 2002, the Court of Appeals affirmed in toto the decision of the PA and declared null and void the
MAB decision.
The Court of Appeals, banking on the premise that the SEM is the agent of MMC by virtue of its assignment of EP 133 in favor of SEM and
the purported fact that SEM is a 100% subsidiary of MMC, ruled that the transfer of EP 133 was valid. It argued that since SEM is an agent
of MMC, the assignment of EP 133 did not violate the condition therein prohibiting its transfer except to MMCs duly designated agent. Thus,
despite the non-renewal of EP 133 on 6 July 1994, the Court of Appeals deemed it relevant to declare EP 133 as valid since MMCs mining
rights were validly transferred to SEM prior to its expiration.
The Court of Appeals also ruled that MMCs right to explore under EP 133 is a property right which the 1987 Constitution protects and which
cannot be divested without the holders consent. It stressed that MMCs failure to proceed with the extraction and utilization of minerals did
not diminish its vested right to explore because its failure was not attributable to it.
Reading Proclamation No. 369, Section 11 of Commonwealth Act 137, and Sections 6, 7, and 8 of Presidential Decree No. 463, the Court of
Appeals concluded that the issuance of DAO No. 66 was done by the DENR Secretary beyond his power for it is the President who has the
sole power to withdraw from the forest reserve established under Proclamation No. 369 as non-forest land for mining purposes. Accordingly,
the segregation of 729 hectares of mining areas from the coverage of EP 133 by the MAB was unfounded.
The Court of Appeals also faulted the DENR Secretary in implementing DAO No. 66 when he awarded the 729 hectares segregated from the
coverage area of EP 133 to other corporations who were not qualified as small-scale miners under Republic Act No. 7076.
As to the petitions of Villaflor and company, the Court of Appeals argued that their failure to submit the sketch plan to the PA, which is a
jurisdictional requirement, was fatal to their appeal. It likewise stated the Villaflor and companys mining claims, which were based on their
alleged rights under DAO No. 66, cannot stand as DAO No. 66 was null and void. The dispositive portion of the Decision decreed:
WHEREFORE, premises considered, the Petition of Southeast Mindanao Gold Mining Corporation is GRANTED while the Petition of
Rosendo Villaflor, et al., is DENIED for lack of merit. The Decision of the Panel of Arbitrators dated 13 June 1997 is AFFIRMED in toto and
the assailed MAB Decision is hereby SET ASIDE and declared as NULL and VOID. 16
Hence, the instant Petitions for Review on Certiorari under Rule 45 of the Rules of Court filed by Apex, Balite and MAB.
During the pendency of these Petitions, President Gloria Macapagal-Arroyo issued Proclamation No. 297 dated 25 November 2002. This
proclamation excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral reservation
and as environmentally critical area. Subsequently, DENR Administrative Order No. 2002-18 was issued declaring an emergency situation in
the Diwalwal gold rush area and ordering the stoppage of all mining operations therein. Thereafter, Executive Order No. 217 dated 17 June
2003 was issued by the President creating the National Task Force Diwalwal which is tasked to address the situation in the Diwalwal Gold
Rush Area.
In G.R. No. 152613 and No. 152628, Apex raises the following issues:
I
WHETHER OR NOT SOUTHEAST MINDANAO GOLD MININGS [SEM] E.P. 133 IS NULL AND VOID DUE TO THE FAILURE OF
MARCOPPER TO COMPLY WITH THE TERMS AND CONDITIONS PRESCRIBED IN EP 133.
II
WHETHER OR NOT APEX HAS A SUPERIOR AND PREFERENTIAL RIGHT TO STAKE ITS CLAIM OVER THE ENTIRE 4,941
HECTARES AGAINST SEM AND THE OTHER CLAIMANTS PURSUANT TO THE TIME-HONORED PRINCIPLE IN MINING LAW THAT
"PRIORITY IN TIME IS PRIORITY IN RIGHT." 17
In G.R. No. 152619-20, Balite anchors its petition on the following grounds:
I
WHETHER OR NOT THE MPSA OF SEM WHICH WAS FILED NINE (9) DAYS LATE (JUNE 23, 1994) FROM THE FILING OF THE MPSA
OF BALITE WHICH WAS FILED ON JUNE 14, 1994 HAS A PREFERENTIAL RIGHT OVER THAT OF BALITE.
II
WHETHER OR NOT THE DISMISSAL BY THE PANEL OF ARBITRATORS OF THE ADVERSE CLAIM OF BALITE ON THE GROUND
THAT BALITE FAILED TO SUBMIT THE REQUIRED SKETCH PLAN DESPITE THE FACT THAT BALITE, HAD IN FACT SUBMITTED ON
TIME WAS A VALID DISMISSAL OF BALITES ADVERSE CLAIM.
III
WHETHER OR NOT THE ACTUAL OCCUPATION AND SMALL-MINING OPERATIONS OF BALITE PURSUANT TO DAO 66 IN THE 729
HECTARES WHICH WAS PART OF THE 4,941.6759 HECTARES COVERED BY ITS MPSA WHICH WAS REJECTED BY THE BUREAU
OF MINES AND GEOSCIENCES WAS ILLEGAL.18
In G.R. No. 152870-71, the MAB submits two issues, to wit:
I
WHETHER OR NOT EP NO. 133 IS STILL VALID AND SUBSISTING.
II
WHETHER OR NOT THE SUBSEQUENT ACTS OF THE GOVERNMENT SUCH AS THE ISSUANCE OF DAO NO. 66, PROCLAMATION
NO. 297, AND EXECUTIVE ORDER 217 CAN OUTWEIGH EP NO. 133 AS WELL AS OTHER ADVERSE CLAIMS OVER THE DIWALWAL
GOLD RUSH AREA.19
The common issues raised by petitioners may be summarized as follows:
I. Whether or not the Court of Appeals erred in upholding the validity and continuous existence of EP 133 as well as its transfer to
SEM;
II. Whether or not the Court of Appeals erred in declaring that the DENR Secretary has no authority to issue DAO No. 66; and
III. Whether or not the subsequent acts of the executive department such as the issuance of Proclamation No. 297, and DAO No.
2002-18 can outweigh Apex and Balites claims over the Diwalwal Gold Rush Area.
On the first issue, Apex takes exception to the Court of Appeals ruling upholding the validity of MMCs EP 133 and its subsequent transfer to
SEM asserting that MMC failed to comply with the terms and conditions in its exploration permit, thus, MMC and its successor-in-interest
SEM lost their rights in the Diwalwal Gold Rush Area. Apex pointed out that MMC violated four conditions in its permit. First, MMC failed to
comply with the mandatory work program, to complete exploration work, and to declare a mining feasibility. Second, it reneged on its duty to
submit an Environmental Compliance Certificate. Third, it failed to comply with the reportorial requirements. Fourth, it violated the terms of
EP 133 when it assigned said permit to SEM despite the explicit proscription against its transfer.
Apex likewise emphasizes that MMC failed to file its MPSA application required under DAO No. 82 20which caused its exploration permit to
lapse because DAO No. 82 mandates holders of exploration permits to file a Letter of Intent and a MPSA application not later than 17 July
1991. It said that because EP 133 expired prior to its assignment to SEM, SEMs MPSA application should have been evaluated on its own
merit.
As regards the Court of Appeals recognition of SEMs vested right over the disputed area, Apex bewails the same to be lacking in statutory
bases. According to Apex, Presidential Decree No. 463 and Republic Act No. 7942 impose upon the claimant the obligation of actually
undertaking exploration work within the reserved lands in order to acquire priority right over the area. MMC, Apex claims, failed to conduct
the necessary exploration work, thus, MMC and its successor-in-interest SEM lost any right over the area.
In its Memorandum, Balite maintains that EP 133 of MMC, predecessor-in-interest of SEM, is an expired and void permit which cannot be
made the basis of SEMs MPSA application.
Similarly, the MAB underscores that SEM did not acquire any right from MMC by virtue of the transfer of EP 133 because the transfer directly
violates the express condition of the exploration permit stating that "it shall be for the exclusive use and benefit of the permittee or his duly
authorized agents." It added that while MMC is the permittee, SEM cannot be considered as MMCs duly designated agent as there is no
proof on record authorizing SEM to represent MMC in its business dealings or undertakings, and neither did SEM pursue its interest in the
permit as an agent of MMC. According to the MAB, the assignment by MMC of EP 133 in favor of SEM did not make the latter the duly
authorized agent of MMC since the concept of an agent under EP 133 is not equivalent to the concept of assignee. It finds fault in the
assignment of EP 133 which lacked the approval of the DENR Secretary in contravention of Section 25 of Republic Act No. 7942 21 requiring
his approval for a valid assignment or transfer of exploration permit to be valid.
SEM, on the other hand, counters that the errors raised by petitioners Apex, Balite and the MAB relate to factual and evidentiary matters
which this Court cannot inquire into in an appeal by certiorari.
The established rule is that in the exercise of the Supreme Courts power of review, the Court not being a trier of facts, does not normally
embark on a re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of
facts of the Court of Appeals are conclusive and binding on the Court. 22 This rule, however, admits of exceptions as recognized by
jurisprudence, to wit:
(1) [w]hen the findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on misapprehension of facts; (5) when the
findings of facts are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the
petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence
of evidence and contradicted by the evidence on record; and (11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different conclusion. 23
Also, in the case of Manila Electric Company v. Benamira, 24 the Court in a Petition for Review on Certiorari, deemed it proper to look deeper
into the factual circumstances of the case since the Court of Appeals findings are at odds to those of the National Labor Relations
Commission (NLRC). Just like in the foregoing case, it is this Courts considered view that a re-evaluation of the attendant facts surrounding
the present case is appropriate considering that the findings of the MAB are in conflict with that of the Court of Appeals.
I
At the threshold, it is an undisputed fact that MMC assigned to SEM all its rights under EP 133 pursuant to a Deed of Assignment dated 16
February 1994.25
EP 133 is subject to the following terms and conditions 26 :
1. That the permittee shall abide by the work program submitted with the application or statements made later in support thereof,
and which shall be considered as conditions and essential parts of this permit;
2. That permittee shall maintain a complete record of all activities and accounting of all expenditures incurred therein subject to
periodic inspection and verification at reasonable intervals by the Bureau of Mines at the expense of the applicant;
3. That the permittee shall submit to the Director of Mines within 15 days after the end of each calendar quarter a report under oath
of a full and complete statement of the work done in the area covered by the permit;
4. That the term of this permit shall be for two (2) years to be effective from this date, renewable for the same period at the
discretion of the Director of Mines and upon request of the applicant;
5. That the Director of Mines may at any time cancel this permit for violation of its provision or in case of trouble or breach of peace
arising in the area subject hereof by reason of conflicting interests without any responsibility on the part of the government as to
expenditures for exploration that might have been incurred, or as to other damages that might have been suffered by the permittee;
and
6. That this permit shall be for the exclusive use and benefit of the permittee or his duly authorized agents and shall be used for
mineral exploration purposes only and for no other purpose.
Under Section 9027 of Presidential Decree No. 463, the applicable statute during the issuance of EP 133, the DENR Secretary, through
Director of BMG, is charged with carrying out the said law. Also, under Commonwealth Act No. 136, also known as "An Act Creating The
Bureau of Mines," which was approved on 7 November 1936, the Director of Mines has the direct charge of the administration of the mineral
lands and minerals, and of the survey, classification, lease or any other form of concession or disposition thereof under the Mining Act. 28 This
power of administration includes the power to prescribe terms and conditions in granting exploration permits to qualified entities. Thus, in the
grant of EP 133 in favor of the MMC, the Director of the BMG acted within his power in laying down the terms and conditions attendant
thereto.
Condition number 6 categorically states that the permit shall be for the exclusive use and benefit of MMC or its duly authorized agents. While
it may be true that SEM, the assignee of EP 133, is a 100% subsidiary corporation of MMC, records are bereft of any evidence showing that
the former is the duly authorized agent of the latter. For a contract of agency to exist, it is essential that the principal consents that the other
party, the agent, shall act on its behalf, and the agent consents so as to act. 29 In the case of Yu Eng Cho v. Pan American World Airways,
Inc.,30 this Court had the occasion to set forth the elements of agency, viz:
(1) consent, express or implied, of the parties to establish the relationship;
(2) the object is the execution of a juridical act in relation to a third person;
(3) the agent acts as a representative and not for himself;
(4) the agent acts within the scope of his authority.
The existence of the elements of agency is a factual matter that needs to be established or proven by evidence. The burden of proving that
agency is extant in a certain case rests in the party who sets forth such allegation. This is based on the principle that he who alleges a fact
has the burden of proving it.31 It must likewise be emphasized that the evidence to prove this fact must be clear, positive and convincing. 32
In the instant Petitions, it is incumbent upon either MMC or SEM to prove that a contract of agency actually exists between them so as to
allow SEM to use and benefit from EP 133 as the agent of MMC. SEM did not claim nor submit proof that it is the designated agent of MMC
to represent the latter in its business dealings or undertakings. SEM cannot, therefore, be considered as an agent of MMC which can use EP
133 and benefit from it. Since SEM is not an authorized agent of MMC, it goes without saying that the assignment or transfer of the permit in
favor of SEM is null and void as it directly contravenes the terms and conditions of the grant of EP 133.
Furthermore, the concept of agency is distinct from assignment. In agency, the agent acts not on his own behalf but on behalf of his
principal.33 While in assignment, there is total transfer or relinquishment of right by the assignor to the assignee. 34 The assignee takes the
place of the assignor and is no longer bound to the latter. The deed of assignment clearly stipulates:
1. That for ONE PESO (P1.00) and other valuable consideration received by the ASSIGNOR from the ASSIGNEE, the ASSIGNOR hereby
ASSIGNS, TRANSFERS and CONVEYS unto the ASSIGNEE whatever rights or interest the ASSIGNOR may have in the area situated in
Monkayo, Davao del Norte and Cateel, Davao Oriental, identified as Exploration Permit No. 133 and Application for a Permit to Prospect in
Bunawan, Agusan del Sur respectively.35
Bearing in mind the just articulated distinctions and the language of the Deed of Assignment, it is readily obvious that the assignment by
MMC of EP 133 in favor of SEM did not make the latter the formers agent. Such assignment involved actual transfer of all rights and
obligations MMC have under the permit in favor of SEM, thus, making SEM the permittee. It is not a mere grant of authority to SEM, as an
agent of MMC, to use the permit. It is a total abdication of MMCs rights over the permit. Hence, the assignment in question did not make
SEM the authorized agent of MMC to make use and benefit from EP 133.
The condition stipulating that the permit is for the exclusive use of the permittee or its duly authorized agent is not without any reason.
Exploration permits are strictly granted to entities or individuals possessing the resources and capability to undertake mining operations.
Without such a condition, non-qualified entities or individuals could circumvent the strict requirements under the law by the simple
expediency acquiring the permit from the original permittee.
We cannot lend recognition to the Court of Appeals theory that SEM, being a 100% subsidiary of MMC, is automatically an agent of MMC.
A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes, and properties
expressly authorized by law or incident to its existence. 36 It is an artificial being invested by law with a personality separate and distinct from
those of the persons composing it as well as from that of any other legal entity to which it may be related. 37 Resultantly, absent any clear
proof to the contrary, SEM is a separate and distinct entity from MMC.
The Court of Appeals pathetically invokes the doctrine of piercing the corporate veil to legitimize the prohibited transfer or assignment of EP
133. It stresses that SEM is just a business conduit of MMC, hence, the distinct legal personalities of the two entities should not be
recognized. True, the corporate mask may be removed when the corporation is just an alter ego or a mere conduit of a person or of another
corporation.38 For reasons of public policy and in the interest of justice, the corporate veil will justifiably be impaled only when it becomes a
shield for fraud, illegality or inequity committed against a third person. 39 However, this Court has made a caveat in the application of the
doctrine of piercing the corporate veil. Courts should be mindful of the milieu where it is to be applied. Only in cases where the corporate
fiction was misused to such an extent that injustice, fraud or crime was committed against another, in disregard of its rights may the veil be
pierced and removed. Thus, a subsidiary corporation may be made to answer for the liabilities and/or illegalities done by the parent
corporation if the former was organized for the purpose of evading obligations that the latter may have entered into. In other words, this
doctrine is in place in order to expose and hold liable a corporation which commits illegal acts and use the corporate fiction to avoid liability
from the said acts. The doctrine of piercing the corporate veil cannot therefore be used as a vehicle to commit prohibited acts because these
acts are the ones which the doctrine seeks to prevent.
To our mind, the application of the foregoing doctrine is unwarranted. The assignment of the permit in favor of SEM is utilized to circumvent
the condition of non-transferability of the exploration permit. To allow SEM to avail itself of this doctrine and to approve the validity of the
assignment is tantamount to sanctioning illegal act which is what the doctrine precisely seeks to forestall.
Quite apart from the above, a cursory consideration of the mining law pertinent to the case, will, indeed, demonstrate the infraction
committed by MMC in its assignment of EP 133 to SEM.
Presidential Decree No. 463, enacted on 17 May 1974, otherwise known as the Mineral Resources Development Decree, which governed
the old system of exploration, development, and utilization of mineral resources through "license, concession or lease" prescribed:
SEC. 97. Assignment of Mining Rights. A mining lease contract or any interest therein shall not be transferred, assigned, or subleased
without the prior approval of the Secretary: Provided, That such transfer, assignment or sublease may be made only to a qualified person
possessing the resources and capability to continue the mining operations of the lessee and that the assignor has complied with all the
obligations of the lease: Provided, further, That such transfer or assignment shall be duly registered with the office of the mining recorder
concerned. (Emphasis supplied.)
The same provision is reflected in Republic Act No. 7942, otherwise known as the Philippine Mining Act of 1995, which is the new law
governing the exploration, development and utilization of the natural resources, which provides:
SEC. 25. Transfer or Assignment. - An exploration permit may be transferred or assigned to a qualified person subject to the approval of the
Secretary upon the recommendation of the Director.
The records are bereft of any indication that the assignment bears the imprimatur of the Secretary of the DENR. Presidential Decree No.
463, which is the governing law when the assignment was executed, explicitly requires that the transfer or assignment of mining rights,
including the right to explore a mining area, must be with the prior approval of the Secretary of DENR. Quite conspicuously, SEM did not
dispute the allegation that the Deed of Assignment was made without the prior approval of the Secretary of DENR. Absent the prior approval
of the Secretary of DENR, the assignment of EP 133, was, therefore, without legal effect for violating the mandatory provision of Presidential
Decree No. 463.
An added significant omission proved fatal to MMC/SEMs cause. While it is true that the case of Apex Mining Co., Inc. v. Garcia 40 settled the
issue of which between Apex and MMC validly acquired mining rights over the disputed area, such rights, though, had been extinguished by
subsequent events. Records indicate that on 6 July 1993, EP 133 was extended for 12 months or until 6 July 1994. 41 MMC never renewed its
permit prior and after its expiration. Thus, EP 133 expired by non-renewal.
With the expiration of EP 133 on 6 July 1994, MMC lost any right to the Diwalwal Gold Rush Area. SEM, on the other hand, has not acquired
any right to the said area because the transfer of EP 133 in its favor is invalid. Hence, both MMC and SEM have not acquired any vested
right over the 4,941.6759 hectares which used to be covered by EP 133.
II
The Court of Appeals theorizes that DAO No. 66 was issued beyond the power of the DENR Secretary since the power to withdraw lands
from forest reserves and to declare the same as an area open for mining operation resides in the President.
Under Proclamation No. 369 dated 27 February 1931, the power to convert forest reserves as non-forest reserves is vested with the DENR
Secretary. Proclamation No. 369 partly states:
From this reserve shall be considered automatically excluded all areas which had already been certified and which in the future may be
proclaimed as classified and certified lands and approved by the Secretary of Agriculture and Natural Resources. 42
However, a subsequent law, Commonwealth Act No. 137, otherwise known as "The Mining Act" which was approved on 7 November 1936
provides:
Sec. 14. Lands within reservations for purposes other than mining, which, after such reservation is made, are found to be more valuable for
their mineral contents than for the purpose for which the reservation was made, may be withdrawn from such reservations by the President
with the concurrence of the National Assembly, and thereupon such lands shall revert to the public domain and be subject to disposition
under the provisions of this Act.
Unlike Proclamation No. 369, Commonwealth Act No. 137 vests solely in the President, with the concurrence of the National Assembly, the
power to withdraw forest reserves found to be more valuable for their mineral contents than for the purpose for which the reservation was
made and convert the same into non-forest reserves. A similar provision can also be found in Presidential Decree No. 463 dated 17 May
1974, with the modifications that (1) the declaration by the President no longer requires the concurrence of the National Assembly and (2) the
DENR Secretary merely exercises the power to recommend to the President which forest reservations are to be withdrawn from the
coverage thereof. Section 8 of Presidential Decree No. 463 reads:
SEC. 8. Exploration and Exploitation of Reserved Lands. When lands within reservations, which have been established for purposes other
than mining, are found to be more valuable for their mineral contents, they may, upon recommendation of the Secretary be withdrawn from
such reservation by the President and established as a mineral reservation.
Against the backdrop of the applicable statutes which govern the issuance of DAO No. 66, this Court is constrained to rule that said
administrative order was issued not in accordance with the laws. Inescapably, DAO No. 66, declaring 729 hectares of the areas covered by
the Agusan-Davao-Surigao Forest Reserve as non-forest land open to small-scale mining operations, is null and void as, verily, the DENR
Secretary has no power to convert forest reserves into non-forest reserves.
III
It is the contention of Apex that its right over the Diwalwal gold rush area is superior to that of MMC or that of SEM because it was the first
one to occupy and take possession of the area and the first to record its mining claims over the area.
For its part, Balite argues that with the issuance of DAO No. 66, its occupation in the contested area, particularly in the 729 hectares smallscale mining area, has entitled it to file its MPSA. Balite claims that its MPSA application should have been given preference over that of
SEM because it was filed ahead.
The MAB, on the other hand, insists that the issue on who has superior right over the disputed area has become moot and academic by the
supervening events. By virtue of Proclamation No. 297 dated 25 November 2002, the disputed area was declared a mineral reservation.
Proclamation No. 297 excluded an area of 8,100 hectares located in Monkayo, Compostela Valley, and proclaimed the same as mineral
reservation and as environmentally critical area, viz:
WHEREAS, by virtue of Proclamation No. 369, series of 1931, certain tracts of public land situated in the then provinces of Davao, Agusan
and Surigao, with an area of approximately 1,927,400 hectares, were withdrawn from settlement and disposition, excluding, however, those
portions which had been certified and/or shall be classified and certified as non-forest lands;
WHEREAS, gold deposits have been found within the area covered by Proclamation No. 369, in the Municipality of Monkayo, Compostela
Valley Province, and unregulated small to medium-scale mining operations have, since 1983, been undertaken therein, causing in the
process serious environmental, health, and peace and order problems in the area;
WHEREAS, it is in the national interest to prevent the further degradation of the environment and to resolve the health and peace and order
problems spawned by the unregulated mining operations in the said area;
WHEREAS, these problems may be effectively addressed by rationalizing mining operations in the area through the establishment of a
mineral reservation;
WHEREAS, after giving due notice, the Director of Mines and Geoxciences conducted public hearings on September 6, 9 and 11, 2002 to
allow the concerned sectors and communities to air their views regarding the establishment of a mineral reservation in the place in question;
WHEREAS, pursuant to the Philippine Mining Act of 1995 (RA 7942), the President may, upon the recommendation of the Director of Mines
and Geosciences, through the Secretary of Environment and Natural Resources, and when the national interest so requires, establish
mineral reservations where mining operations shall be undertaken by the Department directly or thru a contractor;
WHEREAS, as a measure to attain and maintain a rational and orderly balance between socio-economic growth and environmental
protection, the President may, pursuant to Presidential Decree No. 1586, as amended, proclaim and declare certain areas in the country as
environmentally critical;
NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, President of the Philippines, upon recommendation of the Secretary of the
Department of Environment and Natural Resources (DENR), and by virtue of the powers vested in me by law, do hereby exclude certain
parcel of land located in Monkayo, Compostela Valley, and proclaim the same as mineral reservation and as environmentally critical area,
with metes and bound as defined by the following geographical coordinates;
xxxx
with an area of Eight Thousand One Hundred (8,100) hectares, more or less. Mining operations in the area may be undertaken either by the
DENR directly, subject to payment of just compensation that may be due to legitimate and existing claimants, or thru a qualified contractor,
subject to existing rights, if any.
The DENR shall formulate and issue the appropriate guidelines, including the establishment of an environmental and social fund, to
implement the intent and provisions of this Proclamation.
Upon the effectivity of the 1987 Constitution, the State assumed a more dynamic role in the exploration, development and utilization of the
natural resources of the country.43 With this policy, the State may pursue full control and supervision of the exploration, development and
utilization of the countrys natural mineral resources. The options open to the State are through direct undertaking or by entering into co-
production, joint venture, or production-sharing agreements, or by entering into agreement with foreign-owned corporations for large-scale
exploration, development and utilization.44 Thus, Article XII, Section 2, of the 1987 Constitution, specifically states:
SEC. 2. All lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries,
forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State. With the exception of agricultural lands, all
other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full
control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or
production-sharing agreements with Filipino citizens, or corporations or associations at least sixty per centum of whose capital is owned by
such citizens. Such agreements may be for a period not exceeding twenty-five years, renewable for not more than twenty-five years, and
under such terms and conditions as may be provided by law. x x x
xxxx
The President may enter into agreements with foreign-owned corporations involving either technical or financial assistance for large-scale
exploration, development, and utilization of minerals, petroleum, and other mineral oils according to the general terms and conditions
provided by law, based on real contributions to the economic growth and general welfare of the country. x x x (Underscoring supplied.)
Recognizing the importance of the countrys natural resources, not only for national economic development, but also for its security and
national defense, Section 5 of Republic Act No. 7942 empowers the President, when the national interest so requires, to establish mineral
reservations where mining operations shall be undertaken directly by the State or through a contractor.
To implement the intent and provisions of Proclamation No. 297, the DENR Secretary issued DAO No. 2002-18 dated 12 August 2002
declaring an emergency situation in the Diwalwal Gold Rush Area and ordering the stoppage of all mining operations therein.
The issue on who has priority right over the disputed area is deemed overtaken by the above subsequent developments particularly with the
issuance of Proclamation 297 and DAO No. 2002-18, both being constitutionally-sanctioned acts of the Executive Branch. Mining operations
in the Diwalwal Mineral Reservation are now, therefore, within the full control of the State through the executive branch. Pursuant to Section
5 of Republic Act No. 7942, the State can either directly undertake the exploration, development and utilization of the area or it can enter into
agreements with qualified entities, viz:
SEC 5. Mineral Reservations. When the national interest so requires, such as when there is a need to preserve strategic raw materials for
industries critical to national development, or certain minerals for scientific, cultural or ecological value, the President may establish mineral
reservations upon the recommendation of the Director through the Secretary. Mining operations in existing mineral reservations and such
other reservations as may thereafter be established, shall be undertaken by the Department or through a contractor x x x .
It is now up to the Executive Department whether to take the first option, i.e., to undertake directly the mining operations of the Diwalwal Gold
Rush Area. As already ruled, the State may not be precluded from considering a direct takeover of the mines, if it is the only plausible
remedy in sight to the gnawing complexities generated by the gold rush. The State need be guided only by the demands of public interest in
settling on this option, as well as its material and logistic feasibility. 45 The State can also opt to award mining operations in the mineral
reservation to private entities including petitioners Apex and Balite, if it wishes. The exercise of this prerogative lies with the Executive
Department over which courts will not interfere.
WHEREFORE, premises considered, the Petitions of Apex, Balite and the MAB are PARTIALLY GRANTED, thus:
1. We hereby REVERSE and SET ASIDE the Decision of the Court of Appeals, dated 13 March 2002, and hereby declare that EP
133 of MMC has EXPIRED on 7 July 1994 and that its subsequent transfer to SEM on 16 February 1994 is VOID.
2. We AFFIRM the finding of the Court of Appeals in the same Decision declaring DAO No. 66 illegal for having been issued in
excess of the DENR Secretarys authority.
Consequently, the State, should it so desire, may now award mining operations in the disputed area to any qualified entity it may determine.
No costs.
SO ORDERED.
G.R. No. 144805 June 8, 2006
EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,

vs.
ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK &
TRUST COMPANY, Respondents.
DECISION
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the Decision 1 of the Court of Appeals (CA) in CA-G.R. CV No. 51022, which affirmed the
Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution 2 of the CA denying the
motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it had been engaged in the
manufacture of roofing materials and pipe products. Its manufacturing operations were conducted on eight parcels of land with a total area of
47,233 square meters. The properties, located in Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos.
451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium.3 Jack Glanville, an Australian citizen, was the General Manager and President of EC, while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the
country. The Committee for Asia of ESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of the eight parcels of
land. Adams engaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers.
Glanville later showed the properties to Marquez.
Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua, Jr. of the Litonjua & Company, Inc. In a
Letter dated September 12, 1986, Marquez declared that he was authorized to sell the properties for P27,000,000.00 and that the terms of
the sale were subject to negotiation.4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The
Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings offer and relayed
the same to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his
position/ counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville stating
that, based on the "Belgian/Swiss decision," the final offer was "US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to
final liquidation."5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the counterproposal of Delsaux.
Marquez conferred with Glanville, and in a Letter dated February 26, 1987, confirmed that the Litonjua siblings had accepted the counterproposal of Delsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days after execution and preparation of all
documents of sale, together with the necessary governmental clearances. 6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted an
Escrow Agreement to expedite the sale.7
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be implemented. In a telex dated April 22,
1987, Glanville informed Delsaux that he had met with the buyer, which had given him the impression that "he is prepared to press for a
satisfactory conclusion to the sale."8 He also emphasized to Delsaux that the buyers were concerned because they would incur expenses in
bank commitment fees as a consequence of prolonged period of inaction. 9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the political situation in the Philippines
had improved. Marquez received a telephone call from Glanville, advising that the sale would no longer proceed. Glanville followed it up with
a Letter dated May 7, 1987, confirming that he had been instructed by his principal to inform Marquez that "the decision has been taken at a
Board Meeting not to sell the properties on which Eternit Corporation is situated." 10
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed with the sale of
the subject land, to wit:
May 22, 1987

Mr. L.G. Marquez
L.G. Marquez, Inc.
334 Makati Stock Exchange Bldg.
6767 Ayala Avenue
Makati, Metro Manila
Philippines
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the Philippines are (sic)
concerned. Considering [the] new political situation since the departure of MR. MARCOS and a certain stabilization in the Philippines, the
Committee has decided not to stop our operations in Manila. In fact, production has started again last week, and (sic) to recognize the
participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later state, we would consult you again.
xxx
Yours sincerely,
(Sgd.)
C.F. DELSAUX
cc. To: J. GLANVILLE (Eternit Corp.)11
When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for damages they had suffered on
account of the aborted sale. EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton Multi-Resources Corporation) and
the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An amended complaint was filed, in which defendant EC was
substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were
impleaded as additional defendants on account of their purchase of ESAC shares of stocks and were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the Philippines, it cannot be
subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never approved any resolution to sell subject properties nor
authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own personal making which did not
bind EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended complaint. 12The fallo of the decision
reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is dismissed on
the ground that there is no valid and binding sale between the plaintiffs and said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is also dismissed for lack of
merit.13
The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not merely unenforceable, and
as such, could not have been ratified by the principal. In any event, such ratification cannot be given any retroactive effect. Plaintiffs could
not assume that defendants had agreed to sell the property without a clear authorization from the corporation concerned, that is, through
resolutions of the Board of Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all the
assets of defendant EC which would result in the eventual total cessation of its operation. 14
The Litonjuas appealed the decision to the CA, alleging that "(1) the lower court erred in concluding that the real estate broker in the instant
case needed a written authority from appellee corporation and/or that said broker had no such written authority; and (2) the lower court
committed grave error of law in holding that appellee corporation is not legally bound for specific performance and/or damages in the
absence of an enabling resolution of the board of directors." 15 They averred that Marquez acted merely as a broker or go-between and not as
agent of the corporation; hence, it was not necessary for him to be empowered as such by any written authority. They further claimed that an
agency by estoppel was created when the corporation clothed Marquez with apparent authority to negotiate for the sale of the properties.
However, since it was a bilateral contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was obliged
to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were Glanville and Delsaux
authorized by its board of directors to offer the property for sale. Since the sale involved substantially all of the corporations assets, it would
necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The Litonjuas filed a motion for reconsideration, which
was also denied by the appellate court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article 1874 of the New Civil Code.
Under Section 23 of the Corporation Code, he needed a special authority from ECs board of directors to bind such corporation to the sale of
its properties. Delsaux, who was merely the representative of ESAC (the majority stockholder of EC) had no authority to bind the latter. The
CA pointed out that Delsaux was not even a member of the board of directors of EC. Moreover, the Litonjuas failed to prove that an agency
by estoppel had been created between the parties.
In the instant petition for review, petitioners aver that
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A WRITTEN AUTHORITY
FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL
THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS
WITHIN THE SCOPE OF AN APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER TO
SELL THE SAID PROPERTIES.17
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels of land and the improvements
thereon for "US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to final liquidation." Petitioners insist that they had accepted the
counter-offer of respondent EC and that before the counter-offer was withdrawn by respondents, the acceptance was made known to them
through real estate broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to validly act as
broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his authority was of a special and limited character
in most respects. His only job as a broker was to look for a buyer and to bring together the parties to the transaction. He was not authorized
to sell the properties or to make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does not
apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both the offer and counter-offer
and their acceptance of respondent ECs counter-offer, resulting in a perfected contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who was the President and General
Manager of respondent EC, and Delsaux, who was the Managing Director for ESAC Asia, had the necessary authority to sell the subject
property or, at least, had been allowed by respondent EC to hold themselves out in the public as having the power to sell the subject
properties. Petitioners identified such evidence, thus:
1. The testimony of Marquez that he was chosen by Glanville as the then President and General Manager of Eternit, to sell the
properties of said corporation to any interested party, which authority, as hereinabove discussed, need not be in writing.
2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL MONTHS, from 1986 to 1987;
3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;
4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties as evidenced by the Petitioners ACCEPTANCE
of the counter-offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that an ESCROW agreement
was drafted over the subject properties;
6. Glanvilles telex to Delsaux inquiring "WHEN WE (Respondents) WILL IMPLEMENT ACTION TO BUY AND SELL";
7. More importantly, Exhibits "G" and "H" of the Respondents, which evidenced the fact that Petitioners offer was
allegedly REJECTED by both Glanville and Delsaux.18
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners offer and thereafter reject such offer
unless they were authorized to do so by respondent EC. Petitioners insist that Delsaux confirmed his authority to sell the properties in his
letter to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the Philippines are (sic)
concerned. Considering the new political situation since the departure of MR. MARCOS and a certain stabilization in the Philippines, the
Committee has decided not to stop our operations in Manila[.] [I]n fact production started again last week, and (sic) to reorganize the
participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later stage we would consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19
Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly permitted by respondent EC to sell
the properties within the scope of an apparent authority. Petitioners insist that respondents held themselves to the public as possessing
power to sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are proscribed by Rule 45 of the Rules of
Court. On the merits of the petition, respondents EC (now EMC) and ESAC reiterate their submissions in the CA. They maintain that
Glanville, Delsaux and Marquez had no authority from the stockholders of respondent EC and its Board of Directors to offer the properties for
sale to the petitioners, or to any other person or entity for that matter. They assert that the decision and resolution of the CA are in accord
with law and the evidence on record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed to the written authority of
Marquez to sell the properties. The authority of Glanville and Delsaux to bind respondent EC is evidenced by the fact that Glanville and
Delsaux negotiated for the sale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their positions
and their duties in respondent EC at the time of the transaction, and the fact that respondent ESAC owns 90% of the shares of stock of
respondent EC, a formal resolution of the Board of Directors would be a mere ceremonial formality. What is important, petitioners maintain, is
that Marquez was able to communicate the offer of respondent EC and the petitioners acceptance thereof. There was no time that they
acted without the knowledge of respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in this case are factual. Whether or not
Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents relative to the sale of the properties of respondent
EC, and if so, the boundaries of their authority as agents, is a question of fact. In the absence of express written terms creating the
relationship of an agency, the existence of an agency is a fact question. 20 Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent authority of its agent are,
likewise, questions of fact to be resolved on the basis of the evidence on record. 21 The findings of the trial court on such issues, as affirmed
by the CA, are conclusive on the Court, absent evidence that the trial and appellate courts ignored, misconstrued, or misapplied facts and
circumstances of substance which, if considered, would warrant a modification or reversal of the outcome of the case. 22
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court because the Court is not a trier of
facts. It is not to re-examine and assess the evidence on record, whether testimonial and documentary. There are, however, recognized
exceptions where the Court may delve into and resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the
trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the
evidence on record.23
We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant case falls under any of the foregoing
exceptions. Indeed, the assailed decision of the Court of Appeals is supported by the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had empowered Adams, Glanville
and Delsaux or Marquez to offer the properties for sale to prospective buyers and to accept any counter-offer. Petitioners likewise failed to
prove that their counter-offer had been accepted by respondent EC, through Glanville and Delsaux. It must be stressed that when specific
performance is sought of a contract made with an agent, the agency must be established by clear, certain and specific proof. 24
Section 23 of Batas Pambansa Bilang 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.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not affected by the personal rights,
obligations and transactions of the latter. 25 It 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. 26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the limitations prescribed by law
and the Constitution, as follows:
SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the power and capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and personal property,
including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may reasonably and
necessarily require, subject to the limitations prescribed by the law and the Constitution.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold without express
authority from the board of directors. 27 Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of a
counter-offer of prospective buyers of such properties and the execution of the deed of sale covering such property, can be performed by the
corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of
directors.28 Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the
corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are not binding on the
corporation.29
While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of directors
through its officers and agents as authorized by a board resolution or by its by-laws. 30An unauthorized act of an officer of the corporation is
not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a corporation
by a person purporting to be an agent thereof but without written authority from the corporation is null and void. The declarations of the agent
alone are generally insufficient to establish the fact or extent of his/her authority. 31
By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with the
consent or authority of the latter. 32 Consent of both principal and agent is necessary to create an agency. The principal must intend that the
agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression either
in words or conduct between them. 33
An agency may be expressed or implied from the act of the principal, from his silence or lack of action, or his failure to repudiate the agency
knowing that another person is acting on his behalf without authority. Acceptance by the agent may be expressed, or implied from his acts
which carry out the agency, or from his silence or inaction according to the circumstances. 34 Agency may be oral unless the law requires a
specific form.35 However, to create or convey real rights over immovable property, a special power of attorney is necessary. 36 Thus, when a
sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be
void.37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of Directors of respondent EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of land owned
by respondent EC including the improvements thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the
shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that he had likewise been authorized by
respondent EC to sell the parcels of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who, in turn, acted on the authority
of respondent ESAC, through its Committee for Asia, 38 the Board of Directors of respondent ESAC,39 and the Belgian/Swiss component of
the management of respondent ESAC.40 As such, Adams and Glanville engaged the services of Marquez to offer to sell the properties to
prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized to offer for sale the property
forP27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners offered to purchase the property
for P20,000,000.00, through Marquez, the latter relayed petitioners offer to Glanville; Glanville had to send a telex to Delsaux to inquire the
position of respondent ESAC to petitioners offer. However, as admitted by petitioners in their Memorandum, Delsaux was unable to reply
immediately to the telex of Glanville because Delsaux had to wait for confirmation from respondent ESAC. 41 When Delsaux finally responded
to Glanville on February 12, 1987, he made it clear that, based on the "Belgian/Swiss decision" the final offer of respondent ESAC was
US$1,000,000.00 plus P2,500,000.00 to cover all existing obligations prior to final liquidation. 42 The offer of Delsaux emanated only from the
"Belgian/Swiss decision," and not the entire management or Board of Directors of respondent ESAC. While it is true that petitioners accepted
the counter-offer of respondent ESAC, respondent EC was not a party to the transaction between them; hence, EC was not bound by such
acceptance.
While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board of Directors,
the three acted for and in behalf of respondent ESAC, and not as duly authorized agents of respondent EC; a board resolution evincing the
grant of such authority is needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a
mere formality but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another, or even all of such shares of
stocks, taken alone, will not justify their being treated as one corporation. 43
It bears stressing that in an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a
relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. 44
The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC empowering Adams, Glanville or
Delsaux to offer the properties for sale and to sell the said properties to the petitioners. A person dealing with a known agent is not
authorized, under any circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. 45 The
settled rule is that, persons dealing with an assumed agent are bound at their peril, and 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
prove it.46 In this case, the petitioners failed to discharge their burden; hence, petitioners are not entitled to damages from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As gleaned from the letter of Marquez
to Glanville, on February 26, 1987, he confirmed, for and in behalf of the petitioners, that the latter had accepted such offer to sell the land
and the improvements thereon. However, we agree with the ruling of the appellate court that Marquez had no authority to bind respondent
EC to sell the subject properties. A real estate broker is one who negotiates the sale of real properties. His business, generally speaking, is
only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to bind the principal by signing a
contract of sale. Indeed, an authority to find a purchaser of real property does not include an authority to sell. 47
Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence of a principal-agency relationship
between it and Glanville or Delsaux. For an agency by estoppel to exist, the following must be established: (1) the principal manifested a
representation of the agents authority or knowlingly allowed the agent to assume such authority; (2) the third person, in good faith, relied
upon such representation; (3) relying upon such representation, such third person has changed his position to his detriment. 48 An agency by
estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the representations, and that, in turn, needs
proof that the representations predated the action taken in reliance. 49 Such proof is lacking in this case. In their communications to the
petitioners, Glanville and Delsaux positively and unequivocally declared that they were acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified the transactions between the petitioners and respondent ESAC, through Glanville,
Delsaux and Marquez. The transactions and the various communications inter se were never submitted to the Board of Directors of
respondent EC for ratification.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
SO ORDERED.
SECOND DIVISION
AMON TRADING CORPORATION and JULIANA
MARKETING,
P e t i t i o n e r s,
- versus -
HON.
COURT
OF
APPEALS andTRI-REALTY
DEVELOPMENT AND CONSTRUCTION CORPORATION,
R e s p o n d e n t s.
G.R. No. 158585

Present:
PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.
Promulgated:
December 13, 2005

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DECISION
CHICO-NAZARIO, J.:
This is an appeal by certiorari from the Decision[1] dated 28 November 2002 of the Court of Appeals in CA-G.R. CV No. 60031,
reversing the Decision of the Regional Trial Court of Quezon City, Branch 104, and holding petitioners Amon Trading Corporation and Juliana
Marketing to be solidarily liable with Lines & Spaces Interiors Center (Lines & Spaces) in refunding private respondent Tri-Realty
Development and Construction Corporation (Tri-Realty) the amount corresponding to the value of undelivered bags of cement.
The undisputed facts:
Private respondent Tri-Realty is a developer and contractor with projects in Bulacan and Quezon City. Sometime in February 1992,
private respondent had difficulty in purchasing cement needed for its projects. Lines & Spaces, represented by Eleanor Bahia Sanchez,
informed private respondent that it could obtain cement to its satisfaction from petitioners, Amon Trading Corporation and its sister company,
Juliana Marketing. On the strength of such representation, private respondent proceeded to order from Sanchez Six Thousand Fifty (6,050)
bags of cement from petitioner Amon Trading Corporation, and from Juliana Marketing, Six Thousand (6,000) bags at P98.00/bag.
Private respondent, through Mrs. Sanchez of Lines & Spaces, paid in advance the amount of P592,900.00 through Solidbank
Managers Check No. 0011565 payable to Amon Trading Corporation, and the amount of P588,000.00 payable to Juliana Marketing, through
Solidbank Managers Check No. 0011566. A certain Weng Chua signed the check vouchers for Lines & Spaces while Mrs. Sanchez issued
receipts for the two managers checks. Private respondent likewise paid to Lines & Spaces an advance fee for the 12,050 cement bags at
the rate ofP7.00/bag, or a total of P84,350.00, in consideration of the facilitation of the orders and certainty of delivery of the same to the
private respondent. Solidbank Managers Check Nos. 0011565 and 0011566 were paid by Sanchez to petitioners.
There were deliveries to private respondent from Amon Trading Corporation and Juliana Marketing of 3,850 bags and 3,000 bags,
respectively, during the period from April to June 1992. However, the balance of 2,200 bags from Amon Trading Corporation and 3,000 bags
from Juliana Marketing, or a total of 5,200 bags, was not delivered. Private respondent, thus, sent petitioners written demands but in reply,
petitioners stated that they have already refunded the amount of undelivered bags of cement to Lines and Spaces per written instructions of
Eleanor Sanchez.
Left high and dry, with news reaching it that Eleanor Sanchez had already fled abroad, private respondent filed this case for sum of
money against petitioners and Lines & Spaces.
Petitioners plead in defense lack of right or cause of action, alleging that private respondent had no privity of contract with them as
it was Lines & Spaces/Tri-Realty, through Mrs. Sanchez, that ordered or purchased several bags of cement and paid the price thereof
without informing them of any special arrangement nor disclosing to them that Lines & Spaces and respondent corporation are distinct and
separate entities. They added that there were purchases or orders made by Lines & Spaces/Tri-Realty which they were about to deliver, but
were cancelled by Mrs. Sanchez and the consideration of the cancelled purchases or orders was later reimbursed to Lines & Spaces. The
refund was in the form of a check payable to Lines & Spaces.
Lines & Spaces denied in its Answer that it is represented by Eleanor B. Sanchez and pleads in defense lack of cause of action
and in the alternative, it raised the defense that it was only an intermediary between the private respondent and petitioners. [2] Soon after,
though, counsel for Lines & Spaces moved to withdraw from the case for the reason that its client was beyond contact.
On 29 January 1998, the Regional Trial Court of Quezon City, Branch 104, found Lines & Spaces solely liable to private
respondent and absolved petitioners of any liability. The dispositive portion of the trial courts Decision reads:
Wherefore, judgment is hereby rendered ordering defendant Lines and Spaces Interiors Center as
follows: to pay plaintiff on the complaint the amount of P47,950.00 as refund of the fee for the undelivered 5,200
bags of cement at the rate of P7.00 per bag; the amount of P509,600.00 for the refund of the price of the 5,200
undelivered bags of cement at P98.00 per bag; the amount of P2,000,000.00 for compensatory damages; as well as
the amount of P639,387.50 as attorneys fees; and to pay Amon Trading and Juliana Marketing, Inc. on the
crossclaim the sum of P200,000.00 as attorneys fees. [3]
Private Respondent Tri-Realty partially appealed from the trial courts decision absolving Amon Trading Corporation and Juliana
Marketing of any liability to Tri-Realty. In the presently assailed Decision, the Court of Appeals reversed the decision of the trial court and
held petitioners Amon Trading Corporation and Juliana Marketing to be jointly and severally liable with Lines & Spaces for the undelivered
bags of cement. The Court of Appeals disposed-
WHEREFORE, premises considered, the decision of the court a quo is hereby REVERSED AND SET ASIDE, and
another one is entered ordering the following:
Defendant-appellee Amon Trading Corporation is held liable jointly and severally with defendant-appellee Lines
and Spaces Interiors Center in the amount of P215,600.00 for the refund of the price of 2,200 undelivered bags of
cement.
Defendant-appellee Juliana Marketing is held liable jointly and severally with defendant-appellee Lines and
Spaces Interiors Center in the amount of P294,000.00 for the refund of the price of 3,000 undelivered bags of cement.
The defendant-appellee Lines and Spaces Interiors Center is held solely in the amount of P47,950.00 as refund
of the fee for the 5,200 undelivered bags of cement to the plaintiff-appellant Tri-Realty Development and Construction
Corporation.
The awards of compensatory damages and attorneys fees are DELETED.
The cross claim of defendants-appellees Amon Trading Corporation and Juliana Marketing is DISMISSED for
lack of merit.
No pronouncement as to costs.[4]
Pained by the ruling, petitioners elevated the case to this Court via the present petition for review to challenge the Decision and
Resolution of the Court of Appeals on the following issues:
I.
II.
WHETHER OR NOT THERE WAS A CONTRACT OF AGENCY BETWEEN LINES AND SPACES
INTERIOR CENTER AND RESPONDENT;
WHETHER OR NOT PETITIONERS AND RESPONDENT HAS PRIVITY OF CONTRACT. [5]
At the focus of scrutiny is the issue of whether or not the Court of Appeals committed reversible error in ruling that petitioners are
solidarily liable with Lines & Spaces. The key to unlocking this issue is to determine whether or not Lines & Spaces is the private
respondents agent and whether or not there is privity of contract between petitioners and private respondent.
We shall consider these issues concurrently as they are interrelated.
Petitioners, in their brief, zealously make a case that there was no contract of agency between Lines & Spaces and private
respondent.[6] Petitioners strongly assert that they did not have a hint that Lines & Spaces and Tri-Realty are two different and distinct
entities inasmuch as Eleanor Sanchez whom they have dealt with just represented herself to be from Lines & Spaces/Tri-Realty when she
placed her order for the delivery of the bags of cement. Hence, no privity of contract can be said to exist between petitioners and private
respondent.[7]
Private respondent, on the other hand, goes over the top in arguing that contrary to their claim of innocence, petitioners had
knowledge that Lines & Spaces, as represented by Eleanor Sanchez, was a separate and distinct entity from Tri-Realty.[8] Then, too, private
respondent stirs up support for its contention that contrary to petitioners' claim, there was privity of contract between private respondent and
petitioners.[9]
Primarily, there was no written contract entered into between petitioners and private respondent for the delivery of the bags of
cement. As gleaned from the records, and as private respondent itself admitted in its Complaint, private respondent agreed with Eleanor
Sanchez of Lines & Spaces for the latter to source the cement needs of the former in consideration of P7.00 per bag of cement. It is worthy
to note that the payment in managers checks was made to Eleanor Sanchez of Lines & Spaces and was not directly paid to
petitioners. While the managers check issued by respondent company was eventually paid to petitioners for the delivery of the bags of
cement, there is obviously nothing from the face of said managers check to hint that private respondent was the one making the payments.
There was likewise no intimation from Sanchez that the purchase order placed by her was for private respondents benefit. The meeting of
minds, therefore, was between private respondent and Eleanor Sanchez of Lines & Spaces. This contract is distinct and separate from the
contract of sale between petitioners and Eleanor Sanchez who represented herself to be from Lines & Spaces/Tri-Realty, which, per her
representation, was a single account or entity.
The records bear out, too, Annex A showing a check voucher payable to Amon Trading Corporation for the 6,050 bags of
cement received by a certain Weng Chua for Mrs. Eleanor Sanchez of Lines & Spaces, and Annex B which is a check voucher bearing
the name of Juliana Marketing as payee, but was received again by said Weng Chua. Nowhere from the face of the check vouchers is it
shown that petitioners or any of their authorized representatives received the payments from respondent company.
Also on record are the receipts issued by Lines & Spaces, signed by Eleanor Bahia Sanchez, covering the said managers
checks. As Engr. Guido Ganhinhin of respondent Tri-Realty testified, it was Lines & Spaces, not petitioners, which issued to them a receipt
for the two (2) managers checks. Thus-
Q:
And what is your proof that Amon and Juliana were paid of the purchases through managers checks?
A:
Lines & Spaces who represented Amon Trading and Juliana Marketing issued us receipts for the two (2)
managers checks we paid to Amon Trading and Juliana Marketing Corporation.
Q:
I am showing to you check no. 074 issued by Lines & Spaces Interiors Center, what relation has this
check to that check you mentioned earlier?
A:
Official Receipt No. 074 issued by Lines & Spaces Interiors Center was for the P592,900.00 we paid to
Amon Trading Corporation for 6,050 bags of cement.
Q:
Now there appears a signature in that receipt above the printed words authorized signature, whose
signature is that?
[10]
A:
The signature of Mrs. Eleanor Bahia Sanchez, the representative of Lines and Spaces.
Q:
Why do you know that that is her signature?
A:
She is quite familiar with me and I saw her affix her signature upon issuance of the receipt.
(Emphasis supplied.)
Without doubt, no vinculum could be said to exist between petitioners and private respondent.
There is likewise nothing meaty about the assertion of private respondent that inasmuch as the delivery receipts as well as the
purchase order were for the account of Lines & Spaces/Tri-Realty, then petitioners should have been placed on guard that it was private
respondent which is the principal of Sanchez. In China Banking Corp. v. Members of the Board of Trustees, Home Development Mutual
Fund[11] and the later case of Romulo, Mabanta, Buenaventura, Sayoc and De los Angeles v. Home Development Mutual Fund,[12] the term
and/or was held to mean that effect shall be given to both the conjunctive and and the disjunctive or; or that one word or the other may
be taken accordingly as one or the other will best effectuate the intended purpose. It was accordingly ordinarily held that in using the term
"and/or" the word "and" and the word "or" are to be used interchangeably.
By analogy, the words Lines & Spaces/Tri-Realty mean that effect shall be given to both Lines & Spaces and Tri-Realty or that
Lines & Spaces and Tri-Realty may be used interchangeably. Hence, petitioners were not remiss when they believed Eleanor Sanchezs
representation that Lines & Spaces/Tri-Realty refers to just one entity. There was, therefore, no error attributable to petitioners when they
refunded the value of the undelivered bags of cement to Lines & Spaces only.
There is likewise a dearth of evidence to show that the case at bar is an open-and-shut case of agency between private
respondent and Lines & Spaces. Neither Eleanor Sanchez nor Lines & Spaces was an agent for private respondent, but rather a supplier for
the latters cement needs. The Civil Code defines a contract of agency as follows:
Art. 1868. By the contract of agency a person binds himself to render some service or to do something in
representation or on behalf of another, with the consent or authority of the latter.
In a bevy of cases such as the avuncular case of Victorias Milling Co., Inc. v. Court of Appeals,[13] the Court decreed from Article
1868 that the basis of agency is representation.
. . . On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable
from his words or actions and on the part of the agent, there must be an intention to accept the appointment and act on
it, and in the absence of such intent, there is generally no agency. One factor which most clearly distinguishes agency
from other legal concepts is control; one person - the agent - agrees to act under the control or direction of another - the
principal. Indeed, the very word "agency" has come to connote control by the principal. The control factor, more than
any other, has caused the courts to put contracts between principal and agent in a separate category.
Here, the intention of private respondent, as the Executive Officer of respondent corporation testified on, was merely for Lines &
Spaces, through Eleanor Sanchez, to supply them with the needed bags of cement.
Q:
Do you know the defendant Lines & Spaces in this case?
A:
Yes, sir.
Q:
How come you know this defendant?
A:
Lines & Spaces represented by Eleanor Bahia Sanchez offered to supply us cement when there was
scarcity of cement experienced in our projects.[14] (Emphasis supplied)
We cannot go along the Court of Appeals disquisition that Amon Trading Corporation and Juliana Marketing should have required
a special power of attorney form when they refunded Eleanor B. Sanchez the cost of the undelivered bags of cement. All the quibbling about
whether Lines & Spaces acted as agent of private respondent is inane because as illustrated earlier, petitioners took orders from Eleanor
Sanchez who, after all, was the one who paid them the managers checks for the purchase of cement. Sanchez represented herself to be
from Lines & Spaces/Tri-Realty, purportedly a single entity. Inasmuch as they have never directly dealt with private respondent and there is
no paper trail on record to guide them that the private respondent, in fact, is the beneficiary, petitioners had no reason to doubt the request of
Eleanor Sanchez later on to refund the value of the undelivered bags of cement to Lines & Spaces. Moreover, the check refund was payable
to Lines & Spaces, not to Sanchez, so there was indeed no cause to suspect the scheme.
The fact that the deliveries were made at the construction sites of private respondent does not by itself raise suspicion that
petitioners were delivering for private respondent. There was no sufficient showing that petitioners knew that the delivery sites were that of
private respondent and for another thing, the deliveries were made by petitioners men who have no business nosing around their clients
affairs.
Parenthetically, Eleanor Sanchez has absconded to the United States of America and the story of what happened to the check
refund may be forever locked with her. Lines & Spaces, in its Answer to the Complaint, washed its hands of the apparent ruse perpetuated
by Sanchez, but argues that if at all, it was merely an intermediary between petitioners and private respondent. With no other way out, Lines
& Spaces was a no-show at the trial proceedings so that eventually, its counsel had to withdraw his appearance because of his clients
vanishing act. Left with an empty bag, so to speak, private respondent now puts the blame on petitioners. But this Court finds plausible the
stance of petitioners that they had no inkling of the deception that was forthcoming. Indeed, without any contract or any hard evidence to
show any privity of contract between it and petitioners, private respondents claim against petitioners lacks legal foothold.
Considering the vagaries of the case, private respondent brought the wrong upon itself. As adeptly surmised by the trial court,
between petitioners and private respondent, it is the latter who had made possible the wrong that was perpetuated by Eleanor Sanchez
against it so it must bear its own loss. It is in this sense that we must apply the equitable maxim that as between two innocent parties, the
one who made it possible for the wrong to be done should be the one to bear the resulting loss. [15] First, private respondent was the one who
had reposed too much trust on Eleanor Sanchez for the latter to source its cement needs. Second, it failed to employ safety nets to steer
clear of the rip-off. For such huge sums of money involved in this case, it is surprising that a corporation such as private respondent would
pay its construction materials in advance instead of in credit thus opening a window of opportunity for Eleanor Sanchez or Lines & Spaces
to pocket the remaining balance of the amount paid corresponding to the undelivered materials. Private respondent likewise paid in advance
the commission of Eleanor Sanchez for the materials that have yet to be delivered so it really had no means of control over her. Finally,
there is no paper trail linking private respondent to petitioners thereby leaving the latter clueless that private respondent was their true client.
Private respondent should have, at the very least, required petitioners to sign the check vouchers or to issue receipts for the advance
payments so that it could have a hold on petitioners. In this case, it was the representative of Lines & Spaces who signed the check
vouchers. For its failure to establish any of these deterrent measures, private respondent incurred the risk of not being able to recoup the
value of the materials it had paid good money for.
WHEREFORE, the present petition is hereby GRANTED. Accordingly, the Decision and the Resolution dated 28 November 2002
and 10 June 2003, of the Court of Appeals in CA-G.R CV No. 60031, are hereby REVERSED and SET ASIDE. The Decision dated 29
January 1998 of the Regional Trial Court of Quezon City, Branch 104, in Civil Case Q-92-14235 is herebyREINSTATED. No costs.
SO ORDERED.
.R. No. 123560
March 27, 2000
SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,

vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and CLAUDIA
TAGUNICAR, respondents.
PUNO, J.:
This petition for review seeks a reversal of the 31 August 1995
Decision 1 and 11 January 1998 Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for moral and
exemplary damages and attorney's fees, and deleting the trial court's award for actual damages.
The facts as found by the trial court are as follows:
Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this] business, he
travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A &
B) from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World Services, Inc.
(TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00 per computation
of said defendant Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to
buy to two (2) lines of infrared heating system processing textured plastic article (Exh. K).
On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to
San Francisco was on "RQ" status, meaning "on request". Per instruction of defendant Claudia Tagunicar, plaintiffs
returned after a few days for the confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of
TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the
confirmation stickers on the plane tickets (Exhs. A & B).
A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the status of the
flight. According to said Adrian Yu, a personnel of defendant Pan Am told him over the phone that plaintiffs' booking[s]
are confirmed.
On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo on July 28,
1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said
office, however, informed them that their names are not in the manifest. Since plaintiffs were supposed to leave on the
29th of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained to agree to accept
airline tickets for Taipei instead, per advise of JAL officials. This is the only option left to them because Northwest Airlines
was then on strike, hence, there was no chance for the plaintiffs to obtain airline seats to the United States within 72
hours. Plaintiffs paid for these tickets.
Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to Manila on
August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference
of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00.
In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's option to
buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the equipment and make
final arrangement[s] with the said company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng
Cho expected to realize a profit of P300,000.00 to P400,000.00.
[A] scrutiny of defendants' respective evidence reveals the following:
Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia Tagunicar, an independent
travel solicitor, for the purchase of their plane tickets. As such travel solicitor, she helps in the processing of travel papers
like passport, plane tickets, booking of passengers and some assistance at the airport. She is known to defendants PanAm, TWSI/Julieta Canilao, because she has been dealing with them in the past years. Defendant Tagunicar advised
plaintiffs to take Pan-Am because Northwest Airlines was then on strike and plaintiffs are passing Hongkong, Tokyo, then
San Francisco and Pan-Am has a flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta
Canilao, she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95 (Exhs. C, C-1).
Plaintiffs, however, gave her a check in the amount of P25,000.00 only for the two round trip tickets. Out of this
transaction, Tagunicar received a 7% commission and 1% commission for defendant TWSI.
Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant Julieta Canilao with the
following schedules:
Origin Destination Airline Date Time/Travel
Manila Hongkong CX900 7-23-78 1135/1325hrs
Hongkong Tokyo CS500 7-28-78 1615/2115hrs
Tokyo San Francisco PA002 7-29-78 1930/1640hrs
The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed, although the tickets issued are
Pan-Am tickets, as long as it is in connection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B) were issued to
plaintiffs, the letter "RQ" appears below the printed word "status" for the flights from Tokyo to San Francisco which means
"under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure, defendant Tagunicar received
several calls from the plaintiffs inquiring about the status of their bookings. Tagunicar in turn called up TWSI/Canilao to
verify; and if Canilao would answer that the bookings are not yet confirmed, she would relate that to the plaintiffs.
Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng Cho personally
went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and the latter told her "o sige
Claudia, confirm na." She even noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh.
L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These stickers
came from TWSI.
Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu, son of
plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian
Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims
that plaintiffs were asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she
will not be involved, she agreed to sign the affidavit (Exh. M) prepared by the lawyer.
Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs' flight because flights
then were really tight because of the on-going strike at Northwest Airlines. Defendant Claudia Tagunicar is very much
aware that [said] particular segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar called
up TWSI from the airport; defendant Canilao asked her why she attached stickers on the tickets when in fact that portion
of the flight was not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and never authorized defendant
Tagunicar to attach the confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar are stickers
exclusively for use of Pan-Am only. Furthermore, if it is the travel agency that confirms the booking, the IATA number of
said agency should appear on the validation or confirmation stickers. The IATA number that appears on the stickers
attached to plaintiffs' tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is 2-830770 (Exhs. 5, 5-A TWSI). 3
A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World
Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets
and hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the non-confirmation of
their booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly
and severally liable, except defendant Julieta Canilao, thus:
WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World Airways, Inc.,
Tourist World Services, Inc. and Claudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00 as
actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 as
exemplary damages; an amount equivalent to 20% of the award for and as attorney's fees, plus the sum of P30,000.00
as litigation expenses.
Defendants' counterclaims are hereby dismissed for lack of merit.
SO ORDERED.
Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate court rendered judgment
modifying the amount of damages awarded, holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am
and TWSI from any and all liability, thus:
PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE and a new one entered
declaring appellant Tagunicar solely liable for:
1) Moral damages in the amount of P50,000.00;
2) Exemplary damages in the amount of P25,000.00; and
3) Attorney's fees in the amount of P10,000.00 plus costs of suit.
The award of actual damages is hereby DELETED.
SO ORDERED.
In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly authorized agent or representative of
either Pan Am or TWSI. It held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and
TWSI as its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue
validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions. Finally, it deleted the
award for actual damages for lack of proof.
Hence this petition based on the following assignment of errors:
1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling in Nicos Industrial Corporation
vs. Court of Appeals, et. al. [206 SCRA 127]; and
2. the findings of the Court of Appeals that petitioners' ticket reservations in question were not confirmed and that there is
no agency relationship among PAN-AM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI
and Tagunicar and likewise contrary to the findings of fact of the trial court.
We affirm.
I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the Court of Appeals, the decision of the trial
court conforms to the standards of an ideal decision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al., 4 as "that which,
with welcome economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends."
It is averred that the trial court's decision contains a detailed statement of the relevant facts and evidence adduced by the parties which
thereafter became the bases for the court's conclusions.
A careful scrutiny of the decision rendered by the trial court will show that after narrating the evidence of the parties, it proceeded to dispose
of the case with a one-paragraph generalization, to wit:
On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-Am is the principal, and
defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am,
TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs for damages. Defendant Julieta
Canilao, who acted in her official capacity as Office Manager of defendant TWSI should not be held personally liable. 5
The trial court's finding of facts is but a summary of the testimonies of the witnesses and the documentary evidence presented by the parties.
It did not distinctly and clearly set forth, nor substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar
jointly and severally liable. In Del Mundo vs. CA, et al. 6 where the trial court, after summarizing the conflicting asseverations of the parties,
disposed of the kernel issue in just two (2) paragraphs, we held:
It is understandable that courts, with their heavy dockets and time constraints, often find themselves with little to spare in
the preparation of decisions to the extent most desirable. We have thus pointed out that judges might learn to synthesize
and to simplify their pronouncements. Nevertheless, concisely written such as they may be, decisions must still distinctly
and clearly express, at least in minimum essence, its factual and legal bases.
For failing to explain clearly and well the factual and legal bases of its award of moral damages, we set it aside in said case. Once
more, we stress that nothing less than Section 14 of Article VIII of the Constitution requires that "no decision shall be rendered by
any court without expressing therein clearly and distinctly the facts and the law on which it is based." This is demanded by the due
process clause of the Constitution. In the case at bar, the decision of the trial court leaves much to be desired both in form and
substance. Even while said decision infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency
of the evidence submitted by the petitioners.
II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am. Proceeding from this
premise, they contend that TWSI and Pan Am should be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that
the existence of the agency relationship has been established by the judicial admissions allegedly made by respondents herein, to wit: (1)
the admission made by Pan Am in its Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she
admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions from ticket
sales made by Tagunicar.
We do not agree. 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. 7 The elements of agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority. 8 It is a settled rule that persons dealing with an assumed agent 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. 9
In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized agent of TWSI. This
affidavit, however, has weak probative value in light of respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex
parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their
infirmity as a species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in court. 10Further,
affidavits are not complete reproductions of what the declarant has in mind because they are generally prepared by the administering officer
and the affiant simply signs them after the same have been read to her. 11Respondent Tagunicar testified that her affidavit was prepared and
typewritten by the secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to
see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit of
the same day. 12 The circumstances under which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by
respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to the
questions propounded to her by Atty. Acebedo. 13They never told her that the affidavit would be used in a case to be filed against her. 14 They
even assured her that she would not be included as defendant if she agreed to execute the affidavit. 15 Respondent Tagunicar was prevailed
upon by petitioners' son and their lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI.
They assured her that "it is immaterial"17 This purported admission of respondent Tagunicar cannot be used by petitioners to prove their
agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship cannot be
established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. 18 In
addition, as between the negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the
affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their
allegation, 19 failing in which, their claim must necessarily fail.
We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of TWSI, and declared that she is
an independent travel agent. 20 We have consistently ruled that in case of conflict between statements in the affidavit and testimonial
declarations, the latter command greater weight. 21
As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received
sales commissions from Pan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received
by TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited to TWSI's sales report.
Exhibit "8" 24 is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from TWSI. These documents
cannot justify the decision that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when
she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. 25 From all sides of the legal
prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her
clients.
III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI is its duly authorized agent, and
respondent Tagunicar is an agent of TWSI, then Pan Am should also be held responsible for the acts of respondent Tagunicar. Our
disquisitions above show that this contention lacks factual and legal bases. Indeed, there is nothing in the records to show that respondent
Tagunicar has been employed by Pan Am as its agent, except the bare allegation of petitioners. The real motive of petitioners in suing Pan
Am appears in its Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the
amounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate principal, is primarily and/or subsidiary
liable to pay the said amounts to plaintiffs." 26 This lends credence to respondent Tagunicar's testimony that she was persuaded to execute
an affidavit implicating respondents because petitioners knew they would not be able to get anything of value from her. In the past, we have
warned that this Court will not tolerate an abuse of judicial process by passengers in order to pry on international airlines for damage awards,
like "trophies in a safari." 27
This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they were bumped off in Tokyo. If petitioners were of
the honest belief that Pan Am was responsible for the misfortune which beset them, there is no evidence to show that they lodged a protest
with Pan Am's Tokyo office immediately after they were refused passage for the flight to San Francisco, or even upon their arrival in Manila.
The testimony of petitioner Yu Eng Cho in this regard is of title value, viz:
Atty. Jalandoni: . . .
q Upon arrival at the Tokyo airport, what did you do if any in connection with your schedule[d] trip?
a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in Tokyo to
reconfirm my flight, but they told me that our names were not listed in the manifest, so next morning,
very early in the morning I went to the airport, Pan Am office in the airport to verify and they told me
the same and we were not allowed to leave.
q You were scheduled to be in Tokyo for how long Mr. Yu?
a We have to leave the next day 29th.
q In other words, what was your status as a passenger?
a Transient passengers. We cannot stay for more than 72 hours.
xxx xxx xxx
q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you that your
names were not in the manifest, what did you do, if any?
a I ask[ed] them if I can go anywhere in the State? They told me I can go to LA via Japan Airlines and
I accepted it.
q Do you have the tickets with you that they issued for Los Angels?
a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.
xxx xxx xxx
q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in lieu of
the tickets to San Francisco?
a No, sir.
q Why not?
a The Japanese Airlines said that there were no more available seats.
q And as a consequence of that, what did you do, if any?
a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and I
accepted it.
xxx xxx xxx
q Why did you accept the Japan Airlines offer for you to go to Taipei?
a Because there is no chance for us to go to the United States within 72 hours because during that
time Northwest Airlines [was] on strike so the seats are very scarce. So they advised me better left
(sic) before the 72 hours otherwise you will have trouble with the Japanese immigration.
q As a consequence of that you were force[d] to take the trip to Taipei?
a Yes, sir. 28 (emphasis supplied)
It grinds against the grain of human experience that petitioners did not insist that they be allowed to board, considering that it was then
doubly difficult to get seats because of the ongoing Northwest Airlines strike. It is also perplexing that petitioners readily accepted whatever
the Tokyo office had to offer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI and Canilao. 29 Nor was a
demand letter sent to respondent Pan Am. To say the least, the motive of petitioners in suing Pan Am is suspect.
We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify petitioners' claim for damages. Mere
refusal to accede to the passenger's wishes does not necessarily translate into damages in the absence of bad faith. 30 The settled rule is
that the law presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving
that the latter acted in bad faith or with ill motive. 31 In the case at bar, we find the evidence presented by petitioners insufficient to overcome
the presumption of good faith. They have failed to show any wanton, malevolent or reckless misconduct imputable to respondent Pan Am in
its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did not
have confirmed tickets and more importantly, they were not in the passenger manifest.
In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted in bad faith in refusing to accommodate
a passenger who had a confirmed ticket and whose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines
Inc., 32 we ruled that there was a valid and binding contract between the airline and its passenger after finding that validating sticker on the
passenger's ticket had the letters "O.K." appearing in the "Res. Status" box which means "space confirmed" and that the ticket is confirmed
or validated. In Pan American World Airways Inc. v. IAC, et al. 33 where a would-be-passenger had the necessary ticket, baggage claim and
clearance from immigration all clearly showing that she was a confirmed passenger and included in the passenger manifest and yet was
denied accommodation in said flight, we awarded damages. InArmovit, et al. v. CA, et al., 34 we upheld the award of damages made against
an airline for gross negligence committed in the issuance of tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et
al., 35we held that when airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises,
and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a
suit for breach of contract of carriage. And finally, an award of damages was held proper in the case of Zalamea, et al. v. CA, et al., 36 where
a confirmed passenger included in the manifest was denied accommodation in such flight.
On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd., 37 was held not liable for damages where the passenger
was not allowed to board the plane because his ticket had not been confirmed. We ruled that "[t]he stub that the lady employee put on the
petitioner's ticket showed among other coded items, under the column "status" the letters "RQ" which was understood to mean "Request."
Clearly, this does not mean a confirmation but only a request. JAL Traffic Supervisor explained that it would have been different if what was
written in the stub were the letter "ok" in which case the petitioner would have been assured of a seat on said flight. But in this case, the
petitioner was more of a wait-listed passenger than a regularly booked passenger."
In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and their names were not listed in the
passenger manifest. In other words, this is not a case where Pan Am bound itself to transport petitioners and thereafter reneged on its
obligation. Hence, respondent airline cannot be held liable for damages.
IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmed for good reasons: (1) The persistent calls
made by respondent Tagunicar to Canilao, and those made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are
eloquent indications that petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan Am, why would one
continually try to have one's ticket confirmed if it had already been confirmed? (2) The validation stickers which respondent Tagunicar
attached to petitioners' tickets were those intended for the exclusive use of airline companies. She had no authority to use them. Hence, said
validation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3) The names of petitioners do not appear in
the passengers manifest. (4) Respondent Tagunicar's "Exhibit 1" 38shows that the status of the San Francisco-New York segment was "Ok",
meaning it was confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5) Respondent Canilao testified
that on the day that petitioners were to depart for Hongkong, respondent Tagunicar called her from the airport asking for confirmation of the
Tokyo-San Francisco flight, and that when she told respondent Tagunicar that she should not have allowed petitioners to leave because their
tickets have not been confirmed, respondent Tagunicar merely said "Bahala na." 39 This was never controverted nor refuted by respondent
Tagunicar. (6) To prove that it really did not confirm the bookings of petitioners, respondent Canilao pointed out that the validation stickers
which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas the IATA number of TWSI
is 28-30770. 40
Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting to petitioners that their tickets have been
confirmed. Her culpability, however, was properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the
confirmation of their tickets with Pan Am because he doubted the confirmation made by respondent Tagunicar. 41 This is clear proof that
petitioners knew that they might be bumped off at Tokyo when they decided to proceed with the trip. Aware of this risk, petitioners exerted
efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as to the amount of
damages awarded just and equitable under the circumstances.
WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.1wphi1.nt
SO ORDERED.
G.R. No. 123560
March 27, 2000
SPOUSES YU ENG CHO and FRANCISCO TAO YU, petitioners,

vs.
PAN AMERICAN WORLD AIRWAYS, INC., TOURIST WORLD SERVICES, INC., JULIETA CANILAO and CLAUDIA
TAGUNICAR, respondents.
PUNO, J.:
This petition for review seeks a reversal of the 31 August 1995
Decision 1 and 11 January 1998 Resolution 2 of the Court of Appeals holding private respondent Claudia Tagunicar solely liable for moral and
exemplary damages and attorney's fees, and deleting the trial court's award for actual damages.
The facts as found by the trial court are as follows:

