Republic of the Philippines continuance of the agency with notice to Vicente.
of the agency with notice to Vicente. The said agency contract was in triplicate, one
SUPREME COURT
Manila
EN BANC
G.R. No. L-30573 October 29, 1971
VICENTE M. DOMINGO, represented by his heirs, ANTONINA RAYMUNDO VDA. DE
DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR, IRENE and JOSELITO,
all surnamed DOMINGO, petitioners-appellants,
vs.
GREGORIO M. DOMINGO, respondent-appellee, TEOFILO P. PURISIMA, intervenor-
respondent.
Teofilo Leonin for petitioners-appellants.
Osorio, Osorio & Osorio for respondent-appellee.
Teofilo P. Purisima in his own behalf as intervenor-respondent.
MAKASIAR, J.:
Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina
Raymundo vda. de Domingo, Ricardo, Cesar, Amelia, Vicente Jr., Salvacion, Irene and Joselito,
all surnamed Domingo, sought the reversal of the majority decision dated, March 12, 1969 of the
Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which
sentenced the said Vicente M. Domingo to pay Gregorio M. Domingo P2,307.50 and the
intervenor Teofilo P. Purisima P2,607.50 with interest on both amounts from the date of the filing
of the complaint, to pay Gregorio Domingo P1,000.00 as moral and exemplary damages and
P500.00 as attorney's fees plus costs.
The following facts were found to be established by the majority of the Special Division of Five of
the Court of Appeals:
In a document Exhibit "A" executed on June 2, 1956, Vicente M. Domingo granted Gregorio
Domingo, a real estate broker, the exclusive agency to sell his lot No. 883 of Piedad Estate with
an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00)
with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else
during the 30-day duration of the agency or if the property is sold by Vicente within three months
from the termination of the agency to apurchaser to whom it was submitted by Gregorio during the
copy was given to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer,
promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per
square meter (Exhibit "B"). Vicente directed Gregorio to tell Oscar de Leon to raise his offer. After
several conferences between Gregorio and Oscar de Leon, the latter raised his offer to
P109,000.00 on June 20, 1956 as evidenced by Exhibit "C", to which Vicente agreed by signing
Exhibit "C". Upon demand of Vicente, Oscar de Leon issued to him a check in the amount of
P1,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of P300.00.
Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in
another letter, Exhibit "D". Subsequently, Vicente asked for an additional amount of P1,000.00 as
earnest money, which Oscar de Leon promised to deliver to him. Thereafter, Exhibit "C" was
amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house
and lot at Denver Street, Quezon City which is part of the purchase price. It was again amended to
the effect that Oscar will vacate his house and lot on December 1, 1956, because his wife was on
the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a
document dated June 30, 1956 (the year 1957 therein is a mere typographical error) and marked
Exhibit "D". Pursuant to his promise to Gregorio, Oscar gave him as a gift or propina the sum of
One Thousand Pesos (P1,000.00) for succeeding in persuading Vicente to sell his lot at P1.20 per
square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This
gift of One Thousand Pesos (P1,000.00) was not disclosed by Gregorio to Vicente. Neither did
Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00) by way of earnest
money. In the deed of sale was not executed on August 1, 1956 as stipulated in Exhibit "C" nor on
August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his money
from his brother in the United States, for which reason he was giving up the negotiation including
the amount of One Thousand Pesos (P1,000.00) given as earnest money to Vicente and the One
Thousand Pesos (P1,000.00) given to Gregorio aspropina or gift. When Oscar did not see him
after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion
of Exhibit "A" marked habit "A-1" to the effect that Vicente was still committed to pay him 5%
commission, if the sale is consummated within three months after the expiration of the 30-day
period of the exclusive agency in his favor from the execution of the agency contract on June 2,
1956 to a purchaser brought by Gregorio to Vicente during the said 30-day period. Vicente
grabbed the original of Exhibit "A" and tore it to pieces. Gregorio held his peace, not wanting to
antagonize Vicente further, because he had still duplicate of Exhibit "A". From his meeting with
Vicente, Gregorio proceeded to the office of the Register of Deeds of Quezon City, where he
discovered Exhibit "G' deed of sale executed on September 17, 1956 by Amparo Diaz, wife of
Oscar de Leon, over their house and lot No. 40 Denver Street, Cubao, Quezon City, in favor
Vicente as down payment by Oscar de Leon on the purchase price of Vicente's lot No. 883 of
Piedad Estate. Upon thus learning that Vicente sold his property to the same buyer, Oscar de
Leon and his wife, he demanded in writting payment of his commission on the sale price of One
Hundred Nine Thousand Pesos (P109,000.00), Exhibit "H". He also conferred with Oscar de Leon,
who told him that Vicente went to him and asked him to eliminate Gregorio in the transaction and
that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.0 In
Vicente's reply to Gregorio's letter, Exhibit "H", Vicente stated that Gregorio is not entitled to the
5% commission because he sold the property not to Gregorio's buyer, Oscar de Leon, but to
another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Exhibit "A", the exclusive agency contract, is
genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon the sale by Vicente of his
property is practically a sale to Oscar de Leon since husband and wife have common or identical
interests; that Gregorio and intervenor Teofilo Purisima were the efficient cause in the
consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de
Leon paid Gregorio the sum of One Thousand Pesos (P1,000.00) as "propina" or gift and not as
additional earnest money to be given to the plaintiff, because Exhibit "66", Vicente's letter
addressed to Oscar de Leon with respect to the additional earnest money, does not appear to
have been answered by Oscar de Leon and therefore there is no writing or document supporting
Oscar de Leon's testimony that he paid an additional earnest money of One Thousand Pesos
(P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos
(P1,000.00) paid by Oscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit
"4"; and that Vicente did not even mention such additional earnest money in his two replies
Exhibits "I" and "J" to Gregorio's letter of demand of the 5% commission.
The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to
Vicente the payment to him by Oscar de Leon of the amount of One Thousand Pesos (P1,000.00)
as gift or "propina" for having persuaded Vicente to reduce the purchase price from P2.00 to P1.20
per square meter, so constitutes fraud as to cause a forfeiture of his commission on the sale price;
(2) whether Vicente or Gregorio should be liable directly to the intervenor Teofilo Purisima for the
latter's share in the expected commission of Gregorio by reason of the sale; and (3) whether the
award of legal interest, moral and exemplary damages, attorney's fees and costs, was proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by
Justice Juan Enriquez did not touch on these issues which were extensively discussed by Justice
Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring opinion,
affirmed that it does not constitute breach of trust or fraud on the part of the broker and regarded
same as merely part of the whole process of bringing about the meeting of the minds of the seller
and the purchaser and that the commitment from the prospect buyer that he would give a reward
to Gregorio if he could effect better terms for him from the seller, independent of his legitimate
commission, is not fraudulent, because the principal can reject the terms offered by the
prospective buyer if he believes that such terms are onerous disadvantageous to him. On the
other hand, Justice Gatmaitan, with whom Justice Antonio Cafizares corner held the view that
such an act on the part of Gregorio was fraudulent and constituted a breach of trust, which should
deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are essentially those which an agent owes to
his principal.1
Consequently, the decisive legal provisions are in found Articles 1891 and 1909 of the New Civil
Code.
Art. 1891. Every agent is bound to render an account of his transactions and to
deliver to the principal whatever he may have received by virtue of the agency,
even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account
shall be void.
xxx xxx xxx
Art. 1909. The agent is responsible not only for fraud but also for negligence,
which shall be judged with more less rigor by the courts, according to whether
the agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 17 of the old Spanish Civil Code which provides
that:
Art. 1720. Every agent is bound to give an account of his transaction and to pay
to the principal whatever he may have received by virtue of the agency, even
though what he has received is not due to the principal.
The modification contained in the first paragraph Article 1891 consists in changing the phrase "to
pay" to "to deliver", which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required
to an agent — condemning as void any stipulation exempting the agent from the duty and liability
imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish
Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for negligence, which
shall be judged with more or less severity by the courts, according to whether the
agency was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on
the part of the agent, the real estate broker in this case, to his principal, the vendor. The law
imposes upon the agent the absolute obligation to make a full disclosure or complete account to
his principal of all his transactions and other material facts relevant to the agency, so much so that
the law as amended does not countenance any stipulation exempting the agent from such an
obligation and considers such an exemption as void. The duty of an agent is likened to that of a
trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest
principle of morality as well as of the strictest justice.2
Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit
from the vendee, without revealing the same to his principal, the vendor, is guilty of a breach of his
loyalty to the principal and forfeits his right to collect the commission from his principal, even if the
principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better
results or that the agency is a gratuitous one, or that usage or custom allows it; because the rule is
to prevent the possibility of any wrong, not to remedy or repair an actual damage. 3 By taking such
profit or bonus or gift or propina from the vendee, the agent thereby assumes a position wholly
inconsistent with that of being an agent for hisprincipal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the principal may have been
benefited by the valuable services of the said agent does not exculpate the agent who has only
himself to blame for such a result by reason of his treachery or perfidy.
This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil
Code. Thus, for failure to deliver sums of money paid to him as an insurance agent for the account
of his employer as required by said Article 1720, said insurance agent was convicted estafa.4 An
administrator of an estate was likewise under the same Article 1720 for failure to render an
account of his administration to the heirs unless the heirs consented thereto or are estopped by
having accepted the correctness of his account previously rendered.5
Because of his responsibility under the aforecited article 1720, an agent is likewise liable for estafa
for failure to deliver to his principal the total amount collected by him in behalf of his principal and
cannot retain the commission pertaining to him by subtracting the same from his collections.6
A lawyer is equally liable unnder said Article 1720 if he fails to deliver to his client all the money
and property received by him for his client despite his attorney's lien. 7 The duty of a commission
agent to render a full account his operations to his principal was reiterated in Duhart, etc. vs.
Macias.8
The American jurisprudence on this score is well-nigh unanimous.
Where a principal has paid an agent or broker a commission while ignorant of the
fact that the latter has been unfaithful, the principal may recover back the
commission paid, since an agent or broker who has been unfaithful is not entitled
to any compensation.
xxx xxx xxx
In discussing the right of the principal to recover commissions retained by an
unfaithful agent, the court in Little vs. Phipps (1911) 208 Mass. 331, 94 NE 260,
34 LRA (NS) 1046, said: "It is well settled that the agent is bound to exercise the
utmost good faith in his dealings with his principal. As Lord Cairns said, this rule
"is not a technical or arbitrary rule. It is a rule founded on the highest and truest
principles, of morality." Parker vs. McKenna (1874) LR 10,Ch(Eng) 96,118 ... If
the agent does not conduct himself with entire fidelity towards his principal, but is
guilty of taking a secret profit or commission in regard the matter in which he is
employed, he loses his right to compensation on the ground that he has taken a
position wholly inconsistent with that of agent for his employer, and which gives
his employer, upon discovering it, the right to treat him so far as compensation,
at least, is concerned as if no agency had existed. This may operate to give to
the principal the benefit of valuable services rendered by the agent, but the agent
has only himself to blame for that result."
xxx xxx xxx
The intent with which the agent took a secret profit has been held immaterial
where the agent has in fact entered into a relationship inconsistent with his
agency, since the law condemns the corrupting tendency of the inconsistent
relationship. Little vs. Phipps (1911) 94 NE 260.9
As a general rule, it is a breach of good faith and loyalty to his principal for an
agent, while the agency exists, so to deal with the subject matter thereof, or with
information acquired during the course of the agency, as to make a profit out of it
for himself in excess of his lawful compensation; and if he does so he may be
held as a trustee and may be compelled to account to his principal for all profits,
advantages, rights, or privileges acquired by him in such dealings, whether in
performance or in violation of his duties, and be required to transfer them to his
principal upon being reimbursed for his expenditures for the same, unless the
principal has consented to or ratified the transaction knowing that benefit or profit
would accrue or had accrued, to the agent, or unless with such knowledge he
has allowed the agent so as to change his condition that he cannot be put in
status quo. The application of this rule is not affected by the fact that the principal
did not suffer any injury by reason of the agent's dealings or that he in fact
obtained better results; nor is it affected by the fact that there is a usage or
custom to the contrary or that the agency is a gratuitous one. (Emphasis
applied.) 10
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift
or propina in the amount of One Thousand Pesos (P1,000.00) from the prospective buyer Oscar
de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests
only of his principal and undermined his loyalty to his principal, who gave him partial advance of
Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of exerting his
best to persuade his prospective buyer to purchase the property on the most advantageous terms
desired by his principal, the broker, herein defendant-appellee Gregorio Domingo, succeeded in
persuading his principal to accept the counter-offer of the prospective buyer to purchase the
property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in
round figure for the lot of 88,477 square meters, which is very much lower the the price of P2.00
per square meter or One Hundred Seventy-Six Thousand Nine Hundred Fifty-Four Pesos
(P176,954.00) for said lot originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted
only as a middleman with the task of merely bringing together the vendor and vendee, who
themselves thereafter will negotiate on the terms and conditions of the transaction. Neither would
the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he
received from the purchaser and his principal did not object therto. 11 Herein defendant-appellee
Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and
the buyer Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And
therein petitioner-appellant was not aware of the gift of One Thousand Pesos (P1,000.00)
received by Gregorio Domingo from the prospective buyer; much less did he consent to his
agent's accepting such a gift.

The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon,
does not materially alter the situation; because the transaction, to be valid, must necessarily be
with the consent of the husband Oscar de Leon, who is the administrator of their conjugal assets
including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as
part of and constituted the down payment on, the purchase price of herein petitioner-appellant's lot
No. 883 of Piedad Estate. Hence, both in law and in fact, it was still Oscar de Leon who was the
buyer.

As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must

forfeit his right to the commission and must return the part of the commission he received from his
principal.

Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his
one-half share of whatever amounts Gregorio Domingo received by virtue of the transaction as his
sub-agency contract was with Gregorio Domingo alone and not with Vicente Domingo, who was
not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and
Oscar de Leon respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand
Pesos (P1,000.00) or a total of One Thousand Three Hundred Pesos (P1,300.00), one-half of the
same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo
Purisima.

Because Gregorio Domingo's clearly unfounded complaint caused Vicente Domingo mental
anguish and serious anxiety as well as wounded feelings, petitioner-appellant Vicente Domingo
should be awarded moral damages in the reasonable amount of One Thousand Pesos
(P1,000.00) attorney's fees in the reasonable amount of One Thousand Pesos (P1,000.00),
considering that this case has been pending for the last fifteen (15) years from its filing on October
3, 1956.

WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals
and directing defendant-appellee Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo
the sum of One Thousand Pesos (P1,000.00) as moral damages and One Thousand Pesos
(P1,000.00) as attorney's fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos
(P650.00); and (3) to pay the costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.
 THIRD DIVISION
January 18, 2017
G.R. No. 192602
SPOUSES MAY S. VILLALUZ and JOHNNY VILLALUZ, JR., Petitioners
vs.
LAND BANK OF THE PHILIPPINES and the REGISTER OF DEEDS FOR DAVAO CITY,
Respondents
DECISION
JARDELEZA, J.:
The Civil Code sets the default rule that an agent may appoint a substitute if the principal has not
prohibited him from doing so. The issue in this petition for review on certiorari, 1 which seeks to set
aside the Decision2 dated September 22, 2009 and Resolution3 dated May 26, 2010 of the Court
of Appeals (CA) in CA-G.R. CV No. 01307, is whether the mortgage contract executed by the
substitute is valid and binding upon the principal.
I when Milflores Cooperative assigned its produce and inventory to Land Bank as additional
Sometime in 1996, Paula Agbisit (Agbisit), mother of petitioner May S. Villaluz (May), requested
the latter to provide her with collateral for a loan. At the time, Agbisit was the chairperson of
Milflores Cooperative and she needed ₱600,000 to ₱650,000 for the expansion of her backyard
cut flowers business.4 May convinced her husband, Johnny Villaluz (collectively, the Spouses
Villaluz), to allow Agbisit to use their land, located in Calinan, Davao City and covered by Transfer
Certificate of Title (TCT) No. T-202276, as collateral. 5 On March 25, 1996, the Spouses Villaluz
executed a Special Power of Attorney6 in favor of Agbisit authorizing her to, among others,
"negotiate for the sale mortgage, or other forms of disposition a parcel of land covered by Transfer
Certificate of Title No. T-202276" and "sign in our behalf all documents relating to the sale, loan or
mortgage, or other disposition of the aforementioned property. "7 The one-page power of attorney
neither specified the conditions under which the special powers may be exercised nor stated the
amounts for which the subject land may be sold or mortgaged.
On June 19, 1996, Agbisit executed her own Special Power of Attorney, 8 appointing Milflores
Cooperative as attorney-in-fact in obtaining a loan from and executing a real mortgage in favor of
Land Bank of the Philippines (Land Bank). On June 21, 1996, Milflores Cooperative, in a
representative capacity, executed a Real Estate Mortgage9 in favor of Land Bank in consideration
of the ₱3,000,000 loan to be extended by the latter. On June 24, 1996, Milflores Cooperative also
executed a Deed of Assignment of the Produce/Inventory 10 as additional collateral for the loan.
Land Bank partially released one-third of the total loan amount, or ₱995,500, to Milflores
Cooperative on June 25, 1996. On the same day, Agbisit borrowed the amount of ₱604,750 from
Milflores Cooperative. Land Bank released the remaining loan amount of ₱2,000,500 to Milflores
Cooperative on October 4, 1996. 11
Unfortunately, Milflorcs Cooperative was unable to pay its obligations to Land Bank. Thus, Land
Bank filed a petition for extra-judicial foreclosure sale with the Office of the Clerk of Court of Davao
City. Sometime in August, 2003, the Spouses Villaluz learned that an auction sale covering their
land had been set for October 2, 2003. Land Bank won the auction sale as the sole bidder. 12
The Spouses Villaluz filed a complaint with the Regional Trial Court (RTC) of Davao City seeking
the annulment of the foreclosure sale. The sole question presented before the RTC was whether
Agbisit could have validly delegated her authority as attorney-in-fact to Milflores Cooperative.
Citing Article 1892 of the Civil Code, the RTC held that the delegation was valid since the Special
Power of Attorney executed by the Spouses Villaluz had no specific prohibition against Agbisit
appointing a substitute. Accordingly, the RTC dismissed the complaint. 13
On appeal, the CA affirmed the RTC Decision. In its Decision14 dated September 22, 2009, the CA
similarly found Article 1892 to be squarely applicable. According to the CA, the rule is that an
agent is allowed to appoint a sub-agent in the absence of an express agreement to the contrary
and that "a scrutiny of the Special Power of Attorney dated March 25, 1996 executed by
appellants in favor of [Agbisit] contained no prohibition for the latter to appoint a sub-
agent." 15 Therefore, Agbisit was allowed to appoint Milflores Cooperative as her sub-agent.
After the CA denied their motion for reconsideration, the Spouses Villaluz filed this petition for
review. They argue that the Real Estate Mortgage was void because there was no loan yet when
the mortgage contract was executed and that the Special Power of Attorney was extinguished
collateral. 16 In response, Land Bank maintains that the CA and RTC did not err in applying Article
1892, that the Real Estate Mortgage can only be extinguished after the amount of the secured
loan has been paid, and that the additional collateral was executed because the deed of
assignment was meant to cover any deficiency in the Real Estate Mortgage. 17
II
Articles 1892 and 1893 of the Civil Code provide the rules regarding the appointment of a
substitute by an agent:
Art. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person appointed
was notoriously incompetent or insolvent.
All acts of the substitute appointed against the prohibition of the principal shall be void.
Art. 1893. In the cases mentioned in Nos. 1 and 2 of the preceding article, the principal may
furthermore bring an action against the substitute with respect to the obligations which the latter
has contracted under the substitution.
The law creates a presumption that an agent has the power to appoint a substitute. The
consequence of the presumption is that, upon valid appointment of a substitute by the agent,
there ipso jure arises an agency relationship between the principal and the substitute, i.e., the
substitute becomes the agent of the principal. As a result, the principal is bound by the acts of the
substitute as if these acts had been performed by the principal's appointed agent. Concomitantly,
the substitute assumes an agent's obligations to act within the scope of authority, 18to act in
accordance with the principal's instructions, 19 and to carry out the agency, 20 among others. In
order to make the presumption inoperative and relieve himself from its effects, it is incumbent
upon the principal to prohibit the agent from appointing a substitute.
Although the law presumes that the agent is authorized to appoint a substitute, it also imposes an
obligation upon the agent to exercise this power conscientiously. To protect the principal, Article
1892 allocates responsibility to the agent for the acts of the substitute when the agent was not
expressly authorized by the principal to appoint a substitute; and, if so authorized but a specific
person is not designated, the agent appoints a substitute who is notoriously incompetent or
insolvent. In these instances, the principal has a right of action against both the agent and the
substitute if the latter commits acts prejudicial to the principal.
The case of Escueta v. Lim21illustrates the prevailing rule. In that case, the father, through a
special power of attorney, appointed his daughter as his attorney-in-fact for the purpose of selling
real properties. The daughter then appointed a substitute or sub-agent to sell the properties. After
the properties were sold, the father sought to nullify the sale effected by the subagent on the
ground that he did not authorize his daughter to appoint a subagent. We refused to nullify the sale
because it is clear from the special power of attorney executed by the father that the daughter is
not prohibited from appointing a substitute. Applying Article 1892, we held that the daughter
"merely acted within the limits of the authority given by her father, but she will have to be
'responsible for the acts of the sub-agent,' among which is precisely the sale of the subject
properties in favor of respondent."22
In the present case, the Special Power of Attorney executed by the Spouses Villaluz contains no
restrictive language indicative of an intention to prohibit Agbisit from appointing a substitute or
sub-agent. Thus, we agree with the findings of the CA and the RTC that Agbisit's appointment of
Milflores Cooperative was valid.
III
Perhaps recognizing the correctness of the CA and the RTC's legal position, the Spouses Villaluz
float a new theory in their petition before us. They now seek to invalidate the Real Estate
Mortgage for want of consideration. Citing Article 1409(3), which provides that obligations "whose
cause or object did not exist at the time of the transaction" are void ab initio, the Spouses Villaluz
posit that the mortgage was void because the loan was not yet existent when the mortgage was
executed on June 21, 1996. Since the loan was released only on June 25, 1996, the mortgage
executed four days earlier was without valuable consideration.
Article 1347 provides that "[a]ll things which are not outside the commerce of men, including future
things, may be the object of a contract." Under Articles 1461 and 1462, things having a potential
existence and "future goods," i.e., those that are yet to be manufactured, raised, or acquired, may
be the objects of contracts of sale.1âwphi1 The narrow interpretation advocated by the Spouses
Villaluz would create a dissonance between Articles 1347, 1461, and 1462, on the one hand, and
Article 1409(3), on the other. A literal interpretation of the phrase "did not exist at the time of the
transaction" in Article 1409(3) would essentially defeat the clear intent and purpose of Articles
1347, 1461, and 1462 to allow future things to be the objects of contracts. To resolve this apparent
conflict, Justice J.B.L. Reyes commented that the phrase "did not exist" should be interpreted as
"could not come into existence" because the object may legally be a future thing. 23 We adopt this
interpretation.
One of the basic rules in statutory interpretation is that all parts of a statute are to be harmonized
and reconciled so that effect may be given to each and every part thereof, and that conflicting
intentions in the same statute are never to be supposed or so regarded.24 Thus, in order to give
effect to Articles 134 7, 1461, and 1462, Article 1409(3) must be interpreted as referring to
contracts whose cause or object is impossible of existing at the time of the transaction. 25
The cause of the disputed Real Estate Mortgage is the loan to be obtained by Milflores
Cooperative. This is clear from the terms of the mortgage document, which expressly provides that
it is being executed in "consideration of certain loans, advances, credit lines, and other credit
facilities or accommodations obtained from [Land Bank by Milflores Cooperative] x x x in the
principal amount of [₱3,000,000]."26 The consideration is certainly not an impossible one because
Land Bank was capable of granting the ₱3,000,000 loan, as it in fact released one-third of the loan
a couple of days later. Although the validity of the Real Estate Mortgage is dependent upon the
validity of the loan,27 what is essential is that the loan contract intended to be secured is actually
perfected,28 not at the time of the execution of the mortgage contract vis-a-vis the loan contract. In
loan transactions, it is customary for the lender to require the borrower to execute the security
contracts prior to initial drawdown. This is understandable since a prudent lender would not want
to release its funds without the security agreements in place. On the other hand, the borrower
would not be prejudiced by mere execution of the security contract, because unless the loan
proceeds are delivered, the obligations under the security contract will not arise. 29 In other words,
the security contract-in this case, the Real Estate Mortgage-is conditioned upon the release of the
loan amount. This suspensive condition was satisfied when Land Bank released the first tranche
of the ₱3,000,000 loan to Milflores Cooperative on June 25, 1996, which consequently gave rise
to the Spouses Villaluz's obligations under the Real Estate Mortgage.1awp++i1
IV
The Spouses Villaluz claim that the Special Power of Attorney they issued was mooted by the
execution of the Deed of Assignment of the Produce/Inventory by Milflores Cooperative in favor of
Land Bank. Their theory is that the additional security on the same loan extinguished the agency
because the Deed of Assignment "served as payment of the loan of the [Milflores] Cooperative." 30
The assignment was for the express purpose of "securing the payment of the Line/Loan, interest
and charges thereon."31 Nowhere in the deed can it be reasonably deduced that the collaterals
assigned by Milflores Cooperative were intended to substitute the payment of sum of money under
the loan. It was an accessory obligation to secure the principal loan obligation.
The assignment, being intended to be a mere security rather than a satisfaction of indebtedness,
is not a elation in payment under Article 124532 and did not extinguish the loan
obligation. 33 "Dation in payment extinguishes the obligation to the extent of the value of the thing
delivered, either as agreed upon by the parties or as may be proved, unless the parties by
agreement-express or implied, or by their silence-consider the thing as equivalent to the
obligation, in which case the obligation is totally extinguished."34 As stated in the second condition
of the Deed of Assignment, the "Assignment shall in no way release the ASSIGNOR from liability
to pay the Line/Loan and other obligations, except only up to the extent of any amount actually
collected and paid to ASSIGNEE by virtue of or under this Assignment." 35 Clearly, the assignment
was not intended to substitute the payment of sums of money. It is the delivery of cash proceeds,
not the execution of the Deed of Assignment, that is considered as payment. Absent any proof of
delivery of such proceeds to Land Bank, the Spouses Villaluz' s claim of payment is without basis.

Neither could the assignment have constituted payment by cession under Article 1255 36 for the
plain and simple reason that there was only one creditor, Land Bank. Article 1255 contemplates
the existence of two or more creditors and involves the assignment of all the debtor's property. 37

The Spouses Villaluz understandably feel shorthanded because their property was foreclosed by
reason of another person's inability to pay. However, they were not coerced to grant a special
power of attorney in favor of Agbisit. Nor were they prohibited from prescribing conditions on how
such power may be exercised. Absent such express limitations, the law recognizes Land Bank's
right to rely on the terms of the power of attorney as written. 38 "Courts cannot follow one every
step of his life and extricate him from bad bargains, protect him from unwise investments, relieve
him from one-sided contracts, or annul the effects of [unwise] acts."39 The remedy afforded by the
Civil Code to the Spouses Villaluz is to proceed against the agent and the substitute in
accordance with A1iicles 1892 and 1893.

WHEREFORE, the petition is DENIED. The Decision dated September 22, 2009 and Resolution
dated May 26, 2010 of the Court of Appeals in CA-G.R. CV No. 01307 are AFFIRMED.

SO ORDERED.

FRANCIS H. JARDELEZA
Associate Justice
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 167552 April 23, 2007
EUROTECH INDUSTRIAL TECHNOLOGIES, INC., Petitioner,
vs.
EDWIN CUIZON and ERWIN CUIZON, Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision 1 of the Court of Appeals dated
10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G.R. SP No. 71397 entitled,
"Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez." The assailed Decision and
Resolution affirmed the Order3 dated 29 January 2002 rendered by Judge Antonio T. Echavez
ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case
No. CEB-19672.
The generative facts of the case are as follows:
Petitioner is engaged in the business of importation and distribution of various European industrial
equipment for customers here in the Philippines. It has as one of its customers Impact Systems
Sales ("Impact Systems") which is a sole proprietorship owned by respondent ERWIN Cuizon
(ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the
court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly
amounting to ninety-one thousand three hundred thirty-eight (₱91,338.00) pesos. Subsequently,
respondents sought to buy from petitioner one unit of sludge pump valued at ₱250,000.00 with
respondents making a down payment of fifty thousand pesos (₱50,000.00). 4 When the sludge
pump arrived from the United Kingdom, petitioner refused to deliver the same to respondents
without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995,
respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of
Assignment of receivables in favor of petitioner, the pertinent part of which states:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in
the amount of THREE HUNDRED SIXTY FIVE THOUSAND (₱365,000.00) PESOS as
payment for the purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the
ASSIGNEE6 the said receivables from Toledo Power Corporation in the amount of
THREE HUNDRED SIXTY FIVE THOUSAND (₱365,000.00) PESOS which receivables
the ASSIGNOR is the lawful recipient;
3.) That the ASSIGNEE does hereby accept this assignment.7
Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge
pump as shown by Invoice No. 12034 dated 30 June 1995.8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of
Assignment, proceeded to collect from Toledo Power Company the amount of ₱365,135.29 as
evidenced by Check Voucher No. 09339prepared by said power company and an official receipt
dated 15 August 1995 issued by Impact Systems.10Alarmed by this development, petitioner made
several demands upon respondents to pay their obligations. As a result, respondents were able to
make partial payments to petitioner. On 7 October 1996, petitioner’s counsel sent respondents a
final demand letter wherein it was stated that as of 11 June 1996, respondents’ total obligations
stood at ₱295,000.00 excluding interests and attorney’s fees.11 Because of respondents’ failure to
abide by said final demand letter, petitioner instituted a complaint for sum of money, damages,
with application for preliminary attachment against herein respondents before the Regional Trial
Court of Cebu City.12
On 8 January 1997, the trial court granted petitioner’s prayer for the issuance of writ of preliminary
attachment.13
On 25 June 1997, respondent EDWIN filed his Answer14 wherein he admitted petitioner’s
allegations with respect to the sale transactions entered into by Impact Systems and petitioner
between January and April 1995.15 He, however, disputed the total amount of Impact Systems’
indebtedness to petitioner which, according to him, amounted to only ₱220,000.00.16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party
in interest in this case. According to him, he was acting as mere agent of his principal, which was
the Impact Systems, in his transaction with petitioner and the latter was very much aware of this
fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioner’s
Complaint stating –
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is
the proprietor of a single proprietorship business known as Impact Systems Sales
("Impact Systems" for brevity), with office located at 46-A del Rosario Street, Cebu City,
where he may be served summons and other processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City.
He is the Sales Manager of Impact Systems and is sued in this action in such capacity.17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for
Summary Judgment. The trial court granted petitioner’s motion to declare respondent ERWIN in
default "for his failure to answer within the prescribed period despite the opportunity granted"18 but
it denied petitioner’s motion for summary judgment in its Order of 31 August 2001 and scheduled
the pre-trial of the case on 16 October 2001.19 However, the conduct of the pre-trial conference
was deferred pending the resolution by the trial court of the special and affirmative defenses
raised by respondent EDWIN.20
After the filing of respondent EDWIN’s Memorandum21 in support of his special and affirmative
defenses and petitioner’s opposition22 thereto, the trial court rendered its assailed Order dated 29
January 2002 dropping respondent EDWIN as a party defendant in this case. According to the trial
court –
A study of Annex "G" to the complaint shows that in the Deed of Assignment, defendant Edwin B.
Cuizon acted in behalf of or represented [Impact] Systems Sales; that [Impact] Systems Sale is a
single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is the
proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the
contract which is dated June 28, 1995. A study of Annex "H" to the complaint reveals that [Impact]
Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down payment of
₱50,000.00 that Annex "H" is dated June 30, 1995 or two days after the execution of Annex "G",
thereby showing that [Impact] Systems Sales ratified the act of Edwin B. Cuizon; the records
further show that plaintiff knew that [Impact] Systems Sales, the principal, ratified the act of Edwin
B. Cuizon, the agent, when it accepted the down payment of ₱50,000.00. Plaintiff, therefore,
cannot say that it was deceived by defendant Edwin B. Cuizon, since in the instant case the
principal has ratified the act of its agent and plaintiff knew about said ratification. Plaintiff could not
say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since
[Impact] Systems Sales made a down payment of ₱50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party
defendant.23
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of
Appeals which, however, affirmed the 29 January 2002 Order of the court a quo. The dispositive
portion of the now assailed Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the
public respondent in his Order dated January 29, 2002, it is hereby AFFIRMED.24
Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution
promulgated on 17 March 2005. Hence, the present petition raising, as sole ground for its
allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT
RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON,
IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE
OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD.25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of
collecting the receivables from the Toledo Power Corporation notwithstanding the existence of the
Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did not
revoke the agency relations of respondents, petitioner insists that ERWIN’s action repudiated
EDWIN’s power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the
extent of his powers as an agent, petitioner claims that he should be made personally liable for the
obligations of his principal.26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it
into selling the one unit of sludge pump to Impact Systems and signing the Deed of Assignment.
Petitioner directs the attention of this Court to the fact that respondents are bound not only by their
principal and agent relationship but are in fact full-blooded brothers whose successive
contravening acts bore the obvious signs of conspiracy to defraud petitioner.27
In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in
interest in this case and it was proper for the trial court to have him dropped as a defendant. He
insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his status
as such is known even to petitioner as it is alleged in the Complaint that he is being sued in his
capacity as the sales manager of the said business venture. Likewise, respondent EDWIN points
to the Deed of Assignment which clearly states that he was acting as a representative of Impact
Systems in said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service or to do something in
representation or on behalf of another with the latter’s consent. 29 The underlying principle of the
contract of agency is to accomplish results by using the services of others – to do a great variety
of things like selling, buying, manufacturing, and transporting.30 Its purpose is to extend the
personality of the principal or the party for whom another acts and from whom he or she derives
the authority to act.31 It is said that the basis of agency is representation, that is, the agent acts for
and on behalf of the principal on matters within the scope of his authority and said acts have the
same legal effect as if they were personally executed by the principal.32 By this legal fiction, the
actual or real absence of the principal is converted into his legal or juridical presence – qui facit
per alium facit per se.33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the
scope of his authority.34
In this case, the parties do not dispute the existence of the agency relationship between
respondents ERWIN as principal and EDWIN as agent. The only cause of the present dispute is
whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to petitioner. Petitioner firmly believes limits of his authority without giving notice of his powers to the third person. However, it must be
that respondent EDWIN acted beyond the authority granted by his principal and he should pointed out that in case of excess of authority by the agent, like what petitioner claims exists here,
therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code. the law does not say that a third person can recover from both the principal and the agent.40

We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally
liable to the party with whom he contracts. The same provision, however, presents two instances
when an agent becomes personally liable to a third person. The first is when he expressly binds
himself to the obligation and the second is when he exceeds his authority. In the last instance, the
agent can be held liable if he does not give the third party sufficient notice of his powers. We hold
that respondent EDWIN does not fall within any of the exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales
manager of Impact Systems. As discussed elsewhere, the position of manager is unique in that it
presupposes the grant of broad powers with which to conduct the business of the principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or
manager; such a position presupposes a degree of confidence reposed and investiture with liberal
powers for the exercise of judgment and discretion in transactions and concerns which are
incidental or appurtenant to the business entrusted to his care and management. In the absence
of an agreement to the contrary, a managing agent may enter into any contracts that he deems
reasonably necessary or requisite for the protection of the interests of his principal entrusted to his
management. x x x.35
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire
any right nor incur any liability arising from the Deed of Assignment, it follows that he is not a real
party in interest who should be impleaded in this case. A real party in interest is one who "stands
to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the
suit."41 In this respect, we sustain his exclusion as a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10
August 2004 and Resolution dated 17 March 2005 of the Court of Appeals in CA-G.R. SP No.
71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu
City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the
continuation of the proceedings against respondent Erwin Cuizon.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice

Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his
authority when he signed the Deed of Assignment. To recall, petitioner refused to deliver the one
unit of sludge pump unless it received, in full, the payment for Impact Systems’
indebtedness.36 We may very well assume that Impact Systems desperately needed the sludge
pump for its business since after it paid the amount of fifty thousand pesos (₱50,000.00) as down
payment on 3 March 1995,37 it still persisted in negotiating with petitioner which culminated in the
execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June
1995.38 The significant amount of time spent on the negotiation for the sale of the sludge pump
underscores Impact Systems’ perseverance to get hold of the said equipment. There is, therefore,
no doubt in our mind that respondent EDWIN’s participation in the Deed of Assignment was
"reasonably necessary" or was required in order for him to protect the business of his principal.
Had he not acted in the way he did, the business of his principal would have been adversely
affected and he would have violated his fiduciary relation with his principal.

