BRITISH AIRWAYS, INC vs. CA G.R. No. 92288 Feb.
2288 Feb. 9, 1993 On August 8, 1981, private respondent received a telex message from its principal
NOTE: SO AS NOT TO CONFUSE YOURSELVES WITH THE DATES IN THIS
CASE, I JUST CHANGED THE DATE OF DEPARTURE TO THE SEQUENCE OF
THE FLIGHTS 
Facts: Private respondent First International Trading and General Services Co., a duly
licensed domestic recruitment and placement agency, received a telex message from
its principal ROLACO Engineering and Contracting Services in Jeddah, Saudi Arabia
to recruit Filipino contract workers in behalf of said principal.
During the early part of March 1981, said principal paid to the Jeddah branch of
petitioner British Airways, Inc. airfare tickets for 93 contract workers with specific
instruction to transport said workers to Jeddah on or before March 30, 1981.
As soon as petitioner received a prepaid ticket advice from its Jeddah branch to
transport the 93 workers, private respondent was immediately informed by petitioner
that its principal had forwarded 93 prepaid tickets. Private respondent instructed its
travel agent, ADB Travel and Tours. Inc., to book the 93 workers with petitioner but
the latter failed to fly said workers, thereby compelling private respondent to borrow
money in the amount of P304,416.00 in order to purchase airline tickets from the other
airlines as evidenced by the cash vouchers for the 93 workers it had recruited who
must leave immediately since the visas of said workers are valid only for 45 days and
the Bureau of Employment Services mandates that contract workers must be sent to
the job site within a period of 30 days.
Private respondent was again informed by the petitioner that it had received a prepaid
ticket advice from its Jeddah branch for the transportation of 27 contract workers.
Private respondent instructed its travel agent to book the 27 contract workers with the
petitioner but the latter was only able to book and confirm 16 seats on its 1ST Flight. On
the date of the scheduled flight only 9 workers were able to board said flight while the
remaining 7 workers were rebooked to 2nd flight which bookings were again cancelled
by the petitioner without any prior notice to either private respondent or the workers.
The 7 workers were rebooked to the 3rd flight of petitioner with 6 more workers
booked for said flight. Unfortunately, the confirmed bookings of the 13 workers were
again cancelled and rebooked to 4th flight.
Private respondent paid the travel tax of the said workers as required by the petitioner
but when the receipt of the tax payments was submitted, the latter informed private
respondent that it can only confirm the seats of the 12 workers on its July 7, 1981
flight. However, the confirmed seats of said workers were again cancelled without any
prior notice either to the private respondent or said workers. The 12 workers were
finally able to leave for Jeddah after private respondent had bought tickets from the
other airlines. Private respondent sent a letter to petitioner demanding compensation
for the damages it had incurred by the latter's repeated failure to transport its contract
workers despite confirmed bookings and payment of the corresponding travel taxes.
On July 23, 1981, the counsel of private respondent sent another letter to the
petitioner demanding the latter to pay the amount of P350,000.00 representing
damages and unrealized profit or income which was denied by the petitioner.
1 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
cancelling the hiring of the remaining recruited workers due to the delay in transporting
the workers to Jeddah. 5
Contention of petitioner on the different instances I mentioned:
• Due to the unavailability of space and limited time, petitioner had to return to
its sponsor in Jeddah the prepaid ticket advice consequently not even one
of the alleged 93 contract workers were booked in any of its flights.
• Only 9 contract workers boarded the scheduled flight with 1 passenger not
showing up as evidenced by the Philippine Airlines' passenger manifest for
Flight
• private respondent's travel agent booked seats for 5 contract workers on
petitioner's 3rd flight but said travel agent cancelled the booking of 2
passengers while the other 3 passengers did not show up on said flight.
• The travel agent of the private respondent booked 7 more contract workers
in addition to the previous 5 contract workers who were not able to board
the 3rd flight with the petitioner's 4th flight which was accepted by petitioner
subject to reconfirmation.
• Petitioner's computer system broke down which resulted to petitioner's
failure to get a reconfirmation from Saudi Arabia Airlines causing the
automatic cancellation of the bookings of private respondent's 12 contract
workers.
• The computer system of the petitioner was reinstalled and immediately
petitioner tried to reinstate the bookings of the 12 workers with either Gulf
Air or Saudi Arabia Airlines but both airlines replied that no seat was
available on that date and had to place the 12 workers on the wait list. Said
information was duly relayed to the private respondent and the 12 workers
before the scheduled flight.
Decisions of the courts:
• the trial court rendered its decision Ordering the defendant to pay the
plaintiff actual , moral , exemplary damages, 30% of its total claim for
and as attorney's fees and costs
• respondent appellate court affirmed the decision of the trial court,
• petitioner filed a Motion for Reconsideration which was also denied
Issues:
1.
WON private respondent has no cause of action against it there being no
perfected contract of carriage existing between them as no ticket was ever
issued to private respondent's contract workers and, therefore, the
 obligation of the petitioner to transport said contract workers did not arise
2. WON the appellate court erred in awarding actual damages in the amount of
P308,016.00 to private respondent since all expenses had already been
subsequently reimbursed by the latter's principal.
Ratio:
1. Private respondent had a valid cause of action for damages
against petitioner. A cause of action is an act or omission of one party in
violation of the legal right or rights of the other. 9 Petitioner's repeated failures
to transport private respondent's workers in its flight despite confirmed booking
of said workers clearly constitutes breach of contract and bad faith on its part.
In dealing with the contract of common carriage of passengers for purpose of
accuracy, there are two (2) aspects of the same, namely: (a) the contract "to carry (at
some future time)," which contract is consensual and is necessarily perfected by mere
consent
b) the contract "of carriage" or "of common carriage" itself which should be considered
as a real contract for not until the carrier is actually used can the carrier be said to
have already assumed the obligation of a carrier. In the instant case, the contract
"to carry" is the one involved which is consensual and is perfected by the mere
consent of the parties.
There is no dispute as to the appellee's consent to the said contract "to carry" its
contract workers from Manila to Jeddah. The appellant's consent thereto, on the other
hand, was manifested by its acceptance of the PTA or prepaid ticket advice that
ROLACO Engineering has prepaid the airfares of the appellee's contract workers
advising the appellant that it must transport the contract workers on or before the end
of March, 1981 and the other batch in June, 1981.
The fact remains that the passage had already been paid for by the principal of the
appellee, and the appellant had accepted such payment. The existence of this
payment was never objected to nor questioned by the appellant in the lower court.
Thus, the cause or consideration which is the fare paid for the passengers exists in
this case.
The third essential requisite of a contract is an object certain. In this contract "to
carry", such an object is the transport of the passengers from the place of
departure to the place of destination as stated in the telex. , there could be no
more pretensions as to the existence of an oral contract of carriage imposing
reciprocal obligations on both parties.
