THIRD DIVISION

EUROTECH INDUSTRIAL TECHNOLOGIES, INC.,

Petitioner,

- versus -

EDWIN CUIZON and ERWIN CUIZON,

Respondents.

G.R. No. 167552

Present:

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

CALLEJO, SR.,

CHICO-NAZARIO, and

NACHURA, JJ.

Promulgated:

April 23, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a petition for review by certiorari assailing the Decision[1] of the Court of
Appeals dated 10 August 2004 and its Resolution[2] dated 17 March 2005 in CA-G.R. SP No.
71397 entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez. The
assailed Decision and Resolution affirmed the Order[3] dated 29 January 2002 rendered by
Judge Antonio T. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a
party defendant in Civil Case No. CEB-19672.

The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European

industrial equipment for customers here in the Philippines. It has as one of its customers
Impact Systems Sales (Impact Systems) which is a sole proprietorship owned by
respondent ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact
Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to ninety-one thousand three hundred thirty-eight (P91,338.00) pesos.
Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at
P250,000.00 with respondents making a down payment of fifty thousand pesos
(P50,000.00).[4] When the sludge pump arrived from the United Kingdom, petitioner
refused to deliver the same to respondents without their having fully settled their
indebtedness to petitioner. Thus, on 28 June 1995, respondent EDWIN and Alberto de
Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor
of petitioner, the pertinent part of which states:

1.) That ASSIGNOR[5] has an outstanding receivables from Toledo Power Corporation in the
amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS as payment for
the purchase of one unit of Selwood Spate 100D Sludge Pump;

2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE[6] the said receivables from Toledo Power Corporation in the amount of THREE
HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR
is the lawful recipient;

3.) That the ASSIGNEE does hereby accept this assignment.[7]

Following the execution of the Deed of Assignment, petitioner delivered to respondents the
sludge pump as shown by Invoice No. 12034 dated 30 June 1995.[8]

Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of

Assignment, proceeded to collect from Toledo Power Company the amount of P365,135.29
as evidenced by Check Voucher No. 0933[9] prepared by said power company and an
official receipt dated 15 August 1995 issued by Impact Systems.[10] Alarmed by this
development, petitioner made several demands upon respondents to pay their obligations.
As a result, respondents were able to make partial payments to petitioner. On 7 October
1996, petitioners counsel sent respondents a final demand letter wherein it was stated that
as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding interests
and attorneys fees.[11] Because of respondents failure to abide by said final demand letter,
petitioner instituted a complaint for sum of money, damages, with application for
preliminary attachment against herein respondents before the Regional Trial Court of Cebu
City.[12]

On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of
preliminary attachment.[13]

On 25 June 1997, respondent EDWIN filed his Answer[14] wherein he admitted petitioners
allegations with respect to the sale transactions entered into by Impact Systems and
petitioner between January and April 1995.[15] He, however, disputed the total amount of
Impact Systems indebtedness to petitioner which, according to him, amounted to only
P220,000.00.[16]

By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real
party in interest in this case. According to him, he was acting as mere agent of his principal,
which was the Impact Systems, in his transaction with petitioner and the latter was very
much aware of this fact. In support of this argument, petitioner points to paragraphs 1.2
and 1.3 of petitioners Complaint stating

1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the
proprietor of a single proprietorship business known as Impact Systems Sales (Impact
Systems for brevity), with office located at 46-A del Rosario Street, Cebu City, where he
may be served summons and other processes of the Honorable Court.

1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He
is the Sales Manager of Impact Systems and is sued in this action in such capacity.[17]

On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with
Motion for Summary Judgment. The trial court granted petitioners motion to declare
respondent ERWIN in default for his failure to answer within the prescribed period despite
the opportunity granted[18] but it denied petitioners motion for summary judgment in its
Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001.[19]
However, the conduct of the pre-trial conference was deferred pending the resolution by the
trial court of the special and affirmative defenses raised by respondent EDWIN.[20]

After the filing of respondent EDWINs Memorandum[21] in support of his special and
affirmative defenses and petitioners opposition[22] thereto, the trial court rendered its
assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in
this case. According to the trial court

A study of Annex G to the complaint shows that in the Deed of Assignment, defendant
Edwin B. Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact]
Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin
H. Cuizon is the proprietor; that plaintiff corporation is represented by its general manager
Alberto de Jesus in the contract which is dated June 28, 1995. A study of Annex H to the
complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H.
Cuizon, made a down payment of P50,000.00 that Annex H is dated June 30, 1995 or two
days after the execution of Annex G, thereby showing that [Impact] Systems Sales ratified
the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact]
Systems Sales, the principal, ratified the act of Edwin B. Cuizon, the agent, when it
accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was
deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified
the act of its agent and plaintiff knew about said ratification. Plaintiff could not say that the
subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact]
Systems Sales made a down payment of P50,000.00 two days later.

In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as
party defendant.[23]

Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court
of Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. The
dispositive portion of the now assailed Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by
the public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.[24]

Petitioners motion for reconsideration was denied by the appellate court in its Resolution
promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its
allowance, the following:

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT

RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON, IS
NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS
AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD.[25]

To support its argument, petitioner points to Article 1897 of the New Civil Code which
states:

Art. 1897. The agent who acts as such is not personally liable to the party with whom he
contracts, unless he expressly binds himself or exceeds the limits of his authority without
giving such party sufficient notice of his powers.

Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of
collecting the receivables from the Toledo Power Corporation notwithstanding the existence
of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said
collection did not revoke the agency relations of respondents, petitioner insists that ERWINs
action repudiated EDWINs power to sign the Deed of Assignment. As EDWIN did not
sufficiently notify it of the extent of his powers as an agent, petitioner claims that he should
be made personally liable for the obligations of his principal.[26]

Petitioner also contends that it fell victim to the fraudulent scheme of respondents who
induced it into selling the one unit of sludge pump to Impact Systems and signing the Deed
of Assignment. Petitioner directs the attention of this Court to the fact that respondents are
bound not only by their principal and agent relationship but are in fact full-blooded brothers
whose successive contravening acts bore the obvious signs of conspiracy to defraud
petitioner.[27]

In his Comment,[28] respondent EDWIN again posits the argument that he is not a real
party in interest in this case and it was proper for the trial court to have him dropped as a
defendant. He insists that he was a mere agent of Impact Systems which is owned by
ERWIN and that his status as such is known even to petitioner as it is alleged in the
Complaint that he is being sued in his capacity as the sales manager of the said business
venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states
that he was acting as a representative of Impact Systems in said transaction.

We do not find merit in the petition.

In a contract of agency, a person binds himself to render some service or to do something

in representation or on behalf of another with the latters consent.[29] The underlying
principle of the contract of agency is to accomplish results by using the services of others to
do a great variety of things like selling, buying, manufacturing, and transporting.[30] Its
purpose is to extend the personality of the principal or the party for whom another acts and
from whom he or she derives the authority to act.[31] It is said that the basis of agency is
representation, that is, the agent acts for and on behalf of the principal on matters within
the scope of his authority and said acts have the same legal effect as if they were personally
executed by the principal.[32] By this legal fiction, the actual or real absence of the
principal is converted into his legal or juridical presence qui facit per alium facit per se.[33]

The elements of the contract of agency are: (1) consent, express or implied, of the parties
to establish the relationship; (2) the object is the execution of a juridical act in relation to a
third person; (3) the agent acts as a representative and not for himself; (4) the agent acts
within the scope of his authority.[34]

In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present dispute
is whether respondent EDWIN exceeded his authority when he signed the Deed of
Assignment thereby binding himself personally to pay the obligations to petitioner.
Petitioner firmly believes that respondent EDWIN acted beyond the authority granted by his
principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the
New Civil Code.

We disagree.

Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not
personally liable to the party with whom he contracts. The same provision, however,
presents two instances when an agent becomes personally liable to a third person. The first
is when he expressly binds himself to the obligation and the second is when he exceeds his
authority. In the last instance, the agent can be held liable if he does not give the third
party sufficient notice of his powers. We hold that respondent EDWIN does not fall within
any of the exceptions contained in this provision.