Plaintiff Yu Eng Cho is the owner of Young Hardware Co. and Achilles Marketing. In connection with [this] business, he
travels from time to time to Malaysia, Taipei and Hongkong. On July 10, 1976, plaintiffs bought plane tickets (Exhs. A &
B) from defendant Claudia Tagunicar who represented herself to be an agent of defendant Tourist World Services, Inc.
(TWSI). The destination[s] are Hongkong, Tokyo, San Francisco, U.S.A., for the amount of P25,000.00 per computation
of said defendant Claudia Tagunicar (Exhs. C & C-1). The purpose of this trip is to go to Fairfield, New Jersey, U.S.A. to
buy to two (2) lines of infrared heating system processing textured plastic article (Exh. K).
On said date, only the passage from Manila to Hongkong, then to Tokyo, were confirmed. [PAA] Flight 002 from Tokyo to
San Francisco was on "RQ" status, meaning "on request". Per instruction of defendant Claudia Tagunicar, plaintiffs
returned after a few days for the confirmation of the Tokyo-San Francisco segment of the trip. After calling up Canilao of
TWSI, defendant Tagunicar told plaintiffs that their flight is now confirmed all the way. Thereafter, she attached the
confirmation stickers on the plane tickets (Exhs. A & B).
A few days before the scheduled flight of plaintiffs, their son, Adrian Yu, called the Pan Am office to verify the status of the
flight. According to said Adrian Yu, a personnel of defendant Pan Am told him over the phone that plaintiffs' booking[s]
are confirmed.
On July 23, 1978, plaintiffs left for Hongkong and stayed there for five (5) days. They left Hongkong for Tokyo on July 28,
1978. Upon their arrival in Tokyo, they called up Pan-Am office for reconfirmation of their flight to San Francisco. Said
office, however, informed them that their names are not in the manifest. Since plaintiffs were supposed to leave on the
29th of July, 1978, and could not remain in Japan for more than 72 hours, they were constrained to agree to accept
airline tickets for Taipei instead, per advise of JAL officials. This is the only option left to them because Northwest Airlines
was then on strike, hence, there was no chance for the plaintiffs to obtain airline seats to the United States within 72
hours. Plaintiffs paid for these tickets.
Upon reaching Taipei, there were no flight[s] available for plaintiffs, thus, they were forced to return back to Manila on
August 3, 1978, instead of proceeding to the United States. [Japan] Air Lines (JAL) refunded the plaintiffs the difference
of the price for Tokyo-Taipei [and] Tokyo-San Francisco (Exhs. I & J) in the total amount of P2,602.00.
In view of their failure to reach Fairfield, New Jersey, Radiant Heat Enterprises, Inc. cancelled Yu Eng Cho's option to
buy the two lines of infra-red heating system (Exh. K). The agreement was for him to inspect the equipment and make
final arrangement[s] with the said company not later than August 7, 1978. From this business transaction, plaintiff Yu Eng
Cho expected to realize a profit of P300,000.00 to P400,000.00.
[A] scrutiny of defendants' respective evidence reveals the following:
Plaintiffs, who were intending to go to the United States, were referred to defendant Claudia Tagunicar, an independent
travel solicitor, for the purchase of their plane tickets. As such travel solicitor, she helps in the processing of travel papers
like passport, plane tickets, booking of passengers and some assistance at the airport. She is known to defendants PanAm, TWSI/Julieta Canilao, because she has been dealing with them in the past years. Defendant Tagunicar advised
plaintiffs to take Pan-Am because Northwest Airlines was then on strike and plaintiffs are passing Hongkong, Tokyo, then
San Francisco and Pan-Am has a flight from Tokyo to San Francisco. After verifying from defendant TWSI, thru Julieta
Canilao, she informed plaintiffs that the fare would be P25,093.93 giving them a discount of P738.95 (Exhs. C, C-1).
Plaintiffs, however, gave her a check in the amount of P25,000.00 only for the two round trip tickets. Out of this
transaction, Tagunicar received a 7% commission and 1% commission for defendant TWSI.
Defendant Claudia Tagunicar purchased the two round-trip Pan-Am tickets from defendant Julieta Canilao with the
following schedules:
Origin Destination Airline Date Time/Travel
Manila Hongkong CX900 7-23-78 1135/1325hrs
Hongkong Tokyo CS500 7-28-78 1615/2115hrs
Tokyo San Francisco PA002 7-29-78 1930/1640hrs

The use of another airline, like in this case it is Cathay Pacific out of Manila, is allowed, although the tickets issued are
Pan-Am tickets, as long as it is in connection with a Pan-Am flight. When the two (2) tickets (Exhs. A & B) were issued to
plaintiffs, the letter "RQ" appears below the printed word "status" for the flights from Tokyo to San Francisco which means
"under request," (Exh. 3-A, 4-A Pan-Am). Before the date of the scheduled departure, defendant Tagunicar received
several calls from the plaintiffs inquiring about the status of their bookings. Tagunicar in turn called up TWSI/Canilao to
verify; and if Canilao would answer that the bookings are not yet confirmed, she would relate that to the plaintiffs.
Defendant Tagunicar claims that on July 13, 1978, a few days before the scheduled flight, plaintiff Yu Eng Cho personally
went to her office, pressing her about their flight. She called up defendant Julieta Canilao, and the latter told her "o sige
Claudia, confirm na." She even noted this in her index card (Exh. L), that it was Julieta who confirmed the booking (Exh.
L-1). It was then that she allegedly attached the confirmation stickers (Exhs. 2, 2-B TWSI) to the tickets. These stickers
came from TWSI.
Defendant Tagunicar alleges that it was only in the first week of August, 1978 that she learned from Adrian Yu, son of
plaintiffs, that the latter were not able to take the flight from Tokyo to San Francisco, U.S.A. After a few days, said Adrian
Yu came over with a gentleman and a lady, who turned out to be a lawyer and his secretary. Defendant Tagunicar claims
that plaintiffs were asking for her help so that they could file an action against Pan-Am. Because of plaintiffs' promise she
will not be involved, she agreed to sign the affidavit (Exh. M) prepared by the lawyer.
Defendants TWSI/Canilao denied having confirmed the Tokyo-San Francisco segment of plaintiffs' flight because flights
then were really tight because of the on-going strike at Northwest Airlines. Defendant Claudia Tagunicar is very much
aware that [said] particular segment was not confirmed, because on the very day of plaintiffs' departure, Tagunicar called
up TWSI from the airport; defendant Canilao asked her why she attached stickers on the tickets when in fact that portion
of the flight was not yet confirmed. Neither TWSI nor Pan-Am confirmed the flight and never authorized defendant
Tagunicar to attach the confirmation stickers. In fact, the confirmation stickers used by defendant Tagunicar are stickers
exclusively for use of Pan-Am only. Furthermore, if it is the travel agency that confirms the booking, the IATA number of
said agency should appear on the validation or confirmation stickers. The IATA number that appears on the stickers
attached to plaintiffs' tickets (Exhs. A & B) is 2-82-0770 (Exhs. 1, 1-A TWSI), when in fact TWSI's IATA number is 2-830770 (Exhs. 5, 5-A TWSI). 3
A complaint for damages was filed by petitioners against private respondents Pan American World Airways, Inc. (Pan Am), Tourist World
Services, Inc. (TWSI), Julieta Canilao (Canilao), and Claudia Tagunicar (Tagunicar) for expenses allegedly incurred such as costs of tickets
and hotel accommodations when petitioners were compelled to stay in Hongkong and then in Tokyo by reason of the non-confirmation of
their booking with Pan-Am. In a Decision dated November 14, 1991, the Regional Trial Court of Manila, Branch 3, held the defendants jointly
and severally liable, except defendant Julieta Canilao, thus:
WHEREFORE, judgment is hereby rendered for the plaintiffs and ordering defendants Pan American World Airways, Inc.,
Tourist World Services, Inc. and Claudia Tagunicar, jointly and severally, to pay plaintiffs the sum of P200,000.00 as
actual damages, minus P2,602.00 already refunded to the plaintiffs; P200,000.00 as moral damages; P100,000.00 as
exemplary damages; an amount equivalent to 20% of the award for and as attorney's fees, plus the sum of P30,000.00
as litigation expenses.
Defendants' counterclaims are hereby dismissed for lack of merit.
SO ORDERED.
Only respondents Pan Am and Tagunicar appealed to the Court of Appeals. On 11 August 1995, the appellate court rendered judgment
modifying the amount of damages awarded, holding private respondent Tagunicar solely liable therefor, and absolving respondents Pan Am
and TWSI from any and all liability, thus:
PREMISES CONSIDERED, the decision of the Regional Trial Court is hereby SET ASIDE and a new one entered
declaring appellant Tagunicar solely liable for:
1) Moral damages in the amount of P50,000.00;
2) Exemplary damages in the amount of P25,000.00; and

3) Attorney's fees in the amount of P10,000.00 plus costs of suit.
The award of actual damages is hereby DELETED.
SO ORDERED.
In so ruling, respondent court found that Tagunicar is an independent travel solicitor and is not a duly authorized agent or representative of
either Pan Am or TWSI. It held that their business transactions are not sufficient to consider Pan Am as the principal, and Tagunicar and
TWSI as its agent and sub-agent, respectively. It further held that Tagunicar was not authorized to confirm the bookings of, nor issue
validation stickers to, herein petitioners and hence, Pan Am and TWSI cannot be held responsible for her actions. Finally, it deleted the
award for actual damages for lack of proof.
Hence this petition based on the following assignment of errors:
1. the Court of Appeals, in reversing the decision of the trial court, misapplied the ruling in Nicos Industrial Corporation
vs. Court of Appeals, et. al. [206 SCRA 127]; and
2. the findings of the Court of Appeals that petitioners' ticket reservations in question were not confirmed and that there is
no agency relationship among PAN-AM, TWSI and Tagunicar are contrary to the judicial admissions of PAN-AM, TWSI
and Tagunicar and likewise contrary to the findings of fact of the trial court.
We affirm.
I. The first issue deserves scant consideration. Petitioners contend that contrary to the ruling of the Court of Appeals, the decision of the trial
court conforms to the standards of an ideal decision set in Nicos Industrial Corporation, et. al. vs. Court of Appeals, et. al., 4 as "that which,
with welcome economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends."
It is averred that the trial court's decision contains a detailed statement of the relevant facts and evidence adduced by the parties which
thereafter became the bases for the court's conclusions.
A careful scrutiny of the decision rendered by the trial court will show that after narrating the evidence of the parties, it proceeded to dispose
of the case with a one-paragraph generalization, to wit:
On the basis of the foregoing facts, the Court is constrained to conclude that defendant Pan-Am is the principal, and
defendants TWSI and Tagunicar, its authorized agent and sub-agent, respectively. Consequently, defendants Pan-Am,
TWSI and Claudia Tagunicar should be held jointly and severally liable to plaintiffs for damages. Defendant Julieta
Canilao, who acted in her official capacity as Office Manager of defendant TWSI should not be held personally liable. 5
The trial court's finding of facts is but a summary of the testimonies of the witnesses and the documentary evidence presented by the parties.
It did not distinctly and clearly set forth, nor substantiate, the factual and legal bases for holding respondents TWSI, Pan Am and Tagunicar
jointly and severally liable. In Del Mundo vs. CA, et al. 6 where the trial court, after summarizing the conflicting asseverations of the parties,
disposed of the kernel issue in just two (2) paragraphs, we held:
It is understandable that courts, with their heavy dockets and time constraints, often find themselves with little to spare in
the preparation of decisions to the extent most desirable. We have thus pointed out that judges might learn to synthesize
and to simplify their pronouncements. Nevertheless, concisely written such as they may be, decisions must still distinctly
and clearly express, at least in minimum essence, its factual and legal bases.
For failing to explain clearly and well the factual and legal bases of its award of moral damages, we set it aside in said case. Once
more, we stress that nothing less than Section 14 of Article VIII of the Constitution requires that "no decision shall be rendered by
any court without expressing therein clearly and distinctly the facts and the law on which it is based." This is demanded by the due
process clause of the Constitution. In the case at bar, the decision of the trial court leaves much to be desired both in form and
substance. Even while said decision infringes the Constitution, we will not belabor this infirmity and rather examine the sufficiency
of the evidence submitted by the petitioners.
II. Petitioners assert that Tagunicar is a sub-agent of TWSI while TWSI is a duly authorized ticketing agent of Pan Am. Proceeding from this
premise, they contend that TWSI and Pan Am should be held liable as principals for the acts of Tagunicar. Petitioners stubbornly insist that
the existence of the agency relationship has been established by the judicial admissions allegedly made by respondents herein, to wit: (1)
the admission made by Pan Am in its Answer that TWSI is its authorized ticket agent; (2) the affidavit executed by Tagunicar where she
admitted that she is a duly authorized agent of TWSI; and (3) the admission made by Canilao that TWSI received commissions from ticket
sales made by Tagunicar.
We do not agree. 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. 7 The elements of agency are: (1) consent, express or implied, of the parties to establish
the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority. 8 It is a settled rule that persons dealing with an assumed agent 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. 9
In the case at bar, petitioners rely on the affidavit of respondent Tagunicar where she stated that she is an authorized agent of TWSI. This
affidavit, however, has weak probative value in light of respondent Tagunicar's testimony in court to the contrary. Affidavits, being taken ex
parte, are almost always incomplete and often inaccurate, sometimes from partial suggestion, or for want of suggestion and inquiries. Their
infirmity as a species of evidence is a matter of judicial experience and are thus considered inferior to the testimony given in court. 10Further,
affidavits are not complete reproductions of what the declarant has in mind because they are generally prepared by the administering officer
and the affiant simply signs them after the same have been read to her. 11Respondent Tagunicar testified that her affidavit was prepared and
typewritten by the secretary of petitioners' lawyer, Atty. Acebedo, who both came with Adrian Yu, son of petitioners, when the latter went to
see her at her office. This was confirmed by Adrian Yu who testified that Atty. Acebedo brought his notarial seal and notarized the affidavit of
the same day. 12 The circumstances under which said affidavit was prepared put in doubt petitioners' claim that it was executed voluntarily by
respondent Tagunicar. It appears that the affidavit was prepared and was based on the answers which respondent Tagunicar gave to the
questions propounded to her by Atty. Acebedo. 13They never told her that the affidavit would be used in a case to be filed against her. 14 They
even assured her that she would not be included as defendant if she agreed to execute the affidavit. 15 Respondent Tagunicar was prevailed
upon by petitioners' son and their lawyer to sign the affidavit despite her objection to the statement therein that she was an agent of TWSI.
They assured her that "it is immaterial"17 This purported admission of respondent Tagunicar cannot be used by petitioners to prove their
agency relationship. At any rate, even if such affidavit is to be given any probative value, the existence of the agency relationship cannot be
established on its sole basis. The declarations of the agent alone are generally insufficient to establish the fact or extent of his authority. 18 In
addition, as between the negative allegation of respondents Canilao and Tagunicar that neither is an agent nor principal of the other, and the
affirmative allegation of petitioners that an agency relationship exists, it is the latter who have the burden of evidence to prove their
allegation, 19 failing in which, their claim must necessarily fail.
We stress that respondent Tagunicar categorically denied in open court that she is a duly authorized agent of TWSI, and declared that she is
an independent travel agent. 20 We have consistently ruled that in case of conflict between statements in the affidavit and testimonial
declarations, the latter command greater weight. 21
As further proofs of agency, petitioners call our attention to TWSI's Exhibits "7", "7-A", and "8" which show that Tagunicar and TWSI received
sales commissions from Pan Am. Exhibit "7" 22 is the Ticket Sales Report submitted by TWSI to Pan Am reflecting the commissions received
by TWSI as an agent of Pan Am. Exhibit "7-A" 23 is a listing of the routes taken by passengers who were audited to TWSI's sales report.
Exhibit "8" 24 is a receipt issued by TWSI covering the payment made by Tagunicar for the tickets she bought from TWSI. These documents
cannot justify the decision that Tagunicar was paid a commission either by TWSI or Pan Am. On the contrary, Tagunicar testified that when
she pays TWSI, she already deducts in advance her commission and merely gives the net amount to TWSI. 25 From all sides of the legal
prism, the transaction is simply a contract of sale wherein Tagunicar buys airline tickets from TWSI and then sells it at a premium to her
clients.
III. Petitioners included respondent Pan Am in the complainant on the supposition that since TWSI is its duly authorized agent, and
respondent Tagunicar is an agent of TWSI, then Pan Am should also be held responsible for the acts of respondent Tagunicar. Our
disquisitions above show that this contention lacks factual and legal bases. Indeed, there is nothing in the records to show that respondent
Tagunicar has been employed by Pan Am as its agent, except the bare allegation of petitioners. The real motive of petitioners in suing Pan
Am appears in its Amended Complaint that "[d]efendants TWSI, Canilao and Tagunicar may not be financially capable of paying plaintiffs the
amounts herein sought to be recovered, and in such event, defendant Pan Am, being their ultimate principal, is primarily and/or subsidiary
liable to pay the said amounts to plaintiffs." 26 This lends credence to respondent Tagunicar's testimony that she was persuaded to execute
an affidavit implicating respondents because petitioners knew they would not be able to get anything of value from her. In the past, we have
warned that this Court will not tolerate an abuse of judicial process by passengers in order to pry on international airlines for damage awards,
like "trophies in a safari." 27
This meritless suit against Pan Am becomes more glaring with petitioner' inaction after they were bumped off in Tokyo. If petitioners were of
the honest belief that Pan Am was responsible for the misfortune which beset them, there is no evidence to show that they lodged a protest
with Pan Am's Tokyo office immediately after they were refused passage for the flight to San Francisco, or even upon their arrival in Manila.
The testimony of petitioner Yu Eng Cho in this regard is of title value, viz:
Atty. Jalandoni: . . .
q Upon arrival at the Tokyo airport, what did you do if any in connection with your schedule[d] trip?
a I went to the Hotel, Holiday Inn and from there I immediately called up Pan Am office in Tokyo to
reconfirm my flight, but they told me that our names were not listed in the manifest, so next morning,
very early in the morning I went to the airport, Pan Am office in the airport to verify and they told me
the same and we were not allowed to leave.
q You were scheduled to be in Tokyo for how long Mr. Yu?
a We have to leave the next day 29th.
q In other words, what was your status as a passenger?
a Transient passengers. We cannot stay for more than 72 hours.
xxx xxx xxx
q As a consequence of the fact that you claimed that the Pan Am office in Tokyo told you that your
names were not in the manifest, what did you do, if any?
a I ask[ed] them if I can go anywhere in the State? They told me I can go to LA via Japan Airlines and
I accepted it.
q Do you have the tickets with you that they issued for Los Angels?
a It was taken by the Japanese Airlines instead they issue[d] me a ticket to Taipei.
xxx xxx xxx
q Were you able to take the trip to Los Angeles via Pan Am tickets that was issued to you in lieu of
the tickets to San Francisco?
a No, sir.
q Why not?
a The Japanese Airlines said that there were no more available seats.
q And as a consequence of that, what did you do, if any?
a I am so much scared and worried, so the Japanese Airlines advised us to go to Taipei and I
accepted it.
xxx xxx xxx
q Why did you accept the Japan Airlines offer for you to go to Taipei?
a Because there is no chance for us to go to the United States within 72 hours because during that
time Northwest Airlines [was] on strike so the seats are very scarce. So they advised me better left
(sic) before the 72 hours otherwise you will have trouble with the Japanese immigration.
q As a consequence of that you were force[d] to take the trip to Taipei?
a Yes, sir. 28 (emphasis supplied)
It grinds against the grain of human experience that petitioners did not insist that they be allowed to board, considering that it was then
doubly difficult to get seats because of the ongoing Northwest Airlines strike. It is also perplexing that petitioners readily accepted whatever
the Tokyo office had to offer as an alternative. Inexplicably too, no demand letter was sent to respondents TWSI and Canilao. 29 Nor was a
demand letter sent to respondent Pan Am. To say the least, the motive of petitioners in suing Pan Am is suspect.
We hasten to add that it is not sufficient to prove that Pan Am did not allow petitioners to board to justify petitioners' claim for damages. Mere
refusal to accede to the passenger's wishes does not necessarily translate into damages in the absence of bad faith. 30 The settled rule is
that the law presumes good faith such that any person who seeks to be awarded damages due to acts of another has the burden of proving
that the latter acted in bad faith or with ill motive. 31 In the case at bar, we find the evidence presented by petitioners insufficient to overcome
the presumption of good faith. They have failed to show any wanton, malevolent or reckless misconduct imputable to respondent Pan Am in
its refusal to accommodate petitioners in its Tokyo-San Francisco flight. Pan Am could not have acted in bad faith because petitioners did not
have confirmed tickets and more importantly, they were not in the passenger manifest.
In not a few cases, this Court did not hesitable to hold an airline liable for damages for having acted in bad faith in refusing to accommodate
a passenger who had a confirmed ticket and whose name appeared in the passenger manifest. In Ortigas Jr. v. Lufthansa German Airlines
Inc., 32 we ruled that there was a valid and binding contract between the airline and its passenger after finding that validating sticker on the
passenger's ticket had the letters "O.K." appearing in the "Res. Status" box which means "space confirmed" and that the ticket is confirmed
or validated. In Pan American World Airways Inc. v. IAC, et al. 33 where a would-be-passenger had the necessary ticket, baggage claim and
clearance from immigration all clearly showing that she was a confirmed passenger and included in the passenger manifest and yet was
denied accommodation in said flight, we awarded damages. InArmovit, et al. v. CA, et al., 34 we upheld the award of damages made against
an airline for gross negligence committed in the issuance of tickets with erroneous entries as to the time of flight. In Alitalia Airways v. CA, et
al., 35we held that when airline issues a ticket to a passenger confirmed on a particular flight, on a certain date, a contract of carriage arises,
and the passenger has every right to expect that he would fly on that flight and on that date. If he does not, then the carrier opens itself to a
suit for breach of contract of carriage. And finally, an award of damages was held proper in the case of Zalamea, et al. v. CA, et al., 36 where
a confirmed passenger included in the manifest was denied accommodation in such flight.
On the other hand, the respondent airline in Sarreal, Sr. v. Japan Airlines Co., Ltd., 37 was held not liable for damages where the passenger
was not allowed to board the plane because his ticket had not been confirmed. We ruled that "[t]he stub that the lady employee put on the
petitioner's ticket showed among other coded items, under the column "status" the letters "RQ" which was understood to mean "Request."
Clearly, this does not mean a confirmation but only a request. JAL Traffic Supervisor explained that it would have been different if what was
written in the stub were the letter "ok" in which case the petitioner would have been assured of a seat on said flight. But in this case, the
petitioner was more of a wait-listed passenger than a regularly booked passenger."
In the case at bar, petitioners' ticket were on "RQ" status. They were not confirmed passengers and their names were not listed in the
passenger manifest. In other words, this is not a case where Pan Am bound itself to transport petitioners and thereafter reneged on its
obligation. Hence, respondent airline cannot be held liable for damages.
IV. We hold that respondent Court of Appeals correctly rules that the tickets were never confirmed for good reasons: (1) The persistent calls
made by respondent Tagunicar to Canilao, and those made by petitioners at the Manila, Hongkong and Tokyo offices in Pan Am, are
eloquent indications that petitioners knew that their tickets have not been confirmed. For, as correctly observed by Pan Am, why would one
continually try to have one's ticket confirmed if it had already been confirmed? (2) The validation stickers which respondent Tagunicar
attached to petitioners' tickets were those intended for the exclusive use of airline companies. She had no authority to use them. Hence, said
validation stickers, wherein the word "OK" appears in the status box, are not valid and binding. (3) The names of petitioners do not appear in
the passengers manifest. (4) Respondent Tagunicar's "Exhibit 1" 38shows that the status of the San Francisco-New York segment was "Ok",
meaning it was confirmed, but that the status of the Tokyo-San Francisco segment was still "on request". (5) Respondent Canilao testified
that on the day that petitioners were to depart for Hongkong, respondent Tagunicar called her from the airport asking for confirmation of the
Tokyo-San Francisco flight, and that when she told respondent Tagunicar that she should not have allowed petitioners to leave because their
tickets have not been confirmed, respondent Tagunicar merely said "Bahala na." 39 This was never controverted nor refuted by respondent
Tagunicar. (6) To prove that it really did not confirm the bookings of petitioners, respondent Canilao pointed out that the validation stickers
which respondent Tagunicar attached to the tickets of petitioners had IATA No. 2-82-0770 stamped on it, whereas the IATA number of TWSI
is 28-30770. 40
Undoubtedly, respondent Tagunicar should be liable for having acted in bad faith in misrepresenting to petitioners that their tickets have been
confirmed. Her culpability, however, was properly mitigated. Petitioner Yu Eng Cho testified that he repeatedly tried to follow up on the
confirmation of their tickets with Pan Am because he doubted the confirmation made by respondent Tagunicar. 41 This is clear proof that
petitioners knew that they might be bumped off at Tokyo when they decided to proceed with the trip. Aware of this risk, petitioners exerted
efforts to confirm their tickets in Manila, then in Hongkong, and finally in Tokyo. Resultantly, we find the modification as to the amount of
damages awarded just and equitable under the circumstances.
WHEREFORE, the decision appealed from is hereby AFFIRMED. Cost against petitioners.1wphi1.nt
SO ORDERED.
G.R. No. L-24332 January 31, 1978
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
MUOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion Rallos, sold the latter's undivided
share in a parcel of land pursuant to a power of attorney which the principal had executed in favor. The administrator of the estate of the
went to court to have the sale declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for, but
upon appeal the Court of Appeals uphold the validity of the sale and the complaint.
Hence, this Petition for Review on certiorari.
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of
land known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu. On
April 21, 1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their
behalf lot 5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters
Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was
registered in the Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title No. 12989 was issued in
the named of the vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No.
R-4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983
be d unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of 'title issued in the name of Felix Go Chan & Sons
Realty Corporation be cancelled and another title be issued in the names of the corporation and the "Intestate estate of Concepcion Rallos"
in equal undivided and (3) that plaintiff be indemnified by way of attorney's fees and payment of costs of suit. Named party defendants were
Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was dropped from
the complaint. The complaint was amended twice; defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon
Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon
and his sister Gerundia died and they were substituted by the respective administrators of their estates.
After trial the court a quo rendered judgment with the following dispositive portion:
A. On Plaintiffs Complaint
(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso share of
Concepcion Rallos in the property in question, Lot 5983 of the Cadastral Survey of Cebu is
concerned;
(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989
covering Lot 5983 and to issue in lieu thereof another in the names of FELIX GO CHAN & SONS
REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion of one-half (1/2)
share each pro-indiviso;
(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided
one-half (1/2) share of Lot 5983 to the herein plaintiff;
(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay
to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and
(5) Ordering both defendants to pay the costs jointly and severally.
B. On GO CHANTS Cross-Claim:
(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45, representing the
price of one-half (1/2) share of lot 5983;
(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in
concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of
P500.00.
C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos, against Josefina
Rallos special administratrix of the Estate of Gerundia Rallos:
(1) Dismissing the third-party complaint without prejudice to filing either a complaint against the regular administrator of
the Estate of Gerundia Rallos or a claim in the Intestate-Estate of Cerundia Rallos, covering the same subject-matter of
the third-party complaint, at bar. (pp. 98-100, Record on Appeal)
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it set aside
the sale of the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on November 20,
1964 in favor of the appellant corporation sustaining the sale in question. 1 The appellee administrator, Ramon Rallos, moved for a
reconsider of the decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant case, We
have the query. is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the
death of his principal? What is the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for
and in behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act
performed after such death?
Before proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter tinder consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another without being authorized by the
latter, or unless he has by law a right to represent him. 3 A contract entered into in the name of another by one who has no authority or the
legal representation or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person
on whose behalf it has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
(1) Those entered into in the name of another person by one who hi - been given no authority or legal representation or
who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, caged the principal
(mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The essential
elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the execution of a
juridical act in relation to a third person; (3) the agents acts as a representative and not for himself, and (4) the agent acts within the scope of
his authority. 5
Agency is basically personal representative, and derivative in nature. The authority of the agent to act emanates from the powers granted to
him by his principal; his act is the act of the principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts
through another acts himself". 6
2. There are various ways of extinguishing agency, 7 but her We are concerned only with one cause death of the principal Paragraph 3 of
Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish Civil Code provides:
ART. 1919. Agency is extinguished.
xxx xxx xxx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ... (Emphasis supplied)
By reason of the very nature of the relationship between Principal and agent, agency is extinguished by the death of the principal or the
agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in thejuridical basis of agency
which is representation Them being an in. integration of the personality of the principal integration that of the agent it is not possible for the
representation to continue to exist once the death of either is establish. Pothier agrees with Manresa that by reason of the nature of agency,
death is a necessary cause for its extinction. Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon
the death of either without necessity for the heirs of the fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law the death of the principal effects instantaneous and absolute revocation of the authority of the
agent unless the Power be coupled with an interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a
power without an interest confer. red upon an agent is dissolved by the principal's death, and any attempted execution of the power
afterward is not binding on the heirs or representatives of the deceased. 11
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject to any
exception, and if so, is the instant case within that exception? That is the determinative point in issue in this litigation. It is the contention of
respondent corporation which was sustained by respondent court that notwithstanding the death of the principal Concepcion Rallos the act of
the attorney-in-fact, Simeon Rallos in selling the former's sham in the property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule afore-mentioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted
in the common interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation
in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which
extinguishes the agency, is valid and shall be fully effective with respect to third persons who may have contracted with
him in good. faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with an
interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only
under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal and (2) that the third person who
contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal
at the time he contracted with said agent. These two requisites must concur the absence of one will render the act of the agent invalid and
unenforceable.
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latter's
share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simon
Rallos before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a
quo 13 and of respondent appellate court when the latter stated that Simon Rallos 'must have known of the death of his sister, and yet he
proceeded with the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty
corporation) of the death of the former. 14
On the basis of the established knowledge of Simon Rallos concerning the death of his principal Concepcion Rallos, Article 1931 of the Civil
Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal; it is
not enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil
rode now Art. 1931 of the new Civil Code sustained the validity , of a sale made after the death of the principal because it was not shown
that the agent knew of his principal's demise. 15 To the same effect is the case of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the
words of Justice Jesus Barrera the Court stated:
... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in
the record, that the agent Luy Kim Guan was aware of the death of his principal at the time he sold the property. The
death 6f the principal does not render the act of an agent unenforceable, where the latter had no knowledge of such
extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent consideration the Court of Appeals reasoned out that there is no provision in the Code
which provides that whatever is done by an agent having knowledge of the death of his principal is void even with respect to third persons
who may have contracted with him in good faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in Article 1919 that the death
of the principal extinguishes the agency. That being the general rule it follows a fortiorithat any act of an agent after the death of his principal
is void ab initio unless the same fags under the exception provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an
exception to the general rule, is to be strictly construed, it is not to be given an interpretation or application beyond the clear import of its
terms for otherwise the courts will be involved in a process of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power of attorney which was duly
registered on the original certificate of title recorded in the Register of Deeds of the province of Cebu, that no notice of the death was aver
annotated on said certificate of title by the heirs of the principal and accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresa's Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made known
to them. But if the agency is general iii nature, without reference to particular person with whom the agent is to contract, it
is sufficient that the principal exercise due diligence to make the revocation of the agency publicity known.
In case of a general power which does not specify the persons to whom represents' on should be made, it is the general
opinion that all acts, executed with third persons who contracted in good faith, Without knowledge of the revocation, are
valid. In such case, the principal may exercise his right against the agent, who, knowing of the revocation, continued to
assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
The above discourse however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be distinguished
from revocation by operation of law such as death of the principal which obtains in this case. On page six of this Opinion We stressed that by
reason of the very nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal
or agent. Although a revocation of a power of attorney to be effective must be communicated to the parties concerned, 18 yet a revocation by
operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch as "by legal fiction the agent's exercise of
authority is regarded as an execution of the principal's continuing will. 19With death, the principal's will ceases or is the of authority is
extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal What the Code provides in Article 1932 is
that, if the agent die his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may demand
in the interest of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the property in
the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal
6. Holding that the good faith of a third person in said with an agent affords the former sufficient protection, respondent court drew a "parallel"
between the instant case and that of an innocent purchaser for value of a land, stating that if a person purchases a registered land from one
who acquired it in bad faith even to the extent of foregoing or falsifying the deed of sale in his favor the registered owner has no
recourse against such innocent purchaser for value but only against the forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We
quote from the brief:
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of lands with Agustin
Nano. The latter had a power of attorney supposedly executed by Vallejo Nano in his favor. Vallejo delivered to Nano his
land titles. The power was registered in the Office of the Register of Deeds. When the lawyer-husband of Angela
Blondeau went to that Office, he found all in order including the power of attorney. But Vallejo denied having executed the
power The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the decision of the court a quo,
the Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant- appellee must be overruled.
Agustin Nano had possession of Jose Vallejo's title papers. Without those title papers handed over to
Nano with the acquiescence of Vallejo, a fraud could not have been perpetuated. When Fernando de
la Canters, a member of the Philippine Bar and the husband of Angela Blondeau, the principal
plaintiff, searched the registration record, he found them in due form including the power of attorney
of Vallajo in favor of Nano. If this had not been so and if thereafter the proper notation of the
encumbrance could not have been made, Angela Blondeau would not have sent P12,000.00 to the
defendant Vallejo.' An executed transfer of registered lands placed by the registered owner thereof in
the hands of another operates as a representation to a third party that the holder of the transfer is
authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a breach of trust,
the one who made it possible by his act of coincidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who admittedly was
an agent of his sister and who sold the property of the latter after her death with full knowledge of such death. The situation is expressly
covered by a provision of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its
tenor, in the same manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law
which in part provides:
xxx xxx xxx
The production of the owner's duplicate certificate whenever any voluntary instrument is presented for registration shall
be conclusive authority from the registered owner to the register of deeds to enter a new certificate or to make a
memorandum of registration in accordance with such instruments, and the new certificate or memorandum Shall be
binding upon the registered owner and upon all persons claiming under him in favor of every purchaser for value and in
good faith: Provided however, That in all cases of registration provided by fraud, the owner may pursue all his legal and
equitable remedies against the parties to such fraud without prejudice, however, to the right, of any innocent holder for
value of a certificate of title. ... (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the Supreme Court of
Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the death of the principal were held to be "good", "the
parties being ignorant of the death". Let us take note that the Opinion of Justice Rogers was premised on the statement that the parties were
ignorant of the death of the principal. We quote from that decision the following:
... Here the precise point is, whether a payment to an agent when the Parties are ignorant of the death is a good
payment. in addition to the case in Campbell before cited, the same judge Lord Ellenboruogh, has decided in 5 Esp. 117,
the general question that a payment after the death of principal is not good. Thus, a payment of sailor's wages to a
person having a power of attorney to receive them, has been held void when the principal was dead at the time of the
payment. If, by this case, it is meant merely to decide the general proposition that by operation of law the death of the
principal is a revocation of the powers of the attorney, no objection can be taken to it. But if it intended to say that his
principle applies where there was 110 notice of death, or opportunity of twice I must be permitted to dissent from it.
... That a payment may be good today, or bad tomorrow, from the accident circumstance of the death of the principal,
which he did not know, and which by no possibility could he know? It would be unjust to the agent and unjust to the
debtor. In the civil law, the acts of the agent, done bona fide in ignorance of the death of his principal are held valid and
binding upon the heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common law is so
unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke, mention may be made that the above represents the
minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court said.
There are several cases which seem to hold that although, as a general principle, death revokes an agency and renders
null every act of the agent thereafter performed, yet that where a payment has been made in ignorance of the death,
such payment will be good. The leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am.
76, where, in an elaborate opinion, this view ii broadly announced. It is referred to, and seems to have been followed, in
the case of Dick v. Page,17 Mo. 234, 57 AmD 267; but in this latter case it appeared that the estate of the deceased
principal had received the benefit of the money paid, and therefore the representative of the estate might well have been
held to be estopped from suing for it again. . . . These cases, in so far, at least, as they announce the doctrine under
discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie 4 Watts & S. 282, 39 AmD 76), is
believed to stand almost, if not quite, alone in announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in
2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it related to the particular
facts, was a mere dictum, Baldwin J. said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views on the
general subject, than as the adjudication of the Court upon the point in question. But accordingly all power weight to this
opinion, as the judgment of a of great respectability, it stands alone among common law authorities and is opposed by an
array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for
the simple reason that our statute, the Civil Code, expressly provides for two exceptions to the general rule that death of the principal
revokes ipso jure the agency, to wit: (1) that the agency is coupled with an interest (Art 1930), and (2) that the act of the agent was executed
without knowledge of the death of the principal and the third person who contracted with the agent acted also in good faith (Art. 1931).
Exception No. 2 is the doctrine followed in Cassiday, and again We stress the indispensable requirement that the agent acted without
knowledge or notice of the death of the principal In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of
the death of his principal Accordingly, the agent's act is unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court, and We affirm en toto the judgment rendered
by then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against
respondent realty corporation at all instances.
So Ordered.
G.R. Nos. L-18223-24
June 29, 1963
COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee,

vs.
REPUBLIC ARMORED CAR SERVICE CORPORATION and DAMASO PEREZ, ET AL., defendants-appellants.
Pompeyo Diaz for plaintiff-appellee.
Halili, Bolinao, Bolinao & Associates and Crispin D. Baizas for defendants-appellants.
LABRADOR, J.:
The above-entitled cases are appeals from judgments rendered by the Court of First Instance of through Judges Gustavo Victoriano and
Conrado M. Vasquez, respectively, of said Court.
In G.R. No. L-8223 plaintiff-appellee filed it complaint alleging that the defendants-appellants were granted by it credit accommodations in
the form of an overdraft line for an amount not exceeding P80,000, with interest (paragraph 2, Complaint); that defendants or either of them
drew regularly upon the above credit line and as of February 10, 1960, the total of their drawings and interest due amounted to P79,940.80
(par. 3, id.); that repeated demands were made upon defendants to pay for the drawings but said demands were ignored (par. 4, id.). In their
answer to the complaint the defendants admit having drawn upon the credit line extended to them as alleged in the complaint; claim they
have not ignored the demands for the payment of the sums demanded and have instituted actions against the former officers of defendant
corporation who held defrauded the latter; etc. (par. 4, Answer). By way of special affirmative defenses, they allege that the former officers
and directors of the defendant corporation had deliberately defrauded and mismanaged the corporations, as a part of their scheme to wrest
control of various corporations owned by Damaso Perez, from the latter, and as a result of said frauds or mismanagements the defendants
have instituted actions for damages for breach of trust; and that the amounts drawn on the credit line subject of the complaint were received
and used by the former directors and officers of the defendant corporations and constitute part of the funds misapplied by them. Upon
motion, Judge Victoriano entered for the plaintiff a judgment on the pleadings, holding that the "special affirmative defenses (of the answer)
filled to show that any allegation respecting the extent of defendants' drawing although they have admitted having drawn against the credit
line, subject of the action, so that said denial, not being specific denial in the true sense, does not controvert the allegation at which it is
aimed," etc. The court also further held that the alleged mismanagement and fraud of the former directors and officials of defendant
corporation and the action now pending in court regarding the same are merely internal affairs of the corporation which cannot affect or
diminish the liability of the defendant corporation to the plaintiff. The defendants appealed from the decision to the Court of Appeals, but this
Court certified the case to Us.
In G.R. No. L-18224 the complaint also alleges that the defendants were given credit accommodation in the form of an overdraft line in an
amount not exceeding P150,000 and drew regularly upon said credit line amounts which with their interest reach the sum of P133,453.17;
that demands were made for the payment of the drawings but defendants have failed to pay the amounts demanded. Defendants in their
answer admit the opening of the credit line in their favor and that demands for the indebtedness were made upon them, but allege as special
defenses that the directors and officers of the defendant corporation deliberately defrauded and mismanaged the said corporation breach of
trust in order to deprive Damaso Perez of his control and majority interest in the defendant corporation, as a result of which fraud,
mismanagement and breach of trust the defendants suffered tremendous losses; that the amounts drawn by defendant corporation upon the
credit line were received and used by the former directors and officers and same constitute part of the funds of the defendant corporation
misapplied and mismanaged by said former officers and directors of said corporation. Upon the presentation of the answer the plaintiff
presented motion sustained, for judgment on the pleadings which the court sustained, holding:
The defendants having admitted the indebtedness in question, its liability to pay the plaintiff the amount of the said indebtedness is
beyond question. The alleged fact that the money borrowed from the plaintiff was misappropriated or misapplied by some officers
of the defendant corporation is no defense against the liability of the defendants to the plaintiff. It is an internal matter of the
defendant corporation in which the plaintiff has no concern or participation whatsoever. This is specially so with respect to the
defendant Damaso Perez who appears to have executed the agreement, Annex A, in his own personal capacity and not as an
officer of the defendant Republic Credit Corporation. The allegation that the defendants have a right to claim indemnity or
contribution from the erring directors and officers of the defendant corporation is a matter which may be the subject of a separate
action, and in which the plaintiff is not concerned. (p. 37, Record on Appeal)
Against the above judgment the defendants also have prosecuted this appeal. The Court of Appeals certified the same to Us in accordance
with law.
In G.R. No. L-18223, the defendants-appellants argue that the admission made by the defendants in their answer that the amount demanded
was due, is qualified "in the sense that whatever amounts were drawn from the overdraft line in question were part of those corporate funds
of Philippine Armored Car, Inc., misused and misapplied by Ramon Racelis, et al., former directors and executive officers of said
corporation." (p. 13, Appellee's Brief) In answer to this argument we call attention to the fact that in the agreement attached to the complaint
Exhibit "A", the obligation of the defendants-appellants to pay for the amount due under the overdraft line is not in any way qualified; there is
no statement that the responsibility of the defendants-appellants for the amount taken on overdraft would cease or be defeated or reduced
upon misappropriations on mismanagement of the funds of the corporation by the directors and employees thereof. The special defense is,
therefore, a sham defense.
Furthermore, under general rules and principles of law the mismanagement of the business of a party by his agents does not relieve said
party from the responsibility that he had contracted to third persons, especially in the case at bar where the written agreement contains no
limitation to defendants-appellants' liability.1wph1.t
The so-called special defense contained in the answer is, therefore, no special defense to the liability of the defendants-appellants, nor to the
action, and the court's action or judgment on the pleadings was properly taken. The argument contained in the brief of the defendantsappellants that the defendants contemplated a third-party complaint is of no weight, because a third-party complaint was not available to the
defendants under the facts of the case. A third-party complaint is, under the Rules, available only if the defendant has a right to demand
contribution, indemnity, subrogation or any other relief from the supposed third-party defendants in respect to the plaintiff's claim. (Sec. 1,
Rule 12, Rules of Court). The supposed parties defendants or alleged officers of the defendant corporation had nothing to do with the
overdraft account of defendant corporation with the plaintiff-appellee. Consequently, they cannot be made parties defendants in a third party
complaint. Anyway the filing of a third party complaint is no hindrance to the issuance of the order of the court declaring that the defendants'
answer presented no issue or defense and that, therefore, plaintiff-appellee was entitled to judgment.
In G. R. No. L-18224, our ruling in the first case is also applicable. In this second case, it is also alleged that at the time of the agreement for
credit in current account the defendant corporation was under the management of Ramon Racelis and others who defrauded and
mismanaged the corporation, in breach of trust, etc., etc. Again we declare that the written agreement for credit in current account, Annex
"A", contains no limitation about the liability of the defendants-appellants, nor an express agreement that the responsibility of the defendantsappellants should be conditioned upon the lawful management of the business of the defendant corporation. The same rulings in the first
case are applicable in this second case.
WHEREFORE, the judgments appealed from are hereby affirmed, with costs against the defendants-appellants.
Padilla, Bautista Angelo, Concepcion., Reyes, J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur.
Bengzon, C.J., took no part.
G.R. No. L-25301
October 26, 1968
GOLD STAR MINING CO., INC., petitioner,

vs.
MARTA LIM-JIMENA, CARLOS JIMENA, GLORIA JIMENA, AURORA JIMENA, JAIME JIMENA, DANTE JIMENA, JORGE JIMENA,
JOYCE JIMENA, as legal heirs of the deceased VICTOR JIMENA, and JOSE HIDALGO, respondents.
Emiliano S. Samson and R. Balderrama-Samson for petitioner.
Leandro Sevilla and Ramon C. Aquino for respondents.
REYES, J.B.L., J.:
From an affirmance in toto by the Court of Appeals1 of a decision of the Court of First Instance of Manila, 2specifically the portion thereof
condemning Gold Star Mining Co., Inc. to pay Marta Lim Vda. de Jimena, et al., the sum of P30,691.92 solidarily with Ananias Isaac Lincallo
for violation of an injunction this appeal is taken.
It is of record that in 1937, Ananias Isaac Lincallo bound himself in writing to turn to Victor Jimena one-half (1/2) of the proceeds from all
mining claims that he would purchase with the money to be advanced by the latter. This agreement was later on modified (in a 1939 notarial
instrument duly registered with the Register of Deeds of Marinduque in his capacity as mining recorder) so as to include in the equal sharing
arrangement not only the proceeds from several mining claims, which by that time had already been purchased by Lincallo with various
sums totalling P5,800.00 supplied by Jimena, but also the lands constituting the same, and so as to bind thereby their "heirs, assigns, or
legal representatives." Apparently, the mining rights over part of the claims were assigned by Lincallo to Gold Star Mining Co., Inc., sometime
before World War Il because in 1950 the corporation paid him P5,000 in consideration of, and as a quitclaim for, pre-war royalties.
On several occasions thereafter, the mining claims in question were made subject-matter of contracts entered into by Lincallo in his own
name and for his benefit alone without the slightest intimation of Jimena's interests over the same. Thus, on 19 September 1951, Lincallo
and one Alejandro Marquez, as separate owners of particular mining claims, entered into an agreement with Gold Star Mining Co., Inc., the
assignee thereof, regarding allotment to Lincallo of 45% of the royalties due from the corporation. Four months later, Lincallo, Marquez and
Congressman Panfilo Manguerra, again as owners, leased certain mining claims to Jacob Cabarrus, who, in turn, transferred to Marinduque
Iron Mines Agents, Inc., his rights under the lease contract. By virtue of still another contract executed by these lessors on 29 February 1952,
43% of the royalties due from Marinduque Iron Mines Agents, Inc., were agreed upon to be paid to Lincallo.
As early as August, 1939 and down to September, 1952, Jimena repeatedly apprised Gold Star Mining Co., Inc., and Marinduque Iron Mines
Agents, Inc., of his interests over the mining claims so assigned and/or leased by Lincallo and, accordingly, demanded recognition and
payment of his one-half share in all the royalties, allocated and paid and, thereafter, to be paid to the latter. Both corporations, however,
ignored Jimena's demands.
Payment of the P5,800 advanced for the purchase of the mining claims, as well as the one-half share in the royalties paid by the two
corporations, were also repeatedly demanded by Jimena from Lincallo. Acknowledging Jimena's contractual claim, Lincallo off and on
promised to settle his obligations. And on 14 July 1952, Lincallo promised for the last time, to settle everything on or before the 30th day of
the same month.
Lincallo, however, did not only fail to settle his accounts with Jimena but transferred on 16 August 1952, a month after he promised to pay
Jimena, 35 of his 45% share in the royalties due from Gold Star Mining Co., Inc., to one Gregorio Tolentino, a salaried employee, for an
alleged consideration of P10,000.00.
On 2 September 1954, Jimena commenced a suit against Lincallo for recovery of his advances and his one-half share in the royalties. Gold
Star Mining Co., Inc., and Marinduque Iron Mines, Inc., together with Tolentino, were later joined as defendants.
On 17 September 1954, the trial court issued, upon petition of Jimena, a writ of preliminary injunction restraining Gold Star Mining Co., Inc.,
and Marinduque Iron Mines Agents, Inc., from paying royalties during the pendency of the case to Lincallo, his assigns or legal
representatives. Despite the injunction, however, Gold Star Mining Co., Inc., was found out to have paid P30, 691.92 to Lincallo and
Tolentino. Said corporation claimed later on (on appeal) that the injunction had been superseded and/or dissolved on 25 May 1955 by the
trial court's grant of Jimena's petition for a writ of preliminary attachment "to supersede the writ of preliminary injunction previously issued."
But as the grant was conditioned upon filing of a bond to be approved by the trial court, no writ of attachment was issued because the bond
offered by Jimena was disapproved.3
Jimena and Tolentino died successively during the pendency of the case in the trial court and were, accordingly, substituted by their
respective widows and children.
After a protracted trial, the lower court rendered a decision, the dispositive portion of which reads as follows:
IN VIEW WHEREOF, judgment is rendered:
1. Declaring the plaintiffs
(a) as successors in interest of Victor Jimena to be entitled to 1/2 of the 45% share of the royalties of defendant Lincallo
under the latter's contract with Gold Star, Exh. D or Exh. D-l, dated September 19, 1951;
(b) to 1/2 of the 43% shares of the rental of defendant Lincallo under his contract with Jesus (Jacob) Cabarrus assigned
to Marinduque Iron Mines, and his contract with Alejandro Marquez, dated December 5, 1951, and February 29, 1952,
Exhs. J and J-1; .
(c) and condemning defendants Gold Star and Marinduque Iron Mines to pay direct to plaintiffs said 1/2 shares of the
royalties until said contracts are terminated;
2. Condemning defendant Lincallo to pay unto plaintiffs, as successors in interest of Victor Jimena
(a) the sum of P5,800 with legal interest from the date of the filing of the complaint;
(b) the sum of P40,167.52 which is the 1/2 share of the royalties paid by Gold Star unto Lincallo as of the September 14,
1957;
(c) the sum of P3,235.64 which is the 1/2 share of Jimena on the rentals amounting to P6,471.27 corresponding to
Lincallo's share paid by Marinduque Iron Mines unto Lincallo from December, 1951 to August 25, 1954; under Exhibit N;
(d) P1,000.00 as attorneys fees;
3. Declaring that the deed of sale, Exh. H, dated August 16, 1952, between defendant Lincallo and Gregorio Tolentino was
effective and transferred only 1/2 of the 45% (43%) share of Lincallo, and ordering Gold Star Mining Company to make payment
hereafter unto plaintiffs, pursuant to this decision on the royalties due unto Lincallo, notwithstanding the cession unto Tolentino, so
that of the royalties due unto Lincallo 1/2 should always be paid by Gold Star unto plaintiffs notwithstanding said session, Exh. H,
unto Tolentino by Lincallo;
4. Judgment is also rendered condemning the estate of Gregorio Tolentino but not the heirs personally, to pay unto plaintiffs the
sum of P24,386.51 with legal interest from the date of the filing of the complaint against Gregorio Tolentino.
5. Judgment is rendered condemning defendant Gold Star Mining Company to pay to plaintiffs solidarily with Lincallo and to be
imputed to Lincallo's liability under this judgment unto Jimena, the sum of P30,691.92;
6. Judgment is rendered condemning defendant Marinduque Iron Mines to pay unto plaintiffs the sum of P7,330.36;
7. The counterclaims of defendants are dismissed;
8. Costs against defendant Lincallo.
SO ORDERED. (Emphasis supplied.)
From this judgment, all four defendants, namely, Lincallo, the widow and children of Tolentino, and the two corporations, appealed to the
Court of Appeals. The appeal interposed by Marinduque Iron Mines Agents, Inc., was, however, withdrawn, while that of Lincallo was
dismissed for the failure to file brief. Pending outcome of the appeal, the royalties due from Gold Star Mining Co., Inc., were required to be
deposited with the trial court, as per order of 17 June 1958 issued by the same court. In compliance therewith, Gold Star Mining Co., Inc.,
made a judicial deposit in the amount of P30,691.92.
On 8 October 1965, the Court of Appeals handed down a decision sustaining in its entirety that of the trial court. Gold Star Mining Co., Inc.,
moved for reconsideration of said decision insofar as its adjudged solidary liability with Lincallo to pay to the Jimenas the sum of P30,691.92
"for flagrant violation of the injunction" was concerned. The motion was denied. Hence, the present appeal.
Petitioner Gold Star Mining Co., Inc., argues that the Court of Appeals' decision finding that respondents Jimenas have a cause of action
against it, and condemning it to pay the sum of P30,691.92 for violation of an allegedly non-existent injunction, are reversible errors.
Reasons: As to respondents Jimena's cause of action, the same does not allegedly appear in the complaint filed against petitioner
corporation. And as to the P30,691.92 penalty for violation of the injunction, the same can not allegedly be imposed because (1) the sum of
P30,691.92 was not prayed for, (2) the injunction in question had already been superseded and/or dissolved by the trial court's grant of
Jimena's petition for writ of preliminary attachment; and (3) the corporation was never charged, heard, nor found guilty in accordance with,
and pursuant to, the provisions, of Rule 64 of the (Old) Rules of Court.
We are of the same opinion with the Court of Appeals that respondents Jimenas have a cause of action against petitioner corporation and
that the latter's joinder as one of the defendants before the trial court is fitting and proper. Said the Court of Appeals, and we adopt the same:
There first assigned error is the Trial Court erred in not dismissing this instant action as "there is no privity of contract between
Gold Star and Jimena." This contention is without merit.
The situation at bar is similar to the status of the first and second mortgagees of a duly registered real estate mortgage. While
there exists no privity of contract between them, yet the common subject-matter supplies the juridical link.
Here the evidence overwhelmingly established that Jimena made prewar and postwar demands upon Gold Star for the payment of
his 1/2 share of the royalties but all in vain so he (Jimena) was constrained to implead Gold Star because it refused to recognize
his right.
Jimena now seeks for accounting of the royalties paid by Gold Star to Lincallo, and for direct payment to himself of his share of the
royalties. This relief cannot be granted without joining the Gold Star specially in the face of the attitude it had displayed towards
Jimena.
Borrowing the Spanish maxim cited by Jimena's counsel, "el deudor de mi deudor es deudor mio," this legal maxim finds sanction
in Article 1177, new Civil Code which provides that "creditors, after having pursued the property in possession of the debtor to
satisfy their claims, may exercise all the rights and bring all the actions of the latter (debtor) for the same purpose, save those
which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them (1111)."
From another standpoint, equally valid and acceptable, it can be said that Lincallo, in transferring the mining claims to Gold Star
(without disclosing that Jimena was a co-owner although Gold Star had knowledge of the fact as shown by the proofs heretofore
mentioned) acted as Jimena's agent with respect to Jimena's share of the claims.
Under such conditions, Jimena has an action against Gold Star, pursuant to Article 1883, New Civil Code, which provides that the
principal may sue the person with whom the agent dealt with in his (agent's) own name, when the transaction "involves things
belonging to the principal."
As counsel for Jimena has correctly contended, "the remedy of garnishment suggested by Gold Star is utterly inadequate for the
enforcement of Jimena's right against Lincallo because Jimena wanted an accounting and wanted to receive directly his share of
the royalties from Gold Star. That recourse is not open to Jimena unless Gold Star is made a party in this action."
Coming now to the violation of the injunction, we observe that the facts speak for themselves. Considering that no writ of preliminary
attachment was issued by the trial court, the condition for its issuance not having been met by Jimena, nothing can be said to have
superseded the writ of preliminary injunction in question. The preliminary injunction was, therefore, subsisting and evidently violated by
petitioner corporation when it paid the sum of P30,691.92 to Lincallo and Tolentino.
Gold Star Mining Co., Inc., insists that it may not be penalized for breach of the injunction, issued by the court of origin, without prior written
charge for indirect contempt, and due hearing, citing section 3 of Rule 64 of the old Rules of Court, now Rule 71 of the Revised Rules. We
fail to see any merit in this contention, as it misses the true nature and intent of the award of P30,691.92 to Jimena, payable by Gold Star
and Lincallo's estate.
Said award is not so much a penalty against petitioner as a decree of restitution, in order to make the violated injunction effective, as it
should be, by placing the parties in the same condition as if the injunction had been fully obeyed. If Gold Star Mining Co., Inc., had only
heeded the injunction and had not paid to Lincallo the royalties of P30,691.92, such amount would now be available for the satisfaction of the
claims of Jimena and his heirs against Lincallo. By sentencing Gold Star Mining Co., Inc., to pay, for the account of Lincallo, the sum
aforesaid, the court merely endeavoured to prevent its award from being rendered pro tanto nugatory and ineffective, and thus make it
conformable to law and justice.
That the questioned award was not intended to be a penalty against appellant Gold Star Mining Co., Inc., is shown by the provision in the
judgment that the P30,691.92 to be paid by it to Jimena is "to be imputed to Lincallo's liability under this judgment." The court thus left the
way open for Gold Star Mining Co., Inc., to recover later the whole amount from Lincallo, whether by direct action against him or by
deducting it from the royalties that may fall due under his 1951 contract with appellant.
That the recovery of this particular amount was not specifically sought in the complaint is of no moment, since the complaint prayed in
general for "other equitable relief."
WHEREFORE, finding no reversible error in the decision appealed from, the same is affirmed, with costs against petitioner-appellant, Gold
Star Mining Co., Inc.
G.R. No. L-10919
February 28, 1958
LORETO LORCA, plaintiff-appellant,

vs.
JOSE S. DINEROS, defendant-appellee.
Pedro B. Puya for appellant.
Manuel F. Zamora for appellee.
BENGZON, J.:
This action for damages against Deputy Sheriff Jose S. Dineros was dismissed by Hon. Pantaleon Pelayo, Judge of Iloilo, on the ground that
it is the Sheriff who is responsible, if at all not this deputy.
Such decision resulted from a motion for judgment on the pleadings. The facts are short and simple:
Pursuant to a writ of execution issued in Civil Case No. 1062 entitled "Rosario Suero vs. Jose Morata" Jose S. Dineros as Deputy Sheriff and
in the name of the Sheriff sold at public auction to Jose Bermejo and Rosario Suero the property attached therein, disregarding the thirdparty claim of Loreto Lorca (herein Plaintiff) who asserted ownership over said property. This suit for damages is the result of said auction
sale. Defendant, in his answer, denied liability, pointing out, that he had merely acted for and on behalf of Provincial Sheriff, Cipriano
Cabaluna.
The appellant insists here that Dineros was responsible in view of sec. 334 of the Revised Administrative Code and sec. 15, Rule 39, Rules
of Court, which provides as follows:
SEC. 334 Right of Bonded Officer to require Bond from Deputy or assistant. A sheriff or other accountable official may require
any of his deputies or assistants, not bonded in the fidelity fund, to give an adequate personal bond as security against loss by
reason of any wrong doing on the part of such deputy or assistant. The taking of such security shall in no wise impair the
independent civil liability of any of the parties.
. . . and in case the sheriff or attaching officer is sued for damages as a result of the attachment. . . .
In the light of section 330 of the Administrative Code we think the above provisions apply where the deputy acts in his own name or is guilty
of active malfeasance1 or possibly where he exceeds the limits of his agency. In this case it is clear from the certificate of sale attached to the
complaint as Annex C that Dineros acted all the time in the name of the Ex-Officio Provincial Sheriff of Iloilo; and no allegations of
misfeasance are made. The Sheriff is liable to third persons on the acts of his deputy, 2 in the same manner that the principal is responsible
for the acts of his agent, that is why he is required to post a bond for "the benefit of whom it may concern," (Section 330, Revised
Administrative Code) for instance the owners of property unlawfully sold by him on execution. 3
The complaint should not have been dismissed, appellant argues, since the court could have included the Sheriff as party defendant, in line
with Rule 3, section 11 of the Rules of Court. However, what should have been done was not "inclusion" as plaintiff asked, nor "exclusion"
under said section 11. It was "substitution" of the deputy by the Sheriff. Anyway, the word "may" in said see. 11 implies direction of the court;
and we are shown no reasons indicating abuse thereof.
This is not the first time an action is dismissed for the reason that the agent instead of his principal was made the party defendant. (See
Macias & Co. vs. Warner Barnes, 43 Phil., 155; Banque Generate Belge vs.Walter Bull & Co., 84 Phil., 164, 47 Off. Gaz., 138.)
Judgment affirmed, with costs against appellant.
G.R. No. 130423
November 18, 2002
VIRGIE SERONA, petitioner,

vs.
HON. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES, respondents.
DECISION
YNARES-SANTIAGO, J.:
During the period from July 1992 to September 1992, Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold on
commission basis. By oral agreement of the parties, petitioner shall remit payment or return the pieces of jewelry if not sold to Quilatan, both
within 30 days from receipt of the items.
Upon petitioners failure to pay on September 24, 1992, Quilatan required her to execute an acknowledgment receipt (Exhibit B) indicating
their agreement and the total amount due, to wit:
Ako, si Virginia Serona, nakatira sa Mother Earth Subd., Las Pinas, ay kumuha ng mga alahas kay Gng. Leonida Quilatan na may
kabuohang halaga na P567,750.00 para ipagbili para ako magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang mga
nasabing alahas kung hindi mabibili sa loob ng 30 araw.
Las Pinas, September 24, 1992.1
The receipt was signed by petitioner and a witness, Rufina G. Navarette.
Unknown to Quilatan, petitioner had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission basis.
Petitioner was not able to collect payment from Labrador, which caused her to likewise fail to pay her obligation to Quilatan.
Subsequently, Quilatan, through counsel, sent a formal letter of demand 2 to petitioner for failure to settle her obligation. Quilatan executed a
complaint affidavit3 against petitioner before the Office of the Assistant Provincial Prosecutor. Thereafter, an information for estafa under
Article 315, paragraph 1(b)4 of the Revised Penal Code was filed against petitioner, which was raffled to Branch 255 of the Regional Trial
Court of Las Pinas. The information alleged:
That on or about and sometime during the period from July 1992 up to September 1992, in the Municipality of Las Pinas, Metro Manila,
Philippines, and within the jurisdiction of this Honorable Court, the said accused received in trust from the complainant Leonida E. Quilatan
various pieces of jewelry in the total value of P567,750.00 to be sold on commission basis under the express duty and obligation of remitting
the proceeds thereof to the said complainant if sold or returning the same to the latter if unsold but the said accused once in possession of
said various pieces of jewelry, with unfaithfulness and abuse of confidence and with intent to defraud, did then and there willfully, unlawfully
and feloniously misappropriate and convert the same for her own personal use and benefit and despite oral and written demands, she failed
and refused to account for said jewelry or the proceeds of sale thereof, to the damage and prejudice of complainant Leonida E. Quilatan in
the aforestated total amount of P567,750.00.
CONTRARY TO LAW.5
Petitioner pleaded not guilty to the charge upon arraignment. 6 Trial on the merits thereafter ensued.
Quilatan testified that petitioner was able to remit P100,000.00 and returned P43,000.00 worth of jewelriy; 7 that at the start, petitioner was
prompt in settling her obligation; however, subsequently the payments were remitted late; 8that petitioner still owed her in the amount of
P424,750.00.9
On the other hand, petitioner admitted that she received several pieces of jewelry from Quilatan and that she indeed failed to pay for the
same. She claimed that she entrusted the pieces of jewelry to Marichu Labrador who failed to pay for the same, thereby causing her to
default in paying Quilatan.10 She presented handwritten receipts (Exhibits 1 & 2)11 evidencing payments made to Quilatan prior to the filing of
the criminal case.
Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth P441,035.00. She identified an acknowledgment
receipt (Exhibit 3)12 signed by her dated July 5, 1992 and testified that she sold the jewelry to a person who absconded without paying her.
Labrador also explained that in the past, she too had directly transacted with Quilatan for the sale of jewelry on commission basis; however,
due to her outstanding account with the latter, she got jewelry from petitioner instead. 13
On November 17, 1994, the trial court rendered a decision finding petitioner guilty of estafa, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing, the court finds the accused Virgie Serona guilty beyond reasonable doubt, and as the amount
misappropriated is P424,750.00 the penalty provided under the first paragraph of Article 315 of the Revised Penal Code has to be imposed
which shall be in the maximum period plus one (1) year for every additional P10,000.00.
Applying the Indeterminate Sentence Law, the said accused is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR
(4) YEARS and ONE (1) DAY of prision correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum; to
pay the sum of P424,750.00 as cost for the unreturned jewelries; to suffer the accessory penalties provided by law; and to pay the costs.
SO ORDERED.14
Petitioner appealed to the Court of Appeals, which affirmed the judgment of conviction but modified the penalty as follows:
WHEREFORE, the appealed decision finding the accused-appellant guilty beyond reasonable doubt of the crime of estafa is hereby
AFFIRMED with the following MODIFICATION:
Considering that the amount involved is P424,750.00, the penalty should be imposed in its maximum period adding one (1) year for each
additional P10,000.00 albeit the total penalty should not exceed Twenty (20) Years (Art. 315). Hence, accused-appellant is hereby
SENTENCED to suffer the penalty of imprisonment ranging from Four (4) Years and One (1) Day of Prision Correccional as minimum to
Twenty (20) Years of Reclusion Temporal.
SO ORDERED.15
Upon denial of her motion for reconsideration,16 petitioner filed the instant petition under Rule 45, alleging that:
I
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE
PART OF PETITIONER IN ENTRUSTING THE SUBJECT JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO
PROSPECTIVE BUYERS.
II
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS MISAPPROPRIATION OR
CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILED TO RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE
COMPLAINANT.17
Petitioner argues that the prosecution failed to establish the elements of estafa as penalized under Article 315, par. 1(b) of the Revised Penal
Code. In particular, she submits that she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the
subject jewelry; that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her undertaking with
Quilatan. Moreover, petitioner delivered the jewelry to Labrador under the same terms upon which it was originally entrusted to her. It was
established that petitioner had not derived any personal benefit from the loss of the jewelry. Consequently, it cannot be said that she
misappropriated or converted the same.
We find merit in the petition.
The elements of estafa through misappropriation or conversion as defined in Article 315, par. 1(b) of the Revised Penal Code are: (1) that the
money, good or other personal property is received by the offender in trust, or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to return, the same; (2) that there be misappropriation or conversion of such money or
property by the offender or denial on his part of such receipt; (3) that such misappropriation or conversion or denial is to the prejudice of
another; and (4) that there is a demand made by the offended party on the offender. 18 While the first, third and fourth elements are
concededly present, we find the second element of misappropriation or conversion to be lacking in the case at bar.
Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-agent for
sale on commission basis. We are unable to agree with the lower courts conclusion that this fact alone is sufficient ground for holding that
petitioner disposed of the jewelry "as if it were hers, thereby committing conversion and a clear breach of trust." 19
It must be pointed out that the law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the
absence of an express agreement to the contrary between the agent and the principal. 20 In the case at bar, the appointment of Labrador as
petitioners sub-agent was not expressly prohibited by Quilatan, as the acknowledgment receipt, Exhibit B, does not contain any such
limitation. Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to another person before the
acknowledgment receipt was executed or at any other time. Thus, it cannot be said that petitioners act of entrusting the jewelry to Labrador
is characterized by abuse of confidence because such an act was not proscribed and is, in fact, legally sanctioned.
The essence of estafa under Article 315, par. 1(b) is the appropriation or conversion of money or property received to the prejudice of the
owner. The words "convert" and "misappropriated" connote an act of using or disposing of anothers property as if it were ones own, or of
devoting it to a purpose or use different from that agreed upon. To misappropriate for ones own use includes not only conversion to ones
personal advantage, but also every attempt to dispose of the property of another without right. 21
In the case at bar, it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry or
the proceeds of its sale to her principal Quilatan was due, in turn, to the failure of Labrador to abide by her agreement with petitioner.
Notably, Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or to return the same
if not sold. In other words, the pieces of jewelry were given by petitioner to Labrador to achieve the very same end for which they were
delivered to her in the first place. Consequently, there is no conversion since the pieces of jewelry were not devoted to a purpose or use
different from that agreed upon.
Similarly, it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador "without right." Aside from the fact that
no condition or limitation was imposed on the mode or manner by which petitioner was to effect the sale, it is also consistent with usual
practice for the seller to necessarily part with the valuables in order to find a buyer and allow inspection of the items for sale.
In People v. Nepomuceno,22 the accused-appellant was acquitted of estafa on facts similar to the instant case. Accused-appellant therein
undertook to sell two diamond rings in behalf of the complainant on commission basis, with the obligation to return the same in a few days if
not sold. However, by reason of the fact that the rings were delivered also for sale on commission to sub-agents who failed to account for the
rings or the proceeds of its sale, accused-appellant likewise failed to make good his obligation to the complainant thereby giving rise to the
charge of estafa. In absolving the accused-appellant of the crime charged, we held:
Where, as in the present case, the agents to whom personal property was entrusted for sale, conclusively proves the inability to return the
same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith, and for the same
purpose for which it was received; there being no prohibition to do so and the chattel being delivered to the subagent before the owner
demands its return or before such return becomes due, we hold that the first agent can not be held guilty of estafa by either misappropriation
or conversion. The abuse of confidence that is characteristic of this offense is missing under the circumstances. 23
Accordingly, petitioner herein must be acquitted. The lower courts reliance on People v. Flores 24 and U.S. v. Panes25 to justify petitioners
conviction is misplaced, considering that the factual background of the cited cases differ from those which obtain in the case at bar. In Flores,
the accused received a ring to sell under the condition that she would return it the following day if not sold and without authority to retain the
ring or to give it to a sub-agent. The accused in Panes, meanwhile, was obliged to return the jewelry he received upon demand, but passed
on the same to a sub-agent even after demand for its return had already been made. In the foregoing cases, it was held that there was
conversion or misappropriation.
Furthermore, in Lim v. Court of Appeals, 26 the Court, citing Nepomuceno and the case of People v. Trinidad, 27held that:
In cases of estafa the profit or gain must be obtained by the accused personally, through his own acts, and his mere negligence in permitting
another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315, paragraph 1-b, of the Revised
Penal Code; unless of course the evidence should disclose that the agent acted in conspiracy or connivance with the one who carried out the
actual misappropriation, then the accused would be answerable for the acts of his co-conspirators. If there is no such evidence, direct or
circumstantial, and if the proof is clear that the accused herself was the innocent victim of her sub-agents faithlessness, her acquittal is in
order.28 (Italics copied)
Labrador admitted that she received the jewelry from petitioner and sold the same to a third person. She further acknowledged that she
owed petitioner P441,035.00, thereby negating any criminal intent on the part of petitioner. There is no showing that petitioner derived
personal benefit from or conspired with Labrador to deprive Quilatan of the jewelry or its value. Consequently, there is no estafa within
contemplation of the law.
Notwithstanding the above, however, petitioner is not entirely free from any liability towards Quilatan. The rule is that an accused acquitted of
estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. Then too, an agent who is not
prohibited from appointing a sub-agent but does so without express authority is responsible for the acts of the sub-agent. 29 Considering that
the civil action for the recovery of civil liability arising from the offense is deemed instituted with the criminal action, 30 petitioner is liable to pay
complainant Quilatan the value of the unpaid pieces of jewelry.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CR No. 17222 dated April 30,1997 and its
resolution dated August 28, 1997 are REVERSED and SET ASIDE. Petitioner Virgie Serona is ACQUITTED of the crime charged, but is held
civilly liable in the amount of P424,750.00 as actual damages, plus legal interest, without subsidiary imprisonment in case of insolvency.
SO ORDERED.
G.R. No. L-20136
June 23, 1965
IN RE: PETITION FOR ISSUANCE OF SEPARATE CERTIFICATE OF TITLE.

