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Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 148116

April 14, 2004

ANTONIO K. LITONJUA and AURELIO K. LITONJUA, JR., petitioners,


vs.
MARY ANN GRACE FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA, represented by GREGORIO T. ELEOSIDA, HEIRS OF DOMINGO
B. TICZON, represented by MARY MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T.
BENITEZ, DOMINIC TICZON, JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-G.R. CV No. 64940, which reversed and set aside the
June 23, 1999 Decision2 of the Regional Trial Court of Pasig City, Branch 68, in Civil Case No. 65629, as well as its Resolution dated April 30,
2001 denying the petitioners motion for reconsideration of the aforesaid decision.
The heirs of Domingo B. Ticzon3 are the owners of a parcel of land located in San Pablo City, covered by Transfer Certificate of Title (TCT) No.
T-36766 of the Register of Deeds of San Pablo City.4 On the other hand, the heirs of Paz Ticzon Eleosida, represented by Gregorio T. Eleosida,
are the owners of a parcel of land located in San Pablo City, covered by TCT No. 36754, also of the Register of Deeds of San Pablo City. 5
The Case for the Petitioners
Sometime in September 1995, Mrs. Lourdes Alimario and Agapito Fisico who worked as brokers, offered to sell to the petitioners, Antonio K.
Litonjua and Aurelio K. Litonjua, Jr., the parcels of land covered by TCT Nos. 36754 and 36766. The petitioners were shown a locator plan and
copies of the titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T. Eleosida,
respectively. The brokers told the petitioners that they were authorized by respondent Fernandez to offer the property for sale. The petitioners,
thereafter, made two ocular inspections of the property, in the course of which they saw some people gathering coconuts.
In the afternoon of November 27, 1995, the petitioners met with respondent Fernandez and the two brokers at the petitioners office in
Mandaluyong City.6 The petitioners and respondent Fernandez agreed that the petitioners would buy the property consisting of 36,742 square
meters, for the price of P150 per square meter, or the total sum of P5,098,500. They also agreed that the owners would shoulder the capital
gains tax, transfer tax and the expenses for the documentation of the sale. The petitioners and respondent Fernandez also agreed to meet on
December 8, 1995 to finalize the sale. It was also agreed upon that on the said date, respondent Fernandez would present a special power of
attorney executed by the owners of the property, authorizing her to sell the property for and in their behalf, and to execute a deed of absolute
sale thereon. The petitioners would also remit the purchase price to the owners, through respondent Fernandez. However, only Agapito Fisico
attended the meeting. He informed the petitioners that respondent Fernandez was encountering some problems with the tenants and was trying
to work out a settlement with them.7 After a few weeks of waiting, the petitioners wrote respondent Fernandez on January 5, 1995, demanding
that their transaction be finalized by January 30, 1996.8
When the petitioners received no response from respondent Fernandez, the petitioners sent her another Letter 9dated February 1, 1996, asking
that the Deed of Absolute Sale covering the property be executed in accordance with their verbal agreement dated November 27, 1995. The
petitioners also demanded the turnover of the subject properties to them within fifteen days from receipt of the said letter; otherwise, they would
have no option but to protect their interest through legal means.
Upon receipt of the above letter, respondent Fernandez wrote the petitioners on February 14, 1996 10 and clarified her stand on the matter in this
wise:
1) It is not true I agreed to shoulder registration fees and other miscellaneous expenses, etc. I do not recall we ever discussed about
them. Nonetheless, I made an assurance at that time that there was no liens/encumbrances and tenants on my property (TCT
36755).
2) It is not true that we agreed to meet on December 8, 1995 in order to sign the Deed of Absolute Sale. The truth of the matter is that
you were the one who emphatically stated that you would prepare a Contract to Sell and requested us to come back first week of
December as you would be leaving the country then. In fact, what you were demanding from us was to apprise you of the status of the
property, whether we would be able to ascertain that there are really no tenants. Ms. Alimario and I left your office, but we did not
assure you that we would be back on the first week of December.
Unfortunately, some people suddenly appeared and claiming to be "tenants" for the entire properties (including those belonging to my
other relatives.) Another thing, the Barangay Captain now refuses to give a certification that our properties are not tenanted.

Thereafter, I informed my broker, Ms. Lulu Alimario, to relay to Mr. Agapito that due to the appearance of "alleged tenants" who are
demanding for a one-hectare share, my cousin and I have thereby changed our mind and that the sale will no longer push through. I
specifically instructed her to inform you thru your broker that we will not be attending the meeting to be held sometime first week of
December.
In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. We
have not demanded and received from you any earnest money, thereby, no obligations exist. In the meantime, we hope that in the
future we will eventually be able to transact business since we still have other properties in San Pablo City.11
Appended thereto was a copy of respondent Fernandez letter to the petitioners dated January 16, 1996, in response to the latters January 5,
1996 letter.12
On April 12, 1996, the petitioners filed the instant Complaint for specific performance with damages 13 against respondent Fernandez and the
registered owners of the property. In their complaint, the petitioners alleged, inter alia, the following:
4. On 27 November 1995, defendants offered to sell to plaintiffs two (2) parcels of land covered by Transfer Certificates of Title Nos.
36766 and 36754 measuring a total of 36,742 square meters in Barrio Concepcion, San Pablo City. After a brief negotiation,
defendants committed and specifically agreed to sell to plaintiffs 33,990 square meters of the two (2) aforementioned parcels of land
at P150.00 per square meter.
5. The parties also unequivocally agreed to the following:
(a) The transfer tax and all the other fees and expenses for the titling of the subject property in plaintiffs names would be for
defendants account.
(b) The plaintiffs would pay the entire purchase price of P5,098,500.00 for the aforementioned 33,990 square meters of land in
plaintiffs office on 8 December 1995.
6. Defendants repeatedly assured plaintiffs that the two (2) subject parcels of land were free from all liens and encumbrances and that
no squatters or tenants occupied them.
7. Plaintiffs, true to their word, and relying in good faith on the commitment of defendants, pursued the purchase of the subject parcels
of lands. On 5 January 1996, plaintiffs sent a letter of even date to defendants, setting the date of sale and payment on 30 January
1996.
7.1 Defendants received the letter on 12 January 1996 but did not reply to it.
8. On 1 February 1996, plaintiffs again sent a letter of even date to defendants demanding execution of the Deed of Sale.
8.1 Defendants received the same on 6 February 1996. Again, there was no reply. Defendants thus reneged on their
commitment a second time.
9. On 14 February 1996, defendant Fernandez sent a written communication of the same date to plaintiffs enclosing therein a copy of
her 16 January 1996 letter to plaintiffs which plaintiffs never received before. Defendant Fernandez stated in her 16 January 1996
letter that despite the meeting of minds among the parties over the 33,990 square meters of land for P150.00 per square meter on 27
November 1995, defendants suddenly had a change of heart and no longer wished to sell the same. Paragraph 6 thereof
unquestionably shows defendants previous agreement as above-mentioned and their unjustified breach of their obligations under it.

10. Defendants cannot unilaterally, whimsically and capriciously cancel a perfected contract to sell.
11. Plaintiffs intended to use the subject property for their subdivision project to support plaintiffs quarry operations, processing of
aggregate products and manufacture of construction materials. Consequently, by reason of defendants failure to honor their just
obligations, plaintiffs suffered, and continue to suffer, actual damages, consisting in unrealized profits and cost of money, in the
amount of at least P5 Million.
12. Plaintiffs also suffered sleepless nights and mental anxiety on account of defendants fraudulent actuations for which reason
defendants are liable to plaintiffs for moral damages in the amount of at least P1.5 Million.
13. By reason of defendants above-described fraudulent actuations, plaintiffs, despite their willingness and ability to pay the agreed
purchase price, have to date been unable to take delivery of the title to the subject property. Defendants acted in a wanton, fraudulent
and malevolent manner in violating the contract to sell. By way of example or correction for the public good, defendants are liable to
plaintiff for exemplary damages in the amount of P500,000.00.
14. Defendants bad faith and refusal to honor their just obligations to plaintiffs constrained the latter to litigate and to engage the
services of undersigned counsel for a fee in the amount of at least P250,000.00. 14

The petitioners prayed that, after due hearing, judgment be rendered in their favor ordering the respondents to
(a) Secure at defendants expense all clearances from the appropriate government agencies that will enable defendants to comply
with their obligations under the Contract to Sell;
(b) Execute a Contract to Sell with terms agreed upon by the parties;
(c) Solidarily pay the plaintiffs the following amounts:
1. P5,000,000.00 in actual damages;
2. P1,500,000.00 in moral damages;
3. P500,000.00 in exemplary damages;
4. P250,000.00 in attorneys fees.15
On July 5, 1996, respondent Fernandez filed her Answer to the complaint. 16 She claimed that while the petitioners offered to buy the property
during the meeting of November 27, 1995, she did not accept the offer; thus, no verbal contract to sell was ever perfected. She specifically
alleged that the said contract to sell was unenforceable for failure to comply with the statute of frauds. She also maintained that even
assuming arguendo that she had, indeed, made a commitment or promise to sell the property to the petitioners, the same was not binding upon
her in the absence of any consideration distinct and separate from the price. She, thus, prayed that judgment be rendered as follows:
1. Dismissing the Complaint, with costs against the plaintiffs;
2. On the COUNTERCLAIM, ordering plaintiffs to pay defendant moral damages in the amount of not less than P2,000,000.00 and
exemplary damages in the amount of not less than P500,000.00 and attorneys fees and reimbursement expenses of litigation in the
amount of P300,000.00.17
On September 24, 1997, the trial court, upon motion of the petitioners, declared the other respondents in default for failure to file their
responsive pleading within the reglementary period.18 At the pre-trial conference held on March 2, 1998, the parties agreed that the following
issues were to be resolved by the trial court: (1) whether or not there was a perfected contract to sell; (2) in the event that there was, indeed, a
perfected contract to sell, whether or not the respondents breached the said contract to sell; and (3) the corollary issue of damages. 19
Respondent Fernandez testified that she requested Lourdes Alimario to look for a buyer of the properties in San Pablo City "on a best offer
basis." She was later informed by Alimario that the petitioners were interested to buy the properties. On November 27, 1995, along with Alimario
and another person, she met with the petitioners in the latters office and told them that she was at the conference merely to hear their offer,
that she could not bind the owners of the properties as she had no written authority to sell the same. The petitioners offered to buy the property
at P150 per square meter. After the meeting, respondent Fernandez requested Joy Marquez to secure a barangay clearance stating that the
property was free of any tenants. She was surprised to learn that the clearance could not be secured. She contacted a cousin of hers, also one
of the owners of the property, and informed him that there was a prospective buyer of the property but that there were tenants thereon. Her
cousin told her that he was not selling his share of the property and that he was not agreeable to the price of P150 per square meter. She no
longer informed the other owners of the petitioners offer. Respondent Fernandez then asked Alimario to apprise the petitioners of the foregoing
developments, through their agent, Agapito Fisico. She was surprised to receive a letter from the petitioners dated January 5, 1996.
Nonetheless, she informed the petitioners that she had changed her mind in pursuing the negotiations in a Letter dated January 18, 1996.
When she received petitioners February 1, 1996 Letter, she sent a Reply-Letter dated February 14, 1996.
After trial on the merits, the trial court rendered judgment in favor of the petitioners on June 23, 1999, 20 the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of plaintiffs ANTONIO K. LITONJUA and
AURELIO K. LITONJUA and against defendants MARY MEDIATRIX T. FERNANDEZ, HEIRS OF PAZ TICZON ELEOSIDA,
represented by GREGORIO T. ELEOSIDA, JOHN DOES and JANE DOES; HEIRS OF DOMINGO B. TICZON, represented by MARY
MEDIATRIX T. FERNANDEZ, CRISTETA TICZON, EVANGELINE JILL R. TICZON, ERLINDA T. BENITEZ, DOMINIC TICZON,
JOSEFINA LUISA PIAMONTE, JOHN DOES and JANE DOES, ordering defendants to:
1. execute a Contract of Sale and/or Absolute Deed of Sale with the terms agreed upon by the parties and to secure all
clearances from the concerned government agencies and removal of any tenants from the subject property at their expense
to enable defendants to comply with their obligations under the perfected agreement to sell; and
2. pay to plaintiffs the sum of Two Hundred Thousand (P200,000.00) Pesos as and by way of attorneys fees. 21
On appeal to the Court of Appeals, the respondents ascribed the following errors to the court a quo:
I. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT OF SALE OF THE TWO LOTS ON
NOVEMBER 27, 1995.
II. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT OF SALE AS CLAIMED BY PLAINTIFFSAPPELLEES ANTONIO LITONJUA AND AURELIO LITONJUA WAS UNENFORCEABLE.

III. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANT-APPELLANT FERNANDEZ DATED JANUARY
16, 1996 WAS A CONFIRMATION OF THE PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF.
IV. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF ATTORNEY WAS REQUIRED IN ORDER THAT
DEFENDANT-APPELLANT FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER REGISTERED COOWNERS OF THE TWO LOTS.
V. THE LOWER COURT ERRED IN AWARDING ATTORNEYS FEES IN THE DISPOSITIVE PORTION OF THE DECISION
WITHOUT STATING THE BASIS IN THE TEXT OF SAID DECISION.22
On February 28, 2001, the appellate court promulgated its decision reversing and setting aside the judgment of the trial court and dismissing
the petitioners complaint, as well as the respondents counterclaim.23 The appellate court ruled that the petitioners failed to prove that a sale or
a contract to sell over the property between the petitioners and the private respondent had been perfected.
Hence, the instant petition for review on certiorari under Rule 45 of the Revised Rules of Court.
The petitioners submit the following issues for the Courts resolution:
A. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES.
B. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS.
C. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE BENEFITED BY THE ASSAILED DECISION OF THE
COURT OF APPEALS.24
The petition has no merit.
The general rule is that the Courts jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the
appellate court. As the findings of fact of the appellate court are deemed continued, this Court is not duty-bound to analyze and calibrate all
over again the evidence adduced by the parties in the court a quo.25 This rule, however, is not without exceptions, such as where the factual
findings of the Court of Appeals and the trial court are conflicting or contradictory.26 Indeed, in this case, the findings of the trial court and its
conclusion based on the said findings contradict those of the appellate court. However, upon careful review of the records of this case, we find
no justification to grant the petition. We, thus, affirm the decision of the appellate court.
On the first and second assignment of errors, the petitioners assert that there was a perfected contract of sale between the petitioners as
buyers and the respondents-owners, through respondent Fernandez, as sellers. The petitioners contend that the perfection of the said contract
is evidenced by the January 16, 1996 Letter of respondent Fernandez.27 The pertinent portions of the said letter are as follows:
[M]y cousin and I have thereby changed our mind and that the sale will no longer push through. I specifically instructed her to
inform you thru your broker that we will not be attending the meeting to be held sometime first week of December.
In view thereof, I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. We
have not demanded and received from you any earnest money, thereby, no obligations exist28
The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract, thus, removing it from the coverage of the
statute of frauds. The letter specifically makes reference to a sale which respondent Fernandez agreed to initially, but which the latter withdrew
because of the emergence of some people who claimed to be tenants on both parcels of land. According to the petitioners, the respondentsowners, in their answer to the complaint, as well as respondent Fernandez when she testified, admitted the authenticity and due execution of
the said letter. Besides, when the petitioner Antonio Litonjua testified on the contract of sale entered into between themselves and the
respondents-owners, the latter did not object thereto. Consequently, the respondents-owners thereby ratified the said contract of sale. The
petitioners thus contend that the appellate courts declaration that there was no perfected contract of sale between the petitioners and the
respondents-owners is belied by the evidence, the pleadings of the parties, and the law.
The petitioners contention is bereft of merit. In its decision, the appellate court ruled that the Letter of respondent Fernandez dated January 16,
1996 is hardly the note or memorandum contemplated under Article 1403(2)(e) of the New Civil Code, which reads:
Art. 1403. The following contracts are unenforceable, unless they are ratified:

(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases an agreement hereafter
made shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the
party charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing, or secondary evidence of
its contents:


(e) An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest
therein.29
The appellate court based its ruling on the following disquisitions:
In the case at bar, the letter dated January 16, 1996 of defendant-appellant can hardly be said to constitute the note or memorandum
evidencing the agreement of the parties to enter into a contract of sale as it is very clear that defendant-appellant as seller did not
accept the condition that she will be the one to pay the registration fees and miscellaneous expenses and therein also categorically
denied she had already committed to execute the deed of sale as claimed by the plaintiffs-appellees. The letter, in fact, stated the
reasons beyond the control of the defendant-appellant, why the sale could no longer push through because of the problem with
tenants. The trial court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds, thereby
concluding that defendant-appellant had unilaterally cancelled the sale or backed out of her previous commitment. However, the tenor
of the letter actually reveals a consistent denial that there was any such commitment on the part of defendant-appellant to sell the
subject lands to plaintiffs-appellees. When defendant-appellant used the words "changed our mind," she was clearly referring to the
decision to sell the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as
defendant-appellant had not yet made the final decision to sell the property to said plaintiffs-appellees. This conclusion is buttressed
by the last paragraph of the subject letter stating that "we are no longer selling the property until all problems are fully settled." To read
a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the contents of this letter is to unduly
restrict the freedom of the contracting parties to negotiate and prejudice the right of every property owner to secure the best possible
offer and terms in such sale transactions. We believe, therefore, that the trial court committed a reversible error in finding that there
was a perfected contract of sale or contract to sell under the foregoing circumstances. Hence, the defendant-appellant may not be
held liable in this action for specific performance with damages.30
In Rosencor Development Corporation vs. Court of Appeals,31 the term "statute of frauds" is descriptive of statutes which require certain classes
of contracts to be in writing. The statute does not deprive the parties of the right to contract with respect to the matters therein involved, but
merely regulates the formalities of the contract necessary to render it enforceable. The purpose of the statute is to prevent fraud and perjury in
the enforcement of obligations, depending for their existence on the unassisted memory of witnesses, by requiring certain enumerated
contracts and transactions to be evidenced by a writing signed by the party to be charged. The statute is satisfied or, as it is often stated, a
contract or bargain is taken within the statute by making and executing a note or memorandum of the contract which is sufficient to state the
requirements of the statute.32 The application of such statute presupposes the existence of a perfected contract. However, for a note or
memorandum to satisfy the statute, it must be complete in itself and cannot rest partly in writing and partly in parol. The note or memorandum
must contain the names of the parties, the terms and conditions of the contract and a description of the property sufficient to render it capable of
identification.33 Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be
ascertained from the note or memorandum itself, or some other writing to which it refers or within which it is connected, without resorting to
parol evidence.34 To be binding on the persons to be charged, such note or memorandum must be signed by the said party or by his agent duly
authorized in writing.35
In City of Cebu v. Heirs of Rubi,36 we held that the exchange of written correspondence between the parties may constitute sufficient writing to
evidence the agreement for purposes of complying with the statute of frauds.
In this case, we agree with the findings of the appellate court that there was no perfected contract of sale between the respondents-owners, as
sellers, and the petitioners, as buyers.
There is no documentary evidence on record that the respondents-owners specifically authorized respondent Fernandez to sell their properties
to another, including the petitioners. Article 1878 of the New Civil Code provides that 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, 37 or to create or
convey real rights over immovable property,38 or for any other act of strict dominion.39 Any sale of real property by one purporting to be the agent
of the registered owner without any authority therefor in writing from the said owner is null and void. 40The declarations of the agent alone are
generally insufficient to establish the fact or extent of her authority.41 In this case, the only evidence adduced by the petitioners to prove that
respondent Fernandez was authorized by the respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez
openly represented herself to be the representative of the respondents-owners, 42 and that she promised to present to the petitioners on
December 8, 1996 a written authority to sell the properties. 43 However, the petitioners claim was belied by respondent Fernandez when she
testified, thus:
Q Madam Witness, what else did you tell to the plaintiffs?
A I told them that I was there representing myself as one of the owners of the properties, and I was just there to listen to his proposal
because that time, we were just looking for the best offer and I did not have yet any written authorities from my brother and sisters and
relatives. I cannot agree on anything yet since it is just a preliminary meeting, and so, I have to secure authorities and relate the
matters to my relatives, brother and sisters, sir.
Q And what else was taken up?
A Mr. Antonio Litonjua told me that they will be leaving for another country and he requested me to come back on the first week of
December and in the meantime, I should make an assurance that there are no tenants in our properties, sir.44

The petitioners cannot feign ignorance of respondent Fernandez lack of authority to sell the properties for the respondents-owners. It must be
stressed that the petitioners are noted businessmen who ought to be very familiar with the intricacies of business transactions, such as the sale
of real property.
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.45 In this case, respondent Fernandez specifically denied that she was authorized by the respondents-owners to sell the properties, both
in her answer to the complaint and when she testified. The Letter dated January 16, 1996 relied upon by the petitioners was signed by
respondent Fernandez alone, without any authority from the respondents-owners. There is no evidence on record that the respondents-owners
ratified all the actuations of respondent Fernandez in connection with her dealings with the petitioners. As such, said letter is not binding on the
respondents as owners of the subject properties.
Contrary to the petitioners contention, the letter of January 16, 1996 46 is not a note or memorandum within the context of Article 1403(2)
because it does not contain the following: (a) all the essential terms and conditions of the sale of the properties; (b) an accurate description of
the property subject of the sale; and, (c) the names of the respondents-owners of the properties. Furthermore, the letter made reference to only
one property, that covered by TCT No. T-36755.
We note that the petitioners themselves were uncertain as to the specific area of the properties they were seeking to buy. In their complaint,
they alleged to have agreed to buy from the respondents-owners 33,990 square meters of the total acreage of the two lots consisting of 36,742
square meters. In their Letter to respondent Fernandez dated January 5, 1996, the petitioners stated that they agreed to buy the two lots, with a
total area of 36,742 square meters.47 However, in their Letter dated February 1, 1996, the petitioners declared that they agreed to buy a portion
of the properties consisting of 33,990 square meters. 48 When he testified, petitioner Antonio Litonjua declared that the petitioners agreed to buy
from the respondents-owners 36,742 square meters at P150 per square meter or for the total price of P5,098,500. 49
The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and conditions of the contract asserted by the
petitioners and, (b) her authority to sell the properties for the respondents-registered owners did not and should not prejudice the respondentsowners who had been declared in default.50
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the appellate court is AFFIRMEDIN TOTO. Costs against the
petitioners.SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

SECOND DIVISION

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
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-19265

May 29, 1964

MOISES SAN DIEGO, SR., petitioner,


vs.
ADELO NOMBRE and PEDRO ESCANLAR, respondents.
A. R. Castaeda and M. S. Roxas for petitioner.
Amado B. Parreo Law Office for respondents.
PAREDES, J.:
The case at bar had its origin in Special Proceedings No. 7279 of the CFI of Negros Occidental wherein respondent Adelo Nombre was the duly
constituted judicial administrator. On May 1, 1960, Nombre, in his capacity was judicial administrator of the intestate estate subject of the Sp.
Proc. stated above, leased one of the properties of the estate (a fishpond identified as Lot No. 1617 of the cadastral survey of Kabankaban,
Negros Occidental), to Pedro Escanlar, the other respondent. The terms of the lease was for three (3) years, with a yearly rental of P3,000.00 to
expire on May 1, 1963, the transaction having been done, admittedly, without previous authority or approval of the Court where the proceedings
was pending. On January 17, 1961, Nombre was removed as administrator by Order of the court and one Sofronio Campillanos was appointed
in his stead. The appeal on the Order of Nombre's removal is supposedly pending with the Court of Appeals. Respondent Escanlar was cited for
contempt, allegedly for his refusal to surrender the fishpond to the newly appointed administrator. On March 20, 1961, Campillanos filed a
motion asking for authority to execute a lease contract of the same fishpond, in favor of petitioner herein, Moises San Diego, Sr., for 5 years
from 1961, at a yearly rental of P5,000.00. Escanlar was not notified of such motion. Nombre, the deposed administrator, presented a written
opposition to the motion of Campillanos on April 11, 1964, pointing out that the fishpond had been leased by him to Escanlar for 3 years, the
period of which was going to expire on May 1, 1963. In a supplemental opposition, he also invited the attention of the Court that to grant the
motion of the new administrator would in effect nullify the contract in favor of Escanlar, a person on whom the Court had no jurisdiction. He also
intimated that the validity of the lease contract entered into by a judicial administrator, must be recognized unless so declared void in a separate
action. The opposition notwithstanding, the Court on April 8, 1961, in effect declared that the contract in favor of Escanlar was null and void, for
want of judicial authority and that unless he would offer the same as or better conditions than the prospective lessee, San Diego, there was no
good reason why the motion for authority to lease the property to San Diego should not be granted. Nombre moved to reconsider the Order of
April 8, stating that Escanlar was willing to increase the rental of P5,000.00, but only after the termination of his original contract. The motion for
reconsideration was denied on April 24, 1961, the trial judge stating that the contract in favor of Escanlar was executed in bad faith and was
fraudulent because of the imminence of Nombre's removal as administrator, one of the causes of which was his indiscriminate pleasant, of the
property with inadequate rentals.
From this Order, a petition for Certiorari asking for the annulment of the Orders of April 8 and 24, 1961 was presented by Nombre and Escanlar
with the Court of Appeals. A Writ of preliminary injunction was likewise prayed for to restrain the new administrator Campillanos from
possessing the fishpond and from executing a new lease contract covering it; requiring him to return the possession thereof to Escanlar, plus
damages and attorney's fees in the amount of P10,000.00 and costs. The Court of Appeals issued the injunctive writ and required respondents
therein to Answer. Campillanos insisted on the invalidity of the contract in favor of Escanlar; the lower court alleged that it did not exactly annul
or invalidate the lease in his questioned orders but suggested merely that Escanlar "may file a separate ordinary action in the Court of general
jurisdiction."
The Court of Appeals, in dismissing the petition for certiorari, among others said
The controlling issue in this case is the legality of the contract of lease entered into by the former administrator Nombre, and Pedro
Escanlar on May 1, 1960.
Respondents contend that this contract, not having been authorized or approved by the Court, is null and void and cannot be an
obstacle to the execution of another of lease by the new administrator, Campillanos. This contention is without merit. ... . It has been
held that even in the absence of such special powers, a contract or lease for more than 6 years is not entirely invalid; it is invalid only
in so far as it exceeds the six-year limit (Enrique v. Watson Company, et al., 6 Phil. 84). 1
No such limitation on the power of a judicial administrator to grant a lease of property placed under his custody is provided for in the
present law. Under Article 1647 of the present Civil Code, it is only when the lease is to be recorded in the Registry of Property that it
cannot be instituted without special authority. Thus, regardless of the period of lease, there is no need of special authority unless the
contract is to be recorded in the Registry of Property. As to whether the contract in favor of Escanlar is to be so recorded is not
material to our inquiry. 1wph1.t