In the case of appellee, it has fully complied with the obligation, namely, the payment
of the fare and its willingness for its contract workers to leave for their place of
destination. The facts clearly show that appellant was remiss in its obligation to
transport the contract workers on their flight despite confirmation and bookings made
by appellee's travelling agent. Appellant knew very well that time was of the essence
2 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
as the prepaid ticket advice had specified the period of compliance therewith, and with
emphasis that it could only be used if the passengers fly on BA
2. While it may be true that private respondent was compelled to borrow money for the
airfare tickets of its contract workers when petitioner failed to transport said workers,
the reimbursements made by its principal to private respondent failed to support the
latter's claim that it suffered actual damages as a result of petitioner's failure to
transport said workers. It is undisputed that private respondent had consistently
admitted that its principal had reimbursed all its expenses.
Article 2199 of the Civil Code provides that:
Except as provided by law or by stipulations, one is entitled to an adequate
compensation only for such pecuniary loss suffered by him as he has duly proved.
Such compensation is referred to as actual or compensatory damages.
Furthermore, actual or compensatory damages cannot be presumed, but must be duly
proved, and proved with reasonable degree of certainty. Private respondent is entitled
to an award of moral and exemplary damages for the injury suffered as a result of
petitioner's failure to transport the former's workers because of the latter's patent bad
faith in the performance of its obligation.
No previous notice was ever registered by the appellant that it could not comply with
the same and then followed the detestable act of appellant in unilaterally cancelling,
booking and rebooking unreasonably the flight of appellee's contract workers in June
to July, 1981 without prior notice. And all of these actuations of the appellant indeed
constitute malice and evident bad faith which had caused damage and besmirched the
reputation and business image of the appellee. The record shows that no claim for
said damages was ever made by the petitioner immediately after their alleged
occurrence therefore said counterclaims were mere afterthoughts when private
respondent filed the present case
Dispositive Portion: WHEREFORE, the assailed decision is hereby AFFIRMED with
the MODIFICATION that the award of actual damages be deleted from said decision.
BA Finance v. CA
Facts:
Cuady spouses obtained from Supercars a credit of P39,574.80, w/c covered the cost
of 1 Ford Escort 1300, four-door sedan. Cuady spouses executed a promissory note
in favor of Supercars & to secure this obligation, the spouses constituted a chattel
mortgage on the said car. Then, Supercars, assigned the promissory note to BA
Finance. The spouses paid a total of P36,730.15 to BA Finance.
BA Finance, obtained the renewal of the insurance coverage over the motor vehicle w/
Zenith Insurance Corporation when the Cuadys failed to renew said insurance
coverage themselves. Under the terms & Conditions, any loss under the policy shall
be payable to BA finance.
Unfortunately, the motor vehicle figured an accident & was badly damaged. The
Cuadys asked BA Finance to consider the same as a total loss, and to claim from the
insurer the face value of the car insurance policy and apply the same to the payment
of their remaining and give them the surplus if any. BA Finance did not heed their
request but instead, advised them to just have the car repaired. The car bugged down.
The spouses wrote a letter to BA Finance requesting the latter to pursue their prior
instruction of enforcing the total loss provision in the insurance coverage. When BA
Finance did not respond favorably, they stopped paying the their monthly installments
on the promissory note.
BA Finance sued the spouses in the RTC for recovery of the installments. The CA
affirmed the RTC ruling.
Issue:
W/N BA Finance has waived its right to the collection of unpaid balance of the Cuadys
on the promissory note for failure of the former to enforce the total loss provision in the
insurance coverage of the motor vehicle subject of the Chattel Mortgage.
Held/Ratio:
YES. BA Finance was deemed subrogated to the rights & obligations of Supercars
when the latter assigned the promissory note, together w/ the chattel mortgage
constituted on the car in favor of BA Finance. BA Finance is therefore bound by the
terms and conditions of the chattel mortgage executed between the Cuadys and
Supercars.
Under the deed of chattel mortgage, BA Finance acted as an attorney-in-fact w/ full
power & authority to file, follow-up, compromise and or settle insurance claims. It was
authorized to sign, execute and deliver the corresponding papers, receipts &
documents to the Insurance company as may be necessary to prove the claim & to
collect from the latter the proceeds of insurance to the extent of its interests.
In granting BA finance such powers, there existed an agency. Under Art. 1884 of the
CC, BA finance is bound by its acceptance to carry out the agency & is liable for
damages w/c through its non-performance, the Cuadys, the principal may suffer.
Dispositive Portion:
PREMISES CONSIDERED, the instant petition is DENIED, and the decision appealed
from is AFFIRMED.
SO ORDERED.
Gozun v. Mercado
December 19, 2006
3 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
Facts:
Mercado ran for the 1995 local elections for the position of Governor in
Pampanga. Gozun, Mercado’s compadre and owner of a publishing and printing
house, submitted draft samples and price quotations for the printing of campaign
materials to Mercado. Gozun was thereafter informed by Mercado’s wife, Annie, that
Mercado approved the quotations. Thus, Gozun began printing the campaign
materials. Due to the urgency and quantity of the order, Gozun availed the services of
2 other publishing houses owned by his mother and daughter. After the printing of
materials, Gozun delivered it to Mercado’s headquarters in San Fernando.
Meanwhile, early one morning, Mercado’s sister-in-law Lilian Soriano,
obtained a cash advance of P253,000 from Gozun for the allowances of poll watchers
and other election related expenses because allegedly, they were unable to go to the
bank. Lilian said that she was borrowing money in behalf of Mercado’s wife as was
indicated in the succeeding Statement of Account. Gozun submits that Mercado
informed him that he had authorized Lilian to obtain the loan. However, Lilian signed
the receipt in her name alone.
Gozun then sent a Statement of Account to Mercado in the total amount of
P2,177,906, itemized as follows:
For Gozun’s publishing house: P640,310
2 Other publishing houses: P1,284,596
Payment for Lilian’s cash advance “in behalf of Annie Mercado”: P253,000
Annie paid P1M and was issued a receipt. Despite repeated demands,
Mercado failed to settle the balance. It took 3 years before Gozun finally asked his
counsel to send a demand letter, to no avail. They subsequently filed a case to
recover the balance plus damages and costs.
Mercado claimed that the campaign materials that Gozun delivered were
donations to his campaign and that he did not authorize his wife to enter into a
contract for the campaign materials. Also, he stressed that he did not authorize Lilian
to borrow money from Gozun. He further claimed that the P1M paid by Annie to
Gozun was for a job well done as he would voluntarily help his campaign and would
give his opinions on his campaign strategy.
Issues:
1. Whether Mercado is liable to pay for the campaign materials
2. Whether Lilian was authorized to borrow money from Gozun
Held:
1. Yes. Mercado’s claim that the campaign materials were mere donations
does not hold water. Per Comelec rules, “if a campaign material is donated,
it must be so stated on its face, acknowledged that nothing of that sort was
 written on all the materials made by petitioner.” There was no such Borja, however, failed to pay the amounts stated in the judicial compromise. Sulyap
acknowledgment found on the materials. The court held that Mercado must filed a writ of execution against Borja. The Trial Court granted the writ. Borja motioned
pay P924,906 for the campaign materials. to quash the writ by stating that his failure to pay the amounts within the agreed period
was due to Sulyap’s fault; therefore, the penalty clause should not be imposed.

