[G.R. No. 15297. November 25, 1921. ]
ph
ISIDRO NANTES, Plaintiff-Appellant, v. DAMIAN MADRIGUERA and
ANACLETO CAINTO, Defendants-Appellees.
Godofredo Reyes for Appellant.
No appearance for Appellees.
SYLLABUS
1. AGENCY; ACTION OF THIRD PERSON AGAINST PRINCIPAL; EFFECT OF
PRINCIPAL S DENIAL OF AGENT’S AUTHORITY. — A person with whom an agent has
contracted in the name and for the account of his principal, has a right of action
against the latter, on such contract, notwithstanding the principal’s denial of the
commission or authority of the agent.
2. ID.; PROOF OF AGENT S COMMISSION OR AUTHORITY. — In an action against
the principal by a person with whom the agent has transacted business, the plaintiff
may prove the existence of the agency notwithstanding the defendant’s denial
thereof in his answer.
3. ID.; ARTICLE 247 OF THE CODE OF COMMERCE CONSTRUED. — Article 247 of
the Code of Commerce provides that "the contract and the actions arising therefrom
shall be effective between the principal and the persons or person who may have
transacted business with the agent; but the latter shall be liable to the persons with
whom he transacted business during the time he does not prove the commission, if
the principal should deny it." Under this provision, as we construe it, the mere fact
that the agent becomes liable to the third person upon denial of the agency by his
principal and upon his failure to prove the same, cannot and does not, of itself, wipe
out the liability of said principal to the person with whom the agent has contracted
in the name of the principal. The third person can prosecute his action against the
principal, and if he does not succeed because of his failure or inability to prove the
agency upon which the action is based, he can turn to the agent himself; or, if he so
elects (as he undoubtedly would if he knew beforehand that he could not prove the
agency), he can sue the agent directly, without the necessity of suing the principal
first. In other words, the denial of the agency by the principal will save him from
liability to a third person on a contract executed in his (principal’s) name by one
who purports to be his agent, only when such agency or commission is not
ultimately proved.
DECISION
JOHNSON, J. :
The defendant Damian Madriguera is a merchant engaged in the purchase and sale
of abaca (hemp), having his principal place of business in the municipality of Paete,
Province of Laguna; and, up to the time hereinafter mentioned, he had been
engaged in such business-for at least twenty years. On the 10th day of July, 1917,
the other defendant herein, Anacleto Cainto, acting as an agent of the said
Madriguera, purchased from the plaintiff, Isidro Nantes, in the municipality of
Lukban, Province of Tayabas, 1,257 kilos of abaca at the agreed price of P1,357.56.
Of this sum only P70 was paid by Cainto to Nantes at the time of the sale, leaving a
balance of P1,287.56. The whole transaction was reduced to writing in the words
and figures following:jgc:chanrobles.com.
"Be it known that I, Anacleto Cainto, of age, of Paete, Laguna, have this day bought
from Mr. Isidro Nantes, of Lukban, for the account of my principal Mr. Damian
Madriguera, of Paete, 1,257 kilos of abaca for the sum of one thousand three
hundred fifty-seven pesos and fifty-six centavos (P1,357.56), of which I have only
paid the sum of seventy pesos (P70), the balance of P1,287.56 to be paid to said
Isidro Nantes or any other person that may be designated by him, in Santa Cruz,
Laguna, where the abaca is to be sent by him as per our agreement, upon receipt of
the abaca and delivery thereof to my principal, all the transportation expenses to
the amount of P25.81 to be paid by me, and I promise to do all this immediately
after delivery.
"In witness whereof I have hereunto set my hand in the presence of two witnesses
at Lukban, this 10th day of July, 1917.
"On behalf of
"Mr. Damian Madriguera
(Sgd.) "ANACLETO CAINTO.
(Sgd.) "MARCELO RADUVAN,
"ISABELO DEVESA.
"I have this 16th day of July, 1917, received from Mr. Isabelo Devesa the 1,257
kilos of abaca, and I promise to pay him the balance of P1,313.37 on Friday, the
20th, in the municipality of Lukban, as I have to get the money yet from my said
principal, Mr. Damian Madriguera, for whose account I have purchased the abaca.
"Santa Cruz, Laguna, July 16, 1917.
(Sgd.) "A. CAINTO.’
The 1,257 kilos of abaca above-mentioned was duly delivered by the defendant
Anacleto Cainto to his codefendant Damian Madriguera.
The present action was instituted by the vendor, Isidro Nantes, on the 7th day of
August, 1917, against Damian Madriguera as principal and Anacleto Cainto as
agent, to recover the said balance of P1,287.56 together with interest and costs.
The defendant Madriguera in his answer denied the relation of principal and agent
between him and his codefendant Cainto, and disclaimed any liability to the plaintiff.
The defendant Cainto, in his answer, admitted all the allegations of the complaint,
but claimed that, inasmuch as in the transaction in question he had acted as a mere
agent of Madriguera, the latter alone, as principal, was liable to the plaintiff, and
prayed that he be absolved from all liability under the complaint.
During the trial of the cause the plaintiff called the defendant Anacleto Cainto to the
witness stand, and he testified, in substance, that he was a buyer of abaca for the
account of Damian Madriguera, and had been such a buyer since the month of
March, 1917; that Madriguera furnished him the money with which to pay for the
abaca which he purchased; that, when he had no cash on hand, he had instructions
from Madriguera to buy abaca on credit, issuing a receipt therefor and promising to
pay upon the arrival of Madriguera from Manila where he held the abaca which had
been purchased by his agent, Cainto; that he bought the 1,257 kilos of abaca in
question from the Plaintiff, Isidro Nantes, for the account of his principal,
Madriguera, and issued the document Exhibit A, hereinabove quoted; and that he
delivered the said abaca to the defendant Madriguera.
Counsel for Madriguera moved to strike out the testimony of the witness Cainto with
reference to the relation of principal and agent between the former and the latter,
upon the ground that it was incompetent, and the court reserved its ruling.
Plaintiff offered three other witnesses — Pablo Valquiera Aniceto Caiud, and
Rosendo Bagabaldo — to further prove the relation of principal and agent existing
between the two defendants herein, but the court, upon objection of counsel for the
defendant Madriguera, refused to allow them to testify upon the ground that their
testimony was incompetent.
Plaintiff also offered Exhibits A and B in evidence, but they were likewise rejected by
the court upon objection of counsel for the defendant Madriguera.
In its decision the lower court held that the plaintiff, at the time of filing his
complaint, had no cause of action against the defendant Madriguera because the
latter in his answer denied that the defendant Cainto had acted as his agent in the
purchase of the abaca in question from the plaintiff; and, for that reason, the court
held, proof was inadmissible which tended to establish the liability of Madriguera to
the plaintiff, Nantes, inasmuch as at the time of the presentation of the complaint
no obligation had arisen on the part of the former to pay the balance of the price of
abaca which the latter sold to Cainto. The lower court, construing article 247 of the
Code of Commerce, held that under that article only when the commission is known
and admitted can the third person hold the principal liable upon a contract executed
by his agent; that when the commission is denied the third person can only sue the
agent personally; and that in the present case he only person who could prove the
commission or agency was Cainto. and not Nantes. For the reasons stated, the
lower court rendered a judgment against the defendant Anacleto Cainto and in favor
of the plaintiff for the sum of P1,287.56, with interest thereon at the legal rate from
the 7th day of August, 1917, and to pay the costs. The defendant Damian
Madriguera was absolved from all liability under the complaint, without prejudice to
the action which the defendant Cainto might institute against him. From that
judgment the plaintiff appealed to this court.
Appellant contends that the lower court committed an error in discarding and in
refusing to admit any and all proof adduced and offered by him to show the relation
of principal and agent between the defendants Madriguera and Cainto.
It will be seen that the only question presented is one of law, to wit: When an agent
contracts in the name and for the account of his principal, can the person with
whom he has so contracted prove the existence of the agency, in an action brought
by him against the principal, in case the latter should deny the same?
Article 247 of the Code of Commerce provides:jgc:chanrobles.com.ph
"ART. 247. If the agent transacts business in the name of the principal, he must
state that fact; and if the contract is in writing, he must state it therein or in the
subscribing clause, giving the name, surname, and domicile of said principal.
"In the case prescribed in the foregoing paragraph, the contract and the actions
arising therefrom shall be effective between the principal and the persons or person
who may have transacted business with the agent; but the latter shall be liable to
the persons with whom he transacted business during the time he does not prove
the commission, if the principal should deny it, without prejudice to the obligation
and proper actions between the principal and agent."cralaw virtua1aw library
Article 246 of the same Code provides:jgc:chanrobles.com.ph
"ART. 246. When the agent transacts business in his. own name, it shall not be
necessary for him to state who is the principal and he shall be directly liable, as if
the business were for his own account, to the persons with whom he transacts the
same, said persons not having any right of action against the principal, nor the
latter against the former, the liabilities of the principal and of the agent to each
other always being reserved."cralaw virtua1aw library
It will be noted from the foregoing provisions that when the agent transacts
business in his own name, the person with whom he transacts the same can only
sue such agent, he not having any right of action against the principal; but when
the agent transacts business in the name of the principal, as prescribed by article
247, the person with whom he transacts the same can only sue the principal, he
having a right of action against the agent only when the principal denies the agency
and the agent does not prove the same. The reason, we think, is obvious: In the
first ease, the third person, in contracting with the agent, has relied exclusively
upon his business standing and financial ability; whereas in the second case, he has
relied upon the business standing and financial ability of the principal in whose
name the agent has contracted.
Now, in the case contemplated by article 247, when a person sues the principal on a
contract duly entered into by his agent, is the mere denial by said principal of the
existence of the agency sufficient to defeat the action? An affirmative answer, in our
opinion, is not only repugnant to the spirit of the law but is fraught with disastrous
consequences. The article in question (art. 247) provides that "the contract and the
actions arising therefrom shall be effective between the principal and the persons or
person who may have transacted business with the agent; but the latter shall be
liable to the persons with whom he transacted business during the time he does not
prove the commission, if the principal should deny it." Under this provision, as we
construe it, the mere fact that the agent becomes liable to the third person upon
denial of the agency by his principal and upon his failure to prove the same, cannot
and does not, of itself, wipe out the liability of said principal to the person with
whom the agent has contracted in the name of the principal. The third person can
prosecute his action against the principal. and if he does not succeed because of his
failure or inability to prove the agency upon which the action is based, he can turn
to the agent himself; or, if he so elects (as he undoubtedly would if he knew
beforehand that he could not prove the agency), he can sue the agent directly,
without the necessity of suing the principal first. In other words, the denial of the
agency by the principal will save him from liability to a third person on a contract
executed in his (principal’s) name by one who purports to be his agent, only when
such agency or commission is not ultimately proved. For, if it be satisfactorily
proved that he really authorized the supposed agent to enter into such contract as
the one on which the action is based, and if that contract is valid and legal in every
respect, we see no reason why he (the principal) should not be held liable thereon
to the person with whom his agent has contracted. It follows that such third person
has a right of action against the principal notwithstanding the latter’s denial of the
agency; and he, having a right of action, certainly has the right to adduce proof of
the agency or commission to make that right effective. The reason for making the
agent liable to the third person in case the supposed principal should deny the
agency is to protect both such third person and the supposed principal from the
imposition of the alleged agent who, without commission or authority whatever,
might contract in the name of said principal but for his (agent’s) own personal
benefit. In such a case the third person would, of course, be unable to prove the
agency or commission, and his only recourse would be against the pseudo-agent.
But when, as in the case at bar, the third person has reliable, trustworthy, and
competent proof that the principal had really commissioned or authorized the agent
to transact the business, or enter into the contract in question, there is certainly no
reason, either in law or in equity, why he should not be allowed to present such
proof and hold the principal liable.
Aside from the foregoing, to hold otherwise, as the lower court did, would, in our
opinion, lead to disastrous consequences, which the law sedulously guards against.
For, if the mere denial of the agency by the principal is sufficient to bar or defeat
the action of the person with whom the agent duly contracted or transacted
business, it requires no stretch of the imagination to see the door to fraud thrown
wide open. For, then, a person of well-known and sound financial standing could
purposely employ an indigent but otherwise capable agent, publicly and legally
authorizing him to transact enormous business in his name and for his account, with
the intention of denying later the person or persons with whom said agent has
transacted the person or persons with whom said agent has transacted business.
True, such person has an action against the insolvent agent; but of what use would
it be to attempt to squeeze blood out of a turnip? True, also, the insolvent agent
has an action against the principal; but under what power on earth can the third
person compel him to bring an action against his principal, especially if the latter
should secretly and fraudulently agree to split the spoil with him? If such were the
effect of article 247 of the Code of Commerce no one would ever transact business
with an agent, relying upon the credit of the principal. Thus, not only said article but
all the other articles of the Code relating to agency would be rendered practically
nugatory.
We are therefore of the opinion that a person who has transacted business with an
agent acting in the name of his principal, as prescribed by article 247 of the Code of
Commerce, has an action against such principal notwithstanding the latter’s denial
of the agent’s commission or authority, and should be permitted to prove that
commission or authority of the agent to transact the business in question. It follows
that the lower court committed the error assigned by the appellant herein.
Appellant in his brief asks that the decision of the lower court be revoked and that
the cause be remanded to the court below with instructions to admit the proofs
offered by the plaintiff with regard to the existence of the commercial commission
or agency in question. Most of the proofs duly offered by the Plaintiff but rejected by
the trial court are attached to the record before us. Such proofs consist of (1)
Exhibit A, above quoted; (2) the testimony of Anacleto Cainto, hereinabove
summarized; (3) Exhibit B, a telegram prepared by the defendant Madriguera,
addressed to the plaintiff, Nantes, telling the latter that the amount in question
would be paid to him in Paete, Laguna; and (4) the testimony of Isabelo Devesa,
appearing at pages 24 to 26 of the stenographic notes. These proofs, which should
have been admitted by the lower court and which we hereby admit, fully establish
the relation of principal and agent between Madriguera and Cainto. There is no
proof in the record on behalf of the defendant Madriguera, which would tend to
overcome the proofs presented by the plaintiff, except the testimony of Madriguera
himself, simply denying that the defendant Cainto was his agent. In view whereof,
we see no necessity for ordering a new trial of this cause. The expense and the
delay incident to such new trial should, in justice to all the parties concerned, be
avoided.
Wherefore, the judgment of the lower court is hereby revoked, and it is hereby
ordered and decreed that the plaintiff Isidro Nantes have and recover from the
defendant Damian Madriguera the sum of P1,287.56, with interest thereon at the
legal rate from the 7th day of August, 1917, until paid, and the costs of both
instances. The defendant Anacleto Cainto is hereby absolved from all liability under
the complaint. So ordered.
[G.R. No. 82978. November 22, 1990.]
THE MANILA REMNANT CO., INC., Petitioner, v. THE HONORABLE COURT OF
APPEALS and OSCAR VENTANILLA, JR. and CARMEN GLORIA
DIAZ, Respondents.
Bede S. Talingcos, for Petitioners.
Augusto Gatmaytan for Private Respondent.
SYLLABUS
1. CIVIL LAW; AGENCY; FAILURE OF THE PRINCIPAL TO CORRECT AN
IRREGULARITY DESPITE KOWLEDGE THEREOF, DEEMED A RATIFICATION OF THE
ACT OF THE AGENT. — In the case at bar, the Valencia realty firm had clearly
overstepped the bounds of its authority as agent — and for that matter, even the
law — when it undertook the double sale of the disputed lots. Such being the case,
the principal, Manila Remnant, would have been in the clear pursuant to Article
1897 of the Civil Code which states that" (t)he agent who acts as such is not
personally liable to that party with whom he contracts, unless he expressly binds
himself or exceeds the limits of his authority without giving such party sufficient
notice of his powers." However, the unique relationship existing between the
principal and the agent at the time of the dual sale must be underscored. Bear in
mind that the president then of both firms was Artemio U. Valencia, the individual
directly responsible for the sale scam. Hence, despite the fact that the double sale
was beyond the power of the agent, Manila Remnant as principal was chargeable
with the knowledge or constructive notice of that fact and not having done anything
to correct such an irregularity was deemed to have ratified the same. (See Art.
1910, Civil Code.)
2. ID.; ID.; PRINCIPLE OF ESTOPPEL; REASON AND EFFECT THEREOF; CASE AT
BAR. — More in point, we find that by the principle of estoppel, Manila Remnant is
deemed to have allowed its agent to act as though it had plenary powers. Article
1911 of the Civil Code provides: "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." The above-quoted article is new. It is intended to
protect the rights of innocent persons. In such a situation, both the principal and
the agent may be considered as joint feasors whose liability is joint and solidary
(Verzosa v. Lim, 45 Phil. 416). Authority by estoppel has arisen in the instant case
because by its negligence, the principal, Manila Remnant, has permitted its agent,
A.U. Valencia and Co., to exercise powers not granted to it. That the principal might
not have had actual knowledge of the agent’s misdeed is of no moment.