We likewise take note of the fact that in this case, petitioner is seeking to recover both from
respondents ERWIN, the principal, and EDWIN, the agent. It is well to state here that Article 1897
of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN "does
not hold that in case of excess of authority, both the agent and the principal are liable to the other
contracting party."39 To reiterate, the first part of Article 1897 declares that the principal is liable in
cases when the agent acted within the bounds of his authority. Under this, the agent is completely
absolved of any liability. The second part of the said provision presents the situations when the
agent himself becomes liable to a third party when he expressly binds himself or he exceeds the
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 174610 July 14, 2009
SORIAMONT STEAMSHIP AGENCIES, INC., and PATRICK RONAS, Petitioners,
vs.
SPRINT TRANSPORT SERVICES, INC., RICARDO CRUZ PAPA, doing business under the
style PAPA TRANSPORT SERVICES, Respondents.
DECISION
CHICO-NAZARIO, J.:
Assailed in this Petition for Review on Certiorari, under Rule 45 of the Revised Rules of Court, is
the Decision1dated 22 June 2006 and Resolution2 dated 7 September 2006 of the Court of
Appeals in CA-G.R. CV No. 74987. The appellate court affirmed with modification the
Decision3 dated 22 April 2002 of the Regional Trial Court (RTC), Branch 46, of Manila, in Civil
Case No. 98-89047, granting the Complaint for Sum of Money of herein respondent Sprint
Transport Services, Inc. (Sprint) after the alleged failure of herein petitioner Soriamont Steamship
Agencies, Inc. (Soriamont) to return the chassis units it leased from Sprint and pay the
accumulated rentals for the same.
The following are the factual and procedural antecedents:
Soriamont is a domestic corporation providing services as a receiving agent for line load
contractor vessels. Patrick Ronas (Ronas) is its general manager.
On the other hand, Sprint is a domestic corporation engaged in transport services. Its co-
respondent Ricardo Cruz Papa (Papa) is engaged in the trucking business under the business
name "Papa Transport Services" (PTS).
Sprint filed with the RTC on 2 June 1998 a Complaint4 for Sum of Money against Soriamont and
Ronas, docketed as Civil Case No. 98-89047. Sprint alleged in its Complaint that: (a) on 17
December 1993, it entered into a lease agreement, denominated as Equipment Lease Agreement
(ELA) with Soriamont, wherein the former agreed to lease a number of chassis units to the latter
for the transport of container vans; (b) with authorization letters dated 19 June 1996 issued by
Ronas on behalf of Soriamont, PTS and another trucker, Rebson Trucking, were able to withdraw
on 22 and 25 June 1996, from the container yard of Sprint, two chassis units (subject
equipment),5evidenced by Equipment Interchange Receipts No. 14215 and No. 14222; (c)
Soriamont and Ronas failed to pay rental fees for the subject equipment since 15 January 1997;
(d) Sprint was subsequently informed by Ronas, through a letter dated 17 June 1997, of the
purported loss of the subject equipment sometime in June 1997; and (e) despite demands,
Soriamont and Ronas failed to pay the rental fees for the subject equipment, and to replace or
return the same to Sprint.
Sprint, thus, prayed for the RTC to render judgment:
1. Ordering [Soriamont and Ronas] to pay [Sprint], jointly and severally, actual damages,
in the amount of Five Hundred Thirty-Seven Thousand Eight Hundred Pesos
(₱537,800.00) representing unpaid rentals and the replacement cost for the lost chassis
units.
2. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount of
Fifty-Three Thousand Five Hundred Four Pesos and Forty-Two centavos (₱53,504.42) as
interest and penalties accrued as of March 31, 1998 and until full satisfaction thereof.
3. Ordering [Soriamont and Ronas], jointly and severally, to pay [Sprint] the amount
equivalent to twenty-five percent (25%) of the total amount claimed for and as attorney’s
fees plus Two Thousand Pesos (₱2,000.00) per court appearance.
4. Ordering [Soriamont and Ronas] to pay the cost of the suit.6
Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim. 7 Soriamont
admitted therein to having a lease agreement with Sprint, but only for the period 21 October 1993
to 21 January 1994. It denied entering into an ELA with respondent Sprint on 17 December 1993
as alleged in the Complaint. Soriamont further argued that it was not a party-in-interest in Civil
Case No. 98-89047, since it was PTS and Rebson Trucking that withdrew the subject equipment
from the container yard of Sprint. Ronas was likewise not a party-in-interest in the case since his
actions, assailed in the Complaint, were executed as part of his regular functions as an officer of
Soriamont.
Consistent with their stance, Soriamont and Ronas filed a Third-Party Complaint8 against Papa,
who was doing business under the name PTS. Soriamont and Ronas averred in their Third-Party
Complaint that it was PTS and Rebson Trucking that withdrew the subject equipments from the
container yard of Sprint, and failed to return the same. Since Papa failed to file an answer to the
Third-Party Complaint, he was declared by the RTC to be in default.9
After trial, the RTC rendered its Decision in Civil Case No. 98-89047 on 22 April 2002, finding
Soriamont liable for the claim of Sprint, while absolving Ronas and Papa from any liability.
According to the RTC, Soriamont authorized PTS to withdraw the subject equipment. The
dispositive portion of the RTC Decision reads:
WHEREFORE, judgment is hereby rendered in favor of [herein respondent] Sprint Transport
Services, Inc. and against [herein petitioner] Soriamont Steamship Agencies, Inc., ordering the
latter to pay the former the following:
 Three hundred twenty thousand pesos (₱320,000) representing the value of the two
chassis units with interest at the legal rate from the filing of the complaint;
  Two hundred seventy thousand one hundred twenty four & 42/100 pesos (₱270,124.42)
representing unpaid rentals with interest at the legal rate from the filing of the complaint;
 ₱20,000.00 as attorney’s fees.
The rate of interest shall be increased to 12% per annum once this decision becomes final and
executory.
Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability.10
Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals, docketed as CA-
G.R. CV No. 74987.
The Court of Appeals, in its Decision dated 22 June 2006, found the following facts to be borne
out by the records: (1) Sprint and Soriamont entered into an ELA whereby the former leased
chassis units to the latter for the specified daily rates. The ELA covered the period 21 October
1993 to 21 January 1994, but it contained an "automatic" renewal clause; (2) on 22 and 25 June
1996, Soriamont, through PTS and Rebson Trucking, withdrew Sprint Chassis 2-07 with Plate No.
NUP-261 Serial No. ICAZ-165118, and Sprint Chassis 2-55 with Plate No. NUP-533 Serial MOTZ-
160080, from the container yard of Sprint; (3) Soriamont authorized the withdrawal by PTS and
Rebson Trucking of the subject equipment from the container yard of Sprint; and (4) the subject
pieces of equipment were never returned to Sprint. In a letter to Sprint dated 19 June 1997,
Soriamont relayed that it was still trying to locate the subject equipment, and requested the former
to refrain from releasing more equipment to respondent PTS and Rebson Trucking.
Hence, the Court of Appeals decreed:
WHEREFORE, the appealed Decision dated April 22, 2002 of the trial court is affirmed, subject to
the modification that the specific rate of legal interest per annum on both the ₱320,000.00
representing the value of the two chassis units, and on the ₱270,124.42 representing the unpaid
rentals, is six percent (6%), to be increased to twelve percent (12%) from the finality of this
Decision until its full satisfaction.11
In a Resolution dated 7 September 2006, the Court of Appeals denied the Motion for
Reconsideration of Soriamont for failing to present any cogent and substantial matter that would
warrant a reversal or modification of its earlier Decision.
Aggrieved, Soriamont12 filed the present Petition for Review with the following assignment of
errors:
I.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS
SOLE ISSUE FOR RESOLUTION OF WHETHER OR NOT AN AGENCY RELATIONSHIP
EXISTED BETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN
PETITIONERS SORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA
TRUCKING BUT TOTALLY DISREGARDING AND FAILING TO RULE ON THE LIABILITY OF
PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. THE LIABILITY OF
PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF THE
THIRD-PARTY COMPLAINT WAS TOTALLY IGNORED;
II.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING
HEREIN PETITIONERS STEAMSHIP AGENCIES SOLELY LIABLE. EVIDENCE ON RECORD
SHOW THAT IT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW THE
SUBJECT CHASSIS. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN
POSSESSION OF THE SAID SUBJECT CHASSIS AND IT SHOULD BE HELD SOLELY LIABLE
FOR THE LOSS THEREOF;
III.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT IGNORED
A MATERIAL INCONSISTENCY IN THE TESTIMONY OF PRIVATE RESPONDENT SPRINT
TRANSPORT’S WITNESS, MR. ENRICO G. VALENCIA. THE TESTIMONY OF MR. VALENCIA
WAS ERRONEOUSLY MADE THE BASIS FOR HOLDING HEREIN PETITIONERS LIABLE FOR
THE LOSS OF THE SUBJECT CHASSIS.
We find the Petition to be without merit.
The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized by
Soriamont to secure possession of the subject equipment from Sprint, pursuant to the existing
ELA between Soriamont and Sprint. The authorization issued by Soriamont to PTS established an
agency relationship, with Soriamont as the principal and PTS as an agent. Resultantly, the actions
taken by PTS as regards the subject equipment were binding on Soriamont, making the latter
liable to Sprint for the unpaid rentals for the use, and damages for the subsequent loss, of the
subject equipment.
Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw the
subject equipment from the container yard of Sprint. Although Soriamont admits that the
authorization letter dated 19 June 1996 was under its letterhead, said letter was actually meant for
and sent to Harman Foods as shipper. It was then Harman Foods that tasked PTS to withdraw the
subject equipment from Sprint. Soriamont insists that the Court of Appeals merely presumed that
an agency relationship existed between Soriamont and PTS, since there was nothing in the
records to evidence the same. Meanwhile, there is undisputed evidence that it was PTS that
withdrew and was last in possession of the subject equipment. Soriamont further calls attention to
the testimony of Enrico Valencia (Valencia), a witness for Sprint, actually supporting the position of
Soriamont that PTS did not present any authorization from Soriamont when it withdrew the subject
equipment from the container yard of Sprint. Assuming, for the sake of argument that an agency
relationship did exist between Soriamont and PTS, the latter should not have been exonerated
from any liability. The acts of PTS that resulted in the loss of the subject equipment were beyond
the scope of its authority as supposed agent of Soriamont. Soriamont never ratified, expressly or
impliedly, such acts of PTS.
Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appeals
based its conclusion that PTS withdrew the subject equipment from the container yard of Sprint as
an agent of Soriamont. In effect, Soriamont is raising questions of fact, the resolution of which
requires us to re-examine and re-evaluate the evidence presented by the parties below.
Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for review
under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases
brought to it from the Court of Appeals is limited to reviewing errors of law, the findings of fact of
the appellate court being conclusive. We have emphatically declared that it is not the function of
this Court to analyze or weigh such evidence all over again, its jurisdiction being limited to
reviewing errors of law that may have been committed by the lower court.13
These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties’ conflicting claims and to carefully weigh their respective sets of
evidence. The findings of the trial court were subsequently affirmed by the Court of Appeals.
Where the factual findings of both the trial court and the Court of Appeals coincide, the same are
binding on this Court. We stress that, subject to some exceptional instances, only questions of law
– not questions of fact – may be raised before this Court in a petition for review under Rule 45 of
the Revised Rules of Court.14
Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the
Court of Appeals are premised on the absence of evidence and are contradicted by the evidence
on record,15 we accommodate Soriamont by going over the same evidence considered by the
Court of Appeals and the RTC.
In Republic v. Court of Appeals,16 we explained that:
In civil cases, the party having the burden of proof must establish his case by a preponderance of
evidence. Stated differently, the general rule in civil cases is that a party having the burden of
proof of an essential fact must produce a preponderance of evidence thereon (I Moore on Facts,
4, cited in Vicente J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, p.
542, 1973 Edition). By preponderance of evidence is meant simply evidence which is of greater
weight, or more convincing than that which is offered in opposition to it (32 C.J.S., 1051), The term
'preponderance of evidence' means the weight, credit and value of the aggregate evidence on
either side and is usually considered to be synonymous with the terms `greater weight of evidence'
or 'greater weight, of the credible evidence.' Preponderance of the evidence is a phrase which, in
the last analysis, means probability of the truth. Preponderance of the evidence means evidence
which is more convincing to the court as worthy of belief than that which is offered in opposition
thereto. x x x." (20 Am. Jur., 1100-1101)
After a review of the evidence on record, we rule that the preponderance of evidence indeed
supports the existence of an agency relationship between Soriamont and PTS.
It is true that a person dealing with an agent is not authorized, under any circumstances, to trust
blindly the agent’s statements as to the extent of his powers. Such person must not act negligently
but must use reasonable diligence and prudence to ascertain whether the agent acts within the
scope of his authority. The settled rule is that persons dealing with an assumed agent are bound
at their peril; and if they would hold the principal liable, they must ascertain not only the fact of
agency, but also the nature and extent of authority, and in case either is controverted, the burden
of proof is upon them to prove it. Sprint has successfully discharged this burden.
The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, of
chassis units, explicitly authorized the latter to appoint a representative who shall withdraw and
return the leased chassis units to Sprint, to wit:
EQUIPMENT LEASE AGREEMENT
between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And
SORIAMONT STEAMSHIP AGENCIES, INC.
(LESSEE)
TERMS and CONDITIONS
xxxx
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished every
time a chassis is withdrawn and returned to a designated depot. The EIR relates the condition of
the chassis at the point of on-hire/off-hire duly acknowledged by the LESSOR, Property Custodian
and the LESSEE’S authorized representative.
xxxx
5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE
authorizes his representative to withdraw/return the chassis on his behalf. Only persons with a
duly accomplished and signed authorization slip shall be entertained by the LESSOR for purposes
of withdrawal/return of the chassis. The signatory in the Withdrawal/Return Slip has to be the
signatory of the corresponding Lease Agreement or the LESSEE’s duly authorized
representative(s).17 (Emphases ours.)
Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January
1994, and no longer in effect at the time the subject pieces of equipment were reportedly
withdrawn and lost by PTS. This contention of Soriamont is without merit, given that the same ELA
expressly provides for the "automatic" renewal thereof in paragraph 24, which reads:
There shall be an automatic renewal of the contract subject to the same terms and conditions as
stipulated in the original contract unless terminated by either party in accordance with paragraph
no. 23 hereof. However, in this case, termination will take effect immediately.18
There being no showing that the ELA was terminated by either party, then it was being
automatically renewed in accordance with the afore-quoted paragraph 24.
It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking
should appear before Sprint in June 1996 with authorization letters, issued by Soriamont, for the
withdrawal of the subject equipment.19On the witness stand, Valencia testified, as the operations
manager of Sprint, as follows:
Atty. Porciuncula:
Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint
Transport Services, Inc. and the defendant Soriamont Steamship Agencies, Inc.?
A. Yes, Sir.
Q. In this particular incident, Mr. Witness, how was it sent?
A. By fax, Sir.
Q. Is this standard operating procedure of Sprint Transport Services, Inc.?
A. Yes, Sir, if the trucking could not bring to our office the original copy of the
authorization they have to send us thru fax, but the original copy of the authorization will
be followed.

Q. What transactions are these, Mr. Witness? Atty. Porciuncula:

A. They got from us chassis, Sir. Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies,
Inc. letter head with the headings Authorization, are these the same withdrawal authority
Court: that you mentioned awhile ago?

Q. Who among the two, who withdrew? A. Yes, Sir.

A. The representative of Soriamont Steamship Agencies, Inc., Your Honor. Atty. Porciuncula:

Atty. Porciuncula: Your Honor, at this point may we request that these documents identified by the witness
be marked as Exhibits JJ and KK, Your Honor.
Q. And when were these chassis withdrawn, Mr. Witness?
Court:
A. June 1996, Sir.
Mark them.
Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis
units from your container yard? xxxx

Witness: Q. Way back Mr. Witness, who withdrew the chassis units 2-07 and 2-55?

Before they can withdraw the chassis they have to present withdrawal authority, Sir. A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.

Atty. Porciuncula: Q. And are these trucking companies authorized to withdraw these chassis units?

And what is this withdrawal authority? A. Yes, Sir, it was stated in the withdrawal authority.

