G.R. No.
L-20567 July 30, 1965PHILIPPINE Its demands on the principal debtor and the Surety having
NATIONAL BANK, petitioner, vs.
MANILA SURETY and FIDELITY CO., INC. and THE COURT
OF APPEALS (Second Division), respondents.
The Philippine National Bank petitions for the review and
reversal of the decision rendered by the Court of Appeals
(Second Division), in its case CA-G.R. No. 24232-R,
dismissing the Bank's complaint against respondent Manila
Surety & Fidelity Co., Inc., and modifying the judgment of
the Court of First Instance of Manila in its Civil Case No.
11263.
The material facts of the case, as found by the appellate
Court, are as follows:
The Philippine National Bank had opened a letter of credit
and advanced thereon $120,000.00 to Edgington Oil
Refinery for 8,000 tons of hot asphalt. Of this amount,
2,000 tons worth P279,000.00 were released and delivered
to Adams & Taguba Corporation (known as ATACO) under a
trust receipt guaranteed by Manila Surety & Fidelity Co. up
to the amount of P75,000.00. To pay for the asphalt,
ATACO constituted the Bank its assignee and attorney-in-
fact to receive and collect from the Bureau of Public Works
the amount aforesaid out of funds payable to the assignor
under Purchase Order No. 71947. This assignment (Exhibit
"A") stipulated that:
The conditions of this assignment are as follows:
1. The same shall remain irrevocable until the said
credit accomodation is fully liquidated.
2. The PHILIPPINE NATIONAL BANK is hereby
appointed as our Attorney-in-Fact for us and in our
name, place and stead, to collect and to receive
the payments to be made by virtue of the
aforesaid Purchase Order, with full power and
authority to execute and deliver on our behalf,
receipt for all payments made to it; to endorse for
deposit or encashment checks, money order and
treasury warrants which said Bank may receive,
and to apply said payments to the settlement of
said credit accommodation.
This power of attorney shall also remain
irrevocable until our total indebtedness to the said
Bank have been fully liquidated. (Exhibit E)
ATACO delivered to the Bureau of Public Works, and the
latter accepted, asphalt to the total value of P431,466.52.
Of this amount the Bank regularly collected, from April 21,
1948 to November 18, 1948, P106,382.01. Thereafter, for
unexplained reasons, the Bank ceased to collect, until in
1952 its investigators found that more moneys were
payable to ATACO from the Public Works office, because
the latter had allowed mother creditor to collect funds due
to ATACO under the same purchase order to a total of
P311,230.41.
been refused, the Bank sued both in the Court of First
Instance of Manila to recover the balance of P158,563.18 as
of February 15, 1950, plus interests and costs.
On October 4, 1958, the trial court rendered a decision, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered as follows:
1. Ordering defendants, Adams & Taguba
Corporation and Manila Surety & Fidelity Co., Inc.,
to pay plaintiff, Philippines National Bank, the sum
of P174,462.34 as of February 24, 1956, minus the
amount of P8,000 which defendant, Manila Surety
Co., Inc. paid from March, 1956 to October, 1956
with interest at the rate of 5% per annum from
February 25, 1956, until fully paid provided that
the total amount that should be paid by defendant
Manila Surety Co., Inc., on account of this case
shall not exceed P75,000.00, and to pay the costs;
2. Orderinq cross-defendant, Adams & Taguba
Corporation, and third-party defendant, Pedro A.
Taguba, jointly and severally, to pay cross and
third-party plaintiff, Manila Surety & Fidelity Co.,
Inc., whatever amount the latter has paid or shall
pay under this judgment;
3. Dismissing the complaint insofar as the claim for
17% special tax is concerned; and
4. Dismissing the counterclaim of defendants
Adams & Taguba Corporation and Manila Surety &
Fidelity Co., Inc.
From said decision, only the defendant Surety Company has
duly perfected its appeal. The Central Bank of the
Philippines did not appeal, while defendant ATACO failed to
perfect its appeal.
The Bank recoursed to the Court of Appeals, which
rendered an adverse decision and modified the judgment
of the court of origin as to the surety's liability. Its motions
for reconsideration having proved unavailing, the Bank
appealed to this Court.
The Court of Appeals found the Bank to have been
negligent in having stopped collecting from the Bureau of
Public Works the moneys falling due in favor of the
principal debtor, ATACO, from and after November 18,
1948, before the debt was fully collected, thereby allowing
such funds to be taken and exhausted by other creditors to
the prejudice of the surety, and held that the Bank's
negligence resulted in exoneration of respondent Manila
Surety & Fidelity Company.
This holding is now assailed by the Bank. It contends the
power of attorney obtained from ATACO was merely in
additional security in its favor, and that it was the duty of
the surety, and not that of the creditor, owed see to it that
the obligor fulfills his obligation, and that the creditor owed there is only one that is partially secured, the error is of no
the surety no duty of active diligence to collect any, sum importance, since the principal reason based on the Bank's
from the principal debtor, citing Judge Advocate General vs. negligence furnishes adequate support to the decision of
Court of Appeals, G.R. No. L-10671, October 23, 1958. the Court of Appeals that the surety was thereby released.

This argument of appellant Bank misses the point. The WHEREFORE, the appealed decision is affirmed, with costs
Court of Appeals did not hold the Bank answerable for against appellant Philippine National Bank.
negligence in failing to collect from the principal debtor but
for its neglect in collecting the sums due to the debtor from -----------------------------------------------------------------------
the Bureau of Public Works, contrary to its duty as holder of
an exclusive and irrevocable power of attorney to make PNB V. MANILA SURETY & FIDELITY CO., INC.
such collections, since an agent is required to act with the
care of a good father of a family (Civ. Code, Art. 1887) and
An agent is required to act with the care of a good father of
becomes liable for the damages which the principal may
a family and becomes liable for the damages, which the
suffer through his non-performance (Civ. Code, Art. 1884).
principal may suffer through his non-performance. A bank is
Certainly, the Bank could not expect that the Bank would
answerable for negligence in failing to collect the sums due
diligently perform its duty under its power of attorney, but
its debtor from the latters own debtor, contrary to said
because they could not have collected from the Bureau
banks duty as holder of an exclusive and irrevocable power
even if they had attempted to do so. It must not be
of attorney to make such collections.
forgotten that the Bank's power to collect was expressly
made irrevocable, so that the Bureau of Public Works could
FACTS:
very well refuse to make payments to the principal debtor
itself, and a fortiori reject any demands by the surety.
Adams & Taguba Corporation (ATACO) constituted PNB as
its assignee and attorney-in-fact to receive and collect from
Even if the assignment with power of attorney from the
the Bureau of Public Works the amount to pay for the
principal debtor were considered as mere additional
asphalt delivered to it under a trust receipt guaranteed by
security still, by allowing the assigned funds to be
exhausted without notifying the surety, the Bank deprived Manila Surety. ATACO delivered to BPW asphalt worth
P431,466.52. Of this amount, PNB was able to regularly
the former of any possibility of recoursing against that
collect a total of P106,382.01. However, due to unexplained
security. The Bank thereby exonerated the surety, pursuant
reasons, PNB was not able to collect until the investigators
to Article 2080 of the Civil Code:
found out that more money were payable to ATACO from
BPW. The latter allowed another creditor to collect funds
ART. 2080. The guarantors, even though they be
due to ATACO under the same purchase order, to a total of
solidary, are released from their obligation
P311,230.41.
whenever by come act of the creditor they cannot
be subrogated to the rights, mortgages and
Thus, PNB sued both ATACO and Manila Surety to recover
preferences of the latter. (Emphasis supplied.)
the balance of P158,563.18, plus interests and damages. CA
ruled that PNB was negligent in having stopped collecting
The appellant points out to its letter of demand, Exhibit "K",
from BPW before ATACOs debt is fully collected, thereby
addressed to the Bureau of Public Works, on May 5, 1949,
allowing funds to be taken by other creditors to the
and its letter to ATACO, Exhibit "G", informing the debtor
prejudice of the surety. PNB asserts that the power of
that as of its date, October 31, 1949, its outstanding
attorney executed in it is favor from ATACO was merely an
balance was P156,374.83. Said Exhibit "G" has no bearing
additional security; that it was the duty of the surety to see
on the issue whether the Bank has exercised due diligence
to it that the obligor fulfills his obligation; and that PNB has
in collecting from the Bureau of Public Works, since the
no obligation to the surety to collect any sum from ATACO.
letter was addressed to ATACO, and the funds were to
come from elsewhere. As to the letter of demand on the
ISSUE: W/N PNB is negligent as an agent-creditor of ATACO
Public Works office, it does not appear that any reply
in collecting sums due to it
thereto was made; nor that the demand was pressed, nor
that the debtor or the surety were ever apprised that
payment was not being made. The fact remains that HELD: YES. The CA did not hold PNB responsible for its
because of the Bank's inactivity the other creditors were negligence in failing to collect from ATACO for its debt to
enabled to collect P173,870.31, when the balance due to PNB, but for ITS NEGLECT IN COLLECTING SUMS DUE TO
appellant Bank was only P158,563.18. The finding of ATACO FROM BPW. An agent is required to act with the
negligence made by the Court of Appeals is thus not only care and diligence of a good father of a family and becomes
conclusive on us but fully supported by the evidence. liable for the damages, which the principal may suffer
through its non-performance. PNBs power to collect was
expressly made irrevocable so that BPW could very well
Even if the Court of Appeals erred on the second reason it
refuse to make payments to ATACO itself, and reject any
advanced in support of the decision now under appeal,
because the rules on application of payments, giving demands by the surety.
preference to secured obligations are only operative in
cases where there are several distinct debts, and not where ---------------------------------------------------------------------
G.R. No. L-5142 February 26, 1954CONSOLACION L.
RAMOS, administratrix-appellant, vs.BENIGNO A. CAOIBES,
attorney-in-fact-appellee.
This is an appeal by Consolacion L. Ramos as administratrix
of the estate of Concepcion Ramos from an order issued by
the Court of First Instance of Batangas on June 15, 1951.
On August 16, 1948, Concepcion Ramos Dipusoy executed
before a notary public two documents which have been
marked as Annex "A" and Annex "B".
Annex "A" is a power of attorney which reads as follows:
CITY OF MANILA s.s.
Before me, a Notary Public for and in the City of Manila,
personally appeared Miss Concepcion Ramos Dipusoy, with
Residence Certificate No. A-3115097, issued at Balayan,
Batangas, on February 26, 1948, who is known to me to be
the same person who executed the foregoing power of
attorney in favor of Mr. Benigno A. Caoibes, and
acknowledged to me that the same is her free and
voluntary act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand this
16th day of August, 1948, in the City of Manila and affixed
my Notarial Seal.