The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales
manager of Impact Systems. As discussed elsewhere, the position of manager is unique in
that it presupposes the grant of broad powers with which to conduct the business of the
principal, thus:

The powers of an agent are particularly broad in the case of one acting as a general agent
or manager; such a position presupposes a degree of confidence reposed and investiture
with liberal powers for the exercise of judgment and discretion in transactions and concerns
which are incidental or appurtenant to the business entrusted to his care and management.
In the absence of an agreement to the contrary, a managing agent may enter into any
contracts that he deems reasonably necessary or requisite for the protection of the interests
of his principal entrusted to his management. x x x.[35]

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver
the one unit of sludge pump unless it received, in full, the payment for Impact Systems
indebtedness.[36] We may very well assume that Impact Systems desperately needed the
sludge pump for its business since after it paid the amount of fifty thousand pesos
(P50,000.00) as down payment on 3 March 1995,[37] it still persisted in negotiating with
petitioner which culminated in the execution of the Deed of Assignment of its receivables
from Toledo Power Company on 28 June 1995.[38] The significant amount of time spent on
the negotiation for the sale of the sludge pump underscores Impact Systems perseverance
to get hold of the said equipment. There is, therefore, no doubt in our mind that respondent
EDWINs participation in the Deed of Assignment was reasonably necessary or was required
in order for him to protect the business of his principal. Had he not acted in the way he did,
the business of his principal would have been adversely affected and he would have violated
his fiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article
1897 of the New Civil Code upon which petitioner anchors its claim against respondent
EDWIN does not hold that in case of excess of authority, both the agent and the principal
are liable to the other contracting party.[39] To reiterate, the first part of Article 1897
declares that the principal is liable in cases when the agent acted within the bounds of his
authority. Under this, the agent is completely absolved of any liability. The second part of
the said provision presents the situations when the agent himself becomes liable to a third
party when he expressly binds himself or he exceeds the limits of his authority without
giving notice of his powers to the third person. However, it must be pointed out that in case
of excess of authority by the agent, like what petitioner claims exists here, the law does not
say that a third person can recover from both the principal and the agent.[40]

As we declare that respondent EDWIN acted within his authority as an agent, who did not
acquire any right nor incur any liability arising from the Deed of Assignment, it follows that
he is not a real party in interest who should be impleaded in this case. A real party in
interest is one who stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit.[41] In this respect, we sustain his exclusion as a
defendant in the suit before the court a quo.

WHEREFORE, premises considered, the present petition is DENIED and the Decision dated
10 August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP
No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch
8, Cebu City, is AFFIRMED.

Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City,
for the continuation of the proceedings against respondent ERWIN CUIZON.

SO ORDERED.
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 its sub-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.1wphi1 We refer particularly to the lower court's decision ordering American Air to
"reinstate defendant as its general sales agent for passenger transportation in the Philippines in
accordance with said GSA Agreement."

By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air
to extend its personality to Orient Air. Such would be violative of the principles and essence of agency,
defined by law as a contract whereby "a person binds himself to render some service or to do
something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER .17 (emphasis supplied) In an agent-principal relationship, the personality of the principal is
extended through the facility of the agent. In so doing, the agent, by legal fiction, becomes the
principal, authorized to perform all acts which the latter would have him do. Such a relationship can
only be effected with the consent of the principal, which must not, in any way, be compelled by law or
by any court. The Agreement itself between the parties states that "either party may terminate the
Agreement without cause by giving the other 30 days' notice by letter, telegram or cable." (emphasis
supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.

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

SO ORDERED.

FIRST DIVISION

EDUARDO V. LINTONJUA, JR. G.R. No. 144805

and ANTONIO K. LITONJUA,

Petitioners,

Present:

PANGANIBAN, C.J., Chairperson,

- versus - YNARES-SANTIAGO,*

AUSTRIA-MARTINEZ,

CALLEJO, SR., and

CHICO-NAZARIO, JJ.

ETERNIT CORPORATION

(now ETERTON MULTI-

RESOURCES CORPORATION),

ETEROUTREMER, S.A. and Promulgated:

FAR EAST BANK & TRUST

COMPANY, June 8, 2006

Respondents.

x-----------------------------------------------------------------------------------------x

DECISION

CALLEJO, SR., J.:

On appeal via a Petition for Review on Certiorari is the Decision[1] of the Court of Appeals (CA) in CA-
G.R. CV No. 51022, which affirmed the Decision of the Regional Trial Court (RTC), Pasig City, Branch
165, in Civil Case No. 54887, as well as the Resolution[2] of the CA denying the motion for
reconsideration thereof.

The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws.
Since 1950, it had been engaged in the manufacture of roofing materials and pipe products. Its
manufacturing operations were conducted on eight parcels of land with a total area of 47,233 square
meters. The properties, located in Mandaluyong City, Metro Manila, were covered by Transfer
Certificates of Title Nos. 451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125
under the name of Far East Bank & Trust Company, as trustee. Ninety (90%) percent of the shares of
stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium.[3] Jack Glanville, an Australian citizen, was the General
Manager and President of EC, while Claude Frederick Delsaux was the Regional Director for Asia of
ESAC. Both had their offices in Belgium.

In 1986, the management of ESAC grew concerned about the political situation in the Philippines and
wanted to stop its operations in the country. The Committee for Asia of ESAC instructed Michael
Adams, a member of ECs Board of Directors, to dispose of the eight parcels of land. Adams engaged
the services of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to
prospective buyers. Glanville later showed the properties to Marquez.

Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B. Litonjua,
Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he
was authorized to sell the properties for P27,000,000.00 and that the terms of the sale were subject
to negotiation.[4]

Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr.,
and his brother Antonio K. Litonjua. The Litonjua siblings offered to buy the property for
P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings offer and relayed the same
to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville telexed Delsaux
in Belgium, inquiring on his position/ counterproposal to the offer of the Litonjua siblings. It was only
on February 12, 1987 that Delsaux sent a telex to Glanville stating that, based on the Belgian/Swiss
decision, the final offer was US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior
to final liquidation.[5]

Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr.
accepted the counterproposal of Delsaux. Marquez conferred with Glanville, and in a Letter dated
February 26, 1987, confirmed that the Litonjua siblings had accepted the counter-proposal of Delsaux.
He also stated that the Litonjua siblings would confirm full payment within 90 days after execution and
preparation of all documents of sale, together with the necessary governmental clearances.[6]

The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust
Company, Ermita Branch, and drafted an Escrow Agreement to expedite the sale.[7]

Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be
implemented. In a telex dated April 22, 1987, Glanville informed Delsaux that he had met with the
buyer, which had given him the impression that he is prepared to press for a satisfactory conclusion to
the sale.[8] He also emphasized to Delsaux that the buyers were concerned because they would incur
expenses in bank commitment fees as a consequence of prolonged period of inaction.[9]

Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines,
the political situation in the Philippines had improved. Marquez received a telephone call from
Glanville, advising that the sale would no longer proceed. Glanville followed it up with a Letter dated
May 7, 1987, confirming that he had been instructed by his principal to inform Marquez that the
decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated.[10]

Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had
decided not to proceed with the sale of the subject land, to wit:

May 22, 1987

Mr. L.G. Marquez

L.G. Marquez, Inc.

334 Makati Stock Exchange Bldg.

6767 Ayala Avenue

Makati, Metro Manila

Philippines

Dear Sir:

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land
which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined the
position as far as the Philippines are (sic) concerned. Considering [the] new political situation since the
departure of MR. MARCOS and a certain stabilization in the Philippines, the Committee has decided not
to stop our operations in Manila. In fact, production has started again last week, and (sic) to recognize
the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy would change at a
later state, we would consult you again.

xxx

Yours sincerely,

(Sgd.)

C.F. DELSAUX

cc. To: J. GLANVILLE (Eternit Corp.)[11]

When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for
damages they had suffered on account of the aborted sale. EC, however, rejected their demand.

The Litonjuas then filed a complaint for specific performance and damages against EC (now the
Eterton Multi-Resources Corporation) and the Far East Bank & Trust Company, and ESAC in the RTC of
Pasig City. An amended complaint was filed, in which defendant EC was substituted by Eterton Multi-
Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio
were impleaded as additional defendants on account of their purchase of ESAC shares of stocks and
were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business
in the Philippines, it cannot be subject to the jurisdiction of Philippine courts; the Board and
stockholders of EC never approved any resolution to sell subject properties nor authorized Marquez to
sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own personal making
which did not bind EC.

On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended
complaint.[12] The fallo of the decision reads:

WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and
Eteroutremer, S.A. is dismissed on the ground that there is no valid and binding sale between the
plaintiffs and said defendants.

The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of
action.

The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer,
S.A. is also dismissed for lack of merit.[13]

The trial court declared that since the authority of the agents/realtors was not in writing, the sale is
void and not merely unenforceable, and as such, could not have been ratified by the principal. In any
event, such ratification cannot be given any retroactive effect. Plaintiffs could not assume that
defendants had agreed to sell the property without a clear authorization from the corporation
concerned, that is, through resolutions of the Board of Directors and stockholders. The trial court also
pointed out that the supposed sale involves substantially all the assets of defendant EC which would
result in the eventual total cessation of its operation.[14]

The Litonjuas appealed the decision to the CA, alleging that (1) the lower court erred in concluding
that the real estate broker in the instant case needed a written authority from appellee corporation
and/or that said broker had no such written authority; and (2) the lower court committed grave error
of law in holding that appellee corporation is not legally bound for specific performance and/or
damages in the absence of an enabling resolution of the board of directors.[15] They averred that
Marquez acted merely as a broker or go-between and not as agent of the corporation; hence, it was
not necessary for him to be empowered as such by any written authority. They further claimed that an
agency by estoppel was created when the corporation clothed Marquez with apparent authority to
negotiate for the sale of the properties. However, since it was a bilateral contract to buy and sell, it
was equivalent to a perfected contract of sale, which the corporation was obliged to consummate.