A. This is to prove that they are authorizing their representative to get from us a chassis
unit.
Q. And who is this authorization send to you, Mr. Witness?
A. Sometime a representative bring to our office the letter or the authorization or
sometime thru fax, Sir.
Atty. Porciuncula:
Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ
and KK, could you please go over the same and tell this Honorable Court where states
there that the trucking companies which you mentioned awhile ago authorized to
withdraw?
A. Yes, Sir, it is stated in this withdrawal authority.
Atty. Porciuncula:
At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking
identified by the witness be bracketed and mark as our Exhibits JJ-1 and KK-1, Your
Honor.
Court:
Mark them. Are these documents have dates?
Atty. Porciuncula:
Yes, Your Honor, both documents are dated June 19, 1996.
Q. Mr. Witness, after this what happened next?
A. After they presented to us the withdrawal authority, we called up Soriamont Steamship
Agencies, Inc. to verify whether the one sent to us through truck and the one sent to us
through fax are one and the same.
Q. Then what happened next, Mr. Witness?
A. Then after the verification whether it is true, then we asked them to choose the chassis
units then my checker would see to it whether the chassis units are in good condition,
then after that we prepared the outgoing Equipment Interchange Receipt, Sir.
Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment
Interchange Receipt means?
A. This is a document proving that the representative of Soriamont Steamship Agencies,
Inc. really withdraw (sic) the chassis units, Sir.
xxxx
Atty. Porciuncula:
Q. Going back Mr. Witness, you mentioned awhile ago that your company issued
outgoing Equipment Interchange Receipt?
A. Yes, Sir.
Q. Are there incoming Equipment Interchange Receipt Mr. Witness?
A. We have not made Incoming Equipment Interchange Receipt with respect to
Soriamont Steamship Agencies, Inc., Sir.
Q. And why not, Mr. Witness?
A. Because they have not returned to us the two chassis units.20
In his candid and straightforward testimony, Valencia was able to clearly describe the standard
operating procedure followed in the withdrawal by Soriamont or its authorized representative of
the leased chassis units from the container yard of Sprint. In the transaction involved herein,
authorization letters dated 19 June 1996 in favor of PTS and Rebson Trucking were faxed by
Sprint to Soriamont, and were further verified by Sprint through a telephone call to Soriamont.
Valencia’s testimony established that Sprint exercised due diligence in its dealings with PTS, as
the agent of Soriamont.
Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the
withdrawal of the subject equipment was not authorized by it, but by the shipper/consignee,
Harman Foods, which actually designated PTS and Rebson Trucking as truckers. However, a
scrutiny of the Equipment Interchange Receipts will show that these documents merely identified
Harman Foods as the shipper/consignee, and the location of said shipping line. It bears to stress
that it was Soriamont that had an existing ELA with Sprint, not Harman Foods, for the lease of the
subject equipment. Moreover, as stated in the ELA, the outgoing Equipment Interchange Receipts
shall be signed, upon the withdrawal of the leased chassis units, by the lessee, Soriamont, or its
authorized representative. In this case, we can only hold that the driver of PTS signed the receipts
for the subject equipment as the authorized representative of Soriamont, and no other.
Finally, the letter21 dated 17 June 1997, sent to Sprint by Ronas, on behalf of Soriamont, which
stated:
As we are currently having a problem with regards to the whereabouts of the subject trailers, may
we request your kind assistance in refraining from issuing any equipment to the above trucking
companies.
reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis units
from Sprint, hence, necessitating an express request from Soriamont for Sprint to discontinue
recognizing said authority.1avvphi1
Alternatively, if PTS is found to be its agent, Soriamont argues that PTS is liable for the loss of the
subject equipment, since PTS acted beyond its authority as agent. Soriamont cites Article 1897 of
the Civil Code, which provides:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers.
The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner
in excess of its authority as agent, thus, resulting in the loss of the subject equipment. To recall,
the subject equipment was withdrawn and used by PTS with the authority of Soriamont. And for
PTS to be personally liable, as agent, it is vital that Soriamont be able to prove that PTS damaged
or lost the said equipment because it acted contrary to or in excess of the authority granted to it by
Soriamont. As the Court of Appeals and the RTC found, however, Soriamont did not adduce any
evidence at all to prove said allegation. Given the lack of evidence that PTS was in any way
responsible for the loss of the subject equipment, then, it cannot be held liable to Sprint, or even to
Soriamont as its agent. In the absence of evidence showing that PTS acted contrary to or in
excess of the authority granted to it by its principal, Soriamont, this Court cannot merely presume
PTS liable to Soriamont as its agent. The only thing proven was that Soriamont, through PTS,
withdrew the two chassis units from Sprint, and that these have never been returned to Sprint.
Considering our preceding discussion, there is no reason for us to depart from the general rule
that the findings of fact of the Court of Appeals and the RTC are already conclusive and binding
upon us.
Finally, the adjustment by the Court of Appeals with respect to the applicable rate of legal interest
on the ₱320,000.00, representing the value of the subject equipment, and on the ₱270,124.42,
representing the unpaid rentals awarded in favor of Sprint, is proper and with legal basis. Under
Article 2209 of the Civil Code, when an obligation not constituting a loan or forbearance of money
is breached, then an interest on the amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. Clearly, the monetary judgment in favor of
Sprint does not involve a loan or forbearance of money; hence, the proper imposable rate of
interest is six (6%) percent. Further, as declared in Eastern Shipping Lines, Inc. v. Court of
Appeals,22 the interim period from the finality of the judgment awarding a monetary claim until
payment thereof is deemed to be equivalent to a forbearance of credit. Eastern Shipping Lines,
Inc. v. Court of Appeals23 explained, to wit:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts
or quasi-delicts is breached, the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:
1. When the obligation is breached, and it consists in the payment of a sum of
money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of
stipulation, the rate of interest shall be 12% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall begin to run
from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shall begin to run only from the date the judgment
of the court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for the
computation of legal interest shall, in any case, be on the amount finally
adjudged.
3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.
Consistent with the foregoing jurisprudence, and later on affirmed in more recent cases,24 when
the judgment awarding a sum of money becomes final and executory, the rate of legal interest
shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to
be by then an equivalent of a forbearance of credit. Thus, from the time the judgment becomes
final until its full satisfaction, the applicable rate of legal interest shall be twelve percent (12%).
WHEREFORE, premises considered, the instant Petition for Review on Certiorari is hereby
DENIED. The Decision dated 22 June 2006 and Resolution dated 7 September 2006 of the Court
of Appeals in CA-G.R. CV No. 74987 are hereby AFFIRMED. Costs against petitioner Soriamont
Steamship Agencies, Inc.
SO ORDERED.
 SECOND DIVISION
G.R. No. 151319 November 22, 2004
MANILA MEMORIAL PARK CEMETERY, INC., petitioner,
vs.
PEDRO L. LINSANGAN, respondent.
DECISION
TINGA, J.:
For resolution in this case is a classic and interesting texbook question in the law on agency.
1
This is a petition for review assailing the Decision of the Court of Appeals dated 22 June 2001,
and its Resolution2dated 12 December 2001 in CA G.R. CV No. 49802 entitled "Pedro L.
Linsangan v. Manila Memorial Cemetery, Inc. et al.," finding Manila Memorial Park Cemetery, Inc.
(MMPCI) jointly and severally liable with Florencia C. Baluyot to respondent Atty. Pedro L.
Linsangan.
The facts of the case are as follows:
Sometime in 1984, Florencia Baluyot offered Atty. Pedro L. Linsangan a lot called Garden State at
the Holy Cross Memorial Park owned by petitioner (MMPCI). According to Baluyot, a former owner
of a memorial lot under Contract No. 25012 was no longer interested in acquiring the lot and had
opted to sell his rights subject to reimbursement of the amounts he already paid. The contract was
for P95,000.00. Baluyot reassured Atty. Linsangan that once reimbursement is made to the former
buyer, the contract would be transferred to him. Atty. Linsangan agreed and gave Baluyot
P35,295.00 representing the amount to be reimbursed to the original buyer and to complete the
down payment to MMPCI.3 Baluyot issued handwritten and typewritten receipts for these
payments.4
Sometime in March 1985, Baluyot informed Atty. Linsangan that he would be issued Contract No.
28660, a new contract covering the subject lot in the name of the latter instead of old Contract No.
25012. Atty. Linsangan protested, but Baluyot assured him that he would still be paying the old
price of P95,000.00 with P19,838.00 credited as full down payment leaving a balance of about
P75,000.00.5
Subsequently, on 8 April 1985, Baluyot brought an Offer to Purchase Lot No. A11 (15), Block 83,
Garden Estate I denominated as Contract No. 28660 and the Official Receipt No. 118912 dated 6
April 1985 for the amount of P19,838.00. Contract No. 28660 has a listed price of P132,250.00.
Atty. Linsangan objected to the new contract price, as the same was not the amount previously
agreed upon. To convince Atty. Linsangan, Baluyot executed a document6 confirming that while
the contract price is P132,250.00, Atty. Linsangan would pay only the original price of P95,000.00.
The document reads in part:
The monthly installment will start April 6, 1985; the amount of P1,800.00 and the
difference will be issued as discounted to conform to the previous price as previously
agreed upon. --- P95,000.00
Prepared by:
(Signed)
(MRS.) FLORENCIA C. BALUYOT
Agency Manager
Holy Cross Memorial Park
4/18/85
Dear Atty. Linsangan:
This will confirm our agreement that while the offer to purchase under Contract No. 28660
states that the total price of P132,250.00 your undertaking is to pay only the total sum of
P95,000.00 under the old price. Further the total sum of P19,838.00 already paid by you
under O.R. # 118912 dated April 6, 1985 has been credited in the total purchase price
thereby leaving a balance of P75,162.00 on a monthly installment of P1,800.00 including
interests (sic) charges for a period of five (5) years.
(Signed)
FLORENCIA C. BALUYOT
By virtue of this letter, Atty. Linsangan signed Contract No. 28660 and accepted Official Receipt
No. 118912. As requested by Baluyot, Atty. Linsangan issued twelve (12) postdated checks of
P1,800.00 each in favor of MMPCI. The next year, or on 29 April 1986, Atty. Linsangan again
issued twelve (12) postdated checks in favor of MMPCI.
On 25 May 1987, Baluyot verbally advised Atty. Linsangan that Contract No. 28660 was cancelled
for reasons the latter could not explain, and presented to him another proposal for the purchase of
an equivalent property. He refused the new proposal and insisted that Baluyot and MMPCI honor
their undertaking.
For the alleged failure of MMPCI and Baluyot to conform to their agreement, Atty. Linsangan filed
a Complaint7 for Breach of Contract and Damages against the former.
Baluyot did not present any evidence. For its part, MMPCI alleged that Contract No. 28660 was
cancelled conformably with the terms of the contract8 because of non-payment of
arrearages.9 MMPCI stated that Baluyot was not an agent but an independent contractor, and as
such was not authorized to represent MMPCI or to use its name except as to the extent expressly
stated in the Agency Manager Agreement.10 Moreover, MMPCI was not aware of the
arrangements entered into by Atty. Linsangan and Baluyot, as it in fact received a down payment
and monthly installments as indicated in the contract.11 Official receipts showing the application of
payment were turned over to Baluyot whom Atty. Linsangan had from the beginning allowed to
receive the same in his behalf. Furthermore, whatever misimpression that Atty. Linsangan may
have had must have been rectified by the Account Updating Arrangement signed by Atty.
Linsangan which states that he "expressly admits that Contract No. 28660 'on account of serious
delinquency…is now due for cancellation under its terms and conditions.'''12
The trial court held MMPCI and Baluyot jointly and severally liable. 13 It found that Baluyot was an
agent of MMPCI and that the latter was estopped from denying this agency, having received and
enchased the checks issued by Atty. Linsangan and given to it by Baluyot. While MMPCI insisted
that Baluyot was authorized to receive only the down payment, it allowed her to continue to
receive postdated checks from Atty. Linsangan, which it in turn consistently encashed. 14
The dispositive portion of the decision reads:
WHEREFORE, judgment by preponderance of evidence is hereby rendered in favor of
plaintiff declaring Contract No. 28660 as valid and subsisting and ordering defendants to
perform their undertakings thereof which covers burial lot No. A11 (15), Block 83, Section
Garden I, Holy Cross Memorial Park located at Novaliches, Quezon City. All payments
made by plaintiff to defendants should be credited for his accounts. NO DAMAGES, NO
ATTORNEY'S FEES but with costs against the defendants.
The cross claim of defendant Manila Memorial Cemetery Incorporated as against
defendant Baluyot is GRANTED up to the extent of the costs.
SO ORDERED.15
MMPCI appealed the trial court's decision to the Court of Appeals.16 It claimed that Atty. Linsangan
is bound by the written contract with MMPCI, the terms of which were clearly set forth therein and
read, understood, and signed by the former.17 It also alleged that Atty. Linsangan, a practicing
lawyer for over thirteen (13) years at the time he entered into the contract, is presumed to know
his contractual obligations and is fully aware that he cannot belatedly and unilaterally change the
terms of the contract without the consent, much less the knowledge of the other contracting party,
which was MMPCI. And in this case, MMPCI did not agree to a change in the contract and in fact
implemented the same pursuant to its clear terms. In view thereof, because of Atty. Linsangan's
delinquency, MMPCI validly cancelled the contract.
MMPCI further alleged that it cannot be held jointly and solidarily liable with Baluyot as the latter
exceeded the terms of her agency, neither did MMPCI ratify Baluyot's acts. It added that it cannot
be charged with making any misrepresentation, nor of having allowed Baluyot to act as though
she had full powers as the written contract expressly stated the terms and conditions which Atty.
Linsangan accepted and understood. In canceling the contract, MMPCI merely enforced the terms
and conditions imposed therein.18
Imputing negligence on the part of Atty. Linsangan, MMPCI claimed that it was the former's
obligation, as a party knowingly dealing with an alleged agent, to determine the limitations of such
agent's authority, particularly when such alleged agent's actions were patently questionable.
According to MMPCI, Atty. Linsangan did not even bother to verify Baluyot's authority or ask
copies of official receipts for his payments.19
The Court of Appeals affirmed the decision of the trial court. It upheld the trial court's finding that
Baluyot was an agent of MMPCI at the time the disputed contract was entered into, having
represented MMPCI's interest and acting on its behalf in the dealings with clients and customers.
Hence, MMPCI is considered estopped when it allowed Baluyot to act and represent MMPCI even
beyond her authority.20 The appellate court likewise found that the acts of Baluyot bound MMPCI
when the latter allowed the former to act for and in its behalf and stead. While Baluyot's authority
"may not have been expressly conferred upon her, the same may have been derived impliedly by
habit or custom, which may have been an accepted practice in the company for a long period of
time."21 Thus, the Court of Appeals noted, innocent third persons such as Atty. Linsangan should
not be prejudiced where the principal failed to adopt the needed measures to prevent
misrepresentation. Furthermore, if an agent misrepresents to a purchaser and the principal
accepts the benefits of such misrepresentation, he cannot at the same time deny responsibility for
such misrepresentation.22 Finally, the Court of Appeals declared:
There being absolutely nothing on the record that would show that the court a quo overlooked,
disregarded, or misinterpreted facts of weight and significance, its factual findings and conclusions
must be given great weight and should not be disturbed by this Court on appeal.
WHEREFORE, in view of the foregoing, the appeal is hereby DENIED and the appealed
decision in Civil Case No. 88-1253 of the Regional Trial Court, National Capital Judicial
