G.R. No.

171052 January 28, 2008

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), petitioner,
vs.
CARMELA ESTRADA/CARA HEALTH SERVICES, respondent.
DECISION
NACHURA, J.:
This petition for review on certiorari assails the Decision1 dated June 16, 2005 of the
Court of Appeals (CA) in CA-G.R. CV No. 66040 which affirmed in toto the Decision2
dated October 8, 1999 of the Regional Trial Court (RTC), Branch 135, of Makati City in
an action for breach of contract and damages filed by respondent Carmela Estrada, sole
proprietor of Cara Health Services, against Philippine Health-Care Providers, Inc.
(Maxicare).
The facts, as found by the CA and adopted by Maxicare in its petition, follow:
[Maxicare] is a domestic corporation engaged in selling health insurance plans whose
Chairman Dr. Roberto K. Macasaet, Chief Operating Officer Virgilio del Valle, and
Sales/Marketing Manager Josephine Cabrera were impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of Carmela Estrada
who was doing business under the name of CARA HEALTH [SERVICES] to promote
and sell the prepaid group practice health care delivery program called MAXICARE Plan
with the position of Independent Account Executive. [Maxicare] formally appointed
[Estrada] as its "General Agent," evidenced by a letter-agreement dated February 16,
1991. The letter agreement provided for plaintiff-appellees [Estradas] compensation in
the form of commission, viz.:
Commission
In consideration of the performance of your functions and duties as specified in this
letter-agreement, [Maxicare] shall pay you a commission equivalent to 15 to 18% from
individual, family, group accounts; 2.5 to 10% on tailored fit plans; and 10% on standard
plans of commissionable amount on corporate accounts from all membership dues
collected and remitted by you to [Maxicare].
[Maxicare] alleged that it followed a "franchising system" in dealing with its agents
whereby an agent had to first secure permission from [Maxicare] to list a prospective
company as client. [Estrada] alleged that it did apply with [Maxicare] for the MERALCO
account and other accounts, and in fact, its franchise to solicit corporate accounts,
MERALCO account included, was renewed on February 11, 1991.
Plaintiff-appellee [Estrada] submitted proposals and made representations to the officers
of MERALCO regarding the MAXICARE Plan but when MERALCO decided to
subscribe to the MAXICARE Plan, [Maxicare] directly negotiated with MERALCO
regarding the terms and conditions of the agreement and left plaintiff-appellee [Estrada]
out of the discussions on the terms and conditions.
On November 28, 1991, MERALCO eventually subscribed to the MAXICARE Plan and
signed a Service Agreement directly with [Maxicare] for medical coverage of its qualified
members, i.e.: 1) the enrolled dependent/s of regular MERALCO executives; 2) retired
executives and their dependents who have opted to enroll and/or continue their
MAXICARE membership up to age 65; and 3) regular MERALCO female executives
(exclusively for maternity benefits). Its duration was for one (1) year from December 1,
1991 to November 30, 1992. The contract was renewed twice for a term of three (3) years
each, the first started on December 1, 1992 while the second took effect on December 1,
1995.
The premium amounts paid by MERALCO to [Maxicare] were alleged to be the
following: a) P215,788.00 in December 1991; b) P3,450,564.00 in 1992; c)
P4,223,710.00 in 1993; d) P4,782,873.00 in 1994; e) P5,102,108.00 in 1995; and
P2,394,292.00 in May 1996. As of May 1996, the total amount of premium paid by
MERALCO to [Maxicare] was P20,169,335.00.
On March 24, 1992, plaintiff-appellee [Estrada], through counsel, demanded from
[Maxicare] that it be paid commissions for the MERALCO account and nine (9) other
accounts. In reply, [Maxicare], through counsel, denied [Estradas] claims for
commission for the MERALCO and other accounts because [Maxicare] directly
negotiated with MERALCO and the other accounts(,) and that no agent was given the go
signal to intervene in the negotiations for the terms and conditions and the signing of the
service agreement with MERALCO and the other accounts so that if ever [Maxicare] was
indebted to [Estrada], it was only for P1,555.00 and P43.l2 as commissions on the
accounts of Overseas Freighters Co. and Mr. Enrique Acosta, respectively.
[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its officers with the
Regional Trial Court (RTC) of Makati City, docketed as Civil Case No. 93-935, raffled to
Branch 135.
Defendants-appellants [Maxicare] and its officers filed their Answer with Counterclaim
on September 13, 1993 and their Amended Answer with Counterclaim on September 28,
1993, alleging that: plaintiff-appellee [Estrada] had no cause of action; the cause of
action, if any, should be is against [Maxicare] only and not against its officers; CARA
HEALTHs appointment as agent under the February 16, 1991 letter-agreement to
promote the MAXICARE Plan was for a period of one (1) year only; said agency was not
renewed after the expiration of the one (1) year period; [Estrada] did not intervene in the
negotiations of the contract with MERALCO which was directly negotiated by
MERALCO with [Maxicare]; and [Estradas] alleged other clients/accounts were not
accredited with [Maxicare] as required, since the agency contract on the MAXICARE
health plans were not renewed. By way of counterclaim, defendants-appellants
[Maxicare] and its officers claimed P100,000.00 in moral damages for each of the
officers of [Maxicare] impleaded as defendant, P100,000.00 in exemplary damages,
P100,000.00 in attorneys fees, and P10,000.00 in litigation expenses.3
After trial, the RTC found Maxicare liable for breach of contract and ordered it to pay
Estrada actual damages in the amount equivalent to 10% of P20,169,335.00, representing
her commission for the total premiums paid by Meralco to Maxicare from the year 1991
to 1996, plus legal interest computed from the filing of the complaint on March 18, 1993,
and attorneys fees in the amount of P100,000.00.
On appeal, the CA affirmed in toto the RTCs decision. In ruling for Estrada, both the trial
and appellate courts held that Estrada was the "efficient procuring cause" in the execution
of the service agreement between Meralco and Maxicare consistent with our ruling in
Manotok Brothers, Inc. v. Court of Appeals.4
Undaunted, Maxicare comes to this Court and insists on the reversal of the RTC Decision
as affirmed by the CA, raising the following issues, to wit:
1. Whether the Court of Appeals committed serious error in affirming Estradas
entitlement to commissions for the execution of the service agreement between Meralco
and Maxicare.
2. Corollarily, whether Estrada is entitled to commissions for the two (2) consecutive
renewals of the service agreement effective on December 1, 19925 and December 1,
1995.6
We are in complete accord with the trial and appellate courts ruling. Estrada is entitled to
commissions for the premiums paid under the service agreement between Meralco and
Maxicare from 1991 to 1996.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court,
especially when affirmed by the appellate court, are accorded the highest degree of
respect and are considered conclusive between the parties.7A review of such findings by
this Court is not warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on speculation,
surmises or conjectures; (2) when a lower courts inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in
the appreciation of facts; (4) when the findings of the appellate court go beyond the issues
of the case, or fail to notice certain relevant facts which, if properly considered, will
justify a different conclusion; (5) when there is a misappreciation of facts; (6) when the
findings of fact are conclusions without mention of the specific evidence on which they
are based, are premised on the absence of evidence, or are contradicted by evidence on
record.8 None of the foregoing exceptions which would warrant a reversal of the assailed
decision obtains in this instance.
Maxicare urges us that both the RTC and CA failed to take into account the stipulations
contained in the February 19, 1991 letter agreement authorizing the payment of
commissions only upon satisfaction of twin conditions, i.e., collection and
contemporaneous remittance of premium dues by Estrada to Maxicare. Allegedly, the
lower courts disregarded Estradas admission that the negotiations with Meralco failed.
Thus, the flawed application of the "efficient procuring cause" doctrine enunciated in
Manotok Brothers, Inc. v. Court of Appeals,9 and the erroneous conclusion upholding
Estradas entitlement to commissions on contracts completed without her participation.
We are not persuaded.
Contrary to Maxicares assertion, the trial and the appellate courts carefully considered
the factual backdrop of the case as borne out by the records. Both courts were one in the
conclusion that Maxicare successfully landed the Meralco account for the sale of
healthcare plans only by virtue of Estradas involvement and participation in the
negotiations. The assailed Decision aptly states:
There is no dispute as to the role that plaintiff-appellee [Estrada] played in selling
[Maxicares] health insurance plan to Meralco. Plaintiff-appellee [Estradas] efforts
consisted in being the first to offer the Maxicare plan to Meralco, using her connections
with some of Meralco Executives, inviting said executives to dinner meetings, making
submissions and representations regarding the health plan, sending follow-up letters, etc.
These efforts were recognized by Meralco as shown by the certification issued by its
Manpower Planning and Research Staff Head Ruben A. Sapitula on September 5, 1991,
to wit:
"This is to certify that Ms. Carmela Estrada has initiated talks with us since November
1990 with regards (sic) to the HMO requirements of both our rank and file employees,
managers and executives, and that it was favorably recommended and the same be
approved by the Meralco Management Committee."
xxxx
This Court finds that plaintiff-appellee [Estradas] efforts were instrumental in
introducing the Meralco account to [Maxicare] in regard to the latters Maxicare health
insurance plans. Plaintiff-appellee [Estrada] was the efficient "intervening cause" in
bringing about the service agreement with Meralco. As pointed out by the trial court in its
October 8, 1999 Decision, to wit:
"xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends, Messrs. Lopez
and Guingona of Meralco, PHPI would still be an anonymity. xxx"10
Under the foregoing circumstances, we are hard pressed to disturb the findings of the
RTC, which the CA affirmed.
We cannot overemphasize the principle that in petitions for review on certiorari under
Rules 45 of the Rules of Court, only questions of law may be put into issue. Questions of
fact are not cognizable by this Court. The finding of "efficient procuring cause" by the
CA is a question of fact which we desist from passing upon as it would entail delving into
factual matters on which such finding was based. To reiterate, the rule is that factual
findings of the trial court, especially those affirmed by the CA, are conclusive on this
Court when supported by the evidence on record.11
The jettisoning of the petition is inevitable even upon a close perusal of the merits of the
case.
First. Maxicares contention that Estrada may only claim commissions from membership
dues which she has collected and remitted to Maxicare as expressly provided for in the
letter-agreement does not convince us. It is readily apparent that Maxicare is attempting
to evade payment of the commission which rightfully belongs to Estrada as the broker
who brought the parties together. In fact, Maxicares former Chairman Roberto K.
Macasaet testified that Maxicare had been trying to land the Meralco account for two (2)
years prior to Estradas entry in 1990.12 Even without that admission, we note that
Meralcos Assistant Vice-President, Donatila San Juan, in a letter13 dated January 21,
1992 to then Maxicare President Pedro R. Sen, categorically acknowledged Estradas
efforts relative to the sale of Maxicare health plans to Meralco, thus:
Sometime in 1989, Meralco received a proposal from Philippine Health-Care Providers,
Inc. (Maxicare) through the initiative and efforts of Ms. Carmela Estrada, who introduced
Maxicare to Meralco. Prior to this time, we did not know that Maxicare is a major health
care provider in the country. We have since negotiated and signed up with Maxicare to
provide a health maintenance plan for dependents of Meralco executives, effective
December 1, 1991 to November 30, 1992.
At the very least, Estrada penetrated the Meralco market, initially closed to Maxicare, and
laid the groundwork for a business relationship. The only reason Estrada was not able to
participate in the collection and remittance of premium dues to Maxicare was because she
was prevented from doing so by the acts of Maxicare, its officers, and employees.
In Tan v. Gullas,14 we had occasion to define a broker and distinguish it from an agent,
thus:
[O]ne who is engaged, for others, on a commission, negotiating contracts relative to
property with the custody of which he has no concern; the negotiator between the other
parties, never acting in his own name but in the name of those who employed him. [A]
broker is one whose occupation is to bring the parties together, in matter of trade,
commerce or navigation.15
An agent receives a commission upon the successful conclusion of a sale. On the other
hand, a broker earns his pay merely by bringing the buyer and the seller together, even if
no sale is eventually made.16
In relation thereto, we have held that the term "procuring cause" in describing a brokers
activity, refers to a cause originating a series of events which, without break in their
continuity, result in the accomplishment of the prime objective of the employment of the
brokerproducing a purchaser ready, willing and able to buy on the owners terms.17 To
be regarded as the "procuring cause" of a sale as to be entitled to a commission, a
brokers efforts must have been the foundation on which the negotiations resulting in a
sale began.18 Verily, Estrada was instrumental in the sale of the Maxicare health plans to
Meralco. Without her intervention, no sale could have been consummated.
Second. Maxicare next contends that Estrada herself admitted that her negotiations with
Meralco failed as shown in Annex "F" of the Complaint.
The chicanery and disingenuousness of Maxicares counsel is not lost on this Court. We
observe that this Annex "F" is, in fact, Maxicares counsels letter dated April 10, 1992
addressed to Estrada. The letter contains a unilateral declaration by Maxicare that the
efforts initiated and negotiations undertaken by Estrada failed, such that the service
agreement with Meralco was supposedly directly negotiated by Maxicare. Thus, the latter
effectively declares that Estrada is not the "efficient procuring cause" of the sale, and as
such, is not entitled to commissions.
Our holding in Atillo III v. Court of Appeals,19 ironically the case cited by Maxicare to
bolster its position that the statement in Annex "F" amounted to an admission, provides a
contrary answer to Maxicares ridiculous contention. We intoned therein that in spite of
the presence of judicial admissions in a partys pleading, the trial court is still given
leeway to consider other evidence presented.20 We ruled, thus:
As provided for in Section 4 of Rule 129 of the Rules of Court, the general rule that a
judicial admission is conclusive upon the party making it and does not require proof
admits of two exceptions: 1) when it is shown that the admission was made through
palpable mistake, and 2) when it is shown that no such admission was in fact made. The
latter exception allows one to contradict an admission by denying that he made such an
admission.
For instance, if a party invokes an "admission" by an adverse party, but cites the
admission "out of context," then the one making the admission may show that he made
no "such" admission, or that his admission was taken out of context.
This may be interpreted as to mean "not in the sense in which the admission is made to
appear." That is the reason for the modifier "such."21
In this case, the letter, although part of Estradas Complaint, is not, ipso facto, an
admission of the statements contained therein, especially since the bone of contention
relates to Estradas entitlement to commissions for the sale of health plans she claims to
have brokered. It is more than obvious from the entirety of the records that Estrada has
unequivocally and consistently declared that her involvement as broker is the proximate
cause which consummated the sale between Meralco and Maxicare.
Moreover, Section 34,22 Rule 132 of the Rules of Court requires the purpose for which
the evidence is offered to be specified. Undeniably, the letter was attached to the
Complaint, and offered in evidence, to demonstrate Maxicares bad faith and ill will
towards Estrada.23
Even a cursory reading of the Complaint and all the pleadings filed thereafter before the
RTC, CA, and this Court, readily show that Estrada does not concede, at any point, that
her negotiations with Meralco failed. Clearly, Maxicares assertion that Estrada herself
does not pretend to be the "efficient procuring cause" in the execution of the service
agreement between Meralco and Maxicare is baseless and an outright falsehood.
After muddling the issues and representing that Estrada made an admission that her
negotiations with Meralco failed, Maxicares counsel then proceeds to cite a case which
does not, by any stretch of the imagination, bolster the flawed contention.
We, therefore, ADMONISH Maxicares counsel, and, in turn, remind every member of
the Bar that the practice of law carries with it responsibilities which are not to be trifled
with. Maxicares counsel ought to be reacquainted with Canon 1024 of the Code of
Professional Responsibility, specifically, Rule 10.02, to wit:
Rule 10.02 A lawyer shall not knowingly misquote or misrepresent the contents of a
paper, the language or the argument of opposing counsel, or the text of a decision or
authority, or knowingly cite as law a provision already rendered inoperative by repeal or
amendment, or assert as a fact that which has not been proved.
Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that Estrada is
entitled to 10% of the total amount of premiums paid25 by Meralco to Maxicare as of
May 1996. Maxicares argument that assuming Estrada is entitled to commissions, such
entitlement only covers the initial year of the service agreement and should not include
the premiums paid for the succeeding renewals thereof, fails to impress. Considering that
we have sustained the lower courts factual finding of Estradas close, proximate and
causal connection to the sale of health plans, we are not wont to disturb Estradas
complete entitlement to commission for the total premiums paid until May 1996 in the
amount of P20,169,335.00.
WHEREFORE, premises considered and finding no reversible error committed by the
Court of Appeals, the petition is hereby DENIED. Costs against the petitioner.
SO ORDERED.