In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it;
neither were Glanville and Delsaux authorized by its board of directors to offer the property for sale.
Since the sale involved substantially all of the corporations assets, it would necessarily need the
authority from the stockholders.

On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. [16] The Litonjuas
filed a motion for reconsideration, which was also denied by the appellate court.

The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of
Article 1874 of the New Civil Code. Under Section 23 of the Corporation Code, he needed a special
authority from ECs board of directors to bind such corporation to the sale of its properties. Delsaux,
who was merely the representative of ESAC (the majority stockholder of EC) had no authority to bind
the latter. The CA pointed out that Delsaux was not even a member of the board of directors of EC.
Moreover, the Litonjuas failed to prove that an agency by estoppel had been created between the
parties.
In the instant petition for review, petitioners aver that

THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.

II

THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A
WRITTEN AUTHORITY FROM RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.

III

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE
NECESSARY AUTHORITY TO SELL THE SUBJECT PROPERTIES, OR AT THE VERY LEAST, WERE
KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN
APPARENT AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER TO SELL
THE SAID PROPERTIES.[17]

Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the
parcels of land and the improvements thereon for US$1,000,000.00 plus P2,500,000.00 to cover
obligations prior to final liquidation. Petitioners insist that they had accepted the counter-offer of
respondent EC and that before the counter-offer was withdrawn by respondents, the acceptance was
made known to them through real estate broker Marquez.

Petitioners assert that there was no need for a written authority from the Board of Directors of EC for
Marquez to validly act as broker/middleman/intermediary. As broker, Marquez was not an ordinary
agent because his authority was of a special and limited character in most respects. His only job as a
broker was to look for a buyer and to bring together the parties to the transaction. He was not
authorized to sell the properties or to make a binding contract to respondent EC; hence, petitioners
argue, Article 1874 of the New Civil Code does not apply.

In any event, petitioners aver, what is important and decisive was that Marquez was able to
communicate both the offer and counter-offer and their acceptance of respondent ECs counter-offer,
resulting in a perfected contract of sale.

Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville,
who was the President and General Manager of respondent EC, and Delsaux, who was the Managing
Director for ESAC Asia, had the necessary authority to sell the subject property or, at least, had been
allowed by respondent EC to hold themselves out in the public as having the power to sell the subject
properties. Petitioners identified such evidence, thus:

1. The testimony of Marquez that he was chosen by Glanville as the then President and General
Manager of Eternit, to sell the properties of said corporation to any interested party, which authority,
as hereinabove discussed, need not be in writing.

2. The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL MONTHS,
from 1986 to 1987;

3. The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;

4. The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties as evidenced by the
Petitioners ACCEPTANCE of the counter-offer;
5. The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and
that an ESCROW agreement was drafted over the subject properties;

6. Glanvilles telex to Delsaux inquiring WHEN WE (Respondents) WILL IMPLEMENT ACTION TO BUY
AND SELL;

7. More importantly, Exhibits G and H of the Respondents, which evidenced the fact that Petitioners
offer was allegedly REJECTED by both Glanville and Delsaux.[18]

Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners
offer and thereafter reject such offer unless they were authorized to do so by respondent EC.
Petitioners insist that Delsaux confirmed his authority to sell the properties in his letter to Marquez, to
wit:

Dear Sir,

Re: Land of Eternit Corporation

I would like to confirm officially that our Group has decided not to proceed with the sale of the land
which was proposed to you.

The Committee for Asia of our Group met recently (meeting every six months) and examined the
position as far as the Philippines are (sic) concerned. Considering the new political situation since the
departure of MR. MARCOS and a certain stabilization in the Philippines, the Committee has decided not
to stop our operations in Manila[.] [I]n fact production started again last week, and (sic) to reorganize
the participation in the Corporation.

We regret that we could not make a deal with you this time, but in case the policy would change at a
later stage we would consult you again.

In the meantime, I remain

Yours sincerely,

C.F. DELSAUX[19]

Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly
permitted by respondent EC to sell the properties within the scope of an apparent authority.
Petitioners insist that respondents held themselves to the public as possessing power to sell the
subject properties.

By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are
proscribed by Rule 45 of the Rules of Court. On the merits of the petition, respondents EC (now EMC)
and ESAC reiterate their submissions in the CA. They maintain that Glanville, Delsaux and Marquez
had no authority from the stockholders of respondent EC and its Board of Directors to offer the
properties for sale to the petitioners, or to any other person or entity for that matter. They assert that
the decision and resolution of the CA are in accord with law and the evidence on record, and should be
affirmed in toto.

Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux,
conformed to the written authority of Marquez to sell the properties. The authority of Glanville and
Delsaux to bind respondent EC is evidenced by the fact that Glanville and Delsaux negotiated for the
sale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their
positions and their duties in respondent EC at the time of the transaction, and the fact that respondent
ESAC owns 90% of the shares of stock of respondent EC, a formal

resolution of the Board of Directors would be a mere ceremonial formality. What is important,
petitioners maintain, is that Marquez was able to communicate the offer of respondent EC and the
petitioners acceptance thereof. There was no time that they acted without the knowledge of
respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.

The petition has no merit.

Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner
in this case are factual. Whether or not Marquez, Glanville, and Delsaux were authorized by
respondent EC to act as its agents relative to the sale of the properties of respondent EC, and if so,
the boundaries of their authority as agents, is a question of fact. In the absence of express written
terms creating the relationship of an agency, the existence of an agency is a fact question.[20]
Whether an agency by estoppel was created or whether a person acted within the bounds of his
apparent authority, and whether the principal is estopped to deny the apparent authority of its agent
are, likewise, questions of fact to be resolved on the basis of the evidence on record.[21] The findings
of the trial court on such issues, as affirmed by the CA, are conclusive on the Court, absent evidence
that the trial and appellate courts ignored, misconstrued, or misapplied facts and circumstances of
substance which, if considered, would warrant a modification or reversal of the outcome of the
case.[22]

It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of
Court because the Court is not a trier of facts. It is not to re-examine and assess the evidence on
record, whether testimonial and documentary. There are, however, recognized exceptions where the
Court may delve into and resolve factual issues, namely:

(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2)
when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse
of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of
fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of
the case and the same is contrary to the admissions of both appellant and appellee; (7) when the
findings of the Court of Appeals are contrary to those of the trial court; (8) when the findings of fact
are conclusions without citation of specific evidence on which they are based; (9) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion; and (10) when the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted by the evidence on record.[23]

We have reviewed the records thoroughly and find that the petitioners failed to establish that the
instant case falls under any of the foregoing exceptions. Indeed, the assailed decision of the Court of
Appeals is supported by the evidence on record and the law.

It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and
that it had empowered Adams, Glanville and Delsaux or Marquez to offer the properties for sale to
prospective buyers and to accept any counter-offer. Petitioners likewise failed to prove that their
counter-offer had been accepted by respondent EC, through Glanville and Delsaux. It must be
stressed that when specific performance is sought of a contract made with an agent, the agency must
be established by clear, certain and specific proof.[24]

Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines,
provides:
SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code, the corporate
powers of all corporations formed under this Code shall be exercised, all business conducted and all
property of such corporations controlled and held by the board of directors or trustees to be elected
from among the holders of stocks, or where there is no stock, from among the members of the
corporation, who shall hold office for one (1) year and until their successors are elected and qualified.

Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and
is not affected by the personal rights,

obligations and transactions of the latter.[25] It may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents in the normal
course of business. The general principles of agency govern the relation between the corporation and
its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of
law.[26]

Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject
to the limitations prescribed by law and the Constitution, as follows:

SEC. 36. Corporate powers and capacity. Every corporation incorporated under this Code has the
power and capacity:

xxxx

7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal
with such real and personal property, including securities and bonds of other corporations, as the
transaction of a lawful business of the corporation may reasonably and necessarily require, subject to
the limitations prescribed by the law and the Constitution.

