Republic of the Philippines

SUPREME COURT
Manila

G.R. No. L-24332 January 31, 1978

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,

vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF
APPEALS, respondents.

Seno, Mendoza & Associates for petitioner.

Ramon Duterte for private respondent.

MUOZ PALMA, J.:

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal,
Concepcion Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of
attorney which the principal had executed in favor. The administrator of the estate of the went
to court to have the sale declared uneanforceable and to recover the disposed share. The
trial court granted the relief prayed for, but upon appeal the Court of Appeals uphold the
validity of the sale and the complaint.

Hence, this Petition for Review on certiorari.

The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were
sisters and registered co-owners of a parcel of land known as Lot No. 5983 of the Cadastral
Survey of Cebu covered by Transfer Certificate of Title No. 11116 of the Registry of Cebu.
On April 21, 1954, the sisters executed a special power of attorney in favor of their brother,
Simeon Rallos, authorizing him to sell for and in their behalf lot 5983. On March 3, 1955,
Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares
of his sisters Concepcion and Gerundia in lot 5983 to Felix Go Chan & Sons Realty
Corporation for the sum of P10,686.90. The deed of sale was registered in the Registry of
Deeds of Cebu, TCT No. 11118 was cancelled, and a new transfer certificate of Title No.
12989 was issued in the named of the vendee.

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion
Rallos filed a complaint docketed as Civil Case No. R-4530 of the Court of First Instance of
Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in
lot 5983 be d unenforceable, and said share be reconveyed to her estate; (2) that the
Certificate of 'title issued in the name of Felix Go Chan & Sons Realty Corporation be
cancelled and another title be issued in the names of the corporation and the "Intestate
estate of Concepcion Rallos" in equal undivided and (3) that plaintiff be indemnified by way of
attorney's fees and payment of costs of suit. Named party defendants were Felix Go Chan &
Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but
subsequently, the latter was dropped from the complaint. The complaint was amended twice;
defendant Corporation's Answer contained a crossclaim against its co-defendant, Simon
Rallos while the latter filed third-party complaint against his sister, Gerundia Rallos While the
case was pending in the trial court, both Simon and his sister Gerundia died and they were
substituted by the respective administrators of their estates.

After trial the court a quo rendered judgment with the following dispositive portion:

A. On Plaintiffs Complaint

(1) Declaring the deed of sale, Exh. "C", null and void insofar as the one-half pro-indiviso
share of Concepcion Rallos in the property in question, Lot 5983 of the Cadastral Survey
of Cebu is concerned;

(2) Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No.
12989 covering Lot 5983 and to issue in lieu thereof another in the names of FELIX GO
CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the
proportion of one-half (1/2) share each pro-indiviso;

(3) Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an
undivided one-half (1/2) share of Lot 5983 to the herein plaintiff;

(4) Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos,
to pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and

(5) Ordering both defendants to pay the costs jointly and severally.

B. On GO CHANTS Cross-Claim:

(1) Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon
Rallos, to pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45,
representing the price of one-half (1/2) share of lot 5983;

(2) Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the
sum of P500.00.

C. On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of

Simeon Rallos, against Josefina Rallos special administratrix of the Estate of Gerundia
Rallos:

(1) Dismissing the third-party complaint without prejudice to filing either a complaint against
the regular administrator of the Estate of Gerundia Rallos or a claim in the Intestate-Estate of
Cerundia Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp.
98-100, Record on Appeal)

Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from
the foregoing judgment insofar as it set aside the sale of the one-half (1/2) share of
Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on
November 20, 1964 in favor of the appellant corporation sustaining the sale in question. 1 The
appellee administrator, Ramon Rallos, moved for a reconsider of the decision but the same
was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal?
Applied more particularly to the instant case, We have the query. is the sale of the undivided
share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the
death of his principal? What is the law in this jurisdiction as to the effect of the death of the
principal on the authority of the agent to act for and in behalf of the latter? Is the fact of
knowledge of the death of the principal a material factor in determining the legal effect of an
act performed after such death?

Before proceedings to the issues, We shall briefly restate certain principles of law relevant to
the matter tinder consideration.

1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the
name of another without being authorized by the latter, or unless he has by law a right to
represent him. 3 A contract entered into in the name of another by one who has no authority
or the legal representation or who has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person on whose behalf it has been
executed, before it is revoked by the other contracting party.4 Article 1403 (1) of the same
Code also provides:

ART. 1403. The following contracts are unenforceable, unless they are justified:

(1) Those entered into in the name of another person by one who hi - been given no authority
or legal representation or who has acted beyond his powers; ...

Out of the above given principles, sprung the creation and acceptance of the relationship of
agency whereby one party, caged the principal (mandante), authorizes another, called the
agent (mandatario), to act for and in his behalf in transactions with third persons. The
essential elements of agency are: (1) there is consent, express or implied of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agents acts as a representative and not for himself, and (4) the agent acts
within the scope of his authority. 5

Agency is basically personal representative, and derivative in nature. The authority of the
agent to act emanates from the powers granted to him by his principal; his act is the act of the
principal if done within the scope of the authority. Qui facit per alium facit se. "He who acts
through another acts himself". 6

2. There are various ways of extinguishing agency, 7 but her We are concerned only with one
cause death of the principal Paragraph 3 of Art. 1919 of the Civil Code which was taken
from Art. 1709 of the Spanish Civil Code provides:

ART. 1919. Agency is extinguished.

xxx xxx xxx

3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)

By reason of the very nature of the relationship between Principal and agent, agency is
extinguished by the death of the principal or the agent. This is the law in this jurisdiction.8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for
the law is found in the juridical basis of agency which is representation Them being an in.
integration of the personality of the principal integration that of the agent it is not possible for
the representation to continue to exist once the death of either is establish. Pothier agrees
with Manresa that by reason of the nature of agency, death is a necessary cause for its
extinction. Laurent says that the juridical tie between the principal and the agent is severed
ipso jure upon the death of either without necessity for the heirs of the fact to notify the agent
of the fact of death of the former. 9

The same rule prevails at common law the death of the principal effects instantaneous and
absolute revocation of the authority of the agent unless the Power be coupled with an
interest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a
power without an interest confer. red upon an agent is dissolved by the principal's death, and
any attempted execution of the power afterward is not binding on the heirs or representatives
of the deceased. 11

3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent
extinguishes the agency, subject to any exception, and if so, is the instant case within that
exception? That is the determinative point in issue in this litigation. It is the contention of
respondent corporation which was sustained by respondent court that notwithstanding the
death of the principal Concepcion Rallos the act of the attorney-in-fact, Simeon Rallos in
selling the former's sham in the property is valid and enforceable inasmuch as the
corporation acted in good faith in buying the property in question.

Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule
afore-mentioned.

ART. 1930. The agency shall remain in full force and effect even after the death of the
principal, if it has been constituted in the common interest of the latter and of the agent, or in
the interest of a third person who has accepted the stipulation in his favor.

ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of
any other cause which extinguishes the agency, is valid and shall be fully effective with
respect to third persons who may have contracted with him in good. faith.

Article 1930 is not involved because admittedly the special power of attorney executed in
favor of Simeon Rallos was not coupled with an interest.

Article 1931 is the applicable law. Under this provision, an act done by the agent after the
death of his principal is valid and effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal and (2) that the third person who
contracted with the agent himself acted in good faith. Good faith here means that the third
person was not aware of the death of the principal at the time he contracted with said agent.
These two requisites must concur the absence of one will render the act of the agent invalid
and unenforceable.

In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death
of his principal at the time he sold the latter's share in Lot No. 5983 to respondent corporation.
The knowledge of the death is clearly to be inferred from the pleadings filed by Simon Rallos
before the trial court. 12 That Simeon Rallos knew of the death of his sister Concepcion is also
a finding of fact of the court a quo 13 and of respondent appellate court when the latter stated
that Simon Rallos 'must have known of the death of his sister, and yet he proceeded with the
sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without
informing appellant (the realty corporation) of the death of the former. 14

On the basis of the established knowledge of Simon Rallos concerning the death of his
principal Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly
requires for its application lack of knowledge on the part of the agent of the death of his
principal; it is not enough that the third person acted in good faith. Thus in Buason & Reyes v.
Panuyas, the Court applying Article 1738 of the old Civil rode now Art. 1931 of the new Civil
Code sustained the validity , of a sale made after the death of the principal because it was
not shown that the agent knew of his principal's demise. 15 To the same effect is the case
of Herrera, et al., v. Luy Kim Guan, et al., 1961, where in the words of Justice Jesus Barrera
the Court stated:

... even granting arguemendo that Luis Herrera did die in 1936, plaintiffs presented no proof
and there is no indication in the record, that the agent Luy Kim Guan was aware of the death
of his principal at the time he sold the property. The death 6f the principal does not render the
act of an agent unenforceable, where the latter had no knowledge of such extinguishment of
the agency. (1 SCRA 406, 412)

4. In sustaining the validity of the sale to respondent consideration the Court of Appeals
reasoned out that there is no provision in the Code which provides that whatever is done by
an agent having knowledge of the death of his principal is void even with respect to third
persons who may have contracted with him in good faith and without knowledge of the death
of the principal. 16

We cannot see the merits of the foregoing argument as it ignores the existence of the general
rule enunciated in Article 1919 that the death of the principal extinguishes the agency. That
being the general rule it follows a fortiorithat any act of an agent after the death of his
principal is void ab initio unless the same fags under the exception provided for in the
aforementioned Articles 1930 and 1931. Article 1931, being an exception to the general rule,
is to be strictly construed, it is not to be given an interpretation or application beyond the clear
import of its terms for otherwise the courts will be involved in a process of legislation outside
of their judicial function.

5. Another argument advanced by respondent court is that the vendee acting in good faith
relied on the power of attorney which was duly registered on the original certificate of title
recorded in the Register of Deeds of the province of Cebu, that no notice of the death was
aver annotated on said certificate of title by the heirs of the principal and accordingly they
must suffer the consequences of such omission. 17

To support such argument reference is made to a portion in Manresa's Commentaries which

We quote:

If the agency has been granted for the purpose of contracting with certain persons, the
revocation must be made known to them. But if the agency is general iii nature, without
reference to particular person with whom the agent is to contract, it is sufficient that the
principal exercise due diligence to make the revocation of the agency publicity known.

In case of a general power which does not specify the persons to whom represents' on
should be made, it is the general opinion that all acts, executed with third persons who
contracted in good faith, Without knowledge of the revocation, are valid. In such case, the
principal may exercise his right against the agent, who, knowing of the revocation, continued
to assume a personality which he no longer had. (Manresa Vol. 11, pp. 561 and 575; pp.
15-16, rollo)

The above discourse however, treats of revocation by an act of the principal as a mode of
terminating an agency which is to be distinguished from revocation by operation of law such
as death of the principal which obtains in this case. On page six of this Opinion We stressed
that by reason of the very nature of the relationship between principal and agent, agency is
extinguished ipso jure upon the death of either principal or agent. Although a revocation of a
power of attorney to be effective must be communicated to the parties concerned, 18 yet a
revocation by operation of law, such as by death of the principal is, as a rule, instantaneously
effective inasmuch as "by legal fiction the agent's exercise of authority is regarded as an
execution of the principal's continuing will. 19 With death, the principal's will ceases or is the of
authority is extinguished.

The Civil Code does not impose a duty on the heirs to notify the agent of the death of the
principal What the Code provides in Article 1932 is that, if the agent die his heirs must notify
the principal thereof, and in the meantime adopt such measures as the circumstances may
demand in the interest of the latter. Hence, the fact that no notice of the death of the principal
was registered on the certificate of title of the property in the Office of the Register of Deeds,
is not fatal to the cause of the estate of the principal

6. Holding that the good faith of a third person in said with an agent affords the former
sufficient protection, respondent court drew a "parallel" between the instant case and that of
an innocent purchaser for value of a land, stating that if a person purchases a registered land
from one who acquired it in bad faith even to the extent of foregoing or falsifying the deed
of sale in his favor the registered owner has no recourse against such innocent purchaser
for value but only against the forger. 20

To support the correctness of this respondent corporation, in its brief, cites the case
of Blondeau, et al., v. Nano and Vallejo, 61 Phil. 625. We quote from the brief:

In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a
co-owner of lands with Agustin Nano. The latter had a power of attorney supposedly
executed by Vallejo Nano in his favor. Vallejo delivered to Nano his land titles. The power
was registered in the Office of the Register of Deeds. When the lawyer-husband of Angela
Blondeau went to that Office, he found all in order including the power of attorney. But Vallejo
denied having executed the power The lower court sustained Vallejo and the plaintiff
Blondeau appealed. Reversing the decision of the court a quo, the Supreme Court, quoting
the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:

But there is a narrower ground on which the defenses of the defendant- appellee must be
overruled. Agustin Nano had possession of Jose Vallejo's title papers. Without those title
papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Canters, a member of the Philippine Bar and the
husband of Angela Blondeau, the principal plaintiff, searched the registration record, he
found them in due form including the power of attorney of Vallajo in favor of Nano. If this had
not been so and if thereafter the proper notation of the encumbrance could not have been
made, Angela Blondeau would not have sent P12,000.00 to the defendant Vallejo.' An
executed transfer of registered lands placed by the registered owner thereof in the hands of
another operates as a representation to a third party that the holder of the transfer is
authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a breach of
trust, the one who made it possible by his act of coincidence bear the loss. (pp. 19-21)

The Blondeau decision, however, is not on all fours with the case before Us because here
We are confronted with one who admittedly was an agent of his sister and who sold the
property of the latter after her death with full knowledge of such death. The situation is
expressly covered by a provision of law on agency the terms of which are clear and
unmistakable leaving no room for an interpretation contrary to its tenor, in the same manner
that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the
Land Registration Law which in part provides:

xxx xxx xxx

The production of the owner's duplicate certificate whenever any voluntary instrument is
presented for registration shall be conclusive authority from the registered owner to the
register of deeds to enter a new certificate or to make a memorandum of registration in
accordance with such instruments, and the new certificate or memorandum Shall be binding
upon the registered owner and upon all persons claiming under him in favor of every
purchaser for value and in good faith: Provided however, That in all cases of registration
provided by fraud, the owner may pursue all his legal and equitable remedies against the
parties to such fraud without prejudice, however, to the right, of any innocent holder for value
of a certificate of title. ... (Act No. 496 as amended)

7. One last point raised by respondent corporation in support of the appealed decision is an
1842 ruling of the Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein
payments made to an agent after the death of the principal were held to be "good", "the
parties being ignorant of the death". Let us take note that the Opinion of Justice Rogers was
premised on the statement that the parties were ignorant of the death of the principal. We
quote from that decision the following:

... Here the precise point is, whether a payment to an agent when the Parties are ignorant of
the death is a good payment. in addition to the case in Campbell before cited, the same judge
Lord Ellenboruogh, has decided in 5 Esp. 117, the general question that a payment after the
death of principal is not good. Thus, a payment of sailor's wages to a person having a power
of attorney to receive them, has been held void when the principal was dead at the time of
the payment. If, by this case, it is meant merely to decide the general proposition that by
operation of law the death of the principal is a revocation of the powers of the attorney, no
objection can be taken to it. But if it intended to say that his principle applies where there was
110 notice of death, or opportunity of twice I must be permitted to dissent from it.

... That a payment may be good today, or bad tomorrow, from the accident circumstance of
the death of the principal, which he did not know, and which by no possibility could he know?
It would be unjust to the agent and unjust to the debtor. In the civil law, the acts of the agent,
done bona fide in ignorance of the death of his principal are held valid and binding upon the
heirs of the latter. The same rule holds in the Scottish law, and I cannot believe the common
law is so unreasonable... (39 Am. Dec. 76, 80, 81; emphasis supplied)

To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may evoke,
mention may be made that the above represents the minority view in American jurisprudence.
Thus in Clayton v. Merrett, the Court said.
There are several cases which seem to hold that although, as a general principle, death
revokes an agency and renders null every act of the agent thereafter performed, yet that
where a payment has been made in ignorance of the death, such payment will be good. The
leading case so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa) 282, 39 Am. 76,
where, in an elaborate opinion, this view ii broadly announced. It is referred to, and seems to
have been followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter
case it appeared that the estate of the deceased principal had received the benefit of the
money paid, and therefore the representative of the estate might well have been held to be
estopped from suing for it again. . . . These cases, in so far, at least, as they announce the
doctrine under discussion, are exceptional. The Pennsylvania Case, supra (Cassiday v.
McKenzie 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone in
announcing the principle in its broadest scope. (52, Misc. 353, 357, cited in 2 C.J. 549)

So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the
opinion, except so far as it related to the particular facts, was a mere dictum, Baldwin J. said:

The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial
indication of his views on the general subject, than as the adjudication of the Court upon the
point in question. But accordingly all power weight to this opinion, as the judgment of a of
great respectability, it stands alone among common law authorities and is opposed by an
array too formidable to permit us to following it. (15 Cal. 12,17, cited in 2 C.J. 549)

Whatever conflict of legal opinion was generated by Cassiday v. McKenzie in American

jurisprudence, no such conflict exists in our own for the simple reason that our statute, the
Civil Code, expressly provides for two exceptions to the general rule that death of the
principal revokes ipso jure the agency, to wit: (1) that the agency is coupled with an interest
(Art 1930), and (2) that the act of the agent was executed without knowledge of the death of
the principal and the third person who contracted with the agent acted also in good faith (Art.
1931). Exception No. 2 is the doctrine followed in Cassiday, and again We stress the
indispensable requirement that the agent acted without knowledge or notice of the death of
the principal In the case before Us the agent Ramon Rallos executed the sale
notwithstanding notice of the death of his principal Accordingly, the agent's act is
unenforceable against the estate of his principal.

IN VIEW OF ALL THE FOREGOING, We set aside the ecision of respondent appellate court,
and We affirm en toto the judgment rendered by then Hon. Amador E. Gomez of the Court of
First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against
respondent realty corporation at all instances.

So Ordered.

Teehankee (Chairman), Makasiar, Fernandez and Guerrero, JJ., concur.

Footnotes

1 p. 40, rollo

2 p, 42, Ibid.
3 Art. 1317, Civil Code of the Philippines

4 Ibid

5 Art. 1868, Civil Code. By the contract of the agency of a person blinds himself to render
some service or to do something in representation or on behalf of another, with the consent
of the authority of the latter.

Art. 1881, Civil Code. The Agent must act within the scope of his authority. He may do acts
as may be conductive to the accomplishment of the purpose of the agency.

11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 26 Scaevola, 243, 262; Tolentino,
Comments, Civil Code of the Philippines, p.340, vol. 5, 1959 Ed.

See also Columbia University Club v. Higgins, D.CN.Y., 23 f. Supp. 572, 574; Valentine Oil
Co. v. Young 109 P. 2d 180, 185.

6 74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb. 87; Purnell v. City
of Florence, 175 So. 417, 27 Ala. App. 516; Stroman Motor Co. v. Brown, 243 P. 133, 126 Ok.
36

7 See Art. 1919 of the Civil Code

8 Hermosa v. Longara, 1953, 93 Phil. 977, 983; Del Rosario, et al. v. Abad, et al., 1958, 104
Phil. 648, 652

9 11 Manresa 572-573; Tolentino, supra, 369-370

10 2 Kent Comm. 641, cited in Williston on Contracts, 3rd Ed., Vol. 2, p. 288

11 See Notes on Acts of agent after principal's death, 39 Am. Dec. 81,83, citing Ewell's
Evans on Agency, 116; Dunlap's Paley on Agency, 186; Story on Agency, see. 488; Harper v.
Little. 11 Am. Dec. 25; Staples v. Bradbury, 23 Id. 494; Gale v. Tappan 37 Id. 194; Hunt v.
Rousmanier, 2 Mason, 244, S.C. 8 Wheat, 174; Boones Executor v. Clarke 3 Cranch C.C.
389; Hank of 'Washington v. Person, 2 'Rash. C.C. 6.85; Scruggs v. Driver's Executor, 31 Ala.
274; McGriff v. Porter, 5 Fla. 373; Lincoln v. Emerson, 108 Mass 87; 'Wilson v. Edmonds, 24
N.H 517; Easton v. Ellis, 1 Handy (Ohio), 70; McDonald v. Black's Administrators, 20 Ohio,
185; Michigan Ins. Co. v. Leavenworth, 30 Vt. 11; Huston v. Cantril, 11 Leigh, 136;
Campanari v. 'Woodburn, 15 Com B 400

See also ',Williston on Contracts, 3rd Ed., Vol. 2, p. 289

12 see p. 15, 30-31 64 68-69, Record on Appeal

13 pp. 71-72, Ibid.

14 p. 7 of the Decision at page 14, rollo

15 105 Phil. 79:i, 798

16 p. 6 of Decision, at page 13, rollo

17 pp. 6-7 of Decision at pp, 13-14, Ibid.

18 See Articles 1921 & 1922 of the Civil Code

19 2 C.J.S. 1 174 citing American Jurisprudence in different States from Alabama to

Washington; emphasis supplied.

20 p. 8, decision at Page 15, rollo

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 76931 May 29, 1991

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner,

vs.
COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED, respondents.

G.R. No. 76933 May 29, 1991

AMERICAN AIRLINES, INCORPORATED, petitioner,

vs.
COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED,respondents.

Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel
Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.

PADILLA, J.:

This case is a consolidation of two (2) petitions for review on certiorari of a decision1 of the
Court of Appeals in CA-G.R. No. CV-04294, entitled "American Airlines, Inc. vs. Orient Air
Services and Hotel Representatives, Inc." which affirmed, with modification, the decision2 of
the Regional Trial Court of Manila, Branch IV, which dismissed the complaint and granted
therein defendant's counterclaim for agent's overriding commission and damages.

The antecedent facts are as follows:

On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air
carrier offering passenger and air cargo transportation in the Philippines, and Orient Air
Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the
former authorized the latter to act as its exclusive general sales agent within the Philippines
for the sale of air passenger transportation. Pertinent provisions of the agreement are
reproduced, to wit:

WITNESSETH

In consideration of the mutual convenants herein contained, the parties hereto agree as
follows:

1. Representation of American by Orient Air Services

Orient Air Services will act on American's behalf as its exclusive General Sales Agent within
the Philippines, including any United States military installation therein which are not serviced
by an Air Carrier Representation Office (ACRO), for the sale of air passenger transportation.
The services to be performed by Orient Air Services shall include:

(a) soliciting and promoting passenger traffic for the services of American and, if necessary,
employing staff competent and sufficient to do so;

(b) providing and maintaining a suitable area in its place of business to be used exclusively
for the transaction of the business of American;

(c) arranging for distribution of American's timetables, tariffs and promotional material to
sales agents and the general public in the assigned territory;

(d) servicing and supervising of sales agents (including such sub-agents as may be
appointed by Orient Air Services with the prior written consent of American) in the assigned
territory including if required by American the control of remittances and commissions
retained; and

(e) holding out a passenger reservation facility to sales agents and the general public in the
assigned territory.

In connection with scheduled or non-scheduled air passenger transportation within the

United States, neither Orient Air Services nor its sub-agents will perform services for any
other air carrier similar to those to be performed hereunder for American without the prior
written consent of American. Subject to periodic instructions and continued consent from
American, Orient Air Services may sell air passenger transportation to be performed within
the United States by other scheduled air carriers provided American does not provide
substantially equivalent schedules between the points involved.

xxx xxx xxx

4. Remittances

Orient Air Services shall remit in United States dollars to American the ticket stock or
exchange orders, less commissions to which Orient Air Services is entitled hereunder, not
less frequently than semi-monthly, on the 15th and last days of each month for sales made
during the preceding half month.

All monies collected by Orient Air Services for transportation sold hereunder on American's
ticket stock or on exchange orders, less applicable commissions to which Orient Air Services
is entitled hereunder, are the property of American and shall be held in trust by Orient Air
Services until satisfactorily accounted for to American.

5. Commissions

American will pay Orient Air Services commission on transportation sold hereunder by Orient
Air Services or its sub-agents as follows:

(a) Sales agency commission

American will pay Orient Air Services a sales agency commission for all sales of
transportation by Orient Air Services or its sub-agents over American's services and any
connecting through air transportation, when made on American's ticket stock, equal to the
following percentages of the tariff fares and charges:

(i) For transportation solely between points within the United States and between such points
and Canada: 7% or such other rate(s) as may be prescribed by the Air Traffic Conference of
America.

(ii) For transportation included in a through ticket covering transportation between points
other than those described above: 8% or such other rate(s) as may be prescribed by the
International Air Transport Association.

(b) Overriding commission

In addition to the above commission American will pay Orient Air Services an overriding
commission of 3% of the tariff fares and charges for all sales of transportation over
American's service by Orient Air Service or its sub-agents.

xxx xxx xxx

10. Default

If Orient Air Services shall at any time default in observing or performing any of the provisions
of this Agreement or shall become bankrupt or make any assignment for the benefit of or
enter into any agreement or promise with its creditors or go into liquidation, or suffer any of its
goods to be taken in execution, or if it ceases to be in business, this Agreement may, at the
option of American, be terminated forthwith and American may, without prejudice to any of its
rights under this Agreement, take possession of any ticket forms, exchange orders, traffic
material or other property or funds belonging to American.

11. IATA and ATC Rules

The provisions of this Agreement are subject to any applicable rules or resolutions of the
International Air Transport Association and the Air Traffic Conference of America, and such
rules or resolutions shall control in the event of any conflict with the provisions hereof.

xxx xxx xxx

13. Termination

American may terminate the Agreement on two days' notice in the event Orient Air Services
is unable to transfer to the United States the funds payable by Orient Air Services to
American under this Agreement. Either party may terminate the Agreement without cause by
giving the other 30 days' notice by letter, telegram or cable.

xxx xxx x x x3

On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement
by failing to promptly remit the net proceeds of sales for the months of January to March
1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in
accordance with Paragraph 13 thereof (Termination). Four (4) days later, or on 15 May 1981,
American Air instituted suit against Orient Air with the Court of First Instance of Manila,
Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction
and Restraining Order4 averring the aforesaid basis for the termination of the Agreement as
well as therein defendant's previous record of failures "to promptly settle past outstanding
refunds of which there were available funds in the possession of the defendant, . . . to the
damage and prejudice of plaintiff."5

In its Answer6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material
allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted
amounts, contending that after application thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions.
Further, the defendant contended that the actions taken by American Air in the course of
terminating the Agreement as well as the termination itself were untenable, Orient Air
claiming that American Air's precipitous conduct had occasioned prejudice to its business
interests.

Finding that the record and the evidence substantiated the allegations of the defendant, the
trial court ruled in its favor, rendering a decision dated 16 July 1984, the dispositive portion of
which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor
of defendant and against plaintiff dismissing the complaint and holding the termination made
by the latter as affecting the GSA agreement illegal and improper and order the plaintiff to
reinstate defendant as its general sales agent for passenger tranportation in the Philippines
in accordance with said GSA agreement; plaintiff is ordered to pay defendant the balance of
the overriding commission on total flown revenue covering the period from March 16, 1977 to
December 31, 1980 in the amount of US$84,821.31 plus the additional amount of
US$8,000.00 by way of proper 3% overriding commission per month commencing from
January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent
legally prevailing at the time of payment plus legal interest to commence from the filing of the
counterclaim up to the time of payment. Further, plaintiff is directed to pay defendant the
amount of One Million Five Hundred Thousand (Pl,500,000.00) pesos as and for exemplary
damages; and the amount of Three Hundred Thousand (P300,000.00) pesos as and by way
of attorney's fees.

Costs against plaintiff.7

On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision

promulgated on 27 January 1986, affirmed the findings of the court a quo on their material
points but with some modifications with respect to the monetary awards granted. The
dispositive portion of the appellate court's decision is as follows:

WHEREFORE, with the following modifications

1) American is ordered to pay Orient the sum of US$53,491.11 representing the balance of
the latter's overriding commission covering the period March 16, 1977 to December 31,
1980, or its Philippine peso equivalent in accordance with the official rate of exchange legally
prevailing on July 10, 1981, the date the counterclaim was filed;
2) American is ordered to pay Orient the sum of US$7,440.00 as the latter's overriding
commission per month starting January 1, 1981 until date of termination, May 9, 1981 or its
Philippine peso equivalent in accordance with the official rate of exchange legally prevailing
on July 10, 1981, the date the counterclaim was filed

3) American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date
the answer with counterclaim was filed, until full payment;

4) American is ordered to pay Orient exemplary damages of P200,000.00;

5) American is ordered to pay Orient the sum of P25,000.00 as attorney's fees.

the rest of the appealed decision is affirmed.

Costs against American.8

American Air moved for reconsideration of the aforementioned decision, assailing the
substance thereof and arguing for its reversal. The appellate court's decision was also the
subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration
of the trial court's ruling with respect to the monetary awards. The Court of Appeals, by
resolution promulgated on 17 December 1986, denied American Air's motion and with
respect to that of Orient Air, ruled thus:

Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the
trial court's award of exemplary damages and attorney's fees, but granted insofar as the rate
of exchange is concerned. The decision of January 27, 1986 is modified in paragraphs (1)
and (2) of the dispositive part so that the payment of the sums mentioned therein shall be at
their Philippine peso equivalent in accordance with the official rate of exchange legally
prevailing on the date of actual payment.9

Both parties appealed the aforesaid resolution and decision of the respondent court, Orient
Air as petitioner in G.R. No. 76931 and American Air as petitioner in G.R. No. 76933. By
resolution10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the
case at bar.