DECISION
FERNAN, J.:
Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty members
of the University of the Philippines and renting a faculty unit, dreamed of someday
owning a house and lot. Instead of attaining this dream, they became innocent
victims of deceit and found themselves in the midst of an ensuing squabble between
a subdivision owner and its real estate agent.
The facts as found by the trial court and adopted by the Appellate Court are as
follows:chanrob1es virtual 1aw library
Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land situated in
Quezon City covered by Transfer Certificates of Title Nos. 26400, 26401, 30783 and
31986 and constituting the subdivision known as Capital Homes Subdivision Nos. I
and II. On July 25, 1972, Manila Remnant and A.U. Valencia & Co. Inc. entered into
a written agreement entitled "Confirmation of Land Development and Sales
Contract" to formalize an earlier verbal agreement whereby for a consideration of
17 and 1/2% fee, including sales commission and management fee, A.U. Valencia
and Co., Inc. was to develop the aforesaid subdivision with authority to manage the
sales thereof, execute contracts to sell to lot buyers and issue official receipts. 1
At that time the President of both A.U. Valencia and Co. Inc. and Manila Remnant
Co., Inc. was Artemio U. Valencia.cralawnad
On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed two
"contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar C. Ventanilla
and Carmen Gloria Diaz for the combined contract price of P66,571.00 payable
monthly for ten years. 2 As thus agreed in the contracts to sell, the Ventanillas paid
the down payments on the two lots even before the formal contract was signed on
March 3, 1970.
Ten (10) days after the signing of the contracts with the Ventanillas or on March 13,
1970, Artemio U. Valencia, as President of Manila Remnant, and without the
knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block 17 again, this time in
favor of Carlos Crisostomo, one of his sales agents without any consideration. 3
Artemio Valencia then transmitted the fictitious Crisostomo contracts to Manila
Remnant while he kept in his files the contracts to sell in favor of the Ventanillas. All
the amounts paid by the Ventanillas were deposited in Valencia’s bank account.
Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly payments
of the Ventanillas were remitted to Manila Remnant as payments of Crisostomo for
which the former issued receipts in favor of Crisostomo. Since Valencia kept the
receipts in his files and never transmitted the same to Crisostomo, the latter and
the Ventanillas remained ignorant of Valencia’s scheme. Thus, the Ventanillas
continued paying their monthly installments.chanrobles virtual lawlibrary
Subsequently, the harmonious business relationship between Artemio Valencia and
Manila Remnant ended. On May 30, 1973, Manila Remnant, through its General
Manager Karl Landahl, wrote Artemio Valencia informing him that Manila Remnant
was terminating its existing collection agreement with his firm on account of the
considerable amount of discrepancies and irregularities discovered in its collections
and remittances by virtue of confirmations received from lot buyers. 4 As a
consequence, on June 6, 1973, Artemio Valencia was removed as President by the
Board of Directors of Manila Remnant. Therefore, from May of 1973, Valencia
stopped transmitting Ventanilla’s monthly installments which at that time had
already amounted to P17,925.40 for Lot 1 and P18,141.95 for Lot 2, (which
appeared in Manila Remnant’s record as credited in the name of Crisostomo). 5
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch 19 of
the then Court of First Instance of Manila 6 to impugn the abrogation of their
agency agreement. On June 10 and July 10, 1973, said court ordered all lot buyers
to deposit their monthly amortizations with the court. 7 But on July 17, 1973, A.U.
Valencia and Co. wrote the Ventanillas that it was still authorized by the court to
collect the monthly amortizations and requested them to continue remitting their
amortizations with the assurance that said payments would be deposited later in
court. 8 On May 22, 1974, the trial court issued an order prohibiting A.U. Valencia
and Co. from collecting the monthly installments. 9 On July 22, 1974 and February
6, 1976 the same court ordered the Valencia firm to furnish the court with a
complete list of all lot buyers who had already made down payments to Manila
Remnant before December 1972. 10 Valencia complied with the court’s order on
August 6, 1974 by submitting a list which excluded the name of the Ventanillas. 11
Since A.U. Valencia and Co. failed to forward its collections after May 1973, Manila
Remnant caused on August 20, 1976 the publication in the Times Journal of a notice
cancelling the contracts to sell of some lot buyers including that of Carlos
Crisostomo in whose name the payments of the Ventanillas had been credited. 12
To prevent the effective cancellation of their contracts, Artemio Valencia instigated
on September 22, 1976 the filing by Carlos Crisostomo and seventeen (17) other lot
vendees of a complaint for specific performance with damages against Manila
Remnant before the Court of First Instance of Quezon City. The complaint alleged
that Crisostomo had already paid a total of P17,922.40 and P18,136.85 on Lots 1
and 2, respectively. 13
It was not until March 1978 when the Ventanillas, after learning of the termination
of the agency agreement between Manila Remnant and A.U. Valencia & Co., decided
to stop paying their amortizations to the latter. The Ventanillas, believing that they
had already remitted P37,007.00 for Lot 1 and P36,911.00 for Lot 2 or a grand
total, inclusive of interest, of P73,122.35 for the two lots, thereby leaving a balance
of P13,531.58 for Lot 1 and P13,540.22 for Lot 2, went directly to Manila Remnant
and offered to pay the entire outstanding balance of the purchase price. 14 To their
shock and utter consternation, they discovered from Gloria Caballes, an accountant
of Manila Remnant, that their names did not appear in the records of A.U. Valencia
and Co. as lot buyers. Caballes showed the Ventanillas copies of the contracts to sell
in favor of Carlos Crisostomo, duly signed by Artemio U. Valencia as President of
Manila Remnant. 15 Whereupon, Manila Remnant refused the offer of the
Ventanillas to pay for the remainder of the contract price because they did not have
the personality to do so. Furthermore, they were shown the published Notice of
Cancellation in the January 29, 1978 issue of the Times Journal rescinding the
contracts of delinquent buyers including Crisostomo.
Thus, on November 21, 1978, the Ventanillas commenced an action for specific
performance, annulment of deeds and damages against Manila Remnant, A.U.
Valencia and Co. and Carlos Crisostomo before the Court of First Instance of Quezon
City, Branch 17-B. 16 Crisostomo was declared in default for failure to file an
answer.chanrobles.com:cralaw:red
On November 17, 1980, the trial court rendered a decision 1) declaring the
contracts to sell issued in favor of the Ventanillas valid and subsisting and annulling
the contracts to sell in Crisostomo’s favor; 2) ordering Manila Remnant to execute in
favor of the Ventanillas an Absolute Deed of Sale free from all liens and
encumbrances; and 3) condemning defendants A.U. Valencia and Co. Inc., Manila
Remnant and Carlos Crisostomo jointly and severally to pay the Ventanillas the
amount of P100,000.00 as moral damages, P100,000.00 as exemplary damages,
and P100,000.00 as attorney’s fees. The lower court also added that if, for any legal
reason, the transfer of the lots could no longer be effected, the defendants should
reimburse jointly and severally to the Ventanillas the total amount of P73,122.35
representing the total amount paid for the two lots plus legal interest thereon from
March 1970 plus damages as aforestated. With regard to the cross claim of Manila
Remnant against Valencia, the court found that Manila Remnant could have not
been dragged into this suit without the fraudulent manipulations of Valencia. Hence,
it adjudged A.U. Valencia and Co. to pay the Manila Remnant P5,000.00 as moral
damages and exemplary damages and P5,000.00 as attorney’s fees. 17
Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the lower court’s
decision to the Court of Appeals through separate appeals. On October 13, 1987,
the Appellate Court affirmed in toto the decision of the lower court. Reconsideration
sought by petitioner Manila Remnant was denied, hence the instant petition.
There is no question that the contracts to sell in favor of the Ventanilla spouses are
valid and subsisting. The only issue remaining is whether or not petitioner Manila
Remnant should be held solidarily liable together with A.U. Valencia and Co. and
Carlos Crisostomo for the payment of moral, exemplary damages and attorney’s
fees in favor of the Ventanillas. 18
While petitioner Manila Remnant has not refuted the legality of the award of
damages per se, it believes that it cannot be made jointly and severally liable with
its agent A.U. Valencia and Co. since it was not aware of the illegal acts perpetrated
nor did it consent or ratify said acts of its agent.
The argument is devoid of merit.
In the case at bar, the Valencia realty firm had clearly overstepped the bounds of its
authority as agent — and for that matter, even the law — when it undertook the
double sale of the disputed lots. Such being the case, the principal, Manila Remnant,
would have been in the clear pursuant to Article 1897 of the Civil Code which states
that" (t)he agent who acts as such is not personally liable to that party with whom
he contracts, unless he expressly binds himself or exceeds the limits of his authority
without giving such party sufficient notice of his powers." chanrobles.com.ph :
virtual law library
However, the unique relationship existing between the principal and the agent at
the time of the dual sale must be underscored. Bear in mind that the president then
of both firms was Artemio U. Valencia, the individual directly responsible for the sale
scam. Hence, despite the fact that the double sale was beyond the power of the
agent, Manila Remnant as principal was chargeable with the knowledge or
constructive notice of that fact and not having done anything to correct such an
irregularity was deemed to have ratified the same. 19
More in point, we find that by the principle of estoppel, Manila Remnant is deemed
to have allowed its agent to act as though it had plenary powers. Article 1911 of the
Civil Code provides:jgc:chanrobles.com.ph
"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."
(Emphasis supplied)
The above-quoted article is new. It is intended to protect the rights of innocent
persons. In such a situation, both the principal and the agent may be considered as
joint feasors whose liability is joint and solidary. 20
Authority by estoppel has arisen in the instant case because by its negligence, the
principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That the principal might not have had actual
knowledge of the agent’s misdeed is of no moment. Consider the following
circumstances:chanrob1es virtual 1aw library
Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and
Co. in the sale and disposition of the subdivision lots. As a disclosed principal in the
contracts to sell in favor of the Ventanilla couple, there was no doubt that they were
in fact contracting with the principal. Section 7 of the Ventanillas’ contracts to sell
states:jgc:chanrobles.com.ph
"7. That all payments whether deposits, down payment and monthly installment
agreed to be made by the vendee shall be payable to A.U. Valencia and Co., Inc. It
is hereby expressly understood that unauthorized payments made to real estate
brokers or agents shall be the sole and exclusive responsibility and at the risk of the
vendee and any and all such payments shall not be recognized by the vendors
unless the official receipts therefor shall have been duly signed by the vendors’ duly
authorized agent, A.U. Valencia and Co., Inc." (Emphasis supplied)
Indeed, once Manila Remnant had been furnished with the usual copies of the
contracts to sell, its only participation then was to accept the collections and pay the
commissions to the agent. The latter had complete control of the business
arrangement. 21
Secondly, it is evident from the records that Manila Remnant was less than prudent
in the conduct of its business as a subdivision owner. For instance, Manila Remnant
failed to take immediate steps to avert any damage that might be incurred by the
lot buyers as a result of its unilateral abrogation of the agency contract. The
publication of the cancelled contracts to sell in the Times Journal came three years
after Manila Remnant had revoked its agreement with A.U. Valencia and
Co.chanrobles virtual lawlibrary
Moreover, Manila Remnant also failed to check the records of its agent immediately
after the revocation of the agency contract despite the fact that such revocation was
due to reported anomalies in Valencia’s collections. Altogether, as pointed out by
the counsel for the Ventanillas, Manila Remnant could and should have devised a
system whereby it could monitor and require a regular accounting from A.U.
Valencia and Co., its agent. Not having done so, Manila Remnant has made itself
liable to those who have relied on its agent and the representation that such agent
was clothed with sufficient powers to act on behalf of the principal.
Even assuming that Manila Remnant was as much a victim as the other innocent lot
buyers, it cannot be gainsaid that it was precisely its negligence and laxity in the
day to day operations of the real estate business which made it possible for the
agent to deceive unsuspecting vendees like the Ventanillas.
In essence, therefore, the basis for Manila Remnant’s solidary liability is estoppel
which, in turn, is rooted in the principal’s neglectfulness in failing to properly
supervise and control the affairs of its agent and to adopt the needed measures to
prevent further misrepresentation. As a consequence, Manila Remnant is considered
estopped from pleading the truth that it had no direct hand in the deception
employed by its agent. 22
A final word. The Court cannot help but be alarmed over the reported practice of
supposedly reputable real estate brokers of manipulating prices by allowing their
own agents to "buy" lots in their names in the hope of reselling the same at a
higher price to the prejudice of bona fide lot buyers, as precisely what the agent
had intended to happen in the present case. This is a serious matter that must be
looked into by the appropriate government housing authority.chanrobles.com.ph :
virtual law library
WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals
dated October 13, 1987 sustaining the decision of the Quezon City trial court dated
November 17, 1980 is AFFIRMED. This judgment is immediately executory. Costs
against petitioner.
SO ORDERED.
G.R. No. L-2437 February 13, 1906
MONICA CASON, plaintiff-appellant,
vs. FRANCISCO WALTERIO RICKARDS, ET AL., defendants-appellees.
W.A. Kincaid for appellant.
Pillsbury and Sutro for appellees.
WILLARD, J.:
From the 1st day of November, 1895, until the 31st day of October, 1896, the
defendant Rickards was the agent at Dagupan, in the Province of Pangasinan, of the
other defendant, Smith, Bell & Co. While he was such agent he received from the
plaintiff, as a deposit, the sum of 2,000 pesos. When he left the employ of the
defendant company the 2,000 pesos were, by his orders, delivered to another agent
of Smith, Bell & Co. in that province, and Smith, Bell & Co. received ad used the
same. This money was not mingled with other money belonging either to Richards
or to Smith, Bell & Co., and at the time of its delivery by Rickards to the other agent
he notified Smith, Bell & Co. that it was not the money of Smith, Bell & Co., but was
the money of the plaintiff. The judgment of the court below holding Smith, Bell &
Co., responsible for this amount was clearly right. The question as to whether
Rickards was authorized by Smith, Bell & Co. to receive deposits of this character
for third persons is a matter of no consequence. The identical money which he
received from the plaintiff was by him turned over to Smith, Bell & Co., with notice
that it was the money of the plaintiff, and they now have it in their possession, and
are therefore bound to pay it to her.
At the trial of this case Rickards testified that a few days after he received the 2,000
pesos from the plaintiff, and about the 8th day of October, 1896, he received from
her an order or warrant upon the Spanish treasury for the sum of 4,200 pesos; that
he wrote Smith, Bell & Co., asking if it could be collected; that they told him to send
it to Manila. It was sent to Manila, and collected through the Hongkong and
Shanghai Bank. Rickards testified that he received the money from the Hongkong
and Shanghai Bank, and paid all of it out in the business of Smith, Bell & Co.; that
after he had received it he entered upon the books of Smith, Bell & Co. at Dagupan
a credit in favor of the plaintiff of 4,200 pesos, less 5 per cent commission for
collection, of which commission Smith, Bell & Co. received the benefit. He testified
that all these transactions took place prior to the 31st day of October, 1896, when
he left the employ of Smith, Bell & Co. He also testified that he had seen the books
of Smith, Bell & Co.; that they were in court in an action commenced in regard to
this same amount in 1896 or 1897, and that the books which were then produced in
court by Smith, Bell & Co. contained an entry or entries of the receipt by Smith, Bell
& Co. of this 4,200 pesos. If this testimony is to be believed there is no doubt as to
the liability of Smith, Bell & Co. to repay to the plaintiff the sum of 4,200 pesos, less
the commission of 5 per cent.
The question as to the general authority of Rickards to receive money on deposit for
Smith, Bell & Co. has nothing to do with this cause of action, for Rickards testified
that he received express directions in regard to this particular transaction. Rickards
in his testimony stated that he had had several conversations with different agents
and employees of Smith, Bell & Co. in Manila in regard to the transaction. At the
trial of this case Smith, Bell & Co. did not present as witnesses any of these
employees or agents, and did not present any of their books which the witness
Rickards declared would corroborate his statement, if produced, but contented
themselves with calling as a witness one who was then a bookkeeper of the
Hongkong and Shanghai Bank. He, testifying from entries which appeared in the
books of that bank, stated that there was received for Rickards, in November, 1896,
4,200 pesos, a part of which was credited to his accounts in that bank, and the
balance, amounting to about 2,616 pesos, was paid in cash. The witness could not
testify to whom this cash was paid. Although he testified that he had some
independent recollection of this transaction, yet it is apparent that his testimony is
substantially, if not entirely, based upon the entries made in the books of the bank,
which were in his handwriting.
The question in this case is this: Can the positive testimony of Rickards, which has
been set forth above, be overcome by the testimony of the agent of the bank in
view of the fact that Smith, Bell & Co. had it in their power to demonstrate the
falsity of the testimony of Rickards by producing their books? No reason appears in
the case why the books were not produced. The trial was had in Manila, where is
located the main office of Smith, Bell & Co. Rickards gave his testimony at the
opening of the trial. If it were false its falsity could have been easily proved by the
introduction of these books, and their production was more imperatively demanded
considering the statement of Rickards that he had seen them, and that they did
contain the entries in regard to this amount of 4,200 pesos.
Under these circumstances the judgment of the court below relieving Smith, Bell &
Co. of the responsibility for this 4,200 pesos can not be affirmed. The evidence as it
stands in the record strongly preponderates against them, and the judgment must
be reversed.
The question arises as to what disposition should be made of this case; whether
final judgment should be entered in this court against Smith, Bell & Co., or whether
the case should be remanded for further proceedings. Under the Code of Civil
Procedure we have authority, when the judgment must be reversed, either to enter
final judgment in this court or to remand the case for a new trial or for further
proceedings. In the present case we think that the ends of justice require that there
should be a new trial as to the 4,200 pesos. (Regalado vs. Luchsinger & Co., 1 Phil.
Rep., 619.) If at the new trial Smith, Bell & Co. still fail to produce their books, and
no additional evidence is offered to overcome the testimony of Rickards, final
judgment should be entered against them in reference to this 4,200 pesos. In
accordance with the provisions of section 505 of the Code of Civil Procedure, upon
the new trial it will not be necessary to retake any of the evidence which has
already been taken.
The judgment is reversed, and the case is remanded to the court below for a new
trial only of the issue relating to the 4,200 pesos. After the new trial judgment will,
as a matter of course, be entered for the plaintiff against Smith, Bell & Co. in
reference to the 2,000 pesos, and for or against them in respect to the 4,200 pesos,
as the results of the new trial may require. No costs will be allowed to either party
in this court. So ordered.
G.R. No. L-41377 July 26, 1935
ANGELA BLONDEAU and FERNANDO DE LA CANTERA Y UZQUIANO, plaintiffs-
appellants, vs. AGUSTIN NANO and JOSE VALLEJO, defendants-appellees.
John R. McFie, Jr., for appellants.
Evangelista and Santos for appellee Vallejo.
No appearance for the other appellee.
MALCOLM, J.:
This action was brought in the Court of First Instance of Manila to foreclose a
mortgage alleged to have been made by the defendants Agustin Nano and Jose
Vallejo to the plaintiff Angela Blondeau, bearing date November 5, 1931, to secure
the payment of the sum of P12,000, and covering property situated on Calle
Georgia, Manila. Nano, purporting to represent both defendants, after filing an
answer, was found in contempt of court. The other defendant Vallejo thereupon
presented an amended answer in which it was alleged that his signature to the
mortgage was a forgery. Following the trial, judgment was rendered against Nano
but not against Vallejo. From this judgment the plaintiffs have taken an appeal.
With all due deference to the findings of the trial judge, now an honored member of
this court, we are inclined to the view, first, that the accessorias bearing Nos. 905A
to 905F, Calle Georgia, Manila, were as indicated in the mortgage, the property of
the defendant Agustin Nano, and second, that the purported signature of the
defendant Vallejo to the mortgage was not a forgery. In support of the first of our
statements, attention need only be invited to a series of documents, including the
transfer certificate of title, showing that Vallejo was considered the owner of the
land only. As to the second statement, it needs be recalled that the mortgage was
executed in the home of the plaintiffs, and that of those present, the principal
plaintiff Angela Blondeau and her husband Fernando de la Cantera, together with
the instrumental witness Pedro Jimenez Zoboli, identified Vallejo as the person who
signed the document. As against their testimony stands the alibi of Vallejo, partially
corroborated by the testimony of the notary public Gregorio Bilog. It is expecting a
great deal to have us believe that not only the mortgage but the power of attorney
of Vallejo in favor of Nano and a series of documents were the product of the evil
machinations of Nano, and that although Nano and Vallejo, members of same
family, lived together, Vallejo was entirely unacquainted with the activities of Nano
in dealing with their joint property. It is significant that the proper cedulas of Vallejo
were presented for the accomplishment of the documents, and that if there was
fraud, not one but a number of notaries public were deceived thereby.
We repeat that upon its face, the mortgage appears to be regular and to have been
duly executed and accepted by Vallejo on November 5, 1931. The evidence then
resolves itself into a question of the execution of the mortgage by Vallejo on the
one hand, and the denial of its execution on the other hand. That there was a
conflict between experts as to the handwriting, one being of the opinion that the
signatures of Vallejo were genuine, and the other being of the opinion that they
were not genuine, is not unexpected. Under such conditions, the question is, which
side produced the weightier testimony, and as hereinbefore indicated, we are of the
opinion that the balance inclined in favor of the plaintiffs.
But there is a narrower ground on which the defenses of the defendant-appellee
must be overruled. Agustin Nano had possession of Jose Vallejo's title papers.
Without those title papers handed over to Nano with the acquiescence of Vallejo, a
fraud could not have been perpetrated. When Fernando de la Cantera, a member of
the Philippine bar and the husband of Angela Blondeau, the principal plaintiff,
searched the registration records, he found them in due form, including the power
of attorney of Vallejo, in favor of Nano. If this had not been so and if thereafter the
proper notation of the encumbrance could not have been made, Angela Blondeau
would not have lent P12,000 to the defendant Vallejo.
The Torrens system is intended for the registration of title, rather than the
muniments of title. It represents a departure from the orthodox principles of
property law. Under the common law, if the pretended signature of the mortgagor is
a forgery, the instrument is invalid for every purpose and will pass on the title or
rights to anyone, unless the spurious document is ratified and accepted by the
mortgagor. The Torrens Act on the contrary permits a forged transfer, when duly
entered in the registry, to become the root of a valid title in a bona fide purchaser.
The act erects a safeguard against a forged transfer being registered, by the
requirement that no transfer shall be registered unless the owner's certificate was
produced along with the instrument of transfer. An executed transfer of registered
lands placed by the registered owner thereof in the hands of another operates as a
representation to a third party that the holder of the transfer is authorized to deal
with the lands. (53 C.J., 1141, 1142; Act No. 496, as amended, secs. 47, 51, 55.)
With respect to the conclusiveness of the Torrens title and the binding force and
effect of annotations thereon even when through a forged deed the land passes into
the possession of an innocent purchaser for value, the basic rule is found in the
opinion delivered by Mr. Chief Justice Arellano in De la Cruz vs. Fabie ( [1916], 35
Phil., 144). The history of the case was as follows:
Vedasto Velazquez was attorney in fact of Gregoria Hernandez. Gregoria Hernandez
registered her title of ownership to the land in question in the property registry and
was issued certificate of title No. 121. Vedasto Velazquez, being the attorney in fact
of Gregoria Hernandez, had in his possession all the muniments of title of the land,
including the certificate of title No. 121, and, abusing her confidence in him, a few
days after the registration of the land, forged a notarial instrument wherein he
made it appear that she had sold the said land to him for the price of P8,000.
Vedasto Velazquez then went to the register of deeds and applied for the
registration of the land in his own name, presenting Gregoria Hernandez' certificate
of title No. 121 for cancellation, and the deed of conveyance which was purported to
have been made by Gregoria Hernandez in his favor in order that he might be
registered as the true owner of the land. All this was done; Gregoria Hernandez'
title was cancelled and certificate of title No. 43 was issued to Vedasto Velazquez.
On May 31, 1907, Vedasto Velazquez sold the land finally and absolutely to Ramon
Fabie, who presented to the register of deeds the notarial instrument executed for
the purpose and was thereupon furnished with the certificate of title No. 766." On
these facts, it was held that Fabie was an innocent holder of a title for value and
that, under section 55 of the Land Registration Law, he was the absolute owner of
the land.
The decision above cited has repeatedly been reexamined by this court, one of the
most recent instances being found in the case of El Hogar Filipino vs.
Olviga ( [1934], 60 Phil., 17). While counsel for the appellee is undoubtedly correct
in his contention that neither the case of Fabie nor the case of Olgiva nor any other
case relied upon by the appellants is on all fours with the present facts, the principle
on which these cases rest should here be carried forward and given application.
The recent decision of the United States Supreme Court in the case of Eliason vs.
Wilborn ( [1930], 281 U.S., 457), is of enlightening interest. Plaintiffs in this case,
purchasers of land previously brought under the Illinois Torrens Act, delivered the
certificate of title to a party under an agreement to sell, who forged a deed to
himself, had a certificate issue in his name, and then conveyed to defendants who
were good faith purchasers for value. Plaintiffs informed the register of the forgery
after the defendants had bought, and demanded the cancellation of the deeds and
certificates, and the reissue of a certificate to themselves. The register refused, and
a petition was brought to compel such action. The Circuit Court for Cook County,
Illinois, the Supreme Court of Illinois, and the United States Supreme Court, united
in dismissing the petition. Mr. Justice Holmes, delivering the opinion of the latter
court, said:
. . . The statute requires the production of the outstanding certificate, as a condition
to the issue of a new one. The appellants saw fit no entrust it to Napletone and they
took the risk. They say that according to the construction of the act adopted the
registrar's certificate would have had the same effect even if the old certificate had
not been produced. But that, if correct, is no answer. Presumably the register will
do his duty, and if he does he will require the old certificate to be handed in. It does
not justify the omission of a precaution that probably would be sufficient, to point
out that a dishonest official could get around it. There is not the slightest reason to
suppose that Napletone would have got a certificate on which the Wilborns could
rely, without the delivery of the old one by the appellants. As between two innocent
persons, one of whom must suffer the consequence of a breach of trust, the one
who made it possible by his act of confidence must bear the loss.
Vargas & Mañalac in their treatise on the Philippine Land Registration Law quote
with approval the comment of Mr. Powell in his book on Land Registration, section
213. The question which the author propounded was: Why does the law say that
the person who had no title at all and only a forged deed as a color of title should
become the true owner of the land by merely continuing to occupy and enjoy the
land which in fact does not belong to him, but which belongs to the victim of the
forgery? His answer was:
. . . that public policy, expediency, and the need of a statute of repose as to the
possession of land, demand such a rule. Likewise, public policy, expediency, and the
need of repose and certainty as to land titles demand that the bona fide purchaser
of a certificate of title to registered land, who, though he buys on a forged transfer,
succeeds in having the land registered in his name, should nevertheless hold an
unimpeachable title. There is more natural justice in recognizing his title as being
valid than there is in recognizing as valid the title of one who has succeeded in
ripening a forged color of title by prescription.
In the first place, a forger cannot effectuate his forgery in the case of registered
land by executing a transfer which can be registered, unless the owner has allowed
him, in some way, to get possession of the owner's certificate. The Act has erected
in favor of the owner, as a safeguard, against a forged transfer being perpetrated
against him, the requirement that no voluntary transfer shall be registered unless
the owner's certificate is produced along with the instrument of transfer. Therefore,
if the owner has voluntarily or carelessly allowed the forger to come into possession
of his owner's certificate he is to be judged according to the maxim, that when one
of two innocent persons must suffer by the wrongful act of a third person the loss
fall on him who put it into the power of that third person to perpetrate the wrong.
Furthermore, even if the forger stole the owner's certificate, the owner is up against
no greater hardship than is experienced by one whose money or negotiable paper
payable to bearer is stolen and transferred by the thief to an innocent purchaser.
Other incidental facts might be mentioned and other incidental legal propositions
might be discussed, but in its final analysis this is a case of a mortgagee relying
upon a Torrens title, and loaning money in all good faith on the basis of the title
standing in the name of the mortgagors only thereafter to discover one defendant
to be an alleged forger and the other defendant, if not a party to the conspiracy, at
least having by his negligence or acquiescence made it possible for the fraud to
transpire. Giving to the facts the most favorable interpretation for Vallejo, yet, as
announced by the United States Supreme Court, the maxim is, as between two
innocent persons, in this case Angela Blondeau and Jose Vallejo, one of whom must
suffer the consequence of a breach of trust, the one who made it possible by his act
of confidence must bear the loss, in this case Jose Vallejo. Accordingly, the four
errors assigned will be sustained, the judgment reversed, and in the court of origin
a new one entered sustaining plaintiff's mortgage and granting her the relief prayed
for in her complaints .So ordered, without special pronouncement as to the costs in
either instance.
[GR. No. 153743. March 18, 2005]
NORMA B. DOMINGO, petitioner, vs. YOLANDA ROBLES; and MICHAEL
MALABANAN ROBLES, MARICON MALABANAN ROBLES, MICHELLE
MALABANAN ROBLES, All Minors Represented by Their Mother,
YOLANDA ROBLES, respondents.
DECISION
PANGANIBAN, J.:
Forgery must be proven by the party alleging it; it cannot be presumed. To
prevent a forged transfer from being registered, the Torrens Act requires, as a
prerequisite to registration, the production of the owners certificate of title and the
instrument of conveyance. A registered owner who places in the hands of another
an executed document of transfer of registered land effectively represents to a third
party that the holder of such document is authorized to deal with the property. [1]
The Case
Before us is a Petition for Review [2] under Rule 45 of the Rules of Court,
challenging the May 27, 2002 Decision [3] of the Court of Appeals (CA) in CA-GR CV
No. 53842. The decretal portion of the assailed Decision reads:
IN VIEW OF ALL THE FOREGOING, [there being] no reversible error in the
challenged decision, the same is hereby AFFIRMED, in toto, and the instant
appeal ordered DISMISSED. Costs against the [petitioner].[4]
On the other hand, the affirmed Decision [5] of the Regional Trial Court (RTC),
Branch 272 of Marikina, disposed as follows:
WHEREFORE, premises considered, the complaint subject of this decision is hereby
DISMISSED.[6]
The Facts
The facts are narrated by the CA as follows:
The historical backdrop shows that [petitioner] and her husband, Valentino
Domingo, were the registered owners of Lot 19, Block 1, subdivision plan (LRC)
Psd-15706 located at Cristina Subdivision, Concepcion, Marikina and covered by
Transfer Certificate of Title No. 53412. On this lot, [Petitioner] Norma B. Domingo
discontinued the construction of her house allegedly for failure of her husband to
send the necessary financial support. So, she decided to dispose of the property.
A friend, Flor Bacani, volunteered to act as [petitioners] agent in selling the lot.
Trusting Bacani, [petitioner] delivered their owners copy of Transfer Certificate of
Title No. 53412 to him (Bacani). Later, the title was said to have been lost. In the
petition for its reconstitution, [petitioner] gave Bacani all her receipts of payment
for real estate taxes. At the same time, Bacani asked [petitioner] to sign what she
recalled was a record of exhibits. Thereafter, [petitioner] waited patiently but Bacani
did not show up any more.
On November 1, 1994, [Petitioner] Norma Domingo visited the lot and was
surprised to see the [respondents] (Robles, for short) starting to build a house on
the subject lot. A verification with the Register of Deeds revealed that the
reconstituted Transfer Certificate of Title No. 53412 had already been cancelled with
the registration of a Deed of Absolute Sale dated May 9, 1991 signed by Norma B.
Domingo and her husband Valentino Domingo, as sellers, and [Respondent] Yolanda
Robles, for herself and representing the other minor [respondents], as buyers. As a
consequence, Transfer Certificate of Title No. 201730 was issued on June 10, 1991
in the name of [Respondent] Robles.
Claiming not to have met any of the [respondents] nor having signed any sale over
the property in favor of anybody (her husband being abroad at the time),
[petitioner] assumed that the Deed of Absolute Sale dated May 9, 1991 is a forgery
and, therefore, could not validly transfer ownership of the lot to the [respondents].
Hence, the case for the nullity thereof and its reconveyance.
[Respondents] Robles responded alleging to be buyers in good faith and for value.
They narrate that the subject lot was offered to them by Flor Bacani, as the agent of
the owners; that after some time when they were already prepared to buy the lot,
Bacani introduced to them the supposed owners and agreed on the sale; then, on
May 9, 1991, Bacani and the introduced seller presented a Deed of Absolute Sale
already signed by Valentino and Norma Domingo needing only her (Robles)
signature. Presented likewise at that meeting, where she paid full purchase price,
was the original of the owners duplicate of Transfer Certificate of Title No. 53412.
Then sometime later, [Respondents] Robles contracted to sell the lot in issue in
favor of spouses Danilo and Herminigilda Deza for P250,000.00. [Respondent]
Yolanda Robles even had to secure a guardianship authority over the persons and
properties of her minor children from the Regional Trial Court of Pasig in JDRC No.
2614. When only P20,000.00 remained unpaid of the total purchase price under the
contract to sell, payment was stopped because of the letter received by Yolanda
Robles that [petitioner] intends to sue her.
After due proceedings, the [Regional Trial Court] rendered its Decision dated May
13, 1996, dismissing the complaint.[7]
Ruling of the Court of Appeals
The CA held that respondents were purchasers in good faith and for value.
According to its findings, (a) the sale was admittedly made through petitioners
agent; (b) as Domingos agent, Bacani brought with him the original of the owners
duplicate Certificate of Title of the property and some receipts; (c) the reconstituted
title presented to the buyers was free from any liens, encumbrances or adverse
interests of other persons; and (d) the land was unoccupied. Petitioner was not able
to present, against these established facts, any evidence to prove that respondents
had prior knowledge of any other persons right to or interest over the property in
question.
Hence, this Petition.[8]
Issue
Petitioner submits this sole issue for our consideration:
To determine whether or not the petitioner is entitled to her claims, the issue
worthy of consideration by the Honorable Court in the instant case is WHO IS A
PURCHASER IN GOOD FAITH?[9]
The Courts Ruling
The Petition has no merit.
Sole Issue:
Acquisition of Valid Title
It is a well-established principle that factual findings of the trial court, when
affirmed by the Court of Appeals, are binding on this Court. [10] Petitioner has given
this Court no cogent reason to deviate from this rule; on the contrary, the findings
of the courts a quo are amply supported by the evidence on record.
Petitioner claims that her signature and that of her husband were forged in the
Deed of Absolute Sale transferring the property from the Domingo spouses to
respondent. Relying on the general rule that a forged deed is void and conveys no
title,[11] she assails the validity of the sale.
It is a well-settled rule, however, that a notarized instrument enjoys a prima
facie presumption of authenticity and due execution. [12] Clear and convincing
evidence must be presented to overcome such legal presumption. Forgery cannot
be presumed; hence, it was incumbent upon petitioner to prove it. [13] This, she
failed to do. On this point, the CA observed:
x x x. What surprises the Court is that a comparison of the signature of appellant
Norma Domingo in the Deed of Absolute Sale in favor of the appellees and the
signature in the verification of the complaint manifest a striking similarity to the
point that without any contrary proof, it would be safe to conclude that said
signatures were written by one and the same person. Sadly, appellant left that
matter that way without introducing counteracting evidence. x x x [14]
Petitioner also failed to convince the trial court that the person with whom
Respondent Yolanda Robles transacted was in fact not Valentino Domingo. Except
for her insistence that her husband was out of the country, petitioner failed to
present any other clear and convincing evidence that Valentino was not present at
the time of the sale. Bare allegations, unsubstantiated by evidence, are not
equivalent to proof.[15]
Petitioner now stresses the issue of good faith on the part of respondents. In
the absence of a finding of fraud and a consequent finding of authenticity and due
execution of the Deed of Absolute Sale, a discussion of whether respondents were
purchasers in good faith is wholly unnecessary. Without a clear and persuasive
substantiation of bad faith, a presumption of good faith in their favor stands. [16]
The sale was admittedly made with the aid of Bacani, petitioners agent, who
had with him the original of the owners duplicate Certificate of Title to the property,
free from any liens or encumbrances. The signatures of Spouses Domingo, the
registered owners, appear on the Deed of Absolute Sale. Petitioners husband met
with Respondent Yolanda Robles and received payment for the property. The
Torrens Act requires, as a prerequisite to registration, the production of the owners
certificate of title and the instrument of conveyance. The registered owner who
places in the hands of another an executed document of transfer of registered land
effectively represents to a third party that the holder of such document is
authorized to deal with the property.[17]
WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.
Costs against petitioner.
SO ORDERED.
G.R. Nos. L-18223-24 June 29, 1963
COMMERCIAL BANK & TRUST COMPANY OF THE PHILIPPINES, plaintiff-
appellee,
vs. REPUBLIC ARMORED CAR SERVICE CORPORATION and DAMASO PEREZ,
ET AL., defendants-appellants.
Pompeyo Diaz for plaintiff-appellee.
Halili, Bolinao, Bolinao & Associates and Crispin D. Baizas for defendants-appellants.
LABRADOR, J.:
The above-entitled cases are appeals from judgments rendered by the Court of First
Instance of through Judges Gustavo Victoriano and Conrado M. Vasquez,
respectively, of said Court.
In G.R. No. L-8223 plaintiff-appellee filed it complaint alleging that the defendants-
appellants were granted by it credit accommodations in the form of an overdraft line
for an amount not exceeding P80,000, with interest (paragraph 2, Complaint); that
defendants or either of them drew regularly upon the above credit line and as of
February 10, 1960, the total of their drawings and interest due amounted to
P79,940.80 (par. 3, id.); that repeated demands were made upon defendants to
pay for the drawings but said demands were ignored (par. 4, id.). In their answer to
the complaint the defendants admit having drawn upon the credit line extended to
them as alleged in the complaint; claim they have not ignored the demands for the
payment of the sums demanded and have instituted actions against the former
officers of defendant corporation who held defrauded the latter; etc. (par. 4,
Answer). By way of special affirmative defenses, they allege that the former officers
and directors of the defendant corporation had deliberately defrauded and
mismanaged the corporations, as a part of their scheme to wrest control of various
corporations owned by Damaso Perez, from the latter, and as a result of said frauds
or mismanagements the defendants have instituted actions for damages for breach
of trust; and that the amounts drawn on the credit line subject of the complaint
were received and used by the former directors and officers of the defendant
corporations and constitute part of the funds misapplied by them. Upon motion,
Judge Victoriano entered for the plaintiff a judgment on the pleadings, holding that
the "special affirmative defenses (of the answer) filled to show that any allegation
respecting the extent of defendants' drawing although they have admitted having
drawn against the credit line, subject of the action, so that said denial, not being
specific denial in the true sense, does not controvert the allegation at which it is
aimed," etc. The court also further held that the alleged mismanagement and fraud
of the former directors and officials of defendant corporation and the action now
pending in court regarding the same are merely internal affairs of the corporation
which cannot affect or diminish the liability of the defendant corporation to the
plaintiff. The defendants appealed from the decision to the Court of Appeals, but
this Court certified the case to Us.
In G.R. No. L-18224 the complaint also alleges that the defendants were given
credit accommodation in the form of an overdraft line in an amount not exceeding
P150,000 and drew regularly upon said credit line amounts which with their interest
reach the sum of P133,453.17; that demands were made for the payment of the
drawings but defendants have failed to pay the amounts demanded. Defendants in
their answer admit the opening of the credit line in their favor and that demands for
the indebtedness were made upon them, but allege as special defenses that the
directors and officers of the defendant corporation deliberately defrauded and
mismanaged the said corporation breach of trust in order to deprive Damaso Perez
of his control and majority interest in the defendant corporation, as a result of
which fraud, mismanagement and breach of trust the defendants suffered
tremendous losses; that the amounts drawn by defendant corporation upon the
credit line were received and used by the former directors and officers and same
constitute part of the funds of the defendant corporation misapplied and
mismanaged by said former officers and directors of said corporation. Upon the
presentation of the answer the plaintiff presented motion sustained, for judgment
on the pleadings which the court sustained, holding:
The defendants having admitted the indebtedness in question, its liability to pay the
plaintiff the amount of the said indebtedness is beyond question. The alleged fact
that the money borrowed from the plaintiff was misappropriated or misapplied by
some officers of the defendant corporation is no defense against the liability of the
defendants to the plaintiff. It is an internal matter of the defendant corporation in
which the plaintiff has no concern or participation whatsoever. This is specially so
with respect to the defendant Damaso Perez who appears to have executed the
agreement, Annex A, in his own personal capacity and not as an officer of the
defendant Republic Credit Corporation. The allegation that the defendants have a
right to claim indemnity or contribution from the erring directors and officers of the
defendant corporation is a matter which may be the subject of a separate action,
and in which the plaintiff is not concerned. (p. 37, Record on Appeal)
Against the above judgment the defendants also have prosecuted this appeal. The
Court of Appeals certified the same to Us in accordance with law.
In G.R. No. L-18223, the defendants-appellants argue that the admission made by
the defendants in their answer that the amount demanded was due, is qualified "in
the sense that whatever amounts were drawn from the overdraft line in question
were part of those corporate funds of Philippine Armored Car, Inc., misused and
misapplied by Ramon Racelis, et al., former directors and executive officers of said
corporation." (p. 13, Appellee's Brief) In answer to this argument we call attention
to the fact that in the agreement attached to the complaint Exhibit "A", the
obligation of the defendants-appellants to pay for the amount due under the
overdraft line is not in any way qualified; there is no statement that the
responsibility of the defendants-appellants for the amount taken on overdraft would
cease or be defeated or reduced upon misappropriations on mismanagement of the
funds of the corporation by the directors and employees thereof. The special
defense is, therefore, a sham defense.
Furthermore, under general rules and principles of law the mismanagement of the
business of a party by his agents does not relieve said party from the responsibility
that he had contracted to third persons, especially in the case at bar where the
written agreement contains no limitation to defendants-appellants'
liability.1äwphï1.ñët
The so-called special defense contained in the answer is, therefore, no special
defense to the liability of the defendants-appellants, nor to the action, and the
court's action or judgment on the pleadings was properly taken. The argument
contained in the brief of the defendants-appellants that the defendants
contemplated a third-party complaint is of no weight, because a third-party
complaint was not available to the defendants under the facts of the case. A third-
party complaint is, under the Rules, available only if the defendant has a right to
demand contribution, indemnity, subrogation or any other relief from the supposed
third-party defendants in respect to the plaintiff's claim. (Sec. 1, Rule 12, Rules of
Court). The supposed parties defendants or alleged officers of the defendant
corporation had nothing to do with the overdraft account of defendant corporation
with the plaintiff-appellee. Consequently, they cannot be made parties defendants in
a third party complaint. Anyway the filing of a third party complaint is no hindrance
to the issuance of the order of the court declaring that the defendants' answer
presented no issue or defense and that, therefore, plaintiff-appellee was entitled to
judgment.
In G. R. No. L-18224, our ruling in the first case is also applicable. In this second
case, it is also alleged that at the time of the agreement for credit in current
account the defendant corporation was under the management of Ramon Racelis
and others who defrauded and mismanaged the corporation, in breach of trust, etc.,
etc. Again we declare that the written agreement for credit in current account,
Annex "A", contains no limitation about the liability of the defendants-appellants,
nor an express agreement that the responsibility of the defendants-appellants
should be conditioned upon the lawful management of the business of the
defendant corporation. The same rulings in the first case are applicable in this
second case.
WHEREFORE, the judgments appealed from are hereby affirmed, with costs against
the defendants-appellants.
G.R. No. L-19375 May 21, 1969
DY PEH, AND/OR VICTORY RUBBER MANUFACTURING,petitioner,
vs. COLLECTOR OF INTERNAL REVENUE,respondent.
Rene A. Diokno for petitioner.
Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Felicisimo
R. Rosete and Special Attorney Alejandro B. Afurong for respondent.
DIZON,J.:
Petition filed by Dy Peh for the review of the decision and resolution of the Court of
Tax Appeals dated April 29 and December 23, 1961, respectively, in C.T.A. Case No.
538, ordering him to pay deficiency percentage taxes in the total amount of Petitioner, during all the time material to this case, was engaged in the business of
P51,939,27. manufacturing and selling rubber shoes and allied products in the city of Cebu,
under the registered firm name Victory Rubber Manufacturing.
The following facts are not disputed: .
Sometime in the year 1955 the Bureau of Internal Revenue unearthed anomalies
committed in the office of the Treasurer of the city of Cebu in connection with the
Official Appearing in the Original Appearing in the Duplicate payment of taxes by some taxpayers, amongst them petitioner herein. As a result
Receipt Triplicate and/or the respondent assessed against, and demanded from petitioner the payment of the
Number Quadruplicate following sums: P4,725, including P100 as penalty, P29,980, including P50 as
Date Amount penalty, and P17,425 including P50 as penalty, on January 27, 1956, November 12,
1955 and November 12, 1955, respectively. This assessment was based upon short
Re 1st cause of action Date Amount Difference payments in connection with taxes due from petitioner during the periods covered
by the assessment. The investigation of the anomalies disclosed that the amounts
of the taxes allegedly paid by him, as appearing in the original of every official
699004 4-20-54 P3,227.47 4-20-54 P227.47 P3,000.00 receipt he had in his possession, were bigger than the amounts appearing in the
corresponding duplicate, triplicate and quadruplicate copies thereof kept in the
office of the City Treasurer of Cebu. Such discrepancies are hereunder tabulated as
704201 7-20-54 3,681.41 7-20-54 681.41 3,000.00
follows:

709008 10-20-54 1,892.78 10-20-54 192.78 1,700.00

Petitioner's contention below and here is this: since the checks issued by him
covered in full the amount due for each quarter, and were accepted and deposited
A- by the City Treasurer of Cebu; since the originals of the official receipts issued by
1-20-55 2,575.46 1-20-55 175.46 2,400.00 the latter show that the full amount of the taxes due from him had been paid, he
210319
must be deemed to have paid such taxesin full, and any anomaly in the application
of the amounts paid by him consisting in the diversion of part thereof to pay the
A- taxes of other taxpayers — whether attributable solely to employees in the office of
4-20-55 3,968.68 4-20-55 168.69 3,800.00
218105 said Treasurer or to other parties — should not be held against him.