2. No. “Generally, the agency may be oral, unless the law requires a specific
form. However, a special power of attorney is necessary for an agent to, as
in this case, borrow money, unless it be urgent and indispensable for the
preservation of the things which are under administration. Since nothing in
this case involves the preservation of things under administration, a
determination of whether Lilian had the special authority to borrow money
on behalf of respondent is in order.” There was no SPA. Gozun claims that
Mercado himself authorized the loan, however, the statement of account
says that it was in behalf of Annie. Thus, the alleged authority cannot be
clearly inferred. Also, Lilian signed the receipt in her name alone. There was
no indication on the note that it was made on behalf of either Mercado or his
wife.
Borja filed another motion praying for the quashal of the writ of execution and
modification of the decision. This time, he contended that there was fraud in the
execution of the compromise agreement. He claimed that 3 sets of compromise
agreement were submitted for his approval. Among them, he allegedly chose and
signed the compromise agreement which contained no stipulation as to the payment
of 2% monthly interest and 25% attorney’s fees in case of default in payment. He
alleged that his former counsel, Atty. Leonardo Cruz, who assisted him in entering into
the said agreement, removed the page of the genuine compromise agreement where
he affixed his signature and fraudulently attached the same to the compromise
agreement submitted to the court in order to make it appear that he agreed to the
penalty clause embodied therein.

Dispositive Portion:
WHEREFORE, the petition is GRANTED. The Decision dated December 8, 2004 and Sulyap presented Atty. Cruz as witness, who declared that the petitioner gave his
the Resolution dated April 14, 2005 of the Court of Appeals are hereby REVERSED consent to the inclusion of the penalty clause of 2% monthly interest and 25%
and SET ASIDE. attorney’s fees in the compromise agreement. He added that the compromise
agreement approved by the court was in fact signed by the petitioner inside the
courtroom before the same was submitted for approval. Atty. Cruz stressed that the
penalty clause of 2% interest per month until full payment of the amount due, plus
BORJA, SR. vs. SULYAP, INC. 25% thereof as attorney’s fees, in case of default in payment, was actually chosen by
the petitioner.
GR No. 150718 March 26, 2003

The trial court ruled in favour of Sulyap because it gave credence to the testimony of
FACTS:
Atty. Cruz and even noted that it was more than one year from receipt of the judgment
on compromise on October 25, 1995, when he questioned the inclusion of the penalty
clause in the approved compromise agreement despite several opportunities to raise
Basilio Borja, Sr. as lessor, and Sulyap, Inc., as lessee, entered into a contract of said objection.
lease involving a one-storey office building owned by Borja located at New Manila,
Quezon City. Pursuant to the lease, Sulyap, Inc. paid, among others, advance rentals,
association dues and deposit for electrical and telephone expenses. Upon the
ISSUE:
expiration of their lease contract, Sulyap demanded the return of the said advance
rentals, dues and deposit but Borja refused to do so. Thus, Sulyap filed with the RTC
of QC a complaint for sum of money against Borja. Subsequently, the parties entered
into and submitted to the trial court a “Compromise Agreement” stating that Borja is W/N Borja is bound by the penalty clause in the compromise agreement.
bound to pay the amounts P30,575 and P50,000 and in case any amount due is not
paid within the period stated in this agreement shall earn 2% interest per month until
fully paid plus 25% attorney’s fees of the amount collectible and that writ of execution HELD/RATIO:
shall be issued as a matter of right.
YES. While a judicial compromise may be annulled or modified on the ground of
vitiated consent or forgery, we find that the testimony of the petitioner failed to
establish the attendance of fraud in the instant case. No evidence was presented by
4 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
petitioner other than his bare allegation that his former counsel fraudulently attached
the page of the genuine compromise agreement where he affixed his signature to the
compromise agreement submitted to the court.
Petitioner cannot feign ignorance of the existence of the penalty clause in the
compromise agreement approved by the court. When he received the judgment
reproducing the full text of the compromise agreement, to February 19, 1997, he never
raised the issue of the fraudulent inclusion of the penalty clause in their agreement.
We note that petitioner is a doctor of medicine. He must have read and understood the
contents of the judgment on compromise. In fact, on November 13, 1995, he filed,
without the assistance of counsel, a motion praying that the amounts of P50,000.00
and 37,575.00 be withheld from his total obligation and instead be applied to the
expenses for the repair of the leased premises which was allegedly vandalized by the
private respondent
Even assuming that Atty. Leonardo Cruz exceeded his authority in inserting the
penalty clause, the status of the said clause is not void but merely voidable, i.e.,
capable of being ratified.17 Indeed, petitioner’s failure to question the inclusion of the
2% monthly interest and 25% attorney’s fees in the judicial compromise despite
several opportunities to do so was tantamount to ratification. Hence, he is estopped
from assailing the validity thereof.
"Private practice" of a profession, specifically the law profession does not pertain to an
isolated court appearance; rather, it contemplates a succession of acts of the same
nature habitually or customarily holding one’s self to the public as a lawyer.
CERVANTES v. Court of Appeals, Philippine Airlines
G.R.No.125138 March 2, 1999
Facts:
Private respondent, PAL, issued to the herein petitioner, Nicholas Cervantes, a
round trip plane ticket for Manila-Honolulu-LA-Honolulu-Manila, which expressly
provided an expiry of date of one year from issuance, i.e., until March 27, 1990. The
issuance of the ticket was in compliance with a Compromise Agreement entered into
between the contending parties in two previous suits dismissing petitioner’s complaint
for damages.
Four days before the expiry date of ticket, the petitioner used it. Upon his arrival in
Los Angeles on March 23, he immediately booked his LA-Manila return ticket with the
PAL office, and was confirmed for April 2. Learning that the same PAL plane would
make a stop-over in San Francisco, and considering that he would be there on April 2,
1990, petitioner made arrangements with PAL for him to board the flight in San
Francisco instead of boarding in Los Angeles. When the petitioner checked in at the
5 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
PAL counter in SF, he was not allowed to board, his ticket was marked: “TICKET NOT
ACCEPTED DUE EXPIRATION OF VALIDITY.”
Cervantes filed a Complaint for Damages but dismissed for lack of merit.
Issues:
1. W/N act of PAL agents in confirming ticket extended the period of validity of
petitioner’s ticket. No
2. W/N denial of the award for damages was proper
Ratio:
1. PAL agents had no authority to do so. Appellant knew this from the start when he
called up the Legal Department of appellee in the Philippines before he left for the
US. He had first hand knowledge that the ticket in question would expire on March
27,1990 and that to secure an extension, he would have to file a written request for
extension at the PAL’s office in the Philippines. Despite this knowledge, appellant
persisted to use the ticket in question.
Since PAL agents are not privy to the said Agreement and petitioner knew that a
written request to the legal counsel of PAL was necessary, he cannot use what the
PAL agents did to his advantage. The agents acted without authority when they
confirmed the flights of the petitioner.
Article 1898 of the New Civil Code, the acts of an agent beyond the scope of
his authority do not bind the principal, unless the latter ratifies the same
expressly or impliedly. Furthermore, when the third person (herein
petitioner) knows that the agent was acting beyond his power or authority, the
principal cannot be held liable for the acts of the agent. If the said third person
is aware of such limits of authority, he is to blame, and is not entitled to
recover damages from the agent, unless the latter undertook to secure the
principal’s ratification.