G.R. No. 142950 March 26, 2001

EQUITABLE PCI BANK, formerly EQUITABLE BANKING CORPORATION,
petitioner,
vs.
ROSITA KU, respondent.
KAPUNAN, J.:
Can a person be evicted by virtue of a decision rendered in an ejectment case where she
was not joined as a party? This was the issue that confronted the Court of Appeals, which
resolved the issue in the negative. To hold the contrary, it said, would violate due process.
Given the circumstances of the present case, petitioner Equitable PCI Bank begs to differ.
Hence, this petition.
On February 4, 1982, respondent Rosita Ku, as treasurer of Noddy Dairy Products, Inc.,
and Ku Giok Heng, as Vice-President/General Manager of the same corporation,
mortgaged the subject property to the Equitable Banking Corporation, now known as
Equitable PCI Bank to secure Noddy Inc.s loan to Equitable. The property, a residential
house and lot located in La Vista, Quezon City, was registered in respondents name.
Noddy, Inc. subsequently failed to pay the loan secured by the mortgage, prompting
petitioner to foreclose the property extrajudicially. As the winning bidder in the
foreclosure sale, petitioner was issued a certificate of sale. Respondent failed to redeem
the property. Thus, on December 10, 1984, the Register of Deeds canceled the Transfer
Certificate of Title in the name of respondent and a new one was issued in petitioners
name.
On May 10, 1989, petitioner instituted an action for ejectment before the Quezon City
Metropolitan Trial Court (MeTC) against respondents father Ku Giok Heng. Petitioner
alleged that it allowed Ku Giok Heng to remain in the property on the condition that the
latter pay rent. Ku Giok Hengs failure to pay rent prompted the MeTC to seek his
ejectment. Ku Giok Heng denied that there was any lease agreement over the
property.1wphi1.nt
On December 8, 1994, the MeTC rendered a decision in favor of petitioner and ordered
Ku Giok Heng to, among other things, vacate the premises. It ruled:
x x x for his failure or refusal to pay rentals despite proper demands, the defendant had
not established his right for his continued possession of or stay in the premises acquired
by the plaintiff thru foreclosure, the title of which had been duly transferred in the name
of the plaintiff. The absence of lease agreement or agreement for the payment of rentals is
of no moment in the light of the prevailing Supreme Court ruling on the matter. Thus: "It
is settled that the buyer in foreclosure sale becomes the absolute owner of the property
purchased if it is not redeemed during the period of one (1) year after the registration of
the sale is as such he is entitled to the possession of the property and the demand at any
time following the consolidation of ownership and the issuance to him of a new
certificate of title. The buyer can, in fact, demand possession of the land even during the
redemption period except that he has to post a bond in accordance with Section 7 of Act
No. 3155 as amended. Possession of the land then becomes an absolute right of the
purchaser as confirmed owner. Upon proper application and proof of title, the issuance of
a writ of possession becomes a ministerial duty of the court. (David Enterprises vs.
IBAA[,] 191 SCRA 116).1
Ku Giok Heng did not appeal the decision of the MeTC. Instead, he and his daughter,
respondent Rosita Ku, filed on December 20, 1994, an action before the Regional Trial
Court (RTC) of Quezon City to nullify the decision of the MeTC. Finding no merit in the
complaint, the RTC on September 13, 1999 dismissed the same and ordered the execution
of the MeTC decision.
Respondent filed in the Court of Appeals (CA) a special civil action for certiorari
assailing the decision of the RTC. She contended that she was not made a party to the
ejectment suit and was, therefore, deprived of due process. The CA agreed and, on March
31, 2000, rendered a decision enjoining the eviction of respondent from the premises.
On May 10, 2000, Equitable PCI Bank filed in this Court a motion for an extension of 30
days from May 10, 2000 or until June 9, 2000 to file its petition for review of the CA
decision. The motion alleged that the Bank received the CA decision on April 25, 2000.2
The Court granted the motion for a 30-day extension "counted from the expiration of the
reglementary period" and "conditioned upon the timeliness of the filing of [the] motion
[for extension]."3
On June 13, 2000,4 Equitable Bank filed its petition, contending that there was no need to
name respondent Rosita Ku as a party in the action for ejectment since she was not a
resident of the premises nor was she in possession of the property.
The petition is meritorious.
Generally, no man shall be affected by any proceeding to which he is a stranger, and
strangers to a case are not bound by judgment rendered by the court.5 Nevertheless, a
judgment in an ejectment suit is binding not only upon the defendants in the suit but also
against those not made parties thereto, if they are:
a) trespassers, squatters or agents of the defendant fraudulently occupying the property to
frustrate the judgment;
b) guests or other occupants of the premises with the permission of the defendant;
c) transferees pendente lite;
d) sub-lessees;
e) co-lessees; or
f) members of the family, relatives and other privies of the defendant.6
Thus, even if respondent were a resident of the property, a point disputed by the parties,
she is nevertheless bound by the judgment of the MeTC in the action for ejectment
despite her being a non-party thereto. Respondent is the daughter of Ku Giok Heng, the
defendant in the action for ejectment.
Respondent nevertheless claims that the petition is defective. The bank alleged in its
petition that it received a copy of the CA decision on April 25, 2000. A Certification dated
June 6, 2000 issued by the Manila Central Post Office reveals, however, that the copy
"was duly delivered to and received by Joel Rosales (Authorized Representative) on April
24, 2000."7 Petitioners motion for extension to file this petition was filed on May 10,
2000, sixteen (16) days from the petitioners receipt of the CA decision (April 24, 2000)
and one (1) day beyond the reglementary period for filing the petition for review (May 9,
2000).
Petitioner however maintains "its honest representation of having received [a copy of the
decision] on April 25, 2000."8 Appended as Annex "A" to petitioners Reply is an
Affidavit9 dated October 27, 2000 and executed by Joel Rosales, who was mentioned in
the Certification as having received the decision. The Affidavit states:
(1) I am an employee of Unique Industrial & Allied Services, Inc. (Unique) a corporation
duly organized and existing under Philippine laws with principal place of business at
1206 Vito Cruz St., Malate, Manila, and I am assigned with the Equitable PCI Bank, Mail
and Courier Department, Equitable PCI Bank Tower II, cor. Makati Avenue and H.V. dela
Costa St., Makati City, Metro Manila;
(2) Under the contract of services between the Bank and Unique, it is my official duty
and responsibility to receive and pick-up from the Manila Central Post Office (CPO) the
various mails, letters, correspondence, and other mail matters intended for the banks
various departments and offices at Equitable Bank Building, 262 Juan Luna St., Binondo,
Manila. This building, however, also houses various other offices or tenants not related to
the Bank.
(3) I am not the constituted agent of "Curato Divina Mabilog Niedo Magturo Pagaduan
Law Office" whose former address is at Rm. 405 4/F Equitable Bank Bldg., 262 Juan
Luna St., Binondo, Manila, for purposes of receiving their incoming mail matters; neither
am I any such agent of the various other tenants of the said Building. On occasions when
I receive mail matters for said law office, it is only to help them receive their letters
promptly.
(4) On April 24, 2000, I received the registered letter sent by the Court of Appeals,
covered by Registry Receipt No. 125234 and Delivery No. 4880 (copy of envelope
attached as Annex "A") together with other mail matters, and brought them to the Mail
and Courier Department;
(5) After sorting out these mail matters, on April 25, 2000, I erroneously recorded them
on page 422 of my logbook as having been received by me on said dated April 25, 2000
(copy of page 422 is attached as Annex "B").
(6) On April 27, 2000, this letter was sent by the Mail and Courier Department to said
Law Office whose receiving clerk Darwin Bawar opened the letter and stamped on the
"Notice of Judgment" their actual date of receipt: "April 27, 2000" (copy of the said
Notice with the date so stamped is attached as Annex "C").
(7) On May 8, 2000, Atty. Roland A. Niedo of said law office inquired from me as to my
actual date of receipt of this letter, and I informed him that based on my logbook, I
received it on April 25, 2000.
(8) I discovered this error only on September 6, 2000, when I was informed by Atty.
Niedo that Postmaster VI Alfredo C. Mabanag, Jr. of the Central Post Office, Manila,
issued a certification that I received the said mail on April 24, 2000.
(9) I hereby confirm that this error was caused by an honest mistake.
Petitioner argues that receipt on April 25, 2000 by Joel Rosales, who was not an agent of
its counsels law office, did not constitute notice to its counsel, as required by Sections
210 and 10,11 Rule 13 of the Rules of Court. To support this contention, petitioner cites
Philippine Long Distance Telephone Co. vs. NLRC.12 In said case, the bailiff served the
decision of the National Labor Relations Commission at the ground floor of the building
of the petitioner therein, the Philippine Long Distance Telephone Co., rather than on the
office of its counsel, whose address, as indicated in the notice of the decision, was on the
ninth floor of the building. We held that:
x x x practical considerations and the realities of the situation dictate that the service
made by the bailiff on March 23, 1981 at the ground floor of the petitioners building and
not at the address of record of petitioners counsel on record at the 9th floor of the PLDT
building cannot be considered a valid service. It was only when the Legal Services
Division actually received a copy of the decision on March 26, 1981 that a proper and
valid service may be deemed to have been made. x x x.
Applying the foregoing provisions and jurisprudence, petitioner submits that actual
receipt by its counsel was on April 27, 2000, not April 25, 2000. Following the argument
to its logical conclusion, the motion for extension to file the petition for review was even
filed two (2) days before the lapse of the 15-day reglementary period. That counsel
treated April 25, 2000 and not April 27, 2000 as the date of receipt was purportedly
intended to obviate respondents possible argument that the 15-day period had to be
counted from April 25, 2000.
The Court is not wholly convinced by petitioners argument. The Affidavit of Joel
Rosales states that he is "not the constituted agent of Curato Divina Mabilog Nedo
Magturo Pagaduan Law Office." An agency may be express but it may also be implied
from the acts of the principal, from his silence, or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority.13 Likewise, acceptance by the agent may also be express, although it may also
be implied from his acts which carry out the agency, or from his silence or inaction
according to the circumstances.14 In this case, Joel Rosales averred that "[o]n occasions
when I receive mail matters for said law office, it is only to help them receive their letters
promptly," implying that counsel had allowed the practice of Rosales receiving mail in
behalf of the former. There is no showing that counsel had objected to this practice or
took steps to put a stop to it. The facts are, therefore, inadequate for the Court to make a
ruling in petitioners favor.
Assuming the motion for extension was indeed one day late, petitioner urges the Court, in
any event, to suspend its rules and admit the petition in the interest of justice. Petitioner
invokes Philippine National Bank vs. Court of Appeals,15 where the petition was filed
three (3) days late. The Court held:
It has been said time and again that the perfection of an appeal within the period fixed by
the rules is mandatory and jurisdictional. But, it is always in the power of this Court to
suspend its own rules, or to except a particular case from its operation, whenever the
purposes of justice require it. Strong compelling reasons such as serving the ends of
justice and preventing a grave miscarriage thereof warrant the suspension of the rules.
The Court proceeded to enumerate cases where the rules on reglementary periods were
suspended. Republic vs. Court of Appeals16 involved a delay of six days; Siguenza vs.
Court of Appeals,17 thirteen days; Pacific Asia Overseas Shipping Corporation vs.
NLRC,18 one day; Cortes vs. Court of Appeals,19 seven days; Olacao vs. NLRC,20 two
days; Legasto vs. Court of Appeals,21 two days; and City Fair Corporation vs. NLRC,22
which also concerned a tardy appeal.1wphi1.nt
The Court finds these arguments to be persuasive, especially in light of the merits of the
petition.
WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The decision of
the Court of Appeals is REVERSED.
SO ORDERED.
G.R. No. 143978 December 3, 2002
MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA, petitioners,
vs.
EDUARDO R. GULLAS and NORMA S. GULLAS, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review seeking to set aside the decision1 of the Court of Appeals2 in
CA-G.R. CV No. 46539, which reversed and set aside the decision3 of the Regional Trial
Court of Cebu City, Branch 22 in Civil Case No. CEB-12740.
The records show that private respondents, Spouses Eduardo R. Gullas and Norma S.
Gullas, were the registered owners of a parcel of land in the Municipality of Minglanilla,
Province of Cebu, measuring 104,114 sq. m., with Transfer Certificate of Title No.
31465.4 On June 29, 1992, they executed a special power of attorney5authorizing
petitioners Manuel B. Tan, a licensed real estate broker,6 and his associates Gregg M.
Tecson and Alexander Saldaa, to negotiate for the sale of the land at Five Hundred Fifty
Pesos (P550.00) per square meter, at a commission of 3% of the gross price. The power
of attorney was non-exclusive and effective for one month from June 29, 1992.7
On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction
manager of the Sisters of Mary of Banneaux, Inc. (hereafter, Sisters of Mary), a religious
organization interested in acquiring a property in the Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property with Engineer
Ledesma. Thereafter, the two men accompanied Sisters Michaela Kim and Azucena
Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his
office at the University of Visayas. The Sisters, who had already seen and inspected the
land, found the same suitable for their purpose and expressed their desire to buy it.8
However, they requested that the selling price be reduced to Five Hundred Thirty Pesos
(P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) per square
meter. Private respondent Eduardo Gullas referred the prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent Eduardo Gullas
was the owner of the property. On July 3, 1992, private respondents agreed to sell the
property to the Sisters of Mary, and subsequently executed a special power of attorney9
in favor of Eufemia Caete, giving her the special authority to sell, transfer and convey
the land at a fixed price of Two Hundred Pesos (P200.00) per square meter.
On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in favor of the
Sisters of Mary for the price of Twenty Million Eight Hundred Twenty Two Thousand
Eight Hundred Pesos (P20,822.800.00), or at the rate of Two Hundred Pesos (P200.00)
per square meter.10 The buyers subsequently paid the corresponding taxes.11 Thereafter,
the Register of Deeds of Cebu Province issued TCT No. 75981 in the name of the Sisters
of Mary of Banneaux, Inc.12
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private respondent
Eduardo Gullas to claim their commission, but the latter told them that he and his wife
have already agreed to sell the property to the Sisters of Mary. Private respondents
refused to pay the brokers fee and alleged that another group of agents was responsible
for the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint13 against the defendants for recovery
of their brokers fee in the sum of One Million Six Hundred Fifty Five Thousand Four
Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well as moral and exemplary
damages and attorneys fees. They alleged that they were the efficient procuring cause in
bringing about the sale of the property to the Sisters of Mary, but that their efforts in
consummating the sale were frustrated by the private respondents who, in evident bad
faith, malice and in order to evade payment of brokers fee, dealt directly with the buyer
whom petitioners introduced to them. They further pointed out that the deed of sale was
undervalued obviously to evade payment of the correct amount of capital gains tax,
documentary stamps and other internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners claim, they
were not the efficient procuring cause in bringing about the consummation of the sale
because another broker, Roberto Pacana, introduced the property to the Sisters of Mary
ahead of the petitioners.14 Private respondents maintained that when petitioners
introduced the buyers to private respondent Eduardo Gullas, the former were already
decided in buying the property through Pacana, who had been paid his commission.
Private respondent Eduardo Gullas admitted that petitioners were in his office on July 3,
1992, but only to ask for the reimbursement of their cellular phone expenses.
In their reply and answer to counterclaim,15 petitioners alleged that although the Sisters
of Mary knew that the subject land was for sale through various agents, it was petitioners
who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the dispositive
portion of which reads:
WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is hereby
rendered for the plaintiffs and against the defendants. By virtue hereof, defendants
Eduardo and Norma Gullas are hereby ordered to pay jointly and severally plaintiffs
Manuel Tan, Gregg Tecson and Alexander Saldaa;
1) The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX HUNDRED
EIGHTY FOUR PESOS (P624,684.00) as brokers fee with legal interest at the rate of
6% per annum from the date of filing of the complaint; and
2) The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees and costs of
litigation.
For lack of merit, defendants counterclaim is hereby DISMISSED.
IT IS SO ORDERED.16
Both parties appealed to the Court of Appeals. Private respondents argued that the lower
court committed errors of fact and law in holding that it was petitioners efforts which
brought about the sale of the property and disregarding the previous negotiations between
private respondent Norma Gullas and the Sisters of Mary and Pacana. They further
alleged that the lower court had no basis for awarding brokers fee, attorneys fees and the
costs of litigation to petitioners.17
Petitioners, for their part, assailed the lower courts basis of the award of brokers fee
given to them. They contended that their 3% commission for the sale of the property
should be based on the price of P55,180.420.00, or at P530.00 per square meter as agreed
upon and not on the alleged actual selling price of P20,822,800.00 or at P200.00 per
square meter, since the actual purchase price was undervalued for taxation purposes.
They also claimed that the lower court erred in not awarding moral and exemplary
damages in spite of its finding of bad faith; and that the amount of P50,000.00 as
attorneys fees awarded to them is insufficient. Finally, petitioners argued that the legal
interest imposed on their claim should have been pegged at 12% per annum instead of the
6% fixed by the court.18
The Court of Appeals reversed and set aside the lower courts decision and rendered
another judgment dismissing the complaint.19
Hence, this appeal.
Petitioners raise following issues for resolution:
I.
THE APPELLATE COURT GROSSLY ERRED IN THEIR FINDING THAT THE
PETITIONERS ARE NOT ENTITLED TO THE BROKERAGE COMMISSION.
II.
IN DISMISSING THE COMPLAINT, THE APPELLATE COURT HAS DEPRIVED
THE PETITIONERS OF MORAL AND EXEMPLARY DAMAGES, ATTORNEYS
FEES AND INTEREST IN THE FOREBEARANCE OF MONEY.
The petition is impressed with merit.
The records show that petitioner Manuel B. Tan is a licensed real estate broker, and
petitioners Gregg M. Tecson and Alexander Saldaa are his associates. In Schmid and
Oberly v. RJL Martinez Fishing Corporation,20 we defined a "broker" as "one who is
engaged, for others, on a commission, negotiating contracts relative to property with the
custody of which he has no concern; the negotiator between other parties, never acting in
his own name but in the name of those who employed him. x x x a broker is one whose
occupation is to bring the parties together, in matters of trade, commerce or navigation."
(Emphasis supplied)
During the trial, it was established that petitioners, as brokers, were authorized by private
respondents to negotiate for the sale of their land within a period of one month reckoned
from June 29, 1992. The authority given to petitioners was non-exclusive, which meant
that private respondents were not precluded from granting the same authority to other
agents with respect to the sale of the same property. In fact, private respondent authorized
another agent in the person of Mr. Bobby Pacana to sell the same property. There was
nothing illegal or amiss in this arrangement, per se, considering the non-exclusivity of
petitioners authority to sell. The problem arose when it eventually turned out that these
agents were entertaining one and the same buyer, the Sisters of Mary.
As correctly observed by the trial court, the argument of the private respondents that
Pacana was the one entitled to the stipulated 3% commission is untenable, considering
that it was the petitioners who were responsible for the introduction of the representatives
of the Sisters of Mary to private respondent Eduardo Gullas. Private respondents,
however, maintain that they were not aware that their respective agents were negotiating
to sell said property to the same buyer.
Private respondents failed to prove their contention that Pacana began negotiations with
private respondent Norma Gullas way ahead of petitioners. They failed to present
witnesses to substantiate this claim. It is curious that Mrs. Gullas herself was not
presented in court to testify about her dealings with Pacana. Neither was Atty. Nachura
who was supposedly the one actively negotiating on behalf of the Sisters of Mary, ever
presented in court.
Private respondents contention that Pacana was the one responsible for the sale of the
land is also unsubstantiated. There was nothing on record which established the existence
of a previous negotiation among Pacana, Mrs. Gullas and the Sisters of Mary. The only
piece of evidence that the private respondents were able to present is an undated and
unnotarized Special Power of Attorney in favor of Pacana. While the lack of a date and an
oath do not necessarily render said Special Power of Attorney invalid, it should be borne
in mind that the contract involves a considerable amount of money. Hence, it is
inconsistent with sound business practice that the authority to sell is contained in an
undated and unnotarized Special Power of Attorney. Petitioners, on the other hand, were
given the written authority to sell by the private respondents.
The trial courts evaluation of the witnesses is accorded great respect and finality in the
absence of any indication that it overlooked certain facts or circumstances of weight and
influence, which if reconsidered, would alter the result of the case.21
Indeed, it is readily apparent that private respondents are trying to evade payment of the
commission which rightfully belong to petitioners as brokers with respect to the sale.
There was no dispute as to the role that petitioners played in the transaction. At the very
least, petitioners set the sale in motion. They were not able to participate in its
consummation only because they were prevented from doing so by the acts of the private
respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren
Werke Aktiengesellschaft (BMW)22 we ruled that, "An agent receives a commission
upon the successful conclusion of a sale. On the other hand, a broker earns his pay merely
by bringing the buyer and the seller together, even if no sale is eventually made."
(Underscoring ours). Clearly, therefore, petitioners, as brokers, should be entitled to the
commission whether or not the sale of the property subject matter of the contract was
concluded through their efforts.
Having ruled that petitioners are entitled to the brokers commission, we should now
resolve how much commission are petitioners entitled to?
Following the stipulation in the Special Power of Attorney, petitioners are entitled to 3%
commission for the sale of the land in question. Petitioners maintain that their
commission should be based on the price at which the land was offered for sale, i.e.,
P530.00 per square meter. However, the actual purchase price for which the land was sold
was only P200.00 per square meter. Therefore, equity considerations dictate that
petitioners commission must be based on this price. To rule otherwise would constitute
unjust enrichment on the part of petitioners as brokers.
In the matter of attorneys fees and expenses of litigation, we affirm the amount of
P50,000.00 awarded by the trial court to the petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The May 29, 2000
decision of the Court of Appeals is REVERSED and SET ASIDE. The decision of the
Regional Trial Court of Cebu City, Branch 22, in Civil Case No. CEB-12740 ordering
private respondents Eduardo Gullas and Norma S. Gullas to pay jointly and severally
petitioners Manuel B. Tan, Gregg Tecson and Alexander Saldaa the sum of Six Hundred
Twenty-Four Thousand and Six Hundred Eighty-Four Pesos (P624,684.00) as brokers
fee with legal interest at the rate of 6% per annum from the filing of the complaint; and
the sum of Fifty Thousand Pesos (P50,000.00) as attorneys fees and costs of litigation, is
REINSTATED.
SO ORDERED.