Region, Branch 57 of Makati, is hereby AFFIRMED in toto.
SO ORDERED.23
MMPCI filed its Motion for Reconsideration,24 but the same was denied for lack of merit.25
In the instant Petition for Review, MMPCI claims that the Court of Appeals seriously erred in
disregarding the plain terms of the written contract and Atty. Linsangan's failure to abide by the
terms thereof, which justified its cancellation. In addition, even assuming that Baluyot was an
agent of MMPCI, she clearly exceeded her authority and Atty. Linsangan knew or should have
known about this considering his status as a long-practicing lawyer. MMPCI likewise claims that
the Court of Appeals erred in failing to consider that the facts and the applicable law do not
support a judgment against Baluyot only "up to the extent of costs."26
Atty. Linsangan argues that he did not violate the terms and conditions of the contract, and in fact
faithfully performed his contractual obligations and complied with them in good faith for at least
two years.27 He claims that contrary to MMPCI's position, his profession as a lawyer is immaterial
to the validity of the subject contract and the case at bar.28 According to him, MMPCI had
practically admitted in its Petition that Baluyot was its agent, and thus, the only issue left to be
resolved is whether MMPCI allowed Baluyot to act as though she had full powers to be held
solidarily liable with the latter.29
We find for the petitioner MMPCI.
The jurisdiction of the Supreme Court in a petition for review under Rule 45 of the Rules of Court is
limited to reviewing only errors of law, not fact, unless the factual findings complained of are
devoid of support by the evidence on record or the assailed judgment is based on
misapprehension of facts.30 In BPI Investment Corporation v. D.G. Carreon Commercial
Corporation,31 this Court ruled:
There are instances when the findings of fact of the trial court and/or Court of Appeals
may be reviewed by the Supreme Court, such as (1) when the conclusion is a finding
grounded entirely on speculation, surmises and conjectures; (2) when the inference made
is manifestly mistaken, absurd or impossible; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the
findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the trial court; (8)
when the findings of fact are conclusions without citation of specific evidence on which
they are based; (9) when the facts set forth in the petition as well as in the petitioners'
main and reply briefs are not disputed by the respondents; and (10) the findings of fact of
the Court of Appeals are premised on the supposed absence of evidence and
contradicted by the evidence on record.32
In the case at bar, the Court of Appeals committed several errors in the apprehension of the facts
of the case, as well as made conclusions devoid of evidentiary support, hence we review its
findings of fact.
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. 33 Thus, the
elements of agency are (i) consent, express or implied, of the parties to establish the relationship;
(ii) the object is the execution of a juridical act in relation to a third person; (iii) the agent acts as a
representative and not for himself; and (iv) the agent acts within the scope of his authority.34
In an attempt to prove that Baluyot was not its agent, MMPCI pointed out that under its Agency
Manager Agreement; an agency manager such as Baluyot is considered an independent
contractor and not an agent.35However, in the same contract, Baluyot as agency manager was
authorized to solicit and remit to MMPCI offers to purchase interment spaces belonging to and
sold by the latter.36 Notwithstanding the claim of MMPCI that Baluyot was an independent
contractor, the fact remains that she was authorized to solicit solely for and in behalf of MMPCI. As
properly found both by the trial court and the Court of Appeals, Baluyot was an agent of MMPCI,
having represented the interest of the latter, and having been allowed by MMPCI to represent it in
her dealings with its clients/prospective buyers.
Nevertheless, contrary to the findings of the Court of Appeals, MMPCI cannot be bound by the
contract procured by Atty. Linsangan and solicited by Baluyot.
Baluyot was authorized to solicit and remit to MMPCI offers to purchase interment spaces
obtained on forms provided by MMPCI. The terms of the offer to purchase, therefore, are
contained in such forms and, when signed by the buyer and an authorized officer of MMPCI,
becomes binding on both parties.
The Offer to Purchase duly signed by Atty. Linsangan, and accepted and validated by MMPCI
showed a total list price of P132,250.00. Likewise, it was clearly stated therein that "Purchaser
agrees that he has read or has had read to him this agreement, that he understands its terms and
conditions, and that there are no covenants, conditions, warranties or representations other than
those contained herein."37 By signing the Offer to Purchase, Atty. Linsangan signified that he
understood its contents. That he and Baluyot had an agreement different from that contained in
the Offer to Purchase is of no moment, and should not affect MMPCI, as it was obviously made
outside Baluyot's authority. To repeat, Baluyot's authority was limited only to soliciting purchasers.
She had no authority to alter the terms of the written contract provided by MMPCI. The
document/letter "confirming" the agreement that Atty. Linsangan would have to pay the old price
was executed by Baluyot alone. Nowhere is there any indication that the same came from MMPCI
or any of its officers.
It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority,
and in case either is controverted, the burden of proof is upon them to establish it. 38 The basis for
agency is representation and a person dealing with an agent is put upon inquiry and must discover
upon his peril the authority of the agent.39 If he does not make such an inquiry, he is chargeable
with knowledge of the agent's authority and his ignorance of that authority will not be any
excuse.40
As noted by one author, the ignorance of a person dealing with an agent as to the scope of the
latter's authority is no excuse to such person and the fault cannot be thrown upon the principal. 41 A
person dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge
the principal by relying upon the agent's assumption of authority that proves to be unfounded. The
principal, on the other hand, may act on the presumption that third persons dealing with his agent
will not be negligent in failing to ascertain the extent of his authority as well as the existence of his
agency.42
In the instant case, it has not been established that Atty. Linsangan even bothered to inquire
whether Baluyot was authorized to agree to terms contrary to those indicated in the written
contract, much less bind MMPCI by her commitment with respect to such agreements. Even if
Baluyot was Atty. Linsangan's friend and known to be an agent of MMPCI, her declarations and
actions alone are not sufficient to establish the fact or extent of her authority.43 Atty. Linsangan as
a practicing lawyer for a relatively long period of time when he signed the contract should have
been put on guard when their agreement was not reflected in the contract. More importantly, Atty.
Linsangan should have been alerted by the fact that Baluyot failed to effect the transfer of rights
earlier promised, and was unable to make good her written commitment, nor convince MMPCI to
assent thereto, as evidenced by several attempts to induce him to enter into other contracts for a
higher consideration. As properly pointed out by MMPCI, as a lawyer, a greater degree of caution
should be expected of Atty. Linsangan especially in dealings involving legal documents. He did not
even bother to ask for official receipts of his payments, nor inquire from MMPCI directly to
ascertain the real status of the contract, blindly relying on the representations of Baluyot. A lawyer
by profession, he knew what he was doing when he signed the written contract, knew the meaning
and value of every word or phrase used in the contract, and more importantly, knew the legal
effects which said document produced. He is bound to accept responsibility for his negligence.
The trial and appellate courts found MMPCI liable based on ratification and estoppel. For the trial
court, MMPCI's acts of accepting and encashing the checks issued by Atty. Linsangan as well as
allowing Baluyot to receive checks drawn in the name of MMPCI confirm and ratify the contract of
agency. On the other hand, the Court of Appeals faulted MMPCI in failing to adopt measures to
prevent misrepresentation, and declared that in view of MMPCI's acceptance of the benefits of
Baluyot's misrepresentation, it can no longer deny responsibility therefor.
The Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Art. 1898. If the agent contracts in the name of the principal, exceeding the scope of his
authority, and the principal does not ratify the contract, it shall be void if the party with
whom the agent contracted is aware of the limits of the powers granted by the principal. In
this case, however, the agent is liable if he undertook to secure the principal's ratification.
Art. 1910. The principal must comply with all the obligations that the agent may have
contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly.
Art. 1911. Even when the agent has exceeded his authority, the principal is solidarily
liable with the agent if the former allowed the latter to act as though he had full powers.
Thus, the acts of an agent beyond the scope of his authority do not bind the principal, unless he
ratifies them, expressly or impliedly. Only the principal can ratify; the agent cannot ratify his own
unauthorized acts. Moreover, the principal must have knowledge of the acts he is to ratify.44
Ratification in agency is the adoption or confirmation by one person of an act performed on his
behalf by another without authority. The substance of the doctrine is confirmation after conduct,
amounting to a substitute for a prior authority. Ordinarily, the principal must have full knowledge at
the time of ratification of all the material facts and circumstances relating to the unauthorized act of
the person who assumed to act as agent. Thus, if material facts were suppressed or unknown,
there can be no valid ratification and this regardless of the purpose or lack thereof in concealing
such facts and regardless of the parties between whom the question of ratification may
arise.45Nevertheless, this principle does not apply if the principal's ignorance of the material facts
and circumstances was willful, or that the principal chooses to act in ignorance of the
facts.46 However, in the absence of circumstances putting a reasonably prudent man on inquiry,
ratification cannot be implied as against the principal who is ignorant of the facts.47
No ratification can be implied in the instant case.
A perusal of Baluyot's Answer48 reveals that the real arrangement between her and Atty.
Linsangan was for the latter to pay a monthly installment of P1,800.00 whereas Baluyot was to
shoulder the counterpart amount of P1,455.00 to meet the P3,255.00 monthly installments as
indicated in the contract. Thus, every time an installment falls due, payment was to be made
through a check from Atty. Linsangan for P1,800.00 and a cash component of P1,455.00 from
Baluyot.49 However, it appears that while Atty. Linsangan issued the post-dated checks, Baluyot
failed to come up with her part of the bargain. This was supported by Baluyot's statements in her
letter50 to Mr. Clyde Williams, Jr., Sales Manager of MMPCI, two days after she received the copy
of the Complaint. In the letter, she admitted that she was remiss in her duties when she consented
to Atty. Linsangan's proposal that he will pay the old price while the difference will be shouldered
by her. She likewise admitted that the contract suffered arrearages because while Atty. Linsangan
issued the agreed checks, she was unable to give her share of P1,455.00 due to her own financial
difficulties. Baluyot even asked for compassion from MMPCI for the error she committed.
Atty. Linsangan failed to show that MMPCI had knowledge of the arrangement. As far as MMPCI
is concerned, the contract price was P132,250.00, as stated in the Offer to Purchase signed by
Atty. Linsangan and MMPCI's authorized officer. The down payment of P19,838.00 given by Atty.
Linsangan was in accordance with the contract as well. Payments of P3,235.00 for at least two
installments were likewise in accord with the contract, albeit made through a check and partly in
cash. In view of Baluyot's failure to give her share in the payment, MMPCI received only
P1,800.00 checks, which were clearly insufficient payment. In fact, Atty. Linsangan would have
incurred arrearages that could have caused the earlier cancellation of the contract, if not for
MMPCI's application of some of the checks to his account. However, the checks alone were not
sufficient to cover his obligations.
If MMPCI was aware of the arrangement, it would have refused the latter's check payments for
being insufficient. It would not have applied to his account the P1,800.00 checks. Moreover, the
fact that Baluyot had to practically explain to MMPCI's Sales Manager the details of her
"arrangement" with Atty. Linsangan and admit to having made an error in entering such
arrangement confirm that MMCPI had no knowledge of the said agreement. It was only when
Baluyot filed her Answer that she claimed that MMCPI was fully aware of the agreement.
Neither is there estoppel in the instant case. The essential elements of estoppel are (i) conduct of
a party amounting to false representation or concealment of material facts or at least calculated to
convey the impression that the facts are otherwise than, and inconsistent with, those which the
party subsequently attempts to assert; (ii) intent, or at least expectation, that this conduct shall be
acted upon by, or at least influence, the other party; and (iii) knowledge, actual or constructive, of
the real facts.51
While there is no more question as to the agency relationship between Baluyot and MMPCI, there
is no indication that MMPCI let the public, or specifically, Atty. Linsangan to believe that Baluyot
had the authority to alter the standard contracts of the company. Neither is there any showing that
prior to signing Contract No. 28660, MMPCI had any knowledge of Baluyot's commitment to Atty.
Linsangan. One who claims the benefit of an estoppel on the ground that he has been misled by
the representations of another must not have been misled through his own want of reasonable
care and circumspection.52 Even assuming that Atty. Linsangan was misled by MMPCI's
actuations, he still cannot invoke the principle of estoppel, as he was clearly negligent in his
dealings with Baluyot, and could have easily determined, had he only been cautious and prudent,
whether said agent was clothed with the authority to change the terms of the principal's written
contract. Estoppel must be intentional and unequivocal, for when misapplied, it can easily become
a most convenient and effective means of injustice.53 In view of the lack of sufficient proof showing
estoppel, we refuse to hold MMPCI liable on this score.
Likewise, this Court does not find favor in the Court of Appeals' findings that "the authority of
defendant Baluyot may not have been expressly conferred upon her; however, the same may
have been derived impliedly by habit or custom which may have been an accepted practice in
their company in a long period of time." A perusal of the records of the case fails to show any
indication that there was such a habit or custom in MMPCI that allows its agents to enter into
agreements for lower prices of its interment spaces, nor to assume a portion of the purchase price
of the interment spaces sold at such lower price. No evidence was ever presented to this effect.
As the Court sees it, there are two obligations in the instant case. One is the Contract No. 28660
between MMPCI and by Atty. Linsangan for the purchase of an interment space in the former's
cemetery. The other is the agreement between Baluyot and Atty. Linsangan for the former to
shoulder the amount P1,455.00, or the difference between P95,000.00, the original price, and
P132,250.00, the actual contract price.
to shoulder the said difference would be to conclude that MMPCI undertook to pay itself the
difference, a conclusion that is very illogical, if not antithetical to its business interests.
However, this does not preclude Atty. Linsangan from instituting a separate action to recover
damages from Baluyot, not as an agent of MMPCI, but in view of the latter's breach of their
separate agreement. To review, Baluyot obligated herself to pay P1,455.00 in addition to Atty.
Linsangan's P1,800.00 to complete the monthly installment payment under the contract, which, by
her own admission, she was unable to do due to personal financial difficulties. It is undisputed that
Atty. Linsangan issued the P1,800.00 as agreed upon, and were it not for Baluyot's failure to
provide the balance, Contract No. 28660 would not have been cancelled. Thus, Atty. Linsangan
has a cause of action against Baluyot, which he can pursue in another case.
WHEREFORE, the instant petition is GRANTED. The Decision of the Court of Appeals dated 22
June 2001 and its Resolution dated 12 December 2001 in CA- G.R. CV No. 49802, as well as the
Decision in Civil Case No. 88-1253 of the Regional Trial Court, Makati City Branch 57, are hereby
REVERSED and SET ASIDE. The Complaint in Civil Case No. 88-1253 is DISMISSED for lack of
cause of action. No pronouncement as to costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur.