(Sgd.) ARTEMIO ABAYA

SPECIAL POWER OF ATTORNEY
Notary Public
KNOW ALL MEN BY THESE PRESENTS:
My commission expires on December 31, 1948
That I, Concepcion Ramos Dipusoy, of legal age, single,
Filipino citizen and resident of Balayan, Batangas, have Annex B is an affidavit of the following tenor:
made, constituted and appointed, and by these presents do
make, constitute and appoint Mr. Benigno A. Caoibes, also REPUBLIC OF THE PHILIPPINES}
of legal age, married, Filipino citizen and at present residing
at 1047 Antipolo Street, Sampaloc, Manila, my true and CITY OF MANILA } s.s.
lawful attorney-in-fact, for me and in my name, place and
stead, to collect any amount due me from the Philippine AFFIDAVIT
War Damage Commission, regarding my claim filed for my
properties that were lost during the last war in Balayan,
That I, CONCEPCION RAMOS DIPUSOY, of legal age, single,
Batangas, to cash checks, warrants and to sign receipts,
Filipino citizen, and resident of Balayan, Batangas, after
vouchers, documents which shall be necessary to the said
having been duly sworn to in accordance to law depose and
purpose.
say:

That I am giving and granting unto my said attorney-in-fact

That in case payment of any amount or amounts collected
Benigno A. Caoibes, full and absolute power and authority
from the Philippine War Damage Commission, my nephew
to do and perform all any every act or thing whatsoever to
and at the same time attorney-in-fact, shall give my sister
be done necessary in and about the premises, as fully to all
Teopista Vda. de Basa one-half (), of the corresponding
intents and purposes as I might or could myself do if I were
amount and the other half () shall be given to my nephew
personally present, and hereby confirming and ratifying all
and niece Mr. and Mrs. Benigno A. Caoibes.
that my said attorney-in-fact shall lawfully do or cause to
be done and by virtue of these presents.
IN WITNESS WHEREOF, I have hereunto set my hand this
16th day of August, 1948, in the City of Manila.
IN WITNESS WHEREOF, I have hereunto set my hand this
16th day of August, 1948, in the City of Manila, Philippines.
(Sgd.) CONCEPCION RAMOS DIPUSOY
(Miss) CONCEPCION RAMOS DIPUSOY
Signed in the Presence of:
Signed in the Presence of:
1. (Sgd.) CONSOLACION L. RAMOS
1. (Sgd.) CONSOLACION L. RAMOS
2. (Sgd.) SOCORRO L. RAMOS
Witness
Subscribed and sworn to before me this 16th day of August,
1948, in the City of Manila. Affiant have exhibited her
2. (Sgd.) SOCORRO L. RAMOS
residence certificate No. A-3115097, issued at Balayan,
Batangas, on February 26, 1948.
Witness
(Sgd.) ARTEMIO ABAYA
REPUBLIC OF THE PHILIPPINES
Notary Public
My commission expires on December 31,1948
Concepcion Ramos died on August 19, 1948, leaving a will
dated January 7, 1927 admitted to probate on October 4,
1948, in which she ordered that the credits due to her be
distributed among the children of the deceased Antonino
Ramos, namely, Consolacion, Ramon, Socorro and Cirila.
One year before she died, Concepcion Ramos filed with the
War Damage Commission a claim which was identified as
No. 411773. On August 31, 1948, the Commission issued
check No. 348444, in the amount of P501.62, payable to
the deceased Concepcion Ramos. This check was returned
to the Commission and substituted by the latter which
check No. 564614, on November 10, 1948, for the same
amount, but payable to Benigno A. Caoibes, who had
presented to said entity Annexes "A" and "B", above
mentioned, in order to exchange the first check No.
564614, which he cashed for himself.
Annexes "A" and "B" were presented to the Commission by
Caoibes after the death of Concepcion. The administratrix,
Consolacion L. Ramos, the appellant herein, discovered the
collection made by Caoibes when she saw the note
"previous payment" which appeared in the account sent to
her by the Commission on October 13, 1950. She filed a
motion with the court asking that Caoibes be ordered to
deposit the sum of P501.62 with the clerk of court. Caoibes
answered the motion admitting that after the death of
Concepcion, he presented Annexes "A" and "B" to the
Commission and received in cash the sum of P501.62,
amount of the second check, above mentioned, but stating
that he was willing to deliver to the clerk the sum of
P250.81. He contended that, by virtue of Annex "A", and
Annex "B", he had the right to retain, for himself, half of the
sum of P501.62.
The court below issued the following order:
Considering the motion of the administratrix praying that
Atty. Benigno A. Caoibes turn over the amount of P510.62,
representing war damage claim, to the office of the Clerk of
this Court, and the answer of Atty. Caoibes to the said
motion and this Court having had the opportunity to
personally confer with the parties and Atty. Caoibes being
agreeable to turn over the amount of P250.81 to the Clerk
of this Court in final settlement of this matter it is
ordered that the said Atty. Caoibes deposit the said amount
to be at the disposal of the administratrix and the other
parties in this intestate proceedings. With this order, the
matter before this Court is deemed closed.
SO ORDERED
Batangas, Batangas, June 15, 1951
(Sgd.) E. SORIANO
Judge
On July 3, 1951, the administratrix filed a motion for
reconsideration, which was denied by the order of the
court dated July 12, 1951. (In the printed Record on Appeal
the date appears to be July 12, 1950, but it is evidently a
mistake and it should be July 12, 1951.)
We will now proceed to consider the two documents.
Annex A is only a power of attorney. Caoibes, as agent, had
the obligation to deliver the amount collected by virtue of
said power to his principal, Concepcion, or, after her death,
to the administratrix of her estate, Consolacion. There is
absolutely no cession of rights made in favor of Caoibes in
Annex "A", and under Article 1711 of the old Civil Code
(which was in force at the time of the transaction), the
contract of agency is presumed to be gratuitous, unless the
agent is a professional agent. There is no proof that Caoibes
was such. Furthermore, according to Article 1732 of said
Code, an agency is terminated, among other causes, by the
death of the principal or of the agent. When Caoibes made
use of the power of attorney, his principal, Concepcion was
already dead.
Coming now to Annex "B", the alleged document of
donation, it should be noted that it is not a donation of real
but of personal property and is governed by article 632 of
the old Civil Code, which reads as follows:
Donations of personal property may be made verbally or in
writing.
Verbal donation requires the simultaneous delivery of the
gift. In the absence of this requisite the donation shall
produce no effect, unless made in writing and accepted in
the same form.
The alleged donation was made in writing but it has not
been accepted in the same form, and consequently, has no
validity. It cannot be considered a donation upon valuable
consideration, for no services nor any valuable
consideration had passed from the donees to the donor.
The mere fact that Caoibes collected the claim from the
War Damage Commission is not such a service as to require
compensation. Caoibes did not even prepare the claim.
The court below in its order of June 15, 1951, said that it
"having had the opportunity to personally confer with the
parties and Attorney Caoibes being agreeable to turn over
the amount of P250.81 to the Clerk of this Court in final
settlement of this matter it is ordered that the said Atty.
Caoibes deposit the amount of P250.81 with the Clerk of
this Court, the said amount to be at the disposal of the
administratrix and the other parties in these intestate
proceedings. With this order, the matter before the
administratrix never consented to the reduction of the
claim.
In view of the foregoing, the order appealed from is hereby
reversed and Benigno A. Caoibes is ordered to deposit with
the Clerk of Court of Batangas the sum of P501.62 to be at
the disposal of the administratrix in her capacity as such,
without pronouncement as to costs. So ordered.
-----------------------------------------------------------------------
Ramos vs. Caoibes, 94 Phil. 440
FACTS: Concepcion Ramos appointed Caoibes through a
power of attorney to collect an amount due him from the
Philippine War Damage Commission. Half of that amount
will then be given to the sister of Concepcion and half to her
niece and nephew as evidenced by an affidavit. Days after
Concepcion died, a Check was issued to Caoibes when he
presented the power of attorney and affidavit and later on
encashed it for himself. The administratrix discovered the
collection made by Caoibes. The administratrix filed to the
court asking Caoibes to deposit the money to the clerk of
court. Caoibes contended that he will deliver half of the
amount to the clerk of court and then said that he had the
right to retain half of the money by virtue of the power of
attorney and the Affidavit.
ISSUE: Whether Caoibes is correct with her contention that
he had the right to retain the money by virtue of the power
of attorney?
RULING: No. Caoibes as an agent had the obligation to
deliver the amount collected by virtue of the power of
attorney to his principla, Concepcion or the administratrix
since she died. No where in the in power of attorney did it
state that the was a cession of rights made in favour of
Caoibes. And the prevailing provision during the time of the
transaction stated that a contract of agency is deemed
gratuitous unless the agent is a professional agent and
there was no showing that Caoibes was such. Lastly, an
agency is terminated by death of the principal or of the
agent. When Caoibes made use of the power of attorney,
the principal was already dead.
Additional: Verbal donation requires the simultaneous
delivery of the gift. In the absence of this requisite the
donation shall produce no effect, unless made in writing
and accepted in the same form. The alleged donation was
made in writing but it has not been accepted in the same
form, and consequently, has no validity.
---------------------------------------------------------------------
FORTIS V. GUTIERREZ HERMANOS
In an action by an agent to recover the amount of
certain disbursements and not compensation for
services, Art. 1728, not Art. 1711, is applicable.
FACTS: Fortis, an employee of Gutierrez Hermanos,
brought the action to recover the balance of his salary
for the year 1902, which is 5% of the net profits of
Hermanos business, and the amount he expended for
the year 1903 amounting to P600. The salary was in
accordance with the contract made by Miguel Alonzo
Gutierrez, who was made as one of the managers of
the company, with full power to transact all of the
business and to make a contract of employment. In
1903, Fortis went to Hongkong to look after the
business of Gutierrez Hermanos in the matter of the
repair of a certain steamship, for which he expended
P600. Gutierrez Hermanos contended that Fortis is
not entitled to compensation for the services
rendered, because according to Art. 1711 of the Civil
Code, the contract of agency is supposed to be
gratuitous in the absence of an agreement to the
contrary. Lower court ruled in favor of Fortis.
ISSUE:
W/N Fortis, as an agent of Gutierrez Hermanos in
Hongkong, is entitled to reimbursement of the P600
expense he incurred
HELD:
YES. Art. 1711 is INAPPLICABLE in this case because
the amount of P600 is not claimed as compensation
for services but as a reimbursement for money
expended by him in the business of Hermanos. Thus,
it is Art. 1728 (now Art. 1912 of the NCC) that is
applicable Article 1912. The principal must advance to
the agent, should the latter so request, the sums
necessary for the execution of the agency. Should the
agent have advanced them, the principal must
reimburse him therefore, even if the business or
undertaking was not successful, provided the agent is
free from all fault. The reimbursement shall include
interest on the sums advanced, from the day on which
the advance was made. (1728)
----------------------------------------------------------------------
G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO vs.GREGORIO M. DOMINGO,
Petitioner-appellant Vicente M. Domingo, now deceased
and represented by his heirs, Antonina Raymundo vda. de
Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion,
Irene and Joselito, all surnamed Domingo, sought the
reversal of the majority decision dated, March 12, 1969 of
the Special Division of Five of the Court of Appeals affirming
the judgment of the trial court, which sentenced the said
Vicente M. Domingo to pay Gregorio M. Domingo
P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50
with interest on both amounts from the date of the filing of
the complaint, to pay Gregorio Domingo P1,000.00 as
moral and exemplary damages and P500.00 as attorney's
fees plus costs.
The following facts were found to be established by the
majority of the Special Division of Five of the Court of
Appeals:
In a document Exhibit "A" executed on June 2, 1956,
Vicente M. Domingo granted Gregorio Domingo, a real
estate broker, the exclusive agency to sell his lot No. 883 of
Piedad Estate with an area of about 88,477 square meters
at the rate of P2.00 per square meter (or for P176,954.00)
with a commission of 5% on the total price, if the property
is sold by Vicente or by anyone else during the 30-day
duration of the agency or if the property is sold by Vicente
within three months from the termination of the agency to
apurchaser to whom it was submitted by Gregorio during
the continuance of the agency with notice to Vicente. The
said agency contract was in triplicate, one copy was given
to Vicente, while the original and another copy were
retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo
P. Purisima to look for a buyer, promising him one-half of
the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to
Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very
much lower than the price of P2.00 per square meter
(Exhibit "B"). Vicente directed Gregorio to tell Oscar de
Leon to raise his offer. After several conferences between
Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by Exhibit "C",
to which Vicente agreed by signing Exhibit "C". Upon
demand of Vicente, Oscar de Leon issued to him a check in
the amount of P1,000.00 as earnest money, after which
Vicente advanced to Gregorio the sum of P300.00. Oscar de
Leon confirmed his former offer to pay for the property at
P1.20 per square meter in another letter, Exhibit "D".
Subsequently, Vicente asked for an additional amount of
P1,000.00 as earnest money, which Oscar de Leon
promised to deliver to him. Thereafter, Exhibit "C" was
amended to the effect that Oscar de Leon will vacate on or
about September 15, 1956 his house and lot at Denver
Street, Quezon City which is part of the purchase price. It
was again amended to the effect that Oscar will vacate his
house and lot on December 1, 1956, because his wife was
on the family way and Vicente could stay in lot No. 883 of
Piedad Estate until June 1, 1957, in a document dated June
30, 1956 (the year 1957 therein is a mere typographical
error) and marked Exhibit "D". Pursuant to his promise to
Gregorio, Oscar gave him as a gift or propina the sum of
One Thousand Pesos (P1,000.00) for succeeding in
persuading Vicente to sell his lot at P1.20 per square meter
or a total in round figure of One Hundred Nine Thousand
Pesos (P109,000.00). This gift of One Thousand Pesos
(P1,000.00) was not disclosed by Gregorio to Vicente.
Neither did Oscar pay Vicente the additional amount of
One Thousand Pesos (P1,000.00) by way of earnest money.
In the deed of sale was not executed on August 1, 1956 as
stipulated in Exhibit "C" nor on August 15, 1956 as
extended by Vicente, Oscar told Gregorio that he did not
receive his money from his brother in the United States, for
which reason he was giving up the negotiation including the
amount of One Thousand Pesos (P1,000.00) given as
earnest money to Vicente and the One Thousand Pesos
(P1,000.00) given to Gregorio as propina or gift. When
Oscar did not see him after several weeks, Gregorio sensed
something fishy. So, he went to Vicente and read a portion
of Exhibit "A" marked habit "A-1" to the effect that Vicente
was still committed to pay him 5% commission, if the sale is
consummated within three months after the expiration of
the 30-day period of the exclusive agency in his favor from
the execution of the agency contract on June 2, 1956 to a
purchaser brought by Gregorio to Vicente during the said
30-day period. Vicente grabbed the original of Exhibit "A"
and tore it to pieces. Gregorio held his peace, not wanting
to antagonize Vicente further, because he had still
duplicate of Exhibit "A". From his meeting with Vicente,
Gregorio proceeded to the office of the Register of Deeds
of Quezon City, where he discovered Exhibit "G' deed of
sale executed on September 17, 1956 by Amparo Diaz, wife
of Oscar de Leon, over their house and lot No. 40 Denver