G.R. No. 163720 December 16, 2004

GENEVIEVE LIM, petitioner,
vs.
FLORENCIO SABAN, respondents.

DECISION

TINGA, J.:
Before the Court is a Petition for Review on Certiorari assailing the Decision1 dated
October 27, 2003 of the Court of Appeals, Seventh Division, in CA-G.R. V No. 60392.2
The late Eduardo Ybaez (Ybaez), the owner of a 1,000-square meter lot in Cebu City
(the "lot"), entered into an Agreement and Authority to Negotiate and Sell (Agency
Agreement) with respondent Florencio Saban (Saban) on February 8, 1994. Under the
Agency Agreement, Ybaez authorized Saban to look for a buyer of the lot for Two
Hundred Thousand Pesos (P200,000.00) and to mark up the selling price to include the
amounts needed for payment of taxes, transfer of title and other expenses incident to the
sale, as well as Sabans commission for the sale.3
Through Sabans efforts, Ybaez and his wife were able to sell the lot to the petitioner
Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on
March 10, 1994. The price of the lot as indicated in the Deed of Absolute Sale is Two
Hundred Thousand Pesos (P200,000.00).4 It appears, however, that the vendees agreed to
purchase the lot at the price of Six Hundred Thousand Pesos (P600,000.00), inclusive of
taxes and other incidental expenses of the sale. After the sale, Lim remitted to Saban the
amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos
(P113,257.00) for payment of taxes due on the transaction as well as Fifty Thousand
Pesos (P50,000.00) as brokers commission.5 Lim also issued in the name of Saban four
postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven
Hundred Forty Three Pesos (P236,743.00). These checks were Bank of the Philippine
Islands (BPI) Check No. 1112645 dated June 12, 1994 for P25,000.00; BPI Check No.
1112647 dated June 19, 1994 for P18,743.00; BPI Check No. 1112646 dated June 26,
1994 for P25,000.00; and Equitable PCI Bank Check No. 021491B dated June 20, 1994
for P168,000.00.
Subsequently, Ybaez sent a letter dated June 10, 1994 addressed to Lim. In the letter
Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to "extend
another partial payment" for the lot in his (Ybaezs) favor.6
After the four checks in his favor were dishonored upon presentment, Saban filed a
Complaint for collection of sum of money and damages against Ybaez and Lim with the
Regional Trial Court (RTC) of Cebu City on August 3, 1994.7 The case was assigned to
Branch 20 of the RTC.
In his Complaint, Saban alleged that Lim and the Spouses Lim agreed to purchase the lot
for P600,000.00, i.e., with a mark-up of Four Hundred Thousand Pesos (P400,000.00)
from the price set by Ybaez. Of the total purchase price of P600,000.00, P200,000.00
went to Ybaez, P50,000.00 allegedly went to Lims agent, and P113,257.00 was given to
Saban to cover taxes and other expenses incidental to the sale. Lim also issued four (4)
postdated checks8 in favor of Saban for the remaining P236,743.00.9
Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any commission
for the sale since he concealed the actual selling price of the lot from Ybaez and because
he was not a licensed real estate broker. Ybaez was able to convince Lim to cancel all
four checks.
Saban further averred that Ybaez and Lim connived to deprive him of his sales
commission by withholding payment of the first three checks. He also claimed that Lim
failed to make good the fourth check which was dishonored because the account against
which it was drawn was closed.
In his Answer, Ybaez claimed that Saban was not entitled to any commission because he
concealed the actual selling price from him and because he was not a licensed real estate
broker.
Lim, for her part, argued that she was not privy to the agreement between Ybaez and
Saban, and that she issued stop payment orders for the three checks because Ybaez
requested her to pay the purchase price directly to him, instead of coursing it through
Saban. She also alleged that she agreed with Ybaez that the purchase price of the lot was
only P200,000.00.
Ybaez died during the pendency of the case before the RTC. Upon motion of his
counsel, the trial court dismissed the case only against him without any objection from
the other parties.10
On May 14, 1997, the RTC rendered its Decision11 dismissing Sabans complaint,
declaring the four (4) checks issued by Lim as stale and non-negotiable, and absolving
Lim from any liability towards Saban.
Saban appealed the trial courts Decision to the Court of Appeals.
On October 27, 2003, the appellate court promulgated its Decision12 reversing the trial
courts ruling. It held that Saban was entitled to his commission amounting to
P236,743.00.13
The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban
was invalid because the agency was coupled with an interest and Ybaez effected the
revocation in bad faith in order to deprive Saban of his commission and to keep the
profits for himself.14
The appellate court found that Ybaez and Lim connived to deprive Saban of his
commission. It declared that Lim is liable to pay Saban the amount of the purchase price
of the lot corresponding to his commission because she issued the four checks knowing
that the total amount thereof corresponded to Sabans commission for the sale, as the
agent of Ybaez. The appellate court further ruled that, in issuing the checks in payment
of Sabans commission, Lim acted as an accommodation party. She signed the checks as
drawer, without receiving value therefor, for the purpose of lending her name to a third
person. As such, she is liable to pay Saban as the holder for value of the checks.15
Lim filed a Motion for Reconsideration of the appellate courts Decision, but her Motion
was denied by the Court of Appeals in a Resolution dated May 6, 2004.16
Not satisfied with the decision of the Court of Appeals, Lim filed the present petition.
Lim argues that the appellate court ignored the fact that after paying her agent and
remitting to Saban the amounts due for taxes and transfer of title, she paid the balance of
the purchase price directly to Ybaez.17
She further contends that she is not liable for Ybaezs debt to Saban under the Agency
Agreement as she is not privy thereto, and that Saban has no one but himself to blame for
consenting to the dismissal of the case against Ybaez and not moving for his substitution
by his heirs.18
Lim also assails the findings of the appellate court that she issued the checks as an
accommodation party for Ybaez and that she connived with the latter to deprive Saban
of his commission.19
Lim prays that should she be found liable to pay Saban the amount of his commission,
she should only be held liable to the extent of one-third (1/3) of the amount, since she had
two co-vendees (the Spouses Lim) who should share such liability.20
In his Comment, Saban maintains that Lim agreed to purchase the lot for P600,000.00,
which consisted of the P200,000.00 which would be paid to Ybaez, the P50,000.00 due
to her broker, the P113,257.00 earmarked for taxes and other expenses incidental to the
sale and Sabans commission as broker for Ybaez. According to Saban, Lim assumed
the obligation to pay him his commission. He insists that Lim and Ybaez connived to
unjustly deprive him of his commission from the negotiation of the sale.21
The issues for the Courts resolution are whether Saban is entitled to receive his
commission from the sale; and, assuming that Saban is entitled thereto, whether it is Lim
who is liable to pay Saban his sales commission.
The Court gives due course to the petition, but agrees with the result reached by the Court
of Appeals.
The Court affirms the appellate courts finding that the agency was not revoked since
Ybaez requested that Lim make stop payment orders for the checks payable to Saban
only after the consummation of the sale on March 10, 1994. At that time, Saban had
already performed his obligation as Ybaezs agent when, through his (Sabans) efforts,
Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.
To deprive Saban of his commission subsequent to the sale which was consummated
through his efforts would be a breach of his contract of agency with Ybaez which
expressly states that Saban would be entitled to any excess in the purchase price after
deducting the P200,000.00 due to Ybaez and the transfer taxes and other incidental
expenses of the sale.22
In Macondray & Co. v. Sellner,23 the Court recognized the right of a broker to his
commission for finding a suitable buyer for the sellers property even though the seller
himself consummated the sale with the buyer.24 The Court held that it would be in the
height of injustice to permit the principal to terminate the contract of agency to the
prejudice of the broker when he had already reaped the benefits of the brokers efforts.
In Infante v. Cunanan, et al.,25 the Court upheld the right of the brokers to their
commissions although the seller revoked their authority to act in his behalf after they had
found a buyer for his properties and negotiated the sale directly with the buyer whom he
met through the brokers efforts. The Court ruled that the sellers withdrawal in bad faith
of the brokers authority cannot unjustly deprive the brokers of their commissions as the
sellers duly constituted agents.
The pronouncements of the Court in the aforecited cases are applicable to the present
case, especially considering that Saban had completely performed his obligations under
his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of
Absolute Sale between Ybaez and Lim and her co-vendees. Moreover, the contract of
agency very clearly states that Saban is entitled to the excess of the mark-up of the price
of the lot after deducting Ybaezs share of P200,000.00 and the taxes and other
incidental expenses of the sale.
However, the Court does not agree with the appellate courts pronouncement that Sabans
agency was one coupled with an interest. Under Article 1927 of the Civil Code, an
agency cannot be revoked if a bilateral contract depends upon it, or if it is the means of
fulfilling an obligation already contracted, or if a partner is appointed manager of a
partnership in the contract of partnership and his removal from the management is
unjustifiable. Stated differently, an agency is deemed as one coupled with an interest
where it is established for the mutual benefit of the principal and of the agent, or for the
interest of the principal and of third persons, and it cannot be revoked by the principal so
long as the interest of the agent or of a third person subsists. In an agency coupled with an
interest, the agents interest must be in the subject matter of the power conferred and not
merely an interest in the exercise of the power because it entitles him to compensation.
When an agents interest is confined to earning his agreed compensation, the agency is
not one coupled with an interest, since an agents interest in obtaining his compensation
as such agent is an ordinary incident of the agency relationship.26
Sabans entitlement to his commission having been settled, the Court must now determine
whether Lim is the proper party against whom Saban should address his claim.
Sabans right to receive compensation for negotiating as broker for Ybaez arises from
the Agency Agreement between them. Lim is not a party to the contract. However, the
record reveals that she had knowledge of the fact that Ybaez set the price of the lot at
P200,000.00 and that the P600,000.00the price agreed upon by her and Sabanwas
more than the amount set by Ybaez because it included the amount for payment of taxes
and for Sabans commission as broker for Ybaez.
According to the trial court, Lim made the following payments for the lot: P113,257.00
for taxes, P50,000.00 for her broker, and P400.000.00 directly to Ybaez, or a total of
Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos (P563,257.00).27
Lim, on the other hand, claims that on March 10, 1994, the date of execution of the Deed
of Absolute Sale, she paid directly to Ybaez the amount of One Hundred Thousand
Pesos (P100,000.00) only, and gave to Saban P113,257.00 for payment of taxes and
P50,000.00 as his commission,28and One Hundred Thirty Thousand Pesos (P130,000.00)
on June 28, 1994,29 or a total of Three Hundred Ninety Three Thousand Two Hundred
Fifty Seven Pesos (P393,257.00). Ybaez, for his part, acknowledged that Lim and her
co-vendees paid him P400,000.00 which he said was the full amount for the sale of the
lot.30 It thus appears that he received P100,000.00 on March 10, 1994, acknowledged
receipt (through Saban) of the P113,257.00 earmarked for taxes and P50,000.00 for
commission, and received the balance of P130,000.00 on June 28, 1994. Thus, a total of
P230,000.00 went directly to Ybaez. Apparently, although the amount actually paid by
Lim was P393,257.00, Ybaez rounded off the amount to P400,000.00 and waived the
difference.
Lims act of issuing the four checks amounting to P236,743.00 in Sabans favor belies her
claim that she and her co-vendees did not agree to purchase the lot at P600,000.00. If she
did not agree thereto, there would be no reason for her to issue those checks which is the
balance of P600,000.00 less the amounts of P200,000.00 (due to Ybaez), P50,000.00
(commission), and the P113,257.00 (taxes). The only logical conclusion is that Lim
changed her mind about agreeing to purchase the lot at P600,000.00 after talking to
Ybaez and ultimately realizing that Sabans commission is even more than what Ybaez
received as his share of the purchase price as vendor. Obviously, this change of mind
resulted to the prejudice of Saban whose efforts led to the completion of the sale between
the latter, and Lim and her co-vendees. This the Court cannot countenance.
The ruling of the Court in Infante v. Cunanan, et al., cited earlier, is enlightening for the
facts therein are similar to the circumstances of the present case. In that case, Consejo
Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the
house built thereon for Thirty Thousand Pesos (P30,000.00) . She promised to pay them
five percent (5%) of the purchase price plus whatever overprice they may obtain for the
property. Cunanan and Mijares offered the properties to Pio Noche who in turn expressed
willingness to purchase the properties. Cunanan and Mijares thereafter introduced Noche
to Infante. However, the latter told Cunanan and Mijares that she was no longer interested
in selling the property and asked them to sign a document stating that their written
authority to act as her agents for the sale of the properties was already cancelled.
Subsequently, Infante sold the properties directly to Noche for Thirty One Thousand
Pesos (P31,000.00). The Court upheld the right of Cunanan and Mijares to their
commission, explaining that
[Infante] had changed her mind even if respondent had found a buyer who was willing
to close the deal, is a matter that would not give rise to a legal consequence if [Cunanan
and Mijares] agreed to call off the transaction in deference to the request of [Infante]. But
the situation varies if one of the parties takes advantage of the benevolence of the other
and acts in a manner that would promote his own selfish interest. This act is unfair as
would amount to bad faith. This act cannot be sanctioned without according the party
prejudiced the reward which is due him. This is the situation in which [Cunanan and
Mijares] were placed by [Infante]. [Infante] took advantage of the services rendered by
[Cunanan and Mijares], but believing that she could evade payment of their commission,
she made use of a ruse by inducing them to sign the deed of cancellation.This act of
subversion cannot be sanctioned and cannot serve as basis for [Infante] to escape
payment of the commission agreed upon.31
The appellate court therefore had sufficient basis for concluding that Ybaez and Lim
connived to deprive Saban of his commission by dealing with each other directly and
reducing the purchase price of the lot and leaving nothing to compensate Saban for his
efforts.
Considering the circumstances surrounding the case, and the undisputed fact that Lim had
not yet paid the balance of P200,000.00 of the purchase price of P600,000.00, it is just
and proper for her to pay Saban the balance of P200,000.00.
Furthermore, since Ybaez received a total of P230,000.00 from Lim, or an excess of
P30,000.00 from his asking price of P200,000.00, Saban may claim such excess from
Ybaezs estate, if that remedy is still available,32 in view of the trial courts dismissal of
Sabans complaint as against Ybaez, with Sabans express consent, due to the latters
demise on November 11, 1994.33
The appellate court however erred in ruling that Lim is liable on the checks because she
issued them as an accommodation party. Section 29 of the Negotiable Instruments Law
defines an accommodation party as a person "who has signed the negotiable instrument
as maker, drawer, acceptor or indorser, without receiving value therefor, for the purpose
of lending his name to some other person." The accommodation party is liable on the
instrument to a holder for value even though the holder at the time of taking the
instrument knew him or her to be merely an accommodation party. The accommodation
party may of course seek reimbursement from the party accommodated.34
As gleaned from the text of Section 29 of the Negotiable Instruments Law, the
accommodation party is one who meets all these three requisites, viz: (1) he signed the
instrument as maker, drawer, acceptor, or indorser; (2) he did not receive value for the
signature; and (3) he signed for the purpose of lending his name to some other person. In
the case at bar, while Lim signed as drawer of the checks she did not satisfy the two other
remaining requisites.
The absence of the second requisite becomes pellucid when it is noted at the outset that
Lim issued the checks in question on account of her transaction, along with the other
purchasers, with Ybaez which was a sale and, therefore, a reciprocal contract.
Specifically, she drew the checks in payment of the balance of the purchase price of the
lot subject of the transaction. And she had to pay the agreed purchase price in
consideration for the sale of the lot to her and her co-vendees. In other words, the
amounts covered by the checks form part of the cause or consideration from Ybaezs
end, as vendor, while the lot represented the cause or consideration on the side of Lim, as
vendee.35 Ergo, Lim received value for her signature on the checks.
Neither is there any indication that Lim issued the checks for the purpose of enabling
Ybaez, or any other person for that matter, to obtain credit or to raise money, thereby
totally debunking the presence of the third requisite of an accommodation party.
WHEREFORE, in view of the foregoing, the petition is DISMISSED.
SO ORDERED.
G.R. No. 174978 July 31, 2013
SALLY YOSHIZAKI, Petitioner,
vs.
JOY TRAINING CENTER OF AURORA, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioner Sally Yoshizaki to
challenge the February 14, 2006 Decision2 and the October 3, 2006 Resolution3 of the
Court of Appeals (CA) in CA-G.R. CV No. 83773.
The Factual Antecedents
Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit
religious educational institution. It was the registered owner of a parcel of land and the
building thereon (real properties) located in San Luis Extension Purok No. 1, Barangay
Buhangin, Baler, Aurora. The parcel of land was designated as Lot No. 125-L and was
covered by Transfer Certificate of Title (TCT) No. T-25334.4
On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties,
a Wrangler jeep, and other personal properties in favor of the spouses Sally and Yoshio
Yoshizaki. On the same date, a Deed of Absolute Sale5 and a Deed of Sale of Motor
Vehicle6 were executed in favor of the spouses Yoshizaki. The spouses Johnson were
members of Joy Trainings board of trustees at the time of sale. On December 7, 1998,
TCT No. T-25334 was cancelled and TCT No. T-260527 was issued in the name of the
spouses Yoshizaki.
On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V.
Rubio, filed an action for the Cancellation of Sales and Damages with prayer for the
issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction against
the spouses Yoshizaki and the spouses Johnson before the Regional Trial Court of Baler,
Aurora (RTC).8 On January 4, 1999, Joy Training filed a Motion to Amend Complaint
with the attached Amended Complaint. The amended complaint impleaded Cecilia A.
Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as additional
defendant. The RTC granted the motion on the same date.9
In the complaint, Joy Training alleged that the spouses Johnson sold its properties without
the requisite authority from the board of directors.10 It assailed the validity of a board
resolution dated September 1, 199811 which purportedly granted the spouses Johnson the
authority to sell its real properties. It averred that only a minority of the board, composed
of the spouses Johnson and Alexander Abadayan, authorized the sale through the
resolution. It highlighted that the Articles of Incorporation provides that the board of
trustees consists of seven members, namely: the spouses Johnson, Reuben, Carmencita
Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.12
Cecilia and the spouses Johnson were declared in default for their failure to file an
Answer within the reglementary period.13 On the other hand, the spouses Yoshizaki filed
their Answer with Compulsory Counterclaims on June 23, 1999. They claimed that Joy
Training authorized the spouses Johnson to sell the parcel of land. They asserted that a
majority of the board of trustees approved the resolution. They maintained that the actual
members of the board of trustees consist of five members, namely: the spouses Johnson,
Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the corporate secretary,
issued a certification dated February 20, 199814 authorizing the spouses Johnson to act
on Joy Trainings behalf. Furthermore, they highlighted that the Wrangler jeep and other
personal properties were registered in the name of the spouses Johnson.15 Lastly, they
assailed the RTCs jurisdiction over the case. They posited that the case is an intra-
corporate dispute cognizable by the Securities and Exchange Commission (SEC).16
After the presentation of their testimonial evidence, the spouses Yoshizaki formally
offered in evidence photocopies of the resolution and certification, among others.17 Joy
Training objected to the formal offer of the photocopied resolution and certification on
the ground that they were not the best evidence of their contents.18 In an Order19 dated
May 18, 2004, the RTC denied the admission of the offered copies.
The RTC Ruling
The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the
real properties. However, it held that the sale was valid because Joy Training authorized
the spouses Johnson to sell the real properties. It recognized that there were only five
actual members of the board of trustees; consequently, a majority of the board of trustees
validly authorized the sale. It also ruled that the sale of personal properties was valid
because they were registered in the spouses Johnsons name.20
Joy Training appealed the RTC decision to the CA.
The CA Ruling
The CA upheld the RTCs jurisdiction over the case but reversed its ruling with respect to
the sale of real properties. It maintained that the present action is cognizable by the RTC
because it involves recovery of ownership from third parties.
It also ruled that the resolution is void because it was not approved by a majority of the
board of trustees. It stated that under Section 25 of the Corporation Code, the basis for
determining the composition of the board of trustees is the list fixed in the articles of
incorporation. Furthermore, Section 23 of the Corporation Code provides that the board
of trustees shall hold office for one year and until their successors are elected and
qualified. Seven trustees constitute the board since Joy Training did not hold an election
after its incorporation.
The CA did not also give any probative value to the certification. It stated that the
certification failed to indicate the date and the names of the trustees present in the
meeting. Moreover, the spouses Yoshizaki did not present the minutes that would prove
that the certification had been issued pursuant to a board resolution.21 The CA also
denied22 the spouses Yoshizakis motion for reconsideration, prompting Sally23 to file
the present petition.
The Petition
Sally avers that the RTC has no jurisdiction over the case. She points out that the
complaint was principally for the nullification of a corporate act. The transfer of the
SECs original and exclusive jurisdiction to the RTC24 does not have any retroactive
application because jurisdiction is a substantive matter.
She argues that the spouses Johnson were authorized to sell the parcel of land and that she
was a buyer in good faith because she merely relied on TCT No. T-25334. The title states
that the spouses Johnson are Joy Trainings representatives.
She also argues that it is a basic principle that a party dealing with a registered land need
not go beyond the certificate of title to determine the condition of the property. In fact,
the resolution and the certification are mere reiterations of the spouses Johnsons
authority in the title to sell the real properties. She further claims that the resolution and
the certification are not even necessary to clothe the spouses Johnson with the authority
to sell the disputed properties. Furthermore, the contract of agency was subsisting at the
time of sale because Section 108 of Presidential Decree No. (PD) 1529 requires that the
revocation of authority must be approved by a court of competent jurisdiction and no
revocation was reflected in the certificate of title.25
The Case for the Respondent
In its Comment26 and Memorandum,27 Joy Training takes the opposite view that the
RTC has jurisdiction over the case. It posits that the action is essentially for recovery of
property and is therefore a case cognizable by the RTC. Furthermore, Sally is estopped
from questioning the RTCs jurisdiction because she seeks to reinstate the RTC ruling in
the present case.
Joy Training maintains that it did not authorize the spouses Johnson to sell its real
properties. TCT No. T-25334 does not specifically grant the authority to sell the parcel of
land to the spouses Johnson. It further asserts that the resolution and the certification
should not be given any probative value because they were not admitted in evidence by
the RTC. It argues that the resolution is void for failure to comply with the voting
requirements under Section 40 of the Corporation Code. It also posits that the
certification is void because it lacks material particulars.
The Issues
The case comes to us with the following issues:
1) Whether or not the RTC has jurisdiction over the present case; and
2) Whether or not there was a contract of agency to sell the real properties between Joy
Training and the spouses Johnson.
3) As a consequence of the second issue, whether or not there was a valid contract of sale
of the real properties between Joy Training and the spouses Yoshizaki.
Our Ruling
We find the petition unmeritorious.
The RTC has jurisdiction over disputes concerning the application of the Civil Code
Jurisdiction over the subject matter is the power to hear and determine cases of the
general class to which the proceedings before a court belong.28 It is conferred by law.
The allegations in the complaint and the status or relationship of the parties determine
which court has jurisdiction over the nature of an action.29 The same test applies in
ascertaining whether a case involves an intra-corporate controversy.30
The CA correctly ruled that the RTC has jurisdiction over the present case. Joy Training
seeks to nullify the sale of the real properties on the ground that there was no contract of
agency between Joy Training and the spouses Johnson. This was beyond the ambit of the
SECs original and exclusive jurisdiction prior to the enactment of Republic Act No. 8799
which only took effect on August 3, 2000. The determination of the existence of a
contract of agency and the validity of a contract of sale requires the application of the
relevant provisions of the Civil Code. It is a well-settled rule that "disputes concerning
the application of the Civil Code are properly cognizable by courts of general
jurisdiction."31 Indeed, no special skill requiring the SECs technical expertise is
necessary for the disposition of this issue and of this case.
The Supreme Court may review questions of fact in a petition for review on certiorari
when the findings of fact by the lower courts are conflicting
We are aware that the issues at hand require us to review the pieces of evidence presented
by the parties before the lower courts. As a general rule, a petition for review on certiorari
precludes this Court from entertaining factual issues; we are not duty-bound to analyze
again and weigh the evidence introduced in and considered by the lower courts. However,
the present case falls under the recognized exception that a review of the facts is
warranted when the findings of the lower courts are conflicting.32 Accordingly, we will
examine the relevant pieces of evidence presented to the lower court.
There is no contract of agency between Joy Training and the spouses Johnson to sell the
parcel of land with its improvements
Article 1868 of the Civil Code defines a contract of agency as a contract whereby a
person "binds himself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter." It may be express, or
implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without
authority.
As a general rule, a contract of agency may be oral. However, it must be written when the
law requires a specific form.33 Specifically, Article 1874 of the Civil Code provides that
the contract of agency must be written for the validity of the sale of a piece of land or any
interest therein. Otherwise, the sale shall be void. A related provision, Article 1878 of the
Civil Code, states that special powers of attorney are necessary to convey real rights over
immovable properties.
The special power of attorney mandated by law must be one that expressly mentions a
sale or that includes a sale as a necessary ingredient of the authorized act. We
unequivocably declared in Cosmic Lumber Corporation v. Court of Appeals34 that a
special power of attorneymust express the powers of the agent in clear and unmistakable
language for the principal to confer the right upon an agent to sell real estate. When there
is any reasonable doubt that the language so used conveys such power, no such
construction shall be given the document. The purpose of the law in requiring a special
power of attorney in the disposition of immovable property is to protect the interest of an
unsuspecting owner from being prejudiced by the unwarranted act of another and to
caution the buyer to assure himself of the specific authorization of the putative agent.35
In the present case, Sally presents three pieces of evidence which allegedly prove that Joy
Training specially authorized the spouses Johnson to sell the real properties: (1) TCT No.
T-25334, (2) the resolution, (3) and the certification. We quote the pertinent portions of
these documents for a thorough examination of Sallys claim. TCT No. T-25334, entered
in the Registry of Deeds on March 5, 1998, states:
A parcel of land x x x is registered in accordance with the provisions of the Property
Registration Decree in the name of JOY TRAINING CENTER OF AURORA, INC., Rep.
by Sps. RICHARD A. JOHNSON and LINDA S. JOHNSON, both of legal age, U.S.
Citizen, and residents of P.O. Box 3246, Shawnee, Ks 66203, U.S.A.36(emphasis ours)
On the other hand, the fifth paragraph of the certification provides:
Further, Richard A. and Linda J. Johnson were given FULL AUTHORITY for ALL
SIGNATORY purposes for the corporation on ANY and all matters and decisions
regarding the property and ministry here. They will follow guidelines set forth according
to their appointment and ministerial and missionary training and in that, they will
formulate and come up with by-laws which will address and serve as governing papers
over the center and corporation. They are to issue monthly and quarterly statements to all
members of the corporation.37 (emphasis ours)
The resolution states:
We, the undersigned Board of Trustees (in majority) have authorized the sale of land and
building owned by spouses Richard A. and Linda J. Johnson (as described in the title SN
No. 5102156 filed with the Province of Aurora last 5th day of March, 1998. These
proceeds are going to pay outstanding loans against the project and the dissolution of the
corporation shall follow the sale. This is a religious, non-profit corporation and no profits
or stocks are issued.38 (emphasis ours)
The above documents do not convince us of the existence of the contract of agency to sell
the real properties. TCT No. T-25334 merely states that Joy Training is represented by the
spouses Johnson. The title does not explicitly confer to the spouses Johnson the authority
to sell the parcel of land and the building thereon. Moreover, the phrase "Rep. by Sps.
RICHARD A. JOHNSON and LINDA S. JOHNSON"39 only means that the spouses
Johnson represented Joy Training in land registration.
The lower courts should not have relied on the resolution and the certification in
resolving the case.1wphi1 The spouses Yoshizaki did not produce the original
documents during trial. They also failed to show that the production of pieces of
secondary evidence falls under the exceptions enumerated in Section 3, Rule 130 of the
Rules of Court.40 Thus, the general rule that no evidence shall be admissible other than
the original document itself when the subject of inquiry is the contents of a document
applies.41
Nonetheless, if only to erase doubts on the issues surrounding this case, we declare that
even if we consider the photocopied resolution and certification, this Court will still
arrive at the same conclusion.
The resolution which purportedly grants the spouses Johnson a special power of attorney
is negated by the phrase "land and building owned by spouses Richard A. and Linda J.
Johnson."42 Even if we disregard such phrase, the resolution must be given scant
consideration. We adhere to the CAs position that the basis for determining the board of
trustees composition is the trustees as fixed in the articles of incorporation and not the
actual members of the board. The second paragraph of Section 2543 of the Corporation
Code expressly provides that a majority of the number of trustees as fixed in the articles
of incorporation shall constitute a quorum for the transaction of corporate business.
Moreover, the certification is a mere general power of attorney which comprises all of
Joy Trainings business.44Article 1877 of the Civil Code clearly states that "an agency
couched in general terms comprises only acts of administration, even if the principal
should state that he withholds no power or that the agent may execute such acts as he may
consider appropriate, or even though the agency should authorize a general and unlimited
management."45
The contract of sale is unenforceable
Necessarily, the absence of a contract of agency renders the contract of sale
unenforceable;46 Joy Training effectively did not enter into a valid contract of sale with
the spouses Yoshizaki. Sally cannot also claim that she was a buyer in good faith. She
misapprehended the rule that persons dealing with a registered land have the legal right to
rely on the face of the title and to dispense with the need to inquire further, except when
the party concerned has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry.47 This rule applies when the ownership of
a parcel of land is disputed and not when the fact of agency is contested.
At this point, we reiterate the established principle that persons dealing with an agent
must ascertain not only the fact of agency, but also the nature and extent of the agents
authority.48 A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as
regards the agency.49 The basis for agency is representation and a person dealing with an
agent is put upon inquiry and must discover on his own peril the authority of the agent.50
Thus, Sally bought the real properties at her own risk; she bears the risk of injury
occasioned by her transaction with the spouses Johnson.
WHEREFORE, premises considered, the assailed Decision dated February 14, 2006 and
Resolution dated October 3, 2006 of the Court of Appeals are hereby AFFIRMED and the
petition is hereby DENIED for lack of merit.
SO ORDERED.