Re 2nd cause of action Respondent's contention, on the other hand, is that the amounts actually paid by
petitioner were those appearing on the duplicates, triplicates and quadruplicates of
the official receipts mentioned heretofore; that the originals thereof were falsified or
1923194 4-21-52 P4,380.37 4-21-52 P380.37 P4,000.00
altered to make them show payment in full of the taxes due from petitioner.

1972817 7-21-52 4,140.29 7-21-52 140.29 4,000.00 In connection with the issues thus joined petitioner tried to prove that the payments
in question were made by him personally, while, on the other hand, respondent
6399188 10-20-52 2,113.07 10-20-52 113.07 2,000.00 claimed that said payments were made not by petitioner personally but by Tan
Chuan Liong, his authorized agent in the matter of payment of his taxes; that
Bartolome Baguio, Chief of the Internal Revenue Division of the City Treasurer's
7769180 1-17-53 1,457.42 4-7-53 6.00 1,451.42 Office of Cebu, had allowed the wrongful practice of permitting Tan Chuan Liong to
prepare the official receipts in connection with tax payments made by him in behalf
of his merchant clients; that it was Tan Chuan Liong who applied a portion of the
7778387 4-18-53 4,057.56 4-18-52 57.56 4,000.00
amounts given to him by petitioner to pay tax obligations of other taxpayers, also
his clients, and that therefore petitioner's recourse is against him.lawphi1.ñet
8423087 7-20-53 2,850.63 7-20-53 50.63 2,800.00
Whether it was petitioner, in person, who made the payment of his taxes herein
8470851 10-20-53 2,901.87 10-20-53 101.87 2,800.00 involved, or it was his aforesaid agent, is manifestly a question of fact squarely
resolved by the Court of Tax Appeals as follows: "Petitioner sought to prove that he
never employed Tan Chuan Liong as a business agent in the payment of the tax in
693613 1-20-54 2,996.26 1-20-54 96.26 2,900.00 question. The preponderance of the evidence shows otherwise. If, as alleged,
petitioner paid the tax personally, why were the official receipts prepared by Tan
Re 3rd cause of action Chuan Liong and not by Bartolome Baguio or any authorized employee in the office
of the City Treasurer of Cebu? It appears that Tan Chuan Liong prepared the official
receipts of payments of taxpayers who employed him as business agent. It has not
A-
1-17-52 P3,815.18 1-17-52 P115.18 P3,700.00
1709018
been shown that Tan Chuan Liong prepared any official receipt covering payment of
taxpayers other than those who employed him business agent."
After ruling against petitioner on this question, the Court of Tax Appeals said
further:
Even assuming that Tan Chuan Liong was not employed by petitioner as business
agent, petitioner is not entirely blameless. The records show that the payments
were made by checks. The number of the official receipts covering the payments are
indicated on the back of the checks. After the checks had been deposited and the
amounts credited in favor of the Government, the cancelled checks were returned to
petitioner. Petitioner is, therefore, charged with knowledge of the fact that the
amount covered by each check was applied in payment not only of his tax but also
of taxes of other taxpayers, the numbers of the official receipts covering which are
indicated on the back of the check. The fact that he accepted the cancelled checks
without protest is evidence of his acquiescence to the manner in which the amount
covered by each check was applied by the collecting officer. He cannot now be
heard to complain.lawphi1.ñet
We can hardly add any other consideration to strengthen the lower court's ruling.
Another question of fact vital to this case is whether or not the official receipts in
petitioner's possession were falsified, and if so by whom.
In this connection, We believe it established as a fact that petitioner had employed
Tan Chuan Liong as a business agent in the matter of payment of his taxes. The
testimonies of Bartolome Baguio, Isidro Badana and Lauro Abalos on this matter
(T.s.n. pp. 200-201, 472-473, 483-484, 501-503, 508-510, 525, 535-539) were
corroborated by the statement and report of NBI handwriting expert Felipe Logan.
That Tan Chuan Liong, as such petitioner's agent, actually paid to the government
less than the amounts of the taxes due from petitioner is also fully proven by their
testimonies and the duplicate, triplicate and quadruplicate copies of the official
receipts which appear upon their face to be genuine or authentic. The same thing
cannot be claimed for the official receipts in question, because the lower court found
that, as in the case ofTiu Bon Sin vs. Collector etc., C.T.A. No. 286, andYap Pe Giok
vs. Arañas, C.T.A. No. 533, appellant employed the same business agent who
misappropriated a portion of the amounts entrusted to him and paid less than what
was due from his principals. In plain words, the lower court expressed the view that
the official receipts in petitioner's hands did not reflect the truth.
The trial court's ruling upon these questions must be sustained pursuant to our
consistent ruling to the effect that in reviews of the nature of the present, only
errors of law are reviewable by this Court (G.R. L-12174, Maria B. Castro vs.
Collector, April 26, 1962; G.R. L-9738, Blas Gutierrez, et al. vs. Court of Tax
Appeals; G.R. L-8556, Benito Sanchez vs. Commissioner of Customs, Sept. 30,
1957 and 54 O.G. No. 2, p. 361, Eugenie Perez vs. Court of Tax Appeals, G.R. L-
10507, May 30, 1958; G.R. No. L-13387, Sy Chiuco vs. Collector, March 23, 1960;
G.R. No. L-11622, Collector vs. Fisher and G.R. No. L-1168, Fisher vs. Collector,
January 28, 1961).
The foregoing disposes of the first two assignments of error submitted in petitioner's
brief. In the third, it is his contention that the Court a quo erred in holding that he is
estopped from questioning the misapplication of his payments.
This is only a corollary of the questions raised in the previous assignments of error.
Inasmuch as We have held in resolving the latter that, in point of fact, Tan Chuan
Liong was petitioner's agent, the conclusion must necessarily be that the agent's
acts bind his principal; without prejudice, of course, to the latter seeking recourse
against him in an appropriate civil or criminal action.
The fourth and last assignment of error has been impliedly resolved adversely to
petitioner in our rulings upon the first three.
PREMISES CONSIDERED, the decision appealed from is hereby affirmed, with costs.
G.R. No. 88539 October 26, 1993
KUE CUISON, doing business under the firm name and style"KUE CUISON
PAPER SUPPLY," petitioner,
vs. THE COURT OF APPEALS, VALIANT INVESTMENT
ASSOCIATES, respondents.
Leighton R. Siazon for petitioner.
Melanio L. Zoreta for private respondent.
BIDIN, J.:
This petition for review assails the decision of the respondent Court of Appeals
ordering petitioner to pay private respondent, among others, the sum of
P297,482.30 with interest. Said decision reversed the appealed decision of the trial
court rendered in favor of petitioner.
The case involves an action for a sum of money filed by respondent against
petitioner anchored on the following antecedent facts:
Petitioner Kue Cuison is a sole proprietorship engaged in the purchase and sale of
newsprint, bond paper and scrap, with places of business at Baesa, Quezon City,
and Sto. Cristo, Binondo, Manila. Private respondent Valiant Investment Associates,
on the other hand, is a partnership duly organized and existing under the laws of
the Philippines with business address at Kalookan City.
From December 4, 1979 to February 15, 1980, private respondent delivered various
kinds of paper products amounting to P297,487.30 to a certain Lilian Tan of LT
Trading. The deliveries were made by respondent pursuant to orders allegedly
placed by Tiu Huy Tiac who was then employed in the Binondo office of petitioner. It
was likewise pursuant to Tiac's instructions that the merchandise was delivered to
Lilian Tan. Upon delivery, Lilian Tan paid for the merchandise by issuing several
checks payable to cash at the specific request of Tiu Huy Tiac. In turn, Tiac issued
nine (9) postdated checks to private respondent as payment for the paper products.
Unfortunately, sad checks were later dishonored by the drawee bank.
Thereafter, private respondent made several demands upon petitioner to pay for the
merchandise in question, claiming that Tiu Huy Tiac was duly authorized by
petitioner as the manager of his Binondo office, to enter into the questioned
transactions with private respondent and Lilian Tan. Petitioner denied any
involvement in the transaction entered into by Tiu Huy Tiac and refused to pay
private respondent the amount corresponding to the selling price of the subject
merchandise.
Left with no recourse, private respondent filed an action against petitioner for the
collection of P297,487.30 representing the price of the merchandise. After due
hearing, the trial court dismissed the complaint against petitioner for lack of merit.
On appeal, however, the decision of the trial court was modified, but was in effect
reversed by the Court of Appeals, the dispositive portion of which reads:
WHEREFORE, the decision appealed from is MODIFIED in that defendant-appellant
Kue Cuison is hereby ordered to pay plaintiff-appellant Valiant Investment
Associates the sum of P297,487.30 with 12% interest from the filing of the
complaint until the amount is fully paid, plus the sum of 7% of the total amount due
as attorney's fees, and to pay the costs. In all other respects, the decision appealed
from is affirmed. (Rollo, p. 55)
In this petition, petitioner contends that:
THE HONORABLE COURT ERRED IN FINDING TIU HUY TIAC AGENT OF DEFENDANT-
APPELLANT CONTRARY TO THE UNDISPUTED/ESTABLISHED FACTS AND
CIRCUMSTANCES.
THE HONORABLE COURT ERRED IN FINDING DEFENDANT-APPELLANT LIABLE FOR
AN OBLIGATION UNDISPUTEDLY BELONGING TO TIU HUY TIAC.
THE HONORABLE COURT ERRED IN REVERSING THE WELL-FOUNDED DECISION OF
THE TRIAL COURT, (Rollo, p, 19)
The issue here is really quite simple — whether or not Tiu Huy Tiac possessed the
required authority from petitioner sufficient to hold the latter liable for the disputed
transaction.
This petition ought to have been denied outright, forin the final analysis, it raises a
factual issue. It is elementary that in petitions for review under Rule 45, this Court
only passes upon questions of law. An exception thereto occurs where the findings
of fact of the Court of Appeals are at variance with the trial court, in which case the
Court reviews the evidence in order to arrive at the correct findings based on the
records.
As to the merits of the case, it is a well-established rule that one who clothes
another with apparent authority as his agent and holds him out to the public as
such cannot be permitted to deny the authority of such person to act as his agent,
to the prejudice of innocent third parties dealing with such person in good faith and
in the honest belief that he is what he appears to be (Macke, et al, v. Camps, 7 Phil.
553 (1907]; Philippine National Bank. v Court of Appeals, 94 SCRA 357 [1979]).
From the facts and the evidence on record, there is no doubt that this rule obtains.
The petition must therefore fail.
It is evident from the records that by his own acts and admission, petitioner held
out Tiu Huy Tiac to the public as the manager of his store in Sto. Cristo, Binondo,
Manila. More particularly, petitioner explicitly introduced Tiu Huy Tiac to Bernardino
Villanueva, respondent's manager, as his (petitioner's) branch manager as testified
to by Bernardino Villanueva. Secondly, Lilian Tan, who has been doing business with
petitioner for quite a while, also testified that she knew Tiu Huy Tiac to be the
manager of petitioner's Sto. Cristo, Binondo branch. This general perception of Tiu
Huy Tiac as the manager of petitioner's Sto. Cristo store is even made manifest by
the fact that Tiu Huy Tiac is known in the community to be the "kinakapatid"
(godbrother) of petitioner. In fact, even petitioner admitted his close relationship
with Tiu Huy Tiac when he said that they are "like brothers" (Rollo, p. 54). There
was thus no reason for anybody especially those transacting business with
petitioner to even doubt the authority of Tiu Huy Tiac as his manager in the Sto.
Cristo Binondo branch.
In a futile attempt to discredit Villanueva, petitioner alleges that the former's
testimony is clearly self-serving inasmuch as Villanueva worked for private
respondent as its manager.
We disagree, The argument that Villanueva's testimony is self-serving and therefore
inadmissible on the lame excuse of his employment with private respondent utterly
misconstrues the nature of "'self-serving evidence" and the specific ground for its
exclusion. As pointed out by this Court in Co v. Court of Appeals et, al., (99 SCRA
321 [1980]):
Self-serving evidence is evidence made by a party out of court at one time; it does
not include a party's testimony as a witness in court. It is excluded on the same
ground as any hearsay evidence, that is the lack of opportunity for cross-
examination by the adverse party, and on the consideration that its admission
would open the door to fraud and to fabrication of testimony. On theother hand, a
party's testimony in court is sworn and affords the other party the opportunity for
cross-examination (emphasis supplied)
Petitioner cites Villanueva's failure, despite his commitment to do so on cross-
examination, to produce the very first invoice of the transaction between petitioner
and private respondent as another ground to discredit Villanueva's testimony. Such
failure, proves that Villanueva was not only bluffing when he pretended that he can
produce the invoice, but that Villanueva was likewise prevaricating when he insisted
that such prior transactions actually took place. Petitioner is mistaken. In fact, it
was petitioner's counsel himself who withdrew the reservation to have Villanueva
produce the document in court. As aptly observed by the Court of Appeals in its
decision:
. . . However, during the hearing on March 3, 1981, Villanueva failed to present the
document adverted to because defendant-appellant's counsel withdrew his
reservation to have the former (Villanueva) produce the document or invoice, thus
prompting plaintiff-appellant to rest its case that same day (t.s.n., pp. 39-40, Sess.
of March 3, 1981). Now, defendant-appellant assails the credibility of Villanueva for
having allegedly failed to produce even one single document to show that plaintiff-
appellant have had transactions before, when in fact said failure of Villanueva to
produce said document is a direct off-shoot of the action of defendant-appellant's
counsel who withdrew his reservation for the production of the document or invoice
and which led plaintiff-appellant to rest its case that very day. (Rollo, p.52)
In the same manner, petitioner assails the credibility of Lilian Tan by alleging that
Tan was part of an intricate plot to defraud him. However, petitioner failed to
substantiate or prove that the subject transaction was designed to defraud him.
Ironically, it was even the testimony of petitioner's daughter and assistant manager
Imelda Kue Cuison which confirmed the credibility of Tan as a witness. On the
witness stand, Imelda testified that she knew for a fact that prior to the transaction
in question, Tan regularly transacted business with her father (petitioner herein),
thereby corroborating Tan's testimony to the same effect. As correctly found by the
respondent court, there was no logical explanation for Tan to impute liability upon
petitioner. Rather, the testimony of Imelda Kue Cuison only served to add credence
to Tan's testimony as regards the transaction, the liability for which petitioner
wishes to be absolved.
But of even greater weight than any of these testimonies, is petitioner's categorical
admission on the witness stand that Tiu Huy Tiac was the manager of his store in
Sto. Cristo, Binondo, to wit:
Court:
xxx xxx xxx
Q And who was managing the store in Sto. Cristo?
A At first it was Mr. Ang, then later Mr. Tiu Huy Tiac but I cannot remember the
exact year.
Q So, Mr. Tiu Huy Tiac took over the management,.
A Not that was because every afternoon, I was there, sir.
Q But in the morning, who takes charge?
A Tiu Huy Tiac takes charge of management and if there (sic) orders for newsprint
or bond papers they are always referred to the compound in Baesa, sir. (t.s.n., p.
16, Session of January 20, 1981, CA decision, Rollo, p. 50, emphasis supplied).
Such admission, spontaneous no doubt, and standing alone, is sufficient to negate
all the denials made by petitioner regarding the capacity of Tiu Huy Tiac to enter
into the transaction in question. Furthermore, consistent with and as an obvious
indication of the fact that Tiu Huy Tiac was the manager of the Sto. Cristo branch,
three (3) months after Tiu Huy Tiac left petitioner's employ, petitioner even sent,
communications to its customers notifying them that Tiu Huy Tiac is no longer
connected with petitioner's business. Such undertaking spoke unmistakenly of Tiu
Huy Tiac's valuable position as petitioner's manager than any uttered disclaimer.
More than anything else, this act taken together with the declaration of petitioner in
open court amount to admissions under Rule 130 Section 22 of the Rules of Court,
to wit : "The act, declaration or omission of a party as to a relevant fact may be
given in evidence against him." For well-settled is the rule that "a man's acts,
conduct, and declaration, wherever made, if voluntary, are admissible against him,
for the reason that it is fair to presume that they correspond with the truth, and it is
his fault if they do not. If a man's extrajudicial admissions are admissible against
him, there seems to be no reason why his admissions made in open court, under
oath, should not be accepted against him." (U.S. vs. Ching Po, 23 Phil. 578, 583
[1912];).
Moreover, petitioner's unexplained delay in disowning the transactions entered into
by Tiu Huy Tiac despite several attempts made by respondent to collect the amount
from him, proved all the more that petitioner was aware of the questioned
commission was tantamount to an admission by silence under Rule 130 Section 23
of the Rules of Court, thus: "Any act or declaration made in the presence of and
within the observation of a party who does or says nothing when the act or
declaration is such as naturally to call for action or comment if not true, may be
given in evidence against him."
All of these point to the fact that at the time of the transaction Tiu Huy Tiac was
admittedly the manager of petitioner's store in Sto. Cristo, Binondo. Consequently,
the transaction in question as well as the concomitant obligation is valid and binding
upon petitioner.
By his representations, petitioner is now estopped from disclaiming liability for the
transaction entered by Tiu Huy Tiac on his behalf. It matters not whether the
representations are intentional or merely negligent so long as innocent, third
persons relied upon such representations in good faith and for value As held in the
case of Manila Remnant Co. Inc. v. Court of Appeals, (191 SCRA 622 [1990]):
More in point, we find that by the principle of estoppel, Manila Remnant is deemed
to have allowed its agent to act as though it had plenary powers. Article 1911 of the
Civil Code provides:
"Even when the agent has exceeded his authority, the principal issolidarily liable
with the agent if the former allowed the latter to act as though he had full powers."
(Emphasis supplied).
The above-quoted article is new. It is intended to protect the rights of innocent
persons. In such a situation, both the principal and the agent may be considered as
joint tortfeasors whose liability is joint and solidary.
Authority by estoppel has arisen in the instant case because by its negligence, the
principal, Manila Remnant, has permitted its agent, A.U. Valencia and Co., to
exercise powers not granted to it. That the principal might not have had actual
knowledge of theagent's misdeed is of no moment.
Tiu Huy Tiac, therefore, by petitioner's own representations and manifestations,
became an agent of petitioner by estoppel, an admission or representation is
rendered conclusive upon the person making it, and cannot be denied or disproved
as against the person relying thereon (Article 1431, Civil Code of the Philippines). A
party cannot be allowed to go back on his own acts and representations to the
prejudice of the other party who, in good faith, relied upon them (Philippine
National Bank v. Intermediate Appellate Court, et al., 189 SCRA 680 [1990]).
Taken in this light,. petitioner is liable for the transaction entered into by Tiu Huy
Tiac on his behalf. Thus, even when the agent has exceeded his authority, the
principal is solidarily liable with the agent if the former allowed the latter to fact as
though he had full powers (Article 1911 Civil Code), as in the case at bar.
Finally, although it may appear that Tiu Huy Tiac defrauded his principal (petitioner)
in not turning over the proceeds of the transaction to the latter, such fact cannot in
any way relieve nor exonerate petitioner of his liability to private respondent. For it
is an equitable maxim that as between two innocent parties, the one who made it
possible for the wrong to be done should be the one to bear the resulting loss
(Francisco vs. Government Service Insurance System, 7 SCRA 577 [1963]).
Inasmuch as the fundamental issue of the capacity or incapacity of the purported
agent Tiu Huy Tiac, has already been resolved, the Court deems it unnecessary to
resolve the other peripheral issues raised by petitioner.
WHEREFORE, the instant petition in hereby DENIED for lack of merit. Costs against
petitioner.
[G.R. No. 94050. November 21, 1991.]
SYLVIA H. BEDIA and HONTIVEROS & ASSOCIATED PRODUCERS PHILS.
YIELDS, INC., Petitioners, v. EMILY A. WHITE and HOLMAN T.
WHITE, Respondents.
Ramon A. Gonzales for Petitioner.
Renato S. Corpuz for Private Respondents.
SYLLABUS
1. CIVIL LAW; SPECIAL CONTRACTS; AGENCY; AGENT, NOT LIABLE FOR ACTS
PERFORMED BY HER FOR AND IMPUTABLE TO THE PRINCIPAL. — If the plaintiffs
had any doubt about the capacity in which Bedia was acting, what they should have
done was verify the matter with Hontiveros. They did not. Instead, they simply
accepted Bedia’s representation that she was an agent of Hontiveros and dealt with
her as such. Under Article 1910 of the Civil Code, "the principal must comply with all
the obligations which the agent may have contracted within the scope of his
authority." Hence, the private respondents cannot now hold Bedia liable for the acts
performed by her for, and imputable to, Hontiveros as her principal.
2. ID.; ID.; ID.; WAIVER OF CLAIMS AGAINST THE PRINCIPAL; FORFEITS
WHATEVER CLAIMS AGAINST THE AGENT; CASE AT BAR. — The plaintiffs’ position
became all the more untenable when they moved on June 5, 1984, for the dismissal
of the complaint against Hontiveros, leaving Bedia as the sole defendant. Hontiveros
had admitted as early as when it filed its answer that Bedia was acting as its agent.
The effect of the motion was to leave the plaintiffs without a cause of action against
Bedia for the obligation, if any, of Hontiveros. Our conclusion is that since it has not
been found that Bedia was acting beyond the scope of her authority when she
entered into the Participation Contract on behalf of Hontiveros, it is the latter that
should be held answerable for any obligation arising from that agreement. By
moving to dismiss the complaint against Hontiveros, the plaintiffs virtually disarmed
themselves and forfeited whatever claims they might have proved against the latter
under the contract signed for it by Bedia. It should be obvious that having waived
these claims against the principal, they cannot now assert them against the agent.
DECISION
CRUZ, J.:
The basic issue before us is the capacity in which petitioner Sylvia H. Bedia entered
into the subject contract with private respondent Emily A. White. Both the trial court
and the respondent court held she was acting in her own personal behalf. She faults
this finding as reversible error and insists that she was merely acting as an agent.
The case arose when Bedia and White entered into a Participation Contract 1
reading in full as follows:chanrob1es virtual 1aw library
THE STATE FAIR OF TEXAS ‘80
PARTICIPATION CONTRACT
PARTICIPANT (COMPANY NAME) EMILY WHITE ENTERPRISES.
I/We, the abovementioned company hereby agrees to participate in the 1980 Dallas
State Fair to be held in Dallas, Texas on October 3, to October 19, 1980. I/We
request for a 15 square meter booth space worth $2,250.00 U.S. Dollars.
I/We further understand that this participation contract shall be deemed non-
cancelable after payment of the said down payment, and that any intention on our
part to cancel the same shall render whatever amount we have paid forfeited in
favor of HONTIVEROS & ASSOCIATED PRODUCERS PHILIPPINE YIELDS,
INC.chanrobles.com : virtual law library
FOR THE ABOVE CONSIDERATION, I/We understand the HONTIVEROS &
ASSOCIATED PRODUCERS PHIL. YIELDS, INC. shall: Reserve said booth for our
exclusive perusal; We also understand that the above cost includes overall exterior
booth decoration and materials but does not include interior designs which will be
per our specifications and expenses.
PARTICIPANT’S PARTICIPATION
AUTHORIZED SIGNATURE: ACCEPTED BY:chanrob1es virtual 1aw library
(SGD.) EMILY WHITE (SGD.) SYLVIA H. BEDIA
DATE: 8/13/80 DATE: Aug. 1, 1980.