Street, Cubao, Quezon City, in favor Vicente as down
payment by Oscar de Leon on the purchase price of
Vicente's lot No. 883 of Piedad Estate. Upon thus learning
that Vicente sold his property to the same buyer, Oscar de
Leon and his wife, he demanded in writting payment of his
commission on the sale price of One Hundred Nine
Thousand Pesos (P109,000.00), Exhibit "H". He also
conferred with Oscar de Leon, who told him that Vicente
went to him and asked him to eliminate Gregorio in the
transaction and that he would sell his property to him for
One Hundred Four Thousand Pesos (P104,000.0 In Vicente's
reply to Gregorio's letter, Exhibit "H", Vicente stated that
Gregorio is not entitled to the 5% commission because he
sold the property not to Gregorio's buyer, Oscar de Leon,
but to another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit
"A", the exclusive agency contract, is genuine; that Amparo
Diaz, the vendee, being the wife of Oscar de Leon the sale
by Vicente of his property is practically a sale to Oscar de
Leon since husband and wife have common or identical
interests; that Gregorio and intervenor Teofilo Purisima
were the efficient cause in the consummation of the sale in
favor of the spouses Oscar de Leon and Amparo Diaz; that
Oscar de Leon paid Gregorio the sum of One Thousand
Pesos (P1,000.00) as "propina" or gift and not as additional
earnest money to be given to the plaintiff, because Exhibit
"66", Vicente's letter addressed to Oscar de Leon with
respect to the additional earnest money, does not appear
to have been answered by Oscar de Leon and therefore
there is no writing or document supporting Oscar de Leon's
testimony that he paid an additional earnest money of One
Thousand Pesos (P1,000.00) to Gregorio for delivery to
Vicente, unlike the first amount of One Thousand Pesos
(P1,000.00) paid by Oscar de Leon to Vicente as earnest
money, evidenced by the letter Exhibit "4"; and that
Vicente did not even mention such additional earnest
money in his two replies Exhibits "I" and "J" to Gregorio's
letter of demand of the 5% commission.
The three issues in this appeal are (1) whether the failure
on the part of Gregorio to disclose to Vicente the payment
to him by Oscar de Leon of the amount of One Thousand
Pesos (P1,000.00) as gift or "propina" for having persuaded
Vicente to reduce the purchase price from P2.00 to P1.20
per square meter, so constitutes fraud as to cause a
forfeiture of his commission on the sale price; (2) whether
Vicente or Gregorio should be liable directly to the
intervenor Teofilo Purisima for the latter's share in the
expected commission of Gregorio by reason of the sale; and
(3) whether the award of legal interest, moral and
exemplary damages, attorney's fees and costs, was proper.
Unfortunately, the majority opinion penned by Justice
Edilberto Soriano and concurred in by Justice Juan Enriquez
did not touch on these issues which were extensively
discussed by Justice Magno Gatmaitan in his dissenting
opinion. However, Justice Esguerra, in his concurring
opinion, affirmed that it does not constitute breach of trust
or fraud on the part of the broker and regarded same as
merely part of the whole process of bringing about the
meeting of the minds of the seller and the purchaser and
that the commitment from the prospect buyer that he
would give a reward to Gregorio if he could effect better
terms for him from the seller, independent of his legitimate
commission, is not fraudulent, because the principal can
reject the terms offered by the prospective buyer if he
believes that such terms are onerous disadvantageous to
him. On the other hand, Justice Gatmaitan, with whom
Justice Antonio Cafizares corner held the view that such an
act on the part of Gregorio was fraudulent and constituted
a breach of trust, which should deprive him of his right to
the commission.
The duties and liabilities of a broker to his employer are
essentially those which an agent owes to his principal.1
Consequently, the decisive legal provisions are in found
Articles 1891 and 1909 of the New Civil Code.
Art. 1891. Every agent is bound to render an
account of his transactions and to deliver to the principal
whatever he may have received by virtue of the agency,
even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation
to render an account shall be void.
Art. 1909. The agent is responsible not only for
fraud but also for negligence, which shall be judged with
more less rigor by the courts, according to whether the
agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the
old Spanish Civil Code which provides that:
Art. 1720. Every agent is bound to give an account
of his transaction and to pay to the principal whatever he
may have received by virtue of the agency, even though
what he has received is not due to the principal.
The modification contained in the first paragraph Article
1891 consists in changing the phrase "to pay" to "to
deliver", which latter term is more comprehensive than the
former.
Paragraph 2 of Article 1891 is a new addition designed to
stress the highest loyalty that is required to an agent
condemning as void any stipulation exempting the agent
from the duty and liability imposed on him in paragraph
one thereof.
Article 1909 of the New Civil Code is essentially a
reinstatement of Article 1726 of the old Spanish Civil Code
which reads thus:
Art. 1726. The agent is liable not only for fraud, but
also for negligence, which shall be judged with more or less
severity by the courts, according to whether the agency
was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith,
fidelity, honesty, candor and fairness on the part of the
agent, the real estate broker in this case, to his principal,
the vendor. The law imposes upon the agent the absolute
obligation to make a full disclosure or complete account to
his principal of all his transactions and other material facts
relevant to the agency, so much so that the law as
amended does not countenance any stipulation exempting
the agent from such an obligation and considers such an
exemption as void. The duty of an agent is likened to that
of a trustee. This is not a technical or arbitrary rule but a
rule founded on the highest and truest principle of morality
as well as of the strictest justice.2
Hence, an agent who takes a secret profit in the nature of a
bonus, gratuity or personal benefit from the vendee,
without revealing the same to his principal, the vendor, is
guilty of a breach of his loyalty to the principal and forfeits
his right to collect the commission from his principal, even
if the principal does not suffer any injury by reason of such
breach of fidelity, or that he obtained better results or that
the agency is a gratuitous one, or that usage or custom
allows it; because the rule is to prevent the possibility of
any wrong, not to remedy or repair an actual damage.3 By
taking such profit or bonus or gift or propina from the
vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for hisprincipal,
who has a right to treat him, insofar as his commission is
concerned, as if no agency had existed. The fact that the
principal may have been benefited by the valuable services
of the said agent does not exculpate the agent who has
only himself to blame for such a result by reason of his
treachery or perfidy.
This Court has been consistent in the rigorous application
of Article 1720 of the old Spanish Civil Code. Thus, for
failure to deliver sums of money paid to him as an
insurance agent for the account of his employer as required
by said Article 1720, said insurance agent was convicted
estafa.4 An administrator of an estate was likewise under
the same Article 1720 for failure to render an account of his
administration to the heirs unless the heirs consented
thereto or are estopped by having accepted the correctness
of his account previously rendered.5
Because of his responsibility under the aforecited article
1720, an agent is likewise liable for estafa for failure to
deliver to his principal the total amount collected by him in
behalf of his principal and cannot retain the commission
pertaining to him by subtracting the same from his
collections.6
A lawyer is equally liable unnder said Article 1720 if he fails
to deliver to his client all the money and property received
by him for his client despite his attorney's lien.7 The duty of
a commission agent to render a full account his operations
to his principal was reiterated in Duhart, etc. vs. Macias.8
The American jurisprudence on this score is well-nigh
unanimous.
Where a principal has paid an agent or broker a
commission while ignorant of the fact that the latter has
been unfaithful, the principal may recover back the
commission paid, since an agent or broker who has been
unfaithful is not entitled to any compensation.
In discussing the right of the principal to recover
commissions retained by an unfaithful agent, the court in
Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260, 34 LRA
(NS) 1046, said: "It is well settled that the agent is bound to
exercise the utmost good faith in his dealings with his
principal. As Lord Cairns said, this rule "is not a technical or
arbitrary rule. It is a rule founded on the highest and truest
principles, of morality." Parker vs. McKenna (1874) LR
10,Ch(Eng) 96,118 ... If the agent does not conduct himself
with entire fidelity towards his principal, but is guilty of
taking a secret profit or commission in regard the matter in
which he is employed, he loses his right to compensation
on the ground that he has taken a position wholly
inconsistent with that of agent for his employer, and which
gives his employer, upon discovering it, the right to treat
him so far as compensation, at least, is concerned as if no
agency had existed. This may operate to give to the
principal the benefit of valuable services rendered by the
agent, but the agent has only himself to blame for that
result."
The intent with which the agent took a secret profit has
been held immaterial where the agent has in fact entered
into a relationship inconsistent with his agency, since the
law condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps (1911) 94 NE 260.9
As a general rule, it is a breach of good faith and loyalty to
his principal for an agent, while the agency exists, so to deal
with the subject matter thereof, or with information
acquired during the course of the agency, as to make a
profit out of it for himself in excess of his lawful
compensation; and if he does so he may be held as a
trustee and may be compelled to account to his principal
for all profits, advantages, rights, or privileges acquired by
him in such dealings, whether in performance or in
violation of his duties, and be required to transfer them to
his principal upon being reimbursed for his expenditures for
the same, unless the principal has consented to or ratified
the transaction knowing that benefit or profit would accrue
or had accrued, to the agent, or unless with such
knowledge he has allowed the agent so as to change his
condition that he cannot be put in status quo. The
application of this rule is not affected by the fact that the
principal did not suffer any injury by reason of the agent's
dealings or that he in fact obtained better results; nor is it
affected by the fact that there is a usage or custom to the
contrary or that the agency is a gratuitous one. (Emphasis
applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as
the broker, received a gift or propina in the amount of One
Thousand Pesos (P1,000.00) from the prospective buyer
Oscar de Leon, without the knowledge and consent of his
principal, herein petitioner-appellant Vicente Domingo. His
acceptance of said substantial monetary gift corrupted his
duty to serve the interests only of his principal and
undermined his loyalty to his principal, who gave him
partial advance of Three Hundred Pesos (P300.00) on his
commission. As a consequence, instead of exerting his best
to persuade his prospective buyer to purchase the property
on the most advantageous terms desired by his principal,
the broker, herein defendant-appellee Gregorio Domingo,
succeeded in persuading his principal to accept the
counter-offer of the prospective buyer to purchase the
property at P1.20 per square meter or One Hundred Nine
Thousand Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower the the
price of P2.00 per square meter or One Hundred Seventy-
Six Thousand Nine Hundred Fifty-Four Pesos (P176,954.00)
for said lot originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code
will not apply if the agent or broker acted only as a
middleman with the task of merely bringing together the
vendor and vendee, who themselves thereafter will
negotiate on the terms and conditions of the transaction.
Neither would the rule apply if the agent or broker had
informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not object
therto. 11 Herein defendant-appellee Gregorio Domingo
was not merely a middleman of the petitioner-appellant
Vicente Domingo and the buyer Oscar de Leon. He was the
broker and agent of said petitioner-appellant only. And
therein petitioner-appellant was not aware of the gift of
One Thousand Pesos (P1,000.00) received by Gregorio
Domingo from the prospective buyer; much less did he
consent to his agent's accepting such a gift.
The fact that the buyer appearing in the deed of sale is
Amparo Diaz, the wife of Oscar de Leon, does not
materially alter the situation; because the transaction, to
be valid, must necessarily be with the consent of the
husband Oscar de Leon, who is the administrator of their
conjugal assets including their house and lot at No. 40
Denver Street, Cubao, Quezon City, which were given as
part of and constituted the down payment on, the
purchase price of herein petitioner-appellant's lot No. 883
of Piedad Estate. Hence, both in law and in fact, it was still
Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust,
defendant-appellee Gregorio Domingo must forfeit his right
to the commission and must return the part of the
commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can
only recover from Gregorio Domingo his one-half share of
whatever amounts Gregorio Domingo received by virtue of
the transaction as his sub-agency contract was with
Gregorio Domingo alone and not with Vicente Domingo,
who was not even aware of such sub-agency. Since
Gregorio Domingo received from Vicente Domingo and
Oscar de Leon respectively the amounts of Three Hundred
Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a
total of One Thousand Three Hundred Pesos (P1,300.00),
one-half of the same, which is Six Hundred Fifty Pesos
(P650.00), should be paid by Gregorio Domingo to Teofilo
Purisima.
Because Gregorio Domingo's clearly unfounded complaint
caused Vicente Domingo mental anguish and serious
anxiety as well as wounded feelings, petitioner-appellant
Vicente Domingo should be awarded moral damages in the
reasonable amount of One Thousand Pesos (P1,000.00)
attorney's fees in the reasonable amount of One Thousand
Pesos (P1,000.00), considering that this case has been
pending for the last fifteen (15) years from its filing on
October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing
the decision of the Court of Appeals and directing
defendant-appellee Gregorio Domingo: (1) to pay to the
heirs of Vicente Domingo the sum of One Thousand Pesos
(P1,000.00) as moral damages and One Thousand Pesos
(P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima
the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay
the costs.
------------------------------------------------------------------------
-------------------------------------------------------------------------
US v. Hon. Luis R. Reyes- DIGEST
[219 SCRA 192, March 1, 1993]
G.R. No. 79253
FACTS:
Private respondent [Montoya] is an American citizen,
employed as an identification (I.D.) checker at the U.S. Navy
Exchange (NEX) at the Joint United States Military
Assistance Group (JUSMAG) headquarters in Quezon City.
Petitioner [Bradford] also worked at NEX JUSMAG as an
activity manager. There was an incident on 22 January
1987 whereby Bradford had Montoyas person and
belongings searched in front of many curious onlookers.
This caused Montoya to feel aggrieved and to file a suit for
damages.
Contentions:
Bradford claimed that she was immune from suit because:
1) (This) action is in effect a suit against the United States of
America, a foreign sovereign immune from suit without its
consent for the cause of action pleaded in the complaint;
and
2) Defendant, Maxine Bradford, as manager of the US Navy
Exchange Branch at JUSMAG, Quezon City, is immune from
suit for act(s) done by her in the performance of her official
functions under the Philippines-United States Military
Assistance Agreement of 1947 and Military Bases
Agreement of 1947, as amended.
Montoya argued that:
(a) Bradford, in ordering the search upon her person and
belongings outside the NEX JUSMAG store in the presence