On the contrary, Rule 85, Section 3, of the Rules of Court authorizes a judicial administrator, among other things, to administer the
estate of the deceased not disposed of by will. Commenting on this Section in the light of several Supreme Court decisions (Jocson
de Hilado v. Nava, 69 Phil. 1; Gamboa v. Gamboa, 68 Phil. 304; Ferraris v. Rodas, 65 Phil. 732; Rodriguez v. Borromeo, 43 Phil. 479),
Moran says: "Under this provision, the executor or administrator has the power of administering the estate of the deceased for
purposes of liquidation and distribution. He may, therefore, exercise all acts of administration without special authority of the Court.
For instance, he may lease the property without securing previously any permission from the court. And where the lease has formally
been entered into, the court cannot, in the same proceeding, annul the same, to the prejudice of the lessee, over whose person it had
no jurisdiction. The proper remedy would be a separate action by the administrator or the heirs to annul the lease. ... .
On September 13, 1961, petitioner herein Moises San Diego, Sr., who was not a party in the case, intervened and moved for a reconsideration
of the above judgment. The original parties (the new administrator and respondent judge) also filed Motions for reconsideration, but we do not
find them in the record. On November 18, 1961, the Court of Appeals denied the motions for reconsideration. With the denial of the said
motions, only San Diego, appealed therefrom, raising legal questions, which center on "Whether a judicial administrator can validly lease
property of the estate without prior judicial authority and approval", and "whether the provisions of the New Civil Code on Agency should apply
to judicial administrators."
The Rules of Court provide that
An executor or administrator shall have the right to the possession of the real as well as the personal estate of the deceased so long
as it is necessary for the payment of the debts and the expenses of administration, and shall administer the estate of the deceased
not disposed of by his will. (Sec. 3, Rule 85, old Rules).
Lease has been considered an act of administration (Jocson v. Nava; Gamboa v. Gamboa; Rodriguez v. Borromeo; Ferraris v. Rodas, supra).
The Civil Code, on lease, provides:
If a lease is to be recorded in the Registry of Property, the following persons cannot constitute the same without proper authority, the
husband with respect to the wife's paraphernal real estate, the father or guardian as to the property of the minor or ward, and the
manager without special power. (Art. 1647).
The same Code, on Agency, states:
Special powers of attorneys are necessary in the following cases:
(8) To lease any real property to another person for more than one year. (Art. 1878)
Petitioner contends, that No. 8, Art. 1878 is the limitation to the right of a judicial administrator to lease real property without prior court authority
and approval, if it exceeds one year. The lease contract in favor of Escanlar being for 3 years and without such court approval and authority is,
therefore, null and void. Upon the other hand, respondents maintain that there is no limitation of such right; and that Article 1878 does not apply
in the instant case.
We believe that the Court of Appeals was correct in sustaining the validity of the contract of lease in favor of Escanlar, notwithstanding the lack
of prior authority and approval. The law and prevailing jurisprudence on the matter militates in favor of this view. While it may be admitted that
the duties of a judicial administrator and an agent (petitioner alleges that both act in representative capacity), are in some respects, identical,
the provisions on agency (Art. 1878, C.C.), should not apply to a judicial administrator. A judicial administrator is appointed by the Court. He is
not only the representative of said Court, but also the heirs and creditors of the estate (Chua Tan v. Del Rosario, 57 Phil. 411). A judicial
administrator before entering into his duties, is required to file a bond. These circumstances are not true in case of agency. The agent is only
answerable to his principal. The protection which the law gives the principal, in limiting the powers and rights of an agent, stems from the fact
that control by the principal can only be thru agreements, whereas the acts of a judicial administrator are subject to specific provisions of law
and orders of the appointing court. The observation of former Chief Justice Moran, as quoted in the decision of the Court of Appeals, is indeed
sound, and We are not prone to alter the same, at the moment.
We, likewise, seriously doubt petitioner's legal standing to pursue this appeal. And, if We consider the fact that after the expiration of the original
period of the lease contract executed by respondent Nombre in favor of Escanlar, a new contract in favor of said Escanlar, was executed on
May 1, 1963, by the new administrator Campillanos. who, incidentally, did not take any active participation in the present appeal, the right of
petitioner to the fishpond becomes a moot and academic issue, which We need not pass upon.
WHEREFORE, the decision appealed from should be, as it is hereby affirmed, in all respects, with costs against petitioner Moises San Diego,
Sr.
Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala and Makalintal, JJ., concur.
Padilla, Labrador and Dizon, JJ., took no part.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-54681 May 31, 1982
LILIA B. BARRERA, represented by Miguel R. Logarta, Attorney-in-Fact, petitioner,
vs.
THE HONORABLE FRANCIS J. MILITANTE, Judge of the Court of First Instance of Cebu, Branch XII, and CARMEN BELLEZA,
ELEUTERIA CABRERA, BALDOMERO HERNANI, BENJAMIN SEVILLA, and LUCAS DE LA CALZADA, respondents.

DE CASTRO, J.:
Special civil action of certiorari to annul and set aside the Orders of respondent Francis J. Militante, Presiding Judge of the Court of First
Instance of Cebu, Branch XII, issued on June 11 and 20, 1980, in Civil Case No. R-17617 entitled "Lilia B. Barrera, etc., Plaintiff, versus,
Carmen Belleza, et al., Defendants," respectively dismissing petitioner's complaint and denying the motion for reconsideration of the said order
of dismissal. The foregoing Orders of respondent Judge read as follows:
When this case was called for hearing today, the defendants (private respondents herein) and their counsel appeared.
Neither the plaintiff (petitioner herein) nor her counsel appeared. In view of the failure of the plaintiff to appear despite the
fact that she was duly notified, this case is hereby dismissed.
IT IS SO ORDERED.
Given in open court, Cebu City, this 11th day of June 1980.

Finding the motion for reconsideration to be without merit, the same is hereby DENIED.
IT IS SO ORDERED.
Given in open court, Cebu City, this 20th day of June, 1980.

It appears that on December 13, 1978, petitioner filed a complaint in the Court of First Instance of Cebu, docketed as Civil Case No. R-17617,
against private respondents for recovery of ownership and possession of a parcel of land designated as Lot 4356 of the Talisay-Minglanilla Friar
Lands Estate, and damages. Private respondents were accordingly summoned to answer said complaint and to enter into pre-trial and trial. The
case was set for pre-trial conferences at various dates, the last two of which, were on May 18, 1980 and on June 11, 1980 at 8:30 A.M. The
scheduled pre-trial conference of May 18, 1980 was postponed to June 11, 1980 because of the unreadiness of petitioner's counsel to go on
with the pre-trial conference. When the case was called for pre-trial conference on June 11, 1980 at 8:30 A.M., neither petitioner nor her
counsel appeared, thus prompting respondent Judge to issue the dismissal order of even date as quoted above,
On June 17, 1980, petitioner filed a motion 3 to reconsider said dismissal order, stating that on the scheduled pre-trial conference of June 11,
1980, her counsel, who was allegedly armed with "a special power of attorney to appear at the pre-trial and to enter into a compromise was a
little late," because "the secretary of the law office did not arrive early in the said office where counsel could pick up the records of the case on
his way to Court." 4 Attached to said motion for reconsideration is an affidavit of the supposed secretary of the above-referred law office, stating
that she was feverish sometime last June 11, 1980, and was thus unable to report for work early. Petitioner's above-stated motion was however
denied by the respondent Judge for lack of merit in the order of June 20, 1980, also as above-quoted.
Hence, the present recourse, petitioner claiming that respondent Judge committed grave abuse of discretion in dismissing her complaint as well
as in denying her motion for reconsideration.
From a casual perusal of the order of dismissal of June 11, 1980, We can readily understand the considerations which prompted the
respondent Judge in dismissing petitioner's complaint, especially considering that since the filing of the complaint on December 13, 1978 up to

the issuance of the order of dismissal on June 11, 1980, or a lapsed period of about eighteen months, the pre-trial stage of the case has not yet
been terminated, showing that its progress was abnormally very slow. Moreover, unrefuted by petitioner is private respondent's claim that in all
the pre-trial conferences scheduled by the lower court, petitioner has never appeared nor does the record show that she had executed a special
power of attorney in favor of either her attorney- in-fact Miguel R. Logarta or her counsel of record to serve as the written authority to represent
her in said pre-trial conferences, with power to compromise the case. 5 This is a measure conducive to the early and expeditious termination of
the case, which is consistent with the purpose of a pre-trial as provided under Section 1 of Rule 20, which petitioner could have easily availed of
but did not.
For failure of the petitioner and her counsel to appear at the last scheduled pre-trial of June 11, 1980, the lower court is given the discretion to
dismiss the case, said failure to appear being a ground to authorize dismissal of the complaint for failure to prosecute. 6 We find no reversible
error committed by the respondent Judge in dismissing the case on this ground.
The explanation given in petitioner's motion for reconsideration regarding her counsel's alleged late arrival in court at the pre-trial conference of
June 11, 1980, is far from being satisfactory. While an affidavit supposedly executed by the secretary of counsel's law office was attached to the
motion for reconsideration, the same was not even supported by a medical certificate, authenticated or otherwise, to substantiate the official's
claim of illness which is her supposed reason of failing to report for work early. Besides, as correctly pointed out by private respondents, the
allegation of the office secretary that she arrived in the law office at almost 9:00 in the morning of June 11, 1980 does not jibe with the allegation
of counsel for the petitioner that he arrived in court some ten minutes after 8:15 A.M. of said day when the case was called for pre-trial.
Counsel for the petitioner would, likewise, have Us believe that he was armed with a special power of attorney, without, however, showing the
scope, extent and limits of the authority granted him. Worse still, said special power of attorney was only allegedly executed by petitioner's
attorney-in-fact, one Miguel R. Logarta, the scope, extent and limits of whose authority was, likewise, not shown. As earlier indicated, the record
does not show that petitioner had executed a special power of attorney in favor of either her attorney-in-fact or her counsel of record. We are
thus, left without any Idea as to the nature and extent of said alleged authority, which have to be proven, because Section 23, Rule 138 of the
Rules of Court requires, 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 given him. The respondent Judge, therefore, did not act erroneously,
much less abuse his discretion gravely, in denying the motion for reconsideration in spite of such manifestation of petitioner's counsel because
the authority to compromise cannot rightly be presumed. And if, with good reason, the judge is not satisfied that said authority exists, as in this
case, dismissal of the case for non-appearance of petitioner in pre-trial is sanctioned by the Rules.
We take this opportunity to remind the lower courts once more that the issuance of minute orders, like the one denying the motion for
reconsideration of petitioner, is not sanctioned by our jurisprudence. As categorically stated by this Court in Continental Bank v. Tiangco, 94
SCRA 715:
We have admonished the trial courts not to issue a minute order like the one under appeal. A trial court should specify in its
order the reasons for the dismissal of the complaint so that when the order is appealed, this Court can readily determine
from a casual perusal thereof whether there is a prima facie justification for the dismissal.
But notwithstanding the foregoing omission of respondent Judge, We cannot however grant the instant petition for reasons already explained
earlier.
WHEREFORE, the petition for certiorari is dismissed. Costs against the petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-17011

August 30, 1963

EMMA S. ACENAS and ALBERTO E. ACENAS, spouses, plaintiffs-appellees,


vs.
ANGELA SISON and TEOFILO SISON, spouses, defendants-appellants.
Gil R. Carlos & Associates for plaintiffs-appellees.
Sevilla and Aquino for defendants-appellants.
REGALA, J.:
This is an appeal from the order dated March 7, 1960 of the Court of First Instance of Rizal, Quezon City Branch, holding husband and wife
solidarily liable on a note made by the wife.
But although this appeal was brought on behalf of husband and wife, the decision of the trial court is being questioned only insofar as it holds
the husband liable on the note of his wife. The wife's liability is admitted.
The records show that in September, 1956, Angela Sison executed a promissory note, promising to pay Emma S. Acenas the sum of P8,160 in
26 installments, the first falling due on November 30, 1956 and the last on November 30, 1960. The note provided that failure to pay two
consecutive installments would make the balance due and demandable.
Mrs. Sison was able to pay up to August 31, 1957 only. Upon her failure to pay the balance of the note, alleged to be in the sum of P8,391.60,
she was sued. Her husband, Teofilo Sison, was joined as a defendant pursuant to Article 113 of the Civil Code.
In their answer, Mr. Sison denied liability on the ground that he had not signed the promissory note.
The case was set for hearing on March 7, 1960. What happened on that day is set forth in the following decision of the court of First Instance,
dated March 7, 1960.
When this case was called for hearing today, counsel for the defendants moved for the postponement of the hearing hereof in view of
the absence of his clients and that he needs time within which to confer with them for the purpose of amicably settling this case. To
this motion for postponement, however, counsel for the plaintiffs objected on the ground that the defendants have been given
sufficient time within which to settle this case but failed to do so. On the other hand, when the court indicated to the defendant's
counsel that there seems to be no defense on the part of the defendants in this case, and that it would be for the best interest of the
latter if the case is terminated by way of judgment on the pleadings or confession of judgment, counsel for defendants offered no
objection and asked that confession of judgment by the defendants may be entered in this case provided that the corresponding writ
of execution thereof should not be issued until June 30, 1960, to which counsel for the plaintiffs agreed.
In view thereof, and upon motion of counsel for defendants with the conformity of counsel for the plaintiffs, the motion for confession
of judgment under the terms and conditions set forth above are hereby granted.
WHEREFORE, judgment is rendered, one in favor of the plaintiffs and against the defendants, by ordering the defendants, jointly and
severally, to pay to plaintiffs the sum of P8,391.60, with interest at the rate of 1% per month from November 1, 1959 until fully paid for:
by ordering the same defendants, jointly and severally, to pay to plaintiffs the additional sum of P500.00 by way of attorney's fees; and
for the defendants to pay the costs. This decision, however, is subject to the condition that the corresponding writ of execution should
not be issued until June 30, 1960, as agreed upon by the parties herein. (Emphasis supplied).