2. Award of damages is improper as petitioner failed to show that PAL acted in bad
faith in refusing to allow him to board its plane in San Francisco. In awarding moral
damages for breach of contract of carriage, the breach must be wanton and
deliberately injurious or the one responsible acted fraudulently or with malice or bad
faith. Petitioner knew of the possibility that he could not use the subject ticket that he
bought a back-up ticket to ensure departure. Should there be a finding of bad faith,
we are of the opinion that it should be on the petitioner. What the employees of PAL
did was one of simple negligence. No injury resulted on the part of petitioner because
he had a back-up ticket should PAL refuse to accommodate him with the use of
subject ticket.
Neither can the claim for exemplary damages be upheld. Such kind of damages
is imposed by way of example or correction for the public good, and the existence of
bad faith is established. The wrongful act must be accompanied by bad faith, and an
award of damages would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless or malevolent manner. Here, there is no showing that PAL acted
in such a manner. An award for attorney’s fees is also improper.

Dispositive Portion: WHEREFORE, the Petition is DENIED and the decision of the
Court of Appeals dated July 25, 1995 AFFIRMED in toto.
Rural Bank v. Court of Appeals
Facts:
Ederlinda Gallardo, wife of Daniel Manzo, executed a special power of attorney in
favor of Rufino S. Aquino authorizing him to “secure a loan from any bank for any
amount or otherwise mortgage a property in las pinas”. Aquino executed a Deed of
Real Estate in favor of Rural Bank(referred herein as the Bank) for the payment of
loans and advances obtained by the mortgagor totaling php 350,000 with 14% interest
rate.
Gallardo and Manzo filed an action against Rufino and the Bank because Aquino
allegedly left his residence in Bulacan and that the plaintiffs were allegedly surprised
to discover that the property was mortgaged to pay personal loans obtained by Aquino
from the Bank solely for personal use and benefit of Aquino. Plaintiffs allege that
Aquino, in the real estate mortgage, appointed the Bank as attorney in fact and in
case of judicial foreclosure as receiver with corresponding power to sell and that
although without any express authority from Gallardo, Aquino waived the former’s
rights under Section 12, Rule 39 of the Rules of Court.
The trial court issued a TRO against the Bank. Aquino in his defense said that plaintiff
authorized him to mortgage her property to the Bank in order to liquidate her
php350,000 obligation to him. The trial court issued a judgment in favor of the Bank
but the Court of Appeals reversed.
Issue:
G.R.No.137162 January 24, 2007
Facts: Respondent Rufina Lim filed an action to remove cloud on, or quiet title to, real
property, with preliminary injunction and issuance of [a hold-departure order] from the
Philippines against Ignacio Rubio. Respondent amended her complaint to include
specific performance and damages. She alleged that she bought the hereditary shares
consisting of 10 lots of Rubio and the heirs of Luz Baloloy and that a contract of sale
was executed in her favour. Allegedly, said vendors received a downpayment or
earnest money of P102,169.86 and P450,000. Also, it was agreed in the contract of
sale that the vendors would secure certificates of title covering their respective
hereditary shares; that the balance of the purchase price would be paid to each heir
upon presentation of their individual certificates of title; and that Rubio and the heirs
of Baloloy refused to receive the other half of the down payment and refuse to deliver
to the respondents the certificates of title covering his share on the two lots.
As to petitioner Corazon Escueta, in spite of her knowledge that the disputed lots have
already been sold by Ignacio Rubio to respondent, it is alleged that a simulated deed
of sale involving said lots was effected by Ignacio Rubio in her favor and that the
simulated deed of sale by Rubio to Escueta has raised doubts and clouds over
respondent’s title.
In their separate amended answers, petitioners denied the material allegations of the
complaint and alleged inter alia the following:
The heirs of Baloloy said that respondent has no cause of action, because the subject
contract of sale has no more force and effect as far as the Baloloys are concerned,
since they have withdrawn their offer to sell for the reason that respondent failed to
pay the balance of the purchase price as orally promised on or before May 1, 1990.
As for Rubio and Escueta, they said that respondent has no cause of action because
Rubio has not entered into a contract of sale with her; that he has appointed his
daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virgiania Laygo-
Lim who was the one who represented him in the sale of the disputed lots in favor of
respondent; that the P100,000 respondent claimed he received as down payment for
the lots is a simple transaction by way of a loan with Lim.

W/N the Deed of Real Estate Mortgage executed by Aquino to the Bank is valid The trial court ruled in favour of Lim, and so did the CA. Now, petitioners are alleging
that the CA erred, considering that the CA did not consider the circumstances
Held: surrounding petitioners’ failure to appear at the pre-trial and to file the petition for relief
on time. As to the failure to appear at the pre-trial, there was fraud, accident and/or
No. Aquino’s act of signing the Deed of Real Estate Mortgage in his name alone as excusable neglect, because petitioner Bayani was in the United States. There was no
mortgagor, without any indication that he was signing for and in behalf of the property service of the notice of pre-trial or order. Furthermore, petitioner Alejandrino was not
owner, Gallarado, bound himself alone in his personal capacity as a debtor of the clothed with a power of attorney to appear on behalf of Bayani at the pre-trial
Bank and not as the agent or attorney in fact of Galalrdo. Article 1883 does not apply conference.
in the case at bar
Second, petitioners allege that the sale by Virginia to respondent is not binding
Virginia was not authorized to transact business in his behalf pertaining to the
property. The Special Power of Attorney was constituted in favor of Llamas, and the
latter was not empowered to designate a substitute attorney-in-fact. Llamas even
ESCUETA, RUBIO & THE HEIRS OF BALOLOY V. LIM disowned her signature appearing on the "Joint Special Power of Attorney," which
constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties.
6 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN
Petitioners further allege that the amount encashed by Rubio represented not the
down payment, but the payment of respondent’s debt. His acceptance and
encashment of the check was not a ratification of the contract of sale.
Also, they say that the contract between respondent and Virginia is a contract to sell,
not a contract of sale. The real character of the contract is not the title given, but the
intention of the parties. They intended to reserve ownership of the property to
petitioners pending full payment of the purchase price.
Issue: W/N the contract of sale between petitioner and respondent is valid.
Ratio: YES, valid.
1. No fraud, accident, mistake, or excusable negligence exists in order that the
petition for relief may be granted. Article. 1892 provides that the agent may appoint
a substitute if the principal has not prohibited him from doing so, although such
agent shall be responsible for the acts of the substitute when he was not given
the power to appoint one.
2. Applying the above-quoted provision to the special power of attorney executed by
Ignacio Rubio in favor of his daughter Patricia Llamas, it is clear that she is not
prohibited from appointing a substitute. By authorizing Virginia Lim to sell the subject
properties, Patricia merely acted within the limits of the authority given by her father,
but she will have to be "responsible for the acts of the sub-agent," among which is
precisely the sale of the subject properties in favor of respondent.
3. Even assuming that Virginia Lim has no authority to sell the subject properties, the
contract she executed in favor of respondent is not void, but simply unenforceable,
under the second paragraph of Article 1317 of the Civil Code which provides that a
contract entered into in the name of another by one who has no authority or
legal representation, or who has acted beyond his powers, shall be
unenforceable, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other contracting
party.