G.R. No. 182349, July 24, 2013

REMAN RECIO, Petitioner, v. HEIRS OF THE SPOUSES AGUEDO AND MARIA
ALTAMIRANO, NAMELY: ALEJANDRO, ADELAIDA, CATALINA, ALFREDO,
FRANCISCO, ALL SURNAMED ALTAMIRANO; VIOLETA ALTAMIRANO
OLFATO, AND LORETA ALTAMIRANO VDA. DE MARALIT AND SPOUSES
LAURO AND MARCELINA LAJARCA, Respondents.

DECISION
REYES, J.:

This petition for review on certiorari1 under Rule 45 of the Rules of Court seeks to
modify the Decision2 of the Court of Appeals (CA) dated November 29, 2007 in CA-
G.R. CV No. 86001, affirming with modification the Decision3 dated August 23, 2005 of
the Regional Trial Court (RTC) of Lipa City, Branch 85 in Civil Case No. 97-0107. The
petitioner asks this Court to reinstate in full the said RTC decision.

The Facts

In the 1950s, Nena Recio (Nena), the mother of Reman Recio (petitioner), leased from
the respondents Alejandro, Adelaida, Catalina, Alfredo, Francisco, all surnamed
Altamirano, Violeta Altamirano Olfato, and Loreto Altamirano Vda. De Maralit (referred
to as the Altamiranos) a parcel of land with improvements, situated at No. 39 10 de Julio
Street (now Esteban Mayo Street), Lipa City, Batangas. The said land has an area of more
or less eighty-nine square meters and fifty square decimeters (89.50 sq m), and is found at
the northern portion of two (2) parcels of land covered by Transfer Certificate of Title
(TCT) Nos. 66009 and 66010 of the Registry of Deeds of Lipa City. The Altamiranos
inherited the subject land from their deceased parents, the spouses Aguedo Altamirano
and Maria Valduvia.4

Nena used the ground floor of the subject property as a retail store for grains and the
upper floor as the familys residence. The petitioner claimed that in 1988, the Altamiranos
offered to sell the subject property to Nena for Five Hundred Thousand Pesos
(P500,000.00). The latter accepted such offer, which prompted the Altamiranos to waive
the rentals for the subject property. However, the sale did not materialize at that time due
to the fault of the Altamiranos. Nonetheless, Nena continued to occupy and use the
property with the consent of the Altamiranos.5

Meanwhile, the Altamiranos consolidated the two (2) parcels of land covered by TCT
Nos. 66009 and 66010. They were eventually subdivided into three (3) parcels of land
which were then denominated as Lots 1, 2, and 3 of the Consolidation-Subdivision Plan
PCS-04-00367. Subsequently, TCT No. T-102563 of the Registry of Deeds of Lipa City
was issued to cover the subject property. The petitioner and his family remained in
peaceful possession of Lot No. 3.6

In the latter part of 1994, the petitioner renewed Nenas option to buy the subject
property. The petitioner conducted a series of negotiations with respondent Alejandro
who introduced himself as representing the other heirs. After the said negotiations, the
Altamiranos through Alejandro entered into an oral contract of sale with the petitioner
over the subject property. In January 1995, in view of the said oral contract of sale, the
petitioner made partial payments to the Altamiranos in the total amount of One Hundred
Ten Thousand Pesos (P110,000.00). Alejandro duly received and acknowledged these
partial payments as shown in a receipt dated January 24, 1995. On April 14, 1995, the
petitioner made another payment in the amount of Fifty Thousand Pesos (P50,000.00),
which Alejandro again received and acknowledged through a receipt of the same date.
Subsequently, the petitioner offered in many instances to pay the remaining balance of the
agreed purchase price of the subject property in the amount of Three Hundred Forty
Thousand Pesos (P340,000.00), but Alejandro kept on avoiding the petitioner. Because of
this, the petitioner demanded from the Altamiranos, through Alejandro, the execution of a
Deed of Absolute Sale in exchange for the full payment of the agreed price.7

Thus, on February 24, 1997, the petitioner filed a complaint for Specific Performance
with Damages. On March 14, 1997, the petitioner also caused to annotate on the TCT No.
T-102563 a Notice of Lis Pendens.8

Pending the return of service of summons to the Altamiranos, the petitioner discovered
that the subject property has been subsequently sold to respondents Lauro and Marcelina
Lajarca (Spouses Lajarca). TCT No. T-102563 was cancelled and a new title, TCT No.
112727, was issued in the name of the Spouses Lajarca by virtue of a Deed of Sale
executed by the latter and the Altamiranos on February 26, 1998. Thus, the petitioner
filed an Amended Complaint impleading the Spouses Lajarca and adding as a cause of
action the annulment of the sale between the Altamiranos and the Spouses Lajarca.9

Thereafter, trial ensued. Alejandro was called to testify at the instance of the petitioner
but after a brief testimony, he excused himself and never returned to the witness stand
despite several subpoenas. For the respondents, the Altamiranos manifested that they
would no longer present any witness while the Spouses Lajarca were considered to have
waived their right to present evidence since they failed to appear on the day set for them
to do so.10

The Ruling of the RTC in Civil Case No. 97-0107

On August 23, 2005, the trial court rendered a decision,11 the dispositive portion of
which reads as follows:cralavvonlinelawlibrary

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

and against the defendants as follows:cralavvonlinelawlibrary

1. declaring as NULL AND VOID the Deed of Absolute Sale dated 26 February 1998
between the defendants Altamiranos and the defendants Lajarcas covering that parcel of
land together with all improvements thereon situated at No. 39 10 de Julio Street (now
Esteban Mayo Street), Lipa City, Batangas, containing an area of more or less
Eighty[-]Nine Square Meters and Fifty Square Decimeters (89.50 sq. m) then covered by
Transfer Certificate of Title No. T-102563 of the Registry of Deeds of Lipa
City;chanroblesvirtualawlibrary

2. ordering the Register of Deeds of Lipa City to cancel Transfer Certificate of Title No.
T-112727 of the Registry of Deeds of Lipa City in the name of the defendants Lajarcas
and to reinstate Transfer Certificate of Title No. T-102563;chanroblesvirtualawlibrary

3. directing the defendants Altamiranos to execute a Deed of Absolute Sale in favor of

plaintiff covering the parcel of land together with all improvements thereon situated at
No. 39 10 de Julio Street (now Esteban Mayo Street), Lipa City, Batangas, containing an
area of more or less Eighty[-]Nine Square Meters and Fifty Square Decimeters (89.50 sq.
m) then covered by Transfer Certificate of Title No. T-102563 upon payment by said
plaintiff of the balance of the purchase price in the amount of THREE HUNDRED
FORTY THOUSAND PESOS ([P]340,000.00).