The principal issue for resolution by the Court is the extent of Orient Air's right to the 3%
overriding commission. It is the stand of American Air that such commission is based only on
sales of its services actually negotiated or transacted by Orient Air, otherwise referred to as
"ticketed sales." As basis thereof, primary reliance is placed upon paragraph 5(b) of the
Agreement which, in reiteration, is quoted as follows:

5. Commissions

a) . . .

b) Overriding Commission

In addition to the above commission, American will pay Orient Air Services an overriding
commission of 3% of the tariff fees and charges for all sales of transportation over
American's services by Orient Air Services or itssub-agents. (Emphasis supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former
not having opted to appoint any sub-agents, it is American Air's contention that Orient Air can
claim entitlement to the disputed overriding commission based only on ticketed sales. This is
supposed to be the clear meaning of the underscored portion of the above provision. Thus, to
be entitled to the 3% overriding commission, the sale must be made by Orient Air and the
sale must be done with the use of American Air's ticket stocks.

On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding
commission covers the total revenue of American Air and not merely that derived from
ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes
its designation as the exclusive General Sales Agent of American Air, with the corresponding
obligations arising from such agency, such as, the promotion and solicitation for the services
of its principal. In effect, by virtue of such exclusivity, "all sales of transportation over
American Air's services are necessarily by Orient Air."11

It is a well settled legal principle that in the interpretation of a contract, the entirety thereof
must be taken into consideration to ascertain the meaning of its provisions.12 The various
stipulations in the contract must be read together to give effect to all.13 After a careful
examination of the records, the Court finds merit in the contention of Orient Air that the
Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3%
overriding commission based on total revenue, or as referred to by the parties, "total flown
revenue."

As the designated exclusive General Sales Agent of American Air, Orient Air was responsible
for the promotion and marketing of American Air's services for air passenger transportation,
and the solicitation of sales therefor. In return for such efforts and services, Orient Air was to
be paid commissions of two (2) kinds: first, a sales agency commission, ranging from 7-8% of
tariff fares and charges from sales by Orient Air when made on American Air ticket stock; and
second, an overriding commission of 3% of tariff fares and charges for all sales of passenger
transportation over American Air services. It is immediately observed that the precondition
attached to the first type of commission does not obtain for the second type of commissions.
The latter type of commissions would accrue for sales of American Air services made not on
its ticket stock but on the ticket stock of other air carriers sold by such carriers or other
authorized ticketing facilities or travel agents. To rule otherwise, i.e., to limit the basis of such
overriding commissions to sales from American Air ticket stock would erase any distinction
between the two (2) types of commissions and would lead to the absurd conclusion that the
parties had entered into a contract with meaningless provisions. Such an interpretation must
at all times be avoided with every effort exerted to harmonize the entire Agreement.

An additional point before finally disposing of this issue. It is clear from the records that
American Air was the party responsible for the preparation of the Agreement. Consequently,
any ambiguity in this "contract of adhesion" is to be taken "contra proferentem", i.e.,
construed against the party who caused the ambiguity and could have avoided it by the
exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the
interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.14 To put it differently, when several interpretations of a provision are
otherwise equally proper, that interpretation or construction is to be adopted which is most
favorable to the party in whose favor the provision was made and who did not cause the
ambiguity.15 We therefore agree with the respondent appellate court's declaration that:

Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be
read against the party who drafted it.16
We now turn to the propriety of American Air's termination of the Agreement. The respondent
appellate court, on this issue, ruled thus:

It is not denied that Orient withheld remittances but such action finds justification from
paragraph 4 of the Agreement, Exh. F, which provides for remittances to American less
commissions to which Orient is entitled, and from paragraph 5(d) which specifically allows
Orient to retain the full amount of its commissions. Since, as stated ante, Orient is entitled to
the 3% override. American's premise, therefore, for the cancellation of the Agreement did not
exist. . . ."

We agree with the findings of the respondent appellate court. As earlier established, Orient
Air was entitled to an overriding commission based on total flown revenue. American Air's
perception that Orient Air was remiss or in default of its obligations under the Agreement was,
in fact, a situation where the latter acted in accordance with the Agreementthat of retaining
from the sales proceeds its accrued commissions before remitting the balance to American
Air. Since the latter was still obligated to Orient Air by way of such commissions. Orient Air
was clearly justified in retaining and refusing to remit the sums claimed by American Air. The
latter's termination of the Agreement was, therefore, without cause and basis, for which it
should be held liable to Orient Air.

On the matter of damages, the respondent appellate court modified by reduction the trial
court's award of exemplary damages and attorney's fees. This Court sees no error in such
modification and, thus, affirms the same.

It is believed, however, that respondent appellate court erred in affirming the rest of the
decision of the trial court. We refer particularly to the lower court's decision ordering
1wphi1

American Air to "reinstate defendant as its general sales agent for passenger transportation
in the Philippines in accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels
American Air to extend its personality to Orient Air. Such would be violative of the principles
and essence of agency, defined by law as a contract whereby "a person binds himself to
render some service or to do something in representation or on behalf of another, WITH THE
CONSENT OR AUTHORITY OF THE LATTER .17 (emphasis supplied) In an agent-principal
relationship, the personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which
the latter would have him do. Such a relationship can only be effected with the consent of the
principal, which must not, in any way, be compelled by law or by any court. The Agreement
itself between the parties states that "either party may terminate the Agreementwithout
cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis supplied)
We, therefore, set aside the portion of the ruling of the respondent appellate court reinstating
Orient Air as general sales agent of American Air.

WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and
resolution of the respondent Court of Appeals, dated 27 January 1986 and 17 December
1986, respectively. Costs against petitioner American Air.

SO ORDERED.

Melencio-Herrera, and Regalado, JJ., concur.

Paras, J., took no part. Son is a partner in one of the counsel.
Sarmiento, J., is on leave.
Footnotes

1
Penned by Justice Serafin B. Camilon and concurred in by Justices Jose C. Campos, Jr.
and Desiderio P. Jurado.

2
Penned by Judge Herminio C. Mariano.

3 Rollo, pp. 110-118.

4 Rollo, p. 102.

5
Ibid., p. 104.

6
Ibid., p. 121.

7
Rollo, p. 162.

8 Rollo, pp. 173-174.

9 Ibid., p. 210.

10
Rollo, p. 212.

11
Rollo, p. 291.

NAESS Shipping Philippines, Inc. vs. NLRC, G.R. No. 73441, 4 September 1987, 153
12

SCRA 657.

North Negros Sugar Co. vs. Compania General de Tabacos, No. L-9277, 29 March 1957;
13

Article 1374, Civil Code of the Philippines.

Equitable Banking Corporation vs. Intermediate Appellate Court, G.R. No. 74451, 25 May
14

1988, 161 SCRA 518.

Government of the Philippine Islands vs. Derham Brothers and the International Banking
15

Corporation, 36 Phil. 960.

 FIRST DIVISION

[G.R. No. 143978. December 3, 2002]

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER

SALDAA, petitioners, vs. EDUARDO R. GULLAS and
NORMA S. GULLAS, respondents.

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review seeking to set aside the decision[1]of the Court of
Appeals[2] in CA-G.R. CV No. 46539, which reversed and set aside the
decision[3] of the Regional Trial Court of Cebu City, Branch 22 in Civil Case No.
CEB-12740.
The records show that private respondents, Spouses Eduardo R. Gullas and
Norma S. Gullas, were the registered owners of a parcel of land in the
Municipality of Minglanilla, Province of Cebu, measuring 104,114 sq. m., with
Transfer Certificate of Title No. 31465.[4] On June 29, 1992, they executed a
special power of attorney[5] authorizing petitioners Manuel B. Tan, a licensed real
estate broker,[6] and his associates Gregg M. Tecson and Alexander Saldaa, to
negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per
square meter, at a commission of 3% of the gross price. The power of attorney
was non-exclusive and effective for one month from June 29, 1992.[7]
On the same date, petitioner Tan contacted Engineer Edsel Ledesma,
construction manager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters
of Mary), a religious organization interested in acquiring a property in the
Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property with
Engineer Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim
and Azucena Gaviola, representing the Sisters of Mary, to see private respondent
Eduardo Gullas in his office at the University of Visayas. The Sisters, who had
already seen and inspected the land, found the same suitable for their purpose
and expressed their desire to buy it.[8]However, they requested that the selling
price be reduced to Five Hundred Thirty Pesos (P530.00) per square meter
instead of Five Hundred Fifty Pesos (P550.00) per square meter. Private
respondent Eduardo Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent
Eduardo Gullas was the owner of the property. On July 3, 1992, private
respondents agreed to sell the property to the Sisters of Mary, and subsequently
executed a special power of attorney[9] in favor of Eufemia Caete, giving her the
special authority to sell, transfer and convey the land at a fixed price of Two
Hundred Pesos (P200.00) per square meter.
On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in
favor of the Sisters of Mary for the price of Twenty Million Eight Hundred Twenty
Two Thousand Eight Hundred Pesos (P20,822,800.00), or at the rate of Two
Hundred Pesos (P200.00) per square meter.[10] The buyers subsequently paid the
corresponding taxes.[11] Thereafter, the Register of Deeds of Cebu Province
issued TCT No. 75981 in the name of the Sisters of Mary of Banneaux, Inc.[12]
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private
respondent Eduardo Gullas to claim their commission, but the latter told them that
he and his wife have already agreed to sell the property to the Sisters of Mary.
Private respondents refused to pay the brokers fee and alleged that another
group of agents was responsible for the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint[13]against the defendants for
recovery of their brokers fee in the sum of One Million Six Hundred Fifty Five
Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60),as well as
moral and exemplary damages and attorneys fees. They alleged that they were
the efficient procuring cause in bringing about the sale of the property to the
Sisters of Mary, but that their efforts in consummating the sale were frustrated by
the private respondents who, in evident bad faith, malice and in order to evade
payment of brokers fee, dealt directly with the buyer whom petitioners introduced
to them. They further pointed out that the deed of sale was undervalued obviously
to evade payment of the correct amount of capital gains tax, documentary stamps
and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners
claim, they were not the efficient procuring cause in bringing about the
consummation of the sale because another broker, Roberto Pacana, introduced
the property to the Sisters of Mary ahead of the petitioners.[14] Private respondents
maintained that when petitioners introduced the buyers to private respondent
Eduardo Gullas, the former were already decided in buying the property through
Pacana, who had been paid his commission. Private respondent Eduardo Gullas
admitted that petitioners were in his office on July 3, 1992, but only to ask for the
reimbursement of their cellular phone expenses.
In their reply and answer to counterclaim,[15] petitioners alleged that although
the Sisters of Mary knew that the subject land was for sale through various
agents, it was petitioners who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the
dispositive portion of which reads:

WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is

hereby rendered for the plaintiffs and against the defendants. By virtue hereof,
defendants Eduardo and Norma Gullas are hereby ordered to pay jointly and
severally plaintiffs Manuel Tan, Gregg Tecson and Alexander Saldaa;

1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX

HUNDRED EIGHTY FOUR PESOS (P624,684.00) as brokers fee with legal
interest at the rate of 6% per annum from the date of filing of the complaint;
and

2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees and

costs of litigation.

For lack of merit, defendants counterclaim is hereby DISMISSED.

IT IS SO ORDERED. [16]

Both parties appealed to the Court of Appeals. Private respondents argued

that the lower court committed errors of fact and law in holding that it was
petitioners efforts which brought about the sale of the property and disregarding
the previous negotiations between private respondent Norma Gullas and the
Sisters of Mary and Pacana. They further alleged that the lower court had no
basis for awarding brokers fee, attorneys fees and the costs of litigation to
petitioners.[17]
Petitioners, for their part, assailed the lower courts basis of the award of
brokers fee given to them. They contended that their 3% commission for the sale
of the property should be based on the price of P55,180,420.00, or at P530.00
per square meter as agreed upon and not on the alleged actual selling price of
P20,822,800.00 or at P200.00 per square meter, since the actual purchase price
was undervalued for taxation purposes. They also claimed that the lower court
erred in not awarding moral and exemplary damages in spite of its finding of bad
faith; and that the amount of P50,000.00 as attorneys fees awarded to them is
insufficient. Finally, petitioners argued that the legal interest imposed on their
claim should have been pegged at 12% per annum instead of the 6% fixed by the
court.[18]
The Court of Appeals reversed and set aside the lower courts decision and
rendered another judgment dismissing the complaint.[19]
Hence, this appeal.
Petitioners raise following issues for resolution:
I.

THE APPELLATE COURT GROSSLY ERRED IN THEIR FINDING THAT

THE PETITIONERS ARE NOT ENTITLED TO THE BROKERAGE
COMMISSION.
 II.

IN DISMISSING THE COMPLAINT, THE APPELLATE COURT HAS

DEPRIVED THE PETITIONERS OF MORAL AND EXEMPLARY
DAMAGES, ATTORNEYS FEES AND INTEREST IN THE
FOREBEARANCE OF MONEY.

The petition is impressed with merit.

The records show that petitioner Manuel B. Tan is a licensed real estate
broker, and petitioners Gregg M. Tecson and Alexander Saldaa are his
associates. In Schmid and Oberly v. RJL Martinez Fishing Corporation,[20] we
defined a broker as one who is engaged, for others, on a commission, negotiating
contracts relative to property with the custody of which he has no concern; the
negotiator between other parties, never acting in his own name but in the name of
those who employed him. x x x a broker is one whose occupation is to bring the
parties together, in matters of trade, commerce or navigation. (Emphasis
supplied)
During the trial, it was established that petitioners, as brokers, were
authorized by private respondents to negotiate for the sale of their land within a
period of one month reckoned from June 29, 1992. The authority given to
petitioners was non-exclusive, which meant that private respondents were not
precluded from granting the same authority to other agents with respect to the
sale of the same property. In fact, private respondent authorized another agent in
the person of Mr. Bobby Pacana to sell the same property. There was nothing
illegal or amiss in this arrangement, per se, considering the non-exclusivity of
petitioners authority to sell. The problem arose when it eventually turned out that
these agents were entertaining one and the same buyer, the Sisters of Mary.
As correctly observed by the trial court, the argument of the private
respondents that Pacana was the one entitled to the stipulated 3% commission is
untenable, considering that it was the petitioners who were responsible for the
introduction of the representatives of the Sisters of Mary to private respondent
Eduardo Gullas. Private respondents, however, maintain that they were not
aware that their respective agents were negotiating to sell said property to the
same buyer.
Private respondents failed to prove their contention that Pacana began
negotiations with private respondent Norma Gullas way ahead of petitioners.
They failed to present witnesses to substantiate this claim. It is curious that Mrs.
Gullas herself was not presented in court to testify about her dealings with
Pacana. Neither was Atty. Nachura who was supposedly the one actively
negotiating on behalf of the Sisters of Mary, ever presented in court.
Private respondents contention that Pacana was the one responsible for the
sale of the land is also unsubstantiated. There was nothing on record which
established the existence of a previous negotiation among Pacana, Mrs. Gullas
and the Sisters of Mary. The only piece of evidence that the private respondents
were able to present is an undated and unnotarized Special Power of Attorney in
favor of Pacana. While the lack of a date and an oath do not necessarily render
said Special Power of Attorney invalid, it should be borne in mind that the
contract involves a considerable amount of money. Hence, it is inconsistent with
sound business practice that the authority to sell is contained in an undated and
unnotarized Special Power of Attorney. Petitioners, on the other hand, were given
the written authority to sell by the private respondents.
The trial courts evaluation of the witnesses is accorded great respect and
finality in the absence of any indication that it overlooked certain facts or
circumstances of weight and influence, which if reconsidered, would alter the
result of the case.[21]
Indeed, it is readily apparent that private respondents are trying to evade
payment of the commission which rightfully belong to petitioners as brokers with
respect to the sale. There was no dispute as to the role that petitioners played in
the transaction. At the very least, petitioners set the sale in motion. They were not
able to participate in its consummation only because they were prevented from
doing so by the acts of the private respondents. In the case of Alfred Hahn v.
Court of Appeals and Bayerische Motoren Werke Aktiengesellschaft (BMW)[22] we
ruled that, An agent receives a commission upon the successful conclusion of a
sale. On the other hand, a broker earns his pay merely by bringing the buyer and
the seller together, even if no sale is eventually made. (Underscoring ours).
Clearly, therefore, petitioners, as brokers, should be entitled to the commission
whether or not the sale of the property subject matter of the contract was
concluded through their efforts.
Having ruled that petitioners are entitled to the brokers commission, we
should now resolve how much commission are petitioners entitled to?
Following the stipulation in the Special Power of Attorney, petitioners are
entitled to 3% commission for the sale of the land in question. Petitioners
maintain that their commission should be based on the price at which the land
was offered for sale, i.e., P530.00 per square meter.However, the actual
purchase price for which the land was sold was only P200.00 per square
meter.Therefore, equity considerations dictate that petitioners commission must
be based on this price. To rule otherwise would constitute unjust enrichment on
the part of petitioners as brokers.
In the matter of attorneys fees and expenses of litigation, we affirm the
amount of P50,000.00 awarded by the trial court to the petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The May
29, 2000 decision of the Court of Appeals is REVERSED and SET ASIDE. The
decision of the Regional Trial Court of Cebu City, Branch 22, in Civil Case No.
CEB-12740 ordering private respondents Eduardo Gullas and Norma S. Gullas to
pay jointly and severally petitioners Manuel B. Tan, Gregg Tecson and Alexander
Saldaa the sum of Six Hundred Twenty-Four Thousand and Six Hundred
Eighty-Four Pesos (P624,684.00) as brokers fee with legal interest at the rate of
6% per annum from the filing of the complaint; and the sum of Fifty Thousand
Pesos (P50,000.00) as attorneys fees and costs of litigation, is REINSTATED.
SO ORDERED.
Vitug, and Carpio, JJ., concur.
Davide, Jr., C.J., (Chairman), no part due to close relationship to a party.
Azcuna, J., on official leave.

[1]
Dated May 29, 2000, Rollo, p. 16.
[2]
Penned by Associate Justice Mariano M. Umali and concurred in by Associate Justices
Conrado M. Vazquez, Jr. and Eriberto U. Rosario, Jr.
[3]
Penned by Judge Pampio A. Abarintos, promulgated on March 11, 1994, Rollo, p. 8.
[4]
Annex F, Record, p. 16.
[5]
Annex A, Record, pp. 8-9.
[6]
Folder of Exhibits, Exhibit I.
[7]
Ibid., Exhibits A and A-3.
[8]
Record, p. 131.
[9]
Folder of Exhibits, Exhibit C, dated July 4, 1992.
[10]
Ibid., Exhibit D.
[11]
Id., Exhibit E.
[12]
Id., Exhibit F.
[13]
Record, pp. 1-7.
[14]
Record, pp. 28-34.
[15]
Id., at 35-38.
[16]
Record, p. 206.
[17]
Rollo, p. 21.
[18]
Id., at 21-22.
[19]
Rollo, pp. 32-33.
[20]
166 SCRA 493 (1988).
[21]
People v. Realm, 301 SCRA 495 (1999); Yam v. Court of Appeals, 303 SCRA 1
(1999); People v. Maglatay, 304 SCRA 272 (1999).
[22]
266 SCRA 537 (1997).
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-9184 February 2, 1916

MACONDRAY & CO., INC., plaintiff-appellee,

vs.
GEORGE S. SELLNER, defendant-appellant.

D.R. Williams for appellant.

Haussermann, Cohn and Fisher for appellee.

CARSON, J.:

This action was brought to recover the sum of P17, 175 by way of damages alleged to have
been suffered by the plaintiff as a result of the sale of a parcel of land which it is alleged was
made by the defendant for and on behalf of the plaintiff after authority to make the sale had
been revoked. Judgment was rendered in favor of the plaintiff for the sum of P3,435, together
with interest at 6 per cent per annum from the date of the institution of this action. From this
judgment defendant appealed, and brought the case have on his duly certified bill of
exceptions.

Early in 1912 the defendant, a real estate broker, sold the parcel of land described in the
complaint to the plaintiff company for P17,175. The formal deed of sale was not executed
and accepted until July 29, 1912, the agreement to purchase being conditioned on the
delivery of a Torrens title, which was not secured until early in that month. In the meantime
the land was flooded by high tides, and the plaintiff company became highly dissatisfied with
its purchase. When the final transfer was made the plaintiff company informed defendant that
the land was wholly unsuited for use as a coal-yard, for which it had been purchased, and
requested him to find another purchaser. At that time it was expressly understood and
agreed that the plaintiff company was willing to dispose of the land for P17,175, and that
defendant was to have as his commission for securing a purchaser anything over that
amount which he could get.

A short time thereafter, defendant reported to plaintiff that he had a purchaser for the land in
the person of Antonio M. Barretto, who was willing to pay P2.75 per square meter, or a total
of P18,892.50. Plaintiff thereupon executed a formal deed of conveyance which, together
with the certificate of title (Torrens), was delivered to defendant, with the understanding that
he was to conclude the sale, deliver the title-deed and certificate to Barretto, and received
from him the purchase price. The deed was dated August 21, 1912. Thereafter defendant
advised Barretto that plaintiff had executed the title-deed and that he was ready to close the
deal. Barretto agreed to accept the land if, upon examination, the title and the deed should
prove satisfactory; and defendant left the deed of conveyance with him, with the
understanding that if the title and the deed of conveyance were as represented, Barretto
would give him his check for the amount of the purchase price. Defendant retained
possession of the Torrens certificate of title. A few days afterwards Barretto was compelled to
go to Tayabas on business and was detained by a typhoon which delayed his return until the
31st of August.
During Barretto's absence the plaintiff company advised defendant that he must consummate
the sale and collect the purchase money without delay upon Barretto's return to Manila. On
the arrival of Barretto on Saturday, August 31st, defendant called upon him and informed him
that the plaintiff company desired to close up the transaction at once, and Barretto, who was
somewhat indisposed from his trip, promised to examine the papers as soon as he could get
to them, and assured the defendant that he would send his check for the purchased price in a
day or two if he found the documents in proper shape. These assurance were reported to
Young, the plaintiff company's general manager and representative throughout the
transaction, on Monday morning, September 2d. Young then formally notified defendant that
unless the purchase price was paid before five o'clock of that same afternoon the deal would
be off. Defendants again called upon Barretto, who informed him that if he would turn over
the Torrens certificate of title he would let him have a check for the purchase price.
Defendant sent the certificate as requested, but did not receive the check until thirty-six hours
afterwards, on Wednesday morning. On receipt of Barretto's check he immediately tendered
plaintiff company a check for the agreed selling price, P17,175. Plaintiff's manager refused to
accept the check and soon thereafter filed this action, claiming that the sale had been
"cancelled" upon the failure of defendant to turn over the purchase price on the afternoon of
Monday, September 2nd.

The following is a copy of plaintiff company's letter to defendant advising him that the sale
would be "cancelled" unless the purchase price was paid at five o'clock of the day on which it
was written.

SEPT. 2, 1912.

Mr. GEO. C. SELLNER, Manila.

DEAR SIR: In accordance with our conversation today, this is to notify you that we consider
the sale of our lot in Nagtajan to Antonio M. Barretto as cancelled in view of the nonpayment
of the purchase price before five o'clock this afternoon.

Please confirm.

Yours very truly,

MACONDRAY & CO., INC.,

(Sgd.) CARLOS YOUNG,
General Manager.

As to the facts just narrated there is practically no dispute, the only matters of facts as to
which there is any real contention in the record being limited to question as to the value of the
land, and as to the original instructions to defendant in regard to the delivery of the title
deeds.

Plaintiffs' manager testified that as he had no confidence in Barretto, he expressly instructed

defendant not to deliver the title deeds until Barretto turned over the purchase price.
Defendant swore that he had received no such instruction. Upon this conflict of testimony we
do not deem it necessary to make an express finding, because, as we view the transaction, it
could in no event affect our disposition of this appeal.
We are of opinion that the disputed evidence clearly discloses that on August 21st the
plaintiff company, through the defendant real estate broker, agreed to sell the land to Barretto
for P18,892.50, and that Barretto agreed to buy the land at that price on the usual condition
precedent that before turning over the purchase price the title deeds and deed of transfer
from the company should be found to be in due and legal form. That for the purpose of
consummating the sale the plaintiff company turned over to the defendant a deed of transfer
to Barretto, together with a Torrens title certificate to the land, executed as of the day when
the agreement to sell was entered into. That the defendant, with full authority from plaintiff
company, agreed to deliver the deed and certificate to Barretto on payment of the purchase
price. That from the very nature of the transaction it was understood that the purchaser
should have a reasonable time in which to examine the deed of transfer and the other
documents of title, and that defendant exercising an authority impliedly if not expressly
conferred upon him, gave the purchaser a reasonable time in which to satisfy himself as to
the legality and correctness of the documents of title. That the company through its manager
Young, acquiesced in and ratified what had been done by defendant in this regard when, with
full knowledge of all the facts, Young advised the defendant, during Barretto's absence in
Tayabas, that the deal must be closed up without delay on Barretto's return to Manila.

No reason appears, nor had any reason been assigned for the demand by the plaintiff
company for the delivery of the purchase price at the hour specified under threat in the event
of failure to make payment at that hour it would decline to carry out the agreement, other than
that the manager of the plaintiff company had been annoyed by the delays which occurred
during the earlier stage of the negotiations, and had changed his mind as to the desirability of
making the sale at the price agreed upon, either because he believed that he could get a
better price elsewhere, or that the land was worth more to his company than the price he had
agreed to take for it. It is very evident that plaintiff company's manager hoped that by setting
a limit of a few hours upon the time within which he would receive the money, his company
would be relieved of the obligation to carry out its contract.

Upon the question of the value of the land we think that the evidence clearly discloses that at
the date of the sale its actual and its true market value was not more than the amount paid for
it by Barretto, that is to say, P18,892.50. The evidence discloses that it had been in the hands
of an expert real estate agent for many months prior to the sale, with every inducement to
him to secure the highest cash price which could be gotten for it. That he actually sold it to
the plaintiff company, a few months prior to the sale to Barretto, for P17,175. That the plaintiff
company was highly dissatisfied with its purchase, and readily agreed to resell at that price.
That the defendant, in his company was highly dissatisfied with its purchase, and readily
agreed to resell at that price. That the defendant, in his capacity as a real estate agent, with a
personal and direct interest in securing the highest possible price for the land, sold it to
Barretto for P18,892.50.

The only evidence in the record tending to prove that the land had a higher market value than
the price actually paid for it under such circumstances is the testimony of a rival real estate
broker, who had never been on the land, but claimed that he was familiar with its general
location from maps and description, and asserted that in his opinion it was worth
considerably more than the price actually paid for it, and that he thought he could have sold
the land for P3 a meter, or approximately P20,610. Of course an expert opinion of this kind,
however sincere and honest the witness may have been in forming it, is wholly insufficient to
maintain a finding that the land was worth any more than it actually brought when sold under
the conditions above set forth.
It may be that the land has a speculative value much higher than the actual market value at
the time of the sale, so that if held for an opportune turn in the market, or until a buyer of
some special need for it happened to present himself, a price approximating that indicated by
this witness might be secured for it. But the question of fact ruled upon is the actual market
value of the land at the time of its sale to Barretto, and not any speculative value which might
be assigned to it in anticipation of unknown, indefinite and uncertain contingencies.

Among other definitions of "market value" to be found in "Words and Phrases," vol. 5, p. 4383,
and supported by citation of authority, are the following:

The "market value" of property is the price which the property will bring in a fair market after
fair and reasonable efforts have been made to find a purchaser who will give the highest
price for it.

xxx xxx xxx

The market value of land is the price that would in all probability result form fair negotiations
where the seller is willing to sell and the buyer desires to buy.

Upon the foregoing statement of the facts disclosed by the record, we are of opinion that the
judgment entered in the court below should be reversed and the complaint dismissed without
costs in this instance.

1. Even were we to admit, which we do not, that the plaintiff company had the right to
terminate the negotiations at the time indicated by its manager, and to direct its real estate
not make the sale of Barretto after the hour indicated, nevertheless we would be compelled
to hold, upon the evidence before us, that the plaintiff company has no cause of action for
monetary damages against the defendant real estate agent.

The measure of the damages which the plaintiff would be entitled to recover from the real
estate agent for the unauthorized sale of its property would be the actual market value of the
property, title to which had been lost as a result of the sale. We are not now considering any
question as to the right of the owner, under such circumstances, to recover the property from
the purchaser, or damages for its detention or like; but merely his right to recover monetary
damages from his agent should he elect, as the plaintiff company did in this case, to ratify the
sale and recoup from the agent any loss resulting from his alleged unauthorized
consummation of the sale.

The market value of the land in question was P18,892.50. Of this the plaintiff company has
received P17,175, leaving a balance of P1,717.50 unpaid. But, whatever may be the view
which should taken as to the right of the plaintiff company to terminate the negotiations for
the sale of the property to Barretto at the time fixed by it in its letter to the defendant real
estate agent, there can be no question as to the liability of the plaintiff company to the real
estate agent, in the event that it did so terminate the negotiations, for the amount of the
commission which it agreed to pay him should he find a purchaser for the land at the price
agreed upon in his agency contract. The commission agreed upon was all over P17,175
which the defendant could secure from the property, and it is clear that allowing the
defendant this commission, and offsetting it against the unpaid balance of the market value
of the land, the plaintiff company is not entitled to a money judgment against defendant.

We do not mean to question the general doctrine as to the power of a principal to revoke the
authority of his agent at will, in the absence of a contract fixing the duration of the agency
(subject, however, to some well defined exceptions). Our ruling is that at the time fixed by the
manager of the plaintiff company for the termination of the negotiations, the defendant real
estate agent had already earned the commissions agreed upon, and could not be deprived
thereof by the arbitrary action of the plaintiff company in declining to execute the contract of
sale for some reason personal to itself.