Applying this to the case at bar: Rubio is now estopped since he accepted and
encashed the check. Such acts constitute ratification and produce the effects of an
express power of agency. The same applies to the Baloloy heirs.
4. Indeed, Virginia Lim and respondent have entered into a contract of sale. Not only
has the title to the subject properties passed to the latter upon delivery of the thing
sold, but there is also no stipulation in the contract that states the ownership is to be
reserved in or "retained by the vendor until full payment of the price."
Other Doctrines:
1. As regards the pre-trial: The notices of pre-trial had been sent to both the Baloloys
and their former counsel of record. Not having raised the ground of lack of a special
power of attorney in their motion, they are now deemed to have waived it. For lack of
representation at the pre-trial, Bayani Baloloy was properly declared in default. 2. Whether or not the consent of the other attorney-in-fact is necessary for the
7 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
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2. All the elements of a valid contract of sale under Article 1458 of the Civil Code are
present, such as: (1) consent or meeting of the minds; (2) determinate subject matter;
and (3) price certain in money or its equivalent. Ignacio Rubio, the Baloloys, and their
co-heirs sold their hereditary shares for a price certain to which respondent agreed to
buy and pay for the subject properties. The offer and the acceptance are concurrent,
since the minds of the contracting parties meet in the terms of the agreement.
In fact, earnest money has been given by respondent and it shall be considered as
part of the price and as proof of the perfection of the contract.
Dispositive Portion: WHEREFORE, the petition is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. CV No. 48282, dated. Consequently,
Ignacio Rubio could no longer sell the subject properties to Corazon Escueta.
October 26, 1998 and January 11, 1999, respectively, are hereby AFFIRMED. Costs
against petitioners.
SO ORDERED.
The Municipal Council of Iloilo v. Evangelista
G.R. No. L-32977 November 17, 1930
Facts:
Appelant Tan Ong Sze Vda. de Tan Toco (Tan Ong/Tan Toco) obtained a
favorable judgement regarding compensation for a strip of land that was expropriated
by the Municipal Council of Iloilo to widen a public street. The judgment entitled Tan
Ong/Tan Toco to recover P42,966.40, representing the value of said strip of land.
There were several adverse claimants including Antero Soriano
(Soriano)who claimed that the Tan Ong/Tan Toco’s attorney-in-fact assigned to him a
portion of said value. Deceased Antero Soriano had assigned his rights to his claim to
Mauricio Cruz & Co.
This appeal, then, is confined to the claim of Mauricio Cruz & Co. as alleged
assignee of the rights of the late Attorney Antero Soriano by virtue of the said
judgment in payment of professional services rendered by him to the said widow and
her coheirs.
Issues:
1. Whether Tan Ong/Tan Toco’s attorney-in-fact’s assignment to Attorney
Antero Soriano (in consideration of the professional services rendered by
the latter), of all the credits, rights and interests of the former derived from
the favorable judgment in the civil case is legal/valid?
 assignment to be valid? Lubao, Pampanga at P1,300.00 and P2,100.00 per metric ton, respectively, for the
total amount of P96,600.00. After paying the stated purchase price, Romualdez
3. whether or not the attorney-in-fact violated Article 1459, case 5, of the Civil addressed a letter to Atty. Cipriano Dizon, PNR’s Acting Purchasing Agent.
Code prohibiting lawyers from acquiring property of their client which is
involved in a case they are trying for their client The Lizette R. Wijanco mentioned in the letter was Lizette Wijanco- Angeles,
petitioner's now deceased wife. That very same day – May 26, 1980 – Lizette
Ratio: requested the PNR to transfer the location of withdrawal for the reason that the
Yes. As to whether Tan Boon Tiong as attorney-in-fact of the appellant, was scrap/unserviceable rails located in Del Carmen and Lubao, Pampanga were not
empowered by his principal to make as assignment of credits, rights and interests, in ready for hauling. The PNR granted said request and allowed Lizette to withdraw
payment of debts for professional services rendered by lawyers, in paragraph VI of the scrap/unserviceable rails in Murcia, Capas and San Miguel, Tarlac instead. However,
power of attorney, Exhibit 5-Cruz, Tan Boon Tiong is authorized to employ and the PNR subsequently suspended the withdrawal in view of what it considered as
contract for the services of lawyers upon such conditions as he may deem convenient, documentary discrepancies coupled by reported pilferages of over P500,000.00 worth
to take charge of any actions necessary or expedient for the interests of his principal, of PNR scrap properties in Tarlac.
and to defend suits brought against her. This power necessarily implies the authority Consequently, the spouses Angeles demanded the refund of the amount of
to pay for the professional services thus engaged. In the present case, the assignment P96,000.00. The PNR, however, refused to pay, alleging that as per delivery receipt
made by Tan Boon Tiong, as Attorney-in-fact for the appellant, in favor of Attorney duly signed by Lizette, 54.658 metric tons of unserviceable rails had already been
Antero Soriano for professional services rendered in other cases in the interests of the withdrawn which, at P2,100.00 per metric ton, were worth P114,781.80, an amount
appellant and her coheirs, was that credit which she had against the municipality of that exceeds the claim for refund.
Iloilo, and such assignment was equivalent to the payment of the amount of said credit
to Antero Soriano for professional services. On August 10, 1988, the spouses Angeles filed suit against the PNR and its corporate
secretary, Rodolfo Flores, among others, for specific performance and damages
For the foregoing considerations, the court is of opinion and so holds: (1) That an before the Regional Trial Court of Quezon City. In it, they prayed that PNR be directed
agent of attorney-in -fact empowered to pay the debts of the principal, and to employ to deliver 46 metric tons of scrap/unserviceable rails and to pay them damages and
lawyers to defend the latter's interests, is impliedly empowered to pay the lawyer's attorney's fees.
fees for services rendered in the interests of said principal, and may satisfy them by
an assignment of a judgment rendered in favor of said principal; (2) that when a Issues having been joined following the filing by PNR, et al., of their answer, trial
person appoints two attorneys-in-fact independently, the consent of the one will not be ensued. Meanwhile, Lizette W. Angeles passed away and was substituted by her
required to validate the acts of the other unless that appears positively to have been heirs, among whom is her husband, herein petitioner Laureno T. Angeles.
the principal's attention; and (3) that the assignment of the amount of a judgment
made by a person to his attorney, who has not taken any part in the case wherein said On April 16, 1996, the trial court, on the postulate that the spouses Angeles are not
judgment was rendered, made in payment of professional services in other cases, the real parties-in-interest, rendered judgment dismissing their complaint for lack of
does not contravene the prohibition of article 1459, case 5, of the Civil Code. cause of action. As held by the court, Lizette was merely a representative of
Romualdez in the withdrawal of scrap or unserviceable rails awarded to him and not
Dispositive Portion: an assignee to the latter's rights with respect to the award.
By virtue whereof, and finding no error in the judgment appealed from, the Aggrieved, the petitioner interposed an appeal with the CA, which, as stated at the
same is affirmed in its entirety, with costs against the appellant. So ordered. threshold hereof, in its decision of June 4, 2001, dismissed the appeal and affirmed
that of the trial court. The affirmatory decision was reiterated by the CA in its resolution
of September 17, 2001, denying the petitioner’s motion for reconsideration.