The property of a corporation, however, is not the property of the stockholders or members, and as
such, may not be sold without express authority from the board of directors.[27] Physical acts, like
the offering of the properties of the corporation for sale, or the acceptance of a counter-offer of
prospective buyers of such properties and the execution of the deed of sale covering such property,
can be performed by the corporation only by officers or agents duly authorized for the purpose by
corporate by-laws or by specific acts of the board of directors.[28] Absent such valid
delegation/authorization, the rule is that the declarations of an individual director relating to the
affairs of the corporation, but not in the course of, or

connected with, the performance of authorized duties of such director, are not binding on the
corporation.[29]

While a corporation may appoint agents to negotiate for the sale of its real properties, the final say
will have to be with the board of directors through its officers and agents as authorized by a board
resolution or by its by-laws.[30] An unauthorized act of an officer of the corporation is not binding on
it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real
property of a corporation by a person purporting to be an agent thereof but without written authority
from the corporation is null and void. The declarations of the agent alone are generally insufficient to
establish the fact or extent of his/her authority.[31]

By the contract of agency, a person binds himself to render some service or to do something in
representation on behalf of another, with the consent or authority of the latter.[32] Consent of both
principal and agent is necessary to create an agency. The principal must intend that the agent shall
act for him; the agent must intend to accept the authority and act on it, and the intention of the
parties must find expression either in words or conduct between them.[33]
An agency may be expressed or implied from the act of the principal, from his silence or lack of action,
or his failure to repudiate the agency knowing that another person is acting on his behalf without
authority. Acceptance by the agent may be expressed, or implied from his acts which carry out the
agency, or from his silence or inaction according to the circumstances.[34] Agency may be oral unless
the law requires a specific form.[35] However, to create or convey real rights over immovable
property, a special power of attorney is necessary.[36] Thus, when a sale of a piece of land or any
portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale
shall be void.[37]

In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the
Board of Directors of respondent EC empowering Marquez, Glanville or Delsaux as its agents, to sell,
let alone offer for sale, for and in its behalf, the eight parcels of land owned by respondent EC
including the improvements thereon. The bare fact that Delsaux may have been authorized to sell to
Ruperto Tan the shares of stock of respondent ESAC, on June 1, 1997, cannot be used as basis for
petitioners claim that he had likewise been authorized by respondent EC to sell the parcels of land.

Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of
Delsaux, who, in turn, acted on the authority of respondent ESAC, through its Committee for Asia,[38]
the Board of Directors of respondent ESAC,[39] and the Belgian/Swiss component of the management
of respondent ESAC.[40] As such, Adams and Glanville engaged the services of Marquez to offer to
sell the properties to prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner
that he was authorized to offer for sale the property for P27,000,000.00 and the other terms of the
sale subject to negotiations. When petitioners offered to purchase the property for P20,000,000.00,
through Marquez, the latter relayed petitioners offer to Glanville; Glanville had to send a telex to
Delsaux to inquire the position of respondent ESAC to petitioners offer. However, as admitted by
petitioners in their Memorandum, Delsaux was unable to reply immediately to the telex of Glanville
because Delsaux had to wait for confirmation from respondent ESAC.[41] When Delsaux finally
responded to Glanville on February 12, 1987, he made it clear that, based on the Belgian/Swiss
decision the final offer of respondent ESAC was US$1,000,000.00 plus P2,500,000.00 to cover all
existing obligations prior to final liquidation.[42] The offer of Delsaux emanated only from the
Belgian/Swiss decision, and not the entire management or Board of Directors of respondent ESAC.
While it is true that petitioners accepted the counter-offer of respondent ESAC, respondent EC was not
a party to the transaction between them; hence, EC was not bound by such acceptance.

While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux
were members of its Board of Directors, the three acted for and in behalf of respondent ESAC, and not
as duly authorized agents of respondent EC; a board resolution evincing the grant of such authority is
needed to bind EC to any agreement regarding the sale of the subject properties. Such board
resolution is not a mere formality but is a condition sine qua non to bind respondent EC. Admittedly,
respondent ESAC owned 90% of the shares of stocks of respondent EC; however, the mere fact that a
corporation owns a majority of the shares of stocks of another, or even all of such shares of stocks,
taken alone, will not justify their being treated as one corporation.[43]

It bears stressing that in an agent-principal relationship, the personality of the principal is extended
through the facility of the agent. In so doing, the agent, by legal fiction, becomes the principal,
authorized to perform all acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be compelled by law or by any
court.[44]

The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent
EC empowering Adams, Glanville or Delsaux to offer the properties for sale and to sell the said
properties to the petitioners. A person dealing with a known agent is not authorized, under any
circumstances, blindly to trust the agents; statements as to the extent of his powers; such person
must not act negligently but must use reasonable diligence and prudence to ascertain whether the
agent acts within the scope of his authority.[45] The settled rule is that, persons dealing with an
assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not
only the fact of agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to prove it.[46] In this case, the petitioners failed to discharge their
burden; hence, petitioners are not entitled to damages from respondent EC.

It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent.
As gleaned from the letter of Marquez to Glanville, on February 26, 1987, he confirmed, for and in
behalf of the petitioners, that the latter had accepted such offer to sell the land and the improvements
thereon. However, we agree with the ruling of the appellate court that Marquez had no authority to
bind respondent EC to sell the subject properties. A real estate broker is one who negotiates the sale
of real properties. His business, generally speaking, is only to find a purchaser who is willing to buy
the land upon terms fixed by the owner. He has no authority to bind the principal by signing a contract
of sale. Indeed, an authority to find a purchaser of real property does not include an authority to
sell.[47]

Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence
of a principal-agency relationship between it and Glanville or Delsaux. For an agency by estoppel to
exist, the following must be established: (1) the principal manifested a representation of the agents
authority or knowlingly allowed the agent to assume such

authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon such
representation, such third person has changed his position to his detriment.[48] An agency by
estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.[49] Such proof is lacking in this case. In their communications to the petitioners, Glanville
and Delsaux positively and unequivocally declared that they were acting for and in behalf of
respondent ESAC.

Neither may respondent EC be deemed to have ratified the transactions between the petitioners and
respondent ESAC, through Glanville, Delsaux and Marquez. The transactions and the various
communications inter se were never submitted to the Board of Directors of respondent EC for
ratification.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the
petitioners.

SO ORDERED.
G.R. No. 149353 June 26, 2006

JOCELYN B. DOLES, Petitioner,

vs.

MA. AURA TINA ANGELES, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of Court questioning the
Decision1 dated April 30, 2001 of the Court of Appeals (CA) in C.A.-G.R. CV No. 66985, which
reversed the Decision dated July 29, 1998 of the Regional Trial Court (RTC), Branch 21, City of Manila;
and the CA Resolution2 dated August 6, 2001 which denied petitioners Motion for Reconsideration.

The antecedents of the case follow:

On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint for Specific
Performance with Damages against Jocelyn B. Doles (petitioner), docketed as Civil Case No. 97-
82716. Respondent alleged that petitioner was indebted to the former in the concept of a personal
loan amounting to P405,430.00 representing the principal amount and interest; that on October 5,
1996, by virtue of a "Deed of Absolute Sale",3 petitioner, as seller, ceded to respondent, as buyer, a
parcel of land, as well as the improvements thereon, with an area of 42 square meters, covered by
Transfer Certificate of Title No. 382532,4 and located at a subdivision project known as Camella
Townhomes Sorrente in Bacoor, Cavite, in order to satisfy her personal loan with respondent; that this
property was mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure
petitioners loan in the sum of P337,050.00 with that entity; that as a condition for the foregoing sale,
respondent shall assume the undue balance of the mortgage and pay the monthly amortization of
P4,748.11 for the remainder of the 25 years which began on September 3, 1994; that the property
was at that time being occupied by a tenant paying a monthly rent of P3,000.00; that upon
verification with the NHMFC, respondent learned that petitioner had incurred arrearages amounting to
P26,744.09, inclusive of penalties and interest; that upon informing the petitioner of her arrears,
petitioner denied that she incurred them and refused to pay the same; that despite repeated demand,
petitioner refused to cooperate with respondent to execute the necessary documents and other
formalities required by the NHMFC to effect the transfer of the title over the property; that petitioner
collected rent over the property for the month of January 1997 and refused to remit the proceeds to
respondent; and that respondent suffered damages as a result and was forced to litigate.

Petitioner, then defendant, while admitting some allegations in the Complaint, denied that she
borrowed money from respondent, and averred that from June to September 1995, she referred her
friends to respondent whom she knew to be engaged in the business of lending money in exchange for
personal checks through her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida
Romulo, Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed money
from respondent and issued personal checks in payment of the loan; that the checks bounced for
insufficiency of funds; that despite her efforts to assist respondent to collect from the borrowers, she
could no longer locate them; that, because of this, respondent became furious and threatened
petitioner that if the accounts were not settled, a criminal case will be filed against her; that she was
forced to issue eight checks amounting to P350,000 to answer for the bounced checks of the
borrowers she referred; that prior to the issuance of the checks she informed respondent that they
were not sufficiently funded but the latter nonetheless deposited the checks and for which reason they
were subsequently dishonored; that respondent then threatened to initiate a criminal case against her
for violation of Batas Pambansa Blg. 22; that she was forced by respondent to execute an "Absolute
Deed of Sale" over her property in Bacoor, Cavite, to avoid criminal prosecution; that the said deed
had no valid consideration; that she did not appear before a notary public; that the Community Tax
Certificate number on the deed was not hers and for which respondent may be prosecuted for
falsification and perjury; and that she suffered damages and lost rental as a result.

The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is valid; second; if
valid, whether petitioner is obliged to sign and execute the necessary documents to effect the transfer
of her rights over the property to the respondent; and third, whether petitioner is liable for damages.