The question as to what constitutes a sale so as to entitle a real estate broker to his
commissions is extensively annotated in the case of Lunney vs. Healey (Nebraska) 56313
reported in 44 Law Rep. Ann., 593 [Note], and the long line of authorities there cited support
the following rule:

The business of a real estate broker or agent, generally, is only to find a purchaser, and the
settled rule as stated by the courts is that, in the absence of an express contract between the
broker and his principal, the implication generally is that the broker becomes entitled to the
usual commissions whenever he brings to his principal a party who is able and willing to take
the property and enter into a valid contract upon the terms then named by the principal,
although the particulars may be arranged and the matter negotiated and completed between
the principal and the purchaser directly.

In the case of Watson vs. Brooks (17 Fed. Rep., 540; 8 Sawy., 316), it was held that a sale of
real property entitling a broker to his commissions, was an agreement by the vendor for a
certain valuable consideration then or thereafter to be paid, and was complete without
conveyance, although the legal title remained in the vendor.

The rights of a real estate broker to be protected against the arbitrary revocation of his
agency, without remuneration for services rendered in finding a suitable purchaser prior to
the revocation, are clearly and forcefully stated in the following citation form the opinion in the
case of Blumenthal vs. Goodall (89 Cal., 251).

The act of the agent in finding a purchaser required time and labor for its completion, and
within three days of the execution of the contract, and prior to its revocation, he had placed
the matter in the position that success was practically certain and immediate, and it would be
the height of injustice to permit the principal then to withdraw the authority and terminate the
agency as against an express provision of the contract, and perchance reap the benefit of the
agent's labors, without being liable to him for his commissions. This would be to make the
contract an unconscionable one, and would offer a premium for fraud by enabling one of the
parties to take advantage of his own wrong and secure the labor of the other without
remuneration.

2. We are of opinion that under all the circumstances surrounding the negotiations as
disclosed by the practically undisputed evidence of record, the plaintiff company could not
lawfully terminate the negotiations at the time it attempted to do so and thereafter decline to
convey the land to Barretto, who had accepted an offer of sale made to him by the plaintiff's
duly authorized agent, subject only to an examination of the documents of title, and stood
ready to pay the purchase price upon the delivery of the duly executed deed of conveyance
and other necessary documents of title. We are not now considering the right or the power of
the plaintiff company to terminate or revoke the agency of the defendant at that time. The
revocation of the agent's authority at that time could in no wise relieve the plaintiff company
of its obligation to sell the land to Barretto for the price and on the terms agreed upon before
the agency was revoked.
If we are correct in our conclusions in this regard, it follows, of course that no matter hat was
the actual value of the land, the plaintiff company suffered no damage by the delivery of the
title deeds to Barretto, and the consummation of the sale by the defendant upon the terms
and at the price agreed upon prior to the revocation of his agency.

Without considering any of the disputed questions of fact it clearly appears that before the
manager of the plaintiff company wrote the letter dated September 2, 1912, which is set forth
in the foregoing statement of facts, and before the conversation was had to which that letter
refers, the defendant real estate agent had offered to sell the land to Barretto for P18,892.50
and that he did so with the knowledge and consent, and under the authority of the plaintiff
company. It further clearly appears that this offer had been duly accepted by Barretto, who
stood ready and willing to pay over the agreed purchase price, upon the production and
delivery of the necessary documents of title, should these documents be found, upon
examination, to be executed in due and legal form. The only question, then, which we need
consider, is whether the plaintiff company could lawfully "cancel" or rescind this agreement
for the sale and purchase of the land, on the sole ground that the purchase price was not
paid at the hour designated in the letter to the defendant.

The only reasons assigned for the sudden and arbitrary demand for the payment of the
purchase price which was made with the manifest hope that it would defeat the agent's deal
with Barretto, are that the plaintiff company's manager had become satisfied that the land
was worth more than he had agreed to accept for it; and that he was piqued and annoyed at
the delays which marked the earlier stages of the negotiations.

Time does not appear to have been of the essence of the contract. The agreement to sell
was made without any express stipulation as to the time within which the purchase price was
to be paid, except that the purchaser reserved the right to examine the documents of title
before making payment of the purchase price, though it was understood that the sale was for
cash upon the delivery of the documents of title executed in due form. Under the agreement
with the agent of the plaintiff company, the purchaser had a perfect right to examine the
documents of title; and in the absence of an express agreement fixing the time to be allowed
therefore, he was clearly entitled to such time as might be reasonably necessary for that
purpose.

The plaintiff company, through its agent, had given Barretto an opportunity to examine the
documents of title, with the express understanding that if they were satisfactory he would
hand the agent his check for the purchase price, and it is very clear that the plaintiff company
could not arbitrarily, and for its own convenience, deprive Barretto of this opportunity to make
such examination of the documents as might be reasonably necessary.

Of course we are not to be understood as denying the right of the vendor to couple his
agreement to sell with a stipulation that the purchase price must be paid at a specific day,
hour and minute; nor that the obligation to pay over the purchase price forthwith may not be
inferred from all the circumstances surrounding the transaction in a particular case. Time
may be, and often is of the very essence of the contract. But in a contract for the sale of real
estate, where no agreement to the contrary appears, it may fairly be assumed that it was the
intention of the parties to allow a reasonable time for the examination of the documents of
title; and in any case in which time has been expressly allowed for that purpose, the vendor
cannot arbitrarily demand the payment of the purchase price before the expiration of the time
reasonably necessary therefor.
The doctrine supported by citation of authority is set forth as follows on page 165, "Maupin on
Marketable Title to Real Estate:"

The contract of sale usually specifies a time in which the purchaser may examine the title
before completing the purchase. If no time be specified, he will be entitled to a reasonable
time for that purpose, but cannot keep the contract open indefinitely so as to avail himself of a
rise in the value of the property or escape loss in case of depreciation. He cannot be required
to pay the purchase money before he has examined the abstract, unless he has expressly
stipulated so to do. It has been held that if the contract provide that the purchaser shall be
furnished an abstract of title, and shall have a specified time in which to examine the title and
pay the purchase money, the purchaser must determine in that time whether he will take the
title, and that he cannot tender the purchase money after that time, even though no abstract
of the title was furnished.

The purchaser is entitled to a reasonable time within which to determine by investigation the
validity of apparent liens disclosed by the record. After the purchaser has examined the
abstract, or investigated the title in the time allowed for that purpose, it is his duty to point out
or make known his objections to the title, if any, so as to give the vendor an opportunity to
remove them.

In the case of Hoyt vs. Tuxbury (70 Ill., 331, 332), the rule is stated as follows:

Where the purchase of land is made upon condition the title is found good, the purchaser is
only entitled to a reasonable time in which to determine whether he will take the title the
vendor has, or reject it. He cannot keep the contract open indefinitely, so as to avail of a rise
in the value of the property, or relieve himself in case of a depreciation.

In the case of Easton vs. Montgomery (90 Cal., 307), the rule is set forth as follows:

A contract for the sale of land which provides "title to prove good or no sale," without
specifying the time within which the examination is to be made, implies a reasonable time.

In 39 Cyc., 1332, the general rule, supported by numerous citations, is set forth as follows:

If the contract of sale does not specify the time of performance, a reasonable time will be
implied. In other words a reasonable time for performance will be allowed, and performance
within a reasonable time will be required. What is a reasonable time necessarily depends
upon the facts and circumstances of the particular case. The rule permitting and requiring
performance within a reasonable time applies both to the time for making and executing the
conveyance by the vendor, and to the time for making or tendering payment by the purchaser;
and where some precedent act or demand is necessary, the rule applies to the time of
performance after such act is done, or after such demand has been made. It also applies to
the time within which any conditions precedent is to be performed, or within which a
contingency upon which the transaction depends is to happen, and to the performance of
various acts by the parties such as the furnishing of an abstract of title, or making a survey, or
any act which is to precede or may affect the time of conveyance or payment, or which one of
the parties may do at his option which may affect the rights of the parties under the contract.
If the purchaser is entitled to an examination of the title a reasonable time therefor will be
implied.

Under all the circumstances surrounding the transaction in the case at bar, as they appear
from the evidence of record, we have no hesitation in holding that the plaintiff company's
letter of September 2, 1912 demanding payment before five o'clock of the afternoon of that
day, under penalty of the cancellation of its agreement to sell, was an arbitrary unreasonable
attempt to deny to the purchaser the reasonable opportunity to inspect the documents of title,
to which he was entitled by virtue of the express agreement of the plaintiff company's agent
before any attempt was made to revoke his agency. It follows that Barretto's right to enforce
the agreement to sell was in no wise affected by the attempt of the plaintiff company to
"cancel" the agreement; and that the plaintiff company suffered no damage by the
consummation of the agreement by the acceptance of the stipulated purchase price by the
defendant real estate agent.

Perhaps we should indicate that in arriving at these conclusions we have not found it
necessary to pass upon the disputed question of fact, as to whether or not the plaintiff
company's manager instructed the defendant not to deliver the title-deed until he had
received the purchase price. On this point there is a direct conflict of evidence. But as we
understand the transaction, it was clearly understood that the purchaser would have a
reasonable opportunity to inspect and examine the documents of title before paying over a
large sum of money in exchange therefor, whether the agent did or did not have the authority
to make actual delivery of the title deed for that purpose.

Twenty days hereafter let judgment be entered reversing the judgment entered in the court
below without costs in this instance, and directing the dismissal of the complaint with the
costs in first instance against the plaintiff company, and ten days thereafter let the record be
returned to the court wherein it originated. So ordered.

Arellano, C.J., Torres, Moreland, Trent and Araullo, JJ., concur.

 FIRST DIVISION

[G.R. No. 66541. November 20, 1990.]

GUARDEX ENTERPRISES and/or MARCELINA A. ESCANDOR, Petitioners, v. NATIONAL LABOR

RELATIONS COMMISSION and JUMBEE ORBETA, Respondents.

Rogelio B. De Guzman, for Petitioners.

Vicente R. Guzman for Private Respondent.

SYLLABUS

1. REMEDIAL LAW; CRIMINAL PROCEDURE; SEARCH WARRANT; PROBABLE CAUSE; DEFINITION AND
REQUISITES THEREOF. The right against unreasonable searches and seizures is guaranteed under Article
III (Bill of Rights), Section 2 of the 1987 Constitution of the Philippines. Under this provision, the issuance of
a search warrant is justified only upon a finding of probable cause. Probable cause for a search has been
defined as such facts and circumstances which would lead a reasonably discreet and prudent man to believe
that an offense has been committed and that the objects sought in connection with the offense are in the
place sought to be searched (Burgos, Sr. v. Chief of Staff, G.R. No. 64261, Dec. 26, 1984, 133 SCRA 800).
In determining the existence of probable cause, it is required that: 1) the judge (or) officer must examine
the . . witnesses personally; 2) the examination must be under oath; and (3) the examination must be
reduced to writing in the form of searching questions and answers (Marinas v. Sioco, 104 SCRA 403, Ponsica
v. Ignalaga, G.R. No. 72301, July 31, 1987, 152 SCRA 647). These requirements are provided under Section
4, Rule 126 of the New Rules of Criminal Procedure.

2. ID.; ID.; ID.; ID.; FINDING OR OPINION THEREOF BY THE EXAMINING JUDGE, MUST BE SUPPORTED BY
THE RECORD; NOT OBSERVED IN THE CASE AT BAR. It has been ruled that the existence of probable
cause depends to a large degree upon the finding or opinion of the judge conducting the examination (Luna
v. Plaza, G.R. No. L-27511, Nov. 29, 1968), however, the opinion or finding of probable cause must, to a
certain degree, be substantiated or supported by the record. In this case, We find that the requirement
mandated by the law and the rules that the judge must personally examine the applicant and his witnesses
in the form of searching questions and answers before issuing the warrant, was not sufficiently complied with.
The applicant himself was not asked any searching question by Judge Magallanes. The records disclose that
the only part played by the applicant, Lieutenant Rojas was to subscribe the application before Judge
Magallanes. The application contained pre-typed questions, none of which stated that applicant had personal
knowledge of a robbery or a theft and that the proceeds thereof are in the possession and control of the
person against whom the search warrant was sought to be issued. In the case of Roan v. Gonzales, G.R. No.
71410, Nov. 25, 1986, 145 SCRA 687, citing the case of Mata v. Bayona, G.R. No. 50720, March 26, 1984,
128 SCRA 388, where the applicant himself was not subjected to an interrogation but was questioned only
"to ascertain, among others, if he knew and understood (his affidavit) and only because the application was
not yet subscribed and sworn to," We held that: "It is axiomatic that the examination must be probing and
exhaustive, not merely routinary or pro forma, if the claimed probable cause is to be established. The
examining magistrate must not simply rehash the contents of the affidavit but must make his own inquiry on
the intent and justification of the application."
cral aw virt ua1aw library

3. ID.; ID.; ID.; ARTICLES SOUGHT TO BE SEIZED, MUST BE DESCRIBED WITH PARTICULARITY. Another
infirmity of Search Warrant No. 181 is its generality. The law requires that the articles sought to be seized
must be described with particularity. The items listed in the warrant, to wit: "NAPOCOR Galvanized bolts,
grounding motor drive assembly, aluminum wires and other NAPOCOR Towers parts and line accessories"
are so general that the searching team can practically take half of the business of Kener Trading, the
premises searched. Kener Trading, as alleged in petitioners petition before respondent Court of Appeals and
which has not been denied by respondent, is engaged in the business of buying and selling scrap metals,
second hand spare parts and accessories and empty bottles. Far more important is that the items described
in the application do not fall under the list of personal property which may be seized under Section 2, Rule
126 of the Rules on Criminal Procedure because neither the application nor the joint deposition alleged that
the item/s sought to be seized were: a) the subject of an offense; b) stolen or embezzled property and other
proceeds or fruits of an offense; and c) used or intended to be used as a means of committing an offense.

4. ID.; ID.; ID.;SEIZURE OF INCRIMINATING ARTICLES, CANNOT VALIDATE AN INVALID WARRANT. No

matter how incriminating the articles taken from the petitioner may be, their seizure cannot validate an
invalid warrant. Again, in the case of Mata v. Bayona, G.R. No. 50720, March 26, 1984, 128 SCRA 388: ". . .
that nothing can justify the issuance of the search warrant but the fulfillment of the legal requisites. It might
be well to point out what has been said in Asian Surety & Insurance Co., Inc. v. Herrera: It has been said
that of all the rights of a citizen, few are of greater importance or more essential to his peace and happiness
than the right of personal security, and that involves the exemption of his private affairs, books and papers
from inspection and scrutiny of others. While the power to search and seize is necessary to the public welfare,
still it must be exercised and the law enforced without transgressing the constitutional rights of the citizens,
for the enforcement of no statute is of sufficient importance to justify indifference to the basic principles of
government." "Thus, in issuing a search warrant the Judge must strictly comply with the requirements of the
Constitution and the statutory provisions. A liberal construction should be given in favor of the individual to
prevent stealthy encroachment upon, or gradual depreciation of the rights secured by the Constitution. No
presumption of regularity are to be invoked in aid of the process when an officer undertakes to justify it."

DECISION

NARVASA, J.:

A claim for alleged unpaid commissions of an agent is what is basically involved in the action at bar.
Somehow, it twice escaped outright rejection for lack of jurisdiction in the Department of Labor where the
case was resolved at the first instance and on appeal. Both the Labor Arbiter and the National Labor Relations
Commission appeared unaware of the utter lack of labor-related issues in the parties conflicting contentions
as to the existence of agency relations between them, and proceeded to decide the case. Neither of them of
course had competence to do so. Be that as it may, the instant petition for certiorari will be decided on its
merits to the end that the controversy may now be laid to rest without further proceedings. chanrobles virt ual lawlibrary

The protagonists in this case are: chanrob1es virtu al 1aw library

1) Marcelina A. Escandor engaged, under the name and style of Guardex Enterprises, in (a) the
manufacture and sale of fire-fighting equipment such as fire extinguishers, fire hose cabinets and related
products, and (b) occasionally, the building or fabrication of fire trucks; and

2) Jumbee Orbeta a "freelance" salesman. 1

It appears that Orbeta somehow learned that Escandor had offered to fabricate a fire truck for Rubberworld
(Phil.) Inc. He wrote to Escandor inquiring about the amount of commission for the sale of a fire truck.
Escandor wrote back on the same day to advise that it was P15,000.00 per unit. Four days later, Orbeta
offered to look after (follow-up) Escandors pending proposal to sell a fire truck to Rubberworld, and asked
for P250.00 as representation expenses. Escandor agreed and gave him the money.

When no word was received by Escandor from Orbeta after three days, she herself inquired in writing from
Rubberworld about her offer of sale of a fire truck. Having apparently received an encouraging response,
Escandor sent Rubberworld a revised price quotation some ten days later.

In the meantime, Orbeta sold to other individuals some of Escandors fire extinguishers, receiving traveling
expenses in connection therewith as well as the corresponding commissions. He then dropped out of sight.

About seven months afterwards, Escandor herself finally concluded a contract with Rubberworld for the
latters purchase of a fire truck. The transaction was consummated with the delivery of the truck and full
payment thereof by Rubberworld.

At this point, Orbeta suddenly reappeared and asked for his commission for the sale of the fire truck to
Rubberworld. Escandor refused, saying that he had had nothing to do with the offer, negotiation and
consummation of the sale.

Insisting that he was entitled to the commission, Orbeta filed a complaint against Escandor with the Ministry
of Labor. The Labor Arbiter agreed with him and rendered judgment in his favor, on August 26, 1982. That
judgment was affirmed by the National Labor Relations Commission on December 29, 1983, on appeal taken
by Escandor. 2 Hence, this petition for certiorari, to annul those judgments as having been rendered with
grave abuse of discretion if not indeed without or in excess of jurisdiction.

It is claimed that an implied agency had been created between Escandor and Orbeta on the basis of the
following circumstances: chanrobles virt ual lawlibrary

1) the alleged verbal authority given to him to offer a fire truck to Rubberworld;

2) the alleged written authority to sell the truck contained in a letter of Escandors dated August 14, 1978;

3) Escandors having given Orbeta P250.00 as representation expenses; and

4) Orbetas submission of a price quotation to Rubberworld and his having arranged a meeting between
Escandor and Rubberworlds Purchasing Manager.

The circumstances have not been correctly read by Orbeta and his co-respondents.

Escandor denies that she had ever given Orbeta any such verbal authority. Indeed, months prior to Orbetas
approaching Escandor, the latter had already made a written offer of a fire truck to Rubberworld. All that she
consented to was for Orbeta to "follow up" that pending offer. In truth, it does not even appear that on the
strength of this "arrangement" vague as it was Orbeta undertook the promised follow-up at all. He
reported nothing of his efforts or their fruits to Escandor. It was Escandor who, in the months that followed
her initial meeting with Orbeta, determinedly pushed the Rubberworld deal. Orbeta was simply nowhere to
be found. Furthermore, it seems fairly evident that the "representation allowance" of P250 was meant to
cover the expenses for the "follow-up" offered by Orbeta an ambiguous fact which does not of itself
suggest the creation of an agency and is not at all inconsistent with the theory of its absence in this case.

Even a finding that under these circumstances, an agency had indeed been constituted will not save the day
for Orbeta, because nothing in the record tends to prove that he succeeded in carrying out its terms or even
as much as attempted to do so. The evidence in fact clearly indicates otherwise. The terms of Escandors
letter of August 14, 1978 assuming that it was indeed an "authority to sell," as Orbeta insists are to the
effect that entitlement to the P15,000 commission is contingent on the purchase by a customer of a fire truck,
the implicit condition being that the agent would earn the commission if he was instrumental in bringing the
sale about. Orbeta certainly had nothing to do with the sale of the fire truck, and is not therefore entitled to
any commission at all.

Furthermore, even if Orbeta is considered to have been Escandors agent for the time he was supposed to
"follow up" the offer to sell, such agency would have been deemed revoked upon the resumption of direct
negotiations between Escandor and Rubberworld, Orbeta having in the meantime abandoned all efforts (if
indeed any were exerted) to secure the deal in Escandors behalf. chanrobles law library : red

It has of course already been stated at the outset that, given the sole issue raised by the parties concededly
from the cases inception (i.e., whether or not Orbeta is Escandors agent as regards the sale of a fire truck
to Rubberworld), the competence to resolve the controversy did not pertain to either the Labor Arbiter or the
NLRC. The jurisdiction vested in them by the Labor Code extends, generally speaking, only to cases arising
from employer-employee relationships.3 What has all along been at issue here, as advanced by the parties
themselves and as is evident from the facts, is the existence of a contract of agency 4 not employment or
lease of services. It is indeed a puzzle how the fundamental differences between the two 5 altogether
escaped not only the parties counsel in this case but also the tribunals before which it had been brought.
Nevertheless, since no one has thought to question their authority even up to this late stage, as in fact all the
parties appear to have completely accepted the validity of their exercise of jurisdiction over the case, the
Court has opted, as already stated, to render judgment on its merits and end the controversy once and for
all. 6

WHEREFORE, the petition for certiorari is GRANTED, and the judgment of the National Labor Relations
Commission dated December 29, 1983, and that of the Labor Arbiter dated August 26, 1982, are hereby
REVERSED and SET ASIDE and another one rendered dismissing respondent Jumbee Orbetas claim for
unpaid commissions. chanrobles virt ual lawlibrary

SO ORDERED.

Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Endnotes:
1. Rollo, p. 14.

2. Id., pp. 52-53.

3. which arise from "contracts of labor" treated

of in Chapter 3, Title VIII Book IV of the Civil
Code. As provided by Art. 1700 thereof, an
employment contract or lease of service (as it is
referred to in Arts. 1642 and 1644 of the Civil Code)
is "subject to the special laws on labor unions,
collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of
labor and similar subjects" which in this
jurisdiction is the Labor Code and other labor laws.
SEE Art. 217 of the Labor Code for the jurisdiction
of the Labor Arbiter and the NLRC.

4. Treated of in Title X, Book IV, Civil Code (Arts.

1868, et seq.).

5. Both involve the rendition of services by one

party to the other, but the similarity ends there.
The basis of agency is representation, the agent
being the representative of his principal, while
the basis of lease of service is employment.
(Nielson & Company, Inc. v. Lepanto Consolidated
Mining, 26 SCRA 540). Agency is merely a
preparatory contract which empowers the agent to
execute juridical acts to bring about contractual
relations between his principal and third persons
(Padilla, Civil Code Annotated, [1987 ed.], Vol.
VI., pp. 248-249, citing Nielson & Company, Inc.
v. Lepanto Consolidated Mining, supra, and
Philippine Free Press v. P. Floro & Sons, Inc., 21
SCRA CAR [2s] 601, 606.

6. SEE Tijam v. Sibonghanoy, 23 SCRA 29.

 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 94753. April 7, 1993.

MANOTOK BROTHERS, INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, THE HONORABLE JUDGE OF THE
REGIONAL TRIAL COURT OF MANILA (Branch VI), and SALVADOR SALIGUMBA,
respondents.

Antonio C. Ravelo for petitioner.

Remigio M. Trinidad for private respondent.

SYLLABUS

1. CIVIL LAW; AGENCY; AGENT'S COMMISSION; WHEN ENTITLED' RULE;

APPLICATION IN CASE AT BAR. In an earlier case, this Court ruled that when there is a
close, proximate and causal connection between the agent's efforts and labor and the
principal's sale of his property, the agent is entitled to a commission. We agree with
respondent Court that the City of Manila ultimately became the purchaser of petitioner's
property mainly through the efforts of private respondent. Without discounting the fact that
when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968, private
respondent's authority had already expired, it is to be noted that the ordinance was approved
on April 26, 1968 when private respondent's authorization was still in force. Moreover, the
approval by the City Mayor came only three days after the expiration of private respondent's
authority. It is also worth emphasizing that from the records, the only party given a written
authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968 was private
respondent.

DECISION

CAMPOS, JR., J p:

Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed as G.R. No. 94753
sought relief from this Court's Resolution dated May 3, 1989, which reads:

"G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of Appeals).
Considering the manifestation of compliance by counsel for petitioner dated April 14, 1989
with the resolution of March 13, 1989 which required the petitioner to locate private
respondent and to inform this Court of the present address of said private respondent, the
Court Resolved to DISMISS this case, as the issues cannot be joined as private respondent's
and counsel's addresses cannot be furnished by the petitioner to this court." 1
In addition, petitioner prayed for the issuance of a preliminary injunction to prevent
irreparable injury to itself pending resolution by this Court of its cause. Petitioner likewise
urged this Court to hold in contempt private respondent for allegedly adopting sinister ploy to
deprive petitioner of its constitutional right to due process.

Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set aside the entry
of judgment made on May 3, 1989 in case G.R. No. 78898; admitted the amended petition;
and issued a temporary restraining order to restrain the execution of the judgment appealed
from.

The amended petition 3 admitted, by this Court sought relief from this Court's Resolution
abovequoted. In the alternative, petitioner begged leave of court to re-file its Petition for
Certiorari 4 (G.R. No. 78898) grounded on the allegation that petitioner was deprived of its
opportunity to be heard.

The facts as found by the appellate court, revealed that petitioner herein (then
defendant-appellant) is the owner of a certain parcel of land and building which were formerly
leased by the City of Manila and used by the Claro M. Recto High School, at M.F. Jhocson
Street, Sampaloc Manila.

By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent
Salvador Saligumba to negotiate with the City of Manila the sale of the aforementioned
property for not less than P425,000.00. In the same writing, petitioner agreed to pay private
respondent a five percent (5%) commission in the event the sale is finally consummated and
paid.

Petitioner, on March 4, 1967, executed another letter 6 extending the authority of private
respondent for 120 days. Thereafter, another extension was granted to him for 120 more
days, as evidenced by another letter 7 dated June 26, 1967.

Finally, through another letter 8 dated November 16, 1967, the corporation with Rufino
Manotok, its President, as signatory, authorized private respondent to finalize and
consummate the sale of the property to the City of Manila for not less than P410,000.00. With
this letter came another extension of 180 days.

The Municipal Board of the City of Manila eventually, on April 26, 1968, passed Ordinance
No. 6603, appropriating the sum of P410,816.00 for the purchase of the property which
private respondent was authorized to sell. Said ordinance however, was signed by the City
Mayor only on May 17, 1968, one hundred eighty three (183) days after the last letter of
authorization.

On January 14, 1969, the parties signed the deed of sale of the subject property. The initial
payment of P200,000.00 having been made, the purchase price was fully satisfied with a
second payment on April 8, 1969 by a check in the amount of P210,816.00.

Notwithstanding the realization of the sale, private respondent never received any
commission, which should have amounted to P20,554.50. This was due to the refusal of
petitioner to pay private respondent said amount as the former does not recognize the latter's
role as agent in the transaction.
Consequently, on June 29, 1969, private respondent filed a complaint against petitioner,
alleging that he had successfully negotiated the sale of the property. He claimed that it was
because of his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which
appropriated the sum for the payment of the property subject of the sale.

Petitioner claimed otherwise. It denied the claim of private respondent on the following
grounds: (1) private respondent would be entitled to a commission only if the sale was
consummated and the price paid within the period given in the respective letters of authority;
and (2) private respondent was not the person responsible for the negotiation and
consummation of the sale, instead it was Filomeno E. Huelgas, the PTA president for
1967-1968 of the Claro M. Recto High School. As a counterclaim, petitioner (then
defendant-appellant) demanded the sum of P4,000.00 as attorney's fees and for moral
damages.

Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the efforts
undertaken by him to ensure the consummation of the sale. He recounted that it first began
at a meeting with Rufino Manotok at the office of Fructuoso Ancheta, principal of C.M. Recto
High School. Atty. Dominador Bisbal, then president of the PTA, was also present. The
meeting was set precisely to ask private respondent to negotiate the sale of the school lot
and building to the City of Manila. Private respondent then went to Councilor Mariano
Magsalin, the author of the Ordinance which appropriated the money for the purchase of said
property, to present the project. He also went to the Assessor's Office for appraisal of the
value of the property. While these transpired and his letters of authority expired, Rufino
Manotok always renewed the former's authorization until the last was given, which was to
remain in force until May 14, 1968. After securing the report of the appraisal committee, he
went to the City Mayor's Office, which indorsed the matter to the Superintendent of City
Schools of Manila. The latter office approved the report and so private respondent went back
to the City Mayor's Office, which thereafter indorsed the same to the Municipal Board for
appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603 was passed by the
Municipal Board for the appropriation of the sum corresponding to the purchase price.
Petitioner received the full payment of the purchase price, but private respondent did not
receive a single centavo as commission.

Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the authority of
private respondent regarding the transaction.

Petitioner presented as its witnesses Filomeno Huelgas and the petitioner's President, Rufino
Manotok.

Huelgas testified to the effect that after being inducted as PTA president in August, 1967 he
followed up the sale from the start with Councilor Magsalin until after it was approved by the
Mayor on May 17, 1968. He. also said that he came to know Rufino Manotok only in August,
1968, at which meeting the latter told him that he would be given a "gratification" in the
amount of P20,000.00 if the sale was expedited.

Rufino Manotok confirmed that he knew Huelgas and that there was an agreement between
the two of them regarding the "gratification".