JOSE A. SANTOS Y Diaz, petitioner-appellant,
vs.
ANATOLIO BUENCONSEJO, ET AL., respondents-appellees.
Segundo C. Mastrili for petitioner-appellant.
Manuel Calleja Rafael S. Lucila and Jose T. Rubio for respondents-appellees.
CONCEPCION, J.:
Petitioner Jose A. Santos y Diaz seeks the reversal of an order of the Court of First Instance of Albay, denying his petition, filed in Cadastral
Case No. M-2197, LRC Cad. Rec. No. 1035, for the cancellation of original certificate of title No. RO-3848 (25322), issued in the name of
Anatolio Buenconsejo, Lorenzo Bon and Santiago Bon, and covering Lot No. 1917 of the Cadastral Survey of Tabaco, Albay, and the
issuance in lieu thereof, of a separate transfer certificate of title in his name, covering part of said Lot No. 1917, namely Lot No. 1917-A of
Subdivision Plan PSD-63379.
The main facts are not disputed. They are set forth in the order appealed from, from which we quote:
It appears that the aforementioned Lot No. 1917 covered by Original Certificate of Title No. RO-3848 (25322) was originally owned
in common by Anatolio Buenconsejo to the extent of undivided portion and Lorenzo Bon and Santiago Bon to the extent of the
other (Exh. B); that Anatolio Buenconsejo's rights, interests and participation over the portion abovementioned were on January
3, 1961 and by a Certificate of Sale executed by the Provincial Sheriff of Albay, transferred and conveyed to Atty. Tecla San Andres
Ziga, awardee in the corresponding auction sale conducted by said Sheriff in connection with the execution of the decision of the
Juvenile Delinquency and Domestic Relations Court in Civil Case No. 25267, entitled "Yolanda Buenconsejo, et al. vs. Anatolio
Buenconsejo"; that on December 26, 1961 and by a certificate of redemption issued by the Provincial Sheriff of Albay, the rights,
interest, claim and/or or participation which Atty. Tecla San Andres Ziga may have acquired over the property in question by reason
of the aforementioned auction sale award, were transferred and conveyed to the herein petitioner in his capacity as Attorney-in-fact
of the children of Anatolio Buenconsejo, namely, Anastacio Buenconsejo, Elena Buenconsejo and Azucena Buenconsejo (Exh. C).
It would appear, also, that petitioner Santos had redeemed the aforementioned share of Anatolio Buenconsejo, upon the authority of a
special power of attorney executed in his favor by the children of Anatolio Buenconsejo; that relying upon this power of attorney and
redemption made by him, Santos now claims to have acquired the share of Anatolio Buenconsejo in the aforementioned Lot No. 1917; that
as the alleged present owner of said share, Santos caused a subdivision plan of said Lot No. 1917 to be made, in which the portion he
claims as his share thereof has been marked as Lot No. 1917-A; and that he wants said subdivision at No. 1917-A to be segregated from Lot
No. 1917 and a certificate of title issued in his name exclusively for said subdivision Lot No. 1917-A.
As correctly held by the lower court, petitioner's claim is clearly untenable, for: (1) said special power of attorney authorized him to act on
behalf of the children of Anatolio Buenconsejo, and, hence, it could not have possibly vested in him any property right in his own name; (2)
the children of Anatolio Buenconsejo had no authority to execute said power of attorney, because their father is still alive and, in fact, he and
his wife opposed the petition of Santos; (3) in consequence of said power of attorney (if valid) and redemption, Santos could have acquired
no more than the share pro indiviso of Anatolio Buenconsejo in Lot No. 1917, so that petitioner cannot without the conformity of the other
co-owners (Lorenzo and Santiago Bon), or a judicial decree of partition issued pursuant to the provisions of Rule 69 of the new Rules of
Court (Rule 71 of the old Rules of Court) which have not been followed By Santos adjudicate to himself in fee simple a determinate
portion of said Lot No. 1917, as his share therein, to the exclusion of the other co-owners.
Inasmuch as the appeal is patently devoid of merit, the order appealed from is hereby affirmed, with treble cost against petitioner-appellant
Jose A. Santos y Diaz. It is so ordered.
Bengzon, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur.
Bautista Angelo, Barrera and Paredes, JJ., took no part.
G.R. No. L-21601
December 28, 1968
NIELSON & COMPANY, INC., plaintiff-appellant,

vs.
LEPANTO CONSOLIDATED MINING COMPANY, defendant-appellee.
RESOLUTION
ZALDIVAR, J.:
Lepanto seeks the reconsideration of the decision rendered on December 17, 1966. The motion for reconsideration is based on two sets of
grounds the first set consisting of four principal grounds, and the second set consisting of five alternative grounds, as follows:
Principal Grounds:
1. The court erred in overlooking and failing to apply the proper law applicable to the agency or management contract in question,
namely, Article 1733 of the Old Civil Code (Article 1920 of the new), by virtue of which said agency was effectively revoked and
terminated in 1945 when, as stated in paragraph 20 of the complaint, "defendant voluntarily ... prevented plaintiff from resuming
management and operation of said mining properties."
2. The court erred in holding that paragraph II of the management contract (Exhibit C) suspended the period of said contract.
3. The court erred in reversing the ruling of the trial judge, based on well-settled jurisprudence of this Supreme Court, that the
management agreement was only suspended but not extended on account of the war.
4. The court erred in reversing the finding of the trial judge that Nielson's action had prescribed, but considering only the first claim
and ignoring the prescriptibility of the other claims.
Alternative Grounds:
5. The court erred in holding that the period of suspension of the contract on account of the war lasted from February 1942 to June
26, 1948.
6. Assuming arguendo that Nielson is entitled to any relief, the court erred in awarding as damages (a) 10% of the cash dividends
declared and paid in December, 1941; (b) the management fee of P2,500.00 for the month of January, 1942; and (c) the full
contract price for the extended period of sixty months, since these damages were neither demanded nor proved and, in any case,
not allowable under the general law of damages.
7. Assuming arguendo that appellant is entitled to any relief, the court erred in ordering appellee to issue and deliver to appellant
shares of stock together with fruits thereof.
8. The court erred in awarding to appellant an undetermined amount of shares of stock and/or cash, which award cannot be
ascertained and executed without further litigation.
9. The court erred in rendering judgment for attorney's fees.
We are going to dwell on these grounds in the order they are presented.
1. In its first principal ground Lepanto claims that its own counsel and this Court had overlooked the real nature of the management contract
entered into by and between Lepanto and Nielson, and the law that is applicable on said contract. Lepanto now asserts for the first time and
this is done in a motion for reconsideration - that the management contract in question is a contract of agency such that it has the right to
revoke and terminate the said contract, as it did terminate the same, under the law of agency, and particularly pursuant to Article 1733 of the
Old Civil Code (Article 1920 of the New Civil Code).
We have taken note that Lepanto is advancing a new theory. We have carefully examined the pleadings filed by Lepanto in the lower court,
its memorandum and its brief on appeal, and never did it assert the theory that it has the right to terminate the management contract
because that contract is one of agency which it could terminate at will. While it is true that in its ninth and tenth special affirmative defenses,
in its answer in the court below, Lepanto pleaded that it had the right to terminate the management contract in question, that plea of its right
to terminate was not based upon the ground that the relation between Lepanto and Nielson was that of principal and agent but upon the
ground that Nielson had allegedly not complied with certain terms of the management contract. If Lepanto had thought of considering the
management contract as one of agency it could have amended its answer by stating exactly its position. It could have asserted its theory of
agency in its memorandum for the lower court and in its brief on appeal. This, Lepanto did not do. It is the rule, and the settled doctrine of
this Court, that a party cannot change his theory on appeal that is, that a party cannot raise in the appellate court any question of law or of
fact that was not raised in the court below or which was not within the issue made by the parties in their pleadings (Section 19, Rule 49 of the
old Rules of Court, and also Section 18 of the new Rules of Court; Hautea vs. Magallon, L-20345, November 28, 1964; Northern Motors, Inc.
vs. Prince Line, L-13884, February 29, 1960; American Express Co. vs. Natividad, 46 Phil. 207; Agoncillo vs. Javier, 38 Phil. 424 and Molina
vs. Somes, 24 Phil 49).
At any rate, even if we allow Lepanto to assert its new theory at this very late stage of the proceedings, this Court cannot sustain the same.
Lepanto contends that the management contract in question (Exhibit C) is one of agency because: (1) Nielson was to manage and operate
the mining properties and mill on behalf, and for the account, of Lepanto; and (2) Nielson was authorized to represent Lepanto in entering, on
Lepanto's behalf, into contracts for the hiring of laborers, purchase of supplies, and the sale and marketing of the ores mined. All these,
Lepanto claims, show that Nielson was, by the terms of the contract, destined to execute juridical acts not on its own behalf but on behalf of
Lepanto under the control of the Board of Directors of Lepanto "at all times". Hence Lepanto claims that the contract is one of agency.
Lepanto then maintains that an agency is revocable at the will of the principal (Article 1733 of the Old Civil Code), regardless of any term or
period stipulated in the contract, and it was in pursuance of that right that Lepanto terminated the contract in 1945 when it took over and
assumed exclusive management of the work previously entrusted to Nielson under the contract. Lepanto finally maintains that Nielson as an
agent is not entitled to damages since the law gives to the principal the right to terminate the agency at will.
Because of Lepanto's new theory We consider it necessary to determine the nature of the management contract whether it is a contract of
agency or a contract of lease of services. Incidentally, we have noted that the lower court, in the decision appealed from, considered the
management contract as a contract of lease of services.
Article 1709 of the Old Civil Code, defining contract of agency, provides:
By the contract of agency, one person binds himself to render some service or do something for the account or at the request of
another.
Article 1544, defining contract of lease of service, provides:
In a lease of work or services, one of the parties binds himself to make or construct something or to render a service to the other
for a price certain.
In both agency and lease of services one of the parties binds himself to render some service to the other party. Agency, however, is
distinguished from lease of work or services in that the basis of agency is representation, while in the lease of work or services the basis is
employment. The lessor of services does not represent his employer, while the agent represents his principal. Manresa, in his
"Commentarios al Codigo Civil Espaol" (1931, Tomo IX, pp. 372-373), points out that the element of representation distinguishes agency
from lease of services, as follows:
Nuestro art. 1.709 como el art. 1.984 del Codigo de Napoleon y cuantos textos legales citamos en lasconcordancias, expresan
claramente esta idea de la representacion, "hacer alguna cosa por cuenta o encargo de otra" dice nuestro Codigo; "poder de
hacer alguna cosa para el mandante o en su nombre" dice el Codigo de Napoleon, y en tales palabras aparece vivo y luminoso el
concepto y la teoria de la representacion, tan fecunda en ensenanzas, que a su sola luz es como se explican las diferencias que
separan el mandato del arrendamiento de servicios, de los contratos inominados, del consejo y de la gestion de negocios.
En efecto, en el arrendamiento de servicios al obligarse para su ejecucion, se trabaja, en verdad, para el dueno que remunera la
labor, pero ni se le representa ni se obra en su nombre....
On the basis of the interpretation of Article 1709 of the old Civil Code, Article 1868 of the new Civil Code has defined the contract of agency
in more explicit terms, as follows:
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.
There is another obvious distinction between agency and lease of services. Agency is a preparatory contract, as agency "does not stop with
the agency because the purpose is to enter into other contracts." The most characteristic feature of an agency relationship is the agent's
power to bring about business relations between his principal and third persons. "The agent is destined to execute juridical acts (creation,
modification or extinction of relations with third parties). Lease of services contemplate only material (non-juridical) acts." (Reyes and Puno,
"An Outline of Philippine Civil Law," Vol. V, p. 277).
In the light of the interpretations we have mentioned in the foregoing paragraphs let us now determine the nature of the management
contract in question. Under the contract, Nielson had agreed, for a period of five years, with the right to renew for a like period, to explore,
develop and operate the mining claims of Lepanto, and to mine, or mine and mill, such pay ore as may be found therein and to market the
metallic products recovered therefrom which may prove to be marketable, as well as to render for Lepanto other services specified in the
contract. We gather from the contract that the work undertaken by Nielson was to take complete charge subject at all times to the general
control of the Board of Directors of Lepanto, of the exploration and development of the mining claims, of the hiring of a sufficient and
competent staff and of sufficient and capable laborers, of the prospecting and development of the mine, of the erection and operation of the
mill, and of the benefication and marketing of the minerals found on the mining properties; and in carrying out said obligation Nielson should
proceed diligently and in accordance with the best mining practice. In connection with its work Nielson was to submit reports, maps, plans
and recommendations with respect to the operation and development of the mining properties, make recommendations and plans on the
erection or enlargement of any existing mill, dispatch mining engineers and technicians to the mining properties as from time to time may
reasonably be required to investigate and make recommendations without cost or expense to Lepanto. Nielson was also to "act as
purchasing agent of supplies, equipment and other necessary purchases by Lepanto, provided, however, that no purchase shall be made
without the prior approval of Lepanto; and provided further, that no commission shall be claimed or retained by Nielson on such purchase";
and "to submit all requisition for supplies, all constricts and arrangement with engineers, and staff and all matters requiring the expenditures
of money, present or future, for prior approval by Lepanto; and also to make contracts subject to the prior approve of Lepanto for the sale
and marketing of the minerals mined from said properties, when said products are in a suitable condition for marketing." 1
It thus appears that the principal and paramount undertaking of Nielson under the management contract was the operation and development
of the mine and the operation of the mill. All the other undertakings mentioned in the contract are necessary or incidental to the principal
undertaking these other undertakings being dependent upon the work on the development of the mine and the operation of the mill. In the
performance of this principal undertaking Nielson was not in any way executing juridical acts for Lepanto, destined to create, modify or
extinguish business relations between Lepanto and third persons. In other words, in performing its principal undertaking Nielson was not
acting as an agent of Lepanto, in the sense that the term agent is interpreted under the law of agency, but as one who was performing
material acts for an employer, for a compensation.
It is true that the management contract provides that Nielson would also act as purchasing agent of supplies and enter into contracts
regarding the sale of mineral, but the contract also provides that Nielson could not make any purchase, or sell the minerals, without the prior
approval of Lepanto. It is clear, therefore, that even in these cases Nielson could not execute juridical acts which would bind Lepanto without
first securing the approval of Lepanto. Nielson, then, was to act only as an intermediary, not as an agent.
Lepanto contends that the management contract in question being one of agency it had the right to terminate the contract at will pursuant to
the provision of Article 1733 of the old Civil Code. We find, however, a proviso in the management contract which militates against this stand
of Lepanto. Paragraph XI of the contract provides:
Both parties to this agreement fully recognize that the terms of this Agreement are made possible only because of the faith or
confidence that the Officials of each company have in the other; therefore, in order to assure that such confidence and faith shall
abide and continue, NIELSON agrees that LEPANTO may cancel this Agreement at any time upon ninety (90) days written notice,
in the event that NIELSON for any reason whatsoever, except acts of God, strike and other causes beyond its control, shall cease
to prosecute the operation and development of the properties herein described, in good faith and in accordance with approved
mining practice.
It is thus seen, from the above-quoted provision of paragraph XI of the management contract, that Lepanto could not terminate the
agreement at will. Lepanto could terminate or cancel the agreement by giving notice of termination ninety days in advance only in the event
that Nielson should prosecute in bad faith and not in accordance with approved mining practice the operation and development of the mining
properties of Lepanto. Lepanto could not terminate the agreement if Nielson should cease to prosecute the operation and development of the
mining properties by reason of acts of God, strike and other causes beyond the control of Nielson.
The phrase "Both parties to this agreement fully recognize that the terms of this agreement are made possible only because of the faith and
confidence of the officials of each company have in the other" in paragraph XI of the management contract does not qualify the relation
between Lepanto and Nielson as that of principal and agent based on trust and confidence, such that the contractual relation may be
terminated by the principal at any time that the principal loses trust and confidence in the agent. Rather, that phrase simply implies the
circumstance that brought about the execution of the management contract. Thus, in the annual report for 1936 2, submitted by Mr. C. A.
Dewit, President of Lepanto, to its stockholders, under date of March 15, 1937, we read the following:
To the stockholders
xxx
xxx
xxx
The incorporation of our Company was effected as a result of negotiations with Messrs. Nielson & Co., Inc., and an offer by these
gentlemen to Messrs. C. I. Cookes and V. L. Lednicky, dated August 11, 1936, reading as follows:
Messrs. Cookes and Lednicky,
Present
Re: Mankayan Copper Mines
GENTLEMEN:
After an examination of your property by our engineers, we have decided to offer as we hereby offer to underwrite the
entire issue of stock of a corporation to be formed for the purpose of taking over said properties, said corporation to have
an authorized capital of P1,750,000.00, of which P700,000.00 will be issued in escrow to the claim-owners in exchange
for their claims, and the balance of P1,050,000.00 we will sell to the public at par or take ourselves.
The arrangement will be under the following conditions:
1. The subscriptions for cash shall be payable 50% at time of subscription and the balance subject to the call of the
Board of Directors of the proposed corporation.
2. We shall have an underwriting and brokerage commission of 10% of the P1,050,000.00 to be sold for cash to the
public, said commission to be payable from the first payment of 50% on each subscription.
3. We will bear the cost of preparing and mailing any prospectus that may be required, but no such prospectus will be
sent out until the text thereof has been first approved by the Board of Directors of the proposed corporation.
4. That after the organization of the corporation, all operating contract be entered into between ourselves and said
corporation, under the terms which the property will be developed and mined and a mill erected, under our supervision,
our compensation to be P2,000.00 per month until the property is put on a profitable basis and P2,500.00 per month plus
10% of the net profits for a period of five years thereafter.
5. That we shall have the option to renew said operating contract for an additional period of five years, on the same basis
as the original contract, upon the expiration thereof.
It is understood that the development and mining operations on said property, and the erection of the mill thereon, and
the expenditures therefor shall be subject to the general control of the Board of Directors of the proposed corporation,
and, in case you accept this proposition, that a detailed operating contract will be entered into, covering the relationships
between the parties.
Yours very truly,
(Sgd.) L. R. Nielson
Pursuant to the provisions of paragraph 2 of this offer, Messrs. Nielson & Co., took subscriptions for One Million Fifty Thousand
Pesos (P1,050,000.00) in shares of our Company and their underwriting and brokerage commission has been paid. More than fifty
per cent of these subscriptions have been paid to the Company in cash. The claim owners have transferred their claims to the
Corporation, but the P700,000.00 in stock which they are to receive therefor, is as yet held in escrow.
Immediately upon the formation of the Corporation Messrs. Nielson & Co., assumed the Management of the property under the
control of the Board of Directors. A modification in the Management Contract was made with the consent of all the then
stockholders, in virtue of which the compensation of Messrs. Nielson & Co., was increased to P2,500.00 per month when mill
construction began. The formal Management Contract was not entered into until January 30, 1937.
xxx
xxx
xxx
Manila, March 15, 1937

(Sgd.) C. A. DeWitt President
We can gather from the foregoing statements in the annual report for 1936, and from the provision of paragraph XI of the Management
contract, that the employment by Lepanto of Nielson to operate and manage its mines was principally in consideration of the know-how and
technical services that Nielson offered Lepanto. The contract thus entered into pursuant to the offer made by Nielson and accepted by
Lepanto was a "detailed operating contract". It was not a contract of agency. Nowhere in the record is it shown that Lepanto considered
Nielson as its agent and that Lepanto terminated the management contract because it had lost its trust and confidence in Nielson.
The contention of Lepanto that it had terminated the management contract in 1945, following the liberation of the mines from Japanese
control, because the relation between it and Nielson was one of agency and as such it could terminate the agency at will, is, therefore,
untenable. On the other hand, it can be said that, in asserting that it had terminated or cancelled the management contract in 1945, Lepanto
had thereby violated the express terms of the management contract. The management contract was renewed to last until January 31, 1947,
so that the contract had yet almost two years to go upon the liberation of the mines in 1945. There is no showing that Nielson had ceased
to prosecute the operation and development of the mines in good faith and in accordance with approved mining practice which would warrant
the termination of the contract upon ninety days written notice. In fact there was no such written notice of termination. It is an admitted fact
that Nielson ceased to operate and develop the mines because of the war a cause beyond the control of Nielson. Indeed, if the
management contract in question was intended to create a relationship of principal and agent between Lepanto and Nielson, paragraph XI of
the contract should not have been inserted because, as provided in Article 1733 of the old Civil Code, agency is essentially revocable at the
will of the principal that means, with or without cause. But precisely said paragraph XI was inserted in the management contract to provide
for the cause for its revocation. The provision of paragraph XI must be given effect.
In the construction of an instrument where there are several provisions or particulars, such a construction is, if possible, to be adopted as will
give effect to all,3 and if some stipulation of any contract should admit of several meanings, it shall be understood as bearing that import
which is most adequate to render it effectual.4
It is Our considered view that by express stipulation of the parties, the management contract in question is not revocable at the will of
Lepanto. We rule that this management contract is not a contract of agency as defined in Article 1709 of the old Civil Code, but a contract of
lease of services as defined in Article 1544 of the same Code. This contract can not be unilaterally revoked by Lepanto.
The first ground of the motion for reconsideration should, therefore, be brushed aside.
2. In the second, third and fifth grounds of its motion for reconsideration, Lepanto maintains that this Court erred, in holding that paragraph
11 of the management contract suspended the period of said contract, in holding that the agreement was not only suspended but was
extended on account of the war, and in holding that the period of suspension on account of the war lasted from February, 1942 to June 26,
1948. We are going to discuss these three grounds together because they are interrelated.
In our decision we have dwelt lengthily on the points that the management contract was suspended because of the war, and that the period
of the contract was extended for a period equivalent to the time when Nielson was unable to perform the work of mining and milling because
of the adverse effects of the war on the work of mining and milling.
It is the contention of Lepanto that the happening of those events, and the effects of those events, simply suspended the performance of the
obligations by either party in the contract, but did not suspend the period of the contract, much less extended the period of the contract.
We have conscientiously considered the arguments of Lepanto in support of these three grounds, but We are not persuaded to reconsider
the rulings that We made in Our decision.
We want to say a little more on these points, however. Paragraph II of the management contract provides as follows:
In the event of inundation, flooding of the mine, typhoon, earthquake or any other force majeure, war, insurrection, civil commotion,
organized strike, riot, fire, injury to the machinery or other event or cause reasonably beyond the control of NIELSON and which
adversely affects the work of mining and milling; NIELSON shall report such fact to LEPANTO and without liability or breach of the
terms of this Agreement,the same shall remain in suspense, wholly or partially during the terms of such inability. (Emphasis
supplied)
A reading of the above-quoted paragraph II cannot but convey the idea that upon the happening of any of the events enumerated therein,
which adversely affects the work of mining and milling, the agreement is deemed suspended for as long as Nielson is unable to perform its
work of mining and milling because of the adverse effects of the happening of the event on the work of mining and milling. During the period
when the adverse effects on the work of mining and milling exist, neither party in the contract would be held liable for non-compliance of its
obligation under the contract. In other words, the operation of the contract is suspended for as long as the adverse effects of the happening
of any of those events had impeded or obstructed the work of mining and milling. An analysis of the phraseology of the above-quoted
paragraph II of the management contract readily supports the conclusion that it is the agreement, or the contract, that is suspended. The
phrase "the same" can refer to no other than the term "Agreement" which immediately precedes it. The "Agreement" may be wholly or
partially suspended, and this situation will depend on whether the event wholly or partially affected adversely the work of mining and milling.
In the instant case, the war had adversely affected and wholly at that the work of mining and milling. We have clearly stated in Our
decision the circumstances brought about by the war which caused the whole or total suspension of the agreement or of the management
contract.
LEPANTO itself admits that the management contract was suspended. We quote from the brief of LEPANTO:
Probably, what Nielson meant was, it was prevented by Lepanto to assume again the management of the mine in 1945, at the
precise time when defendant was at the feverish phase of rehabilitation and although the contract had already been suspended.
(Lepanto's Brief, p. 9).
... it was impossible, as a result of the destruction of the mine, for the plaintiff to manage and operate the same and because, as
provided in the agreement, the contract was suspended by reason of the war (Lepanto's Brief, pp. 9-10).
Clause II, by its terms, is clear that the contract is suspended in case fortuitous event or force majeure, such as war, adversely
affects the work of mining and milling. (Lepanto's Brief, p. 49).
Lepanto is correct when it said that the obligations under the contract were suspended upon the happening of any of the events enumerated
in paragraph II of the management contract. Indeed, those obligations were suspended because the contract itself was suspended. When we
talk of a contract that has been suspended we certainly mean that the contract temporarily ceased to be operative, and the contract becomes
operative again upon the happening of a condition or when a situation obtains which warrants the termination of the suspension of the
contract.
In Our decision We pointed out that the agreement in the management contract would be suspended when two conditions concur, namely:
(1) the happening of the event constituting a force majeure that was reasonably beyond the control of Nielson, and (2) that the event
constituting the force majeure adversely affected the work of mining and milling. The suspension, therefore, would last not only while the
event constituting the force majeure continued to occur but also for as long as the adverse effects of the force majeure on the work of mining
and milling had not been eliminated. Under the management contract the happening alone of the event constituting the force majeure which
did not affect adversely the work of mining and milling would not suspend the period of the contract. It is only when the two conditions concur
that the period of the agreement is suspended.
It is not denied that because of the war, in February 1942, the mine, the original mill, the original power plant, the supplies and equipment,
and all installations at the Mankayan mines of Lepanto, were destroyed upon order of the United States Army, to prevent their utilization by
the enemy. It is not denied that for the duration of the war Nielson could not undertake the work of mining and milling. When the mines were
liberated from the enemy in August, 1945, the condition of the mines, the mill, the power plant and other installations, was not the same as in
February 1942 when they were ordered destroyed by the US army. Certainly, upon the liberation of the mines from the enemy, the work of
mining and milling could not be undertaken by Nielson under the same favorable circumstances that obtained before February 1942. The
work of mining and milling, as undertaken by Nielson in January, 1942, could not be resumed by Nielson soon after liberation because of the
adverse effects of the war, and this situation continued until June of 1948. Hence, the suspension of the management contract did not end
upon the liberation of the mines in August, 1945. The mines and the mill and the installations, laid waste by the ravages of war, had to be
reconstructed and rehabilitated, and it can be said that it was only on June 26, 1948 that the adverse effects of the war on the work of mining
and milling had ended, because it was on that date that the operation of the mines and the mill was resumed. The period of suspension
should, therefore, be reckoned from February 1942 until June 26, 1948, because it was during this period that the war and the adverse
effects of the war on the work of mining and milling had lasted. The mines and the installations had to be rehabilitated because of the
adverse effects of the war. The work of rehabilitation started soon after the liberation of the mines in August, 1945 and lasted until June 26,
1948 when, as stated in Lepanto's annual report to its stockholders for the year 1948, "June 28, 1948 marked the official return to operation
of this company at its properties at Mankayan, Mountain Province, Philippines" (Exh. F-1).
Lepanto would argue that if the management contract was suspended at all the suspension should cease in August of 1945, contending that
the effects of the war should cease upon the liberation of the mines from the enemy. This contention cannot be sustained, because the
period of rehabilitation was still a period when the physical effects of the war the destruction of the mines and of all the mining installations
adversely affected, and made impossible, the work of mining and milling. Hence, the period of the reconstruction and rehabilitation of the
mines and the installations must be counted as part of the period of suspension of the contract.
Lepanto claims that it would not be unfair to end the period of suspension upon the liberation of the mines because soon after the liberation
of the mines Nielson insisted to resume the management work, and that Nielson was under obligation to reconstruct the mill in the same way
that it was under obligation to construct the mill in 1937. This contention is untenable. It is true that Nielson insisted to resume its
management work after liberation, but this was only for the purpose of restoring the mines, the mill, and other installations to their operating
and producing condition as of February 1942 when they were ordered destroyed. It is not shown by any evidence in the record, that Nielson
had agreed, or would have agreed, that the period of suspension of the contract would end upon the liberation of the mines. This is so
because, as found by this Court, the intention of the parties in the management contract, and as understood by them, the management
contract was suspended for as long as the adverse effects of the force majeure on the work of mining and milling had not been removed, and
the contract would be extended for as long as it was suspended. Under the management contract Nielson had the obligation to erect and
operate the mill, but not to erect or reconstruct the mill in case of its destruction by force majeure.
It is the considered view of this court that it would not be fair to Nielson to consider the suspension of the contract as terminated upon the
liberation of the mines because then Nielson would be placed in a situation whereby it would have to suffer the adverse effects of the war on
the work of mining and milling. The evidence shows that as of January 1942 the operation of the mines under the management of Nielson
was already under beneficial conditions, so much so that dividends were already declared by Lepanto for the years 1939, 1940 and 1941. To
make the management contract immediately operative after the liberation of the mines from the Japanese, at the time when the mines and
all its installations were laid waste as a result of the war, would be to place Nielson in a situation whereby it would lose all the benefits of
what it had accomplished in placing the Lepanto mines in profitable operation before the outbreak of the war in December, 1941. The record
shows that Nielson started its management operation way back in 1936, even before the management contract was entered into. As early as
August 1936 Nielson negotiated with Messrs. C. I. Cookes and V. L. Lednicky for the operation of the Mankayan mines and it was the result
of those negotiations that Lepanto was incorporated; that it was Nielson that helped to capitalize Lepanto, and that after the formation of the
corporation (Lepanto) Nielson immediately assumed the management of the mining properties of Lepanto. It was not until January 30, 1937
when the management contract in question was entered into between Lepanto and Nielson (Exhibit A).
A contract for the management and operation of mines calls for a speculative and risky venture on the part of the manager-operator. The
manager-operator invests its technical know-how, undertakes back-breaking efforts and tremendous spade-work, so to say, in the first years
of its management and operation of the mines, in the expectation that the investment and the efforts employed might be rewarded later with
success. This expected success may never come. This had happened in the very case of the Mankayan mines where, as recounted by Mr.
Lednicky of Lepanto, various persons and entities of different nationalities, including Lednicky himself, invested all their money and failed.
The manager-operator may not strike sufficient ore in the first, second, third, or fourth year of the management contract, or he may not strike
ore even until the end of the fifth year. Unless the manager-operator strikes sufficient quantity of ore he cannot expect profits or reward for
his investment and efforts. In the case of Nielson, its corps of competent engineers, geologists, and technicians begun working on the
Mankayan mines of Lepanto since the latter part of 1936, and continued their work without success and profit through 1937, 1938, and the
earlier part of 1939. It was only in December of 1939 when the efforts of Nielson started to be rewarded when Lepanto realized profits and
the first dividends were declared. From that time on Nielson could expect profit to come to it as in fact Lepanto declared dividends for
1940 and 1941 if the development and operation of the mines and the mill would continue unhampered. The operation, and the expected
profits, however, would still be subject to hazards due to the occurrence of fortuitous events, fires, earthquakes, strikes, war, etc., constituting
force majeure, which would result in the destruction of the mines and the mill. One of these diverse causes, or one after the other, may
consume the whole period of the contract, and if it should happen that way the manager-operator would reap no profit to compensate for the
first years of spade-work and investment of efforts and know-how. Hence, in fairness to the manager-operator, so that he may not be
deprived of the benefits of the work he had accomplished, the force majeure clause is incorporated as a standard clause in contracts for the
management and operation of mines.
The nature of the contract for the management and operation of mines justifies the interpretation of the force majeure clause, that a period
equal to the period of suspension due to force majeure should be added to the original term of the contract by way of an extension. We,
therefore, reiterate the ruling in Our decision that the management contract in the instant case was suspended from February, 1942 to June
26, 1948, and that from the latter date the contract had yet five years to go.
3. In the fourth ground of its motion for reconsideration, Lepanto maintains that this Court erred in reversing the finding of the trial court that
Nielson's action has prescribed, by considering only the first claim and ignoring the prescriptibility of the other claims.
This ground of the motion for reconsideration has no merit.
In Our decision We stated that the claims of Nielson are based on a written document, and, as such, the cause of action prescribes in ten
years.5 Inasmuch as there are different claims which accrued on different dates the prescriptive periods for all the claims are not the same.
The claims of Nielson that have been awarded by this Court are itemized in the dispositive part of the decision.
The first item of the awards in Our decision refers to Nielson's compensation in the sum of P17,500.00, which is equivalent to 10% of the
cash dividends declared by Lepanto in December, 1941. As we have stated in Our decision, this claim accrued on December 31, 1941, and
the right to commence an action thereon started on January 1, 1942. We declared that the action on this claim did not prescribe although the
complaint was filed on February 6, 1958 or after a lapse of 16 years, 1 month and 5 days because of the operation of the moratorium
law.
We declared that under the applicable decisions of this Court 6 the moratorium period of 8 years, 2 months and 8 days should be deducted
from the period that had elapsed since the accrual of the cause of action to the date of the filing of the complaint, so that there is a period of
less than 8 years to be reckoned for the purpose of prescription.
This claim of Nielson is covered by Executive Order No. 32, issued on March 10, 1945, which provides as follows:
Enforcement of payments of all debts and other monetary obligations payable in the Philippines, except debts and other monetary
obligations entered into in any area after declaration by Presidential Proclamation that such area has been freed from enemy
occupation and control, is temporarily suspended pending action by the Commonwealth Government. (41 O.G. 56-57; Emphasis
supplied)
Executive Order No. 32 covered all debts and monetary obligation contracted before the war (or before December 8, 1941) and those
contracted subsequent to December 8, 1941 and during the Japanese occupation. Republic Act No. 342, approved on July 26, 1948, lifted
the moratorium provided for in Executive Order No. 32 on pre-war (or pre-December 8, 1941) debts of debtors who had not filed war damage
claims with the United States War Damage Commission. In other words, after the effectivity of Republic Act No. 342, the debt moratorium
was limited: (1) to debts and other monetary obligations which were contracted after December 8, 1941 and during the Japanese occupation,
and (2) to those pre-war (or pre-December 8, 1941) debts and other monetary obligations where the debtors filed war damage claims. That
was the situation up to May 18, 1953 when this Court declared Republic Act No. 342 unconstitutional. 7 It has been held by this Court,
however, that from March 10, 1945 when Executive Order No. 32 was issued, to May 18, 1953 when Republic Act No. 342 was declared
unconstitutional or a period of 8 years, 2 months and 8 days the debt moratorium was in force, and had the effect of suspending the
period of prescription.8
Lepanto is wrong when in its motion for reconsideration it claims that the moratorium provided for in Executive Order No. 32 was continued
by Republic Act No. 342 "only with respect to debtors of pre-war obligations or those incurred prior to December 8, 1941," and that "the
moratorium was lifted and terminated with respect to obligations incurred after December 8, 1941." 9
This Court has held that Republic Act No. 342 does not apply to debts contracted during the war and did not lift the moratorium in relations
thereto.10 In the case of Abraham, et al. vs. Intestate Estate of Juan C. Ysmael, et al., L-16741, Jan. 31, 1962, this Court said:
Respondents, however, contend that Republic Act No. 342, which took effect on July 26, 1948, lifted the moratorium on debts
contracted during the Japanese occupation. The court has already held that Republic Act No. 342 did not lift the moratorium on
debts contracted during the war (Uy vs. Kalaw Katigbak, G.R. No. L-1830, Dec. 31, 1949) but modified Executive Order No. 32 as
to pre-war debts, making the protection available only to debtors who had war damage claims (Sison v. Mirasol, G.R. No. L-4711,
Oct. 3, 1952).
We therefore reiterate the ruling in Our decision that the claim involved in the first item awarded to Nielson had not prescribed.
What we have stated herein regarding the non-prescription of the cause of action of the claim involved in the first item in the award also
holds true with respect to the second item in the award, which refers to Nielson's claim for management fee of P2,500.00 for January, 1942.
Lepanto admits that this second item, like the first, is a monetary obligation. The right of action of Nielson regarding this claim accrued on
January 31, 1942.
As regards items 3, 4, 5, 6 and 7 in the awards in the decision, the moratorium law is not applicable. That is the reason why in Our decision
We did not discuss the question of prescription regarding these items. The claims of Nielson involved in these items are based on the
management contract, and Nielson's cause of action regarding these claims prescribes in ten years. Corollary to Our ruling that the
management contract was suspended from February, 1942 until June 26, 1948, and that the contract was extended for five years from June
26, 1948, the right of action of Nielson to claim for what is due to it during that period of extension accrued during the period from June 26,
1948 till the end of the five-year extension period or until June 26, 1953. And so, even if We reckon June 26, 1948 as the starting date of the
ten-year period in connection with the prescriptibility of the claims involved in items 3, 4, 5, 6 and 7 of the awards in the decision, it is obvious
that when the complaint was filed on February 6, 1958 the ten-year prescriptive period had not yet lapsed.
In Our decision We have also ruled that the right of action of Nielson against Lepanto had not prescribed because of the arbitration clause in
the Management contract. We are satisfied that there is evidence that Nielson had asked for arbitration, and an arbitration committee had
been constituted. The arbitration committee, however, failed to bring about any settlement of the differences between Nielson and Lepanto.
On June 25, 1957 counsel for Lepanto definitely advised Nielson that they were not entertaining any claim of Nielson. The complaint in this
case was filed on February 6, 1958.
4. In the sixth ground of its motion for reconsideration, Lepanto maintains that this Court "erred in awarding as damages (a) 10% of the cash
dividends declared and paid in December, 1941; (b) the management fee of P2,500.00 for the month of January 1942; and (c) the full
contract price for the extended period of 60 months, since the damages were never demanded nor proved and, in any case, not allowable
under the general law on damages."
We have stated in Our decision that the original agreement in the management contract regarding the compensation of Nielson was
modified, such that instead of receiving a monthly compensation of P2,500.00 plus 10% of the net profits from the operation of the properties
for the preceding month,11 Nielson would receive a compensation of P2,500.00 a month, plus (1) 10% of the dividends declared and paid,
when and as paid, during the period of the contract, and at the end of each year, (2) 10% of any depletion reserve that may be set up, and
(3) 10% of any amount expended during the year out of surplus earnings for capital account.
It is shown that in December, 1941, cash dividends amounting to P175,000.00 was declared by Lepanto. 12Nielson, therefore, should receive
the equivalent of 10% of this amount, or the sum of P17,500.00. We have found that this amount was not paid to Nielson.
In its motion for reconsideration, Lepanto inserted a photographic copy of page 127 of its cash disbursement book, allegedly for 1941, in an
effort to show that this amount of P17,500.00 had been paid to Nielson. It appears, however, in this photographic copy of page 127 of the
cash disbursement book that the sum of P17,500.00 was entered on October 29 as "surplus a/c Nielson & Co. Inc." The entry does not make
any reference to dividends or participation of Nielson in the profits. On the other hand, in the photographic copy of page 89 of the 1941 cash
disbursement book, also attached to the motion for reconsideration, there is an entry for P17,500.00 on April 23, 1941 which states "Accts.
Pay. Particip. Nielson & Co. Inc." This entry for April 23, 1941 may really be the participation of Nielson in the profits based on dividends
declared in April 1941 as shown in Exhibit L. But in the same Exhibit L it is not stated that any dividend was declared in October 1941. On the
contrary it is stated in Exhibit L that dividends were declared in December 1941. We cannot entertain this piece of evidence for several
reasons: (1) because this evidence was not presented during the trial in the court below; (2) there is no showing that this piece of evidence is
newly discovered and that Lepanto was not in possession of said evidence when this case was being tried in the court below; and (3)
according to Exhibit L cash dividends of P175,000.00 were declared in December, 1941, and so the sum of P17,500.00 which appears to
have been paid to Nielson in October 1941 could not be payment of the equivalent of 10% of the cash dividends that were later declared in
December, 1941.
As regards the management fee of Nielson corresponding to January, 1942, in the sum of P2,500.00, We have also found that Nielson is
entitled to be paid this amount, and that this amount was not paid by Lepanto to Nielson. Whereas, Lepanto was able to prove that it had
paid the management fees of Nielson for November and December, 1941, 13 it was not able to present any evidence to show that the
management fee of P2,500.00 for January, 1942 had been paid.
It having been declared in Our decision, as well as in this resolution, that the management contract had been extended for 5 years, or sixty
months, from June 27, 1948 to June 26, 1953, and that the cause of action of Nielson to claim for its compensation during that period of
extension had not prescribed, it follows that Nielson should be awarded the management fees during the whole period of extension, plus the
10% of the value of the dividends declared during the said period of extension, the 10% of the depletion reserve that was set up, and the
10% of any amount expended out of surplus earnings for capital account.
5. In the seventh ground of its motion for reconsideration, Lepanto maintains that this Court erred in ordering Lepanto to issue and deliver to
Nielson shares of stock together with fruits thereof.
In Our decision, We declared that pursuant to the modified agreement regarding the compensation of Nielson which provides, among others,
that Nielson would receive 10% of any dividends declared and paid, when and as paid, Nielson should be paid 10% of the stock dividends
declared by Lepanto during the period of extension of the contract.
It is not denied that on November 28, 1949, Lepanto declared stock dividends worth P1,000,000.00; and on August 22, 1950, it declared
stock dividends worth P2,000,000.00). In other words, during the period of extension Lepanto had declared stock dividends worth
P3,000,000.00. We held in Our decision that Nielson is entitled to receive l0% of the stock dividends declared, or shares of stock worth
P300,000.00 at the par value of P0.10 per share. We ordered Lepanto to issue and deliver to Nielson those shares of stocks as well as all
the fruits or dividends that accrued to said shares.
In its motion for reconsideration, Lepanto contends that the payment to Nielson of stock dividends as compensation for its services under the
management contract is a violation of the Corporation Law, and that it was not, and it could not be, the intention of Lepanto and Nielson
as contracting parties that the services of Nielson should be paid in shares of stock taken out of stock dividends declared by Lepanto. We
have assiduously considered the arguments adduced by Lepanto in support of its contention, as well as the answer of Nielson in this
connection, and We have arrived at the conclusion that there is merit in the contention of Lepanto.
Section 16 of the Corporation Law, in part, provides as follows:
No corporation organized under this Act shall create or issue bills, notes or other evidence of debt, for circulation as money, and no
corporation shall issue stock or bonds except in exchange for actual cash paid to the corporation or for: (1) property actually
received by it at a fair valuation equal to the par or issued value of the stock or bonds so issued; and in case of disagreement as to
their value, the same shall be presumed to be the assessed value or the value appearing in invoices or other commercial
documents, as the case may be; and the burden or proof that the real present value of the property is greater than the assessed
value or value appearing in invoices or other commercial documents, as the case may be, shall be upon the corporation, or for
(2) profits earned by it but not distributed among its stockholders or members; Provided, however, That no stock or bond dividend
shall be issued without the approval of stockholders representing not less than two-thirds of all stock then outstanding and entitled
to vote at a general meeting of the corporation or at a special meeting duly called for the purpose.
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No corporation shall make or declare any dividend except from the surplus profits arising from its business, or divide or distribute
its capital stock or property other than actual profits among its members or stockholders until after the payment of its debts and the
termination of its existence by limitation or lawful dissolution: Provided, That banking, savings and loan, and trust corporations may
receive deposits and issue certificates of deposit, checks, drafts, and bills of exchange, and the like in the transaction of the
ordinary business of banking, savings and loan, and trust corporations. (As amended by Act No. 2792, and Act No. 3518;
Emphasis supplied.)
From the above-quoted provision of Section 16 of the Corporation Law, the consideration for which shares of stock may be issued are: (1)
cash; (2) property; and (3) undistributed profits. Shares of stock are given the special name "stock dividends" only if they are issued in lieu of
undistributed profits. If shares of stocks are issued in exchange of cash or property then those shares do not fall under the category of "stock
dividends". A corporation may legally issue shares of stock in consideration of services rendered to it by a person not a stockholder, or in
payment of its indebtedness. A share of stock issued to pay for services rendered is equivalent to a stock issued in exchange of property,
because services is equivalent to property.14 Likewise a share of stock issued in payment of indebtedness is equivalent to issuing a stock in
exchange for cash. But a share of stock thus issued should be part of the original capital stock of the corporation upon its organization, or
part of the stocks issued when the increase of the capitalization of a corporation is properly authorized. In other words, it is the shares of
stock that are originally issued by the corporation and forming part of the capital that can be exchanged for cash or services rendered, or
property; that is, if the corporation has original shares of stock unsold or unsubscribed, either coming from the original capitalization or from
the increased capitalization. Those shares of stock may be issued to a person who is not a stockholder, or to a person already a stockholder
in exchange for services rendered or for cash or property. But a share of stock coming from stock dividends declared cannot be issued to
one who is not a stockholder of a corporation.
A "stock dividend" is any dividend payable in shares of stock of the corporation declaring or authorizing such dividend. It is, what the term
itself implies, a distribution of the shares of stock of the corporation among the stockholders as dividends. A stock dividend of a corporation is
a dividend paid in shares of stock instead of cash, and is properly payable only out of surplus profits. 15 So, a stock dividend is actually two
things: (1) a dividend, and (2) the enforced use of the dividend money to purchase additional shares of stock at par. 16 When a corporation
issues stock dividends, it shows that the corporation's accumulated profits have been capitalized instead of distributed to the stockholders or
retained as surplus available for distribution, in money or kind, should opportunity offer. Far from being a realization of profits for the
stockholder, it tends rather to postpone said realization, in that the fund represented by the new stock has been transferred from surplus to
assets and no longer available for actual distribution. 17 Thus, it is apparent that stock dividends are issued only to stockholders. This is so
because only stockholders are entitled to dividends. They are the only ones who have a right to a proportional share in that part of the
surplus which is declared as dividends. A stock dividend really adds nothing to the interest of the stockholder; the proportional interest of
each stockholder remains the same.18If a stockholder is deprived of his stock dividends - and this happens if the shares of stock forming part
of the stock dividends are issued to a non-stockholder then the proportion of the stockholder's interest changes radically. Stock dividends
are civil fruits of the original investment, and to the owners of the shares belong the civil fruits. 19
The term "dividend" both in the technical sense and its ordinary acceptation, is that part or portion of the profits of the enterprise which the
corporation, by its governing agents, sets apart for ratable division among the holders of the capital stock. It means the fund actually set
aside, and declared by the directors of the corporation as dividends and duly ordered by the director, or by the stockholders at a corporate
meeting, to be divided or distributed among the stockholders according to their respective interests. 20
It is Our considered view, therefore, that under Section 16 of the Corporation Law stock dividends can not be issued to a person who is not a
stockholder in payment of services rendered. And so, in the case at bar Nielson can not be paid in shares of stock which form part of the
stock dividends of Lepanto for services it rendered under the management contract. We sustain the contention of Lepanto that the
understanding between Lepanto and Nielson was simply to make the cash value of the stock dividends declared as the basis for determining
the amount of compensation that should be paid to Nielson, in the proportion of 10% of the cash value of the stock dividends declared. And
this conclusion of Ours finds support in the record.
We had adverted to in Our decision that in 1940 there was some dispute between Lepanto and Nielson regarding the application and
interpretation of certain provisions of the original contract particularly with regard to the 10% participation of Nielson in the net profits, so that
some adjustments had to be made. In the minutes of the meeting of the Board of Directors of Lepanto on August 21, 1940, We read the
following:
The Chairman stated that he believed that it would be better to tie the computation of the 10% participation of Nielson & Company,
Inc. to the dividend, because Nielson will then be able to definitely compute its net participation by the amount of the dividends
declared. In addition to the dividend, we have been setting up a depletion reserve and it does not seem fair to burden the 10%
participation of Nielson with the depletion reserve, as the depletion reserve should not be considered as an operating expense.
After a prolonged discussion, upon motion duly made and seconded, it was
RESOLVED, That the President, be, and he hereby is, authorized to enter into an agreement with Nielson & Company, Inc.,
modifying Paragraph V of management contract of January 30, 1937, effective January 1, 1940, in such a way that Nielson &
Company, Inc. shall receive 10% of any dividends declared and paid, when and as paid during the period of the contract and at the
end of each year, 10% of any depletion reserve that may be set up and 10% of any amount expended during the year out of
surplus earnings for capital account. (Emphasis supplied.)
From the sentence, "The Chairman stated that he believed that it would be better to tie the computation of the 10% participation of Nielson &
Company, Inc., to the dividend, because Nielson will then be able to definitely compute its net participation by the amount of the dividends
declared" the idea is conveyed that the intention of Lepanto, as expressed by its Chairman C. A. DeWitt, was to make the value of the
dividends declared whether the dividends were in cash or in stock as the basis for determining the amount of compensation that should
be paid to Nielson, in the proportion of 10% of the cash value of the dividends so declared. It does not mean, however, that the
compensation of Nielson would be taken from the amount actually declared as cash dividend to be distributed to the stockholder, nor from
the shares of stocks to be issued to the stockholders as stock dividends, but from the other assets or funds of the corporation which are not
burdened by the dividends thus declared. In other words, if, for example, cash dividends of P300,000.00 are declared, Nielson would be
entitled to a compensation of P30,000.00, but this P30,000.00 should not be taken from the P300,000.00 to be distributed as cash dividends
to the stockholders but from some other funds or assets of the corporation which are not included in the amount to answer for the cash
dividends thus declared. This is so because if the P30,000.00 would be taken out from the P300,000.00 declared as cash dividends, then the
stockholders would not be getting P300,000.00 as dividends but only P270,000.00. There would be a dilution of the dividend that
corresponds to each share of stock held by the stockholders. Similarly, if there were stock dividends worth one million pesos that were
declared, which means an issuance of ten million shares at the par value of ten centavos per share, it does not mean that Nielson would be
given 100,000 shares. It only means that Nielson should be given the equivalent of 10% of the aggregate cash value of those shares issued
as stock dividends. That this was the understanding of Nielson itself is borne out by the fact that in its appeal brief Nielson urged that it
should be paid "P300,000.00 being 10% of the P3,000,000.00 stock dividends declared on November 28, 1949 and August 20, 1950...." 21
We, therefore, reconsider that part of Our decision which declares that Nielson is entitled to shares of stock worth P300,000.00 based on the
stock dividends declared on November 28, 1949 and on August 20, 1950, together with all the fruits accruing thereto. Instead, We declare
that Nielson is entitled to payment by Lepanto of P300,000.00 in cash, which is equivalent to 10% of the money value of the stock dividends
worth P3,000,000.00 which were declared on November 28, 1949 and on August 20, 1950, with interest thereon at the rate of 6% from
February 6, 1958.
6. In the eighth ground of its motion for reconsideration Lepanto maintains that this Court erred in awarding to Nielson an undetermined
amount of shares of stock and/or cash, which award can not be ascertained and executed without further litigation.
In view of Our ruling in this resolution that Nielson is not entitled to receive shares of stock as stock dividends in payment of its compensation
under the management contract, We do not consider it necessary to discuss this ground of the motion for reconsideration. The awards in the
present case are all reduced to specific sums of money.
7. In the ninth ground of its motion for reconsideration Lepanto maintains that this Court erred in rendering judgment or attorney's fees.
The matter of the award of attorney's fees is within the sound discretion of this Court. In Our decision We have stated the reason why the
award of P50,000.00 for attorney's fees is considered by this Court as reasonable.
Accordingly, We resolve to modify the decision that We rendered on December 17, 1966, in the sense that instead of awarding Nielson
shares of stock worth P300,000.00 at the par value of ten centavos (P0.10) per share based on the stock dividends declared by Lepanto on
November 28, 1949 and August 20, 1950, together with their fruits, Nielson should be awarded the sum of P300,000.00 which is an amount
equivalent to 10% of the cash value of the stock dividends thus declared, as part of the compensation due Nielson under the management
contract. The dispositive portion of the decision should, therefore, be amended, to read as follows:
IN VIEW OF THE FOREGOING CONSIDERATIONS, We hereby reverse the decision of the court a quo and enter in lieu thereof another,
ordering the appellee Lepanto to pay the appellant Nielson the different amounts as specified hereinbelow:
(1) Seventeen thousand five hundred pesos (P17,500.00), equivalent to 10% of the cash dividends of December, 1941, with legal interest
thereon from the date of the filing of the complaint;
(2) Two thousand five hundred pesos (P2,500.00) as management fee for January 1942, with legal interest thereon from the date of the filing
of the complaint;
(3) One hundred fifty thousand pesos (P150,000.00), representing management fees for the sixty-month period of extension of the
management contract, with legal interest thereon from the date of the filing of the complaint;
(4) One million four hundred thousand pesos (P1,400,000.00), equivalent to 10% of the cash dividends declared during the period of
extension of the management contract, with legal interest thereon from the date of the filing of the complaint;
(5) Three hundred thousand pesos (P300,000.00), equivalent to 10% of the cash value of the stock dividends declared on November 28,
1949 and August 20, 1950, with legal interest thereon from the date of the filing of the complaint;
(6) Fifty three thousand nine hundred twenty eight pesos and eighty eight centavos (P53,928.88), equivalent to 10% of the depletion reserve
set up during the period of extension, with legal interest thereon from the date of the filing of the complaint;
(7) Six hundred ninety four thousand three hundred sixty four pesos and seventy six centavos (P694,364.76), equivalent to 10% of the
expenses for capital account during the period of extension, with legal interest thereon from the date of the filing of the complaint;
(8) Fifty thousand pesos (P50,000.00) as attorney's fees; and
(9) The costs.
It is so ordered.
SECOND DIVISION
LAUREANO T. ANGELES,
G.R. No. 150128

Present:
P
e
t
i
t
i
o
n
e
r
,
PUNO, J., Chairpe

rson,
SANDOVALGUTIERREZ,
CORONA,
AZCUNA, and
GARCIA, JJ.
Promulgated:
August 31, 2006
- versus -
PHILIPPINE NATIONAL RAILWAYS

(PNR) AND RODOLFO FLORES,[1]
Respondent
s.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
GARCIA, J.:
Under consideration is this petition for review under Rule 45 of the Rules of Court assailing and seeking to set aside the following
issuances of the Court of Appeals (CA) in CA-G.R. CV No. 54062, to wit:
Decision[2] dated June 4, 2001, affirming an earlier decision of the Regional Trial Court (RTC) ofQuezon
City, Branch 79, which dismissed the complaint for specific performance and damagesthereat commenced by
the petitioner against the herein respondents; and
Resolution[3] dated September 17, 2001, denying the petitioner's motion for reconsideration.
1.
2.
The facts:
On
May
5,
1980, the respondent
Romualdez (Romualdez, hereinafter) that
it
Philippine
National
has accepted the
Railways
latters offer
(PNR)
to
buy, on
informed
an
a
AS
certain
IS,
Gaudencio
WHERE
IS
basis, the PNRs scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton,
respectively, for the total amount ofP96,600.00. After paying the stated purchase price, Romualdez addressed a letter to Atty. Cipriano
Dizon, PNRs Acting Purchasing Agent. Bearing date May 26, 1980, the letter reads:
Dear Atty. Dizon:

This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R.
WIJANCO of No. 1606 Aragon St., Sta. Cruz, Manila, to be my lawful representative in the withdrawal of the
scrap/unserviceable rails awarded to me.
For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980 and O.R. No. 8706855
dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R. WIJANCO.
Thank you for your cooperation.
Very truly yours,
(Sgd.) Gaudencio Romualdez
The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles, petitioner's now deceased wife. That very same day May
26, 1980 Lizette requested the PNR to transfer the location of withdrawal for the reason that the scrap/unserviceable rails located in Del
Carmen and Lubao, Pampanga were not ready for hauling. The PNR granted said request and allowedLizette to withdraw
scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However, the PNR subsequently suspended the withdrawal in
view of what it considered as documentary discrepancies coupled by reported pilferages of over P500,000.00 worth of PNRscrap properties
in Tarlac.
Consequently, the spouses Angeles demanded the refund of the amount of P96,000.00. The PNR, however, refused to pay, alleging
that as per delivery receipt duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been withdrawn which, at P2,100.00
per metric ton,were worth P114,781.80, an amount that exceeds the claim for refund.
On August
10,
1988, the spouses Angeles filed suit against the PNR
Rodolfo Flores, among others, for
specific
and
its
corporate
secretary,
performance and damages before the
Regional Trial Court of Quezon City. In it, they prayed that PNR be directed to deliver 46 metric tons of scrap/unserviceable rails
and to pay them damages and attorney's fees.
Issues having been joined following the filing by PNR, et al., of their answer, trial ensued. Meanwhile, Lizette W. Angeles passed away
and was substituted by her heirs, among whom is her husband, herein petitioner Laureno T. Angeles.
On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not the real parties-in-interest, rendered
judgment dismissing their complaint for lack of cause of action. As held by the court, Lizette was merely a representative of Romualdez in the
withdrawal of scrap or unserviceable rails awarded to him and not an assignee to the latter's rights with respect to the award.
Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the threshold hereof, in its decision of June 4, 2001,
dismissed the appeal and affirmed that of the trial court. Theaffirmatory decision was reiterated by the CA in its resolution of September 17,
2001, denying thepetitioners motion for reconsideration.
Hence, the petitioners present recourse on the submission that the CA erred in affirming the trial court's holding that petitioner and his
spouse, as plaintiffs a quo, had no cause of action as they were not the real parties-in-interest in this case.
We DENY the petition.
At the crux of the issue is the matter of how the aforequoted May 26, 1980 letter of Romualdez to Atty. Dizon of
the PNR should be taken: was it meant to designate, or has it the effect of designating, Lizette W. Angeles as a mere agent or as an
assignee of his (Romualdez's) interest in the scrap rails awarded to San Juanico Enterprises? The CAs conclusion, affirmatory of that of
the trial court, is that Lizette was not an assignee, but merely an agent whose authority was limited to the withdrawal of the scrap rails,
hence, without personality to sue.
Where agency exists, the third party's (in this case, PNR's) liability on a contract is to the principal and not to the agent and the
relationship of the third party to the principal is the same as that in a contract in which there is no agent. Normally, the agent has neither
rights nor liabilities as against the third party. He cannot thus sue or be sued on the contract. Since a contract may be violated only by the
parties thereto as against each other, the real party-in-interest, either as plaintiff or defendant in an action upon that contract must, generally,
be a contracting party.
The legal situation is, however, different where an agent is constituted as an assignee. In such a case, the agent may, in his own
behalf, sue on a contract made for his principal, as an assignee of such contract. The rule
requiring every action to be prosecuted in the name of the real party-in-interest recognizes the assignment of rights of action and also
recognizes
that when one has a right assigned to him, he is then the real party-in-interest and may maintain an action upon such claim or right. [4]
Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26, 1980, it is at once apparent that Lizette was to
act just as a representative of Romualdez in the withdrawal of rails, and not an assignee. For perspective, we reproduce the contents of
said letter:
This is to inform you as President of San Juanico Enterprises, that I have authorized the bearer, LIZETTE R.
WIJANCO x x x to be my lawful representative in the withdrawal of the scrap/unserviceable rails awarded to me.
For this reason, I have given her the ORIGINAL COPY of the AWARD, dated May 5, 1980and O.R. No.
8706855 dated May 20, 1980 which will indicate my waiver of rights, interests and participation in favor of LIZETTE R.
WIJANCO. (Emphasis added)
If Lizette was without legal standing to sue and appear in this case, there is more reason to hold that her petitioner husband, either as
her conjugal partner or her heir, is also without such standing.
Petitioner makes much of the fact that the terms agent or attorney-in-fact were not usedin the Romualdez letter aforestated. It bears
to stress, however, that the words principal and agent, are not the only terms used to designate the parties in an agency relation. The
agent may also be called an attorney, proxy, delegate or, as here, representative.
It cannot be over emphasized that Romualdez's use of the active verb authorized, instead of assigned, indicated an intent on his
part to keep and retain his interest in the subject matter. Stated a bit differently, he intended to limit Lizettes role in the scrap
transaction to being therepresentative of his interest therein.
Petitioner submits that the second paragraph of the Romualdez letter, stating - I have given[Lizette] the original copy of the award x x x
which will indicate my waiver of rights, interests and participation in favor of Lizette R. Wijanco - clarifies that Lizette was intended to be an
assignee, and not a mere agent.
We are not persuaded. As it were, the petitioner conveniently omitted an important phrase preceding the paragraph which would
have put the whole matter in context. The phrase is For this reason, and the antecedent thereof is his (Romualdez) having
appointed Lizette as his representative in the matter of the withdrawal of the scrap items. In fine, the key phrase clearlyconveys
the idea that Lizette was given the original copy of the contract award to enable her towithdraw the rails as Romualdezs authorized
representative.
Article 1374 of the Civil Code provides that the various stipulations of a contract shall be read and interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly. In fine, the real intention of the parties is primarily to be determined
from the language used and gathered from the whole instrument. When put into the context of the letter as a whole, it
is abundantly clear that the rights which Romualdez waived or ceded in favor of Lizettewere those in furtherance of the agency relation that
he had established for the withdrawal of the rails.
At any rate, any doubt as to the intent of Romualdez generated by the way his letter was couched could be clarified by the acts of the
main players themselves. Article 1371 of the Civil Code provides that to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered. In other words, in case of doubt, resort may be made to the situation, surroundings, and
relations of the parties.
The fact of agency was, as the trial court aptly observed,[5] confirmed in subsequent letters from the Angeles spouses in which
they themselves refer to Lizette as authorized representative of San Juanico Enterprises. Mention may also be made that the withdrawal
receipt which Lizette had signed indicated that she was doing so in a representative capacity. One professing to act as agent for
another is estopped to deny his agency both as against his asserted principal and third persons interested in the transaction which he
engaged in.
Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for
another. The appellate court, and before it, the trial court, had peremptorily determined that Lizette, with respect to the withdrawal of the
scrap in question, was acting for Romualdez. And with the view we take of this case, there were substantial pieces ofevidence adduced to
support this determination. The desired reversal urged by the petitioner cannot, accordingly, be granted. For, factual findings of the trial court,
adopted and confirmed by the CA, are, as a rule, final and conclusive and may not be disturbed on appeal.[6] So it must be here.
Petitioner maintains that the Romualdez letter in question was not in the form of a special power of attorney, implying that the latter had
not intended to merely authorize his wife, Lizette, to perform an act for him (Romualdez). The contention is specious. In the absence of
statute, no form or method of execution is required for a valid power of attorney; it may be in any form clearlyshowing on its face the agents
authority.[7]
A power of attorney is only but an instrument in writing by which a person, as principal, appoints another as his agent and confers
upon him the authority to perform certain specified acts on behalf of the principal. The written authorization itself is the power of attorney, and
this is clearly indicated by the fact that it has also been called a letter of attorney. Its primary purpose is not to define the authority of the
agent as between himself and his principal but to evidence the authority of the agent to third parties with whom the agent deals.[8] The letter
under consideration is sufficient to constitute a power of attorney. Except as may be required by statute, a power of attorney is valid although
no notary public intervened in its execution.[9]
A power of attorney must be strictly construed and pursued. The instrument will be held to grant only those powers which are specified
therein, and the agent may neither go beyond nor deviate from the power of attorney. [10] Contextually, all that Lizette was authorized to do
was towithdraw the unserviceable/scrap railings. Allowing her authority to sue therefor, especially in her own name, would be to read
something not intended, let alone written in the Romualdez letter.
Finally, the petitioner's claim that Lizette paid the amount of P96,000.00 to the PNR appears to be a mere afterthought; it ought to
be dismissed outright under the estoppel principle. In earlier proceedings, petitioner himself admitted in his complaint that it
was Romualdez who paid thisamount.
WHEREFORE, the petition is DENIED and the assailed decision of the CA isAFFIRMED.
SO ORDERED.
SECOND DIVISION
[G.R. No. 117356. June 19, 2000]
VICTORIAS MILLING CO., INC., petitioner, vs. COURT OF APPEALS and CONSOLIDATED SUGAR
CORPORATION, respondents.
DECISION
QUISUMBING, J.:
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals
dated February 24, 1994, in CA-G.R. CV No. 31717, as well as the respondent court's resolution of September 30, 1994 modifying
said decision. Both decision and resolution amended the judgment dated February 13, 1991, of the Regional Trial Court of Makati
City, Branch 147, in Civil Case No. 90-118.
The facts of this case as found by both the trial and appellate courts are as follows:
St. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co., Inc., (VMC). In the course
of their dealings, petitioner issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. Among these
was SLDR No. 1214M, which gave rise to the instant case. Dated October 16, 1989, SLDR No. 1214M covers 25,000 bags of
sugar. Each bag contained 50 kilograms and priced at P638.00 per bag as "per sales order VMC Marketing No. 042 dated October
16, 1989."[1] The transaction it covered was a "direct sale."[2] The SLDR also contains an additional note which reads: "subject for
(sic) availability of a (sic) stock at NAWACO (warehouse)." [3]
On October 25, 1989, STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No. 1214M for P
14,750,000.00. CSC issued one check dated October 25, 1989 and three checks postdated November 13, 1989 in payment. That
same day, CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No. 1214M. Enclosed
in the letter were a copy of SLDR No. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf
the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214 dated October 16, 1989 in the total
quantity of 25,000 bags."[4]
On October 27, 1989, STM issued 16 checks in the total amount of P31,900,000.00 with petitioner as payee. The latter, in turn,
issued Official Receipt No. 33743 dated October 27, 1989 acknowledging receipt of the said checks in payment of 50,000 bags.
Aside from SLDR No. 1214M, said checks also covered SLDR No. 1213.
Private respondent CSC surrendered SLDR No. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw
sugar. However, after 2,000 bags had been released, petitioner refused to allow further withdrawals of sugar against SLDR No.
1214M. CSC then sent petitioner a letter dated January 23, 1990 informing it that SLDR No. 1214M had been "sold and endorsed"
to it but that it had been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2,000 bags had
been withdrawn.[5] CSC thus inquired when it would be allowed to withdraw the remaining 23,000 bags.
On January 31, 1990, petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. 1214M because
STM had already dwithdrawn all the sugar covered by the cleared checks. [6]
On March 2, 1990, CSC sent petitioner a letter demanding the release of the balance of 23,000 bags.
Seven days later, petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully
withdrawn and hence, there would be no more deliveries of the commodity to STM's account. Petitioner also noted that CSC had
represented itself to be STM's agent as it had withdrawn the 2,000 bags against SLDR No. 1214M "for and in behalf" of STM.
On April 27, 1990, CSC filed a complaint for specific performance, docketed as Civil Case No. 90-1118. Defendants were Teresita
Ng Sy (doing business under the name of St. Therese Merchandising) and herein petitioner. Since the former could not be served
with summons, the case proceeded only against the latter. During the trial, it was discovered that Teresita Ng Go who testified for
CSC was the same Teresita Ng Sy who could not be reached through summons. [7] CSC, however, did not bother to pursue its case
against her, but instead used her as its witness.
CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M. Therefore, the latter had no
justification for refusing delivery of the sugar. CSC prayed that petitioner be ordered to deliver the 23,000 bags covered by SLDR
No. 1214M and sought the award of P1,104,000.00 in unrealized profits, P3,000,000.00 as exemplary damages, P2,200,000.00 as
attorney's fees and litigation expenses.
Petitioner's primary defense a quo was that it was an unpaid seller for the 23,000 bags. [8] Since STM had already drawn in full all
the sugar corresponding to the amount of its cleared checks, it could no longer authorize further delivery of sugar to CSC.
Petitioner also contended that it had no privity of contract with CSC.
Petitioner explained that the SLDRs, which it had issued, were not documents of title, but mere delivery receipts issued pursuant to
a series of transactions entered into between it and STM. The SLDRs prescribed delivery of the sugar to the party specified therein
and did not authorize the transfer of said party's rights and interests.
Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co-conspirator to defraud it through a
misrepresentation that CSC was an innocent purchaser for value and in good faith. Petitioner then prayed that CSC be ordered to
pay it the following sums: P10,000,000.00 as moral damages; P10,000,000.00 as exemplary damages; and P1,500,000.00 as
attorney's fees. Petitioner also prayed that cross-defendant STM be ordered to pay it P10,000,000.00 in exemplary damages, and
P1,500,000.00 as attorney's fees.
Since no settlement was reached at pre-trial, the trial court heard the case on the merits.
As earlier stated, the trial court rendered its judgment favoring private respondent CSC, as follows:
"WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against
defendant Victorias Milling Company:
"1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23,000 bags of refined sugar due under SLDR
No. 1214;
"2) Ordering defendant Victorias Milling Company to pay the amount of P920,000.00 as unrealized profits, the amount of
P800,000.00 as exemplary damages and the amount of P1,357,000.00, which is 10% of the acquisition value of the
undelivered bags of refined sugar in the amount of P13,570,000.00, as attorney's fees, plus the costs.
"SO ORDERED."[9]
It made the following observations:
"[T]he testimony of plaintiff's witness Teresita Ng Go, that she had fully paid the purchase price of P15,950,000.00 of the
25,000 bags of sugar bought by her covered by SLDR No. 1214 as well as the purchase price of P15,950,000.00 for the
25,000 bags of sugar bought by her covered by SLDR No. 1213 on the same date, October 16, 1989 (date of the two
SLDRs) is duly supported by Exhibits C to C-15 inclusive which are post-dated checks dated October 27, 1989 issued by
St. Therese Merchandising in favor of Victorias Milling Company at the time it purchased the 50,000 bags of sugar
covered by SLDR No. 1213 and 1214. Said checks appear to have been honored and duly credited to the account of
Victorias Milling Company because on October 27, 1989 Victorias Milling Company issued official receipt no. 34734 in
favor of St. Therese Merchandising for the amount of P31,900,000.00 (Exhibits B and B-1). The testimony of Teresita Ng
Go is further supported by Exhibit F, which is a computer printout of defendant Victorias Milling Company showing the
quantity and value of the purchases made by St. Therese Merchandising, the SLDR no. issued to cover the purchase,
the official reciept no. and the status of payment. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR
No. 1214 the same has been fully paid as indicated by the word 'cleared' appearing under the column of 'status of
payment.'
"On the other hand, the claim of defendant Victorias Milling Company that the purchase price of the 25,000 bags of sugar
purchased by St. Therese Merchandising covered by SLDR No. 1214 has not been fully paid is supported only by the
testimony of Arnulfo Caintic, witness for defendant Victorias Milling Company. The Court notes that the testimony of
Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully paid and is not
corroborated by any positive evidence. There is an insinuation by Arnulfo Caintic in his testimony that the postdated
checks issued by the buyer in payment of the purchased price were dishonored. However, said witness failed to present
in Court any dishonored check or any replacement check. Said witness likewise failed to present any bank record
showing that the checks issued by the buyer, Teresita Ng Go, in payment of the purchase price of the sugar covered by
SLDR No. 1214 were dishonored."[10]
Petitioner appealed the trial courts decision to the Court of Appeals.
On appeal, petitioner averred that the dealings between it and STM were part of a series of transactions involving only one account
or one general contract of sale. Pursuant to this contract, STM or any of its authorized agents could withdraw bags of sugar only
against cleared checks of STM. SLDR No. 21214M was only one of 22 SLDRs issued to STM and since the latter had already
withdrawn its full quota of sugar under the said SLDR, CSC was already precluded from seeking delivery of the 23,000 bags of
sugar.
Private respondent CSC countered that the sugar purchases involving SLDR No. 1214M were separate and independent
transactions and that the details of the series of purchases were contained in a single statement with a consolidated summary of
cleared check payments and sugar stock withdrawals because this a more convenient system than issuing separate statements for
each purchase.
The appellate court considered the following issues: (a) Whether or not the transaction between petitioner and STM involving
SLDR No. 1214M was a separate, independent, and single transaction; (b) Whether or not CSC had the capacity to sue on its own
on SLDR No. 1214M; and (c) Whether or not CSC as buyer from STM of the rights to 25,000 bags of sugar covered by SLDR No.
1214M could compel petitioner to deliver 23,000 bags allegedly unwithdrawn.
On February 24, 1994, the Court of Appeals rendered its decision modifying the trial court's judgment, to wit:
"WHEREFORE, the Court hereby MODIFIES the assailed judgment and orders defendant-appellant to:
"1) Deliver to plaintiff-appellee 12,586 bags of sugar covered by SLDR No. 1214M;
" 2) Pay to plaintiff-appellee P792,918.00 which is 10% of the value of the undelivered bags of refined sugar, as attorneys
fees;
"3) Pay the costs of suit.
"SO ORDERED."[11]
Both parties then seasonably filed separate motions for reconsideration.
In its resolution dated September 30, 1994, the appellate court modified its decision to read:
"WHEREFORE, the Court hereby modifies the assailed judgment and orders defendant-appellant to:
"(1) Deliver to plaintiff-appellee 23,000 bags of refined sugar under SLDR No. 1214M;
"(2) Pay costs of suit.
"SO ORDERED."[12]
The appellate court explained the rationale for the modification as follows:
"There is merit in plaintiff-appellee's position.
"Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as 12,586 cannot be made
the basis for such a finding. The rule is explicit that courts should consider the evidence only for the purpose for which it
was offered. (People v. Abalos, et al, 1 CA Rep 783). The rationale for this is to afford the party against whom the
evidence is presented to object thereto if he deems it necessary. Plaintiff-appellee is, therefore, correct in its argument
that Exhibit F' which was offered to prove that checks in the total amount of P15,950,000.00 had been cleared. (Formal
Offer of Evidence for Plaintiff, Records p. 58)cannot be used to prove the proposition that 12,586 bags of sugar remained
undelivered.
"Testimonial evidence (Testimonies of Teresita Ng [TSN, 10 October 1990, p. 33] and Marianito L. Santos [TSN, 17
October 1990, pp. 16, 18, and 36]) presented by plaintiff-appellee was to the effect that it had withdrawn only 2,000 bags
of sugar from SLDR after which it was not allowed to withdraw anymore. Documentary evidence (Exhibit I, Id., p. 78,
Exhibit K, Id., p. 80) show that plaintiff-appellee had sent demand letters to defendant-appellant asking the latter to allow
it to withdraw the remaining 23,000 bags of sugar from SLDR 1214M. Defendant-appellant, on the other hand, alleged
that sugar delivery to the STM corresponded only to the value of cleared checks; and that all sugar corresponded to
cleared checks had been withdrawn. Defendant-appellant did not rebut plaintiff-appellee's assertions. It did not present
evidence to show how many bags of sugar had been withdrawn against SLDR No. 1214M, precisely because of its
theory that all sales in question were a series of one single transaction and withdrawal of sugar depended on the clearing
of checks paid therefor.
"After a second look at the evidence, We see no reason to overturn the findings of the trial court on this point." [13]
Hence, the instant petition, positing the following errors as grounds for review:
"1. The Court of Appeals erred in not holding that STM's and private respondent's specially informing petitioner that
respondent was authorized by buyer STM to withdraw sugar against SLDR No. 1214M "for and in our (STM) behalf,"
(emphasis in the original) private respondent's withdrawing 2,000 bags of sugar for STM, and STM's empowering other
persons as its agents to withdraw sugar against the same SLDR No. 1214M, rendered respondent like the other persons,
an agent of STM as held in Rallos v. Felix Go Chan & Realty Corp., 81 SCRA 252, and precluded it from subsequently
claiming and proving being an assignee of SLDR No. 1214M and from suing by itself for its enforcement because it was
conclusively presumed to be an agent (Sec. 2, Rule 131, Rules of Court) and estopped from doing so. (Art. 1431, Civil
Code).
" 2. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain relevant and undisputed
facts which, had they been considered, would have shown that petitioner was not liable, except for 69 bags of sugar, and
which would justify review of its conclusion of facts by this Honorable Court.
" 3. The Court of Appeals misapplied the law on compensation under Arts. 1279, 1285 and 1626 of the Civil Code when it
ruled that compensation applied only to credits from one SLDR or contract and not to those from two or more distinct
contracts between the same parties; and erred in denying petitioner's right to setoff all its credits arising prior to notice of
assignment from other sales or SLDRs against private respondent's claim as assignee under SLDR No. 1214M, so as to
extinguish or reduce its liability to 69 bags, because the law on compensation applies precisely to two or more distinct
contracts between the same parties (emphasis in the original).
"4. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in Exh. F between petitioner
and STM, respondent's admission of its balance, and STM's acquiescence thereto by silence for almost one year did not
render Exh. `F' an account stated and its balance binding.
"5. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No. 1214, namely, (a) its subject
matter being generic, and (b) the sale of sugar being subject to its availability at the Nawaco warehouse, made the sale
conditional and prevented STM or private respondent from acquiring title to the sugar; and the non-availability of sugar
freed petitioner from further obligation.
"6. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded respondent from seeking judicial
reliefs (sic) from petitioner, its only remedy being against its assignor." [14]
Simply stated, the issues now to be resolved are:

(1)....Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence, estopped to sue
upon SLDR No. 1214M as an assignee.
(2)....Whether or not the Court of Appeals erred in applying the law on compensation to the transaction under SLDR No.
1214M so as to preclude petitioner from offsetting its credits on the other SLDRs.
(3)....Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR No. 1214M was a
conditional sale or a contract to sell and hence freed petitioner from further obligations.
(4)....Whether or not the Court of Appeals committed an error of law in not applying the "clean hands doctrine" to
preclude CSC from seeking judicial relief.
The issues will be discussed in seriatim.
Anent the first issue, we find from the records that petitioner raised this issue for the first time on appeal. It is settled that an issue
which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be
offensive to the basic rules of fair play, justice, and due process. [15] Nonetheless, the Court of Appeals opted to address this issue,
hence, now a matter for our consideration.
Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. 1214M to show that the
latter was STM's agent. The pertinent portion of said letter reads:
"This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress
supplied) the refined sugar covered by Shipping List/Delivery Receipt = Refined Sugar (SDR) No. 1214 dated October
16, 1989 in the total quantity of 25, 000 bags."[16]
The Civil Code defines a contract of agency as follows:
"Art. 1868. By the contract of agency a person binds himself to render some service or to do something in representation
or on behalf of another, with the consent or authority of the latter."
It is clear from Article 1868 that the basis of agency is representation. [17] On the part of the principal, there must be an actual
intention to appoint[18] or an intention naturally inferable from his words or actions; [19] and on the part of the agent, there must be an
intention to accept the appointment and act on it, [20] and in the absence of such intent, there is generally no agency. [21] One factor
which most clearly distinguishes agency from other legal concepts is control; one person - the agent - agrees to act under the
control or direction of another - the principal. Indeed, the very word "agency" has come to connote control by the principal. [22] The
control factor, more than any other, has caused the courts to put contracts between principal and agent in a separate category.
[23]
The Court of Appeals, in finding that CSC, was not an agent of STM, opined:
"This Court has ruled that where the relation of agency is dependent upon the acts of the parties, the law makes no
presumption of agency, and it is always a fact to be proved, with the burden of proof resting upon the persons alleging
the agency, to show not only the fact of its existence, but also its nature and extent (Antonio vs. Enriquez [CA], 51 O.G.
3536]. Here, defendant-appellant failed to sufficiently establish the existence of an agency relation between plaintiffappellee and STM. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our
(STM's) behalf" should not be eyed as pointing to the existence of an agency relation ...It should be viewed in the context
of all the circumstances obtaining. Although it would seem STM represented plaintiff-appellee as being its agent by the
use of the phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990, plaintiff-appellee
informed defendant-appellant that SLDFR No. 1214M had been "sold and endorsed" to it by STM (Exhibit I, Records, p.
78). Further, plaintiff-appellee has shown that the 25, 000 bags of sugar covered by the SLDR No. 1214M were sold and
transferred by STM to it ...A conclusion that there was a valid sale and transfer to plaintiff-appellee may, therefore, be
made thus capacitating plaintiff-appellee to sue in its own name, without need of joining its imputed principal STM as coplaintiff."[24]
In the instant case, it appears plain to us that private respondent CSC was a buyer of the SLDFR form, and not an agent of STM.
Private respondent CSC was not subject to STM's control. The question of whether a contract is one of sale or agency depends on
the intention of the parties as gathered from the whole scope and effect of the language employed. [25] That the authorization given
to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency. Ultimately, what is decisive is the
intention of the parties.[26] That no agency was meant to be established by the CSC and STM is clearly shown by CSC's
communication to petitioner that SLDR No. 1214M had been "sold and endorsed" to it. [27] The use of the words "sold and endorsed"
means that STM and CSC intended a contract of sale, and not an agency. Hence, on this score, no error was committed by the
respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner.
On the second issue, proceeding from the theory that the transactions entered into between petitioner and STM are but serial parts
of one account, petitioner insists that its debt has been offset by its claim for STM's unpaid purchases, pursuant to Article 1279 of
the Civil Code.[28] However, the trial court found, and the Court of Appeals concurred, that the purchase of sugar covered by SLDR
No. 1214M was a separate and independent transaction; it was not a serial part of a single transaction or of one account contrary
to petitioner's insistence. Evidence on record shows, without being rebutted, that petitioner had been paid for the sugar purchased
under SLDR No. 1214M. Petitioner clearly had the obligation to deliver said commodity to STM or its assignee. Since said sugar
had been fully paid for, petitioner and CSC, as assignee of STM, were not mutually creditors and debtors of each other. No
reversible error could thereby be imputed to respondent appellate court when, it refused to apply Article 1279 of the Civil Code to
the present case.
Regarding the third issue, petitioner contends that the sale of sugar under SLDR No. 1214M is a conditional sale or a contract to
sell, with title to the sugar still remaining with the vendor. Noteworthy, SLDR No. 1214M contains the following terms and
conditions:
"It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the
buyer/trader personally or through a representative, title to refined sugar is transferred to buyer/trader and delivery to
him/it is deemed effected and completed(stress supplied) and buyer/trader assumes full responsibility therefore" [29]
The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon
payment of the purchase price. Said terms clearly establish a contract of sale, not a contract to sell. Petitioner is now estopped
from alleging the contrary. The contract is the law between the contracting parties. [30] And where the terms and conditions so
stipulated are not contrary to law, morals, good customs, public policy or public order, the contract is valid and must be upheld.
[31]
Having transferred title to the sugar in question, petitioner is now obliged to deliver it to the purchaser or its assignee.
As to the fourth issue, petitioner submits that STM and private respondent CSC have entered into a conspiracy to defraud it of its
sugar. This conspiracy is allegedly evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing price; (b)
CSC's refusal to pursue its case against Teresita Ng Go; and (c) the authority given by the latter to other persons to withdraw sugar
against SLDR No. 1214M after she had sold her rights under said SLDR to CSC. Petitioner prays that the doctrine of "clean hands"
should be applied to preclude CSC from seeking judicial relief. However, despite careful scrutiny, we find here the records bare of
convincing evidence whatsoever to support the petitioner's allegations of fraud. We are now constrained to deem this matter purely
speculative, bereft of concrete proof.
WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner.
SO ORDERED.
G.R. No. 113074 January 22, 1997
ALFRED HAHN, petitioner,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT (BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision 1 of the Court of Appeals dismissing a complaint for specific performance which petitioner had filed
against private respondent on the ground that the Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a
nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for reconsideration.
The following are the facts:

Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-Manila." On the other hand, private respondent
Bayerische Motoren Werke Aktiengesellschaft (BMW) is a nonresident foreign corporation existing under the laws of the former Federal
Republic of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with Special Power of Attorney," which reads in
full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and device in the Philippines which
ASSIGNOR uses and has been using on the products manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized
exclusive Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of registration issued by the Director
of Patents on 12 December 1963 and is referred to as Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer of the said BMW trademark and device
in favor of the ASSIGNEE herein with the Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations hereunder stated, the ASSIGNOR hereby
affirms the said assignment and transfer in favor of the ASSIGNEE under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR or infringer of the BMW trademark in the
Philippines; for such purpose, the ASSIGNOR shall inform the ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information the ASSIGNOR shall automatically act as Attorney-In-Fact of
the ASSIGNEE for such case, with full power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and for purposes hereof the ASSIGNOR is hereby named and constituted as ASSIGNEE's
Attorney-In-Fact, but any such suit without ASSIGNEE's consent will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been usual in the past without a formal
contract, and for that purpose, the dealership of ASSIGNOR shall cover the ASSIGNEE's complete production program with the
only limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall not be able to supply automobiles to
ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past without a formal contract." But on February 16,
1993, in a meeting with a BMW representative and the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was
informed that BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which had expressed interest in
acquiring the same. On February 24, 1993, petitioner received confirmation of the information from BMW which, in a letter, expressed
dissatisfaction with various aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating services, and
inadequate showroom and warehouse facilities, and petitioner's alleged failure to comply with the standards for an exclusive BMW
dealer. 2 Nonetheless, BMW expressed willingness to continue business relations with the petitioner on the basis of a "standard BMW
importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no alternative but to terminate petitioner's
exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of the Deed of Assignment. 3 Hahn insisted
that as long as the assignment of its trademark and device subsisted, he remained BMW's exclusive dealer in the Philippines because the
assignment was made in consideration of the exclusive dealership. In the same letter petitioner explained that the decline in sales was due
to lower prices offered for BMW cars in the United States and the fact that few customers returned for repairs and servicing because of the
durability of BMW parts and the efficiency of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993 its offer of a "standard importer contract"
and terminated the exclusive dealer relationship effective June 30, 1993. 4 At a conference of BMW Regional Importers held on April 26,
1993 in Singapore, Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993, BMW proposed that
Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific performance and damages against BMW to
compel it to continue the exclusive dealership. Later he filed an amended complaint to include an application for temporary restraining order
and for writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his exclusive dealership. Hahn's amended
complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with principal offices at Munich, Germany. It may be
served with summons and other court processes through the Secretary of the Department of Trade and Industry of the
Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment with Special Power of Attorney covering
the trademark and in consideration thereof, under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer
of the Assignee in the Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and without any monetary contribution from defendant BMW, established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and resources in order to singlehandedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures
such as service centers and showrooms to maintain and promote the car and products of defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was willing to maintain with Plaintiff a relationship
but only "on the basis of a standard BMW importer contract as adjusted to reflect the particular situation in the Philippines" subject
to certain conditions, otherwise, defendant BMW would terminate Plaintiffs exclusive dealership and any relationship for cause
effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of the assignment agreement between itself and plaintiff since the
consideration for the assignment of the BMW trademark is the continuance of the exclusive dealership agreement. It thus, follows
that the exclusive dealership should continue for so long as defendant BMW enjoys the use and ownership of the trademark
assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon City Regional Trial Court, which on June 14,
1993 issued a temporary restraining order. Summons and copies of the complaint and amended complaint were thereafter served on the
private respondent through the Department of Trade and Industry, pursuant to Rule 14, 14 of the Rules of Court. The order, summons and
copies of the complaint and amended complaint were later sent by the DTI to BMW via registered mail on June 15, 1993 5 and received by
the latter on June 24, 1993.
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of preliminary injunction proceeded ex parte,
with petitioner Hahn testifying. On June 30, 1993, the trial court issued an order granting the writ of preliminary injunction upon the filing of a
bond of P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire jurisdiction over it through the service of
summons on the Department of Trade and Industry, because it (BMW) was a foreign corporation and it was not doing business in the
Philippines. It contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn was not its agent because the
latter undertook to assemble and sell BMW cars and products without the participation of BMW and sold other products; and that Hahn was
an indentor or middleman transacting business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the Philippines through him as its agent, as shown
by the fact that BMW invoices and order forms were used to document his transactions; that he gave warranties as exclusive BMW dealer;
that BMW officials periodically inspected standards of service rendered by him; and that he was described in service booklets and
international publications of BMW as a "BMW Importer" or "BMW Trading Company" in the Philippines.
The trial court 6 deferred resolution of the motion to dismiss until after trial on the merits for the reason that the grounds advanced by BMW in
its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition for certiorari with the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE INJUDICIOUSLY IN PROCEEDINGS LEADING
TOWARD THE ISSUANCE OF THE WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE
ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF THE MOTION TO DISMISS ON THE
GROUND OF LACK OF JURISDICTION, AND THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a writ of preliminary injunction, to enjoin the
trial court from proceeding further in Civil Case No. Q-93-15933. Private respondent pointed out that, unless the trial court's order was set
aside, it would be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in default, when the very question
was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20, 1993, it rendered judgment finding the
trial court guilty of grave abuse of discretion in deferring resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its questioned order of July 26, 1993, we rule
and so hold that petitioner's (BMW) motion to dismiss could be resolved then and there, and that the respondent judge's deferment
of his action thereon until after trial on the merit constitutes, to our mind, grave abuse of discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as regards the factual matters relating to the motion to dismiss. What truly divide
(sic) the parties and to which they greatly differ is the legal conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the Philippines while the latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would anyway be elevated to it on appeal, the
Court of Appeals itself resolved the motion. It ruled that BMW was not doing business in the country and, therefore, jurisdiction over it could
not be acquired through service of summons on the DTI pursuant to Rule 14, 14. 'The court upheld private respondent's contention that
Hahn acted in his own name and for his own account and independently of BMW, based on Alfred Hahn's allegations that he had invested
his own money and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn sold products other than
those of BMW. It held that petitioner was a mere indentor or broker and not an agent through whom private respondent BMW transacted
business in the Philippines. Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial court gravely abused its discretion in
deferring action on the motion to dismiss and (2) in finding that private respondent BMW is not doing business in the Philippines and, for this
reason, dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, 14 provides:
14. Service upon private foreign corporations. If the defendant is a foreign corporation, or a nonresident joint stock company or
association, doing business in the Philippines, service may be made on its resident agent designated in accordance with law for
that purpose, or, if there be no such agent, on the government official designated by law to that effect, or on any of its officers or
agents within the Philippines. (Emphasis added).
What acts are considered "doing business in the Philippines" are enumerated in 3(d) of the Foreign Investments Act of 1991 (R.A. No.
7042) as follows: 7
d) the phrase "doing business" shall include soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for
a period or periods totalling one hundred eighty (180) days or more; participating in the management, supervision or control of any
domestic business, firm, entity or corporation in the Philippines; and any other act or acts that imply a continuity of commercial
dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its own name and for its own account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not when the representative or distributor
"transacts business in its name and for its own account." In addition, 1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus
Investment Code of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of the Code. In particular, "doing business"
includes:
(1) . . . A foreign firm which does business through middlemen acting in their own names, such as indentors, commercial brokers or
commission merchants, shall not be deemed doing business in the Philippines. But such indentors, commercial brokers or
commission merchants shall be the ones deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of private respondent BMW. If he is, BMW may be
considered doing business in the Philippines and the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an independent dealer, albeit of BMW cars and products,
BMW, a foreign corporation, is not considered doing business in the Philippines within the meaning of the Foreign Investments Act of 1991
and the IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own account and not as agent or distributor in the
Philippines of BMW on the ground that "he alone had contacts with individuals or entities interested in acquiring BMW vehicles.
Independence characterizes Hahn's undertakings, for which reason he is to be considered, under governing statutes, as doing business." (p.
13) In support of this conclusion, the appellate court cited the following allegations in Hahn's amended complaint:
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the Philippines up to the present, Plaintiff,
through its firm name "HAHN MANILA" and without any monetary contributions from defendant BMW, established BMW's goodwill
and market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and resources in order to singlehandedly compete against other motorcycle and car companies. . . . Moreover, Plaintiff has built buildings and other infrastructures
such as service centers and showrooms to maintain and promote the car and products of defendant BMW.
As the above quoted allegations of the amended complaint show, however, there is nothing to support the appellate court's finding that Hahn
solicited orders alone and for his own account and without "interference from, let alone direction of, BMW." (p. 13) To the contrary, Hahn
claimed he took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed the downpayment and pricing
charges, notified Hahn of the scheduled production month for the orders, and reconfirmed the orders by signing and returning to Hahn the
acceptance sheets. Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the buyer and Hahn never
paid for the purchase price of BMW cars sold in the Philippines. Hahn was credited with a commission equal to 14% of the purchase price
upon the invoicing of a vehicle order by BMW. Upon confirmation in writing that the vehicles had been registered in the Philippines and
serviced by him, Hahn received an additional 3% of the full purchase price. Hahn performed after-sale services, including warranty services,
for which he received reimbursement from BMW. All orders were on invoices and forms of BMW. 8
These allegations were substantially admitted by BMW which, in its petition for certiorari before the Court of Appeals, stated: 9
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase prices are made, the vehicles are shipped to
the Philippines. (The payments may be made by the purchasers or third-persons or even by Hahn.) The bills of lading are made up
in the name of the purchasers, but Hahn-Manila is therein indicated as the person to be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of conducting pre-delivery inspections. Thereafter,
he delivers the vehicles to the purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of fourteen percent (14%) of the full
purchase price thereof, and as soon as he confirms in writing that the vehicles have been registered in the Philippines and have
been serviced by him, he will receive an additional three percent (3%) of the full purchase prices as commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent receives a commission upon the successful
conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually made.
As to the service centers and showrooms which he said he had put up at his own expense, Hahn said that he had to follow BMW
specifications as exclusive dealer of BMW in the Philippines. According to Hahn, BMW periodically inspected the service centers to see to it
that BMW standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for Hahn's alleged failure to maintain
BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does not necessarily prove that he is not an
agent of BMW. For as already noted, there are facts in the record which suggest that BMW exercised control over Hahn's activities as a
dealer and made regular inspections of Hahn's premises to enforce compliance with BMW standards and specifications. 10 For example, in its
letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that we have to tackle the Philippine market more
professionally and that we are through your present activities not adequately prepared to cope with the forthcoming challenges. 11
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of Appeals, 12 in which the foreign corporation entered into a
"Representative Agreement" and a "Licensing Agreement" with a domestic corporation, by virtue of which the latter was appointed "exclusive
representative" in the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation sold products exported
by the foreign corporation and put up a service center for the products sold locally. This Court held that these acts constituted doing business
in the Philippines. The arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market and establish its
presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines, even as it announced in the Asian region
that Hahn was the "official BMW agent" in the Philippines. 13
The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not exclusively in BMW products, and, on this basis,
ruled that Hahn was not an agent of BMW. (p. 14) This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial
court and in its petition for certiorari before the Court of Appeals. 14 But this allegation was denied by Hahn 15 and therefore the Court of
Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the Court of Appeals the necessity of affirming the trial court's
order deferring resolution of BMW's motion to dismiss. Petitioner alleged that whether or not he is considered an agent of BMW, the fact is
that BMW did business in the Philippines because it sold cars directly to Philippine buyers. 16 This was denied by BMW, which claimed that
Hahn was not its agent and that, while it was true that it had sold cars to Philippine buyers, this was done without solicitation on its part. 17
It is not true then that the question whether BMW is doing business could have been resolved simply by considering the parties' pleadings.
There are genuine issues of facts which can only be determined on the basis of evidence duly presented. BMW cannot short circuit the
process on the plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the trial court which precisely it
denies. Rule 16, 3 authorizes courts to defer the resolution of a motion to dismiss until after the trial if the ground on which the motion is
based does not appear to be indubitable. Here the record of the case bristles with factual issues and it is not at all clear whether some
allegations correspond to the proof.
Anyway, private respondent need not apprehend that by responding to the summons it would be waiving its objection to the trial court's
jurisdiction. It is now settled that, for purposes of having summons served on a foreign corporation in accordance with Rule 14, 14, it is
sufficient that it be alleged in the complaint that the foreign corporation is doing business in the Philippines. The court need not go beyond
the allegations of the complaint in order to determine whether it has Jurisdiction. 18 A determination that the foreign corporation is doing
business is only tentative and is made only for the purpose of enabling the local court to acquire jurisdiction over the foreign corporation
through service of summons pursuant to Rule 14, 14. Such determination does not foreclose a contrary finding should evidence later show
that it is not transacting business in the country. As this Court has explained:
This is not to say, however, that the petitioner's right to question the jurisdiction of the court over its person is now to be deemed a
foreclosed matter. If it is true, as Signetics claims, that its only involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said to be doing business in
the Philippines. It is a defense, however, that requires the contravention of the allegations of the complaint, as well as a full
ventilation, in effect, of the main merits of the case, which should not thus be within the province of a mere motion to dismiss. So,
also, the issue posed by the petitioner as to whether a foreign corporation which has done business in the country, but which has
ceased to do business at the time of the filing of a complaint, can still be made to answer for a cause of action which accrued while
it was doing business, is another matter that would yet have to await the reception and admission of evidence. Since these points
have seasonably been raised by the petitioner, there should be no real cause for what may understandably be its
apprehension, i.e., that by its participation during the trial on the merits, it may, absent an invocation of separate or independent
reliefs of its own, be considered to have voluntarily submitted itself to the court's jurisdiction. 19
Far from committing an abuse of discretion, the trial court properly deferred resolution of the motion to dismiss and thus avoided prematurely
deciding a question which requires a factual basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It
is the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of uncertain allegations in the pleadings,
disposed of the whole case with finality and thereby deprived petitioner of his right to be heard on his cause of action. Nor was there
justification for nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was issued ex parte, the fact is that
BMW was subsequently heard on its defense by filing a motion to dismiss.
WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED to the trial court for further proceedings.
SO ORDERED.
G.R. No. L-34338 November 21, 1984
LOURDES VALERIO LIM, petitioner,
vs.
PEOPLE OF THE PHILIPPINES, respondent.
RELOVA, J.:
Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and was sentenced "to suffer an imprisonment of four (4) months and
one (1) day as minimum to two (2) years and four (4) months as maximum, to indemnify the offended party in the amount of P559.50, with
subsidize imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo)
From this judgment, appeal was taken to the then Court of Appeals which affirmed the decision of the lower court but modified the penalty
imposed by sentencing her "to suffer an indeterminate penalty of one (1) month and one (1) day of arresto mayor as minimum to one (1) year
and one (1) day of prision correccional as maximum, to indemnify the complainant in the amount of P550.50 without subsidiary
imprisonment, and to pay the costs of suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a contract of agency to sell or a contract of sale of the subject
tobacco between petitioner and the complainant, Maria de Guzman Vda. de Ayroso, thereby precluding criminal liability of petitioner for the
crime charged.
The findings of facts of the appellate court are as follows:
... The appellant is a businesswoman. On January 10, 1966, the appellant went to the house of Maria Ayroso and
proposed to sell Ayroso's tobacco. Ayroso agreed to the proposition of the appellant to sell her tobacco consisting of 615
kilos at P1.30 a kilo. The appellant was to receive the overprice for which she could sell the tobacco. This agreement was
made in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew the document, Exh. A, dated January
10, 1966, which reads:
To Whom It May Concern:
This is to certify that I have received from Mrs. Maria de Guzman Vda. de Ayroso. of Gapan, Nueva
Ecija, six hundred fifteen kilos of leaf tobacco to be sold at Pl.30 per kilo. The proceed in the amount
of Seven Hundred Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it was
sold.
This was signed by the appellant and witnessed by the complainant's sister, Salud Bantug, and the latter's maid,
Genoveva Ruiz. The appellant at that time was bringing a jeep, and the tobacco was loaded in the jeep and brought by
the appellant. Of the total value of P799.50, the appellant had paid to Ayroso only P240.00, and this was paid on three
different times. Demands for the payment of the balance of the value of the tobacco were made upon the appellant by
Ayroso, and particularly by her sister, Salud Bantug. Salud Bantug further testified that she had gone to the house of the
appellant several times, but the appellant often eluded her; and that the "camarin" the appellant was empty. Although the
appellant denied that demands for payment were made upon her, it is a fact that on October 19, 1966, she wrote a letter
to Salud Bantug which reads as follows:
Dear Salud,
Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang nasisingil kong pera,
magintay ka hanggang dito sa linggo ito at tiak na ako ay magdadala sa iyo. Gosto ko Salud ay
makapagbigay man lang ako ng marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto
mo ay kahit konte muna ay bibigyan kita. Pupunta lang kami ni Mina sa Maynila ngayon. Salud kung
talagang kailangan mo ay bukas ay dadalhan kita ng pera.
Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat ang mga suki ko ng
puesto. Huwag kang mabahala at tiyak na babayaran kita.
Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).
Ludy
Pursuant to this letter, the appellant sent a money order for P100.00 on October 24, 1967, Exh. 4, and another for
P50.00 on March 8, 1967; and she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2, dated April 18,
1967, or a total of P240.00. As no further amount was paid, the complainant filed a complaint against the appellant for
estafa. (pp. 14, 15, 16, Rollo)
In this petition for review by certiorari, Lourdes Valerio Lim poses the following questions of law, to wit:
1. Whether or not the Honorable Court of Appeals was legally right in holding that the foregoing document (Exhibit "A")
"fixed a period" and "the obligation was therefore, immediately demandable as soon as the tobacco was sold" (Decision,
p. 6) as against the theory of the petitioner that the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended in which case the only action that can be maintained is a
petition to ask the court to fix the duration thereof;
2. Whether or not the Honorable Court of Appeals was legally right in holding that "Art. 1197 of the New Civil Code does
not apply" as against the alternative theory of the petitioner that the fore. going receipt (Exhibit "A") gives rise to an
obligation wherein the duration of the period depends upon the will of the debtor in which case the only action that can be
maintained is a petition to ask the court to fix the duration of the period; and
3. Whether or not the honorable Court of Appeals was legally right in holding that the foregoing receipt is a contract of
agency to sell as against the theory of the petitioner that it is a contract of sale. (pp. 3-4, Rollo)
It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the tobacco should be turned over to the complainant as soon as the
same was sold, or, that the obligation was immediately demandable as soon as the tobacco was disposed of. Hence, Article 1197 of the New
Civil Code, which provides that the courts may fix the duration of the obligation if it does not fix a period, does not apply.
Anent the argument that petitioner was not an agent because Exhibit "A" does not say that she would be paid the commission if the goods
were sold, the Court of Appeals correctly resolved the matter as follows:
... Aside from the fact that Maria Ayroso testified that the appellant asked her to be her agent in selling Ayroso's tobacco,
the appellant herself admitted that there was an agreement that upon the sale of the tobacco she would be given
something. The appellant is a businesswoman, and it is unbelievable that she would go to the extent of going to Ayroso's
house and take the tobacco with a jeep which she had brought if she did not intend to make a profit out of the
transaction. Certainly, if she was doing a favor to Maria Ayroso and it was Ayroso who had requested her to sell her
tobacco, it would not have been the appellant who would have gone to the house of Ayroso, but it would have been
Ayroso who would have gone to the house of the appellant and deliver the tobacco to the appellant. (p. 19, Rollo)
The fact that appellant received the tobacco to be sold at P1.30 per kilo and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The agreement (Exhibit "A') constituted her as an agent with the
obligation to return the tobacco if the same was not sold.
ACCORDINGLY, the petition for review on certiorari is dismissed for lack of merit. With costs.
SO ORDERED.
EN BANC
[G.R. No. L-2870. September 19, 1950.]
CHUA NGO, plaintiff-appellee, vs. UNIVERSAL TRADING CO., INC., defendant-appellant.
Manuel O. Chan and H. B. Arandia for appellant.
Arsenio Sy Santos for appellee.
SYLLABUS
1.
PURCHASE AND SALE; PART OF GOODS LOST IN TRANSIT; WHO IS TO SUFFER THE LOSS. Chua Ngo purchased and
paid for 300 boxes of orange Trading Co. In turn, the latter purchased from Gabuardi Company of San Francisco F.O.B San Francisco
sufficient to comply with ints contract with Chua Ngo. Part of the orange consignment from Gabuardi Company of San Francisco was lost in
Transit and so Chua received 120 boxes only. Held, as between Gabuardi Company and Universal Trading Co., the loss must be borne by
the latter, said goods having been legally delivered to the purchaser at San Francisco on board the vessel; Chua Ngo, as a consequence, is
entitled to be paid back for the price for the undelivered goods.
DECISION
BENGZON, J p:
Chua Ngo delivered, in Manila, to the Universal Trading Company, Inc., a local corporation, the price of 300 boxes of Sunkist oranges to be
gotten from the United States. The latter ordered the said boxes from Gabuardi Company of San Francisco, and in due course, the goods
were shipped from that port to Manila "F. O. B. San Francisco." One hundred eighty boxes were lost in transit, and were never delivered to
Chua Ngo.
This suit by Chua Ngo is to recover the corresponding price he had paid in advance.
Universal Trading Company refused to pay, alleging it merely acted as agent of Chua Ngo in purchasing the oranges. Chua Ngo maintains
he bought the oranges from Universal Trading Company, and, therefore, is entitled to the return of the price corresponding to the undelivered
fruit.
From a judgment for plaintiff, the defendant appealed.
It appears that on January 14, 1946, the herein litigants signed the document Exhibit 1, which reads as follows:
UNIVERSAL TRADING COMPANY, INC.

Far Eastern Division
R-236-238 Ayala Building
Juan Luna, Manila
CONTRACT NO. 632
14 January 1946
Agreement is hereby made between Messrs. Chua Ngo of 753Folgueras, Manila, and the Universal Trading Company, Inc., Manila,for order
as follows and under the following terms:
Quantity Merchandise and description Unit
300
Unit PriceAmount
Sunkist oranges, wrapped

Grade No. 1
Navel, 220 to case Case
300
$6.30
$1,890.00
Onions, Australian
Browns, 90 lbs. to case
Case
$6.82
$2,046.00
We are advised by the supplier that the charges to bring these goods to Manila are:
Oranges $3.06 per case

Onions
1.83 per case
Deposit of 40% of the contract price plus the above charges to be payable immediately upon receipt of telegraphic confirmation. Balance
payable upon arrival of goods in Manila. If balance is not paid within 48 hours of notification merchandise may be resold by Universal Trading
Co., Inc. and the deposit forfeited.
NOTE:
Onions cancelled by supplier.

(Initialed) R.E.H.
Total amount of order
Agreed and accepted:

(Sgd.) CHUA NGO
Confirmed and approved:
(Sgd.) RALPH E. HOLMES
$3,936
Sales manager
Universal Trading Company, Inc.
(See terms of agreement on reverse side.)
On the same date, the defendant forwarded an order to GabuardiCompany of San Francisco, U. S. A., which in part says:
ORDER NO. 707
TO GABUARDI COMPANY OF CALIFORNIA

258 Market Street
San Francisco, California
Please send for our account, subject to conditions on the back of this order, the following merchandise enumerated below:
Shipping instructions
Via San Francisco, California.
Terms:
F. O. B.
San Francisco
Quantity Articles Unit
300
Unit price Total Price
Sunkist oranges wrapped

Grade No. 1
Navel, 220 to case Case
xxx
xxx
xxx
Approved:
Universal Trading Company, Inc.
(Sgd.) RALPH R. HOLMES
$6.00
$1,800.00
Sales Manager
xxx
xxx
xxx
On January 16 and January 19, 1946, the Universal Trading Co., Inc., wrote Chua Ngo two letters informing him that the contract for oranges
(and onions) had been confirmed by the supplier i. e., could be fulfilled and asking for deposit of 65% of the price and certain additional
charges.
On January 21, 1946, Chua Ngo deposited with the defendant, on account of the Sunkist oranges, the amount of P3,650, and later (March 9,
1946), delivered the additional sum of P2,822.43 to complete the price, as follows:
300 cases of oranges at $9.36
Bank charges
196.56
Customs charges, etc

Delivery charges
P6,616.00
270.00
171.00
3 1/2 percent sales tax
218.00
P6,253.56
Less deposit R. No. 1062
3,650.00
=========
P2,822.43
The 300 cases of oranges ordered by the defendant from Gabuardi Company were loaded in good condition on board the S/S Silversandal
in the port of San Francisco, together with other oranges (totalling 6,380 cases) for other customers. They were all marked "UTC Manila" and
were consigned to defendant. The Silversandal arrived at the port of Manila on March 7, 1946. And out of the 6,380 boxes of oranges, 607
cases were short landed for causes beyond defendant's control. Consequently, defendant failed to deliver to Chua Ngo 180 cases of the 300
cases contracted for. The total cost of such 180 cases (received by defendant) is admittedly P3,882.60.
The above are the main facts according to the stipulation of the parties. Uncontradicted additional evidence was introduced that the mark
"UTC Manila" written on all the boxes means "Universal Trading Company, Manila"; that the defendant paid in its own name to Gabuardi
Company the shipment of oranges, and made claims for the lost oranges to the steamship company and the insurance company that insured
the shipment; and finally, that in the transaction between plaintiff and defendant, the latter received no commission.
The crucial question is: Did Universal Trading Company merely agree to buy for and on behalf of Chua Ngo the 300 boxes of oranges, or did
it agree to sell and sold the oranges to Chua Ngo? If the first, the judgment must be reversed; if the latter, it should be affirmed.
In our opinion, the circumstances of record sufficiently indicate a sale. First, no commission was paid. Second, Exhibit I says that "if balance
is not paid within 48 hours of notification, merchandise may be resold by the Universal Trading Company and the deposit forfeited." "Resold"
implies the goods had been sold to Chua Ngo. And forfeiture of the deposit is incompatible with a contract of agency. Third, immediately after
executing Exhibit I wherein oranges were quoted at $6.30 per box, Universal Trading placed an order for purchase of the same with
Gabuardi Company at $6 per box. If Universal Trading Company was agent of Chua Ngo, it could not properly do that. Inasmuch as good
faith is to be presumed, we must hold that Universal Trading acted thus because it was not acting as agent of Chua Ngo, but as independent
purchaser from Gabuardi Company. Fourth, the defendant charged the plaintiff the sum of P218.87 for 3 1/2 percent sales tax, thereby
implying that their transaction was a sale. Fifth, if the purchase of the oranges had been made on behalf of Chua Ngo, all claims for losses
thereof against the insurance company and against the shipping company should have been assigned to Chua Ngo. Instead, the defendant
has been pressing such claims for itself.
In our opinion, the arrangement between the parties was this: Chua Ngo purchased from Universal Trading Company, 300 boxes of oranges
at $6.30 plus. In turn, the latter purchased from Gabuardi Company at $6 plus, sufficient fruit to comply with its contract with Chua Ngo.
Unfortunately, however, part of the orange consignment from San Francisco was lost in transit. Who is to suffer that loss? Naturally, whoever
was the owner of the oranges at the time of such loss. It could not be Chua Ngo because the fruit had not been delivered to him. As between
Gabuardi and the Universal Trading, inasmuch as the goods had been sold "F. O. B. San Francisco", the loss must be borne by the latter,
because Under the law, said goods had been delivered to the purchaser at San Francisco on board the vessel Silversandal. 1 That is why
the Universal has been trying to recover the loss from both the steamship company and the insurer.
Now, as Chua Ngo has paid for 300 boxes and has received 120 boxes only, the price of 180 boxes undelivered must be paid back to him.
It appears that whereas in the lower court defendant sustained the theory that it acted as agent of plaintiff, in this Court the additional theory
is advanced that it acted as agent of Gabuardi Company. This obviously has no merit.
As to the contention that defendant incurred no liability because it is admitted that the oranges were lost due to causes beyond the control of
the defendant, and the oranges were shipped "F. O. B. San Francisco", the answer is that such contention is based on the assumption
which we reject that defendant merely acted as agent of plaintiff in the purchase of the oranges from Gabuardi.
In view of the foregoing, the appealed judgment for plaintiff in the sum of P3,882.60 is affirmed, with costs.
Moran, C.J., Ozaeta, Paras, Pablo, Tuason Montemayor and Reyes, JJ., concur.
G.R. No. L-8169
January 29, 1957
THE SHELL COMPANY OF THE PHILIPPINES, LTD., petitioner,

vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON,
PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division),respondents.
Ross, Selph, Carrascoso & Janda for petitioner.
J. A. Wolfson and Manuel Y. Macias for respondents.
PADILLA, J.:
Appeal by certiorari under Rule 46 to review a judgment of the Court of Appeals which reversed that of the Court of First Instance of Manila
and sentenced ". . . the defendants-appellees to pay, jointly and severally, the plaintiffs-appellants the sum of P1,651.38, with legal interest
from December 6, 1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the Shell Company of the Philippine Islands, Ltd. accept
the statement of facts made by the trial court in its decision and appearing on pages 23 to 37 of the Record on Appeal, we quote
hereunder such statement:
This is an action for recovery of sum of money, based on alleged negligence of the defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on September 3, 1947 to the Shell Gasoline and Service
Station, located at the corner of Marques de Comillas and Isaac Peral Streets, Manila, for washing, greasing and spraying. The
operator of the station, having agreed to do service upon payment of P8.00, the car was placed on a hydraulic lifter under the
direction of the personnel of the station.
What happened to the car is recounted by Perlito Sison, as follows:
Q. Will you please describe how they proceeded to do the work?

A. Yes, sir. The first thing that was done, as I saw, was to drive the car over the lifter. Then by the aid of the two grease
men they raised up my car up to six feet high, and then washing was done. After washing, the next step was greasing.
Before greasing was finished, there is a part near the shelf of the right fender, right front fender, of my car to be greased,
but the the grease men cannot reached that part, so the next thing to be done was to loosen the lifter just a few feet
lower. Then upon releasing the valve to make the car lower, a little bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As the escape of the air is too strong for my ear I faced backward. I faced
toward Isaac Peral Street, and covered my ear. After the escaped of the air has been finished, the air coming out from
the valve, I turned to face the car and I saw the car swaying at that time, and just for a few second the car fell., (t.s.n. pp.
22-23.)
The case was immediately reported to the Manila Adjustor Company, the adjustor of the firemen's Insurance Company and the Commercial
Casualty Insurance Company, as the car was insured with these insurance companies. After having been inspected by one Mr. Baylon,
representative of the Manila Adjustor Company, the damaged car was taken to the shops of the Philippine Motors, Incorporated, for repair
upon order of the Firemen's Insurance Company and the Commercial Casualty Company, with the consent of Salvador R. Sison. The car
was restored to running condition after repairs amounting to P1,651.38, and was delivered to Salvador R. Sison, who, in turn made
assignments of his rights to recover damages in favor of the Firemen's Insurance Company and the Commercial Casualty Insurance
Company.
On the other hand, the fall of the car from the hydraulic lifter has been explained by Alfonso M. Adriano, a greaseman in the Shell
Gasoline and Service Station, as follows:
Q. Were you able to lift the car on the hydraulic lifter on the occasion, September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.
Q. Were you able to reach the portion which you were not able to reach while it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his counter-statement of facts which is hereunder also reproduced:
In the afternoon of September 3, 1947, an automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito
Sison, to the gasoline and service station at the corner of Marques de Comillas and Isaac Peral Streets, City of Manila, Philippines,
owned by the defendant The Shell Company of the Philippine Islands, Limited, but operated by the defendant Porfirio de la Fuente,
for the purpose of having said car washed and greased for a consideration of P8.00 (t.s.n., pp. 19-20.) Said car was insured
against loss or damage by Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company
jointly for the sum of P10,000 (Exhibits "A', "B", and "D").
The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two employees, Alfonso M.
Adriano, as greaseman and one surnamed de los Reyes, a helper and washer (t.s.n., pp. 65-67). To perform the job the car was
carefully and centrally placed on the platform of the lifter in the gasoline and service station aforementioned before raising up said
platform to a height of about 5 feet and then the servicing job was started. After more than one hour of washing and greasing, the
job was about to be completed except for an ungreased portion underneath the vehicle which could not be reached by the
greasemen. So, the lifter was lowered a little by Alfonso M. Adriano and while doing so, the car for unknown reason accidentally fell
and suffered damage to the value of P1, 651.38 (t.s.n., pp. 65-67).
The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to Salvador
Sison in accordance with the terms of the insurance contract, have filed this action together with said Salvador Sison for the
recovery of the total amount of the damage from the defendants on the ground of negligence (Record on Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer and contended further
that the accidental fall of the car was caused by unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who ordered their adjustor, the Manila Adjustor Company, to investigate the incident and
after such investigation the damaged car, upon order of the insures and with the consent of the owner, was brought to the shop of the
Philippine Motors, Inc. The car was restored to running condition after thereon which amounted to P1,651.38 and returned to the owner who
assigned his right to collect the aforesaid amount to the Firemen's Insurance Company and the Commercial Casualty Insurance Company.
On 6 December 1947 the insures and the owner of the car brought an action in the Court of First Instance of Manila against the Shell
Company of the Philippines, Ltd. and Porfirio de la Fuente to recover from them, jointly and severally, the sum of P1,651.38, interest thereon
at the legal rate from the filing of the complaint until fully paid, the costs. After trial the Court dismissed the complaint. The plaintiffs appealed.
The Court of Appeals reversed the judgment and sentenced the defendant to pay the amount sought to be recovered, legal interest and
costs, as stated at the beginning of this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was brought to the station for servicing Profirio de la Fuente, the
operator of the gasoline and service station, was an agent of the Shell Company of the Philippines, Ltd., the Court of Appeals found that
. . . De la Fuente owned his position to the Shell Company which could remove him terminate his services at any time from the said
Company, and he undertook to sell the Shell Company's products exculusively at the said Station. For this purpose, De la Fuente
was placed in possession of the gasoline and service station under consideration, and was provided with all the equipments
needed to operate it, by the said Company, such as the tools and articles listed on Exhibit 2 which the hydraulic lifter (hoist) and
accessories, from which Sison's automobile fell on the date in question (Exhibit 1 and 2). These equipments were delivered to De
la Fuente on a so-called loan basis. The Shell Company took charge of its care and maintenance and rendered to the public or its
customers at that station for the proper functioning of the equipment. Witness Antonio Tiongson, who was sales superintendent of
the Shell Company, and witness Augusto Sawyer, foreman of the same Company, supervised the operators and conducted
periodic inspection of the Company's gasoline and service station, the service station in question inclusive. Explaining his duties
and responsibilities and the reason for the loan, Tiongson said: "mainly of the supervision of sales or (of) our dealers and
rountinary inspection of the equipment loaned by the Company" (t.s.n., 107); "we merely inquire about how the equipments are,
whether they have complaints, and whether if said equipments are in proper order . . .", (t.s.n., 110); station equipments are
"loaned for the exclusive use of the dealer on condition that all supplies to be sold by said dealer should be exclusively Shell, so as
a concession we loan equipments for their use . . .," "for the proper functioning of the equipments, we answer and see to it that the
equipments are in good running order usable condition . . .," "with respect to the public." (t.s.n., 111-112). De la Fuente, as
operator, was given special prices by the Company for the gasoline products sold therein. Exhibit 1 Shell, which was a receipt
by Antonio Tiongson and signed by the De la Fuente, acknowledging the delivery of equipments of the gasoline and service station
in question was subsequently replaced by Exhibit 2 Shell, an official from of the inventory of the equipment which De la Fuente
signed above the words: "Agent's signature" And the service station in question had been marked "SHELL", and all advertisements
therein bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him as it
pleased; that all the equipments needed to operate the station was owned by the Defendant Company which took charge of their
proper care and maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave the fixing of
price for gasoline to De la Fuente; on the other hand, the Defendant company had complete control thereof; and that Tiongson, the
sales representative of the Defendant Company, had supervision over De la Fuente in the operation of the station, and in the sale
of Defendant Company's products therein. . . .
Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his
services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the
company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took
charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the
company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the
operator; and that the receipt signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator
was an agent of the company and not an independent contractor should not be disturbed.
To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties,
should there be a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their
respective obligation stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title
given the contract by the parties, the former must prevail over the latter.
It was admitted by the operator of the gasoline and service station that "the car was carefully and centrally placed on the platform of the
lifter . . ." and the Court of Appeals found that
. . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused therefor, were the result of the jerking and
swaying of the lift when the valve was released, and that the jerking was due to some accident and unforeseen shortcoming of the
mechanism itself, which caused its faulty or defective operation or functioning,
. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the normal and ordinary conduct of his
business as operator of his co-appellee's service station, and that the jerking and swaying of the hydraulic lift which caused the fall
of the subject car were due to its defective condition, resulting in its faulty operation. . . .
As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by
the agent is one for which the principal is answerable. Moreover, the company undertook to "answer and see to it that the equipments are in
good running order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check up
of the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that
the operator was satisfactory, he (the mechanic) left the place." The latter was negligent and the company must answer for the negligent act
of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.
G.R. No. 142950
March 26, 2001
EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION, petitioner,

vs.
ROSITA KU, respondent.
KAPUNAN, J.:
Can a person be evicted by virtue of a decision rendered in an ejectment case where she was not joined as a party? This was the issue that
confronted the Court of Appeals, which resolved the issue in the negative. To hold the contrary, it said, would violate due process. Given the
circumstances of the present case, petitioner Equitable PCI Bank begs to differ. Hence, this petition.
On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc., and Ku Giok Heng, as Vice-President/General
Manager of the same corporation, mortgaged the subject property to the Equitable Banking Corporation, now known as Equitable PCI Bank
to secure Noddy Inc.s loan to Equitable. The property, a residential house and lot located in La Vista, Quezon City, was registered in
respondents name.
Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting petitioner to foreclose the property extrajudicially. As the
winning bidder in the foreclosure sale, petitioner was issued a certificate of sale. Respondent failed to redeem the property. Thus, on
December 10, 1984, the Register of Deeds canceled the Transfer Certificate of Title in the name of respondent and a new one was issued in
petitioners name.
On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City Metropolitan Trial Court (MeTC) against respondents
father Ku Giok Heng. Petitioner alleged that it allowed Ku Giok Heng to remain in the property on the condition that the latter pay rent. Ku
Giok Hengs failure to pay rent prompted the MeTC to seek his ejectment. Ku Giok Heng denied that there was any lease agreement over
the property.1wphi1.nt
On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered Ku Giok Heng to, among other things, vacate the
premises. It ruled:
x x x for his failure or refusal to pay rentals despite proper demands, the defendant had not established his right for his continued
possession of or stay in the premises acquired by the plaintiff thru foreclosure, the title of which had been duly transferred in the
name of the plaintiff. The absence of lease agreement or agreement for the payment of rentals is of no moment in the light of the
prevailing Supreme Court ruling on the matter. Thus: "It is settled that the buyer in foreclosure sale becomes the absolute owner of
the property purchased if it is not redeemed during the period of one (1) year after the registration of the sale is as such he is
entitled to the possession of the property and the demand at any time following the consolidation of ownership and the issuance to
him of a new certificate of title. The buyer can, in fact, demand possession of the land even during the redemption period except
that he has to post a bond in accordance with Section 7 of Act No. 3155 as amended. Possession of the land then becomes an
absolute right of the purchaser as confirmed owner. Upon proper application and proof of title, the issuance of a writ of possession
becomes a ministerial duty of the court. (David Enterprises vs. IBAA[,] 191 SCRA 116). 1
Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter, respondent Rosita Ku, filed on December 20, 1994, an
action before the Regional Trial Court (RTC) of Quezon City to nullify the decision of the MeTC. Finding no merit in the complaint, the RTC
on September 13, 1999 dismissed the same and ordered the execution of the MeTC decision.
Respondent filed in the Court of Appeals (CA) a special civil action for certiorari assailing the decision of the RTC. She contended that she
was not made a party to the ejectment suit and was, therefore, deprived of due process. The CA agreed and, on March 31, 2000, rendered a
decision enjoining the eviction of respondent from the premises.
On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an extension of 30 days from May 10, 2000 or until June 9, 2000 to file
its petition for review of the CA decision. The motion alleged that the Bank received the CA decision on April 25, 2000. 2 The Court granted
the motion for a 30-day extension "counted from the expiration of the reglementary period" and "conditioned upon the timeliness of the filing
of [the] motion [for extension]."3
On June 13, 2000,4 Equitable Bank filed its petition, contending that there was no need to name respondent Rosita Ku as a party in the
action for ejectment since she was not a resident of the premises nor was she in possession of the property.
The petition is meritorious.
Generally, no man shall be affected by any proceeding to which he is a stranger, and strangers to a case are not bound by judgment
rendered by the court.5 Nevertheless, a judgment in an ejectment suit is binding not only upon the defendants in the suit but also against
those not made parties thereto, if they are:
a) trespassers, squatters or agents of the defendant fraudulently occupying the property to frustrate the judgment;
b) guests or other occupants of the premises with the permission of the defendant;
c) transferees pendente lite;
d) sub-lessees;
e) co-lessees; or
f) members of the family, relatives and other privies of the defendant. 6
Thus, even if respondent were a resident of the property, a point disputed by the parties, she is nevertheless bound by the judgment of the
MeTC in the action for ejectment despite her being a non-party thereto. Respondent is the daughter of Ku Giok Heng, the defendant in the
action for ejectment.
Respondent nevertheless claims that the petition is defective. The bank alleged in its petition that it received a copy of the CA decision
on April 25, 2000. A Certification dated June 6, 2000 issued by the Manila Central Post Office reveals, however, that the copy "was duly
delivered to and received by Joel Rosales (Authorized Representative) on April 24, 2000."7 Petitioners motion for extension to file this
petition was filed on May 10, 2000, sixteen (16) days from the petitioners receipt of the CA decision (April 24, 2000) and one (1) day beyond
the reglementary period for filing the petition for review (May 9, 2000).
Petitioner however maintains "its honest representation of having received [a copy of the decision] on April 25, 2000." 8 Appended as Annex
"A" to petitioners Reply is an Affidavit9 dated October 27, 2000 and executed by Joel Rosales, who was mentioned in the Certification as
having received the decision. The Affidavit states:
(1) I am an employee of Unique Industrial & Allied Services, Inc. (Unique) a corporation duly organized and existing under
Philippine laws with principal place of business at 1206 Vito Cruz St., Malate, Manila, and I am assigned with the Equitable PCI
Bank, Mail and Courier Department, Equitable PCI Bank Tower II, cor. Makati Avenue and H.V. dela Costa St., Makati City, Metro
Manila;
(2) Under the contract of services between the Bank and Unique, it is my official duty and responsibility to receive and pick-up from
the Manila Central Post Office (CPO) the various mails, letters, correspondence, and other mail matters intended for the banks
various departments and offices at Equitable Bank Building, 262 Juan Luna St., Binondo, Manila. This building, however, also
houses various other offices or tenants not related to the Bank.
(3) I am not the constituted agent of "Curato Divina Mabilog Niedo Magturo Pagaduan Law Office" whose former address is at Rm.
405 4/F Equitable Bank Bldg., 262 Juan Luna St., Binondo, Manila, for purposes of receiving their incoming mail matters; neither
am I any such agent of the various other tenants of the said Building. On occasions when I receive mail matters for said law office,
it is only to help them receive their letters promptly.
(4) On April 24, 2000, I received the registered letter sent by the Court of Appeals, covered by Registry Receipt No. 125234 and
Delivery No. 4880 (copy of envelope attached as Annex "A") together with other mail matters, and brought them to the Mail and
Courier Department;
(5) After sorting out these mail matters, on April 25, 2000, I erroneously recorded them on page 422 of my logbook as having been
received by me on said dated April 25, 2000 (copy of page 422 is attached as Annex "B").
(6) On April 27, 2000, this letter was sent by the Mail and Courier Department to said Law Office whose receiving clerk Darwin
Bawar opened the letter and stamped on the "Notice of Judgment" their actual date of receipt: "April 27, 2000" (copy of the said
Notice with the date so stamped is attached as Annex "C").
(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me as to my actual date of receipt of this letter, and I
informed him that based on my logbook, I received it on April 25, 2000.
(8) I discovered this error only on September 6, 2000, when I was informed by Atty. Niedo that Postmaster VI Alfredo C. Mabanag,
Jr. of the Central Post Office, Manila, issued a certification that I received the said mail on April 24, 2000.
(9) I hereby confirm that this error was caused by an honest mistake.
Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent of its counsels law office, did not constitute notice to
its counsel, as required by Sections 210 and 10,11 Rule 13 of the Rules of Court. To support this contention, petitioner cites Philippine Long
Distance Telephone Co. vs. NLRC.12 In said case, the bailiff served the decision of the National Labor Relations Commission at the ground
floor of the building of the petitioner therein, the Philippine Long Distance Telephone Co., rather than on the office of its counsel, whose
address, as indicated in the notice of the decision, was on the ninth floor of the building. We held that:
x x x practical considerations and the realities of the situation dictate that the service made by the bailiff on March 23, 1981 at the
ground floor of the petitioners building and not at the address of record of petitioners counsel on record at the 9 th floor of the PLDT
building cannot be considered a valid service. It was only when the Legal Services Division actually received a copy of the decision
on March 26, 1981 that a proper and valid service may be deemed to have been made. x x x.
Applying the foregoing provisions and jurisprudence, petitioner submits that actual receipt by its counsel was on April 27, 2000, not April 25,
2000. Following the argument to its logical conclusion, the motion for extension to file the petition for review was even filed two (2) days
before the lapse of the 15-day reglementary period. That counsel treated April 25, 2000 and not April 27, 2000 as the date of receipt was
purportedly intended to obviate respondents possible argument that the 15-day period had to be counted from April 25, 2000.
The Court is not wholly convinced by petitioners argument. The Affidavit of Joel Rosales states that he is "not the constituted agent of
Curato Divina Mabilog Nedo Magturo Pagaduan Law Office." An agency may be express butit may also be implied from the acts of the
principal, from his silence, or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without
authority.13 Likewise, acceptance by the agent may also be express, although it may also be implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances. 14 In this case, Joel Rosales averred that "[o]n occasions when I
receive mail matters for said law office, it is only to help them receive their letters promptly," implying that counsel had allowed the practice of
Rosales receiving mail in behalf of the former. There is no showing that counsel had objected to this practice or took steps to put a stop to it.
The facts are, therefore, inadequate for the Court to make a ruling in petitioners favor.
Assuming the motion for extension was indeed one day late, petitioner urges the Court, in any event, to suspend its rules and admit the
petition in the interest of justice. Petitioner invokes Philippine National Bank vs. Court of Appeals,15 where the petition was filed three (3) days
late. The Court held:
It has been said time and again that the perfection of an appeal within the period fixed by the rules is mandatory and jurisdictional.
But, it is always in the power of this Court to suspend its own rules, or to except a particular case from its operation, whenever the
purposes of justice require it. Strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage
thereof warrant the suspension of the rules.
The Court proceeded to enumerate cases where the rules on reglementary periods were suspended. Republic vs. Court of
Appeals16 involved a delay of six days; Siguenza vs. Court of Appeals,17 thirteen days; Pacific Asia Overseas Shipping Corporation vs.
NLRC,18 one day; Cortes vs. Court of Appeals,19 seven days; Olacao vs. NLRC,20 two days; Legasto vs. Court of Appeals,21 two
days; and City Fair Corporation vs. NLRC,22 which also concerned a tardy appeal.1wphi1.nt
The Court finds these arguments to be persuasive, especially in light of the merits of the petition.
WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The decision of the Court of Appeals isREVERSED.
SO ORDERED.
G.R. No. 120528
January 29, 2001
ATTY. DIONISIO CALIBO, JR., petitioner,

vs.
COURT OF APPEALS and DR. PABLO U. ABELLA, respondents.
QUISUMBING, J.:
Before us is the petition for review on certiorari by petitioner Dionisio Calibo, Jr., assailing the decision of the Court of Appeals in CA-G.R. CV
No. 39705, which affirmed the decision of the Regional Trial Court of Cebu, Branch 11, declaring private respondent as the lawful possessor
of a tractor subject of a replevin suit and ordering petitioner to pay private respondent actual damages and attorney's fees.
The facts of the case, as summarized by respondent court, are undisputed.
"on January 25, 1979, plaintiff-appellee [herein petitioner] Pablo U. Abella purchased an MF 210 agricultural tractor with Serial
No. 00105 and Engine No. P126M00199 (Exhibit A; Record, p.5) which he used in his farm in Dagohoy, Bohol.
Sometimes in October or November 1985, Pablo Abella's son, Mike abella rented for residential purpose the house of defendantappellant Dionosio R. Calibo, Jr., in Tagbilaran City.
In October 1986, Pablo Abella pulled out his aforementioned tractor from his farm in Dagohoy, Bohol, and left it in the safekeeping
of his son, Mike Abella, in Tagbilaran City. Mike kept the tractor in the garage of the house he was leasing from Calibo.
Since he started renting Calibo's house, Mike had been religiously paying the monthly rentals therefor, but beginning November of
1986, he stopped doing so. The following month, Calibo learned that Mike had never paid the charges for electric and water
consumption in the leased premises which the latter was duty-bound to shoulder. Thus, Calibo confronted Mike about his rental
arrears and the unpaid electric and water bills. During this confrontation, Mike informed Calibo that he (Mike) would be staying in
the leased property only until the end of December 1986. Mike also assured Calibo that he would be settling his account with the
latter, offering the tractor as security. Mike even asked Calibo to help him find a buyer for the tractor so he could sooner pay his
outstanding obligation.1wphi1.nt
In January 1987 when a new tenant moved into the house formerly leased to Mike, Calibo had the tractor moved to the garage of
his father's house, also in Tagbilaran City.
Apprehensive over Mike's unsettled account, Calibo visited him in his Cebu City address in January, February and March, 1987
and tried to collect payment. On all three occasions, Calibo was unable to talk to Mike as the latter was reportedly out of town. On
his third trip to Cebu City, Calibo left word with the occupants of the Abella residence thereat that there was a prospective buyer for
the tractor. The following week, Mike saw Calibo in Tagbilaran City to inquire about the possible tractor buyer. The sale, however,
did not push through as the buyer did not come back anymore. When again confronted with his outstanding obligation, Mike
reassured Calibo that the tractor would stand as a guarantee for its payment. That was the last time Calibo saw or heard from
Mike.
After a long while, or on November 22, 1988, Mike's father, Pablo Abella, came to Tagbilaran City to claim and take possession of
the tractor. Calibo, however, informed Pablo that Mike left the tractor with him as security for the payment of Mike's obligation to
him. Pablo offered to write Mike a check for P2,000.00 in payment of Mike's unpaid lease rentals, in addition to issuing postdated
checks to cover the unpaid electric and water bills the correctness of which Pablo said he still had to verify with Mike. Calibo told
Pablo that he would accept the P2,000.00-check only if the latter would execute a promissory note in his favor to cover the amount
of the unpaid electric and water bills. Pablo was not amenable to this proposal. The two of them having failed to come to an
agreement, Pablo left and went back to Cebu City, unsuccessful in his attempt to take possession of the tractor." 1
On November 25, 1988, private respondent instituted an action for replevin, claiming ownership of the tractor and seeking to recover
possession thereof from petitioner. As adverted to above, the trial court ruled in favor of private respondent; so did the Court of Appeals when
petitioner appealed.
The Court of Appeals sustained the ruling of the trial court that Mike Abella could not have validly pledged the subject tractor to petitioner
since he was not the owner thereof, nor was he authorized by its owner to pledge the tractor. Respondent court also rejected petitioner's
contention that, if not a pledge, then a deposit was created. The Court of Appeals said that under the Civil Code, the primary purpose of a
deposit is only safekeeping and not, as in this case, securing payment of a debt.
The Court of Appeals reduced the amount of actual damages payable to private respondent, deducting therefrom the cost of transporting the
tractor from Tagbilaran, Bohol, to Cebu City.
Hence, this petition.
Essentially, petitioner claims that the tractor in question was validly pledged to him by private respondent's son Mike Abella to answer for the
latter's monetary obligations to petitioner. In the alternative, petitioner asserts that the tractor was left with him, in the concept of an
innkeeper, on deposit and that he may validly hold on thereto until Mike Abella pays his obligations.
Petitioner maintains that even if Mike Abella were not the owner of the tractor, a principal-agent relationship may be implied between Mike
Abella and private respondent. He contends that the latter failed to repudiate the alleged agency, knowing that his son is acting on his behalf
without authority when he pledged the tractor to petitioner. Petitioner argues that, under Article 1911 of the Civil Code, private respondent is
bound by the pledge, even if it were beyond the authority of his son to pledge the tractor, since he allowed his son to act as though he had
full powers.
On the other hand, private respondent asserts that respondent court had correctly ruled on the matter.
In a contract of pledge, the creditor is given the right to retain his debtor's movable property in his possession, or in that of a third person to
whom it has been delivered, until the debt is paid. For the contract to be valid, it is necessary that: (1) the pledge is constituted to secure the
fulfillment of a principal obligation; (2) the pledgor be the absolute owner of the thing pledged; and (3) the person constituting the pledge has
the free disposal of his property, and in the absence thereof, that he be legally authorized for the purpose. 2
As found by the trial court and affirmed by respondent court, the pledgor in this case, Mike Abella, was not the absolute owner of the tractor
that was allegedly pledged to petitioner. The tractor was owned by his father, private respondent, who left the equipment with him for
safekeeping. Clearly, the second requisite for a valid pledge, that the pledgor be the absolute owner of the property, is absent in this case.
Hence, there is no valid pledge.
"He who is not the owner or proprietor of the property pledged or mortgaged to guarantee the fulfillment of a principal obligation,
cannot legally constitute such a guaranty as may validly bind the property in favor of his creditor, and the pledgee or mortgagee in
such a case acquires no right whatsoever in the property pledged or mortgaged." 3
There also does not appear to be any agency in this case. We agree with the Court of Appeals that:
"As indicated in Article 1869, for an agency relationship to be deemed as implied, the principal must know that another person is
acting on his behalf without authority. Here, appellee categorically stated that the only purpose for his leaving the subject tractor in
the care and custody of Mike Abella was for safekeeping, and definitely not for him to pledge or alienate the same. If it were true
that Mike pledged appeellee's tractor to appellant, then Mike was acting not only without appellee's authority but without the latter's
knowledge as well.
Article 1911, on the other hand, mandates that the principal is solidarily liable with the agent if the former allowed the latter to act
as though he had full powers. Again, in view of appellee's lack of knowledge of Mike's pledging the tractor without any authority
from him, it stands to reason that the former could not have allowed the latter to pledge the tractor as if he had full powers to do
so."4
There is likewise no valid deposit in this case. In a contract of deposit, a person receives an object belonging to another with the obligation of
safely keeping it and of returning the same.5 Petitioner himself states that he received the tractor not to safely keep it but as a form of
security for the payment of Mike Abella's obligations. There is no deposit where the principal purpose for receiving the object is not
safekeeping.6
Consequently, petitioner had no right to refuse delivery of the tractor to its lawful owner. On the other hand, private respondent, as owner,
had every right to seek to repossess the tractor, including the institution of the instant action for replevin.1wphi1.nt
We do not here pass upon the other assignment of errors made by petitioner concerning alleged irregularities in the raffle and disposition of
the case at the trial court. A petition for review on certiorari is not the proper vehicle for such allegations.
WHEREFORE, the instant petition is DENIED for lack of merit, and the decision of the Court of Appeals in CA-G.R. CV No. 39705
is AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. L-6626
October 6, 1911
JOSE DE LA PEA Y DE RAMON, administrator of the estate of the deceased Jose de la Pea y Gomiz; F. GARFIELD WAIT, ET
AL., interveners-appellants,
vs.
FEDERICO HIDALGO, defendant-appellant.
C. A. DeWitt, for interveners and appellants.
Eduardo Gutierrez Repide, for defendant and appellant.
TORRES, J.:
This decision concerns the appeals entered under respective bills of exception by counsel for Jose de la Pea y de Ramon, the
administrator of the estate of the deceased Jose de la Pea y Gomiz, from the order of the 18th of the same month, directing that the amount
deposited as bond, by counsel for the intervening attorneys, Chicote & Miranda, Frederick G. Waite, and C. W. O'Brien, from the said order
of October 18, in so far as it declares that the counterclaim by the said Hidalgo against de la Pea was presented in his capacity as
administrator of the aforementioned estate and that the intervener's lien could not avail to prevent the set-off decreed in the said first order
appealed from.
After a regular trial in the Court of First Instance of this city of the case of Jose de la Pea y de Ramon, as administrator of the estate
of his deceased father, Jose de la Pea y Gomiz, vs. Federico Hidalgo, for the payment of a sum of money, the record of the proceedings
was forwarded to this court on appeal. By the decision rendered Hidalgo to pay to Jose de la Pea y de Ramon, as administrator, the sum of
P6,774.50 with legal interest from May 23, 1906, and, likewise, sentenced the said Jose de la Pea y de Ramon to pay to Federico Hidalgo,
as a counterclaim, the sum of P9,000, with legal interest thereon from May 21, 1907, the date of the counterclaim; and affirmed the judgment
appealed from in so far as it was in agreement with the said decision, and reversed it in so far as it was not in accordance therewith. That
decision became final.
The record of proceedings having been remanded for execution to the Court of First Instance whence it originated, the judge, by order
of October 14, 1910, decreed that both amounts for which the defendant Hidalgo and the administrator Pea were mutually liable in
concurrent sums, should off-set each other, and that, consequently, the plaintiff, Pea y de Ramon, in conformity with the final decision of this
court, was liable for the payment of the difference between such amounts, or P2,274.93, together with the interests at 6 per cent from the
said date.
At this stage of the proceedings for the execution of the judgment that had become final, the attorneys for the said plaintiff, Messrs.
Chicote & Miranda, Frederick Garfield Waite, and C. W. O'Brien represented by C. A. DeWitt, asked that they be permitted to intervene in the
proceedings, as they held a lien upon the amount awarded in the said decision of this court, rendered in favor of the plaintiff and against the
defendant, and alleged that the lien which they held was upon the judgment entered in favor of the plaintiff in his capacity as administrator,
against the defendant; that the defendant was entitled to the judgment awarded him by virtue of his counterclaim, yet, in consideration of the
fact that their lien affected the judgment of the lower court, which was in no wise reversed, the said lien was valid with respect to any
judgment that the plaintiff had obtained against the defendant, notwithstanding such counterclaim. In spite of the defendant's opposition, the
court, ruling on this incidental question raised, issued the aforecited order of October 18, 1910.
Counsel for the administrator Pea did not file a brief calculated to prove the soundness of his appeal from the order of October 14,
1910, whereby there was declared a set-off between the amounts for which the plaintiff and the defendant were liable, up to the sum where
the liability of the one equaled that of the other, then latter to pay to the former the difference, together with the interest. This order is
pursuant to the law and in perfect harmony with the decision rendered in the case by this court, and, though it was not duly impugned, its
legality and correctness will be considered in this decision in demonstrating that of the other order of the 18th of the same month, appealed
from by the intervening attorneys and by the counsel for Federico Hidalgo.
With respect to the said order of the 18th of October, the second of those appealed from in this incidental issue, it must be borne in
mind, for the proper determination of the pending appeals, that the main action, from which the said incidental issue proceeded, was
prosecuted in the Court of First Instance of this city by Jose de la Pea y de Ramon, in his capacity as judicial administrator of the estate of
his deceased father, Jose de la Pea y Gomiz, against Federico Hidalgo, for the payment of various sums which the later was owing, with
interest, to the estate; and that the defendant, in answering the complaint with the costs against the plaintiff and that the latter be sentenced
to the payment of P9,000 which the testator, Jose de la Pea y Gomiz, owed to Hidalgo. So that if the complaint in the main action was filed
by the administrator of the estate of the deceased Pea y Gomiz, the counterclaim presented in the same suit by the defendant, Federico
Hidalgo, in answering the complaint of the administrator, during his lifetime, owed the said defendant.
The defendant may, pursuant to section 95 of the Code of Procedure in Civil Actions, set forth by answer as many defenses and
counterclaims as he may have, whatever their nature. Section 96 of the same code provides that a counterclaim, to be available as a
defense in an answer, must be one in favor of all the substantial defendants and against all the substantial plaintiffs in the action.
A counterclaim is termed a mutual petition, because both parties sue each other mutually in the same action, each of them assuming
the double role of plaintiff and defendant, before the trial judge, and the two suits are brought under a single proceedings where both actions
are tried at the same time and finally determined in one and the same judgment.
The different amounts sought to be recovered by Jose de la Pea y de Ramon, as the administrator of the estate of the deceased
Jose de la Pea y Gomiz, from the defendant, Federico Hidalgo, constitute various separate obligations contracted by the later, according to
the complaint, in favor of the deceased, testator, Pea y Gomiz; and the amount of the counterclaim was likewise a debt which the said
testator at his death left unpaid and owing the defendant Hidalgo; therefore, Jose de la Pea y de Ramon, as administrator, and Federico
Hidalgo are the substantial plaintiffs and defendants, reciprocally, in the aforementioned main action.
It is evident, by a simple perusal of the finding of facts an of the grounds of law of the final decision rendered in that action, that the
same was instituted by Jose de la Pea y de Ramon, not by himself and in his own representation, but in his capacity as administrator of the
estate of his deceased father, Jose de la Pea y Gomiz, demanding payment of certain amounts which, according to his third mended
complaint, the defendant Federico Hidalgo owed the latter; and it is none the less evident that the counterclaim presented by the defendant
Federico Hidalgo had for its sole object the collection of a certain sum which was owing to him by the deceased testator, Jose de la Pea y
Gomiz, and that the plaintiff, Jose de la Pea y de Ramon, per se and personally, had nothing to do with this debt of the estate, which
concerned him only as such administrator. This is shown by the record and clearly appears in the said decision which disposed of the
plaintiff-administrator's complaint and the defendant-debtor's counterclaim. that decision, from the beginning to the end, evidence without
contradiction or proofs to the contrary, all that has been hereinbefore stated; it shows who were the contending parties, the nature of the
questions raised by complaint and counterclaim and the respective purposes sought by the one and the other; it is therefore unreasonable to
affirm that the counterclaim was made against Pea y de Ramon personally, apart from his position as administrator.
If in any place or in any line of said decision mention was made of the name of the plaintiff Pea y de Ramon without the title of his
office as administrator of the estate, it probably was because the complaint was filed and the action was brought by him in his capacity of
administrator, and the counterclaim, also, was directed him as such administrator; and if in any paragraph the said title of his office was
omitted in designating him, such omission can not serve as a ground for concluding that the counterclaim allowed and the sentence imposed
in the said decision were against Jose de la Pea y de Ramon as a private individual and not as the administrator of the aforementioned
estate; and the sentence contained in the decision referred to can in no wise be understood to have been made against Jose de la Pea y
de Ramon personally, but in his capacity of administrator of the estate, which alone was liable for the debt owing to the defendant; if mention
was therein made of the plaintiff by name, it is because he was the representative of the debtor estate.
The intervening attorneys allege that, in the aforesaid suit between the administrator Pea y de Ramon and Hidalgo, two judgments
were rendered, one against the defendant Hidalgo and the other against the administrator Pea y de Ramon. This averment is incorrect,
because, as has been seen and is obvious to all who intervened in the said suit, there was but one judgment appealed from and but one
decision rendered in second instance by this court, which in part modified the prior judgment in first instance. A complaint and a counterclaim
having been entered in the said suit, it logically follows that the decision should contain a finding relative to the demand contained in the
complaint and another finding concerning the counterclaim. This separation of findings in one decision does not denote distinct judgments,
but different disposals of the several questions raised in the suit and comprised within a single decision, which alone terminated the double
litigation. Reason and justice will not support the claim that the sentence therein contained, directing Jose de la Pea y de Ramon to pay to
the defendant Hidalgo the sum of P9,000 and interest by virtue of the counterclaim, was pronounced against the plaintiff in his personal
capacity and not as administrator of the estate, inasmuch as Pea y de Ramon did not initiate or prosecute his suit, in the said main action
on his own account, but in his capacity as administrator; and the debt demanded in the counterclaim was one owing by the estate, which he
represented in that action, and by his father, the testator Pea y Gomiz, as the judge of First Instance, in directing in his order of October 14,
1910, in fulfillment and execution of the decision of this court, so recognized such debt and declared in an unmistakable manner that Hidalgo
was entitled, as a result of the set-off between the two amounts specified in the decision of the Supreme Court and which the administrator
Pea y de Ramon and the defendant Hidalgo were mutually owing to each other, to collect the sum of P2,274.93 with interest thereon at the
rate of 6 per cent per annum, this amount being the difference between the two debts set off against each other and which is owing to the
defendant from the estate.
In the aforementioned decision of this court, by which the complaint and the counterclaim presented by the parties to the said suit
were disposed of, the amount which the defendant Hidalgo should pay to the administrator of the estate of the deceased Pea y Gomiz and
the sum which the said administrator, designated by his name of Jose de la Pea y de Ramon, should, by virtue of the counterclaim, pay to
the defendant, Federico Hidalgo, alone were specified; the resultant difference, after the set-off should have been made, was not stated, as it
was considered that this merely arithmetical operation would necessarily be performed in the course of the execution proceedings by the
judge of the Court of First Instance charged with carrying out the final decision rendered in the case. This, in fact, he did do in his order of
October 14, by directing that the plaintiff should pay the said sum, that it, the difference which was found to exist, after making the set-off
between the respective amounts the litigating parties were sentenced to pay. The failure to state in the said decision that both debts were set
off against each other up to a concurrent sum, can not avail as a ground for alleging that the attorneys of the administrator Pea y de Ramon
have acquired a lien on the amount which Hidalgo should pay to the administrator Pea y de Ramon in preference to the creditor of the
amount that is the subject of the counterclaim.
It is to be observed that, although counsel for the plaintiff Pea excepted to the order of October 14, 1910, by which the judge of the
Court of First Instance, following the final decisions of this court, declared a set-off between the amounts that were owing reciprocally by both
parties and directed the said plaintiff to pay to the defendant the difference of P2,274.93 with interest at the rate of 6 per cent per annum, he
did not present any bill of exceptions nor any brief with the required assignment of errors, doubtless because he was convinced that the
appeal which we would have to maintained was directed against a final decision of this court.
It is lawful and proper to allow the set-off between the two amounts specified in the said decision, in accordance with the provisions of
articles 1195, 1196, and 1202 of the Civil Code, because the credit of P6,774.50, together with the legal interest thereon, to the payment of
which the defendant Hidalgo was sentenced, belongs to the estate of the deceased Pea y Gomiz, represented by the plaintiff, Pea y de
Ramon, and the P9,000, with interest, which, in turn, the plaintiff-administrator was sentenced to pay to the said defendant, was a debt of the
testator which it is now incumbent upon his estate to repay to his creditor; therefore, as the trial judge very well says in the order of October
18, appealed from, the lien of the intervening attorneys can not serve to prevent the set-off, for the reason that interveners rendered their
services to Jose de la Pea y de Ramon as administrator of the said estate, and the credit by which the debt owing to this estate by the
defendant Hidalgo appears to be set-off consists of a debt of the estate in favor of its debtor, Hidalgo.
If it just be that the estate of the deceased Pea y Gomiz should collect the amount owing it by Hidalgo, as determined by final
decision, it is equally just that Hidalgo should have the same right to collect the sum which the said estate owes him, according to the same
decision; therefore, in order to comply with such decision, determining the two liabilities directly opposed to each other, it consequently and
logically follows that a set-off of both credits, up to a concurrent amount, must be affected; and if the lien or the right to collect professional
fees on the part of the attorneys were superior to the right of the creditor of the estate, the result would be that the executory decision would
not be complied with; there would then be no set-off and the defendant would be compelled to pay to the said administrator his debt to the
estate, through the aforementioned lien of the intervening attorneys, but could not collect, nor apply to the payment of the credit owing him by
the same estate, the amount of his debt to the latter; this would be illegal and opposed to the most rudimentary principles of justice and,
furthermore, would be an absurdity and contrary to common sense.
Section 37 of the Code of Procedure in Civil Actions prescribes, among other provisions, that a lawyer shall have a lien upon all
judgments and decrees for the payment of money, and executions issued in pursuance of such judgments and decrees which he has
secured in a litigation of his client, from and after, but not before, the time when he shall have caused to be entered upon the records of the
court, . . . and shall have the same right and power over such judgments, decrees and execution to enforce his lien as his client had or may
have, to the extent that may be necessary for the payment of his just fees and disbursements.
If it be taken into account that, while the administrator Pea y de Ramon is entitled to collect from Hidalgo the P6,774.50 which the
later is owing to the estate left by the said Pea's father, this estate must, in turn, pay to the said Hidalgo P9,000; and that, on comparing
these two amounts with each other, in proceeding with the execution of the final judgment, it would be necessarily be disclosed by the
operation that the said estate or its administrator, far from collecting any sum or whatever from its or his credit, would have to pay Hidalgo the
difference resulting from the set-off between the one amount and the other, up to a concurrent sum, it will be understood at once that the
attorneys for the representative of that estate can not collect any part whatever of the amount awarded in the executory decision, because tat
sum was intended to cover a large part of the debt of the testator and the later's testate succession will still have to pay the difference.
The lien or right to collect fees for professional service, which the appellant attorneys possess to the sum awarded in the final decision,
is equal to the right of their client, to that of the administrator Pea y de Ramon, recognized in the said decision, pursuant to the provisions of
the aforecited section 37 of the Code of Civil Procedure. The preference claimed by these interveners over the creditors right, by virtue of the
later's counterclaim, does not appear to be established by this section; and if the estate of the deceased Pea is obliged to pay to Hidalgo
P9,000, it is not entitled to collect from the latter the said P6,774.50 by way of a set-off, unless it shall previously have satisfied the whole
amount of its debt, which it has done; therefore the attorneys of the representative of the said estate are not entitled to collect their fees out
of the said amount recognized by decision to being to their client, but subject to a set-off by virtue of a counterclaim, as their rights are no
better than those of the creditor Hidalgo.
The judgment appealed from having been reversed with respect to that portion thereof relative to the liability asked by the
administrator of the estate to be laid against Federico Hidalgo, the sole judgment to be executed is that contained in the decision rendered in
second instance and in this decision, as has been shown; and the result, in short, has been in no wise favorable to the plaintiff because,
instead of being able to collect the amount of his credit owing by Hidalgo to the estate, he still finds himself obliged to pay the defendant the
difference resulting from the set-off to which the counterclaim, made by the latter for a greater sum, gave rise; and therefore, the right
claimed by the appellant attorneys to collect their fees out of the amount awarded to the said administrator, is in all respects unsustainable,
inasmuch as, in consequence of the counterclaim, there was a set-off against that amount and the plaintiff has nothing to collect, but, on the
contrary, is still liable for the difference which was found to exist after the reciprocal debts of both parties had been set off against each other.
The right of attorneys for the administrator Pea y de Ramon, to collect fees for professional service, under section 37 of the Code of
Civil Procedure, is restricted to the personal founds of their client, to amounts awarded to the latter by final decision, but does not comprise
sums of money which, according to the same decision, must be applied to be made in such decision by virtue of a prior
counterclaim.1awphil.net
We know of no legal provision which grants to the attorneys for the losing party in a suit, or who has not obtained a judgment
authorizing him to collect money from the adverse party, the privilege of collecting their professional fees with preference over, and better
right then, the said adverse party, the legitimate creditor of the said attorneys' client.
The suit was prosecuted for the collection of amounts which both parties reciprocally were owing each other, and a decision was
rendered deciding the complaint and the counterclaim and determining the sums which the litigating parties must mutually pay; therefore, the
final judgment must be executed, as provided by the trial judge, pursuant to its terms, and no impediment to such execution can be had in
the improper contention made by the appellant attorneys, who can invoke no law or just reason which authorizes them to collect their
professional fees out of the bond given by Hidalgo, once the same was not deposited as security for the payment of the said fees.
For the foregoing reasons, whereby the errors attributed by the appellant attorneys to the trial judge have been duly refuted, it is our
opinion and we hold that we should and hereby do affirm the order of October 14, 1910, and also the order of the 18th of the same month,
with the exception of the final provision of this last order, of October 18, which we reversed and direct tat return be made to Federico Hidalgo
of the sum of P8,500 retained by the clerk of the court below as a result of the motion of intervention herein concerned. No special finding is
made as to the costs. So ordered.
G.R. No. L-40242 December 15, 1982
DOMINGA CONDE, petitioner,
vs.
THE HONORABLE COURT OF APPEALS, MANILA PACIENTE CORDERO, together with his wife, NICETAS ALTERA, RAMON
CONDE, together with his wife, CATALINA T. CONDE, respondents.
MELENCIO-HERRERA, J.:
An appeal by certiorari from the Decision of respondent Court of Appeals 1 (CA-G.R. No. 48133- R) affirming the judgment of the Court of
First Instance of Leyte, Branch IX, Tacloban City (Civil Case No. B-110), which dismissed petitioner's Complaint for Quieting of Title and
ordered her to vacate the property in dispute and deliver its possession to private respondents Ramon Conde and Catalina Conde.
The established facts, as found by the Court of Appeals, show that on 7 April 1938. Margarita Conde, Bernardo Conde and the petitioner
Dominga Conde, as heirs of Santiago Conde, sold with right of repurchase, within ten (10) years from said date, a parcel of agricultural land
located in Maghubas Burauen Leyte, (Lot 840), with an approximate area of one (1) hectare, to Casimira Pasagui, married to Pio Altera
(hereinafter referred to as the Alteras), for P165.00. The "Pacto de Retro Sale" further provided:
... (4) if at the end of 10 years the said land is not repurchased, a new agreement shall be made between the parties and
in no case title and ownership shall be vested in the hand of the party of the SECOND PART (the Alteras).
xxx xxx xxx (Exhibit "B")
On 17 April 1941, the Cadastral Court of Leyte adjudicated Lot No. 840 to the Alteras "subject to the right of redemption by Dominga Conde,
within ten (10) years counting from April 7, 1983, after returning the amount of P165.00 and the amounts paid by the spouses in concept of
land tax ... " (Exhibit "1"). Original Certificate of Title No. N-534 in the name of the spouses Pio Altera and Casimira Pasagui, subject to said
right of repurchase, was transcribed in the "Registration Book" of the Registry of Deeds of Leyte on 14 November 1956 (Exhibit "2").
On 28 November 1945, private respondent Paciente Cordero, son-in-law of the Alteras, signed a document in the Visayan dialect, the
English translation of which reads:
MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH REPURCHASE WHICH DOCUMENT
GOT LOST
WE, PIO ALTERA and PACIENTE CORDERO, both of legal age, and residents of Burauen Leyte, Philippines, after
having been duly sworn to in accordance with law free from threats and intimidation, do hereby depose and say:
1. That I, PIO ALTERA bought with the right of repurchase two parcels of land from DOMINGA
CONDE, BERNARDO CONDE AND MARGARITA CONDE, all brother and sisters.
2. That these two parcels of land were all inherited by the three.
3. That the document of SALE WITH THE RIGHT OF REPURCHASE got lost in spite of the diligent
efforts to locate the same which was lost during the war.
4. That these two parcels of land which was the subject matter of a Deed of Sale with the Right of
Repurchase consists only of one document which was lost.
5. Because it is about time to repurchase the land, I have allowed the representative of Dominga
Conde, Bernardo Conde and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase
the same.
6. Now, this very day November 28, 1945, 1 or We have received together with Paciente Cordero
who is my son-in-law the amount of ONE HUNDRED SIXTY-FIVE PESOS (P165. 00) Philippine
Currency of legal tender which was the consideration in that sale with the right of repurchase with
respect to the two parcels of land.
That we further covenant together with Paciente Cordero who is my son-in-law that from this day the said Dominga
Conde, Bernardo Conde and Margarita Conde will again take possession of the aforementioned parcel of land because
they repurchased the same from me. If and when their possession over the said parcel of land be disturbed by other
persons, I and Paciente Cordero who is my son-in-law will defend in behalf of the herein brother and sisters mentioned
above, because the same was already repurchased by them.
IN WITNESS WHEREOF, I or We have hereunto affixed our thumbmark or signature to our respective names below this
document or memorandum this 28th day of November 1945 at Burauen Leyte, Philippines, in the presence of two
witnesses.
PIO ALTERA (Sgd.) PACIENTE CORDERO
WITNESSES:
1. (SGD.) TEODORO C. AGUILLON
To be noted is the fact that neither of the vendees-a-retro, Pio Altera nor Casimira Pasagui, was a signatory to the deed. Petitioner maintains
that because Pio Altera was very ill at the time, Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. Petitioner
further states that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose.
The pacto de retro document was eventually found.
On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. Conde, who are also private respondents
herein. Their relationship to petitioner does not appear from the records. Nor has the document of sale been exhibited.
Contending that she had validly repurchased the lot in question in 1945, petitioner filed, on 16 January 1969, in the Court of First Instance of
Leyte, Branch IX, Tacloban City, a Complaint (Civil Case No. B-110), against Paciente Cordero and his wife Nicetas Altera, Ramon Conde
and his wife Catalina T. Conde, and Casimira Pasagui Pio Altera having died in 1966), for quieting of title to real property and declaration of
ownership.
Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio Altera, who
was seriously sick on that occasion, and of his mother-in-law who was in Manila at the time, and that Cordero received the repurchase price
of P65.00.
Private respondents, for their part, adduced evidence that Paciente Cordero signed the document of repurchase merely to show that he had
no objection to the repurchase; and that he did not receive the amount of P165.00 from petitioner inasmuch as he had no authority from his
parents-in-law who were the vendees-a-retro.
After trial, the lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate the
property in dispute and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. Conde".
On appeal, the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of repurchase in
view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera, the vendee-a-retro, and that
there is nothing in said document to show that Cordero was specifically authorized to act for and on behalf of the vendee a retro, Pio Altera.
Reconsideration having been denied by the Appellate Court, the case is before us on review.
There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase", and that there was no formal
authorization from the vendees for Paciente Cordero to act for and on their behalf.
Of significance, however, is the fact that from the execution of the repurchase document in 1945, possession, which heretofore had been
with the Alteras, has been in the hands of petitioner as stipulated therein. Land taxes have also been paid for by petitioner yearly from 1947
to 1969 inclusive (Exhibits "D" to "D-15"; and "E"). If, as opined by both the Court a quo and the Appellate Court, petitioner had done nothing
to formalize her repurchase, by the same token, neither have the vendees-a-retro done anything to clear their title of the encumbrance
therein regarding petitioner's right to repurchase. No new agreement was entered into by the parties as stipulated in the deed of pacto de
retro, if the vendors a retro failed to exercise their right of redemption after ten years. If, as alleged, petitioner exerted no effort to procure the
signature of Pio Altera after he had recovered from his illness, neither did the Alteras repudiate the deed that their son-in-law had signed.
Thus, an implied agency must be held to have been created from their silence or lack of action, or their failure to repudiate the agency. 2
Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was
executed, to 1969, when she instituted this action, or for 24 years, the Alteras must be deemed to have incurred in laches. 3 That petitioner
merely took advantage of the abandonment of the land by the Alteras due to the separation of said spouses, and that petitioner's possession
was in the concept of a tenant, remain bare assertions without proof.
Private respondents Ramon Conde and Catalina Conde, to whom Pio Altera sold the disputed property in 1965, assuming that there was,
indeed, such a sale, cannot be said to be purchasers in good faith. OCT No. 534 in the name of the Alteras specifically contained the
condition that it was subject to the right of repurchase within 10 years from 1938. Although the ten-year period had lapsed in 1965 and there
was no annotation of any repurchase by petitioner, neither had the title been cleared of that encumbrance. The purchasers were put on
notice that some other person could have a right to or interest in the property. It behooved Ramon Conde and Catalina Conde to have looked
into the right of redemption inscribed on the title, and particularly the matter of possession, which, as also admitted by them at the pre-trial,
had been with petitioner since 1945.
Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged
the receipt of P165.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they be "disturbed by other
persons". It was executed in the Visayan dialect which he understood. He cannot now be allowed to dispute the same. "... If the contract is
plain and unequivocal in its terms he is ordinarily bound thereby. It is the duty of every contracting party to learn and know its contents before
he signs and delivers it." 4
There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had no
objection to petitioner's right of repurchase. Besides, he would have had no personality to object. To uphold his oral testimony on that point,
would be a departure from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended.
... The purpose of the rule is to give stability to written agreements, and to remove the temptation and possibility of
perjury, which would be afforded if parol evidence was admissible. 6
In sum, although the contending parties were legally wanting in their respective actuations, the repurchase by petitioner is supported by the
admissions at the pre-trial that petitioner has been in possession since the year 1945, the date of the deed of repurchase, and has been
paying land taxes thereon since then. The imperatives of substantial justice, and the equitable principle of laches brought about by private
respondents' inaction and neglect for 24 years, loom in petitioner's favor.
WHEREFORE, the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE, and petitioner is hereby declared the
owner of the disputed property. If the original of OCT No. N-534 of the Province of Leyte is still extant at the office of the Register of Deeds,
then said official is hereby ordered to cancel the same and, in lieu thereof, issue a new Transfer Certificate of Title in the name of petitioner,
Dominga Conde.
No costs.
SO ORDERED.
G.R. No. 167812
December 19, 2006
JESUS M. GOZUN, petitioner,

vs.
JOSE TEOFILO T. MERCADO a.k.a. DON PEPITO MERCADO, respondent.
DECISION
CARPIO MORALES, J.:

On challenge via petition for review on certiorari is the Court of Appeals Decision of December 8, 2004 and Resolution of April 14, 2005 in
CA-G.R. CV No. 763091 reversing the trial courts decision2 against Jose Teofilo T. Mercado a.k.a. Don Pepito Mercado (respondent) and
accordingly dismissing the complaint of Jesus M. Gozun (petitioner).
In the local elections of 1995, respondent vied for the gubernatorial post in Pampanga. Upon respondents request, petitioner, owner of JMG
Publishing House, a printing shop located in San Fernando, Pampanga, submitted to respondent draft samples and price quotation of
campaign materials.
By petitioners claim, respondents wife had told him that respondent already approved his price quotation and that he could start printing the
campaign materials, hence, he did print campaign materials like posters bearing respondents photograph, 3 leaflets containing the slate of
party candidates,4 sample ballots,5 poll watcher identification cards,6 and stickers.
Given the urgency and limited time to do the job order, petitioner availed of the services and facilities of Metro Angeles Printing and of St.
Joseph Printing Press, owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun, respectively. 7
Petitioner delivered the campaign materials to respondents headquarters along Gapan-Olongapo Road in San Fernando, Pampanga. 8
Meanwhile, on March 31, 1995, respondents sister-in-law, Lilian Soriano (Lilian) obtained from petitioner "cash advance" of P253,000
allegedly for the allowances of poll watchers who were attending a seminar and for other related expenses. Lilian acknowledged on
petitioners 1995 diary9 receipt of the amount.10
Petitioner later sent respondent a Statement of Account 11 in the total amount of P2,177,906 itemized as follows:P640,310 for JMG Publishing
House; P837,696 for Metro Angeles Printing; P446,900 for St. Joseph Printing Press; and P253,000, the "cash advance" obtained by Lilian.
On August 11, 1995, respondents wife partially paid P1,000,000 to petitioner who issued a receipt12 therefor.
Despite repeated demands and respondents promise to pay, respondent failed to settle the balance of his account to petitioner.
Petitioner and respondent being compadres, they having been principal sponsors at the weddings of their respective daughters, waited for
more than three (3) years for respondent to honor his promise but to no avail, compelling petitioner to endorse the matter to his counsel who
sent respondent a demand letter.13 Respondent, however, failed to heed the demand. 14
Petitioner thus filed with the Regional Trial Court of Angeles City on November 25, 1998 a complaint 15 against respondent to collect the
remaining amount of P1,177,906 plus "inflationary adjustment" and attorneys fees.
In his Answer with Compulsory Counterclaim, 16 respondent denied having transacted with petitioner or entering into any contract for the
printing of campaign materials. He alleged that the various campaign materials delivered to him were represented as donations from his
family, friends and political supporters. He added that all contracts involving his personal expenses were coursed through and signed by him
to ensure compliance with pertinent election laws.
On petitioners claim that Lilian, on his (respondents) behalf, had obtained from him a cash advance of P253,000, respondent denied having
given her authority to do so and having received the same.
At the witness stand, respondent, reiterating his allegations in his Answer, claimed that petitioner was his over-all coordinator in charge of the
conduct of seminars for volunteers and the monitoring of other matters bearing on his candidacy; and that while his campaign manager,
Juanito "Johnny" Cabalu (Cabalu), who was authorized to approve details with regard to printing materials, presented him some campaign
materials, those were partly donated.17
When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing House of the amount
of P1,000,000, respondent claimed that it was his first time to see the receipt, albeit he belatedly came to know from his wife and Cabalu that
the P1,000,000 represented "compensation [to petitioner] who helped a lot in the campaign as a gesture of goodwill." 18
Acknowledging that petitioner is engaged in the printing business, respondent explained that he sometimes discussed with petitioner
strategies relating to his candidacy, he (petitioner) having actively volunteered to help in his campaign; that his wife was not authorized to
enter into a contract with petitioner regarding campaign materials as she knew her limitations; that he no longer questioned the P1,000,000
his wife gave petitioner as he thought that it was just proper to compensate him for a job well done; and that he came to know about
petitioners claim against him only after receiving a copy of the complaint, which surprised him because he knew fully well that the campaign
materials were donations.19
Upon questioning by the trial court, respondent could not, however, confirm if it was his understanding that the campaign materials delivered
by petitioner were donations from third parties.20
Finally, respondent, disclaiming knowledge of the Comelec rule that if a campaign material is donated, it must be so stated on its face,
acknowledged that nothing of that sort was written on all the materials made by petitioner. 21
As adverted to earlier, the trial court rendered judgment in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, the plaintiff having proven its (sic) cause of action by preponderance of evidence, the Court hereby renders a
decision in favor of the plaintiff ordering the defendant as follows:
1. To pay the plaintiff the sum of P1,177,906.00 plus 12% interest per annum from the filing of this complaint until fully paid;
2. To pay the sum of P50,000.00 as attorneys fees and the costs of suit.
SO ORDERED.22
Also as earlier adverted to, the Court of Appeals reversed the trial courts decision and dismissed the complaint for lack of cause of action.
In reversing the trial courts decision, the Court of Appeals held that other than petitioners testimony, there was no evidence to support his
claim that Lilian was authorized by respondent to borrow money on his behalf. It noted that the acknowledgment receipt 23 signed by Lilian did
not specify in what capacity she received the money. Thus, applying Article 1317 24 of the Civil Code, it held that petitioners claim
for P253,000 is unenforceable.
On the accounts claimed to be due JMG Publishing House P640,310, Metro Angeles Printing P837,696, and St. Joseph Printing Press
P446,900, the appellate court, noting that since the owners of the last two printing presses were not impleaded as parties to the case and it
was not shown that petitioner was authorized to prosecute the same in their behalf, held that petitioner could not collect the amounts due
them.
Finally, the appellate court, noting that respondents wife had paid P1,000,000 to petitioner, the latters claim ofP640,310 (after excluding
the P253,000) had already been settled.
Hence, the present petition, faulting the appellate court to have erred:
1. . . . when it dismissed the complaint on the ground that there is no evidence, other than petitioners own testimony, to prove that
Lilian R. Soriano was authorized by the respondent to receive the cash advance from the petitioner in the amount of P253,000.00.
xxxx
2. . . . when it dismissed the complaint, with respect to the amounts due to the Metro Angeles Press and St. Joseph Printing Press
on the ground that the complaint was not brought by the real party in interest.
x x x x25
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. 26 Contracts entered into in the name of another person by one who has been given no authority or legal
representation or who has acted beyond his powers are classified as unauthorized contracts and are declared unenforceable, unless they
are ratified.27
Generally, the agency may be oral, unless the law requires a specific form. 28 However, a special power of attorney is necessary for an agent
to, as in this case, borrow money, unless it be urgent and indispensable for the preservation of the things which are under
administration.29 Since nothing in this case involves the preservation of things under administration, a determination of whether Soriano had
the special authority to borrow money on behalf of respondent is in order.
Lim Pin v. Liao Tian, et al.30 held that the requirement of a special power of attorney refers to the nature of the authorization and not to its
form.
. . . The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. As
early as 1906, this Court in Strong v. Gutierrez-Repide (6 Phil. 680) stated that such a mandate may be either oral or written. The
one thing vital being that it shall be express. And more recently, We stated that, if the special authority is not written, then it must
be duly established by evidence:
"the Rules require, for attorneys to compromise the litigation of their clients, a special authority. And while the same does not
state that the special authority be in writing the Court has every reason to expect that, if not in writing, the same be duly
established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given
him."31 (Emphasis and underscoring supplied)
Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a loan from him, viz:
Q : Another caption appearing on Exhibit "A" is cash advance, it states given on 3-31-95 received by Mrs. Lilian Soriano in behalf
of Mrs. Annie Mercado, amount P253,000.00, will you kindly tell the Court and explain what does that caption means?
A : It is the amount representing the money borrowed from me by the defendant when one morning they came very early and
talked to me and told me that they were not able to go to the bank to get money for the allowances of Poll Watchers who were
having a seminar at the headquarters plus other election related expenses during that day, sir.
Q : Considering that this is a substantial amount which according to you was taken by Lilian Soriano, did you happen to make her
acknowledge the amount at that time?
A : Yes, sir.32 (Emphasis supplied)
Petitioners testimony failed to categorically state, however, whether the loan was made on behalf of respondent or of his wife. While
petitioner claims that Lilian was authorized by respondent, the statement of account marked as Exhibit "A" states that the amount was
received by Lilian "in behalf of Mrs. Annie Mercado."
Invoking Article 187333 of the Civil Code, petitioner submits that respondent informed him that he had authorized Lilian to obtain the loan,
hence, following Macke v. Camps34 which holds that one who clothes another with apparent authority as his agent, and holds him out
to the public as such, respondent cannot be permitted to deny the authority.
Petitioners submission does not persuade. As the appellate court observed:
. . . Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to support his claim unfortunately only indicates the
Two Hundred Fifty Three Thousand Pesos (P253,0000.00) was received by one Lilian R. Soriano on 31 March 1995, but without
specifying for what reason the said amount was delivered and in what capacity did Lilian R. Soriano received [sic] the money. The
note reads:
"3-31-95
261,120 ADVANCE MONEY FOR TRAINEE
RECEIVED BY
RECEIVED FROM JMG THE AMOUNT OF 253,000 TWO HUNDRED FIFTY THREE THOUSAND PESOS
(SIGNED)
LILIAN R. SORIANO
3-31-95"
Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. Under Article 1317 of the
New Civil Code, a person cannot be bound by contracts he did not authorize to be entered into his behalf. 35 (Underscoring
supplied)
It bears noting that Lilian signed in the receipt in her name alone, without indicating therein that she was acting for and in behalf of
respondent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter.
It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon
its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that
the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal. x x x 36 (Emphasis and underscoring
supplied)
On the amount due him and the other two printing presses, petitioner explains that he was the one who personally and directly contracted
with respondent and he merely sub-contracted the two printing establishments in order to deliver on time the campaign materials ordered by
respondent.
Respondent counters that the claim of sub-contracting is a change in petitioners theory of the case which is not allowed on appeal.
In Oco v. Limbaring,37 this Court ruled:
The parties to a contract are the real parties in interest in an action upon it, as consistently held by the Court. Only the contracting
parties are bound by the stipulations in the contract; they are the ones who would benefit from and could violate it. Thus, one who
is not a party to a contract, and for whose benefit it was not expressly made, cannot maintain an action on it. One cannot do so,
even if the contract performed by the contracting parties would incidentally inure to one's benefit.38 (Underscoring supplied)
In light thereof, petitioner is the real party in interest in this case. The trial courts findings on the matter were affirmed by the appellate
court.39 It erred, however, in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign materials made by
petitioners mother and sister are concerned, upon the wrong notion that they should have been, but were not, impleaded as plaintiffs.
In sum, respondent has the obligation to pay the total cost of printing his campaign materials delivered by petitioner in the total
of P1,924,906, less the partial payment of P1,000,000, or P924,906.
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and the Resolution dated April 14, 2005 of the Court of
Appeals are hereby REVERSED and SET ASIDE.
The April 10, 2002 Decision of the Regional Trial Court of Angeles City, Branch 57, is REINSTATED mutatis mutandis, in light of the
foregoing discussions. The trial courts decision is modified in that the amount payable by respondent to petitioner is reduced to P924,906.
SO ORDERED.
SECOND DIVISION
SPOUSES
JOSELINA
ALCANTARA
AND ANTONIO ALCANTARA,
and
SPOUSES JOSEFINO RUBI
AND
,
ANNIE DISTOR- RUBI,
Petitio
ners,
versus -
G.R. No. 165133

Present:
CARPIO, J., Chairperson
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.
Promulgated:
April 19, 2010
BRIGIDA L. NIDO, as
attorney-in-fact of REVELEN
N. SRIVASTAVA,
Respon
dent.
x--------------------------------------------------x
RESOLUTION
CARPIO, J.:
The Case
Spouses Antonio and Joselina Alcantara and Spouses Josefino and Annie Rubi (petitioners) filed this Petition for Review [1] assailing
the Court of Appeals (appellate court) Decision [2] dated 10 June 2004 as well as the Resolution [3] dated 17 August 2004 in CA-G.R. CV No.
78215. In the assailed decision, the appellate court reversed the 17 June 2002 Decision [4] of Branch 69 of the Regional Trial Court of
Binangonan, Rizal (RTC) by dismissing the case for recovery of possession with damages and preliminary injunction filed by Brigida L. Nido
(respondent), in her capacity as administrator and attorney-in-fact of Revelen N. Srivastava (Revelen).
The Facts
Revelen, who is respondents daughter and of legal age, is the owner of an unregistered land with an area of 1,939 square meters
located in Cardona, Rizal. Sometime in March 1984, respondent accepted the offer of petitioners to purchase a 200-square meter portion of
Revelens lot (lot) at P200 per square meter. Petitioners paid P3,000 as downpayment and the balance was payable on installment.
Petitioners constructed their houses in 1985. In 1986, with respondents consent, petitioners occupied an additional 150 square meters of the
lot. By 1987, petitioners had already paid P17,500[5] before petitioners defaulted on their installment payments.
On 11 May 1994, respondent, acting as administrator and attorney-in-fact of Revelen, filed a complaint for recovery of possession with
damages and prayer for preliminary injunction against petitioners with the RTC.
The RTCs Ruling
The RTC stated that based on the evidence presented, Revelen owns the lot and respondent was verbally authorized to sell 200
square meters to petitioners. The RTC ruled that since respondents authority to sell the land was not in writing, the sale was void under
Article 1874[6] of the Civil Code.[7] The RTC ruled that rescission is the proper remedy. [8]
On 17 June 2002, the RTC rendered its decision, the dispositive portion reads:
WHEREFORE, judgment is rendered in favor of plaintiff and against the defendants, by 1.
Declaring the contract to sell orally agreed by the plaintiff Brigida Nido, in her capacity as
representative or agent of her daughter Revelen Nido Srivastava, VOID and UNENFORCEABLE.
2.
Ordering the parties, upon finality of this judgment, to have mutual restitution the defendants and
all persons claiming under them to peacefully vacate and surrender to the plaintiff the possession of
the subject lot covered by TD No. 09-0742 and its derivative Tax Declarations, together with all
permanent improvements introduced thereon, and all improvements built or constructed during the
pendency of this action, in bad faith; and the plaintiff, to return the sum of P17,500.00, the total
amount of the installment on the land paid by defendant; the fruits and interests during the pendency
of the condition shall be deemed to have been mutually compensated.
3.
Ordering the defendants to pay plaintiff the sum of P20,000.00 as attorneys fees, plusP15,000.00
as actual litigation expenses, plus the costs of suit.
SO ORDERED.[9]
The Appellate Courts Ruling
On 5 January 2004, petitioners appealed the trial courts Decision to the appellate court. In its decision dated 10 June 2004, the
appellate court reversed the RTC decision and dismissed the civil case. [10]
The appellate court explained that this is an unlawful detainer case. The prayer in the complaint and amended complaint was for
recovery of possession and the case was filed within one year from the last demand letter. Even if the complaint involves a question of
ownership, it does not deprive the Municipal Trial Court (MTC) of its jurisdiction over the ejectment case. Petitioners raised the issue of lack
of jurisdiction in their Motion to Dismiss and Answer before the RTC. [11] The RTC denied the Motion to Dismiss and assumed jurisdiction over
the case because the issues pertain to a determination of the real agreement between the parties and rescission of the contract to sell the
property.[12]
The appellate court added that even if respondents complaint is for recovery of possession or accion publiciana, the RTC still has no
jurisdiction to decide the case. The appellate court explained:
Note again that the complaint was filed on 11 May 1994. By that time, Republic Act No. 7691 was already in effect. Said
law took effect on 15 April 1994, fifteen days after its publication in the Malaya and in the Time Journal on 30 March 1994
pursuant to Sec. 8 of Republic Act No. 7691.
Accordingly, Sec. 33 of Batas Pambansa 129 was amended by Republic Act No. 7691 giving the Municipal Trial
Court the exclusive original jurisdiction over all civil actions involving title to, or possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not exceed P20,000 or, in civil actions
in Metro Manila, where such assessed value does not exceedP50,000, exclusive of interest, damages of whatever kind,
attorneys fees, litigation expenses and costs.
At bench, the complaint alleges that the whole 1,939- square meter lot of Revelen N. Srivastava is covered by
Tax Declaration No. 09-0742 (Exh. B, p. 100, Records) which gives its assessed value of the whole lot of P4,890.00.
Such assessed value falls within the exclusive original prerogative or jurisdiction of the first level court and, therefore, the
Regional Trial Court a quo has no jurisdiction to try and decided the same. [13]
The appellate court also held that respondent, as Revelens agent, did not have a written authority to enter into such contract of sale;
hence, the contract entered into between petitioners and respondent is void. A void contract creates no rights or obligations or any juridical
relations. Therefore, the void contract cannot be the subject of rescission. [14]
Aggrieved by the appellate courts Decision, petitioners elevated the case before this Court.
Issues
Petitioners raise the following arguments:
1.
The appellate court gravely erred in ruling that the contract entered into by respondent, in representation of her
daughter, and former defendant Eduardo Rubi (deceased), is void; and
2.
The appellate court erred in not ruling that the petitioners are entitled to their counterclaims, particularly specific
performance.[15]
Ruling of the Court
We deny the petition.
Petitioners submit that the sale of land by an agent who has no written authority is not void but merely voidable given the spirit and
intent of the law. Being only voidable, the contract may be ratified, expressly or impliedly. Petitioners argue that since the contract to sell was
sufficiently established through respondents admission during the pre-trial conference, the appellate court should have ruled on the matter of
the counterclaim for specific performance.[16]
Respondent argues that the appellate court cannot lawfully rule on petitioners counterclaim because there is nothing in the records to
sustain petitioners claim that they have fully paid the price of the lot. [17] Respondent points out that petitioners admitted the lack of written
authority to sell. Respondent also alleges that there was clearly no meeting of the minds between the parties on the purported contract of
sale.[18]
Sale of Land through an Agent
Articles 1874 and 1878 of the Civil Code provide:
Art. 1874. When a 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.
Art. 1878. Special powers of attorney are necessary in the following cases:
xxx
(5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either
gratuitously or for a valuable consideration;
xxx
Article 1874 of the Civil Code explicitly requires a written authority before an agent can sell an immovable property. Based on a
review of the records, there is absolutely no proof of respondents written authority to sell the lot to petitioners. In fact, during the pre-trial
conference, petitioners admitted that at the time of the negotiation for the sale of the lot, petitioners were of the belief that respondent was
the owner of lot.[19] Petitioners only knew that Revelen was the owner of the lot during the hearing of this case. Consequently, the sale of the
lot by respondent who did not have a written authority from Revelen is void. A void contract produces no effect either against or in favor of
anyone and cannot be ratified.[20]
A special power of attorney is also necessary to enter into any contract by which the ownership of an immovable is transmitted or
acquired for a valuable consideration. Without an authority in writing, respondent cannot validly sell the lot to petitioners. Hence, any sale in
favor of the petitioners is void.
Our ruling in Dizon v. Court of Appeals[21] is instructive:
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in
writing; otherwise, the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate
must be conferred in writing and must give him specific authority, either to conduct the general business of the principal
or to execute a binding contract containing terms and conditions which are in the contract he did execute. A special
power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration. The express mandate required by law to enable an appointee
of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a
necessary ingredient of the act mentioned. For the principal to confer the right upon an agent to sell real estate, a power
of attorney must so express the powers of the agent in clear and unmistakable language. When there is any reasonable
doubt that the language so used conveys such power, no such construction shall be given the document.
Further, Article 1318 of the Civil Code enumerates the requisites for a valid contract, namely:
1.
consent of the contracting parties;
2.
object certain which is the subject matter of the contract;
3.
cause of the obligation which is established.
Respondent did not have the written authority to enter into a contract to sell the lot. As the consent of Revelen, the real owner of the lot, was
not obtained in writing as required by law, no contract was perfected. Consequently, petitioners failed to validly acquire the lot.
General Power of Attorney
On 25 March 1994, Revelen executed a General Power of Attorney constituting respondent as her attorney-in-fact and authorizing her
to enter into any and all contracts and agreements on Revelens behalf. The General Power of Attorney was notarized by Larry A. Reid,
Notary Public in California, U.S.A.
Unfortunately, the General Power of Attorney presented as Exhibit C [22] in the RTC cannot also be the basis of respondents written
authority to sell the lot.
Section 25, Rule 132 of the Rules of Court provides:

Sec. 25. Proof of public or official record. An official record or an entry therein, when admissible for any
purpose, may be evidenced by an official publication thereof or by a copy attested by the officer having the legal custody
of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines, with a certificate that such
officer has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a
secretary of embassy or legation consul general, consul, vice consul, or consular agent or by any officer in the foreign
service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal of his
office.
In Teoco v. Metropolitan Bank and Trust Company,[23] quoting Lopez v. Court of Appeals,[24] we explained:
From the foregoing provision, when the special power of attorney is executed and acknowledged before a notary
public or other competent official in a foreign country, it cannot be admitted in evidence unless it is certified as such in
accordance with the foregoing provision of the rules by a secretary of embassy or legation, consul general, consul, vice
consul, or consular agent or by any officer in the foreign service of the Philippines stationed in the foreign country in
which the record is kept of said public document and authenticated by the seal of his office. A city judge-notary who
notarized the document, as in this case, cannot issue such certification. [25]
Since the General Power of Attorney was executed and acknowledged in the United States of America, it cannot be admitted in evidence
unless it is certified as such in accordance with the Rules of Court by an officer in the foreign service of the Philippines stationed in the
United States of America. Hence, this document has no probative value.
Specific Performance
Petitioners are not entitled to claim for specific performance. It must be stressed that when specific performance is sought of a
contract made with an agent, the agency must be established by clear, certain and specific proof. [26] To reiterate, there is a clear absence of
proof that Revelen authorized respondent to sell her lot.
Jurisdiction of the RTC
Section 33 of Batas Pambansa Bilang 129,[27] as amended by Republic Act No. 7691 provides:
Section 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts in
Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts shall exercise:
xxx
(3) Exclusive original jurisdiction in all civil actions which involve title to, possession of, real property, or any
interest therein where the assessed value of the property or interest therein does not exceed Twenty thousand pesos
(P20,000.00) or, in civil actions in Metro Manila, where such assessed value does not exceed Fifty thousand pesos
(P50,000.00) exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and costs: x x x
In Geonzon Vda. de Barrera v. Heirs of Vicente Legaspi,[28] the Court explained:

Before the amendments introduced by Republic Act No. 7691, the plenary action of accion publiciana was to be
brought before the regional trial court. With the modifications introduced by R.A. No. 7691 in 1994, the jurisdiction of the
first level courts has been expanded to include jurisdiction over other real actions where the assessed value does not
exceed P20,000, P50,000 where the action is filed in Metro Manila. The first level courts thus have exclusive original
jurisdiction over accion publiciana andaccion reivindicatoria where the assessed value of the real property does not
exceed the aforestated amounts. Accordingly, the jurisdictional element is the assessed value of the property.
Assessed value is understood to be the worth or value of property established by taxing authorities on the basis
of which the tax rate is applied. Commonly, however, it does not represent the true or market value of the property.
The appellate court correctly ruled that even if the complaint filed with the RTC involves a question of ownership, the MTC still has
jurisdiction because the assessed value of the whole lot as stated in Tax Declaration No. 09-0742 is P4,890.[29] The MTC cannot be deprived
of jurisdiction over an ejectment case based merely on the assertion of ownership over the litigated property, and the underlying reason for
this rule is to prevent any party from trifling with the summary nature of an ejectment suit. [30]
The general rule is that dismissal of a case for lack of jurisdiction may be raised at any stage of the proceedings since jurisdiction is
conferred by law. The lack of jurisdiction affects the very authority of the court to take cognizance of and to render judgment on the action;
otherwise, the inevitable consequence would make the courts decision a lawless thing. [31] Since the RTC has no jurisdiction over the
complaint filed, all the proceedings as well as the Decision of 17 June 2002 are void. The complaint should perforce be dismissed.
WHEREFORE, we DENY the petition. We AFFIRM the Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 78215.
SO ORDERED.
HIRD DIVISION
[G.R. No. 173312, August 26, 2008]
ESTATE OF LINO OLAGUER, REPRESENTED BY LINDA O. OLAGUER, AND LINDA O. MONTAYRE, PETITIONERS, VS. EMILIANO M.
ONGJOCO, RESPONDENT.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari[1] is the Decision[2] of the Court of Appeals dated 27 February 2006 in CA-G.R. CV No.
71710. Said decision modified the Decision[3] and the subsequent Order[4] of the Regional Trial Court (RTC) of Legazpi City, Branch 6, in
Civil Case No. 6223, and upheld the validity of the sales of properties to respondent Emiliano M. Ongjoco.
The relevant factual antecedents of the case, as found by the trial court and adapted by the Court of Appeals, are as follows:
The plaintiffs Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre are the
legitimate children of the spouses Lino Olaguer and defendant Olivia P. Olaguer.
Lino Olaguer died on October 3, 1957 so Special Proceedings No. 528 for probate of will was filed in the then Court of First Instance of
Albay. Defendant Olivia P. Olaguer was appointed as administrator pursuant to the will. Later, defendant Eduardo Olaguer was appointed as
co-administrator. x x x
On October 15, 1959 defendant Olivia P. Olaguer got married to defendant Jose A. Olaguer before the then Justice of the Peace of Sto.
Domingo (Libog) Albay. (Exhibit "NNNN") On January 24, 1965 they were married in church. (Exhibit "XX")
In the order of the probate court dated April 4, 1961, some properties of the estate were authorized to be sold to pay obligations of the
estate. Pursuant to this authority, administrators Olivia P. Olaguer and Eduardo Olaguer on December 12, 1962 sold to Pastor Bacani for
[P]25,000 Pesos, twelve (12) parcels of land, particularly, Lots 4518, 4526, 4359, 8750, 7514, 6608, 8582, 8157, 7999, 6167, 8266,
and 76 with a total area of 99 hectares. (Exhibit "A" - Deed of Sale notarized by defendant Jose A. Olaguer)
This sale of twelve (12) parcels of land to Pastor Bacani was approved by the Probate Court on December 12, 1962. (Exhibit "15")
The following day, December 13, 1962, Pastor Bacani sold back to Eduardo Olaguer and Olivia Olaguer for [P]12,000.00 Pesos, one
of the twelve (12) lots he bought the day before, particularly, Lot No. 76 in the proportion of 7/13 and 6/13 pro-indiviso respectively.
(Exhibit "B" - Deed of Sale notarized by Felipe A. Cevallos, Sr.)
Simultaneously, on the same day December 13, 1962, Pastor Bacani sold back to Olivia Olaguer and Eduardo Olaguer the other eleven (11)
parcels he bought from them as follows:
To Olivia Olaguer - Four (4) parcels for 10,700 Pesos, particularly Lots 4518, 4526, 4359, 8750 with a total area of 84 hectares. (Exhibit "E" Deed of Sale notarized by Felipe A. Cevallos, Sr.)
To Eduardo Olaguer - Seven (7) parcels of land for 2,500 Pesos, particularly Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266 with a total
area of 15 hectares. (Exhibit "C" - Deed of Sale notarized by defendant Jose A. Olaguer)
Relying upon the same order of April 4, 1961 but without prior notice or permission from the Probate Court, defendants Olivia P. Olaguer and
Eduardo Olaguer on November 1, 1965 sold to Estanislao Olaguer for 7,000 Pesos, ten (10) parcels of land, particularly, (a) TCT No. T-4011
- Lot No. 578, (b) TCT No. T-1417 - Lot No. 1557, (c) TCT No. T-4031 - Lot No. 1676, (d) TCT No. T-4034 - Lot No. 4521, (e) TCT No. T-4035
- Lot No. 4522, (f) TCT No. 4013 - Lot No. 8635, (g) TCT No. T-4014 - Lot 8638, (h) TCT No. T-4603 - Lot No. 7589, (i) TCT No. 4604 - Lot
No. 7593, and (j) TCT No. T-4605 - Lot No. 7396. (Exhibit "D" - Deed of Sale notarized by Rodrigo R. Reantaso)
This sale to Estanislao Olaguer was approved by the Probate Court on November 12, 1965.
After the foregoing sale to Estanislao Olaguer, the following transactions took place:
1) On July 7, 1966, defendant Olivia P. Olaguer executed a Special Power of Attorney notarized by Rodrigo R. Reantaso (Exhibit
"T") in favor of defendant Jose A. Olaguer, authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" the
properties covered by TCT No. 14654 for Lot 76 6/13 share only, T-13983, T-14658, T-14655, T-14656, and T-14657.
2) On July 7, 1966, Estanislao Olaguer executed a Special Power of Attorney in favor of Jose A. Olaguer (Exhibit "X") notarized by Rodrigo
R. Reantaso authorizing the latter to "sell, mortgage, assign, transfer, endorse and deliver" the properties covered by TCT No. T-20221, T20222, T-20225 for Lot No. 8635, T-20226 for Lot No. 8638, T-20227, T-20228, and T-20229.
By virtue of this Special Power of Attorney, on March 1, 1967, Jose A. Olaguer as Attorney-in-Fact of Estanislao Olaguer mortgaged Lots
7589, 7593 and 7396 to defendant Philippine National Bank (PNB) as security for a loan of 10,000 Pesos. The mortgage was foreclosed by
the PNB on June 13, 1973 and the properties mortgage were sold at public auction to PNB. On December 10, 1990, the PNB transferred
the properties to the Republic of the Philippines pursuant to Exec. Order No. 407 dated June 14, 1990 for agrarian reform purposes.
(records, vol. 1, page 66)
3) On October 29, 1966, Estanislao Olaguer executed a General Power of Attorney notarized by Rodrigo R. Reantaso (Exhibit "Y") in favor of
Jose A. Olaguer, authorizing the latter to exercise general control and supervision over all of his business and properties, and among others,
to sell or mortgage any of his properties.
4) On December 29, 1966, Estanislao Olaguer sold to Jose A. Olaguer for 15,000 Pesos, (Exhibit "UU") the ten (10) parcels of land (Lots
578, 4521, 4522, 1557, 1676, 8635, 8638, 7589, 7593 and 7396) he bought from Olivia P. Olaguer and Eduardo Olaguer under Exhibit "D".
5) On March 16, 1968, Estanislao Olaguer sold to Jose A. Olaguer for 1 Peso and other valuable consideration Lot No. 4521 - TCT No. T20223 and Lot 4522 - TCT No. 20224 with a total area of 2.5 hectares. (records, vol. 1, page 33)
6) On June 5, 1968, Estanislao Olaguer sold Lot No. 8635 under TCT No. T-20225, and Lot No. 8638 under TCT No. 20226 to Jose A.
Olaguer for 1 Peso and other valuable consideration. (Exhibit "F") Deed of Sale was notarized by Rodrigo R. Reantaso.
7) On May 13, 1971, Jose A. Olaguer in his capacity as Attorney in-Fact of Estanislao Olaguer sold to his son Virgilio Olaguer for 1 Peso and
other valuable consideration Lot No. 1557 - TCT No. 20221 and Lot No. 1676 - TCT No. 20222. The deed of sale was notarized by Otilio Sy
Bongon.
8) On July 15, 1974, Jose A. Olaguer sold to his son Virgilio Olaguer Lot No. 4521 and Lot No. 4522 for 1,000 Pesos. Deed of Sale was
notarized by Otilio Sy Bongon. (records, vol. 1, page 34)
9) On September 16, 1978 Virgilio Olaguer executed a General Power of Attorney in favor of Jose A. Olaguer notarized by Otilio Sy Bongon
(Exhibit "V") authorizing the latter to exercise general control and supervision over all of his business and properties and among others, to
sell or mortgage the same.
Olivia P. Olaguer and Eduardo Olaguer were removed as administrators of the estate and on February 12, 1980, plaintiff Ma. Linda Olaguer
Montayre was appointed administrator by the Probate Court.
Defendant Jose A. Olaguer died on January 24, 1985. (Exhibit "NN") He was survived by his children, namely the defendants Nimfa Olaguer
Taguay, Corazon Olaguer Uy, Jose Olaguer, Jr., Virgilio Olaguer, Jacinto Olaguer, and Ramon Olaguer.
Defendant Olivia P. Olaguer died on August 21, 1997 (Exhibit "OO") and was survived by all the plaintiffs as the only heirs.
The decedent Lino Olaguer have had three marriages. He was first married to Margarita Ofemaria who died April 6, 1925. His second wife
was Gloria Buenaventura who died on July 2, 1937. The third wife was the defendant Olivia P. Olaguer.
Lot No. 76 with an area of 2,363 square meters is in the heart of the Poblacion of Guinobatan, Albay. The deceased Lino Olaguer
inherited this property from his parents. On it was erected their ancestral home.
As already said above, Lot No. 76 was among the twelve (12) lots sold for 25,000 Pesos, by administrators Olivia P. Olaguer and
Eduardo Olaguer to Pastor Bacani on December 12, 1962. The sale was approved by the probate court on December 12, 1962.
But, the following day, December 13, 1962 Pastor Bacani sold back the same 12 lots to Olivia P. Olaguer and Eduardo Olaguer for 25,200
Pesos, as follows:
a) Lot No. 76 was sold back to Olivia P. Olaguer and Eduardo Olaguer for 12,000 Pesos, in the proportion of [6/13] and [7/13]
respectively. (Exhibit "B")
b) 4 of the 12 lots namely, Lots 4518, 4526, 4359, and 8750 were sold back to Olivia Olaguer for 10,700 Pesos. (Exhibit "E")
c) 7 of the 12 lots namely, Lots 7514, 6608, 8582, 8157, 7999, 6167, and 8266 were sold back to Eduardo Olaguer for 2,500 Pesos. (Exhibit
"C")
d) Lot No. 76 was thus issued TCT No. T-14654 on December 13, 1962 in the names of Eduardo B. Olaguer married to Daisy Pantig
and Olivia P. Olaguer married to Jose A. Olaguer to the extent of 7/13 and 6/13 pro-indiviso, respectively. (Exhibit "FF" also "14-a)
e) It appears from Plan (LRC) Psd-180629 (Exhibit "3") that defendant Jose A. Olaguer caused the subdivision survey of Lot 76 into
eleven (11) lots, namely, 76-A, 76-B, 76-C, 76-D, 76-E, 76-F, 76-G, 76-H, 76-I, 76-J, and 76-K, sometime on April 3, 1972. The
subdivision survey was approved on October 5, 1973. After the approval of the subdivision survey of Lot 76, a subdivision
agreement was entered into on November 17, 1973, among Domingo Candelaria, Olivia P. Olaguer, Domingo O. de la Torre and
Emiliano M. [Ongjoco]. (records, vol. 2, page 109).
This subdivision agreement is annotated in TCT No. 14654(Exhibit "14" - "14-d") as follows:
Owner
Lot No.
Area
insq. m.
TCT No.
Vol.
Page
Domingo
Candelaria
76-A
300
T-36277
206
97
Olivia P.
Olaguer
76-B
200
T-36278
"
98
- do -
76-C
171
T-36279
"
99
- do -
76-D
171
T-36280
"
100
- do -
76-E
171
T-36281
"
101
- do -
76-F
171
T-36282
"
102
- do -
76-G
202
T-36283
"
103
Domingo O.
de la Torre
76-H
168
T-36284
"
104
- do -
76-I
168
T-36285
"
105
- do -
76-J
168
T-36286
"
106
Emiliano M.
[Ongjoco]
76-K
473
T-36287
"
107
After Lot 76 was subdivided as aforesaid, Jose A. Olaguer as attorney-in-fact of Olivia P. Olaguer, sold to his son Virgilio
Olaguer Lots 76-B, 76-C, 76-D, 76-E, 76-F, and 76-G on January 9, 1974 for 3,000 Pesos. (Exhibit "G") The deed of absolute sale was
notarized by Otilio Sy Bongon.
Lots 76-B and 76-C were consolidated and then subdivided anew and designated as Lot No. 1 with an area of 186 square meters
and Lot No. 2 with an area of 185 square meters of the Consolidation Subdivision Plan (LRC) Pcs-20015. (Please sketch plan marked
as Exhibit "4", records, vol. 2, page 68)
On January 15, 1976, Jose A. Olaguer claiming to be the attorney-in-fact of his son Virgilio Olaguer under a general power of
attorney Doc. No. 141, Page No. 100, Book No. 7, Series of 1972 of Notary Public Otilio Sy Bongon, sold Lot No. 1to defendant
Emiliano M. [Ongjoco] for 10,000 Pesos per the deed of absolute sale notarized by Otilio Sy Bongon. (Exhibit "H") The alleged
general power of attorney however was not presented or marked nor formally offered in evidence.
On September 7, 1976, Jose A. Olaguer again claiming to be the attorney-in-fact of Virgilio Olaguer under the same general power
of attorney referred to in the deed of absolute sale of Lot 1, sold Lot No. 2 to Emiliano M. [Ongjoco] for 10,000 Pesos. (Exhibit "I")
The deed of absolute sale was notarized by Otilio Sy Bongon.
On July 16, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a general power of attorney Doc. No. 378, Page No.
76, Book No. 14, Series of 1978 sold Lot No. 76-D to Emiliano M. [Ongjoco] for 5,000 Pesos. The deed of absolute sale is Doc. No.
571, Page No. 20, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit "K")
The same Lot No. 76-D was sold on October 22, 1979 by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under a general
power of attorney Doc. No. 378, Page No. 76, Book No. 14, Series of 1978 of Notary Public Otilio Sy Bongon sold Lot No. 76-D to
Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc. No. 478, Page No. 97, Book NO. XXII, Series of 1979 of
Notary Public Antonio A. Arcangel. (Exhibit "J")
On July 3, 1979, Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lots 76-E and 76-F to Emiliano M. [Ongjoco] for 15,000
Pesos. The deed of absolute sale is Doc. No. 526, Page No. 11, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon.
(Exhibit "M")
The same Lots 76-E and 76-F were sold on October 25, 1979, by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under the
same general power of attorney of 1978 referred to above to Emiliano M. [Ongjoco] for 30,000 Pesos. The deed of absolute sale is
Doc. No. 47, Page No. 11, Book No. XXIII, Series of 1972 of Notary Public Antonio A. Arcangel. (Exhibit "L")
On July 2, 1979 Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer sold Lot No. 76-G to Emiliano M. [Ongjoco] for 10,000
Pesos. The deed of sale is Doc. No. 516, Page No. 9, Book No. 16, Series of 1979 of Notary Public Otilio Sy Bongon. (Exhibit "N")
The same Lot 76-G was sold on February 29, 1980 by Jose A. Olaguer as attorney-in-fact of Virgilio Olaguer under the same
general power of attorney of 1978 referred to above to Emiliano M. [Ongjoco] for 10,000 Pesos. The deed of absolute sale is Doc.
No. l02, Page No. 30, Book No. 17, Series of 1980 of Notary Public Otilio Sy Bongon. (Exhibit "O")[5] (Emphases ours.)
Thus, on 28 January 1980, the Estate of Lino Olaguer represented by the legitimate children of the spouses Lino Olaguer and defendant
Olivia P. Olaguer, namely, Sor Mary Edith Olaguer, Aurora O. de Guzman, Clarissa O. Trinidad, Lina Olaguer and Ma. Linda O. Montayre, as
attorney-in-fact and in her own behalf, filed an action for the Annulment of Sales of Real Property and/or Cancellation of Titles [6] in the then
Court of First Instance of Albay.[7]
Docketed as Civil Case No. 6223, the action named as defendants the spouses Olivia P. Olaguer and Jose A. Olaguer; Eduardo Olaguer;
Virgilio Olaguer; Cipriano Duran; the Heirs of Estanislao O. Olaguer, represented by Maria Juan Vda. de Olaguer; and the Philippine National
Bank (PNB).
In the original complaint, the plaintiffs therein alleged that the sales of the following properties belonging to the Estate of Lino Olaguer to
Estanislao Olaguer were absolutely simulated or fictitious, particularly: Lots Nos. 578, 1557, 1676, 4521, 4522, 8635, 8638, 7589, 7593, and
7396. In praying that the sale be declared as null and void, the plaintiffs likewise prayed that the resulting Transfer Certificates of Title issued
to Jose Olaguer, Virgilio Olaguer, Cipriano Duran and the PNB be annulled.
Defendant PNB claimed in its Answer, [8] inter alia, that it was a mortgagee in good faith and for value of Lots Nos. 7589, 7593 and 7396,
which were mortgaged as security for a loan of P10,000.00; the mortgage contract and other loan documents were signed by the spouses
Estanislao and Maria Olaguer as registered owners; the proceeds of the loan were received by the mortgagors themselves; Linda Olaguer
Montayre had no legal capacity to sue as attorney-in-fact; plaintiffs as well as Maria Olaguer were in estoppel; and the action was already
barred by prescription. PNB set up a compulsory counterclaim for damages, costs of litigation and attorney's fees. It also filed a cross-claim
against Maria Olaguer for the payment of the value of the loan plus the agreed interests in the event that judgment would be rendered
against it.
Defendants Olivia P. Olaguer, Jose A. Olaguer and Virgilio Olaguer, in their Answer, [9]denied the material allegations in the complaint. They
maintained that the sales of the properties to Pastor Bacani and Estanislao Olaguer were judicially approved; the complaint did not state a
sufficient cause of action; it was barred by laches and/or prescription; lis pendens existed; that the long possession of the vendees have
ripened into acquisitive prescription in their favor, and the properties no longer formed part of the Estate of Lino Olaguer; until the liquidation
of the conjugal properties of Lino Olaguer and his former wives, the plaintiffs were not the proper parties in interest to sue in the action; and
in order to afford complete relief, the other conjugal properties of Lino Olaguer with his former wives, and his capital property that had been
conveyed without the approval of the testate court should also be included for recovery in the instant case.
Defendant Maria Juan Vda. de Olaguer, representing the heirs of Estanislao Olaguer, in her Answer, [10] likewise denied the material
allegations of the complaint and insisted that the plaintiffs had no valid cause of action against the heirs of the late Estanislao Olaguer, as the
latter did not participate in the alleged transfer of properties by Olivia P. Olaguer and Eduardo Olaguer in favor of the late Estanislao Olaguer.
Defendant Cipriano Duran claimed, in his Answer,[11] that the complaint stated no cause of action; he was merely instituted by his late sisterin-law Josefina Duran to take over the management of Lots Nos. 8635 and 8638 in 1971; and the real party-in-interest in the case was the
administrator of the estate of Josefina Duran.
On 11 January 1995, an Amended Complaint[12] was filed in order to implead respondent Emiliano M. Ongjoco as the transferee of Virgilio
Olaguer with respect to portions of Lot No. 76, namely Lots Nos. 1, 2, 76-D, 76-E, 76-F, and 76-G.
In his Answer with Counterclaim and Motion to Dismiss, [13] respondent Ongjoco denied the material allegations of the amended complaint
and interposed, as affirmative defenses the statute of limitations, that he was a buyer in good faith, that plaintiffs had no cause of action
against him, and that the sale of property to Pastor Bacani, from whom Ongjoco derived his title, was judicially approved.
On 23 January 1996, plaintiffs filed a Re-Amended Complaint, [14] in which the heirs of Estanislao Olaguer were identified, namely, Maria Juan
Vda. de Olaguer, Peter Olaguer, Yolanda Olaguer and Antonio Bong Olaguer.
In their Answer,[15] the heirs of Estanislao Olaguer reiterated their claim that Estanislao Olaguer never had any transactions or dealings with
the Estate of Lino Olaguer; nor did they mortgage any property to the PNB.
On 5 August 1998, the heirs of Estanislao Olaguer and petitioner Ma. Linda Olaguer Montayre submitted a compromise agreement, [16] which
was approved by the trial court.
On 6 October 1999, Cipriano Duran filed a Manifestation [17] in which he waived any claim on Lots Nos. 8635 and 8638. Upon motion, Duran
was ordered dropped from the complaint by the trial court in an order [18] dated 20 October 1999.
In a Decision[19] dated 13 July 2001, the RTC ruled in favor of the plaintiffs. The pertinent portions of the decision provide:
The entirety of the evidence adduced clearly show that the sale of the 12 lots to Pastor Bacani pursuant to Exhibit "A" and the sale of the 10
lots to Estanislao Olaguer pursuant to Exhibit "D" were absolutely simulated sales and thus void ab initio. The two deeds of sales Exhibits
"A" and "D" are even worse than fictitious, they are completely null and void for lack of consideration and the parties therein never intended
to be bound by the terms thereof and the action or defense for the declaration of their inexistence does not prescribe. (Art. 1410, Civil Code)
Aside from being simulated they were clearly and unequivocally intended to deprive the compulsory heirs of their legitime x x x.
The deeds of sale, Exhibits "A" and "D" being void ab initio, they are deemed as non-existent and the approval thereof by the probate court
becomes immaterial and of no consequence, because the approval by the probate court did not change the character of the sale from void to
valid x x x.
xxxx
Defendant Jose A. Olaguer simulated the sales and had them approved by the probate court so that these properties would appear then to
cease being a part of the estate and the vendee may then be at liberty to dispose of the same in any manner he may want. They probably
believed that by making it appear that the properties were bought back from Pastor Bacani under a simulated sale, they (Olivia Olaguer and
Eduardo Olaguer) would appear then as the owners of the properties already in their personal capacities that disposals thereof will no longer
require court intervention. x x x.
xxxx
[Jose A. Olaguer] had Olivia P. Olaguer execute a Special Power of Attorney (Exhibit "T") authorizing him (Jose A. Olaguer) to sell
or encumber the properties allegedly bought back from Pastor Bacani which Jose A. Olaguer did with respect to the 6/13 share of
Olivia P. Olaguer on Lot No. 76 by selling it to his son Virgilio for only 3,000 Pesos, then caused Virgilio to execute a power of
attorney authorizing him to sell or encumber the 6/13 share which he did by selling the same to defendant Emiliano M. [Ongjoco].
Virgilio Olaguer however executed an affidavit (Exhibit "CC") wherein he denied having bought any property from the estate of Lino Olaguer
and that if there are documents showing that fact he does not know how it came about. x x x.
The 1972 power of attorney referred to by Jose A. Olaguer as his authority for the sale of Lots 1 and 2 (formerly lots 76-B and 76-C)
was not presented nor offered in evidence.

There are two deeds of sale over Lot 76-D, (Exhibits "K" and "J") in favor of defendant Emiliano M. [Ongjoco] with different dates
of execution, different amount of consideration, different Notary Public.
There are two deeds of sale over Lots 76-E and 76-F (Exhibits "M" and "L") in favor of defendant Emiliano M. [Ongjoco] with
different dates of execution, different amount of consideration and different Notary Public.
There are two deeds of sale over Lot 76-G (Exhibits "N" and "O") in favor of Emiliano M. [Ongjoco] with different dates of execution
with the same amount of consideration and the same Notary Public.
While Lot 76-D was allegedly sold already to Emiliano M. [Ongjoco] in 1979, yet it was still Jose A. Olaguer who filed a petition for
the issuance of a second owner's copy as attorney in fact of Virgilio Olaguer on August 8, 1980 (Exhibit "SS") and no mention was
made about the sale.
Under these circumstances, the documents of defendant Emiliano M. [Ongjoco] on lots 76 therefore, in so far as the portions he
allegedly bought from Jose A. Olaguer as attorney in fact of Virgilio Olaguer suffers seriously from infirmities and appear dubious.
Defendant Emiliano M. [Ongjoco] cannot claim good faith because according to him, when these lots 76-[B] to 76-G were offered to
him his condition was to transfer the title in his name and then he pays. He did not bother to verify the title of his vendor. x x x.
So with respect to the sale of Lots 76-B to 76-G, Emiliano M. [Ongjoco] has no protection as innocent purchaser for good faith
affords protection only to purchasers for value from the registered owners. x x x. Knowing that he was dealing only with an agent x
x x, it behooves upon defendant Emiliano M. [Ongjoco] to find out the extent of the authority of Jose A. Olaguer as well as the title
of the owner of the property, because as early as 1973 pursuant to the subdivision agreement, (records, vol. 2, page 109 and
Exhibit "14" and "14-d") he already knew fully well that Lots 76-B to 76-G he was buying was owned by Olivia P. Olaguer and not by
Virgilio Olaguer.
xxxx
With respect to the 10 lots sold to [Eduardo] Olaguer (Exhibit "D") Jose A. Olaguer had Estanislao Olaguer execute a power of attorney
(Exhibit "X") authorizing him (Jose A. Olaguer) to sell or encumber the 10 lots allegedly bought by Estanislao from the estate. With this
power of attorney, he mortgaged lots 7589, 7593 and 7398 to the PNB. He sold lots 1557 and 1676 to his son Virgilio Olaguer. While under
Exhibit "UU" dated December 29, 1966, he bought the 10 parcels of land, among which is lots 4521 and 4522 from Estanislao Olaguer, yet,
on March 16, 1968, he again bought lots 4521 and 4522 (records, vol. 1, page 38) from Estanislao Olaguer. While lots 8635 and 8638 were
among those sold to him under Exhibit "UU", it appears that he again bought the same on June 5, 1968 under Exhibit "F".
The heirs of Estanislao Olaguer however denied having bought any parcel of land from the estate of Lino Olaguer. Estanislao Olaguer's
widow, Maria Juan vda. de Olaguer, executed an affidavit (Exhibit "BB") that they did not buy any property from the estate of Lino Olaguer,
they did not sell any property of the estate and that they did not mortgage any property with the PNB. She repeated this in her deposition.
(records, vol. 2, page 51) This was corroborated by no less than former co-administrator Eduardo Olaguer in his deposition too (Exhibit
"RRRR") that the sale of the 10 parcels of land to Estanislao Olaguer was but a simulated sale without any consideration. x x x.
xxxx
A partial decision was already rendered by this court in its order of August 5, 1998 (records, vol. 2, page 64) approving the compromise
agreement with defendants Heirs of Estanislao Olaguer. (records, vol. 2 page 57).
Defendant Cipriano Duran was dropped from the complaint per the order of the court dated October 20, 1999 (records, vol. 2, page 155)
because he waived any right or claim over lots 8635 and 8638. (records, vol. 2, page 150). (Emphasis ours.)
The dispositive portion of the above decision was, however, amended by the trial court in an Order [20] dated 23 July 2001 to read as follows:
WHEREFORE, premises considered, decision is hereby rendered in favor of the plaintiffs as follows:
1) The deed of sale to Pastor Bacani (Exhibit "A") and the deed of sale to Estanislao Olaguer (Exhibit "D") are hereby declared as null and
void and without force and effect and all the subsequent transfers and certificates arising therefrom likewise declared null and void and
cancelled as without force and effect, except as herein provided for.
2) Lot Nos. 4518, 4526, 4359 and 8750 are hereby ordered reverted back to the estate of Lino Olaguer and for this purpose, within
ten (10) days from the finality of this decision, the heirs of Olivia P. Olaguer (the plaintiffs herein) [sic] are hereby ordered to
execute the necessary document of reconveyance, failure for which, the Clerk of Court is hereby ordered to execute the said deed
of reconveyance.
3) Lot Nos. 7514, 6608, 8582, 8157, 7999, 6167 and 8266 are hereby ordered reverted back to the estate of Lino Olaguer and for this
purpose, within ten (10) days from the finality of this decision, defendant Eduardo Olaguer is hereby ordered to execute the
necessary document of reconveyance, failure for which, the Clerk of Court is hereby ordered to execute the said deed of
reconveyance.
4) Lots 1 and 2, Pcs-20015, and Lots 76-D, 76-E, 76-F and 76-G, Psd-180629 sold to Emiliano M. [Ongjoco] are hereby ordered reverted
back to the estate of Lino Olaguer. For this purpose, within ten (10) days from the finality of this decision, defendant Emiliano M. [Ongjoco] is
hereby ordered to execute the necessary deed of reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said
reconveyance and have the same registered with the Register of Deeds so that new titles shall be issued in the name of the estate of Lino
Olaguer and the titles of Emiliano [Ongjoco] cancelled.
5) The parties have acquiesced to the sale of the 7/13 portion of Lot 76 to Eduardo Olaguer as well as to the latter's disposition thereof and
are now in estoppel to question the same. The court will leave the parties where they are with respect to the 7/13 share of Lot 76.
6) Lots 578, 1557, 1676, 4521, 4522, 8635, 8638, are hereby reverted back to the estate of Lino Olaguer and for this purpose, the Clerk of
[Court] is hereby ordered to execute the necessary deed of reconveyance within ten days from the finality of this decision and cause its
registration for the issuance of new titles in the name of the Estate of Lino Olaguer and the cancellation of existing ones over the same.
7) While the mortgage with the defendant PNB is null and void, Lots 7589, 7593 and 7396 shall remain with the Republic of the Philippines
as a transferee in good faith.
Both the petitioners and respondent filed their respective Notices of Appeal [21] from the above decision. The case was docketed in the Court
of Appeals as CA-G.R. CV No. 71710.
In their Plaintiff-Appellant's Brief[22] filed before the Court of Appeals, petitioner Estate argued that the trial court erred in not ordering the
restitution and/or compensation to them of the value of the parcels of land that were mortgaged to PNB, notwithstanding the fact that the
mortgage was declared null and void. Petitioners maintain that the PNB benefited from a void transaction and should thus be made liable for
the value of the land, minus the cost of the mortgage and the reasonable expenses for the foreclosure, consolidation and transfer of the lots.
Ongjoco, on the other hand, argued in his Defendant-Appellant's Brief [23] that the trial court erred in: declaring as null and void the Deeds of
Sale in favor of Pastor Bacani and Eduardo Olaguer and the subsequent transfers and certificates arising therefrom; ordering the
reconveyance of the lots sold to him (Ongjoco); and failing to resolve the affirmative defenses of prescription, the authority of Olivia and
Eduardo to dispose of properties formerly belonging to the estate of Lino Olaguer, recourse in a court of co-equal jurisdiction, and forum
shopping.
Petitioner Linda O. Montayre was likewise allowed to file a Brief [24] on her own behalf, as Plaintiff-Appellee and Plaintiff-Appellant. [25] She
refuted therein the assignment of errors made by Defendant-Appellant Ongjoco and assigned as error the ruling of the trial court that the lots
mortgaged to the PNB should remain with the Republic of the Philippines as a transferee in good faith.
On 27 February 2006, the Court of Appeals rendered the assailed Decision, the dispositive portion of which reads:
WHEREFORE, premises considered, the appealed Decision is hereby MODIFIED, in that Paragraph 4 of the amended decision is hereby
Ordered Deleted, and the questioned sales to defendant-appellant Emiliano M. Ongjoco are UPHELD. [26]
In denying the appeal interposed by petitioners, the appellate court reasoned that the claim for the value of the lots mortgaged with the PNB
were not prayed for in the original Complaint, the Amended Complaint or even in the Re-Amended Complaint. What was sought therein was
merely the declaration of the nullity of the mortgage contract with PNB. As the relief prayed for in the appeal was not contained in the
complaint, the same was thus barred.
The Court of Appeals also ruled that the evidence of petitioners failed to rebut the presumption that PNB was a mortgagee in good faith.
Contrarily, what was proven was the fact that Olivia Olaguer and Jose A. Olaguer were the persons responsible for the fraudulent
transactions involving the questioned properties. Thus, the claim for restitution of the value of the mortgaged properties should be made
against them.
As regards the appeal of respondent Ongjoco, the appellate court found the same to be meritorious. The said court ruled that when the sale
of real property is made through an agent, the buyer need not investigate the principal's title. What the law merely requires for the validity of
the sale is that the agent's authority be in writing.
Furthermore, the evidence adduced by petitioners was ruled to be inadequate to support the conclusion that Ongjoco knew of facts indicative
of the defect in the title of Olivia Olaguer or Virgilio Olaguer.
Petitioners moved for a partial reconsideration[27] of the Court of Appeals' decision in order to question the ruling that respondent Ongjoco
was a buyer in good faith. The motion was, however, denied in a Resolution [28] dated 29 June 2006.
Aggrieved, petitioners filed the instant Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, raising the following
assignment of errors:
I.
THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT RULED, ON SPECULATION, THAT RESPONDENT EMILIANO M.
ONGJOCO WAS A BUYER IN GOOD FAITH OF THE PROPERTIES OF THE ESTATE OF LINO OLAGUER, DESPITE THE EXISTENCE
OF FACTS AND CIRCUMSTANCES FOUND BY THE TRIAL COURT THAT OUGHT TO PUT EMILIANO M. ONGJOCO ON NOTICE THAT
THE PETITIONERS-APPELLANTS HAVE A RIGHT OR INTEREST OVER THE SAID PROPERTIES, AND CONTRARY TO PREVAILING
JURISPRUDENCE.
II.
THE COURT OF APPEALS COMMITTED AN ERROR IN LAW WHEN IT DISREGARDED THE CLEAR FINDINGS OF FACTS AND
CONCLUSIONS MADE BY THE TRIAL COURT, IN THE ABSENCE OF ANY STRONG AND COGENT REASONS TO REVERSE THE SAID
FINDINGS, CONTRARY TO PREVAILING JURISPRUDENCE.[29]
Essentially, the question that has been brought before us for consideration is whether or not, under the facts and circumstances of this case,
respondent Ongjoco can be considered an innocent purchaser for value.
Petitioners agree with the pronouncement of the trial court that respondent Ongjoco could not have been a buyer in good faith since he did
not bother to verify the title and the capacity of his vendor to convey the properties involved to him. Knowing that Olivia P. Olaguer owned
the properties in 1973 and that he merely dealt with Jose A. Olaguer as an agent in January 1976, Ongjoco should have ascertained the
extent of Jose's authority, as well as the title of Virgilio as the principal and owner of the properties.
Petitioners likewise cite the following incidents that were considered by the trial court in declaring that respondent was a buyer in bad faith,
namely: (1) that Virgilio Olaguer executed an affidavit, [30] wherein he denied having bought any property from the estate of Lino Olaguer, and
that if there are documents showing that fact, he does not know how they came about; (2) that the power of attorney referred to by Jose A.
Olaguer as his authority for the sale of Lots 1 and 2 (formerly Lots 76-B and 76-C) was not presented or offered in evidence; (3) that there
are two deeds of sale[31]over Lot 76-D in favor of Ongjoco; (4) that there are two deeds of sale [32] over Lots 76-E and 76-F in favor of Ongjoco;
(5) that there are two deeds of sale[33] over Lot 76-G in favor of Ongjoco; and (6) that while Lot 76-D was already sold to Ongjoco in 1979, it
was still Jose A. Olaguer as attorney in fact of Virgilio Olaguer who filed on 8 August 1980 a petition for the issuance of a second owner's
copy[34] of the title to the property, and no mention was made about the sale to Ongjoco.
Respondent Ongjoco, on the other hand, invokes the ruling of the Court of Appeals that he was an innocent purchaser for value. His
adamant stance is that, when he acquired the subject properties, the same were already owned by Virgilio Olaguer. Respondent insists that
Jose A. Olaguer was duly authorized by a written power of attorney when the properties were sold to him (Ongjoco). He posits that this fact
alone validated the sales of the properties and foreclosed the need for any inquiry beyond the title to the principal. All the law requires,
respondent concludes, is that the agent's authority be in writing in order for the agent's transactions to be considered valid.
Respondent Ongjoco's posture is only partly correct.
According to the provisions of Article 1874[35] of the Civil Code on Agency, when the sale of a piece of land or any interest therein is made
through an agent, the authority of the latter shall be in writing. Absent this requirement, the sale shall be void. Also, under Article 1878,[36] a
special power of attorney is necessary in order for an agent to enter into a contract by which the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a valuable consideration.
We note that the resolution of this case, therefore, hinges on the existence of the written power of attorney upon which respondent Ongjoco
bases his good faith.
When Lots Nos. 1 and 2 were sold to respondent Ongjoco through Jose A. Olaguer, the Transfer Certificates of Title of said properties were
in Virgilio's name.[37] Unfortunately for respondent, the power of attorney that was purportedly issued by Virgilio in favor of Jose Olaguer with
respect to the sale of Lots Nos. 1 and 2 was never presented to the trial court. Neither was respondent able to explain the omission. Other
than the self-serving statement of respondent, no evidence was offered at all to prove the alleged written power of attorney. This of course
was fatal to his case.
As it stands, there is no written power of attorney to speak of. The trial court was thus correct in disregarding the claim of its existence.
Accordingly, respondent Ongjoco's claim of good faith in the sale of Lots Nos. 1 and 2 has no leg to stand on.
As regards Lots Nos. 76-D, 76-E, 76-F and 76-G, Ongjoco was able to present a general power of attorney that was executed by Virgilio
Olaguer. While the law requires a special power of attorney, the general power of attorney was sufficient in this case, as Jose A. Olaguer
was expressly empowered to sell any of Virgilio's properties; and to sign, execute, acknowledge and deliver any agreement therefor. [38] Even
if a document is designated as a general power of attorney, the requirement of a special power of attorney is met if there is a clear mandate
from the principal specifically authorizing the performance of the act. [39] The special power of attorney can be included in the general power
when the act or transaction for which the special power is required is specified therein. [40]
On its face, the written power of attorney contained the signature of Virgilio Olaguer and was duly notarized. As such, the same is
considered a public document and it has in its favor the presumption of authenticity and due execution, which can only be contradicted by
clear and convincing evidence.[41]
No evidence was presented to overcome the presumption in favor of the duly notarized power of attorney. Neither was there a showing of
any circumstance involving the said document that would arouse the suspicion of respondent and spur him to inquire beyond its four corners,
in the exercise of that reasonable degree of prudence required of a man in a similar situation. We therefore rule that respondent Ongjoco
had every right to rely on the power of attorney in entering into the contracts of sale of Lots Nos. 76-D to 76-G with Jose A. Olaguer.
With respect to the affidavit of Virgilio Olaguer in which he allegedly disavowed any claim or participation in the purchase of any of the
properties of the deceased Lino Olaguer, we hold that the same is rather irrelevant. The affidavit was executed only on 1 August 1986 or six
years after the last sale of the properties was entered into in 1980. In the determination of whether or not a buyer is in good faith, the point in
time to be considered is the moment when the parties actually entered into the contract of sale.
Furthermore, the fact that Lots Nos. 76-D to 76-G were sold to respondent Ongjoco twice does not warrant the conclusion that he was a
buyer in bad faith. While the said incidents might point to other obscured motives and arrangements of the parties, the same do not indicate
that respondent knew of any defect in the title of the owner of the property.
As to the petition filed by Jose A. Olaguer for the issuance of a second owner's copy of the title to Lot No. 76-D, after the property was
already sold to respondent Ongjoco, the same does not inevitably indicate that respondent was in bad faith. It is more likely that Jose A.
Olaguer was merely compiling the documents necessary for the transfer of the subject property. Indeed, it is to be expected that if the title to
the property is lost before the same is transferred to the name of the purchaser, it would be the responsibility of the vendor to cause its
reconstitution.
In sum, we hold that respondent Emiliano M. Ongjoco was in bad faith when he bought Lots Nos. 1 and 2 from Jose A. Olaguer, as the latter
was not proven to be duly authorized to sell the said properties.
However, respondent Ongjoco was an innocent purchaser for value with regard to Lots Nos. 76-D, 76-E, 76-F and 76-G since it was entirely
proper for him to rely on the duly notarized written power of attorney executed in favor of Jose A. Olaguer.
WHEREFORE, premises considered, the instant petition is hereby PARTIALLY GRANTED. The assailed Decision of the Court of Appeals
dated 27 February 2006 in CA-G.R. CV NO. 71710 is MODIFIED in that Paragraph 4 of the Decision dated 13 July 2001 of the Regional Trial
Court of Legazpi City, Branch 6, and the Order dated 23 July 2001 shall read as follows:
4) Lots 1 and 2, Pcs-20015 sold to Emiliano M. Ongjoco are hereby ordered reverted back to the estate of Lino Olaguer. For this purpose,
within ten (10) days from the finality of this decision, defendant Emiliano M. Ongjoco is hereby ordered to execute the necessary deed of
reconveyance, otherwise, the Clerk of Court shall be ordered to execute the said reconveyance and have the same registered with the
Register of Deeds so that new titles shall be issued in the name of the estate of Lino Olaguer and the titles of Emiliano Ongjoco cancelled.
No costs.
SO ORDERED.
G.R. No. 176405
August 20, 2008
LEO WEE, petitioner,

vs.
GEORGE DE CASTRO (on his behalf and as attorney-in-fact of ANNIE DE CASTRO and FELOMINA UBAN) and MARTINIANA DE
CASTRO, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Revised Rules of Court filed by petitioner Leo Wee, seeking the
reversal and setting aside of the Decision2 dated 19 September 2006 and the Resolution3 dated 25 January 2007 of the Court of Appeals in
CA-G.R. SP No. 90906. The appellate court, in its assailed Decision, reversed the dismissal of Civil Case. No. 1990, an action for ejectment
instituted by respondent George de Castro, on his own behalf and on behalf of Annie de Castro, Felomina de Castro Uban and Jesus de
Castro4 against petitioner, by the Municipal Trial Court (MTC) of Alaminos City, which was affirmed by the Regional Trial Court (RTC), Branch
54, Alaminos City, Pangasinan; and, ruling in favor of the respondents, ordered the petitioner to vacate the subject property. In its assailed
Resolution dated 25 January 2007, the Court of Appeals refused to reconsider its earlier Decision of 19 September 2006.
In their Complaint5 filed on 1 July 2002 with the MTC of Alaminos City, docketed as Civil Case No. 1990, respondents alleged that they are
the registered owners of the subject property, a two-storey building erected on a parcel of land registered under Transfer Certificate of Title
(TCT) No. 16193 in the Registry of Deeds of Pangasinan, described and bounded as follows:
A parcel of land (Lot 13033-D-2, Psd-01550-022319, being a portion of Lot 13033-D, Psd-018529, LRC Rec. No. ____) situated in
Pob., Alaminos City; bounded on the NW. along line 1-2 by Lot 13035-D-1 of the subdivision plan; on the NE. along line 2-3 by
Vericiano St.; on the SE. along line 3-4 by Lot 13033-D-2 of the subdivision plan; on the SW. along line 4-1 by Lot 575, Numeriano
Rabago. It is coverd by TCT No. 16193 of the Register of Deeds of Pangasinan (Alaminos City) and declared for taxation purposes
per T.D. No. 2075, and assessed in the sum ofP93,400.00.6
Respondents rented out the subject property to petitioner on a month to month basis for P9,000.00 per month.7 Both parties agreed that
effective 1 October 2001, the rental payment shall be increased fromP9,000.00 to P15,000.00. Petitioner, however, failed or refused to pay
the corresponding increase on rent when his rental obligation for the month of 1 October 2001 became due. The rental dispute was brought
to the Lupon Tagapagpamayapa of Poblacion, Alaminos, Pangasinan, in an attempt to amicably settle the matter but the parties failed to
reach an agreement, resulting in the issuance by theBarangay Lupon of a Certification to file action in court on 18 January 2002. On 10 June
2002, respondent George de Castro sent a letter to petitioner terminating their lease agreement and demanding that the latter vacate and
turn over the subject property to respondents. Since petitioner stubbornly refused to comply with said demand letter, respondent George de
Castro, together with his siblings and co-respondents, Annie de Castro, Felomina de Castro Uban and Jesus de Castro, filed the Complaint
for ejectment before the MTC.
It must be noted, at this point, that although the Complaint stated that it was being filed by all of the respondents, the Verification and the
Certificate of Non-Forum Shopping were signed by respondent George de Castro alone. He would subsequently attach to his position paper
filed before the MTC on 28 October 2002 the Special Powers of Attorney (SPAs) executed by his sisters Annie de Castro and Felomina de
Castro Uban dated 7 February 2002 and 14 March 2002 respectively, authorizing him to institute the ejectment case against petitioner.
Petitioner, on the other hand, countered that there was no agreement between the parties to increase the monthly rentals and respondents'
demand for an increase was exorbitant. The agreed monthly rental was only for the amount of P9,000.00 and he was religiously paying the
same every month. Petitioner then argued that respondents failed to comply with the jurisdictional requirement of conciliation before
theBarangay Lupon prior to the filing of Civil Case. No. 1990, meriting the dismissal of their Complaint therein. The Certification to file action
issued by the Barangay Lupon appended to the respondents' Complaint merely referred to the issue of rental increase and not the matter of
ejectment. Petitioner asserted further that the MTC lacked jurisdiction over the ejectment suit, since respondents' Complaint was devoid of
any allegation that there was an "unlawful withholding" of the subject property by the petitioner. 8
During the Pre-Trial Conference9 held before the MTC, the parties stipulated that in May 2002, petitioner tendered to respondents the sum
of P9,000.00 as rental payment for the month of January 2002; petitioner paid rentals for the months of October 2001 to January 2002 but
only in the amount ofP9,000.00 per month; respondents, thru counsel, sent a letter to petitioner on 10 June 2002 terminating their lease
agreement which petitioner ignored; and the Barangay Lupon did issue a Certification to file action after the parties failed to reach an
agreement before it.
After the submission of the parties of their respective Position Papers, the MTC, on 21 November 2002, rendered a Decision 10 dismissing
respondents' Complaint in Civil Case No. 1990 for failure to comply with the prior conciliation requirement before the Barangay Lupon. The
decretal portion of the MTC Decision reads:
WHEREFORE, premised considered, judgment is hereby rendered ordering the dismissal of this case. Costs against the [herein
respondents].
On appeal, docketed as Civil Case No. A-2835, the RTC of Alaminos, Pangasinan, Branch 54, promulgated its Decision 11 dated 27 June
2005 affirming the dismissal of respondents' Complaint for ejectment after finding that the appealed MTC Decision was based on facts and
law on the matter. The RTC declared that since the original agreement entered into by the parties was for petitioner to pay only the sum
of P9.000.00 per month for the rent of the subject property, and no concession was reached by the parties to increase such amount
to P15.000.00, petitioner cannot be faulted for paying only the originally agreed upon monthly rentals. Adopting petitioner's position, the RTC
declared that respondents' failure to refer the matter to the Barangay court for conciliation process barred the ejectment case, conciliation
before the Lupon being a condition sine qua non in the filing of ejectment suits. The RTC likewise agreed with petitioner in ruling that the
allegation in the Complaint was flawed, since respondents failed to allege that there was an "unlawful withholding" of possession of the
subject property, taking out Civil Case No. 1990 from the purview of an action for unlawful detainer. Finally, the RTC decreed that
respondents' Complaint failed to comply with the rule that a co-owner could not maintain an action without joining all the other co-owners.
Thus, according to the dispositive portion of the RTC Decision:
WHEREFORE the appellate Court finds no cogent reason to disturb the findings of the court a quo. The Decision dated November
21, 2002 appealed from is hereby AFFIRMED IN TOTO. 12
Undaunted, respondents filed a Petition for Review on Certiorari13 with the Court of Appeals where it was docketed as CA-G.R. SP No.
90906. Respondents argued in their Petition that the RTC gravely erred in ruling that their failure to comply with the conciliation process was
fatal to their Complaint, since it is only respondent George de Castro who resides in Alaminos City, Pangasinan, while respondent Annie de
Castro resides in Pennsylvania, United States of America (USA); respondent Felomina de Castro Uban, in California, USA; and respondent
Jesus de Castro, now substituted by his wife, Martiniana, resides in Manila. Respondents further claimed that the MTC was not divested of
jurisdiction over their Complaint for ejectment because of the mere absence therein of the term "unlawful withholding" of their subject
property, considering that they had sufficiently alleged the same in their Complaint, albeit worded differently. Finally, respondents posited that
the fact that only respondent George de Castro signed the Verification and the Certificate of Non-Forum Shopping attached to the Complaint
was irrelevant since the other respondents already executed Special Powers of Attorney (SPAs) authorizing him to act as their attorney-infact in the institution of the ejectment suit against the petitioner.
On 19 September 2006, the Court of Appeals rendered a Decision granting the respondents' Petition and ordering petitioner to vacate the
subject property and turn over the same to respondents. The Court of Appeals decreed:
WHEREFORE, premises considered, the instant petition is GRANTED. The assailed Decision dated June 27, 2005 issued by the
RTC of Alaminos City, Pangasinan, Branch 54, is REVERSED and SET ASIDE. A new one is hereby rendered ordering [herein
petitioner] Leo Wee to SURRENDER and VACATE the leased premises in question as well as to pay the sum of P15,000.00 per
month reckoned from March, 2002 until he shall have actually turned over the possession thereof to petitioners plus the rental
arrearages of P30,000.00 representing unpaid increase in rent for the period from October, 2001 to February, 2002, with legal
interest at 6% per annum to be computed from June 7, 2002 until finality of this decision and 12% thereafter until full payment
thereof. Respondent is likewise hereby ordered to pay petitioners the amount ofP20,000.00 as and for attorney's fees and the
costs of suit.14
In a Resolution dated 25 January 2007, the appellate court denied the Motion for Reconsideration interposed by petitioner for lack of merit.
Petitioner is now before this Court via the Petition at bar, making the following assignment of errors:
I.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT CONCILIATION PROCESS IS NOT A
JURISDICTIONAL REQUIREMENT THAT NON-COMPLIANCE THEREWITH DOES NOT AFFECT THE JURISDICTION IN
EJECTMENT CASE;
II.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN UPHOLDING THE SUFFICIENCY OF THE ALLEGATIONS IN
THE COMPLAINT FOR EJECTMENT DESPITE THE WANT OF ALLEGATION OF "UNLAWFUL WITHOLDING PREMISES" (sic)
QUESTIONED BY PETITIONER;
III.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE FILING OF THE COMPLAINT OF
RESPONDENT GEORGE DE CASTRO WITHOUT JOINING ALL HIS OTHER CO-OWNERS OVER THE SUBJECT PROPERTY
IS PROPER;
IV.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT APPLYING SUPREME COURT CIRCULAR NO. 10 WHICH
DIRECTS A PLEADER TO INDICATE IN HIS PLEADINGS HIS OFFICIAL RECEIPT OF HIS PAYMENT OF HIS IBP DUES. 15
Petitioner avers that respondents failed to go through the conciliation process before the Barangay Lupon, a jurisdictional defect that bars the
legal action for ejectment. The Certification to file action dated 18 January 2002 issued by the Barangay Lupon, appended by the
respondents to their Complaint in Civil Case No. 1990, is of no moment, for it attested only that there was confrontation between the parties
on the matter of rental increase but not on unlawful detainer of the subject property by the petitioner. If it was the intention of the respondents
from the very beginning to eject petitioner from the subject property, they should have brought up the alleged unlawful stay of the petitioner
on the subject property for conciliation before the Barangay Lupon.
The barangay justice system was established primarily as a means of easing up the congestion of cases in the judicial courts. This could be
accomplished through a proceeding before the barangay courts which, according to the one who conceived of the system, the late Chief
Justice Fred Ruiz Castro, is essentially arbitration in character; and to make it truly effective, it should also be compulsory. With this primary
objective of the barangay justice system in mind, it would be wholly in keeping with the underlying philosophy of Presidential Decree No.
1508 (Katarungang Pambarangay Law), which would be better served if an out-of-court settlement of the case is reached voluntarily by the
parties.16 To ensure this objective, Section 6 of Presidential Decree No. 1508 requires the parties to undergo a conciliation process before
the Lupon Chairman or the Pangkat ng Tagapagkasundo as a precondition to filing a complaint in court subject to certain exceptions. The
said section has been declared compulsory in nature. 17
Presidential Decree No. 1508 is now incorporated in Republic Act No. 7160 (The Local Government Code), which took effect on 1 January
1992.
The pertinent provisions of the Local Government Code making conciliation a precondition to the filing of complaints in court are reproduced
below:
SEC. 412. Conciliation.- (a) Pre-condition to filing of complaint in court. - No complaint, petition, action, or proceeding involving any
matter within the authority of the lupon shall be filed or instituted directly in court or any other government office for adjudication,
unless there has been a confrontation between the parties before the lupon chairman or the pangkat, and that no conciliation or
settlement has been reached as certified by the lupon secretary or pangkat secretary as attested to by the lupon or pangkat
chairman or unless the settlement has been repudiated by the parties thereto.
(b) Where parties may go directly to court. - The parties may go directly to court in the following instances:
(1) Where the accused is under detention;
(2) Where a person has otherwise been deprived of personal liberty calling for habeas corpus proceedings;
(3) Where actions are coupled with provisional remedies such as preliminary injunction, attachment, delivery of personal
property, and support pendente lite; and
(4) Where the action may otherwise be barred by the statute of limitations.
(c) Conciliation among members of indigenous cultural communities. - The customs and traditions of indigenous cultural
communities shall be applied in settling disputes between members of the cultural communities.
SEC. 408. Subject Matter for Amicable Settlement; Exception Thereto. - The lupon of each barangay shall have authority to bring
together the parties actually residing in the same city or municipality for amicable settlement of all disputes except:
(a) Where one party is the government or any subdivision or instrumentality thereof;
(b) Where one party is a public officer or employee, and the dispute relates to the performance of his official functions;
(c) Offenses punishable by imprisonment exceeding one (1) year or a fine exceeding Five thousand pesos (P5,000.00);
(d) Offenses where there is no private offended party;