Issue:
Angeles v. Philippine National Railways W/N Lizette Angeles was an assignee.
G.R.No. 150128 August 31, 2006 Held:
Facts: No. Where agency exists, the third party's (in this case, PNR's) liability on a contract is
to the principal and not to the agent and the relationship of the third party to the
On May 5, 1980, the respondent Philippine National Railways (PNR) informed a
principal is the same as that in a contract in which there is no agent. Normally, the
certain Gaudencio Romualdez that it has accepted the latter’s offer to buy, on an "AS
agent has neither rights nor liabilities as against the third party. He cannot thus sue or
IS, WHERE IS" basis, the PNR’s scrap/unserviceable rails located in Del Carmen and
be sued on the contract. Since a contract may be violated only by the parties thereto
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as against each other, the real party-in-interest, either as plaintiff or defendant in an
action upon that contract must, generally, be a contracting party.
The legal situation is, however, different where an agent is constituted as an assignee.
In such a case, the agent may, in his own behalf, sue on a contract made for his
principal, as an assignee of such contract. The rule requiring every action to be
prosecuted in the name of the real party-in-interest recognizes the assignment of
rights of action and also recognizes that when one has a right assigned to him, he is
then the real party-in-interest and may maintain an action upon such claim or right.
Upon scrutiny of the subject Romualdez's letter to Atty. Cipriano Dizon dated May 26,
1980, it is at once apparent that Lizette was to act just as a "representative" of
Romualdez in the "withdrawal of rails," and not an assignee.
Other Doctrines:
1. If Lizette was without legal standing to sue and appear in this case, there is
more reason to hold that her petitioner husband, either as her conjugal
partner or her heir, is also without such standing.
Petitioner makes much of the fact that the terms "agent" or "attorney-in-fact" were not
used in the Romualdez letter aforestated. It bears to stress, however, that the words
"principal" and "agent," are not the only terms used to designate the parties in an
agency relation. The agent may also be called an attorney, proxy, delegate or, as
here, representative.
It cannot be over emphasized that Romualdez's use of the active verb "authorized,"
instead of "assigned," indicated an intent on his part to keep and retain his interest in
the subject matter. Stated a bit differently, he intended to limit Lizette’s role in the
scrap transaction to being the representative of his interest therein.
2. A power of attorney is only but an instrument in writing by which a person,
as principal, appoints another as his agent and confers upon him the
authority to perform certain specified acts on behalf of the principal. The
written authorization itself is the power of attorney, and this is clearly
indicated by the fact that it has also been called a "letter of attorney." Its
primary purpose is not to define the authority of the agent as between
himself and his principal but to evidence the authority of the agent to third
parties with whom the agent deals. The letter under consideration is
sufficient to constitute a power of attorney. Except as may be required by
statute, a power of attorney is valid although no notary public intervened in
its execution.
A power of attorney must be strictly construed and pursued. The instrument will be
held to grant only those powers which are specified therein, and the agent may neither
go beyond nor deviate from the power of attorney. 10 Contextually, all that Lizette was
authorized to do was to withdraw the unserviceable/scrap railings. Allowing her
authority to sue therefor, especially in her own name, would be to read something not
intended, let alone written in the Romualdez letter.
Dispositive Portion: WHEREFORE, the petition is DENIED and the assailed decision
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of the CA is AFFIRMED.
Uy vs. Court of Appeals
September 9, 1999
Facts:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight
parcels of land by the owners thereof. By virtue of such authority, petitioners offered
to sell the lands, located in Tuba, Tadiangan, Benguet to respondent National Housing
Authority (NHA) to be utilized and developed as a housing project.
Of the eight parcels of land, however, only five were paid for by the NHA
because of the report it received from the Land Geosciences Bureau of the
Department of Environment and Natural Resources (DENR) that the remaining area is
located at an active landslide area and therefore, not suitable for development into a
housing project. The NHA cancelled the sale over the three parcels of land. The NHA,
subsequently offered the amount of P1.225 million to the landowners as daños
perjuicios. The petitioners then filed before the Regional Trial Court (RTC) of Quezon
City a Complaint for Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the
contract to be justified. The trial court nevertheless awarded damages to plaintiffs in
the sum of P1.255 million, the same amount initially offered by NHA to petitioners as
damages.
The Court of Appeals reversed the decision of the trial court and entered a
new one dismissing the complaint. It held that since there was “sufficient justifiable
basis” in cancelling the sale, “it saw no reason” for the award of damages.
The Court of Appeals noted that plaintiffs alleged themselves to be “sellers’
agents” for several owners of the 8 lots subject matter of the case. Obviously, William
Uy and Rodel Roxas in filing this case acted as attorneys-in-fact of the lot owners who
are the real parties in interest but who were omitted to be pleaded as party-plaintiffs in
the case. This omission is fatal. Where the action is brought by an attorney-in-fact of
a land owner in his name, and not in the name of his principal, the action was properly
dismissed because the rule is that every action must be prosecuted in the name of the
real parties-in-interest (Section 2, Rule 3, Rules of Court).
Further, the Court of Appeals said that when plaintiffs Uy and Roxas sought
payment of damages in their favor in view of the partial rescission of Resolution No.
1632 and the Deed of Absolute Sale covering TCT Nos. 10998, 10999 and 11292
(Prayer complaint, page 5, RTC records), it becomes obviously indispensable that the
lot owners be included, mentioned and named as party-plaintiffs, being the real party-
in-interest. Uy and Roxas, as attorneys-in-fact or apoderados, cannot by themselves
lawfully commence this action, more so, when the supposed special power of
attorney, in their favor, was never presented as an evidence in this case.
Hence this petition to the Supreme Court.
Issue: Do petitioners, under substantive law, possess the right they seek to enforce
(Are they real party-in-interest as agents of their principals)? Since the petitioners
acted on their own name as agents and not on behalf of their principal.
Held: The Court rule on the negative.
Ratio:
Petitioners claim that they lodged the complaint not in behalf of their principals but in
their own name as agents directly damaged by the termination of the contract. The
damages prayed for were intended not for the benefit of their principals but to
indemnify petitioners for the losses they themselves allegedly incurred as a result of
such termination. These damages consist mainly of “unearned income” and
advances. Petitioners, thus, attempt to distinguish the case at bar from those involving
agents or apoderados instituting actions in their own name but in behalf of their
principals. Petitioners in this case purportedly brought the action for damages in their
own name and in their own behalf. This is unmeritorious.
Section 2, Rule 3 of the Rules of Court requires that every action must be prosecuted
and defended in the name of the real party-in-interest. The real party-in-interest is the
party who stands to be benefited or injured by the judgment or the party entitled to the
avails of the suit
The applicable substantive law in this case is Article 1311 of the Civil Code,
which states:
Contracts take effect only between the parties, their assigns,
and heirs, except in case where the rights and obligations
arising from the contract are not transmissible by their nature,
or by stipulation, or by provision of law…
If a contract should contain some stipulation in favor of a third
person, he may demand its fulfillment provided he
communicated his acceptance to the obligor before its
revocation. A mere incidental benefit or interest of a person is
not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person.