On August 10, 1986, White and her husband filed a complaint in the Regional Trial
Court of Pasay City for damages against Bedia and Hontiveros & Associated
Producers Phil. Yields, Inc. for damages caused by their fraudulent violation of their
agreement. She averred that Bedia had approached her and persuaded her to
participate in the State of Texas Fair, and that she made a down payment of
$500.00 to Bedia on the agreed display space. In due time, she enplaned for Dallas
with her merchandise but was dismayed to learn later that the defendants had not
paid for or registered any display space in her name, nor were they authorized by
the state fair director to recruit participants. She said she incurred losses as a result
for which the defendants should be held solidarily liable. 2
In their joint answer, the defendants denied the plaintiffs allegation that they had
deceived her and explained that no display space was registered in her name as she
was only supposed to share the space leased by Hontiveros in its name. She was
not allowed to display her goods in that space because she had not paid her balance
of $1,750.00, in violation of their contract. Bedia also made the particular averment
that she did not sign the Participation Contract on her own behalf but as an agent of
Hontiveros and that she had later returned the advance payment of $500.00 to the
plaintiff. The defendants filed their own counterclaim and complained of malice on
the part of the plaintiffs. 3
In the course of the trial, the complaint against Hontiveros was dismissed on motion
of the plaintiffs. 4
In his decision dated May 29, 1986, Judge Fermin Martin, Jr. found Bedia liable for
fraud and awarded the plaintiffs actual and moral damages plus attorney’s fees and
the costs. The court said:chanrob1es virtual 1aw library
In claiming to be a mere agent of Hontiveros & Associated Producers Phil. Yields,
Inc., defendant Sylvia H. Bedia evidently attempted to escape liability for herself.
Unfortunately for her, the "Participation Contract" is not actually in representation
or in the name of said corporation. It is a covenant entered into by her in her
personal capacity, for no one may contract in the name of another without being
authorized by the latter, or unless she has by law a right to represent her. (Art.
1347, new Civil Code)chanrobles.com.ph : virtual law library
Sustaining the trial court on this point, the respondent court 5 declared in its
decision dated March 30, 1990:chanrob1es virtual 1aw library
The evidence, on the whole, shows that the definitely acted on her own. She
represented herself as authorized by the State of Texas to solicit and assign booths
at the Texas fair; she assured the appellee that she could give her booth. Under
Article 1883 of the New Civil Code, if the agent acts in his own name, the principal
has no right of action against the persons with whom the agent had contracted.
We do not share these views.
It is noteworthy that in her letter to the Minister of Trade dated December 23, 1984,
Emily White began:chanrob1es virtual 1aw library
I am a local exporter who was recruited by Hontiveros & Associated Producers Phil.
Yields, Inc. to participate in the State Fair of Dallas, Texas which was held last Oct.
3 to 19, 1980. Hontiveros & Associates charged me US $150.00 per square meter
for display booth of said fair. I have paid an advance of US $500.00 as partial
payment for the total space of 15 square meter of which is $2,250.00 (Two
Thousand Two Hundred Fifty Dollars). 6
As the Participation Contract was signed by Bedia, the above statement was an
acknowledgment by White that Bedia was only acting for Hontiveros when it
recruited her as a participant in the Texas State Fair and charged her a partial
payment of $500.00. This amount was to be fortified to Hontiveros in case of
cancellation of her of the agreement. The fact that the contract was typewritten on
the letterhead stationery of Hontiveros bolsters this conclusion in the absence of
any showing that said stationery had been illegally used by Bedia.
Significantly, Hontiveros itself has not repudiated Bedia’s agency as it would have if
she had really not signed in its name. In the answer it filed with Bedia, it did not
deny the latter’s allegation in Paragraph 4 thereof that she was only acting as its
agent when she solicited White’s participation. In fact, by filing the answer jointly
with Bedia through their common counsel, Hontiveros affirmed this allegation.
If the plaintiffs had any doubt about the capacity in which Bedia was acting, what
they should have done was verify the matter with Hontiveros. They did not. Instead,
they simply accepted Bedia’s representation that she was an agent of Hontiveros
and dealt with her as such. Under Article 1910 of the Civil Code, "the principal must
comply with all the obligations which the agent may have contracted within the
scope of his authority." Hence, the private respondents cannot now hold Bedia liable
for the acts performed by her for, and imputable to, Hontiveros as her principal.
The plaintiffs’ position became all the more untenable when they moved on June 5,
1984, for the dismissal of the complaint against Hontiveros, 7 leaving Bedia as the
sole defendant. Hontiveros had admitted as early as when it filed its answer that
Bedia was acting as its agent. The effect of the motion was to leave the plaintiffs
without a cause of action against Bedia for the obligation, if any, of
Hontiveros.chanrobles virtual lawlibrary
Our conclusion is that since it has not been found that Bedia was acting beyond the
scope of her authority when she entered into the Participation Contract on behalf of
Hontiveros, it is the latter that should be held answerable for any obligation arising
from that agreement. By moving to dismiss the complaint against Hontiveros, the
plaintiffs virtually disarmed themselves and forfeited whatever claims they might
have proved against the latter under the contract signed for it by Bedia. It should
be obvious that having waived these claims against the principal, they cannot now
assert them against the agent.
WHEREFORE, the appealed decision dated March 30, 1990, of the respondent court
is REVERSED and a new judgment is rendered dismissing Civil Case No. 9246-P in
the Regional Trial Court of Pasay City.
G.R. No. 137686 February 8, 2000
RURAL BANK OF MILAOR (CAMARINES SUR), petitioner,
vs. FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO,
FELICISIMO OCFEMIA, RENATO OCFEMIA JR, and WINSTON
OCFEMIA, respondents.
PANGANIBAN, J.:
When a bank, by its acts and failure to act, has clearly clothed its manager with
apparent authority to sell an acquired asset in the normal course of business, it is
legally obliged to confirm the transaction by issuing a board resolution to enable the
buyers to register the property in their names. It has a duty to perform necessary
and lawful acts to enable the other parties to enjoy all benefits of the contract which
it had authorized.
The Case
Before this Court is a Petition for Review on Certiorari challenging the December 18,
1998 Decision of the Court of Appeals 1 (CA) in CA-GR SP No. 46246, which affirmed
the May 20, 1997 Decision 2 of the Regional Trial Court (RTC) of Naga City (Branch
28). The CA disposed as follows:
Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED.
Costs against the respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA ruled in this wise:
WHEREFORE, in view of all the foregoing findings, decision is hereby rendered
whereby the [petitioner] Rural Bank of Milaor (Camarines Sur), Inc. through its
Board of Directors is hereby ordered to immediately issue a Board Resolution
confirming the Deed of Sale it executed in favor of Renato Ocfemia marked Exhibits
C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00) PESOS
as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees;
THIRTY THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND
(P30,000.00) PESOS as exemplary damages; and to pay the costs. 4
Also assailed is the February 26, 1999 CA Resolution 5
which denied petitioner's
Motion for Reconsideration.
The Facts
The trial court's summary of the undisputed facts was reproduced in the CA Decision
as follows:
This is an action for mandamus with damages. On April 10, 1996, [herein
petitioner] was declared in default on motion of the [respondents] for failure to file
an answer within the reglementary-period after it was duly served with summons.
On April 26, 1996, [herein petitioner] filed a motion to set aside the order of default
with objection thereto filed by [herein respondents].
On June 17, 1996, an order was issued denying [petitioner's] motion to set aside
the order of default. On July 10, 1996, the defendant filed a motion for
reconsideration of the order of June 17, 1996 with objection thereto by
[respondents]. On July 12, 1996, an order was issued denying [petitioner's] motion
for reconsideration. On July 31, 1996, [respondents] filed a motion to set case for
hearing. A copy thereof was duly furnished the [petitioner] but the latter did not file
any opposition and so [respondents] were allowed to present their evidence ex-
parte. A certiorari case was filed by the [petitioner] with the Court of Appeals
docketed as CA GR No. 41497-SP but the petition was denied in a decision rendered
on March 31, 1997 and the same is now final.
The evidence presented by the [respondents] through the testimony of Marife O.
Niño, one of the [respondents] in this case, show[s] that she is the daughter of
Francisca Ocfemia, a co-[respondent] in this case, and the late Renato Ocfemia who
died on July 23, 1994. The parents of her father, Renato Ocfemia, were Juanita
Arellano Ocfemia and Felicisimo Ocfemia. Her other co-[respondents] Rowena O.
Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her
brothers and sisters.1âwphi1.nêt
Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the
petition which are located in Bombon, Camarines Sur and that they are the ones
possessing them which [were] originally owned by her grandparents, Juanita
Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her grandparents,
[respondents] mortgaged the said five (5) parcels of land and two (2) others to the
[petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage
(Exhs. A and A-1) and the Promissory Note (Exh. B).
The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to
redeem the mortgaged properties consisting of seven (7) parcels of land and so the
mortgage was foreclosed and thereafter ownership thereof was transferred to the
[petitioner] bank. Out of the seven (7) parcels that were foreclosed, five (5) of
them are in the possession of the [respondents] because these five (5) parcels of
land described in paragraph 6 of the petition were sold by the [petitioner] bank to
the parents of Marife O. Niño as evidenced by a Deed of Sale executed in January
1988 (Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C),
have not been, however transferred in the name of the parents of Merife O. Niño
after they were sold to her parents by the [petitioner] bank because according to
the Assessor's Office the five (5) parcels of land, subject of the sale, cannot be
transferred in the name of the buyers as there is a need to have the document of
sale registered with the Register of Deeds of Camarines Sur.
In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines
Sur with the Deed of Sale (Exh. C) in order to have the same registered. The
Register of Deeds, however, informed her that the document of sale cannot be
registered without a board resolution of the [petitioner] Bank. Marife Niño then went
to the bank, showed to if the Deed of Sale (Exh. C), the tax declaration and receipt
of tax payments and requested the [petitioner] for a board resolution so that the
property can be transferred to the name of Renato Ocfemia the husband of
petitioner Francisca Ocfemia and the father of the other [respondents] having died
already.
The [petitioner] bank refused her request for a board resolution and made many
alibi[s]. She was told that the [petitioner] bank ha[d] a new manager and it had no
record of the sale. She was asked and she complied with the request of the
[petitioner] for a copy of the deed of sale and receipt of payment. The president of
the [petitioner] bank told her to get an authority from her parents and other
[respondents] and receipts evidencing payment of the consideration appearing in
the deed of sale. She complied with said requirements and after she gave all these
documents, Marife O. Niño was again told to wait for two (2) weeks because the
[petitioner] bank would still study the matter.
After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was
told that the resolution of the board would not be released because the [petitioner]
bank ha[d] no records from the old manager. Because of this, Marife O. Niño
brought the matter to her lawyer and the latter wrote a letter on December 22,
1995 to the [petitioner] bank inquiring why no action was taken by the board of the
request for the issuance of the resolution considering that the bank was already
fully paid [for] the consideration of the sale since January 1988 as shown by the
deed of sale itself (Exh. D and D-1 ).
On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter
(Exh. D and D-1) informing the latter that the request for board resolution ha[d]
already been referred to the board of directors of the [petitioner] bank with another
request that the latter should be furnished with a certified machine copy of the
receipt of payment covering the sale between the [respondents] and the [petitioner]
(Exh. E). This request of the [petitioner] bank was already complied [with] by
Marife O. Niño even before she brought the matter to her lawyer.
On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the
[petitioner] bank informing the latter that they were already furnished the receipts
the bank was asking [for] and that the [respondents] want[ed] already to know the
stand of the bank whether the board [would] issue the required board resolution as
the deed of sale itself already show[ed] that the [respondents were] clearly entitled
to the land subject of the sale (Exh. F). The manager of the [petitioner] bank
received the letter which was served personally to him and the latter told Marife O.
Niño that since he was the one himself who received the letter he would not sign
anymore a copy showing him as having already received said letter (Exh. F).
After several days from receipt of the letter (Exh. F) when Marife O. Niño went to
the [petitioner] again and reiterated her request, the manager of the [petitioner]
bank told her that they could not issue the required board resolution as the
[petitioner] bank ha[d] no records of the sale. Because of this Merife O. Niño
already went to their lawyer and ha[d] this petition filed.
The [respondents] are interested in having the property described in paragraph 6 of
the petition transferred to their names because their mother and co-petitioner,
Francisca Ocfemia, is very sickly and they want to mortgage the property for the
medical expenses of Francisca Ocfemia. The illness of Francisca Ocfemia beg[a]n
after her husband died and her suffering from arthritis and pulmonary disease
already became serious before December 1995.
Marife O. Niño declared that her mother is now in serious condition and they could
not have her hospitalized for treatment as they do not have any money and this is
causing the family sleepless nights and mental anguish, thinking that their mother
may die because they could not submit her for medication as they do not have
money. 6
The trial court granted the Petition. As noted earlier, the CA affirmed the RTC
Decision.
Hence, this recourse. 7 In a Resolution dated June 23, 1999, this Court issued a
Temporary Restraining Order directing the trial court "to refrain and desist from
executing [pending appeal] the decision dated May 20, 1997 in Civil Case No. RTC-
96-3513, effective immediately until further orders from this Court." 8
Ruling of the Court of Appeals
The CA held that herein respondents were "able to prove their present cause of
action" against petitioner. It ruled that the RTC had jurisdiction over the case,
because (1) the Petition involved a matter incapable of pecuniary estimation;
(2) mandamus fell within the jurisdiction of RTC; and (3) assuming that the action
was for specific performance as argued by the petitioner, it was still cognizable by
the said court.
Issues
In its Memorandum, 9
the bank posed the following questions:
1. Question of Jurisdiction of the Regional Trial Court. — Has a Regional Trial Court
original jurisdiction over an action involving title to real property with a total
assessed value of less than P20,000.00?
2. Question of Law. — May the board of directors of a rural banking corporation be
compelled to confirm a deed of absolute sale of real property owned by the
corporation which deed of sale was executed by the bank manager without prior
authority of the board of directors of the rural banking corporation? 10
This Court's Ruling
The present Petition has no merit.
First Issue:
Jurisdiction of the Regional Trial Court
Petitioner submits that the RTC had no jurisdiction over the case. Disputing the
ruling of the appellate court that the present action was incapable of pecuniary
estimation, petitioner argues that the matter in fact involved title to real property
worth less than P20,000. Thus, under RA 7691, the case should have been filed
before a metropolitan trial court, a municipal trial court or a municipal circuit trial
court.
We disagree. The well-settled rule is that jurisdiction is determined by the
allegations of the complaint. 11 In the present case, the Petition for Mandamus filed
by respondents before the trial court prayed that petitioner-bank be compelled to
issue a board resolution confirming the Deed of Sale covering five parcels of
unregistered land, which the bank manager had executed in their favor. The RTC
has jurisdiction over such action pursuant to Section 21 of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts shall exercise
original jurisdiction;
(1) in the issuance of writ of certiorari, prohibition, mandamus, quo
warranto, habeas corpus and injunction which may be enforced in any part of their
respective regions; and
(2) In actions affecting ambassadors and other public ministers and consuls.
In failing to file its answer specifically denying under oath the Deed of Sale, the
bank admitted the due execution of the said contract. Such admission means that it
acknowledged that Tena was authorized to sign the Deed of Sale on its
behalf. 13 Thus, defenses that are inconsistent with the due execution and the
genuineness of the written instrument are cut off by an admission implied from a
failure to make a verified specific denial.

A perusal of the Petition shows that the respondents did not raise any question
Other Acts of the Bank
involving the title to the property, but merely asked that petitioner's board of
directors be directed to issue the subject resolution. Moreover, the bank did not
controvert the allegations in the said Petition. To repeat, the issue therein was not In any event, the bank acknowledged, by its own acts or failure to act, the authority
the title to the property; it was respondents' right to compel the bank to issue a of Fe S. Tena to enter into binding contracts. After the execution of the Deed of
board resolution confirming the Deed of Sale. Sale, respondents occupied the properties in dispute and paid the real estate taxes
due thereon. If the bank management believed that it had title to the property, it
should have taken some measures to prevent the infringement or invasion of its
Second Issue:
title thereto and possession thereof.
Authority of the Bank Manager

Likewise, Tena had previously transacted business on behalf of the bank, and the
Respondents initiated the present proceedings, so that they could transfer to their
latter had acknowledged her authority. A bank is liable to innocent third persons
names the subject five parcels of land; and subsequently, to mortgage said lots and
where representation is made in the course of its normal business by an agent like
to use the loan proceeds for the medical expenses of their ailing mother. For the
Manager Tena, even though such agent is abusing her authority. 14 Clearly, persons
property to be transferred in their names, however, the register of deeds required
dealing with her could not be blamed for believing that she was authorized to
the submission of a board resolution from the bank confirming both the Deed of
transact business for and on behalf of the bank. Thus, this Court has ruled in Board
Sale and the authority of the bank manager, Fe S. Tena, to enter into such
of Liquidators v. Kalaw: 15
transaction. Petitioner refused. After being given the runaround by the bank,
respondents sued in exasperation.
Settled jurisprudence has it that where similar acts have been approved by
the directors as a matter of general practice, custom, and policy, the
Allegations in the Petition for Mandamus Deemed Admitted
general manager may bind the company without formal authorization of
the board of directors. In varying language, existence of such authority is
Respondents based their action before the trial court on the Deed of Sale, the established, by proof of the course of business, the usages and practices of
substance of which was alleged in and a copy thereof was attached to the Petition the company and by the knowledge which the board of directors has, or
for Mandamus. The Deed named Fe S. Tena as the representative of the bank. must be presumed to have, of acts and doings of its subordinates in and
Petitioner, however, failed to specifically deny under oath the allegations in that about the affairs of the corporation. So also,
contract. In fact, it filed no answer at all, for which reason it was declared in
default. Pertinent provisions of the Rules of Court read:
. . . authority to act for and bind a corporation may be presumed from acts
of recognition in other instances where the power was in fact exercised.
Sec. 7. Action or defense based on document. — Whenever an action or
defense is based upon a written instrument or document, the substance of
. . . Thus, when, in the usual course of business of a corporation, an officer
such instrument or document shall be set forth in the pleading, and the
has been allowed in his official capacity to manage its affairs, his authority
original or a copy thereof shall be attached to the pleading as an exhibit,
to represent the corporation may be implied from the manner in which he
which shall be deemed to be a part of the pleading, or said copy may with
has been permitted by the directors to manage its business.
like effect be set forth in the pleading.

Notwithstanding the putative authority of the manager to bind the bank in the Deed
Sec. 8. How to contest genuineness of such documents.— When an action
of Sale, petitioner has failed to file an answer to the Petition below within the
or defense is founded upon a written instrument, copied in or attached to
reglementary period, let alone present evidence controverting such authority.
the corresponding pleading as provided in the preceding section, the
Indeed, when one of herein respondents, Marife S. Nino, went to the bank to ask for
genuineness and due execution of the instrument shall be deemed
the board resolution, she was merely told to bring the receipts. The bank failed to
admitted unless the adverse party, under oath, specifically denies them,
categorically declare that Tena had no authority. This Court stresses the following:
and sets forth what he claims to be the facts; but this provision does not
apply when the adverse party does not appear to be a party to the
instrument or when compliance with an order for an inspection of the . . . Corporate transactions would speedily come to a standstill were every
original instrument is refused. 12 person dealing with a corporation held duty-bound to disbelieve every act
of its responsible officers, no matter how regular they should appear on
 their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil.
634, 654-655, that —
In passing upon the liability of a corporation in cases of this kind it
is always well to keep in mind the situation as it presents itself to
the third party with whom the contract is made. Naturally he can
have little or no information as to what occurs in corporate
meetings; and he must necessarily rely upon the external
manifestation of corporate consent. The integrity of commercial
transactions can only be maintained by holding the corporation
strictly to the liability fixed upon it by its agents in accordance
with law; and we would be sorry to announce a doctrine which
would permit the property of man in the city of Paris to be
whisked out of his hands and carried into a remote quarter of the
earth without recourse against the corporation whose name and
authority had been used in the manner disclosed in this case. As
already observed, it is familiar doctrine that if a corporation
knowingly permits one of its officers, or any other agent, to do
acts within the scope of an apparent authority, and thus holds him
out to the public as possessing power to do those acts, the
corporation will, as against any one who has in good faith dealt
with the corporation through such agent, be estopped from
denying his authority; and where it is said "if the corporation
permits this means the same as "if the thing is permitted by the
directing power of the corporation." 16
In this light, the bank is estopped from questioning the authority of the bank
manager to enter into the contract of sale. If a corporation knowingly permits one of
its officers or any other agent to act within the scope of an apparent authority, it
holds the agent out to the public as possessing the power to do those acts; thus,
the corporation will, as against anyone who has in good faith dealt with it through
such agent, be estopped from denying the agent's authority. 17
Unquestionably, petitioner has authorized Tena to enter into the Deed of Sale.
Accordingly, it has a clear legal duty to issue the board resolution sought by
respondent's. Having authorized her to sell the property, it behooves the bank to
confirm the Deed of Sale so that the buyers may enjoy its full use.
The board resolution is, in fact, mere paper work. Nonetheless, it is paper work
necessary in the orderly operations of the register of deeds and the full enjoyment
of respondents' rights. Petitioner-bank persistently and unjustifiably refused to
perform its legal duty. Worse, it was less than candid in dealing with respondents
regarding this matter. In this light, the Court finds it proper to assess the bank
treble costs, in addition to the award of damages.
WHEREFORE, the Petition is hereby DENIED and the assailed Decision and
Resolution AFFIRMED. The Temporary Restraining Order issued by this Court is
hereby LIFTED. Treble costs against petitioner.
SO ORDERED.
Melo, Purisima and Gonzaga-Reyes, JJ., concur.
Vitug, J., please see concurring opinion.
Separate Opinions
VITUG, J., concurring opinion;
I share the views expressed in the ponencia written for the Court by our esteemed
colleague Mr. Justice Artemio V. Panganiban. There is just a brief clarificatory
statement that I thought could be made.
The Civil Code, being a law of general application, can be suppletory to special laws
and certainly not preclusive of those that govern commercial transactions. Indeed,
in its generic sense, civil law can rightly be said to encompass commercial law. Jus
civile, in ancient Rome, was merely used to distinguish it from jus gentium or the
law common to all the nations within the empire and, at some time later, only in
contrast to international law. In more recent times, civil law is so referred to as
private law in distinction from public law and criminal law. Today, it may not be
totally inaccurate to consider commercial law, among some other special laws, as
being a branch of civil law.
Sec. 45 of the Corporation Code provides:
Sec. 45. Ultra vires acts of corporations. — No corporation under this Code
shall possess or exercise any corporate powers except those conferred by
this Code or by its articles of incorporation and except such as are
necessary or incidental to the exercise of the powers so conferred.
The language of the Code appears to confine the term ultra vires to an act outside
or beyond express, implied and incidental corporate powers. Nevertheless, the
concept can also include those acts that may ostensibly be within such powers but
are, by general or special laws, either proscribed or declared illegal. In general,
although perhaps loosely, ultra vires has also been used to designate those acts of
the board of directors or of corporate officers when acting beyond their respective
spheres of authority. In the context that the law has used the term in Article 45 of
the Corporation Code, an ultra vires act would be void and not susceptible to
ratification. 1 In determining whether or not a corporation may perform an act, one
considers the logical and necessary relation between the act assailed and the
corporate purpose expressed by the law or in the charter. For if the act were one
which is lawful in itself or not otherwise prohibited and done for the purpose of
serving corporate ends or reasonably contributes to the promotion of those ends in
a substantial and not merely in a remote and fanciful sense, it may be fairly
considered within corporate powers. 2
Sec. 23 of the Corporation Code states that the corporate powers are to be
exercised, all business conducted, and all property of corporations controlled and
held, by the Board of Directors. When the act of the board is within corporate
powers but it is done without the concurrence of the shareholders as and when such
approval is required by law 3 or when the act is beyond its competence to do, 4 the
act has been described as void 5 or, as unenforceable, 6 or as ineffective and not
legally binding. 7 These holdings notwithstanding, the act cannot accurately be
likened to an ultra vires act of the corporation itself defined in Section 45 of the
Code. Where the act is within corporate powers but the board has acted without
being competent to independently do so, the action is not necessarily and totally
devoid of effects, and it may generally be ratified expressly or impliedly. Thus, an
acceptance of benefits derived by the shareholders from an outside investment
made by the board without the required concurrence of the stockholders may,
nonetheless, be so considered as an effective investment. 8 It may be said,
however, that when the board resolution is yet executory, the act should aptly be
deemed inoperative and specific performance cannot be validly demanded but, if for
any reason, the contemplated action is carried out, such principles as ratification or
prescription when applicable, normally unknown in void contracts, can serve to
negate a claim for the total nullity thereof.
Corporate officers, in their case, may act on such matters as may be authorized
either expressly by the By-laws or Board Resolutions or impliedly such as by general
practice or policy or as are implied by express powers. When officers are allowed to
act in certain particular cases, their acts conformably therewith can bind the
company. Hence, a corporate officer entrusted with general management and
control of the business has the implied authority to act or contract for the
corporation which may be necessary or appropriate to conduct the ordinary
business. 9 If the act of corporate officers comes within corporate powers but it is
done without any express or implied authority therefor from the by-laws, board
resolutions or corporate practices, such an act does not bind the corporation. The
Board, however, acting within its competence, may ratify the unauthorized act of
the corporate officer. So, too, a corporation may be held in estoppel from denying
as against innocent third persons the authority of its officers or agents who have
been clothed by it with ostensible or apparent authority. 10
The Corporation Code itself has not been that explicit with respect to the
consequences of ultra vires acts; hence, the varied ascriptions to its effects
heretofore expressed. It may well be to consider futile any further attempt to have
these situations bear any exact equivalence to the civil law precepts of defective
contracts. Nevertheless, general statements could be made. Here reiterated, while
an act of the corporation which is either illegal or outside of express, implied or
incidental powers as so provided by law or the charter would be void under Article
5 11 of the Civil Code, and the act is not susceptible to ratification, an unauthorized
act (if within corporate powers) of the board or a corporate officer, however, would
only be unenforceable conformably with Article 1403 12 of the Civil Code but, if the
party with whom the agent has contracted is aware of the latter's limits of powers,
the unauthorized act is declared void by Article 1898 13 of the same Code, although
still susceptible thereunder to ratification by the principal. Any person dealing with
corporate boards and officers may be said to be charged with the knowledge that
the latter can only act within their respective limits of power, and he is put to notice
accordingly. Thus, it would generally behoove such a person to look into the extent
of the authority of corporate agents since the onus would ordinarily be with
him.1âwphi1.nêt
[G.R. NO. 149353 : June 26, 2006]
JOCELYN B. DOLES, Petitioner, v. MA. AURA TINA ANGELES, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
This refers to the Petition for Review on Certiorari under Rule 45 of the Rules of
Court questioning the Decision 1 dated April 30, 2001 of the Court of Appeals (CA) in
C.A.-G.R. CV No. 66985, which reversed the Decision dated July 29, 1998 of the
Regional Trial Court (RTC), Branch 21, City of Manila; and the CA Resolution 2 dated
August 6, 2001 which denied petitioner's Motion for Reconsideration.
The antecedents of the case follow:
On April 1, 1997, Ma. Aura Tina Angeles (respondent) filed with the RTC a complaint
for Specific Performance with Damages against Jocelyn B. Doles (petitioner),
docketed as Civil Case No. 97-82716. Respondent alleged that petitioner was
indebted to the former in the concept of a personal loan amounting to P405,430.00
representing the principal amount and interest; that on October 5, 1996, by virtue
of a "Deed of Absolute Sale", 3 Petitioner, as seller, ceded to respondent, as buyer, a
parcel of land, as well as the improvements thereon, with an area of 42 square
meters, covered by Transfer Certificate of Title No. 382532, 4 and located at a
subdivision project known as Camella Townhomes Sorrente in Bacoor, Cavite, in
order to satisfy her personal loan with respondent; that this property was
mortgaged to National Home Mortgage Finance Corporation (NHMFC) to secure
petitioner's loan in the sum of P337,050.00 with that entity; that as a condition for
the foregoing sale, respondent shall assume the undue balance of the mortgage and
pay the monthly amortization of P4,748.11 for the remainder of the 25 years which
began on September 3, 1994; that the property was at that time being occupied by
a tenant paying a monthly rent of P3,000.00; that upon verification with the
NHMFC, respondent learned that petitioner had incurred arrearages amounting
to P26,744.09, inclusive of penalties and interest; that upon informing the petitioner
of her arrears, petitioner denied that she incurred them and refused to pay the
same; that despite repeated demand, petitioner refused to cooperate with
respondent to execute the necessary documents and other formalities required by
the NHMFC to effect the transfer of the title over the property; that petitioner
collected rent over the property for the month of January 1997 and refused to remit
the proceeds to respondent; and that respondent suffered damages as a result and
was forced to litigate.
Petitioner, then defendant, while admitting some allegations in the Complaint,
denied that she borrowed money from respondent, and averred that from June to
September 1995, she referred her friends to respondent whom she knew to be
engaged in the business of lending money in exchange for personal checks through
her capitalist Arsenio Pua. She alleged that her friends, namely, Zenaida Romulo,
Theresa Moratin, Julia Inocencio, Virginia Jacob, and Elizabeth Tomelden, borrowed
money from respondent and issued personal checks in payment of the loan; that
the checks bounced for insufficiency of funds; that despite her efforts to assist
respondent to collect from the borrowers, she could no longer locate them; that,
because of this, respondent became furious and threatened petitioner that if the
accounts were not settled, a criminal case will be filed against her; that she was
forced to issue eight checks amounting to P350,000 to answer for the bounced
checks of the borrowers she referred; that prior to the issuance of the checks she
informed respondent that they were not sufficiently funded but the latter
nonetheless deposited the checks and for which reason they were subsequently
dishonored; that respondent then threatened to initiate a criminal case against her
for violation of Batas Pambansa Blg. 22; that she was forced by respondent to
execute an "Absolute Deed of Sale" over her property in Bacoor, Cavite, to avoid
criminal prosecution; that the said deed had no valid consideration; that she did not
appear before a notary public; that the Community Tax Certificate number on the
deed was not hers and for which respondent may be prosecuted for falsification and
perjury; and that she suffered damages and lost rental as a result.
The RTC identified the issues as follows: first, whether the Deed of Absolute Sale is
valid; second; if valid, whether petitioner is obliged to sign and execute the
necessary documents to effect the transfer of her rights over the property to the
respondent; and third, whether petitioner is liable for damages.
On July 29, 1998, the RTC rendered a decision the dispositive portion of which
states:
WHEREFORE, premises considered, the Court hereby orders the dismissal of the
complaint for insufficiency of evidence. With costs against plaintiff.
SO ORDERED.
The RTC held that the sale was void for lack of cause or consideration: 5
Plaintiff Angeles' admission that the borrowers are the friends of defendant Doles
and further admission that the checks issued by these borrowers in payment of the
loan obligation negates [sic] the cause or consideration of the contract of sale
executed by and between plaintiff and defendant. Moreover, the property is not
solely owned by defendant as appearing in Entry No. 9055 of Transfer Certificate of
Title No. 382532 (Annex A, Complaint), thus:
"Entry No. 9055. Special Power of Attorney in favor of Jocelyn Doles covering the
share of Teodorico Doles on the parcel of land described in this certificate of title by
virtue of the special power of attorney to mortgage, executed before the notary
public, etc."
The rule under the Civil Code is that contracts without a cause or consideration
produce no effect whatsoever. (Art. 1352, Civil Code).
Respondent appealed to the CA. In her appeal brief, respondent interposed her sole
assignment of error:
THE TRIAL COURT ERRED IN DISMISSING THE CASE AT BAR ON THE GROUND OF
[sic] THE DEED OF SALE BETWEEN THE PARTIES HAS NO CONSIDERATION OR
INSUFFICIENCY OF EVIDENCE.6
On April 30, 2001, the CA promulgated its Decision, the dispositive portion of which
reads:
WHEREFORE, IN VIEW OF THE FOREGOING, this appeal is hereby GRANTED. The
Decision of the lower court dated July 29, 1998 is REVERSED and SET ASIDE. A new
one is entered ordering defendant-appellee to execute all necessary documents to
effect transfer of subject property to plaintiff-appellant with the arrearages of the
former's loan with the NHMFC, at the latter's expense. No costs.
SO ORDERED.
The CA concluded that petitioner was the borrower and, in turn, would "re-lend" the
amount borrowed from the respondent to her friends. Hence, the Deed of Absolute
Sale was supported by a valid consideration, which is the sum of money petitioner
owed respondent amounting to P405,430.00, representing both principal and
interest.
The CA took into account the following circumstances in their entirety: the supposed
friends of petitioner never presented themselves to respondent and that all
transactions were made by and between petitioner and respondent; 7 that the
money borrowed was deposited with the bank account of the petitioner, while
payments made for the loan were deposited by the latter to respondent's bank
account;8that petitioner herself admitted in open court that she was "re-lending" the
money loaned from respondent to other individuals for profit; 9 and that the
documentary evidence shows that the actual borrowers, the friends of petitioner,
consider her as their creditor and not the respondent.10
Furthermore, the CA held that the alleged threat or intimidation by respondent did
not vitiate consent, since the same is considered just or legal if made to enforce
one's claim through competent authority under Article 1335 11 of the Civil
Code;12 that with respect to the arrearages of petitioner on her monthly
amortization with the NHMFC in the sum of P26,744.09, the same shall be deemed
part of the balance of petitioner's loan with the NHMFC which respondent agreed to
assume; and that the amount of P3,000.00 representing the rental for January 1997
supposedly collected by petitioner, as well as the claim for damages and attorney's
fees, is denied for insufficiency of evidence.13
On May 29, 2001, petitioner filed her Motion for Reconsideration with the CA,
arguing that respondent categorically admitted in open court that she acted only as
agent or representative of Arsenio Pua, the principal financier and, hence, she had
no legal capacity to sue petitioner; and that the CA failed to consider the fact that
petitioner's father, who co-owned the subject property, was not impleaded as a
defendant nor was he indebted to the respondent and, hence, she cannot be made
to sign the documents to effect the transfer of ownership over the entire property.
On August 6, 2001, the CA issued its Resolution denying the motion on the ground
that the foregoing matters had already been passed upon.
On August 13, 2001, petitioner received a copy of the CA Resolution. On August 28,
2001, petitioner filed the present Petition and raised the following issues:
I.
WHETHER OR NOT THE PETITIONER CAN BE CONSIDERED AS A DEBTOR OF THE On the first, third, and fourth points, the CA cites the testimony of the petitioner,
RESPONDENT. then defendant, during her cross-examination:22

II. Atty. Diza:

WHETHER OR NOT AN AGENT WHO WAS NOT AUTHORIZED BY THE PRINCIPAL TO Q. You also mentioned that you were not the one indebted to the plaintiff?
COLLECT DEBT IN HIS BEHALF COULD DIRECTLY COLLECT PAYMENT FROM THE cralawlibrary
DEBTOR.
witness:
III.
A. Yes, sir.
WHETHER OR NOT THE CONTRACT OF SALE WAS EXECUTED FOR A CAUSE.14
Atty. Diza:
Although, as a rule, it is not the business of this Court to review the findings of fact
made by the lower courts, jurisprudence has recognized several exceptions, at least
Q. And you mentioned the persons[,] namely, Elizabeth Tomelden, Teresa
three of which are present in the instant case, namely: when the judgment is based
Moraquin, Maria Luisa Inocencio, Zenaida Romulo, they are your friends?
on a misapprehension of facts; when the findings of facts of the courts a quo are
cralawlibrary
conflicting; and when the CA manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, could justify a different
conclusion.15 To arrive at a proper judgment, therefore, the Court finds it necessary witness:
to re-examine the evidence presented by the contending parties during the trial of
the case. A. Inocencio and Moraquin are my friends while [as to] Jacob and Tomelden[,] they
were just referred.
The Petition is meritorious.
Atty. Diza:
The principal issue is whether the Deed of Absolute Sale is supported by a valid
consideration. Q. And you have transact[ed] with the plaintiff?cralawlibrary

1. Petitioner argues that since she is merely the agent or representative of the witness:
alleged debtors, then she is not a party to the loan; and that the Deed of Sale
executed between her and the respondent in their own names, which was
predicated on that pre-existing debt, is void for lack of consideration. A. Yes, sir.