(e) Where the dispute involves real properties located in different cities or municipalities unless the parties thereto agree to submit
their differences to amicable settlement by an appropriate lupon;
(f) Disputes involving parties who actually reside in barangays of different cities or municipalities, except where such barangay
units adjoin each other and the parties thereto agree to submit their differences to amicable settlement by an appropriate lupon;
(g) Such other classes of disputes which the President may determine in the interest of justice or upon the recommendation of the
Secretary of Justice.
There is no question that the parties to this case appeared before the Barangay Lupon for conciliation proceedings. There is also no dispute
that the only matter referred to the Barangay Lupon for conciliation was the rental increase, and not the ejectment of petitioner from the
subject property. This is apparent from a perusal of the Certification to file action in court issued by the Barangay Lupon on 18 January 2002,
to wit:
CERTIFICATION TO FILE COMPLAINTS
This is to certify that:
1. There was personal confrontation between parties before the barangay Lupon regarding rental increase of a commercial
building but conciliation failed;
2. Therefore, the corresponding dispute of the above-entitled case may now be filed in Court/Government Office. 18 (Emphasis
ours.)
The question now to be resolved by this Court is whether the Certification dated 18 January 2002 issued by the Barangay Lupon stating that
no settlement was reached by the parties on the matter of rental increase sufficient to comply with the prior conciliation requirement under
the Katarungang Pambarangay Law to authorize the respondents to institute the ejectment suit against petitioner.
The Court rules affirmatively.
While it is true that the Certification to file action dated 18 January 2002 of the Barangay Lupon refers only to rental increase and not to the
ejectment of petitioner from the subject property, the submission of the same for conciliation before the Barangay Lupon constitutes sufficient
compliance with the provisions of the Katarungang Pambarangay Law. Given the particular circumstances of the case at bar, the conciliation
proceedings for the amount of monthly rental should logically and reasonably include also the matter of the possession of the property
subject of the rental, the lease agreement, and the violation of the terms thereof.
We now proceed to discuss the meat of the controversy.
The contract of lease between the parties did not stipulate a fixed period. Hence, the parties agreed to the payment of rentals on a monthly
basis. On this score, Article 1687 of the Civil Code provides:
Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year,if the rent agreed upon
is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be
paid daily. However, even though a monthly rent is paid, and no period for the lease has been set, the courts may fix a longer term
for the lease after the lessee has occupied the premises for over one year. If the rent is weekly, the courts may likewise determine
a longer period after the lessee has been in possession for over six months. In case of daily rent, the courts may also fix a longer
period after the lessee has stayed in the place for over one month. (Emphasis supplied.)
The rentals being paid monthly, the period of such lease is deemed terminated at the end of each month. Thus, respondents have every right
to demand the ejectment of petitioners at the end of each month, the contract having expired by operation of law. Without a lease contract,
petitioner has no right of possession to the subject property and must vacate the same. Respondents, thus, should be allowed to resort to an
action for ejectment before the MTC to recover possession of the subject property from petitioner.
Corollarily, petitioner's ejectment, in this case, is only the reasonable consequence of his unrelenting refusal to comply with the respondents'
demand for the payment of rental increase agreed upon by both parties. Verily, the lessor's right to rescind the contract of lease for nonpayment of the demanded increased rental was recognized by this Court in Chua v. Victorio19:
The right of rescission is statutorily recognized in reciprocal obligations, such as contracts of lease. In addition to the general
remedy of rescission granted under Article 1191 of the Civil Code, there is an independent provision granting the remedy of
rescission for breach of any of the lessor or lessee's statutory obligations. Under Article 1659 of the Civil Code, the aggrieved party
may, at his option, ask for (1) the rescission of the contract; (2) rescission and indemnification for damages; or (3) only
indemnification for damages, allowing the contract to remain in force.
Payment of the rent is one of a lessee's statutory obligations, and, upon non-payment by petitioners of the increased
rental in September 1994, the lessor acquired the right to avail of any of the three remedies outlined above. (Emphasis
supplied.)
Petitioner next argues that respondent George de Castro cannot maintain an action for ejectment against petitioner, without joining all his coowners.
Article 487 of the New Civil Code is explicit on this point:
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful detainer (accion interdictal), recovery of
possession (accion publiciana), and recovery of ownership (accion de reivindicacion). As explained by the renowned civilist, Professor Arturo
M. Tolentino20:
A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs, because
the suit is deemed to be instituted for the benefit of all . If the action is for the benefit of the plaintiff alone, such that he claims
possession for himself and not for the co-ownership, the action will not prosper. (Emphasis added.)
In the more recent case of Carandang v. Heirs of De Guzman,21 this Court declared that a co-owner is not even a necessary party to an
action for ejectment, for complete relief can be afforded even in his absence, thus:
In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to Article 487 of the Civil Code
and the relevant jurisprudence, any one of them may bring an action, any kind of action for the recovery of co-owned properties.
Therefore, only one of the co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is an
indispensable party thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a
complete relief can be afforded in the suit even without their participation, since the suit is presumed to have been filed for the
benefit of all co-owners.
Moreover, respondents Annie de Castro and Felomina de Castro Uban each executed a Special Power of Attorney, giving respondent
George de Castro the authority to initiate Civil Case No. 1990.
A power of attorney is an instrument in writing by which one person, as principal, appoints another as his agent and confers upon him the
authority to perform certain specified acts or kinds of acts on behalf of the principal. The written authorization itself is the power of attorney,
and this is clearly indicated by the fact that it has also been called a "letter of attorney." 22
Even then, the Court views the SPAs as mere surplusage, such that the lack thereof does not in any way affect the validity of the action for
ejectment instituted by respondent George de Castro. This also disposes of petitioner's contention that respondent George de Castro lacked
the authority to sign the Verification and the Certificate of Non-Forum Shopping. As the Court ruled in Mendoza v. Coronel23:
We likewise hold that the execution of the certification against forum shopping by the attorney-in-fact in the case at bar is
not a violation of the requirement that the parties must personally sign the same. The attorney-in-fact, who has authority to
file, and who actually filed the complaint as the representative of the plaintiff co-owner, pursuant to a Special Power of Attorney, is
a party to the ejectment suit. In fact, Section 1, Rule 70 of the Rules of Court includes the representative of the owner in an
ejectment suit as one of the parties authorized to institute the proceedings. (Emphasis supplied.)
Failure by respondent George de Castro to attach the said SPAs to the Complaint is innocuous, since it is undisputed that he was granted by
his sisters the authority to file the action for ejectment against petitioner prior to the institution of Civil Case No. 1990. The SPAs in his favor
were respectively executed by respondents Annie de Castro and Felomina de Castro Uban on 7 February 2002 and 14 March 2002; while
Civil Case No. 1990 was filed by respondent George de Castro on his own behalf and on behalf of his siblings only on 1 July 2002, or way
after he was given by his siblings the authority to file said action. The Court quotes with approval the following disquisition of the Court of
Appeals:
Moreover, records show that [herein respondent] George de Castro was indeed authorized by his sisters Annie de Castro and
Felomina de Castro Uban, to prosecute the case in their behalf as shown by the Special Power of Attorney dated February 7, 2002
and March 14, 2002. That these documents were appended only to [respondent George de Castro's] position paper is of no
moment considering that the authority conferred therein was given prior to the institution of the complaint in July, 2002. x x x. 24
Respondent deceased Jesus de Castro's failure to sign the Verification and Certificate of Non-Forum Shopping may be excused since he
already executed an Affidavit25 with respondent George de Castro that he had personal knowledge of the filing of Civil Case No. 1990.
In Torres v. Specialized Packaging Development Corporation,26 the Court ruled that the personal signing of the verification requirement was
deemed substantially complied with when, as in the instant case, two out of 25 real parties-in-interest, who undoubtedly have sufficient
knowledge and belief to swear to the truth of the allegations in the petition, signed the verification attached to it.
In the same vein, this Court is not persuaded by petitioner's assertion that respondents' failure to allege the jurisdictional fact that there was
"unlawful withholding" of the subject property was fatal to their cause of action.
It is apodictic that what determines the nature of an action as well as which court has jurisdiction over it are the allegations in the complaint
and the character of the relief sought. In an unlawful detainer case, the defendant's possession was originally lawful but ceased to be so
upon the expiration of his right to possess. Hence, the phrase "unlawful withholding" has been held to imply possession on the part of
defendant, which was legal in the beginning, having no other source than a contract, express or implied, and which later expired as a right
and is being withheld by defendant.27
In Barba v. Court of Appeals,28 the Court held that although the phrase "unlawfully withholding" was not actually used by therein petitioner in
her complaint, the Court held that her allegations, nonetheless, amounted to an unlawful withholding of the subject property by therein
private respondents, because they continuously refused to vacate the premises even after notice and demand.
In the Petition at bar, respondents alleged in their Complaint that they are the registered owners of the subject property; the subject property
was being occupied by the petitioner pursuant to a monthly lease contract; petitioner refused to accede to respondents' demand for rental
increase; the respondents sent petitioner a letter terminating the lease agreement and demanding that petitioner vacate and turn over the
possession of the subject property to respondents; and despite such demand, petitioner failed to surrender the subject property to
respondents.29 The Complaint sufficiently alleges the unlawful withholding of the subject property by petitioner, constitutive of unlawful
detainer, although the exact words "unlawful withholding" were not used. In an action for unlawful detainer, an allegation that the defendant is
unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily employing the terminology of the law. 30
Petitioner's averment that the Court of Appeals should have dismissed respondents' Petition in light of the failure of their counsel to attach
the Official Receipt of his updated payment of Integrated Bar of the Philippines (IBP) dues is now moot and academic, since respondents'
counsel has already duly complied therewith. It must be stressed that judicial cases do not come and go through the portals of a court of law
by the mere mandate of technicalities.31 Where a rigid application of the rules will result in a manifest failure or miscarriage of justice,
technicalities should be disregarded in order to resolve the case. 32
Finally, we agree in the ruling of the Court of Appeals that petitioner is liable for the payment of back rentals, attorney's fees and cost of the
suit. Respondents must be duly indemnified for the loss of income from the subject property on account of petitioner's refusal to vacate the
leased premises.
WHEREFORE, premises considered, the instant Petition is DENIED. The Decision dated 19 September 2006 and Resolution dated 25
January 2007 of the Court of Appeals in CA-G.R. SP No. 90906 are hereby AFFIRMED in toto. Costs against petitioner.
SO ORDERED.
G.R. No. 157493
February 5, 2007
RIZALINO, substituted by his heirs, JOSEFINA, ROLANDO and FERNANDO, ERNESTO, LEONORA, BIBIANO, JR., LIBRADO and
ENRIQUETA, all surnamed OESMER, Petitioners,
vs.
PARAISO DEVELOPMENT CORPORATION, Respondent.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of the 1997 Revised Rules of Civil Procedure seeking to reverse and
set aside the Court of Appeals Decision1 dated 26 April 2002 in CA-G.R. CV No. 53130 entitled, Rizalino, Ernesto, Leonora, Bibiano, Jr.,
Librado, Enriqueta, Adolfo, and Jesus, all surnamed Oesmer vs. Paraiso Development Corporation, as modified by its Resolution 2 dated 4
March 2003, declaring the Contract to Sell valid and binding with respect to the undivided proportionate shares of the six signatories of the
said document, herein petitioners, namely: Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); and
ordering them to execute the Deed of Absolute Sale concerning their 6/8 share over the subject parcels of land in favor of herein respondent
Paraiso Development Corporation, and to pay the latter the attorneys fees plus costs of the suit. The assailed Decision, as modified, likewise
ordered the respondent to tender payment to the petitioners in the amount of P3,216,560.00 representing the balance of the purchase price
of the subject parcels of land.
The facts of the case are as follows:
Petitioners Rizalino, Ernesto, Leonora, Bibiano, Jr., Librado, and Enriqueta, all surnamed Oesmer, together with Adolfo Oesmer (Adolfo) and
Jesus Oesmer (Jesus), are brothers and sisters, and the co-owners of undivided shares of two parcels of agricultural and tenanted land
situated in Barangay Ulong Tubig, Carmona, Cavite, identified as Lot 720 with an area of 40,507 square meters (sq. m.) and Lot 834
containing an area of 14,769 sq. m., or a total land area of 55,276 sq. m. Both lots are unregistered and originally owned by their parents,
Bibiano Oesmer and Encarnacion Durumpili, who declared the lots for taxation purposes under Tax Declaration No. 3438 3(cancelled by I.D.
No. 6064-A) for Lot 720 and Tax Declaration No. 3437 4 (cancelled by I.D. No. 5629) for Lot 834. When the spouses Oesmer died, petitioners,
together with Adolfo and Jesus, acquired the lots as heirs of the former by right of succession.
Respondent Paraiso Development Corporation is known to be engaged in the real estate business.
Sometime in March 1989, Rogelio Paular, a resident and former Municipal Secretary of Carmona, Cavite, brought along petitioner Ernesto to
meet with a certain Sotero Lee, President of respondent Paraiso Development Corporation, at Otani Hotel in Manila. The said meeting was
for the purpose of brokering the sale of petitioners properties to respondent corporation.
Pursuant to the said meeting, a Contract to Sell5 was drafted by the Executive Assistant of Sotero Lee, Inocencia Almo. On 1 April 1989,
petitioners Ernesto and Enriqueta signed the aforesaid Contract to Sell. A check in the amount of P100,000.00, payable to Ernesto, was
given as option money. Sometime thereafter, Rizalino, Leonora, Bibiano, Jr., and Librado also signed the said Contract to Sell. However, two
of the brothers, Adolfo and Jesus, did not sign the document.
On 5 April 1989, a duplicate copy of the instrument was returned to respondent corporation. On 21 April 1989, respondent brought the same
to a notary public for notarization.
In a letter6 dated 1 November 1989, addressed to respondent corporation, petitioners informed the former of their intention to rescind the
Contract to Sell and to return the amount of P100,000.00 given by respondent as option money.
Respondent did not respond to the aforesaid letter. On 30 May 1991, herein petitioners, together with Adolfo and Jesus, filed a Complaint 7 for
Declaration of Nullity or for Annulment of Option Agreement or Contract to Sell with Damages before the Regional Trial Court (RTC) of
Bacoor, Cavite. The said case was docketed as Civil Case No. BCV-91-49.
During trial, petitioner Rizalino died. Upon motion of petitioners, the trial court issued an Order, 8 dated 16 September 1992, to the effect that
the deceased petitioner be substituted by his surviving spouse, Josefina O. Oesmer, and his children, Rolando O. Oesmer and Fernando O.
Oesmer. However, the name of Rizalino was retained in the title of the case both in the RTC and the Court of Appeals.
After trial on the merits, the lower court rendered a Decision 9 dated 27 March 1996 in favor of the respondent, the dispositive portion of which
reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of herein [respondent] Paraiso Development Corporation. The
assailed Contract to Sell is valid and binding only to the undivided proportionate share of the signatory of this document and recipient of the
check, [herein petitioner] co-owner Ernesto Durumpili Oesmer. The latter is hereby ordered to execute the Contract of Absolute Sale
concerning his 1/8 share over the subject two parcels of land in favor of herein [respondent] corporation, and to pay the latter the attorneys
fees in the sum of Ten Thousand (P10,000.00) Pesos plus costs of suit.
The counterclaim of [respondent] corporation is hereby Dismissed for lack of merit. 10
Unsatisfied, respondent appealed the said Decision before the Court of Appeals. On 26 April 2002, the appellate court rendered a Decision
modifying the Decision of the court a quo by declaring that the Contract to Sell is valid and binding with respect to the undivided
proportionate shares of the six signatories of the said document, herein petitioners, namely: Ernesto, Enriqueta, Librado, Rizalino, Bibiano,
Jr., and Leonora (all surnamed Oesmer). The decretal portion of the said Decision states that:
WHEREFORE, premises considered, the Decision of the court a quo is hereby MODIFIED. Judgment is hereby rendered in favor of herein
[respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided proportionate
share of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora
(all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their 6/8 share over the
subject two parcels of land and in favor of herein [respondent] corporation, and to pay the latter the attorneys fees in the sum of Ten
Thousand Pesos (P10,000.00) plus costs of suit.11
Aggrieved by the above-mentioned Decision, petitioners filed a Motion for Reconsideration of the same on 2 July 2002. Acting on petitioners
Motion for Reconsideration, the Court of Appeals issued a Resolution dated 4 March 2003, maintaining its Decision dated 26 April 2002, with
the modification that respondent tender payment to petitioners in the amount of P3,216,560.00, representing the balance of the purchase
price of the subject parcels of land. The dispositive portion of the said Resolution reads:
WHEREFORE, premises considered, the assailed Decision is hereby modified.1awphi1.net Judgment is hereby rendered in favor of herein
[respondent] Paraiso Development Corporation. The assailed Contract to Sell is valid and binding with respect to the undivided proportionate
shares of the six (6) signatories of this document, [herein petitioners], namely, Ernesto, Enriqueta, Librado, Rizalino, Bibiano, Jr., and
Leonora (all surnamed Oesmer). The said [petitioners] are hereby ordered to execute the Deed of Absolute Sale concerning their 6/8 share
over the subject two parcels of land in favor of herein [respondent] corporation, and to pay the latter attorneys fees in the sum of Ten
Thousand Pesos (P10,000.00) plus costs of suit. Respondent is likewise ordered to tender payment to the above-named [petitioners] in the
amount of Three Million Two Hundred Sixteen Thousand Five Hundred Sixty Pesos (P3,216,560.00) representing the balance of the
purchase price of the subject two parcels of land. 12
Hence, this Petition for Review on Certiorari.
Petitioners come before this Court arguing that the Court of Appeals erred:
I. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is not binding upon petitioner Ernesto
Oesmers co-owners (herein petitioners Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora).
II. On a question of law in not holding that, the supposed Contract to Sell (Exhibit D) is void altogether considering that respondent
itself did not sign it as to indicate its consent to be bound by its terms. Moreover, Exhibit D is really a unilateral promise to sell
without consideration distinct from the price, and hence, void.
Petitioners assert that the signatures of five of them namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the margins of the
supposed Contract to Sell did not confer authority on petitioner Ernesto as agent to sell their respective shares in the questioned properties,
and hence, for lack of written authority from the above-named petitioners to sell their respective shares in the subject parcels of land, the
supposed Contract to Sell is void as to them. Neither do their signatures signify their consent to directly sell their shares in the questioned
properties. Assuming that the signatures indicate consent, such consent was merely conditional. The effectivity of the alleged Contract to Sell
was subject to a suspensive condition, which is the approval of the sale by all the co-owners.
Petitioners also assert that the supposed Contract to Sell (Exhibit D), contrary to the findings of the Court of Appeals, is not couched in
simple language.
They further claim that the supposed Contract to Sell does not bind the respondent because the latter did not sign the said contract as to
indicate its consent to be bound by its terms. Furthermore, they maintain that the supposed Contract to Sell is really a unilateral promise to
sell and the option money does not bind petitioners for lack of cause or consideration distinct from the purchase price.
The Petition is bereft of merit.
It is true that the signatures of the five petitioners, namely: Enriqueta, Librado, Rizalino, Bibiano, Jr., and Leonora, on the Contract to Sell did
not confer authority on petitioner Ernesto as agent authorized to sell their respective shares in the questioned properties because of Article
1874 of the Civil Code, which expressly provides that:
Art. 1874. When a 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.
The law itself explicitly requires a written authority before an agent can sell an immovable. The conferment of such an authority should be in
writing, in as clear and precise terms as possible. It is worth noting that petitioners signatures are found in the Contract to Sell. The Contract
is absolutely silent on the establishment of any principal-agent relationship between the five petitioners and their brother and co-petitioner
Ernesto as to the sale of the subject parcels of land. Thus, the Contract to Sell, although signed on the margin by the five petitioners, is not
sufficient to confer authority on petitioner Ernesto to act as their agent in selling their shares in the properties in question.
However, despite petitioner Ernestos lack of written authority from the five petitioners to sell their shares in the subject parcels of land, the
supposed Contract to Sell remains valid and binding upon the latter.
As can be clearly gleaned from the contract itself, it is not only petitioner Ernesto who signed the said Contract to Sell; the other five
petitioners also personally affixed their signatures thereon. Therefore, a written authority is no longer necessary in order to sell their shares in
the subject parcels of land because, by affixing their signatures on the Contract to Sell, they were not selling their shares through an agent
but, rather, they were selling the same directly and in their own right.
The Court also finds untenable the following arguments raised by petitioners to the effect that the Contract to Sell is not binding upon them,
except to Ernesto, because: (1) the signatures of five of the petitioners do not signify their consent to sell their shares in the questioned
properties since petitioner Enriqueta merely signed as a witness to the said Contract to Sell, and that the other petitioners, namely: Librado,
Rizalino, Leonora, and Bibiano, Jr., did not understand the importance and consequences of their action because of their low degree of
education and the contents of the aforesaid contract were not read nor explained to them; and (2) assuming that the signatures indicate
consent, such consent was merely conditional, thus, the effectivity of the alleged Contract to Sell was subject to a suspensive condition,
which is the approval by all the co-owners of the sale.
It is well-settled that contracts are perfected by mere consent, upon the acceptance by the offeree of the offer made by the offeror. From that
moment, the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which,
according to their nature, may be in keeping with good faith, usage and law. To produce a contract, the acceptance must not qualify the
terms of the offer. However, the acceptance may be express or implied. For a contract to arise, the acceptance must be made known to the
offeror. Accordingly, the acceptance can be withdrawn or revoked before it is made known to the offeror. 13
In the case at bar, the Contract to Sell was perfected when the petitioners consented to the sale to the respondent of their shares in the
subject parcels of land by affixing their signatures on the said contract. Such signatures show their acceptance of what has been stipulated in
the Contract to Sell and such acceptance was made known to respondent corporation when the duplicate copy of the Contract to Sell was
returned to the latter bearing petitioners signatures.
As to petitioner Enriquetas claim that she merely signed as a witness to the said contract, the contract itself does not say so. There was no
single indication in the said contract that she signed the same merely as a witness. The fact that her signature appears on the right-hand
margin of the Contract to Sell is insignificant. The contract indisputably referred to the "Heirs of Bibiano and Encarnacion Oesmer," and since
there is no showing that Enriqueta signed the document in some other capacity, it can be safely assumed that she did so as one of the
parties to the sale.
Emphasis should also be given to the fact that petitioners Ernesto and Enriqueta concurrently signed the Contract to Sell. As the Court of
Appeals mentioned in its Decision,14 the records of the case speak of the fact that petitioner Ernesto, together with petitioner Enriqueta, met
with the representatives of the respondent in order to finalize the terms and conditions of the Contract to Sell. Enriqueta affixed her signature
on the said contract when the same was drafted. She even admitted that she understood the undertaking that she and petitioner Ernesto
made in connection with the contract. She likewise disclosed that pursuant to the terms embodied in the Contract to Sell, she updated the
payment of the real property taxes and transferred the Tax Declarations of the questioned properties in her name. 15 Hence, it cannot be
gainsaid that she merely signed the Contract to Sell as a witness because she did not only actively participate in the negotiation and
execution of the same, but her subsequent actions also reveal an attempt to comply with the conditions in the said contract.
With respect to the other petitioners assertion that they did not understand the importance and consequences of their action because of their
low degree of education and because the contents of the aforesaid contract were not read nor explained to them, the same cannot be
sustained.
We only have to quote the pertinent portions of the Court of Appeals Decision, clear and concise, to dispose of this issue. Thus,
First, the Contract to Sell is couched in such a simple language which is undoubtedly easy to read and understand. The terms of the
Contract, specifically the amount of P100,000.00 representing the option money paid by [respondent] corporation, the purchase price
of P60.00 per square meter or the total amount ofP3,316,560.00 and a brief description of the subject properties are well-indicated thereon
that any prudent and mature man would have known the nature and extent of the transaction encapsulated in the document that he was
signing.
Second, the following circumstances, as testified by the witnesses and as can be gleaned from the records of the case clearly indicate the
[petitioners] intention to be bound by the stipulations chronicled in the said Contract to Sell.
As to [petitioner] Ernesto, there is no dispute as to his intention to effect the alienation of the subject property as he in fact was the one who
initiated the negotiation process and culminated the same by affixing his signature on the Contract to Sell and by taking receipt of the amount
of P100,000.00 which formed part of the purchase price.
xxxx
As to [petitioner] Librado, the [appellate court] finds it preposterous that he willingly affixed his signature on a document written in a language
(English) that he purportedly does not understand. He testified that the document was just brought to him by an 18 year old niece named
Baby and he was told that the document was for a check to be paid to him. He readily signed the Contract to Sell without consulting his other
siblings. Thereafter, he exerted no effort in communicating with his brothers and sisters regarding the document which he had signed, did not
inquire what the check was for and did not thereafter ask for the check which is purportedly due to him as a result of his signing the said
Contract to Sell. (TSN, 28 September 1993, pp. 22-23)
The [appellate court] notes that Librado is a 43 year old family man (TSN, 28 September 1993, p. 19). As such, he is expected to act with
that ordinary degree of care and prudence expected of a good father of a family. His unwitting testimony is just divinely disbelieving.
The other [petitioners] (Rizalino, Leonora and Bibiano Jr.) are likewise bound by the said Contract to Sell. The theory adopted by the
[petitioners] that because of their low degree of education, they did not understand the contents of the said Contract to Sell is devoid of merit.
The [appellate court] also notes that Adolfo (one of the co-heirs who did not sign) also possess the same degree of education as that of the
signing co-heirs (TSN, 15 October 1991, p. 19). He, however, is employed at the Provincial Treasury Office at Trece Martirez, Cavite and has
even accompanied Rogelio Paular to the Assessors Office to locate certain missing documents which were needed to transfer the titles of
the subject properties. (TSN, 28 January 1994, pp. 26 & 35) Similarly, the other co-heirs [petitioners], like Adolfo, are far from ignorant, more
so, illiterate that they can be extricated from their obligations under the Contract to Sell which they voluntarily and knowingly entered into with
the [respondent] corporation.
The Supreme Court in the case of Cecilia Mata v. Court of Appeals (207 SCRA 753 [1992]), citing the case of Tan Sua Sia v. Yu Baio Sontua
(56 Phil. 711), instructively ruled as follows:
"The Court does not accept the petitioners claim that she did not understand the terms and conditions of the transactions because she only
reached Grade Three and was already 63 years of age when she signed the documents. She was literate, to begin with, and her age did not
make her senile or incompetent. x x x.
At any rate, Metrobank had no obligation to explain the documents to the petitioner as nowhere has it been proven that she is unable to read
or that the contracts were written in a language not known to her. It was her responsibility to inform herself of the meaning and consequence
of the contracts she was signing and, if she found them difficult to comprehend, to consult other persons, preferably lawyers, to explain them
to her. After all, the transactions involved not only a few hundred or thousand pesos but, indeed, hundreds of thousands of pesos.
As the Court has held:
x x x The rule that one who signs a contract is presumed to know its contents has been applied even to contracts of illiterate persons on the
ground that if such persons are unable to read, they are negligent if they fail to have the contract read to them. If a person cannot read the
instrument, it is as much his duty to procure some reliable persons to read and explain it to him, before he signs it, as it would be to read it
before he signed it if he were able to do and his failure to obtain a reading and explanation of it is such gross negligence as will estop from
avoiding it on the ground that he was ignorant of its contents."16
That the petitioners really had the intention to dispose of their shares in the subject parcels of land, irrespective of whether or not all of the
heirs consented to the said Contract to Sell, was unveiled by Adolfos testimony as follows:
ATTY. GAMO: This alleged agreement between you and your other brothers and sisters that unless everybody will agree, the properties
would not be sold, was that agreement in writing?
WITNESS: No sir.
ATTY. GAMO: What you are saying is that when your brothers and sisters except Jesus and you did not sign that agreement which had been
marked as [Exhibit] "D", your brothers and sisters were grossly violating your agreement.
WITNESS: Yes, sir, they violated what we have agreed upon. 17
We also cannot sustain the allegation of the petitioners that assuming the signatures indicate consent, such consent was merely conditional,
and that, the effectivity of the alleged Contract to Sell was subject to the suspensive condition that the sale be approved by all the co-owners.
The Contract to Sell is clear enough. It is a cardinal rule in the interpretation of contracts that if the terms of a contract are clear and leave no
doubt upon the intention of the contracting parties, the literal meaning of its stipulation shall control. 18 The terms of the Contract to Sell made
no mention of the condition that before it can become valid and binding, a unanimous consent of all the heirs is necessary. Thus, when the
language of the contract is explicit, as in the present case, leaving no doubt as to the intention of the parties thereto, the literal meaning of its
stipulation is controlling.
In addition, the petitioners, being owners of their respective undivided shares in the subject properties, can dispose of their shares even
without the consent of all the co-heirs. Article 493 of the Civil Code expressly provides:
Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may
therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved.
But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in
the division upon the termination of the co-ownership. [Emphases supplied.]
Consequently, even without the consent of the two co-heirs, Adolfo and Jesus, the Contract to Sell is still valid and binding with respect to the
6/8 proportionate shares of the petitioners, as properly held by the appellate court.
Therefore, this Court finds no error in the findings of the Court of Appeals that all the petitioners who were signatories in the Contract to Sell
are bound thereby.
The final arguments of petitioners state that the Contract to Sell is void altogether considering that respondent itself did not sign it as to
indicate its consent to be bound by its terms; and moreover, the Contract to Sell is really a unilateral promise to sell without consideration
distinct from the price, and hence, again, void. Said arguments must necessarily fail.
The Contract to Sell is not void merely because it does not bear the signature of the respondent corporation. Respondent corporations
consent to be bound by the terms of the contract is shown in the uncontroverted facts which established that there was partial performance
by respondent of its obligation in the said Contract to Sell when it tendered the amount of P100,000.00 to form part of the purchase price,
which was accepted and acknowledged expressly by petitioners. Therefore, by force of law, respondent is required to complete the payment
to enforce the terms of the contract. Accordingly, despite the absence of respondents signature in the Contract to Sell, the former cannot
evade its obligation to pay the balance of the purchase price.
As a final point, the Contract to Sell entered into by the parties is not a unilateral promise to sell merely because it used the word option
money when it referred to the amount of P100,000.00, which also form part of the purchase price.
Settled is the rule that in the interpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged by
looking to the words they used to project that intention in their contract, all the words, not just a particular word or two, and words in context,
not words standing alone.19
In the instant case, the consideration of P100,000.00 paid by respondent to petitioners was referred to as "option money." However, a careful
examination of the words used in the contract indicates that the money is not option money but earnest money. "Earnest money" and
"option money" are not the same but distinguished thus: (a) earnest money is part of the purchase price, while option money is the money
given as a distinct consideration for an option contract; (b) earnest money is given only where there is already a sale, while option money
applies to a sale not yet perfected; and, (c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be
buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option. 20
The sum of P100,000.00 was part of the purchase price. Although the same was denominated as "option money," it is actually in the nature
of earnest money or down payment when considered with the other terms of the contract. Doubtless, the agreement is not a mere unilateral
promise to sell, but, indeed, it is a Contract to Sell as both the trial court and the appellate court declared in their Decisions.
WHEREFORE, premises considered, the Petition is DENIED, and the Decision and Resolution of the Court of Appeals dated 26 April 2002
and 4 March 2003, respectively, are AFFIRMED, thus, (a) the Contract to Sell isDECLARED valid and binding with respect to the undivided
proportionate shares in the subject parcels of land of the six signatories of the said document, herein petitioners Ernesto, Enriqueta, Librado,
Rizalino, Bibiano, Jr., and Leonora (all surnamed Oesmer); (b) respondent is ORDERED to tender payment to petitioners in the amount
ofP3,216,560.00 representing the balance of the purchase price for the latters shares in the subject parcels of land; and (c) petitioners are
further ORDERED to execute in favor of respondent the Deed of Absolute Sale covering their shares in the subject parcels of land after
receipt of the balance of the purchase price, and to pay respondent attorneys fees plus costs of the suit. Costs against petitioners.
SO ORDERED.
G.R. No. 122544
January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND
A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
x---------------------------------------------------------x
G.R. No. 124741 January 28, 2003
REGINA P. DIZON, AMPARO D. BARTOLOME, FIDELINA D. BALZA, ESTER ABAD DIZON and JOSEPH ANTHONY DIZON, RAYMUND
A. DIZON, GERARD A. DIZON and JOSE A. DIZON, JR., petitioners,
vs.
COURT OF APPEALS HON. MAXIMIANO C. ASUNCION and OVERLAND EXPRESS LINES, INC., respondents.
RESOLUTION
YNARES-SANTIAGO, J.:
On January 28, 1999, this Court rendered judgment in these consolidated cases as follows:
WHEREFORE, in view of the foregoing, both petitions are GRANTED. The decision dated March 29, 1994 and the resolution
dated October 19, 1995 in CA-G.R. CV Nos. 25153-54, as well as the decision dated December 11, 1995 and the resolution dated
April 23, 1997 in CA-G.R. SP No. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE.
Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22, 1982 in
Civil Case No. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City, Branch III as affirmed in the
decision dated September 26, 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution dated
June 19, 1985 of this Court.
However, petitioners are ordered to REFUND to private respondent the amount of P300,000.00 which they received through Alice
A. Dizon on June 20, 1975.
SO ORDERED.
Private respondent filed a Motion for Reconsideration, Second Motion for Reconsideration, and Motion to Suspend Procedural Rules in the
Higher Interest of Substantial Justice, all of which have been denied by this Court. This notwithstanding, the cases were set for oral
argument on March 21, 2001, on the following issues:
1. WHETHER THERE ARE CIRCUMSTANCES THAT WOULD JUSTIFY SUSPENSION OF THE RULES OF COURT;
2. WHETHER THE SUM OF P300,000.00 RECEIVED BY ALICE DIZON FROM PRIVATE RESPONDENT WAS INTENDED AS
PARTIAL PAYMENT OF THE PURCHASE PRICE OF THE PROPERTY, OR AS PAYMENT OF BACK RENTALS ON THE
PROPERTY;
3. WHETHER ALICE DIZON WAS AUTHORIZED TO RECEIVE THE SUM OF P300,000.00 ON BEHALF OF PETITIONERS;
4. (A) IF SO, WHETHER PETITIONERS ARE ESTOPPED FROM QUESTIONING THE BELATED EXERCISE BY PRIVATE
RESPONDENT OF ITS OPTION TO BUY WHEN THEY ACCEPTED THE SAID PARTIAL PAYMENT;
(B) IF SO, WHETHER ALICE DIZON CAN VALIDLY BIND PETITIONERS IN THE ABSENCE OF A WRITTEN POWER OF
ATTORNEY;
5. (A) WHETHER THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES;
(B) WHETHER THERE WAS A CONTRACT OF SALE AT LEAST WITH RESPECT TO THE SHARES OF FIDELA AND ALICE
DIZON; AND
6. WHETHER PRIVATE RESPONDENT'S ACTION FOR SPECIFIC PERFORMANCE HAS PRESCRIBED.
In order to resolve the first issue, it is necessary to pass upon the other questions which relate to the merits of the case. It is only where there
exist strong compelling reasons, such as serving the ends of justice and preventing a miscarriage thereof, that this Court can suspend the
rules.1
After reviewing the records, we find that, despite all of private respondent's protestations, there is absolutely no written proof of Alice Dizon's
authority to bind petitioners. First of all, she was not even a co-owner of the property. Neither was she empowered by the co-owners to act
on their behalf.
The acceptance of the amount of P300,000.00, purportedly as partial payment of the purchase price of the land, was an act integral to the
sale of the land. As a matter of fact, private respondent invokes such receipt of payment as giving rise to a perfected contract of sale. In this
connection, Article 1874 of the Civil Code is explicit that: "When a 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."
When the sale of a piece of land or any interest thereon is through an agent, the authority of the latter shall be in writing; otherwise,
the sale shall be void. Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing
and must give him specific authority, either to conduct the general business of the principal or to execute a binding contract
containing terms and conditions which are in the contract he did execute. A special power of attorney is necessary to enter into any
contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that
expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear and unmistakable
language. When there is any reasonable doubt that the language so used conveys such power, no such construction shall be given
the document.2
It necessarily follows, therefore, that petitioners cannot be deemed to have received partial payment of the supposed purchase price for the
land through Alice Dizon. It cannot even be said that Alice Dizon's acceptance of the money bound at least the share of Fidela Dizon, in the
absence of a written power of attorney from the latter. It should be borne in mind that the Receipt dated June 20, 1975, while made out in the
name of Fidela Dizon, was signed by Alice Dizon alone.
Moreover, there could not have been a perfected contract of sale. As we held in our Decision dated January 28, 1999, the implied renewal of
the contract of lease between the parties affected only those terms and conditions which are germane to the lessee's right of continued
enjoyment of the property. The option to purchase afforded private respondent expired after the one-year period granted in the contract.
Otherwise stated, the implied renewal of the lease did not include the option to purchase. We see no reason to disturb our ruling on this
point,viz:
In this case, there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the private
respondent, as lessee, purchasing the property but remained in possession thereof. Hence, there was an implicit renewal of the
contract of lease on a monthly basis. The other terms of the original contract of lease which are revived in the implied new lease
under Article 1670 of the New Civil Code are only those terms which are germane to the lessee's right of continued enjoyment of
the property leased. Therefore, an implied new lease does not ipso facto carry with it any implied revival of private respondent's
option to purchase (as lessee thereof) the leased premises. The provision entitling the lessee the option to purchase the leased
premises is not deemed incorporated in the impliedly renewed contract because it is alien to the possession of the lessee. Private
respondent's right to exercise the option to purchase expired with the termination of the original contract of lease for one year. The
rationale of this Court is that:
"This is a reasonable construction of the provision, which is based on the presumption that when the lessor allows the
lessee to continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that
such enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up to the
end of the month because the rent was paid monthly. Necessarily, if the presumed will of the parties refers to the
enjoyment of possession the presumption covers the other terms of the contract related to such possession, such as the
amount of rental, the date when it must be paid, the care of the property, the responsibility for repairs, etc. But no such
presumption may be indulged in with respect to special agreements which by nature are foreign to the right of occupancy
or enjoyment inherent in a contract of lease."3
There being no merit in the arguments advanced by private respondent, there is no need to suspend the Rules of Court and to admit the
motion for reconsideration. While it is within the power of the Court to suspend its own rules, or to except a particular case from its operation,
whenever the interest of justice require it, however, the movant must show strong compelling reasons such as serving the ends of justice and
preventing a grave miscarriage thereof,4 none of which obtains in this case.
Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that, once a judgment has become
final, the winning party be not, through a mere subterfuge, deprived of the fruits of the verdict. Courts must, therefore, guard against any
scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to
prolong them.5
ACCORDINGLY, the Motion to Suspend Procedural Rules in the Higher Interest of Substantial Justice filed by private respondent is DENIED
WITH FINALITY. No further pleadings will be entertained in these cases.
SO ORDERED.
G.R. No. 138639
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 Appeals1 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
CITY-LITE.
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, CITYLITE conveyed its interest to purchase a portion or one-half (1/2) of the front lot of the "Violago Property. Apparently, Roy subsequently
informed CITY-LITE'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. Avenue with an area of 9,192 square meters.
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 CITYLITE 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. T-51671.
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 CITY-LITE, 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.
G.R. No. 138639
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 Appeals1 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
CITY-LITE.
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, CITYLITE conveyed its interest to purchase a portion or one-half (1/2) of the front lot of the "Violago Property. Apparently, Roy subsequently
informed CITY-LITE'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. Avenue with an area of 9,192 square meters.
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 CITYLITE 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. T-51671.
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 CITY-LITE, 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.
G.R. No. L-67889 October 10, 1985
PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners,
vs.
INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.
Payawal, Jimenez & Associates for petitioners.
Nelson A. Loyola for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review of the decision of the Intermediate Appellate Court affirming in toto the judgment of the Court of First Instance of
Manila, Branch XXI, which ordered the petitioner to pay respondent the thirty percent (30%) commission on 15,666 pieces of Philippine flags
worth P936,960.00, moral damages, attorney's fees and the costs of the suit.
Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then Department of Education and Culture,
hereinafter called Department, to purchase without public bidding, one million pesos worth of national flags for the use of public schools
throughout the country. The respondent was able to expedite the approval of the purchase by hand-carrying the different indorsements from
one office to another, so that by the first week of September, 1974, all the legal requirements had been complied with, except the release of
the purchase orders. When Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase orders could
not be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval, she
contacted the owners of the United Flag Industry on September 17, 1974. The next day, after the transaction was discussed, the following
document (Exhibit A) was drawn up:
Mrs. Tessie Nacianceno,
This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or organization,
private or government in connection with the marketing of our products-flags and all its accessories.
For your service, you will be entitled to a commission of thirty
(30%) percent.
Signed
Mr. Primitive Siasat
Owner and Gen. Manager
On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The next day, on October 17, 1974, the
respondent's authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of P469,980.00 on October 23, 1974 for the first delivery,
tendered the amount of P23,900.00 or five percent (5%) of the amount received, to the respondent as payment of her commission. The latter
allegedly protested. She refused to accept the said amount insisting on the 30% commission agreed upon. The respondent was prevailed
upon to accept the same, however, because of the assurance of the petitioners that they would pay the commission in full after they
delivered the other half of the order. The respondent states that she later on learned that petitioner Siasat had already received payment for
the second delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied receipt of the payment, at the same time
claiming that the respondent had no participation whatsoever with regard to the second delivery of flags and that the agency had already
been revoked.
The respondent originally filed a complaint with the Complaints and Investigation Office in Malacaang but when nothing came of the
complaint, she filed an action in the Court of First Instance of Manila to recover the following commissions: 25%, as balance on the first
delivery and 30%, on the second delivery.
The trial court decided in favor of the respondent. The dispositive portion of the decision reads as follows:
WHEREFORE, judgment is hereby rendered sentencing Primitivo Siasat to pay to the plaintiff the sum of P281,988.00,
minus the sum P23,900.00, with legal interest from the date of this decision, and ordering the defendants to pay jointly
and solidarily the sum of P25,000.00 as moral damages, and P25,000.00 as attorney's fees, also with legal interest from
the date of this decision, and the costs.
The decision was affirmed in toto by the Intermediate Appellate Court. After their motion for reconsideration was denied, the petitioners went
to this Court on a petition for review on August 6, 1984.
In assailing the appellate court's decision, the petition tenders the following arguments: first, the authorization making the respondent the
petitioner's representative merely states that she could deal with any entity in connection with the marketing of their products for a
commission of 30%. There was no specific authorization for the sale of 15,666 Philippine flags to the Department; second, there were two
transactions involved evidenced by the separate purchase orders and separate delivery receipts, Exhibit 6-C for the purchase and deliver on
October 16, 1974, and Exhibits 7 to 7-C, for the purchase and delivery on November 6, 1974. The revocation of agency effected by the
parties with mutual consent on October 17, 1974, therefore, forecloses the respondent's claim of 30% commission on the second
transaction; and last, there was no basis for the granting of attorney's fees and moral damages because there was no showing of bad faith
on the part of the petitioner. It was respondent who showed bad faith in denying having received her commission on the first delivery. The
petitioner's counterclaim, therefore, should have been granted.
This petition was initially dismissed for lack of merit in a minute resolution.On a motion for reconsideration, however,this Court give due
course to the petition on November 14, 1984.
After a careful review of the records, we are constrained to sustain with some modifications the decision of the appellate court.
We find respondent's argument regarding respondent's incapacity to represent them in the transaction with the Department untenable. There
are several kinds of agents. To quote a commentator on the matter:
An agent may be (1) universal: (2) general, or (3) special. A universal; agent is one authorized to do all acts for his
principal which can lawfully be delegated to an agent. So far as such a condition is possible, such an agent may be said
to have universal authority. (Mec. Sec. 58).
A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all
acts pertaining to a business of a particular class or series. He has usually authority either expressly conferred in general
terms or in effect made general by the usages, customs or nature of the business which he is authorized to transact.
An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in a particular
place, would, for this reason, be ordinarily deemed a general agent. (Mec Sec. ,30).
A special agent is one authorized to do some particular act or to act upon some particular occasion. lie acts usually in
accordance with specific instructions or under limitations necessarily implied from the nature of the act to be done. (Mec.
Sec. 61) (Padilla, Civil Law The Civil Code Annotated, Vol. VI, 1969 Edition, p. 204).
One does not have to undertake a close scrutiny of the document embodying the agreement between the petitioners and the respondent to
deduce that the 'latter was instituted as a general agent. Indeed, it can easily be seen by the way general words were employed in the
agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed.
The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of
sale of petitioners' merchandise with any entity or organization.
There is no merit in petitioners' allegations that the contract of agency between the parties was entered into under fraudulent representation
because respondent "would not disclose the agency with which she was supposed to transact and made the petitioner believe that she
would be dealing with The Visayas", and that "the petitioner had known of the transactions and/or project for the said purchase of the
Philippine flags by the Department of Education and Culture and precisely it was the one being followed up also by the petitioner."
If the circumstances were as claimed by the petitioners, they would have exerted efforts to protect their interests by limiting the respondent's
authority. There was nothing to prevent the petitioners from stating in the contract of agency that the respondent could represent them only in
the Visayas. Or to state that the Department of Education and Culture and the Department of National Defense, which alone would need a
million pesos worth of flags, are outside the scope of the agency. As the trial court opined, it is incredible that they could be so careless after
being in the business for fifteen years.
A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that "when the terms of an agreement have
been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be between the parties and their
successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing", except in cases specifically
mentioned in the same rule. Petitioners have failed to show that their agreement falls under any of these exceptions. The respondent was
given ample authority to transact with the Department in behalf of the petitioners. Equally without merit is the petitioners' proposition that the
transaction involved two separate contracts because there were two purchase orders and two deliveries. The petitioners' evidence is
overcome by other pieces of evidence proving that there was only one transaction.
The indorsement of then Assistant Executive Secretary Roberto Reyes to the Budget Commission on September 3, 1974 (Exhibit "C") attests
to the fact that out of the total budget of the Department for the fiscal year 1975, "P1,000,000.00 is for the purchase of national flags." This is
also reflected in the Financial and Work Plan Request for Allotment (Exhibit "F") submitted by Secretary Juan Manuel for fiscal year 1975
which however, divided the allocation and release of the funds into three, corresponding to the second, third, and fourth quarters of the said
year. Later correspondence between the Department and the Budget Commission (Exhibits "D" and "E") show that the first allotment of
P500.000.00 was released during the second quarter. However, due to the necessity of furnishing all of the public schools in the country with
the Philippine flag, Secretary Manuel requested for the immediate release of the programmed allotments intended for the third and fourth
quarters. These circumstances explain why two purchase orders and two deliveries had to be made on one transaction.
The petitioners' evidence does not necessarily prove that there were two separate transactions. Exhibit "6" is a general indorsement made by
Secretary Manuel for the purchase of the national flags for public schools. It contains no reference to the number of flags to be ordered or the
amount of funds to be released. Exhibit "7" is a letter request for a "similar authority" to purchase flags from the United Flag Industry. This
was, however, written by Dr. Narciso Albarracin who was appointed Acting Secretary of the Department after Secretary Manuel's tenure, and
who may not have known the real nature of the transaction.
If the contracts were separate and distinct from one another, the whole or at least a substantial part of the government's supply procurement
process would have been repeated. In this case, what were issued were mere indorsements for the release of funds and authorization for the
next purchase.
Since only one transaction was involved, we deny the petitioners' contention that respondent Nacianceno is not entitled to the stipulated
commission on the second delivery because of the revocation of the agency effected after the first delivery. The revocation of agency could
not prevent the respondent from earning her commission because as the trial court opined, it came too late, the contract of sale having been
already perfected and partly executed.
In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this Court held:
We do not mean to question the general doctrine as to the power of a principal to revoke the authority of his agent at will,
in the absence of a contract fixing the duration of the agency (subject, however, to some well defined exceptions). Our
ruling is that at the time fixed by the manager of the plaintiff company for the termination of the negotiations, the
defendant real estate agent had already earned the commissions agreed upon, and could not be deprived thereof by the
arbitrary action of the plaintiff company in declining to execute the contract of sale for some reason personal to itself.
The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and, thereafter, dealing directly with the
buyer. (Infante v. Cunanan, 93 Phil. 691).
The appellate courts citation of its previous ruling in Heimbrod et al. v. Ledesma (C.A. 49 O.G. 1507) is correct:
The appellee is entitled to recovery. No citation is necessary to show that the general law of contracts the equitable
principle of estoppel. and the expense of another, uphold payment of compensation for services rendered.
There is merit, however, in the petitioners' contention that the agent's commission on the first delivery was fully paid. The evidence does not
sustain the respondent's claim that the petitioners paid her only 5% and that their right to collect another 25% commission on the first
delivery must be upheld.
When respondent Nacianceno asked the Malacanang Complaints and Investigation Office to help her collect her commission, her statement
under oath referred exclusively to the 30% commission on the second delivery. The statement was emphatic that "now" her demand was for
the 30% commission on the (second) release of P469,980.00. The demand letter of the respondent's lawyer dated November 13, 1984
asked petitioner Siasat only for the 30% commission due from the second delivery. The fact that the respondent demanded only the
commission on the second delivery without reference to the alleged unpaid balance which was only slightly less than the amount claimed
can only mean that the commission on the first delivery was already fully paid, Considering the sizeable sum involved, such an omission is
too glaringly remiss to be regarded as an oversight.
Moreover, the respondent's authorization letter (Exhibit "5") bears her signature with the handwritten words "Fully Paid", inscribed above it.
The respondent contested her signature as a forgery, Handwriting experts from two government agencies testified on the matter. The reason
given by the trial court in ruling for the respondent is too flimsy to warrant a finding of forgery.
The court stated that in thirteen documents presented as exhibits, the private respondent signed her name as "Tessie Nacianceno" while in
this particular instance, she signed as "T. Nacianceno."
The stated basis is inadequate to sustain the respondent's allegation of forgery. A variance in the manner the respondent signed her name
can not be considered as conclusive proof that the questioned signature is a forgery. The mere fact that the respondent signed thirteen
documents using her full name does not rule out the possibility of her having signed the notation "Fully Paid", with her initial for the given
came and the surname written in full. What she was signing was a mere acknowledgment.
This leaves the expert testimony as the sole basis for the verdict of forgery.
In support of their allegation of full payment as evidenced by the signed authorization letter (Exhibit "5-A"), the petitioners presented as
witness Mr. Francisco Cruz. Jr., a senior document examiner of the Philippine Constabulary Crime laboratory. In rebuttal, the respondent
presented Mr. Arcadio Ramos, a junior document examiner of the National Bureau of Investigation.
While the experts testified in a civil case, the principles in criminal cases involving forgery are applicable. Forgery cannot be presumed. It
must be proved.
In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:
xxx xxx xxx
... Where the evidence, as here, gives rise to two probabilities, one consistent with the defendant's innocence and
another indicative of his guilt, that which is favorable to the accused should be considered. The constitutional
presumption of innocence continues until overthrown by proof of guilt beyond reasonable doubt, which requires moral
certainty which convinces and satisfies the reason and conscience of those who are to act upon it. (People v. Clores, et
al., 125 SCRA 67; People v. Bautista, 81 Phil. 78).
We ruled in another case that where the supposed expert's testimony would constitute the sole ground for conviction and there is equally
convincing expert testimony to the contrary, the constitutional presumption of innocence must prevail. (Lorenzo Ga. Cesar v. Hon.
Sandiganbayan and People of the Philippines, 134 SCRA 105). In the present case, the circumstances earlier mentioned taken with the
testimony of the PC senior document examiner lead us to rule against forgery.
We also rule against the respondent's allegation that the petitioners acted in bad faith when they revoked the agency given to the
respondent.
Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts. To support a judgment for damages, facts
which justify the inference of a lack or absence of good faith must be alleged and proven. (Bacolod-Murcia Milling Co., Inc. vs. First Farmers
Milling Co., Inc., Etc., 103 SCRA 436).
There is no evidence on record from which to conclude that the revocation of the agency was deliberately effected by the petitioners to avoid
payment of the respondent's commission. What appears before us is only the petitioner's use in court of such a factual allegation as a
defense against the respondent's claim. This alone does not per se make the petitioners guilty of bad faith for that defense should have been
fully litigated.
Moral damages cannot be awarded in the absence of a wrongful act or omission or of fraud or bad faith. (R & B Surety & Insurance Co., Inc.
vs. Intermediate Appellate Court, 129 SCRA 736).
We therefore, rule that the award of P25,000.00 as moral damages is without basis.
The additional award of P25,000.00 damages by way of attorney's fees, was given by the courts below on the basis of Article 2208,
Paragraph 2, of the Civil Code, which provides: "When the defendant's act or omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interests;" attorney's fees may be awarded as damages. (Pirovano et al. v. De la Rama
Steamship Co., 96 Phil. 335).
The underlying circumstances of this case lead us to rule out any award of attorney's fees. For one thing, the respondent did not come to
court with completely clean hands. For another, the petitioners apparently believed they could legally revoke the agency in the manner they
did and deal directly with education officials handling the purchase of Philippine flags. They had reason to sincerely believe they did not have
to pay a commission for the second delivery of flags.
We cannot close this case without commenting adversely on the inexplicably strange procurement policies of the Department of Education
and Culture in its purchase of Philippine flags. There is no reason why a shocking 30% of the taxpayers' money should go to an agent or
facilitator who had no flags to sell and whose only work was to secure and handcarry the indorsements of education and budget officials.
There are only a few manufacturers of flags in our country with the petitioners claiming to have supplied flags for our public schools on earlier
occasions. If public bidding was deemed unnecessary, the Department should have negotiated directly with flag manufacturers. Considering
the sad plight of underpaid and overworked classroom teachers whose pitiful salaries and allowances cannot sometimes be paid on time, a
P300,000.00 fee for a P1,000,000.00 purchase of flags is not only clearly unnecessary but a scandalous waste of public funds as well.
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are ordered to pay the respondent the amount of
ONE HUNDRED FOURTY THOUSAND NINE HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission on the second
delivery of flags with legal interest from the date of the trial court's decision. No pronouncement as to costs.
SO ORDERED.
Relova, De la Fuente an
FIRST DIVISION
[G. R. No. 129919. February 6, 2002]
DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS, RODOLFO S. GUEVARRA, and FERNANDO
AUSTRIA, respondents.
DECISION
PARDO, J.:
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 P156,473.90representing 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 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:
ORDER
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 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.
SO ORDERED.
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 datedJuly 17, 1992.
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 July 19, 1996, the Court of Appeals promulgated a decision affirming that of the trial court. [6] OnSeptember 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]
Hence, this appeal.[9]
The Issues
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 principal-agent 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 BONDINGwith the right, upon our prior written consent, to
appoint agents and sub-agents.
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, [20] but, couched in general terms, it is limited only to acts of administration. [21]
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 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,
which states that the payment shall come from respondent Guevarras revolving fund or collection. The authority to pay is worded as
follows:
[25]
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;
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 respondentGuevarra 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.
G.R. No. 140667
August 12, 2004
WOODCHILD HOLDINGS, INC., petitioner,

vs.
ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., respondent.
DECISION
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 Decision 2 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-3B-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-A-3-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. 6 On September 5, 1991, a Deed of Absolute Sale 7 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-squaremeter 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-squaremeter 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.
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.
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;
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;
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;
d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual damages and unrealized income;
e) to pay attorney's fees in the amount of P100,000.00; and
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. 491-A-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-B-2 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-B1, 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 unless
ratified by the corporation.23
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-3-B-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-B2 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 non-performance 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.
G.R. No. 148775
January 13, 2004
SHOPPERS PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner,

vs.
EFREN P. ROQUE, respondent.
DECISION
VITUG, J.:
On 23 December 1993, petitioner Shoppers Paradise Realty & Development Corporation, represented by its president, Veredigno Atienza,
entered into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, with an area of two thousand and thirty
six (2,036) square meters, situated at Plaza Novaliches, Quezon City, covered by Transfer of Certificate of Title (TCT) No. 30591 of the
Register of Deeds of Quezon City in the name of Dr. Roque. Petitioner issued to Dr. Roque a check for P250,000.00 by way of "reservation
payment." Simultaneously, petitioner and Dr. Roque likewise entered into a memorandum of agreement for the construction, development
and operation of a commercial building complex on the property. Conformably with the agreement, petitioner issued a check for another
P250,000.00 "downpayment" to Dr. Roque.
The contract of lease and the memorandum of agreement, both notarized, were to be annotated on TCT No. 30591 within sixty (60) days
from 23 December 1993 or until 23 February 1994. The annotations, however, were never made because of the untimely demise of Dr.
Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P. Roque, one of the
surviving children of the late Dr. Roque, but the negotiations broke down due to some disagreements. In a letter, dated 3 November 1994,
respondent advised petitioner "to desist from any attempt to enforce the aforementioned contract of lease and memorandum of agreement".
On 15 February 1995, respondent filed a case for annulment of the contract of lease and the memorandum of agreement, with a prayer for
the issuance of a preliminary injunction, before Branch 222 of the Regional Trial Court of Quezon City. Efren P. Roque alleged that he had
long been the absolute owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr.
Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had no authority to enter into the assailed
agreements with petitioner. The donation was made in a public instrument duly acknowledged by the donor-spouses before a notary public
and duly accepted on the same day by respondent before the notary public in the same instrument of donation. The title to the property,
however, remained in the name of Dr. Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later, or
on 11 May 1994, under TCT No. 109754 of the Register of Deeds of Quezon City. Respondent, while he resided in the United States of
America, delegated to his father the mere administration of the property. Respondent came to know of the assailed contracts with petitioner
only after retiring to the Philippines upon the death of his father.
On 9 August 1996, the trial court dismissed the complaint of respondent; it explained:
"Ordinarily, a deed of donation need not be registered in order to be valid between the parties. Registration, however, is important
in binding third persons. Thus, when Felipe Roque entered into a leased contract with defendant corporation, plaintiff Efren Roque
(could) no longer assert the unregistered deed of donation and say that his father, Felipe, was no longer the owner of the subject
property at the time the lease on the subject property was agreed upon.
"The registration of the Deed of Donation after the execution of the lease contract did not affect the latter unless he had knowledge
thereof at the time of the registration which plaintiff had not been able to establish. Plaintiff knew very well of the existence of the
lease. He, in fact, met with the officers of the defendant corporation at least once before he caused the registration of the deed of
donation in his favor and although the lease itself was not registered, it remains valid considering that no third person is involved.
Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule
that contracts take effect not only between the parties themselves but also between their assigns and heirs (Article 1311, Civil
Code) and therefore, the lease contract together with the memorandum of agreement would be conclusive on plaintiff Efren Roque.
He is bound by the contract even if he did not participate therein. Moreover, the agreements have been perfected and partially
executed by the receipt of his father of the downpayment and deposit totaling to P500,000.00." 1
The Trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the annotation of the
questioned Contract of Lease and Memorandum of Agreement.
On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memorandum of
Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third
persons, the appellate court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in
favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned. The appellate court
based its findings largely on the testimony of Veredigno Atienza during cross-examination, viz;
"Q. Aside from these two lots, the first in the name of Ruben Roque and the second, the subject of the construction involved in this
case, you said there is another lot which was part of development project?
"A. Yes, this was the main concept of Dr. Roque so that the adjoining properties of his two sons, Ruben and Cesar, will comprise
one whole. The other whole property belongs to Cesar.
"Q. You were informed by Dr. Roque that this property was given to his three (3) sons; one to Ruben Roque, the other to Efren,
and the other to Cesar Roque?
"A. Yes.
"Q. You did the inquiry from him, how was this property given to them?
"A. By inheritance.
"Q. Inheritance in the form of donation?
"A. I mean inheritance.
"Q. What I am only asking you is, were you told by Dr. Felipe C. Roque at the time of your transaction with him that all these three
properties were given to his children by way of donation?
"A. What Architect Biglang-awa told us in his exact word: "Yang mga yan pupunta sa mga anak. Yong kay Ruben pupunta kay
Ruben. Yong kay Efren palibhasa nasa America sya, nasa pangalan pa ni Dr. Felipe C. Roque."
"x x x
xxx
xxx
"Q. When was the information supplied to you by Biglang-awa? Before the execution of the Contract of Lease and Memorandum of
Agreement?
"A. Yes.
"Q. That being the case, at the time of the execution of the agreement or soon before, did you have such information confirmed by
Dr. Felipe C. Roque himself?
"A. Biglang-awa did it for us.
"Q. But you yourself did not?
"A. No, because I was doing certain things. We were a team and so Biglang-awa did it for us.
"Q. So in effect, any information gathered by Biglang-awa was of the same effect as if received by you because you were members
of the same team?
"A. Yes."2
In the instant petition for review, petitioner seeks a reversal of the decision of the Court of Appeals and the reinstatement of the ruling of the
Regional Trial Court; it argues that the presumption of good faith it so enjoys as a party dealing in registered land has not been overturned by
the aforequoted testimonial evidence, and that, in any event, respondent is barred by laches and estoppel from denying the contracts.
The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred
in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation
results in an effective transfer of title over the property from the donor to the donee. 3 In donations of immovable property, the law requires for
its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the
donee must satisfy.4 The Civil Code provides, however, that "titles of ownership, or other rights over immovable property, which are not duly
inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons." 5 It is enough,
between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third
persons, the donation must be registered in the registry of Property (Registry of Land Titles and Deeds). 6 Consistently, Section 50 of Act No.
496 (Land Registration Act), as so amended by Section 51 of P.D. No. 1529 (Property Registration Decree), states:
"SECTION 51. Conveyance and other dealings by registered owner.- An owner of registered land may convey, mortgage, lease,
charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or
other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will
purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a
contract between the parties and as evidence of authority to the Register of Deeds to make registration.
"The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all
cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land
lies." (emphasis supplied)
A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefore, and he is not required
to go beyond the certificate to determine the condition of the property 7 but, where such party has knowledge of a prior existing interest which
is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration
as regards to him.8
The appellate court was not without substantial basis when it found petitioner to have had knowledge of the donation at the time it entered
into the two agreements with Dr. Roque. During their negotiation, petitioner, through its representatives, was apprised of the fact that the
subject property actually belonged to respondent.
It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent.
In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter. 9Article 1878 of the Civil Code
expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of
real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special
power of attorney is thus necessary for its execution through an agent.1awphil.ne+
The Court cannot accept petitioners argument that respondent is guilty of laches. Laches, in its real sense, is the failure or neglect, for an
unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is
negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has
abandoned or declined to assert it.10
Respondent learned of the contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed
the validity of the agreements. Hardly, could respondent then be said to have neglected to assert his case for unreasonable length of time.
Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in pais, in relation to the party sought to
be estopped, are: 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the
impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an intent or, at
least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by
him of the real facts.11 With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the
means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the party to be
estopped; and 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or
prejudice.12 It has not been shown that respondent intended to conceal the actual facts concerning the property; more importantly, petitioner
has been shown not to be totally unaware of the real ownership of the subject property.
Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision.
WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals declaring the contract of lease and memorandum of
agreement entered into between Dr. Felipe C. Roque and Shoppers Paradise Realty & Development Corporation not to be binding on
respondent is AFFIRMED. No costs.
SO ORDERED.
G.R. No. 102737 August 21, 1996
FRANCISCO A. VELOSO, petitioner,
vs.
COURT OF APPEALS, AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the REGISTER OF DEEDS FOR
THE CITY OF MANILA, respondents.
TORRES, JR., J.:p