On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from 1965 to
1967 but he never offered to help in the acquisition of said property. Moreover, he testified
that Huelgas was aware of the fact that it was private respondent who was negotiating the
sale of the subject property.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment
sentencing petitioner and/or Rufino Manotok to pay unto private respondent the sum of
P20,540.00 by way of his commission fees with legal interest thereon from the date of the
filing of the complaint until payment. The lower court also ordered petitioner to pay private
respondent the amount of P4,000.00 as and for attorney's fees. 9

Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the
said ruling of the trial court. 10

Its Motion for Reconsideration having been denied by respondent appellate court in a
Resolution dated June 22, 1987, petitioner seasonably elevated its case on Petition for
Review on Certiorari on August 10, 1987 before this Court, docketed as G.R. No. 78898.

Acting on said Petition, this Court issued a Minute Resolution 11 dated August 31, 1987
ordering private respondent to comment on said Petition.

It appearing that the abovementioned Resolution was returned unserved with the
postmaster's notation "unclaimed", this Court in another Resolution 12 dated March 13, 1989,
required petitioner to locate private respondent and to inform this Court of the present
address of private respondent within ten (10) days from notice. As petitioner was
unsuccessful in its efforts to locate private respondent, it opted to manifest that private
respondent's last address was the same as that address to which this. Court's Resolution
was forwarded.

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioner's case
on the ground that the issues raised in the case at bar cannot be joined. Thus, the
above-entitled case became final and executory by the entry of judgment on May 3, 1989.

Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said
judgment before the court of origin. Upon discovery of said development, petitioner verified
with the court of origin the circumstances by which private respondent obtained knowledge of
the resolution of this Court. Sensing a fraudulent scheme employed by private respondent,
petitioner then instituted this instant Petition for Relief, on August 30, 1990. On September 13,
1990, said petition was amended to include, in the alternative, its petition to re-file its Petition
for Certiorari (G.R. No. 78898).

The sole issue to be addressed in this petition is whether or not private respondent is entitled
to the five percent (5%) agent's commission.

It is petitioner's contention that as a broker, private respondent's job is to bring together the
parties to a transaction. Accordingly, if the broker does not succeed in bringing the minds of
the purchaser and the vendor to an agreement with respect to the sale, he is not entitled to a
commission.

Private respondent, on the other hand, opposes petitioner's position maintaining that it was
because of his efforts that a purchase actually materialized between the parties.

We rule in favor of private respondent.

At first sight, it would seem that private respondent is not entitled to any commission as he
was not successful in consummating the sale between the parties, for the sole reason that
when the Deed of Sale was finally executed, his extended authority had already expired. By
this alone, one might be misled to believe that this case squarely falls within the ambit of the
established principle that a broker or agent is not entitled to any commission until he has
successfully done the job given to him. 13

Going deeper however into the case would reveal that it is within the coverage of the
exception rather than of the general rule, the exception being that enunciated in the case of
Prats vs. Court of Appeals. 14 In the said case, this Court ruled in favor of claimant-agent,
despite the expiration of his authority, when a sale was finally consummated.

In its decision in the abovecited case, this Court said, that while it was respondent court's
(referring to the Court of Appeals) factual findings that petitioner Prats (claimant-agent) was
not the efficient procuring cause in bringing about the sale (prescinding from the fact of
expiration of his exclusive authority), still petitioner was awarded compensation for his
services. And We quote:

"In equity, however, the Court notes that petitioner had diligently taken steps to bring back
together respondent Doronila and the SSS,.

xxx xxx xxx

The court has noted on the other hand that Doronila finally sold the property to the Social
Security System at P3.25 per square meter which was the very same price counter-offered
by the Social Security System and accepted by him in July, 1967 when he alone was dealing
exclusively with the said buyer long before Prats came into the picture but that on the other
hand Prats' efforts somehow were instrumental in bringing them together again and finally
consummating the transaction at the same price of P3.25 per square meter, although such
finalization was after the expiration of Prats' extended exclusive authority.

xxx xxx xxx

Under the circumstances, the Court grants in equity the sum of One hundred Thousand
Pesos (P100,000.00) by way of compensation for his efforts and assistance in the
transaction, which however was finalized and consummated after the expiration of his
exclusive authority . . ." 15 (Emphasis supplied.).

From the foregoing, it follows then that private respondent herein, with more reason, should
be paid his commission, While in Prats vs. Court of Appeals, the agent was not even the
efficient procuring cause in bringing about the sale, unlike in the case at bar, it was still held
therein that the agent was entitled to compensation. In the case at bar, private respondent is
the efficient procuring cause for without his efforts, the municipality would not have anything
to pass and the Mayor would not have anything to approve.

In an earlier case, 16 this Court ruled that when there is a close, proximate and causal
connection between the agent's efforts and labor and the principal's sale of his property, the
agent is entitled to a commission.

We agree with respondent Court that the City of Manila ultimately became the purchaser of
petitioner's property mainly through the efforts of private respondent. Without discounting the
fact that when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968,
private respondent's authority had already expired, it is to be noted that the ordinance was
approved on April 26, 1968 when private respondent's authorization was still in force.
Moreover, the approval by the City Mayor came only three days after the expiration of private
respondent's authority. It is also worth emphasizing that from the records, the only party
given a written authority by petitioner to negotiate the sale from July 5, 1966 to May 14, 1968
was private respondent.

Contrary to what petitioner advances, the case of Danon vs. Brimo, 17 on which it heavily
anchors its justification for the denial of private respondent's claim, does not apply squarely
to the instant petition. Claimant-agent in said case fully comprehended the possibility that he
may not realize the agent's commission as he was informed that another agent was also
negotiating the sale and thus, compensation will pertain to the one who finds a purchaser and
eventually effects the sale. Such is not the case herein. On the contrary, private respondent
pursued with his goal of seeing that the parties reach an agreement, on the belief that he
alone was transacting the business with the City Government as this was what petitioner
made it to appear.

While it may be true that Filomeno Huelgas followed up the matter with Councilor Magsalin,
the author of Municipal Ordinance No. 6603 and Mayor Villegas, his intervention regarding
the purchase came only after the ordinance had already been passed when the buyer has
already agreed to the purchase and to the price for which said property is to be paid. Without
the efforts of private respondent then, Mayor Villegas would have nothing to approve in the
first place. It was actually private respondent's labor that had set in motion the intervention of
the third party that produced the sale, hence he should be amply compensated.

WHEREFORE, in the light of the foregoing and finding no reversible error committed by
respondent Court, the decision of the Court of Appeals is hereby AFFIRMED. The temporary
restraining order issued by this Court in its Resolution dated October 1, 1990 is hereby lifted.

SO ORDERED.

Narvasa, C .J ., Padilla, Regalado and Nocon, JJ ., concur.

Footnotes

1. Rollo of G.R. No. 94753, p. 12.

2. Ibid., p. 77.

3. Ibid., p. 47.

4. Rollo of G.R. No. 78898, p. 12.

5. Supra, note 1 at p. 156.

6. Ibid., p. 160.

7. Ibid., p. 161.

8. Ibid., p. 162.
9. Decision rendered by then Court of Instance, Branch VI, Manila in Civil Case No. 76997,
Rollo, pp. 13-18.

10. Penned by Associate Justice Vicente V. Mendoza and concurred in by Associate Justices
Manuel C. Herrera and Jorge S. Imperial. Rollo, pp. 19-28.

11. Supra, note 4 at p. 67.

12. Ibid., p. 69.

13. Ramos vs. Court of Appeals, 63 SCRA 331 (1975).

14. 81 SCRA 360 (1978).

15. Ibid., pp. 383-385.

16. Reyes vs. Manaoat, et al., 8 C.A. Rep. 2d 368 (1965).

17. 42 Phil. 133 (1921).

 FIRST DIVISION

[G.R. No. 76969. June 9, 1997]

INLAND REALTY INVESTMENT SERVICE, INC. and ROMAN M.

DE LOS REYES, petitioners, vs. HON. COURT OF APPEALS,
GREGORIO ARANETA, INC. and J. ARMANDO
EDUQUE, respondents.

DECISION
HERMOSISIMA, JR., J.:

Herein petitioners Inland Realty Investment Service, Inc. (hereafter, "Inland

Realty") and Roman M. de los Reyes seek the reversal of the Decision[1] of the
Intermediate Appellate Court (now Court of Appeals)[2] which affirmed the trial
court's dismissal[3] of petitioners' claim for unpaid agent's commission for
brokering the sales transaction involving 9,800 shares of stock in Architects' Bldg.,
Inc. (hereafter, "Architects'") between private respondent Gregorio Araneta, Inc.
(hereafter, "Araneta, Inc.") as seller and Stanford Microsystems, Inc. (hereafter,
"Stanford") as buyer.
Petitioners come to us with a two-fold agenda: (1) to obtain from us a
declaration that the trial court and the respondent appellate court gravely erred
when appreciating the facts of the case by disregarding Exhibits "L," a Letter
dated October 28, 1976 signed by Gregorio Araneta II, renewing petitioners'
authority to act as sales agent for a period of thirty (30) days from same date, and
Exhibit "M," a Letter dated November 16, 1976 signed by petitioner de los Reyes,
naming four (4) other prospective buyers, respectively; and (2) to obtain from us a
categorical ruling that a broker is automatically entitled to the stipulated
commission merely upon securing for, and introducing to, the seller the particular
buyer who ultimately purchases from the former the object of the sale, regardless
of the expiration of the broker's contract of agency and authority to sell.
Before we proceed to address petitioners' objectives, there is a need to
unfold the facts of the case. For that purpose, we quote hereunder the findings of
fact of the Court of Appeals with which petitioners agree, except as to the
respondent appellate court's non-inclusion of the aforementioned Exhibits "L" and
"M":
"From the evidence, the following facts appear undisputed: On September 16,
1975, defendant corporation thru its co-defendant Assistant General Manager J.
Armando Eduque, granted to plaintiffs a 30-day authority to sell its x x x 9,800
shares of stock in Architects' Bldg., Inc. as follows:

'September 16,
1975

TO WHOM IT MAY CONCERN:

This is to authorize Mr. R.M. de los Reyes, representing Inland Realty, to sell
on a first come first served basis the total holdings of Gregorio Araneta, Inc. in
Architects' [Bldg.], Inc. equivalent to 98% or 9,800 shares of stock at the price
of P1,500.00 per share for a period of 30 days.

(SGD.) J. ARMANDO
EDUQUE
Asst. General
Manager'

Plaintiff Inland Realty Investment Service, Inc. (Inland Realty for short) is a
corporation engaged [in], among others x x x the real estate business [and]
brokerages, duly licensed by the Bureau of Domestic Trade x x x. [Inland
Realty] planned their sales campaign, sending proposal letters to prospective
buyers. One such prospective buyer to whom a proposal letter was sent to was
Stanford Microsystems, Inc. x x x [that] counter-proposed to buy 9,800 shares
offered at P1,000.00 per share or for a total of P9,800,000.00, P4,900,000.00
payable in five years at 12% per annum interest until fully paid.

Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote

defendant a letter to register Stanford Microsystems, Inc. as one of its
prospective buyers x x x. Defendant Araneta, Inc., thru its Assistant General
Manager J. Armando Eduque, replied that the price offered by Stanford was
too low and suggested that plaintiffs see if the price and terms of payment can
be improved upon by Stanford x x x. Other prospective buyers were submitted
to defendants among whom were Atty. Maximo F. Belmonte and Mr. Joselito
Hernandez. The authority to sell given to plaintiffs by defendants was extended
several times: the first being on October 2, 1975, for 30 days from said date
(Exh. 'J'), the second on October 28, 1975 for 30 days from said date (Exh. 'L')
and on December 2, 1975 for 30 days from said date (Exh. 'K').
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage division,
who by contract with Inland Realty would be entitled to 1/2 of the claim
asserted herein, testified that when his company was initially granted the
authority to sell, he asked for an exclusive authority and for a longer period but
Armando Eduque would not give, but according to this witness, the life of the
authority could always be extended for the purpose of negotiation that would
be continuing.

On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock [in] Architects'
[Bldg.], Inc. to Stanford Microsystems, Inc. for P13,500,000.00 x x x.

On September 6, 1977, plaintiffs demanded formally [from] defendants,

through a letter of demand, for payment of their 5% broker['s] commission
at P13,500,000.00 or a total amount of P675,000.00 x x x which was declined
by [defendants] on the ground that the claim has no factual or legal basis." [4]

Ascribing merit to private respondents' defense that, after their authority to

sell expired thirty (30) days from December 2, 1975, or on January 1, 1976,
petitioners abandoned the sales transaction and were no longer privy to the
consummation and documentation thereof, the trial court dismissed petitioners'
complaint for collection of unpaid broker's commission.
Petitioners appealed, but the Court of Appeals was unswayed in the face of
evidence of the expiration of petitioners' agency contract and authority to sell on
January 1, 1976 and the consummation of the sale to Stanford on July 8, 1977 or
more than one (1) year and five (5) months after petitioners' agency contract and
authority to sell expired. Respondent appellate court dismissed petitioners'
appeal in this wise:

" x x x The resolution would seem to hinge on the question of whether plaintiff
was instrumental in the final consummation of the sale to Stanford which was
the same name of the company submitted to defendants as a prospective buyer
although their price was considered by defendant to be too low and defendants
wrote to plaintiff if the price may be improved upon by Stanford x x x. This
was on October 13, 1975. After that, there was an extension for 30 days from
October 28, 1975 of the authority (Exh. 'L') and another on December 2, 1975
for another 30 days from the said date x x x. x x x There is nothing in the
record or in the testimonial evidence that the authority extended 30 days from
the last date of extension was ever reserved nor extended, nor has there been
any communication made to defendants that the plaintiff was actually
negotiating with Stanford a better price than what was previously offered by it
x x x.
In fact there was no longer any agency after the last extension. Certainly, the
length of time which had transpired from the date of last extension of authority
to the final consummation of the sale with Stanford of about one (1) year and
five (5) months without any communication at all from plaintiffs to defendants
with respect to the suggestion of defendants that Stanford's offer was too low
and suggested if plaintiffs may make it better. We have a case of proposal and
counter-proposal which would not constitute a definite closing of the
transaction just because it was plaintiff who solely suggested to defendants the
name of Stanford as buyer x x x." [5]

Unable to accept the dismissal of its claim for unpaid broker's commission,
petitioners filed the instant petition for review asking us (1) to pass upon the
factual issue of the alleged extension of their agency contract and authority to sell
and (2) to rule in favor of a broker's automatic entitlement to the stipulated
commission merely upon securing for, and introducing to, the seller, the particular
buyer who ultimately purchases from the former the object of the sale, regardless
of the expiration of the broker's contract of agency and authority to sell.
We find for private respondents.
I
Petitioners take exception to the finding of the respondent Court of Appeals
that their contract of agency and authority to sell expired thirty (30) days from its
last renewal on December 2, 1975. They insist that, in the Letter dated October
28, 1976, Gregorio Araneta III, in behalf of Araneta, Inc., renewed petitioner
Inland Realty's authority to act as agent to sell the former's 9,800 shares in
Architects' for another thirty (30) days from same date. This Letter dated October
28, 1976, petitioners claim, was marked as Exhibit "L" during the trial proceedings
before the trial court.
This claim is a blatant lie. In the first place, petitioners have conspicuously
failed to attach a certified copy of this Letter dated October 28, 1976. They have,
in fact, not attached even a machine copy thereof. All they gave this court is their
word that said Letter dated October 28, 1976 does exist, and on that basis, they
expect us to accordingly rule in their favor.
Such naivety, this court will not tolerate. We will not treat lightly petitioners'
attempt to mislead this court by claiming that the Letter dated October 28, 1976
was marked as Exhibit "L" by the trial court, when the truth is that the trial court
marked as Exhibit "L", and the respondent Court of Appeals considered as
Exhibit "L," private respondent Araneta, Inc.'s Letter dated October 28, 1975,
not 1976. Needless to say, this blatant attempt to mislead this court, is
contemptuous conduct that we sternly condemn.
II
The Letter dated November 16, 1976, claimed by petitioners to have been
marked as Exhibit "M", has no probative value, considering that its very existence
remains under a heavy cloud of doubt and that hypothetically assuming its
existence, its alleged content, namely, a listing of four (4) other prospective
buyers, does not at all prove that the agency contract and authority to sell in favor
of petitioners was renewed or revived after it expired on January 1, 1976. As in
the case of the Letter dated October 28, 1976, petitioners have miserably failed to
attach any copy of the Letter dated November 16, 1976. A copy thereof would not
help petitioners' failing cause, anyway, especially considering that said letter was
signed by petitioner De los Reyes and would therefore take on the nature of a
self-serving document that has no evidentiary value insofar as petitioners are
concerned.
III
Finally, petitioners asseverate that, regardless of whether or not their agency
contract and authority to sell had expired, they are automatically entitled to their
broker's commission merely upon securing for and introducing to private
respondent Araneta, Inc. the buyer in the person of Stanford which ultimately
acquired ownership over Araneta, Inc.'s 9,800 shares in Architects'.
Petitioners' asseverations are devoid of merit.
It is understandable, though, why petitioners have resorted to a campaign for
an automatic and blanket entitlement to brokerage commission upon doing
nothing but submitting to private respondent Araneta, Inc., the name of Stanford
as prospective buyer of the latter's shares in Architects'. Of course petitioners
would advocate as such because precisely petitioners did nothing but submit
Stanford's name as prospective buyer. Petitioners did not succeed in outrightly
selling said shares under the predetermined terms and conditions set out by
Araneta, Inc., e.g., that the price per share is P1,500.00. They admit that they
could not dissuade Stanford from haggling for the price of P1,000.00 per share
with the balance of 50% of the total purchase price payable in five (5) years at
12% interest per annum. From September 16, 1975 to January 1, 1976, when
petitioners' authority to sell was subsisting, if at all, petitioners had nothing to
show that they actively served their principal's interests, pursued to sell the
shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the
sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more
than one (1) year and five (5) months between the expiration of petitioners'
authority to sell and the consummation of the sale to Stanford, to be a significant
index of petitioners' non-participation in the really critical events leading to the
consummation of said sale, i.e., the negotiations to convince Stanford to sell at
Araneta, Inc.'s asking price, the finalization of the terms and conditions of the sale,
the drafting of the deed of sale, the processing of pertinent documents, and the
delivery of the shares of stock to Stanford. Certainly, when the lapse of the period
of more than one (1) year and five (5) months between the expiration of
petitioners' authority to sell and the consummation of the sale, is viewed in the
context of the utter lack of evidence of petitioners' involvement in the negotiations
between Araneta, Inc. and Stanford during that period and in the subsequent
processing of the documents pertinent to said sale, it becomes undeniable that
the respondent Court of Appeals did not at all err in affirming the trial court's
dismissal of petitioners' claim for unpaid brokerage commission.
Petitioners were not the efficient procuring cause[6] in bringing about the sale
in question on July 8, 1977 and are, therefore, not entitled to the stipulated
broker's commission of "5% on the total price."
WHEREFORE, the instant petition is HEREBY DISMISSED.
Costs against petitioners.
SO ORDERED.
Bellosillo, Vitug, and Kapunan, JJ., concur.
Padilla, J., (Chairman), on leave.

[1]
In AC-G.R. CV No. 00221, promulgated on May 29, 1986, and penned by Associate Justices
Floreliana Castro-Bartolome with Associate Justices Jorge R. Coquia and Bienvenido C.
Ejercito, concurring; Rollo, pp. 61-65.
[2]
Third Civil Cases Division.
[3]
Decision rendered on January 5, 1981 by the Court of First Instance (now Regional Trial Court)
of Manila, Branch VII.
[4]
Decision of the Court of Appeals dated May 29, 1986, pp. 2-3; Rollo, pp. 62-63.
[5]
Decision of the Court of Appeals dated May 29, 1986, pp. 3-5; Rollo, pp. 63-65.
[6]
Prats v. Court of Appeals, 81 SCRA 360, 381 [1978].
 SECOND DIVISION

[G.R. No. 150678. February 18, 2005]

BIENVENIDO R. MEDRANO and IBAAN RURAL

BANK, petitioners, vs. COURT OF APPEALS, PACITA G.
BORBON, JOSEFINA E. ANTONIO and ESTELA A.
FLOR, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review of the Decision[1] of the Court of Appeals (CA)
affirming in toto the Decision[2] of the Regional Trial Court (RTC) of Makati City,
Branch 135, in Civil Case No. 15664 which awarded to the respondents their 5%
brokers commission.
The facts are as follows:
Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank
owned by the Medrano family. In 1986, Mr. Medrano asked Mrs. Estela Flor, a
cousin-in-law, to look for a buyer of a foreclosed asset of the bank,[3] a 17-hectare
mango plantation priced at P2,200,000.00, located in Ibaan, Batangas.[4]
Mr. Dominador Lee, a businessman from Makati City, was a client of
respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The two met
through a previous transaction where Lee responded to an ad in a newspaper put
up by Borbon for an 8-hectare property in Lubo, Batangas, planted with atis trees.
Lee expressed that he preferred a land with mango trees instead. Borbon
promised to get back to him as soon as she would be able to find a property
according to his specifications.
Borbon relayed to her business associates and friends that she had a ready
buyer for a mango orchard. Flor then advised her that her cousin-in-law owned a
mango plantation which was up for sale. She told Flor to confer with Medrano and
to give them a written authority to negotiate the sale of the property.[5] Thus, on
September 3, 1986, Medrano issued the Letter of Authority, as follows:
Mrs. Pacita G. Borbon & Miss Josefina E. Antonio
Campos Rueda Building
Tindalo, Makati, M.M.

Mrs. Estela A. Flor & Miss Maria Yumi S. Karasig

23 Mabini Street
Quezon City, M.M.

Dear Mesdames:

This letter will serve as your authority* to negotiate with any prospective
buyer for the sale of a certain real estate property more specifically a mango
plantation which is described more particularly therein below:

Location : Barrio Tulay-na-Patpat, Ibaan,

Batangas
Lot Area : 17 hectares (more or less) per
attached Appendix A
Improvements : 720 all fruit-bearing mango trees
(carabao variety) and other trees
Price : P 2,200,000.00

For your labor and effort in finding a purchaser thereof, I hereby bind myself
to pay you a commission of 5% of the total purchase price to be agreed upon
by the buyer and seller.

Very truly yours,

(Sgd.)
B.R. Medrano
Owner

* Subject to price sale.[6]

The respondents arranged for an ocular inspection of the property together

with Lee which never materialized the first time was due to inclement weather;
the next time, no car was available for the tripping to Batangas.[7] Lee then called
up Borbon and told her that he was on his way to Lipa City to inspect another
property, and might as well also take a look at the property Borbon was offering.
Since Lee was in a hurry, the respondents could no longer accompany him at the
time. Thus, he asked for the exact address of the property and the directions on
how to reach the lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get
in touch with Medranos daughter and also an officer of the bank, Mrs. Teresa
Ganzon, regarding the property.[8]
 Two days after the visit, respondent Josefina Antonio called Lee to inquire
about the result of his ocular inspection. Lee told her that the mango trees looked
sick so he was bringing an agriculturist to the property. Three weeks thereafter,
Antonio called Lee again to make a follow-up of the latters visit to Ibaan. Lee
informed her that he already purchased the property and had made a down
payment of P1,000,000.00. The remaining balance of P1,200,000.00 was to be
paid upon the approval of the incorporation papers of the corporation he was
organizing by the Securities and Exchange Commission. According to Antonio,
Lee asked her if they had already received their commission. She answered no,
and Lee expressed surprise over this.[9]
A Deed of Sale was eventually executed on November 6, 1986 between the
bank, represented by its President/General Manager Teresa M. Ganzon (as
Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee), for
the purchase price of P1,200,000.00.[10] Since the sale of the property was
consummated, the respondents asked from the petitioners their commission, or
5% of the purchase price. The petitioners refused to pay and offered a measly
sum of P5,000.00 each.[11] Hence, the respondents were constrained to file an
action against herein petitioners.
The petitioners alleged that Medrano issued the letter of authority in favor of
all the respondents, upon the representation of Flor that she had a prospective
buyer. Flor was the only person known to Medrano, and he had never met
Borbon and Antonio. Medrano had asked that the name of their prospective
buyer be immediately registered so as to avoid confusion later on, but Flor failed
to do so. Furthermore, the other officers of the bank had never met nor dealt with
the respondents in connection with the sale of the property. Ganzon also asked
Lee if he had an agent and the latter replied that he had none. The petitioners
also denied that the purchase price of the property was P2,200,000.00 and
alleged that the property only cost P1,200,000.00. The petitioners further
contended that the letter of authority signed by Medrano was not binding or
enforceable against the bank because the latter had a personality separate and
distinct from that of Medrano. Medrano, on the other hand, denied liability,
considering that he was not the registered owner of the property, but the bank.
The petitioners, likewise, filed a counterclaim as they were constrained to hire the
services of counsel and suffered damages.[12]
After the case was submitted for decision, Medrano died, but no substitution
of party was made at this time.[13]
The trial court resolved the case based on the following common issues:
1. Whether or not the letter of authority is binding and enforceable against the
defendant Bank only or both defendants; and
2. Whether or not the plaintiffs are entitled to any commission for the sale of the
subject property.[14]
On September 21, 1994, the trial court rendered a Decision in favor of the
respondents. The petitioners were ordered to pay, jointly and severally, the 5%
brokers commission to herein respondents. The trial court found that the letter of
authority was valid and binding as against Medrano and the Ibaan Rural bank.
Medrano signed the said letter for and in behalf of the bank, and as owner of the
property, promising to pay the respondents a 5% commission for their efforts in
looking for a purchaser of the property. He is, therefore, estopped from denying
liability on the basis of the letter of authority he issued in favor of the respondents.
The trial court further stated that the sale of the property could not have been
possible without the representation and intervention of the respondents. As such,
they are entitled to the brokers commission of 5% of the selling price
of P1,200,000.00 as evidenced by the deed of sale.[15]The fallo of the decision
reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor of

the plaintiffs and against the defendants, for the latter, jointly and severally:

1. To pay plaintiffs the sum of P60,000.00 representing their five percent (5%)
commission of the purchase price of the property sold based on Exh. D or 9
plus legal interest from date of filing of the herein complaint until fully paid;

2. To pay plaintiffs the sum of P20,000.00 as and for attorneys fees;

3. To pay the plaintiffs the sum of P10,000.00 as litigation expenses;

4. To pay the costs of the proceedings.[16]

Unable to agree with the RTC decision, petitioner Ibaan Rural Bank filed its
notice of appeal.[17]
On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for
Reconsideration[18]praying that the late Bienvenido Medrano be substituted by his
heirs. They further prayed that the trial courts decision as far as Medrano was
concerned be set aside and dismissed considering his demise. The trial court
denied the motion for reconsideration.[19]Hence, the heirs of Medrano also filed
their notice of appeal.[20]
On appeal, the petitioners reiterated their stance that the letter of authority
was not binding and enforceable, as the same was signed by Medrano, who was
not actually the owner of the property. They refused to give the respondents any
commission, since the latter did not perform any act to consummate the sale. The
petitioners pointed out that the respondents (1) did not verify the real owner of the
property; (2) never saw the property in question; (3) never got in touch with the
registered owner of the property; and (4) neither did they perform any act of
assisting their buyer in having the property inspected and verified.[21] The
petitioners further raised the trial courts error in not dismissing the case against
Bienvenido Medrano considering his death.
 On May 3, 2001, the CA promulgated the assailed decision affirming the
finding of the trial court that the letter of authority was valid and binding. Applying
the principle of agency, the appellate court ruled that Bienvenido Medrano
constituted the respondents as his agents, granting them authority to represent
and act on behalf of the former in the sale of the 17-hectare mango plantation.
The CA also ruled that the trial court did not err in finding that the respondents
were the procuring cause of the sale. Suffice it to state that were it not for the
respondents, Lee would not have known that there was a mango orchard offered
for sale.
The CA further ruled that an action for a sum of money continues even after
the death of the defendant, and shall remain as a money claim against the estate
of the deceased.
Undaunted by the CAs unfavorable decision, the petitioners filed the instant
petition, raising eight (8) assignments of errors, to wit:

I. THE COURT OF APPEALS ERRED WHEN IT FOUND THE

PRIVATE RESPONDENTS TO BE THE PROCURING CAUSE OF
THE SALE;

II. THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO

THE LETTER-AUTHORITY OF PETITIONER MR. MEDRANO;

III. THE COURT OF APPEALS MADE A MISTAKE WHEN IT

CORRECTLY RECOGNIZED THE EXTENT OF THE PRIVATE
RESPONDENTS OBLIGATION AND AUTHORITY CONTAINED
IN MEDRANOS LETTER-AUTHORITY AND YET
ERRONEOUSLY GRANTED THE PRIVATE-RESPONDENTS
DEMAND, NOTWITHSTANDING THE NON-PERFORMANCE
OF THEIR OBLIGATION THEREUNDER;

IV. THE COURT OF APPEALS ERRED IN PRESUMING BAD FAITH

UPON THE PETITIONERS;

V. THE COURT OF APPEALS ERRED IN PLACING THE BURDEN

OF PROOF UPON THE DEFENDANTS-PETITIONERS;

VI. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS

CONCLUSION WITH EVIDENCE AND INSTEAD RELIED ON
INFERENCE;
 VII. THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS
CONCLUSION WITH EVIDENCE AND MERELY RELIED ON
SPECULATION AND SURMISE;

VIII. THE COURT OF APPEALS MISAPPRECIATED THE FACTS

PRESENTED BEFORE IT, AND CONSEQUENTLY FAILED TO
CONSIDER REASONABLY THE TWO (2) BASIC ARGUMENTS
OF THE PETITIONERS.[22]

The petition is denied.