To repeat, the acts of the agent beyond the scope of his authority do not bind the principal unless
the latter ratifies the same. It also bears emphasis that when the third person knows that the agent
was acting beyond his power or authority, the principal cannot be held liable for the acts of the
agent. If the said third person was aware of such limits of authority, he is to blame and is not
entitled to recover damages from the agent, unless the latter undertook to secure the principal's
ratification.54

This Court finds that Contract No. 28660 was validly entered into both by MMPCI and Atty.
Linsangan. By affixing his signature in the contract, Atty. Linsangan assented to the terms and
conditions thereof. When Atty. Linsangan incurred delinquencies in payment, MMCPI merely
enforced its rights under the said contract by canceling the same.

Being aware of the limits of Baluyot's authority, Atty. Linsangan cannot insist on what he claims to
be the terms of Contract No. 28660. The agreement, insofar as the P95,000.00 contract price is
concerned, is void and cannot be enforced as against MMPCI. Neither can he hold Baluyot liable
for damages under the same contract, since there is no evidence showing that Baluyot undertook
to secure MMPCI's ratification. At best, the "agreement" between Baluyot and Atty. Linsangan
bound only the two of them. As far as MMPCI is concerned, it bound itself to sell its interment
space to Atty. Linsangan for P132,250.00 under Contract No. 28660, and had in fact received
several payments in accordance with the same contract. If the contract was cancelled due to
arrearages, Atty. Linsangan's recourse should only be against Baluyot who personally undertook
to pay the difference between the true contract price of P132,250.00 and the original proposed
price of P95,000.00. To surmise that Baluyot was acting on behalf of MMPCI when she promised
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 120465 September 9, 1999
WILLIAM UY and RODEL ROXAS, petitioners,
vs.
COURT OF APPEALS, HON. ROBERT BALAO and NATIONAL HOUSING
AUTHORITY, respondents.
KAPUNAN, J.:
Petitioners William Uy and Rodel Roxas are agents authorized to sell eight parcels of land by the
owners thereof. By virtue of such authority, petitioners offered to sell the lands, located in Tuba,
Tadiangan, Benguet to respondent National Housing Authority (NHA) to be utilized and developed
as a housing project.
On February 14, 1989, the NHA Board passed Resolution No. 1632 approving the acquisition of
said lands, with an area of 31.8231 hectares, at the cost of P23.867 million, pursuant to which the
parties executed a series of Deeds of Absolute Sale covering the subject lands. Of the eight
parcels of land, however, only five were paid for by the NHA because of the report 1 it received
from the Land Geosciences Bureau of the Department of Environment and Natural Resources
(DENR) that the remaining area is located at an active landslide area and therefore, not suitable
for development into a housing project.
On 22 November 1991, the NHA issued Resolution No. 2352 cancelling the sale over the three
parcels of land. The NHA, through Resolution No. 2394, subsecguently offered the amount of
P1.225 million to the landowners as daños perjuicios.
On 9 March 1992, petitioners filed before the Regional Trial Court (RTC) of Quezon City a
Complaint for Damages against NHA and its General Manager Robert Balao.
After trial, the RTC rendered a decision declaring the cancellation of the contract to be justified.
The trial court nevertheless awarded damages to plaintiffs in the sum of P1.255 million, the same
amount initially offered by NHA to petitioners as damages.1âwphi1.nêt
Upon appeal by petitioners, the Court of Appeals reversed the decision of the trial court and
entered a new one dismissing the complaint. It held that since there was "sufficient justifiable
basis" in cancelling the sale, "it saw no reason" for the award of damages. The Court of Appeals
also noted that petitioners were mere attorneys-in-fact and, therefore, not the real parties-in-
interest in the action before the trial court.
. . . In paragraph 4 of the complaint, plaintiffs alleged themselves to be
"sellers' agents" for the several owners of the 8 lots subject matter of the
case. Obsviously, William Uy and Rodel Roxas in filing this case acted
as attorneys-in-fact of the lot owners who are the real parties in interest
but who were omitted to be pleaded as party-plaintiffs in the case. This
omission is fatal. Where the action is brought by an attorney-in-fact of a
land owner in his name, (as in our present action) and not in the name of
his principal, the action was properly dismissed (Ferrer vs. Villamor, 60
SCRA 406 [1974]; Marcelo vs. de Leon, 105 Phil. 1175) because the
rule is that every action must be prosecuted in the name of the real
parties-in-interest (Section 2, Rule 3, Rules of Court).
When plaintiffs UY and Roxas sought payment of damages in their favor
in view of the partial rescission of Resolution No. 1632 and the Deed of
Absolute Sale covering TCT Nos. 10998, 10999 and 11292 (Prayer
complaint, page 5, RTC records), it becomes obviously indispensable
that the lot owners be included, mentioned and named as party-plaintiffs,
being the real party-in-interest. UY and Roxas, as attorneys-in-fact or
apoderados, cannot by themselves lawfully commence this action, more
so, when the supposed special power of attorney, in their favor, was
never presented as an evidence in this case. Besides, even if herein
plaintiffs Uy and Roxas were authorized by the lot owners to commence
this action, the same must still be filed in the name of the principal,
(Filipino Industrial Corporation vs. San Diego, 23 SCRA 706 [1968]). As
such indispensable party, their joinder in the action is mandatory and the
complaint may be dismissed if not so impleaded (NDC vs. CA, 211
SCRA 422 [1992]). 2
Their motion for reconsideration having been denied, petitioners seek relief from this Court
contending that:
I. THE RESPONDENT CA ERRED IN DECLARING THAT
RESPONDENT NHA HAD ANY LEGAL BASIS FOR RESCINDING THE
SALE INVOLVING THE LAST THREE (3) PARCELS COVERED BY
NHA RESOLUTION NO. 1632.
II. GRANTING ARGUENDO THAT THE RESPONDENT NHA HAD
LEGAL BASIS TO RESCIND THE SUBJECT SALE, THE
RESPONDENT CA NONETHELESS ERRED IN DENYING HEREIN
PETITIONERS' CLAIM TO DAMAGES, CONTRARY TO THE
PROVISIONS OF ART. 1191 OF THE CIVIL CODE.
 III. THE RESPONDENT CA ERRED IN DISMISSING THE SUBJECT
COMPLAINT FINDING THAT THE PETITIONERS FAILED TO JOIN AS
INDISPENSABLE PARTY PLAINTIFF THE SELLING LOT-OWNERS. 3
We first resolve the issue raised in the the third assignment of error.
Petitioners claim that they lodged the complaint not in behalf of their principals but in their own
name as agents directly damaged by the termination of the contract. The damages prayed for
were intended not for the benefit of their principals but to indemnify petitioners for the losses they
themselves allegedly incurred as a result of such termination. These damages consist mainly of
"unearned income" and advances. 4 Petitioners, thus, attempt to distinguish the case at bar from
those involving agents or apoderedos instituting actions in their own name but in behalf of their
principals. 5 Petitioners in this case purportedly brought the action for damages in their own name
and in their own behalf.
We find this contention unmeritorious.
Sec. 2, Rule 3 of the Rules of Court requires that every action must be prosecuted and defended
in the name of the real party-in-interest. The real party-in-interest is the party who stands to be
benefited or injured by the judgment or the party entitled to the avails of the suit. "Interest, within
the meaning of the rule, means material interest, an interest in the issue and to be affected by the
decree, as distinguished from mere interest in the question involved, or a mere incidental
interest. 6 Cases construing the real party-in-interest provision can be more easily understood if it
is borne in mind that the true meaning of real party-in-interest may be summarized as follows: An
action shall be prosecuted in the name of the party who, by the substantive law, has the right
sought to be enforced. 7
Do petitioners, under substantive law, possess the right they seek to enforce? We rule in the
negative.
The applicable substantive law in this case is Article 1311 of the Civil Code, which states:
Contracts take effect only between the parties, their assigns, and heirs,
except in case where the rights and obligations arising from the contract
are not transmissible by their nature, or by stipulation, or by provision of
law. . . .
If a contract should contain some stipulation in favor of a third person, he
may demand its fulfillment provided he communicated his acceptance to
the obligor before its revocation. A mere incidental benefit or interest of a
person is not sufficient. The contracting parties must have clearly and
deliberately conferred a favor upon a third person. (Emphasis supplied.)
Petitioners are not parties to the contract of sale between their principals and NHA. They are mere
agents of the owners of the land subject of the sale. As agents, they only render some service or
do something in representation or on behalf of their principals. 8 The rendering of such service did
not make them parties to the contracts of sale executed in behalf of the latter. Since a contract
may be violated only by the parties thereto as against each other, the real parties-in-interest,
either as plaintiff or defendant, in an action upon that contract must, generally, either be parties to
said contract. 9
Neither has there been any allegation, much less proof, that petitioners are the heirs of their
principals.
Are petitioners assignees to the rights under the contract of sale? In McMicking vs. Banco
Español-Filipino, 10 we held that the rule requiring every action to be prosecuted in the name of the
real party-in-interest.
. . . recognizes the assignments of rights of action and also recognizes
that when one has a right of action assigned to him he is then the real
party in interest and may maintain an action upon such claim or right.
The purpose of [this rule] is to require the plaintiff to be the real party in
interest, or, in other words, he must be the person to whom the proceeds
of the action shall belong, and to prevent actions by persons who have
no interest in the result of the same. . . .
Thus, an agent, in his own behalf, may bring an action founded on a contract made for his
principal, as an assignee of such contract. We find the following declaration in Section 372 (1) of
the Restatement of the Law on Agency (Second): 11
Sec. 372. Agent as Owner of Contract Right
(1) Unless otherwise agreed, an agent who has or who acquires an
interest in a contract which he makes on behalf of his principal can,
although not a promisee, maintain such action thereon maintain such
action thereon as might a transferee having a similar interest.
The Comment on subsection (1) states:
a. Agent a transferee. One who has made a contract on behalf of
another may become an assignee of the contract and bring suit against
the other party to it, as any other transferee. The customs of business or
the course of conduct between the principal and the agent may indicate
that an agent who ordinarily has merely a security interest is a transferee
of the principals rights under the contract and as such is permitted to
bring suit. If the agent has settled with his principal with the
understanding that he is to collect the claim against the obligor by way of
reimbursing himself for his advances and commissions, the agent is in
the position of an assignee who is the beneficial owner of the chose in
action. He has an irrevocable power to sue in his principal's name. . . .
And, under the statutes which permit the real party in interest to sue, he
can maintain an action in his own name. This power to sue is not
affected by a settlement between the principal and the obligor if the latter
 has notice of the agent's interest. . . . Even though the agent has not
settled with his principal, he may, by agreement with the principal, have
a right to receive payment and out of the proceeds to reimburse himself
for advances and commissions before turning the balance over to the
principal. In such a case, although there is no formal assignment, the
agent is in the position of a transferee of the whole claim for security; he
has an irrevocable power to sue in his principal's name and, under
statutes which permit the real party in interest to sue, he can maintain an
action in his own name.
Petitioners, however, have not shown that they are assignees of their principals to the subject
contracts. While they alleged that they made advances and that they suffered loss of
commissions, they have not established any agreement granting them "the right to receive
payment and out of the proceeds to reimburse [themselves] for advances and commissions before
turning the balance over to the principal[s]."
Finally, it does not appear that petitioners are beneficiaries of a stipulation pour autrui under the
second paragraph of Article 1311 of the Civil Code. Indeed, there is no stipulation in any of the
Deeds of Absolute Sale "clearly and deliberately" conferring a favor to any third person.
That petitioners did not obtain their commissions or recoup their advances because of the non-
performance of the contract did not entitle them to file the action below against respondent NHA.
Section 372 (2) of the Restatement of the Law on Agency (Second) states:
(2) An agent does not have such an interest in a contract as to entitle him to
maintain an action at law upon it in his own name merely because he is entitled
to a portion of the proceeds as compensation for making it or because he is liable
for its breach.
The following Comment on the above subsection is illuminating:
The fact that an agent who makes a contract for his principal will gain or suffer
loss by the performance or nonperformance of the contract by the principal or by
the other party thereto does not entitle him to maintain an action on his own
behalf against the other party for its breach. An agent entitled to receive a
commission from his principal upon the performance of a contract which he has
made on his principal's account does not, from this fact alone, have any claim
against the other party for breach of the contract, either in an action on the
contract or otherwise. An agent who is not a promisee cannot maintain an action
at law against a purchaser merely because he is entitled to have his
compensation or advances paid out of the purchase price before payment to the
principal. . . .
Thus, in Hopkins vs. Ives, 12 the Supreme Court of Arkansas, citing Section 372 (2) above, denied
the claim of a real estate broker to recover his alleged commission against the purchaser in an
agreement to purchase property.
In Goduco vs. Court of appeals, 13 this Court held that:
. . . granting that appellant had the authority to sell the property, the
same did not make the buyer liable for the commission she claimed. At
most, the owner of the property and the one who promised to give her a
commission should be the one liable to pay the same and to whom the
claim should have been directed. . . .
As petitioners are not parties, heirs, assignees, or beneficiaries of a stipulation pour autrui under
the contracts of sale, they do not, under substantive law, possess the right they seek to enforce.
Therefore, they are not the real parties-in-interest in this case.
Petitioners not being the real parties-in-interest, any decision rendered herein would be pointless
since the same would not bind the real parties-in-
interest. 14
Nevertheless, to forestall further litigation on the substantive aspects of this case, we shall
proceed to rule on me merits. 15
Petitioners submit that respondent NHA had no legal basis to "rescind" the sale of the subject
three parcels of land. The existence of such legal basis, notwithstanding, petitioners argue that
they are still entitled to an award of damages.
Petitioners confuse the cancellation of the contract by the NHA as a rescission of the contract
under Article 1191 of the Civil Code. The right of rescission or, more accurately, resolution, of a
party to an obligation under Article 1191 is predicated on a breach of faith by the other party that
violates the reciprocity between them. 16 The power to rescind, therefore, is given to the injured
party. 17 Article 1191 states:
The power to rescind obligations is implied in reciprocal ones, in case one of the
obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfillment and the rescission of the
obligation, with the payment of damages in either case. He may also seek
rescission, even after he has chosen fulfillment, if the latter should become
impossible.
In this case, the NHA did not rescind the contract. Indeed, it did not have the right to do so for the
other parties to the contract, the vendors, did not commit any breach, much less a substantial
breach, 18 of their obligation. Their obligation was merely to deliver the parcels of land to the NHA,
an obligation that they fulfilled. The NHA did not suffer any injury by the performance thereof.
The cancellation, therefore, was not a rescission under Article 1191. Rather, the cancellation was
based on the negation of the cause arising from the realization that the lands, which were the
object of the sale, were not suitable for housing.1âwphi1.nêt
Cause is the essential reason which moves the contracting parties to enter into it. 19 In other
words, the cause is the immediate, direct and proximate reason which justifies the creation of an
obligation through the will of the contracting parties. 20 Cause, which is the essential reason for the
contract, should be distinguished from motive, which is the particular reason of a contracting party
which does not affect the other party. 21
For example, in a contract of sale of a piece of land, such as in this case, the cause of the vendor
(petitioners' principals) in entering into the contract is to obtain the price. For the vendee, NHA, it is
the acquisition of the land. 22 The motive of the NHA, on the other hand, is to use said lands for
housing. This is apparent from the portion of the Deeds of Absolute Sale 23stating:
WHEREAS, under the Executive Order No. 90 dated December 17, 1986, the
VENDEE is mandated to focus and concentrate its efforts and resources in
providing housing assistance to the lowest thirty percent (30%) of urban income
earners, thru slum upgrading and development of sites and services projects;
WHEREAS, Letters of Instructions Nos. 555 and 557 [as] amended by Letter of
Instruction No. 630, prescribed slum improvement and upgrading, as well as the
development of sites and services as the principal housing strategy for dealing
with slum, squatter and other blighted communities;
xxx xxx xxx
WHEREAS, the VENDEE, in pursuit of and in compliance with the above-stated
purposes offers to buy and the VENDORS, in a gesture of their willing to
cooperate with the above policy and commitments, agree to sell the aforesaid
property together with all the existing improvements there or belonging to the
VENDORS;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
terms and conditions hereinbelow stipulated, the VENDORS hereby, sell,
transfer, cede and convey unto the VENDEE, its assigns, or successors-in-
interest, a parcel of land located at Bo. Tadiangan, Tuba, Benguet containing a
total area of FIFTY SIX THOUSAND EIGHT HUNDRED NINETEEN (56,819)
SQUARE METERS, more or less . . . .
Ordinarily, a party's motives for entering into the contract do not affect the contract. However,
when the motive predetermines the cause, the motive may be regarded as the cause. In Liguez
vs. Court of Appeals, 24 this Court, speaking through Justice J.B.L. REYES, HELD:
. . . it is well to note, however, that Manresa himself (Vol. 8, pp. 641-
642), while maintaining the distinction and upholding the inoperativeness
of the motives of the parties to determine the validity of the contract,
expressly excepts from the rule those contracts that are conditioned
upon the attainment of the motives of either party.
The same view is held by the Supreme Court of Spain, in its decisions of
February 4, 1941, and December 4, 1946, holding that the motive may
be regarded as causa when it predetermines the purpose of the
contract.
In this case, it is clear, and petitioners do not dispute, that NHA would not have entered into the
contract were the lands not suitable for housing. In other words, the quality of the land was an
implied condition for the NHA to enter into the contract. On the part of the NHA, therefore, the
motive was the cause for its being a party to the sale.
Were the lands indeed unsuitable for housing as NHA claimed?
We deem the findings contained in the report of the Land Geosciences Bureau dated 15 July 1991
sufficient basis for the cancellation of the sale, thus:
In Tadiangan, Tuba, the housing site is situated in an area of moderate
topography. There [are] more areas of less sloping ground apparently
habitable. The site is underlain by . . . thick slide deposits (4-45m)
consisting of huge conglomerate boulders (see Photo No. 2) mix[ed] with
silty clay materials. These clay particles when saturated have some
swelling characteristics which is dangerous for any civil structures
especially mass housing development. 25
Petitioners contend that the report was merely "preliminary," and not conclusive, as indicated in its
title:
MEMORANDUM
TO: EDWIN G. DOMINGO
Chief, Lands Geology Division
FROM: ARISTOTLE A. RILLON
Geologist II
SUBJECT: Preliminary Assessment of
Tadiangan Housing Project in Tuba, Benguet 26
Thus, page 2 of the report states in part:
xxx xxx xxx
 Actually there is a need to conduct further geottechnical [sic] studies in
the NHA property. Standard Penetration Test (SPT) must be carried out
to give an estimate of the degree of compaction (the relative density) of
the slide deposit and also the bearing capacity of the soil materials.
Another thing to consider is the vulnerability of the area to landslides and
other mass movements due to thick soil cover. Preventive physical
mitigation methods such as surface and subsurface drainage and
regrading of the slope must be done in the area. 27