of onlookers, had committed an improper, unlawful and
highly discriminatory act against a Filipino employee and
had exceeded the scope of her authority; (b) having
exceeded her authority, Bradford cannot rely on the
sovereign immunity of the public petitioner because her
liability is personal; (c) Philippine courts are vested with
jurisdiction over the case because Bradford is a civilian
employee who had committed the challenged act outside
the U.S. Military Bases; such act is not one of those
exempted from the jurisdiction of Philippine courts; and (d)
Philippine courts can inquire into the factual circumstances
of the case to determine whether or not Bradford had
acted within or outside the scope of her authority.
ISSUE:
1.) Whether or not Bradford acted as an agent of the
US government hence entitled to diplomatic immunity.
2.) Whether or not the case at bar is a suit against the
State.
HELD:
1.) NO. First of all, she is not among those granted
diplomatic immunity under Art. 16(b) of the 1953 Military
Assistance Agreement creating the JUSMAG. Second, even
diplomatic agents who enjoy immunity are liable if they
perform acts outside their official functions (Art. 31, Vienna
Convention on Diplomatic Relations).
2.) NO .Doctrine of state immunity is expressed in Art.
XVI, Sec. 3 of the 1987 Constitution. This immunity also
applies to complaints filed against officials of the state for
acts allegedly performed by them in discharge of their
duties since it will require the state to perform an
affirmative act such as appropriation of amount to pay
damages. This will be regarded as a case against the state
even if it has not be formally impleaded. But this is not all
encompassing. Its a different matter where the public
official is made to account in his capacity as such for acts
contrary to law & injurious to rights of plaintiff. State
authorizes only legal acts by its officers. Action against
officials by one whose rights have been violated by such
acts is not a suit against the State w/in the rule of immunity
of the State from suit. The doctrine of state immunity
cannot be used as an instrument for perpetrating an
injustice. It will not apply & may not be invoked where the
public official is being sued in his private & personal
capacity as an ordinary citizen. This usually arises where the
public official acts w/o authority or in excess of the powers
vested in him. A public official is liable if he acted w/malice
& in bad faith or beyond the scope of his authority or
jurisdiction. (Shauf vs. CA) Also, USA vs. Guinto declared
that USA is not conferred with blanket immunity for all acts
done by it or its agents in the Philippines merely because
they have acted as agents of the US in the discharge of
their official functions. In this case, Bradford was sued in
her private/personal capacity for acts done beyond the
scope & place of her official function, thus, it falls w/in the
exception to the doctrine of state immunity.
---------------------------------------------
VILLA SI VS. GARCIA G.R. No. 190106 January 15, 2014
Facts:
Villasi engaged the services of respondent Fil-Garcia
Construction, Inc. (FGCI) to construct a seven-storey
condominium building located Cubao, Quezon City. For
failure of Villasi to fully pay the contract price despite
several demands, FGCI initiated a suit for collection of sum
of money. Villasi filed an answer specifically denying the
material allegations of the complaint. Contending that FGCI
has no cause of action against her, Villasi averred that she
delivered the total amount of P7,490,325.10 to FGCI but
the latter accomplished only 28% of the project.To enforce
her right as prevailing party, Villasi filed a Motion for
Execution. To satisfy the judgment, the sheriff levied on a
building located Kalayaan Avenue, Quezon City. While the
building was declared for taxation purposes in the name of
FGCI, the lots in which it was erected were registered in the
names of the Spouses Garcia. The Spouses Garcia argued
that the building covered by the levy was mistakenly
assessed by the City Assessor in the name of FGCI and that
it could not be levied upon not being owned by the
judgment debtor.
Issue:
Whether the general rule on accession can be applied in
the case at bar
Ruling:
While it is a horn-book doctrine that the accessory follows
the principal, that is, the ownership of the property gives
the right by accession to everything which is produced
thereby, or which is incorporated or attached thereto,
either naturally or artificially, such rule is not without
exception. In cases where there is a clear and convincing
evidence to prove that the principal and the accessory are
not owned by one and the same person or entity, the
presumption shall not be applied and the actual ownership
shall be upheld.
When there are factual and evidentiary evidence to prove
that the building and the lot on which it stands are owned
by different persons, they shall be treated separately. As
such, the building or the lot, as the case may be, can be
made liable to answer for the obligation of its respective
owner.
----------------------------------------------------------------------------
DBP V. CA
A mistake upon a doubtful or difficult question of law may
be the basis of good faith.
FACTS:
Spouses Piedas are registered owners of a parcel of land
in Capiz, which they mortgaged to DBP to secure the loan
(P20,000) they obtained from the latter. Piedas eventually
defaulted, prompting DBP to extra-judicially foreclose and
take possession of such property. The Ministry of Justice,
then, opined through its Opinion No. 92 (78) that lands
covered by P.D. No. 27, to which the subject property was
included, may not be the object of foreclosure proceedings.
The Piedas, then, sought to redeem such property (with
P10,000 as downpayment) but was denied as the land was
allegedly tenanted. They then sought the cancellation of
the title and specific performance, stating that DBP acted in
bad faith when it took possession of the property
andcaused the consolidation of its title in spite of the fact
that the 5-year redemption period expressly stated in the
Sheriffs Certificate of Sale had not yet lapsed and that their
offer to redeem was within the redemption period.
ISSUE:
Whether or not DBP acted in bad faith when it took
possession of the property
RULING: NO.
DBPs act of consolidating its title and taking possession of
the property after the expiration of the redemption period
was in accordance with Sec. 6 of Act No. 3135, which states
that if no redemption of a foreclosed property is made
within one year, the purchaser (DBP) is entitled as a matter
of right to consolidate and to possess the property. In
addition to this, it was in consonance with Sec. 4 of the
mortgage contract between DBP and the Piedas where
they agreed the appointment of DBP as receiver to take
charge and to hold possession of the mortgaged property in
case of foreclosure. In fact, without DBPs act of
consolidating its title, the Piedas would not be able to
assert their right to repurchase the property within 5 years,
which would begin to run after the expiration of the one-
year period. Thus, its acts cannot be tainted with bad faith
nor did it impair Piedas right to repurchase
It may also be argued that P.D. No. 27 was already in effect
when DBP foreclosed the property. However, the legal
propriety of the foreclosure of the land was questioned
only after Opinion No. 92 (78) was issued, which happened
almost 2 months after DBP consolidated its title to the
property. By law and jurisprudence, a mistake upon a
doubtful or difficult question of law may properly be the
basis of good faith.
Art. 526 of NCC states that a possessor in good faith is one
who is not aware that there exists in his title or mode of
acquisition any flaw, which invalidates it. Moreover, Art.
527 of NCC provides good faith is always presumed, and
upon him who alleges bad faith on the part of the
possessor rests the burden of proof. Thus, it is incumbent
on the Piedas to prove that DBP was aware of the flaw in
its title (nullity of the foreclosure), but this they failed to
do.
------------------------------------------------------------------------
Philippine Products Company vs Primateria Societe
Anonyme Pour Le Commerce Exterieur
15 SCRA 301 Business Organization Corporation Law
Liability of Foreign Corporations and their Agents
Primateria Societe Anonyme Pour Le Commerce Exterieur
(Primateria Zurich, a sociedad anonima formed in Zurich),
through Alexander Baylin, entered into an agreement with
Philippine Products Company (PPC) whereby it was agreed
that from 1951 to 1953, PPC shall ship copra products
abroad.
Apparently, Primateria Zurich was not licensed by the
Securities and Exchange Commission to do business in the
Philippines. Primateria Zurich also failed to pay its
obligations amounting to P31,009.71. PPC sued Primateria
Zurich and it impleaded Baylin, Primateria Philippines, and
one Jose Crame, the latter three being impleaded as agents
of Primateria Zurich.
The lower court ruled in favor PPC but it absolved Baylin,
Crame, and Primateria Philippines.
PPC appealed as it insists that Baylin et al should be liable
as agents because under Section 68 and 69 of the
Corporation Law, the agents of foreign corporations not
licensed to transact in the Philippines shall be personally
liable for contracts made in their (foreign corporations)
behalf.
ISSUE: Whether or not PPC is correct.
HELD: No. PPC was not able to prove that Primateria Zurich,
a sociedad anonima, is a foreign corporation. And as a
sociedad anonima, Primateria Zurich is not a corporation
under our Corporation Law. As such, Sections 68 and 69
cannot be invoked in order to make the alleged agents of
Primateria Zurich be liable. PPC will have to enforce the
judgment against Primateria Zurich alone.
--------------------------------------------------------------------
NAPOCOR v. NATIONAL MERCHANDISING Corp.
NAPOCOR v. NATIONAL MERCHANDISING Corp.
G.R. Nos. L-33819 and L-33897; October 23, 1982
Ponente: J. Aquino
FACTS:
Plaintiff-appellant National Power Corporation (NPC) and
defendant- appellant National Merchandising Corporation
(NAMERCO), the Philippine representative of New York-
based International Commodities Corporation, executed a
contract of sale of sulfur with a stipulation for liquidated
damages in case of breach.
Defendant-appellant Domestic Insurance Company
executed a performance bond in favor of NPC to guarantee
the seller's obligation. In entering into the contract,
Namerco, however, did not disclose to NPC that Namerco's
principal, in a cabled instruction, stated that the sale was
subject to availability of a steamer, and contrary to its
principal's instruction, Namerco agreed that non-availability
of a steamer was not a justification for non-payment of
liquidated damages.
The New York supplier was not able to deliver the sulfur
due to its inability to secure shipping space. Consequently,
the Government Corporate Counsel rescinded the contract
of sale due to the supplier's non-performance of its
obligations, and demanded payment of liquidated damages
from both Namerco and the surety. Thereafter, NPC sued
for recovery of the stipulated liquidated damages. After
trial, the Court of First Instance rendered judgment
ordering defendants-appellants to pay solidarity to the NPC
reduced liquidated damages with interest.
ISSUE:
Whether NaMerCo exceeded their authority
HELD:
Yes, NaMerCo exceeded their authority.
The Supreme Court held that before the contract of sale
was signed Namerco was already aware that its principal
was having difficulties in booking shipping space.
It is being enforced against the agent because article 1897
implies that the agent who acts in excess of his authority is
personally liable to the party with whom he contracted.
Moreover, the rule is complemented by article 1898 of the
Civil Code which provides that "if the agent contracts in the
name of the principal, exceeding the scope of his authority,
and the principal does not ratify the contract, it shall be
void if the party with whom the agent contracted is aware
of the limits of the powers granted by the principal".
Namerco never disclosed to the Napocor the cabled or
written instructions of its principal. For that reason and
because Namerco exceeded the limits of its authority, it
virtually acted in its own name and not as agent and it is,
therefore, bound by the contract of sale which, however, is
not enforceable against its principal.
-------------------------------------------------------------------------
G.R. No. L-19118 January 30, 1965 MARIANO A.
ALBERT, plaintiff-appellant, vs.UNIVERSITY PUBLISHING CO.,
INC., defendant-appellee.
No less than three times have the parties here appealed to
this Court.
In Albert vs. University Publishing Co., Inc., L-9300, April 18,
1958, we found plaintiff entitled to damages (for breach of
contract) but reduced the amount from P23,000.00 to
P15,000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275,
October 24, 1960, we held that the judgment for
P15,000.00 which had become final and executory, should
be executed to its full amount, since in fixing it, payment
already made had been considered.
Now we are asked whether the judgment may be executed
against Jose M. Aruego, supposed President of University
Publishing Co., Inc., as the real defendant.
Fifteen years ago, on September 24, 1949, Mariano A.
Albert sued University Publishing Co., Inc. Plaintiff alleged
inter alia that defendant was a corporation duly organized
and existing under the laws of the Philippines; that on July
19, 1948, defendant, through Jose M. Aruego, its President,
entered into a contract with plaintifif; that defendant had
thereby agreed to pay plaintiff P30,000.00 for the exclusive
right to publish his revised Commentaries on the Revised
Penal Code and for his share in previous sales of the book's
first edition; that defendant had undertaken to pay in eight
quarterly installments of P3,750.00 starting July 15, 1948;
that per contract failure to pay one installment would
render the rest due; and that defendant had failed to pay
the second installment.
Defendant admitted plaintiff's allegation of defendant's
corporate existence; admitted the execution and terms of
the contract dated July 19, 1948; but alleged that it was
plaintiff who breached their contract by failing to deliver his
manuscript. Furthermore, defendant counterclaimed for
damages.1wph1.t
Plaintiff died before trial and Justo R. Albert, his estate's
administrator, was substituted for him.
The Court of First Instance of Manila, after trial, rendered
decision on April 26, 1954, stating in the dispositive portion
IN VIEW OF ALL THE FOREGOING, the Court renders
judgment in favor of the plaintiff and against the defendant
the University Publishing Co., Inc., ordering the defendant
to pay the administrator Justo R. Albert, the sum of
P23,000.00 with legal [rate] of interest from the date of the
filing of this complaint until the whole amount shall have
been fully paid. The defendant shall also pay the costs. The
counterclaim of the defendant is hereby dismissed for lack
of evidence.
As aforesaid, we reduced the amount of damages to
P15,000.00, to be executed in full. Thereafter, on July 22,
1961, the court a quo ordered issuance of an execution writ
against University Publishing Co., Inc. Plaintiff, however, on
August 10, 1961, petitioned for a writ of execution against
Jose M. Aruego, as the real defendant, stating, "plaintiff's
counsel and the Sheriff of Manila discovered that there is
no such entity as University Publishing Co., Inc." Plaintiff
annexed to his petition a certification from the securities
and Exchange Commission dated July 31, 1961, attesting:
"The records of this Commission do not show the
registration of UNIVERSITY PUBLISHING CO., INC., either as
a corporation or partnership." "University Publishing Co.,
Inc." countered by filing, through counsel (Jose M. Aruego's
own law firm), a "manifestation" stating that "Jose M.
Aruego is not a party to this case," and that, therefore,
plaintiff's petition should be denied.
Parenthetically, it is not hard to decipher why "University
Publishing Co., Inc.," through counsel, would not want Jose
M. Aruego to be considered a party to the present case:
should a separate action be now instituted against Jose M.
Aruego, the plaintiff will have to reckon with the statute of
limitations.
The court a quo denied the petition by order of September
9, 1961, and from this, plaintiff has appealed.
The fact of non-registration of University Publishing Co.,
Inc. in the Securities and Exchange Commission has not
been disputed. Defendant would only raise the point that
"University Publishing Co., Inc.," and not Jose M. Aruego, is
the party defendant; thereby assuming that "University
Publishing Co., Inc." is an existing corporation with an
independent juridical personality. Precisely, however, on
account of the non-registration it cannot be considered a