4. directing the defendants Altamiranos and Lajarcas, jointly and severally, to pay
plaintiff moral damages in the amount of [P]100,000.00, actual and compensatory
damages in the amount of [P]100,000.00, [P]50,000.00 as exemplary damages and the
sum of [P]50,000.00 as attorneys fees plus [P]2,500.00 for every hearing attended as and
for appearance fees, and costs of suit.

SO ORDERED.12

Aggrieved, the Spouses Lajarca filed an appeal assailing the above RTC decision.

The Ruling of the CA in CA-G.R. CV No. 86001

In its Decision13 dated November 29, 2007, the CA affirmed with modification, the
dispositive portion of which states:cralavvonlinelawlibrary

WHEREFORE, premises considered, the August 23, 2005 Decision of the Regional Trial
Court, Br. 85, Fourth Judicial Region, Lipa City, in Civil Case No. 97-0107, is hereby
AFFIRMED with MODIFICATION. Concomitantly, judgment is hereby rendered, as
follows:cralavvonlinelawlibrary
1) The complaint, as far as Adelaida Altam[i]rano, Catalina Altam[i]rano, Alfredo
Altam[i]rano, Francisco Altam[i]rano, Violeta Altam[i]rano Olfato and Loreta
Altam[i]rano vda. de Maralit are concerned, is hereby
DISMISSED;chanroblesvirtualawlibrary

2) The contract of sale between Alejandro Altam[i]rano and Reman Recio is VALID only
with respect to the aliquot share of Alejandro Altam[i]rano in the lot previously covered
by TCT No. T-102563 (now covered by TCT No. 112727);chanroblesvirtualawlibrary

3) The Deed of Sale, dated February 26, 1998, between the Altam[i]ranos and the Lajarca
Spouses is declared NULL and VOID as far as the aliquot share of Alejandro
Altam[i]rano is concerned;chanroblesvirtualawlibrary

4) Reman Recio is DECLARED a co-owner of the Spouses Lauro and Marcelina Lajarca
over the property previously covered by TCT No. T-102563 (now TCT No. 112727), his
share being that which previously corresponds to the aliquot share of Alejandro
Altam[i]rano; and

5) The damages awarded below to Reman Recio are AFFIRMED. No costs.

SO ORDERED.14nadcralavvonlinelawlibrary

In prcis, the CA found and ruled as follows:cralavvonlinelawlibrary

1) That the summons to Alejandro is not summons to the other Altamiranos since
Alejandros authority to represent his co-heirs is disputed for lack of a written special
power of attorney (SPA). Furthermore, the CA found that the Altamiranos, save for
Alejandro and Violeta, reside abroad with unknown addresses. Thus, for the CA,
summons to the non-resident Altamiranos should have been served extraterritorially as
provided in Section 15, Rule 1415 of the Revised Rules of Court.16

2) That there was a valid contract of sale entered into by Alejandro and the petitioner
considering that: (a) Alejandro did not make any express reservation of ownership or title
to the subject parcel of land, and that he issued receipts precisely to acknowledge the
payments made for the purchase of Lot No. 3; (b) Alejendro actually delivered Lot No. 3
to the petitioner and waived the rental payments thereof; (c) Alejandro did not actually
refuse the petitioners offer to pay the balance of the purchase price but instead, merely
avoided the petitioner; and (d) all the elements of a valid contract of sale exist in the
transaction between the petitioner and the Altamiranos.17

3) That Alejandros sale of Lot No. 3 did not bind his co-owners because a sale of real
property by one purporting to be an agent of the owner without any written authority
from the latter is null and void. An SPA from the co-owners pursuant to Article 1878 of
the New Civil Code is necessary. However, the CA held that the contract of sale between
Alejandro and the petitioner is valid because under a regime of co-ownership, a co-owner
can freely sell and dispose his undivided interest, citing Acabal v. Acabal.18 Furthermore,
the Spouses Lajarca were not buyers in good faith because they had knowledge of the
prior sale to the petitioner who even caused the annotation of the Notice of Lis Pendens
on TCT No. T-102563.19

The CA, thereby, held that insofar as the verbal contract of sale between Alejandro and
the petitioner is concerned, Alejandros disposition affects only his pro indiviso share,
such that the transferee (the petitioner) receives only what corresponds to Alejandros
undivided share in the subject lot. Likewise, the CA declared the deed of absolute sale
between the Altamiranos and the Spouses Lajarca valid only insofar as the aliquot shares
of the other Altamiranos are concerned. Thus, in effect, the petitioner and the Spouses
Lajarca are co-owners of the subject property.

Not satisfied with the decision, the petitioner sought reconsideration but his motion was
denied in the CA Resolution20 dated March 18, 2008.

Issue

The petitioner filed the instant petition alleging in the main that the CA gravely and
seriously erred in modifying the RTC decision.

Our Ruling

The petition has no merit.

Under Rule 45 of the Rules of Court, jurisdiction is generally limited to the review of
errors of law committed by the appellate court. The Supreme Court is not obliged to
review all over again the evidence which the parties adduced in the court a quo. Of
course, the general rule admits of exceptions, such as where the factual findings of the
CA and the trial court are conflicting or contradictory.21 In the instant case, the findings
of the trial court and its conclusion based on the said findings contradict those of the CA.
After a careful review, the Court finds no reversible error with the decision of the CA.

At the core of the present petition is the validity of the verbal contract of sale between
Alejandro and the petitioner; and the Deed of Absolute Sale between the Altamiranos and
the Spouses Lajarca involving the subject property.

A valid contract of sale requires: (a) a meeting of minds of the parties to transfer
ownership of the thing sold in exchange for a price; (b) the subject matter, which must be
a possible thing; and (c) the price certain in money or its equivalent.22

In the instant case, all these elements are present. The records disclose that the
Altamiranos were the ones who offered to sell the property to Nena but the transaction
did not push through due to the fault of the respondents. Thereafter, the petitioner
renewed Nenas option to purchase the property to which Alejandro, as the representative
of the Altamiranos verbally agreed. The determinate subject matter is Lot No. 3, which is
covered under TCT No. T-102563 and located at No. 39 10 de Julio Street (now Esteban
Mayo Street), Lipa City, Batangas.23 The price agreed for the sale of the property was
Five Hundred Thousand Pesos (P500,000.00).24 It cannot be denied that the oral contract
of sale entered into between the petitioner and Alejandro was valid.

However, the CA found that it was only Alejandro who agreed to the sale. There is no
evidence to show that the other co-owners consented to Alejandros sale transaction with
the petitioner. Hence, for want of authority to sell Lot No. 3, the CA ruled that Alejandro
only sold his aliquot share of the subject property to the petitioner.

In Alcantara v. Nido,25 the Court emphasized the requirement of an SPA before an agent
may sell an immovable property. In the said case, Revelen was the owner of the subject
land. Her mother, respondent Brigida Nido accepted the petitioners offer to buy
Revelens land at Two Hundred Pesos (P200.00) per sq m. However, Nido was only
authorized verbally by Revelen. Thus, the Court declared the sale of the said land null
and void under Articles 1874 and 1878 of the Civil Code.26

Articles 1874 and 1878 of the Civil Code explicitly provide:cralavvonlinelawlibrary

Art. 1874. When a sale of a piece of land or any interest therein is through an agent, the
authority of the latter shall be in writing; otherwise, the sale shall be void.

Art. 1878. Special powers of attorney are necessary in the following

cases:cralavvonlinelawlibrary

xxxx

(5) To enter into any contract by which the ownership of an immovable is transmitted or
acquired either gratuitously or for a valuable consideration;

The petitioner insists that the authority of Alejandro to represent his co-heirs in the
contract of sale entered into with the petitioner had been adequately proven during the
trial. He alleges that the other Altamiranos are deemed to have knowledge of the contract
of sale entered into by Alejandro with the petitioner since all of them, either personally or
through their authorized representatives participated in the sale transaction with the
Spouses Lajarca involving the same property covered by TCT No. T-102563. In fact, said
TCT even contained a notice of lis pendens which should have called their attention that
there was a case involving the property. Moreover, the petitioner points out that Alejandro
represented a considerable majority of the co-owners as can be observed from other
transaction and documents, i.e., three (3) Deeds of Sale executed in favor of the Spouses
Lajarca and the two other buyers of the parcels of land co-owned by the Altamiranos.27

The petitioners contentions are untenable. Given the expressed requirement under the
Articles 1874 and 1878 of the Civil Code that there must be a written authority to sell an
immovable property, the petitioners arguments must fail. The petitioner asserts that since
TCT No. T-102563 contained a notice of lis pendens, the Altamiranos very well knew of
the earlier sale to him by Alejandro. While this may be true, it does not negate the fact
that Alejandro did not have any SPA. It was a finding that need not be disturbed that
Alejandro had no authority from his co-owners to sell the subject property.

Moreover, the fact that Alejandro allegedly represented a majority of the co-owners in the
transaction with the Spouses Lajarca, is of no moment. The Court cannot just simply
assume that Alejandro had the same authority when he transacted with the petitioner.

In Woodchild Holdings, Inc. v. Roxas Electric and Construction Company, Inc.28 the
Court stated that persons dealing with an assumed agency, whether the assumed agency
be a general or special one, are bound at their peril, if they would hold the principal
liable, to ascertain not only the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is upon them to establish it.29 In
other words, when the petitioner relied only on the words of respondent Alejandro
without securing a copy of the SPA in favor of the latter, the petitioner is bound by the
risk accompanying such trust on the mere assurance of Alejandro.

The same Woodchild case stressed that apparent authority based on estoppel can arise
from the principal who knowingly permit the agent to hold himself out with authority and
from the principal who clothe the agent with indicia of authority that would lead a
reasonably prudent person to believe that he actually has such authority.30 Apparent
authority of an agent arises only from acts or conduct on the part of the principal and
such acts or conduct of the principal must have been known and relied upon in good faith
and as a result of the exercise of reasonable prudence by a third person as claimant and
such must have produced a change of position to its detriment.31 In the instant case, the
sale to the Spouses Lajarca and other transactions where Alejandro allegedly represented
a considerable majority of the co-owners transpired after the sale to the petitioner; thus,
the petitioner cannot rely upon these acts or conduct to believe that Alejandro had the
same authority to negotiate for the sale of the subject property to him.

Indeed, the petitioner can only apply the principle of apparent authority if he is able to
prove the acts of the Altamiranos which justify his belief in Alejandros agency; that the
Altamiranos had such knowledge thereof; and if the petitioner relied upon those acts and
conduct, consistent with ordinary care and prudence.32

The instant case shows no evidence on record of specific acts which the Altamiranos
made before the sale of the subject property to the petitioner, indicating that they fully
knew of the representation of Alejandro. All that the petitioner relied upon were acts that
happened after the sale to him. Absent the consent of Alejandros co-owners, the Court
holds that the sale between the other Altamiranos and the petitioner is null and void. But
as held by the appellate court, the sale between the petitioner and Alejandro is valid
insofar as the aliquot share of respondent Alejandro is concerned. Being a co-owner,
Alejandro can validly and legally dispose of his share even without the consent of all the
other co-heirs.33 Since the balance of the full price has not yet been paid, the amount
paid shall represent as payment to his aliquot share. 34 This then leaves the sale of the lot
of the Altamiranos to the Spouses Lajarca valid only insofar as their shares are concerned,
exclusive of the aliquot part of Alejandro, as ruled by the CA. The Court finds no
reversible error with the decision of the CA in all respects.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals dated
November 29, 2007 in CA-G.R. CV No. 86001 is AFFIRMED.

SO ORDERED.

G.R. No. 140667 August 12, 2004

WOODCHILD HOLDINGS, INC., petitioner,
vs.
ROXAS ELECTRIC AND CONSTRUCTION COMPANY, INC., respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals in CA-
G.R. CV No. 56125 reversing the Decision2 of the Regional Trial Court of Makati,
Branch 57, which ruled in favor of the petitioner.
The Antecedents
The respondent Roxas Electric and Construction Company, Inc. (RECCI), formerly the
Roxas Electric and Construction Company, was the
owner of two parcels of land, identified as Lot No. 491-A-3-B-1 covered by Transfer
Certificate of Title (TCT) No. 78085 and Lot No. 491-A-3-B-2 covered by TCT No.
78086. A portion of Lot No. 491-A-3-B-1 which abutted Lot No. 491-A-3-B-2 was a dirt
road accessing to the Sumulong Highway, Antipolo, Rizal.
At a special meeting on May 17, 1991, the respondent's Board of Directors approved a
resolution authorizing the corporation, through its president, Roberto B. Roxas, to sell
Lot No. 491-A-3-B-2 covered by TCT No. 78086, with an area of 7,213 square meters, at
a price and under such terms and conditions which he deemed most reasonable and
advantageous to the corporation; and to execute, sign and deliver the pertinent sales
documents and receive the proceeds of the sale for and on behalf of the company.3
Petitioner Woodchild Holdings, Inc. (WHI) wanted to buy Lot No. 491-A-3-B-2 covered
by TCT No. 78086 on which it planned to construct its warehouse building, and a portion
of the adjoining lot, Lot No. 491-A-3-B-1, so that its 45-foot container van would be able
to readily enter or leave the property. In a Letter to Roxas dated June 21, 1991, WHI
President Jonathan Y. Dy offered to buy Lot No. 491-A-3-B-2 under stated terms and
conditions for P1,000 per square meter or at the price of P7,213,000.4 One of the terms
incorporated in Dy's offer was the following provision:
5. This Offer to Purchase is made on the representation and warranty of the
OWNER/SELLER, that he holds a good and registrable title to the property, which shall
be conveyed CLEAR and FREE of all liens and encumbrances, and that the area of 7,213
square meters of the subject property already includes the area on which the right of way
traverses from the main lot (area) towards the exit to the Sumulong Highway as shown in
the location plan furnished by the Owner/Seller to the buyer. Furthermore, in the event
that the right of way is insufficient for the buyer's purposes (example: entry of a 45-foot
container), the seller agrees to sell additional square meter from his current adjacent
property to allow the buyer to full access and full use of the property.5
Roxas indicated his acceptance of the offer on page 2 of the deed. Less than a month later
or on July 1, 1991, Roxas, as President of RECCI, as vendor, and Dy, as President of
WHI, as vendee, executed a contract to sell in which RECCI bound and obliged itself to
sell to Dy Lot No. 491-A-3-B-2 covered by TCT No. 78086 for P7,213,000.6 On
September 5, 1991, a Deed of Absolute Sale7 in favor of WHI was issued, under which
Lot No. 491-A-3-B-2 covered by TCT No. 78086 was sold for P5,000,000, receipt of
which was acknowledged by Roxas under the following terms and conditions:
The Vendor agree (sic), as it hereby agrees and binds itself to give Vendee the beneficial
use of and a right of way from Sumulong Highway to the property herein conveyed
consists of 25 square meters wide to be used as the latter's egress from and ingress to and
an additional 25 square meters in the corner of Lot No. 491-A-3-B-1, as turning and/or
maneuvering area for Vendee's vehicles.
The Vendor agrees that in the event that the right of way is insufficient for the Vendee's
use (ex entry of a 45-foot container) the Vendor agrees to sell additional square meters
from its current adjacent property to allow the Vendee full access and full use of the
property.