We read the quoted portion, however, to mean only that further tests are required to determine the
"degree of compaction," "the bearing capacity of the soil materials," and the "vulnerability of the
area to landslides," since the tests already conducted were inadequate to ascertain such
geological attributes. It is only in this sense that the assessment was "preliminary."

Accordingly, we hold that the NHA was justified in canceling the contract. The realization of the
mistake as regards the quality of the land resulted in the negation of the motive/cause thus
rendering the contract inexistent. 28 Article 1318 of the Civil Code states that:

Art. 1318. There is no contract unless the following requisites concur:

(1) Consent of the contracting parties;

(2) Object certain which is the subject matter of the contract;

(3) Cause of the obligation which is established. (Emphasis supplied.)

Therefore, assuming that petitioners are parties, assignees or beneficiaries to the contract of sale,
they would not be entitled to any award of damages.

WHEREFORE, the instant petition is hereby DENIED.

SO ORDERED.

Puno, Pardo and Ynares-Santiago, JJ., concur.

Davide, Jr., C.J., on leave.

 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 199990 February 4, 2015
SPOUSES ROLANDO and HERMINIA SALVADOR, Petitioners,
vs.
SPOUSES ROGELIO AND ELIZABETH RABAJA and ROSARIO GONZALES, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside the August 22, 2011
Decision1 and the January 5, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No.
90296 which affirmed with modification the March 29, 2007 Decision of the Regional Trial Court
Branch 214 (RTC-Branch 214), Mandaluyong City in Civil Case No. MC-03-2175, for rescission of
a contract (rescission case).
The Facts
This case stemmed from a dispute involving the sellers, petitioner spouses Rolando and Herminia
Salvador (Spouses Salvador); the sellers' agent, Rosario Gonzales (Gonzales),· and the buyers,
respondent Spouses Rogelio and Elizabeth Rabaja (Spouses Rabaja), over a parcel of land
situated at No. 25, Merryland Village, 375 Jose Rizal Street, Mandaluyong City (subject
property),covered by Transfer Certificate of Title (TCT) No. 13426 and registered in the names of
Spouses Salvador. From 1994 until 2002, Spouses Rabaja were leasing an apartment in the
subject lot.
Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were looking for a buyer
of the subject property. Petitioner Herminia Salvador (Herminia)personally introduced Gonzales to
them as the administrator of the said property. Spouses Salvador even handed to Gonzales the
owner’s duplicate certificate of title over the subject property. On July, 3, 1998, Spouses Rabaja
made an initial payment of ₱48,000.00 to Gonzales in the presence of Herminia. Gonzales then
presented the Special Power of Attorney3 (SPA),executed by Rolando Salvador (Rolando) and
dated July 24, 1998. On the same day, the parties executed the Contract to Sell 4 which stipulated
that for a consideration of ₱5,000,000.00, Spouses Salvador sold, transferred and conveyed in
favor of Spouses Rabaja the subject property. Spouses Rabaja made several payments totalling
₱950,000.00, which were received by Gonzales pursuant to the SPA provided earlier as
evidenced by the check vouchers signed by Gonzales and the improvised receiptssigned by
Herminia.
Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did
not receive any payment from Gonzales. This prompted Spouses Rabaja to suspend further
payment of the purchase price; and as a consequence, they received a notice to vacate the
subject property from Spouses Salvador for non-payment of rentals.
Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In turn,
Spouses Rabaja filed an action for rescission of contract against Spouses Salvador and Gonzales,
the subject matter of the present petition.
In the action for ejectment, the complaint was filed before the Metropolitan Trial Court of
Mandaluyong City, Branch 60 (MeTC),where it was docketed as Civil Case No. 17344. In its
August 14, 2002 Decision,5 the MeTC ruled in favor of Spouses Salvador finding that valid
grounds existed for the eviction of Spouses Rabaja from the subject property and ordering them to
pay back rentals. Spouses Salvador were able to garnish the amount of ₱593,400.00 6from
Spouses Rabaja’s time deposit account pursuant to a writ of execution issued by the
MeTC.7 Spouses Rabaja appealed to the Regional Trial Court, Branch 212, Mandaluyong City
(RTC-Br. 212)which reversed the MeTC ruling in its March 1, 2005 decision. 8 The RTC-Br. 212
found that no lease agreement existed between the parties. Thereafter, Spouses Salvador filed an
appeal with the CA which was docketed as CAG.R. SP No. 89259. On March 31, 2006, the CA
ruled in favor of Spouses Salvador and reinstated the MeTC ruling ejecting Spouses Rabaja.9 Not
having been appealed, the CA decision in CA-G.R. SP No. 89259 became final and executory on
May 12, 2006.10
Meanwhile, the rescission case filed by Spouses Rabaja against Spouses Salvador and Gonzales
and docketed as Civil Case No. MC No. 03-2175 was also raffled to RTC-Br. 212. In their
complaint,11 dated July 7, 2003, Spouses Rabaja demanded the rescission of the contract to sell
praying that the amount of ₱950,000.00 they previously paid to Spouses Salvador be returned to
them. They likewise prayed that damages be awarded due to the contractual breach committed by
Spouses Salvador.
Spouses Salvador filed their answer with counterclaim and cross-claim12 contending that there
was no meeting of the minds between the parties and that the SPA in favor of Gonzales was
falsified. In fact, they filed a case for falsification against Gonzales, but it was dismissed because
the original of the alleged falsified SPAcould not be produced. They further averred that they did
not receive any payment from Spouses Rabaja through Gonzales. In her defense, Gonzales filed
her answer13 stating that the SPA was not falsified and that the payments of Spouses Rabaja
amounting to ₱950,000.00 were all handed over to Spouses Salvador.
The pre-trial conference began but attempts to amicably settle the case were unsuccessful. It was
formally reset to February 4, 2005, but Spouses Salvador and their counsel failed to attend.
Consequently, the RTC issued the pre-trial order14 declaring Spouses Salvador in default and
allowing Spouses Rabaja to present their evidence ex parte against Spouses Salvador and
Gonzales to present evidence in her favor.
A motion for reconsideration,15 dated March 28, 2005, was filed by Spouses Salvador on the said
pre-trial order beseeching the liberality of the court. The rescission case was then re-raffled to
RTC-Br. 214 after the Presiding Judge of RTC-Br. 212 inhibited herself. In the Order,16 dated
October 24, 2005, the RTC-Br. 214 denied the motion for reconsideration because Spouses
Salvador provided a flimsy excuse for their non-appearance in the pre-trial conference. Thereafter,
trial proceeded and Spouses Rabaja and Gonzales presented their respective testimonial and
documentary evidence.
RTC Ruling
On March 29, 2007, the RTC-Br. 214 rendered a decision17 in favor of Spouses Rabaja. It held
that the signature of Spouses Salvador affixed in the contract to sell appeared to be authentic. It
also held that the contract, although denominated as "contract to sell," was actually a contract of
sale because Spouses Salvador, as vendors, did not reserve their title to the property until the
vendees had fully paid the purchase price. Since the contract entered into was a reciprocal
contract, it could bevalidly rescinded by Spouses Rabaja, and in the process, they could recover
the amount of ₱950,000.00 jointly and severally from Spouses Salvador and Gonzales. The RTC
stated that Gonzales was undoubtedly the attorney-in-fact of Spouses Salvador absent any taint of
irregularity. Spouses Rabaja could not be faulted in dealing with Gonzales who was duly equipped
with the SPA from Spouses Salvador.
The RTC-Br. 214 then ruled that the amount of ₱593,400.00 garnished from the time deposit
account of Spouses Rabaja, representing the award of rental arrearages in the separate ejectment
suit, should be returned by Spouses Salvador.18 The court viewed that such amount was part of
the purchase price of the subject property which must be returned. It also awarded moral and
exemplary damages in favor of Spouses Rabaja and attorney’s fees in favor of Gonzales. The
dispositive portion of the said decision reads:
WHEREFORE, this court renders judgment as follows:
a. Ordering the "Contract to Sell" entered into by the plaintiff and defendant spouses
Rolando and Herminia Salvador on July 24, 1998 as RESCINDED;
b. Ordering defendant spouses Rolando and Herminia Salvador and defendant Rosario
S. Gonzales jointly and severally liable to pay plaintiffs:
1. the amount of NINE HUNDRED FIFTY THOUSAND PESOS (₱950,000.00),
representing the payments made by the latter for the purchase of subject
property;
2. the amount of TWENTY THOUSAND PESOS (₱20,000.00), as moral
damages;
3. the amount of TWENTY THOUSAND PESOS (₱20,000.00), as exemplary
damages;
4. the amount of ONE HUNDRED THOUSAND PESOS (₱100,000.00), as
attorney’s fees;
5. the cost of suit.
c. Ordering defendant Spouses Rolando and Herminia Salvador to pay plaintiffs the
amount of FIVE HUNDRED NINETY THREE THOUSAND PESOS (₱593,000.00) (sic),
representing the amount garnished from the Metrobank deposit of plaintiffs as payment
for their alleged back rentals;
d. Ordering the defendant Spouses Rolando and Herminia Salvador to pay defendant
Rosario Gonzales on her cross-claim in the amount of ONE HUNDRED THOUSAND
PESOS (₱100,000.00);
e. Dismissing the counterclaims of the defendants against the plaintiff.
SO ORDERED.19
Gonzales filed a motion for partial reconsideration, but it was denied by the RTC-Br. 114 in its
Order,20 dated September 12, 2007. Undaunted, Spouses Salvador and Gonzales filed an appeal
before the CA.
CA Ruling
On March 29, 2007, the CA affirmed the decision of the RTC-Br. 114 with modifications. It ruled
that the "contract to sell" was indeed a contract of sale and that Gonzales was armed with an SPA
and was, in fact, introduced to Spouses Rabaja by Spouses Salvador as the administrator of the
property. Spouses Rabaja could not be blamed if they had transacted with Gonzales. The CA then
held that Spouses Salvador should return the amount of ₱593,400.00 pursuant to a separate
ejectment case, reasoning that Spouses Salvador misled the court because an examination of
CA-G.R. SP No. 89260showed that Spouses Rabaja were not involved in that case. CA-G.R. SP
No. 59260 was an action between Spouses Salvador and Gonzales only and involved a
completely different residential apartment located at 302-C Jupiter Street, Dreamland Subdivision,
Mandaluyong City.
The CA, however, ruled that Gonzales was not solidarily liable with Spouses Salvador. The agent
must expressly bind himself or exceed the limit of his authority in order to be solidarily liable. It was
not shown that Gonzales as agent of Spouses Salvador exceeded her authority or expressly
bound herself to be solidarily liable. The decretal portion of the CA decision reads: WHEREFORE,
the appeal is PARTLY GRANTED. The assailed Decision dated March 29, 2007 and the Order
dated September 12, 2007, of the Regional Trial Court, Branch 214, Mandaluyong City, in Civil
Case No. MC-03-2175, are AFFIRMED with MODIFICATION in that Rosario Gonzalez is not
jointly and severally liable to pay Spouses Rabaja the amounts enumerated in paragraph (b) of the
Decision dated March 29, 2007.
SO ORDERED.21
Spouses Salvador filed a motion for reconsideration but it was denied by the CA in its January 5,
2012 Resolution.
Hence, this petition.
ASSIGNMENT OF ERRORS
I the order of default must be lifted because reasonable grounds exist to justify their failure to attend
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY
ABUSED ITS DISCRETION IN DECLARING PETITIONERS IN DEFAULT AND IN DEPRIVING
THEM OF THE OPPORTUNITY TO CROSS-EXAMINE RESPONDENTS SPS. RABAJA AS
WELL AS TO PRESENT EVIDENCE FOR AND IN THEIR BEHALF, GIVEN THE MERITORIOUS
DEFENSES RAISED IN THEIR ANSWER THAT CATEGORICALLY AND DIRECTLY DISPUTE
RESPONDENTS SPS. RABAJA’S CAUSE OF ACTION.
II
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY
ERRED IN GIVING CREDENCE TO THE TESTIMONY OF RESPONDENT GONZALES THAT
PAYMENTS WERE INDEED REMITTED TO AND RECEIVED BY PETITIONER HERMINIA
SALVADOR EVEN AS THE IMPROVISED RECEIPTS WEREEVIDENTLY MADE UP AND
FALSIFIED BY RESPONDENT GONZALES.
III
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY
ERRED IN RESCINDING THE CONTRACT TO SELL WHENTHERE IS NOTHING TO RESCIND
AS NO VALID CONTRACT TO SELL WAS ENTERED INTO, AND IN DIRECTING THE REFUND
OF THE AMOUNT OF ₱950,000.00 WHEN THE EVIDENCECLEARLY SHOWS THAT SAID
AMOUNT WAS PAIDTO AND RECEIVED BY RESPONDENT GONZALES ALONE WHO
MISAPPROPRIATED THE SAME.
IV
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION FOR
PETITIONERS TO RETURN THE AMOUNT OF ₱543,400.00 REPRESENTING RENTALS IN
ARREARS GARNISHED OR WITHDRAWN BY VIRTUE OF A WRIT OF EXECUTION ISSUED IN
AN EJECTMENT CASE WHICH WAS TRIED AND DECIDED BY ANOTHER COURT.
V the lower courts absent any compelling reason to the contrary.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY
ERRED IN AWARDING DAMAGES TO RESPONDENTS SPS. RABAJA, THERE BEING NO
FACTUAL AND LEGAL BASES FOR SUCH AWARD. VI THE COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE TRIAL COURT GRAVELY ERRED IN AWARDING ₱100,000.00 TO
RESPONDENT GONZALES AS ATTORNEY’S FEES WHEN RESPONDENT GONZALES, IN
FACT, COMMITTED FORGERY AND FALSIFICATION IN DEALING WITH THE PROPERTY OF
PETITIONERS AND MISAPPROPRIATED THE MONIES PAID TO HER BY RESPONDENTS
SPS. RABAJA, THUS GIVING PREMIUM TO HER FRAUDULENT ACTS.22
The foregoing can be synthesized into three main issues. First, Spouses Salvador contend that
the pre-trial conference on February 4, 2005. Second, Spouses Salvador raise in issue the
veracity of the receipts given by Gonzales, the SPA and the validity of the contract to sell. They
claim that the improvised receipts should not be given credence because these were crude and
suspicious, measuring only by 2 x 2 inches which showed that Gonzales misappropriated the
payments of Spouses Rabaja for herself and did not remit the amount of ₱950,000.00 to them. As
there was no consideration, then no valid contract to sell existed. Third, Spouses Salvador argue
that the ejectment case, from which the amount of ₱593,400.00 was garnished, already became
final and executory and could not anymore be disturbed. Lastly, the award of damages in favor of
Spouses Rabaja and Gonzales was improper absent any legal and factual bases.
On January 21, 2013, Spouses Salvador filed their supplemental petition23 informing the Court that
RTC-Br. 213 had rendered a decision in Civil Case No. MC00-1082, an action for rescission of the
SPA. The said decision held that Spouses Salvador properly revoked the SPA in favor of
Gonzales due to loss of trust and confidence. On September 11, 2013, Gonzales filed her
comment to the supplemental petition,24 contending that the RTC-Branch 213 decision had no
bearing because it had not yet attained finality. On even date, Spouses Rabaja filed their
Comment,25 asserting that the present petition is a mere rehash of the previous arguments of
Spouses Salvador before the CA. On November 15, 2013, Spouses Salvador replied that they
merely wanted to show that the findings by the RTC-Br. 213 should be given weight as a full-
blown trial was conducted therein.26
The Court’s Ruling
As a general rule, the Court’s jurisdiction in a Rule 45 petition is limited to the review of pure
questions of law. A question of law arises when the doubt or difference exists as to what the law is
on a certain state of facts. Negatively put, Rule 45 does not allow the review of questions of fact. A
question of fact exists when the doubt or difference arises as to the truth or falsity of the
allegations.27
The present petition presents questions of fact because it requires the Court to examine the
veracity of the evidence presented during the trial, such as the improvised receipts, the SPA given
to Gonzales and the contract to sell. Even the petitioner spouses themselves concede and ask the
Court to consider questions of fact,28 but the Court finds no reason to disturb the findings of fact of
The failure of Spouses Salvador
to attend pre-trial conference
warrants the presentation of
evidence ex parte by Spouses
Rabaja
On the procedural aspect, the Court reiterates the rule that the failure to attend the pre-trial
conference does not result in the default of an absent party. Under the 1997 Rules of Civil
Procedure, a defendant is only declared in default if he fails to file his Answer within the
reglementary period.29 On the other hand, if a defendant fails to attend the pre-trial conference, the
plaintiff can present his evidence ex parte. Sections 4 and 5, Rule 18 of the Rules of Court
provide:
Sec. 4. Appearance of parties.
It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance
of a party may be excused only if a valid cause is shown therefor or if a representative shall
appear in his behalf fully authorized in writing to enter into an amicable settlement, to submit to
alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of
documents.
Sec. 5. Effect of failure to appear.
The failure of the plaintiff to appear when so required pursuant to the next preceding section shall
be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise
ordered by the court. A similar failure on the part of the defendant shall be cause to allow the
plaintiff to present his evidence ex parteand the court to render judgment on the basis thereof.
[Emphasis supplied]
The case of Philippine American Life & General Insurance Company v. Joseph Enario 30 discussed
the difference between the non-appearance of a defendant in a pre-trial conference and the
declaration of a defendant in default in the present Rules of Civil Procedure. The decision
instructs:
Prior to the 1997 Revised Rules of Civil Procedure, the phrase "as in default" was initially included
in Rule 20 of the old rules, and which read as follows:
Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or considered as in
default.
It was, however, amended in the 1997 Revised Rules of Civil Procedure. Justice Regalado, in his
book, REMEDIAL LAW COMPENDIUM, explained the rationale for the deletion of the phrase "as
in default" in the amended provision, to wit:
1. This is a substantial reproduction of Section 2 of the former Rule 20 with the change that,
instead of defendant being declared "as in default" by reason of his non-appearance, this section
now spells out that the procedure will be to allow the ex parte presentation of plaintiff’s evidence
and the rendition of judgment on the basis thereof. While actually the procedure remains the
same, the purpose is one of semantical propriety or terminological accuracy as there were
criticisms on the use of the word "default" in the former provision since that term is identified with
the failure to file a required answer, not appearance in court.
Still, in the same book, Justice Regalado clarified that while the order of default no longer
obtained, its effects were retained, thus:
Failure to file a responsive pleading within the reglementary period, and not failure to appear at
the hearing, is the sole ground for an order of default, except the failure to appear at a pre-trial
conference wherein the effects of a default on the part of the defendant are followed, that is, the
plaintiff shall be allowed to present evidence ex parte and a judgment based thereon may be
rendered against defendant.
From the foregoing, the failure of a party to appear at the pre-trial has indeed adverse
consequences. If the absent party is the plaintiff, then his case shall be dismissed. If it is the
defendant who fails to appear, then the plaintiff is allowed to present his evidence ex parte and the
court shall render judgment based on the evidence presented. Thus, the plaintiff is given the
privilege to present his evidence without objection from the defendant, the likelihood being that the
court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or
present its own evidence.31 The stringent application of the rules on pre-trial is necessitated from
the significant role of the pre-trial stage in the litigation process. Pretrial is an answer to the clarion
call for the speedy disposition of cases. Although it was discretionary under the 1940 Rules of
Court, it was made mandatory under the 1964 Rules and the subsequent amendments in
1997.32 "The importance of pre-trial in civil actions cannot be overemphasized."33
There is no dispute that Spouses Salvador and their counsel failed to attend the pre-trial
conference set on February 4, 2005 despite proper notice. Spouses Salvador aver that their non-
attendance was due to the fault of their counsel as he forgot to update his calendar. 34 This excuse
smacks of carelessness, and indifference to the pre-trial stage. It simply cannot be considered as
a justifiable excuse by the Court. As a result of their inattentiveness, Spouses Salvador could no
longer present any evidence in their favor. Spouses Rabaja, as plaintiffs, were properly allowed by
the RTC to present evidence ex parte against Spouses Salvador as defendants. Considering that
Gonzales as co-defendant was able to attend the pre-trial conference, she was allowed to present
her evidence. The RTC could only render judgment based on the evidence presented during the
trial.
Gonzales, as agent of Spouses
Salvador, could validly receive
the payments of Spouses
Rabaja
Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with
the courts below in finding that the contract entered into by the parties was essentially a contract
of sale which could be validly rescinded. Spouses Salvador insist that they did not receive the
payments made by Spouses Rabaja from Gonzales which totalled ₱950,000.00 and that Gonzales
was not their duly authorized agent. These contentions, however, must fail in light of the
applicable provisions of the New Civil Code which state:
Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within
the scope of the agent's authority, if such act is within the terms of the power of attorney, as
written, even if the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.
xxxx
Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or the instructions as regards the agency.
Private or secret orders and instructions of the principal do not prejudice third persons who have
relied upon the power of attorney or instructions shown them.
xxxx
Art. 1910. The principal must comply with all the obligations which the agent may have contracted
within the scope of his authority.
Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and
extent of the agent’s authority. A third person with whom the agent wishes to contract on behalf of
the principal may require the presentation of the power of attorney, or the instructions as regards
the agency. The basis for agency is representation and a person dealing with an agent is put upon
inquiry and must discover on his own peril the authority of the agent.35
According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is
deemed to have been performed within the scope of the agent's authority, if such act is within the
terms of the power of attorney, as written. In this case, Spouses Rabaja did not recklessly enter
into a contract to sell with Gonzales. They required her presentation of the power of attorney
before they transacted with her principal. And when Gonzales presented the SPA to Spouses
Rabaja, the latter had no reason not to rely on it.
The law mandates an agent to act within the scope of his authority which what appears in the
written terms of the power of attorney granted upon him.36 The Court holds that, indeed, Gonzales
acted within the scope of her authority. The SPA precisely stated that she could administer the
property, negotiate the sale and collect any document and all payments related to the subject
property.37 As the agent acted within the scope of his authority, the principal must comply with all
the obligations.38 As correctly held by the CA, considering that it was not shown that Gonzales
exceeded her authority or that she expressly bound herself to be liable, then she could not be
considered personally and solidarily liable with the principal, Spouses Salvador.39
Perhaps the most significant point which defeats the petition would be the fact that it was Herminia
herself who personally introduced Gonzalez to Spouses Rabaja as the administrator of the subject
property. By their own ostensible acts, Spouses Salvador made third persons believe that
Gonzales was duly authorized to administer, negotiate and sell the subject property. This fact was
even affirmed by Spouses Salvador themselves in their petition where they stated that they had
authorized Gonzales to look for a buyer of their property.40 It is already too late in the day for
Spouses Salvador to retract the representation to unjustifiably escape their principal obligation.
As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses
Rabaja properly made payments to Gonzales, as agent of Spouses Salvador; and it was as if they
paid to Spouses Salvador. It is of no moment, insofar as Spouses Rabaja are concerned, whether
or not the payments were actually remitted to Spouses Salvador. Any internal matter,
arrangement, grievance or strife between the principal and the agent is theirs alone and should
not affect third persons. If Spouses Salvador did not receive the payments or they wish to
specifically revoke the SPA, then their recourse is to institute a separate action against Gonzales.
Such action, however, is not any more covered by the present proceeding.
The amount of ₱593,400.00
should not be returned by
Spouses Salvador
Nevertheless, the assailed decision of the CA must be modified with respect to the amount of
₱593,400.00 garnished by Spouses Salvador and ordered returned to Spouses Rabaja. The RTC
ordered the return of the amount garnished holding that it constituted a part of the purchase price.
The CA ruled that Spouses Salvador misled the Court when they improperly cited CA-G.R. SP No.
89260 to prove their entitlement to the said amount. Both courts erred in their ruling. First, the
garnishment of the amount of ₱593,400.00 against Spouses Rabaja was pursuant to the CA
decision in CA-G.R. SP No. 89259, an entirely different case involving an action for ejectment, and
it does not concern the rescission case which is on appeal before this Court. Moreover, the
decision on the ejectment case is final and executory and an entry of judgment has already been
made.41 Nothing is more settled in law than that when a final judgment is executory, it thereby
becomes immutable and unalterable. The judgment may no longer be modified in any respect,
even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact
or law, and regardless of whether the modification is attempted to be made by the court which
rendered it or by the highest Court of the land. The doctrine is founded on consideration of public
policy and sound practice that, at the risk of occasional errors, judgments must become final at
some definite point in time.42
The March 31, 2006 CA decision43 in CA-G.R. SP No. 89259has long been final and executory
and cannot any more be disturbed by the Court. Public policy dictates that once a judgment
becomes final, executory and unappealable, the prevailing party should not be denied the fruits of
his victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement of
a judgment sets at naught the role and purpose of the courts to resolve justiciable controversies
with finality.44
Meanwhile, in ruling that the garnishment was improper and thus ordering the return of the
garnished amount, the CA referred to its decision in CA-G.R. SP No. 89260. Spouses Salvador,
however, clarified in its motion for reconsideration45 before the CA and in the present petition46 that
the garnishment was pursuant to CA-G.R. SP No. 89259, and not CA-G.R. SP No. 89260, another
ejectment case involving another property. A perusal of the records reveals that indeed the
garnishment was pursuant to the ejectment case in the MeTC, docketed as Civil Case No.
17344,47 where Spouses Rabaja were the defendants. The MeTC decision was then reinstated by
the CA in CA-G.R. SP No. 89259, not CA-G.R. SP No. 89260. There, a writ of execution48 and
notice of pay49 were issued against Spouses Rabaja in the amount of ₱591,900.00.
Second, Spouses Rabaja’s appeal with the RTC never sought relief in returning the garnished attorney’s fees in the amount of One Hundred Thousand (₱100,000.00) Pesos in favor of
amount.50 Such issue simply emerged in the RTC decision. This is highly improper because the Spouses Rabaja should be deleted; and
court’s grant of relief is limited only to what has been prayed for in the complaint or related thereto,
supported by evidence, and covered by the party’s cause of action.51 3. The award of attorney’s fees in amount of One Hundred Thousand (₱100,000.00)
Pesos in favor of Gonzales should be deleted.
If Spouses Rabaja would have any objection on the manner and propriety of the execution, then
they must institute their opposition to the execution proceeding a separate case. Spouses Rabaja The other amounts awarded are subject to interest at the legal rate of 6% per annum, to be
can invoke the Civil Code provisions on legal compensation or set-off under Articles 1278, 1279 reckoned from the date of finality of this judgment until fully paid.
and 1270.52 The two obligations appear to have respectively offset each other, compensation
having taken effectby operation of law pursuant to the said provisions of the Civil Code, since all
the requisites provided in Art. 1279 of the said Code for automatic compensation are duly present. WHEREFORE, the petition is PARTLY GRANTED. The March 29, 2007 Decision of the Regional
Trial Court, Branch 214, Mandaluyong City, in Civil Case No. MC-03-2175, is MODIFIED to read
as follows:
No award of actual, moral and
exemplary damages
"WHEREFORE, this Court renders judgment as follows:
The award of damages to Spouses Rabaja cannot be sustained by this Court. The filing alone of a
civil action should not be a ground for an award of moral damages in the same way that a clearly a. Ordering the "Contract to Sell" entered into by Spouses Rogelio and Elizabeth Rabaja
and Spouses Rolando and Herminia Salvador on July 24, 1998 as RESCINDED;
unfounded civil action is not among the grounds for moral damages.53 Article 2220 of the New Civil
Code provides that to award moral damages in a breach of contract, the defendant must act
fraudulently or in bad faith. In this case, Spouses Rabaja failed to sufficiently show that Spouses b. Ordering Spouses Rolando and Herminia Salvador to pay Spouses Rogelio and
Salvador acted in a fraudulent manner or with bad faith when it breached the contract of sale. Elizabeth Rabaja:
Thus, the award of moral damages cannot be warranted.
1. The amount of Nine Hundred Fifty Thousand (₱950,000.00) Pesos,
As to the award of exemplary damages, Article 2229 of the New Civil Code provides that representing the payments made by the latter for the purchase of the subject
exemplary damages may be imposed by way of example or correction for the public good, in property; and
addition to the moral, temperate, liquidated or compensatory damages.54 The claimant must first
establish his right to moral, temperate, liquidated or compensatory damages. In this case, 2. The cost of suit;
considering that Spouses Rabaja failed to prove moral or compensatory damages, then there
could be no award of exemplary damages. c. Dismissing the counterclaims of Spouses Rolando and Herminia Salvador and Rosario
Gonzales against Spouses Rogelio and Elizabeth Rabaja.
With regard to attorney’s fees, neither Spouses Rabaja nor Gonzales is entitled to the
award.1âwphi1 The settled rule is that no premium should be placed on the right to litigate and The amounts awarded are subject to interest at the legal rate of 6% per annum to be reckoned
that not every winning party is entitled to an automatic grant of attorney’s fees.55 The RTC from the date of finality of this judgment until fully paid."
reasoned that Gonzales was forced to litigate due to the acts of Spouses Salvador. The Court
does not agree. Gonzales, as agent of Spouses Salvador, should have expected that she would
be called to litigation in connection with her fiduciary duties to the principal. As aforestated, this is without prejudice to the invocation by either party of the Civil Code
provisions on legal compensation or set-off under Articles 1278, 1279 and 1270.
In view of all the foregoing, the CA decision should be affirmed with the following modifications:
SO ORDERED.
1. The order requiring defendant Spouses Rolando and Herminia Salvador to pay
plaintiffs the amount of Five Hundred Ninety Three Thousand (₱593,000.00) Pesos,
representing the amount garnished from the Metrobank deposit of plaintiffs as for their
back rentals should be deleted;