On July 29, 1998, the RTC rendered a decision the dispositive portion of which states:

WHEREFORE, premises considered, the Court hereby orders the dismissal of the complaint for
insufficiency of evidence. With costs against plaintiff.

SO ORDERED.

The RTC held that the sale was void for lack of cause or consideration:5

Plaintiff Angeles admission that the borrowers are the friends of defendant Doles and further
admission that the checks issued by these borrowers in payment of the loan obligation negates [sic]
the cause or consideration of the contract of sale executed by and between plaintiff and defendant.
Moreover, the property is not solely owned by defendant as appearing in Entry No. 9055 of Transfer
Certificate of Title No. 382532 (Annex A, Complaint), thus:

"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the share of Teodorico
Doles on the parcel of land described in this certificate of title by virtue of the special power of
attorney to mortgage, executed before the notary public, etc."

The rule under the Civil Code is that contracts without a cause or consideration produce no effect
whatsoever. (Art. 1352, Civil Code).

Respondent appealed to the CA. In her appeal brief, respondent interposed her sole assignment of
error:

THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF [sic] THE DEED OF
SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR INSUFFICIENCY OF EVIDENCE.6

On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which reads:

WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The Decision of the lower
court dated July 29, 1998 is REVERSED and SET ASIDE. A new one is entered ordering defendant-
appellee to execute all necessary documents to effect transfer of subject property to plaintiff-appellant
with the arrearages of the formers loan with the NHMFC, at the latters expense. No costs.

SO ORDERED.

The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the amount borrowed
from the respondent to her friends. Hence, the Deed of Absolute Sale was supported by a valid
consideration, which is the sum of money petitioner owed respondent amounting to P405,430.00,
representing both principal and interest.

The CA took into account the following circumstances in their entirety: the supposed friends of
petitioner never presented themselves to respondent and that all transactions were made by and
between petitioner and respondent;7 that the money borrowed was deposited with the bank account
of the petitioner, while payments made for the loan were deposited by the latter to respondents bank
account;8 that petitioner herself admitted in open court that she was "re-lending" the money loaned
from respondent to other individuals for profit;9 and that the documentary evidence shows that the
actual borrowers, the friends of petitioner, consider her as their creditor and not the respondent.10

Furthermore, the CA held that the alleged threat or intimidation by respondent did not vitiate consent,
since the same is considered just or legal if made to enforce ones claim through competent authority
under Article 133511 of the Civil Code;12 that with respect to the arrearages of petitioner on her
monthly amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed part of the
balance of petitioners loan with the NHMFC which respondent agreed to assume; and that the amount
of P3,000.00 representing the rental for January 1997 supposedly collected by petitioner, as well as
the claim for damages and attorneys fees, is denied for insufficiency of evidence.13

On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA, arguing that respondent
categorically admitted in open court that she acted only as agent or representative of Arsenio Pua, the
principal financier and, hence, she had no legal capacity to sue petitioner; and that the CA failed to
consider the fact that petitioners father, who co-owned the subject property, was not impleaded as a
defendant nor was he indebted to the respondent and, hence, she cannot be made to sign the
documents to effect the transfer of ownership over the entire property.

On August 6, 2001, the CA issued its Resolution denying the motion on the ground that the foregoing
matters had already been passed upon.

On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28, 2001, petitioner
filed the present Petition and raised the following issues:

I.

WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE RESPONDENT.

II.

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO COLLECT DEBT IN
HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE DEBTOR.

III.

WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14

Although, as a rule, it is not the business of this Court to review the findings of fact made by the lower
courts, jurisprudence has recognized several exceptions, at least three of which are present in the
instant case, namely: when the judgment is based on a misapprehension of facts; when the findings
of facts of the courts a quo are conflicting; and when the CA manifestly overlooked certain relevant
facts not disputed by the parties, which, if properly considered, could justify a different conclusion.15
To arrive at a proper judgment, therefore, the Court finds it necessary to re-examine the evidence
presented by the contending parties during the trial of the case.

The Petition is meritorious

The principal issue is whether the Deed of Absolute Sale is supported by a valid consideration.
1. Petitioner argues that since she is merely the agent or representative of the alleged debtors, then
she is not a party to the loan; and that the Deed of Sale executed between her and the respondent in
their own names, which was predicated on that pre-existing debt, is void for lack of consideration.

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in the form of a price
certain in money16 and that this sum indisputably pertains to the debt in issue. This Court has
consistently held that a contract of sale is null and void and produces no effect whatsoever where the
same is without cause or consideration.17 The question that has to be resolved for the moment is
whether this debt can be considered as a valid cause or consideration for the sale.

To restate, the CA cited four instances in the record to support its holding that petitioner "re-lends"
the amount borrowed from respondent to her friends: first, the friends of petitioner never presented
themselves to respondent and that all transactions were made by and between petitioner and
respondent;18 second; the money passed through the bank accounts of petitioner and respondent;19
third, petitioner herself admitted that she was "re-lending" the money loaned to other individuals for
profit;20 and fourth, the documentary evidence shows that the actual borrowers, the friends of
petitioner, consider her as their creditor and not the respondent.21

On the first, third, and fourth points, the CA cites the testimony of the petitioner, then defendant,
during her cross-examination:22

Atty. Diza:

q. You also mentioned that you were not the one indebted to the plaintiff?

witness:

a. Yes, sir.

Atty. Diza:

q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa Moraquin, Maria Luisa
Inocencio, Zenaida Romulo, they are your friends?

witness:

a. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they were just referred.

Atty. Diza:

q. And you have transact[ed] with the plaintiff?

witness:

a. Yes, sir.

Atty. Diza:

q. What is that transaction?

witness:

a. To refer those persons to Aura and to refer again to Arsenio Pua, sir.

Atty. Diza:
q. Did the plaintiff personally see the transactions with your friends?

witness:

a. No, sir.

Atty. Diza:

q. Your friends and the plaintiff did not meet personally?

witness:

a. Yes, sir.

Atty. Diza:

q. You are intermediaries?

witness:

a. We are both intermediaries. As evidenced by the checks of the debtors they were deposited to the
name of Arsenio Pua because the money came from Arsenio Pua.

xxxx

Atty. Diza:

q. Did the plaintiff knew [sic] that you will lend the money to your friends specifically the one you
mentioned [a] while ago?

witness:

a. Yes, she knows the money will go to those persons.

Atty. Diza:

q. You are re-lending the money?

witness:

a. Yes, sir.

Atty. Diza:
q. What profit do you have, do you have commission?

witness:

a. Yes, sir.

Atty. Diza:

q. How much?

witness:

a. Two percent to Tomelden, one percent to Jacob and then Inocencio and my friends none, sir.

Based on the foregoing, the CA concluded that petitioner is the real borrower, while the respondent,
the real lender.

But as correctly noted by the RTC, respondent, then plaintiff, made the following admission during her
cross examination:23

Atty. Villacorta:

q. Who is this Arsenio Pua?

witness:

a. Principal financier, sir.

Atty. Villacorta:

q. So the money came from Arsenio Pua?

witness:

a. Yes, because I am only representing him, sir.

Other portions of the testimony of respondent must likewise be considered:24

Atty. Villacorta:

q. So it is not actually your money but the money of Arsenio Pua?

witness:

a. Yes, sir.

Court:

q. It is not your money?

witness:

a. Yes, Your Honor.

Atty. Villacorta:
q. Is it not a fact Ms. Witness that the defendant borrowed from you to accommodate somebody, are
you aware of that?

witness:

a. I am aware of that.

Atty. Villacorta:

q. More or less she [accommodated] several friends of the defendant?

witness:

a. Yes, sir, I am aware of that.

xxxx

Atty. Villacorta:

q. And these friends of the defendant borrowed money from you with the assurance of the defendant?

witness:

a. They go direct to Jocelyn because I dont know them.

xxxx

Atty. Villacorta:

q. And is it not also a fact Madam witness that everytime that the defendant borrowed money from
you her friends who [are] in need of money issued check[s] to you? There were checks issued to you?

witness:

a. Yes, there were checks issued.

Atty. Villacorta:

q. By the friends of the defendant, am I correct?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because of your assistance, the friends of the defendant who are in need of money were able
to obtain loan to [sic] Arsenio Pua through your assistance?

witness:

a. Yes, sir.

Atty. Villacorta:

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

witness:

a. Yes, sir.

Atty. Villacorta:

q. And some of the checks that were issued by the friends of the defendant bounced, am I correct?

witness:

a. Yes, sir.

Atty. Villacorta:

q. And because of that Arsenio Pua got mad with you?

witness:

a. Yes, sir.

Respondent is estopped to deny that she herself acted as agent of a certain Arsenio Pua, her disclosed
principal. She is also estopped to deny that petitioner acted as agent for the alleged debtors, the
friends whom she (petitioner) referred.