The records disclose that respondent Pacita Borbon is a licensed real estate
broker[23] and respondents Josefina Antonio and Estela A. Flor are her
associates.[24] A broker is generally defined as one who is engaged, for others, on
a commission, negotiating contracts relative to property with the custody of which
he has no concern; the negotiator between other parties, never acting in his own
name but in the name of those who employed him; he is strictly a middleman and
for some purposes the agent of both parties. A broker is one whose occupation is
to bring parties together, in matters of trade, commerce or navigation.[25] For the
respondents participation in finding a buyer for the petitioners property, the
petitioners refuse to pay them commission, asserting that they are not the
efficient procuring cause of the sale, and that the letter of authority signed by
petitioner Medrano is not binding against the petitioners.
Procuring cause is meant to be the proximate cause.[26] The term procuring
cause, in describing a brokers activity, refers to a cause originating a series of
events which, without break in their continuity, result in accomplishment of prime
objective of the employment of the broker producing a purchaser ready, willing
and able to buy real estate on the owners terms.[27] A broker will be regarded as
the procuring cause of a sale, so as to be entitled to commission, if his efforts are
the foundation on which the negotiations resulting in a sale are begun.[28] The
broker must be the efficient agent or the procuring cause of the sale. The means
employed by him and his efforts must result in the sale. He must find the
purchaser, and the sale must proceed from his efforts acting as broker.[29]
Indeed, the evidence on record shows that the respondents were
instrumental in the sale of the property to Lee. Without their intervention, no sale
could have been consummated. They were the ones who set the sale of the
subject land in motion.[30] Upon being informed by Flor that Medrano was selling
his mango orchard, Borbon lost no time in informing Lee that they had found a
property according to his specifications. An ocular inspection of the property
together with Lee was immediately planned; unfortunately, it never pushed
through for reasons beyond the respondents control. Since Lee was in a hurry to
see the property, he asked the respondents the exact address and the directions
on how to reach Ibaan, Batangas. The respondents thereupon instructed him to
look for Teresa Ganzon, an officer of the Ibaan Rural Bank and the person to talk
to regarding the property. While the letter-authority issued in favor of the
respondents was non-exclusive, no evidence was adduced to show that there
were other persons, aside from the respondents, who informed Lee about the
property for sale. Ganzon testified that no advertisement was made announcing
the sale of the lot, nor did she give any authority to other brokers/agents to sell
the subject property.[31] The fact that it was Lee who personally called Borbon and
asked for directions prove that it was only through the respondents that Lee
learned about the property for sale.[32]Significantly, too, Ms. Teresa Ganzon
testified that there were no other persons other than the respondents who
inquired from her about the sale of the property to Lee.[33] It can thus be readily
inferred that the respondents were the only ones who knew about the property for
sale and were responsible in leading a buyer to its consummation. All these
circumstances lead us to the inescapable conclusion that the respondents were
the procuring cause of the sale. When there is a close, proximate and causal
connection between the brokers efforts and the principals sale of his property, the
broker is entitled to a commission.[34]
The petitioners insist that the respondents are not entitled to any commission
since they did not actually perform any acts of negotiation as required in the
letter-authority. They refuse to pay the commission since according to them, the
respondents participation in the transaction was not apparent, if not nil. The
respondents did not even look at the property themselves; did not introduce the
buyer to the seller; did not hold any conferences with the buyer, nor take part in
concluding the sale. For the non-compliance of this obligation to negotiate, the
petitioners argue, the respondents are not entitled to any commission.
We find the argument specious. The letter of authority must be read as a
whole and not in its truncated parts. Certainly, it was not the intention of Medrano
to expect the respondents to do just that (to negotiate) when he issued the letter
of authority. The clear intention is to reward the respondents for procuring a buyer
for the property. Before negotiating a sale, a broker must first and foremost bring
in a prospective buyer. It has been held that a broker earns his pay merely by
bringing the buyer and the seller together, even if no sale is eventually
made.[35] The essential feature of a brokers conventional employment is merely to
procure a purchaser for a property ready, able, and willing to buy at the price and
on the terms mutually agreed upon by the owner and the purchaser. And it is not
a prerequisite to the right to compensation that the broker conduct the
negotiations between the parties after they have been brought into contact with
each other through his efforts.[36] The case of Macondray v. Sellner[37] is quite
instructive:

The business of a real estate broker or agent, generally, is only to find a

purchaser, and the settled rule as stated by the courts is that, in the absence of
an express contract between the broker and his principal, the implication
generally is that the broker becomes entitled to the usual commissions
whenever he brings to his principal a party who is able and willing to take the
property and enter into a valid contract upon the terms then named by the
principal, although the particulars may be arranged and the matter negotiated
and completed between the principal and the purchaser directly.

Notably, there are cases where the right of the brokers to recover
commissions were upheld where they actually took no part in the negotiations,
never saw the customer, and even some in which they did nothing except
advertise the property, as long as it can be shown that they were the efficient
cause of the sale.[38]
In the case at bar, the role of the respondents in the transaction is undisputed.
Whether or not they participated in the negotiations of the sale is of no moment.
Armed with an authority to procure a purchaser and with a license to act as
broker, we see no reason why the respondents can not recover compensation for
their efforts when, in fact, they are the procuring cause of the sale.[39]
Anent the validity of the letter-authority signed by Medrano, we find no
reversible error with the findings of the appellate and trial courts that the
petitioners are liable thereunder. Such factual findings deserve this Courts
respect in the absence of any cogent reason to reverse the same. Medranos
obligation to pay the respondents commission for their labor and effort in finding a
purchaser or a buyer for the described parcel of land is unquestionable. In the
absence of fraud, irregularity or illegality in its execution, such letter-authority
serves as a contract, and is considered as the law between the parties. As such,
Medrano can not renege on the promise to pay commission on the flimsy excuse
that he is not the registered owner of the property. The evidence shows that he
comported himself to be the owner of the property. His testimony is quite telling:
Q Mr. Medrano, do you know any of the plaintiffs in this case, Pacita Borbon,
Josefina Antonio, and Stella (sic) F. Flor?
WITNESS
A I know only Stella (sic) F. Flor. The rest, I do not know them. I have never met
them, up to now.
Q How about the co-defendant Ibaan Rural Bank?
A I know co-defendant Ibaan Rural Bank, having been the founder and at one
time or another, I have served several capacities from President to
Chairman of the Board.
Q Are you familiar with a certain parcel of land located at Barrio Tulay na Patpat,
Ibaan, Batangas, with an area of 17 hectares?
A Yes, Sir. I used to own that property but later on mortgaged it to Ibaan Rural
Bank.
Q And what, if any, [did] the bank do to your property after you have mortgaged
the same to it?
A After many demands for payment or redemption of my mortgage, which I
failed to do so, the Ibaan Rural Bank sold it.
 Q After it was foreclosed?
A Yes, Sir.
Q Do you recall having made any transaction with plaintiff Stella (sic) F. Flor
regarding the property?
A Yes, Sir. Since she is the first cousin of my wife, I remember [that] she came
to my office once and requested for a letter of authority which I issued [in]
September 1986, I think, and I gave her the letter of authority.[40]
As to the liability of the bank, we quote with favor the disquisition of the
respondent court, to wit:

Further, the appellants cannot use the flimsy excuse (only to evade liability)
that (w)hat Mr. Medrano represented to the plaintiffs-appellees, without the
knowledge or consent of the defendant Bank, did not bind the Bank. Res inter
alios acta alteri nocere non debet. (page 8 of the Appellants Brief; page 35 of
the Rollo). While it may be true that technically the Ibaan Rural Bank did not
authorize Bienvenido R. Medrano to sell the land under litigation or that the
latter was no longer an officer of the said bank, still, these circumstances do
not convince this Court fully well to absolve the bank. Note that, as former
President of the said bank, it is improbable that he (Bienvenido R. Medrano)
was completely oblivious of the developments therein. By reason of his past
association with the officers of the said bank (who are, in fact, his relatives), it
is unbelievable that Bienvenido R. Medrano could simply have issued the said
letter of authority without the knowledge of the said officers. Granting por
aguendo that Bienvenido R. Medrano did not act on behalf of the bank,
however, We doubt that he had no financial and/or material interest in the said
sale a fact that could not possibly have eluded Our attention.[41]

From all the foregoing, there can be no other conclusion than the
respondents are indeed the procuring cause of the sale. If not for the respondents,
Lee would not have known about the mango plantation being sold by the
petitioners. The sale was consummated. The bank had profited from such
transaction. It would certainly be iniquitous if the respondents would not be
rewarded their commission pursuant to the letter of authority.
WHEREFORE, the petition is DENIED due course. The Decision of the Court
of Appeals is AFFIRMED.
SO ORDERED.
Puno, (Chairman), Tinga, andChico-Nazario, JJ., concur.
Austria-Martinez, J., no part.
[1]
Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Ma. Alicia
Austria-Martinez (now an Associate Justice of the Supreme Court) and Hilarion L. Aquino
(retired), concurring.
[2]
Penned by Judge Omar U. Amin.
[3]
Records, p. 8.
[4]
TSN, 4 January 1989, p. 6.
[5] TSN, 4 December 1987, pp. 7-8.
[6]
Exhibit B, Records, p. 153.
[7]
TSN, 4 December 1987, pp. 9-10; TSN, 15 March 1989, p. 9.
[8]
TSN, 15 March 1989, p. 10
[9]
TSN, 11 May 1989, pp. 8-9.
[10]
Exhibit D, Records, p. 178.
[11] TSN, 15 March 1989, p. 14.
[12]
Records, pp. 8-10.
[13]
Id. at 320.
[14]
Id.
[15]
Id. at 229.
[16]
Id. at 321.
[17] Id. at 322.
[18]
Id. at 325-327.
[19]
Id. at 370-371.
[20]
Id. at 372.
[21]
Rollo, p. 39.
[22]
Rollo, pp. 16-17.
[23] Exhibit A, Records, p. 168.
[24]
TSN, 4 December 1987, p. 6.
[25]
Tan v. Gullas, 393 SCRA 334 (2002).
[26]
Blacks Law Dictionary, Fifth Edition.
[27]
Clark v. Ellsworth, 66 Ariz. 119, 184 P.2d 821 (1947).
[28]
See Mohamed v. Robbins, 23 Ariz. App. 195, 531 P.2d 928, 930 (1975).
[29] Danon v. Brimo, 48 Phil. 133 (1921).
[30]
Tan v. Gullas, supra.
[31]
TSN, 11 September 1990, p. 5.
[32]
TSN, 4 December 1987, p. 11.
[33]
TSN, 11 September 1990, p. 5.
[34]
Manotok Brothers, Inc. v. Court of Appeals, 221 SCRA 224 (1993).
[35]
Tan v. Gullas, supra.
[36]
Wickersham v. T. D. Harris, 313 F.2d 468 (1963).
[37]
33 Phil. 370 (1916).
[38]
Libby v. Ivers & Pond Piano Co., 317 Mass. 478, 58 N.E.2d 834 (1945); Gleason v.
Nelson, 162 Mass. 245, 38 N.E. 497 (1894); Clark v. Ellsworth, supra.
[39] Wickersham v. Harris, supra.
[40]
TSN, 6 November 1990, pp. 5-6.
[41]
Rollo, p. 41.
 SECOND DIVISION

[G.R. No. 130148. December 15, 1997]

JOSE BORDADOR and LYDIA BORDADOR, petitioners,

vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO
DEGANOS, respondents.

DECISION
REGALADO, J.:

In this appeal by certiorari, petitioners assail the judgment of the Court of

Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the Regional Trial
Court of Malolos, Bulacan which found private respondent Narciso Deganos
liable to petitioners for actual damages, but absolved respondent spouses Brigida
D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent
resolution of the Court of Appeals which denied their motion for reconsideration
of its challenged decision.
Petitioners were engaged in the business of purchase and sale of jewelry and
respondent Brigida D. Luz, also known as Aida D. Luz, was their regular
customer. On several occasions during the period from April 27, 1987 to
September 4, 1987, respondent Narciso Deganos, the brother of Brigida D. Luz,
received several pieces of gold and jewelry from petitioners amounting
to P382,816.00. [1] These items and their prices were indicated in seventeen
receipts covering the same. Eleven of the receipts stated that they were received
for a certain Evelyn Aquino, a niece of Deganos, and the remaining six indicated
that they were received for Brigida D. Luz. [2]
Deganos was supposed to sell the items at a profit and thereafter remit the
proceeds and return the unsold items to petitioners. Deganos remitted only the
sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he
return any unsold item to petitioners. By January 1990, the total of his unpaid
account to petitioners, including interest, reached the sum
of P725,463.98. Petitioners eventually filed a complaint in the barangay court
[3]

against Deganos to recover said amount.

In the barangay proceedings, Brigida D. Luz, who was not impleaded in the
case, appeared as a witness for Deganos and ultimately, she and her husband,
together with Deganos, signed a compromise agreement with petitioners. In that
compromise agreement, Deganos obligated himself to pay petitioners, on
installment basis, the balance of his account plus interest thereon. However, he
failed to comply with his aforestated undertakings.
 On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the
Regional Trial Court of Malolos, Bulacan against Deganos and Brigida D. Luz for
recovery of a sum of money and damages, with an application for preliminary
attachment.[4] Ernesto Luz was impleaded therein as the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were
charged with estafa[5] in the Regional Trial Court of Malolos, Bulacan, which was
docketed as Criminal Case No. 785-M-94. That criminal case appears to be still
pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted as
the agent of Brigida D. Luz when he received the subject items of jewelry and,
because he failed to pay for the same, Brigida, as principal, and her spouse are
solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid obligation
to petitioners, he claimed that the same was only in the sum of P382,816.00 and
not P725,463.98. He further asserted that it was he alone who was involved in
the transaction with the petitioners; that he neither acted as agent for nor was he
authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six
of the receipts indicated that the items were received by him for the latter. He
further claimed that he never delivered any of the items he received from
petitioners to Brigida.
Brigida, on her part, denied that she had anything to do with the transactions
between petitioners and Deganos. She claimed that she never authorized
Deganos to receive any item of jewelry in her behalf and, for that matter, neither
did she actually receive any of the articles in question.
After trial, the court below found that only Deganos was liable to petitioners
for the amount and damages claimed. It held that while Brigida D. Luz did have
transactions with petitioners in the past, the items involved were already paid for
and all that Brigida owed petitioners was the sum of P21,483.00 representing
interest on the principal account which she had previously paid for.[6]
The trial court also found that it was petitioner Lydia Bordador who indicated
in the receipts that the items were received by Deganos for Evelyn Aquino and
Brigida D. Luz. [7] Said court was persuaded that Brigida D. Luz was behind
Deganos, but because there was no memorandum to this effect, the agreement
between the parties was unenforceable under the Statute of Frauds. [8] Absent the
required memorandum or any written document connecting the respondent Luz
spouses with the subject receipts, or authorizing Deganos to act on their behalf,
the alleged agreement between petitioners and Brigida D. Luz was
unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98, plus
legal interest thereon from June 25, 1990, and attorneys fees. Brigida D. Luz was
ordered to pay P21,483.00 representing the interest on her own personal
loan. She and her co-defendant spouse were absolved from any other or further
liability. [9]
 As stated at the outset, petitioners appealed the judgment of the court a
quo to the Court of Appeals which affirmed said judgment. [10] The motion for
reconsideration filed by petitioners was subsequently dismissed, [11] hence the
present recourse to this Court.
The primary issue in the instant petition is whether or not herein respondent
spouses are liable to petitioners for the latters claim for money and damages in
the sum of P725,463.98, plus interests and attorneys fees, despite the fact that
the evidence does not show that they signed any of the subject receipts or
authorized Deganos to receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in adopting the findings of
the court a quo that respondent spouses are not liable to them, as said
conclusion of the trial court is contradicted by the finding of fact of the appellate
court that (Deganos) acted as agent of his sister (Brigida Luz). [12] In support of
this contention, petitioners quoted several letters sent to them by Brigida D. Luz
wherein the latter acknowledged her obligation to petitioners and requested for
more time to fulfill the same. They likewise aver that Brigida testified in the trial
court that Deganos took some gold articles from petitioners and delivered the
same to her.
Both the Court of Appeals and the trial court, however, found as a fact that
the aforementioned letters concerned the previous obligations of Brigida to
petitioners, and had nothing to do with the money sought to be recovered in the
instant case. Such concurrent factual findings are entitled to great weight, hence,
petitioners cannot plausibly claim in this appellate review that the letters were in
the nature of acknowledgments by Brigida that she was the principal of Deganos
in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting delivery
of the gold to her, there is no showing whatsoever that her statement referred to
the items which are the subject matter of this case. It cannot, therefore, be validly
said that she admitted her liability regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter
clothed him with apparent authority as her agent and held him out to the public as
such, hence Brigida can not be permitted to deny said authority to innocent third
parties who dealt with Deganos under such belief. [13] Petitioners further represent
that the Court of Appeals recognized in its decision that Deganos was an agent of
Brigida.[14]
The evidence does not support the theory of petitioners that Deganos was an
agent of Brigida D. Luz and that the latter should consequently be held solidarily
liable with Deganos in his obligation to petitioners. While the quoted statement in
the findings of fact of the assailed appellate decision mentioned that Deganos
ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the
Court of Appeals categorically stated that, (Brigida Luz) never authorized her
brother (Deganos) to act for and in her behalf in any transaction with Petitioners
x x x. [15] It is clear, therefore, that even assuming arguendo that Deganos acted
as an agent of Brigida, the latter never authorized him to act on her behalf with
regard to the transactions subject of this case.
The Civil Code provides:

Art. 1868. By the contract of agency a person binds himself to render some
service or to do something in representation or on behalf of another, with the
consent or authority of the latter.

The basis for agency is representation. Here, there is no showing that Brigida
consented to the acts of Deganos or authorized him to act on her behalf, much
less with respect to the particular transactions involved. Petitioners attempt to
foist liability on respondent spouses through the supposed agency relation with
Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to
Deganos, not once or twice but on at least six occasions as evidenced by six
receipts, several pieces of jewelry of substantial value without requiring a written
authorization from his alleged principal. A person dealing with an agent is put
upon inquiry and must discover upon his peril the authority of the agent. [16]
The records show that neither an express nor an implied agency was proven
to have existed between Deganos and Brigida D. Luz. Evidently, petitioners, who
were negligent in their transactions with Deganos, cannot seek relief from the
effects of their negligence by conjuring a supposed agency relation between the
two respondents where no evidence supports such claim.
Petitioners next allege that the Court of Appeals erred in ignoring the fact that
the decision of the court below, which it affirmed, is null and void as it
contradicted its ruling in CA-G.R. SP No. 39445 holding that there is sufficient
evidence/proof against Brigida D. Luz and Deganos for estafa in the pending
criminal case. They further aver that said appellate court erred in ruling against
them in this civil action since the same would result in an inevitable conflict of
decisions should the trial court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners, herein respondents
Brigida D. Luz and Deganos had filed a demurrer to evidence and a motion for
reconsideration in the aforestated criminal case, both of which were denied by
the trial court. They then filed a petition for certiorari in the Court of Appeals to set
aside the denial of their demurrer and motion for reconsideration but, as just
stated, their petition therefor was dismissed.[17]
Petitioners now claim that the aforesaid dismissal by the Court of Appeals of
the petition in CA-G.R. SP No. 39445 with respect to the criminal case is
equivalent to a finding that there is sufficient evidence in the estafa case against
Brigida D. Luz and Deganos. Hence, as already stated, petitioners theorize that
the decision and resolution of the Court of Appeals now being impugned in the
case at bar would result in a possible conflict with the prospective decision in the
criminal case. Instead of promulgating the present decision and resolution under
review, so they suggest, the Court of Appeals should have awaited the decision
in the criminal case, so as not to render academic or preempt the same or, worse,
create two conflicting rulings. [18]
Petitioners have apparently lost sight of Article 33 of the Civil Code which
provides that in cases involving alleged fraudulent acts, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the
injured party. Such civil action shall proceed independently of the criminal
prosecution and shall require only a preponderance of evidence.
It is worth noting that this civil case was instituted four years before the
criminal case for estafa was filed, and that although there was a move to
consolidate both cases, the same was denied by the trial court. Consequently, it
was the duty of the two branches of the Regional Trial Court concerned to
independently proceed with the civil and criminal cases. It will also be observed
that a final judgment rendered in a civil action absolving the defendant from civil
liability is no bar to a criminal action. [19]
It is clear, therefore, that this civil case may proceed independently of the
criminal case [20] especially because while both cases are based on the same
facts, the quantum of proof required for holding the parties liable therein
differ.Thus, it is improvident of petitioners to claim that the decision and resolution
of the Court of Appeals in the present case would be preemptive of the outcome
of the criminal case. Their fancied fear of possible conflict between the
disposition of this civil case and the outcome of the pending criminal case is
illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost its
jurisdiction to issue the denial resolution dated August 18, 1997, as the same was
tainted with irregularities and badges of fraud perpetrated by its court
officers. [21] They charge that said appellate court, through conspiracy and fraud
on the part of its officers, gravely abused its discretion in issuing that resolution
denying their motion for reconsideration. They claim that said resolution was
drafted by the ponente, then signed and issued by the members of the Eleventh
Division of said court within one and a half days from the elevation thereof by the
division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the
resolution as the same was made without waiting for the lapse of the ten-day
period for respondents to file their comment and for petitioners to file their reply. It
was allegedly impossible for the Court of Appeals to resolve the issue in just one
and a half days, especially because its ponente, the late Justice Maximiano C.
Asuncion, was then recuperating from surgery and, that, additionally, hundreds of
more important cases were pending. [22]
These lamentable allegation of irregularities in the Court of Appeals and in
the conduct of its officers strikes us as a desperate attempt of petitioners to
induce this Court to give credence to their arguments which, as already found by
both the trial and intermediate appellate courts, are devoid of factual and legal
substance. The regrettably irresponsible attempt to tarnish the image of the
intermediate appellate tribunal and its judicial officers through ad
hominemimputations could well be contumacious, but we are inclined to let that
pass with a strict admonition that petitioners refrain from indulging in such
conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case
affirming the trial courts decision. [23] Petitioners moved for reconsideration and
the Court of Appeals ordered respondents to file a comment. Respondents filed
the same on August 5, 1997 [24] and petitioners filed their reply to said comment on
August 15, 1997. [25] The Eleventh Division of said court issued the questioned
resolution denying petitioners motion for reconsideration on August 18, 1997.[26]
It is ironic that while some litigants malign the judiciary for being supposedly
slothful in disposing of cases, petitioners are making a show of calling out for
justice because the Court of Appeals issued a resolution disposing of a case
sooner than expected of it. They would even deny the exercise of discretion by
the appellate court to prioritize its action on cases in line with the procedure it has
adopted in disposing thereof and in declogging its dockets. It is definitely not for
the parties to determine and dictate when and how a tribunal should act upon
those cases since they are not even aware of the status of the dockets and the
internal rules and policies for acting thereon.
The fact that a resolution was issued by said court within a relatively short
period of time after the records of the case were elevated to the office of
the ponente cannot, by itself, be deemed irregular. There is no showing
whatsoever that the resolution was issued without considering the reply filed by
petitioners. In fact, that brief pleading filed by petitioners does not exhibit any
esoteric or ponderous argument which could not be analyzed within an hour. It is
a legal presumption, born of wisdom and experience, that official duty has been
regularly performed; [27] that the proceedings of a judicial tribunal are regular and
valid, and that judicial acts and duties have been and will be duly and properly
performed. [28] The burden of proving irregularity in official conduct is on the part of
petitioners and they have utterly failed to do so. It is thus reprehensible for them
to cast aspersions on a court of law on the bases of conjectures or surmises,
especially since one of the petitioners appears to be a member of the Philippine
Bar.
Lastly, petitioners fault the trial courts holding that whatever contract of
agency was established between Brigida D. Luz and Narciso Deganos is
unenforceable under the Statute of Frauds as that aspect of this case allegedly is
not covered thereby. [29] They proceed on the premise that the Statute of Frauds
applies only to executory contracts and not to executed or to partially executed
ones. From there, they move on to claim that the contract involved in this case
was an executed contract as the items had already been delivered by petitioners
to Brigida D. Luz, hence, such delivery resulted in the execution of the contract
and removed the same from the coverage of the Statute of Frauds.
 Petitioners claim is speciously unmeritorious. It should be emphasized that
neither the trial court nor the appellate court categorically stated that there was
such a contractual relation between these two respondents. The trial court merely
said that if there was such an agency existing between them, the same is
unenforceable as the contract would fall under the Statute of Frauds which
requires the presentation of a note or memorandum thereof in order to be
enforceable in court. That was merely a preparatory statement of a principle of
law. What was finally proven as a matter of fact is that there was no such contract
between Brigida D. Luz and Narciso Deganos, executed or partially executed,
and no delivery of any of the items subject of this case was ever made to the
former.
WHEREFORE, no error having been committed by the Court of Appeals in
affirming the judgment of the court a quo, its challenged decision and resolution
are hereby AFFIRMED and the instant petition is DENIED, with double costs
against petitioners
SO ORDERED.
Puno, Mendoza, and Martinez, JJ., concur.

[1]
Rollo, 86.
[2]
Ibid., 203.
[3]
Ibid., 85.
[4]
Ibid., 78-84.
[5]
Ibid., 111-112.
[6]
Ibid., 85-97.
[7]
Ibid., 94.
[8]
Article 1403 of the Civil Code pertinently provides that the following contracts are
unenforceable unless they are ratified:
1. Those entered into in the name of another person by one who had been given no authority or
legal representation, or who has acted beyond his power.
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 a secondary evidence of its contents:
xxx
(b) A special promise to answer for the debt, default, or miscarriage of another;
xxx
[9]
Rollo, 97.
[10]
Justice Maximiano C. Asuncion as ponente, with the concurrence of Justice Jesus M. Elbinias
and Justice Ramon A. Barcelona of the Eleventh Division of the Court of Appeals,
affirmed the decision of the trial court in a decision dated July 9, 1997; Rollo, 9-13.
[11]
The resolution was dated August 18, 1997; Rollo, 70-A.
[12]
Rollo, 33-40.
[13]
Ibid., 40.
[14]
Ibid., 40-41.
[15]
Ibid., 12.
[16]
Toyota Shaw, Inc. vs. Court of Appeals, et al., G.R. No. 116650, May 23, 1995, 244 SCRA 320.
[17]
Rollo, 128-131.
[18]
Ibid., 41.
[19]
Section 4, Rule 111, Rules of Court.
[20]
Salta vs. De Veyra, etc., et al., L-37733 and Philippine National Bank vs. Purisima, etc., et al.,
L-38035, jointly decided on September 30, 1992, 117 SCRA 212.
[21]
Rollo, 47.
[22]
Ibid., 48.
[23]
Ibid., 9-13.
[24]
Ibid. 160-167.
[25]
Ibid. 178-182.
[26]
Ibid., 70-A.
[27]
Section 3(m), Rule 131, Rules of Court.
[28]
Section 3(n), Rule 131, Rules of Court provides that it is presumed that a court, or judge acting
as such, whether in the Philippines or elsewhere, was acting in the lawful exercise of
jurisdiction.
[29]
Rollo, 52.
 FIRST DIVISION

[G.R. No. 102784. February 28, 1996]

ROSA LIM, petitioner, vs. COURT OF APPEALS and PEOPLE OF

THE PHILIPPINES, respondents.
SYLLABUS
1. CIVIL LAW; OBLIGATIONS AND CONTRACTS; CONTRACTS ARE
OBLIGATORY IN WHATEVER FORM ENTERED; PLACE OF SIGNATURE
IMMATERIAL; PARTY BOUND THEREON THE MOMENT SHE AFFIXED
HER SIGNATURE. - Rosa Lims signature indeed appears on the upper
portion of the receipt immediately below the description of the items
taken. We find that this fact does not have the effect of altering the terms of
the transaction from a contract of agency to sell on commission basis to a
contract of sale. Neither does it indicate absence or vitiation of consent
thereto on the part of Rosa Lim which would make the contract void or
voidable. The moment she affixed her signature thereon, petitioner became
bound by all the terms stipulated in the receipt. She, thus, opened herself to
all the legal obligations that may arise from their breach. This is clear from
Article 1356 of the New Civil Code which provides: Contracts shall be
obligatory in whatever form they may have been entered into, provided all the
essential requisites for their validity are present. In the case before us, the
parties did not execute a notarial will but a simple contract of agency to sell
on commission basis, thus making the position of petitioners signature
thereto immaterial.
2. ID.; ID.; CONTRACT OF AGENCY; NO FORMALITIES REQUIRED. - There
are some provisions of the law which require certain formalities for particular
contracts. The first is when the form is required for the validity of the contract;
the second is when it is required to make the contract effective as against the
third parties such as those mentioned in Articles 1357 and 1358; and the third
is when the form is required for the purppose of proving the existence of the
contract, such as those provided in the Statute of Frauds in Article 1403. A
contract of agency to sell on commission basis does not belong to any of
these three categories, hence, it is valid and enforceable in whatever form it
may be entered into.
3. REMEDIAL LAW; EVIDENCE; WEIGHT THEREOF NOT DETERMINED BY
SUPERIORITY IN NUMBERS OF WITNESSES. - Weight of evidence is not
determined mathematically by the numerical superiority of the witnesses
testifying to a given fact. It depends upon its practical effect in inducing belief
on the part of the judge trying the case.
4. ID.; ID.; CREDIBILITY; FINDINGS OF THE TRIAL AND APPELLATE
COURTS GENERALLY NOT INTERFERED WITH ON APPEAL. - In the
case at bench, both the trial court and the Court of Appeals gave weight to
the testimony of Vicky Suarez that she did not authorize Rosa Lim to return
the pieces of jewelry to Nadera. We shall not disturb this finding of the
respondent court. It is well settled that we should not interfere with the
judgment of the trial court in determining the credibility of witnesses, unless
there appears in the record some fact or circumstances of weight and
influence which has been overlooked or the significance of which has been
misinterpreted. The reason is that the trial court is in a better position to
determine questions involving credibility having heard the witnesses and
having observed their deportment and manner of testifying during the trial.
5. CRIMINAL LAW; ESTAFA WITH ABUSE OF CONFIDENCE; ELEMENTS.
- The elements of estafa with abuse of confidence under this subdivision are
as follows: (1) That money, goods, or other personal property be received by
the offender in trust, or on commission, or for administration, or under any
other obligation involving the duty to make delivery of, or to return, the same;
(2) That there be misappropriation or conversion of such money or property
by the offender or denial on his part of such receipt; (3) That such
misappropriation or conversion or denial is to the prejudice of another; and (4)
That there is a demand made by the offended party to the offender (Note:
The 4th element is not necessary when there is evidence of misappropriation
of the goods by the defendant).
6. ID.; ID.; ID.; PRESENT IN CASE AT BAR. All the elements of estafa under
Article 315, Paragraph 1(b) of the Revised Penal Code, are present in the
case at bench. First, the receipt marked as Exhibit A proves that petitioner
Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold
on commission basis. Second, petitioner misappropriated or converted the
jewelry to her own use; and, third, such misappropriation obviously caused
damaged and prejudice to the private respondent.
APPEARANCES OF COUNSEL
Zosa & Quijano Law Offices for petitioner.
The Solicitor General for respondents.