The Vendor hereby undertakes and agrees, at its account, to defend the title of the Vendee
to the parcel of land and improvements herein conveyed, against all claims of any and all
persons or entities, and that the Vendor hereby warrants the right of the Vendee to possess
and own the said parcel of land and improvements thereon and will defend the Vendee
against all present and future claims and/or action in relation thereto, judicial and/or
administrative. In particular, the Vendor shall eject all existing squatters and occupants of
the premises within two (2) weeks from the signing hereof. In case of failure on the part
of the Vendor to eject all occupants and squatters within the two-week period or breach of
any of the stipulations, covenants and terms and conditions herein provided and that of
contract to sell dated 1 July 1991, the Vendee shall have the right to cancel the sale and
demand reimbursement for all payments made to the Vendor with interest thereon at 36%
per annum.8
On September 10, 1991, the Wimbeco Builder's, Inc. (WBI) submitted its quotation for
P8,649,000 to WHI for the construction of the warehouse building on a portion of the
property with an area of 5,088 square meters.9 WBI proposed to start the project on
October 1, 1991 and to turn over the building to WHI on February 29, 1992.10
In a Letter dated September 16, 1991, Ponderosa Leather Goods Company, Inc.
confirmed its lease agreement with WHI of a 5,000-square-meter portion of the
warehouse yet to be constructed at the rental rate of P65 per square meter. Ponderosa
emphasized the need for the warehouse to be ready for occupancy before April 1, 1992.11
WHI accepted the offer. However, WBI failed to commence the construction of the
warehouse in October 1, 1991 as planned because of the presence of squatters in the
property and suggested a renegotiation of the contract after the squatters shall have been
evicted.12 Subsequently, the squatters were evicted from the property.
On March 31, 1992, WHI and WBI executed a Letter-Contract for the construction of the
warehouse building for P11,804,160.13 The contractor started construction in April 1992
even before the building officials of Antipolo City issued a building permit on May 28,
1992. After the warehouse was finished, WHI issued on March 21, 1993 a certificate of
occupancy by the building official. Earlier, or on March 18, 1993, WHI, as lessor, and
Ponderosa, as lessee, executed a contract of lease over a portion of the property for a
monthly rental of P300,000 for a period of three years from March 1, 1993 up to
February 28, 1996.14
In the meantime, WHI complained to Roberto Roxas that the vehicles of RECCI were
parked on a portion of the property over which WHI had been granted a right of way.
Roxas promised to look into the matter. Dy and Roxas discussed the need of the WHI to
buy a 500-square-meter portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 as
provided for in the deed of absolute sale. However, Roxas died soon thereafter. On April
15, 1992, the WHI wrote the RECCI, reiterating its verbal requests to purchase a portion
of the said lot as provided for in the deed of absolute sale, and complained about the
latter's failure to eject the squatters within the three-month period agreed upon in the said
deed.
The WHI demanded that the RECCI sell a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085 for its beneficial use within 72 hours from notice thereof, otherwise the
appropriate action would be filed against it. RECCI rejected the demand of WHI. WHI
reiterated its demand in a Letter dated May 29, 1992. There was no response from
RECCI.
On June 17, 1992, the WHI filed a complaint against the RECCI with the Regional Trial
Court of Makati, for specific performance and damages, and alleged, inter alia, the
following in its complaint:
5. The "current adjacent property" referred to in the aforequoted paragraph of the Deed of
Absolute Sale pertains to the property covered by Transfer Certificate of Title No. N-
78085 of the Registry of Deeds of Antipolo, Rizal, registered in the name of herein
defendant Roxas Electric.
6. Defendant Roxas Electric in patent violation of the express and valid terms of the Deed
of Absolute Sale unjustifiably refused to deliver to Woodchild Holdings the stipulated
beneficial use and right of way consisting of 25 square meters and 55 square meters to the
prejudice of the plaintiff.
7. Similarly, in as much as the 25 square meters and 55 square meters alloted to
Woodchild Holdings for its beneficial use is inadequate as turning and/or maneuvering
area of its 45-foot container van, Woodchild Holdings manifested its intention pursuant to
para. 5 of the Deed of Sale to purchase additional square meters from Roxas Electric to
allow it full access and use of the purchased property, however, Roxas Electric refused
and failed to merit Woodchild Holdings' request contrary to defendant Roxas Electric's
obligation under the Deed of Absolute Sale (Annex "A").
8. Moreover, defendant, likewise, failed to eject all existing squatters and occupants of
the premises within the stipulated time frame and as a consequence thereof, plaintiff's
planned construction has been considerably delayed for seven (7) months due to the
squatters who continue to trespass and obstruct the subject property, thereby Woodchild
Holdings incurred substantial losses amounting to P3,560,000.00 occasioned by the
increased cost of construction materials and labor.
9. Owing further to Roxas Electric's deliberate refusal to comply with its obligation under
Annex "A," Woodchild Holdings suffered unrealized income of P300,000.00 a month or
P2,100,000.00 supposed income from rentals of the subject property for seven (7)
months.
10. On April 15, 1992, Woodchild Holdings made a final demand to Roxas Electric to
comply with its obligations and warranties under the Deed of Absolute Sale but
notwithstanding such demand, defendant Roxas Electric refused and failed and continue
to refuse and fail to heed plaintiff's demand for compliance.
Copy of the demand letter dated April 15, 1992 is hereto attached as Annex "B" and made
an integral part hereof.
11. Finally, on 29 May 1991, Woodchild Holdings made a letter request addressed to
Roxas Electric to particularly annotate on Transfer Certificate of Title No. N-78085 the
agreement under Annex "A" with respect to the beneficial use and right of way, however,
Roxas Electric unjustifiably ignored and disregarded the same.
Copy of the letter request dated 29 May 1992 is hereto attached as Annex "C" and made
an integral part hereof.
12. By reason of Roxas Electric's continuous refusal and failure to comply with
Woodchild Holdings' valid demand for compliance under Annex "A," the latter was
constrained to litigate, thereby incurring damages as and by way of attorney's fees in the
amount of P100,000.00 plus costs of suit and expenses of litigation.15
The WHI prayed that, after due proceedings, judgment be rendered in its favor, thus:
WHEREFORE, it is respectfully prayed that judgment be rendered in favor of Woodchild
Holdings and ordering Roxas Electric the following:
a) to deliver to Woodchild Holdings the beneficial use of the stipulated 25 square meters
and 55 square meters;
b) to sell to Woodchild Holdings additional 25 and 100 square meters to allow it full
access and use of the purchased property pursuant to para. 5 of the Deed of Absolute
Sale;
c) to cause annotation on Transfer Certificate of Title No. N-78085 the beneficial use and
right of way granted to Woodchild Holdings under the Deed of Absolute Sale;
d) to pay Woodchild Holdings the amount of P5,660,000.00, representing actual damages
and unrealized income;
e) to pay attorney's fees in the amount of P100,000.00; and
f) to pay the costs of suit.
Other reliefs just and equitable are prayed for.16
In its answer to the complaint, the RECCI alleged that it never authorized its former
president, Roberto Roxas, to grant the beneficial use of any portion of Lot No. 491-A-3-
B-1, nor agreed to sell any portion thereof or create a lien or burden thereon. It alleged
that, under the Resolution approved on May 17, 1991, it merely authorized Roxas to sell
Lot No. 491-A-3-B-2 covered by TCT No. 78086. As such, the grant of a right of way
and the agreement to sell a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085 in
the said deed are ultra vires. The RECCI further alleged that the provision therein that it
would sell a portion of Lot No. 491-A-3-B-1 to the WHI lacked the essential elements of
a binding contract.17
In its amended answer to the complaint, the RECCI alleged that the delay in the
construction of its warehouse building was due to the failure of the WHI's contractor to
secure a building permit thereon.18
During the trial, Dy testified that he told Roxas that the petitioner was buying a portion of
Lot No. 491-A-3-B-1 consisting of an area of 500 square meters, for the price of P1,000
per square meter.
On November 11, 1996, the trial court rendered judgment in favor of the WHI, the
decretal portion of which reads:
WHEREFORE, judgment is hereby rendered directing defendant:
(1) To allow plaintiff the beneficial use of the existing right of way plus the stipulated 25
sq. m. and 55 sq. m.;
(2) To sell to plaintiff an additional area of 500 sq. m. priced at P1,000 per sq. m. to allow
said plaintiff full access and use of the purchased property pursuant to Par. 5 of their
Deed of Absolute Sale;
(3) To cause annotation on TCT No. N-78085 the beneficial use and right of way granted
by their Deed of Absolute Sale;
(4) To pay plaintiff the amount of P5,568,000 representing actual damages and plaintiff's
unrealized income;
(5) To pay plaintiff P100,000 representing attorney's fees; and
To pay the costs of suit.
SO ORDERED.19
The trial court ruled that the RECCI was estopped from disowning the apparent authority
of Roxas under the May 17, 1991 Resolution of its Board of Directors. The court
reasoned that to do so would prejudice the WHI which transacted with Roxas in good
faith, believing that he had the authority to bind the WHI relating to the easement of right
of way, as well as the right to purchase a portion of Lot No. 491-A-3-B-1 covered by
TCT No. 78085.
The RECCI appealed the decision to the CA, which rendered a decision on November 9,
1999 reversing that of the trial court, and ordering the dismissal of the complaint. The CA
ruled that, under the resolution of the Board of Directors of the RECCI, Roxas was
merely authorized to sell Lot No. 491-A-3-B-2 covered by TCT No. 78086, but not to
grant right of way in favor of the WHI over a portion of Lot No. 491-A-3-B-1, or to grant
an option to the petitioner to buy a portion thereof. The appellate court also ruled that the
grant of a right of way and an option to the respondent were so lopsided in favor of the
respondent because the latter was authorized to fix the location as well as the price of the
portion of its property to be sold to the respondent. Hence, such provisions contained in
the deed of absolute sale were not binding on the RECCI. The appellate court ruled that
the delay in the construction of WHI's warehouse was due to its fault.
The Present Petition
The petitioner now comes to this Court asserting that:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF ABSOLUTE
SALE (EXH. "C") IS ULTRA VIRES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF
THE COURT A QUO ALLOWING THE PLAINTIFF-APPELLEE THE BENEFICIAL
USE OF THE EXISTING RIGHT OF WAY PLUS THE STIPULATED 25 SQUARE
METERS AND 55 SQUARE METERS BECAUSE THESE ARE VALID
STIPULATIONS AGREED BY BOTH PARTIES TO THE DEED OF ABSOLUTE
SALE (EXH. "C").
III.
THERE IS NO FACTUAL PROOF OR EVIDENCE FOR THE COURT OF APPEALS
TO RULE THAT THE STIPULATIONS OF THE DEED OF ABSOLUTE SALE (EXH.
"C") WERE DISADVANTAGEOUS TO THE APPELLEE, NOR WAS APPELLEE
DEPRIVED OF ITS PROPERTY WITHOUT DUE PROCESS.
IV.
IN FACT, IT WAS WOODCHILD WHO WAS DEPRIVED OF PROPERTY WITHOUT
DUE PROCESS BY THE ASSAILED DECISION.
V.
THE DELAY IN THE CONSTRUCTION WAS DUE TO THE FAILURE OF THE
APPELLANT TO EVICT THE SQUATTERS ON THE LAND AS AGREED IN THE
DEED OF ABSOLUTE SALE (EXH. "C").
VI.
THE COURT OF APPEALS GRAVELY ERRED IN REVERSING THE RULING OF
THE COURT A QUO DIRECTING THE DEFENDANT TO PAY THE PLAINTIFF THE
AMOUNT OF P5,568,000.00 REPRESENTING ACTUAL DAMAGES AND
PLAINTIFF'S UNREALIZED INCOME AS WELL AS ATTORNEY'S FEES.20
The threshold issues for resolution are the following: (a) whether the respondent is bound
by the provisions in the deed of absolute sale granting to the petitioner beneficial use and
a right of way over a portion of Lot
No. 491-A-3-B-1 accessing to the Sumulong Highway and granting the option to the
petitioner to buy a portion thereof, and, if so, whether such agreement is enforceable
against the respondent; (b) whether the respondent failed to eject the squatters on its
property within two weeks from the execution of the deed of absolute sale; and, (c)
whether the respondent is liable to the petitioner for damages.
On the first issue, the petitioner avers that, under its Resolution of May 17, 1991, the
respondent authorized Roxas, then its president, to grant a right of way over a portion of
Lot No. 491-A-3-B-1 in favor of the petitioner, and an option for the respondent to buy a
portion of the said property. The petitioner contends that when the respondent sold Lot
No. 491-A-3-B-2 covered by TCT No. 78086, it (respondent) was well aware of its
obligation to provide the petitioner with a means of ingress to or egress from the property
to the Sumulong Highway, since the latter had no adequate outlet to the public highway.
The petitioner asserts that it agreed to buy the property covered by TCT No. 78085
because of the grant by the respondent of a right of way and an option in its favor to buy
a portion of the property covered by TCT No. 78085. It contends that the respondent
never objected to Roxas' acceptance of its offer to purchase the property and the terms
and conditions therein; the respondent even allowed Roxas to execute the deed of
absolute sale in its behalf. The petitioner asserts that the respondent even received the
purchase price of the property without any objection to the terms and conditions of the
said deed of sale. The petitioner claims that it acted in good faith, and contends that after
having been benefited by the said sale, the respondent is estopped from assailing its terms
and conditions. The petitioner notes that the respondent's Board of Directors never
approved any resolution rejecting the deed of absolute sale executed by Roxas for and in
its behalf. As such, the respondent is obliged to sell a portion of Lot No. 491-A-3-B-1
covered by TCT No. 78085 with an area of 500 square meters at the price of P1,000 per
square meter, based on its evidence and Articles 649 and 651 of the New Civil Code.
For its part, the respondent posits that Roxas was not so authorized under the May 17,
1991 Resolution of its Board of Directors to impose a burden or to grant a right of way in
favor of the petitioner on Lot No. 491-A-3-B-1, much less convey a portion thereof to the
petitioner. Hence, the respondent was not bound by such provisions contained in the deed
of absolute sale. Besides, the respondent contends, the petitioner cannot enforce its right
to buy a portion of the said property since there was no agreement in the deed of absolute
sale on the price thereof as well as the specific portion and area to be purchased by the
petitioner.
We agree with the respondent.
In San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,21 we held that:
A corporation is a juridical person separate and distinct from its stockholders or members.
Accordingly, the property of the corporation is not the property of its stockholders or
members and may not be sold by the stockholders or members without express
authorization from the corporation's board of directors. Section 23 of BP 68, otherwise
known as the Corporation Code of the Philippines, provides:
"SEC. 23. The Board of Directors or Trustees. Unless otherwise provided in this Code,
the corporate powers of all corporations formed under this Code shall be exercised, all
business conducted and all property of such corporations controlled and held by the board
of directors or trustees to be elected from among the holders of stocks, or where there is
no stock, from among the members of the corporation, who shall hold office for one (1)
year and until their successors are elected and qualified."
Indubitably, a corporation may act only through its board of directors or, when authorized
either by its by-laws or by its board resolution, through its officers or agents in the normal
course of business. The general principles of agency govern the relation between the
corporation and its officers or agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law. 22
Generally, the acts of the corporate officers within the scope of their authority are binding
on the corporation. However, under Article 1910 of the New Civil Code, acts done by
such officers beyond the scope of their authority cannot bind the corporation unless it has
ratified such acts expressly or tacitly, or is estopped from denying them:
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
Thus, contracts entered into by corporate officers beyond the scope of authority are
unenforceable against the corporation unless ratified by the corporation.23
In BA Finance Corporation v. Court of Appeals,24 we also ruled that persons dealing
with an assumed agency, whether the assumed agency be a general or special one, are
bound at their peril, if they would hold the principal liable, to ascertain not only the fact
of agency but also the nature and extent of authority, and in case either is controverted,
the burden of proof is upon them to establish it.
In this case, the respondent denied authorizing its then president Roberto B. Roxas to sell
a portion of Lot No. 491-A-3-B-1 covered by TCT No. 78085, and to create a lien or
burden thereon. The petitioner was thus burdened to prove that the respondent so
authorized Roxas to sell the same and to create a lien thereon.
Central to the issue at hand is the May 17, 1991 Resolution of the Board of Directors of
the respondent, which is worded as follows:
RESOLVED, as it is hereby resolved, that the corporation, thru the President, sell to any
interested buyer, its 7,213-sq.-meter property at the Sumulong Highway, Antipolo, Rizal,
covered by Transfer Certificate of Title No. N-78086, at a price and on terms and
conditions which he deems most reasonable and advantageous to the corporation;
FURTHER RESOLVED, that Mr. ROBERTO B. ROXAS, President of the corporation,
be, as he is hereby authorized to execute, sign and deliver the pertinent sales documents
and receive the proceeds of sale for and on behalf of the company.25
Evidently, Roxas was not specifically authorized under the said resolution to grant a right
of way in favor of the petitioner on a portion of Lot No. 491-A-3-B-1 or to agree to sell to
the petitioner a portion thereof. The authority of Roxas, under the resolution, to sell Lot
No. 491-A-3-B-2 covered by TCT No. 78086 did not include the authority to sell a
portion of the adjacent lot, Lot No. 491-A-3-B-1, or to create or convey real rights
thereon. Neither may such authority be implied from the authority granted to Roxas to
sell Lot No. 491-A-3-B-2 to the petitioner "on such terms and conditions which he deems
most reasonable and advantageous." Under paragraph 12, Article 1878 of the New Civil
Code, a special power of attorney is required to convey real rights over immovable
property.26 Article 1358 of the New Civil Code requires that contracts which have for
their object the creation of real rights over immovable property must appear in a public
document.27 The petitioner cannot feign ignorance of the need for Roxas to have been
specifically authorized in writing by the Board of Directors to be able to validly grant a
right of way and agree to sell a portion of Lot No. 491-A-3-B-1. The rule is that if the act
of the agent is one which requires authority in writing, those dealing with him are
charged with notice of that fact.28
Powers of attorney are generally construed strictly and courts will not infer or presume
broad powers from deeds which do not sufficiently include property or subject under
which the agent is to deal.29 The general rule is that the power of attorney must be
pursued within legal strictures, and the agent can neither go beyond it; nor beside it. The
act done must be legally identical with that authorized to be done.30 In sum, then, the
consent of the respondent to the assailed provisions in the deed of absolute sale was not
obtained; hence, the assailed provisions are not binding on it.
We reject the petitioner's submission that, in allowing Roxas to execute the contract to
sell and the deed of absolute sale and failing to reject or disapprove the same, the
respondent thereby gave him apparent authority to grant a right of way over Lot No. 491-
A-3-B-1 and to grant an option for the respondent to sell a portion thereof to the
petitioner. Absent estoppel or ratification, apparent authority cannot remedy the lack of
the written power required under the statement of frauds.31 In addition, the petitioner's
fallacy is its wrong assumption of the unproved premise that the respondent had full
knowledge of all the terms and conditions contained in the deed of absolute sale when
Roxas executed it.
It bears stressing that apparent authority is based on estoppel and can arise from two
instances: first, the principal may knowingly permit the agent to so hold himself out as
having such authority, and in this way, the principal becomes estopped to claim that the
agent does not have such authority; second, the principal may so clothe the agent with the
indicia of authority as to lead a reasonably prudent person to believe that he actually has
such authority.32 There can be no apparent authority of an agent without acts or conduct
on the part of the principal and such acts or conduct of the principal must have been
known and relied upon in good faith and as a result of the exercise of reasonable
prudence by a third person as claimant and such must have produced a change of position
to its detriment. The apparent power of an agent is to be determined by the acts of the
principal and not by the acts of the agent.33
For the principle of apparent authority to apply, the petitioner was burdened to prove the
following: (a) the acts of the respondent justifying belief in the agency by the petitioner;
(b) knowledge thereof by the respondent which is sought to be held; and, (c) reliance
thereon by the petitioner consistent with ordinary care and prudence.34 In this case, there
is no evidence on record of specific acts made by the respondent35 showing or indicating
that it had full knowledge of any representations made by Roxas to the petitioner that the
respondent had authorized him to grant to the respondent an option to buy a portion of
Lot No. 491-A-3-B-1 covered by TCT No. 78085, or to create a burden or lien thereon, or
that the respondent allowed him to do so.
The petitioner's contention that by receiving and retaining the P5,000,000 purchase price
of Lot No. 491-A-3-B-2, the respondent effectively and impliedly ratified the grant of a
right of way on the adjacent lot, Lot No. 491-A-3-B-1, and to grant to the petitioner an
option to sell a portion thereof, is barren of merit. It bears stressing that the respondent
sold Lot No. 491-A-3-B-2 to the petitioner, and the latter had taken possession of the
property. As such, the respondent had the right to retain the P5,000,000, the purchase
price of the property it had sold to the petitioner. For an act of the principal to be
considered as an implied ratification of an unauthorized act of an agent, such act must be
inconsistent with any other hypothesis than that he approved and intended to adopt what
had been done in his name.36 Ratification is based on waiver the intentional
relinquishment of a known right. Ratification cannot be inferred from acts that a principal
has a right to do independently of the unauthorized act of the agent. Moreover, if a
writing is required to grant an authority to do a particular act, ratification of that act must
also be in writing.37 Since the respondent had not ratified the unauthorized acts of Roxas,
the same are unenforceable.38 Hence, by the respondent's retention of the amount, it
cannot thereby be implied that it had ratified the unauthorized acts of its agent, Roberto
Roxas.
On the last issue, the petitioner contends that the CA erred in dismissing its complaint for
damages against the respondent on its finding that the delay in the construction of its
warehouse was due to its (petitioner's) fault. The petitioner asserts that the CA should
have affirmed the ruling of the trial court that the respondent failed to cause the eviction
of the squatters from the property on or before September 29, 1991; hence, was liable for
P5,660,000. The respondent, for its part, asserts that the delay in the construction of the
petitioner's warehouse was due to its late filing of an application for a building permit,
only on May 28, 1992.
The petitioner's contention is meritorious. The respondent does not deny that it failed to
cause the eviction of the squatters on or before September 29, 1991. Indeed, the
respondent does not deny the fact that when the petitioner wrote the respondent
demanding that the latter cause the eviction of the squatters on April 15, 1992, the latter
were still in the premises. It was only after receiving the said letter in April 1992 that the
respondent caused the eviction of the squatters, which thus cleared the way for the
petitioner's contractor to commence the construction of its warehouse and secure the
appropriate building permit therefor.
The petitioner could not be expected to file its application for a building permit before
April 1992 because the squatters were still occupying the property. Because of the
respondent's failure to cause their eviction as agreed upon, the petitioner's contractor
failed to commence the construction of the warehouse in October 1991 for the agreed
price of P8,649,000. In the meantime, costs of construction materials spiraled. Under the
construction contract entered into between the petitioner and the contractor, the petitioner
was obliged to pay P11,804,160,39including the additional work costing P1,441,500, or a
net increase of P1,712,980.40 The respondent is liable for the difference between the
original cost of construction and the increase thereon, conformably to Article 1170 of the
New Civil Code, which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay and those who in any manner contravene the tenor thereof, are liable
for damages.
The petitioner, likewise, lost the amount of P3,900,000 by way of unearned income from
the lease of the property to the Ponderosa Leather Goods Company. The respondent is,
thus, liable to the petitioner for the said amount, under Articles 2200 and 2201 of the New
Civil Code:
Art. 2200. Indemnification for damages shall comprehend not only the value of the loss
suffered, but also that of the profits which the obligee failed to obtain.
Art. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted
in good faith is liable shall be those that are the natural and probable consequences of the
breach of the obligation, and which the parties have foreseen or could have reasonably
foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for
all damages which may be reasonably attributed to the non-performance of the obligation.
In sum, we affirm the trial court's award of damages and attorney's fees to the petitioner.
IN LIGHT OF ALL THE FOREGOING, judgment is hereby rendered AFFIRMING the
assailed Decision of the Court of Appeals WITH MODIFICATION. The respondent is
ordered to pay to the petitioner the amount of P5,612,980 by way of actual damages and
P100,000 by way of attorney's fees. No costs.
SO ORDERED.