corporation, not even a corporation de facto (Hall vs.
Piccio, 86 Phil. 603). It has therefore no personality
separate from Jose M. Aruego; it cannot be sued
independently.
The corporation-by-estoppel doctrine has not been
invoked. At any rate, the same is inapplicable here. Aruego
represented a non-existent entity and induced not only the
plaintiff but even the court to believe in such
representation. He signed the contract as "President" of
"University Publishing Co., Inc.," stating that this was "a
corporation duly organized and existing under the laws of
the Philippines," and obviously misled plaintiff (Mariano A.
Albert) into believing the same. One who has induced
another to act upon his wilful misrepresentation that a
corporation was duly organized and existing under the law,
cannot thereafter set up against his victim the principle of
corporation by estoppel (Salvatiera vs. Garlitos, 56 O.G.
3069).
"University Publishing Co., Inc." purported to come to
court, answering the complaint and litigating upon the
merits. But as stated, "University Publishing Co., Inc." has
no independent personality; it is just a name. Jose M.
Aruego was, in reality, the one who answered and litigated,
through his own law firm as counsel. He was in fact, if not,
in name, the defendant
Even with regard to corporations duly organized and
existing under the law, we have in many a case pierced the
veil of corporate fiction to administer the ends of justice. *
And in Salvatiera vs. Garlitos, supra, p. 3073, we ruled: "A
person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such
privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such
agent." Had Jose M. Aruego been named as party
defendant instead of, or together with, "University
Publishing Co., Inc.," there would be no room for debate as
to his personal liability. Since he was not so named, the
matters of "day in court" and "due process" have arisen.
In this connection, it must be realized that parties to a suit
are "persons who have a right to control the proceedings,
to make defense, to adduce and cross-examine witnesses,
and to appeal from a decision" (67 C.J.S. 887) and
Aruego was, in reality, the person who had and exercised
these rights. Clearly, then, Aruego had his day in court as
the real defendant; and due process of law has been
substantially observed.
By "due process of law" we mean " "a law which hears
before it condemns; which proceeds upon inquiry, and
renders judgment only after trial. ... ." (4 Wheaton, U.S.
518, 581.)"; or, as this Court has said, " "Due process of
law" contemplates notice and opportunity to be heard
before judgment is rendered, affecting one's person or
property" (Lopez vs. Director of Lands, 47 Phil. 23, 32)."
(Sicat vs. Reyes, L-11023, Dec. 14, 1956.) And it may not be
amiss to mention here also that the "due process" clause of
the Constitution is designed to secure justice as a living
reality; not to sacrifice it by paying undue homage to
formality. For substance must prevail over form. It may
now be trite, but none the less apt, to quote what long ago
we said in Alonso vs. Villamor, 16 Phil. 315, 321-322:
A litigation is not a game of technicalities in which one,
more deeply schooled and skilled in the subtle art of
movement and position, entraps and destroys the other. It
is, rather, a contest in which each contending party fully
and fairly lays before the court the facts in issue and then,
brushing side as wholly trivial and indecisive all
imperfections of form and technicalities of procedure, asks
that Justice be done upon the merits. Lawsuits, unlike
duels, are not to be won by a rapier's thrust. Technicality,
when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves
scant consideration from courts. There should be no vested
rights in technicalities.
The evidence is patently clear that Jose M. Aruego, acting
as representative of a non-existent principal, was the real
party to the contract sued upon; that he was the one who
reaped the benefits resulting from it, so much so that
partial payments of the consideration were made by him;
that he violated its terms, thereby precipitating the suit in
question; and that in the litigation he was the real
defendant. Perforce, in line with the ends of justice,
responsibility under the judgment falls on him.
We need hardly state that should there be persons who
under the law are liable to Aruego for reimbursement or
contribution with respect to the payment he makes under
the judgment in question, he may, of course, proceed
against them through proper remedial measures.
PREMISES CONSIDERED, the order appealed from is hereby
set aside and the case remanded ordering the lower court
to hold supplementary proceedings for the purpose of
carrying the judgment into effect against University
Publishing Co., Inc. and/or Jose M. Aruego. So ordered.
-----------------------------------------------------------------------
Albert vs University PublishingG.R. No. L-19118
Scra 84
Facts: In Albert vs. University Publishing Co., Inc., L-9300,
April 18, 1958, we found plaintiff entitled to damages (for
breach of contract) but reduced the amount from P23,
000.00 to P15, 000.00.
Then in Albert vs. University Publishing Co., Inc., L-15275,
October 24, 1960, we held that the judgment for
P15,000.00 which had become final and executory, should
be executed to its full amount, since in fixing it, payment
already made had been considered.
15 years ago, Mariano Albert entered into a contract with
University Publishing Co., Inc. through Jose M. Aruego, its
President, whereby University would pay plaintiff for the
exclusive right to publish his revised Commentaries on the
Revised Penal Code. The contract stipulated that failure to
pay one installment would render the rest of the payments
due. When University failed to pay the second installment,
Albert sued for collection and won.
However, upon execution, it was found that the records of
this Commission do not show the registration of
UNIVERSITY PUBLISHING CO., INC., either as a corporation
or partnership. Albert petitioned for a writ of execution
against Jose M. Aruego as the real defendant. University
opposed, on the ground that Aruego was not a party to the
case.
Issue: WON the non-registration of University Publishing
Co., Inc. in the SEC is an existing corporation with an
independent juridical personality.
Held: No.
Ratio: On account of the non-registration it cannot be
considered a corporation, not even a corporation de facto
(Hall vs. Piccio, 86 Phil. 603). It has therefore no personality
separate from Jose M. Aruego; it cannot be sued
independently.
In the case at bar, Aruego represented a non-existent entity
and induced not only Albert but the court to believe in such
representation. He signed the contract as President of
University Publishing Co., Inc., stating that this was a
corporation duly organized and existing under the laws of
the Philippines.
A person acting or purporting to act on behalf of a
corporation which has no valid existence assumes such
privileges and obligations and becomes personally liable for
contracts entered into or for other acts performed as such
agent.
Aruego, acting as representative of such non-existent
principal, was the real party to the contract sued upon, and
thus assumed such privileges and obligations and became
personally liable for the contract entered into or for other
acts performed as such agent.
The Supreme Court likewise held that the doctrine of
corporation by estoppel cannot be set up against Albert
since it was Aruego who had induced him to act upon his
(Aruegos) willful representation that University had been
duly organized and was existing under the law.
Dispositive: The order appealed from is hereby set aside.
----------------------------------------------------------------------
EUGENIO V. CA
As far as third persons are concerned, an act is
deemed to have been performed within the scope
of the agents authority, if such is within the terms
of the power of attorney, as written, even if the
agent has in fact exceeded the limits of his
authority according to the understanding between
the principal and his agent.
FACTS: Nora Eugenio was a dealer of Pepsi. She
had one store in Marikina but had a regular charge
account in Q.C. And Muntinlupa. Her husband
Alfredo used to be a route manager for Pepsi in its
Q.C. Plant. Pepsi filed a complaint for a sum of
money against Eugenio spouses. since according
to them the spouses (1) had an outstanding
balance since it purchased and received on credit
various products from both its Q.C. and
Muntinlupa plant and (2) had an unpaid obligation
for the loaned empties from Pepsi. They
contend that the total outstanding account was
P94,651.xx. Eugenio's in their defense presented
four Trade Provisional Receipts (TPR) allegedly
issued to and received by them from Pepsi's Route
Manager (Malate Warehouse) Jovencio Estrada
showing that they paid a total sum of P80,500.xx.
They also claim that the signature of Nora
Eugenio in a Sales Invoice (85366) for the amount
of P5,631.xx which was included in the
computation of their debt was falsified. Therefore,
without these errors, petitioner contend that (1)
they do not have any outstanding debt, and (2) it is
Pepsi who owes them P3,546.02. RTC found in
favor of Pepsi. CA affirmed the decision.
ISSUE: W/N the amounts in the TPR should be
credited in favor of the spouses.
HELD: CA decision is annulled and set-aside.
Pepsi is ordered to pay Eugenio. Background:
Eugenio submitted the TPR's to Atty. Rosario
(Pepsi's lawyer). Thereafter, Rosario ordered
Daniel Azurin (asst.personnel manager) to
conduct an investigation to verify the claim of the
petitioners. According to Azurin, Estrada denied
that he issued and signed the TPR's. Azurin
testified to this in Court (However, Estrada never
did. He failed to appear and was never found.
Therefore, his testimony- as told by Azurin- is
barred by the Hearsay Evidence Rule).
Furthermore, the investigation conducted was recommended by Dr. Leoncio D. Rebong, Jr. and Dr. J.G.
really more of an interview without any Cruz, Animal Health Division Sales Supervisor.
safeguards and did not give Eugenio opportunity
to object or cross-examine Estrada. The other As a distributor, Green Valley Poultry & Allied Products, Inc.
wig be entitled to a discount as follows:
points of Estrada (and Pepsi) were all invalid
since Estrada was nowhere to be found and Pepsi
Feed Store Price (Catalogue)
failed to comply with the pertinent rules for the
admission of the evidence by which it sought to Less 10%
prove its contentions. Pepsi therefore was unable
to rebut the aforestated presumptions in favor of Wholesale Price
valid payment by petitioners, In relation to
Agency: Assuming in this case that Pepsi never Less 10%
received the amounts reflected in the TPR's, Pepsi
still failed to prove that Estrada (its duly Distributor Price
authorized agent) did not receive the amounts. In
so far as Eugenio is concerned, their obligation is There are exceptions to the above price structure. At
extinguished when they paid Estrada using Pepsi's present, these are:
official receipt. The substantive law is that
payment shall be made to the person in whose 1. Afsillin Improved 40 lbs. bag
favor the obligation has been constituted, or his
successor in interest, or any person authorized to The distributor commission for this product size is 8% off
P120.00
receive it. *TPR: Trade Provisional Receipts are
bound and given in booklets to the company sales 2. Narrow Spectrum Injectible Antibiotics
representatives, under proper acknowledgement
by them and with a record of the distribution These products are subject to price fluctuations. Therefore,
thereof. After every transaction, when a collection they are invoiced at net price per vial.
is made the customer is given by the sales
representative a copy of the TPR, that is, the 3. Deals and Special Offers are not subject to the
triplicate copy or customer's copy, properly filled above distributor price structure. A 5% distributor
up to reflect the completed transactions. All commission is allowed when the distributor furnishes
unused TPR's,as well as the collections made, are copies for each sale of a complete deal or special offer to a
turned over by the sales representative to the feedstore, drugstore or other type of account.
appropriate company officer.
Deals and Special Offers purchased for resale at regular
price invoiced at net deal or special offer price.
---------------------------------------------------------------
Prices are subject to change without notice. Squibb will
G.R. No. L-49395 December 26, 1984GREEN VALLEY
endeavor to advise you promptly of any price changes.
POULTRY & ALLIED PRODUCTS, INC., petitioner vs.THE
However, prices in effect at the tune orders are received by
INTERMEDIATE APPELLATE COURT and E.R. SQUIBB & SONS
Squibb Order Department will apply in all instances.
PHILIPPINE CORPORATION, respondents.
Green Valley Poultry & Allied Products, Inc. win distribute
This is a petition to review a decision of the defunct Court
only for the Central Luzon and Northern Luzon including
of Appeals which affirmed the judgment of the trial court
Cagayan Valley areas. We will not allow any transfer or
whereby... judgment is hereby rendered in favor of the
stocks from Central Luzon and Northern Luzon including
plaintiff [E.R. Squibb & Sons Philippine Corporation],
Cagayan Valley to other parts of Luzon, Visayas or
ordering the defendant [Green Valley Poultry & Allied
Mindanao which are covered by our other appointed
Products, Inc.] to pay the sum of P48,374.74 plus P96.00
Distributors. In line with this, you will follow strictly our
with interest at 6% per annum from the filing of this action;
stipulations that the maximum discount you can give to
plus attorney's fees in the amount of P5,000.00 and to pay
your direct and turnover accounts will not go beyond 10%.
the costs.
It is understood that Green Valley Poultry and Allied
On November 3, 1969, Squibb and Green Valley entered
Products, Inc. will accept turn-over orders from Squibb
into a letter agreement the text of which reads as follows:
representatives for delivery to customers in your area. If for
credit or other valid reasons a turn-over order is not
E.R. Squibb & Sons Philippine Corporation is pleased to served, the Squibb representative will be notified within 48
appoint Green Valley Poultry & Allied Products, Inc. as a hours and hold why the order will not be served.
non-exclusive distributor for Squibb Veterinary Products, as
It is understood that Green Valley Poultry & Allied Products,
Inc. will put up a bond of P20,000.00 from a mutually
acceptable bonding company.
Payment for Purchases of Squibb Products will be due 60
days from date of invoice or the nearest business day
thereto. No payment win be accepted in the form of post-
dated checks. Payment by check must be on current dating.
It is mutually agreed that this non-exclusive distribution
agreement can be terminated by either Green Valley
Poultry & Allied Products, Inc. or Squibb Philippines on 30
days notice.
I trust that the above terms and conditions will be met with
your approval and that the distributor arrangement will be
one of mutual satisfaction.
If you are agreeable, please sign the enclosed three (3)
extra copies of this letter and return them to this Office at
your earliest convenience.
Thank you for your interest and support of the products of
E.R. Squibb & Sons Philippines Corporation. (Rollo, pp. 12-
13.)
For goods delivered to Green Valley but unpaid, Squibb
filed suit to collect. The trial court as aforesaid gave
judgment in favor of Squibb which was affirmed by the
Court of Appeals.
In both the trial court and the Court of Appeals, the parties
advanced their respective theories.
Green Valley claimed that the contract with Squibb was a
mere agency to sell; that it never purchased goods from
Squibb; that the goods received were on consignment only
with the obligation to turn over the proceeds, less its
commission, or to return the goods ff not sold, and since it
had sold the goods but had not been able to collect from
the purchasers thereof, the action was premature.
Upon the other hand, Squibb claimed that the contract was
one of sale so that Green Valley was obligated to pay for
the goods received upon the expiration of the 60-day credit
period.
Both courts below upheld the claim of Squibb that the
agreement between the parties was a sales contract.
We do not have to categorize the contract. Whether
viewed as an agency to sell or as a contract of sale, the
liability of Green Valley is indubitable. Adopting Green
Valley's theory that the contract is an agency to sell, it is
liable because it sold on credit without authority from its
principal. The Civil Code has a provision exactly in point. It
reads:
Art. 1905. The commission agent cannot, without the
express or implied consent of the principal, sell on credit.