DECISION
HERMOSISIMA, JR., J.:

This is a petition to review the Decision of the Court of Appeals in CA-G.R.

CR No. 10290, entitled People v. Rosa Lim, promulgated on August 30, 1991.
On January 26, 1989, an Information for Estafa was filed against petitioner
Rosa Lim before Branch 92 of the Regional Trial Court of Quezon City.[1] The
Information reads:
That on or about the 8th day of October 1987, in Quezon City, Philippines and
within the jurisdiction of this Honorable Court, the said accused with intent to
gain, with unfaithfulness and/or abuse of confidence, did, then and there,
wilfully, unlawfully and feloniously defraud one VICTORIA SUAREZ, in the
following manner, to wit: on the date and place aforementioned said accused
got and received in trust from said complainant one (1) ring 3.35 solo worth
P169,000.00, Philippine Currency, with the obligation to sell the same on
commission basis and to turn over the proceeds of the sale to said complainant
or to return said jewelry if unsold, but the said accused once in possession
thereof and far from complying with her obligation despite repeated demands
therefor, misapplied, misappropriated and converted the same to her own
personal use and benefit, to the damage and prejudice of the said offended
party in the amount aforementioned and in such other amount as may be
awarded under the provisions of the Civil Code.

CONTRARY TO LAW. [2]

After arraignment and trial on the merits, the trial court rendered judgment,
the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, judgment is hereby rendered:

1. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense
of estafa as defined and penalized under Article 315, paragraph 1(b) of the
Revised Penal Code;

2. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and
TWO (2) MONTHS of prision correccional as minimum, to TEN (10) YEARS
of prision mayor as maximum;

3. Ordering her to return to the offended party Mrs. Victoria Suarez the ring or
its value in the amount of P169,000 without subsidiary imprisonment in case of
insolvency; and

4. To pay costs.[3]

On appeal, the Court of Appeals affirmed the Judgment of conviction with the
modification that the penalty imposed shall be six (6) years, eight (8) months and
twenty- one (21) days to twenty (20) years in accordance with Article 315,
paragraph 1 of the Revised Penal Code.[4]
 Petitioner filed a motion for reconsideration before the appellate court on
September 20, 1991, but the motion was denied in a Resolution dated November
11, 1991.
In her final bid to exonerate herself, petitioner filed the instant petition for
review alleging the following grounds:
I

THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE

RULES OF COURT AND THE DECISION OF THIS HONORABLE
COURT IN NOT PASSING UPON THE FIRST AND THIRD ASSIGNED
ERRORS IN PETITIONERS BRIEF;

II

THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT

THE PAROL EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE
PROSECUTOR CROSS-EXAMINED THE PETITIONER AND AURELIA
NADERA AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY
THE COUNSEL FOR THE PETITIONER AS TO THE TRUE NATURE OF
THE AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS
DISCLOSED THAT THE TRUE AGREEMENT OF THE PARTIES WAS A
SALE OF JEWELRIES AND NOT WHAT WAS EMBODIED IN THE
RECEIPT MARKED AS EXHIBIT A WHICH WAS RELIED UPON BY
THE RESPONDENT COURT IN AFFIRMING THE JUDGMENT OF
CONVICTION AGAINST HEREIN PETITIONER; and

III

THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE

PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE
EFFECT THAT ACCUSATION IS NOT, ACCORDING TO THE
FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT: THE
PROSECUTION MUST OVERTHROW THE PRESUMPTION OF
INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE
DOUBT. TO MEET THIS STANDARD, THERE IS NEED FOR THE MOST
CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE, BOTH
ORAL AND DOCUMENTARY, INDEPENDENTLY OF WHATEVER
DEFENSE IS OFFERED BY THE ACCUSED. ONLY IF THE JUDGE
BELOW AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A
CONCLUSION THAT THE CRIME HAD BEEN COMMITTED
PRECISELY BY THE PERSON ON TRIAL UNDER SUCH AN EXACTING
TEST SHOULD SENTENCE THUS REQUIRED THAT EVERY
INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF
AGAINST HIM MUST SURVIVE THE TEST OF REASON, THE
STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY
JUDGMENT. (People v. Austria, 195 SCRA 700) [5]

Herein the pertinent facts as alleged by the prosecution.

On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu
received from private respondent Victoria Suarez the following two pieces of
jewelry: one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet
worth P170,000.00, to be sold on commission basis. The agreement was
reflected in a receipt marked as Exhibit A[6] for the prosecution. The transaction
took place at the Sir Williams Apartelle in Timog Avenue, Quezon City, where
Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but
failed to return the diamond ring or to turn over the proceeds thereof if sold. As a
result, private complainant, aside from making verbal demands, wrote a demand
letter[7] to petitioner asking for the return of said ring or the proceeds of the sale
thereof. In response, petitioner, thru counsel, wrote a letter[8] to private
respondents counsel alleging that Rosa Lim had returned both ring and bracelet
to Vicky Suarez sometime in September, 1987, for which reason, petitioner had
no longer any liability to Mrs. Suarez insofar as the pieces of jewelry were
concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315, par.
1(b) of the Revised Penal Code for which the petitioner herein stands convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in
October 1987, together with one Aurelia Nadera, who introduced petitioner to
private respondent, and that they were lodged at the Williams Apartelle in Timog,
Quezon City. Petitioner denied that the transaction was for her to sell the two
pieces of jewelry on commission basis. She told Mrs. Suarez that she would
consider buying the pieces of jewelry for her own use and that she would inform
the private complainant of such decision before she goes back to
Cebu. Thereafter, the petitioner took the pieces of jewelry and told Mrs. Suarez to
prepare the necessary paper for me to sign because I was not yet prepare(d) to
buy it.[9] After the document was prepared, petitioner signed it. To prove that she
did not agree to the terms of the receipt regarding the sale on commission basis,
petitioner insists that she signed the aforesaid document on the upper portion
thereof and not at the bottom where a space is provided for the signature of the
person(s) receiving the jewelry.[10]
On October 12, 1987 before departing for Cebu, petitioner called up Mrs.
Suarez by telephone in order to inform her that she was no longer interested in
the ring and bracelet. Mrs. Suarez replied that she was busy at the time and so,
she instructed the petitioner to give the pieces of jewelry to Aurelia Nadera who
would in turn give them back to the private complainant. The petitioner did as she
was told and gave the two pieces of jewelry to Nadera as evidenced by a
handwritten receipt, dated October 12, 1987.[11]
Two issues need to be resolved: First, what was the real transaction between
Rosa Lim and Vicky Suarez - a contract of agency to sell on commission basis as
set out in the receipt or a sale on credit; and, second, was the subject diamond
ring returned to Mrs. Suarez through Aurelia Nadera?
Petitioner maintains that she cannot be liable for estafa since she never
received the jewelries in trust or on commission basis from Vicky Suarez. The
real agreement between her and the private respondent was a sale on credit with
Mrs. Suarez as the owner-seller and petitioner as the buyer, as indicated by the
fact that petitioner did not sign on the blank space provided for the signature of
the person receiving the jewelry but at the upper portion thereof immediately
below the description of the items taken.[12]
The contention is far from meritorious.
The receipt marked as Exhibit A which establishes a contract of agency to
sell on commission basis between Vicky Suarez and Rosa Lim is herein
reproduced in order to come to a proper perspective:

THIS IS TO CERTIFY, that I received from Vicky

Suarez PINATUTUNAYAN KO na aking tinanggap kay _______________
the following jewelries:
ang mga alahas na sumusunod:

Description Price
Mga Uri Halaga

1 ring 3.35 dolo P 169,000.00

1 bracelet 170.000.00
total Kabuuan P 339.000.00

in good condition, to be sold in CASH ONLY within . . .days from date of

signing this receipt na nasa mabuting kalagayan upang ipagbili ng
KALIWAAN (ALCONTADO) lamang sa loob ng. . . araw mula ng ating
pagkalagdaan:

if I could not sell, I shall return all the jewelry within the period mentioned
above; if I would be able to sell, I shall immediately deliver and account the
whole proceeds of sale thereof to the owner of the jewelries at his/her
residence; my compensation or commission shall be the over-price on the
value of each jewelry quoted above. I am prohibited to sell any jewelry on
credit or by installment; deposit, give for safekeeping; lend, pledge or give as
security or guaranty under any circumstance or manner, any jewelry to other
person or persons.

kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning

na panahong nakatala sa itaas; kung maipagbili ko naman ay dagli kong
isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas sa
kanyang bahay tahanan; ang aking gantimpala ay ang mapapahigit na halaga sa
nakatakdang halaga sa itaas ng bawat alahas HIND I ko ipinahihintulutang
ipa-u-u-tang o ibibigay na hulugan ang alin mang alahas, ilalagak,
ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa anong paraan ang
alin mang alahas sa ibang mga tao o tao.

I sign my name this . . . day of. . . 19 . . . at Manila, NILALAGDAAN ko ang

kasunduang ito ngayong ika____ ng dito sa Maynila.

Signature of Persons who

received jewelries (Lagda
ng Tumanggap ng mga
Alahas)

Address: . . . . . . . . . . .

Rosa Lims signature indeed appears on the upper portion of the receipt
immediately below the description of the items taken. We find that this fact does
not have the effect of altering the terms of the transaction from a contract of
agency to sell on commission basis to a contract of sale. Neither does it indicate
absence or vitiation of consent thereto on the part of Rosa Lim which would make
the contract void or voidable. The moment she affixed her signature thereon,
petitioner became bound by all the terms stipulated in the receipt. She, thus,
opened herself to all the legal obligations that may arise from their breach. This is
clear from Article 1356 of the New Civil Code which provides:

Contracts shall be obligatory in whatever form they may have been entered
into, provided all the essential requisites for their validity are present. x x x.

However, there are some provisions of the law which require certain formalities
for particular contracts. The first is when the form is required for the validity of the
contract; the second is when it is required to make the contract effective as
against third parties such as those mentioned in Articles 1357 and 1358; and the
third is when the form is required for the purpose of proving the existence of the
contract, such as those provided in the Statute of Frauds in Article 1403.[13]A
contract of agency to sell on commission basis does not belong to any of these
three categories, hence it is valid and enforceable in whatever form it may be
entered into.
 Furthermore, there is only one type of legal instrument where the law strictly
prescribes the location of the signature of the parties thereto. This is in the case
of notarial wills found in Article 805 of the Civil Code, to wit:

Every will, other than a holographic will, must be subscribed at the end thereof
by the testator himself x x x.

The testator or the person requested by him to write his name and the
instrumental witnesses of the will, shall also sign, as aforesaid, each and every
page thereof, except the last, on the left margin x x x.

In the case before us, the parties did not execute a notarial will but a simple
contract of agency to sell on commission basis, thus making the position of
petitioners signature thereto immaterial.
Petitioner insists, however, that the diamond ring had been returned to Vicky
Suarez through Aurelia Nadera, thus relieving her of any liability. Rosa Lim
testified to this effect on direct examination by her counsel:
Q: And when she left the jewelries with you, what did you do thereafter?
A: On October 12, I was bound for Cebu. So I called up Vicky through telephone
and informed her that I am no longer interested in the bracelet and ring and
that 1 will just return it.
Q: And what was the reply of Vicky Suarez?
A: She told me that she could not come to the apartelle since she was very
busy. So, she asked me if Aurelia was there and when I informed her that
Aurelia was there, she instructed me to give the pieces of jewelry to Aurelia
who in turn will give it back to Vicky.
Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera?
A: Yes, Your Honor.[14]
This was supported by Aurelia Nadera in her direct examination by
petitioners counsel:
Q: Do you know if Rosa Lim in fact returned the jewelries ?
A: She gave the jewelries to me.
Q: Why did Rosa Lim give the jewelries to you?
A: Rosa Lim called up Vicky Suarez the following morning and told Vicky
Suarez that she was going home to Cebu and asked if she could give the
jewelries to me.
Q: And when did Rosa Lim give to you the jewelries?
A: Before she left for Cebu.[15]
On rebuttal, these testimonies were belied by Vicky Suarez herself:
 Q: It has been testified to here also by both Aurelia Nadera and Rosa Lim that
you gave authorization to Rosa Lim to turn over the two (2) pieces of
jewelries mentioned in Exhibit A to Aurelia Nadera, what can you say about
that?
A:. That is not true sir, because at that time Aurelia Nadera is highly indebted to
me in the amount of P 140,000.00, so if I gave it to Nadera, I will be
exposing myself to a high risk.[16]
The issue as to the return of the ring boils down to one of credibility. Weight
of evidence is not determined mathematically by the numerical superiority of the
witnesses testifying to a given fact. It depends upon its practical effect in inducing
belief on the part of the judge trying the case.[17] In the case at bench, both the trial
court and the Court of Appeals gave weight to the testimony of Vicky Suarez that
she did not authorize Rosa Lim to return the pieces of jewelry to Nadera. The
respondent court, in affirming the trial court, said:

x x x This claim (that the ring had been returned to Suarez thru Nadera) is
disconcerting. It contravenes the very terms of Exhibit A. The instruction by
the complaining witness to appellant to deliver the ring to Aurelia Nadera is
vehemently denied by the complaining witness, who declared that she did not
authorize and/or instruct appellant to do so. And thus, by delivering the ring to
Aurelia without the express authority and consent of the complaining witness,
appellant assumed the right to dispose of the jewelry as if it were hers, thereby
committing conversion, a clear breach of trust, punishable under Article 315,
par. 1(b), Revised Penal Code.

We shall not disturb this finding of the respondent court. It is well settled that
we should not interfere with the judgment of the trial court in determining the
credibility of witnesses, unless there appears in the record some fact or
circumstance of weight and influence which has been overlooked or the
significance of which has been misinterpreted. The reason is that the trial court is
in a better position to determine questions involving credibility having heard the
witnesses and having observed their deportment and manner of testifying during
the trial.[18]
Article 315, par. 1(b) of the Revised Penal Code provides:

ART. 315. Swindling (estafa). - Any person who shall defraud another by any
of the means mentioned hereinbelow shall be punished by:

xxx xxx xxx

(b) By misappropriating or converting, to the prejudice of another, money,

goods, or any other personal property received by the offender in trust or on
commission, or for administration, or under any other obligation involving the
duty to make delivery of or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such
money, goods, or other property.

xxx xxx xxx

The elements of estafa with abuse of confidence under this subdivision are
as follows: (1) That money, goods, or other personal property be received by the
offender in trust, or on commission, or for administration, or under any other
obligation involving the duty to make delivery of, or to return, the same; (2) That
there be misappropriation or conversion of such money or property by the
offender or denial on his part of such receipt; (3) That such misappropriation or
conversion or denial is to the prejudice of another; and (4) That there is a demand
made by the offended party to the offender (Note: The 4th element is not
necessary when there is evidence of misappropriation of the goods by the
defendant).[19]
All the elements of estafa under Article 315, Paragraph 1(b) of the Revised
Penal Code, are present in the case at bench. First, the receipt marked as Exhibit
A proves that petitioner Rosa Lim received the pieces of jewelry in trust from
Vicky Suarez to be sold on commission basis. Second, petitioner
misappropriated or converted the jewelry to her own use; and, third, such
misappropriation obviously caused damage and prejudice to the private
respondent.
WHEREFORE, the petition is DENIED and the Decision of the Court of
Appeals is hereby AFFIRMED.
Costs against petitioner.
SO ORDERED.
Padilla (Chairman), Bellosillo, and Kapunan, JJ., concur.
Vitug, J., In the results.

[1]
Docketed as Criminal Case No. Q-89-2216.
[2]
Records. p. 1,
[3]
Ibid., p. 168.
[4]
Rollo, p. 66.
[5]
Rollo, pp. 13-14.
[6]
Records, p. 49.
[7]
Exhibit B; Records, p.50.
[8]
Exhibit C; Records, p.51.
[9]
TSN, June 29, 1989, p. 5.
[10]
Exhibits 1, 1-b; Records, p.49.
[11]
Exhibits 2, 2-a; Records, p. 93.
[12]
Exhibit 1, supra.
[13]
Tolentino, Arturo, Commentaries and Jurisprudence on the Civil Code of the Philippines,
Volume IV, 1991 ed., p. 543.
[14]
TSN, June 29, 1989, pp. 7-8.
[15]
TSN, November 16, 1989, p. 12.
[16]
TSN, November 21, 1989, p. 9.
[17]
Francisco, Ricardo J., Evidence, 1993 ed., p. 11.
[18]
People v. Lagrosa, Jr., 230 SCRA 298 [1994].
[19]
Reyes, Luis B., The Revised Penal Code, Book Two, 13th ed., p.658.
 SECOND DIVISION

G.R. No. 199990, February 04, 2015

SPOUSES ROLANDO AND HERMINIA SALVADOR, Petitioners, v. SPOUSES ROGELIO AND

ELIZABETH RABAJA AND ROSARIO GONZALES, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the August 22, 2011 Decision1 and
the January 5, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 90296 which affirmed with
modification the March 29, 2007 Decision of the Regional Trial Court Branch 214 (RTC-Branch 214),
Mandaluyong City in Civil Case No. MC-03-2175, for rescission of a contract (rescission case).

The Facts

This case stemmed from a dispute involving the sellers, petitioner spouses Rolando and Herminia Salvador
(Spouses Salvador); the sellers agent, Rosario Gonzales (Gonzales); and the buyers, respondent Spouses
Rogelio and Elizabeth Rabaja (Spouses Rabaja), over a parcel of land situated at No. 25, Merryland Village,
375 Jose Rizal Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT) No.
13426 and registered in the names of Spouses Salvador. From 1994 until 2002, Spouses Rabaja were
leasing an apartment in the subject lot.

Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were looking for a buyer of the
subject property. Petitioner Herminia Salvador (Herminia) personally introduced Gonzales to them as the
administrator of the said property. Spouses Salvador even handed to Gonzales the owners duplicate
certificate of title over the subject property. On July, 3, 1998, Spouses Rabaja made an initial payment of
P48,000.00 to Gonzales in the presence of Herminia. Gonzales then presented the Special Power of
Attorney3 (SPA), executed by Rolando Salvador (Rolando) and dated July 24, 1998. On the same day, the
parties executed the Contract to Sell4 which stipulated that for a consideration of P5,000,000.00, Spouses
Salvador sold, transferred and conveyed in favor of Spouses Rabaja the subject property. Spouses Rabaja
made several payments totalling P950,000.00, which were received by Gonzales pursuant to the SPA
provided earlier as evidenced by the check vouchers signed by Gonzales and the improvised receipts signed
by Herminia.

Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did not receive
any payment from Gonzales. This prompted Spouses Rabaja to suspend further payment of the purchase
price; and as a consequence, they received a notice to vacate the subject property from Spouses Salvador
for non-payment of rentals.

Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In turn, Spouses
Rabaja filed an action for rescission of contract against Spouses Salvador and Gonzales, the subject matter
of the present petition.

In the action for ejectment, the complaint was filed before the Metropolitan Trial Court of Mandaluyong City,
Branch 60 (MeTC), where it was docketed as Civil Case No. 17344. In its August 14, 2002 Decision,5 the
MeTC ruled in favor of Spouses Salvador finding that valid grounds existed for the eviction of Spouses Rabaja
from the subject property and ordering them to pay back rentals. Spouses Salvador were able to garnish the
amount of P593,400.006 from Spouses Rabajas time deposit account pursuant to a writ of execution issued
by the MeTC.7 Spouses Rabaja appealed to the Regional Trial Court, Branch 212, Mandaluyong City (RTC-Br.
212) which reversed the MeTC ruling in its March 1, 2005 decision.8The RTC-Br. 212 found that no lease
agreement existed between the parties. Thereafter, Spouses Salvador filed an appeal with the CA which was
docketed as CA-G.R. SP No. 89259. On March 31, 2006, the CA ruled in favor of Spouses Salvador
and reinstated the MeTC ruling ejecting Spouses Rabaja.9 Not having been appealed, the CA decision in
CA-G.R. SP No. 89259 became final and executory on May 12, 2006.10 chanroblesvi rt uallawli brary

Meanwhile, the rescission case filed by Spouses Rabaja against Spouses Salvador and Gonzales and
docketed as Civil Case No. MC No. 03-2175 was also raffled to RTC-Br. 212. In their complaint,11 dated July
7, 2003, Spouses Rabaja demanded the rescission of the contract to sell praying that the amount of
P950,000.00 they previously paid to Spouses Salvador be returned to them. They likewise prayed that
damages be awarded due to the contractual breach committed by Spouses Salvador.

Spouses Salvador filed their answer with counterclaim and cross-claim12 contending that there was no
meeting of the minds between the parties and that the SPA in favor of Gonzales was falsified. In fact, they
filed a case for falsification against Gonzales, but it was dismissed because the original of the alleged falsified
SPA could not be produced. They further averred that they did not receive any payment from Spouses
Rabaja through Gonzales. In her defense, Gonzales filed her answer13 stating that the SPA was not falsified
and that the payments of Spouses Rabaja amounting to P950,000.00 were all handed over to Spouses
Salvador.

The pre-trial conference began but attempts to amicably settle the case were unsuccessful. It was formally
reset to February 4, 2005, but Spouses Salvador and their counsel failed to attend. Consequently, the RTC
issued the pre-trial order14declaring Spouses Salvador in default and allowing Spouses Rabaja to present
their evidence ex parte against Spouses Salvador and Gonzales to present evidence in her favor.

A motion for reconsideration,15 dated March 28, 2005, was filed by Spouses Salvador on the said pre-trial
order beseeching the liberality of the court. The rescission case was then re-raffled to RTC-Br. 214 after the
Presiding Judge of RTC-Br. 212 inhibited herself. In the Order,16 dated October 24, 2005, the RTC-Br. 214
denied the motion for reconsideration because Spouses Salvador provided a flimsy excuse for their
non-appearance in the pre-trial conference.

Thereafter, trial proceeded and Spouses Rabaja and Gonzales presented their respective testimonial and
documentary evidence.

RTC Ruling

On March 29, 2007, the RTC-Br. 214 rendered a decision17 in favor of Spouses Rabaja. It held that the
signature of Spouses Salvador affixed in the contract to sell appeared to be authentic. It also held that the
contract, although denominated as contract to sell, was actually a contract of sale because Spouses
Salvador, as vendors, did not reserve their title to the property until the vendees had fully paid the purchase
price. Since the contract entered into was a reciprocal contract, it could be validly rescinded by Spouses
Rabaja, and in the process, they could recover the amount of P950,000.00 jointly and severally from
Spouses Salvador and Gonzales. The RTC stated that Gonzales was undoubtedly the attorney-in-fact of
Spouses Salvador absent any taint of irregularity. Spouses Rabaja could not be faulted in dealing with
Gonzales who was duly equipped with the SPA from Spouses Salvador.

The RTC-Br. 214 then ruled that the amount of P593,400.00 garnished from the time deposit account of
Spouses Rabaja, representing the award of rental arrearages in the separate ejectment suit, should be
returned by Spouses Salvador.18 The court viewed that such amount was part of the purchase price of the
subject property which must be returned. It also awarded moral and exemplary damages in favor of Spouses
Rabaja and attorneys fees in favor of Gonzales. The dispositive portion of the said decision reads: chanRobl esvirtual Lawli brary

WHEREFORE, this court renders judgment as follows: chanRob lesvir tualLa wlibra ry

1. Ordering the Contract to Sell entered into by the

plaintiff and defendant spouses Rolando and Herminia
Salvador on July 24, 1998 as RESCINDED; chanrob leslaw

2. Ordering defendant spouses Rolando and Herminia Salvador

and defendant Rosario S. Gonzales jointly and severally
liable to pay plaintiffs: chanRob lesvir tualLa wlibra ry

1. the amount of NINE HUNDRED FIFTY THOUSAND PESOS

(P950,000.00), representing the payments made by
the latter for the purchase of subject property; chanrob leslaw
 2. the amount of TWENTY THOUSAND PESOS (P20,000.00),
as moral damages; chanrob leslaw

3. the amount of TWENTY THOUSAND PESOS (P20,000.00),

as exemplary damages; chanrob leslaw

4. the amount of ONE HUNDRED THOUSAND PESOS

(P100,000.00), as attorneys fees; chanrob leslaw

5. the cost of suit.

3. Ordering defendant Spouses Rolando and Herminia Salvador

to pay plaintiffs the amount of FIVE HUNDRED NINETY THREE
THOUSAND PESOS (P593,000.00) (sic), representing the
amount garnished from the Metrobank deposit of plaintiffs
as payment for their alleged back rentals; chanrob leslaw

4. Ordering the defendant Spouses Rolando and Herminia

Salvador to pay defendant Rosario Gonzales on her
cross-claim in the amount of ONE HUNDRED THOUSAND PESOS
(P100,000.00); chanrob leslaw

5. Dismissing the counterclaims of the defendants against

the plaintiff.

SO ORDERED.19
Gonzales filed a motion for partial reconsideration, but it was denied by the RTC-Br. 114 in its Order,20dated
September 12, 2007. Undaunted, Spouses Salvador and Gonzales filed an appeal before the CA.

CA Ruling

On March 29, 2007, the CA affirmed the decision of the RTC-Br. 114 with modifications. It ruled that the
contract to sell was indeed a contract of sale and that Gonzales was armed with an SPA and was, in fact,
introduced to Spouses Rabaja by Spouses Salvador as the administrator of the property. Spouses Rabaja
could not be blamed if they had transacted with Gonzales.

The CA then held that Spouses Salvador should return the amount of P593,400.00 pursuant to a separate
ejectment case, reasoning that Spouses Salvador misled the court because an examination of CA-G.R. SP
No. 89260 showed that Spouses Rabaja were not involved in that case. CA-G.R. SP No. 59260 was an
action between Spouses Salvador and Gonzales only and involved a completely different residential
apartment located at 302-C Jupiter Street, Dreamland Subdivision, Mandaluyong City.

The CA, however, ruled that Gonzales was not solidarily liable with Spouses Salvador. The agent must
expressly bind himself or exceed the limit of his authority in order to be solidarily liable. It was not shown
that Gonzales as agent of Spouses Salvador exceeded her authority or expressly bound herself to be
solidarily liable. The decretal portion of the CA decision reads: chanRobl esvirtualLawli brary

WHEREFORE, the appeal is PARTLY GRANTED. The assailed Decision

dated March 29, 2007 and the Order dated September 12, 2007,
 of the Regional Trial Court, Branch 214, Mandaluyong City, in
Civil Case No. MC-03-2175, are AFFIRMED with MODIFICATION in
that Rosario Gonzalez is not jointly and severally liable to
pay Spouses Rabaja the amounts enumerated in paragraph (b) of
the Decision dated March 29, 2007.

SO ORDERED.21
Spouses Salvador filed a motion for reconsideration but it was denied by the CA in its January 5, 2012
Resolution.

Hence, this petition.

ASSIGNMENT OF ERRORS

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE

LOWER COURT GRAVELY ABUSED ITS DISCRETION IN
DECLARING PETITIONERS IN DEFAULT AND IN DEPRIVING
THEM OF THE OPPORTUNITY TO CROSS-EXAMINE
RESPONDENTS SPS. RABAJA AS WELL AS TO PRESENT
EVIDENCE FOR AND IN THEIR BEHALF, GIVEN THE
MERITORIOUS DEFENSES RAISED IN THEIR ANSWER THAT
CATEGORICALLY AND DIRECTLY DISPUTE RESPONDENTS
SPS. RABAJAS CAUSE OF ACTION.

II

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT
GRAVELY ERRED IN GIVING CREDENCE TO THE TESTIMONY OF RESPONDENT
GONZALES THAT PAYMENTS WERE INDEED REMITTED TO AND RECEIVED BY
PETITIONER HERMINIA SALVADOR EVEN AS THE IMPROVISED RECEIPTS
WERE EVIDENTLY MADE UP AND FALSIFIED BY RESPONDENT GONZALES.