Their motion for reconsideration and new trial having been denied, defendants appealed directly to this Court. Appellant Teofilo Sison contends
that his lawyer agreed to a judgment on the pleadings but not to a confession of judgment; that he never authorized his lawyer to confess
judgment for him and that at any rate he was not liable on the note of his wife.
For purposes of this appeal, We take it as a fact, as the trial court found, that Atty. Nicanor S. Sison, counsel for Teofilo and Angela Sison,
agreed to a judgment on confession against his clients, provided no writ of execution was issued until June 30, 1960. But, the records do not
show that Atty. Sison had authority to confess judgment. On the contrary, the decision of March 7, 1960 states that Atty. Sison "moved for the
postponement of the hearing hereof in view of the absence of his clients and that he needs time within which to confer with them for the
purpose of amicably settling this case." This indicates that Atty. Sison lacked authority to confess judgment, otherwise, there would have been
no need for him to confer with his clients. This circumstance should have put the trial court on an inquiry as to counsel's authority.
In Natividad v. Natividad, 51 Phil. 613, and Anduiza v. Quirona, G.R. No. L-5073, May 20, 1953, We held that the compromise of causes and
confession of judgments appear to stand upon the same footing and that since the compromise may not be effected by counsel without special
authority,1 so may not an agreement to permit judgment to be entered against his client be authorized except with the knowledge and at the
instance of the client. Such judgment may be set aside or reopened.
Appellees cite decisions of the courts of Georgia which hold that where a settlement of a suit is made by an attorney accepting less than the full
amount of the claim in cash, the agreement binds the client if the settlement is carried out by a consent verdict and judgment and the settlement
was made without fraud on the part of the attorney or any instruction of the client to the contrary. (Coweta Fertilizer Co. v. Johnson, 26 Ga. App.
528, 106 S.E. 610; Brannan v. Mobley, 169 Ga. 243, 150 S.E. 76).1wph1.t
As this Court noted in the Natividad case, these cases do not apply here because the Georgia statute is different from our law. Thus, in the
Coweta Fertilizer case, supra, the Court of Appeals of Georgia held:
We do not think that section 4956 of the Civil Code of 1910 is applicable to the facts of the present case. That section provides as
follows:
"Without special authority, attorneys cannot receive anything in discharge of a client's claim but the full amount in cash."
In the present case the attorney of the defendant was not endeavoring to collect or enforce his client's claim, but was resisting a suit or claim
against his client and consented to the credit in favor of his client. . . .
In contrast, Section 21 of Rule 127 expressly requires that attorneys have special authority not only to receive anything in discharge of a client's
claim but the full amount in cash but also to compromise their client's litigation.
Appellees also rely on Holker and others v. Parker, 7 Cranch 436, 6 Law Ed. 433. But that case does not support appellees' position, for it was
held there that
Although an attorney at law, merely as such has strictly speaking no right to make a compromise, yet a court would be disinclined to
disturb one which was not so unreasonable in itself as to be exclaimed against by all, and to create an impression that the judgment of
the attorney has been imposed on, or not fairly exercised in the case. But where the sacrifice is such as to leave it scarcely possible
that, with a full knowledge of every circumstance, such a compromise could be fairly made, there can be no hesitation in saying that
the compromise, being unauthorized and being therefore itself void, ought not to bind the injured party. Though it may assume the
form of an award or of a judgment at law, the injured party, if his own conduct has been perfectly blameless, ought to be relieved
against it. . . .
We hold therefore that it was error for the trial court to accept the confession made by counsel without ascertaining his authority to do so, at
least with respect to Teofilo Sison. With respect to Angela Sison, however, the judgment will be maintained, there being no claim in this appeal
that the confession of judgment made in her behalf was unauthorized. In fact her liability is admitted here.
This brings us to the next point. Does Article 113 of the Civil Code, which requires the joinder of the husband in actions against the wife, make
the husband solidarily liable? Appellees maintain that it does, since the order is not assailed as far as Mrs. Sison is concerned "otherwise, his
(the husband's) joinder would be an empty formality."
We do not share this view. The law requires the joinder of the husband not because he is thereby bound with his wife but because he is the
administrator of the conjugal partnership which might be held liable in the action. To make the husband solidarily liable with his wife simply
because his joinder is required would be to subvert the basic rule that the wife cannot bind the conjugal partnership without the husband's
consent. (Art. 172, Civil Code.) The only exceptions are when the husband consents; when the wife spends for the usual daily needs of the
family (Art. 115); or when she is given the management of the partnership (Arts. 157, 168, 178 and 196). There is no allegation in the complaint
that Mrs. Sison incurred her obligation to Mrs. Acenas under any of these exceptions so as to bind the conjugal partnership.
WHEREFORE, the decision dated March 7, 1960 of the lower court is modified in the sense that defendant Teofilo Sison is not liable and that
defendant Angela Sison alone is liable to the plaintiffs for the amount adjudged in the decision. No costs.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Makalintal, JJ., concur.
Footnotes
1

Section 21 of Rule 127 of the Rules of Court provides:

Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeals,
and in all matters of ordinary judicial procedure. But they cannot, without special authority, compromise their client's litigation, or
receive anything in discharge of a client's claim but the full amount in cash.

Republic of the Philippines


SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 137785

September 4, 2000

NATIONAL POWER CORPORATION, petitioner,


vs.
VINE DEVELOPMENT CORPORATION, represented by Vicente C. Ponce; and ROMONAFE CORPORATION, represented by Oscar F.
Tirona, respondents.
DECISION
PANGANIBAN, J.:
Although not authorized to handle cases pending in the Court of Appeals and the Supreme Court, lawyers of the National Power Corporation
may nonetheless file notices of appeal of adverse decisions rendered by trial courts. They cannot, however, enter into compromise agreements
without any specific authority to do so.
The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the January 19, 1999 Resolution of the Court of
Appeals (CA) in CA-GR CV No. 57710,1 which is quoted here in full:
"At the hearing of this case on December 10, 1998, the Honorable Ricardo P. Galvez, Solicitor General, appeared personally and moved for the
dismissal of the case on the ground that the authority of the lawyers of the National Power Corporation to appear as Special Attorneys of the
Solicitor General is limited to cases before the lower courts (RTCs and MTCs). He also invokes the provisions of the Administrative Code
(Section 35(1) Chapter 12, Title III, Book IV) that said lawyers have no authority to appear before this Court.
"WHEREFORE, without objection on the part of all the parties in this case, the instant appeal is DISMISSED." 2
Also challenged by petitioner is the March 8, 1999 CA Resolution denying their Motion for Reconsideration, pertinent portions of which are
quoted hereunder:
"xxx (W)hether or not the Solicitor General moved for the dismissal of the appeal, the foregoing copious notes show beyond cavil the courts'
resolve to dismiss cases appealed to this Court by NAPOCOR's house lawyers without coursing the appeal to the Solicitor General.
"That the Solicitor General did not ask for the dismissal of the appeal is irrelevant; his belated Manifestation giving the NAPOCOR counsels
putative authority to appeal to us cannot cure the basic legal defect which is a violation of the Administrative Code (Section 35(1), Chapter 12,
Title III, Book IV). We have said so in all the many cases brought to us by NAPOCOR's counsel. We iterate the same rulings.
"Motion DENIED."3
The Facts

The undisputed facts of the case are summarized by the Office of the Solicitor General (OSG) as follows:
"1. On July 12, 1995, petitioner instituted a complaint for expropriation of several parcels of land located at San Agustin, Dasmarias, Cavite,
with an area of 96,963.38 and 48,103.12 square meters, respectively owned by respondents Vine Development Corporation (Vine hereafter)
and Romonafe Corporation (Romonafe for brevity). The case was docketed as Civil Case No. 1140-95 and was raffled to Branch 21 of the
Regional Trial Court in Imus, Cavite.
"2. On January 26, 1996, the trial court issued a writ of possession authorizing petitioner to enter and take possession of the property after a
showing that it ha[d] deposited with the Philippine National Bank the amount of P4,616,223.37 representing the assessed value of the property
for taxation purposes pursuant to the provisions of P.D. 42 and the Supreme Court ruling in National Power Corporation versus Jocson, 206
SCRA 520 (1992).
"3. By Order dated December 3, 1996, the trial court constituted a panel of commissioners for purposes of determining the just compensation of
subject property. The panel conducted an ocular inspection of the property on January 10, 1997.
"4. In an undated Commissioner's Valuation Report, the panel recommended just compensation at the rate of P3,500.00 per square meter.
"5. Earlier, however, the Provincial Appraisal Committee (PAC) issued Resolution No. 08-95 dated October 25, 1995 placing the fair market
value of Romonafe and Vine's subject property at P1,500.00 and P2,000.00 per square meter, respectively.
"6. One (1) year and eight (8) months later, the PAC amended its aforesaid resolution under PAC Resolution No. 07-97 dated June 25, 1997 by
increasing the valuation of the Romonafe's property from P1,500.00 to P3,500.00 per square meter, or an increase of P2,000.00 per square
meter. The amendment was made in response to the letter of reconsideration dated June 9, 1997 filed by Romonafe.
"7. While the case was pending, petitioner negotiated with Romonafe for the acquisition of an additional area of 27,293.88 square meters of its
adjacent land.
"8. After due trial, the lower court rendered its Decision on September 5, 1997, the dispositive portion of which reads:
'WHEREFORE, judgment is hereby rendered declaring that the parcels of land of the defendants hereinabove described consisting of
146,066.5 square meters to have been lawfully expropriated and now belong to the plaintiff to be used for public purpose.
'The plaintiff is hereby ordered to pay to the defendants, through the Branch Clerk of Court, the fair market value of the property at P3,500.00
per square meter, that is, for defendant Vine Development Corporation, the total sum of P339,371,830.00 and for defendant Romonafe
Corporation, the total sum of P168,360,920.00 plus legal rate of interest - i.e., 6% per annum - starting from the time the plaintiff took
possession of the property up to the time the full amount shall have been paid.
.........
'The Branch Clerk of Court of this Court is hereby ordered to have a certified copy of this decision be registered in the Office of the Registry of
Deeds of Cavite.
.........
'SO ORDERED.'
(Underscoring ours)
"9. Petitioner directly appealed the foregoing decision to the Court of Appeals on the ground that it is contrary to law, jurisprudence and
evidence on record. The case was docketed as CA-G.R. CV No. 57710.
"10. During the pendency of the appeal, petitioner and Romonafe entered into a Compromise Agreement (copy attached as Annex B-1) under
which petitioner would acquire seventy five thousand three hundred ninety seven (75,397) square meters of land comprising the 48,103.12
square meters subject of the appeal and 27,293.88 square meters at P3,500 per square meter. Romonafe would give petitioner a total discount
of P6,542,810.40 so much so that the net principal amount representing the total purchase price of the land amounts to two hundred eighty
million pesos (P280,000,000.00)"
"11. By Resolution dated June 2, 1998, the Court of Appeals gave the OSG a period of ten (10) days to comment on said compromise
agreement.
"12. In its Comment dated August 18, 1998, the OSG prayed that the compromise agreement be disapproved and that the appeal be instead
resolved on the merits. A copy of said comment is hereto attached as Annex C.