Indeed, the Deed of Absolute Sale purports to be supported by a consideration in Atty. Diza:
the form of a price certain in money 16 and that this sum indisputably pertains to the
debt in issue. This Court has consistently held that a contract of sale is null and void Q. What is that transaction?cralawlibrary
and produces no effect whatsoever where the same is without cause or
consideration.17 The question that has to be resolved for the moment is whether this
debt can be considered as a valid cause or consideration for the sale. witness:

To restate, the CA cited four instances in the record to support its holding that A. To refer those persons to Aura and to refer again to Arsenio Pua, sir.
petitioner "re-lends" the amount borrowed from respondent to her friends: first, the
friends of petitioner never presented themselves to respondent and that all Atty. Diza:
transactions were made by and between petitioner and respondent; 18 second; the
money passed through the bank accounts of petitioner and respondent; 19third,
Q. Did the plaintiff personally see the transactions with your friends?cralawlibrary
petitioner herself admitted that she was "re-lending" the money loaned to other
individuals for profit;20 and fourth, the documentary evidence shows that the actual
borrowers, the friends of petitioner, consider her as their creditor and not the witness:
respondent.21
A. No, sir.
Atty. Diza: Q. How much?cralawlibrary

Q. Your friends and the plaintiff did not meet personally?cralawlibrary witness:

witness: A. Two percent to Tomelden, one percent to Jacob and then Inocencio and my
friends none, sir.
A. Yes, sir.
Based on the foregoing, the CA concluded that petitioner is the real borrower, while
the respondent, the real lender.
Atty. Diza:

But as correctly noted by the RTC, respondent, then plaintiff, made the following
Q. You are intermediaries?cralawlibrary
admission during her cross examination:23

witness:
Atty. Villacorta:

A. We are both intermediaries. As evidenced by the checks of the debtors they were
Q. Who is this Arsenio Pua?cralawlibrary
deposited to the name of Arsenio Pua because the money came from Arsenio Pua.

witness:
xxx

A. Principal financier, sir.

Atty. Diza:

Atty. Villacorta:
Q. Did the plaintiff knew [sic] that you will lend the money to your friends
specifically the one you mentioned [a] while ago?cralawlibrary
Q. So the money came from Arsenio Pua?cralawlibrary
witness:
witness:
A. Yes, she knows the money will go to those persons.
A. Yes, because I am only representing him, sir.
Atty. Diza:
Other portions of the testimony of respondent must likewise be considered: 24
Q. You are re-lending the money?cralawlibrary
Atty. Villacorta:
witness:
Q. So it is not actually your money but the money of Arsenio Pua?cralawlibrary
A. Yes, sir.
witness:
Atty. Diza:
A. Yes, sir.
Q. What profit do you have, do you have commission?cralawlibrary
Court:
witness:
Q. It is not your money?cralawlibrary
A. Yes, sir.
witness:
Atty. Diza:
A. Yes, Your Honor.
Atty. Villacorta: A. Yes, sir.

Q. Is it not a fact Ms. Witness that the defendant borrowed from you to Atty. Villacorta:
accommodate somebody, are you aware of that?cralawlibrary
Q. And because of your assistance, the friends of the defendant who are in need of
witness: money were able to obtain loan to [sic] Arsenio Pua through your assistance?
cralawlibrary
A. I am aware of that.
witness:
Atty. Villacorta:
A. Yes, sir.
Q. More or less she [accommodated] several friends of the defendant?cralawlibrary
Atty. Villacorta:
witness:
Q. So that occasion lasted for more than a year?cralawlibrary
A. Yes, sir, I am aware of that.
witness:
xxx
A. Yes, sir.
Atty. Villacorta:
Atty. Villacorta:
Q. And these friends of the defendant borrowed money from you with the assurance
of the defendant?cralawlibrary Q. And some of the checks that were issued by the friends of the defendant
bounced, am I correct?cralawlibrary
witness:
witness:
A. They go direct to Jocelyn because I don't know them.
A. Yes, sir.
xxx
Atty. Villacorta:
Atty. Villacorta:
Q. And because of that Arsenio Pua got mad with you?cralawlibrary
Q. And is it not also a fact Madam witness that everytime that the defendant
borrowed money from you her friends who [are] in need of money issued check[s] witness:
to you? There were checks issued to you?cralawlibrary
A. Yes, sir.
witness:
Respondent is estopped to deny that she herself acted as agent of a certain Arsenio
A. Yes, there were checks issued. Pua, her disclosed principal. She is also estopped to deny that petitioner acted as
agent for the alleged debtors, the friends whom she (petitioner) referred.
Atty. Villacorta:
This Court has affirmed that, under Article 1868 of the Civil Code, the basis of
agency is representation.25 The question of whether an agency has been created is
Q. By the friends of the defendant, am I correct?cralawlibrary
ordinarily a question which may be established in the same way as any other fact,
either by direct or circumstantial evidence. The question is ultimately one of
witness: intention.26 Agency may even be implied from the words and conduct of the parties
and the circumstances of the particular case. 27 Though the fact or extent of
authority of the agents may not, as a general rule, be established from the
declarations of the agents alone, if one professes to act as agent for another, she
may be estopped to deny her agency both as against the asserted principal and the
third persons interested in the transaction in which he or she is engaged. 28
In this case, petitioner knew that the financier of respondent is Pua; and respondent
knew that the borrowers are friends of petitioner.
The CA is incorrect when it considered the fact that the "supposed friends of
[petitioner], the actual borrowers, did not present themselves to [respondent]" as
evidence that negates the agency relationship it is sufficient that petitioner disclosed
to respondent that the former was acting in behalf of her principals, her friends
whom she referred to respondent. For an agency to arise, it is not necessary that
the principal personally encounter the third person with whom the agent interacts.
The law in fact contemplates, and to a great degree, impersonal dealings where the
principal need not personally know or meet the third person with whom her agent
transacts: precisely, the purpose of agency is to extend the personality of the
principal through the facility of the agent.29
In the case at bar, both petitioner and respondent have undeniably disclosed to
each other that they are representing someone else, and so both of them are
estopped to deny the same. It is evident from the record that petitioner merely
refers actual borrowers and then collects and disburses the amounts of the loan
upon which she received a commission; and that respondent transacts on behalf of
her "principal financier", a certain Arsenio Pua. If their respective principals do not
actually and personally know each other, such ignorance does not affect their
juridical standing as agents, especially since the very purpose of agency is to extend
the personality of the principal through the facility of the agent.
With respect to the admission of petitioner that she is "re-lending" the money
loaned from respondent to other individuals for profit, it must be stressed that the
manner in which the parties designate the relationship is not controlling. If an act
done by one person in behalf of another is in its essential nature one of agency, the
former is the agent of the latter notwithstanding he or she is not so called. 30 The
question is to be determined by the fact that one represents and is acting for
another, and if relations exist which will constitute an agency, it will be an agency
whether the parties understood the exact nature of the relation or not. 31
That both parties acted as mere agents is shown by the undisputed fact that the
friends of petitioner issued checks in payment of the loan in the name of Pua. If it is
true that petitioner was "re-lending", then the checks should have been drawn in
her name and not directly paid to Pua.
With respect to the second point, particularly, the finding of the CA that the
disbursements and payments for the loan were made through the bank accounts of
petitioner and respondent,
suffice it to say that in the normal course of commercial dealings and for reasons of
convenience and practical utility it can be reasonably expected that the facilities of
the agent, such as a bank account, may be employed, and that a sub-agent be
appointed, such as the bank itself, to carry out the task, especially where there is
no stipulation to the contrary.32
In view of the two agency relationships, petitioner and respondent are not privy to
the contract of loan between their principals. Since the sale is predicated on that
loan, then the sale is void for lack of consideration.
2. A further scrutiny of the record shows, however, that the sale might have been
backed up by another consideration that is separate and distinct from the debt:
respondent averred in her complaint and testified that the parties had agreed that
as a condition for the conveyance of the property the respondent shall assume the
balance of the mortgage loan which petitioner allegedly owed to the NHMFC. 33 This
Court in the recent past has declared that an assumption of a mortgage debt may
constitute a valid consideration for a sale.34
Although the record shows that petitioner admitted at the time of trial that she
owned the property described in the TCT, 35 the Court must stress that the Transfer
Certificate of Title No. 38253236 on its face shows that the owner of the property
which admittedly forms the subject matter of the Deed of Absolute Sale refers
neither to the petitioner nor to her father, Teodorico Doles, the alleged co-owner.
Rather, it states that the property is registered in the name of "Household
Development Corporation." Although there is an entry to the effect that the
petitioner had been granted a special power of attorney "covering the shares of
Teodorico Doles on the parcel of land described in this certificate," 37 it cannot be
inferred from this bare notation, nor from any other evidence on the record, that
the petitioner or her father held any direct interest on the property in question so as
to validly constitute a mortgage thereon 38 and, with more reason, to effect the
delivery of the object of the sale at the consummation stage. 39 What is worse, there
is a notation that the TCT itself has been "cancelled." 40
In view of these anomalies, the Court cannot entertain the
possibility that respondent agreed to assume the balance of the mortgage loan
which petitioner allegedly owed to the NHMFC, especially since the record is bereft
of any factual finding that petitioner was, in the first place, endowed with any
ownership rights to validly mortgage and convey the property. As the complainant
who initiated the case, respondent bears the burden of proving the basis of her
complaint. Having failed to discharge such burden, the Court has no choice but to
declare the sale void for lack of cause. And since the sale is void, the Court finds it
unnecessary to dwell on the issue of whether duress or intimidation had been
foisted upon petitioner upon the execution of the sale.
Moreover, even assuming the mortgage validly exists, the Court notes respondent's
allegation that the mortgage with the NHMFC was for 25 years which began
September 3, 1994. Respondent filed her Complaint for Specific Performance in
1997. Since the 25 years had not lapsed, the prayer of respondent to compel
petitioner to execute necessary documents to effect the transfer of title is
premature.
WHEREFORE, the petition is granted. The Decision and Resolution of the Court of
Appeals are REVERSEDand SET ASIDE. The complaint of respondent in Civil Case
No. 97-82716 is DISMISSED.
SO ORDERED.
G.R. No. 160346 August 25, 2009
PURITA PAHUD, SOLEDAD PAHUD, and IAN LEE CASTILLA (represented by
Mother and Attorney-in-Fact VIRGINIA CASTILLA), Petitioners,
vs.
COURT OF APPEALS, SPOUSES ISAGANI BELARMINO and LETICIA OCAMPO,
EUFEMIA SAN AGUSTIN-MAGSINO, ZENAIDA SAN AGUSTIN-McCRAE,
MILAGROS SAN AGUSTIN-FORTMAN, MINERVA SAN AGUSTIN-ATKINSON,
FERDINAND SAN AGUSTIN, RAUL SAN AGUSTIN, ISABELITA SAN AGUSTIN-
LUSTENBERGER and VIRGILIO SAN AGUSTIN, Respondents.
DECISION
NACHURA, J.:
For our resolution is a petition for review on certiorari assailing the April 23, 2003
Decision1 and October 8, 2003 Resolution2 of the Court of Appeals (CA) in CA-G.R.
CV No. 59426. The appellate court, in the said decision and resolution, reversed and
set aside the January 14, 1998 Decision 3 of the Regional Trial Court (RTC), which
ruled in favor of petitioners.
The dispute stemmed from the following facts.
During their lifetime, spouses Pedro San Agustin and Agatona Genil were able to
acquire a 246-square meter parcel of land situated in Barangay Anos, Los Baños,
Laguna and covered by Original Certificate of Title (OCT) No. O-(1655) 0-
15.4 Agatona Genil died on September 13, 1990 while Pedro San Agustin died on
September 14, 1991. Both died intestate, survived by their eight (8) children:
respondents Eufemia, Raul, Ferdinand, Zenaida, Milagros, Minerva, Isabelita and
Virgilio.
Sometime in 1992, Eufemia, Ferdinand and Raul executed a Deed of Absolute Sale
of Undivided Shares5conveying in favor of petitioners (the Pahuds, for brevity) their
respective shares from the lot they inherited from their deceased parents for
₱525,000.00.6 Eufemia also signed the deed on behalf of her four (4) other co-heirs,
namely: Isabelita on the basis of a special power of attorney executed on
September 28, 1991,7 and also for Milagros, Minerva, and Zenaida but without their
apparent written authority.8 The deed of sale was also not notarized.9
On July 21, 1992, the Pahuds paid ₱35,792.31 to the Los Baños Rural Bank where
the subject property was mortgaged. 10 The bank issued a release of mortgage and
turned over the owner’s copy of the OCT to the Pahuds. 11 Over the following
months, the Pahuds made more payments to Eufemia and her siblings totaling to
₱350,000.00.12 They agreed to use the remaining ₱87,500.0013 to defray the
payment for taxes and the expenses in transferring the title of the property. 14 When
Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate
the transfer of the title to the Pahuds, Virgilio refused to sign it. 15
On July 8, 1993, Virgilio’s co-heirs filed a complaint 16 for judicial partition of the
subject property before the RTC of Calamba, Laguna. On November 28, 1994, in the
course of the proceedings for judicial partition, a Compromise Agreement 17 was
signed with seven (7) of the co-heirs agreeing to sell their undivided shares to
Virgilio for ₱700,000.00. The compromise agreement was, however, not approved
by the trial court because Atty. Dimetrio Hilbero, lawyer for Eufemia and her six (6)
co-heirs, refused to sign the agreement because he knew of the previous sale made
to the Pahuds.18lawphil.net
On December 1, 1994, Eufemia acknowledged having received ₱700,000.00 from
Virgilio.19 Virgilio then sold the entire property to spouses Isagani Belarmino and
Leticia Ocampo (Belarminos) sometime in 1994. The Belarminos immediately
constructed a building on the subject property.
Alarmed and bewildered by the ongoing construction on the lot they purchased, the
Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had
sold the property to the Belarminos. 20 Aggrieved, the Pahuds filed a complaint in
intervention21 in the pending case for judicial partition.1avvphil
After trial, the RTC upheld the validity of the sale to petitioners. The dispositive
portion of the decision reads:
WHEREFORE, the foregoing considered, the Court orders:
1. the sale of the 7/8 portion of the property covered by OCT No. O (1655)
O-15 by the plaintiffs as heirs of deceased Sps. Pedro San Agustin and
Agatona Genil in favor of the Intervenors-Third Party plaintiffs as valid and
enforceable, but obligating the Intervenors-Third Party plaintiffs to
complete the payment of the purchase price of ₱437,500.00 by paying the
balance of ₱87,500.00 to defendant Fe (sic) San Agustin Magsino. Upon
receipt of the balance, the plaintiff shall formalize the sale of the 7/8
portion in favor of the Intervenor[s]-Third Party plaintiffs;
2. declaring the document entitled "Salaysay sa Pagsang-ayon sa Bilihan"
(Exh. "2-a") signed by plaintiff Eufemia San Agustin attached to the
unapproved Compromise Agreement (Exh. "2") as not a valid sale in favor
of defendant Virgilio San Agustin;
3. declaring the sale (Exh. "4") made by defendant Virgilio San Agustin of
the property covered by OCT No. O (1655)-O-15 registered in the names of
Spouses Pedro San Agustin and Agatona Genil in favor of Third-party
defendant Spouses Isagani and Leticia Belarmino as not a valid sale and as
inexistent;
4. declaring the defendant Virgilio San Agustin and the Third-Party
defendants spouses Isagani and Leticia Belarmino as in bad faith in buying
the portion of the property already sold by the plaintiffs in favor of the
Intervenors-Third Party Plaintiffs and the Third-Party Defendant Sps.
Isagani and Leticia Belarmino in constructing the two-[storey] building in
(sic) the property subject of this case; and
5. declaring the parties as not entitled to any damages, with the parties
shouldering their respective responsibilities regarding the payment of
attorney[’]s fees to their respective lawyers.
No pronouncement as to costs.
SO ORDERED.22
Not satisfied, respondents appealed the decision to the CA
that the sale made by Eufemia for and on behalf of her other
should have been declared void and inexistent for want of a
her co-heirs. The CA yielded and set aside the findings
disposing the issue, the CA ruled:
III. The Court of Appeals committed grave and reversible error in holding
that respondents spouses Belarminos have superior rights over the
property in question than petitioners despite the fact that the latter were
prior in possession thereby misapplying the provisions of Article 1544 of
the New Civil Code.24
arguing, in the main,
co-heirs to the Pahuds
The focal issue to be resolved is the status of the sale of the subject property by
written authority from
Eufemia and her co-heirs to the Pahuds. We find the transaction to be valid and
of the trial court. In
enforceable.

Article 1874 of the Civil Code plainly provides:

WHEREFORE, in view of the foregoing, the Decision dated January 14, 1998,
rendered by the Regional Trial Court of Calamba, Laguna, Branch 92 in Civil Case
No. 2011-93-C for Judicial Partition is hereby REVERSED and SET ASIDE, and a new
one entered, as follows:
(1) The case for partition among the plaintiffs-appellees and appellant
Virgilio is now considered closed and terminated;
(2) Ordering plaintiffs-appellees to return to intervenors-appellees the total
amount they received from the latter, plus an interest of 12% per annum
from the time the complaint [in] intervention was filed on April 12, 1995
until actual payment of the same;
(3) Declaring the sale of appellant Virgilio San Agustin to appellants
spouses, Isagani and Leticia Belarmino[,] as valid and binding;
(4) Declaring appellants-spouses as buyers in good faith and for value and
are the owners of the subject property.
No pronouncement as to costs.
SO ORDERED.23
Petitioners now come to this Court raising the following arguments:
I. The Court of Appeals committed grave and reversible error when it did
not apply the second paragraph of Article 1317 of the New Civil Code
insofar as ratification is concerned to the sale of the 4/8 portion of the
subject property executed by respondents San Agustin in favor of
petitioners;
II. The Court of Appeals committed grave and reversible error in holding
that respondents spouses Belarminos are in good faith when they bought
the subject property from respondent Virgilio San Agustin despite the
findings of fact by the court a quo that they were in bad faith which clearly
contravenes the presence of long line of case laws upholding the task of
giving utmost weight and value to the factual findings of the trial court
during appeals; [and]
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.
Also, under Article 1878,25 a special power of attorney is necessary for an agent to
enter into a contract by which the ownership of an immovable property is
transmitted or acquired, either gratuitously or for a valuable consideration. Such
stringent statutory requirement has been explained in Cosmic Lumber Corporation
v. Court of Appeals:26
[T]he authority of an agent to execute a contract [of] sale of real estate must be
conferred in writing and must give him specific authority, either to conduct the
general business of the principal or to execute a binding contract containing terms
and conditions which are in the contract he did execute. A special power of attorney
is necessary to enter into any contract by which the ownership of an immovable is
transmitted or acquired either gratuitously or for a valuable consideration. The
express mandate required by law to enable an appointee of an agency (couched) in
general terms to sell must be one that expressly mentions a sale or that includes a
sale as a necessary ingredient of the act mentioned. For the principal to confer the
right upon an agent to sell real estate, a power of attorney must so express the
powers of the agent in clear and unmistakable language. When there is any
reasonable doubt that the language so used conveys such power, no such
construction shall be given the document.27
In several cases, we have repeatedly held that the absence of a written authority to
sell a piece of land is, ipso jure, void, 28 precisely to protect the interest of an
unsuspecting owner from being prejudiced by the unwarranted act of another.
Based on the foregoing, it is not difficult to conclude, in principle, that the sale
made by Eufemia, Isabelita and her two brothers to the Pahuds sometime in 1992
should be valid only with respect to the 4/8 portion of the subject property. The sale
with respect to the 3/8 portion, representing the shares of Zenaida, Milagros, and
Minerva, is void because Eufemia could not dispose of the interest of her co-heirs in
the said lot absent any written authority from the latter, as explicitly required by
law. This was, in fact, the ruling of the CA.
Still, in their petition, the Pahuds argue that the sale with respect to the 3/8 portion
of the land should have been deemed ratified when the three co-heirs, namely:
Milagros, Minerva, and Zenaida, executed their respective special power of
attorneys29 authorizing Eufemia to represent them in the sale of their shares in the
subject property.30
While the sale with respect to the 3/8 portion is void by express provision of law
and not susceptible to ratification,31we nevertheless uphold its validity on the basis
of the common law principle of estoppel.
Article 1431 of the Civil Code provides:
Art. 1431. Through estoppel an admission or representation is rendered conclusive
upon the person making it, and cannot be denied or disproved as against the person
relying thereon.
True, at the time of the sale to the Pahuds, Eufemia was not armed with the
requisite special power of attorney to dispose of the 3/8 portion of the property.
Initially, in their answer to the complaint in intervention, 32 Eufemia and her other
co-heirs denied having sold their shares to the Pahuds. During the pre-trial
conference, however, they admitted that they had indeed sold 7/8 of the property
to the Pahuds sometime in 1992. 33 Thus, the previous denial was superseded, if not
accordingly amended, by their subsequent admission. 34 Moreover, in their
Comment,35 the said co-heirs again admitted the sale made to petitioners. 36
Interestingly, in no instance did the three (3) heirs concerned assail the validity of
the transaction made by Eufemia to the Pahuds on the basis of want of written
authority to sell. They could have easily filed a case for annulment of the sale of
their respective shares against Eufemia and the Pahuds. Instead, they opted to
remain silent and left the task of raising the validity of the sale as an issue to their
co-heir, Virgilio, who is not privy to the said transaction. They cannot be allowed to
rely on Eufemia, their attorney-in-fact, to impugn the validity of the first transaction
because to allow them to do so would be tantamount to giving premium to their
sister’s dishonest and fraudulent deed. Undeniably, therefore, the silence and
passivity of the three co-heirs on the issue bar them from making a contrary claim.
It is a basic rule in the law of agency that a principal is subject to liability for loss
caused to another by the latter’s reliance upon a deceitful representation by an
agent in the course of his employment (1) if the representation is authorized; (2) if
it is within the implied authority of the agent to make for the principal; or (3) if it is
apparently authorized, regardless of whether the agent was authorized by him or
not to make the representation.37
By their continued silence, Zenaida, Milagros and Minerva have caused the Pahuds
to believe that they have indeed clothed Eufemia with the authority to transact on
their behalf. Clearly, the three co-heirs are now estopped from impugning the
validity of the sale from assailing the authority of Eufemia to enter into such
transaction.
Accordingly, the subsequent sale made by the seven co-heirs to Virgilio was void
because they no longer had any interest over the subject property which they could
alienate at the time of the second transaction. 38 Nemo dat quod non habet. Virgilio,
however, could still alienate his 1/8 undivided share to the Belarminos.
The Belarminos, for their part, cannot argue that they purchased the property from
Virgilio in good faith. As a general rule, a purchaser of a real property is not
required to make any further inquiry beyond what the certificate of title indicates on
its face.39 But the rule excludes those who purchase with knowledge of the defect in
the title of the vendor or of facts sufficient to induce a reasonable and prudent
person to inquire into the status of the property. 40Such purchaser cannot close his
eyes to facts which should put a reasonable man on guard, and later claim that he
acted in good faith on the belief that there was no defect in the title of the vendor.
His mere refusal to believe that such defect exists, or his obvious neglect by closing
his eyes to the possibility of the existence of a defect in the vendor’s title, will not
make him an innocent purchaser for value, if afterwards it turns out that the title
was, in fact, defective. In such a case, he is deemed to have bought the property at
his own risk, and any injury or prejudice occasioned by such transaction must be
borne by him.41
In the case at bar, the Belarminos were fully aware that the property was registered
not in the name of the immediate transferor, Virgilio, but remained in the name of
Pedro San Agustin and Agatona Genil.42 This fact alone is sufficient impetus to make
further inquiry and, thus, negate their claim that they are purchasers for value in
good faith.43 They knew that the property was still subject of partition proceedings
before the trial court, and that the compromise agreement signed by the heirs was
not approved by the RTC following the opposition of the counsel for Eufemia and her
six other co-heirs.44 The Belarminos, being transferees pendente lite, are deemed
buyers in mala fide, and they stand exactly in the shoes of the transferor and are
bound by any judgment or decree which may be rendered for or against the
transferor.45 Furthermore, had they verified the status of the property by asking the
neighboring residents, they would have been able to talk to the Pahuds who occupy
an adjoining business establishment46 and would have known that a portion of the
property had already been sold. All these existing and readily verifiable facts are
sufficient to suggest that the Belarminos knew that they were buying the property
at their own risk.
WHEREFORE, premises considered, the April 23, 2003 Decision of the Court of
Appeals as well as its October 8, 2003 Resolution in CA-G.R. CV No. 59426, are
REVERSED and SET ASIDE. Accordingly, the January 14, 1998 Decision of Branch
92 of the Regional Trial Court of Calamba, Laguna is REINSTATED with the
MODIFICATION that the sale made by respondent Virgilio San Agustin to respondent
spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8
portion of the subject property. The trial court is ordered to proceed with the
partition of the property with dispatch.
SO ORDERED.
G.R. No. L-20145 November 15, 1923
VICENTE VERZOSA and RUIZ, REMENTERIA Y CIA., S. en C., plaintiffs-
appellants,
vs.
SILVINO LIM and SIY CONG BIENG and COMPANY, INC., defendants-
appellants.
Ramon Sotelo for plaintiffs-appellants.
Gabriel La O for defendants-appellants.
STREET, J.:
This action was instituted in the Court of first Instance of the City of Manila by
Vicente Versoza and Ruiz, Rementeria y Compania, as owners of the coastwise
vessel Perla, against Silvino Lim and Siy Cong Bieng & Company, Inc., as owner and
agent, respectively, of the vessel Ban Yek, for the purpose of recovering a sum of
money alleged to be the damages resulting to the plaintiffs from a collision which
occurred on March 9, 1921, between the two vessels mentioned, it being alleged
that said collision was due to the experience, carelessness and lack of skill on the
part of the captain of the Ban Yek and to his failure to observe the rules of
navigation appropriate to the case. The defendants answered with a general denial,
and by way of special defense asserted, among other things, that the collision was
due exclusively to the inexperience and carelessness of the captain and officers of
the steamship Perla; for which reason the defendants in turn, by way of
counterclaim, prayed judgment for the damages suffered by the Ban Yek from the
same collision. At the hearing the trial judge absolved the defendants from the
complaint and likewise absolved the plaintiffs from the defendants' counterclaim.
From this judgment both parties appealed.
It appears in evidence that at about five o'clock in the afternoon of March 9, 1921,
the coastwise steamer Ban Yekleft the port of Naga on the Bicol River, in the
Province of Camarines Sur, with destination to the City of Manila. At the time of her
departure from said port the sea was approaching to high tide but the current was
still running in through the Bicol River, with the result that the Ban Yek had the
current against her. As the ship approached the Malbong bend of the Bicol River, in
the municipality of Gainza, another vessel, the Perla, was sighted coming up the
river on the way to Naga. While the boats were yet more than a kilometer apart,
the Ban Yek gave two blasts with her whistle, thus indicating an intention to pass on
the left, or to her own port side. In reply to this signal the Perlagave a single blast,
thereby indicating that she disagreed with the signal given by the Ban Yek and
would maintain her position on the right, that is, would keep to the starboard.
The Ban Yek made no reply to this signal. As the Perlawas navigating with the
current, then running in from the sea, this vessel, under paragraph 163 of Customs
Marine Circular No. 53, had the right of way over the Ban Yek, and the officers of
the Perla interpreted the action of the Ban Yek in not replying to the Perla's signal
as an indication of acquiescene of the officers of the Ban Yek in the determination of
the Perla to keep to the starboard.
The river at this point is about two hundred and fifty feet wide, and the courses thus
being respectively pursued by the two vessels necessarily tended to bring them into
a head-on collision. When the danger of such an occurrence became imminent,
Captain Garrido of the Perla, seeing that he was shut off by the Ban Yek from
passing to the right, put his vessel to port, intending to avoid collision or minimize
its impact by getting farther out into the stream. An additional reason for this
maneuver, as stated by Captain Carrido, is that the captain of the Ban Yek waived
his hand to Garrido, indicating that the latter should turn his vessel towards the
middle of the stream. At about the same time that the Perla was thus deflected
from her course the engine on the Ban Yek was reversed and three blasts were
given by this vessel to indicate that she was backing.
Now, it appears that when the engine is reversed, a vessel swings to the right or
left in accordance with the direction in which the blades of the propeller are set; and
as the Ban Yek began to back, her bow was thrown out into the stream, a
movement which was assisted by the current of the river. By this means the Ban
Yek was brought to occupy an oblique position across the stream at the moment
the Perla was passing; and the bow of the Ban Yekcrashed into the starboard
bumpers of the Perla, carrying away external parts of the ship and inflicting material
damage on the hull. To effect the repairs thus made necessary to the Perla cost her
owners the sum of P17,827, including expenses of survey.
The first legal point presented in the case has reference to the sufficiency of the
protest. In this connection it appears that within twenty-four hours after the arrival
of the Perla at the port of Naga, Captain Garrido appeared before Vicente Rodi, the
auxiliary justice of the peace of the municipality of Naga, and made before that
officer the sworn protest which is in evidence as Exhibit B. This protest is sufficient
in our opinion to answer all the requirements of article 835 of the Code of
Commerce. A regular justice of the peace would without doubt be competent to take
a marine protest, and the same authority must be conceded to the auxiliary justice
in the absence of any showing in the record to the effect that the justice of the
peace himself was acting at the time in the municipality (Adm. Code, sec. 211; sec.
334, Code of Civ. Proc., subsecs. 14, 15). We note that in his certificate to this
protest Vicente Rodi added to the appellation of auxiliary justice of the peace,
following his name, the additional designation "notary public ex-officio." However,
under subsection (c) of section 242 of the Administrative Code, it is plain that an
auxiliary justice of the peace is not an ex-officio notary public. It results that the
taking of this protest must be ascribed to the officer in his character as auxiliary
justice of the peace and not in the character of notary public ex-officio. It is hardly
necessary to add that this court takes judicial notice of the fact that Naga is not a
port of entry and that no customs official of rank is there stationed who could have
taken cognizance of this protest.
Upon the point of responsibility for the collision we have no hesitancy in finding that
the fault is to be attributed exclusively to the negligence and inattention of the
captain and pilot in charge of the Ban Yek. The Perlaundoubtedly had the right of
way, since this vessel was navigating with the current, and the officers in charge of
the Perla were correct in assuming, from the failure of the Ban Yek to respond to
the single blast of the Perla, that the officers in charge of the Ban Yek recognized
that the Perla had a right of way and acquiesced in her resolution to keep to the
right. The excuse urged for the Ban Yek is that this vessel is somewhat larger than
the Perla and that it was desirable for the Ban Yek to keep on the side of the long
arc of the curve of the river; and in this connection it is suggested that the river is
deeper on the outer edge of the bend than on the inner edge. It is also stated that
on a certain previous occasion the Ban Yek on coming out from this port had gotten
stuck in the mud in this bend by keeping too far to the right. Moreover, it is said to
be the practice of ships in navigating this stream to keep nearer the outside than to
the inside of the bend. These suggestions are by no means convincing. It appears in
evidence that the river bottom here is composed of mud and silt, and as the tide at
the time of this incident was nearly at its flood, there was ample depth of water to
have accommodated the Ban Yek if she had kept to that part of the stream which it
was proper for her to occupy. We may further observe that the disparity in the size
of the vessels was not such as to dominate the situation and deprive the Perla of
the right of way under the conditions stated. Blame for the collision must therefore,
as already stated, be attributed to the Ban Yek.
On the other hand no fault can be attributed to the officers navigating
the Perla either in maintaining the course which had been determined upon for that
vessel in conformity with the marine regulations applicable to the case or in
deflecting the vessel towards the middle of the stream after the danger of collision
became imminent. The trial judge suggests in his opinion that when Captain Garrido
saw that the Ban Yek was holding her course to the left, he (Garrido) should have
changed the course of the Perla to port more promptly. The validity of this criticism
cannot be admitted. Among rules applicable to navigation none is better founded on
reason and experience than that which requires the navigating officers of any vessel
to assume that an approaching vessel will observe the regulations prescribed for
navigation (G. Urrutia & Co. vs. Baco River Plantation Co., 26 Phil., 632, 637). Any
other rule would introduce guess work into the control of ships and produce
uncertainty in the operation of the regulations.
Our conclusion is that his Honor, the trial judge, was in error in not awarding
damages to the Perla; but no error was committed in absolving the plaintiffs from
the defendants' cross-complaint.
The sum of P17,827 in our opinion represents the limit of the plaintiffs' right of
recovery. In the original complaint recovery is sought for an additional amount of
P18,000, most of which consists of damages supposed to have been incurred from
the inability of the Perla to maintain her regular schedule while laid up in the dock
undergoing repairs. The damages thus claimed, in addition to being somewhat of a
speculative nature, are in our opinion not sufficiently proved to warrant the court in
allowing the same. lawphil.net
Having determined the amount which the plaintiffs are entitled to recover, it
becomes necessary to consider the person, or persons, who must respond for these
damages. Upon this point we note that Silvino Lim is impleaded as owner; and Siy
Cong Bieng & Co. is impleaded as the shipping agent (casa naviera), or person in
responsible control of the Ban Yek at the time of the accident. We note further that
in article 826 of the Code of Commerce it is declared that the owner of any vessel
shall be liable for the indemnity due to any other vessel injured by the fault,
negligence, or lack of skill of the captain of the first. We say "owner," which is the
word used in the current translation of this article in the Spanish Code of
Commerce. It is to be observed, however, that the Spanish text itself uses the
word naviero; and there is some ambiguity in the use of said word in this article,
owing to the fact that naviero in Spanish has several meanings. The author of the
article which appears under the word naviero in the Enciclopedia Juridica
Española tells us that in Spanish it may mean either owner, outfitter, charterer, or
agent, though he says that the fundamental and correct meaning of the word is that
of "owner." That naviero, as used in the Spanish text of article 826, means owner is
further to be inferred from article 837, which limits the civil liability expressed in
article 826 to the value of the vessel with all her appurtenances and all the freight
earned during the voyage. There would have been no propriety in limiting liability to
the value of the vessel unless the owner were understood to be the person liable. It
is therefore clear that by special provision of the Code of Commerce the owner is
made responsible for the damage caused by an accident of the kind under
consideration in this case; and in more than one case this court has held the owner
liable, when sued alone (Philippine Shipping Co. vs. Garcia Vergara, 6 Phil., 281; G.
Urrutia & Co. vs. Baco River Plantation Co., 26 Phil., 632).
But while it is thus demonstrated that Silvino Lim is liable for these damages in the
character of owner, it does not necessarily follows that Siy Cong Bieng & Co., as
character or agent (casa naviera), is exempt from liability; and we are of the
opinion that both the owner and agent can be held responsible where both are
impleaded together. In Philippine Shipping Co., vs. Garcia Vergara (6 Phil., 281), it
seems to have been accepted as a matter of course that both owner and agent of
the offending vessel are liable for the damage done; and this must, we think, be
true. The liability of the naviero, in the sense of charterer or agent, if not expressed
in article 826 of the Code of Commerce, is clearly deducible from the general
doctrine of jurisprudence stated in article 1902 of the Civil Code, and it is also
recognized, but more especially as regards contractual obligations, in article 586 of
the Code of Commerce. Moreover, we are of the opinion that both the owner and
agent (naviero) should be declared to be jointly and severally liable, since the
obligation which is the subject of this action had its origin in a tortious act and did
not arise from contract. Article 1137 of the Civil Code, declaring that joint
obligations shall be apportionable unless otherwise provided, has no application to
obligation arising from tort.
For the reasons stated the judgment appealed from will be affirmed in so far as it
absolves the plaintiffs from the defendants' cross-complaint but will be reversed in
so far as it absolves the defendants from the plaintiffs' complaint; and judgment will
be entered for the plaintiffs to recover jointly and severally from the defendants
Silvino Lim and Siy Cong Bieng & Co. the sum of seventeen thousand eight hundred
and twenty-seven pesos (P17,827), with interest from the date of the institution of
the action, without special pronouncement as to costs of either instance. So
ordered.
G.R. No. 83122 October 19, 1990
ARTURO P. VALENZUELA and HOSPITALITA N. VALENZUELA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, BIENVENIDO M. ARAGON, ROBERT E.
PARNELL, CARLOS K. CATOLICO and THE PHILIPPINE AMERICAN GENERAL
INSURANCE COMPANY, INC., respondents.
Albino B. Achas for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private respondents.
GUTIERREZ, JR., J.:
This is a petition for review of the January 29, 1988 decision of the Court of Appeals
and the April 27, 1988 resolution denying the petitioners' motion for
reconsideration, which decision and resolution reversed the decision dated June
23,1986 of the Court of First Instance of Manila, Branch 34 in Civil Case No. 121126
upholding the petitioners' causes of action and granting all the reliefs prayed for in
their complaint against private respondents.
The antecedent facts of the case are as follows:
Petitioner Arturo P. Valenzuela (Valenzuela for short) is a General Agent of private
respondent Philippine American General Insurance Company, Inc. (Philamgen for
short) since 1965. As such, he was authorized to solicit and sell in behalf of
Philamgen all kinds of non-life insurance, and in consideration of services rendered
was entitled to receive the full agent's commission of 32.5% from Philamgen under
the scheduled commission rates (Exhibits "A" and "1"). From 1973 to 1975,
Valenzuela solicited marine insurance from one of his clients, the Delta Motors, Inc.
(Division of Electronics Airconditioning and Refrigeration) in the amount of P4.4
Million from which he was entitled to a commission of 32% (Exhibit "B"). However,
Valenzuela did not receive his full commission which amounted to P1.6 Million from
the P4.4 Million insurance coverage of the Delta Motors. During the period 1976 to
1978, premium payments amounting to P1,946,886.00 were paid directly to
Philamgen and Valenzuela's commission to which he is entitled amounted to
P632,737.00.
In 1977, Philamgen started to become interested in and expressed its intent to
share in the commission due Valenzuela (Exhibits "III" and "III-1") on a fifty-fifty
basis (Exhibit "C"). Valenzuela refused (Exhibit "D").
On February 8, 1978 Philamgen and its President, Bienvenido M. Aragon insisted on
the sharing of the commission with Valenzuela (Exhibit E). This was followed by
another sharing proposal dated June 1, 1978. On June 16,1978, Valenzuela firmly
reiterated his objection to the proposals of respondents stating that: "It is with
great reluctance that I have to decline upon request to signify my conformity to
your alternative proposal regarding the payment of the commission due me.
However, I have no choice for to do otherwise would be violative of the Agency
Agreement executed between our goodselves." (Exhibit B-1)
Because of the refusal of Valenzuela, Philamgen and its officers, namely: Bienvenido
Aragon, Carlos Catolico and Robert E. Parnell took drastic action against Valenzuela.
They: (a) reversed the commission due him by not crediting in his account the
commission earned from the Delta Motors, Inc. insurance (Exhibit "J" and "2"); (b)
placed agency transactions on a cash and carry basis; (c) threatened the
cancellation of policies issued by his agency (Exhibits "H" to "H-2"); and (d) started
to leak out news that Valenzuela has a substantial account with Philamgen. All of
these acts resulted in the decline of his business as insurance agent (Exhibits "N",
"O", "K" and "K-8"). Then on December 27, 1978, Philamgen terminated the
General Agency Agreement of Valenzuela (Exhibit "J", pp. 1-3, Decision Trial Court
dated June 23, 1986, Civil Case No. 121126, Annex I, Petition).
The petitioners sought relief by filing the complaint against the private respondents
in the court a quo (Complaint of January 24, 1979, Annex "F" Petition). After due
proceedings, the trial court found:
xxx xxx xxx
Defendants tried to justify the termination of plaintiff Arturo P.
Valenzuela as one of defendant PHILAMGEN's General Agent by
making it appear that plaintiff Arturo P. Valenzuela has a
substantial account with defendant PHILAMGEN particularly Delta
Motors, Inc.'s Account, thereby prejudicing defendant
PHILAMGEN's interest (Exhibits 6,"11","11- "12- A"and"13-A").
Defendants also invoked the provisions of the Civil Code of the
Philippines (Article 1868) and the provisions of the General
Agency Agreement as their basis for terminating plaintiff Arturo P.
Valenzuela as one of their General Agents.
That defendants' position could have been justified had the
termination of plaintiff Arturo P. Valenzuela was (sic) based solely
on the provisions of the Civil Code and the conditions of the
General Agency Agreement. But the records will show that the
principal cause of the termination of the plaintiff as General Agent
of defendant PHILAMGEN was his refusal to share his Delta
commission.
That it should be noted that there were several attempts made by
defendant Bienvenido M. Aragon to share with the Delta
commission of plaintiff Arturo P. Valenzuela. He had persistently
pursued the sharing scheme to the point of terminating plaintiff
Arturo P. Valenzuela, and to make matters worse, defendants
made it appear that plaintiff Arturo P. Valenzuela had substantial
accounts with defendant PHILAMGEN.
Not only that, defendants have also started (a) to treat separately
the Delta Commission of plaintiff Arturo P. Valenzuela, (b) to
reverse the Delta commission due plaintiff Arturo P. Valenzuela by
not crediting or applying said commission earned to the account of
plaintiff Arturo P. Valenzuela, (c) placed plaintiff Arturo P.
Valenzuela's agency transactions on a "cash and carry basis", (d)
sending threats to cancel existing policies issued by plaintiff Arturo
P. Valenzuela's agency, (e) to divert plaintiff Arturo P.
Valenzuela's insurance business to other agencies, and (f) to
spread wild and malicious rumors that plaintiff Arturo P.
Valenzuela has substantial account with defendant PHILAMGEN to
force plaintiff Arturo P. Valenzuela into agreeing with the sharing
of his Delta commission." (pp. 9-10, Decision, Annex 1, Petition).
xxx xxx xxx
These acts of harrassment done by defendants on plaintiff Arturo
P. Valenzuela to force him to agree to the sharing of his Delta
commission, which culminated in the termination of plaintiff Arturo
P. Valenzuela as one of defendant PHILAMGEN's General Agent, do
not justify said termination of the General Agency Agreement
entered into by defendant PHILAMGEN and plaintiff Arturo P.
Valenzuela.
 That since defendants are not justified in the termination of THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO
plaintiff Arturo P. Valenzuela as one of their General Agents, P. VALENZUELA IS ENTITLED TO THE FULL COMMISSION OF
defendants shall be liable for the resulting damage and loss of 32.5% ON THE DELTA ACCOUNT.
business of plaintiff Arturo P. Valenzuela. (Arts. 2199/2200, Civil
Code of the Philippines). (Ibid, p. 11)
III

The court accordingly rendered judgment, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and against defendants ordering the latter to reinstate
plaintiff Arturo P. Valenzuela as its General Agent, and to pay
plaintiffs, jointly and severally, the following:
THE LOWER COURT ERRED IN HOLDING THAT THE TERMINATION
OF PLAINTIFF ARTURO P. VALENZUELA WAS NOT JUSTIFIED AND
THAT CONSEQUENTLY DEFENDANTS ARE LIABLE FOR ACTUAL
AND MORAL DAMAGES, ATTORNEYS FEES AND COSTS.
IV

1. The amount of five hundred twenty-one thousand nine hundred

ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES AGAINST
sixty four and 16/100 pesos (P521,964.16) representing plaintiff
DEFENDANT PHILAMGEN WAS PROPER, THE LOWER COURT
Arturo P. Valenzuela's Delta Commission with interest at the legal
ERRED IN AWARDING DAMAGES EVEN AGAINST THE INDIVIDUAL
rate from the time of the filing of the complaint, which amount
DEFENDANTS WHO ARE MERE CORPORATE AGENTS ACTING
shall be adjusted in accordance with Article 1250 of the Civil Code
WITHIN THE SCOPE OF THEIR AUTHORITY.
of the Philippines;

2. The amount of seventy-five thousand pesos (P75,000.00) per
month as compensatory damages from 1980 until such time that
defendant Philamgen shall reinstate plaintiff Arturo P. Valenzuela
as one of its general agents;
3. The amount of three hundred fifty thousand pesos
(P350,000.00) for each plaintiff as moral damages;
V
ASSUMING ARGUENDO THAT THE AWARD OF DAMAGES IN FAVOR
OF PLAINTIFF ARTURO P. VALENZUELA WAS PROPER, THE LOWER
COURT ERRED IN AWARDING DAMAGES IN FAVOR OF
HOSPITALITA VALENZUELA, WHO, NOT BEING THE REAL PARTY
IN INTEREST IS NOT TO OBTAIN RELIEF.

On January 29, 1988, respondent Court of Appeals promulgated its decision in the
4. The amount of seventy-five thousand pesos (P75,000.00) as
appealed case. The dispositive portion of the decision reads:
and for attorney's fees;

WHEREFORE, the decision appealed from is hereby modified

5. Costs of the suit. (Ibid., P. 12)
accordingly and judgment is hereby rendered ordering:

From the aforesaid decision of the trial court, Bienvenido Aragon,

Robert E. Parnell, Carlos K. Catolico and PHILAMGEN respondents
herein, and defendants-appellants below, interposed an appeal on
the following:
ASSIGNMENT OF ERRORS
I appellants the sum of fifty thousand pesos (P50,000.00) as and by
THE LOWER COURT ERRED IN HOLDING THAT PLAINTIFF ARTURO
P. VALENZUELA HAD NO OUTSTANDING ACCOUNT WITH
DEFENDANT PHILAMGEN AT THE TIME OF THE TERMINATION OF
THE AGENCY.
II
1. Plaintiff-appellee Valenzuela to pay defendant-appellant
Philamgen the sum of one million nine hundred thirty two
thousand five hundred thirty-two pesos and seventeen centavos
(P1,902,532.17), with legal interest thereon from the date of
finality of this judgment until fully paid.
2. Both plaintiff-appellees to pay jointly and severally defendants-
way of attorney's fees.
No pronouncement is made as to costs. (p. 44, Rollo)
There is in this instance irreconcilable divergence in the findings and conclusions of
the Court of Appeals, vis-a-visthose of the trial court particularly on the pivotal
issue whether or not Philamgen and/or its officers can be held liable for damages
due to the termination of the General Agency Agreement it entered into with the
petitioners. In its questioned decision the Court of Appeals observed that:
 In any event the principal's power to revoke an agency at will is
so pervasive, that the Supreme Court has consistently held that
termination may be effected even if the principal acts in bad faith,
subject only to the principal's liability for damages (Danon v.
Antonio A. Brimo & Co., 42 Phil. 133; Reyes v. Mosqueda, 53 O.G.
2158 and Infante V. Cunanan, 93 Phil. 691, cited in Paras, Vol. V,
Civil Code of the Philippines Annotated [1986] 696).
The lower court, however, thought the termination of Valenzuela
as General Agent improper because the record will show the
principal cause of the termination of the plaintiff as General Agent
of defendant Philamgen was his refusal to share his Delta
commission. (Decision, p. 9; p. 13, Rollo, 41)
Because of the conflicting conclusions, this Court deemed it necessary in the
interest of substantial justice to scrutinize the evidence and records of the cases.
While it is an established principle that the factual findings of the Court of Appeals
are final and may not be reviewed on appeal to this Court, there are however
certain exceptions to the rule which this Court has recognized and accepted, among
which, are when the judgment is based on a misapprehension of facts and when the
findings of the appellate court, are contrary to those of the trial court (Manlapaz v.
Court of Appeals, 147 SCRA 236 [1987]); Guita v. Court of Appeals, 139 SCRA 576
[1986]). Where the findings of the Court of Appeals and the trial court are contrary
to each other, this Court may scrutinize the evidence on record (Cruz v. Court of
Appeals, 129 SCRA 222 [1984]; Mendoza v. Court of Appeals, 156 SCRA 597
[1987]; Maclan v. Santos, 156 SCRA 542 [1987]). When the conclusion of the Court
of Appeals is grounded entirely on speculation, surmises or conjectures, or when the
inference made is manifestly mistaken, absurd or impossible, or when there is grave
abuse of discretion, or when the judgment is based on a misapprehension of facts,
and when the findings of facts are conflict the exception also applies (Malaysian
Airline System Bernad v. Court of Appeals, 156 SCRA 321 [1987]).
After a painstaking review of the entire records of the case and the findings of facts
of both the court a quo and respondent appellate court, we are constrained to affirm
the trial court's findings and rule for the petitioners.
We agree with the court a quo that the principal cause of the termination of
Valenzuela as General Agent of Philamgen arose from his refusal to share his Delta
commission. The records sustain the conclusions of the trial court on the
apparent bad faith of the private respondents in terminating the General Agency
Agreement of petitioners. It is axiomatic that the findings of fact of a trial judge are
entitled to great weight (People v. Atanacio, 128 SCRA 22 [1984]) and should not
be disturbed on appeal unless for strong and cogent reasons, because the trial court
is in a better position to examine the evidence as well as to observe the demeanor
of the witnesses while testifying (Chase v. Buencamino, Sr., 136 SCRA 365 [1985];
People v. Pimentel, 147 SCRA 25 [1987]; and Baliwag Trans., Inc. v. Court of
Appeals, 147 SCRA 82 [1987]). In the case at bar, the records show that the
findings and conclusions of the trial court are supported by substantial evidence and
there appears to be no cogent reason to disturb them (Mendoza v. Court of Appeals.
156 SCRA 597 [1987]).
As early as September 30,1977, Philamgen told the petitioners of its desire to share
the Delta Commission with them. It stated that should Delta back out from the
agreement, the petitioners would be charged interests through a reduced
commission after full payment by Delta.
On January 23, 1978 Philamgen proposed reducing the petitioners' commissions by
50% thus giving them an agent's commission of 16.25%. On February 8, 1978,
Philamgen insisted on the reduction scheme followed on June 1, 1978 by still
another insistence on reducing commissions and proposing two alternative schemes
for reduction. There were other pressures. Demands to settle accounts, to confer
and thresh out differences regarding the petitioners' income and the threat to
terminate the agency followed. The petitioners were told that the Delta commissions
would not be credited to their account (Exhibit "J"). They were informed that the
Valenzuela agency would be placed on a cash and carry basis thus removing the 60-
day credit for premiums due. (TSN., March 26, 1979, pp. 54-57). Existing policies
were threatened to be cancelled (Exhibits "H" and "14"; TSN., March 26, 1979, pp.
29-30). The Valenzuela business was threatened with diversion to other agencies.
(Exhibit "NNN"). Rumors were also spread about alleged accounts of the Valenzuela
agency (TSN., January 25, 1980, p. 41). The petitioners consistently opposed the
pressures to hand over the agency or half of their commissions and for a treatment
of the Delta account distinct from other accounts. The pressures and demands,
however, continued until the agency agreement itself was finally terminated.
It is also evident from the records that the agency involving petitioner and private
respondent is one "coupled with an interest," and, therefore, should not be freely
revocable at the unilateral will of the latter.
In the insurance business in the Philippines, the most difficult and frustrating period
is the solicitation and persuasion of the prospective clients to buy insurance policies.
Normally, agents would encounter much embarrassment, difficulties, and oftentimes
frustrations in the solicitation and procurement of the insurance policies. To sell
policies, an agent exerts great effort, patience, perseverance, ingenuity, tact,
imagination, time and money. In the case of Valenzuela, he was able to build up an
Agency from scratch in 1965 to a highly productive enterprise with gross billings of
about Two Million Five Hundred Thousand Pesos (P2,500,000.00) premiums per
annum. The records sustain the finding that the private respondent started to covet
a share of the insurance business that Valenzuela had built up, developed and
nurtured to profitability through over thirteen (13) years of patient work and
perseverance. When Valenzuela refused to share his commission in the Delta
account, the boom suddenly fell on him.
The private respondents by the simple expedient of terminating the General Agency
Agreement appropriated the entire insurance business of Valenzuela. With the
termination of the General Agency Agreement, Valenzuela would no longer be
entitled to commission on the renewal of insurance policies of clients sourced from
his agency. Worse, despite the termination of the agency, Philamgen continued to
hold Valenzuela jointly and severally liable with the insured for unpaid premiums.
Under these circumstances, it is clear that Valenzuela had an interest in the
continuation of the agency when it was unceremoniously terminated not only
because of the commissions he should continue to receive from the insurance
business he has solicited and procured but also for the fact that by the very acts of
the respondents, he was made liable to Philamgen in the event the insured fail to
pay the premiums due. They are estopped by their own positive averments and
claims for damages. Therefore, the respondents cannot state that the agency
relationship between Valenzuela and Philamgen is not coupled with interest. "There
may be cases in which an agent has been induced to assume a responsibility or
incur a liability, in reliance upon the continuance of the authority under such
circumstances that, if the authority be withdrawn, the agent will be exposed to
personal loss or liability" (See MEC 569 p. 406).
Furthermore, there is an exception to the principle that an agency is revocable at
will and that is when the agency has been given not only for the interest of the
principal but for the interest of third persons or for the mutual interest of the
principal and the agent. In these cases, it is evident that the agency ceases to be
freely revocable by the sole will of the principal (See Padilla, Civil Code Annotated,
56 ed., Vol. IV p. 350). The following citations are apropos:
The principal may not defeat the agent's right to indemnification by a termination of
the contract of agency (Erskine v. Chevrolet Motors Co. 185 NC 479, 117 SE 706,
32 ALR 196).
Where the principal terminates or repudiates the agent's employment in violation of
the contract of employment and without cause ... the agent is entitled to receive
either the amount of net losses caused and gains prevented by the breach, or the
reasonable value of the services rendered. Thus, the agent is entitled to prospective
profits which he would have made except for such wrongful termination provided
that such profits are not conjectural, or speculative but are capable of determination
upon some fairly reliable basis. And a principal's revocation of the agency
agreement made to avoid payment of compensation for a result which he has
actually accomplished (Hildendorf v. Hague, 293 NW 2d 272; Newhall v. Journal
Printing Co., 105 Minn 44,117 NW 228; Gaylen Machinery Corp. v. Pitman-Moore
Co. [C.A. 2 NY] 273 F 2d 340)
If a principal violates a contractual or quasi-contractual duty which he owes his
agent, the agent may as a rule bring an appropriate action for the breach of that
duty. The agent may in a proper case maintain an action at law for compensation or
damages ... A wrongfully discharged agent has a right of action for damages and in
such action the measure and element of damages are controlled generally by the
rules governing any other action for the employer's breach of an employment
contract. (Riggs v. Lindsay, 11 US 500, 3L Ed 419; Tiffin Glass Co. v. Stoehr, 54
Ohio 157, 43 NE 2798)
At any rate, the question of whether or not the agency agreement is coupled with
interest is helpful to the petitioners' cause but is not the primary and compelling
reason. For the pivotal factor rendering Philamgen and the other private
respondents liable in damages is that the termination by them of the General
Agency Agreement was tainted with bad faith. Hence, if a principal acts in bad faith
and with abuse of right in terminating the agency, then he is liable in damages. This
is in accordance with the precepts in Human Relations enshrined in our Civil Code
that "every person must in the exercise of his rights and in the performance of his
duties act with justice, give every one his due, and observe honesty and good faith:
(Art. 19, Civil Code), and every person who, contrary to law, wilfully or negligently
causes damages to another, shall indemnify the latter for the same (Art. 20, id).
"Any person who wilfully causes loss or injury to another in a manner contrary to
morals, good customs and public policy shall compensate the latter for the
damages" (Art. 21, id.).
As to the issue of whether or not the petitioners are liable to Philamgen for the
unpaid and uncollected premiums which the respondent court ordered Valenzuela to
pay Philamgen the amount of One Million Nine Hundred Thirty-Two Thousand Five
Hundred Thirty-Two and 17/100 Pesos (P1,932,532,17) with legal interest thereon
until fully paid (Decision-January 20, 1988, p. 16; Petition, Annex "A"), we rule that
the respondent court erred in holding Valenzuela liable. We find no factual and legal
basis for the award. Under Section 77 of the Insurance Code, the remedy for the
non-payment of premiums is to put an end to and render the insurance policy not
binding —
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or contract
of insurance is valid and binding unless and until the premiums thereof have been
paid except in the case of a life or industrial life policy whenever the grace period
provision applies (P.D. 612, as amended otherwise known as the Insurance Code of
1974)
In Philippine Phoenix Surety and Insurance, Inc. v. Woodworks, Inc. (92 SCRA 419
[1979]) we held that the non-payment of premium does not merely suspend but
puts an end to an insurance contract since the time of the payment is peculiarly of
the essence of the contract. And in Arce v. The Capital Insurance and Surety Co.
Inc. (117 SCRA 63, [1982]), we reiterated the rule that unless premium is paid, an
insurance contract does not take effect. Thus:
It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado, 9
SCRA 177 [1963] was decided in the light of the Insurance Act before Sec. 72 was
amended by the underscored portion. Supra. Prior to the Amendment, an insurance
contract was effective even if the premium had not been paid so that an insurer was
obligated to pay indemnity in case of loss and correlatively he had also the right to
sue for payment of the premium. But the amendment to Sec. 72 has radically
changed the legal regime in that unless the premium is paid there is no insurance. "
(Arce v. Capitol Insurance and Surety Co., Inc., 117 SCRA 66; Emphasis supplied)
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the purpose of collecting
premiums and invalid for the purpose of indemnity. (Citing Insurance Law and
Practice by John Alan Appleman, Vol. 15, p. 331; Emphasis supplied)
The foregoing findings are buttressed by Section 776 of the insurance Code
(Presidential Decree No. 612, promulgated on December 18, 1974), which now
provides that no contract of Insurance by an insurance company is valid and binding
unless and until the premium thereof has been paid, notwithstanding any
agreement to the contrary (Ibid., 92 SCRA 425)
Perforce, since admittedly the premiums have not been paid, the policies issued
have lapsed. The insurance coverage did not go into effect or did not continue and
the obligation of Philamgen as insurer ceased. Hence, for Philamgen which had no
more liability under the lapsed and inexistent policies to demand, much less sue
Valenzuela for the unpaid premiums would be the height of injustice and unfair
dealing. In this instance, with the lapsing of the policies through the nonpayment of
premiums by the insured there were no more insurance contracts to speak of. As
this Court held in the Philippine Phoenix Surety case, supra "the non-payment of
premiums does not merely suspend but puts an end to an insurance contract since
the time of the payment is peculiarly of the essence of the contract."
The respondent appellate court also seriously erred in according undue reliance to
the report of Banaria and Banaria and Company, auditors, that as of December 31,
1978, Valenzuela owed Philamgen P1,528,698.40. This audit report of Banaria was
commissioned by Philamgen after Valenzuela was almost through with the
presentation of his evidence. In essence, the Banaria report started with an
unconfirmed and unaudited beginning balance of account of P1,758,185.43 as of
August 20, 1976. But even with that unaudited and unconfirmed beginning balance
of P1,758,185.43, Banaria still came up with the amount of P3,865.49 as
Valenzuela's balance as of December 1978 with Philamgen (Exh. "38-A-3"). In fact,
as of December 31, 1976, and December 31, 1977, Valenzuela had no unpaid
account with Philamgen (Ref: Annexes "D", "D-1", "E", Petitioner's Memorandum).
But even disregarding these annexes which are records of Philamgen and addressed
to Valenzuela in due course of business, the facts show that as of July 1977, the
beginning balance of Valenzuela's account with Philamgen amounted to
P744,159.80. This was confirmed by Philamgen itself not only once but four (4)
times on different occasions, as shown by the records.
On April 3,1978, Philamgen sent Valenzuela a statement of account with a
beginning balance of P744,159-80 as of July 1977.
On May 23, 1978, another statement of account with exactly the same beginning
balance was sent to Valenzuela.
On November 17, 1978, Philamgen sent still another statement of account with
P744,159.80 as the beginning balance.
And on December 20, 1978, a statement of account with exactly the same figure
was sent to Valenzuela.
It was only after the filing of the complaint that a radically different statement of
accounts surfaced in court. Certainly, Philamgen's own statements made by its own
accountants over a long period of time and covering examinations made on four
different occasions must prevail over unconfirmed and unaudited statements made
to support a position made in the course of defending against a lawsuit.
different occasions where Philamgen was duly represented by its account
executives. On the basis of these admissions and representations, Philamgen cannot
later on assume a different posture and claim that it was mistaken in its
representation with respect to the correct beginning balance as of July 1977
amounting to P744,159.80. The Banaria audit report commissioned by Philamgen is
unreliable since its results are admittedly based on an unconfirmed and unaudited
beginning balance of P1,758,185.43 as of August 20,1976.
As so aptly stated by the trial court in its decision:
Defendants also conducted an audit of accounts of plaintiff Arturo P. Valenzuela
after the controversy has started. In fact, after hearing plaintiffs have already
rested their case.
The results of said audit were presented in Court to show plaintiff Arturo P.
Valenzuela's accountability to defendant PHILAMGEN. However, the auditor, when
presented as witness in this case testified that the beginning balance of their audit
report was based on an unaudited amount of P1,758,185.43 (Exhibit 46-A) as of
August 20, 1976, which was unverified and merely supplied by the officers of
defendant PHILAMGEN.
Even defendants very own Exhibit 38- A-3, showed that plaintiff Arturo P.
Valenzuela's balance as of 1978 amounted to only P3,865.59, not P826,128.46 as
stated in defendant Bienvenido M. Aragon's letter dated December 20,1978 (Exhibit
14) or P1,528,698.40 as reflected in defendant's Exhibit 46 (Audit Report of Banaria
dated December 24, 1980).
These glaring discrepancy (sic) in the accountability of plaintiff Arturo P. Valenzuela
to defendant PHILAMGEN only lends credence to the claim of plaintiff Arturo P.
Valenzuela that he has no outstanding account with defendant PHILAMGEN when
the latter, thru defendant Bienvenido M. Aragon, terminated the General Agency
Agreement entered into by plaintiff (Exhibit A) effective January 31, 1979 (see
Exhibits "2" and "2-A"). Plaintiff Arturo P. Valenzuela has shown that as of October
31, 1978, he has overpaid defendant PHILAMGEN in the amount of P53,040.37
(Exhibit "EEE", which computation was based on defendant PHILAMGEN's balance of
P744,159.80 furnished on several occasions to plaintiff Arturo P. Valenzuela by
defendant PHILAMGEN (Exhibits H-1, VV, VV-1, WW, WW-1 , YY , YY-2 , ZZ and ,
ZZ-2).