This Court has affirmed that, under Article 1868 of the Civil Code, the basis of agency is
representation.25 The question of whether an agency has been created is ordinarily a question which
may be established in the same way as any other fact, either by direct or circumstantial evidence. The
question is ultimately one of intention.26 Agency may even be implied from the words and conduct of
the parties and the circumstances of the particular case.27 Though the fact or extent of authority of
the agents may not, as a general rule, be established from the declarations of the agents alone, if one
professes to act as agent for another, she may be estopped to deny her agency both as against the
asserted principal and the third persons interested in the transaction in which he or she is engaged.28

In this case, petitioner knew that the financier of respondent is Pua; and respondent knew that the
borrowers are friends of petitioner.

The CA is incorrect when it considered the fact that the "supposed friends of [petitioner], the actual
borrowers, did not present themselves to [respondent]" as evidence that negates the agency
relationshipit is sufficient that petitioner disclosed to respondent that the former was acting in behalf
of her principals, her friends whom she referred to respondent. For an agency to arise, it is not
necessary that the principal personally encounter the third person with whom the agent interacts. The
law in fact contemplates, and to a great degree, impersonal dealings where the principal need not
personally know or meet the third person with whom her agent transacts: precisely, the purpose of
agency is to extend the personality of the principal through the facility of the agent.29

In the case at bar, both petitioner and respondent have undeniably disclosed to each other that they
are representing someone else, and so both of them are estopped to deny the same. It is evident from
the record that petitioner merely refers actual borrowers and then collects and disburses the amounts
of the loan upon which she received a commission; and that respondent transacts on behalf of her
"principal financier", a certain Arsenio Pua. If their respective principals do not actually and personally
know each other, such ignorance does not affect their juridical standing as agents, especially since the
very purpose of agency is to extend the personality of the principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money loaned from respondent
to other individuals for profit, it must be stressed that the manner in which the parties designate the
relationship is not controlling. If an act done by one person in behalf of another is in its essential
nature one of agency, the former is the agent of the latter notwithstanding he or she is not so
called.30 The question is to be determined by the fact that one represents and is acting for another,
and if relations exist which will constitute an agency, it will be an agency whether the parties
understood the exact nature of the relation or not.31

That both parties acted as mere agents is shown by the undisputed fact that the friends of petitioner
issued checks in payment of the loan in the name of Pua. If it is true that petitioner was "re-lending",
then the checks should have been drawn in her name and not directly paid to Pua.

With respect to the second point, particularly, the finding of the CA that the disbursements and
payments for the loan were made through the bank accounts of petitioner and respondent,

suffice it to say that in the normal course of commercial dealings and for reasons of convenience and
practical utility it can be reasonably expected that the facilities of the agent, such as a bank account,
may be employed, and that a sub-agent be appointed, such as the bank itself, to carry out the task,
especially where there is no stipulation to the contrary.32

In view of the two agency relationships, petitioner and respondent are not privy to the contract of loan
between their principals. Since the sale is predicated on that loan, then the sale is void for lack of
consideration.

2. A further scrutiny of the record shows, however, that the sale might have been backed up by
another consideration that is separate and distinct from the debt: respondent averred in her complaint
and testified that the parties had agreed that as a condition for the conveyance of the property the
respondent shall assume the balance of the mortgage loan which petitioner allegedly owed to the
NHMFC.33 This Court in the recent past has declared that an assumption of a mortgage debt may
constitute a valid consideration for a sale.34

Although the record shows that petitioner admitted at the time of trial that she owned the property
described in the TCT,35 the Court must stress that the Transfer Certificate of Title No. 38253236 on
its face shows that the owner of the property which admittedly forms the subject matter of the Deed
of Absolute Sale refers neither to the petitioner nor to her father, Teodorico Doles, the alleged co-
owner. Rather, it states that the property is registered in the name of "Household Development
Corporation." Although there is an entry to the effect that the petitioner had been granted a special
power of attorney "covering the shares of Teodorico Doles on the parcel of land described in this
certificate,"37 it cannot be inferred from this bare notation, nor from any other evidence on the
record, that the petitioner or her father held any direct interest on the property in question so as to
validly constitute a mortgage thereon38 and, with more reason, to effect the delivery of the object of
the sale at the consummation stage.39 What is worse, there is a notation that the TCT itself has been
"cancelled."40

In view of these anomalies, the Court cannot entertain the

possibility that respondent agreed to assume the balance of the mortgage loan which petitioner
allegedly owed to the NHMFC, especially since the record is bereft of any factual finding that petitioner
was, in the first place, endowed with any ownership rights to validly mortgage and convey the
property. As the complainant who initiated the case, respondent bears the burden of proving the basis
of her complaint. Having failed to discharge such burden, the Court has no choice but to declare the
sale void for lack of cause. And since the sale is void, the Court finds it unnecessary to dwell on the
issue of whether duress or intimidation had been foisted upon petitioner upon the execution of the
sale.

Moreover, even assuming the mortgage validly exists, the Court notes respondents allegation that the
mortgage with the NHMFC was for 25 years which began September 3, 1994. Respondent filed her
Complaint for Specific Performance in 1997. Since the 25 years had not lapsed, the prayer of
respondent to compel petitioner to execute necessary documents to effect the transfer of title is
premature.

WHEREFORE, the petition is granted. The Decision and Resolution of the Court of Appeals are
REVERSED and SET ASIDE. The complaint of respondent in Civil Case No. 97-82716 is DISMISSED.

SO ORDERED.

THIRD DIVISION

PHILEX MINING G.R. No. 148187

CORPORATION,

Petitioner, Present:

Ynares-Santiago, J. (Chairperson),

- versus - Carpio Morales, *

Chico-Nazario,

Nachura, and,

Reyes, JJ.

COMMISSIONER OF

INTERNAL REVENUE, Promulgated:

Respondent.

April 16, 2008

x ---------------------------------------------------------------------------------------- x

DECISION
YNARES-SANTIAGO, J.:

This is a petition for review on certiorari of the June 30, 2000 Decision[1] of the Court of Appeals in
CA-G.R. SP No. 49385, which affirmed the Decision[2] of the Court of Tax Appeals in C.T.A. Case No.
5200. Also assailed is the April 3, 2001 Resolution[3] denying the motion for reconsideration.

The facts of the case are as follows:

On April 16, 1971, petitioner Philex Mining Corporation (Philex Mining), entered into an agreement[4]
with Baguio Gold Mining Company (Baguio Gold) for the former to manage and operate the latters
mining claim, known as the Sto. Nino mine, located in Atok and Tublay, Benguet Province. The parties
agreement was denominated as Power of Attorney and provided for the following terms:

4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the
MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from
time to time may be required by the MANAGERS within the said 3-year period, for use in the
MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS (P11,000,000.00) shall be
deemed, for internal audit purposes, as the owners account in the Sto. Nino PROJECT. Any part of any
income of the PRINCIPAL from the STO. NINO MINE, which is left with the Sto. Nino PROJECT, shall be
added to such owners account.

5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the
MANAGEMENT of the STO. NINO MINE, they may transfer their own funds or property to the Sto. Nino
PROJECT, in accordance with the following arrangements:

(a) The properties shall be appraised and, together with the cash, shall be carried by the Sto. Nino
PROJECT as a special fund to be known as the MANAGERS account.

(b) The total of the MANAGERS account shall not exceed P11,000,000.00, except with prior approval
of the PRINCIPAL; provided, however, that if the compensation of the MANAGERS as herein provided
cannot be paid in cash from the Sto. Nino PROJECT, the amount not so paid in cash shall be added to
the MANAGERS account.

(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until
termination of this Agency.
(d) The MANAGERS account shall not accrue interest. Since it is the desire of the PRINCIPAL to extend
to the MANAGERS the benefit of subsequent appreciation of property, upon a projected termination of
this Agency, the ratio which the MANAGERS account has to the owners account will be determined,
and the corresponding proportion of the entire assets of the STO. NINO MINE, excluding the claims,
shall be transferred to the MANAGERS, except that such transferred assets shall not include mine
development, roads, buildings, and similar property which will be valueless, or of slight value, to the
MANAGERS. The MANAGERS can, on the other hand, require at their option that property originally
transferred by them to the Sto. Nino PROJECT be re-transferred to them. Until such assets are
transferred to the MANAGERS, this Agency shall remain subsisting.

xxxx

12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto. Nino
PROJECT before income tax. It is understood that the MANAGERS shall pay income tax on their
compensation, while the PRINCIPAL shall pay income tax on the net profit of the Sto. Nino PROJECT
after deduction therefrom of the MANAGERS compensation.

xxxx

16. The PRINCIPAL has current pecuniary obligation in favor of the MANAGERS and, in the future, may
incur other obligations in favor of the MANAGERS. This Power of Attorney has been executed as
security for the payment and satisfaction of all such obligations of the PRINCIPAL in favor of the
MANAGERS and as a means to fulfill the same. Therefore, this Agency shall be irrevocable while any
obligation of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS
account. After all obligations of the PRINCIPAL in favor of the MANAGERS have been paid and satisfied
in full, this Agency shall be revocable by the PRINCIPAL upon 36-month notice to the MANAGERS.