"13. On September 30, 1998, the OSG filed a motion to admit its supplemental comment whereby it brought to the attention of the Court of
Appeals the fact that the Compromise Agreement was signed by the deputized counsels of the petitioner in flagrant violation [of] the terms and
conditions of their deputation. A copy of said supplemental comment is hereto attached as Annex D.
"14. By Resolution dated November 25, 1998, the Court of Appeals set the case for hearing/oral argument on December 10, 1998.
"15. During the December 10, 1998 hearing, the Solicitor General personally appeared and argued that subject compromise agreement suffers
from two (2) fatal infirmities, namely: (1) it is grossly disadvantageous to the government; and (2) the deputized lawyers of the petitioner have
no legal authority to bind the Solicitor General [to] the same agreement.
"16. The following day, or on December 11, 1998, the OSG filed a Manifestation dated December 11, 1998 (copy attached as Annex E), the full
text of which reads:
'THE OFFICE OF THE SOLICITOR GENERAL (OSG), to this Honorable Court, respectfully manifests that the OSG[-]deputized counsel of the
National Power Corporation (NAPOCOR) have the authority to file notices of appeal in cases being handled by them such as the subject case
pursuant to their deputation letters. However, such authority does not extend to withdrawal of said appeal, execution of compromise
agreements and filing of pleadings before the appellate courts without the review and approval of the Solicitor General.
"17. In a Resolution dated January 19, 1999, the Court of Appeals dismissed petitioner's appeal, thus:
xxx

xxx

xxx

"18. Petitioner, through counsel, immediately filed its motion for reconsideration on February 5, 1999 (copy attached as Annex F) which the
Court of Appeals denied in its Resolution dated March 8, 1999 x x x."4
Hence, this Petition.5
The Issues
Petitioner raises the following issues:
"A The Honorable Court of Appeals patently erred in declaring that the Solicitor General personally moved for the dismissal of the appeal during
the hearing conducted on December 10, 1998.
"B The Honorable Court of Appeals erred in dismissing the appeal for lack of legal or factual basis."
Since the two issues are interrelated, we shall take them up jointly as follows: Did the NPC lawyers have the authority to (a) file the appeal from
the trial court and (b) enter into the Compromise Agreement?
The Court's Ruling
The Petition is meritorious.
Main Issue:
Authority of the NPC Lawyers
On the grounds that (1) the NPC lawyers had no authority to file the appeal, and (2) Solicitor General Ricardo P. Galvez had personally moved
for its dismissal during the Oral Argument on December 10, 1998, the CA dismissed the said appeal. On the other hand, the state lawyer
contends that he did not ask for a dismissal, but only objected to the Compromise Agreement entered into by and between Romonafe
Corporation and petitioner. According to him, the Agreement suffers from two fatal infirmities: (1) it is grossly disadvantageous to the
government, and (2) the OSG-deputized lawyers of petitioner had no legal authority to bind the solicitor general.
We agree with the solicitor general. There is nothing in the records of the Oral Argument showing that he had moved for the dismissal of the
appeal. Rather, his ardent prayer, even in his Comment dated August 18, 1998, had been to disapprove the Compromise Agreement and to
resolve the appeal on its merits.
No Legal Basis for Dismissal of Appeal
It is undisputed that the OSG has "supervision in the handling" of NPC court cases as provided for in Section 15-A of Republic Act No. 6395,
which states as follows:

"Sec. 15-A. The corporation shall be under the direct supervision of the Office of the President and all legal matters shall be handled by the
Chief Legal Counsel of the corporation, provided that the Solicitor General's Office shall have supervision in the handling of court cases only of
the corporation."
Furthermore, the authority of the OSG to represent NPC is specified in Section 35(1), Chapter 12, Title III, Book IV of EO 292, which provides:
"SEC. 35. Powers and Functions. -- The Office of the Solicitor General shall represent the Government of the Philippines, its agencies and
instrumentalities and its officials and agents in any litigation, proceeding, investigation or matter requiring the services of lawyers. When
authorized by the President or head of the office concerned, it shall also represent government owned or controlled corporations. The Office of
the Solicitor General shall constitute the law office of the Government and, as such, shall discharge duties requiring the services of lawyers. It
shall have the following specific powers and functions:
(1) Represent the Government in the Supreme Court and the Court of Appeals in all criminal proceedings; represent the Government and its
officers in the Supreme Court, Court of Appeals, and all other courts or tribunals in all civil actions and special proceedings in which the
Government or any officer thereof in his official capacity is a party."
To assist it in representing the government, the OSG is empowered to deputize legal officers of government departments, bureaus, agencies
and offices. Paragraph 8 of the same section reads as follows:
"(8) Deputize legal officers of government departments, bureaus, agencies and offices to assist the Solicitor General and appear or represent
the Government in cases involving their respective offices, brought before the courts and exercise supervision and control over such legal
officers with respect to such cases."
In pursuance of such power, the OSG issued to the NPC lawyers a letter of deputization 6 worded as follows:
"As Special Attorneys, you are authorized to appear as counsel in all civil cases in the lower courts (RTCs and MTCs) involving the NPC,
subject to the same conditions stipulated in our letters." 7
The CA ruled that the deputization of the NPC lawyers excluded the authority to file appeals in the higher courts.1wphi1We disagree. Under
Section 2 (a) , Rule 418 of the Revised Rules of Court which pertains to ordinary appeals, the notice of appeal is filed in the very same court
which rendered the assailed decision, which in this case was the Regional Trial Court (RTC) of Imus, Cavite. Since the notice was filed before
the RTC, the NPC lawyers acted clearly within their authority. Indeed, their action ensured that the appeal was filed within the reglementary
period. Regardless of which mode of appeal is used, the appeal itself is presumed beneficial to the government; hence, it should be allowed.
After all, the OSG may withdraw it, if it believes that the appeal will not advance the government's cause.
The reason for the continuous dismissal of NPC appeals in the CA is not the absence of authority of the lawyers per se, but the failure of these
lawyers to inform the OSG of the lower court's adverse decision, resulting in the OSG's lack of participation in the appellate proceeding.
Granting arguendo that the NPC lawyers had no authority to file the appeal, this defect was cured by the OSG's subsequent Manifestation, the
full text of which reads:
"THE OFFICE OF THE SOLICITOR GENERAL (OSG) to this Honorable Court, respectfully manifests that the OSG[-] deputized counsels of the
National Power Corporation (NAPOCOR) have the authority to file notices of appeal in cases being handled by them such as the subject case
pursuant to their deputation letters. However, such authority does not extend to withdrawal of said appeal, execution of compromise
agreements and filing of pleadings before the appellate courts without the review and approval of the Solicitor General."
Authority to Compromise
"A compromise is an agreement between two or more persons who, to avoid a lawsuit, amicably settle their differences on such terms as they
can agree on."9 A compromise may be effected by persons who, as expressed or implied from their relations, are representing and acting under
the authority of the parties to a controversy. In the absence of such authority, no compromise by a third person is binding, 10 as Article 1878 of
the Civil Code provides that an agent, such as the counsel for the case, needs a special power to compromise. Hence, in Monte de Piedad v.
Rodrigo,11 the Court ruled that "if an attorney is not authorized by the client, he cannot compromise his client's claim." Furthermore, Section 23,
Rule 138 of the Rules of Court requires "special authority" for attorneys to bind their clients:
"Section 23. Authority of attorneys to bind clients. - Attorneys have authority to bind their clients in any case by any agreement in relation
thereto made in writing, and in taking appeals, and in all matters of ordinary judicial procedure. But they cannot, without special authority,
compromise their client's litigation, or receive anything in discharge of a client's claim but the full amount in cash."
If, as already ruled, NPC lawyers cannot even handle Napocor cases in the CA, how indeed can they be allowed to bind Napocor to
compromises? Definitely then, their signatures on the instant Compromise Agreement are invalid.

WHEREFORE, the Petition is GRANTED and the appealed Decision REVERSED and SET ASIDE. The case is hereby REMANDED to the
Court of Appeals for disposition on the merits as prayed for by the Office of the Solicitor General. No costs.
SO ORDERED.
Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-18377

December 29, 1962

ANASTACIO G. DUGO, petitioner,


vs.
ADRIANO LOPENA, ROSA RAMOS and HON. ANDRES REYES, Judge of the Court of First Instance of Rizal, respondents.
Gatchalian, Padilla & Sison for petitioner.
Santiago F. Alidio for respondents.
REGALA, J.:
On September 10, 1959, herein petitioner Anastacio Dugo and one Rodrigo S. Gonzales purchased 3 parcel of land from the respondents
Adriano Lopena and Rosa Ramos for the total price of P269,804.00. Of this amount P28.000.00 was given as down payment with the
agreement that the balance of P241,804.00 would be paid in 6 monthly installments.
To secure the payment of the balance Anastacio Dugo and Rodrigo S. Gonzales, the vendees, on September 11, 1958, executed over the
same 3 parcels of land Deed of Real Estate Mortgage in favor of the respondent Adriano Lopena and Rosa Ramos. This deed was duly
registered with the Office of the Register of Deeds Rizal, with the condition that failure of the vendees to pay any of the installments on their
maturity dates shall automatically cause the entire unpaid balance to become due and demandable.
The vendees defaulted on the first installment. It resulted then that on November 7, 1959, the vendors, herein respondents Adriano Lopena and
Rosa Ramos, filed a complaint for the foreclosure of the aforementioned real estate mortgage with the Court of First Instance of Rizal the Hon.
Judge Andres Reyes, presiding. This complaint was answered by the herein petitioner and the other vendee, Rodrigo S. Gonzales, on
December 7, 1959.
Meanwhile, there were 2 other civil cases filed in the same lower court against the same defendants Anastacio Dugo and Rodrigo S.
Gonzales. The plaintiff in one was a certain Dionisio Lopena, and in the other case, the complainants were Bernardo Lopena and Maria de la
Cruz.

Both complaints involved the same cause of action as that of herein respondents Adriano Lopena and Rosa Ramos. As a matter of fact all three
cases arose out of one transaction. In view of the identical nature of the above three cases, they were consolidated by the lower court into just
one proceeding.
It must be made clear, however, that this present decision refers solely to the interests and claim of Adriano Lopena against Anastacio Dugo
alone.
Before the cases could be tried, a compromise agreement dated January 15, 1960 was submitted to the lower court for approval. It was signed
by herein respondents Adriano Lopena and Rosa Ramos on one hand, and Rodrigo S. Gonzales, on the other. It was not signed by the herein
petitioner. However, Rodrigo S. Gonzales represented that his signature was for both himself and the herein petitioner. Moreover, Anastacio
Dugo's counsel of record, Atty. Manuel O. Chan, the same lawyer who signed and submitted for him the answer to the complaint, was present
at the preparation of the compromise agreement and this counsel affixed his signature thereto.
The text of this agreement is hereunder quoted:
COMPROMISE AGREEMENT
COME NOW the parties in the above entitled cases and unto this Hon. Court respectfully set forth:
That, the plaintiffs, have agreed to give the defendants up to June 30, 1960 to pay the mortgage indebtedness in each of the said
cases;
That, should the defendants fail to pay the said mortgage indebtedness, judgments of foreclosure shall thereafter be entered against
the said defendants;
That, the defendants hereby waive the period of redemption provided by law after entry of judgments;
That, in the event of sale of the properties involved in these three cases, the defendants agree that the said properties shall be sold at
one time at public auction, that is, one piece of property cannot be sold without the others.
This compromise agreement was approved by the lower court on the same day it was submitted, January 15, 1960.
Subsequently, on May 3, 1960, a so-called Tri-Party Agreement was drawn. The signatories to it were Anastacio Dugo (herein petitioner) and
Rodrigo S. Gonzales as debtors, Adriano Lopena and Rosa Ramos (herein respondents) as creditors, and, one Emma R. Santos as pay or.
The stipulations of the Tri-Party Agreement were as follows: .
A TRI-PARTY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
This contract entered into by and between
(1) MMA R. SANTOS, Filipino, of legal age, single, with residence and postal address at ..........., Rizal Avenue, Manila, hereinafter
referred to as the PAYOR,
(2) ANASTACIO C. DUGO Filipino, of legal age, single, with residence and postal address at 137 N. Domingo, Quezon City, and
RODRIGO S. GONZALES, Filipino, of legal age, married to Magdalena Balatbat, with residence and postal address at 73 Maryland,
Quezon City, hereinafter referred to as the DEBTOR,
and
(3) DIONISIO LOPENA, married to Teofila Nofuente, LIBRADA LOPENA, married to Arellano Cawagas, BERNARDO LOPENA,
married to Maria de la Cruz, and ADRIANO LOPENA, married to Rosa Ramos, all of whom are Filipinos, of legal ages, with residence
and postal address at Sucat, Muntinlupa, Rizal, hereinafter represented by their attorney of record, ANTONIO LOPENA, hereinafter
referred to as the CREDITOR,
W I T N E S S E T H:
WHEREAS, the DEBTOR is indebted to the CREDITOR as of this date in the aggregate amount of P503,000.00 for the collection of
which, the latter as party plaintiffs have institute foreclosure proceedings against the former as party defendant in Civil Cases Nos.
5872, 5873 and 5874 now pending in the Court of First Instance, Pasig, Rizal;