Should he do so, the principal may demand from him
payment in cash, but the commission agent shall be
entitled to any interest or benefit, which may result from
such sale.
WHEREFORE, the petition is hereby dismissed; the
judgment of the defunct Court of Appeals is affirmed with
costs against the petitioner.
SO ORDERED.
-----------------------------------------------------------------------
GREEN VALLEY V. IAC
In an agency to sell, the agent is liable to pay the
principal for goods sold by the agent without the
principals consent. The commission agent cannot
without the express or implied consent of the
principal, sell on credit. Should he do so, the
principal may demand from him payment in cash,
but the commission agent shall be entitled to any
interest or benefit, which may result from such
sale. FACTS: In 1969, GREEN VALEY
POULTRY AND ALLIED PRODUCTS entered
into a letter agreement with SQUIBB & SONS
PHILIPPINE CORPORATION. The details of the
agreement state that Green Valley will be the
nonexclusive distributor of the products of Squibb
Veterinary Products. As its distributor Green
Valley is entitled to 10% discount on Squibbs
whole sale price and catalogue price. Green
Valley is also limited to selling Squibbs products
to central and northern Luzon. Payment for
purchases from Squibb will be due 60 days from
date of invoice, etc. For goods delivered to Green
Valley but unpaid, Squibb filed a suit to collect.
Squibb argues that their relationship with Green
Valley is a mere contract of sale as evidenced by
the stipulation that Green Valley was obligated to
pay for the goods received upon the expiration of
the 60-day credit period. Green Valley counters
that the relationship between itself and Squibb is
that of an agency to sell.
ISSUE:
W/N Green Valley is an agent of Squibb.
RULING:
Whether viewed as an agency to sell or as a
contract of sale GREEN VALLEY is liable to
Squibb for the unpaid products. If it is a contract
of sale then the Green Valley is liable by just
merely enforcing the clear words of the contract.
If it is an agency then Green Valley is liable
because it sold on credit without authority from its
principal. The Civil Code says: Art. 1905 The
commission agent cannot without the express or
implied consent of the principal, sell on credit.
Should he do so, the principal may demand from
him payment in cash, but the commission agent
shall be entitled to any interest or benefit, which
may result from such sale.
-----------------------------------------------------
G.R. No. 88866 February 18, 1991
METROPOLITAN BANK & TRUST COMPANY, petitioner,
vs.COURT OF APPEALS, GOLDEN SAVINGS & LOAN
ASSOCIATION, INC., LUCIA CASTILLO, MAGNO CASTILLO and
GLORIA CASTILLO, respondents.
This case, for all its seeming complexity, turns on a simple
question of negligence. The facts, pruned of all non-
essentials, are easily told.
The Metropolitan Bank and Trust Co. is a commercial bank
with branches throughout the Philippines and even abroad.
Golden Savings and Loan Association was, at the time these
events happened, operating in Calapan, Mindoro, with the
other private respondents as its principal officers.
In January 1979, a certain Eduardo Gomez opened an
account with Golden Savings and deposited over a period
of two months 38 treasury warrants with a total value of
P1,755,228.37. They were all drawn by the Philippine Fish
Marketing Authority and purportedly signed by its General
Manager and countersigned by its Auditor. Six of these
were directly payable to Gomez while the others appeared
to have been indorsed by their respective payees, followed
by Gomez as second indorser.1
On various dates between June 25 and July 16, 1979, all
these warrants were subsequently indorsed by Gloria
Castillo as Cashier of Golden Savings and deposited to its
Savings Account No. 2498 in the Metrobank branch in
Calapan, Mindoro. They were then sent for clearing by the
branch office to the principal office of Metrobank, which
forwarded them to the Bureau of Treasury for special
clearing.2
More than two weeks after the deposits, Gloria Castillo
went to the Calapan branch several times to ask whether
the warrants had been cleared. She was told to wait.
Accordingly, Gomez was meanwhile not allowed to
withdraw from his account. Later, however, "exasperated"
over Gloria's repeated inquiries and also as an
accommodation for a "valued client," the petitioner says it
finally decided to allow Golden Savings to withdraw from
the proceeds of the
warrants.3
The first withdrawal was made on July 9, 1979, in the
amount of P508,000.00, the second on July 13, 1979, in the
amount of P310,000.00, and the third on July 16, 1979, in
the amount of P150,000.00. The total withdrawal was
P968.000.00.4
In turn, Golden Savings subsequently allowed Gomez to
make withdrawals from his own account, eventually
collecting the total amount of P1,167,500.00 from the
proceeds of the apparently cleared warrants. The last
withdrawal was made on July 16, 1979.
On July 21, 1979, Metrobank informed Golden Savings that
32 of the warrants had been dishonored by the Bureau of
Treasury on July 19, 1979, and demanded the refund by
Golden Savings of the amount it had previously withdrawn,
to make up the deficit in its account.
The demand was rejected. Metrobank then sued Golden
Savings in the Regional Trial Court of Mindoro.5 After trial,
judgment was rendered in favor of Golden Savings, which,
however, filed a motion for reconsideration even as
Metrobank filed its notice of appeal. On November 4, 1986,
the lower court modified its decision thus:
ACCORDINGLY, judgment is hereby rendered:
1. Dismissing the complaint with costs against the
plaintiff;
2. Dissolving and lifting the writ of attachment of the
properties of defendant Golden Savings and Loan
Association, Inc. and defendant Spouses Magno Castillo and
Lucia Castillo;
3. Directing the plaintiff to reverse its action of
debiting Savings Account No. 2498 of the sum of
P1,754,089.00 and to reinstate and credit to such account
such amount existing before the debit was made including
the amount of P812,033.37 in favor of defendant Golden
Savings and Loan Association, Inc. and thereafter, to allow
defendant Golden Savings and Loan Association, Inc. to
withdraw the amount outstanding thereon before the
debit;
4. Ordering the plaintiff to pay the defendant Golden
Savings and Loan Association, Inc. attorney's fees and
expenses of litigation in the amount of P200,000.00.
5. Ordering the plaintiff to pay the defendant
Spouses Magno Castillo and Lucia Castillo attorney's fees
and expenses of litigation in the amount of P100,000.00.
SO ORDERED.
On appeal to the respondent court,6 the decision was
affirmed, prompting Metrobank to file this petition for
review on the following grounds:
1. Respondent Court of Appeals erred in disregarding of the genuineness of his signature as checked by Golden
and failing to apply the clear contractual terms and Savings. In fact, the treasury warrants were dishonored
conditions on the deposit slips allowing Metrobank to allegedly because of the forgery of the signatures of the
charge back any amount erroneously credited. drawers, not of Gomez as payee or indorser. Under the
circumstances, it is clear that Golden Savings acted with
(a) Metrobank's right to charge back is not limited to due care and diligence and cannot be faulted for the
instances where the checks or treasury warrants are forged withdrawals it allowed Gomez to make.
or unauthorized.
By contrast, Metrobank exhibited extraordinary
(b) Until such time as Metrobank is actually paid, its carelessness. The amount involved was not trifling more
obligation is that of a mere collecting agent which cannot than one and a half million pesos (and this was 1979).
be held liable for its failure to collect on the warrants. There was no reason why it should not have waited until
the treasury warrants had been cleared; it would not have
2. Under the lower court's decision, affirmed by lost a single centavo by waiting. Yet, despite the lack of
respondent Court of Appeals, Metrobank is made to pay for such clearance and notwithstanding that it had not
warrants already dishonored, thereby perpetuating the received a single centavo from the proceeds of the treasury
fraud committed by Eduardo Gomez. warrants, as it now repeatedly stresses it allowed Golden
Savings to withdraw not once, not twice, but thrice
from the uncleared treasury warrants in the total amount
3. Respondent Court of Appeals erred in not finding
of P968,000.00
that as between Metrobank and Golden Savings, the latter
should bear the loss.
Its reason? It was "exasperated" over the persistent
inquiries of Gloria Castillo about the clearance and it also
4. Respondent Court of Appeals erred in holding that
wanted to "accommodate" a valued client. It "presumed"
the treasury warrants involved in this case are not
that the warrants had been cleared simply because of "the
negotiable instruments.
lapse of one week."8 For a bank with its long experience,
this explanation is unbelievably naive.
The petition has no merit.
And now, to gloss over its carelessness, Metrobank would
From the above undisputed facts, it would appear to the
invoke the conditions printed on the dorsal side of the
Court that Metrobank was indeed negligent in giving
deposit slips through which the treasury warrants were
Golden Savings the impression that the treasury warrants
deposited by Golden Savings with its Calapan branch. The
had been cleared and that, consequently, it was safe to
conditions read as follows:
allow Gomez to withdraw the proceeds thereof from his
account with it. Without such assurance, Golden Savings
Kindly note that in receiving items on deposit, the bank
would not have allowed the withdrawals; with such
obligates itself only as the depositor's collecting agent,
assurance, there was no reason not to allow the
assuming no responsibility beyond care in selecting
withdrawal. Indeed, Golden Savings might even have
correspondents, and until such time as actual payment shall
incurred liability for its refusal to return the money that to
have come into possession of this bank, the right is
all appearances belonged to the depositor, who could
reserved to charge back to the depositor's account any
therefore withdraw it any time and for any reason he saw
amount previously credited, whether or not such item is
fit.
returned. This also applies to checks drawn on local banks
and bankers and their branches as well as on this bank,
It was, in fact, to secure the clearance of the treasury
which are unpaid due to insufficiency of funds, forgery,
warrants that Golden Savings deposited them to its account
unauthorized overdraft or any other reason. (Emphasis
with Metrobank. Golden Savings had no clearing facilities of
supplied.)
its own. It relied on Metrobank to determine the validity of
the warrants through its own services. The proceeds of the
According to Metrobank, the said conditions clearly show
warrants were withheld from Gomez until Metrobank
that it was acting only as a collecting agent for Golden
allowed Golden Savings itself to withdraw them from its
Savings and give it the right to "charge back to the
own deposit.7 It was only when Metrobank gave the go-
depositor's account any amount previously credited,
signal that Gomez was finally allowed by Golden Savings to
whether or not such item is returned. This also applies to
withdraw them from his own account.
checks ". . . which are unpaid due to insufficiency of funds,
forgery, unauthorized overdraft of any other reason." It is
The argument of Metrobank that Golden Savings should
claimed that the said conditions are in the nature of
have exercised more care in checking the personal
contractual stipulations and became binding on Golden
circumstances of Gomez before accepting his deposit does
Savings when Gloria Castillo, as its Cashier, signed the
not hold water. It was Gomez who was entrusting the
deposit slips.
warrants, not Golden Savings that was extending him a
loan; and moreover, the treasury warrants were subject to
Doubt may be expressed about the binding force of the
clearing, pending which the depositor could not withdraw
conditions, considering that they have apparently been
its proceeds. There was no question of Gomez's identity or
imposed by the bank unilaterally, without the consent of
the depositor. Indeed, it could be argued that the
depositor, in signing the deposit slip, does so only to
identify himself and not to agree to the conditions set forth
in the given permit at the back of the deposit slip. We do
not have to rule on this matter at this time. At any rate, the
Court feels that even if the deposit slip were considered a
contract, the petitioner could still not validly disclaim
responsibility thereunder in the light of the circumstances
of this case.
In stressing that it was acting only as a collecting agent for
Golden Savings, Metrobank seems to be suggesting that as
a mere agent it cannot be liable to the principal. This is not
exactly true. On the contrary, Article 1909 of the Civil Code
clearly provides that
Art. 1909. The agent is responsible not only for fraud,
but also for negligence, which shall be judged 'with more or
less rigor by the courts, according to whether the agency
was or was not for a compensation.
The negligence of Metrobank has been sufficiently
established. To repeat for emphasis, it was the clearance
given by it that assured Golden Savings it was already safe
to allow Gomez to withdraw the proceeds of the treasury
warrants he had deposited Metrobank misled Golden
Savings. There may have been no express clearance, as
Metrobank insists (although this is refuted by Golden
Savings) but in any case that clearance could be implied
from its allowing Golden Savings to withdraw from its
account not only once or even twice but three times. The
total withdrawal was in excess of its original balance before
the treasury warrants were deposited, which only added to
its belief that the treasury warrants had indeed been
cleared.
Metrobank's argument that it may recover the disputed
amount if the warrants are not paid for any reason is not
acceptable. Any reason does not mean no reason at all.
Otherwise, there would have been no need at all for
Golden Savings to deposit the treasury warrants with it for
clearance. There would have been no need for it to wait
until the warrants had been cleared before paying the
proceeds thereof to Gomez. Such a condition, if interpreted
in the way the petitioner suggests, is not binding for being
arbitrary and unconscionable. And it becomes more so in
the case at bar when it is considered that the supposed
dishonor of the warrants was not communicated to Golden
Savings before it made its own payment to Gomez.
The belated notification aggravated the petitioner's earlier
negligence in giving express or at least implied clearance to
the treasury warrants and allowing payments therefrom to
Golden Savings. But that is not all. On top of this, the
supposed reason for the dishonor, to wit, the forgery of the
signatures of the general manager and the auditor of the
drawer corporation, has not been established.9 This was
the finding of the lower courts which we see no reason to
disturb. And as we said in MWSS v. Court of Appeals:10
Forgery cannot be presumed (Siasat, et al. v. IAC, et al., 139
SCRA 238). It must be established by clear, positive and
convincing evidence. This was not done in the present case.
A no less important consideration is the circumstance that
the treasury warrants in question are not negotiable
instruments. Clearly stamped on their face is the word
"non-negotiable." Moreover, and this is of equal
significance, it is indicated that they are payable from a
particular fund, to wit, Fund 501.
The following sections of the Negotiable Instruments Law,
especially the underscored parts, are pertinent:
Sec. 1. Form of negotiable instruments. An instrument
to be negotiable must conform to the following
requirements:
(a) It must be in writing and signed by the maker or
drawer;
(b) Must contain an unconditional promise or order to
pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or
determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee,
he must be named or otherwise indicated therein with
reasonable certainty.
Sec. 3. When promise is unconditional. An unqualified
order or promise to pay is unconditional within the
meaning of this Act though coupled with
(a) An indication of a particular fund out of which
reimbursement is to be made or a particular account to be
debited with the amount; or
(b) A statement of the transaction which gives rise to
the instrument judgment.
But an order or promise to pay out of a particular fund is
not unconditional.
The indication of Fund 501 as the source of the payment to
be made on the treasury warrants makes the order or
promise to pay "not unconditional" and the warrants
themselves non-negotiable. There should be no question
that the exception on Section 3 of the Negotiable