G.R. No. 166044 June 18, 2012

COUNTRY BANKERS INSURANCE CORPORATION, Petitioner,
vs.
KEPPEL CEBU SHIPYARD, UNIMARINE SHIPPING LINES, INC., PAUL
RODRIGUEZ, PETER RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN
QUINAIN, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari1 to reverse and set aside the January 29, 2004
Decision2 and October 28, 2004 Resolution3 of the Court of Appeals in CA-G.R. CV No.
58001, wherein the Court of Appeals affirmed with modification the February 10, 1997
Decision4 of the Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No.
CBB-13447.
Hereunder are the undisputed facts as culled from the records of the case.
On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation
engaged in the shipping industry, contracted the services of Keppel Cebu Shipyard,
formerly known as Cebu Shipyard and Engineering Works, Inc. (Cebu Shipyard), for dry
docking and ship repair works on its vessel, the M/V Pacific Fortune.5
On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to Unimarine in
consideration for its services, which amounted to 4,486,052.00.6 Negotiations between
Cebu Shipyard and Unimarine led to the reduction of this amount to 3,850,000.00. The
terms of this agreement were embodied in Cebu Shipyards February 18, 1992 letter to
the President/General Manager of Unimarine, Paul Rodriguez, who signed his conformity
to said letter, quoted in full below:
18 February 1992
Ref No.: LL92/0383
UNIMARINE SHIPPING LINES, INC.
C/O Autographics, Inc.
Gorordo Avenue, Lahug, Cebu City
Attention: Mr. Paul Rodriguez
President/General Manager
This is to confirm our agreement on the shiprepair bills charged for the repair of MV
Pacific Fortune, our invoice no. 26035.
The shiprepair bill (Bill No. 26035) is agreed at a negotiated amount of 3,850,000.00
excluding VAT.
Unimarine Shipping Lines, Inc. ("Unimarine") will pay the above amount of
[3,850,000.00] in US Dollars to be fixed at the prevailing USDollar to Philippine Peso
exchange rate at the time of payment. The payment terms to be extended to Unimarine is
as follows:
Installments Amount Due Date
1st Installment 2,350,000.00 30 May 1992
2nd Installment 1,500,000.00 30 Jun 1992
Unimarine will deposit post-dated checks equivalent to the above amounts in Philippine
Peso and an additional check amount of 385,000.00, representing 10% [Value Added
Tax] VAT on the above bill of 3,850,000.00. In the event that Unimarine fails to make
full payment on the above due dates in US Dollars, the post-dated checks will be
deposited by CSEW in payment of the amounts owned by Unimarine and Unimarine
agree that the 10% VAT (385,000.00) shall also become payable to CSEW.
Unimarine in consideration of the credit terms extended by CSEW and the release of the
vessel before full payment of the above debt, agree to present CSEW surety bonds equal
to 120% of the value of the credit extended. The total bond amount shall be
4,620,000.00.
Yours faithfully,
CEBU SHIPYARD & ENG'G WORKS, INC. Conforme:
(SGD)
(SGD)
SEET KENG TAT PAUL RODRIGUEZ
Treasurer/VP-Admin. Unimarine Shipping
Lines, Inc.7
In compliance with the agreement, Unimarine, through Paul Rodriguez, secured from
Country Bankers Insurance Corp. (CBIC), through the latters agent, Bethoven Quinain
(Quinain), CBIC Surety Bond No. G (16) 294198 (the surety bond) on January 15, 1992
in the amount of 3,000,000.00. The expiration of this surety bond was extended to
January 15, 1993, through Endorsement No. 331529 (the endorsement), which was later
on attached to and formed part of the surety bond. In addition to this, Unimarine, on
February 19, 1992, obtained another bond from Plaridel Surety and Insurance Co.
(Plaridel), PSIC Bond No. G (16)-0036510 in the amount of 1,620,000.00.
On February 17, 1992, Unimarine executed a Contract of Undertaking in favor of Cebu
Shipyard. The pertinent portions of the contract read as follows:
Messrs, Uni-Marine Shipping Lines, Inc. ("the Debtor") of Gorordo Avenue, Cebu City
hereby acknowledges that in consideration of Cebu Shipyard & Engineering Works, Inc.
("Cebu Shipyard") at our request agreeing to release the vessel specified in part A of the
Schedule ("name of vessel") prior to the receipt of the sum specified in part B of the
Schedule ("Moneys Payable") payable in respect of certain works performed or to be
performed by Cebu Shipyard and/or its subcontractors and/or material and equipment
supplied or to be supplied by Cebu Shipyard and/or its subcontractors in connection with
the vessel for the party specified in part C of the Schedule ("the Debtor"), we hereby
unconditionally, irrevocably undertake to make punctual payment to Cebu Shipyard of
the Moneys Payable on the terms and conditions as set out in part B of the Schedule. We
likewise hereby expressly waive whatever right of excussion we may have under the law
and equity.
This contract shall be binding upon Uni-Marine Shipping Lines, Inc., its heirs, executors,
administrators, successors, and assigns and shall not be discharged until all obligation of
this contract shall have been faithfully and fully performed by the Debtor.11
Because Unimarine failed to remit the first installment when it became due on May 30,
1992, Cebu Shipyard was constrained to deposit the peso check corresponding to the
initial installment of 2,350,000.00. The check, however, was dishonored by the bank
due to insufficient funds.12 Cebu Shipyard faxed a message to Unimarine, informing it of
the situation, and reminding it to settle its account immediately.13
On June 24, 1992, Cebu Shipyard again faxed a message14 to Unimarine, to confirm Paul
Rodriguezs promise that Unimarine will pay in full the 3,850,000.00, in US Dollars on
July 1, 1992.
Since Unimarine failed to deliver on the above promise, Cebu Shipyard, on July 2, 1992,
through a faxed letter, asked Unimarine if the payment could be picked up the next day.
This was followed by another faxed message on July 6, 1992, wherein Cebu Shipyard
reminded Unimarine of its promise to pay in full on July 28, 1992. On August 24, 1992,
Cebu Shipyard again faxed15 Unimarine, to inform it that interest charges will have to be
imposed on their outstanding debt, and if it still fails to pay before August 28, 1992, Cebu
Shipyard will have to enforce payment against the sureties and take legal action.
On November 18, 1992, Cebu Shipyard, through its counsel, sent Unimarine a letter,16
demanding payment, within seven days from receipt of the letter, the amount of
4,859,458.00, broken down as follows:
B#26035 MV PACIFIC
FORTUNE 4,486,052.00
LESS: ADJUSTMENT:
(636,052.00)
CN#00515-03/19/92 -----------------
---
 3,850,000.00
385,000.00
Add: VAT on repair bill no.
-----------------
26035
---
4,235,000.00
Add: Interest/penalty charges:
189,888.00
Debit Note No. 02381
434,570.00
-----------------
Debit Note No. 02382 ---
4,859,458.001
7
Due to Unimarines failure to heed Cebu Shipyards repeated demands, Cebu Shipyard,
through counsel, wrote the sureties CBIC18 on November 18, 1992, and Plaridel,19 on
November 19, 1992, to inform them of Unimarines nonpayment, and to ask them to
fulfill their obligations as sureties, and to respond within seven days from receipt of the
demand.
However, even the sureties failed to discharge their obligations, and so Cebu Shipyard
filed a Complaint dated January 8, 1993, before the RTC, Branch 18 of Cebu City, against
Unimarine, CBIC, and Plaridel. This was docketed as Civil Case No. CBB-13447.
CBIC, in its Answer,20 said that Cebu Shipyards complaint states no cause of action.
CBIC alleged that the surety bond was issued by its agent, Quinain, in excess of his
authority. CBIC claimed that Cebu Shipyard should have doubted the authority of
Quinain to issue the surety bond based on the following:
1. The nature of the bond undertaking (guarantee payment), and the amount involved.
2. The surety bond could only be issued in favor of the Department of Public Works and
Highways, as stamped on the upper right portion of the face of the bond.21 This stamp
was covered by documentary stamps.
3. The issuance of the surety bond was not reported, and the corresponding premiums
were not remitted to CBIC.22
CBIC added that its liability was extinguished when, without its knowledge and consent,
Cebu Shipyard and Unimarine novated their agreement several times. Furthermore, CBIC
stated that Cebu Shipyards claim had already been paid or extinguished when Unimarine
executed an Assignment of Claims23 of the proceeds of the sale of its vessel M/V
Headline in favor of Cebu Shipyard. CBIC also averred that Cebu Shipyards claim had
already prescribed as the endorsement that extended the surety bonds expiry date, was
not reported to CBIC. Finally, CBIC asseverated that if it were held to be liable, its
liability should be limited to the face value of the bond and not for exemplary damages,
attorneys fees, and costs of litigation.24
Subsequently, CBIC filed a Motion to Admit Cross and Third Party Complaint25 against
Unimarine, as cross defendant; Paul Rodriguez, Albert Hontanosas, and Peter Rodriguez,
as signatories to the Indemnity Agreement they executed in favor of CBIC; and Bethoven
Quinain, as the agent who issued the surety bond and endorsement in excess of his
authority, as third party defendants.26
CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter Rodriguez executed an
Indemnity Agreement, wherein they bound themselves, jointly and severally, to
indemnify CBIC for any amount it may sustain or incur in connection with the issuance
of the surety bond and the endorsement.27 As for Quinain, CBIC alleged that he
exceeded his authority as stated in the Special Power of Attorney, wherein he was
authorized to solicit business and issue surety bonds not exceeding 500,000.00 but only
in favor of the Department of Public Works and Highways, National Power Corporation,
and other government agencies.28
On August 23, 1993, third party defendant Hontanosas filed his Answer with
Counterclaim, to the Cross and Third Party Complaint. Hontanosas claimed that he had
no financial interest in Unimarine and was neither a stockholder, director nor an officer of
Unimarine. He asseverated that his relationship to Unimarine was limited to his capacity
as a lawyer, being its retained counsel. He further denied having any participation in the
Indemnity Agreement executed in favor of CBIC, and alleged that his signature therein
was forged, as he neither signed it nor appeared before the Notary Public who
acknowledged such undertaking.29
Various witnesses were presented by the parties during the course of the trial of the case.
Myrna Obrinaga testified for Cebu Shipyard. She was the Chief Accountant in charge of
the custody of the documents of the company. She corroborated Cebu Shipyards
allegations and produced in court the documents to support Cebu Shipyards claim. She
also testified that while it was true that the proceeds of the sale of Unimarines vessel,
M/V Headline, were assigned to Cebu Shipyard, nothing was turned over to them.30
Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard for the repairs it did
on M/V Pacific Fortune, despite the extensions granted to Unimarine. He claimed that he
signed the Indemnity Agreement because he trusted Quinain that it was a mere pre-
requisite for the issuance of the surety bond. He added that he did not bother to read the
documents and he was not aware of the consequences of signing an Indemnity
Agreement. Paul Rodriguez also alleged to not having noticed the limitation "Valid only
in favor of DPWH" stamped on the surety bond.31 However, Paul Rodriguez did not
contradict the fact that Unimarine failed to pay Cebu Shipyard its obligation.32
CBIC presented Dakila Rianzares, the Senior Manager of its Bonding Department. Her
duties included the evaluation and approval of all applications for and reviews of bonds
issued by their agents, as authorized under the Special Power of Attorney and General
Agency Contract of CBIC. Rianzares testified that she only learned of the existence of
CBIC Surety Bond No. G (16) 29419 when she received the summons for this case. Upon
investigation, she found out that the surety bond was not reported to CBIC by Quinain,
the issuing agent, in violation of their General Agency Contract, which provides that all
bonds issued by the agent be reported to CBICs office within one week from the date of
issuance. She further stated that the surety bond issued in favor of Unimarine was issued
beyond Quinains authority. Rianzares added that she was not aware that an endorsement
pertaining to the surety bond was also issued by Quinain.33
After the trial, the RTC was faced with the lone issue of whether or not CBIC was liable
to Cebu Shipyard based on Surety Bond No. G (16) 29419.34
On February 10, 1997, the RTC rendered its Decision, the fallo of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Cebu Shipyard &
Engineering Works, Incorporated and against the defendants:
1. Ordering the defendants Unimarine Shipping Lines, Incorporated, Country Bankers
Insurance Corporation and Plaridel Surety and Insurance Corporation to pay plaintiff
jointly and severally the amount of 4,620,000.00 equivalent to the value of the surety
bonds;
2. Ordering further defendant Unimarine to pay plaintiff the amount of 259,458.00 to
complete its entire obligation of 4,859,458.00;
3. To pay plaintiff jointly and severally the amount of 100,000.00 in attorneys fees and
litigation expenses;
4. For Cross defendant Unimarine Shipping Lines, Incorporated and Third party
defendants Paul Rodriguez, Peter Rodriguez and Alber[t] Hontanosas: To indemnify
jointly and severally, cross plaintiff and third party plaintiff Country Bankers Insurance
Corporation whatever amount the latter is made to pay to plaintiff.35
The RTC held that CBIC, "in its capacity as surety is bound with its principal jointly and
severally to the extent of the surety bond it issued in favor of [Cebu Shipyard]" because
"although the contract of surety is in essence secondary only to a valid principal
obligation, his liability to [the] creditor is said to be direct, primary[,] and absolute, in
other words, he is bound by the principal."36 The RTC added:
Solidary obligations on the part of Unimarine and CBIC having been established and
expressly stated in the Surety Bond No. 29419 (Exh. "C"), [Cebu Shipyard], therefore, is
entitled to collect and enforce said obligation against any and or both of them, and if and
when CBIC pays, it can compel its co-defendant Unimarine to reimburse to it the amount
it has paid.37
The RTC found CBICs contention that Quinain acted in excess of his authority in issuing
the surety bond untenable. The RTC held that CBIC is bound by the surety bond issued
by its agent who acted within the apparent scope of his authority. The RTC said:
[A]s far as third persons are concerned, an act is deemed to have been performed within
the scope of the agents authority, if such act is within the terms of the powers of attorney
as written, even if the agent has in fact exceeded the limits of his authority according to
an understanding between the principal and the agent.38
All the defendants appealed this Decision to the Court of Appeals.
Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas argued that
Unimarines obligation under Bill No. 26035 had been extinguished by novation, as Cebu
Shipyard had agreed to accept the proceeds of the sale of the M/V Headline as payment
for the ship repair works it did on M/V Pacific Fortune. Paul Rodriguez and Peter
Rodriguez added that such novation also freed them from their liability under the
Indemnity Agreement they signed in favor of CBIC. Albert Hontanosas in turn reiterated
that he did not sign the Indemnity Agreement.39 [SC1
CBIC, in its Appellants Brief,40 claimed that the RTC erred in enforcing its liability on
the surety bond as it was issued in excess of Quinains authority. Moreover, CBIC
averred, its liability under such surety had been extinguished by reasons of novation,
payment, and prescription. CBIC also questioned the RTCs order, holding it jointly and
severally liable with Unimarine and Plaridel for the amount of 4,620,000.00, a sum
larger than the face value of CBIC Surety Bond No. G (16) 29419, and why the RTC did
not hold Quinain liable to indemnify CBIC for whatever amount it was ordered to pay
Cebu Shipyard.
On January 29, 2004, the Court of Appeals promulgated its decision, with the following
dispositive portion:
WHEREFORE, in view of the foregoing, the respective appeal[s] filed by Defendants-
Appellants Unimarine Shipping Lines, Inc. and Country Bankers Insurance Corporation;
Cross-Defendant-Appellant Unimarine Shipping Lines, Inc. and; Third-Party Defendants-
Appellants Paul Rodriguez, Peter Rodriguez and Albert Hontanosas are hereby DENIED.
The decision of the RTC in Civil Case No. CEB-13447 dated February 10, 1997 is
AFFIRMED with modification that Mr. Bethoven Quinain, CBICs agent is hereby held
jointly and severally liable with CBIC by virtue of Surety Bond No. 29419 executed in
favor of plaintiff-appellee CSEW.41
In its decision, the Court of Appeals resolved the following issues, as it had summarized
from the parties pleadings:
I. Whether or not UNIMARINE is liable to [Cebu Shipyard] for a sum of money arising
from the ship-repair contract;
II. Whether or not the obligation of UNIMARINE to [Cebu Shipyard] has been
extinguished by novation;
III. Whether or not Defendant-Appellant CBIC, allegedly being the Surety of
UNIMARINE is liable under Surety Bond No. 29419[;]
IV. Whether or not Cross Defendant-Appellant UNIMARINE and Third-Party
Defendants-Appellants Paul Rodriguez, Peter Rodriguez, Albert Hontanosas and Third-