Petitioners are not parties to the contract of sale between their principals and
NHA. They are mere agents of the owners of the land subject of the sale. As agents,
they only render some service or do something in representation or on behalf of their
principals. The rendering of such service did not make them parties to the contracts of
sale executed in behalf of the latter. Since a contract may be violated only by the
parties thereto as against each other, the real parties-in-interest, either as plaintiff or
defendant, in an action upon that contract must, generally, either be parties to said
contract.
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Neither has there been any allegation, much less proof, that petitioners are the
heirs of their principals.
Are petitioners assignees to the rights under the contracts of sale? No.
An agent, in his own behalf, may bring an action founded on a contract made
for his principal, as an assignee of such contract. We find the following declaration in
Section 372 (1) of the Restatement of the Law on Agency (Second):
Section 372. Agent as Owner of Contract Right
Unless otherwise agreed, an agent who has or who acquires
an interest in a contract which he makes on behalf of his
principal can, although not a promisee, maintain such action
thereon as might a transferee having a similar interest.
Petitioners, however, have not shown that they are assignees of their principals to the
subject contracts. While they alleged that they made advances and that they suffered
loss of commissions, they have not established any agreement granting them “the
right to receive payment and out of the proceeds to reimburse [themselves] for
advances and commissions before turning the balance over to the principal[s].”
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour
autrui under the second paragraph of Article 1311 of the Civil Code. Indeed, there is
no stipulation in any of the Deeds of Absolute Sale “clearly and deliberately” conferring
a favor to any third person.
The fact that an agent who makes a contract for his principal will gain or suffer loss by
the performance or nonperformance of the contract by the principal or by the other
party thereto does not entitle him to maintain an action on his own behalf against the
other party for its breach. An agent entitled to receive a commission from his principal
upon the performance of a contract which he has made on his principal’s account
does not, from this fact alone, have any claim against the other party for breach of the
contract, either in an action on the contract or otherwise. An agent who is not a
promisee cannot maintain an action at law against a purchaser merely because he is
entitled to have his compensation or advances paid out of the purchase price before
payment to the principal.
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation
pour autrui under the contracts of sale, they do not, under substantive law, possess
the right they seek to enforce. Therefore, they are not the real parties-in-interest in
this case.
Despositive Portion:
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.
Chemphil Export and Import Corp (CEIC) v. CA G.R.No.112438-39 December 12,
1995
Facts: On September 1984, Dynetics and Garcia filed a complaint for declaratory
relief/injunction against the consortium regarding the validity of the surety agreement
entered into by Dynetics and Garcia with the consortium, and to enjoin the latter from
claiming, collecting and enforcing any obligations that have been undertaken by the
former in the agreement.
Then, Bynetics, Garcia and Matrix filed a complaint for declaratory
relief/injunction against Security Bank and Trust Co. (SBTC case). But the court
granted SBTC’S prayer for the issuance of a writ of preliminary attachment and a
notice of garnishment covering Garcia’s shares in Chemphil (incl. the disputed
shares) was served, such notice was duly annotated in the stock and transfer books
of Chemphil. The writ of attachment was lifted but was subsequently reinstated.
In the consortium case, the preliminary injunction prayed for by Dynetics
and Garcia was denied. Hence, in July 1985, after the consortium had filed the
required bond, a writ of attachment was issued and various real and personal
properties of Dynetics and Garcia were garnished, including the disputed shares,
such garnishment however, was not annotated.
Unsatisfied with the trial court’s order, the consortium appealed to the Court
of Appeals. During this appeal, Garcia and the consortium entered into a
Compromise Agreement, which was approved by the CA.
In July 1988, Garcia transferred to Ferro Chemicals, Inc. (FCI), under a
Deed of Sale, the disputed shares and other properties for 79M. It was agreed
upon that part of the purchase price shall be paid by FCI directly to SBTC for whatever
judgment credits that may be adjudged in the latter’s favor and against Garcia in the
aforementioned SBTC case.
In March 1989, FCI (through its Pres, Garci), issued a bank check in favor
of SBTC in the amount of 35M. SBTC refused the check because it was not sufficient
to discharge the debt. The check was then consigned by Dynetics and Garcia to the
RTC as payment for the debt in the SBTC case.
FCI assigned some of its shares to petitioner CEIC, which includes the
disputed shares, which were registered and recorded in the corporate books of
Chemphil in CEIC’s name.
Meanwhile, Garcia, in the consortium case, failed to comply with the terms
of the compromise agreement. As a consequence, the consortium filed a motion for
execution, which was granted by the court. The properties that were levied upon on
execution include some of his shares in Chemphil (disputed shares) previously
garnished in July 1985. In Aug 1989, the consortium acquired the dispute shares of
stock at the public auction sale.
CEIC filed a motion to intervene in the consortium case seeking the
previous order of the court granting the shares to the latter, for the reason that it is the
11 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
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rightful owner of the disputed shares. The disputed shares were previously owned by
Garcia but were sold to FCI, which in turned assigned to CEIC.
The trial court ruled in favor of the CEIC, stating that since neither CEIC nor
FCI had notice of the consortium’s attachment of July 1985 (the one not annotated),
the shares of stock, legally acquired from Garcia, cannot be levied upon in execution
to satisfy his judgment debts. The Court of Appeals reversed the decision and ruled
for the consortium.
Issues:
Main issue: Who is legally entitled to the disputed shares of Chemphil?
Corollary issues:
a. W/N CEIC was subrogated to the rights of SBTC (particularly its
attachment lien over the disputed shares by virtue of a previous sale
and assignment)
b. W/N the attachment lien acquired by the consortium is valid; W/N
the consortium has indeed a prior valid and existing attachment
lien over the disputed shares
c. W/N the compromise agreement between Garcia and the
consortium discharge the latter’s attachment lien over the
disputed shares
Ratio:
a. NO. CEIC’s subrogation theory is unavailing. When FCI issued the banck check to
SBTC in the amount of 35M to pay Garcia’s indebtedness to the said bank, it was in
effect paying with Garcia’s money, no longer with its own, because said amount was
part of the purchase price, which FCI owed Garcia in payment for the sale of the
disputed shares by the latter to the former. The money ‘paid’ by FCI to SBTC, thus
properly belonged to Garcia. It is as if Garcia himself paid his own debt to SBTC
but through a third party—FCI. Given this, FCI cannot be considered a third
party payor under Art 1302 (2). It was but a conduit, merely an agent as defined in
Art 1868.