Instruments Law is applicable in the case at bar. This
conclusion conforms to Abubakar vs. Auditor General11
where the Court held:
The petitioner argues that he is a holder in good faith and
for value of a negotiable instrument and is entitled to the
rights and privileges of a holder in due course, free from
defenses. But this treasury warrant is not within the scope
of the negotiable instrument law. For one thing, the
document bearing on its face the words "payable from the
appropriation for food administration, is actually an Order
for payment out of "a particular fund," and is not
unconditional and does not fulfill one of the essential
requirements of a negotiable instrument (Sec. 3 last
sentence and section [1(b)] of the Negotiable Instruments
Law).
Metrobank cannot contend that by indorsing the warrants
in general, Golden Savings assumed that they were
"genuine and in all respects what they purport to be," in
accordance with Section 66 of the Negotiable Instruments
Law. The simple reason is that this law is not applicable to
the non-negotiable treasury warrants. The indorsement
was made by Gloria Castillo not for the purpose of
guaranteeing the genuineness of the warrants but merely
to deposit them with Metrobank for clearing. It was in fact
Metrobank that made the guarantee when it stamped on
the back of the warrants: "All prior indorsement and/or lack
of endorsements guaranteed, Metropolitan Bank & Trust
Co., Calapan Branch."
The petitioner lays heavy stress on Jai Alai Corporation v.
Bank of the Philippine Islands,12 but we feel this case is
inapplicable to the present controversy.1wphi1 That case
involved checks whereas this case involves treasury
warrants. Golden Savings never represented that the
warrants were negotiable but signed them only for the
purpose of depositing them for clearance. Also, the fact of
forgery was proved in that case but not in the case before
us. Finally, the Court found the Jai Alai Corporation
negligent in accepting the checks without question from
one Antonio Ramirez notwithstanding that the payee was
the Inter-Island Gas Services, Inc. and it did not appear that
he was authorized to indorse it. No similar negligence can
be imputed to Golden Savings.
We find the challenged decision to be basically correct.
However, we will have to amend it insofar as it directs the
petitioner to credit Golden Savings with the full amount of
the treasury checks deposited to its account.
The total value of the 32 treasury warrants dishonored was
P1,754,089.00, from which Gomez was allowed to
withdraw P1,167,500.00 before Golden Savings was
notified of the dishonor. The amount he has withdrawn
must be charged not to Golden Savings but to Metrobank,
which must bear the consequences of its own negligence.
But the balance of P586,589.00 should be debited to
Golden Savings, as obviously Gomez can no longer be
permitted to withdraw this amount from his deposit
because of the dishonor of the warrants. Gomez has in fact
disappeared. To also credit the balance to Golden Savings
would unduly enrich it at the expense of Metrobank, let
alone the fact that it has already been informed of the
dishonor of the treasury warrants.
WHEREFORE, the challenged decision is AFFIRMED, with
the modification that Paragraph 3 of the dispositive portion
of the judgment of the lower court shall be reworded as
follows:
3. Debiting Savings Account No. 2498 in the sum of
P586,589.00 only and thereafter allowing defendant
Golden Savings & Loan Association, Inc. to withdraw the
amount outstanding thereon, if any, after the debit.
SO ORDERED.
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G.R. No. 108957 June 14, 1993 PRUDENTIAL BANK,
petitioner, vs. THE COURT OF APPEALS, AURORA CRUZ,
respondents.
We deal here with another controversy involving the
integrity of a bank.
The complaint in this case arose when private respondent
Aurora F.
Cruz, * with her sister as co-depositor, invested
P200,000.00 in Central Bank bills with the Prudential Bank
at its branch in Quezon Avenue, Quezon City, on June 23,
1986. The placement was for 63 days at 13.75% annual
interest. For this purpose, the amount of P196,122.88 was
withdrawn from the depositors' Savings Account No. 2546
and applied to the investment. The difference of P3,877.07
represented the pre-paid interest.
The transaction was evidenced by a Confirmation of Sale1
delivered to Cruz two days later, together with a Debit
Memo2 in the amount withdrawn and applied to the
confirmed sale. These documents were issued by Susan
Quimbo, the employee of the bank to whom Cruz was
referred and who was apparently in charge of such
transactions.3
Upon maturity of the placement on August 25, 1986, Cruz
returned to the bank to "roll-over" or renew her
investment. Quimbo, who again attended to her, prepared
a Credit Memo4 crediting the amount of P200,000.00 in
Cruz's savings account passbook. She also prepared a Debit
Memo for the amount of P196,122.88 to cover the re-
investment of P200,000.00 minus the prepaid interest of
P3,877.02.5
This time, Cruz was asked to sign a Withdrawal Slip6 for
P196,122.98, representing the amount to be re-invested
after deduction of the prepaid interest. Quimbo explained
this was a new requirement of the bank. Several days later,
Cruz received another Confirmation of Sale7 and a copy of
the Debit Memo.8
On October 27, 1986, Cruz returned to the bank and sought
to withdraw her P200,000.00. After verification of her
records, however, she was informed that the investment
appeared to have been already withdrawn by her on
August 25, 1986. There was no copy on file of the
Confirmation of Sale and the Debit Memo allegedly issued
to her by Quimbo. Quimbo herself was not available for
questioning as she had not been reporting for the past
week. Shocked by this information, Cruz became hysterical
and burst into tears. The branch manager, Roman Santos,
assured her that he would look into the matter.9
Every day thereafter, Cruz went to the bank to inquire
about her request to withdraw her investment. She
received no definite answer, not even to the letter she
wrote the bank which was received by Santos himself. 10
Finally, Cruz sent the bank a demand letter dated
November 12, 1986 for the amount of P200,000.00 plus
interest. 11 In a reply dated November 20, 1986, the bank's
Vice President Lauro J. Jocson said that there appeared to
be an anomaly
and requested Cruz to defer court action as they hoped to
settle the matter amicably. 12 Increasingly worried, Cruz
sent another letter reiterating her demand. 13 This time
the reply of the bank was unequivocal and negative. She
was told that her request had to be denied because she had
already withdrawn the amount she was claiming. 14
Cruz's reaction was to file a complaint for breach of
contract against Prudential Bank in the Regional Trial Court
of Quezon City. She demanded the return of her money
with interest, plus damages and attorney's fees. In its
answer, the bank denied liability, insisting that Cruz had
withdrawn her investment. The bank also instituted a third-
party complaint against Quimbo, who did not file an answer
and was declared in default. 15 The bank, however, did not
present any evidence against her.
After trial, Judge Rodolfo A. Ortiz rendered judgment in
favor of the plaintiffs and disposed as follows:
ACCORDINGLY, judgment is hereby rendered ordering the
defendant/third-party plaintiff to pay to the plaintiffs the
following amounts:
1. P200,000.00, plus interest thereon at the rate of
13.75% per annum from October 27, 1986, until fully paid;
2. P30,000.00, as moral damages;
3. P20,000.00, as exemplary damages; and
4. P25,000.00, as reasonable attorney's fees.
The counterclaim and the third-party complaint of the
defendant/third-party plaintiff are dismissed.
With costs against the defendant/third-party plaintiff.
The decision was affirmed in toto on appeal to the
respondent court.
The judgment of the Court of Appeals 16 is now faulted in
this petition, mainly on the ground that the bank should
not have been found liable for a quasi-delict when it was
sued for breach of contract.
The petition shall fail. The petitioner is quibbling. It appears
to be merely temporizing to delay enforcement of the
liability clearly established against it.
The basic issues are factual. The private respondent claims
she has not yet collected her investment of P200,000.00
and has submitted in proof of their contention the
Confirmation of Sale and the Debit Memo issued to her by
Quimbo on the official forms of the bank. The petitioner
denies her claim and points to the Withdrawal Slip, which it
says Cruz has not denied having signed. It also contends
that the Confirmation of Sale and the Debit Memo are fake
and should not have been given credence by the lower
courts.
The findings of the trial court on these issues have been
affirmed by the respondent court and we see no reason to
disturb them. The petitioner has not shown that they have
been reached arbitrarily or in disregard of the evidence of
record. On the contrary, we find substantial basis for the
conclusion that the private respondents signed the
Withdrawal Slip only as part of the bank's new procedure of
re-investment. She did not actually receive the amount
indicated therein, which she was made to understand was
being re-invested in her name. The bank itself so assured
her in the Confirmation of Sale and the Debit Memo later
issued to her by Quimbo.
Especially persuasive are the following observations of the
trial court: 17
What is more, it could not be that plaintiff Aurora F. Cruz
withdrew only the amount of P196,122.98 from their
savings account, if her only intention was to make such a
withdrawal. For, if, indeed, it was the desire of the plaintiffs
to withdraw their money from the defendant/third-party
plaintiff, they could have withdrawn an amount in round
figures. Certainly, it is unbelievable that their withdrawal
was in the irregular amount of P196,122.98 if they really
received it. On the contrary, this amount, which is the price
of the Central Bank bills rolled over, indicates that, as
claimed by plaintiff Aurora F. Cruz, she did not receive this
money, but it was left by her with the defendant/third-
party plaintiff in order to buy Central Bank bills placement
for another sixty-three (63) days, for which she signed a
withdrawal slip at the instance of third-party defendant
Susan Quimbo who told her that it was a new bank
requirement for the roll-over of a matured placement
which she trustingly believed.
Indeed, the bank has not explained the remarkable
coincidence that the amount indicated in the withdrawal
slip is exactly the same amount Cruz was re-investing after
deducting therefrom the pre-paid interest.
The bank has also not, succeeded in impugning the
authenticity of the Confirmation of Sale and the Debit
Memo which were made on its official, forms. These are
admittedly not available to the general public or even its
depositors and are handled only by its personnel. Even
assuming that they were not signed by its authorized
officials, as it claims, there was no obligation on the part of
Cruz to verify their authority because she had the right to
presume it. The documents had been issued in the office of
the bank itself and by its own employees with whom she
had previously dealt. Such dealings had not been
questioned before, much leas invalidated. There was
absolutely no reason why she should not have accepted
their authority to act on behalf of their employer.
It is also worthy of note and wonder that although the
bank impleaded Quimbo in a third-party complaint, it did
not pursue its suit even when she failed to answer and was
declared in default. The bank did not introduce evidence
against her although it could have done so under the rules.
No less remarkably, it did not call on her to testify on its
behalf, considering that under the circumstances claimed
by it, she would have been the best witness to show that
Cruz had actually withdrawn her P200,000.00 placement.
Instead, the bank chose to rely on its other employees
whose testimony was less direct and categorical than the
testimony Quimbo could have given.
We do not find that the Court of Appeals held the bank
liable on a quasi-delict. The argument of the petitioner on
this issue is pallid, to say the least, consisting as it does only
of the observation that the article cited by the respondent
court on the agent's liability falls under the heading in the
Civil Code on quasi-delicts. On the other hand, the
respondent court clearly declared that:
The defendant/third-party plaintiff being liable for the
return of the P200,000.00 placement of the plaintiffs, the
extent of the liability of the defendant/third-party plaintiff
for damages resultant thereof, which is contractual, is for
all damages which may be reasonably attributed to the
non-performance of the obligation, . . .
Because of the bad faith of the defendant/third-party
plaintiff in its breach of its contract with the plaintiffs, the
latter are, therefore, entitled to an award of moral
damages . . . (Emphasis supplied)
There is no question that the petitioner was made liable for
its failure or refusal to deliver to Cruz the amount she had
deposited with it and which she had a right to withdraw
upon its maturity. That investment was acknowledged by
its own employees, who had the apparent authority to do
so and so could legally bind it by its acts vis-a-vis Cruz.
Whatever might have happened to the investment
whether it was lost or stolen by whoever was not the
concern of the depositor. It was the concern of the bank.
As far as Cruz was concerned, she had the right to withdraw
her P200,000.00 placement when it matured pursuant to
the terms of her investment as acknowledged and reflected
in the Confirmation of Sale. The failure of the bank to
deliver the amount to her pursuant to the Confirmation of
Sale constituted its breach of their contract, for which it
should be held liable.
The liability of the principal for the acts of the agent is not
even debatable. Law and jurisprudence are clearly and
absolutely against the petitioner.
Such liability dates back to the Roman Law maxim, Qui per
alium facit per seipsum facere videtur. "He who does a
thing by an agent is considered as doing it himself." This
rule is affirmed by the Civil Code thus:
Art. 1910. The principal must comply with all the
obligations which the agent may have contracted within
the scope of his authority.
Art. 1911. Even when the agent has exceeded his
authority, the principal is solidarily liable with the agent if
the former allowed the latter to act as though he had full
powers.
Conformably, we have declared in countless decisions that
the principal is liable for obligations contracted by the
agent. The agent's apparent representation yields to the
principal's true representation and the contract is
considered as entered into between the principal and the
third person. 18
A bank is liable for wrongful acts of its officers done in the
interests of the bank or in the course of dealings of the
officers in their representative capacity but not for acts
outside the scope of their authority. (9 c.q.s. p. 417) A bank
holding out its officers and agent as worthy of confidence
will not be permitted to profit by the frauds they may thus
be enabled to perpetrate in the apparent scope of their
employment; nor will it be permitted to shirk its
responsibility for such frauds, even though no benefit may
accrue to the bank therefrom (10 Am Jur 2d, p. 114).
Accordingly, a banking corporation is liable to innocent
third persons where the representation is made in the
course of its business by an agent acting within the general
scope of his authority even though, in the particular case,
the agent is secretly abusing his authority and attempting
to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v. Dakota
Trust Co., 52 ND 752, 204 NW 818, 40 ALR 1021.)
Application of these principles in especially necessary
because banks have a fiduciary relationship with the public
and their stability depends on the confidence of the people
in their honesty and efficiency. Such faith will be eroded
where banks do not exercise strict care in the selection and
supervision of its employees, resulting in prejudice to their
depositors.
It would appear from the facts established in the case
before us that the petitioner was less than eager to present
Quimbo at the trial or even to establish her liability
although it made the initial effort which it did not pursue
to hold her answerable in the third-party complaint.
What ever happened to her does not appear in the record.
Her absence from the proceedings feeds the suspicion of
her possible misdeed, which the bank seems to have
studiously ignored by its insistence that the missing money
had been actually withdrawn by Cruz. By such insistence,
the bank is absolving not only itself but also, in effect and
by extension, the disappeared Quimbo who apparently has
much to explain.