17. Notwithstanding any agreement or understanding between the PRINCIPAL and the MANAGERS to
the contrary, the MANAGERS may withdraw from this Agency by giving 6-month notice to the
PRINCIPAL. The MANAGERS shall not in any manner be held liable to the PRINCIPAL by reason alone
of such withdrawal. Paragraph 5(d) hereof shall be operative in case of the MANAGERS withdrawal.

x x x x[5]

In the course of managing and operating the project, Philex Mining made advances of cash and
property in accordance with paragraph 5 of the agreement. However, the mine suffered continuing
losses over the years which resulted to petitioners withdrawal as manager of the mine on January 28,
1982 and in the eventual cessation of mine operations on February 20, 1982.[6]
Thereafter, on September 27, 1982, the parties executed a Compromise with Dation in Payment[7]
wherein Baguio Gold admitted an indebtedness to petitioner in the amount of P179,394,000.00 and
agreed to pay the same in three segments by first assigning Baguio Golds tangible assets to
petitioner, transferring to the latter Baguio Golds equitable title in its Philodrill assets and finally
settling the remaining liability through properties that Baguio Gold may acquire in the future.

On December 31, 1982, the parties executed an Amendment to Compromise with Dation in
Payment[8] where the parties determined that Baguio Golds indebtedness to petitioner actually
amounted to P259,137,245.00, which sum included liabilities of Baguio Gold to other creditors that
petitioner had assumed as guarantor. These liabilities pertained to long-term loans amounting to
US$11,000,000.00 contracted by Baguio Gold from the Bank of America NT & SA and Citibank N.A.
This time, Baguio Gold undertook to pay petitioner in two segments by first assigning its tangible
assets for P127,838,051.00 and then transferring its equitable title in its Philodrill assets for
P16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstanding
indebtedness to petitioner in the amount of P114,996,768.00.

Subsequently, petitioner wrote off in its 1982 books of account the remaining outstanding
indebtedness of Baguio Gold by charging P112,136,000.00 to allowances and reserves that were set
up in 1981 and P2,860,768.00 to the 1982 operations.

In its 1982 annual income tax return, petitioner deducted from its gross income the amount of
P112,136,000.00 as loss on settlement of receivables from Baguio Gold against reserves and
allowances.[9] However, the Bureau of Internal Revenue (BIR) disallowed the amount as deduction for
bad debt and assessed petitioner a deficiency income tax of P62,811,161.39.

Petitioner protested before the BIR arguing that the deduction must be allowed since all requisites for
a bad debt deduction were satisfied, to wit: (a) there was a valid and existing debt; (b) the debt was
ascertained to be worthless; and (c) it was charged off within the taxable year when it was
determined to be worthless.

Petitioner emphasized that the debt arose out of a valid management contract it entered into with
Baguio Gold. The bad debt deduction represented advances made by petitioner which, pursuant to the
management contract, formed part of Baguio Golds pecuniary obligations to petitioner. It also included
payments made by petitioner as guarantor of Baguio Golds long-term loans which legally entitled
petitioner to be subrogated to the rights of the original creditor.

Petitioner also asserted that due to Baguio Golds irreversible losses, it became evident that it would
not be able to recover the advances and payments it had made in behalf of Baguio Gold. For a debt to
be considered worthless, petitioner claimed that it was neither required to institute a judicial action for
collection against the debtor nor to sell or dispose of collateral assets in satisfaction of the debt. It is
enough that a taxpayer exerted diligent efforts to enforce collection and exhausted all reasonable
means to collect.
On October 28, 1994, the BIR denied petitioners protest for lack of legal and factual basis. It held that
the alleged debt was not ascertained to be worthless since Baguio Gold remained existing and had not
filed a petition for bankruptcy; and that the deduction did not consist of a valid and subsisting debt
considering that, under the management contract, petitioner was to be paid fifty percent (50%) of the
projects net profit.[10]

Petitioner appealed before the Court of Tax Appeals (CTA) which rendered judgment, as follows:

WHEREFORE, in view of the foregoing, the instant Petition for Review is hereby DENIED for lack of
merit. The assessment in question, viz: FAS-1-82-88-003067 for deficiency income tax in the amount
of P62,811,161.39 is hereby AFFIRMED.

ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to PAY respondent

Commissioner of Internal Revenue the amount of P62,811,161.39, plus, 20% delinquency interest due
computed from February 10, 1995, which is the date after the 20-day grace period given by the
respondent within which petitioner has to pay the deficiency amount x x x up to actual date of
payment.

SO ORDERED.[11]

The CTA rejected petitioners assertion that the advances it made for the Sto. Nino mine were in the
nature of a loan. It instead characterized the advances as petitioners investment in a partnership with
Baguio Gold for the development and exploitation of the Sto. Nino mine. The CTA held that the Power
of Attorney executed by petitioner and Baguio Gold was actually a partnership agreement. Since the
advanced amount partook of the nature of an investment, it could not be deducted as a bad debt from
petitioners gross income.

The CTA likewise held that the amount paid by petitioner for the long-term loan obligations of Baguio
Gold could not be allowed as a bad debt deduction. At the time the payments were made, Baguio Gold
was not in default since its loans were not yet due and demandable. What petitioner did was to pre-
pay the loans as evidenced by the notice sent by Bank of America showing that it was merely
demanding payment of the installment and interests due. Moreover, Citibank imposed and collected a
pre-termination penalty for the pre-payment.

The Court of Appeals affirmed the decision of the CTA.[12] Hence, upon denial of its motion for
reconsideration,[13] petitioner took this recourse under Rule 45 of the Rules of Court, alleging that:
I.

The Court of Appeals erred in construing that the advances made by Philex in the management of the
Sto. Nino Mine pursuant to the Power of Attorney partook of the nature of an investment rather than a
loan.

II.

The Court of Appeals erred in ruling that the 50%-50% sharing in the net profits of the Sto. Nino Mine
indicates that Philex is a partner of Baguio Gold in the development of the Sto. Nino Mine
notwithstanding the clear absence of any intent on the part of Philex and Baguio Gold to form a
partnership.

III.

The Court of Appeals erred in relying only on the Power of Attorney and in completely disregarding the
Compromise Agreement and the Amended Compromise Agreement when it construed the nature of
the advances made by Philex.

IV.

The Court of Appeals erred in refusing to delve upon the issue of the propriety of the bad debts write-
off.[14]

Petitioner insists that in determining the nature of its business relationship with Baguio Gold, we
should not only rely on the Power of Attorney, but also on the subsequent Compromise with Dation in
Payment and Amended Compromise with Dation in Payment that the parties executed in 1982. These
documents, allegedly evinced the parties intent to treat the advances and payments as a loan and
establish a creditor-debtor relationship between them.

The petition lacks merit.

The lower courts correctly held that the Power of Attorney is the instrument that is material in
determining the true nature of the business relationship between petitioner and Baguio Gold. Before
resort may be had to the two compromise agreements, the parties contractual intent must first be
discovered from the expressed language of the primary contract under which the parties business
relations were founded. It should be noted that the compromise agreements were mere collateral
documents executed by the parties pursuant to the termination of their business relationship created
under the Power of Attorney. On the other hand, it is the latter which established the juridical relation
of the parties and defined the parameters of their dealings with one another.
The execution of the two compromise agreements can hardly be considered as a subsequent or
contemporaneous act that is reflective of the parties true intent. The compromise agreements were
executed eleven years after the Power of Attorney and merely laid out a plan or procedure by which
petitioner could recover the advances and payments it made under the Power of Attorney. The parties
entered into the compromise agreements as a consequence of the dissolution of their business
relationship. It did not define that relationship or indicate its real character.

An examination of the Power of Attorney reveals that a partnership or joint venture was indeed
intended by the parties. Under a contract of partnership, two or more persons bind themselves to
contribute money, property, or industry to a common fund, with the intention of dividing the profits
among themselves.[15] While a corporation, like petitioner, cannot generally enter into a contract of
partnership unless authorized by law or its charter, it has been held that it may enter into a joint
venture which is akin to a particular partnership:

The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it
has been generally understood to mean an organization formed for some temporary purpose. x x x It
is in fact hardly distinguishable from the partnership, since their elements are similar community of
interest in the business, sharing of profits and losses, and a mutual right of control. x x x The main
distinction cited by most opinions in common law jurisdictions is that the partnership contemplates a
general business with some degree of continuity, while the joint venture is formed for the execution of
a single transaction, and is thus of a temporary nature. x x x This observation is not entirely accurate
in this jurisdiction, since under the Civil Code, a partnership may be particular or universal, and a
particular partnership may have for its object a specific undertaking. x x x It would seem therefore
that under Philippine law, a joint venture is a form of partnership and should be governed by the law
of partnerships. The Supreme Court has however recognized a distinction between these two business
forms, and has held that although a corporation cannot enter into a partnership contract, it may
however engage in a joint venture with others. x x x (Citations omitted) [16]

Perusal of the agreement denominated as the Power of Attorney indicates that the parties had
intended to create a partnership and establish a common fund for the purpose. They also had a joint
interest in the profits of the business as shown by a 50-50 sharing in the income of the mine.