In sum, CEIC, for its failure to fulfill the requirements of Art 1303 (2),
was not subrogated to the rights of SBTC against Garcia and did not acquire
SBTC’S attachment lien over the disputed shares which, in turn, had already
been lifted or discharged upon satisfaction by Garcia, through FCI, of his debt
to the said bank.
b.1 YES. The attachment acquired by the consortium is valid and effective. Both the
Revised Rules of Court and the Corporation Code do not require annotation in the
corporation’s stock and transfer books for the attachment of shares of stock to be valid
and binding on the corporation and third party. Nowhere in the Samahang Magsasaka
case (petitioner’s basis) was it categorically stated that annotation of the attachment in
the corporate books is mandatory for its validity and for the purpose of giving notice to
third persons.
b.2 YES. The sheriff’s notice of garnishment (July 1985) was received by one Thelly
Ruiz, who was neither the president nor managing agent of Chemphil, but just the
secretary of the president. It makes no difference. A secretary’s major function is to
assist his or her superior. She is in effect an extension of the latter. One of her
duties is to receive letters and notices for and in behalf of her superior.
c. NO. To agree with the petitioner would totally disregard the concept and purpose of
a preliminary attachment. That is, a provisional remedy issued upon order of the court
where an action is pending to be levied upon the property or properties of the
defendant, the same to be held thereafter by the sheriff as security for the satisfaction
of whatever judgment might be secured in said action by the attaching creditor against
the defendant. An attachment lien continues until the debt is paid, or sale is had under
execution issued on the judgment or until judgment is satisfied, or the attachment
discharged or vacated in the same manner provided by law.
Overall Conclusion: It is clear that the consortium and/or its assignee Jaime
Gonzales have the better right over the disputed shares. When CEIC purchased the
disputed shares from Garcia in July 1988, it took the shares subject to the prior, valid
and existing attachment lien in favor of and obtained by the consortium.
Other Doctrines:
1. The Consortium is composed of the ff: PISO, Jaime Gonzales,
as assignee of the Bank of the Philippine Islands (BPI), Rizal Commercial
Banking Corporation (RCBC), Land Bank of the Philippines (LBP), and
Philippine Commercial International Bank (PCIB).
2. Art 1302 (2) It is presumed that there is legal subrogation: 2)
When a third person, not interested in the obligation, pays with the express or
tacit approval of the debtor
Dispositive Portion: WHEREFORE, premises considered the appealed decision in
G.R. Nos. 112438-39 is hereby AFFIRMED and the appealed decision in G.R. No.
113394, insofar as it adjudged the CEIC the rightful owner of the disputed shares, is
hereby REVERSED. Moreover, for wantonly resorting to forum-shopping, PCIB is
hereby REPRIMANDED and WARNED that a repetition of the same or similar acts in
the future shall be dealt with more severely.
Development Bank of the Phils. V. CA and the estate of the late Juan Dans, and
DBP MRI Pool
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G.R. No. L-109937
March 21, 1994
Facts:
May 1987: Juan Dans, 76, applied for a loan with DBP. DBP advised him to get a
mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance
Pool (DBP MRI pool)
Aug 4 1987: The Loan was approved
Aug 11: the loan was released with a deduction of payment for the MRI premium
Aug 15: Dans accomplished and submitted the "MRI Application for Insurance" and
the "Health Statement for DBP MRI Pool."
Aug 20: the MRI premium of Dans, less the DBP service fee of 10 percent, was
credited by DBP to the savings account of the DBP MRI Pool. Accordingly, the DBP
MRI Pool was advised of the credit.
Sept 3: Dans died of cardiac arrest. DBP immediately relayed this info to the DBP
MRI Pool.
Sept 23: the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage,
being over the acceptance age limit of 60 years at the time of application.
Oct 21: DBP apprised Candida Dans of the disapproval of her late husband's MRI
application. DBP offered to refund the premium but Candida refused, demanding
payment of the face value of the MRI or an amount equivalent to the loan. She also
refused to accept a settlement of P30,000.00 DBP offered.
Feb 10, 1989: the Estate of Dans filed a complaint against DBP and the insurance
pool for "Collection of Sum of Money with Damages." Estate alleged that Dans
became insured by the DBP MRI Pool when DBP, with full knowledge of Dans' age at
the time of application, required him to apply for MRI, and later collected the insurance
premium thereon.
Mar 10, 1990: RTC rendered a decision in favor Estate. The DBP MRI Pool, however,
was absolved from liability, after the trial court found no privity of contract
between it and the deceased. RTC declared DBP in estoppel for having led Dans
into applying for MRI and actually collecting the premium and the service fee, despite
knowledge of his age ineligibility.
Issue:
1. W/N DBP MRI Pool is liable to the estate of Dans.
2. W/N DBP is liable to the Estate of Dans.
Held:
1. No The liability of an agent who exceeds the scope of his authority depends
upon whether the third person is aware of the limits of the agent's powers.
2. Yes There is no showing that Dans knew of the limitation on DBP's authority to
Ratio: solicit applications for MRI.

1. Under the “Health Statement” of DBP MRI Pool (signed by deceased), the
MRI coverage shall take effect: (1) when the application shall be approved
by the insurance pool; and (2) when the full premium is paid during the
continued good health of the applicant. These two conditions, being joined
conjunctively, must concur.
Undisputably, the power to approve MRI applications is lodged with the DBP
MRI Pool. The pool, however, did not approve the application of Dans.
There is also no showing that it accepted the sum of the premium, which
DBP credited to its account with full knowledge that it was payment for
Dan's premium. There was, as a result, no perfected contract of insurance.
2. In dealing with Dans, DBP was wearing two legal hats: the first as a lender,
and the second as an insurance agent.
As an insurance agent, DBP made Dans go through the motion of applying
for said insurance, thereby leading him and his family to believe that they
had already fulfilled all the requirements for the MRI and that the issuance
of their policy was forthcoming. Apparently, DBP had full knowledge that
Dan's application was never going to be approved. The maximum age for
MRI acceptance is 60 years as clearly and specifically provided in Article 1
of the Group Mortgage Redemption Insurance Policy signed in 1984 by all
the insurance companies concerned.
If the third person dealing with an agent is unaware of the limits of the
authority conferred by the principal on the agent and he (third person) has
been deceived by the non-disclosure thereof by the agent, then the latter is
liable for damages to him The rule that the agent is liable when he acts
without authority is founded upon the supposition that there has been some
wrong or omission on his part either in misrepresenting, or in affirming, or
concealing the authority under which he assumes to act.
*Note: In this case though, DBP was not made to shoulder the entire sum of the
insurance policy being demanded because it cannot be proven that if Dans applied to
another insurance company for a policy, he would’ve secured. The estate could not
prove their pecuniary loss, but they were awarded moral damages instead of actual
damages.
Dispositive Portion:
WHEREFORE, the decision of the Court of Appeals in CA G.R.-CV
No. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE
respondent Estate of Juan B. Dans the amount of P1,476.00 with legal interest from
the date of the filing of the complaint until fully paid; and (2) to PAY said Estate the
amount of Fifty Thousand Pesos (P50,000.00) as moral damages and the amount of
Ten Thousand Pesos (P10,000.00) as attorney's fees. With costs against petitioner.

Under Article 1987, "the agent who acts as such is not personally liable to
the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice
of his powers."

The DBP is not authorized to accept applications for MRI when its clients
are more than 60 years. Knowing all the while that Dans was ineligible for
MRI coverage, DBP exceeded the scope of its authority when it accepted
Dan's application for MRI by collecting the insurance premium, and
deducting its agent's commission and service fee.

13 ALFONSO ARAGONES ATILANO BARTOLOME BAUTISTA BESANES CABRALES CASIPIT CASTRO CRUZ DUENAS FERMIN
FERNANDO GARCIA GUEVARA HUSSIN MACALINO MANGCO MELCHOR RAMOS REAS SANTOS VALLO WILWAYCO YAN