We agree with the lower courts that the petitioner acted in

bad faith in denying Cruz the obligation she was claiming
against it. It was obvious that an irregularity had been
committed by the bank's personnel, but instead of
repairing the injury to Cruz by immediately restoring her
money to her, it sought to gloss over the anomaly in its own
operations.

Cruz naturally suffered anxious moments and mental

anguish over the loss of the investment. The amount of
P200,000.00 is not small even by present standards. By
unjustly withholding it from her on the unproved defense
that she had already withdrawn it, the bank violated the
trust she had reposed in it and thus subjected itself to
further liability for moral and exemplary damages.

If a person dealing with a bank does not read the fine print
in the contract, it is because he trusts the bank and relies
on its integrity. The ordinary customer applying for a loan
or even making a deposit (and so himself extending the
loan to the bank) does not bother with the red tape
requirements and the finicky conditions in the documents
he signs. His feeling is that he does not have to be wary of
the bank because it will deal with him fairly and there is no
reason to suspect its motives. This is an attitude the bank
must justify.

While this is not to say that bank regulations are

meaningless or have no binding effect, they should,
however, not be used for covering up the fault of bank
employees when they blunder or, worse, intentionally
cheat him. The misdeeds of such employees must be
readily acknowledged and rectified without delay. The bank
must always act in good faith. The ordinary customer does
not feel the need for a lawyer by his side every time he
deals with a bank because he is certain that it is not a
predator or a potential adversary. The bank should show
that there is really no reason for any apprehension because
it truly deserves his faith in it.

WHEREFORE, the petition is DENIED and the appealed

decision is AFFIRMED, with costs against the petitioner. It is
so ordered.

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