This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs against appellant. 1
The following are the antecedent facts:
Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an area of one hundred
seventy seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of
Manila. 2 The title was registered in the name of Francisco A. Veloso, single, 3 on October 4, 1957. 4 The said title was subsequently
cancelled and a new one, Transfer Certificate of Title No. 180685, was issued in the name of Aglaloma B. Escario, married to
Gregorio L. Escario, on May 24, 1988. 5
On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property with damages and
preliminary injunction and/or restraining order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional
Trial Court, Branch 45, Manila. Petitioner alleged therein that he was the absolute owner of the subject property and he never
authorized anybody, not even his wife, to sell it. He alleged that he was in possession of the title but when his wife, Irma, left for
abroad, he found out that his copy was missing. He then verified with the Registry of Deeds of Manila and there he discovered that
his title was already cancelled in favor of defendant Aglaloma Escario. The transfer of property was supported by a General Power
of Attorney 6 dated November 29, 1985 and Deed of Absolute Sale, dated November 2, 1987, executed by Irma Veloso, wife of the
petitioner and appearing as his attorney-in-fact, and defendant Aglaloma Escario. 7 Petitioner Veloso, however, denied having
executed the power of attorney and alleged that his signature was falsified. He also denied having seen or even known Rosemarie
Reyes and Imelda Santos, the supposed witnesses in the execution of the power of attorney. He vehemently denied having met or
transacted with the defendant. Thus, he contended that the sale of the property, and the subsequent transfer thereof, were null and
void. Petitioner Veloso, therefore, prayed that a temporary restraining order be issued to prevent the transfer of the subject
property; that the General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No. 180685 be
annulled; and the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the alleged
irregularity. She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and substance and
was duly notarized. She contended that plaintiff (herein petitioner), had no cause of action against her. In seeking for the
declaration of nullity of the documents, the real party in interest was Irma Veloso, the wife of the plaintiff. She should have been
impleaded in the case. In fact, Plaintiff's cause of action should have been against his wife, Irma. Consequently, defendant Escario
prayed for the dismissal of the complaint and the payment to her of damages. 8
Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not there was a valid sale of the subject
property. 9
During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the subject property from the Philippine
Building Corporation, as evidenced by a Deed of Sale dated October 1, 1957. 10 He married Irma Lazatin on January 20,
1962. 11 Hence, the property did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the power of
attorney and as proof that his signature was falsified, he presented Allied Bank Checks Nos. 16634640, 16634641 and 16634643,
which allegedly bore his genuine signature.
Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the general power of attorney. He attested
that he did not sign thereon, and the same was never entered in his Notarial Register on November 29, 1985.
In the decision of the trial court dated March 9, 1990, 12 defendant Aglaloma Escario was adjudged the lawful owner of the property
as she was deemed an innocent purchaser for value. The assailed general power of attorney was held to be valid and sufficient for
the purpose. The trial court ruled that there was no need for a special power of attorney when the special power was already
mentioned in the general one. It also declared that plaintiff failed to substantiate his allegation of fraud. The court also stressed that
plaintiff was not entirely blameless for although he admitted to be the only person who had access to the title and other important
documents, his wife was still able to possess the copy. Citing Section 55 of Act 496, the court held that Irma's possession and
production of the certificate of title was deemed a conclusive authority from the plaintiff to the Register of Deeds to enter a new
certificate. Then applying the principle of equitable estoppel, plaintiff was held to bear the loss for it was he who made the wrong
possible. Thus:
WHEREFORE, the Court finds for the defendants and against plaintiff
a. declaring that there was a valid sale of the subject property in favor of the defendant;
b. denying all other claims of the parties for want of legal and factual basis.
Without pronouncement as to costs.
SO ORDERED.
Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals. The respondent court affirmed in toto
the findings of the trial court.
Hence, this petition for review before Us.
This petition for review was initially dismissed for failure to submit an affidavit of service of a copy of the petition on the counsel for
private respondent. 13 A motion for reconsideration of the resolution was filed but it was denied in are resolution dated March 30,
1992. 14 A second motion for reconsideration was filed and in a resolution dated Aug. 3, 1992, the motion was granted and the
petition for review was reinstated. 15
A supplemental petition was filed on October 9, 1992 with the following assignment of errors:
I
The Court of Appeals committed a grave error in not finding that the forgery of the power of attorney (Exh . "C") had been
adequately proven, despite the preponderant evidence, and in doing so, it has so far departed from the applicable
provisions of law and the decisions of this Honorable Court, as to warrant the grant of this petition for review on certiorari.
II
There are principles of justice and equity that warrant a review of the decision.
III
The Court of Appeals erred in affirming the decision of the trial court which misapplied the principle of equitable estoppel
since the petitioner did not fail in his duty of observing due diligence in the safekeeping of the title to the property.
We find petitioner's contentions not meritorious.
An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was notarized and
as such, it carries the evidentiary weight conferred upon it with respect to its due execution. While it is true that it was denominated
as a general power of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of
real property, more specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said
attorney shall deem fit and proper. 16
Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had expressly
authorized the agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the
general power when it is specified therein the act or transaction for which the special power is required.
The general power of attorney was accepted by the Register of Deeds when the title to the subject property was cancelled and
transferred in the name of private respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:
Whether the instrument be denominated as "general power of attorney" or "special power of attorney", what matters is
the extent of the power or powers contemplated upon the agent or attorney in fact. If the power is couched in general
terms, then such power cannot go beyond acts of administration. However, where the power to sell is specific, it not
being merely implied, much less couched in general terms, there can not be any doubt that the attorney in fact may
execute a valid sale. An instrument may be captioned as "special power of attorney" but if the powers granted are
couched in general terms without mentioning any specific power to sell or mortgage or to do other specific acts of strict
dominion, then in that case only acts of administration may be deemed conferred.
Petitioner contends that his signature on the power of attorney was falsified. He also alleges that the same was not duly notarized
for as testified by Atty. Tubig himself, he did not sign thereon nor was it ever recorded in his notarial register. To bolster his
argument, petitioner had presented checks, marriage certificate and his residence certificate to prove his alleged genuine signature
which when compared to the signature in the power of attorney, showed some difference.
We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere variance of
the signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be presumed 17 Petitioner,
however, failed to prove his allegation and simply relied on the apparent difference of the signatures. His denial had not
established that the signature on the power of attorney was not his.
We agree with the conclusion of the lower court that private respondent was an innocent purchaser for value. Respondent
Aglaloma relied on the power of attorney presented by petitioner's wife, Irma. Being the wife of the owner and having with her the
title of the property, there was no reason for the private respondent not to believe in her authority. Moreover, the power of attorney
was notarized and as such, carried with it the presumption of its due execution. Thus, having had no inkling on any irregularity and
having no participation thereof, private respondent was a buyer in good faith. It has been consistently held that a purchaser in good
faith is one who buys property of another, without notice that some other person has a right to, or interest in such property and
pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other
person in the property. 18
Documents acknowledged before a notary public have the evidentiary weight with respect to their due execution. The questioned
power of attorney and deed of sale, were notarized and therefore, presumed to be valid and duly executed. Atty. Tubig denied
having notarized the said documents and alleged that his signature had also been falsified. He presented samples of his signature
to prove his contention. Forgery should be proved by clear and convincing evidence and whoever alleges it has the burden of
proving the same. Just like the petitioner, witness Atty. Tubig merely pointed out that his signature was different from that in the
power of attorney and deed of sale. There had never been an accurate examination of the signature, even that of the petitioner. To
determine forgery, it was held in Cesar vs. Sandiganbayan 19(quoting Osborn, The Problem of Proof) that:
The process of identification, therefore, must include the determination of the extent, kind, and significance of this
resemblance as well as of the variation. It then becomes necessary to determine whether the variation is due to the
operation of a different personality, or is only the expected and inevitable variation found in the genuine writing of the
same writer. It is also necessary to decide whether the resemblance is the result of a more or less skillful imitation, or is
the habitual and characteristic resemblance which naturally appears in a genuine writing. When these two questions are
correctly answered the whole problem of identification is solved.
Even granting for the sake of argument, that the petitioner's signature was falsified and consequently, the power of attorney and
the deed of sale were null and void, such fact would not revoke the title subsequently issued in favor of private respondent
Aglaloma. In Tenio-Obsequio vs. Court of Appeals, 20 it was held, viz:
The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title through
fraud. The remedy of the person prejudiced is to bring an action for damages against those who caused or employed the
fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of
damages against the Assurance Fund.
Finally; the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that where
one or two innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it. From the evidence
adduced, it should be the petitioner who should bear the loss. As the court a quo found:
Besides, the records of this case disclosed that the plaintiff is not entirely free from blame. He admitted that he is the sole
person who has access to TCT No. 49138 and other documents appertaining thereto (TSN, May 23, 1989, pp. 7-12)
However, the fact remains that the Certificate of Title, as well as other documents necessary for the transfer of title were
in the possession of plaintiff's wife, Irma L. Veloso, consequently leaving no doubt or any suspicion on the part of the
defendant as to her authority. Under Section 55 of Act 496, as amended, Irma's possession and production of the
Certificate of Title to defendant operated as "conclusive authority from the plaintiff to the Register of Deeds to enter a
new certificate." 21
Considering the foregoing premises, we found no error in the appreciation of facts and application of law by the lower court which
will warrant the reversal or modification of the appealed decision.
ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.
SO ORDERED.
G.R. No. 126297
February 11, 2008
PROFESSIONAL SERVICES, INC., petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD and ENRIQUE AGANA, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 126467
February 11, 2008
NATIVIDAD (Substituted by her children MARCELINO AGANA III, ENRIQUE AGANA, JR., EMMA AGANA ANDAYA, JESUS AGANA,
and RAYMUND AGANA) and ENRIQUE AGANA, petitioners,
vs.
THE COURT OF APPEALS and JUAN FUENTES, respondents,
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - x
G.R. No. 127590
February 11, 2008
MIGUEL AMPIL, petitioner,

vs.
THE COURT OF APPEALS and NATIVIDAD AGANA and ENRIQUE AGANA, respondents.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
As the hospital industry changes, so must the laws and jurisprudence governing hospital liability. The immunity from medical malpractice
traditionally accorded to hospitals has to be eroded if we are to balance the interest of the patients and hospitals under the present setting.
Before this Court is a motion for reconsideration filed by Professional Services, Inc. (PSI), petitioner in G.R. No. 126297, assailing the Courts
First Division Decision dated January 31, 2007, finding PSI and Dr. Miguel Ampil, petitioner in G.R. No. 127590, jointly and severally liable for
medical negligence.
A brief revisit of the antecedent facts is imperative.
On April 4, 1984, Natividad Agana was admitted at the Medical City General Hospital (Medical City) because of difficulty of bowel movement
and bloody anal discharge. Dr. Ampil diagnosed her to be suffering from "cancer of the sigmoid." Thus, on April 11, 1984, Dr. Ampil, assisted
by the medical staff1 of Medical City, performed an anterior resection surgery upon her. During the surgery, he found that the malignancy in
her sigmoid area had spread to her left ovary, necessitating the removal of certain portions of it. Thus, Dr. Ampil obtained the consent of Atty.
Enrique Agana, Natividads husband, to permit Dr. Juan Fuentes, respondent in G.R. No. 126467, to perform hysterectomy upon Natividad.
Dr. Fuentes performed and completed the hysterectomy. Afterwards, Dr. Ampil took over, completed the operation and closed the incision.
However, the operation appeared to be flawed. In the corresponding Record of Operation dated April 11, 1984, the attending nurses entered
these remarks:
sponge count lacking 2
announced to surgeon searched done (sic) but to no avail continue for closure.
After a couple of days, Natividad complained of excruciating pain in her anal region. She consulted both Dr. Ampil and Dr. Fuentes about it.
They told her that the pain was the natural consequence of the surgical operation performed upon her. Dr. Ampil recommended that
Natividad consult an oncologist to treat the cancerous nodes which were not removed during the operation.
On May 9, 1984, Natividad, accompanied by her husband, went to the United States to seek further treatment. After four (4) months of
consultations and laboratory examinations, Natividad was told that she was free of cancer. Hence, she was advised to return to the
Philippines.
On August 31, 1984, Natividad flew back to the Philippines, still suffering from pains. Two (2) weeks thereafter, her daughter found a piece of
gauze protruding from her vagina. Dr. Ampil was immediately informed. He proceeded to Natividads house where he managed to extract by
hand a piece of gauze measuring 1.5 inches in width. Dr. Ampil then assured Natividad that the pains would soon vanish.
Despite Dr. Ampils assurance, the pains intensified, prompting Natividad to seek treatment at the Polymedic General Hospital. While
confined thereat, Dr. Ramon Gutierrez detected the presence of a foreign object in her vagina -- a foul-smelling gauze measuring 1.5 inches
in width. The gauze had badly infected her vaginal vault. A recto-vaginal fistula had formed in her reproductive organ which forced stool to
excrete through the vagina. Another surgical operation was needed to remedy the situation. Thus, in October 1984, Natividad underwent
another surgery.
On November 12, 1984, Natividad and her husband filed with the Regional Trial Court, Branch 96, Quezon City a complaint for damages
against PSI (owner of Medical City), Dr. Ampil and Dr. Fuentes.
On February 16, 1986, pending the outcome of the above case, Natividad died. She was duly substituted by her above-named children (the
Aganas).
On March 17, 1993, the trial court rendered judgment in favor of spouses Agana finding PSI, Dr. Ampil and Dr. Fuentes jointly and severally
liable. On appeal, the Court of Appeals, in its Decision dated September 6, 1996, affirmed the assailed judgment with modification in the
sense that the complaint against Dr. Fuentes was dismissed.
PSI, Dr. Ampil and the Aganas filed with this Court separate petitions for review on certiorari. On January 31, 2007, the Court, through its
First Division, rendered a Decision holding that PSI is jointly and severally liable with Dr. Ampil for the following reasons: first, there is an
employer-employee relationship between Medical City and Dr. Ampil. The Court relied on Ramos v. Court of Appeals,2 holding that for the
purpose of apportioning responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals
and their attending and visiting physicians; second, PSIs act of publicly displaying in the lobby of the Medical City the names and
specializations of its accredited physicians, including Dr. Ampil, estopped it from denying the existence of an employer-employee relationship
between them under the doctrine of ostensible agency or agency by estoppel; and third, PSIs failure to supervise Dr. Ampil and its
resident physicians and nurses and to take an active step in order to remedy their negligence rendered it directly liable under the doctrine of
corporate negligence.
In its motion for reconsideration, PSI contends that the Court erred in finding it liable under Article 2180 of the Civil Code, there being no
employer-employee relationship between it and its consultant, Dr. Ampil. PSI stressed that the Courts Decision in Ramos holding that "an
employer-employee relationship in effect exists between hospitals and their attending and visiting physicians for the purpose of apportioning
responsibility" had been reversed in a subsequent Resolution. 3 Further, PSI argues that the doctrine of ostensible agency or agency by
estoppelcannot apply because spouses Agana failed to establish one requisite of the doctrine, i.e., that Natividad relied on the
representation of the hospital in engaging the services of Dr. Ampil. And lastly, PSI maintains that thedoctrine of corporate negligence is
misplaced because the proximate cause of Natividads injury was Dr. Ampils negligence.
The motion lacks merit.
As earlier mentioned, the First Division, in its assailed Decision, ruled that an employer-employee relationship "in effect" exists between the
Medical City and Dr. Ampil. Consequently, both are jointly and severally liable to the Aganas. This ruling proceeds from the following
ratiocination in Ramos:
We now discuss the responsibility of the hospital in this particular incident. The unique practice (among private hospitals) of filling
up specialist staff with attending and visiting "consultants," who are allegedly not hospital employees, presents problems in
apportioning responsibility for negligence in medical malpractice cases. However, the difficulty is only more apparent than real.
In the first place, hospitals exercise significant control in the hiring and firing of consultants and in the conduct of their
work within the hospital premises. Doctors who apply for "consultant" slots, visiting or attending, are required to submit proof of
completion of residency, their educational qualifications; generally, evidence of accreditation by the appropriate board (diplomate),
evidence of fellowship in most cases, and references. These requirements are carefully scrutinized by members of the hospital
administration or by a review committee set up by the hospital who either accept or reject the application. This is particularly true
with respondent hospital.
After a physician is accepted, either as a visiting or attending consultant, he is normally required to attend clinicopathological conferences, conduct bedside rounds for clerks, interns and residents, moderate grand rounds and patient
audits and perform other tasks and responsibilities, for the privilege of being able to maintain a clinic in the hospital,
and/or for the privilege of admitting patients into the hospital. In addition to these, the physicians performance as a
specialist is generally evaluated by a peer review committee on the basis of mortality and morbidity statistics, and
feedback from patients, nurses, interns and residents. A consultant remiss in his duties, or a consultant who regularly
falls short of the minimum standards acceptable to the hospital or its peer review committee, is normally politely
terminated.
In other words, private hospitals hire, fire and exercise real control over their attending and visiting "consultant" staff.
While "consultants" are not, technically employees, a point which respondent hospital asserts in denying all
responsibility for the patients condition, the control exercised, the hiring, and the right to terminate consultants all fulfill
the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing
whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we
rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in
effect exists between hospitals and their attending and visiting physicians. This being the case, the question now arises as
to whether or not respondent hospital is solidarily liable with respondent doctors for petitioners condition.
The basis for holding an employer solidarily responsible for the negligence of its employee is found in Article 2180 of the Civil Code
which considers a person accountable not only for his own acts but also for those of others based on the formers responsibility
under a relationship of partia ptetas.
Clearly, in Ramos, the Court considered the peculiar relationship between a hospital and its consultants on the bases of certain factors. One
such factor is the "control test" wherein the hospital exercises control in the hiring and firing of consultants, like Dr. Ampil, and in the conduct
of their work.
Actually, contrary to PSIs contention, the Court did not reverse its ruling in Ramos. What it clarified was that the De Los Santos Medical
Clinic did not exercise control over its consultant, hence, there is no employer-employee relationship between them. Thus, despite the
granting of the said hospitals motion for reconsideration, the doctrine in Ramos stays, i.e., for the purpose of allocating responsibility in
medical negligence cases, an employer-employee relationship exists between hospitals and their consultants.
In the instant cases, PSI merely offered a general denial of responsibility, maintaining that consultants, like Dr. Ampil, are "independent
contractors," not employees of the hospital. Even assuming that Dr. Ampil is not an employee of Medical City, but an independent contractor,
still the said hospital is liable to the Aganas.
In Nograles, et al. v. Capitol Medical Center, et al.,4 through Mr. Justice Antonio T. Carpio, the Court held:
The question now is whether CMC is automatically exempt from liability considering that Dr. Estrada is an independent contractorphysician.
In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception to this
principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. (Jones v. Philpott, 702 F. Supp. 1210
[1988]) This exception is also known as the "doctrine of apparent authority." (Sometimes referred to as the apparent or ostensible
agency theory. [King v. Mitchell, 31 A.D.3rd 958, 819 N.Y. S.2d 169 (2006)].
xxx
The doctrine of apparent authority essentially involves two factors to determine the liability of an independent contractor-physician.
The first factor focuses on the hospitals manifestations and is sometimes described as an inquiry whether the hospital acted in a
manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or
agent of the hospital. (Diggs v. Novant Health, Inc., 628 S.E.2d 851 (2006) citing Hylton v. Koontz, 138 N.C. App. 629 (2000). In
this regard, the hospital need not make express representations to the patient that the treating physician is an employee
of the hospital; rather a representation may be general and implied. (Id.)
The doctrine of apparent authority is a specie of the doctrine of estoppel. Article 1431 of the Civil Code provides that "[t]hrough
estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as
against the person relying thereon." Estoppel rests on this rule: "Whether a party has, by his own declaration, act, or omission,
intentionally and deliberately led another to believe a particular thing true, and to act upon such belief, he cannot, in any litigation
arising out of such declaration, act or omission, be permitted to falsify it. (De Castro v. Ginete, 137 Phil. 453 [1969], citing Sec. 3,
par. A, Rule 131 of the Rules of Court. See also King v. Mitchell, 31 A.D.3rd 958, 819 N.Y.S.2d 169 [2006]).
xxx
The second factor focuses on the patients reliance. It is sometimes characterized as an inquiry on whether the plaintiff acted in
reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence. (Diggs v. Novant Health, Inc.)
PSI argues that the doctrine of apparent authority cannot apply to these cases because spouses Agana failed to establish proof of their
reliance on the representation of Medical City that Dr. Ampil is its employee.
The argument lacks merit.
Atty. Agana categorically testified that one of the reasons why he chose Dr. Ampil was that he knew him to be a staff member of Medical
City, a prominent and known hospital.
Q
Will you tell us what transpired in your visit to Dr. Ampil?
A Well, I saw Dr. Ampil at the Medical City, I know him to be a staff member there, and I told him about the case of my wife
and he asked me to bring my wife over so she could be examined. Prior to that, I have known Dr. Ampil, first, he was staying in
front of our house, he was a neighbor, second, my daughter was his student in the University of the East School of Medicine at
Ramon Magsaysay; and when my daughter opted to establish a hospital or a clinic, Dr. Ampil was one of our consultants on how to
establish that hospital. And from there, I have known that he was a specialist when it comes to that illness.
Atty. Agcaoili
On that particular occasion, April 2, 1984, what was your reason for choosing to contact Dr. Ampil in connection with your wifes
illness?
A First, before that, I have known him to be a specialist on that part of the body as a surgeon; second, I have known him to be a
staff member of the Medical City which is a prominent and known hospital. And third, because he is a neighbor, I expect
more than the usual medical service to be given to us, than his ordinary patients. 5
Clearly, PSI is estopped from passing the blame solely to Dr. Ampil. Its act of displaying his name and those of the other physicians in the
public directory at the lobby of the hospital amounts to holding out to the public that it offers quality medical service through the listed
physicians. This justifies Atty. Aganas belief that Dr. Ampil was a member of the hospitals staff. It must be stressed that under the
doctrine of apparent authority, the question in every case is whether the principal has by his voluntary act placed the agent in such
a situation that a person of ordinary prudence, conversant with business usages and the nature of the particular business, is
justified in presuming that such agent has authority to perform the particular act in question. 6 In these cases, the circumstances yield
a positive answer to the question.
The challenged Decision also anchors its ruling on the doctrine of corporate responsibility.7 The duty of providing quality medical service
is no longer the sole prerogative and responsibility of the physician. This is because the modern hospital now tends to organize a highlyprofessional medical staff whose competence and performance need also to be monitored by the hospital commensurate with its inherent
responsibility to provide quality medical care.8 Such responsibility includes the proper supervision of the members of its medical staff.
Accordingly, the hospital has the duty to make a reasonable effort to monitor and oversee the treatment prescribed and
administered by the physicians practicing in its premises.
Unfortunately, PSI had been remiss in its duty. It did not conduct an immediate investigation on the reported missing gauzes to the great
prejudice and agony of its patient. Dr. Jocson, a member of PSIs medical staff, who testified on whether the hospital conducted an
investigation, was evasive, thus:
Q
We go back to the operative technique, this was signed by Dr. Puruganan, was this submitted to the hospital?
Yes, sir, this was submitted to the hospital with the record of the patient.
Was the hospital immediately informed about the missing sponges?
That is the duty of the surgeon, sir.
Q As a witness to an untoward incident in the operating room, was it not your obligation, Dr., to also report to the
hospital because you are under the control and direction of the hospital?
A
The hospital already had the record of the two OS missing, sir.
If you place yourself in the position of the hospital, how will you recover.
You do not answer my question with another question.
Did the hospital do anything about the missing gauzes?
The hospital left it up to the surgeon who was doing the operation, sir.
Did the hospital investigate the surgeon who did the operation?
I am not in the position to answer that, sir.
Q You never did hear the hospital investigating the doctors involved in this case of those missing sponges, or did you
hear something?
xxxxxx
A I think we already made a report by just saying that two sponges were missing, it is up to the hospital to make the
move.
Atty. Agana
Precisely, I am asking you if the hospital did a move, if the hospital did a move.
A
I cannot answer that.
Court
By that answer, would you mean to tell the Court that you were aware if there was such a move done by the hospital?
A
I cannot answer that, your honor, because I did not have any more follow-up of the case that happened until now. 9
The above testimony obviously shows Dr. Jocsons lack of concern for the patients. Such conduct is reflective of the hospitals
manner of supervision. Not only did PSI breach its duty to oversee or supervise all persons who practice medicine within its walls,
it also failed to take an active step in fixing the negligence committed. This renders PSI, not only vicariously liable for the negligence of
Dr. Ampil under Article 2180 of the Civil Code, but also directly liable for its own negligence under Article 2176.
Moreover, there is merit in the trial courts finding that the failure of PSI to conduct an investigation "established PSIs part in the dark
conspiracy of silence and concealment about the gauzes." The following testimony of Atty. Agana supports such findings, thus:
Q You said you relied on the promise of Dr. Ampil and despite the promise you were not able to obtain the said record. Did you
go back to the record custodian?
A
I did not because I was talking to Dr. Ampil. He promised me.
After your talk to Dr. Ampil, you went to the record custodian?
A I went to the record custodian to get the clinical record of my wife, and I was given a portion of the records
consisting of the findings, among them, the entries of the dates, but not the operating procedure and operative report. 10
In sum, we find no merit in the motion for reconsideration.
WHEREFORE, we DENY PSIs motion for reconsideration with finality.
SO ORDERED.
G.R. No. 114311 November 29, 1996
COSMIC LUMBER CORPORATION, petitioner,
vs.
COURT OF APPEAL and ISIDRO PEREZ, respondents.
BELLOSILLO, J.:
COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney
appointing Paz G. Villamil-Estrada as attorney-in-fact
. . . to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127
and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the
premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at
the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the
rights and interest of the corporation in the aforementioned lots. 1
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private
respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan,
docketed as Civil Case No. D-7750. 2
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz the area at present
occupied by defendant wherein his house is located is 333 square meters on the easternmost part of lot 443 and which
portion has been occupied by defendant for several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26,640.00
computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this compromise agreement
over said portion of 333 square m. of lot 443 which portion will be located on the easternmost part as indicated in the
sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental expenses shall be shouldered by the defendant. 3
On 27 November 1985 the "Compromise Agreement" was approved by the trial court and judgment was rendered in accordance
therewith. 4
Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly due
to the failure of petitioner to produce the owner's duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the
portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on 25
January 1993 respondent filed a complaint to revive the judgment, docketed as Civil Case No. D-10459. 5
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of judgment was served upon it that
it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon
which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent
transaction, petitioner sought annulment of the decision of the trial court before respondent Court of Appeals on the ground that the
compromise agreement was void because: (a) the attorney-in-fact did not have the authority to dispose of, sell, encumber or divest
the plaintiff of its ownership over its real property or any portion thereof; (b) the authority of the attorney-in-fact was confined to the
institution and filing of an ejectment case against third persons/squatters on the property of the plaintiff, and to cause their eviction
therefrom; (c) while the special power of attorney made mention of an authority to enter into a compromise agreement, such
authority was in connection with, and limited to, the eviction of third persons/squatters thereat, in order that "the corporation may
take material possession of the entire lot;" (d) the amount of P26,640.00 alluded to as alleged consideration of said agreement was
never received by the plaintiff; (e) the private defendant acted in bad faith in. the execution of said agreement knowing fully well the
want of authority of the attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and, (f) the disposal of a
corporate property indispensably requires a Board Resolution of its Directors, a fact which is wanting in said Civil Case No. D7750, and the General Manager is not the proper officer to encumber a corporate property. 6
On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of the grounds for
annulment, namely, lack of jurisdiction, fraud or illegality was shown to exist. 7 It also denied the motion for reconsideration filed by
petitioner, discoursing that the alleged nullity of the compromise judgment on the ground that petitioner's attorney-in-fact VillamilEstrada was not authorized to sell the subject propety may be raised as a defense in the execution of the compromise judgment as
it does not bind petitioner, but not as a ground for annulment of judgment because it does not affect the jurisdiction of the trial court
over the action nor does it amount to extrinsic fraud. 8
Petitioner challenges this verdict. It argues that the decision of the trial court is void because the compromise agreement upon
which it was based is void. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board
Resolution authorizing the sale of its property. She was merely empowered to enter into a compromise agreement in the recovery
suit she was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined to the "ejectment
of third persons or squatters of . . . lot . . . (No.) 443 . . . for the said squatters to remove their houses and vacate the premises in
order that the corporation may take material possession of the entire lot . . ."
We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary:
for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material
possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise
agreement but only insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this
authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof.
Neither can a conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the
rights and interest of the corporation in the aforementioned lots." In the context of the specific investiture of powers to VillamilEstrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess
the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of
P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale.
the sale shall be void. 9 Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing
containing terms and conditions which are in the contract he did execute. 10 A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration. 11 The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell
must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. 12 For the
principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear
and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document. 13
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement, VillamilEstrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being
the case, the judgment based thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving
petitioner's motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of
the trial court to render its decision based on the compromise agreement. In Alviar v. Court of First Instance of La Union, 14the
Court held
. . . this court does not hesitate to hold that the judgment in question is null and void ab initio. It is not binding upon and
cannot be executed against the petitioners. It is evident that the compromise upon which the judgment was based was
not subscribed by them . . . Neither could Attorney Ortega bind them validly in the compromise because he had no
special authority . . .
As the judgment in question is null and void ab initio, it is evident that the court acquired no jurisdiction to render it, much
less to order the execution thereof . . .
. . . A judgment, which is null and void ab initio, rendered by a court without jurisdiction to do so, is without legal efficacy
and may properly be impugned in any proceeding by the party against whom it is sought to be enforced . . .
This ruling was adopted in Jacinto v. Montesa, 15 by Mr. Justice J. B.L. Reyes, a much-respected authority on civil law, where the
Court declared that a judgment based on a compromise entered into by an attorney without specific authority from the client is
void. Such judgment may be impugned and its execution restrained in any proceeding by the party against whom it is sought to be
enforced. The Court also observed that a defendant against whom a judgment based on a compromise is sought to be enforced
may file a petition for certiorari to quash the execution. He could not move to have the compromise set aside and then appeal from
the order of denial since he was not a party to the compromise. Thus it would appear that the obiter of the appellate court that the
alleged nullity of the compromise agreement should be raised as a defense against its enforcement is not legally feasible.
Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise judgment since
it was never privy to such agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact
but she could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land, as required in Art.
1878, par. (5), of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to annul and set aside judgments
of Regional Trial Courts. 16 "Thus, the Intermediate Appellant Court (now Court of Appeals) shall exercise . . . (2) Exclusive original
jurisdiction over action for annulment of judgments of the Regional Trial Courts . . ." However, certain requisites must first be
established before a final and executory judgment can be the subject of an action for annulment. It must either be void for want of
jurisdiction or for lack of due process of law, or it has been obtained by fraud. 17
Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court in Civil Case No. D-7750
before the Court of Appeals was proper. Emanating as it did from a void compromise agreement, the trial court had no jurisdiction
to render a judgment based thereon. 18
It would also appear, and quite contrary to the finding of the appellate court, that the highly reprehensible conduct of attorney-infact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by reason of which the judgment rendered
thereon should have been struck down. Not all the legal semantics in the world can becloud the unassailable fact that petitioner
was deceived and betrayed by its attorney-in-fact, Villamil-Estrada deliberately concealed from petitioner, her principal, that a
compromise agreement had been forged with the end-result that a portion of petitioner's property was sold to the deforciant,
literally for a song. Thus completely kept unaware of its agent's artifice, petitioner was not accorded even a fighting chance to
repudiate the settlement so much so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud may assume different
shapes and be committed in as many different ways and here lies the danger of attempting to define fraud. For man in his
ingenuity and fertile imagination will always contrive new schemes to fool the unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party
from hearing a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining
to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy. In other
words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the
case, whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception practiced on
him by his opponent. 19 Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud
or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the
defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or
without authority connives at his defeat; these and similar cases which show that there has never been a real contest in the trial or
hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the
case for a new and fair hearing. 20
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the
knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those
who exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general rule as
where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal
the facts in controversy. 21 The logical reason for this exception is that where the agent is committing a fraud, it would be contrary
to common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is engaged
in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really
acting for himself, entirely outside the scope of his agency. 22 Indeed, the basic tenets of agency rest on the highest considerations
of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act
in secret hostility to the interests of his principal transcends the power afforded him. 23
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals dated 29 October 1993 and
10 March 1994, respectively, as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated 27
November 1985, are NULLIFIED and SET ASIDE. The "Compromise Agreement" entered into between Attorney-in-fact Paz G.
Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its
complaint against private respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of a portion of Lot No.
443.
SO ORDERED.
G.R. No. 114311 November 29, 1996
COSMIC LUMBER CORPORATION, petitioner,
vs.
COURT OF APPEAL and ISIDRO PEREZ, respondents.
BELLOSILLO, J.:
COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney
appointing Paz G. Villamil-Estrada as attorney-in-fact
. . . to initiate, institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127
and 443 and covered by TCT Nos. 37648 and 37649, for the said squatters to remove their houses and vacate the
premises in order that the corporation may take material possession of the entire lot, and for this purpose, to appear at
the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the
rights and interest of the corporation in the aforementioned lots. 1
On 11 March 1985 Paz G. Villamil-Estrada, by virtue of her power of attorney, instituted an action for the ejectment of private
respondent Isidro Perez and recover the possession of a portion of Lot No. 443 before the Regional Trial Court of Dagupan,
docketed as Civil Case No. D-7750. 2
On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez, the terms of which follow:
1. That as per relocation sketch plan dated June 5, 1985 prepared by Engineer Rodolfo dela Cruz the area at present
occupied by defendant wherein his house is located is 333 square meters on the easternmost part of lot 443 and which
portion has been occupied by defendant for several years now;
2. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26,640.00
computed at P80.00/square meter;
3. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this compromise agreement
over said portion of 333 square m. of lot 443 which portion will be located on the easternmost part as indicated in the
sketch as annex A;
4. Whatever expenses of subdivision, registration, and other incidental expenses shall be shouldered by the defendant. 3
On 27 November 1985 the "Compromise Agreement" was approved by the trial court and judgment was rendered in accordance
therewith. 4
Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly due
to the failure of petitioner to produce the owner's duplicate copy of Title No. 37649 needed to segregate from Lot No. 443 the
portion sold by the attorney-in-fact, Paz G. Villamil-Estrada, to private respondent under the compromise agreement. Thus on 25
January 1993 respondent filed a complaint to revive the judgment, docketed as Civil Case No. D-10459. 5
Petitioner asserts that it was only when the summons in Civil Case No. D-10459 for the revival of judgment was served upon it that
it came to know of the compromise agreement entered into between Paz G. Villamil-Estrada and respondent Isidro Perez upon
which the trial court based its decision of 26 July 1993 in Civil Case No. D-7750. Forthwith, upon learning of the fraudulent
transaction, petitioner sought annulment of the decision of the trial court before respondent Court of Appeals on the ground that the
compromise agreement was void because: (a) the attorney-in-fact did not have the authority to dispose of, sell, encumber or divest
the plaintiff of its ownership over its real property or any portion thereof; (b) the authority of the attorney-in-fact was confined to the
institution and filing of an ejectment case against third persons/squatters on the property of the plaintiff, and to cause their eviction
therefrom; (c) while the special power of attorney made mention of an authority to enter into a compromise agreement, such
authority was in connection with, and limited to, the eviction of third persons/squatters thereat, in order that "the corporation may
take material possession of the entire lot;" (d) the amount of P26,640.00 alluded to as alleged consideration of said agreement was
never received by the plaintiff; (e) the private defendant acted in bad faith in. the execution of said agreement knowing fully well the
want of authority of the attorney-in-fact to sell, encumber or dispose of the real property of plaintiff; and, (f) the disposal of a
corporate property indispensably requires a Board Resolution of its Directors, a fact which is wanting in said Civil Case No. D7750, and the General Manager is not the proper officer to encumber a corporate property. 6
On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of the grounds for
annulment, namely, lack of jurisdiction, fraud or illegality was shown to exist. 7 It also denied the motion for reconsideration filed by
petitioner, discoursing that the alleged nullity of the compromise judgment on the ground that petitioner's attorney-in-fact VillamilEstrada was not authorized to sell the subject propety may be raised as a defense in the execution of the compromise judgment as
it does not bind petitioner, but not as a ground for annulment of judgment because it does not affect the jurisdiction of the trial court
over the action nor does it amount to extrinsic fraud. 8
Petitioner challenges this verdict. It argues that the decision of the trial court is void because the compromise agreement upon
which it was based is void. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board
Resolution authorizing the sale of its property. She was merely empowered to enter into a compromise agreement in the recovery
suit she was authorized to file against persons squatting on Lot No. 443, such authority being expressly confined to the "ejectment
of third persons or squatters of . . . lot . . . (No.) 443 . . . for the said squatters to remove their houses and vacate the premises in
order that the corporation may take material possession of the entire lot . . ."
We agree with petitioner. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary:
for her to institute any action in court to eject all persons found on Lots Nos. 9127 and 443 so that petitioner could take material
possession thereof, and for this purpose, to appear at the pre-trial and enter into any stipulation of facts and/or compromise
agreement but only insofar as this was protective of the rights and interests of petitioner in the property. Nowhere in this
authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof.
Neither can a conferment of the power to sell be validly inferred from the specific authority "to enter into a compromise agreement"
because of the explicit limitation fixed by the grantor that the compromise entered into shall only be "so far as it shall protect the
rights and interest of the corporation in the aforementioned lots." In the context of the specific investiture of powers to VillamilEstrada, alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess
the same, more so when the land was being sold for a price of P80.00 per square meter, very much less than its assessed value of
P250.00 per square meter, and considering further that petitioner never received the proceeds of the sale.
the sale shall be void. 9 Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing
containing terms and conditions which are in the contract he did execute. 10 A special power of attorney is necessary to enter into
any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable
consideration. 11 The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell
must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. 12 For the
principal to confer the right upon an agent to sell real estate, a power of attorney must so express the powers of the agent in clear
and unmistakable language. When there is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document. 13
It is therefore clear that by selling to respondent Perez a portion of petitioner's land through a compromise agreement, VillamilEstrada acted without or in obvious authority. The sale ipso jure is consequently void. So is the compromise agreement. This being
the case, the judgment based thereon is necessarily void. Antipodal to the opinion expressed by respondent court in resolving
petitioner's motion for reconsideration, the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of
the trial court to render its decision based on the compromise agreement. In Alviar v. Court of First Instance of La Union, 14the
Court held
. . . this court does not hesitate to hold that the judgment in question is null and void ab initio. It is not binding upon and
cannot be executed against the petitioners. It is evident that the compromise upon which the judgment was based was
not subscribed by them . . . Neither could Attorney Ortega bind them validly in the compromise because he had no
special authority . . .
As the judgment in question is null and void ab initio, it is evident that the court acquired no jurisdiction to render it, much
less to order the execution thereof . . .
. . . A judgment, which is null and void ab initio, rendered by a court without jurisdiction to do so, is without legal efficacy
and may properly be impugned in any proceeding by the party against whom it is sought to be enforced . . .
This ruling was adopted in Jacinto v. Montesa, 15 by Mr. Justice J. B.L. Reyes, a much-respected authority on civil law, where the
Court declared that a judgment based on a compromise entered into by an attorney without specific authority from the client is
void. Such judgment may be impugned and its execution restrained in any proceeding by the party against whom it is sought to be
enforced. The Court also observed that a defendant against whom a judgment based on a compromise is sought to be enforced
may file a petition for certiorari to quash the execution. He could not move to have the compromise set aside and then appeal from
the order of denial since he was not a party to the compromise. Thus it would appear that the obiter of the appellate court that the
alleged nullity of the compromise agreement should be raised as a defense against its enforcement is not legally feasible.
Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise judgment since
it was never privy to such agreement. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact
but she could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land, as required in Art.
1878, par. (5), of the Civil Code.
Under authority of Sec. 9, par. (2), of B.P. Blg. 129, a party may now petition the Court of Appeals to annul and set aside judgments
of Regional Trial Courts. 16 "Thus, the Intermediate Appellant Court (now Court of Appeals) shall exercise . . . (2) Exclusive original
jurisdiction over action for annulment of judgments of the Regional Trial Courts . . ." However, certain requisites must first be
established before a final and executory judgment can be the subject of an action for annulment. It must either be void for want of
jurisdiction or for lack of due process of law, or it has been obtained by fraud. 17
Conformably with law and the above-cited authorities, the petition to annul the decision of the trial court in Civil Case No. D-7750
before the Court of Appeals was proper. Emanating as it did from a void compromise agreement, the trial court had no jurisdiction
to render a judgment based thereon. 18
It would also appear, and quite contrary to the finding of the appellate court, that the highly reprehensible conduct of attorney-infact Villamil-Estrada in Civil Case No. 7750 constituted an extrinsic or collateral fraud by reason of which the judgment rendered
thereon should have been struck down. Not all the legal semantics in the world can becloud the unassailable fact that petitioner
was deceived and betrayed by its attorney-in-fact, Villamil-Estrada deliberately concealed from petitioner, her principal, that a
compromise agreement had been forged with the end-result that a portion of petitioner's property was sold to the deforciant,
literally for a song. Thus completely kept unaware of its agent's artifice, petitioner was not accorded even a fighting chance to
repudiate the settlement so much so that the judgment based thereon became final and executory.
For sure, the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. Fraud may assume different
shapes and be committed in as many different ways and here lies the danger of attempting to define fraud. For man in his
ingenuity and fertile imagination will always contrive new schemes to fool the unwary.
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one the effect of which prevents a party
from hearing a trial, or real contest, or from presenting all of his case to the court, or where it operates upon matters, not pertaining
to the judgment itself, but to the manner in which it was procured so that there is not a fair submission of the controversy. In other
words, extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the
case, whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception practiced on
him by his opponent. 19 Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case, by fraud
or deception practiced on him by his opponent, as by keeping him away from court, a false promise of a compromise; or where the
defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an attorney fraudulently or
without authority connives at his defeat; these and similar cases which show that there has never been a real contest in the trial or
hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the
case for a new and fair hearing. 20
It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the
knowledge of or notice to his agent received while the agent was acting as such. But the general rule is intended to protect those
who exercise good faith and not as a shield for unfair dealing. Hence there is a well-established exception to the general rule as
where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal
the facts in controversy. 21 The logical reason for this exception is that where the agent is committing a fraud, it would be contrary
to common sense to presume or to expect that he would communicate the facts to the principal. Verily, when an agent is engaged
in the perpetration of a fraud upon his principal for his own exclusive benefit, he is not really acting for the principal but is really
acting for himself, entirely outside the scope of his agency. 22 Indeed, the basic tenets of agency rest on the highest considerations
of justice, equity and fair play, and an agent will not be permitted to pervert his authority to his own personal advantage, and his act
in secret hostility to the interests of his principal transcends the power afforded him. 23
WHEREFORE, the petition is GRANTED. The decision and resolution of respondent Court of Appeals dated 29 October 1993 and
10 March 1994, respectively, as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. D-7750 dated 27
November 1985, are NULLIFIED and SET ASIDE. The "Compromise Agreement" entered into between Attorney-in-fact Paz G.
Villamil-Estrada and respondent Isidro Perez is declared VOID. This is without prejudice to the right of petitioner to pursue its
complaint against private respondent Isidro Perez in Civil Case No. D-7750 for the recovery of possession of a portion of Lot No.
443.
SO ORDERED.
THIRD DIVISION
G.R. No. 139674
March 6, 2002
NICHIMEN CORPORATION (MANILA BRANCH), petitioner,

vs.
THE HON. COURT OF APPEALS, THE HON. COURT OF TAX APPEALS AND THE HONORABLE COMMISSIONER OF INTERNAL
REVENUE, respondents.
VITUG, J.:
Petitioner appeals from the decision of the Court of Appeals, dated 13 August 1999, in CA-G.R. SP No. 42100 which has affirmed the
12th September 1996 decision of the Court of Tax Appeals in CTA Case No. 4667 ordering petitioner to pay a deficiency percentage tax for
the fiscal year ended 31 March 1987, inclusive of surcharge and interest incident to delinquency, in the amount of P767,531.10.
Petitioner Nichimen Corporation is a resident foreign corporation, organized and existing under the laws of Japan, authorized to do business
in the Philippines. It maintains a Manila branch in dealing with its Philippine customers.1wphi1.nt
On 19 January 1990, petitioner received from the Commissioner of Internal Revenue a demand letter with an accompanying notice
assessing it for deficiency income tax, fixed tax, expanded withholding tax, and percentage tax in the aggregate amount of P1,092,459.94,
inclusive of increments, for the fiscal year ended 31 March 1987. The assessments were computed thusly:
"FY-3-31-87 Deficiency Income Tax
Net Income per return
Add: Unallowable Deductions:
Depreciation
P2,209,455.00
20,500.00
24,711.00
45,211.00
Cost of Calculator, beds, & Facsimile Xerox

Net Income per Investigation
2,254,666.00
Income Tax Due Thereon
779,133.00
Less: Tax Due per Return
763,309.00
Deficiency Income Tax
15,824.00
Add: 25% Surcharge
3,956.00
20% Int. p/a fr. 7-15-87 to 1-30-90
9,725.03
Compromise Penalty
4,500.00
TOTAL AMOUNT DUE AND COLLECTIBLE
P34,005.03
========
"FY-3-31-87 Deficiency Fixed Tax (As Importer/Exporter)

Basic Tax
P 400.00
Add: 25% Surcharge
100.00
20% Int. p/a fr. 5-1-86 to 1-30-90
375.00
Compromise Penalty
100.00
P 975.00
=====
"FY-3-31-87 Deficiency Expanded Withholding Tax

Professional Fee
P 10,600.43
Contractor
103.00
Sub-total
10,703.43
Add: 25% Surcharge
2,675.86
20% Int. p/a fr. 5-1-87 to 1-30-90
7,358.61
Compromise Penalty
4,500.00
P 25,237.90
========
"FY-3-31-87 Deficiency Withholding Tax on Compensation

Basic Tax Due
Add: 25% Surcharge
P 132,495.94
33,123.99
20% Int. p/a fr. 5-1-87 to 1-30-90
91,090.97
Compromise Penalty
8,000.00
P264,710.91
=========
"FY-3-31-87 Deficiency Percentage Tax

1st Qtr.
Basic Tax Due
2nd Qtr.
3rd Qtr.
4th Qtr
Total
P53,382.80
P81,456.21
P116,590.27
P128,289.63
611.26
1,594.48
627.05
1,247.39
Deficiency Tax
52,771.54
79,861.73
115,963.22
127,042.24
P375,638.73
Add: 25% Surcharge
13,192.88
19,965.43
28,990.81
31,760.56
93,909.68
20% Int. p/a

up to 1-30-90
46,541.20
65,441.69
87,776.91
88,222.89
287,982.69
P112,505.62
P165,268.85
P232,730.94
P247,025.69
757,531.10
Less: Payment per

Return
Total
Add: Compromise
10,000.00
P767,531.10"1
=========
TOTAL AMOUNT DUE

AND COLLECTIBLE
Petitioner, through its external auditors Sycip, Gorres Velayo & Co. (SGV & Co.), protested the foregoing assessment in its letter of 06
February 1990. Respondent Commissioner, on 07 October 1991, withdrew the assessment for fixed tax but sustained the other
assessments.2 On 07 November 1991, petitioner finally agreed to pay in full its deficiency income tax, expanded withholding tax, and
withholding tax on compensation. The payment was shown per Central Bank Confirmation Receipt No. B24068532 in the total amount of
P313,953.84; viz:
"Deficiency income tax
"Expanded withholding tax
"Withholding tax
P 34,005.03
25,237.90
254,710.91
P313,953.84"3
Petitioner, however, continued to oppose the assessment for deficiency percentage tax amounting to P767,531.10.
On 06 November 1991, it filed with the Court of Tax Appeals a petition for review, alleging materially that the subject assessment was devoid
of legal basis. It submitted:
"The assessment for deficiency percentage tax (brokers tax) is based on respondents allegations that the compensation received
by petitioner from its Head Office for soliciting orders from Philippine customers should be subject to brokers tax. We most
respectfully disagree with this position.
"It should be noted that petitioners (Nichimen - Manila Branch) act in looking for local buyers is merely liaising for its Head Office.
The Head Office then allocates certain amounts to the petitioner (Branch) to cover its operating requirements for the liaising
activities it does. The amount allocated to the Branch is considered income attributable to the Branch; this is reported to the
Central Bank and converted into Philippine pesos and reported as the Branchs income in its income tax return.
"Under the circumstances, the petitioner (Branch Office) cannot be considered receiving income subject to brokers tax from its
own Head Office, in the same manner that a person cannot be considered receiving taxable income from itself.
"The liaising activities of the Branch is performed for its own Head Office. Hence, it is not an activity that is rendered for another
person, but for itself because NICHIMEN (Head Office) and NICHIMEN (Manila Branch) are but one, single entity.
"A broker is one who acts as a negotiator or middleman to close a deal between one person and another. A broker is necessarily
distinct from the party for which he renders service. In a transaction involving a broker there are three (3) separate and distinct
entities; the principal, the broker, and the buyer.
"In the case at bar only two parties are involved NICHIMEN (Head Office) and the Philippine customers, the Manila branch being
an integral part of the Head Office. Therefore, there could be no broker/agency transaction in instant case. Accordingly, the
amounts received by the Branch from its Head Office cannot be considered commission or brokerage fees subject to brokers tax." 4
Respondent Commissioner maintained that the assessment for deficiency percentage tax was based on the findings of the Bureau of
Internal Revenue that there were receipts for the fiscal year ended 31 March 1997 which showed that certain sales entered into between
Philippine customers and foreign manufacturers resulted from the liaising services rendered by petitioner, and contended that the branch
office should thus be considered a commercial broker in accordance with Revenue Audit Memorandum Order No. 1-86, par. 3, subpar. 3.2.,
to wit:
"3. Branch Operation and Consequences
"3.2. The branch solicits purchase orders from local buyers, relays the information to its home office, the home office solicits
prospective sellers abroad and eventually received compensation for services rendered.
"In the second type of operation: (i) the branch shall be considered `a commercial broker or indentor; (ii) its share from
compensation as allocated by its home office shall be subject to commercial broker gross receipts tax; (iii) the branch shall provide
itself with corresponding fixed tax as a commercial broker; and (iv) pay income on its share of the compensation." 5
The Court of Tax Appeals, in its decision of 12 September 1996, sustained the Commissioner and held:
"WHEREFORE, in view of the foregoing, the petition for review is hereby DENIED and petitioner is ORDERED to pay the amount
of P767,531.10 as deficiency percentage tax for the fiscal year ended March 31, 1987, inclusive of increments, plus 20% interest
per annum from February 1, 1990 until fully paid pursuant to Section 283(c) of the Tax Code." 6
The tax court concluded that petitioner had earned commissions from companies other than Nichimen Corporation in Japan and that the
compensation it received from the head office represented its share in the commissions received by the head office due to their brokerage
activities here and abroad. The commissions received depended on the invoice amounts of import-export transactions. Hence, item 2 of
petitioners Notes to Financial Statements disclosed:
"2. COMPENSATIONS RECEIVED FROM HOME OFFICE AND COMMISSIONS
"Compensations received from Home Office represent income computed at certain percentages of invoice amounts of
import and export transactions in the Philippines of the Home Office and others.
"Commissions represent income computed at certain percentage of invoice amounts of import and export transactions in
the Philippines of certain affiliates of Nichimen Corporation and of other parties." 7
Ms. Myrna Lou Tabije, one of the examiners who investigated the instant tax case, explained:
"Q
Now, according to this report, one of your findings is for deficiency brokers tax in the amount of P718,851.68. Could you
explain briefly the basis of this assessment?
"A
As stated here in the report, the brokers tax assessment here in this report is based on the compensation, these are share
of commission of the branch from the head office or transactions wherein the branch solicits orders from local customers,
Philippine customers and notify the head office who in turn look for the commodities that the Philippine branch needs. And another
instance wherein the head office orders the branch to look for local products wherein the branch merely monitors the shipping to
the importer of these local products. And the documents presented there show that the[y] are merely the agent of the buyer and the
seller. The head office does not have records of sale and purchases of these imports and exports.1wphi1.nt
"Q
Now, you recommended a deficiency of P718,000.00 (sic) as brokers tax. How did you arrive at this amount?
"A
In this docket, on page 181, this is the computation how we arrived at the deficiency tax.
"Q
Where did you base the amount appearing in this computation of yours?
"A
These are taken from the documents presented to us by the taxpayer. This amount was also computed here as shown in
pages 155 to 158. (pp. 6-8, TSN, Hearing on March 23, 1995.)" 8
The Court of Tax Appeals gave weight to respondents testimonial and documentary evidence justifying the demand for the deficiency
brokers tax on petitioner. On appeal to it, the Court of Appeals, in its decision promulgated on 13 August 1999, sustained the findings of the
Court of Tax Appeals. Holding petitioner to be a commercial broker, the appellate court ratiocinated:
"After assiduously evaluating the respective positions of the parties, we have come to the conclusion that the assailed decision of
the CTA is free from any reversible error. It is essentially based on facts and information disclosed by petitioners own documents
as testified to by tax examiner Myrna Lou Tabije. Of particular interest are the Notes to Financial Statements submitted by the
petitioner no less which demonstrate that it had been receiving compensations and commissions from its home office, the
Nichimen Corporation in Japan, over and above its fixed periodical subsidy. These compensations and commissions, by
petitioners own description, represented income computed at certain percentages of invoice amounts of import-export transactions
in the Philippines of the petitioner and others, and import-export transactions in the Philippines of certain affiliates of the Nichimen
Corporation (Japan) and other parties. These are clearly indicative of acts of a commercial broker. Above all, Mr. C. C. Gison of the
Tax Division of SGV & Co., external auditors of the petitioner, let the cat out of the bag, so to speak, when in his letter of August 3,
1989, cited in the challenged CTA decision, he stated, inter alia, that the petitioner is not liable for the deficiency fixed tax `as it is
only engaging in business as a broker. The petitioner never bothered to disown or neutralize this highly damaging admission.
Thus, the self-serving testimony of its witness, Kenji Chijinatsu, easily pales upon juxtaposition with the respondents evidence." 9
On 01 October 1999, Nichimen Corporation (Manila Branch) has filed the instant petition for review by certiorari.
Section 174 of the National Internal Revenue Code imposes on commercial brokers a percentage tax equivalent to seven (7%) per
centum of the gross compensation received by them. Section 157(t) of the same code defines a commercial broker to include "all persons,
other than importers, manufacturers, producers, or bona fideemployees, who, for compensation or profit, sell or bring about sales or
purchases of merchandise for other persons, or bring proposed buyers and sellers together, or negotiate freights or other business for
owners of vessels, or other means of transportation, or for the shippers, or consignors or consignees of freight carried by vessels or other
means of transportation. The term includes commission merchant."
A broker, in general, is a middleman who acts for others, on a commission, negotiating contracts relative to property with the custody of
which he has no concern; he is, in more ways than one, an agent of both parties. 10His task is to bring the parties together and to get them to
come to an agreement.11 A basic characteristic of a broker is that he acts not for himself, but for a third person, regardless of whether the fee
paid to him is a fixed amount, regular or not, or whether the act performed by him can be performed by the principal or not. 12 Strictly, a
commission merchant differs from a broker in that he may buy and sell in his own name without having to disclose his "principal," for which
purpose, the goods are placed in his possession and at his disposal, features that are not true in the case of a broker. 13 The commission
merchant thus maintains a relation not only with the parties but also with the property subject matter of the transaction. 14 A dealer buys and
sells for his own account.
The Court of Tax Appeals and the Court of Appeals both found that the receipts upon which the assessed deficiency brokers tax had been
based were derived from sales consummated between customers in the Philippines and manufacturers abroad, other than petitioner itself;
the sales were said to have resulted from the liaising services rendered by its Philippine branch.
The findings of fact of the Court of Tax Appeals exercising particular expertise on the subject bind this Court, particularly when such findings
are affirmed by the Court of Appeals.15
Given all the foregoing, the Court cannot sustain the position taken by petitioner.
WHEREFORE, the petition is DENIED. Costs against petitioner.
SO ORDERED.
THIRD DIVISION
[G.R. No. 171052, January 28, 2008]
PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), Petitioner, vs. CARMELA ESTRADA/CARA HEALTH SERVICES,
Respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari assails the Decision[1] dated June 16, 2005 of the Court of Appeals (CA) in CA-G.R. CV No. 66040 which
affirmed in toto the Decision[2]dated October 8, 1999 of the Regional Trial Court (RTC), Branch 135, of Makati City in an action for breach of
contract and damages filed by respondent Carmela Estrada, sole proprietor of Cara Health Services, against Philippine Health-Care
Providers, Inc. (Maxicare).
The facts, as found by the CA and adopted by Maxicare in its petition, follow:
[Maxicare] is a domestic corporation engaged in selling health insurance plans whose Chairman Dr. Roberto K. Macasaet, Chief Operating
Officer Virgilio del Valle, and Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada who was doing business under the name of CARA
HEALTH [SERVICES] to promote and sell the prepaid group practice health care delivery program called MAXICARE Plan with the position
of Independent Account Executive. [Maxicare] formally appointed [Estrada] as its General Agent, evidenced by a letter-agreement
dated February 16, 1991. The letter agreement provided for plaintiff-appellees [Estradas] compensation in the form of
commission,viz.:
Commission
In consideration of the performance of your functions and duties as specified in this letter-agreement, [Maxicare] shall pay you a commission
equivalent to 15 to 18% from individual, family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on standard plans of
commissionable amount on corporate accounts from all membership dues collected and remitted by you to [Maxicare].
[Maxicare] alleged that it followed a franchising system in dealing with its agents whereby an agent had to first secure permission
from [Maxicare] to list a prospective company as client. [Estrada] alleged that it did apply with [Maxicare] for the MERALCO account and
other accounts, and in fact, its franchise to solicit corporate accounts, MERALCO account included, was renewed on February 11, 1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers of MERALCO regarding the MAXICARE Plan but
when MERALCO decided to subscribe to the MAXICARE Plan, [Maxicare] directly negotiated with MERALCO regarding the terms and
conditions of the agreement and left plaintiff-appellee [Estrada] out of the discussions on the terms and conditions.
On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and signed a Service Agreement directly with [Maxicare]
for medical coverage of its qualified members, i.e.: 1) the enrolled dependent/s of regular MERALCO executives; 2) retired executives and
their dependents who have opted to enroll and/or continue their MAXICARE membership up to age 65; and 3) regular MERALCO female
executives (exclusively for maternity benefits). Its duration was for one (1) year from December 1, 1991 to November 30, 1992. The contract
was renewed twice for a term of three (3) years each, the first started on December 1, 1992 while the second took effect on December 1,
1995.
The premium amounts paid by MERALCO to [Maxicare] were alleged to be the following: a) P215,788.00 in December 1991; b)
P3,450,564.00 in 1992; c) P4,223,710.00 in 1993; d) P4,782,873.00 in 1994; e) P5,102,108.00 in 1995; and P2,394,292.00 in May 1996. As
of May 1996, the total amount of premium paid by MERALCO to [Maxicare] was P20,169,335.00.
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from [Maxicare] that it be paid commissions for the MERALCO
account and nine (9) other accounts. In reply, [Maxicare], through counsel, denied [Estradas] claims for commission for the MERALCO
and other accounts because [Maxicare] directly negotiated with MERALCO and the other accounts(,) and that no agent was given the go
signal to intervene in the negotiations for the terms and conditions and the signing of the service agreement with MERALCO and the other
accounts so that if ever [Maxicare] was indebted to [Estrada], it was only for P1,555.00 and P43.l2 as commissions on the accounts of
Overseas Freighters Co. and Mr. Enrique Acosta, respectively.
[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers with the Regional Trial Court (RTC) of Makati City, docketed
as Civil Case No. 93-935, raffled to Branch 135.
Defendants-appellants [Maxicare] and its officers filed their Answer with Counterclaim on September 13, 1993 and their Amended Answer
with Counterclaim on September 28, 1993, alleging that: plaintiff-appellee [Estrada] had no cause of action; the cause of action, if any,
should be is against [Maxicare] only and not against its officers; CARA HEALTHs appointment as agent under the February 16, 1991
letter-agreement to promote the MAXICARE Plan was for a period of one (1) year only; said agency was not renewed after the expiration of
the one (1) year period; [Estrada] did not intervene in the negotiations of the contract with MERALCO which was directly negotiated by
MERALCO with [Maxicare] and [Estradas] alleged other clients/accounts were not accredited with [Maxicare] as required, since the
agency contract on the MAXICARE health plans were not renewed. By way of counterclaim, defendants-appellants [Maxicare] and its
officers claimed P100,000.00 in moral damages for each of the officers of [Maxicare] impleaded as defendant, P100,000.00 in exemplary
damages, P100,000.00 in attorneys fees, and P10,000.00 in litigation expenses. [3]
After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay Estrada actual damages in the amount equivalent to
10% of P20,169,335.00, representing her commission for the total premiums paid by Meralco to Maxicare from the year 1991 to 1996, plus
legal interest computed from the filing of the complaint on March 18, 1993, and attorneys fees in the amount of P100,000.00.
On appeal, the CA affirmed in toto the RTCs decision. In ruling for Estrada, both the trial and appellate courts held that Estrada was the
efficient procuring cause in the execution of the service agreement between Meralco and Maxicare consistent with our ruling
in Manotok Brothers, Inc. v. Court of Appeals.[4]
Undaunted, Maxicare comes to this Court and insists on the reversal of the RTC Decision as affirmed by the CA, raising the following issues,
to wit:
1.
Whether the Court of Appeals committed serious error in affirming Estradas entitlement to commissions for the execution of
the service agreement between Meralco and Maxicare.
2.
Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive renewals of the service agreement effective on
December 1, 1992[5] and December 1, 1995.[6]
We are in complete accord with the trial and appellate courts ruling. Estrada is entitled to commissions for the premiums paid under the
service agreement between Meralco and Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate court, are
accorded the highest degree of respect and are considered conclusive between the parties. [7] A review of such findings by this Court is not
warranted except upon a showing of highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower courts inference from its factual findings is manifestly mistaken, absurd or
impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the
issues of the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific evidence on which they are based, are
premised on the absence of evidence, or are contradicted by evidence on record. [8] None of the foregoing exceptions which would warrant a
reversal of the assailed decision obtains in this instance.
Maxicare urges us that both the RTC and CA failed to take into account the stipulations contained in the February 19, 1991 letter agreement
authorizing the payment of commissions only upon satisfaction of twin conditions, i.e., collection and contemporaneous remittance of
premium dues by Estrada to Maxicare. Allegedly, the lower courts disregarded Estradas admission that the negotiations with Meralco
failed. Thus, the flawed application of the efficient procuring cause doctrine enunciated in Manotok Brothers, Inc. v. Court of
Appeals,[9] and the erroneous conclusion upholding Estradas entitlement to commissions on contracts completed without her
participation.
We are not persuaded.
Contrary to Maxicares assertion, the trial and the appellate courts carefully considered the factual backdrop of the case as borne out by
the records. Both courts were one in the conclusion that Maxicare successfully landed the Meralco account for the sale of healthcare plans
only by virtue of Estradas involvement and participation in the negotiations. The assailed Decision aptly states:
There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling [Maxicares] health insurance plan to Meralco. Plaintiffappellee [Estradas] efforts consisted in being the first to offer the Maxicare plan to Meralco, using her connections with some of Meralco
Executives, inviting said executives to dinner meetings, making submissions and representations regarding the health plan, sending followup letters, etc.
These efforts were recognized by Meralco as shown by the certification issued by its Manpower Planning and Research Staff Head Ruben A.
Sapitula on September 5, 1991, to wit:
This is to certify that Ms. Carmela Estrada has initiated talks with us since November 1990 with regards (sic) to the HMO requirements
of both our rank and file employees, managers and executives, and that it was favorably recommended and the same be approved by the
Meralco Management Committee.
xxxx
This Court finds that plaintiff-appellee [Estradas] efforts were instrumental in introducing the Meralco account to [Maxicare] in regard to
the latters Maxicare health insurance plans. Plaintiff-appellee[Estrada] was the efficient intervening cause in bringing about the
service agreement with Meralco. As pointed out by the trial court in its October 8, 1999 Decision, to wit:
xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs. Lopez and Guingona of Meralco, PHPI would still be an
anonymity. xxx[10]
Under the foregoing circumstances, we are hard pressed to disturb the findings of the RTC, which the CA affirmed.
We cannot overemphasize the principle that in petitions for review on certiorari under Rules 45 of the Rules of Court, only questions of law
may be put into issue. Questions of fact are not cognizable by this Court. The finding of efficient procuring cause by the CA is a
question of fact which we desist from passing upon as it would entail delving into factual matters on which such finding was based. To
reiterate, the rule is that factual findings of the trial court, especially those affirmed by the CA, are conclusive on this Court when supported
by the evidence on record.[11]
The jettisoning of the petition is inevitable even upon a close perusal of the merits of the case.
First. Maxicares contention that Estrada may only claim commissions from membership dues which she has collected and remitted to
Maxicare as expressly provided for in the letter-agreement does not convince us. It is readily apparent that Maxicare is attempting to evade
payment of the commission which rightfully belongs to Estrada as the broker who brought the parties together. In fact, Maxicares former
Chairman Roberto K. Macasaet testified that Maxicare had been trying to land the Meralco account for two (2) years prior to Estradas
entry in 1990.[12] Even without that admission, we note that Meralcos Assistant Vice-President, Donatila San Juan, in a letter [13] dated
January 21, 1992 to then Maxicare President Pedro R. Sen, categorically acknowledged Estradas efforts relative to the sale of Maxicare
health plans to Meralco, thus:
Sometime in 1989, Meralco received a proposal from Philippine Health-Care Providers, Inc. (Maxicare) through the initiative and efforts
of Ms. Carmela Estrada, who introduced Maxicare to Meralco. Prior to this time, we did not know that Maxicare is a major health care
provider in the country. We have since negotiated and signed up with Maxicare to provide a health maintenance plan for dependents of
Meralco executives, effective December 1, 1991 to November 30, 1992.
At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and laid the groundwork for a business relationship.
The only reason Estrada was not able to participate in the collection and remittance of premium dues to Maxicare was because she was
prevented from doing so by the acts of Maxicare, its officers, and employees.
In Tan v. Gullas,[14] we had occasion to define a broker and distinguish it from an agent, thus:
[O]ne who is engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern;
the negotiator between the other parties, never acting in his own name but in the name of those who employed him. [A] broker is one whose
occupation is to bring the parties together, in matter of trade, commerce or navigation.[15]
An agent receives a commission upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely by bringing the
buyer and the seller together, even if no sale is eventually made.[16]
In relation thereto, we have held that the term procuring cause in describing a brokers activity, refers to a cause originating a
series of events which, without break in their continuity, result in the accomplishment of the prime objective of the employment of the
brokerproducing a purchaser ready, willing and able to buy on the owners terms. [17] To be regarded as the procuring cause
of a sale as to be entitled to a commission, a brokers efforts must have been the foundation on which the negotiations resulting in a sale
began.[18] Verily, Estrada was instrumental in the sale of the Maxicare health plans to Meralco. Without her intervention, no sale could have
been consummated.
Second. Maxicare next contends that Estrada herself admitted that her negotiations with Meralco failed as shown in Annex F of the
Complaint.
The chicanery and disingenuousness of Maxicares counsel is not lost on this Court. We observe that this Annex F is, in fact,
Maxicares counsels letter dated April 10, 1992 addressed to Estrada. The letter contains a unilateral declaration by Maxicare that
the efforts initiated and negotiations undertaken by Estrada failed, such that the service agreement with Meralco was supposedly directly
negotiated by Maxicare. Thus, the latter effectively declares that Estrada is not the efficient procuring cause of the sale, and as
such, is not entitled to commissions.
Our holding in Atillo III v. Court of Appeals,[19] ironically the case cited by Maxicare to bolster its position that the statement in Annex
F amounted to an admission, provides a contrary answer to Maxicares ridiculous contention. We intoned therein that in spite of
the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented. [20] We
ruled, thus:
As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a judicial admission is conclusive upon the party making
it and does not require proof admits of two exceptions: 1) when it is shown that the admission was made through palpable mistake, and 2)
when it is shown that no such admission was in fact made. The latter exception allows one to contradict an admission by denying that he
made such an admission.
For instance, if a party invokes an admission by an adverse party, but cites the admission out of context, then the one
making the admission may show that he made no such admission, or that his admission was taken out of context .
This may be interpreted as to mean not in the sense in which the admission is made to appear. That is the reason for the modifier
such.[21]
In this case, the letter, although part of Estradas Complaint, is not, ipso facto, an admission of the statements contained therein,
especially since the bone of contention relates to Estradas entitlement to commissions for the sale of health plans she claims to have
brokered. It is more than obvious from the entirety of the records that Estrada has unequivocally and consistently declared that her
involvement as broker is the proximate cause which consummated the sale between Meralco and Maxicare.
Moreover, Section 34,[22] Rule 132 of the Rules of Court requires the purpose for which the evidence is offered to be specified. Undeniably,
the letter was attached to the Complaint, and offered in evidence, to demonstrate Maxicares bad faith and ill will towards Estrada. [23]
Even a cursory reading of the Complaint and all the pleadings filed thereafter before the RTC, CA, and this Court, readily show that Estrada
does not concede, at any point, that her negotiations with Meralco failed. Clearly, Maxicares assertion that Estrada herself does not
pretend to be the efficient procuring cause in the execution of the service agreement between Meralco and Maxicare is baseless
and an outright falsehood.
After muddling the issues and representing that Estrada made an admission that her negotiations with Meralco failed, Maxicares
counsel then proceeds to cite a case which does not, by any stretch of the imagination, bolster the flawed contention.
We, therefore, ADMONISH Maxicares counsel, and, in turn, remind every member of the Bar that the practice of law carries with it
responsibilities which are not to be trifled with. Maxicares counsel ought to be reacquainted with Canon 10 [24] of the Code of
Professional Responsibility, specifically, Rule 10.02, to wit:
Rule 10.02 A lawyer shall not knowingly misquote or misrepresent the contents of a paper, the language or the argument of opposing
counsel, or the text of a decision or authority, or knowingly cite as law a provision already rendered inoperative by repeal or amendment, or
assert as a fact that which has not been proved.
Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that Estrada is entitled to 10% of the total amount of premiums
paid[25] by Meralco to Maxicare as of May 1996. Maxicares argument that assuming Estrada is entitled to commissions, such entitlement
only covers the initial year of the service agreement and should not include the premiums paid for the succeeding renewals thereof, fails to
impress. Considering that we have sustained the lower courts factual finding of Estradas close, proximate and causal connection to
the sale of health plans, we are not wont to disturb Estradas complete entitlement to commission for the total premiums paid until May
1996 in the amount of P20,169,335.00.
WHEREFORE, premises considered and finding no reversible error committed by the Court of Appeals, the petition is hereby DENIED.
SO ORDERED.
T H I R D
CARLOS SANCHEZ,
Petitioner,
- versus -
D I V I S I O N
G.R. No. 141525

Present:
PANGANIBAN, J., Chairman,
SANDOVAL-GUTIERREZ,
CORONA,
CARPIO MORALES, and
GARCIA, JJ.
Promulgated:
September 2, 2005
MEDICARD PHILIPPINES,
INC.,
DR.
NICANOR
MONTOYA and CARLOS
EJERCITO,
Respondents.
x---------------------------------------------------------------------------------------------x
D E C I S I O N
SANDOVAL-GUTIERREZ, J.:
This petition for review on certiorari seeks to reverse the Decision[1] of the Court of Appeals dated February 24, 1999 and its
Resolution dated January 12, 2000 in CA-G.R. CV No. 47681.
The facts, as established by the trial court and affirmed by the Court of Appeals, follow:
Sometime in 1987, Medicard Philippines, Inc. (Medicard), respondent, appointed petitioner as its special corporate agent. As such
agent, Medicard gave him a commission based on the cash brought in.
In September, 1988, through petitioners efforts, Medicard and United Laboratories Group of Companies (Unilab) executed a
Health Care Program Contract. Under this contract, Unilab shall pay Medicard a fixed monthly premium for the health insurance of its
personnel. Unilab paid Medicard P4,148,005.00 representing the premium for one (1) year. Medicard then handed petitioner 18% of said
amount or P746,640.90 representing his commission.
Again, through petitioners initiative, the agency contract between Medicard and Unilab was renewed for another year, or from
October 1, 1989 to September 30, 1990, incorporating therein the increase of premium from P4,148,005.00 to P7,456,896.00. Medicard
paid petitioner P1,342,241.00 as his commission.
Prior to the expiration of the renewed contract, Medicard proposed to Unilab, through petitioner, an increase of the premium for the
next year. Unilab rejected the proposal for the reason that it was too high, prompting Dr. Nicanor Montoya (Medicards president and
general manager), also a respondent, to request petitioner to reduce his commission, but the latter refused.
In a letter dated October 3, 1990, Unilab, through Carlos Ejercito, another respondent, confirmed its decision not to renew the
health program contract with Medicard.
Meanwhile, in order not to prejudice its personnel by the termination of their health insurance, Unilab, through respondent Ejercito,
negotiated with Dr. Montoya and other officers of Medicard, to discuss ways in order to continue the insurance coverage of those personnel.
Under the new scheme, Unilab shall pay Medicard only the amount corresponding to the actual hospitalization expenses incurred
by each personnel plus 15% service fee for using Medicard facilities, which amount shall not be less than P780,000.00.
Medicard did not give petitioner any commission under the new scheme.
In a letter dated March 15, 1991, petitioner demanded from Medicard payment ofP338,000.00 as his commission plus damages,
but the latter refused to heed his demand.
Thus, petitioner filed with the Regional Trial Court (RTC), Branch 66, Makati City, a complaint for sum of money against Medicard,
Dr. Nicanor Montoya and Carlos Ejercito, herein respondents.
After hearing, the RTC rendered its Decision dismissing petitioners complaint and respondents counterclaim.
On appeal, the Court of Appeals affirmed the trial courts assailed Decision. The Appellate Court held that there is no proof that
the execution of the new contract between the parties under the cost plus system is a strategy to deprive petitioner of his commission; that
Medicard did not commit any fraudulent act in revoking its agency contract with Sanchez; that when Unilab rejected Medicards proposal for
an increase of premium, their Health Care Program Contract on its third year was effectively revoked; and that where the contract is
ineffectual, then the agent is not entitled to a commission.
Petitioner filed a motion for reconsideration, but this was denied by the Court of Appeals on January 12, 2000.
Hence, the instant petition for review on certiorari.
The basic issue for our resolution is whether the Court of Appeals erred in holding that the contract of agency has been revoked by
Medicard, hence, petitioner is not entitled to a commission.
It is dictum that in order for an agent to be entitled to a commission, he must be the procuring cause of the sale, which simply
means that the measures employed by him and the efforts he exerted must result in a sale. [2] In other words, an agent receives his
commission only upon the successful conclusion of a sale. [3] Conversely, it follows that where his efforts are unsuccessful, or there was no
effort on his part, he is not entitled to a commission.
In Prats vs. Court of Appeals,[4] this Court held that for the purpose of equity, an agent who is not the efficient procuring cause is
nonetheless entitled to his commission, where said agent, notwithstanding the expiration of his authority, nonetheless, took diligent steps
to bring back together the parties, such that a sale was finalized and consummated between them. In Manotok Borthers vs. Court of
Appeals,[5] where the Deed of Sale was only executed after the agents extended authority had expired, this Court, applying its ruling
in Prats, held that the agent (in Manotok) is entitled to a commission since he was the efficient procuring cause of the sale, notwithstanding
that the sale took place after his authority had lapsed. The proximate, close, and causal connection between the agents efforts and the
principals sale of his property can not be ignored.
It may be recalled that through petitioners efforts, Medicard was able to enter into a one-year Health Care Program Contract with
Unilab. As a result, Medicard paid petitioner his commission. Again, through his efforts, the contract was renewed and once more, he
received his commission. Before the expiration of the renewed contract, Medicard, through petitioner, proposed an increase in premium, but
Unilab rejected this proposal. Medicard then requested petitioner to reduce his commission should the contract be renewed on its third year,
but he was obstinate. Meantime, on October 3, 1990, Unilab informed Medicard it was no longer renewing the Health Care Program
contract.
In order not to prejudice its personnel, Unilab, through respondent Ejercito, negotiated with respondent Dr. Montoya of Medicard, in
order to find mutually beneficial ways of continuing the Health Care Program. The negotiations resulted in a new contract wherein Unilab
shall pay Medicard the hospitalization expenses actually incurred by each employees, plus a service fee. Under the cost plus system
which replaced the premium scheme, petitioner was not given a commission.
It is clear that since petitioner refused to reduce his commission, Medicard directly negotiated with Unilab, thus revoking its agency
contract with petitioner. We hold that such revocation is authorized by Article 1924 of the Civil Code which provides:
Art. 1924. The agency is revoked if the principal directly manages the business entrusted to the agent, dealing
directly with third persons.
Moreover, as found by the lower courts, petitioner did not render services to Medicard, his principal, to entitle him to a
commission. There is no indication from the records that he exerted any effort in order that Unilab and Medicard, after the expiration of the
Health Care Program Contract, can renew it for the third time. In fact, his refusal to reduce his commission constrained Medicard to
negotiate directly with Unilab. We find no reason in law or in equity to rule that he is entitled to a commission. Obviously, he was not the
agent or the procuring cause of the third Health Care Program Contract between Medicard and Unilab.
WHEREFORE, the petition is DENIED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. CV No.
47681 are AFFIRMED IN TOTO. Costs against petitioner.
SO ORDERED.
G.R. No. 76969 June 9, 1997
INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M. DE LOS REYES, petitioners,
vs.
HON. COURT OF APPEALS, GREGORIO ARANETA, INC. and J. ARMANDO EDUQUE, respondents.
HERMOSISIMA, JR., J.:

Herein petitioners Inland Realty Investment Service, Inc. (hereafter, "Inland Realty") and Roman M. de los Reyes seek the reversal of the
Decision 1 of the Intermediate Appellate Court (now Court of Appeals) 2 which affirmed the trial court's dismissal 3 of petitioners' claim for
unpaid agent's commission for brokering the sales transaction involving 9,800 shares of stock in Architects' Bldg., Inc. (hereafter,
"Architects"') between private respondent Gregorio Araneta, Inc. (hereafter, "Araneta, Inc.") as seller and Stanford Microsystems, Inc.
(hereafter, "Stanford") as buyer.
Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration that the trial court and the respondent appellate court
gravely erred when appreciating the facts of the case by disregarding Exhibits "L," a Letter dated October 28, 1976 signed by Gregorio
Araneta II, renewing petitioners' authority to act as sales agent for a period of thirty (30) days from same date, and Exhibit "M," a Letter dated
November 16, 1976 signed by petitioner de los Reyes, naming four (4) other prospective buyers, respectively; and (2) to obtain from us a
categorical ruling that a broker is automatically entitled to the stipulated commission merely upon securing for, and introducing to, the seller
the particular buyer who ultimately purchases from the former the object of the sale, regardless of the expiration of the broker's contract of
agency and authority to sell.
Before we proceed to address petitioners' objectives, there is a need to unfold the facts of the case. For that purpose, we quote hereunder
the findings of fact of the Court of Appeals with which petitioners agree, except as to the respondent appellate court's non-inclusion of the
aforementioned Exhibits "L" and "M":
From the evidence, the following facts appear undisputed: On September 16, 1975, defendant corporation thru its codefendant Assistant General Manager J. Armando Eduque, granted to plaintiffs a 30-day authority to sell its . . . 9,800
shares of stock in Architects' Bldg., Inc. as follows:
S
e
pt
e
m
b
e
r
1
6,
1
9
7
5
TO WHOM IT MAY CONCERN:
This is to authorize Mr. R.M. de los Reyes, representing Inland Realty, to sell on a first come first
served basis the total holdings of Gregorio Araneta, Inc. in Architects' [Bldg.], Inc. equivalent to 98%
or 9,800 shares of stock at the price of P1,500.00 per share for a period of 30 days.
(SGD.) J. ARMANDO
EDUQUE
Asst. General
Manager'
Plaintiff Inland Realty Investment Service, Inc. (Inland Realty for short) is a corporation engaged [in], among others . . .
the real estate business [and] brokerages, duly licensed by the Bureau of Domestic Trade . . . [Inland Realty] planned
their sales campaign, sending proposal letters to prospective buyers. One such prospective buyer to whom a proposal
letter was sent to was Stanford Microsystems, Inc. . . . [that] counter-proposed to buy 9,800 shares offered at P1,000.00
per share or for a total of P9,800,000.00, P4,900,000.00 payable in five years at 12% per annum interest until fully paid.
Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote defendant a letter to register Stanford
Microsystems, Inc. as one of its prospective buyers . . . Defendant Araneta, Inc., thru its Assistant General Manager J.
Armando Eduque, replied that the price offered by Stanford was too low and suggested that plaintiffs see if the price and
terms of payment can be improved upon by Stanford . . . Other prospective buyers were submitted to defendants among
whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez. The authority to sell given to plaintiffs by defendants
was extended several times: the first being on October 2, 1975, for 30 days from said date (Exh. "J"), the second on
October 28, 1975 for 30 days from said date (Exh. "L") and on December 2, 1975 for 30 days from said date (Exh. "K").
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage division, who by contract with Inland Realty would
be entitled to 1/2 of the claim asserted herein, testified that when his company was initially granted the authority to sell,
he asked for an exclusive authority and for a longer period but Armando Eduque would not give, but according to this
witness, the life of the authority could always be extended for the purpose of negotiation that would be continuing.
On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock
[in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for P13,500,000.00 . . .
On September 6, 1977, plaintiffs demanded formally [from] defendants, through a letter of demand, for payment of their
5% broker['s] commission at P13,500,000.00 or a total amount of P675,000.00 . . . which was declined by [defendants]
on the ground that the claim has no factual or legal basis. 4
Ascribing merit to private respondents' defense that, after their authority to sell expired thirty (30) days from December 2, 1975, or on
January 1, 1976, petitioners abandoned the sales transaction and were no longer privy to the consummation and documentation thereof, the
trial court dismissed petitioners' complaint for collection of unpaid broker's commission.
Petitioners appealed, but the Court of Appeals was unswayed in the face of evidence of the expiration of petitioners' agency contract and
authority to sell on January 1, 1976 and the consummation of the sale to Stanford on July 8, 1977 or more than one (1) year and five (5)
months after petitioners' agency contract and authority to sell expired. Respondent appellate court dismissed petitioners' appeal in this wise:
. . . The resolution would seem to hinge on the question of whether plaintiff was instrumental in the final consummation of
the sale to Stanford which was the same name of the company submitted to defendants as a prospective buyer although
their price was considered by defendant to be too low and defendants wrote to plaintiff if the price may be improved upon
by Stanford . . . This was on October 13, 1975. After that, there was an extension for 30 days from October 28, 1975 of
the authority (Exh. "L") and another on December 2, 1975 for another 30 days from the said date . . . . There is nothing in
the record or in the testimonial evidence that the authority extended 30 days from the last date of extension was ever
reserved nor extended, nor has there been any communication made to defendants that the plaintiff was actually
negotiating with Stanford a better price than what was previously offered by it . . . .
In fact there was no longer any agency after the last extension. Certainly, the length of time which had transpired from
the date of last extension of authority to the final consummation of the sale with Stanford of about one (1) year and five
(5) months without any communication at all from plaintiffs to defendants with respect to the suggestion or defendants
that Stanford's offer was too low and suggested if plaintiffs may make it better. We have a case of proposal and counterproposal which would not constitute a definite closing of the transaction just because it was plaintiff who solely suggested
to defendants the name of Stanford as buyer . . . . 5
Unable to accept the dismissal of its claim for unpaid broker's commission, petitioners filed the instant petition for review asking us (1) to
pass upon the factual issue of the alleged extension of their agency contract and authority to sell and (2) to rule in favor of a broker's
automatic entitlement to the stipulated commission merely upon securing for, and introducing to, the seller, the particular buyer who
ultimately purchases from the former the object of the sale, regardless of the expiration of the broker's contract of agency and authority to
sell.
We find for private respondents.
I
Petitioners take exception to the finding of the respondent Court of Appeals that their contract of agency and authority to sell expired thirty
(30) days from its last renewal on December 2, 1975. They insist that, in the Letter dated October 28, 1976, Gregorio Araneta III, in behalf of
Araneta, Inc., renewed petitioner Inland Realty's authority to act as agent to sell the former's 9,800 shares in Architects' for another thirty (30)
days from same date. This Letter dated October 28, 1976, petitioners claim, was marked as Exhibit "L" during the trial proceedings before
the trial court.
This claim is a blatant lie. In the first place, petitioners have conspicuously failed to attach a certified copy of this Letter dated October 28,
1976. They have, in fact, not attached even a machine copy thereof. All they gave this court is their word that said Letter dated October 28,
1976 does exist, and on that basis, they expect us to accordingly rule in their favor.
Such naivety, this court will not tolerate. We will not treat lightly petitioners' attempt to mislead this court by claiming that the Letter dated
October 28, 1976 was marked as Exhibit "L" by the trial court, when the truth is that the trial court marked as Exhibit "L", and the respondent
Court of Appeals considered as Exhibit "L," private respondent Araneta, Inc.'s Letter dated October 28, 1975, not 1976. Needless to say, this
blatant attempt to mislead this court, is contemptuous conduct that we sternly condemn.
II
The Letter dated November 16, 1976, claimed by petitioners to have been marked as Exhibit "M", has no probative value, considering that its
very existence remains under a heavy cloud of doubt and that hypothetically assuming its existence, its alleged content, namely, a listing of
four (4) other prospective buyers, does not at all prove that the agency contract and authority to sell in favor of petitioners was renewed or
revived after it expired on January 1, 1976. As in the case of the Letter dated October 28, 1976, petitioners have miserably failed to attach
any copy of the Letter dated November 16, 1976. A copy thereof would not help petitioners' failing cause, anyway, especially considering that
said letter was signed by petitioner De los Reyes and would therefore take on the nature of a self-serving document that has no evidentiary
value insofar as petitioners are concerned.
III
Finally, petitioners asseverate that, regardless of whether or not their agency contract and authority to sell had expired, they are
automatically entitled to their broker's commission merely upon securing for and introducing to private respondent Araneta, Inc. the buyer in
the person of Stanford which ultimately acquired ownership over Araneta, Inc.'s 9,800 shares in Architects'.
Petitioners' asseverations are devoid of merit.
It is understandable, though, why petitioners have resorted to a campaign for an automatic and blanket entitlement to brokerage commission
upon doing nothing but submitting to private respondent Araneta, Inc., the name of Stanford as prospective buyer of the latter's shares in
Architects'. Of course petitioners would advocate as such because precisely petitioners did nothing but submit Stanford's name as
prospective buyer. Petitioners did not succeed in outrightly selling said shares under the predetermined terms and conditions set out by
Araneta, Inc., e.g., that the price per share is P1,500.00. They admit that they could not dissuade Stanford from haggling for the price of
P1,000.00 per share with the balance of 50% of the total purchase price payable in five (5) years at 12% interest per annum. From
September 16, 1975 to January 1, 1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to show that they
actively served their principal's interests, pursued to sell the shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the sale to Stanford of Araneta, Inc.'s 9,800 shares in
Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5) months between the expiration of
petitioners' authority to sell and the consummation of the sale to Stanford, to be a significant index of petitioners' non-participation in the
really critical events leading to the consummation of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking
price, the finalization of the terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent documents, and the
delivery of the shares of stock to Stanford. Certainly, when the lapse of the period of more than one (1) year and five (5) months between the
expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of evidence of
petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that period and in the subsequent processing of the
documents pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err in affirming the trial court's
dismissal of petitioners' claim for unpaid brokerage commission.
Petitioners were not the efficient procuring cause 6 in bringing about the sale in question an July 8, 1977 and are, therefore, not entitled to the
stipulated broker's commission of "5% on the total price."
WHEREFORE, the instant petition is HEREBY DISMISSED.