WHEREAS, the PAYOR, hereby submits and binds herself to the force and effect of the Order dated January 15, 1960, of the Court of
First Instance of Pasig, Rizal, Branch VI, which order is hereby made an integral part of this agreement as ANNEX "A";
WHEREAS, the PAYOR with due knowledge and consent of the DEBTOR, hereby proposes to pay the aforesaid indebtedness in the
sum of P503,000.00 to the CREDITOR for and in behalf of the DEBTOR under the following terms and condition petitions:
(a) To pay the said P503,000.00 in installments in the following schedule of amounts and time: P50,000.00 on or before May 31, 1960
70,000.00 on or before June 30, 1960 70,000.00 on or before July 31, 1960 313,000.00 on or before Aug. 31, 1960.
(b) That the DEBTOR and the PAYOR hereby waive any right to object and oblige themselves not to oppose the motion that the
CREDITOR may file during the first week of July 1960, or subsequently thereafter, informing the Court of the exact money obligation
of the DEBTOR which shall be P503,000.00 minus whatever payments, if any, made before June 30, 1960 by the PAYOR and praying
for the issuance of an order to sell the property covered by the mortgage.
(c) That the CREDITOR, once he has the order referred to, should not execute the same by giving it to the sheriff if the PAYOR is
regular and punctual in the payment of all of the installments stated above. PROVIDED, however, if the PAYOR defaults or fails to pay
anyone of the installments in the manner stated above, the PAYOR and the DEBTOR hereby permit the CREDITOR to execute the
order of sale referred to above, and they (PAYOR and DEBTOR) hereby waive any and all objection's or oppositions to the propriety
of the public auction sale and to the confirmation of the sale to be made by the court.
(d) That the CREDITOR, at his option, may execute the August installment stated in letter (a) of this paragraph if the PAYOR has paid
regularly the May, June, and July installments, and provided further that one half () of the August installment in the amount of
P156,500.00 is paid on the said date of August 31, 1960.
NOW, THEREFORE, for and in consideration of the foregoing stipulations, the DEBTOR and CREDITOR hereby accept, approve and
ratify the above-mentioned propositions of the PAYOR and all the parties herein bind and oblige themselves to comply to the
covenants and stipulations aforestated;
That by mutual agreements of all the parties herein, this TRI-PARTY AGREEMENT may be submitted to Court to form integral parts of
the records of the Civil Cases mentioned above;
IN WITNESS WHEREOF, the parties hereunto affix their signature on this 3rd day of May, 1960 in the City of Manila, Philippines.
When Anastacio Dugo (herein petitioner) and Rodrigo S. Gonzales failed to pay the balance of their indebtedness on June 30, 1960, herein
respondents Lopena and Ramos filed on July 5, 1960, a Motion for the Sale of Mortgaged Property. Although this last motion was filed ex parte,
Anastacio Dugo and Rodrigo S. Gonzales were notified of it by the lower court. Neither of them, however, despite the notice, filed any
opposition thereto. As a result, the lower court granted the above motion on July 19, 1960, and ordered the sale of the mortgaged property.
On August 25, 1960, the 3 parcels of land above-mentioned were sold by the Sheriff at a public auction where at herein petitioners, together
with the plaintiffs of the other two cases won as the highest bidders. The said sheriff's sale was later confirmed by the lower court on August 30,
1960. In this connection, it should also made of record that before confirming the sale, the lower court gave due notice of the motion for the
confirmation to the herein petitioner who filed no opposition therefore.
On August 31, 1960, Anastacio Dugo filed a motion to set aside all the proceedings on the ground that the compromise agreement dated
January 15, 1960 was void ab initio with respect to him because he did not sign the same. Consequently, he argued, all subsequent
proceedings under and by virtue of the compromise agreement, including the foreclosure sale of August 25, 1960, were void and null as
regards him. This motion to set aside, however, was denied by the lower court in its order of December 14, 1960.
Upon denial of the said motion to set aside, Anastacio Dugo filed a Notice of Appeal from the order of August 31, 1960 approving the
foreclosure sale of August 25, 1960, as well as the order of December 14, 1960, denying his motion to set aside. The approval of the record on
appeal however, was opposed by the herein respondent spouses who claimed that the judgment was not appealable having been rendered by
virtue of the compromise agreement. The opposition was contained in a motion to dismiss the appeal. Anastacio Dugo filed a reply to the
above motion. Soon thereafter, the lower court dismissed the appeal.
Two issues were raised to this Court for review, to wit:
(1) Was the compromise agreement of January 15, 1960, the Order of the same date approving the same, and, all the proceedings subsequent
thereto, valid or void insofar as the petitioner herein is concerned?
(2) Did the lower court abuse its discretion when it dismissed the appeal of the herein petitioner?

Petitioner Anastacio Dugo insists that the Compromise Agreement was void ab initio and could have no effect whatsoever against him
because he did not sign the same. Furthermore, as it was void, all the proceedings subsequent to its execution, including the Order approving
it, were similarly void and could not result to anything adverse to his interest.
The argument was not well taken. It is true that a compromise is, in itself, a contract. It is as such that the Civil Code speaks of it.
ART. 2028. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid a litigation or put an end to one
already commenced.
Moreover, under Art. 1878 of the Civil Code, a third person cannot bind another to a compromise agreement unless he, the third
person, has obtained a special power of attorney for that purpose from the party intended to be bound.
ART. 1878. Special powers of attorney are necessary in the following cases:
xxx

xxx

xxx

xxx

xxx

xxx

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the
venue of an action or to abandon a prescription already acquired;
However, although the Civil Code expressly requires a special power of attorney in order that one may compromise an interest of another, it is
neither accurate nor correct to conclude that its absence renders the compromise agreement void. In such a case, the compromise is merely
unenforceable. This results from its nature is a contract. It must be governed by the rules and the law on contracts.
ART. 1403. The following contracts are unenforceable, unless they are ratified:
(1) Those 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;
Logically, then, the next inquiry in this case should be whether the herein petitioner, Anastacio Dugo had or had not ratified the compromise
agreement. If he had, then the compromise agreement was legally enforced against him; otherwise, he should be sustained in his contention
that it never bound him, nor ever could it be made to bind him.
The ratification of the compromise agreement was conclusively established by the Tri-Party Agreement of May 1960. It is to be noted that the
compromise agreement was submitted to and approved by the lower court January 15, 1960. Now, the Tri-Party Agreement referred itself to
that order when it stipulated thus:
WHEREAS, the MAYOR, hereby submits and binds herself to the force and effect of the order dated January 15, 1960, of the Court of
First Instance of Pasig, Rizal, Branch which order is hereby made an integral part of this agreement as Annex "A".lawphil.net
Having so consented to making that court order approving the compromise agreement an integral part of the Tri-Party Agreement,
how can the petitioner herein now repudiate the compromise agreement and claim he has not authorized it?
When it appears that the client, on becoming aware the compromise and the judgment thereon, fails to repudiate promptly the action of his
attorney, he will not afterwards be heard to contest its validity (Rivero vs. Rivero, 59 Phil. 15).
Besides, this Court has not overlooked the fact that which indeed Anastacio Dugo was not a signatory to the compromise agreement, the
principal provision of the said instrument was for his benefit. Originally, Anastacio Dugo's obligation matured and became demandable on
October 10, 1959. However, the compromise agreement extended the date of maturity to June 30, 1960. More than anything, therefore, the
compromise agreement operated to benefit the herein petitioner because it afforded him more time and opportunity to fulfill his monetary
obligations under the contract. If only for this reason, this Court believes that the herein petitioner should not be heard to repudiate the said
agreement.
Lastly, the compromise agreement stated "that, should the defendants fail to pay the said mortgage indebtedness, judgment of foreclosure shall
thereafter be entered against the said defendants:" Beyond doubt, this was ratified by the Tri-Party Agreement when it covenanted that
If the MAYOR defaults or fails to pay anyone of the installments in the manner stated above, the MAYOR and the DEBTOR hereby
permit the CREDITOR to execute the order of sale referred to above (the Judgment of Foreclosure), and they (PAYOR and DEBTOR)
hereby waive any and all objections or oppositions to the propriety of the public auction sale and to the confirmation of the sale to be
made by the Court.

Petitioner Dugo finally argued that even assuming that the compromise agreement was valid, it nevertheless could not be enforced against
him because it has been novated by the Tri-Party Agreement which brought in a third party, namely, Emma R. Santos, who assumed the
mortgaged obligation of the herein petitioner.
This Court cannot accept the argument. Novation by presumption has never been favored. To be sustained, it need be established that the old
and new contracts are incompatible in all points, or that the will to novate appears by express agreement of the parties or in acts of similar
import. (Martinez v. Cavives, 25 Phil. 581; Tiy Sinco vs. Havana, 45 Phil. 707; Asia Banking Corp. vs. Lacson Co.. 48 Phil. 482; Pascual vs.
Lacsamana, 53 O.G. 2467, April 1957).
An obligation to pay a sum of money is not novated, in a new instrument wherein the old is ratified, by changing only the term of payment and
adding other obligations not incompatible with the old one (Inchausti vs. Yulo, 34 Phil. 978; Pablo vs. Sapungan, 71 Phil. 145) or wherein the
old contract is merely supplemented by the new one Ramos vs. Gibbon, 67 Phil. 371).
Herein petitioner claims that when a third party Emma R. Santos, came in and assumed the mortgaged obligation, novation resulted thereby
inasmuch as a new debtor was substituted in place of the original one. In this kind of novation, however, it is not enough that the juridical
relation of the parties to the original contract is extended to a third person; it is necessary that the old debtor be released from the obligation,
and the third person or new debtor take his place in the new relation. Without such release, there is no novation; the third person who has
assumed the obligation of the debtor merely becomes a co-debtor or surety. If there is no agreement as to solidarity, the first and the new
debtors are considered obligation jointly. (IV Tolentino, Civil Code, p. 360, citing Manresa. There was no such release of the original debtor in
the Tri-Party Agreement.
It is a very common thing in the business affairs for a stranger to a contract to assume its obligations; an while this may have the effect of
adding to the number of persons liable, it does not necessarily imply the extinguishment of the liability of the first debtor (Rios v Jacinto, etc., 49
Phil. 7; Garcia vs. Khu Yek Ching, 65 Phil. 466). The mere fact that the creditor receives a guaranty or accepts payments from a third person
who has agreed to assume the obligation, when there is no agreement that the first debtor shall be released from responsibility, do not
constitute a novation, and the creditor can still enforce the obligation against the original debtor (Straight vs. Haskell, 49 Phil. 614; Pacific
Commercial Co. vs. Sotto, 34 Phil. 237; Estate of Mota vs. Serra, 47 Phil. 446).
In view of all the foregoing, We hold that the Tri-Party Agreement was an instrument intended to render effective the compromise agreement. It
merely complemented an ratified the same. That a third person was involved in it is inconsequential. Nowhere in the new agreement may the
release of the herein petitioner be even inferred.
Having held that the compromise agreement was validity and enforceable against the herein petitioner, it follows that the lower court committed
no abuse of discretion when it dismissed the appeal of the herein petitioner.
WHEREFORE, the petition for certiorari and mandamus filed by the herein petitioner is hereby dismissed. The order of the lower court
dismissing the appeal is her by affirmed, with costs.
Labrador, Concepcion, Reyes, J.B.L., Barrera and Makalintal, JJ., concur.

Republic of the Philippines


SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-47740 July 20, 1982
LIM PIN, petitioner,
vs.
SPS. CONCHITA LIAO TAN, and TAN CHO HUA and HONORABLE CANCIO C. GARCIA, PRESIDING JUDGE OF BRANCH I, CITY
COURT OF CALOOCAN CITY, respondents.
Raymundo M. Aguila for petitioner.
Teofilo F Manalo for private respondent.

GUTIERREZ, JR., J.:

In this petition for certiorari with prayer for the issuance of a writ of preliminary injunction, the petitioner prays:
(1) that Judgment be rendered annulling or modifying the Judgment, dated October 19, 1977, of the Respondent Judge
rendered in Civil Case No. 11716, City Court of Caloocan City. (2) That a Writ of Preliminary Injunction be issued requiring
Private Respondents, and all persons acting in their behalf, to refrain from the Execution of the Judgment, dated October 19,
1977, of the City Court of Caloocan City in Civil Case No. 11716 until further order.
The basis of the judgment, subject matter of the petition, is a compromise agreement entered into between the petitioner, represented by her
son, George Hung and the private respondent Conchita Liao Tan both parties assisted by their respective counsel, during the October 19, 1977
hearing of Civil Case No. 11716 for unlawful detainer. The complaint for unlawful detainer was filed in the court a quo on August 12, 1977 by the
private respondents against the petitioner. The judgment incorporating the compromise agreement reads as follows:
When this case was caged for hearing this afternoon, October 19, 1977, plaintiffs and defendant, the latter acting thru her
son, George Hung, as her duly authorized representative, assisted by their respective counsels, personally appeared before
this Court and mutually agreed as follows:
1. The parties admit that the stipulated rental for the leased premises is as follows:
(a) For the months of April and May, 1977, at P1,500.00 a month; thereafter a monthly increase of
P500.00 until the rent al reaches to P 5,000.00 by December, 1977,
2. That defendant admits having been in arrears in the payment of her rental obligation since April, 1977 and that as of
October, 1977, her total accrued rentals already amounted to P18,000.00, broken down as follows:
April, 1977.........................P 1,500.00
May, 1977............................. 1,500.00
June, 1977............................. 2,000.00
July,1977............................... 2,500.00
August,1977......................... 3,000.00
September,1977.....................3,500.00
October,1977........................ 4,000.00
TOTAL P18,000.00
3. That defendant binds herself to pay in full said accrued rentals of P18,000.00 and attorney's fee of P 2,000.00, not later
than October 31, 1977.
4. That the rental for November, 1977, shall be P4,500.00 a month while the rentals for December, 1977 and for the
succeeding months thereafter shall be P5,000.00, payable at the residence of plaintiff within five (5) days of the current
month.
5. That the Plaintiff hereby agrees to allow the defendant to remain in the leased premises at the rental herein agreed upon.
6. That should defendant fails to pay her accrued rental of P18,000.00, plus attorney's fee of P2,000.00 by October 31,
1977, Plaintiff shall be entitled to an immediate writ of execution to enforce defendant's ejectment from the leased premises
and the collection of all rental in arrears;
7. Defendant's representative, George Hung, affirmed before this court and the same is confirmed by defendant's counsel,
that he (George Hung) has the full authority of her mother, the herein defendant, to act for her and to sign for and in behalf
this amicable settlement.
WHEREFORE, this Court, as prayed for, hereby approves the foregoing compromise agreement and consequently renders
Judgment in accordance with the precise terms and conditions hereof. (Annex "D")
Spouses Conchita Liao Tan and Tan Cho Hua alleged in their complaint for unlawful detainer that the plaintiff Conchita Liao Tan, as owner of a
parcel of registered land with improvements located at Francisco Street, Caloocan City, had leased a portion of it, more particularly known as