III

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT
GRAVELY ERRED IN RESCINDING THE CONTRACT TO SELL WHEN THERE IS
NOTHING TO RESCIND AS NO VALID CONTRACT TO SELL WAS ENTERED INTO,
AND IN DIRECTING THE REFUND OF THE AMOUNT OF P950,000.00 WHEN
THE EVIDENCE CLEARLY SHOWS THAT SAID AMOUNT WAS PAID TO AND
RECEIVED BY RESPONDENT GONZALES ALONE WHO MISAPPROPRIATED THE
SAME.

IV
 THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS
DECISION FOR PETITIONERS TO RETURN THE AMOUNT OF P543,400.00
REPRESENTING RENTALS IN ARREARS GARNISHED OR WITHDRAWN BY
VIRTUE OF A WRIT OF EXECUTION ISSUED IN AN EJECTMENT CASE WHICH
WAS TRIED AND DECIDED BY ANOTHER COURT.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT
GRAVELY ERRED IN AWARDING DAMAGES TO RESPONDENTS SPS. RABAJA,
THERE BEING NO FACTUAL AND LEGAL BASES FOR SUCH AWARD.

VI

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE TRIAL COURT
GRAVELY ERRED IN AWARDING P100,000.00 TO RESPONDENT GONZALES
AS ATTORNEYS FEES WHEN RESPONDENT GONZALES, IN FACT, COMMITTED
FORGERY AND FALSIFICATION IN DEALING WITH THE PROPERTY OF
PETITIONERS AND MISAPPROPRIATED THE MONIES PAID TO HER BY
RESPONDENTS SPS. RABAJA, THUS GIVING PREMIUM TO HER FRAUDULENT
ACTS.22
The foregoing can be synthesized into three main issues. First, Spouses Salvador contend that the order of
default must be lifted because reasonable grounds exist to justify their failure to attend the pre-trial
conference on February 4, 2005. Second, Spouses Salvador raise in issue the veracity of the receipts given
by Gonzales, the SPA and the validity of the contract to sell. They claim that the improvised receipts should
not be given credence because these were crude and suspicious, measuring only by 2 x 2 inches which
showed that Gonzales misappropriated the payments of Spouses Rabaja for herself and did not remit the
amount of P950,000.00 to them. As there was no consideration, then no valid contract to sell existed. Third,
Spouses Salvador argue that the ejectment case, from which the amount of P593,400.00 was garnished,
already became final and executory and could not anymore be disturbed. Lastly, the award of damages in
favor of Spouses Rabaja and Gonzales was improper absent any legal and factual bases.

On January 21, 2013, Spouses Salvador filed their supplemental petition23 informing the Court that RTC-Br.
213 had rendered a decision in Civil Case No. MC00-1082, an action for rescission of the SPA. The said
decision held that Spouses Salvador properly revoked the SPA in favor of Gonzales due to loss of trust and
confidence. On September 11, 2013, Gonzales filed her comment to the supplemental petition,24 contending
that the RTC-Branch 213 decision had no bearing because it had not yet attained finality. On even date,
Spouses Rabaja filed their Comment,25 asserting that the present petition is a mere rehash of the previous
arguments of Spouses Salvador before the CA. On November 15, 2013, Spouses Salvador replied that they
merely wanted to show that the findings by the RTC-Br. 213 should be given weight as a full-blown trial was
conducted therein.26 chanrobles virtuall awlibrary

The Courts Ruling

As a general rule, the Courts jurisdiction in a Rule 45 petition is limited to the review of pure questions of law.
A question of law arises when the doubt or difference exists as to what the law is on a certain state of facts.
Negatively put, Rule 45 does not allow the review of questions of fact. A question of fact exists when the
doubt or difference arises as to the truth or falsity of the allegations.27chanrobles virtuall awlibrary

The present petition presents questions of fact because it requires the Court to examine the veracity of the
evidence presented during the trial, such as the improvised receipts, the SPA given to Gonzales and the
contract to sell. Even the petitioner spouses themselves concede and ask the Court to consider questions of
fact,28 but the Court finds no reason to disturb the findings of fact of the lower courts absent any compelling
reason to the contrary.
The failure of Spouses Salvador to attend pre-trial conference warrants the presentation of evidence ex parte
by Spouses Rabaja

On the procedural aspect, the Court reiterates the rule that the failure to attend the pre-trial conference does
not result in the default of an absent party. Under the 1997 Rules of Civil Procedure, a defendant is only
declared in default if he fails to file his Answer within the reglementary period.29 On the other hand, if a
defendant fails to attend the pre-trial conference, the plaintiff can present his evidence ex parte. Sections 4
and 5, Rule 18 of the Rules of Court provide: chanRobl esvirtual Lawli brary

Sec. 4. Appearance of parties.

It shall be the duty of the parties and their counsel to appear

at the pre-trial. The non-appearance of a party may be excused
only if a valid cause is shown therefor or if a representative
shall appear in his behalf fully authorized in writing to enter
into an amicable settlement, to submit to alternative modes of
dispute resolution, and to enter into stipulations or
admissions of facts and of documents.

Sec. 5. Effect of failure to appear.

The failure of the plaintiff to appear when so required pursuant

to the next preceding section shall be cause for dismissal of
the action. The dismissal shall be with prejudice, unless
otherwise ordered by the court. A similar failure on the part
of the defendant shall be cause to allow the plaintiff to
present his evidence ex parte and the court to render judgment
on the basis thereof.

[Emphasis supplied]
The case of Philippine American Life & General Insurance Company v. Joseph Enario30 discussed the
difference between the non-appearance of a defendant in a pre-trial conference and the declaration of a
defendant in default in the present Rules of Civil Procedure. The decision instructs: chanRobl esvirtual Lawli brary

Prior to the 1997 Revised Rules of Civil Procedure, the phrase

"as in default" was initially included in Rule 20 of the old
rules, and which read as follows: chanRob lesvir tualLa wlibra ry

Sec. 2. A party who fails to appear at a pre-trial

conference may be non-suited or considered as in
default. cralawr ed

It was, however, amended in the 1997 Revised Rules of Civil

Procedure. Justice Regalado, in his book, REMEDIAL LAW
COMPENDIUM, explained the rationale for the deletion of the
phrase "as in default" in the amended provision, to wit: chanRob lesvir tualLa wlibra ry

1. This is a substantial reproduction of Section

2 of the former Rule 20 with the change that,
instead of defendant being declared "as in default"
 by reason of his non-appearance, this section now
spells out that the procedure will be to allow the
ex parte presentation of plaintiffs evidence and
the rendition of judgment on the basis thereof.
While actually the procedure remains the same, the
purpose is one of semantical propriety or
terminological accuracy as there were criticisms
on the use of the word "default" in the former
provision since that term is identified with the
failure to file a required answer, not appearance
in court.cralawr ed

Still, in the same book, Justice Regalado clarified that while

the order of default no longer obtained, its effects were
retained, thus:chanRob lesvir tualLa wlibra ry

Failure to file a responsive pleading within the

reglementary period, and not failure to appear at
the hearing, is the sole ground for an order of
default, except the failure to appear at a
pre-trial conference wherein the effects of a
default on the part of the defendant are followed,
that is, the plaintiff shall be allowed to present
evidence ex parte and a judgment based thereon may
be rendered against defendant. cralawr ed

From the foregoing, the failure of a party to appear at the pre-trial has indeed adverse consequences. If the
absent party is the plaintiff, then his case shall be dismissed. If it is the defendant who fails to appear, then
the plaintiff is allowed to present his evidence ex parte and the court shall render judgment based on the
evidence presented. Thus, the plaintiff is given the privilege to present his evidence without objection from
the defendant, the likelihood being that the court will decide in favor of the plaintiff, the defendant having
forfeited the opportunity to rebut or present its own evidence.31 The stringent application of the rules on
pre-trial is necessitated from the significant role of the pre-trial stage in the litigation process. Pre-trial is an
answer to the clarion call for the speedy disposition of cases. Although it was discretionary under the 1940
Rules of Court, it was made mandatory under the 1964 Rules and the subsequent amendments in
1997.32 The importance of pre-trial in civil actions cannot be overemphasized.33 chanrobles virtuall awlibrary

There is no dispute that Spouses Salvador and their counsel failed to attend the pre-trial conference set on
February 4, 2005 despite proper notice. Spouses Salvador aver that their non-attendance was due to the
fault of their counsel as he forgot to update his calendar.34 This excuse smacks of carelessness, and
indifference to the pre-trial stage. It simply cannot be considered as a justifiable excuse by the Court. As a
result of their inattentiveness, Spouses Salvador could no longer present any evidence in their favor.
Spouses Rabaja, as plaintiffs, were properly allowed by the RTC to present evidence ex parte against
Spouses Salvador as defendants. Considering that Gonzales as co-defendant was able to attend the pre-trial
conference, she was allowed to present her evidence. The RTC could only render judgment based on the
evidence presented during the trial.

Gonzales, as agent of Spouses Salvador, could validly receive the payments of Spouses Rabaja

Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with the courts
below in finding that the contract entered into by the parties was essentially a contract of sale which could
be validly rescinded. Spouses Salvador insist that they did not receive the payments made by Spouses
Rabaja from Gonzales which totalled P950,000.00 and that Gonzales was not their duly authorized agent.
These contentions, however, must fail in light of the applicable provisions of the New Civil Code which
state:chanRobl esvirtual Lawli brary
 Art. 1900. So far as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's
authority, if such act is within the terms of the power of
attorney, as written, even if the agent has in fact exceeded
the limits of his authority according to an understanding
between the principal and the agent.

x x x x

Art. 1902. A third person with whom the agent wishes to contract
on behalf of the principal may require the presentation of the
power of attorney, or the instructions as regards the agency.
Private or secret orders and instructions of the principal do
not prejudice third persons who have relied upon the power of
attorney or instructions shown them.

x x x x

Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his
authority. cralawr ed

Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of
the agents authority. A third person with whom the agent wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or the instructions as regards the agency. The basis for
agency is representation and a person dealing with an agent is put upon inquiry and must discover on his
own peril the authority of the agent.35 chanrobles virtuall awlibrary

According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is deemed to
have been performed within the scope of the agent's authority, if such act is within the terms of the power
of attorney, as written. In this case, Spouses Rabaja did not recklessly enter into a contract to sell with
Gonzales. They required her presentation of the power of attorney before they transacted with her principal.
And when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to rely on it.

The law mandates an agent to act within the scope of his authority which what appears in the written terms
of the power of attorney granted upon him.36 The Court holds that, indeed, Gonzales acted within the scope
of her authority. The SPA precisely stated that she could administer the property, negotiate the sale and
collect any document and all payments related to the subject property.37 As the agent acted within the scope
of his authority, the principal must comply with all the obligations.38 As correctly held by the CA, considering
that it was not shown that Gonzales exceeded her authority or that she expressly bound herself to be liable,
then she could not be considered personally and solidarily liable with the principal, Spouses Salvador.39 chanroblesvi rt uallawli brary

Perhaps the most significant point which defeats the petition would be the fact that it was Herminia herself
who personally introduced Gonzalez to Spouses Rabaja as the administrator of the subject property. By their
own ostensible acts, Spouses Salvador made third persons believe that Gonzales was duly authorized to
administer, negotiate and sell the subject property. This fact was even affirmed by Spouses Salvador
themselves in their petition where they stated that they had authorized Gonzales to look for a buyer of their
property.40 It is already too late in the day for Spouses Salvador to retract the representation to unjustifiably
escape their principal obligation.

As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses Rabaja
properly made payments to Gonzales, as agent of Spouses Salvador; and it was as if they paid to Spouses
Salvador. It is of no moment, insofar as Spouses Rabaja are concerned, whether or not the payments were
actually remitted to Spouses Salvador. Any internal matter, arrangement, grievance or strife between the
principal and the agent is theirs alone and should not affect third persons. If Spouses Salvador did not
receive the payments or they wish to specifically revoke the SPA, then their recourse is to institute a
separate action against Gonzales. Such action, however, is not any more covered by the present proceeding.

The amount of P593,400.00 should not be returned by Spouses Salvador

Nevertheless, the assailed decision of the CA must be modified with respect to the amount of P593,400.00
garnished by Spouses Salvador and ordered returned to Spouses Rabaja. The RTC ordered the return of the
amount garnished holding that it constituted a part of the purchase price. The CA ruled that Spouses
Salvador misled the Court when they improperly cited CA-G.R. SP No. 89260 to prove their entitlement to
the said amount. Both courts erred in their ruling.

First, the garnishment of the amount of P593,400.00 against Spouses Rabaja was pursuant to the CA
decision in CA-G.R. SP No. 89259, an entirely different case involving an action for ejectment, and it does not
concern the rescission case which is on appeal before this Court. Moreover, the decision on the ejectment
case is final and executory and an entry of judgment has already been made.41 Nothing is more settled in
law than that when a final judgment is executory, it thereby becomes immutable and unalterable. The
judgment may no longer be modified in any respect, even if the modification is meant to correct what is
perceived to be an erroneous conclusion of fact or law, and regardless of whether the modification is
attempted to be made by the court which rendered it or by the highest Court of the land. The doctrine is
founded on consideration of public policy and sound practice that, at the risk of occasional errors, judgments
must become final at some definite point in time.42 chanrobles virtuall awlibrary

The March 31, 2006 CA decision43in CA-G.R. SP No. 89259 has long been final and executory and cannot
any more be disturbed by the Court. Public policy dictates that once a judgment becomes final, executory
and unappealable, the prevailing party should not be denied the fruits of his victory by some subterfuge
devised by the losing party. Unjustified delay in the enforcement of a judgment sets at naught the role and
purpose of the courts to resolve justiciable controversies with finality.44 chanrobles virtuall awlibrary

Meanwhile, in ruling that the garnishment was improper and thus ordering the return of the garnished
amount, the CA referred to its decision in CA-G.R. SP No. 89260. Spouses Salvador, however, clarified in its
motion for reconsideration45 before the CA and in the present petition46 that the garnishment was pursuant
to CA-G.R. SP No. 89259, and not CA-G.R. SP No. 89260, another ejectment case involving another property.
A perusal of the records reveals that indeed the garnishment was pursuant to the ejectment case in the MeTC,
docketed as Civil Case No. 17344,47 where Spouses Rabaja were the defendants. The MeTC decision was
then reinstated by the CA in CA-G.R. SP No. 89259, not CA-G.R. SP No. 89260. There, a writ of
execution48 and notice of pay49 were issued against Spouses Rabaja in the amount of P591,900.00.

Second, Spouses Rabajas appeal with the RTC never sought relief in returning the garnished amount.50Such
issue simply emerged in the RTC decision. This is highly improper because the courts grant of relief is limited
only to what has been prayed for in the complaint or related thereto, supported by evidence, and covered by
the partys cause of action.51chanrobles virtuall awlibrary

If Spouses Rabaja would have any objection on the manner and propriety of the execution, then they must
institute their opposition to the execution proceeding a separate case. Spouses Rabaja can invoke the Civil
Code provisions on legal compensation or set-off under Articles 1278, 1279 and 1270.52 The two obligations
appear to have respectively offset each other, compensation having taken effect by operation of law
pursuant to the said provisions of the Civil Code, since all the requisites provided in Art. 1279 of the said
Code for automatic compensation are duly present.

No award of actual, moral and exemplary damages

The award of damages to Spouses Rabaja cannot be sustained by this Court. The filing alone of a civil action
should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action
is not among the grounds for moral damages.53 Article 2220 of the New Civil Code provides that to award
moral damages in a breach of contract, the defendant must act fraudulently or in bad faith. In this case,
Spouses Rabaja failed to sufficiently show that Spouses Salvador acted in a fraudulent manner or with bad
faith when it breached the contract of sale. Thus, the award of moral damages cannot be warranted.

As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary damages
may be imposed by way of example or correction for the public good, in addition to the moral, temperate,
liquidated or compensatory damages.54 The claimant must first establish his right to moral, temperate,
liquidated or compensatory damages. In this case, considering that Spouses Rabaja failed to prove moral or
compensatory damages, then there could be no award of exemplary damages.

With regard to attorneys fees, neither Spouses Rabaja nor Gonzales is entitled to the award. The settled rule
is that no premium should be placed on the right to litigate and that not every winning party is entitled to an
automatic grant of attorneys fees.55 The RTC reasoned that Gonzales was forced to litigate due to the acts
of Spouses Salvador. The Court does not agree. Gonzales, as agent of Spouses Salvador, should have
expected that she would be called to litigation in connection with her fiduciary duties to the principal.

In view of all the foregoing, the CA decision should be affirmed with the following modifications: chanRobl esvirtual Lawli brary

1. The order requiring defendant Spouses Rolando and

Herminia Salvador to pay plaintiffs the amount of Five
Hundred Ninety Three Thousand (P593,000.00) Pesos,
representing the amount garnished from the Metrobank
deposit of plaintiffs as for their back rentals should
be deleted; chanrob leslaw

2. The award of moral damages in the amount of Twenty

Thousand (P20,000.00) Pesos; exemplary damages in the
amount of Twenty Thousand (P20,000.00) Pesos, and
attorneys fees in the amount of One Hundred Thousand
(P100,000.00) Pesos in favor of Spouses Rabaja should
be deleted; and

3. The award of attorneys fees in amount of One Hundred

Thousand (P100,000.00) Pesos in favor of Gonzales should
be deleted.

The other amounts awarded are subject to interest at the legal rate of 6% per annum, to be reckoned from
the date of finality of this judgment until fully paid.

WHEREFORE, the petition is PARTLY GRANTED. The March 29, 2007 Decision of the Regional Trial Court,
Branch 214, Mandaluyong City, in Civil Case No. MC-03-2175, is MODIFIED to read as follows: chanRobl esvirtual Lawli brary

WHEREFORE, this Court renders judgment as follows: chanRob lesvir tualLa wlibra ry

1. Ordering the Contract to Sell entered into by Spouses

Rogelio and Elizabeth Rabaja and Spouses Rolando and
Herminia Salvador on July 24, 1998 as RESCINDED; chanrob leslaw

2. Ordering Spouses Rolando and Herminia Salvador to pay

Spouses Rogelio and Elizabeth Rabaja: chanRob lesvir tualLa wlibra ry

1. The amount of Nine Hundred Fifty Thousand

(P950,000.00) Pesos, representing the payments
made by the latter for the purchase of the subject
property; and
2. The cost of suit; chanrob leslaw
 3. Dismissing the counterclaims of Spouses Rolando and
Herminia Salvador and Rosario Gonzales against Spouses
Rogelio and Elizabeth Rabaja

The amounts awarded are subject to interest at the legal rate

of 6% per annum to be reckoned from the date of finality of this
judgment until fully paid.
As aforestated, this is without prejudice to the invocation by either party of the Civil Code provisions on legal
compensation or set-off under Articles 1278, 1279 and 1270.

SO ORDERED.

Carpio, (Chairperson), Velasco, Jr.,*Del Castillo, and Leonen, JJ., concur.

Endnotes:

*
Designated Acting member in lieu of Associate Justice Arturo
D. Brion, per Special Order No. 1910, dated January 12, 2015.

1
Penned by Associate Justice Agnes Reyes-Carpio with
Associate Justice Fernanda Lampas Peralta and Associate Justice
Priscilla Baltazar-Padilla, concurring; rollo, pp. 50-73.

2
Id. at 75-76.

3
Id. at p. 101.

4
Id. at p. 102.

5
Records, pp. 433-436.

6
Id. at 432.

7
Id. at p. 438.

8
Id. at 439-446.

9
Penned by Associate Justice Amelita Tolentino with Associate
Justice Portia Alino Hormachuelos and Associate Justice Vicente
S.E. Veloso, concurring; rollo, pp. 136-145.

10
Id. at 146.
11
Id. at 79-83.

12
Id. at 84-90.

13
Id. at 91-94.

14
Id. at 105-112.

15
Id. at 113-115.

16
Id. at 124-125.

17
Penned by Judge Edwin D. Sorongon; id. at 126-134.

18
Id. at 132.

19
Id. at 133-134.

20
CA rollo, p. 64.

21
Rollo, pp.72-73.

22
Id. at 23-24.

23
Id. at 242-247.

24
Id. at 296-299.

25
Id. at 308-310.

26
Id. at 314-316.

27
Land Bank of the Philippines v. Yatco Agricultural Enterprises,
G.R. No.172551, January 15, 2014, 713 SCRA 370, 379.

28
Rollo, p. 33.

29
Sec. 3, Rule 9. Default; declaration of.

If the defending party fails to answer within the time allowed

therefor, the court shall, upon motion of the claiming party
with notice to the defending party, and proof of such failure,
declare the defending party in default. Thereupon, the court
shall proceed to render judgment granting the claimant such
relief as his pleading may warrant, unless the court in its
discretion requires the claimant to submit evidence. Such
reception of evidence may be delegated to the clerk of court.

x x x x

30
645 Phil. 166, 174-175 (2010).

31
Tolentino v. Laurel, G.R. No. 181368, February 22, 2012, 666
SCRA 561, 569-570.

32
Balatico Vda. De Agatep v. Rodriguez, 619 Phil. 632, 642 (2009).
33
Chingkoe v. Republic, G.R. No. 183608, July 31, 2013,
(http://sc.judiciary.gov.ph/jurisprudence/2013/july2013/183
608.pdf [last accessed January 13, 2015]).

34
Rollo, p. 114.

35
Yoshizaki v. Joy Training Center f Aurora Inc., G.R. No. 174978,
July 31, 2013
(http://sc.judiciary.gov.ph/jurisprudence/2013/july2013/174
978.pdf [last accessed: January 13, 2015]).

36
Country Bankers Insurance Corporation v. Keppel Cebu Shipyard,
G.R. No. 166044, June 18, 2012, 673 SCRA 427, 451.

37
Rollo, p. 174.

38
Article 1910, New Civil Code.

39
Id. at 71.

40
Rollo, p. 14.

41
Id. at 146.

42
Mauleon v. Porter, G.R. No. 203288, July 18, 2014.
43
Rollo, pp. 136-145.

44
Edillo v. Dulpina, 624 Phil. 587, 600-601, (2010).
45
CA rollo, p. 143.

46
Rollo, p. 36.

47
Records, pp. 433-436.

48
Id. 437.

49
Id. 438.

50
Rollo, pp. 79-82.

51
Diona v. Balangue, G.R. No. 173559, January 7, 2013, 688 SCRA
22, 35.

52
Art. 1278. Compensation shall take place when two persons,
in their own right, are creditors and debtors of each other.

Art. 1279. In order that compensation may be proper, it is

necessary: chanRob lesvir tualLa wlibra ry

(1) That each one of the obligors be bound principally, and that
he be at the same time a principal creditor of the other; chanrob leslaw

(2) That both debts consist in a sum of money, or if the things

due are consumable, they be of the same kind, and also of the
same quality if the latter has been stated; chanrob leslaw

(3) That the two debts be due; chanrob leslaw

(4) That they be liquidated and demandable; chanrob leslaw

(5) That over neither of them there be any retention or

controversy, commenced by third persons and communicated in due
time to the debtor.
xxx

Art. 1290. When all the requisites mentioned in Article 1279

are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though
the creditors and debtors are not aware of the compensation.

53
Rudolf Lietz, Inc. v. Court of Appeals, 514 Phil. 634, 644,
(2005).

54
Metropolitan Bank and Trust Company v. Rosales, G.R. No.
183204, January 13, 2014.

55
First Lepanto-Taisho Insurance Corporation v. Chevron
Philippines, Inc., G.R. No. 177839, January 18, 2012, 663 SCRA
309, 325.
 Republic of the Philippines
Supreme Court
Manila
FIRST DIVISION

COUNTRY BANKERS G.R. No. 166044

INSURANCE CORPORATION,
Petitioner, Present:

LEONARDO-DE CASTRO,*
- versus - Acting Chairperson,
BERSAMIN,
DEL CASTILLO,
KEPPEL CEBU SHIPYARD, VILLARAMA, JR., and
UNIMARINE SHIPPING LINES, PERLAS-BERNABE,** JJ.
INC., PAUL RODRIGUEZ,
PETER RODRIGUEZ, ALBERT
HONTANOSAS, and Promulgated:
BETHOVEN QUINAIN,
Respondents. June 18, 2012
x--------------------------------------------------x

DECISION

LEONARDO-DE CASTRO, J.:

This is a petition for review on certiorari[1] to reverse and set aside

the January 29, 2004 Decision[2] and October 28, 2004 Resolution[3] of the
Court of Appeals in CA-G.R. CV No. 58001, wherein the Court of Appeals
affirmed with modification the February 10, 1997 Decision[4] of the
Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No.
CBB-13447.
Hereunder are the undisputed facts as culled from the records of the case.

On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a

corporation engaged in the shipping industry, contracted the services of
Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering
Works, Inc. (Cebu Shipyard), for dry docking and ship repair works on its
vessel, the M/V Pacific Fortune.[5]

On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to

Unimarine in consideration for its services, which amounted
to P4,486,052.00.[6] Negotiations between Cebu Shipyard and Unimarine
led to the reduction of this amount to P3,850,000.00. The terms of this
agreement were embodied in Cebu Shipyards February 18, 1992 letter to the
President/General Manager of Unimarine, Paul Rodriguez, who signed his
conformity to said letter, quoted in full below:

18 February 1992
Ref No.: LL92/0383

UNIMARINE SHIPPING LINES, INC.

C/O Autographics, Inc.
Gorordo Avenue, Lahug, Cebu City

Attention: Mr. Paul Rodriguez

President/General Manager

This is to confirm our agreement on the shiprepair bills charged for the
repair of MV Pacific Fortune, our invoice no. 26035.

The shiprepair bill (Bill No. 26035) is agreed at a negotiated amount

of P3,850,000.00 excluding VAT.

Unimarine Shipping Lines, Inc. (Unimarine) will pay the above amount of
[P3,850,000.00] in US Dollars to be fixed at the prevailing USDollar to
Philippine Peso exchange rate at the time of payment. The payment terms
to be extended to Unimarine is as follows:

Installments Amount Due Date

1 Installment
st
P2,350,000.00 30 May 1992
2nd Installment P1,500,000.00 30 Jun 1992
 Unimarine will deposit post-dated checks equivalent to the above
amounts in Philippine Peso and an additional check amount
of P385,000.00, representing 10% [Value Added Tax] VAT on the above
bill of P3,850,000.00. In the event that Unimarine fails to make full
payment on the above due dates in US Dollars, the post-dated checks will
be deposited by CSEW in payment of the amounts owned by Unimarine
and Unimarine agree that the 10% VAT (P385,000.00) shall also become
payable to CSEW.

Unimarine in consideration of the credit terms extended by CSEW and

the release of the vessel before full payment of the above debt, agree to
present CSEW surety bonds equal to 120% of the value of the credit
extended. The total bond amount shall be P4,620,000.00.

Yours faithfully,

CEBU SHIPYARD & ENGG WORKS, INC Conforme:

(SGD) (SGD)______
SEET KENG TAT PAUL RODRIGUEZ
Treasurer/VP-Admin. Unimarine Shipping
Lines, Inc.[7]

In compliance with the agreement, Unimarine, through Paul

Rodriguez, secured from Country Bankers Insurance Corp. (CBIC), through
the latters agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16)
29419[8] (the surety bond) on January 15, 1992 in the amount
of P3,000,000.00. The expiration of this surety bond was extended to
January 15, 1993, through Endorsement No. 33152[9] (the endorsement),
which was later on attached to and formed part of the surety bond. In
addition to this, Unimarine, on February 19, 1992, obtained another bond
from Plaridel Surety and Insurance Co. (Plaridel), PSIC Bond No. G
(16)-00365[10] in the amount of P1,620,000.00.

On February 17, 1992, Unimarine executed a Contract of

Undertaking in favor of Cebu Shipyard. The pertinent portions of the
contract read as follows:

Messrs, Uni-Marine Shipping Lines, Inc. (the Debtor) of Gorordo

Avenue, Cebu City hereby acknowledges that in consideration of Cebu
 Shipyard & Engineering Works, Inc. (Cebu Shipyard) at our request
agreeing to release the vessel specified in part A of the Schedule (name of
vessel) prior to the receipt of the sum specified in part B of the Schedule
(Moneys Payable) payable in respect of certain works performed or to be
performed by Cebu Shipyard and/or its subcontractors and/or material and
equipment supplied or to be supplied by Cebu Shipyard and/or its
subcontractors in connection with the vessel for the party specified in part
C of the Schedule (the Debtor), we hereby unconditionally, irrevocably
undertake to make punctual payment to Cebu Shipyard of the Moneys
Payable on the terms and conditions as set out in part B of the
Schedule. We likewise hereby expressly waive whatever right of
excussion we may have under the law and equity.

This contract shall be binding upon Uni-Marine Shipping Lines, Inc., its
heirs, executors, administrators, successors, and assigns and shall not be
discharged until all obligation of this contract shall have been faithfully
and fully performed by the Debtor.[11]

Because Unimarine failed to remit the first installment when it became due
on May 30, 1992, Cebu Shipyard was constrained to deposit the peso check
corresponding to the initial installment of P2,350,000.00. The check,
however, was dishonored by the bank due to insufficient funds.[12] Cebu
Shipyard faxed a message to Unimarine, informing it of the situation, and
reminding it to settle its account immediately.[13]
On June 24, 1992, Cebu Shipyard again faxed a message[14] to
Unimarine, to confirm Paul Rodriguezs promise that Unimarine will pay in
full the P3,850,000.00, in US Dollars on July 1, 1992.