Under the Power of Attorney, petitioner and Baguio Gold undertook to contribute money, property and
industry to the common fund known as the Sto. Nio mine.[17] In this regard, we note that there is a
substantive equivalence in the respective contributions of the parties to the development and
operation of the mine. Pursuant to paragraphs 4 and 5 of the agreement, petitioner and Baguio Gold
were to contribute equally to the joint venture assets under their respective accounts. Baguio Gold
would contribute P11M under its owners account plus any of its income that is left in the project, in
addition to its actual mining claim. Meanwhile, petitioners contribution would consist of its expertise in
the management and operation of mines, as well as the managers account which is comprised of
P11M in funds and property and petitioners compensation as manager that cannot be paid in cash.
However, petitioner asserts that it could not have entered into a partnership agreement with Baguio
Gold because it did not bind itself to contribute money or property to the project; that under
paragraph 5 of the agreement, it was only optional for petitioner to transfer funds or property to the
Sto. Nio project (w)henever the MANAGERS shall deem it necessary and convenient in connection with
the MANAGEMENT of the STO. NIO MINE.[18]

The wording of the parties agreement as to petitioners contribution to the common fund does not
detract from the fact that petitioner transferred its funds and property to the project as specified in
paragraph 5, thus rendering effective the other stipulations of the contract, particularly paragraph 5(c)
which prohibits petitioner from withdrawing the advances until termination of the parties business
relations. As can be seen, petitioner became bound by its contributions once the transfers were made.
The contributions acquired an obligatory nature as soon as petitioner had chosen to exercise its option
under paragraph 5.

There is no merit to petitioners claim that the prohibition in paragraph 5(c) against withdrawal of
advances should not be taken as an indication that it had entered into a partnership with Baguio Gold;
that the stipulation only showed that what the parties entered into was actually a contract of agency
coupled with an interest which is not revocable at will and not a partnership.

In an agency coupled with interest, it is the agency that cannot be revoked or withdrawn by the
principal due to an interest of a third party that depends upon it, or the mutual interest of both
principal and agent.[19] In this case, the non-revocation or non-withdrawal under paragraph 5(c)
applies to the advances made by petitioner who is supposedly the agent and not the principal under
the contract. Thus, it cannot be inferred from the stipulation that the parties relation under the
agreement is one of agency coupled with an interest and not a partnership.

Neither can paragraph 16 of the agreement be taken as an indication that the relationship of the
parties was one of agency and not a partnership. Although the said provision states that this Agency
shall be irrevocable while any obligation of the PRINCIPAL in favor of the MANAGERS is outstanding,
inclusive of the MANAGERS account, it does not necessarily follow that the parties entered into an
agency contract coupled with an interest that cannot be withdrawn by Baguio Gold.

It should be stressed that the main object of the Power of Attorney was not to confer a power in favor
of petitioner to contract with third persons on behalf of Baguio Gold but to create a business
relationship between petitioner and Baguio Gold, in which the former was to manage and operate the
latters mine through the parties mutual contribution of material resources and industry. The essence
of an agency, even one that is coupled with interest, is the agents ability to represent his principal and
bring about business relations between the latter and third persons.[20] Where representation for and
in behalf of the principal is merely incidental or necessary for the proper discharge of ones paramount
undertaking under a contract, the latter may not necessarily be a contract of agency, but some other
agreement depending on the ultimate undertaking of the parties.[21]
In this case, the totality of the circumstances and the stipulations in the parties agreement indubitably
lead to the conclusion that a partnership was formed between petitioner and Baguio Gold.

First, it does not appear that Baguio Gold was unconditionally obligated to return the advances made
by petitioner under the agreement. Paragraph 5 (d) thereof provides that upon termination of the
parties business relations, the ratio which the MANAGERS account has to the owners account will be
determined, and the corresponding proportion of the entire assets of the STO. NINO MINE, excluding
the claims shall be transferred to petitioner.[22] As pointed out by the Court of Tax Appeals, petitioner
was merely entitled to a proportionate return of the mines assets upon dissolution of the parties
business relations. There was nothing in the agreement that would require Baguio Gold to make
payments of the advances to petitioner as would be recognized as an item of obligation or accounts
payable for Baguio Gold.

Thus, the tax court correctly concluded that the agreement provided for a distribution of assets of the
Sto. Nio mine upon termination, a provision that is more consistent with a partnership than a creditor-
debtor relationship. It should be pointed out that in a contract of loan, a person who receives a loan or
money or any fungible thing acquires ownership thereof and is bound to pay the creditor an equal
amount of the same kind and quality.[23] In this case, however, there was no stipulation for Baguio
Gold to actually repay petitioner the cash and property that it had advanced, but only the return of an
amount pegged at a ratio which the managers account had to the owners account.

In this connection, we find no contractual basis for the execution of the two compromise agreements
in which Baguio Gold recognized a debt in favor of petitioner, which supposedly arose from the
termination of their business relations over the Sto. Nino mine. The Power of Attorney clearly provides
that petitioner would only be entitled to the return of a proportionate share of the mine assets to be
computed at a ratio that the managers account had to the owners account. Except to provide a basis
for claiming the advances as a bad debt deduction, there is no reason for Baguio Gold to hold itself
liable to petitioner under the compromise agreements, for any amount over and above the proportion
agreed upon in the Power of Attorney.

Next, the tax court correctly observed that it was unlikely for a business corporation to lend hundreds
of millions of pesos to another corporation with neither security, or collateral, nor a specific deed
evidencing the terms and conditions of such loans. The parties also did not provide a specific maturity
date for the advances to become due and demandable, and the manner of payment was unclear. All
these point to the inevitable conclusion that the advances were not loans but capital contributions to a
partnership.

The strongest indication that petitioner was a partner in the Sto Nio mine is the fact that it would
receive 50% of the net profits as compensation under paragraph 12 of the agreement. The entirety of
the parties contractual stipulations simply leads to no other conclusion than that petitioners
compensation is actually its share in the income of the joint venture.

Article 1769 (4) of the Civil Code explicitly provides that the receipt by a person of a share in the
profits of a business is prima facie evidence that he is a partner in the business. Petitioner asserts,
however, that no such inference can be drawn against it since its share in the profits of the Sto Nio
project was in the nature of compensation or wages of an employee, under the exception provided in
Article 1769 (4) (b).[24]

On this score, the tax court correctly noted that petitioner was not an employee of Baguio Gold who
will be paid wages pursuant to an employer-employee relationship. To begin with, petitioner was the
manager of the project and had put substantial sums into the venture in order to ensure its viability
and profitability. By pegging its compensation to profits, petitioner also stood not to be remunerated
in case the mine had no income. It is hard to believe that petitioner would take the risk of not being
paid at all for its services, if it were truly just an ordinary employee.

Consequently, we find that petitioners compensation under paragraph 12 of the agreement actually
constitutes its share in the net profits of the partnership. Indeed, petitioner would not be entitled to an
equal share in the income of the mine if it were just an employee of Baguio Gold.[25] It is not
surprising that petitioner was to receive a 50% share in the net profits, considering that the Power of
Attorney also provided for an almost equal contribution of the parties to the St. Nino mine. The
compensation agreed upon only serves to reinforce the notion that the parties relations were indeed of
partners and not employer-employee.

All told, the lower courts did not err in treating petitioners advances as investments in a partnership
known as the Sto. Nino mine. The advances were not debts of Baguio Gold to petitioner inasmuch as
the latter was under no unconditional obligation to return the same to the former under the Power of
Attorney. As for the amounts that petitioner paid as guarantor to Baguio Golds creditors, we find no
reason to depart from the tax courts factual finding that Baguio Golds debts were not yet due and
demandable at the time that petitioner paid the same. Verily, petitioner pre-paid Baguio Golds
outstanding loans to its bank creditors and this conclusion is supported by the evidence on record.[26]

In sum, petitioner cannot claim the advances as a bad debt deduction from its gross income.
Deductions for income tax purposes partake of the nature of tax exemptions and are strictly construed
against the taxpayer, who must prove by convincing evidence that he is entitled to the deduction
claimed.[27] In this case, petitioner failed to substantiate its assertion that the advances were
subsisting debts of Baguio Gold that could be deducted from its gross income. Consequently, it could
not claim the advances as a valid bad debt deduction.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 49385
dated June 30, 2000, which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 5200
is AFFIRMED. Petitioner Philex Mining Corporation is ORDERED to PAY the deficiency tax on its 1982
income in the amount of P62,811,161.31, with 20% delinquency interest computed from February 10,
1995, which is the due date given for the payment of the deficiency income tax, up to the actual date
of payment.

SO ORDERED.