91 Francisco Street, Caloocan City to defendant Lim Pin on a month to month basis but that the latter starting April, 1977 had not paid the
agreed rental stipulated for such month and the succeeding months thereafter based on the following schedule of payments: a) For the month
of April, 1977 P 1,500-00; b) For the month of May, 1977 P1,500-00: c) Commencing on the month of June, 1977 and for each calendar
month thereafter P6,000.00 per month; and that despite demand, the defendant refused to vacate the leased premises. In addition to the actual
damages, the plaintiffs asked for an attorney's fee in the amount of P3,000.00.
On August 25, 1977, the defendant Lim Pin, filed her Answer denying the material allegations of the complaint and protesting the alleged highly
"unconscionable and unreasonable" increase of rental demanded by plaintiffs. As a counterclaim, she asked for an attorney's fee in the amount
of P5,000.00. The counterclaim was denied in the plaintiffs' Answer to Counterclaim, dated September 1, 1982.
The initial hearing set for September 1, 1977 was reset to September 14, 1977 upon the joint motion of the parties who were trying to work out
a possible amicable settlement. Upon the failure of the parties to reach an amicable settlement, the September 14, 1977 hearing proceeded as
scheduled during which plaintiff Conchita Liao Tan testified. For lack of material time, Conchita Liao Tan's cross-examination was set for
September 27, 1970 but this hearing was again cancelled and reset to October 19, 1977.
On the scheduled October 19, 1977 hearing, defendant Lim Pin was absent. Her son George Hung who attended with his mother all the
previous hearings was present together with the defendant's counsel. Plaintiff Conchita Liao Tan together with her counsel was also present.
Through the initiative of the court a quo, the subject compromise agreement was formulated and executed and it finally became the basis of the
October 19, 1977 judgment in Civil Case No. 11716.
The aforesaid judgment was the subject of a motion for reconsideration filed on October 28, 1977 by defendant Lim Pin on the following
grounds: 1) that she never authorized her son nor her counsel on record (Atty. Pastor Mamaril) to enter into such compromise agreement and
2) that had she been present when said agreement was prepared, she would not have acceded thereto.
The motion prompted the plaintiffs to file an "Opposition To Motion for Reconsideration With Prayer that defendant's son George Hung and Atty.
Pastor P. Mamaril be cited for contempt" in the event they should belatedly deny that George Hung was duly authorized by his mother to enter
into the compromise agreement dated November 5, 1982.
In the meantime, the plaintiffs, on November 3, 1977 filed an "Urgent Motion For Immediate Execution of Judgment dated October 19, 1977."
All the foregoing motions were resolved by the respondent court in its Order dated January 26, 1978.
The dispositive portion of the Order reads:
IN VIEW OF ALL THE FOREGOING, defendants' 'Motion For Reconsideration,' is hereby DENIED, For reason hereinbefore
mentioned, defendant's son George Hung, is hereby declared in direct contempt of court and is hereby sentenced to pay a
fine of TWO HUNDRED (P200.00) Pesos, with subsidiary imprisonment in case of insolvency. Finding the explanations
given by Atty. Mamaril during the hearing of November 18, 1977, to be meritorious, this Court finds no basis to hold him in
contempt. As prayed for by plaintiffs in their motion for execution, which this Court finds justified, let a writ of execution be
issued in this case.
A writ of execution was issued by the respondent court on the same date. Pursuant to the writ of execution, the City Sheriff of Caloocan City,
Metro Manila served a "Notice of Ejectment" and "Notice to Levy", both dated February 3, 1978, which were received by the plaintiff on
February 3, 1978. Hence, this petition.
On February 8, 1978, We issued a temporary restraining order "enjoining respondent judge from enforcing the execution of the judgment dated
October 19, 1977 issued in Civil Case No. 11714." The petitioner raises two issues in this petition:
1) Whether the respondent Judge committed grave abuse of discretion in allowing the October 19, 1977 compromise
agreement in the absence of the petitioner; and
2) Whether the respondent Judge committed grave abuse of discretion amounting to lack of jurisdiction in denying the
petitioner's motion for reconsideration on the October 19, 1977 judgment and in granting the issuance of execution thereto
upon motion of the private respondents.
Anent the first issue, the petitioner argues that the respondent Judge should not have allowed her son George Hung and her then counsel, Atty.
Pastor Mamaril in her absence to enter into the October 19, 1977 compromise agreement with the private respondent Conchita Liao Tan
assisted by her counsel. She further argues that "... considering that such compromise agreement would impose onerous obligations upon
Petitioner, such as a tremendous increase of rentals in the premises being leased from Private Respondents from P1,500.00 a month to
P5,000.00 a month," and that said agreement contained admissions by petitioner, the respondent Judge should have required a written
authority and power of attorney from her son and counsel. Her objections to the validity of the compromise agreement are premised on Article
1878 of the Civil Code and Rule 138, Section 23 of the Rules of Court.
The arguments are not well taken.

Article 1878 is found in Title X of the Civil Code on Agency. It states that a special power of attorney is necessary to compromise, to submit
questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a
prescription already acquired.
Section 23 of Rule 138 on Attorneys and Admission to the Bar governs the authority of attorneys to bind their clients and provides that
"Attorneys have authority to bind their clients in any case by any agreement in relation thereto made in writing, and in taking appeal, and in an
matters of ordinary Judicial Procedure, but they cannot, without special authority, compromise their clients' litigation or receive anything in
discharge of their clients' claims but the full amount in cash."
The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule 138 of the Rules of Court
refer to the nature of the authorization and not 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 vital thing 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.
(Home Insurance Company vs. United States lines Company, et al., 21 SCRA 863; 866: Vicente vs. Geraldez, 52 SCRA
210; 225).
We are satisfied from the records of this case that Judge Cancio C. Garcia took the necessary precautionary measures and acted on the basis
of satisfactory evidence when he allowed the compromise agreement to be executed by George Hung the petitioner's son.
The records show that prior to the October 19, 1977 hearing, the petitioner as defendant in Civil Case No. 11-116 had repeatedly asked that the
respondent Judge approve her proposals for a monthly increase of P500.00 starting April, 1977 and that the increases be pegged at that rate
until the monthly rental reaches the sum of P5,000.00 on December, 1977. Such a proposal was not acceptable at the time to the private
respondents. Only at the October 19, 1977 hearing did private respondent Conchita Liao Tan have a change of mind. She expressed a
willingness to accomodate the proposals originating from the petitioner prompting the court to suspend proceedings and initiate the execution of
the compromise agreement between the parties. Whereupon the following took place: (1) The court asked George Hung whether he was willing
to enter into the compromise agreement and whether he had the authority of his mother to enter into such a compromise agreement; (2) The
defendant's counsel confirmed in open court the assurance of George Hung that he had the full authority of his mother to enter into a
compromise agreement: (3) After the formulation of the compromise agreement the Judge explained in Tagalog to both parties, including
George Hung its terms and conditions after which the same was reduced into writing; (4) George Hung willingly signed the compromise
agreement, the terms and conditions of which were those originally proposed by the petitioner herself. Hung was all the while assisted by their
counsel.
There were other reasons which led the lower court to a finding that George Hung had the full authority to enter into the compromise. The court
itself observed during the earlier hearings and it is not disputed that ... defendant Lim Pin could not decide on anything without first consulting
her son." George Hung's later denial that he never manifested his authority to represent his mother was rejected by the court. As a matter of
fact, this sudden turnabout of George Hung led the court to cite him for contempt. He was fined Two Hundred Pesos. The citation for contempt
was never appealed.
And finally, even assuming that George Hung and the petitioner's counsel acted without authority, the compromise agreement itself was not null
and void. It would be merely unenforceable, capable of being ratified. (Dungo v. Lapena, 6 SCRA 1007). The compromise agreement was
ratified by the petitioner when, on October 24, 1977, a few days after the promulgation of the questioned judgment and before the filing of a
motion for reconsideration, she filed an "Ex-Parte Motion To Withdraw Deposits" in Civil Case No. 11709, a consignation case pending before
the same court between the same parties. The ex-parte motion in part reads:
xxx xxx xxx
3. That there is another case with this court assigned in Branch I docketed as Civil Case No. 11716, for unlawful detainer,
involving the same parties and subject property and in the said case, parties have entered into a compromise agreement
whereby, among others, petitioner herein shall pay the accrued monthly rentals to respondent (plaintiff in the aforementioned
case);
4. That in order to implement the aforementioned compromise agreement, it is necessary that the deposits made by
petitioner be withdrawn, the same to be paid to respondent Conchita Liao Tan. (Annex "2" for the private respondents, p. 71,
rollo).
The second ground for this petition is consequently unmeritorious. The Petitioner alleged that the respondent Judge acted with grave abuse of
discretion amounting to lack of jurisdiction when he denied the motion for reconsideration of the October 19, 1977 judgment. The motion was
based on the same alleged absence of authority of the petitioner's son and her counsel. A similar allegation regarding the writ of execution is
likewise without merit. It is a well-settled rule that a compromise judgment is final and executory and unappealable. We also note that on or

before June 26, 1978 the petitioner abandoned the disputed property, notwithstanding our February 8, 1978 temporary restraining order
enjoining enforcement of the writ of execution.
WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. The temporary restraining order issued by this Court dated February
8, 1978 is LIFTED. The judgment appealed from is AFFIRMED with costs against the petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. No. L-24765

August 29, 1969

PHILIPPINE NATIONAL BANK, plaintiff-appellee,


vs.
MAXIMO STA. MARIA, ET AL., defendant,
VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA, all surnamed STA. MARIA,defendants-appellants.

Tomas Besa and Jose B. Galang for plaintiff-appellee.