Since Unimarine failed to deliver on the above promise, Cebu

Shipyard, on July 2, 1992, through a faxed letter, asked Unimarine if the
payment could be picked up the next day. This was followed by another
faxed message on July 6, 1992, wherein Cebu Shipyard reminded
Unimarine of its promise to pay in full on July 28, 1992. On August 24,
1992, Cebu Shipyard again faxed[15] Unimarine, to inform it that interest
charges will have to be imposed on their outstanding debt, and if it still fails
to pay before August 28, 1992, Cebu Shipyard will have to enforce payment
against the sureties and take legal action.
 On November 18, 1992, Cebu Shipyard, through its counsel, sent
Unimarine a letter,[16] demanding payment, within seven days from receipt
of the letter, the amount of P4,859,458.00, broken down as follows:

B#26035 MV PACIFIC FORTUNE 4,486,052.00

LESS: ADJUSTMENT:
CN#00515-03/19/92 (636,052.00)
------------------
3,850,000.00
Add: VAT on repair bill no. 26035 385,000.00
------------------
4,235,000.00
Add: Interest/penalty charges:
Debit Note No. 02381 189,888.00
Debit Note No. 02382 434,570.00
------------------
4,859,458.00[17]

Due to Unimarines failure to heed Cebu Shipyards repeated demands, Cebu

Shipyard, through counsel, wrote the sureties CBIC[18] on November 18,
1992, and Plaridel,[19] on November 19, 1992, to inform them of Unimarines
nonpayment, and to ask them to fulfill their obligations as sureties, and to
respond within seven days from receipt of the demand.

However, even the sureties failed to discharge their obligations, and so

Cebu Shipyard filed a Complaint dated January 8, 1993, before the RTC,
Branch 18 of Cebu City, against Unimarine, CBIC, and Plaridel. This was
docketed as Civil Case No. CBB-13447.

CBIC, in its Answer,[20] said that Cebu Shipyards complaint states no cause
of action. CBIC alleged that the surety bond was issued by its agent,
Quinain, in excess of his authority. CBIC claimed that Cebu Shipyard
should have doubted the authority of Quinain to issue the surety bond based
on the following:

1. The nature of the bond undertaking (guarantee payment), and the

amount involved.
 2. The surety bond could only be issued in favor of the Department
of Public Works and Highways, as stamped on the upper right
portion of the face of the bond.[21] This stamp was covered by
documentary stamps.
3. The issuance of the surety bond was not reported, and the
corresponding premiums were not remitted to CBIC.[22]

CBIC added that its liability was extinguished when, without its
knowledge and consent, Cebu Shipyard and Unimarine novated their
agreement several times. Furthermore, CBIC stated that Cebu Shipyards
claim had already been paid or extinguished when Unimarine executed an
Assignment of Claims[23] of the proceeds of the sale of its vessel M/V
Headline in favor of Cebu Shipyard. CBIC also averred that Cebu Shipyards
claim had already prescribed as the endorsement that extended the surety
bonds expiry date, was not reported to CBIC. Finally, CBIC asseverated that
if it were held to be liable, its liability should be limited to the face value of
the bond and not for exemplary damages, attorneys fees, and costs of
litigation.[24]

Subsequently, CBIC filed a Motion to Admit Cross and Third Party

Complaint[25] against Unimarine, as cross defendant; Paul Rodriguez, Albert
Hontanosas, and Peter Rodriguez, as signatories to the Indemnity
Agreement they executed in favor of CBIC; and Bethoven Quinain, as the
agent who issued the surety bond and endorsement in excess of his authority,
as third party defendants.[26]

CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter

Rodriguez executed an Indemnity Agreement, wherein they bound
themselves, jointly and severally, to indemnify CBIC for any amount it may
sustain or incur in connection with the issuance of the surety bond and the
endorsement.[27] As for Quinain, CBIC alleged that he exceeded his
authority as stated in the Special Power of Attorney, wherein he was
authorized to solicit business and issue surety bonds not
exceeding P500,000.00 but only in favor of the Department of Public Works
and Highways, National Power Corporation, and other government
agencies.[28]

On August 23, 1993, third party defendant Hontanosas filed his

Answer with Counterclaim, to the Cross and Third Party
Complaint. Hontanosas claimed that he had no financial interest in
Unimarine and was neither a stockholder, director nor an officer of
Unimarine. He asseverated that his relationship to Unimarine was limited to
his capacity as a lawyer, being its retained counsel. He further denied
having any participation in the Indemnity Agreement executed in favor of
CBIC, and alleged that his signature therein was forged, as he neither signed
it nor appeared before the Notary Public who acknowledged such
undertaking.[29]

Various witnesses were presented by the parties during the course of

the trial of the case. Myrna Obrinaga testified for Cebu Shipyard. She was
the Chief Accountant in charge of the custody of the documents of the
company. She corroborated Cebu Shipyards allegations and produced in
court the documents to support Cebu Shipyards claim. She also testified that
while it was true that the proceeds of the sale of Unimarines vessel, M/V
Headline, were assigned to Cebu Shipyard, nothing was turned over to
them.[30]

Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard

for the repairs it did on M/V Pacific Fortune, despite the extensions granted
to Unimarine. He claimed that he signed the Indemnity Agreement because
he trusted Quinain that it was a mere pre-requisite for the issuance of the
surety bond. He added that he did not bother to read the documents and he
was not aware of the consequences of signing an Indemnity
Agreement. Paul Rodriguez also alleged to not having noticed the limitation
Valid only in favor of DPWH stamped on the surety bond.[31] However,
Paul Rodriguez did not contradict the fact that Unimarine failed to pay Cebu
Shipyard its obligation.[32]
 CBIC presented Dakila Rianzares, the Senior Manager of its Bonding
Department. Her duties included the evaluation and approval of all
applications for and reviews of bonds issued by their agents, as authorized
under the Special Power of Attorney and General Agency Contract of
CBIC. Rianzares testified that she only learned of the existence of CBIC
Surety Bond No. G (16) 29419 when she received the summons for this
case.Upon investigation, she found out that the surety bond was not reported
to CBIC by Quinain, the issuing agent, in violation of their General Agency
Contract, which provides that all bonds issued by the agent be reported to
CBICs office within one week from the date of issuance. She further stated
that the surety bond issued in favor of Unimarine was issued beyond
Quinains authority. Rianzares added that she was not aware that an
endorsement pertaining to the surety bond was also issued by Quinain.[33]

After the trial, the RTC was faced with the lone issue of whether or
not CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16)
29419.[34]
On February 10, 1997, the RTC rendered its Decision, the fallo of
which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff

Cebu Shipyard & Engineering Works, Incorporated and against the
defendants:

1. Ordering the defendants Unimarine Shipping Lines,

Incorporated, Country Bankers Insurance Corporation and Plaridel Surety
and Insurance Corporation to pay plaintiff jointly and severally the
amount of P4,620,000.00 equivalent to the value of the surety bonds;

2. Ordering further defendant Unimarine to pay plaintiff the

amount of P259,458.00 to complete its entire obligation of P4,859,458.00;

3. To pay plaintiff jointly and severally the amount

of P100,000.00 in attorneys fees and litigation expenses;

4. For Cross defendant Unimarine Shipping Lines, Incorporated

and Third party defendants Paul Rodriguez, Peter Rodriguez and Alber[t]
Hontanosas: To indemnify jointly and severally, cross plaintiff and third
party plaintiff Country Bankers Insurance Corporation whatever amount
the latter is made to pay to plaintiff.[35]
 The RTC held that CBIC, in its capacity as surety is bound with its
principal jointly and severally to the extent of the surety bond it issued in
favor of [Cebu Shipyard] because although the contract of surety is in
essence secondary only to a valid principal obligation, his liability to [the]
creditor is said to be direct, primary[,] and absolute, in other words, he is
bound by the principal.[36] The RTC added:

Solidary obligations on the part of Unimarine and CBIC having

been established and expressly stated in the Surety Bond No. 29419 (Exh.
C), [Cebu Shipyard], therefore, is entitled to collect and enforce said
obligation against any and or both of them, and if and when CBIC pays, it
can compel its co-defendant Unimarine to reimburse to it the amount it
has paid.[37]

The RTC found CBICs contention that Quinain acted in excess of his
authority in issuing the surety bond untenable. The RTC held that CBIC is
bound by the surety bond issued by its agent who acted within the apparent
scope of his authority. The RTC said:

[A]s far as third persons are concerned, an act is deemed to have been
performed within the scope of the agents authority, if such act is within
the terms of the powers of attorney as written, even if the agent has in fact
exceeded the limits of his authority according to an understanding
between the principal and the agent.[38]

All the defendants appealed this Decision to the Court of Appeals.

Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas

argued that Unimarines obligation under Bill No. 26035 had been
extinguished by novation, as Cebu Shipyard had agreed to accept the
proceeds of the sale of the M/V Headline as payment for the ship repair
works it did on M/V Pacific Fortune. Paul Rodriguez and Peter Rodriguez
added that such novation also freed them from their liability under the
Indemnity Agreement they signed in favor of CBIC. Albert Hontanosas in
turn reiterated that he did not sign the Indemnity Agreement.[39][SC1]
 CBIC, in its Appellants Brief,[40] claimed that the RTC erred in
enforcing its liability on the surety bond as it was issued in excess of
Quinains authority. Moreover, CBIC averred, its liability under such surety
had been extinguished by reasons of novation, payment, and
prescription. CBIC also questioned the RTCs order, holding it jointly and
severally liable with Unimarine and Plaridel for the amount
of P4,620,000.00, a sum larger than the face value of CBIC Surety Bond No.
G (16) 29419, and why the RTC did not hold Quinain liable to indemnify
CBIC for whatever amount it was ordered to pay Cebu Shipyard.

On January 29, 2004, the Court of Appeals promulgated its decision,

with the following dispositive portion:

WHEREFORE, in view of the foregoing, the respective appeal[s] filed

by Defendants-Appellants Unimarine Shipping Lines, Inc. and Country
Bankers Insurance Corporation; Cross-Defendant-Appellant Unimarine
Shipping Lines, Inc. and; Third-Party Defendants-Appellants Paul
Rodriguez, Peter Rodriguez and Albert Hontanosas are
hereby DENIED. The decision of the RTC in Civil Case No. CEB-13447
dated February 10, 1997 is AFFIRMED with modification that Mr.
Bethoven Quinain, CBICs agent is hereby held jointly and severally liable
with CBIC by virtue of Surety Bond No. 29419 executed in favor of
plaintiff-appellee CSEW.[41]

In its decision, the Court of Appeals resolved the following issues, as it had
summarized from the parties pleadings:

I. Whether or not UNIMARINE is liable to [Cebu Shipyard] for a

sum of money arising from the ship-repair contract;

II. Whether or not the obligation of UNIMARINE to [Cebu Shipyard]

has been extinguished by novation;

III. Whether or not Defendant-Appellant CBIC, allegedly being the

Surety of UNIMARINE is liable under Surety Bond No. 29419[;]

IV. Whether or not Cross Defendant-Appellant UNIMARINE and

Third-Party Defendants-Appellants Paul Rodriguez, Peter Rodriguez,
Albert Hontanosas and Third-Party Defendant Bethoven Quinain are
 liable by virtue of the Indemnity Agreement executed between them and
Cross and Third Party Plaintiff CBIC;

V. Whether or not Plaintiff-Appellee [Cebu Shipyard] is entitled to the

award of P100,000.00 in attorneys fees and litigation expenses.[42]

The Court of Appeals held that it was duly proven that Unimarine
was liable to Cebu Shipyard for the ship repair works it did on the formers
M/V Pacific Fortune. The Court of Appeals dismissed CBICs contention of
novation for lack of merit.[43] CBIC was held liable under the surety bond as
there was no novation on the agreement between Unimarine and Cebu
Shipyard that would discharge CBIC from its obligation. The Court of
Appeals also did not allow CBIC to disclaim liability on the ground that
Quinain exceeded his authority because third persons had relied upon
Quinains representation, as CBICs agent.[44] Quinain was, however, held
solidarily liable with CBIC under Article 1911 of the Civil Code.[45]

Anent the liability of the signatories to the Indemnity Agreement, the

Court of Appeals held Paul Rodriguez, Peter Rodriguez, and Albert
Hontanosas jointly and severally liable thereunder. The Court of Appeals
rejected Hontanosass claim that his signature in the Indemnity Agreement
was forged, as he was not able to prove it.[46]

The Court of Appeals affirmed the award of attorneys fees and litigation
expenses to Cebu Shipyard since it was able to clearly establish the
defendants liability, which they tried to dodge by setting up defenses to
release themselves from their obligation.[47]

CBIC[48]and Unimarine, together with third party

defendants-appellants[49] filed their respective Motions for
Reconsideration. This was, however, denied by the Court of Appeals in its
October 28, 2004 Resolution for lack of merit.

Unimarine elevated its case to this Court via a petition for review
on certiorari, docketed as G.R. No. 166023, which was denied in a
Resolution dated January 19, 2005.[50]
 The lone petitioner in this case, CBIC, is now before this Court,
seeking the reversal of the Court of Appeals decision and resolution on the
following grounds:

A.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED

IN APPLYING THE PROVISIONS OF ARTICLE 1911 OF THE
CIVIL CODE TO HOLD PETITIONER LIABLE FOR THE ACTS
DONE BY ITS AGENT IN EXCESS OF AUTHORITY.

B.

THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED

IN HOLDING THAT AN EXTENSION OF THE PERIOD FOR
THE PERFORMANCE OF AN OBLIGATION GRANTED BY THE
CREDITOR TO THE PRINCIPAL DEBTOR IS NOT SUFFICIENT
TO RELEASE THE SURETY.

C.

ASSUMING THAT PETITIONER IS LIABLE UNDER THE BOND,

THE HONORABLE COURT OF APPEALS NONETHELESS
SERIOUSLY ERRED IN AFFIRMING THE SOLIDARY
LIABILITY OF PETITIONER BEYOND THE VALUE OF THE
BOND.

D.

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING

PETITIONER JOINTLY AND SEVERALLY LIABLE FOR
ATTORNEYS FEES IN THE AMOUNT OF P100,000.00.[51]

Issue

The crux of the controversy lies in CBICs liability on the surety bond
Quinain issued to Unimarine, in favor of Cebu Shipyard.

CBIC avers that the Court of Appeals erred in interpreting and applying the
rules governing the contract of agency. It argued that the Special Power of
Attorney granted to Quinain clearly set forth the extent and limits of his
authority with regard to businesses he can transact for and in behalf of
CBIC. CBIC added that it was incumbent upon Cebu Shipyard to inquire
and look into the power of authority conferred to Quinain. CBIC said:

The authority to bind a principal as a guarantor or surety is one of those

powers which requires a Special Power of Attorney pursuant to Article
1878 of the Civil Code. Such power could not be simply assumed or
inferred from the mere existence of an agency. A person who enters
into a contract of suretyship with an agent without confirming the extent
of the latters authority does so at his peril. x x x.[52]

CBIC claims that the foregoing is true even if Quinain was granted
the authority to transact in the business of insurance in general, as the
authority to bind the principal in a contract of suretyship could
nonetheless never be presumed.[53] Thus, CBIC claims, that:

[T]hird persons seeking to hold the principal liable for transactions

entered into by an agent should establish the following, in case the same
is controverted:

6.6.1. The fact or existence of the agency.

6.6.2. The nature and extent of authority.[54]

To go a little further, CBIC said that the correct Civil Code provision
to apply in this case is Article 1898. CBIC asserts that Cebu Shipyard was
charged with knowledge of the extent of the authority conferred on Mr.
Quinain by its failure to perform due diligence investigations.[55]
Cebu Shipyard, in its Comment[56] first assailed the propriety of the
petition for raising factual issues. In support, Cebu Shipyard claimed that
the Court of Appeals application of Article 1911 of the Civil Code was
founded on findings of facts that CBIC now disputes. Thus, the question is
not purely of law.
Discussion

The fact that Quinain was an agent of CBIC was never put in issue. What
has always been debated by the parties is the extent of authority or, at the
very least, apparent authority, extended to Quinain by CBIC to transact
insurance business for and in its behalf.

In a contract of agency, a person, the agent, binds himself to represent

another, the principal, with the latters consent or authority.[57] Thus, agency
is based on representation, where the agent acts for and in behalf of the
principal on matters within the scope of the authority conferred upon
him.[58] Such acts have the same legal effect as if they were personally done
by the principal. By this legal fiction of representation, the actual or legal
absence of the principal is converted into his legal or juridical presence.[59]

The RTC applied Articles 1900 and 1911 of the Civil Code in holding
CBIC liable for the surety bond. It held that CBIC could not be allowed to
disclaim liability because Quinains actions were within the terms of the
special power of attorney given to him.[60] The Court of Appeals agreed that
CBIC could not be permitted to abandon its obligation especially since third
persons had relied on Quinains representations. It based its decision on
Article 1911 of the Civil Code and found CBIC to have been negligent and
less than prudent in conducting its insurance business for its failure to
supervise and monitor the acts of its agents, to regulate the distribution of its
insurance forms, and to devise schemes to prevent fraudulent
misrepresentations of its agents.[61]

This Court does not agree. Pertinent to this case are the following
provisions of the Civil Code:

Art. 1898. If the agent contracts in the name of the principal,

exceeding the scope of his authority, and the principal does not ratify the
contract, it shall be void if the party with whom the agent contracted is
aware of the limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the principals
ratification.
Art. 1900. So far as third persons are concerned, an act is deemed
to have been performed within the scope of the agents authority, if such
act is within the terms of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.
 Art. 1902. A third person with whom the agent wishes to contract
on behalf of the principal may require the presentation of the power of
attorney, or the instructions as regards the agency. Private or secret orders
and instructions of the principal do not prejudice third persons who have
relied upon the power of attorney or instructions shown to them.

Art. 1910. The principal must comply with all the obligations
which the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power,
the principal is not bound except when he ratifies it expressly or tacitly.

Art. 1911. Even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the latter
to act as though he had full powers.

Our law mandates an agent to act within the scope of his

authority.[62] The scope of an agents authority is what appears in the written
terms of the power of attorney granted upon him.[63] Under Article 1878(11)
of the Civil Code, a special power of attorney is necessary to obligate the
principal as a guarantor or surety.

In the case at bar, CBIC could be held liable even if Quinain

exceeded the scope of his authority only if Quinains act of issuing Surety
Bond No. G (16) 29419 is deemed to have been performed within the
written terms of the power of attorney he was granted.[64]

However, contrary to what the RTC held, the Special Power of

Attorney accorded to Quinain clearly states the limits of his authority and
particularly provides that in case of surety bonds, it can only be issued in
favor of the Department of Public Works and Highways, the National Power
Corporation, and other government agencies; furthermore, the amount of the
surety bond is limited to P500,000.00, to wit:

SPECIAL POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS:

That, COUNTRY BANKERS INSURANCE CORPORATION, a

corporation duly organized and existing under and by virtue of the laws of
the Philippines, with head offices at 8th Floor, G.F. Antonino Building,
T.M. Kalaw Street, Ermita, Manila, now and hereinafter referred to as the
Company hereby appoints BETHOVEN B. QUINAIN with address at x x
x to be its General Agent and Attorney-in-Fact, for and in its place, name
and stead, and for its own use and benefit, to do and perform the
following acts and things:

1. To conduct, manage, carry on and transact insurance business

as usually pertains to a General Agency of Fire, Personal Accident, Bond,
Marine, Motor Car (Except Lancer).

2. To accept, underwrite and subscribe policies of insurance for

and in behalf of the Company under the terms and conditions specified in
the General Agency Contract executed and entered into by and between it
and its said Attorney-in-Fact subject to the following Schedule of Limits:

- SCHEDULE OF LIMITS -

a. FIRE:

xxxx
b. PERSONAL ACCIDENT:

xxxx

c. MOTOR CAR:

xxxx

d. MARINE:

xxxx

e. BONDS:

xxxx

Surety Bond (in favor of Dept. of Pub. Works and

Highways, Natl. Power Corp. & other. 500,000.00
 Government agencies)[65]

CBIC does not anchor its defense on a secret agreement, mutual

understanding, or any verbal instruction to Quinain. CBICs stance is
grounded on its contract with Quinain, and the clear, written terms
therein. This Court finds that the terms of the foregoing contract specifically
provided for the extent and scope of Quinains authority, and Quinain has
indeed exceeded them.

Under Articles 1898 and 1910, an agents act, even if done beyond the
scope of his authority, may bind the principal if he ratifies them, whether
expressly or tacitly. It must be stressed though that only the principal, and
not the agent, can ratify the unauthorized acts, which the principal must
have knowledge of.[66] Expounding on the concept and doctrine of
ratification in agency, this Court said:

Ratification in agency is the adoption or confirmation by one

person of an act performed on his behalf by another without
authority. The substance of the doctrine is confirmation after conduct,
amounting to a substitute for a prior authority. Ordinarily, the principal
must have full knowledge at the time of ratification of all the material
facts and circumstances relating to the unauthorized act of the person who
assumed to act as agent. Thus, if material facts were suppressed or
unknown, there can be no valid ratification and this regardless of the
purpose or lack thereof in concealing such facts and regardless of the
parties between whom the question of ratification may
arise. Nevertheless, this principle does not apply if the principals
ignorance of the material facts and circumstances was willful, or that the
principal chooses to act in ignorance of the facts. However, in the
absence of circumstances putting a reasonably prudent man on
inquiry, ratification cannot be implied as against the principal who is
ignorant of the facts.[67] (Emphases supplied.)

Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs

testimony that it was unaware of the existence of Surety Bond No. G (16)
29419 and Endorsement No. 33152. There were no allegations either that
CBIC should have been put on alert with regard to Quinains business
transactions done on its behalf. It is clear, and undisputed therefore, that
there can be no ratification in this case, whether express or implied.

Article 1911, on the other hand, is based on the principle of estoppel,

which is necessary for the protection of third persons. It states that the
principal is solidarily liable with the agent even when the latter has
exceeded his authority, if the principal allowed him to act as though he had
full powers. However, for an agency by estoppel to exist, the following
must be established:

1. The principal manifested a representation of the agents authority

or knowingly allowed the agent to assume such authority;
2. The third person, in good faith, relied upon such
representation; and
3. Relying upon such representation, such third person has changed
his position to his detriment.[68]

In Litonjua, Jr. v. Eternit Corp.,[69] this Court said that [a]n agency by
estoppel, which is similar to the doctrine of apparent authority, requires
proof of reliance upon the representations, and that, in turn, needs proof that
the representations predated the action taken in reliance.[70]

This Court cannot agree with the Court of Appeals pronouncement of

negligence on CBICs part. CBIC not only clearly stated the limits of its
agents powers in their contracts, it even stamped its surety bonds with the
restrictions, in order to alert the concerned parties. Moreover, its company
procedures, such as reporting requirements, show that it has designed a
system to monitor the insurance contracts issued by its agents. CBIC cannot
be faulted for Quinains deliberate failure to notify it of his transactions with
Unimarine. In fact, CBIC did not even receive the premiums paid by
Unimarine to Quinain.

Furthermore, nowhere in the decisions of the lower courts was it

stated that CBIC let the public, or specifically Unimarine, believe that
Quinain had the authority to issue a surety bond in favor of companies other
than the Department of Public Works and Highways, the National Power
Corporation, and other government agencies. Neither was it shown that
CBIC knew of the existence of the surety bond before the endorsement
extending the life of the bond, was issued to Unimarine. For one to
successfully claim the benefit of estoppel on the ground that he has been
misled by the representations of another, he must show that he was not
misled through his own want of reasonable care and circumspection.[71]

It is apparent that Unimarine had been negligent or less than prudent

in its dealings with Quinain. In Manila Memorial Park Cemetery, Inc. v.
Linsangan,[72] this Court held:

It is a settled rule that persons dealing with an agent are bound at

their peril, if they would hold the principal liable, to ascertain not only the
fact of agency but also the nature and extent of authority, and in case
either is controverted, the burden of proof is upon them to establish
it. The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover upon his peril the authority of
the agent. If he does not make such an inquiry, he is chargeable with
knowledge of the agents authority and his ignorance of that authority will
not be any excuse.

In the same case, this Court added:

[T]he ignorance of a person dealing with an agent as to the scope of the

latters authority is no excuse to such person and the fault cannot be
thrown upon the principal. A person dealing with an agent assumes the
risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agents assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the presumption
that third persons dealing with his agent will not be negligent in failing to
ascertain the extent of his authority as well as the existence of his
agency.[73]

Unimarine undoubtedly failed to establish that it even bothered to

inquire if Quinain was authorized to agree to terms beyond the limits
indicated in his special power of attorney. While Paul Rodriguez stated that
he has done business with Quinain more than once, he was not able to show
that he was misled by CBIC as to the extent of authority it granted
Quinain. Paul Rodriguez did not even allege that he asked for documents to
prove Quinains authority to contract business for CBIC, such as their
contract of agency and power of attorney. It is also worthy to note that even
with the Indemnity Agreement, Paul Rodriguez signed it on Quinains mere
assurance and without truly understanding the consequences of the terms of
the said agreement. Moreover, both Unimarine and Paul Rodriguez could
have inquired directly from CBIC to verify the validity and effectivity of the
surety bond and endorsement; but, instead, they blindly relied on the
representations of Quinain. As this Court held in Litonjua, Jr. v. Eternit
Corp.[74]:

A person dealing with a known agent is not authorized, under any

circumstances, blindly to trust the agents; statements as to the extent of
his powers; such person must not act negligently but must use reasonable
diligence and prudence to ascertain whether the agent acts within the
scope of his authority. 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. In this case, the petitioners failed to
discharge their burden; hence, petitioners are not entitled to damages from
respondent EC.[75]

In light of the foregoing, this Court is constrained to release CBIC from its
liability on Surety Bond No. G (16) 29419 and Endorsement No.
33152. This Court sees no need to dwell on the other grounds propounded
by CBIC in support of its prayer.

WHEREFORE, this petition is hereby GRANTED and the complaint

against CBIC is DISMISSED for lack of merit. The January 29,
2004 Decision and October 28, 2004 Resolution of the Court of Appeals
in CA-G.R. CV No. 58001 is MODIFIED insofar as it affirmed CBICs
liability on Surety Bond No. G (16) 29419 and Endorsement No. 33152.

SO ORDERED.
 TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Acting Chairperson, First Division

WE CONCUR:

LUCAS P. BERSAMIN
Associate Justice

MARIANO C. DEL CASTILLO MARTIN S. VILLARAMA, JR.

Associate Justice Associate Justice

ESTELA M. PERLAS-BERNABE
Associate Justice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Courts Division.

TERESITA J. LEONARDO-DE CASTRO

Associate Justice
Acting Chairperson, First Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the Division
Acting Chairpersons Attestation, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)

*
Per Special Order No. 1226 dated May 30, 2012.
**
Per Special Order No. 1227 dated May 30, 2012.
[1]
Under Rule 45 of the 1997 Rules of Court.
[2]
Rollo, pp. 31-55; penned by Associate Justice Jose C. Reyes, Jr. with Associate Justices Romeo A.
Brawner and Rebecca De Guia-Salvador, concurring.
[3]
Id. at 57-58.
[4]
CA rollo, pp. 25-33.
[5]
Rollo, pp. 81-82.
[6] Id. at 94-114.
[7]
Id. at 115.
[8]
Id. at 116-117.
[9]
Id. at 118.
[10]
Id. at 119-120.
[11]
Id. at 121.
[12]
Id. at 85.
[13]
Id. at 123.
[14]
Id. at 124.
[15]
Id. at 125-127.
[16]
Id. at 128-129.
[17]
Id. at 130.
[18]
Id. at 131-132.
[19]
Id. at 133.
[20]
Id. at 136-143.
[21]
Id. at 236.
[22]
Id. at 137.
[23]
CA rollo, p. 27.
[24]
Rollo, pp. 138-141.
[25]
Id. at 144-145.
[26]
CA rollo, pp. 42-43.
[27]
Rollo, p. 150.
[28]
Id. at 233-234.
[29]
Id. at 153-155.
[30]
CA rollo, p. 27.
[31]
Id. at 28.
[32]
Id. at 30.
[33]
Id. at 28-29.
[34]
Id. at 31.
[35]
Id. at 33.
[36]
Id. at 31.
[37]
Id.
[38]
Id. at 33.
[39]
Id. at 21-22.
[40]
Id. at 39-63.
[41]
Rollo, pp. 54-55.
[42]
Id. at 38.
[43]
Id. at 39-40.
[44]
Id. at 44-46.
[45]
Id. at 53.
[46]
Id. at 49-51.
[47]
Id. at 54.
[48]
CA rollo, pp. 240-252.
[49]
Id. at 253-256.
[50]
Rollo, p. 389.
[51]
Id. at 13-14.
[52]
Id. at 15.
[53]
Id. at 16.
[54]
Id. at 18.
[55]
Id. at 19.
[56]
Id. at 248-287.
[57]
CIVIL CODE, Art. 1868.
[58]
Id., Art. 1881.
[59]
Siredy Enterprises, Inc. v. Court of Appeals, 437 Phil. 580, 591 (2002).
[60]
CA rollo, pp. 31-32.
[61] Rollo, pp. 46-47.
[62] CIVIL CODE, Art. 1881.
[63]
Id., Art. 1900.
[64]
Id.
[65]
Rollo, pp. 233-234.
[66]
Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151319, November 22, 2004, 443 SCRA
377, 394.
[67]
Id. at 394-395.
[68]
Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, June 8, 2006, 490 SCRA 204, 224-225.
[69]
Id.
[70]
Id. at 225.
[71]
Manila Memorial Park Cemetery, Inc. v. Linsangan, supra note 66 at 397.
[72]
Id. at 391-392.
[73]
Id. at 392.
[74]
Supra note 68.
[75]
Id. at 223-224.