Party Defendant Bethoven Quinain are liable by virtue of the Indemnity Agreement
executed between them and Cross and Third Party Plaintiff CBIC;
V. Whether or not Plaintiff-Appellee [Cebu Shipyard] is entitled to the award of
100,000.00 in attorneys fees and litigation expenses.42
The Court of Appeals held that it was duly proven that Unimarine was liable to Cebu
Shipyard for the ship repair works it did on the formers M/V Pacific Fortune. The Court
of Appeals dismissed CBICs contention of novation for lack of merit.43 CBIC was held
liable under the surety bond as there was no novation on the agreement between
Unimarine and Cebu Shipyard that would discharge CBIC from its obligation. The Court
of Appeals also did not allow CBIC to disclaim liability on the ground that Quinain
exceeded his authority because third persons had relied upon Quinains representation, as
CBICs agent.44 Quinain was, however, held solidarily liable with CBIC under Article
1911 of the Civil Code.45
Anent the liability of the signatories to the Indemnity Agreement, the Court of Appeals
held Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas jointly and severally liable
thereunder. The Court of Appeals rejected Hontanosass claim that his signature in the
Indemnity Agreement was forged, as he was not able to prove it.46
The Court of Appeals affirmed the award of attorneys fees and litigation expenses to
Cebu Shipyard since it was able to clearly establish the defendants liability, which they
tried to dodge by setting up defenses to release themselves from their obligation.47
CBIC48 and Unimarine, together with third party defendants-appellants49 filed their
respective Motions for Reconsideration. This was, however, denied by the Court of
Appeals in its October 28, 2004 Resolution for lack of merit.
Unimarine elevated its case to this Court via a petition for review on certiorari, docketed
as G.R. No. 166023, which was denied in a Resolution dated January 19, 2005.50
The lone petitioner in this case, CBIC, is now before this Court, seeking the reversal of
the Court of Appeals decision and resolution on the following grounds:
A.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN APPLYING THE
PROVISIONS OF ARTICLE 1911 OF THE CIVIL CODE TO HOLD PETITIONER
LIABLE FOR THE ACTS DONE BY ITS AGENT IN EXCESS OF AUTHORITY.
B.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT
AN EXTENSION OF THE PERIOD FOR THE PERFORMANCE OF AN
OBLIGATION GRANTED BY THE CREDITOR TO THE PRINCIPAL DEBTOR IS
NOT SUFFICIENT TO RELEASE THE SURETY.
C.
ASSUMING THAT PETITIONER IS LIABLE UNDER THE BOND, THE
HONORABLE COURT OF APPEALS NONETHELESS SERIOUSLY ERRED IN
AFFIRMING THE SOLIDARY LIABILITY OF PETITIONER BEYOND THE VALUE
OF THE BOND.
D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER
JOINTLY AND SEVERALLY LIABLE FOR ATTORNEYS FEES IN THE AMOUNT
OF 100,000.00.51
Issue
The crux of the controversy lies in CBICs liability on the surety bond Quinain issued to
Unimarine, in favor of Cebu Shipyard.
CBIC avers that the Court of Appeals erred in interpreting and applying the rules
governing the contract of agency. It argued that the Special Power of Attorney granted to
Quinain clearly set forth the extent and limits of his authority with regard to businesses he
can transact for and in behalf of CBIC. CBIC added that it was incumbent upon Cebu
Shipyard to inquire and look into the power of authority conferred to Quinain. CBIC said:
The authority to bind a principal as a guarantor or surety is one of those powers which
requires a Special Power of Attorney pursuant to Article 1878 of the Civil Code. Such
power could not be simply assumed or inferred from the mere existence of an agency. A
person who enters into a contract of suretyship with an agent without confirming the
extent of the latters authority does so at his peril. x x x.52
CBIC claims that the foregoing is true even if Quinain was granted the authority to
transact in the business of insurance in general, as "the authority to bind the principal in a
contract of suretyship could nonetheless never be presumed."53 Thus, CBIC claims, that:
[T]hird persons seeking to hold the principal liable for transactions entered into by an
agent should establish the following, in case the same is controverted:
6.6.1. The fact or existence of the agency.
6.6.2. The nature and extent of authority.54
To go a little further, CBIC said that the correct Civil Code provision to apply in this case
is Article 1898. CBIC asserts that "Cebu Shipyard was charged with knowledge of the
extent of the authority conferred on Mr. Quinain by its failure to perform due diligence
investigations."55
Cebu Shipyard, in its Comment56 first assailed the propriety of the petition for raising
factual issues. In support, Cebu Shipyard claimed that the Court of Appeals application
of Article 1911 of the Civil Code was founded on findings of facts that CBIC now
disputes. Thus, the question is not purely of law.
Discussion
The fact that Quinain was an agent of CBIC was never put in issue. What has always
been debated by the parties is the extent of authority or, at the very least, apparent
authority, extended to Quinain by CBIC to transact insurance business for and in its
behalf.
In a contract of agency, a person, the agent, binds himself to represent another, the
principal, with the latters consent or authority.57 Thus, agency is based on
representation, where the agent acts for and in behalf of the principal on matters within
the scope of the authority conferred upon him.58 Such "acts have the same legal effect as
if they were personally done by the principal. By this legal fiction of representation, the
actual or legal absence of the principal is converted into his legal or juridical
presence."59
The RTC applied Articles 1900 and 1911 of the Civil Code in holding CBIC liable for the
surety bond. It held that CBIC could not be allowed to disclaim liability because
Quinains actions were within the terms of the special power of attorney given to him.60
The Court of Appeals agreed that CBIC could not be permitted to abandon its obligation
especially since third persons had relied on Quinains representations. It based its
decision on Article 1911 of the Civil Code and found CBIC to have been negligent and
less than prudent in conducting its insurance business for its failure to supervise and
monitor the acts of its agents, to regulate the distribution of its insurance forms, and to
devise schemes to prevent fraudulent misrepresentations of its agents.61
This Court does not agree. Pertinent to this case are the following provisions of the Civil
Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal.
In this case, however, the agent is liable if he undertook to secure the principals
ratification.
Art. 1900. So far as third persons are concerned, an act is deemed to have been performed
within the scope of the agents authority, if such act is within the terms of the power of
attorney, as written, even if the agent has in fact exceeded the limits of his authority
according to an understanding between the principal and the agent.
Art. 1902. A third person with whom the agent wishes to contract on behalf of the
principal may require the presentation of the power of attorney, or the instructions as
regards the agency. Private or secret orders and instructions of the principal do not
prejudice third persons who have relied upon the power of attorney or instructions shown
to them.
Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.
Our law mandates an agent to act within the scope of his authority.62 The scope of an
agents authority is what appears in the written terms of the power of attorney granted
upon him.63 Under Article 1878(11) of the Civil Code, a special power of attorney is
necessary to obligate the principal as a guarantor or surety.
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his
authority only if Quinains act of issuing Surety Bond No. G (16) 29419 is deemed to
have been performed within the written terms of the power of attorney he was granted.64
However, contrary to what the RTC held, the Special Power of Attorney accorded to
Quinain clearly states the limits of his authority and particularly provides that in case of
surety bonds, it can only be issued in favor of the Department of Public Works and
Highways, the National Power Corporation, and other government agencies; furthermore,
the amount of the surety bond is limited to 500,000.00, to wit:
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, COUNTRY BANKERS INSURANCE CORPORATION, a corporation duly
organized and existing under and by virtue of the laws of the Philippines, with head
offices at 8th Floor, G.F. Antonino Building, T.M. Kalaw Street, Ermita, Manila, now and
hereinafter referred to as "the Company" hereby appoints BETHOVEN B. QUINAIN
with address at x x x to be its General Agent and Attorney-in-Fact, for and in its place,
name and stead, and for its own use and benefit, to do and perform the following acts and
things:
1. To conduct, manage, carry on and transact insurance business as usually pertains to a
General Agency of Fire, Personal Accident, Bond, Marine, Motor Car (Except Lancer).
2. To accept, underwrite and subscribe policies of insurance for and in behalf of the
Company under the terms and conditions specified in the General Agency Contract
executed and entered into by and between it and its said Attorney-in-Fact subject to the
following Schedule of Limits:
- SCHEDULE OF LIMITS -
a. FIRE:
xxxx
b. PERSONAL ACCIDENT:
xxxx
c. MOTOR CAR:
xxxx
d. MARINE:
xxxx
e. BONDS:
xxxx
Surety Bond (in favor of Dept. of Pub. Works and
Highways, Natl. Power Corp. & other. 500,000.00
Government agencies)65
CBIC does not anchor its defense on a secret agreement, mutual understanding, or any
verbal instruction to Quinain. CBICs stance is grounded on its contract with Quinain,
and the clear, written terms therein. This Court finds that the terms of the foregoing
contract specifically provided for the extent and scope of Quinains authority, and
Quinain has indeed exceeded them.
Under Articles 1898 and 1910, an agents act, even if done beyond the scope of his
authority, may bind the principal if he ratifies them, whether expressly or tacitly. It must
be stressed though that only the principal, and not the agent, can ratify the unauthorized
acts, which the principal must have knowledge of.66 Expounding on the concept and
doctrine of ratification in agency, this Court said:
Ratification in agency is the adoption or confirmation by one person of an act performed
on his behalf by another without authority. The substance of the doctrine is confirmation
after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal
must have full knowledge at the time of ratification of all the material facts and
circumstances relating to the unauthorized act of the person who assumed to act as agent.
Thus, if material facts were suppressed or unknown, there can be no valid ratification and
this regardless of the purpose or lack thereof in concealing such facts and regardless of
the parties between whom the question of ratification may arise. Nevertheless, this
principle does not apply if the principals ignorance of the material facts and
circumstances was willful, or that the principal chooses to act in ignorance of the facts.
However, in the absence of circumstances putting a reasonably prudent man on inquiry,
ratification cannot be implied as against the principal who is ignorant of the facts.67
(Emphases supplied.)
Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that it was
unaware of the existence of Surety Bond No. G (16) 29419 and Endorsement No. 33152.
There were no allegations either that CBIC should have been put on alert with regard to
Quinains business transactions done on its behalf. It is clear, and undisputed therefore,
that there can be no ratification in this case, whether express or implied.
Article 1911, on the other hand, is based on the principle of estoppel, which is necessary
for the protection of third persons. It states that the principal is solidarily liable with the
agent even when the latter has exceeded his authority, if the principal allowed him to act
as though he had full powers. However, for an agency by estoppel to exist, the following
must be established:
1. The principal manifested a representation of the agents authority or knowingly
allowed the agent to assume such authority;
2. The third person, in good faith, relied upon such representation; and
3. Relying upon such representation, such third person has changed his position to his
detriment.68
In Litonjua, Jr. v. Eternit Corp.,69 this Court said that "[a]n agency by estoppel, which is
similar to the doctrine of apparent authority, requires proof of reliance upon the
representations, and that, in turn, needs proof that the representations predated the action
taken in reliance."70
This Court cannot agree with the Court of Appeals pronouncement of negligence on
CBICs part. CBIC not only clearly stated the limits of its agents powers in their
contracts, it even stamped its surety bonds with the restrictions, in order to alert the
concerned parties. Moreover, its company procedures, such as reporting requirements,
show that it has designed a system to monitor the insurance contracts issued by its agents.
CBIC cannot be faulted for Quinains deliberate failure to notify it of his transactions
with Unimarine. In fact, CBIC did not even receive the premiums paid by Unimarine to
Quinain.
Furthermore, nowhere in the decisions of the lower courts was it stated that CBIC let the
public, or specifically Unimarine, believe that Quinain had the authority to issue a surety
bond in favor of companies other than the Department of Public Works and Highways,
the National Power Corporation, and other government agencies. Neither was it shown
that CBIC knew of the existence of the surety bond before the endorsement extending the
life of the bond, was issued to Unimarine. For one to successfully claim the benefit of
estoppel on the ground that he has been misled by the representations of another, he must
show that he was not misled through his own want of reasonable care and
circumspection.71
It is apparent that Unimarine had been negligent or less than prudent in its dealings with
Quinain. In Manila Memorial Park Cemetery, Inc. v. Linsangan,72 this Court held:
It is a settled rule that persons dealing with an agent are bound at their peril, if they would
hold the principal liable, to ascertain not only the fact of agency but also the nature and
extent of authority, and in case either is controverted, the burden of proof is upon them to
establish it. The basis for agency is representation and a person dealing with an agent is
put upon inquiry and must discover upon his peril the authority of the agent. If he does
not make such an inquiry, he is chargeable with knowledge of the agents authority and
his ignorance of that authority will not be any excuse.
In the same case, this Court added:
[T]he ignorance of a person dealing with an agent as to the scope of the latters authority
is no excuse to such person and the fault cannot be thrown upon the principal. A person
dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge
the principal by relying upon the agents assumption of authority that proves to be
unfounded. The principal, on the other hand, may act on the presumption that third
persons dealing with his agent will not be negligent in failing to ascertain the extent of his
authority as well as the existence of his agency.73
Unimarine undoubtedly failed to establish that it even bothered to inquire if Quinain was
authorized to agree to terms beyond the limits indicated in his special power of attorney.
While Paul Rodriguez stated that he has done business with Quinain more than once, he
was not able to show that he was misled by CBIC as to the extent of authority it granted
Quinain. Paul Rodriguez did not even allege that he asked for documents to prove
Quinains authority to contract business for CBIC, such as their contract of agency and
power of attorney. It is also worthy to note that even with the Indemnity Agreement, Paul
Rodriguez signed it on Quinains mere assurance and without truly understanding the
consequences of the terms of the said agreement. Moreover, both Unimarine and Paul
Rodriguez could have inquired directly from CBIC to verify the validity and effectivity of
the surety bond and endorsement; but, instead, they blindly relied on the representations
of Quinain. As this Court held in Litonjua, Jr. v. Eternit Corp.74 :
A person dealing with a known agent is not authorized, under any circumstances, blindly
to trust the agents; statements as to the extent of his powers; such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the
agent acts within the scope of his authority. The settled rule is that, persons dealing with
an assumed agent are bound at their peril, and if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to prove it. In this case, the
petitioners failed to discharge their burden; hence, petitioners are not entitled to damages
from respondent EC.75
In light of the foregoing, this Court is constrained to release CBIC from its liability on
Surety Bond No. G (16) 29419 and Endorsement No. 33152. This Court sees no need to
dwell on the other grounds propounded by CBIC in support of its prayer.
WHEREFORE, this petition is hereby GRANTED and the complaint against CBIC is
DISMISSED for lack of merit. The January 29, 2004 Decision and October 28, 2004
Resolution of the Court of Appeals in CA-G.R. CV No. 58001 is MODIFIED insofar as it
affirmed CBICs liability on Surety Bond No. G (16) 29419 and Endorsement No. 33152.
SO ORDERED.