G.P. Nuguid, Jr. for defendants-appellants.
TEEHANKEE, J.:
In this appeal certified to this Court by the Court of Appeals as involving purely legal issues, we hold that a special power of attorney to
mortgage real estate is limited to such authority to mortgage and does not bind the grantor personally to other obligations contracted by the
grantee, in the absence of any ratification or other similar act that would estop the grantor from questioning or disowning such other obligations
contracted by the grantee.
Plaintiff bank filed this action on February 10, 1961 against defendant Maximo Sta. Maria and his six brothers and sisters, defendantsappellants, Valeriana, Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta. Maria, and the Associated Insurance & Surety Co., Inc.
as surety, for the collection of certain amounts representing unpaid balances on two agricultural sugar crop loans due allegedly from
defendants. 1
The said sugar crop loans were obtained by defendant Maximo Sta. Maria from plaintiff bank under a special power of attorney, executed in his
favor by his six brothers and sisters, defendants-appellants herein, to mortgagea 16-odd hectare parcel of land, jointly owned by all of them, the
pertinent portion of which reads as follows:
That we, VALERIANA, EMETERIA, TEOFILO, QUINTIN, ROSARIO and LEONILA all surnamed STA. MARIA, sole heirs of our
deceased parents CANDIDO STA. MARIA and FRANCISCA DE LOS REYES, all of legal age, Filipinos, and residents of Dinalupihan,
Bataan, do hereby name, constitute and appoint Dr. MAXIMO STA. MARIA, of legal age, married, and residing at Dinalupihan, Bataan
to be our true and lawful attorney of and in our place, name and stead to mortgage, or convey as security to any bank, company or to
any natural or juridical person, our undivided shares over a certain parcel of land together the improvements thereon which parcel of
land is more particularly described as follows, to wit:
"Situated in the Barrio of Pinulot, Municipality of Dinalupihan, Bataan, containing an area of 16.7249 hectares and bounded
as follows to wit: North by property of Alejandro Benito; on the Northeast, by public land and property of Tomas Tulop; on the
southeast, by property of Ramindo Agustin; on the southwest, by properties of Jose V. Reyes and Emilio Reyes; and on the
northwest, by excluded portion claimed by Emilio Reyes."
of which parcel of land aforementioned we are together with our said attorney who is our brother, the owners in equal undivided
shares as evidenced by Transfer Certificate of Title No. T-2785 of the Registry of Deeds of Bataan dated Feb. 26th 1951. (Exh. E) 2
In addition, Valeriana Sta. Maria alone also executed in favor of her brother, Maximo, a special power of attorneyto borrow money and
mortgage any real estate owned by her, granting him the following authority:
For me and in my name to borrow money and make, execute, sign and deliver mortgages of real estate now owned by me standing in
my name and to make, execute, sign and deliver any and all promissory notes necessary in the premises. (Exh. E-I)3
By virtue of the two above powers, Maximo Sta. Maria applied for two separate crop loans, for the 1952-1953 and 1953-1954 crop years, with
plaintiff bank, one in the amount of P15,000.00, of which only the sum of P13,216.11 was actually extended by plaintiff, and the other in the
amount of P23,000.00, of which only the sum of P12,427.57 was actually extended by plaintiff. As security for the two loans, Maximo Sta. Maria
executed in his own name in favor of plaintiff bank two chattel mortgages on the standing crops, guaranteed by surety bonds for the full
authorized amounts of the loans executed by the Associated Insurance & Surety Co., Inc. as surety with Maximo Sta. Maria as principal. The
records of the crop loan application further disclose that among the securities given by Maximo for the loans were a "2nd mortgage on 25.3023
Has. of sugarland, including sugar quota rights therein" including, the parcel of land jointly owned by Maximo and his six brothers and sisters
herein for the 1952-1953 crop loan, with the notation that the bank already held a first mortgage on the same properties for the 1951-1952 crop
loan of Maximo, 4 and a 3rd mortgage on the same properties for the 1953-1954 crop loan. 5
The trial court rendered judgment in favor of plaintiff and against defendants thus:1wph1.t
WHEREFORE premises considered, judgment is hereby rendered condemning the defendant Maximo R. Sta. Maria and his codefendants Valeriana, Quintin, Rosario, Emeteria, Teofilo, and Leonila all surnamed Sta. Maria and the Associated Insurance and
Surety Company, Inc., jointly and severally, to pay the plaintiff, the Philippine National Bank, Del Carmen Branch, as follows:
1. On the first cause of action, the sum of P8,500.72 with a daily interest of P0.83 on P6,100.00 at 6% per annum beginning August
21, 1963 until fully paid;
2. On the second cause of action, the sum of P14,299.79 with a daily interest of P1.53 on P9,346.44 at 6% per annum until fully paid;
and
3. On both causes of action the further sum equivalent to 10% of the total amount due as attorney's fee as of the date of the execution
of this decision, and the costs.6

Defendant Maximo Sta. Maria and his surety, defendant Associated Insurance & Surety Co., Inc. who did not resist the action, did not appeal
the judgment. This appeals been taken by his six brothers and sisters, defendants-appellants who reiterate in their brief their main contention in
their answer to the complaint that under this special power of attorney, Exh. E, they had not given their brother, Maximo, the authority to borrow
money but only to mortgage the real estate jointly owned by them; and that if they are liable at all, their liability should not go beyond the value
of the property which they had authorized to be given as security for the loans obtained by Maximo. In their answer, defendants-appellants had
further contended that they did not benefit whatsoever from the loans, and that the plaintiff bank's only recourse against them is to foreclose on
the property which they had authorized Maximo to mortgage.
We find the appeal of defendants-appellants, except for defendant Valeriana Sta. Maria who had executed another special power of attorney,
Exh. E-1, expressly authorizing Maximo to borrow money on her behalf, to be well taken.
1. Plaintiff bank has not made out a cause of action against defendants-appellants (except Valeriana), so as to hold them liable for the
unpaid balances of the loans obtained by Maximo under the chattel mortgages executed by him in his own name alone. In the early
case of Bank of P.I. vs. De Coster, this Court, in holding that the broad power of attorney given by the wife to the husband to look after
and protect the wife's interests and to transact her business did not authorize him to make her liable as a surety for the payment of the
pre-existing debt of a third person, cited the fundamental construction rule that "where in an instrument powers and duties are
specified and defined, that all of such powers and duties are limited andconfined to those which are specified and defined, and all
other powers and duties are excluded." 7 This is but in accord with the disinclination of courts to enlarge an authority granted beyond
the powers expressly given and those which incidentally flow or derive therefrom as being usual or reasonably necessary and proper
for the performance of such express powers. Even before the filing of the present action, this Court in the similar case of De Villa vs.
Fabricante 8 had already ruled that where the power of attorney given to the husband by the wife was limited to a grant of authority to
mortgage a parcel of land titled in the wife's name, the wife may not be held liable for the payment of the mortgage debt contracted by
the husband, as the authority to mortgage does not carry with it the authority to contract obligation. This Court thus held in the said
case:
Appellant claims that the trial court erred in holding that only Cesario A. Fabricante is liable to pay the mortgage debt and not
his wife who is exempt from liability. The trial court said: "Only the defendant Cesario A. Fabricante is liable for the payment
of this amount because it does not appear that the other defendant Maria G. de Fabricante had authorized Cesario A.
Fabricante to contract the debt also in her name. The power of attorney was not presented and it is to be presumed that the
power (of attorney) was limited to a grant of authority to Cesario A. Fabricante to mortgage the parcel of land covered by
Transfer Certificate of Title in the name of Maria G. de Fabricante.
We went over the contents of the deed of mortgage executed by Cesario Fabricante in favor of Appellant on April 18, 1944,
and there is really nothing therein from which we may infer that Cesario was authorized by his wife to construct the
obligation in her name. The deed shows that the authority was limited to the execution of the mortgage insofar as the
property of the wife is concerned. There is a difference between authority to mortgage and authority to contract obligation.
Since the power of attorney was not presented as evidence, the trial court was correct in presuming that the power was
merely limited to a grant of authority to mortgage unless the contrary is shown. 9
2. The authority granted by defendants-appellants (except Valeriana) unto their brother, Maximo, was merely to mortgage the property
jointly owned by them. They did not grant Maximo any authority to contract for any loans in their names and behalf. Maximo alone,
with Valeriana who authorized him to borrow money, must answer for said loans and the other defendants-appellants' only liability is
that the real estate authorized by them to be mortgaged would be subject to foreclosure and sale to respond for the obligations
contracted by Maximo. But they cannot be held personally liable for the payment of such obligations, as erroneously held by the trial
court.
3. The fact that Maximo presented to the plaintiff bank Valeriana's additional special power of attorney expressly authorizing him to
borrow money, Exh. E-1, aside from the authority to mortgage executed by Valeriana together with the other defendants-appellants
also in Maximo's favor, lends support to our view that the bank was not satisfied with the authority to mortgage alone. For otherwise,
such authority to borrow would have been deemed unnecessary and a surplusage. And having failed to require that Maximo submit a
similar authority to borrow, from the other defendants-appellants, plaintiff, which apparently was satisfied with the surety bond for
repayment put up by Maximo, cannot now seek to hold said defendants-appellants similarly liable for the unpaid loans. Plaintiff's
argument that "a mortgage is simply an accessory contract, and that to effect the mortgage, a loan has to be secured" 10 falls, far short
of the mark. Maximo had indeed, secured the loan on his own account and the defendants-appellants had authorized him to mortgage
their respective undivided shares of the real property jointly owned by them as security for the loan. But that was the extent of their
authority land consequent liability, to have the real property answer for the loan in case of non-payment. It is not unusual in family and
business circles that one would allow his property or an undivided share in real estate to be mortgaged by another as security, either
as an accommodation or for valuable consideration, but the grant of such authority does not extend to assuming personal liability,
much less solidary liability, for any loan secured by the grantee in the absence of express authority so given by the grantor.
4. The outcome might be different if there had been an express ratification of the loans by defendants-appellants or if it had been
shown that they had been benefited by the crop loans so as to put them in estoppel. But the burden of establishing such ratification or
estoppel falls squarely upon plaintiff bank. It has not only failed to discharge this burden, but the record stands undisputed that
defendant-appellant Quintin Sta. Maria testified that he and his co-defendants executed the authority to mortgage "to accommodate
(my) brother Dr. Maximo Sta. Maria ... and because he is my brother, I signed it to accommodate him as security for whatever he may
apply as loan. Only for that land, we gave him as, security" and that "we brothers did not receive any centavo as benefit." 11 The

record further shows plaintiff bank itself admitted during the trial that defendants-appellants "did not profit from the loan" and that they
"did not receive any money (the loan proceeds) from (Maximo)." 12 No estoppel, therefore, can be claimed by plaintiff as against
defendants-appellants.
5. Now, as to the extent of defendant Valeriana Sta. Maria's liability to plaintiff. As already stated above, Valeriana stands liable not
merely on the mortgage of her share in the property, but also for the loans which Maximo had obtained from plaintiff bank, since she
had expressly granted Maximo the authority to incur such loans. (Exh. E-1.) Although the question has not been raised in appellants'
brief, we hold that Valeriana's liability for the loans secured by Maximo is not joint and several or solidary as adjudged by the trial
court, but only joint, pursuant to the provisions of Article 1207 of the Civil Code that "the concurrence ... of two or more debtors in one
and the same obligation does not imply that ... each one of the (debtors) is bound to render entire compliance with the prestation.
There is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires
solidarity." It should be noted that in the additional special power of attorney, Exh. E-1, executed by Valeriana, she did not grant
Maximo the authority to bind her solidarity with him on any loans he might secure thereunder.
6. Finally, as to the 10% award of attorney's fees, this Court believes that considering the resources of plaintiff bank and the fact that
the principal debtor, Maximo Sta. Maria, had not contested the suit, an award of five (5%) per cent of the balance due on the principal,
exclusive of interests, i.e., a balance of P6,100.00 on the first cause of action and a balance of P9,346.44 on the second cause of
action, per the bank's statements of August 20, 1963, (Exhs. Q-1 and BB-1, respectively) should be sufficient.
WHEREFORE, the judgment of the trial court against defendants-appellants Emeteria, Teofilo, Quintin, Rosario and Leonila, all surnamed Sta.
Maria is hereby reversed and set aside, with costs in both instances against plaintiff. The judgment against defendant-appellant Valeriana Sta.
Maria is modified in that her liability is held to be joint and not solidary, and the award of attorney's fees is reduced as set forth in the preceding
paragraph, without costs in this instance.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Capistrano and Barredo, JJ., concur.
1wph1.t Reyes, J.B.L., J., is on official leave.

Republic of the Philippines


SUPREME COURT
Manila
EN BANC
G.R. Nos. L-18223 and L-18224

September 30, 1963

COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-appellee,


vs.
REPUBLIC ARMORED CAR SERVICE CORPORATION and DAMASO PEREZ, ET AL., defendants-appellants.
RESOLUTION
LABRADOR, J.:
Defendant-appellant Damaso Perez has presented a motion for new trial on the ground of newly discovered evidence. It is claimed that movant
was not aware of the nature of the power of attorney that Ramon Racelis used, purportedly signed by him, to secure the loans for the Republic
Armored Car Service Corporation and the Republic Credit Corporation. In the motion it is claimed that a photostatic copy of the power of
attorney used by Ramon Racelis was presented at the trial. This photostatic copy or a copy thereof has not been submitted to us, for this
reason We cannot rule upon his claim and contention that Ramon Racelis had no authority to bind the movant as surety for the loans obtained
from the appellee Commercial Bank & Trust Company. Not having before Us the supposed photostatic copy of the power of attorney used to
secure the loans, there is no reason for Us to rule, in accordance with his contention, that Racelis exceeded his authority in securing the loans
subject of the present actions.
The motion for reconsideration, however, presents a copy of a power of attorney purportedly executed by movant on October 22, 1952. It is not
expressly mentioned that this is the precise power of attorney that Ramon Racelis Utilized to secure the loans the collection of which is sought
in these cases. But assuming, for the sake of argument, that the said power of attorney incorporated in the motion for reconsideration was the
one used to obtain the loans. We find that the movant's contention has no merit. In accordance with the document, Racelis was authorized to
negotiate for a loan or various loans .. with other being institution, financing corporation, insurance companies or investment corporations, in
such sum or sums, aforesaid Attorney-in-fact Mr. Ramon Racelis, may deem proper and convenient to my interests, ... and to execute any and
all documents he deems requisite and necessary in order to obtain such loans, always having in mind best interest; ... We hold that this general
power attorney to secure loans from any banking institute was sufficient authority for Ramon Racelis to obtain the credits subject of the present
suits.
It will be noted furthermore that Racelis, as agent Damaso Perez, executed the documents evidencing the loans signing the same "Damaso
Perez by Ramon Racelis," and in the said contracts Damaso Perez agreed jointly and severally to be responsible for the loans. As the
document as signed makes Perez jointly and severally responsible, there is no merit in the contention that Perez was only being held liable as a
guarantor.1awphl.nt
Furthermore, the promissory notes evidencing the loan are attached to the complaint in G.R. Nos. L-182 and L-18224. If the movant Perez
claims that Raceli had no authority to execute the said promissory notes, the authenticity of said documents should have been specifically
denied under oath in defendant's answers in the lower court. This was done; consequently Perez could not and may not now claim that his
agent did not have authority to execute the loan agreements.
Motion for new trial is denied.

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION

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-infact." (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 in Pasno 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.
Paras, Padilla, Sarmiento and Regalado, JJ., concur.

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