It is not correct to say that Valenzuela should have presented its own records to
Prescinding from the foregoing, and considering that the private respondents
refute the unconfirmed and unaudited finding of the Banaria auditor. The records of
terminated Valenzuela with evident mala fide it necessarily follows that the former
Philamgen itself are the best refutation against figures made as an afterthought in
are liable in damages. Respondent Philamgen has been appropriating for itself all
the course of litigation. Moreover, Valenzuela asked for a meeting where the figures
these years the gross billings and income that it unceremoniously took away from
would be reconciled. Philamgen refused to meet with him and, instead, terminated
the petitioners. The preponderance of the authorities sustain the preposition that a
the agency agreement.
principal can be held liable for damages in cases of unjust termination of agency.
In Danon v. Brimo, 42 Phil. 133 [1921]), this Court ruled that where no time for the
After off-setting the amount of P744,159.80, beginning balance as of July 1977, by continuance of the contract is fixed by its terms, either party is at liberty to
way of credits representing the commission due from Delta and other accounts, terminate it at will, subject only to the ordinary requirements of good faith. The
Valenzuela had overpaid Philamgen the amount of P530,040.37 as of November 30, right of the principal to terminate his authority is absolute and unrestricted, except
1978. Philamgen cannot later be heard to complain that it committed a mistake in only that he may not do so in bad faith.
its computation. The alleged error may be given credence if committed only once.
But as earlier stated, the reconciliation of accounts was arrived at four (4) times on
The trial court in its decision awarded to Valenzuela the amount of Seventy Five
Thousand Pesos (P75,000,00) per month as compensatory damages from June
1980 until its decision becomes final and executory. This award is justified in the
light of the evidence extant on record (Exhibits "N", "N-10", "0", "0-1", "P" and "P-
1") showing that the average gross premium collection monthly of Valenzuela over
a period of four (4) months from December 1978 to February 1979, amounted to
over P300,000.00 from which he is entitled to a commission of P100,000.00 more
or less per month. Moreover, his annual sales production amounted to
P2,500,000.00 from where he was given 32.5% commissions. Under Article 2200 of
the new Civil Code, "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."
The circumstances of the case, however, require that the contractual relationship
between the parties shall be terminated upon the satisfaction of the judgment. No
more claims arising from or as a result of the agency shall be entertained by the
courts after that date.
ACCORDINGLY, the petition is GRANTED. The impugned decision of January 29,
1988 and resolution of April 27, 1988 of respondent court are hereby SET ASIDE.
The decision of the trial court dated January 23, 1986 in Civil Case No. 121126 is
REINSTATED with the MODIFICATIONS that the amount of FIVE HUNDRED TWENTY
ONE THOUSAND NINE HUNDRED SIXTY-FOUR AND 16/100 PESOS (P521,964.16)
representing the petitioners Delta commission shall earn only legal interests without
any adjustments under Article 1250 of the Civil Code and that the contractual
relationship between Arturo P. Valenzuela and Philippine American General
Insurance Company shall be deemed terminated upon the satisfaction of the
judgment as modified.
[G.R. No. 115838. July 18, 2002
CONSTANTE AMOR DE CASTRO and CORAZON AMOR DE
CASTRO, Petitioners, vs. COURT OF APPEALS and FRANCISCO
ARTIGO, Respondents.
D E C I S I O N - CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari[1 seeking to annul the Decision of
the Court of Appeals[2 dated May 4, 1994 in CA-G.R. CV No. 37996, which
affirmed in toto the decision[3 of the Regional Trial Court of Quezon City, Branch
80, in Civil Case No. Q-89-2631. The trial court disposed as follows:
WHEREFORE, the Court finds defendants Constante and Corazon Amor de Castro
jointly and solidarily liable to plaintiff the sum of:
a) P303,606.24 representing unpaid commission;
b) P25,000.00 for and by way of moral damages;
c) P45,000.00 for and by way of attorneys fees;
d) To pay the cost of this suit.
Quezon City, Metro Manila, December 20, 1991.
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo (Artigo for brevity) sued
petitioners Constante A. De Castro (Constante for brevity) and Corazon A. De
Castro (Corazon for brevity) to collect the unpaid balance of his brokers commission
from the De Castros.[4 The Court of Appeals summarized the facts in this wise:
x x x. Appellants[5 were co-owners of four (4) lots located at EDSA corner New York
and Denver Streets in Cubao, Quezon City. In a letter dated January 24, 1984
(Exhibit A-1, p. 144, Records), appellee[6 was authorized by appellants to act as
real estate broker in the sale of these properties for the amount of P23,000,000.00,
five percent (5%) of which will be given to the agent as commission. It was appellee
who first found Times Transit Corporation, represented by its president Mr.
Rondaris, as prospective buyer which desired to buy two (2) lots only, specifically
lots 14 and 15. Eventually, sometime in May of 1985, the sale of lots 14 and 15 was
consummated. Appellee received from appellants P48,893.76 as commission.
It was then that the rift between the contending parties soon emerged. Appellee
apparently felt short changed because according to him, his total commission should
be P352,500.00 which is five percent (5%) of the agreed price of P7,050,000.00
paid by Times Transit Corporation to appellants for the two (2) lots, and that it was
he who introduced the buyer to appellants and unceasingly facilitated the
negotiation which ultimately led to the consummation of the sale. Hence, he sued
below to collect the balance of P303,606.24 after having received P48,893.76 in
advance.
On the other hand, appellants completely traverse appellees claims and essentially
argue that appellee is selfishly asking for more than what he truly deserved as
commission to the prejudice of other agents who were more instrumental in the
consummation of the sale. Although appellants readily concede that it was appellee
who first introduced Times Transit Corp. to them, appellee was not designated by
them as their exclusive real estate agent but that in fact there were more or less
eighteen (18) others whose collective efforts in the long run dwarfed those of
appellees, considering that the first negotiation for the sale where appellee took
active participation failed and it was these other agents who successfully brokered
in the second negotiation. But despite this and out of appellants pure liberality,
beneficence and magnanimity, appellee nevertheless was given the largest cut in
the commission (P48,893.76), although on the principle of quantum meruit he
would have certainly been entitled to less. So appellee should not have been heard
to complain of getting only a pittance when he actually got the lions share of the
commission and worse, he should not have been allowed to get the entire
commission. Furthermore, the purchase price for the two lots was only P3.6 million
as appearing in the deed of sale and not P7.05 million as alleged by appellee. Thus,
even assuming that appellee is entitled to the entire commission, he would only be
getting 5% of the P3.6 million, or P180,000.00.
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in
the sale of two lots in Cubao, Quezon City. The handwritten authorization letter
signed by Constante clearly established a contract of agency between Constante
and Artigo. Thus, Artigo sought prospective buyers and found Times Transit
Corporation (Times Transit for brevity). Artigo facilitated the negotiations which
eventually led to the sale of the two lots. Therefore, the Court of Appeals decided
that Artigo is entitled to the 5% commission on the purchase price as provided in
the contract of agency.
Second. The Court of Appeals ruled that Artigos complaint is not dismissible for
failure to implead as indispensable parties the other co-owners of the two lots. The
Court of Appeals explained that it is not necessary to implead the other co-owners
since the action is exclusively based on a contract of agency between Artigo and
Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in
admitting parol evidence to prove the true amount paid by Times Transit to the De
Castros for the two lots. The Court of Appeals ruled that evidence aliunde could be
presented to prove that the actual purchase price was P7.05 million and not P3.6
million as appearing in the deed of sale. Evidence aliunde is admissible considering
that Artigo is not a party, but a mere witness in the deed of sale between the De
Castros and Times Transit. The Court of Appeals explained that, the rule that oral
evidence is inadmissible to vary the terms of written instruments is generally
applied only in suits between parties to the instrument and strangers to the contract
are not bound by it. Besides, Artigo was not suing under the deed of sale, but solely
under the contract of agency. Thus, the Court of Appeals upheld the trial courts
finding that the purchase price was P7.05 million and not P3.6 million.
Hence, the instant petition.
The Issues
According to petitioners, the Court of Appeals erred in -
I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO IMPLEAD
INDISPENSABLE PARTIES-IN-INTEREST;
II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND THAT
ARTIGOS CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT, WAIVER, OR
ABANDONMENT;
III. CONSIDERING INCOMPETENT EVIDENCE;
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;
V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEYS FEES;
VI. NOT AWARDING THE DE CASTROS MORAL AND EXEMPLARY DAMAGES,
AND ATTORNEYS FEES.
The Courts Ruling
The petition is bereft of merit.
First Issue: whether the complaint merits dismissal for failure to implead other co-
owners as indispensable parties
The De Castros argue that Artigos complaint should have been dismissed for failure
to implead all the co-owners of the two lots. The De Castros claim that Artigo
always knew that the two lots were co-owned by Constante and Corazon with their
other siblings Jose and Carmela whom Constante merely represented. The De
Castros contend that failure to implead such indispensable parties is fatal to the
complaint since Artigo, as agent of all the four co-owners, would be paid with funds
co-owned by the four co-owners.
The De Castros contentions are devoid of legal basis.
An indispensable party is one whose interest will be affected by the courts action in
the litigation, and without whom no final determination of the case can be had.
[7 The joinder of indispensable parties is mandatory and courts cannot proceed
without their presence.[8Whenever it appears to the court in the course of a
proceeding that an indispensable party has not been joined, it is the duty of the
court to stop the trial and order the inclusion of such party.[9
However, the rule on mandatory joinder of indispensable parties is not applicable to
the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note dated
January 24, 1984 to sell the properties of the De Castros for P23 million at a 5
percent commission. The authority was on a first come, first serve basis. The
authority reads in full:
24 Jan. 84
To Whom It May Concern:
This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P23,000,000.00 with
5% commission as agents fee.
C.C. de Castro
owner & representing
co-owners
This authority is on a first-come
First serve basis CAC
Constante signed the note as owner and as representative of the other co-owners. Second Issue: whether Artigos claim has been extinguished by full payment, waiver
Under this note, a contract of agency was clearly constituted between Constante or abandonment
and Artigo. Whether Constante appointed Artigo as agent, in Constantes individual
or representative capacity, or both, the De Castros cannot seek the dismissal of the
The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was
case for failure to implead the other co-owners as indispensable parties. The De
given his proportionate share and no longer entitled to any balance. According to
Castros admit that the other co-owners are solidarily liable under the
them, Artigo was just one of the agents involved in the sale and entitled to a
contract of agency,[10 citing Article 1915 of the Civil Code, which reads:
proportionate share in the commission. They assert that Artigo did absolutely
nothing during the second negotiation but to sign as a witness in the deed of sale.
Art. 1915. If two or more persons have appointed an agent for a common He did not even prepare the documents for the transaction as an active real estate
transaction or undertaking, they shall be solidarily liable to the agent for all the broker usually does.
consequences of the agency.
The De Castros arguments are flimsy.
The solidary liability of the four co-owners, however, militates against the De
Castros theory that the other co-owners should be impleaded as indispensable
A contract of agency which is not contrary to law, public order, public policy, morals
parties. A noted commentator explained Article 1915 thus
or good custom is a valid contract, and constitutes the law between the parties.
[14 The contract of agency entered into by Constante with Artigo is the law between
The rule in this article applies even when the appointments were made by the them and both are bound to comply with its terms and conditions in good faith.
principals in separate acts, provided that they are for the same transaction. The
solidarity arises from the common interest of the principals, and not from
The mere fact that other agents intervened in the consummation of the sale and
the act of constituting the agency. By virtue of this solidarity, the agent can
were paid their respective commissions cannot vary the terms of the contract of
recover from any principal the whole compensation and indemnity owing to
agency granting Artigo a 5 percent commission based on the selling price. These
him by the others. The parties, however, may, by express agreement, negate this
other agents turned out to be employees of Times Transit, the buyer Artigo
solidary responsibility. The solidarity does not disappear by the mere partition
introduced to the De Castros. This prompted the trial court to observe:
effected by the principals after the accomplishment of the agency.

The alleged `second group of agents came into the picture only during the so-called
If the undertaking is one in which several are interested, but only some create the
`second negotiation and it is amusing to note that these (sic) second group,
agency, only the latter are solidarily liable, without prejudice to the effects
prominent among whom are Atty. Del Castillo and Ms. Prudencio, happened to be
of negotiorum gestio with respect to the others. And if the power granted includes
employees of Times Transit, the buyer of the properties. And their efforts were
various transactions some of which are common and others are not, only those
limited to convincing Constante to part away with the properties because the
interested in each transaction shall be liable for it.[11
redemption period of the foreclosed properties is around the corner, so to speak.
(tsn. June 6, 1991).
When the law expressly provides for solidarity of the obligation, as in the liability of
co-principals in a contract of agency, each obligor may be compelled to pay the
xxx
entire obligation.[12 The agent may recover the whole compensation from any one
of the co-principals, as in this case.
To accept Constantes version of the story is to open the floodgates of fraud and
deceit. A seller could always pretend rejection of the offer and wait for sometime for
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the
others to renew it who are much willing to accept a commission far less than the
solidary debtors. This article reads:
original broker. The immorality in the instant case easily presents itself if
one has to consider that the alleged `second group are the employees of
Art. 1216. The creditor may proceed against any one of the solidary debtors or the buyer, Times Transit and they have not bettered the offer secured by
some or all of them simultaneously. The demand made against one of them shall Mr. Artigo for P7 million.
not be an obstacle to those which may subsequently be directed against the others,
so long as the debt has not been fully collected.
It is to be noted also that while Constante was too particular about the unrenewed
real estate brokers license of Mr. Artigo, he did not bother at all to inquire as to the
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc. licenses of Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40).[15 (Emphasis
[13 that supplied)

x x x solidarity does not make a solidary obligor an indispensable party in a In any event, we find that the 5 percent real estate brokers commission is
suit filed by the creditor. Article 1216 of the Civil Code says that the creditor reasonable and within the standard practice in the real estate industry for
`may proceed against anyone of the solidary debtors or some or all of them transactions of this nature.
simultaneously. (Emphasis supplied)
The De Castros also contend that Artigos inaction as well as failure to protest estops
him from recovering more than what was actually paid him. The De Castros cite
Article 1235 of the Civil Code which reads:
Art. 1235. When the obligee accepts the performance, knowing its incompleteness
and irregularity, and without expressing any protest or objection, the obligation is
deemed fully complied with.
The De Castros reliance on Article 1235 of the Civil Code is misplaced. Artigos
acceptance of partial payment of his commission neither amounts to a waiver of the
balance nor puts him in estoppel. This is the import of Article 1235 which was
explained in this wise:
The word accept, as used in Article 1235 of the Civil Code, means to take as
satisfactory or sufficient, or agree to an incomplete or irregular
performance. Hence, the mere receipt of a partial payment is not equivalent
to the required acceptance of performance as would extinguish the whole
obligation.[16 (Emphasis supplied)
There is thus a clear distinction between acceptance and mere receipt. In this case,
it is evident that Artigo merely received the partial payment without waiving the
balance. Thus, there is no estoppel to speak of.
The De Castros further argue that laches should apply because Artigo did not file his
complaint in court until May 29, 1989, or almost four years later. Hence, Artigos
claim for the balance of his commission is barred by laches.
Laches means the failure or neglect, for an unreasonable and unexplained length of
time, to do that which by exercising due diligence could or should have been done
earlier. It is negligence or omission to assert a right within a reasonable time,
warranting a presumption that the party entitled to assert it either has abandoned it
or declined to assert it.[17
Artigo disputes the claim that he neglected to assert his rights. He was appointed as
agent on January 24, 1984. The two lots were finally sold in June 1985. As found by
the trial court, Artigo demanded in April and July of 1985 the payment of his
commission by Constante on the basis of the selling price of P7.05 million but there
was no response from Constante.[18 After it became clear that his demands for
payment have fallen on deaf ears, Artigo decided to sue on May 29, 1989.
Actions upon a written contract, such as a contract of agency, must be brought
within ten years from the time the right of action accrues.[19 The right of action
accrues from the moment the breach of right or duty occurs. From this moment, the
creditor can institute the action even as the ten-year prescriptive period begins to
run.[20
The De Castros admit that Artigos claim was filed within the ten-year prescriptive
period. The De Castros, however, still maintain that Artigos cause of action is barred
by laches. Laches does not apply because only four years had lapsed from the time
of the sale in June 1985. Artigo made a demand in July 1985 and filed the action in
court on May 29, 1989, well within the ten-year prescriptive period. This does not
constitute an unreasonable delay in asserting ones right. The Court has ruled, a
delay within the prescriptive period is sanctioned by law and is not
considered to be a delay that would bar relief.[21 In explaining that laches
applies only in the absence of a statutory prescriptive period, the Court has stated -
Laches is recourse in equity. Equity, however, is applied only in the absence,
never in contravention, of statutory law. Thus, laches, cannot, as a rule, be
used to abate a collection suit filed within the prescriptive period mandated
by the Civil Code.[22
Clearly, the De Castros defense of laches finds no support in law, equity or
jurisprudence.
Third issue: whether the determination of the purchase price was made in violation
of the Rules on Evidence
The De Castros want the Court to re-examine the probative value of the evidence
adduced in the trial court to determine whether the actual selling price of the two
lots was P7.05 million and not P3.6 million. The De Castros contend that it is
erroneous to base the 5 percent commission on a purchase price of P7.05 million as
ordered by the trial court and the appellate court. The De Castros insist that the
purchase price is P3.6 million as expressly stated in the deed of sale, the due
execution and authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts committed a mistake in
considering incompetent evidence and disregarding the best evidence and parole
evidence rules. They claim that the Court of Appeals erroneously affirmed sub
silentio the trial courts reliance on the various correspondences between Constante
and Times Transit which were mere photocopies that do not satisfy the best
evidence rule. Further, these letters covered only the first negotiations between
Constante and Times Transit which failed; hence, these are immaterial in
determining the final purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who signed
as witness benefited therefrom, and being equally guilty, should be left where he
presently stands. They likewise claim that the Court of Appeals erred in relying on
evidence which were not offered for the purpose considered by the trial court.
Specifically, Exhibits B, C, D and E were not offered to prove that the purchase price
was P7.05 Million. Finally, they argue that the courts a quoerred in giving credence
to the perjured testimony of Artigo. They want the entire testimony of Artigo
rejected as a falsehood because he was lying when he claimed at the outset that he
was a licensed real estate broker when he was not.
Whether the actual purchase price was P7.05 Million as found by the trial court and
affirmed by the Court of Appeals, or P3.6 Million as claimed by the De Castros, is a
question of fact and not of law. Inevitably, this calls for an inquiry into the facts and
evidence on record. This we can not do.
It is not the function of this Court to re-examine the evidence submitted by the
parties, or analyze or weigh the evidence again.[23 This Court is not the proper
venue to consider a factual issue as it is not a trier of facts. In petitions for review
on certiorari as a mode of appeal under Rule 45, a petitioner can only raise
questions of law. Our pronouncement in the case of Cormero vs. Court of
Appeals[24 bears reiteration:
At the outset, it is evident from the errors assigned that the petition is anchored on
a plea to review the factual conclusion reached by the respondent court. Such task
however is foreclosed by the rule that in petitions for certiorari as a mode of appeal,
like this one, only questions of law distinctly set forth may be raised. These
questions have been defined as those that do not call for any examination of the
probative value of the evidence presented by the parties. (Uniland Resources vs.
Development Bank of the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court
of appeals, et al., 119 Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA 67).
And when this court is asked to go over the proof presented by the parties, and
analyze, assess and weigh them to ascertain if the trial court and the appellate
court were correct in according superior credit to this or that piece of evidence and
eventually, to the totality of the evidence of one party or the other, the court cannot
and will not do the same. (Elayda vs. Court of Appeals, 199 SCRA 349 [1991]).
Thus, in the absence of any showing that the findings complained of are totally
devoid of support in the record, or that they are so glaringly erroneous as to
constitute serious abuse of discretion, such findings must stand, for this court is not
expected or required to examine or contrast the oral and documentary evidence
submitted by the parties. (Morales vs. Court of Appeals, 197 SCRA 391 [1991]
citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966]).
We find no reason to depart from this principle. The trial and appellate courts are in
a much better position to evaluate properly the evidence. Hence, we find no other
recourse but to affirm their finding on the actual purchase price.
Fourth Issue: whether award of moral damages and attorneys fees is proper
The De Castros claim that Artigo failed to prove that he is entitled to moral
damages and attorneys fees. The De Castros, however, cite no concrete reason
except to say that they are the ones entitled to damages since the case was filed to
harass and extort money from them.
Law and jurisprudence support the award of moral damages and attorneys fees in
favor of Artigo. The award of damages and attorneys fees is left to the sound
discretion of the court, and if such discretion is well exercised, as in this case, it will
not be disturbed on appeal.[25Moral damages may be awarded when in a breach of
contract the defendant acted in bad faith, or in wanton disregard of his contractual
obligation.[26 On the other hand, attorneys fees are awarded in instances where
the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just and demandable claim.[27 There is no reason to disturb
the trial courts finding that the defendants lack of good faith and unkind treatment
of the plaintiff in refusing to give his due commission deserve censure. This
warrants the award of P25,000.00 in moral damages and P45,000.00 in attorneys
fees. The amounts are, in our view, fair and reasonable. Having found a buyer for
the two lots, Artigo had already performed his part of the bargain under the
contract of agency. The De Castros should have exercised fairness and good
judgment in dealing with Artigo by fulfilling their own part of the bargain - paying
Artigo his 5 percent brokers commission based on the actual purchase price of the
two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of
Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
[G. R. No. 129919. February 6, 2002]
DOMINION INSURANCE CORPORATION, petitioner, vs. COURT OF APPEALS,
RODOLFO S. GUEVARRA, and FERNANDO AUSTRIA, respondents.
DECISION
PARDO, J.:
The Case
This is an appeal via certiorari[1] from the decision of the Court of
Appeals[2] affirming the decision[3] of the Regional Trial Court, Branch 44, San
Fernando, Pampanga, which ordered petitioner Dominion Insurance Corporation
(Dominion) to pay Rodolfo S. Guevarra (Guevarra) the sum of
P156,473.90 representing the total amount advanced by Guevarra in the payment
of the claims of Dominions clients.
The Facts
The facts, as found by the Court of Appeals, are as follows:
On January 25, 1991, plaintiff Rodolfo S. Guevarra instituted Civil Case No. 8855 for
sum of money against defendant Dominion Insurance Corporation. Plaintiff sought
to recover thereunder the sum of P156,473.90 which he claimed to have advanced
in his capacity as manager of defendant to satisfy certain claims filed by defendants
clients.
In its traverse, defendant denied any liability to plaintiff and asserted a
counterclaim for P249,672.53, representing premiums that plaintiff allegedly failed
to remit.
On August 8, 1991, defendant filed a third-party complaint against Fernando
Austria, who, at the time relevant to the case, was its Regional Manager for Central
Luzon area.
In due time, third-party defendant Austria filed his answer.
Thereafter the pre-trial conference was set on the following dates: October 18,
1991, November 12, 1991, March 29, 1991, December 12, 1991, January 17, 1992,
January 29, 1992, February 28, 1992, March 17, 1992 and April 6, 1992, in all of
which dates no pre-trial conference was held. The record shows that except for the
settings on October 18, 1991, January 17, 1992 and March 17, 1992 which were
cancelled at the instance of defendant, third-party defendant and plaintiff,
respectively, the rest were postponed upon joint request of the parties.
On May 22, 1992 the case was again called for pre-trial conference. Only plaintiff
and counsel were present. Despite due notice, defendant and counsel did not
appear, although a messenger, Roy Gamboa, submitted to the trial court a
handwritten note sent to him by defendants counsel which instructed him to request
for postponement. Plaintiffs counsel objected to the desired postponement and
moved to have defendant declared as in default. This was granted by the trial court
in the following order:
ORDER
When this case was called for pre-trial this afternoon only plaintiff and his counsel
Atty. Romeo Maglalang appeared. When shown a note dated May 21, 1992
addressed to a certain Roy who was requested to ask for postponement,
Atty. Maglalang vigorously objected to any postponement on the ground that the
note is but a mere scrap of paper and moved that the defendant corporation be
declared as in default for its failure to appear in court despite due notice.
Finding the verbal motion of plaintiffs counsel to be meritorious and considering that
the pre-trial conference has been repeatedly postponed on motion of the defendant
Corporation, the defendant Dominion Insurance Corporation is hereby declared (as)
in default and plaintiff is allowed to present his evidence on June 16, 1992 at 9:00
oclock in the morning.
The plaintiff and his counsel are notified of this order in open court.
SO ORDERED.
Plaintiff presented his evidence on June 16, 1992. This was followed by a written
offer of documentary exhibits on July 8 and a supplemental offer of additional
exhibits on July 13, 1992. The exhibits were admitted in evidence in an order
dated July 17, 1992.
On August 7, 1992 defendant corporation filed a MOTION TO LIFT ORDER OF
DEFAULT. It alleged therein that the failure of counsel to attend the pre-trial
conference was due to an unavoidable circumstance and that counsel had sent his
representative on that date to inform the trial court of his inability to appear. The
Motion was vehemently opposed by plaintiff.
On August 25, 1992 the trial court denied defendants motion for reasons, among
others, that it was neither verified nor supported by an affidavit of merit and that it
further failed to allege or specify the facts constituting his meritorious defense.
On September 28, 1992 defendant moved for reconsideration of the aforesaid
order. For the first time counsel revealed to the trial court that the reason for his
nonappearance at the pre-trial conference was his illness. An Affidavit of Merit
executed by its Executive Vice-President purporting to explain its meritorious
defense was attached to the said Motion. Just the same, in an Order
dated November 13, 1992, the trial court denied said Motion.
On November 18, 1992, the court a quo rendered judgment as follows:
WHEREFORE, premises considered, judgment is hereby rendered ordering:
1. The defendant Dominion Insurance Corporation to pay plaintiff the sum of
P156,473.90 representing the total amount advanced by plaintiff in the payment of
the claims of defendants clients;
2. The defendant to pay plaintiff P10,000.00 as and by way of attorneys fees;
3. The dismissal of the counter-claim of the defendant and the third-party
complaint;
4. The defendant to pay the costs of suit.[4]
On December 14, 1992, Dominion appealed the decision to the Court of
Appeals.[5]
On July 19, 1996, the Court of Appeals promulgated a decision affirming that
of the trial court.[6] On September 3, 1996, Dominion filed with the Court of Appeals
a motion for reconsideration.[7] On July 16, 1997, the Court of Appeals denied the
motion.[8]
Hence, this appeal.[9]
The Issues
The issues raised are: (1) whether respondent Guevarra acted within his
authority as agent for petitioner, and (2) whether respondent Guevarra is entitled to
reimbursement of amounts he paid out of his personal money in settling the claims
of several insured.
The Court's Ruling
The petition is without merit.
By the contract of agency, a person binds himself to render some service or to
do something in representation or on behalf of another, with the consent or
authority of the latter.[10] The basis for agency is representation. [11] On the part of
the principal, there must be an actual intention to appoint [12] or an intention
naturally inferrable from his words or actions;[13] and on the part of the agent, there
must be an intention to accept the appointment and act on it, [14] and in the absence
of such intent, there is generally no agency.[15]
A perusal of the Special Power of Attorney [16] would show that petitioner
(represented by third-party defendant Austria) and respondent Guevarra intended
to enter into a principal-agent relationship. Despite the word special in the title of
the document, the contents reveal that what was constituted was actually a general
agency. The terms of the agreement read:
That we, FIRST CONTINENTAL ASSURANCE COMPANY, INC., [17] a corporation duly
organized and existing under and by virtue of the laws of the Republic of the
Philippines, xxx represented by the undersigned as Regional Manager, xxx
do hereby appoint RSG Guevarra Insurance Services represented by Mr.
Rodolfo Guevarra xxx to be our Agency Manager in San Fdo., for our place and
stead, to do and perform the following acts and things:
 1. To conduct, sign, manager (sic), carry on and transact Bonding and
Insurance business as usually pertain to a Agency Office, or FIRE,
MARINE, MOTOR CAR, PERSONAL ACCIDENT, and BONDING with the
right, upon our prior written consent, to appoint agents and sub-
agents.
2. To accept, underwrite and subscribed (sic) cover notes or Policies of
Insurance and Bonds for and on our behalf.
3. To demand, sue, for (sic) collect, deposit, enforce payment, deliver
and transfer for and receive and give effectual receipts and
discharge for all money to which the FIRST CONTINENTAL
ASSURANCE COMPANY, INC.,[18] may hereafter become due, owing
payable or transferable to said Corporation by reason of or in
connection with the above-mentioned appointment.
4. To receive notices, summons, and legal processes for and in behalf of
the FIRST CONTINENTAL ASSURANCE COMPANY, INC., in connection
with actions and all legal proceedings against the said Corporation.
[19]
[Emphasis supplied]
The agency comprises all the business of the principal, [20] but, couched in
general terms, it is limited only to acts of administration. [21]
A general power permits the agent to do all acts for which the law does not
require a special power.[22] Thus, the acts enumerated in or similar to those
enumerated in the Special Power of Attorney do not require a special power of
attorney.
Article 1878, Civil Code, enumerates the instances when a special power of
attorney is required. The pertinent portion that applies to this case provides that:
Article 1878. Special powers of attorney are necessary in the following cases:
(1) To make such payments as are not usually considered as acts of
administration;
(15) Any other act of strict dominion.
The payment of claims is not an act of administration. The settlement of claims
is not included among the acts enumerated in the Special Power of Attorney, neither
is it of a character similar to the acts enumerated therein. A special power of
attorney is required before respondent Guevarra could settle the insurance claims of
the insured.
Respondent Guevarras authority to settle claims is embodied in the
Memorandum of Management Agreement[23] dated February 18, 1987 which
enumerates the scope of respondent Guevarras duties and responsibilities as
agency manager for San Fernando,Pampanga, as follows:
1. You are hereby given authority to settle and dispose of all motor car claims in the
amount of P5,000.00 with prior approval of the Regional Office.
2. Full authority is given you on TPPI claims settlement.
xxx xxx xxx[24]
In settling the claims mentioned above, respondent Guevarras authority is
further limited by the written standard authority to pay, [25] which states that the
payment shall come from respondent Guevarras revolving fund or collection. The
authority to pay is worded as follows:
This is to authorize you to withdraw from your revolving fund/collection the amount
of PESOS __________________ (P ) representing the payment on the
_________________ claim of assured _______________ under Policy No. ______
in that accident of ___________ at ____________.
It is further expected, release papers will be signed and authorized by the
concerned and attached to the corresponding claim folder after effecting payment of
the claim.
(sgd.) FERNANDO C. AUSTRIA
Regional Manager[26]
[Emphasis supplied]
The instruction of petitioner as the principal could not be any clearer.
Respondent Guevarra was authorized to pay the claim of the insured, but the
payment shall come from the revolving fund or collection in his possession.
Having deviated from the instructions of the principal, the expenses that
respondent Guevarra incurred in the settlement of the claims of the insured may not
be reimbursed from petitioner Dominion. This conclusion is in accord with Article
1918, Civil Code, which states that:
The principal is not liable for the expenses incurred by the agent in the following
cases:
(1) If the agent acted in contravention of the principals instructions, unless the
latter should wish to avail himself of the benefits derived from the contract;
xxx xxx xxx
However, while the law on agency prohibits respondent Guevarra from
obtaining reimbursement, his right to recover may still be justified under the
general law on obligations and contracts.
Article 1236, second paragraph, Civil Code, provides:
Whoever pays for another may demand from the debtor what he has paid, except
that if he paid without the knowledge or against the will of the debtor, he can
recover only insofar as the payment has been beneficial to the debtor.
In this case, when the risk insured against occurred, petitioners liability as
insurer arose. This obligation was extinguished when respondent Guevarra paid the
claims and obtained Release of Claim Loss and Subrogation Receipts from the
insured who were paid.
Thus, to the extent that the obligation of the petitioner has been extinguished,
respondent Guevarra may demand for reimbursement from his principal. To rule
otherwise would result in unjust enrichment of petitioner.
The extent to which petitioner was benefited by the settlement of the
insurance claims could best be proven by the Release of Claim Loss and Subrogation
Receipts[27] which were attached to the original complaint as Annexes C-2, D-1, E-1,
F-1, G-1, H-1, I-1 and J-l, in the total amount of P116,276.95.
However, the amount of the revolving fund/collection that was then in the
possession of respondent Guevarra as reflected in the statement of account
dated July 11, 1990 would be deducted from the above amount.
The outstanding balance and the production/remittance for the period
corresponding to the claims was P3,604.84. Deducting this from P116,276.95, we
get P112,672.11. This is the amount that may be reimbursed to
respondent Guevarra.
The Fallo
IN VIEW WHEREOF, we DENY the Petition. However, we MODIFY the
decision of the Court of Appeals [28] and that of the Regional Trial Court, Branch
44, San Fernando, Pampanga,[29] in that petitioner is ordered to pay
respondent Guevarra the amount of P112,672.11 representing the total amount
advanced by the latter in the payment of the claims of petitioners clients.
No costs in this instance.
It appears that Albaladejo y Cia. is a limited partnership, organized in conformity
with the laws of these Islands, and having its principal place of business at Legaspi,
in the Province of Albay; and during the transactions which gave origin to this
litigation said firm was engaged in the buying and selling of the products of the
country, especially copra, and in the conduct of a general mercantile business in
Legaspi and in other places where it maintained agencies, or sub-agencies, for the
prosecution of its commercial enterprises.
The Visayan Refining Co. is a corporation organized under the laws of the Philippine
Islands; and prior to July 9, 1920, it was engaged in operating its extensive plant at
Opon, Cebu, for the manufacture of coconut oil.
On August 28, 1918, the plaintiff made a contract with the Visayan Refining Co., the
material parts of which are as follows:
Memorandum of Agreement Re Purchase of Copra. — This memorandum of
agreement, made and entered into by and between Albaladejo y Compania, S. en
C., of Legaspi, Province of Albay, Philippine Islands, party of the first part, and the
Visayan Refining Company, Inc., of Opon, Province of Cebu, Philippine Islands,
party of the second part,
Witnesseth That. — Whereas, the party of the first part is engaged in the purchase
of copra in the Province of Albay; and Whereas, the party of the second part is
engaged in the business of the manufacture of coconut oil, or which purpose it must
continually purchase large quantities of copra; Now, Therefore, in consideration of
the premises and covenants hereinafter set forth, the said parties have agreed and
do hereby contract and agree as follows, to wit:

G.R. No. L-20726 December 20, 1923

1. The party of the first part agrees and binds itself to sell to the party of the second
part, and the party of the second part agrees and binds itself to buy from the party
ALBALADEJO Y CIA., S. en C., plaintiff-appellant, of the first part, for a period of one (1) year from the date of these presents, all the
vs. The PHILIPPINE REFINING CO., as successor to The Visayan Refining copra purchased by the party of the first part in Province of Albay.
Co., defendant-appellant.
2. The party of the second part agrees to pay the party of the first part for the said
Eduardo Gutierrez Repide and Felix Socias for plaintiff. copra the market price thereof in Cebu at date (of) purchase, deducting, however,
Manly, Goddard and Lockwood for defendant-appellant. from such price the cost of transportation by sea to the factory of the party of
Fisher, DeWitt, Perkins and Brady of counsel. second part at Opon, Cebu, the amount deducted to be ascertained from the rates
established, from time to time, by the public utility commission, or such entity as
STREET, J.: shall succeed to its functions, and also a further deduction for the shrinkage of the
copra from the time of its delivery to the party of the second part to its arrival at
Opon, Cebu, plus one-half of a real per picul in the event the copra is delivered to
This action was instituted in the Court of First Instance of the Province of Albay by boats which will unload it on the pier of the party of the second part at Opon, Cebu,
Albaladejo y Cia., S. en C., to recover a sum of money from the Philippine Refining plus one real per picul in the event that the party of the first part shall employ its
Co., as successor to the Visayan Refining Co., two causes of action being stated in own capital exclusively in its purchase.
the complaint. Upon hearing the cause the trial judge absolved the defendant from
the first cause of action but gave judgment for the plaintiff to recover the sum of
P49,626.68, with costs, upon the second cause of action. From this judgment the 3. During the continuance of this contract the party of the second part will not
plaintiff appealed with respect to the action taken upon the first cause of action, and appoint any other agent for the purchase of copra in Legaspi, nor buy copra from
the defendant appealed with respect to the action taken upon the second cause of any vendor in Legaspi.
action. It results that, by the appeal of the two parties, the decision of the lower
court is here under review as regards the action taken upon both grounds of action 4. The party of the second part will, so far as practicable, keep the party of the first
set forth in the complaint. part advised of the prevailing prices paid for copra in the Cebu market.
5. The party of the second part will provide transportation by sea to Opon, Cebu, for
the copra delivered to it by the party of the first part, but the party of the first part
must deliver such copra to the party of the second part free on board the boats of
the latter's ships or on the pier alongside the latter's ships, as the case may be.
Pursuant to this agreement the plaintiff, during the year therein contemplated,
bought copra extensively for the Visayan Refining Co. At the end of said year both
parties found themselves satisfied with the existing arrangement, and they
therefore continued by tacit consent to govern their future relations by the same
agreement. In this situation affairs remained until July 9, 1920, when the Visayan
Refining Co. closed down its factory at Opon and withdrew from the copra market.
When the contract above referred to was originally made, Albaladejo y Cia.
apparently had only one commercial establishment, i.e., that at Legaspi; but the
large requirements of the Visayan Refining Co. for copra appeared so far to justify
the extension of the plaintiff's business that during the course of the next two or
three years it established some twenty agencies, or subagencies, in various ports
and places of the Province of Albay and neighboring provinces.
After the Visayan Refining Co. had ceased to buy copra, as above stated, of which
fact the plaintiff was duly notified, the supplies of copra already purchased by the
plaintiff were gradually shipped out and accepted by the Visayan Refining Co., and
in the course of the next eight or ten months the accounts between the two parties
were liquidated. The last account rendered by the Visayan Refining Co. to the
plaintiff was for the month of April, 1921, and it showed a balance of P288 in favor
of the defendant. Under date of June 25, 1921, the plaintiff company addressed a
letter from Legaspi to the Philippine Refining Co. (which had now succeeded to the
rights and liabilities of the Visayan Refining Co.), expressing its approval of said
account. In this letter no dissatisfaction was expressed by the plaintiff as to the
state of affairs between the parties; but about six weeks thereafter the present
action was begun.
Upon reference to paragraph five of the contract reproduced above it will be seen
that the Visayan Refining Co. obligated itself to provide transportation by sea to
Opon, Cebu, for the copra which should be delivered to it by the plaintiff; and the
first cause of action set forth in the complaint is planted upon the alleged negligent
failure of the Visayan Refining Co. to provide opportune transportation for the copra
collected by the plaintiff and deposited for shipment at various places. In this
connection we reproduce the following allegations from the complaint:
6. That, from the month of September, 1918, until the month of June, 1920, the
plaintiff opportunely advised the Visayan of the stocks that the former had for
shipment, and, from time to time, requested the Visayan to send vessels to take up
said stocks; but that the Visayan culpably and negligently allowed a great number
of days to elapse before sending the boats for the transportation of the copra to
Opon, Cebu, and that due to the fault and negligence of the Visayan, the stocks of
copra prepared for shipment by the plaintiff had to remain an unnecessary length of
time in warehouses and could not be delivered to the Visayan, nor could they be
transmitted to this latter because of the lack of boats, and that for this reason the
copra gathered by the plaintiff and prepared for delivery to the Visayan suffered the
diminishment of weight herein below specified, through shrinkage or excessive
drying, and, in consequence thereof, an important diminishment in its value.
8. That the diminishment in weight suffered as shrinkage through excessive drying
by all the lots of copra sold by the plaintiff to the Visayan, due to the fault and
negligence of the Visayan in the sending of boats to take up said copra, represents
a total of 9,695 piculs and 56 cates, the just and reasonable value of which, at the
rates fixed by the purchaser as the price in its liquidation, is a total of two hundred
and one thousand, five hundred and ninety-nine pesos and fifty-three centavos
(P201,599.53), Philippine currency, in which amount the plaintiff has been damaged
and injured by the negligent and culpable acts and omissions of the Visayan, as
herein above stated and alleged.
In the course of the appealed decision the trial judge makes a careful examination
of the proof relative to the movements of the fleet of boats maintained by the
Visayan Refining Co. for the purpose of collecting copra from the various ports
where it was gathered for said company, as well as of the movements of other
boats chartered or hired by said company for the same purpose; and upon
consideration of all the facts revealed in evidence, his Honor found that the Visayan
Refining Co. had used reasonable promptitude in its efforts to get out the copra
from the places where it had been deposited for shipment, notwithstanding
occasional irregularities due at times to the condition of the weather as related to
transportation by sea and at other times to the inability of the Visayan Refining Co.
to dispatch boats to the more remote ports. This finding of the trial judge, that no
negligence of the kind alleged can properly be imputed to the Visayan Refining Co.,
is in our opinion supported by the proof.
Upon the point of the loss of weight of the copra by shrinkage, the trial judge found
that this is a product which necessarily undergoes considerable shrinkage in the
process of drying, and intelligent witnesses who are conversant with the matter
testified at the trial that shrinkage of cobra varies from twenty to thirty per centum
of the original gross weight. It is agreed that the shrinkage shown in all of the copra
which the plaintiff delivered to the Visayan Refining Co. amounted to only 8.187 per
centum of the whole, an amount which is notably below the normal. This showing
was undoubtedly due in part, as the trial judge suggests, to the fact that in
purchasing the copra directly from the producers the plaintiff's buyers sometimes
estimated the picul at sixty-eight kilos, or somewhat less, but in no case at the true
weight of 63.25 kilos. The plaintiff was therefore protected in a great measure from
loss by shrinkage by purchasing upon a different basis of weight from that upon
which he sold, otherwise the shrinkage shown in the result must have been much
greater than that which actually appeared. But even considering this fact, it is quite
evident that the demonstrated shrinkage of 8.187 per centum was extremely
moderate average; and this fact goes to show that there was no undue delay on the
part of the Visayan Refining Co. in supplying transportation for the copra collected
by the plaintiff.
In the course of his well-reasoned opinion upon this branch of the case, the trial
judge calls attention to the fact that it is expressly provided in paragraph two of the
contract that the shrinkage of copra from the time of its delivery to the party of the
second part till its arrival at Opon should fall upon the plaintiff, from whence it is to
be interfered that the parties intended that the copra should be paid for according
to its weight upon arrival at Opon regardless of its weight when first purchased; and
such appears to have been the uniform practice of the parties in settling their
accounts for the copra delivered over a period of nearly two years.
From what has been said it follows that the first cause of action set forth in the
complaint is not well founded, and the trial judge committed no error in absolving
the plaintiff therefrom.
It appears that in the first six months of the year 1919, the plaintiff found that its
transactions with the Visayan Refining Co. had not been productive of reasonable
profit, a circumstance which the plaintiff attributed to loss of weight or shrinkage in
the copra from the time of purchase to its arrival at Opon; and the matter was
taken up with the officials of said company, with the result that a bounty amounting
to P15,610.41 was paid to the plaintiff by the Visayan Refining Co. In the ninth
paragraph of the complaint the plaintiff alleges that this payment was made upon
account of shrinkage, for which the Visayan Refining Co. admitted itself to be liable;
and it is suggested that the making of this payment operated as a recognition on
the part of the Visayan refining Co. of the justice of the plaintiff's claim with respect
to the shrinkage in all subsequent transactions. With this proposition we cannot
agree. At most the payment appears to have been made in recognition of an
existing claim, without involving any commitment as to liability on the part of the
defendant in the future; and furthermore it appears to have been in the nature of a
mere gratuity given by the company in order to encourage the plaintiff and to
assure that the plaintiff's organization would be kept in an efficient state for future
activities. It is certain that no general liability for plaintiff's losses was assumed for
the future; and the defendant on more than one occasion thereafter expressly
disclaimed liability for such losses.
As already stated purchases of copra by the defendant were suspended in the
month of July, 1920. At this time the plaintiff had an expensive organization which
had been built up chiefly, we suppose, with a view to the buying of copra; and this
organization was maintained practically intact for nearly a year after the suspension
of purchases by the Visayan Refining Co. Indeed in October, 1920, the plaintiff
added an additional agency at Gubat to the twenty or more already in existence. As
a second cause of action the plaintiff seeks to recover the sum of P110,000, the
alleged amount expended by the plaintiff in maintaining and extending its
organization as above stated. As a basis for the defendant's liability in this respect it
is alleged that said organization was maintained and extended at the express
request, or requirement, of the defendant, in conjunction with repeated assurances
that the defendant would soon resume activity as a purchaser of copra.
With reference to this cause of action the trial judge found that the plaintiff, as
claimed, had incurred expenses at the request of the defendant and upon its
representation that the plaintiff would be fully compensated therefor in the future.
Instead, however, of allowing the plaintiff the entire amount claimed, his Honor
gave judgment for only thirty per centum of said amount, in view of the fact that
the plaintiff's transactions in copra had amounted in the past only to about thirty
per centum of the total business transacted by it. Estimated upon this basis, the
amount recognized as constituting a just claim was found to be P49,626.68, and for
this amount judgment was rendered against the defendant.
The discussion of this branch of the appeal involves the sole question whether the
plaintiff's expense in maintaining and extending its organization for the purchase of
copra in the period between July, 1920, to July, 1921, were incurred at the instance
and request of the defendant, or upon any promise of the defendant to make the
expenditure good. A careful examination of the evidence, mostly of a documentary
character, is, in our opinion, convincing that the supposed liability does not exist.
By recurring to paragraph four of the contract between the plaintiff and the Visayan
Refining Co. it will be seen that the latter agreed to keep the plaintiff advised of the
prevailing prices paid for the copra in the Cebu market. In compliance with this
obligation the Visayan Refining Co. was accustomed to send out "trade letters" from
time to time its various clients in the southern provinces of whom the plaintiff was
one. In these letters the manager of the company was accustomed to make
comment upon the state of the market and to give such information as might be of
interest or value to the recipients of the letters. From the series of letters thus sent
to Albaladejo y Cia. during the latter half of 1920, we here reproduce the following
excerpts:
(Letter of July 2, 1920, from K.B. Day, General Manager of the Visayan Refining
Co., to Albaladejo y Cia.)
The copra market is still very weak. I have spent the past two weeks in Manila
studying conditions and find that practically no business at all is being done. A few
of the mills having provincial agents are accepting small deliveries, but I do not
suppose that 500 piculs of copra are changing hands a day. Buyers are offering
from P13 to P15, depending on quality, and sellers are offering to sell at anywhere
from P16 to P18, but no business can be done for the simple reason that the banks
will not lend the mills any money to buy copra with at this time.
Reports from the United States are to the effect that the oil market is in a very
serious and depressed condition and that large quantities of oil cannot be disposed
of at any price.
Under this conditions it is imperative that this mill buy no more copra than it can
possibly help at the present time. We are not anxious to compete, nor do we wish to
purchase same in competition with others. We do, however, desire to keep our
agents doing business and trust that they will continue to hold their parroquianos
(customers), buying only minimum quantities at present.
The local market has not changed since last week, and our liquidating price is P14.
(Letter of July 9, 1920, from Visayan Refining Co. to Albaladejo y Cia.)
Notify your subagents to drop out of the market temporarily. We do not desire to
purchase at present.
(Letter of July 10, 1920, from K. B. Day, General Manager, to Albaladejo y Cia.)
The market continues to grow weaker. Conditions are so uncertain that this
company desires to drop out of the copra market until conditions have a chance to
readjust themselves. We request therefore that our agents drop out of active
competition for copra temporarily. Stocks that are at present on hand will, of
course, be liquidated, but no new stocks should be acquired. Agents should do their
best to keep their organizations together temporarily, for we expect to be in the
market again soon stronger than ever. We expect the cooperation of agents in
making this effective; and if they give us this cooperation, we will endeavor to see
that they do not lose by the transaction in the long run. This company has been
receiving copra from its agents for a long time at prices which have netted it a loss.
The company has been supporting its agents during this period. It now expects the
same support from its agents. Agents having stocks actually on hand in their
bodegas should telegraph us the quantity immediately and we will protect same.
But stocks not actually in bodegas cannot be considered.
(Letter of August 21, 1920, from Philippine Refining Corporation, by K.B. Day, to
Albaladejo y Cia.)
(Letter of July 17, 1920, from K.B. Day to Albaladejo y Cia.)
Conditions have changed very little in the copra market since last reports. . . . We
are in the same position as last week and are out of the market.
For the benefit of our agents, we wish to explain in a few words just why we are
have been forced to close down our mill until the arrival of a boat to load some of
our stocks on hand. We have large stocks of copra. The market for oil is so
uncertain that we do not care to increase these stocks until such time as we know
that the market has touched the bottom. As soon as this period of uncertainty is
over, we expect to be in the market again stronger than ever, but it is only the part
of business wisdom to play safe at such times as these.
Owing to the very small amounts of copra now in the provinces, we do not think
that our agents will lose anything by our being out of the market. On the contrary,
the producers of copra will have a chance to allow their nuts to mature on the trees
(Letter of October 16, 1920, from K.B. Day, Manager, to Albaladejo y Cia.)
so that the quality of copra which you will receive when we again are in the market
should be much better than what you have been receiving in the past. Due to the
high prices and scarcity of copra a large proportion of the copra we have received
has been made from unripe coconuts and in order to keep revenue coming in the
producers have kept harvesting these coconuts without giving them a chance to
reach maturity. This period now should give them the chance to let their nuts ripen
and should give you a better copra in the future which will shrink less and be more
satisfactory both from your standpoint and ours. Please do all you can to assist us
at this time. We shall greatly appreciate your cooperation.lawphi1.net
(Letter of August 7, 1920, from H.U. Umstead, Assistant General Manager, to
Albaladejo y Cia.)
The copra situation in Manila remains unchanged and the outlook is still uncertain.
Arrivals continue small.
We are still out of the market and are not yet in a position to give you buying
orders. We trust, however, that within the next few days weeks we may be able to
reenter the market and resume our former activity.
While we are not of the market we have no objection whatever to our agents selling
copra to other purchasers, if by doing so they are able to keep themselves in the
market and retain their parroquianos (customers). We do not, however, wish you to
use our money, for this purpose, nor do we want you to buy copra on speculation
with the idea in mind that we will take it off of your hands at high prices when we
reenter the market. We wish to warn you against this now so that you will not be
working under any misapprehension.
In this same mail, we are sending you a notice of change of organization.
In your dealings with us hereafter, will you kindly address all
communications to the Philippine Refining Corporation, Cebu, which you
will understand will be delivered to us.
We are not yet in the market, but, as we have indicated before, are hopeful
of renewing our activities soon. We shall advise all our agents seasonably
of our return to the market. . . .
We are preparing new form of agreement between ourselves and our
agents and hope to have them completed in time to refer them to our
agents in the course of the next week or ten days.
All agents should endeavor to liquidate outstanding advances at this time
because this is a particularly good time to clean out old accounts and be on
a business basis when we return to the market. We request that our agents
concentrate their attention on this point during the coming
week.lawphi1.net
Copra in Manila and coconut oil in the United States have taken a severe
drop during the past week. The Cebu price seems to have remained
unchanged, but we look for an early drop in the local market.
We have received orders from our president in New York to buy no more
copra until the situation becomes more favorable. We had hoped and
expected to be in the market actively before this time, but this most
unexpected reaction in the market makes the date of our entry in it more
doubtful.
With this in view, we hereby notify our agents that we can accept no more
copra and advance no more money until we have permission from our
president to do so. We request, therefore, that you go entirely out of the
market, so far as we are concerned, with the exception of receiving copra
against outstanding accounts.
In case any agent be compelled to take in copra and desire to send same
to us, we will be glad to sell same for him to the highest bidder in Cebu.
We will make no charge for our services in this connection, but the copra
must be forwarded to us on consignment only so that we will not appear as
buyers and be required to pay the internal-revenue tax.
We are extremely sorry to be compelled to make the present
announcement to you, but the market is such that our president does not
deem it wise for us to purchase copra at present, and, with this in view, we
have no alternative other than to comply with his orders. We hope that our
agents will realize the spirit in which these orders are given, and will do all
they can to remain faithful to us until such time as we can reenter the
 market, which we hope and believe will be within a comparatively short to say that there is no proof showing that the officials of the defendant acted in bad
time. faith in holding out this hope.

(Special Letter of October 16, 1920, from Philippine Refining Corporation, by K.B.
Day, to Albaladejo y Cia.)
We have received very strict instructions from New York temporarily to
suspend the purchase of copra, and of course we must comply therewith.
However, should you find yourselves obliged to buy copra in connection
with your business activities, and cannot dispose of it advantageously in
Cebu, we shall be glad to receive your copra under the condition that we
shall sell it in the market on your account to the highest bidder, or, in other
words, we offer you our services free, to sell your copra to the best
possible advantages that the local market may offer, provided that, in
doing so, we be not obliged to accept your copra as a purchase when there
be no market for this product.
Whenever you find yourselves obliged to buy copra in order to liquidate
pending advances, we can accept it provided that, so long as present
conditions prevail, we be not required to make further cash advances.
We shall quote no further from letters written by the management of the Philippine
Refining Corporation to the plaintiff, as we find nothing in the correspondence which
reflects an attitude different from that reflected in the matter above quoted. It is
only necessary to add that the hope so frequently expressed in the letters, to the
effect that the Philippine Refining Corporation would soon enter the market as a
buyer of copra on a more extensive scale than its predecessor, was not destined to
be realized, and the factory at Opon remained closed.
But it is quite obvious that there is nothing in these letters on which to hold the
defendant liable for the expenses incurred by the plaintiff in keeping its organization
intact during the period now under consideration. Nor does the oral testimony
submitted by the plaintiff materially change the situation in any respect.
Furthermore, the allegation in the complaint that one agency in particular (Gubat)
had been opened on October 1, 1920, at the special instance and request of the
defendant, is not at all sustained by the evidence.
In the appellant's brief the contention is advanced that the contract between the
plaintiff and the Visayan Refining Co. created the relation of principal and agent
between the parties, and the reliance is placed upon article 1729 of the Civil Code
which requires the principal to indemnify the agent for damages incurred in carrying
out the agency. Attentive perusal of the contract is, however, convincing to the
effect that the relation between the parties was not that of principal and agent in so
far as relates to the purchase of copra by the plaintiff. It is true that the Visayan
Refining Co. made the plaintiff one of its instruments for the collection of copra; but
it is clear that in making its purchases from the producers the plaintiff was buying
upon its own account and that when it turned over the copra to the Visayan Refining
Co., pursuant to that agreement, a second sale was effected. In paragraph three of
the contract it is declared that during the continuance of this contract the Visayan
Refining Co. would not appoint any other agent for the purchase of copra in
Legaspi; and this gives rise indirectly to the inference that the plaintiff was
considered its buying agent. But the use of this term in one clause of the contract
cannot dominate the real nature of the agreement as revealed in other clauses, no
less than in the caption of the agreement itself. In some of the trade letters also the
various instrumentalities used by the Visayan Refining Co. for the collection of copra
are spoken of as agents. But this designation was evidently used for convenience;
and it is very clear that in its activities as a buyer the plaintiff was acting upon its
own account and not as agents, in the legal sense, of the Visayan Refining Co. The
title to all of the copra purchased by the plaintiff undoubtedly remained in it until it
was delivered by way of subsequent sale to said company.
For the reasons stated we are of the opinion that no liability on the part of the
defendant is shown upon the plaintiff's second cause of action, and the judgment of
the trial court on this part of the case is erroneous.
The appealed judgment will therefore be affirmed in so far as it absolves the
defendant from the first cause of action and will be reversed in so far as it gives
judgment against the defendant upon the second cause of action; and the
defendant will be completely absolved from the complaint. So ordered, without
express findings as to costs of either instance.

We note that in his letter of July 10, 1920, Mr. Day suggested that if the various
purchasing agents of the Visayan Refining Co. would keep their organization intact,
the company would endeavor to see that they should not lose by the transaction in
the long run. These words afford no sufficient basis for the conclusion, which the
trial judge deduced therefrom, that the defendant is bound to compensate the
plaintiff for the expenses incurred in maintaining its organization. The
correspondence sufficiently shows on its face that there was no intention on the part
of the company to lay a basis for contractual liability of any sort; and the plaintiff
must have understood the letters in that light. The parties could undoubtedly have
contracted about it, but there was clearly no intention to enter into contractual
relation; and the law will not raise a contract by implication against the intention of
the parties. The inducement held forth was that, when purchasing should be
resumed, the plaintiff would be compensated by the profits then to be earned for
any expense that would be incurred in keeping its organization intact. It is needless