Costs against petitioners.
SO ORDERED.
G.R. No. L-39822 January 31, 1978
ANTONIO E. PRATS, doing business under the name of Philippine Real Estate Exchange, petitioner,
vs.
HON. COURT OF APPEALS, ALFONSO DORONILA and PHILIPPINE NATIONAL BANK, respondents.
FERNANDEZ, J.:
This is a petition for certiorari to review the decision of the Court of Appeals in CA-G.R. No. 45974-R entitled"Antonio E. Prats, doing
business under the name of Philippine Real Estate Exchange, vs. Alfonso Doronila and the Philippine National Bank", the dispositive part of
which reads:
In view of all the foregoing, it is our considered opinion and so hold that the decision of the lower court be, as it is hereby
reversed, and the complaint, dismissed. On appellant's counterclaim, judgment is hereby rendered directing appellee to
pay attorney's fees in the sum of P10,000 to appellant, no moral damages as therein claimed being awarded for lack of
evidence to justify the same. The injunction issued by the lower court on the P2,000,000.00 cash deposit of the appellant
is hereby lifted. No special pronouncement as to costs.
SO ORDERED. 1
On September 23, 1968 Antonio E. Prats, doing business under the name of "Philippine Real Estate Exchange" instituted against Alfonso
Doronila and Philippine National Bank Civil Case No. Q-12412 in the Court of First Instance of Rizal at Quezon City to recover a sum of
money and damages.
The complaint stated that defendant Alfonso Doronila was the registered owner of 300 hectares of land situated in Montalban, Rizal, covered
by Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750; that defendant Doronila had for sometime tried to sell his aforesaid
300 hectares of land and for that purpose had designated several agents; that at one time, he had offered the same property to the Social
Security System but failed to consummate any sale; that his offer to sell to the Social Security System having failed, defendant Doronila on
February 14, 1968 gave the plaintiff an exclusive option and authority in writing to negotiate the sale of his aforementioned property, which
exclusive option and authority the plaintiff caused to be published in the Manila Times on February 22, 1968; that it was the agreement
between plaintiff and defendant Doronila that the basic price shall be P3.00 per square meter, that plaintiff shall be entitled to a commission
of 10% based on P2.10 per square meter or at any price finally agreed upon and if the property be sold over and above P3.00 per square
meter, the excess shall be created and paid to the plaintiff in addition to his 10% commission based on P2.10 per square meter; that as a
result of the grant of the exclusive option and authority to negotiate the sale of his 300 hectares of land situated in Montalban, Rizal in favor
of the plaintiff, the defendant Doronila, on February 20, 1968, wrote a letter to the Social Security System withdrawing his previous offer to
sell the same land and requesting the return to him of all papers concerning his offered property that the Social Security System, complying
with said request of defendant Doronila, returned all the papers thereon and defendant Doronila, in turn gave them to the plaintiff as his duly
authorized real estate broker; that by virtue of the exclusive written option and authority granted him and relying upon the announced policy
of the President of the Philippines to promote low housing program the plaintiff immediately worked to negotiate the sale of defendant
Doronila's 300 hectares of land to the Social Security System, making the necessary contacts and representations to bring the parties
together, namely, the owner and the buyer, and bring about the ultimate sale of the land by defendant Doronila to the Social Security System;
that on February 27, 1968, after plaintiff had already contacted the Social Security System, its Deputy Administrator, Reynaldo J. Gregorio,
wrote a letter to defendant Doronila inviting the latter to a conference regarding the property in question with Administrator Teodoro,
Chairman Gaviola and said Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the morning, stating that the SSS would like to take
up the offer of the lot; that having granted plaintiff the exclusive written option and authority to negotiate the sale of his 300 hectares of land,
defendant Doronila in a letter dated February 28, 1968 declined the invitation extended by the Social Security System to meet with its
Administrator and Chairman and requested them instead "to deal directly" with the plaintiff, that on March 16, 1968, at the suggestion of
defendant Doronila, the plaintiff wrote a letter to the Social Security System to the effect that plaintiff would be glad to sit with the officials of
the Social Security System to discuss the sale of the property of the defendant Doronila; that on March 18, 1968, the Social Security System
sent a telegram to defendant Doronila to submit certain documents regarding the property offered; that on May 6, 1968, a written offer to sell
the 300 hectares of land belonging to defendant Doronila was formally made by the plaintiff to the Social Security System and accordingly,
on May 7, 1968, the Social Security System Administrator dispatched the following telegram to defendant Doronila: "SSS considering
purchase your property for its housing project Administrator Teodoro"; that a few days thereafter, the plaintiff accompanied the defendant
Doronila to the China Banking Corporation to arrange the matter of clearing payment by chock and delivery of the titles over the property to
the Society Security System; that having been brought together by the plaintiff, the defendant Doronila and the offices of the Society Security
System, on May 29, 1968 and on June 4, 1968, met at the office of the SSS Administrator wherein the price for the purchase of the
defendant Doronila's 300 hectares of land was, among others, taken up; that on June 20, 1968, the Social Security Commission passed
Resolution No. 636 making a counter-offer of P3.25 per square meter subject to an appraise report; that on June 27, 1968, Resolution No.
662 was adopted by the Social Security Commission authorizing the Toples & Harding (Far East) Inc. to conduct an appraisal of the property
and to submit a report thereon; that pursuant thereto, the said company submitted its appraisal report specifying that the present value of the
property is P3.34 per square meter and that a housing program development would represent the highest and best use thereof, that on July
18, 1968, the Social Security Commission, at its regular meeting, taking note of the favorable appraisal report of the Toples'& Harding (Far
East) Inc., passed Resolution No. 738, approving the purchase of defendant Doronila's 300 hectares of land in Montalban, Rizal at a price of
P3.25 per square meter or for a total purchase price of Nine Million Seven Hundred Fifty Thousand Pesos (P9,750,000.00), appropriating the
said amount for the purpose and authorizing the SSS Administrator to sign the necessary documents to implement the said resolution; that
on July 30, 1968, defendant Doronila and the Social Security System executed the corresponding deed of absolute sale over the 300
hectares of land in Montalban, Rizal covered by Transfer Certificate of Title Nos. 77011, 77013, 216747 and 216750 under the terms of
which the total price of P9,750,000.00 shall be payable as follows: (a) 60% of the agreed purchase price, or Five Million Eight Hundred Fifty
Thousand Pesos (P5,860,000.00) immediately after signing the deed of sale. and (b) the balance of 40% of the agreed price, or Three Million
Nine Hundred Thousand Pesos (P3,900,000.00) thirty days after the signing of the deed of absolute sale; that on August 21, 1968, after
payment of the purchase price, the deed absolute sale executed by defendant Doronila in favor of the Social Security System was presented
for registration in the Office of the Register of Deeds of Rizal, and Transfer Certificates of Title Nos. 926574, 226575, 226576 and 226577 in
the name of the Social Security System were issued; that defendant Doronila has received the full purchase price for his 300 hectares of
land in the total amount of P9,750,000.00, which amount he deposited in his bank Account No. 0012-443 with the defendant Philippine
National Bank; that on September 17, 1968, the plaintiff presented his statement to, and demanded of defendant Doronila the payment of his
processional fee as real estate broker as computed under the agreement of February 14, 1968 in the total amount of P1,380,000.00; that
notwithstanding such demand, the defendant Doronila, in gross and evident bad faith after having availed of the services of plaintiff as real
estate broker, refused to pay the professional fees due him; that as a result of defendant Doronila's gross and evident bad faith and
unjustified refusal to pay plaintiff the professional fees due him under the agreement, the latter has suffered and continues to suffer mental
anguish, serious anxiety, and social humiliation for which defendant Doronila shall be held liable to pay moral damages; and, that by reason
likewise of the aforesaid act of defendant Doronila, the plaintiff has been compelled to file this action and to engage the services of counsel
at a stipulated professional fee of P250,000.00.
In his answer filed on November 18, 1968, the defendant Doronila alleged that when the plaintiff offered the answering defendant's property
to the Social Security System on May 6, 1968, said defendant had already offered his property to, and had a closed transaction or contract of
sale of, said property with the Social Security System; that the letter agreement had become null and void because defendant Doronila had
not received any written offer from any prospective buyers of the plaintiff during the agreed period of 60 days until the last day of the
authorization which was April 13, 1968 counting from February 14, 1968; that it is not true that plaintiff brought together defendant Doronila
and the officials of the Social Security System to take up the purchase price of defendant Doronila's property for the simple reason that the
plaintiff's offer was P6.00 per square meter and later on reduced to P4.50 per square meter because the SSS Chairman had already a
closed transaction with the defendant Doronila at the price of P3.25 per square meter and that the offer of the plaintiff was refused by the
officials of the Social Security System; and that defendant Doronila did not answer the statement of collection of the plaintiff because the
latter had not right to demand the payment for services not rendered according to the agreement of the parties. The answering defendant
interposed a counterclaim for damages and attorney's fees.
On January 18, 1969, the plaintiff and defendant Alfonso Doronila submitted the following stipulation of facts:
STIPULATION OF FACTS
COME NOW the plaintiff and defendant DORONILA, through their respective undersigned counsel, and to this
Honorable Court by way of abbreviating the proceeding i the case at bar, without prejudice to presentation of explanatory
evidence, respectfully submit the following STIPULATION OF FACTS.
1.
The defendant Doronila was the registered owner of 300 hectares of land, situated in Montalban, Rizal, covered by
Transfer Certificates of Title Nos. 77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly TCT No.
77012).
2.
That on July 3, 1967, defendant DORONILA under his letter (marked Annex "1" of the answer) addressed to the SSS
Chairman, offered his said property to the Social Security System (SSS) at P4.00 per square meter.
That on July 17, 1967 (Annex "2" of the Answer) the SSS Chairman, Mr. Ramon C. Gaviola, Jr., replied to defendant
DORONILA, as follows:
This will acknowledge your letter of July 3rd, 1967 relative to your offer for sale of your real estate
property.
In this regard, may I please be informed as to how many hectares, out of the total 300 hectares
offered, are located in Quezon City and how many hectares are located in Montalban, Rizal.
Likewise, as regards your offer of P4.00 per square meter, would there be any possibility that the
same be reduced to P3.25 per square meter Finally and before I submit your proposal for process it
is requested that the NAWASA certify to the effect that they have no objection to having this parcel of
land subdivided for residential house purposes.
Thank you for your offer and may I hear from you at the earliest possible time.
2-a
That on July 19, 1967, defendant DORONILA wrote a letter (a xerox copy, attached hereto marked as Annex "2-a" for
DORONILA) to NAWASA, and that in reply thereto, on July 25, 1967, the NAWASA wrote the following letter (Xerox copy
attached hereto to be marked as Annex "2-b" for DORONILA) to defendant DORONILA.
In connection with your proposed subdivision plan of your properties adjacent to our Novaliches
Watershed, this Office would like to impose the following conditions:
1. Since your property is an immediate boundary of our Novaliches Watershed, a 20-meter road
should be constructed along our common boundary.
2. That no waste or drainage water from the subdivision should flow towards the watershed.
3. That the liquid from the septic tanks or similar waste water should be treated before it is drained to
the Alat River above our Alat Dam.
The above conditions are all safeguards to the drinking water of the people of Manila and Suburbs. It
is therefore expected that we all cooperate to make our drinking water safer from any pollution.
3.
That on July 19, 1967, defendant DORONILA wrote another letter (marked as Annex '3' on his Answer) addressed to the
SSS Chairman, Mr. Ramon Gaviola Jr., stating, among others, the following:
In this connection, I have your counter-offer of P3.25 per square meter against my offer of P4.00 per
square meter, although your counter-offer is lower comparing to the prices of adjacent properties, I
have to consider the difference as my privilege and opportunity to contribute or support the
Presidential policy to promote low cost housing in this country particularly to the SSS members by
accepting gladly your counter-offer of P3.25 per square meter with the condition that it should be paid
in cash and such payment shall be made within a period of 30 days from the above stated date (2nd
paragraph of letter dated July 18, 1967, Annex "3" of the Answer).
3.a
That on August 10, 1967, the SSS Chairman, Mr. Ramon Gaviola Jr., wrote the following (Xerox copy attached hereto
and marked as Annex '2-c' for DORONILA: addressed to defendant DORONILA:
With reference to your letter, dated July 1967, please be informed that the same is now with the
Administrator for study and comment. The Commission will act on receipt of information re such
studies.
With the assurance that you will be periodically informed of developments, we remain.
3-b
That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty. Alfonso Doronila, property owner', wrote the
following request (Xerox copy attached hereto and marked as Annex '2-d' for DORONILA) addressed to Realtor Vicente
L. Narciso for a certification regarding the actual prices of DORONILA's property, quoted as follows:
May I have the honor to request for your certification as a member of the Board of Realtor regarding
the actual prices of my real estate raw-land properties described as Lots 3-B-7, 26B, 6 and 4-C-3 all
adjacent to each other, containing a total area of 3,000,000 square meters, all registered in the name
of Alfonso Doronila, covered by T.C.T. Nos. 116631, 77013, 77011, and 77012, located at Montalban,
Rizal, all adjacent to the Northern portion of the NAWASA properties in Quezon City including those
other surrounding adjacent properties and even those properties located before reaching my own
properties coming from Manila.
This request is purposely made for my references in case I decided to sell my said properties
mentioned above.
3-c
That on November 3, 1967, Realtor Vicente Narciso wrote the following reply (Xerox copy attached hereto and marked
as Annex 2 for DORONILA) to Mr. Pastor B. Sajorda:
As per your request dated October 30, 1967, regarding prices of raw land, it is my finding that the fair
market value of raw land in the vicinity of the NAWASA properties at Quezon City and Montalban,
Rizal. including the properties of Atty. Alfonso Doronila. more particularly known as lots 3-B-7, 26-B,
and 4-C-3 containing approximately 3,000,000 square meters is P3.00 to P3.50 per square meter.
Current prices before reaching Doronila's property range from P6.00 to P7.00 per square meter.
4.
That on February 14, 1968, defendant DORONILA granted plaintiff an exclusive option and authority (Annex 'A' of the
complaint), under the following terms and conditions:
1. The price of the property is THREE (P3.00) PESOS per square meter.
2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10 per square meter, or at
any price that you DORONILA finally agree upon, and all expenses shall be for our account, including
preparation of the corresponding deed of conveyance, documentary stamps and registration fee,
whether the sale is causes directly or indirectly by us within the time of this option. If the property is
sold over and above P3.00 per square meter, the excess amount shall be credited and paid to the
herein workers. In addition to the 10% commission based on P2.10 per square meter, provided the
brokers shall pay the corresponding taxes to the owner of the excess amount over P3.00 per square
meter, unless paid by check which would then be deductible as additional expenses.
3. This exclusive option and authority is good for a period of sixty (60) days from the date of your
conformity; provided, however, that should negotiations have been started with a buyer, said period is
automatically extended until said negotiations is terminated, but not more than fifteen (15) days;
4. The written offers must be made by the prospective buyers, unless they prefer to have us take the
offer for and in their behalf some buyers do not want to be known in the early stages of the
negotiations:
5. If no written offer is made to you until the last day of this authorization, this option and authority
shall expire and become null and void;
6. It is clearly understood that prospective buyers and all parties interested in this property shall be
referred to us, and that you will not even quote a price directly to any agent or buyer. You agree to
refer all agents or brokers to us DURING the time this option is in force; and
7. There are some squatters occupying small portions of the property, which fact will be reported to
the prospective buyers, and said squatters will be removed at our expense. (Annex "A" of the
complaint)
Very truly yours,
PHILIPPINE REAL ESTATE EXCHANCE
(Sgd) ANTONIO E. PRATS
General manager
CONFORME:
(Sgt.) ALFONSO DORONILA
Date: February 14, 1968
5.
That on February 19, 1968, plaintiff wrote the following letter to defendant DORONILA (Annex "4" of the Answer), quoted
as follows:
February 19, 1968
Don Alfonso Doronila
Plaza Ferguzon
Ermita, Manila
Dear Don Alfonso:
In view of the exclusive option extended to us for the sale of your property consisting 300 hectares located at Montalban,
Rizal, we earnestly request that you take immediate steps to withdraw any and all papers pertaining to this property
offered to the SOCIAL SECURITY SYSTEM
Very truly yours,
PHILIPPINE REAL
ESTATE EXCHANGE
(Sgd) ANTONIO E. PRATS
General Manager
AEP/acc
RECEIVED ORIGINAL
By: (Sgd.) ROGELIO DAPITAN
6.
That on February 20, 1968, pursuant to the letter dated February 19, 1968 of plaintiff, defendant DORONILA wrote a
letter (Annex 'B' of the complaint) to the SSS Administrator stating:
In as much as the SSS has not acted on my offer to sell a 300 hectare lot located in Montalban,
Rizal, for the last five (5) months I respectfully requested for the return of all my papers concerning
this offered property.
7.
That on February 27, 1968, defendant DORONILA received the following letter (Annex "C" of the complaint) from the
SSS Deputy Administrator, Mr. Reynaldo J. Gregorio, to wit:
May I take this opportunity of inviting you in behalf of Administrator Teodoro, to meet with him, Chairman Gaviola and
myself on Friday, March 4, 10:00 A.M. lot offer.
Thanks and regards.
8.
That on February 28, 1968, defendant DORONILA wrote the following letter (Annex "D" of the complaint) to the SSS
Deputy Administrator:
Thank you for your invitation to meet Administrator Teodoro, Chairman Gaviola and your goodself, to
take up my former offer to sell my property to the Social Security System.
Since the SSS had not acted on my offer dated July 19, 1967, more than seven (7) months ago, I
have asked for the return of my papers, as per my letter of February 20, 1968, and which you have
kindly returned to me.
As of February 20, 1968, I gave the Philippine Real Estate Exchange an exclusive option and
authority to negotiate the sale of this 300 hectare land, and I am no longer at liberty to negotiate its
sale personally; I shall therefore request you communicate directly with the Philippine Real Estate
Exchange, P. O. Box 84, Quezon City, and deal with them directly if you are still interested in my
property.
With my kind personal regards, I am
9.
That on March 16, 1968, plaintiff, acting upon the letter of defendant DORONILA dated February 28, 1968 (Annex 'D' for
plaintiff), wrote the following letter to SSS Administrator:
Don Alfonso Doronila, owner of the 300 hectare land located at Montalban, Rizal, adjoining the
Quezon City boundary, has informed us that the Administrator of the SOCIAL SECURITY' SYSTEM,
through Mr. Reynaldo J. Gregorio, has invited him to meet with the Administrator and Chairman
Gaviola to take up the former offer to sell his property to the SSS.
In his letter to the Administrator dated February 20, 1968 (which has been received by the SSS on
the same day), Mr. Doronila advised you that as of February 20,1968, he gave the PHILIPPINE
REAL ESTATE EXCHANGE (PHILREX) the exclusive option and authority to negotiate the sale of
his 300 hectare land in Montalban, and that he is no longer at liberty to negotiate its sale personally,
and that, if you are still interested in the property, the SSS should communicate directly with the
PHILIPPINE REAL ESTATE EXCHANGE.
It is by virtue of this arrangement that Mr. Doronila now refers to us invitation and his reply to the SSS
and has requested us to get in touch with you.
While, at present we have several prospective buyers interested in this property, we shall, in
compliance with the request of Mr. Doronila, be happy to sit down with you and Chairman Ramon
Gaviola, Jr.
Please let us know when it will be convenient to hold the conference.
10.
That on April 18, 1968, defendant DORONILA extended the plaintiff exclusive option and authority to expire May 18,
1968.(annex 'B' Reply letter of Doronila to SSS Deputy Administrator dated May 8, 1968).
11.
That on May 6,1968, plaintiff made a formal written offer to the Social Security System to sell the 300 hectares land of
defendant DORONILA at the price of P6.00 per square meter, Xerox copy of which bearing the stamp or receipt of Social
Security System is attached hereof as Annex "D" plaintiff.
12.
That on May 16, 1968 the defendant DORONILA received the following telegram (Annex 'E' of the complaint) form the
SSS Administrative, reading:
SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING PROJECT
13.
That on May 18, 1968, after plaintiff exclusive option and authority had been extended, plaintiff wrote the following letter
(Annex "A" Reply' of plaintiff's REPLY TO ANSWER) to defendant DORONILA, to wit:
CONFIDENTIAL
In our conference last Monday, May 13, 1968, you have been definitely advised by responsible
parties that the SOCIAL SECURITY SYSTEM is acquiring your 300-hectare land at Montalban, Rizal,
adjoining the Quezon City Boundary and that said property will be acquired in accordance with the
exclusive option and authority you gave the PHILIPPINE REAL ESTATE EXCHANCE. You were
assured in that conference that the property will be acquired definitely, but, as it has been mentioned
during the conference, it may take from 30 to 60 days to have all the papers prepared and to effect
the corresponding payment. The telegram from the SSS confirming these negotiations has already
been received by you, a copy of which you yourself have kindly furnished us.
Pursuant to paragraph 3 of the terms of the option that you have kindly extended, we still have fifteen days more from
today, May 18, 1968, within which to finish the negotiations for the sale of your property to the SSS. For your
convenience, we quote the pertinent portion of paragraph 3 of the option:
... provided, however, that should negotiation have been started with a buyer, said period is
automatically extended until said negotiation is terminated, but no more than fifteen (15) days.
Please be assured that we will do our very best to complete these negotiations for the sale of your
property within this fifteen-day period. In the meantime' we hope you will also observe the provisions
of paragraph 6 of the exclusive option you have extended to us.
14.
That on May 18, 1968, plaintiff wrote the following letter (Xerox copy attached and marked hereof as Annex 'H' for
plaintiff) addressed defendant DORONILA, to wit:
By virtue of the exclusive option and authority you have granted the PHILIPPINE REAL ESTATE
EXCHANGE to negotiate the sale of your 300-hectare land located at Montalban, Rizal, adjoining the
Quezon City boundary, which properties are covered by Transfer Certificate of Titles Nos. 116631,
77011, 77012 and 77013, of the Registry of Deeds for the Province of Rizal, we hereby make a firm
offer, for and in behalf of our buyer, to purchase said property at the price of FOUR PESOS AND
FIFTY CENTAVOS (P4.50) per square meter, or the total amount of THIRTEEN MILLION FIVE
HUNDRED THOUSAND (P13,500,000.00) PESOS, Philippine Currency, payable in Cash and D.B.P.
Progress Bonds, on a ratio to be decided between you and our principal.
To expedite the negotiations, we suggest that we sit down sometime early next week with our
principal to take up the final arrangement and other details in connection with the purchase of the
subject property.
To give you further assurance of the validity of this offer, we refer you to the CHINA BANKING
CORPORATION (Trust Department) who has already been apprised of these negotiations, to which ]
sank we strongly recommend that this transaction be coursed through, for your own security and
protection.
15.
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy attached hereto, and marked as Annex 'I' for
plaintiff) to defendant DORONILA, quoted as follows:
This is to advise you that the SOCIAL SECURITY SYSTEM agreed to purchase your 300-hectare
land located at Montalban, Rizal, which purchase can be conformed by the Chairman of the SOCIAL
SECURITY COMMISSION. The details will have to be taken up between you and the Chairman, and
we suggest that you communicate with the Chairman at your earliest convenience.
This negotiation was made by virtue of the exclusive option and authority you have granted the
PHILIPPINE REAL ESTATE EXCHANGE, which option is in full force and effect, and covers the
transaction referred above.
16.
That on June 6,1968, defendant DORONILA wrote the following letter (Annex" 7" for DORONILA), to the plaintiff, to wit:
I have to inform you officially, that I have not received any written offer from the SSS or others, to
purchase my Montalban property of which you were given an option and exclusive authority as
appearing in your letter- contract dated February 14, 1968, during the 60 days of your exclusive
authority which expired on April 14, 1968, nor during the extension which was properly a new
exclusive authority of 30 days from April 18, which expired on May 18, 1968, nor during the provided
15 days grace, in case that you have closed any transaction to terminate it during that period, which
also expired on June 3, 1968.
As stated in said letter, we have the following condition:
5. If no written offer is made to you until the last day of this authorization, this option and authority
shall expire and becomes null and void.
As I have informed you, that on April 16, 1968 or two days after your option expired I have signed an
agreement to sell my property to a group of buyers to whom I asked later that the effectivity of said
agreement will be after your new authority has expired will be on June 2, 1968, and they have
accepted; As your option has expired, and they know that there was no written offer made by the
SSS for any price of my property, aside of their previous letter announcing me that they are ready to
pay, I was notified on June 4, 1968 by their representative, calling my attention but our agreement;
that is why I am writing you, that having expired your option and exclusive authority to offer for sale
my said property, I notified only this afternoon said to comply our agreement.
Hoping for your consideration on the matter, as we have to be guided by contracts that we have to
comply, I hereby express to you my sincere sentiments.
17.
That on June 19, 1968, defendant DORONILA wrote the following letter (Annex "5" of the Answer) to the SSS
Administrator, renewing his offer to sell his 300 hectare land to the SSS at P4.00 per square meter, to wit:
This is to renew my offer to sell my properties located at Montalban, Rizal Identified as Lot Nos. 3-B7, 26-8, 6, and 4-C-3 registered in my name in the office of the Registry of Deeds of Rizal under
T.C.T. Nos. 116631, 77013, 77011 and 216750, containing a total area of 300 hectares or 3,000,000
square meters.
You will recall that last year, I offered to the Social Security System the same properties at the price
of Four (P4.00) pesos per square meter. After 3 ocular inspection of Chairman Gaviola one of said
inspections accompanied by Commissioner Arroyo and after receiving the written apprisal report of
Manila realtor Vicente L. Narciso, the System then made a counter-offer of Three pesos and twentyfive (P3.25) per square meter which I accepted under the condition that the total amount be paid
within a period of thirty (30) days from the date of my acceptance (July 19, 1967). My acceptance
was motivated by the fact that within said period of time I had hoped to purchase my sugarcane
hacienda in Iloilo with the proceeds I expected from the sale. No action was however taken by the
System thereon.
Recently the same properties were offered by Antonio E. Prats of the Philippine Real Estate
Exchange to the Presidential Assistant on Housing, at the price of six pesos (p6.00) per square
meter, who referred it to the System, but against no action had been taken by the System.
Considering the lapse of time since our original offer during which prices of real estate have
increased considerably, on the one hand and in cooperation with the System's implementation of our
government's policy to provide low cost houses to its members, on the other hand, I am renewing my
offer to sell my properties to the system only at the same price of P4.00 per square meter, or for a
total amount of twelve million pesos (P12,000,000.00), provided the total amount is paid in cash
within a period of fifteen (15) days from this date.
18.
That on June 20, 1968, the Social Security Commission passed Resolution No. 636 by which the SSS formalized its
counter-offer of P3.25 per square meter. (See Annex 'F' of the complaint)
19.
That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote the following reply letter (Annex '6' of the
Answer) to defendant DORONILA, to wit:
This has reference to your letter dated June 19, 1966 renewing your offer to sell
your property located at Montalban, Rizal containing an area of 300 hectares at
P4.00 per square meter. Please be informed that the said letter was submitted for
the consideration of the Social Security Commission at its last meeting on June
20, 1968 and pursuant to its Resolution No. 636, current series, it decided that
the System reiterate its counter-offer for P3.25 per square meter subject to a
favorable appraisal report by a reputable appraisal entity as regards particularly
to price and housing project feasibility. Should this counter-offer be acceptable to
you, kindly so indicate by signing hereunder your conformity thereon.
Trusting that the foregoing sufficiently advises you on the matter, I remain
Very truly yours,
GILBERTO
TEODORO
Administrator
CONFORME: With condition that the sale will be consummated within Twenty (20) days from this
date.
ALFONSO
DORONILA
Returned and received the original by
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2
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6
8
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20.
That on June 27, 1968, the Social Security Commission passed Resolution No. 662 authorizing the Toples & Harding
(Far East) to conduct an appraisal of the property of defendant DORONILA and to submit a report thereon. (See Annex
'F' of the complaint)
21.
That on July 17, 1968, the Social Security Commission taking note of the report of Toples & Harding (Far East), passed
Resolution No. 736, approving the purchase of the 300 hectare land of defendant DORONILA, at the price of P3.25 per
square meter, for a total purchase price of NINE MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS
(P9,750,000.00), and appropriating the said amount of money for the purpose. (See Annex 'F' of the complaint).
22.
That on July 30, 1968, defendant DORONILA executed the deed of absolute sale (Annex "C" of the complaint) over his
300-hectare land, situated in Montalban, Rizal, covered by TCT Nos. 77011, 77013, 216747 (formerly TCT No. 116631)
and 216750 (formerly TCT No. 77012), in favor of the Social Security System, for the total purchase price of NINE
MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency, which deed of sale was
presented for registration in the Office of the Register of Deeds of Fiscal on August 21, 1968.
23.
That defendant DORONILA had received the full purchase price of NINE MILLION SEVEN HUNDRED FIFTY
THOUSAND PESOS (P9,750,000.00), Philippine Currency, in two installments.
24.
That on September 17, 1968, plaintiff presented his STATEMENT OF ACCOUNT, dated September 16, 1968 (Xerox
copy of which is attached hereto and marked as Annex plaintiff' to defendant DORONILA for the payment of his
professional services as real estate broker in the amount of P1,380,000.00, as computed on the basis of the letteragreement, Annex "A" of the complaint, which defendant failed to pay. Manila, for Quezon City, January 18,1968.
Respectfully
submitted:
CRISPIN D. BAIZAS & ASSOCIATES
and A.N. BOLINAO,
JR.
By: (Sgd.)
Counsel for the
plaintiff
Suite 305,
ShurdutBldg.
Intramuros, Manila
(Sgd.) E. V. Obon
Atty. EUGENIO V.
OBON
Counsel for the
defendant
9 West Point Street
Quezon City
ALFONSO
DORONILA
Counsel for the
defendant
428 Plaza de
Ferguson
Ermita, Manila 2
The trial court rendered its decision dated December 12, 1969, the initiative part of which reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff, ordering defendant Alfonso Doronila, under the first
cause of action, to pay to plaintiff the sum of P1,380,000.00 with interest thereon at the rate of 6% per annum from
September 23, 1968 until fully paid; and under the second Cause of Action, to pay plaintiff the sum of P200,000.00 as
moral damages; the sum of P100,000.00 as exemplary damages; the sum of P150,000.00 as attorney's fees, including
the expenses of. litigation and costs of this suit.
The writ of preliminary injunction issued in this case is hereby made permanent; and the defendant Philippine National
Bank is hereby ordered to pay to the plaintiff the amount of P1,380,000.00 and interest on the P1,380,000.00 to be
computed separately out of the P2,000,000.00 which it presently holds under a fixed time deposit.
SO ORDERED.
December 12, 1969, Quezon City, Philippines.
(SGD.) LOURDES P. SAN DIEGO
Judge3
The defendant appealed to the Court of Appeals where the appeal was docketed as CA-G.R. No. 45974-R.
In a decision promulgated on September 19, 1974, the Court of Appeals reversed the derision of the trial court and dismissed the complaint
because:
In any event, since it has been found that the authority of appellee expired on June 2, 1968, rather than June 12, 1968 as
the lower court opined, the inquiry would be whether up to that time, a written offer was made by appellee in behalf of the
SSS. The stipulation is clear on this point. There should be a written offer by the prospective buyer or by appellee for or
in their behalf, and that if no such written offer is made until the last day of the authorization, the option and authority
shall expire and become null and void. Note that the emphasis is placed on the need of a written offer to save the
authority from an automatic termination on the last day of the authorization. We note such emphasis with special
significance in receive of the condition relative to automatic extension of not more than 15 days if negotiations have been
started. The question then is when are negotiations deemed started In the light of the provisions just cited, it should be
when a response is given by the prospective buyer showing fits interest to buy the property when an offer is made by the
seller or broker and make an offer of the price. Strictly, therefore, prior to May 29, 1968, there were no negotiations yet
started within contemplation of the letter-agreement of brokerage (Exh. A). Nevertheless appellant extended appellee's
exclusive authority to on May 18, 1968 (par. 10, Stipulation of Facts; R.A. p. 89), which was automatically extended by 15
days under their agreement, to expire on June 2, 1968, if the period extended up to May 18, 1968 a necessary authority.
For, it may even be considered as taking the of the 15-days automatic extension, since appellee's pretension is that
negotiations have been started within the original period of 60 days. Appellant in fixing the expiry date on June 2, 1968,
has thus made a liberal concession in favor of appellee, when he chose not to the extension up to May 18, 1968 as the
automatic extension which ougth to have been no more than 15 days, but which he stretched twice as long. 4
The petitioner assigned the following errors:
I
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER WAS NOT THE EFFICIENT
PROCURING CAUSE IN BRING ABOUT THE SALE OF PRIVATE RESPONDENT DORONILA'S LAND TO THE SSS.
II
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THERE WAS FAILURE ON THE PART OF
HEREIN PETITIONER TO COMPLY WITH THE TERMS AND CONDITIONS OF HIS CONTRACT WITH PRIVATE
RESPONDENT.
III
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT PETITIONER IS NOT ENTITLED TO HIS
COMMISSION.
IV
THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING ATTORNEY'S FEES TO PRIVATE RESPONDENT
DORONILA INSTEAD OF AFFIRMING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AS WELL As
ATTORNEY FEES TO PETITIONER. 5
The Court in its Resolution of May 23, 1975 originally denied the petition for lack of merit but upon petitioner's motion for reconsideration and
supplemental petition invoking equity, resolved in its Resolution of August 20, 1975 to give due course thereto.
From the stipulation of facts and the evidence of record, it is clear that the offer of defendant Doronila to sell the 300 hectares of land in
question to the Social Security System was formally accepted by the System only on June 20, 1968 after the exclusive authority, Exhibit A, in
favor of the plaintiff, petitioner herein, had expired. The respondent court's factual findings that petitioner was not the efficient procuring
cause in bringing about the sale proceeding from the fact of expiration of his exclusive authority) which are admittedly final for purposes of
the present petition, provide no basis law to grant relief to petitioner. The following pertinent excerpts from respondent court's extensive
decision amply demonstrate this:
It is noted, however, that even in his brief, when he said
According to the testimony of the plaintiff-appellee a few days before May 29, 1968, he arranged with
Mr. Gilberto Teodoro, SSS Administrator, a meeting with the defendant Manila. He talked with Mr.
Teodoro over the telephone and fixed the date of the meeting with defendant-appellant Doronila for
May 29, 1968, and that he was specifically requested by Mr. Teodoro not to be present at the
meeting, as he, Teodoro, wanted to deal directly with the defendant-appellant alone. (Tsn., pp. 4446,
March 1, 1969). Finding nothing wrong with such a request, as the sale could be caused directly or
indirectly (Exh. 'A'), and believing that as a broker all that he needed to do to be entitled to his
commission was to bring about a meeting between the buyer and the seller as to ripen into a sale,
plaintiff-appellee readily acceded to the request.
appellee is not categorical that it was through his efforts that the meeting took place on inlay 29, 1968. He refers to a
telephone call he made "a few days before May 29, 1968," but in the conversation he had with Mr. Teodoro, the latter
requested him not to be present in the meeting. From these facts, it is manifest that the SSS officials never wanted to be
in any way guided by, or otherwise subject to, the mediation or intervention of, appellee relative to the negotiation for the
purchase of the property. It is thus more reasonable to conclude that if a meeting was held on May 29, 1968, it was done
independently, and not by virtue of, appellee's wish or efforts to hold such meeting. 6
xxx xxx xxx
... It is even doubtful if he tried to make any arrangement for meeting at all, because on May 18, 1968, he told appellant:
... we hereby make a firm offer, for and in behalf of our buyer, to purchase said property at the price
of Four Pesos and Fifty Centavos (P4.50) per square meter ....
As this offer is evidently made in behalf of buyer other than the SSS which had never offered the price of P4.50 per
square meter, appellee could not have at the same time arranged a meeting between the SSS officials and appellant with
a view to consummating the sale in favor of the SSS which had made an offer of only PS.25 per sq. m. and thus lose the
much bigger profit he would realize with a higher price of P4.50 per sq. meter. This 'firm offer' of P4.50 per sq. m. made
by appellee betrayed his lack of any efficient intervention in the negotiations with the SSS for the purchase by it of
appellant's property ... 7
xxx xxx xxx
... This becomes more evident when it is considered that on May 6, 1968 he was making his first offer to sell the property
at P6.00 per sq. m. to the SSS to which offer he received no answer. It is this cold indifference of the SSS to him that
must have prompted him to look for other buyers, resulting in his making the firm offer of 714.50 per sq. m. on May 18,
1968, a fact which only goes to show that for being ignored by the SSS, he gave up all effort to deal with the SSS. ... 8
xxx xxx xxx
... For him to claim that it was he who aroused the interest of the SSS in buying appellant's property is to ignore the fact
that as early as June, (July) 1967, the SSS had directly dealt with appellant to such an extent that the price of P3.25 as
offered by the SSS was accepted by appellant, the latter imposing only the condition that the price should be paid in
cash, and within 30 days from the date of the acceptance. It can truly be said then that the interest of SSS to acquire the
property had been sufficiently aroused for there to be any need for appellee to stimulate it further. Appellee should know
this fact for according to him, the 10-day grace period was agreed upon to give the SSS a chance to pay the price of the
land at P3.25 per sq. m., as a "compromise" to appellant's insistence that the SSS be excluded from appellee's option or
authority to sell the land. 9
... There should be a written offer by the prospective buyer or by appellee for or in their behalf, and that if no such written
offer is made until the last day of the authorization, the option and authority shall expired and become null and void. ...
Yet, no such written offer was made. ... 10
In equity, however, the Court notes that petitioner had Monthly taken steps to bring back together respondent Doronila and the SSS, among
which may be mentioned the following:
In July, 1967, prior to February 14, 1968, respondent Doronila had offered to sell the land in question to the Social Security System Direct
negotiations were made by Doronila with the SSS. The SSS did not then accept the offer of Doronila. Thereafter, Doronila executed the
exclusive authority in favor of petitioner Prats on February 14, 1968.
Prats communicated with the Office of the Presidential Housing Commission on February 23, 1968 offering the Doronila property. Prats wrote
a follow-up letter on April is, 1968 which was answered by the Commission with the suggestion that the property be offered directly to the
SSS. Prats wrote the SSS on March 16, 1968, inviting Chairman Ramon Gaviola, Jr. to discuss the offer of the sale of the property in
question to the SSS. On May 6, 1968, Prats made a formal written offer to the Social Security System to self the 300 hectare land of Doronila
at the price of P6.00 per square meter. Doronila received on May 17, 1968 from the SSS Administrator a telegram that the SSS was
considering the purchase of Doronilas property for its housing project. Prats and his witness Raagas testified that Prats had several dinner
and lunch meetings with Doronila and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the negotiations with the SSS.
Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were invited several times by Prats, sometimes to luncheons and
sometimes to dinner. On a Sunday, June 2, 1968, Prats and Raagas had luncheon in Sulu Hotel in Quezon City and they were joined later by
Chairman Gaviola of the SSS.
The Court has noted on the other hand that Doronila finally sold the property to the Social Security System at P3.25 per square meter which
was the very same price counter-offered by the Social Security System and accepted by him in July, 1967 when he alone was dealing
exclusively with the said buyer long before Prats came into the picture but that on the other hand Prats' efforts somehow were instrumental in
bringing them together again and finally consummating the transaction at the same price of P3.25 square meter, although such finalization
was after the expiration of Prats' extended exclusive authority. Still such price was higher than that stipulated in the exclusive authority
granted by Doronila to Prats.
Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos (P100,000.00) by way of compensation for
his efforts and assistance in the transaction, which however was finalized and consummated after the expiration of his exclusive authority
and sets aside the P10,000.00 attorneys' fees award adjudged against him by respondent court.
WHEREFORE, the derision appealed from is hereby affirmed, with the modification that private respondent Alfonso Doronila in equity is
ordered to pay petitioner or his heirs the amount of One Hundred Thousand Pesos (P100,000.00) and that the portion of the said decision
sell petitioner Prats to pay respondent Doronila attorneys' fees in the sum of P10,000.00 is set aside.
The lifting of the injunction issued by the lower court on the P2,000,000.00 cash deposit of respondent Doronila as ordered by respondent
court is hereby with the exception of the sum of One Hundred Thousand Pesos (P100,000.00) which is ordered segregated therefrom to
satisfy the award herein given to petitioner, the lifting of said injunction, as herein ordered, is immediately executory upon promulgation
hereof.
No pronouncement as to costs.
Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-45262 July 23, 1990
RUPERTO REYES and REYNALDO C. SAN JUAN, in his capacity as Special Administrator, Petitioners, vs. HON. LORENZO R.
MOSQUEDA, Judge of CFI, Pampanga (Branch VII), and URSULA D. PASCUAL, Respondents.
G.R. No. L-45394 July 23, 1990
PEDRO DALUSONG, Petitioner,

vs.
HON. LORENZO R. MOSQUEDA, JUDGE, BRANCH VII, COURT OF FIRST INSTANCE OF PAMPANGA, and URSULA D.
PASCUAL, Respondents.
G.R. Nos. 73241-42 July 23, 1990
OFELIA D. PARUNGAO and ROSARIO DUNCIL, Petitioners, vs. THE HON. INTERMEDIATE APPELLATE COURT, (Third Civil Cases
Division), BENJAMIN P. REYES and OSCAR REYES, Respondents..
GUTIERREZ, JR., J.:

The instant petitions have been consolidated as they arose from the same facts and involve similar issues. Dr. Emilio Pascual died intestate
and without issue on November 18,1972. He was survived by his sister, Ursula Pascual and the children of his late sisters as follows: (1)
Maria Pascual Reyes- Ruperto Reyes and Jose Reyes; (2) Ines Pascual Reyes-Jose P. Reyes, Benito Reyes, and Manna Reyes
Manalastas; (3) Josefa Pascual Reyes-Augusto Reyes and Benjamin Reyes; and (4) Escolastica Pascual Dalusong (half- blood Pedro
Dalusong. .
On December 3, 1973, the heirs of Dr. Pascual filed Special Proceedings No. 73-30-M in the then Court of First Instance of Pampanga for
the administration of his estate. Atty. Marcela Macapagal, Clerk of Court of Branch VII was appointed special administratrix. Macapagal was,
however, replaced by Reynaldo San Juan. .
On February 12, 1976, Ursula Pascual filed a motion to exclude some properties from the inventory of Pascual's estate and to deliver the
titles thereto to her. Ursula alleged that Dr. Pascual during his lifetime or on November 2, 1966 executed a "Donation Mortis Causa" in her
favor covering properties which are included in the estate of Dr. Pascual (subject of Special Proceedings No. 73-30-M) and therefore should
be excluded from the inventory. .
On August 1, 1976; the trial court issued an order excluding from the inventory of the estate the properties donated to Ursula, to wit:
WHEREFORE, in view of all the foregoing discussion, let the properties listed in paragraph 2 of the motion of February 12, 1976 filed by
Ursula D. Pascual thru counsel be, as it is hereby ordered, excluded from the inventory of the estate of the deceased Dr. Emilio D. Pascual,
without prejudice to its final determination in a separate action. Special Administrator Reynaldo San Juan is hereby ordered to return to Court
the custody of the corresponding certificates of titles of these properties, until the issue of ownership is finally determined in a separate
action. (G.R. No. 45262, pp. 23-24)
The Order is now the subject of G.R. Nos. 45262 and 45394. On January 5, 1977, we issued a temporary restraining order enjoining the trial
court from enforcing the August 1, 1976 Order. .
Among the properties included in the "donation mortis causa" in favor of Ursula was Lot 24, Block No. 15 of the subdivision plan Psd-3231,
located at 1109-1111 R. Papa St., Tondo, Manila as evidenced by Transfer Certificate of Title No. 17854. The records show that on May 15,
1969, Emilio Pascual executed a deed of donation of real property inter vivos over the abovementioned lot in Manila in favor of Ofelia D.
Parungao, petitioner in G.R. Nos. 73241-42 a minor with her mother, Rosario Duncil, accepting the gift and donation for and in her behalf.
When Parungao reached the age of majority or on December 20, 1976, she tried to have the donation registered. However, she found out
that the certificate of title was missing from where it was supposed to be kept, prompting her to file a petition for reconstitution of title with the
Court of First Instance of Manila. The petition was granted in October 1977. Parungao registered the deed of donation with the Register of
Deeds of Manila who cancelled Transfer Certificate of Title No. 17854 and issued in lieu thereof Transfer Certificate of Title No. 129092 in the
name of Ofelia Parungao. She then filed a motion for exclusion in Special Proceedings No. 73-30-M. .
In the meantime, on September 23, 1976, Ursula Pascual executed a deed of absolute sale over the Tondo property in favor of Benjamin,
Oscar, Jose and Emmanuel, all surnamed Reyes. .
On May 2, 1978, Benjamin Reyes, private respondent in G.R. Nos. 73241-42 filed a complaint for declaration of nullity of Transfer Certificate
of Title No. 129092, Register of Deeds of Manila and/or reconveyance of deed of title against Ofelia Parungao and Rosario Duncil, with the
then Court of First Instance of Manila. The case was docketed as Civil Case No. 115164. .
In their answer with compulsory counterclaim Parungao and Duncil, denied Reyes' assertion of ownership over the Tondo property. On
November 6, 1978, Ofelia Parungao filed a complaint for recovery of possession over the Tondo property against Benjamin Reyes and his
nephew Oscar Reyes with the Court of First Instance of Manila. The case was docketed as Civil Case No. 119359. In her complaint,
Parungao also alleged that as early as 1973, the defendants occupied two (2) doors of the apartment situated at the Tondo property by mere
tolerance of the previous owner, Dr. Emilio Pascual, and later by her until April 8, 1978 when she formally demanded that the defendants
vacate the premises. Parungao prayed that the defendants be evicted from the premises. .
The two cases were consolidated. On June 3, 1982, the then Court of First Instance, Branch 8 rendered a joint decision, the dispositive
portion of which reads:
WHEREFORE, judgment is hereby rendered: In Civil Case No. 115164 - .
1) Declaring TCT No. 129092 in the name of Ofelia Parungao null and void; and ordering the Register of Deeds of Manila to cancel said title
and to restore, in lieu thereof, TCT No. 17854 in the name of Emilio D. Pascual; .
2) Ordering Ofelia D. Parungao to pay plaintiff Benjamin P. Reyes the sum of Two Thousand (P2,000.00) Pesos, as and for attorney's fees;
and to pay the costs of suit including all fees which the Register of Deeds may prescribe for the full implementation of this decision. For lack
of merit, the counterclaim is dismissed. .
In Civil Case No. 119359 - .
1) Dismissing the complaint for want of merit; and .
2) On the counterclaim, ordering Ofelia Parungao to pay defendant defendants the sum of Two Thousand (P2,000.00) Pesos as and for
attorney's fees.'
Parungao appealed the decision to the then Intermediate Appellate Court. The decision was, however, affirmed, with costs against the
appellant. .
The Intermediate Appellate Court decision is now the subject matter in G.R. Nos. 73241-42. .
On January 29, 1986, we issued a minute resolution denying the above petition for lack of merit. The resolution became final and executory
on March 10, 1986 and on this same day the entry of judgment was effected. The entry of judgment was however set aside in the resolution
dated January 19, 1987 on the ground that the January 29, 1986 resolution was not received by the petitioners' counsel of record. The
petitioner was granted leave to file a motion for reconsideration of the January 29, 1986 resolution. .
The motion for reconsideration is now before us for resolution petition. .
The issues raised in these petitions are two-fold: (1) In G.R. No. L-45394, petitioner Pedro Dalusong questions the jurisdiction of the probate
court to exclude the properties donated to Ursula Pascual in its Order dated August 1, 1976, and (2) In G.R. No. L-45262 and G.R. Nos.
73241-42 Ruperto Reyes, Reynaldo C. San Juan, in his capacity as special administrator of the estate of Emilio Pascual (petitioner in G.R.
No.
L- 45262), Ofelia Parungao and Rosario Duncil (petitioners in G.R. Nos. 7324142) question the appellate court's finding that the "Donation
Mortis Causa" executed by Emilio Pascual in favor of his sister Ursula Pascual was actually a Donation Inter Vivos. .
We first discuss the issue on jurisdiction. The questioned August 1, 1976 order of the then Court of First Instance of Pampanga in S.P. Proc.
No. 73-30-M categorically stated that the exclusion from the inventory of the estate of the deceased Dr. Emilio D. Pascual was "without
prejudice to its final determination in a separate action." The provisional character of the exclusion of the contested properties in the
inventory as stressed in the order is within the jurisdiction of the probate court. This was stressed in the case of Cuizon v. Ramolete (129
SCRA 495 [1984]) which we cited in the case of Morales v. Court of First Instance of Cavite, Branch V (146 SCRA 373 [1986]):
It is well-settled rule that a probate court or one in charge of proceedings whether testate or intestate cannot adjudicate or determine title to
properties claimed to be a part of the estate and which are equally claimed to belong to outside parties. All that the said court could do as
regards said properties is to determine whether they should or should not be included in the inventory or list of properties to be administered
by the administrator. If there is no dispute, well and good; but if there is, then the parties, the administrator, and the opposing parties have to
resort to an ordinary action for a final determination of the conflicting claims of title because the probate court cannot do so (Mallari v. Mallari,
92 Phil. 694; Baquial v. Amihan, 92 Phil. 501). .
Similarly, in Valero Vda. de Rodriguez v. Court of Appeals, (91 SCRA 540) we held that for the purpose of determining whether a certain
property should or should not be included in the inventory, the probate court may pass upon the title thereto but such determination is not
conclusive and is subject to the final decision in a separate action regarding ownership which may be instituted by the parties (3 Moran's
Comments on the Rules of Court, 1970 Edition, pages 448449 and 473; Lachenal v. Salas,
L-42257, June 14, 1976, 71 SCRA 262, 266).
On the second issue, it may be noted that the Court of Appeals did not pass upon the authenticity of the 1969 donation to Parungao because
of its finding that the 1966 donation to Pascual was inter vivos. The petitioners do not press the authenticity of the 1969 donation as their
challenge centers on whether or not the 1966 donation was inter vivos. However, the trial court has a lengthy discussion reflecting adversely
on the authenticity of the 1969 donation to Parungao. .
The petitioners assert that the 1966 donation was null and void since it was not executed with the formalities of a will. Therefore, the
petitioners in G.R. No. L-45262 insist that the donated properties should revert to the estate of Emilio Pascual while the petitioners in G.R.
Nos. 73241-42 insist that the donation of real property inter vivos in favor of Ofelia Parungao be given effect. .
The subject deed of donation titled "DONATION MORTIS CAUSA" duly notarized by a certain Cornelio M. Sigua states:
That Dr. Emilio D. Pascual, Filipino, single, of age and resident of Apalit, Pampanga, hereinafter called the DONOR and Ursula D. Pascual,
Filipino, single, also of age, resident of and with postal address at Apalit, Pampanga, hereinafter called the DONEE, have agreed, as they do
hereby agree, to the following, to wit: .
That the said DONOR, Dr. Emilio D. Pascual, for and in consideration of the love and affection which he has and bears unto the said
DONEE, as also for the personal services rendered by the said DONEE to the said DONOR, does hereby by these presents voluntarily
GIVE, GRANT, and DONATE MORTIS CAUSA unto the said DONEE URSULA D. PASCUAL, her heirs and assigns, all of my rights, title and
interest, in and to the following parcels of land with all the improvements thereon, situated in the Municipality of Apalit, Pampanga, and more
particularly described and Identified as follows: .
xxx xxx xxx .
(Enumerated herein are 41 parcels of land) .
Also included in this DONATION MORTIS CAUSA are all personal properties of the DONOR in the form of cash money or bank deposits and
insurance in his favor, and his real properties situated in other towns of Pampanga, such as San Simon, and in the province of Rizal, San
Francisco del Monte and in the City of Manila. .
That the said donor has reserved for himself sufficient property to maintain him for life; and that the said DONEE does hereby ACCEPT and
RECEIVE this DONATION MORTIS CAUSA and further does express his appreciation and gratefulness for the generosity of said DONOR;
(Rollo of G.R. No. L-45262, pp. 12-16) .
xxx xxx xxx
Considering the provisions of the DONATION MORTIS CAUSA the appellate court ruled that the deed of donation was actually a donation
inter vivos although denominated as DONATION MORTIS CAUSA. .
It is, now a settled rule that the title given to a deed of donation is not the determinative factor which makes the donation "inter vivos" or
"mortis causa" As early as the case of Laureta v. Manta, et al., (44 Phil. 668 [1928]) this Court ruled that the dispositions in a deed of
donation-whether "inter vivos" or "mortis causa" do not depend on the title or term used in the deed of donation but on the provisions stated
in such deed. This Court explained inConcepcion v. Concepcion (91 Phil. 823 [1952]) ...But, it is a rule consistently followed by the courts that it is the body of the document of donation and the statements contained therein, and
not the title that should be considered in ascertaining the intention of the donor. Here, the donation is entitled and called donacion onerosa
mortis causa. From the body, however, we find that the donation was of a nature remunerative rather than onerous. It was for past services
rendered, services which may not be considered as a debt to be paid by the donee but services rendered to her freely and in goodwill. The
donation instead of being onerous or for a valuable consideration, as in payment of a legal obligation, was more of remuneratory or
compensatory nature, besides being partly motivated by affection. .
We should not give too much importance or significance to or be guided by the use of the phrase 'mortis causa in a donation and thereby to
conclude that the donation is not one of inter vivos. In the case of De Guzman et al. v. Ibea et al. (67 Phil. 633), this Court through Mr. Chief
Justice Avancena said that if a donation by its terms is inter vivos, this character is not altered by the fact that the donor styles it mortis
causa. .
In the case of Laureta v. Mata, et al. (44 Phil. 668), the court held that the donation involved was inter vivos. There, the donor Severa Magno
y Laureta gave the properties involved as - .
... a reward for the services which he is rendering me, and as a token of my affection toward him and of the fact that he stands high in my
estimation, I hereby donate 'mortis causa to said youth all the properties described as follows: .
xxx xxx xxx .
I also declare that it is the condition of this donation that the donee cannot take possession of the properties donated before the death of the
donor, and in the event of her death the said donee shall be under obligation to cause a mass to be held annually as a suffrage in behalf of
my sold, and also to defray the expenses of my burial and funerals.'.
It will be observed that the present case and that of Laureta above cited are similar in that in both cases the donation was being made as a
reward for services rendered and being rendered, and as a token of affection for the donee; the phrase 'mortis causa was used; the donee to
take possession of the property donated only after the death of the donor; the donee was under obligation to defray the expenses incident to
the celebration of the anniversary of the donor's death, including church fees. The donation in both cases were duly accepted. In said case of
Laureta this Court held that the donation was in praesenti and not a gift in futuro.
In the later case of Bonsato et al. v. Court of appeals, et al. (95 Phil. 481 [1954]) this Court, distinguished the characteristics of a donation
inter vivos and "mortis causa" in this wise:
Did the late Domingo Bonsato, make donations inter vivos or dispositions post mortem in favor of the petitioners herein? If the latter, then the
documents should reveal any or all of the following characteristics: .
(1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor
should retain the ownership (fun or naked) and control of the property while alive (Vidal v. Posadas, 58 Phil., 108; Guzman v. Ibea 67 Phil.,
633); .
(2) That before his death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly
by means of a reserved power in the donor to dispose of the properties conveyed (Bautista v. Sabiniano, G.R. No. L- 4326, November 18,
1952); .
(3) That the transfer should be void if the transferor should survive the transferee.
These principles were repeated in the case of Castro v. Court of Appeals (27 SCRA 1076 [1969]), to wit:
Whether a donation is inter vivos or mortis causa depends upon the nature of the disposition made. 'Did the donor intend to transfer the
ownership of the property donated upon the execution of the donation? If this is so, as reflected from the provisions contained in the
donation, then it is inter vivos; otherwise, it is merely mortis causa, or made to take effect after death.' (Howard v. Padilla and Court of
Appeals, G.R. No. L-7064 and L-7098, April 22, 1955.
Applying the above principles to the instant petitions, there is no doubt that the so-called DONATION MORTIS CAUSA is really a donation
inter vivos. The donation was executed by Dr. Pascual in favor of his sister Ursula Pascual out of love and affection as well as a recognition
of the personal services rendered by the donee to the donor. The transfer of ownership over the properties donated to the donee was
immediate and independent of the death of the donor. The provision as regards the reservation of properties for the donor's subsistence in
relation to the other provisions of the deed of donation confirms the intention of the donor to give naked ownership of the properties to the
donee immediately after the execution of the deed of donation. .
With these findings we find no need to discuss the other arguments raised by the petitioners. .
WHEREFORE, this Court hereby renders judgment as follows: .
1) In G.R. Nos. 45262 and 45394 the petitions are DENIED. The Temporary Restraining Order issued on January 5, 1977 is hereby LIFTED;
and .
2) In G.R. Nos. 73241-42, the motion for reconsideration is DENIED. This DENIAL is FINAL.
SO ORDERED.
G.R. No. 85302 March 31, 1989
BICOL SAVINGS AND LOAN ASSOCIATION, petitioner,
vs.
HON. COURT OF APPEALS, CORAZON DE JESUS, LYDIA DE JESUS, NELIA DE JESUS, JOSE DE JESUS, AND PABLO DE
JESUS, respondents.
Contreras & Associates for petitioner.
Reynaldo A. Feliciano for private respondents.
MELENCIO-HERRERA, J.:
This Petition for Review on certiorari was filed by Bicol Savings and Loan Association, seeking the reversal of the Decision ** of the
respondent Court of Appeals in CA-G.R. CV No. 02213, dated 11 August 1 988, which ruled adversely against it. The pleadings disclose the
following factual milieu:
Juan de Jesus was the owner of a parcel of land, containing an area of 6,870 sq. ms., more or less, situated in Naga City. On 31 March
1976, he executed a Special Power of Attorney in favor of his son, Jose de Jesus, "To negotiate, mortgage my real property in any bank
either private or public entity preferably in the Bicol Savings Bank, Naga City, in any amount that may be agreed upon between the bank and
my attorney-in-fact." (CA Decision, p. 44, Rollo)
By virtue thereof, Jose de Jesus obtained a loan of twenty thousand pesos (P20,000.00) from petitioner bank on 13 April 1976. To secure
payment, Jose de Jesus executed a deed of mortgage on the real property referred to in the Special Power of Attorney, which mortgage
contract carried, inter alia, the following stipulation:
b) If at any time the Mortgagor shall refuse to pay the obligations herein secured, or any of the
amortizations of such indebtedness when due, or to comply with any of the conditions and
stipulations herein agreed .... then all the obligations of the Mortgagor secured by this Mortgage, all
the amortizations thereof shall immediately become due, payable and defaulted and the Mortgagee
may immediately foreclose this mortgage in accordance with the Rules of Court, or extrajudicially in
accordance with Act No. 3135, as amended, or Act No. 1508. For the purpose of extrajudicial
foreclosure, the Mortgagor hereby appoints the Mortgagee his attorney-in-fact to sell the property
mortgaged. . . . (CA Decision, pp. 47-48, Rollo)
Juan de Jesus died in the meantime on a date that does not appear of record.
By reason of his failure to pay the loan obligation even during his lifetime, petitioner bank caused the mortgage to be extrajudicially
foreclosed on 16 November 1978. In the subsequent public auction, the mortgaged property was sold to the bank as the highest bidder to
whom a Provisional Certificate of Sale was issued.
Private respondents herein, including Jose de Jesus, who are all the heirs of the late Juan de Jesus, failed to redeem the property within one
year from the date of the registration of the Provisional Certificate of Sale on 21 November 1980. Hence, a Definite Certificate of Sale was
issued in favor of the bank on 7 September 1982.
Notwithstanding, private respondents still negotiated with the bank for the repurchase of the property. Offers and counter-offers were made,
but no agreement was reached, as a consequence of which, the bank sold the property instead to other parties in installments. Conditional
deeds of sale were executed between the bank and these parties. A Writ of Possession prayed for by the bank was granted by the Regional
Trial Court.
On 31 January 1983 private respondents herein filed a Complaint with the then Court of First Instance of Naga City for the annulment of the
foreclosure sale or for the repurchase by them of the property. That Court, noting that the action was principally for the annulment of the
Definite Deed of Sale issued to petitioner bank, dismissed the case, ruling that the title of the bank over the mortgaged property had become
absolute upon the issuance and registration of the said deed in its favor in September 1982. The Trial Court also held that herein private
respondents were guilty of laches by failing to act until 31 January 1983 when they filed the instant Complaint.
On appeal, the Trial Court was reversed by respondent Court of Appeals. In so ruling, the Appellate Court applied Article 1879 of the Civil
Code and stated that since the special power to mortgage granted to Jose de Jesus did not include the power to sell, it was error for the
lower Court not to have declared the foreclosure proceedings -and auction sale held in 1978 null and void because the Special Power of
Attorney given by Juan de Jesus to Jose de Jesus was merely to mortgage his property, and not to extrajudicially foreclose the mortgage
and sell the mortgaged property in the said extrajudicial foreclosure. The Appellate Court was also of the opinion that petitioner bank should
have resorted to judicial foreclosure. A Decision was thus handed down annulling the extrajudicial foreclosure sale, the Provisional and
Definite Deeds of Sale, the registration thereof, and the Writ of Possession issued to petitioner bank.
From this ruling, the bank filed this petition to which the Court gave due course.
The pivotal issue is the validity of the extrajudicial foreclosure sale of the mortgaged property instituted by petitioner bank which, in turn
hinges on whether or not the agent-son exceeded the scope of his authority in agreeing to a stipulation in the mortgage deed that petitioner
bank could extrajudicially foreclose the mortgaged property.
Article 1879 of the Civil Code, relied on by the Appellate Court in ruling against the validity of the extrajudicial foreclosure sale, reads:
Art. 1879. A special power to sell excludes the power to mortgage; and a special power to mortgage does not include the
power to sell.
We find the foregoing provision inapplicable herein.
The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an auction sale
resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no foreclosure results. The
stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation supported by the same cause or
consideration for the mortgage and forms an essential or inseparable part of that bilateral agreement (Perez v. Philippine National Bank, No.
L-21813, July 30, 1966, 17 SCRA 833, 839).
The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is
primarily an authority conferred upon the mortgagee for the latter's own protection. That power survives the death of the mortgagor (Perez
vs. PNB, supra). In fact, the right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor Juan de
Jesus, acting through his attorney-in-fact, Jose de Jesus, did not depend on the authorization in the deed of mortgage executed by the latter.
That right existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court, which grants to a
mortgagee three remedies that can be alternatively pursued in case the mortgagor dies, to wit: (1) to waive the mortgage and claim the entire
debt from the estate of the mortgagor as an ordinary claim; (2) to foreclose the mortgage judicially and prove any deficiency as an ordinary
claim; and (3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred by prescription, without right to file a
claim for any deficiency. It is this right of extrajudicial foreclosure that petitioner bank had availed of, a right that was expressly upheld in the
same case of Perez v. Philippine National Bank (supra), which explicitly reversed the decision inPasno v. Ravina (54 Phil. 382) requiring a
judicial foreclosure in the same factual situation. The Court in the aforesaid PNB case pointed out that the ruling in the Pasno case virtually
wiped out the third alternative, which precisely includes extrajudicial foreclosure, a result not warranted by the text of the Rule.
It matters not that the authority to extrajudicially foreclose was granted by an attorney-in-fact and not by the mortgagor personally. The
stipulation in that regard, although ancillary, forms an essential part of the mortgage contract and is inseparable therefrom. No creditor will
agree to enter into a mortgage contract without that stipulation intended for its protection.
Petitioner bank, therefore, in effecting the extrajudicial foreclosure of the mortgaged property, merely availed of a right conferred by law. The
auction sale that followed in the wake of that foreclosure was but a consequence thereof.
WHEREFORE, the Decision of respondent Court of Appeals in CA-G.R. CV No. 02213 is SET ASIDE, and the extrajudicial foreclosure of the
subject mortgaged property, as well as the Deeds of Sale, the registration thereof, and the Writ of Possession in petitioner bank's favor, are
hereby declared VALID and EFFECTIVE.
SO ORDERED.

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G.R. No. 76931 May 29, 1991

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11. IATA and ATC Rules

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July 14, 2009

SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners,

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Q. What transactions are these, Mr. Witness?

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Q. Are there incoming Equipment Interchange Receipt Mr. Witness?

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G.R. No. 159489

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d) the amount of P100,000.00 for and as attorneys fees; and

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June 26, 2006

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JOCELYN B. DOLES, Petitioner,

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q. What profit do you have, do you have commission?

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q. So that occasion lasted for more than a year?

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June 23, 2006

APEX MINING CO., INC., petitioner,

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June 23, 2006

BALITE COMMUNAL PORTAL MINING COOPERATIVE, petitioner,

June 23, 2006

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b) MAC Case No. 005(XI) Davao United Miners Cooperative;

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EDUARDO V. LINTONJUA, JR. and ANTONIO K. LITONJUA, Petitioners,

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