2. The award of moral damages in the amount of Twenty Thousand (₱20,000.00) Pesos;
exemplary damages in the amount of Twenty Thousand (₱20,000.00) Pesos, and
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 159489 February 4, 2008
FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE, INC.), petitioner,
vs.
CLEMENTE N. PEDROSO, TERESITA O. PEDROSO and JENNIFER N. PALACIO thru her
Attorney-in-Fact PONCIANO C. MARQUEZ, respondents.
DECISION
QUISUMBING, J.:
This petition for review on certiorari seeks the reversal of the Decision 1 and Resolution,2 dated
November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No.
33568. The appellate court had affirmed the Decision3 dated October 10, 1989 of the Regional
Trial Court (RTC) of Manila, Branch 3, finding petitioner as defendant and the co-defendants
below jointly and severally liable to the plaintiffs, now herein respondents.
The antecedent facts are as follows:
Respondent Teresita O. Pedroso is a policyholder of a 20-year endowment life insurance issued
by petitioner Filipinas Life Assurance Company (Filipinas Life). Pedroso claims Renato Valle was
her insurance agent since 1972 and Valle collected her monthly premiums. In the first week of
January 1977, Valle told her that the Filipinas Life Escolta Office was holding a promotional
investment program for policyholders. It was offering 8% prepaid interest a month for certain
amounts deposited on a monthly basis. Enticed, she initially invested and issued a post-dated
check dated January 7, 1977 for P10,000.4 In return, Valle issued Pedroso his personal check
for P800 for the 8%5prepaid interest and a Filipinas Life "Agent’s Receipt" No. 807838.6
Subsequently, she called the Escolta office and talked to Francisco Alcantara, the administrative
assistant, who referred her to the branch manager, Angel Apetrior. Pedroso inquired about the
promotional investment and Apetrior confirmed that there was such a promotion. She was even
told she could "push through with the check" she issued. From the records, the check, with the
endorsement of Alcantara at the back, was deposited in the account of Filipinas Life with the
Commercial Bank and Trust Company (CBTC), Escolta Branch.
Relying on the representations made by the petitioner’s duly authorized representatives Apetrior
and Alcantara, as well as having known agent Valle for quite some time, Pedroso waited for the
maturity of her initial investment. A month after, her investment of P10,000 was returned to her
after she made a written request for its refund. The formal written request, dated February 3, 1977,
was written on an inter-office memorandum form of Filipinas Life prepared by Alcantara.7 To
collect the amount, Pedroso personally went to the Escolta branch where Alcantara gave her
the P10,000 in cash. After a second investment, she made 7 to 8 more investments in varying
amounts, totaling P37,000 but at a lower rate of 5%8 prepaid interest a month. Upon maturity of
Pedroso’s subsequent investments, Valle would take back from Pedroso the corresponding
yellow-colored agent’s receipt he issued to the latter.
Pedroso told respondent Jennifer N. Palacio, also a Filipinas Life insurance policyholder, about
the investment plan. Palacio made a total investment of P49,5509 but at only 5% prepaid interest.
However, when Pedroso tried to withdraw her investment, Valle did not want to return
some P17,000 worth of it. Palacio also tried to withdraw hers, but Filipinas Life, despite demands,
refused to return her money. With the assistance of their lawyer, they went to Filipinas Life Escolta
Office to collect their respective investments, and to inquire why they had not seen Valle for quite
some time. But their attempts were futile. Hence, respondents filed an action for the recovery of a
sum of money.
After trial, the RTC, Branch 3, Manila, held Filipinas Life and its co-defendants Valle, Apetrior and
Alcantara jointly and solidarily liable to the respondents.
On appeal, the Court of Appeals affirmed the trial court’s ruling and subsequently denied the
motion for reconsideration.
Petitioner now comes before us raising a single issue:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE DECISION OF THE
LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLY
LIABLE WITH ITS CO-DEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD
OF HOLDING ITS AGENT, RENATO VALLE, SOLELY LIABLE TO THE
RESPONDENTS.10
Simply put, did the Court of Appeals err in holding petitioner and its co-defendants jointly and
severally liable to the herein respondents?
Filipinas Life does not dispute that Valle was its agent, but claims that it was only a life insurance
company and was not engaged in the business of collecting investment money. It contends that
the investment scheme offered to respondents by Valle, Apetrior and Alcantara was outside the
scope of their authority as agents of Filipinas Life such that, it cannot be held liable to the
respondents.11
On the other hand, respondents contend that Filipinas Life authorized Valle to solicit investments
from them. In fact, Filipinas Life’s official documents and facilities were used in consummating the
transactions. These transactions, according to respondents, were confirmed by its officers Apetrior
and Alcantara. Respondents assert they exercised all the diligence required of them in
ascertaining the authority of petitioner’s agents; and it is Filipinas Life that failed in its duty to
ensure that its agents act within the scope of their authority.
Considering the issue raised in the light of the submissions of the parties, we find that the petition
lacks merit. The Court of Appeals committed no reversible error nor abused gravely its discretion
in rendering the assailed decision and resolution.

It appears indisputable that respondents Pedroso and Palacio had invested P47,000 and P49,550,
respectively. These were received by Valle and remitted to Filipinas Life, using Filipinas Life’s
official receipts, whose authenticity were not disputed. Valle’s authority to solicit and receive
investments was also established by the parties. When respondents sought confirmation,
Alcantara, holding a supervisory position, and Apetrior, the branch manager, confirmed that Valle
had authority. While it is true that a person dealing with an agent is put upon inquiry and must
discover at his own peril the agent’s authority, in this case, respondents did exercise due diligence
in removing all doubts and in confirming the validity of the representations made by Valle.

Filipinas Life, as the principal, is liable for obligations contracted by its agent Valle. 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.12 The general rule is that the
principal is responsible for the acts of its agent done within the scope of its authority, and should
bear the damage caused to third persons.13 When the agent exceeds his authority, the agent
becomes personally liable for the damage.14 But even when the agent exceeds his authority, the
principal is still solidarily liable together with the agent if the principal allowed the agent to act as
though the agent had full powers.15 In other words, the acts of an agent beyond the scope of his
authority do not bind the principal, unless the principal ratifies them, expressly or
impliedly.16 Ratification in agency is the adoption or confirmation by one person of an act
performed on his behalf by another without authority.17

Filipinas Life cannot profess ignorance of Valle’s acts. Even if Valle’s representations were beyond
his authority as a debit/insurance agent, Filipinas Life thru Alcantara and Apetrior expressly and
knowingly ratified Valle’s acts. It cannot even be denied that Filipinas Life benefited from the
investments deposited by Valle in the account of Filipinas Life. In our considered view, Filipinas
Life had clothed Valle with apparent authority; hence, it is now estopped to deny said authority.
Innocent third persons should not be prejudiced if the principal failed to adopt the needed
measures to prevent misrepresentation, much more so if the principal ratified his agent’s acts
beyond the latter’s authority. The act of the agent is considered that of the principal itself. Qui per
alium facit per seipsum facere videtur. "He who does a thing by an agent is considered as doing it
himself."18

WHEREFORE, the petition is DENIED for lack of merit. The Decision and Resolution, dated
November 29, 2002 and August 5, 2003, respectively, of the Court of Appeals in CA-G.R. CV No.
33568 are AFFIRMED.

Costs against the petitioner.

SO ORDERED.
 THIRD DIVISION
[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 free from all liens and encumbrances; and 3) condemning defendants A.U. Valencia and Co. Inc.,
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
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
 In essence, therefore, the basis for Manila Remnant’s solidary liability is estoppel which, in turn, is
"Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if rooted in the principal’s neglectfulness in failing to properly supervise and control the affairs of its
the former allowed the latter to act as though he had full powers." (Emphasis supplied) 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
The above-quoted article is new. It is intended to protect the rights of innocent persons. In such a deception employed by its agent. 22
situation, both the principal and the agent may be considered as joint feasors whose liability is
joint and solidary. 20 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
Authority by estoppel has arisen in the instant case because by its negligence, the principal, their names in the hope of reselling the same at a higher price to the prejudice of bona fide lot
Manila Remnant, has permitted its agent, A.U. Valencia and Co., to exercise powers not granted buyers, as precisely what the agent had intended to happen in the present case. This is a serious
to it. That the principal might not have had actual knowledge of the agent’s misdeed is of no matter that must be looked into by the appropriate government housing
moment. Consider the following circumstances:chanrob1es virtual 1aw library authority.chanrobles.com.ph : virtual law library

Firstly, Manila Remnant literally gave carte blanche to its agent A.U. Valencia and Co. in the sale WHEREFORE, in view of the foregoing, the appealed decision of the Court of Appeals dated
and disposition of the subdivision lots. As a disclosed principal in the contracts to sell in favor of October 13, 1987 sustaining the decision of the Quezon City trial court dated November 17, 1980
the Ventanilla couple, there was no doubt that they were in fact contracting with the principal. is AFFIRMED. This judgment is immediately executory. Costs against petitioner.
Section 7 of the Ventanillas’ contracts to sell states:jgc:chanrobles.com.ph
SO ORDERED.
"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 Gutierrez, Jr and Bidin, JJ., concur.
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 Feliciano, J., is on leave.
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.
 Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 79688 February 1, 1996
PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner,
vs.
COURT OF APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:
Is a lot buyer who constructs improvements on the wrong property erroneously delivered by the
owner's agent, a builder in good faith? This is the main issue resolved in this petition for review
on certiorari to reverse the Decision1of the Court of Appeals2 in CA-G.R. No. 11040, promulgated
on August 20, 1987.
By resolution dated November 13, 1995, the First Division of this Court resolved to transfer this
case (along with several others) to the Third Division. After due deliberation and consultation, the
Court assigned the writing of this Decision to the undersigned ponente.
The Facts
The facts, as found by respondent Court, are as follows:
Edith Robillo purchased from petitioner a parcel of land designated as Lot 9, Phase II and located
at Taculing Road, Pleasantville Subdivision, Bacolod City. In 1975, respondent Eldred Jardinico
bought the rights to the lot from Robillo. At that time, Lot 9 was vacant.
Upon completing all payments, Jardinico secured from the Register of Deeds of Bacolod City on
December 19, 1978 Transfer Certificate of Title No. 106367 in his name. It was then that he
discovered that improvements had been introduced on Lot 9 by respondent Wilson Kee, who had
taken possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the same subdivision from
C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real estate agent of petitioner. Under the
Contract to Sell on Installment, Kee could possess the lot even before the completion of all
installment payments. On January 20, 1975, Kee paid CTTEI the relocation fee of P50.00 and
another P50.00 on January 27, 1975, for the preparation of the lot plan. These amounts were paid
prior to Kee's taking actual possession of Lot 8. After the preparation of the lot plan and a copy
thereof given to Kee, CTTEI through its employee, Zenaida Octaviano, accompanied Kee's wife,
Donabelle Kee, to inspect Lot 8. Unfortunately, the parcel of land pointed by Octaviano was Lot 9.
Thereafter, Kee proceeded to construct his residence, a store, an auto repair shop and other
improvements on the lot.
After discovering that Lot 9 was occupied by Kee, Jardinico confronted him. The parties tried to
reach an amicable settlement, but failed.
On January 30, 1981, Jardinico's lawyer wrote Kee, demanding that the latter remove all
improvements and vacate Lot 9. When Kee refused to vacate Lot 9, Jardinico filed with the
Municipal Trial Court in Cities, Branch 3, Bacolod City (MTCC), a complaint for ejectment with
damages against Kee.
Kee, in turn, filed a third-party complaint against petitioner and CTTEI.
The MTCC held that the erroneous delivery of Lot 9 to Kee was attributable to CTTEI. It further
ruled that petitioner and CTTEI could not successfully invoke as a defense the failure of Kee to
give notice of his intention to begin construction required under paragraph 22 of the Contract to
Sell on Installment and his having built a sari-sari store without the prior approval of petitioner
required under paragraph 26 of said contract, saying that the purpose of these requirements was
merely to regulate the type of improvements to be constructed on the Lot.3
However, the MTCC found that petitioner had already rescinded its contract with Kee over Lot 8
for the latter's failure to pay the installments due, and that Kee had not contested the rescission.
The rescission was effected in 1979, before the complaint was instituted. The MTCC concluded
that Kee no longer had any right over the lot subject of the contract between him and petitioner.
Consequently, Kee must pay reasonable rentals for the use of Lot 9, and, furthermore, he cannot
claim reimbursement for the improvements he introduced on said lot.
The MTCC thus disposed:
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as follows:
1. Defendant Wilson Kee is ordered to vacate the premises of Lot 9, covered by TCT No.
106367 and to remove all structures and improvements he introduced thereon;
2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the rate of P15.00 a
day computed from the time this suit was filed on March 12, 1981 until he actually vacates
the premises. This amount shall bear interests (sic) at the rate of 12 per cent (sic) per
annum.
3. Third-Party Defendant C.T. Torres Enterprises, Inc. and Pleasantville Subdivision are
ordered to pay the plaintiff jointly and severally the sum of P3,000.00 as attorney's fees
and P700.00 as cost and litigation expenses.4
On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled that petitioner and
CTTEI were not at fault or were not negligent, there being no preponderant evidence to show that
they directly participated in the delivery of Lot 9 to Kee 5 . It found Kee a builder in bad faith. It
further ruled that even assuming arguendo that Kee was acting in good faith, he was, nonetheless,
guilty of unlawfully usurping the possessory right of Jardinico over Lot 9 from the time he was
served with notice to vacate said lot, and thus was liable for rental.
The RTC thus disposed:
WHEREFORE, the decision appealed from is affirmed with respect to the order against
the defendant to vacate the premises of Lot No. 9 covered by Transfer Certificate of Title
No. T-106367 of the land records of Bacolod City; the removal of all structures and
improvements introduced thereon at his expense and the payment to plaintiff (sic) the
sum of Fifteen (P15.00) Pesos a day as reasonable rental to be computed from January
30, 1981, the date of the demand, and not from the date of the filing of the complaint, until
he had vacated (sic) the premises, with interest thereon at 12% per annum. This Court
further renders judgment against the defendant to pay the plaintiff the sum of Three
Thousand (P3,000.00) Pesos as attorney's fees, plus costs of litigation.
The third-party complaint against Third-Party Defendants Pleasantville Development
Corporation and C.T. Torres Enterprises, Inc. is dismissed. The order against Third-Party
Defendants to pay attorney's fees to plaintiff and costs of litigation is reversed.6
Following the denial of his motion for reconsideration on October 20, 1986, Kee appealed directly
to the Supreme Court, which referred the matter to the Court of Appeals.
The appellate court ruled that Kee was a builder in good faith, as he was unaware of the "mix-up"
when he began construction of the improvements on Lot 8. It further ruled that the erroneous
delivery was due to the negligence of CTTEI, and that such wrong delivery was likewise imputable
to its principal, petitioner herein. The appellate court also ruled that the award of rentals was
without basis.
Thus, the Court of Appeals disposed:
WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED, and
judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the improvements he
introduced on Lot 9, and is entitled to the rights granted him under Articles 448, 546 and
548 of the New Civil Code.
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
A. If Eldred Jardinico decides to appropriate the improvements and,
thereafter, remove these structures, the third-party defendants shall answer for
all demolition expenses and the value of the improvements thus destroyed or
rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall
answer for the amount representing the value of Lot 9 that Kee should pay to
Jardinico.
3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
attorney's fees, as well as litigation expenses.
4. The award of rentals to Jardinico is dispensed with.
Furthermore, the case is REMANDED to the court of origin for the determination of the
actual value of the improvements and the property (Lot 9), as well as for further
proceedings in conformity with Article 448 of the New Civil Code.7
Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.
The Issues
The petition submitted the following grounds to justify a review of the respondent Court's Decision,
as follows:
1. The Court of Appeals has decided the case in a way probably not in accord with law or
the the (sic) applicable decisions of the Supreme Court on third-party complaints, by
ordering third-party defendants to pay the demolition expenses and/or price of the land;
2. The Court of Appeals has so far departed from the accepted course of judicial
proceedings, by granting to private respondent-Kee the rights of a builder in good faith in
excess of what the law provides, thus enriching private respondent Kee at the expense of
the petitioner;
3. In the light of the subsequent events or circumstances which changed the rights of the
parties, it becomes imperative to set aside or at least modify the judgment of the Court of
Appeals to harmonize with justice and the facts;
4. Private respondent-Kee in accordance with the findings of facts of the lower court is
clearly a builder in bad faith, having violated several provisions of the contract to sell on
installments;
5. The decision of the Court of Appeals, holding the principal, Pleasantville Development
Corporation (liable) for the acts made by the agent in excess of its authority is clearly in
violation of the provision of the law;
6. The award of attorney's fees is clearly without basis and is equivalent to putting a
premium in (sic) court litigation.
From these grounds, the issues could be re-stated as follows:
(1) Was Kee a builder in good faith?
(2) What is the liability, if any, of petitioner and its agent, C.T. Torres Enterprises, Inc.?
and
(3) Is the award of attorney's fees proper?
The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the RTC's ruling that Kee was a
builder in bad faith.
Petitioner fails to persuade this Court to abandon the findings and conclusions of the Court of
Appeals that Kee was a builder in good faith. We agree with the following observation of the Court
of Appeals:
The roots of the controversy can be traced directly to the errors committed by CTTEI,
when it pointed the wrong property to Wilson Kee and his wife. It is highly improbable that
a purchaser of a lot would knowingly and willingly build his residence on a lot owned by
another, deliberately exposing himself and his family to the risk of being ejected from the
land and losing all improvements thereon, not to mention the social humiliation that would
follow.
Under the circumstances, Kee had acted in the manner of a prudent man in ascertaining
the identity of his property. Lot 8 is covered by Transfer Certificate of Title No. T-69561,
while Lot 9 is identified in Transfer Certificate of Title No. T-106367. Hence, under the
Torrens system of land registration, Kee is presumed to have knowledge of the metes
and bounds of the property with which he is dealing. . . .
xxx xxx xxx
But as Kee is a layman not versed in the technical description of his property, he had to
find a way to ascertain that what was described in TCT No. 69561 matched Lot 8. Thus,
he went to the subdivision developer's agent and applied and paid for the relocation of the
lot, as well as for the production of a lot plan by CTTEI's geodetic engineer. Upon Kee's
receipt of the map, his wife went to the subdivision site accompanied by CTTEI's
employee, Octaviano, who authoritatively declared that the land she was pointing to was
indeed Lot 8. Having full faith and confidence in the reputation of CTTEI, and because of
the company's positive identification of the property, Kee saw no reason to suspect that
there had been a misdelivery. The steps Kee had taken to protect his interests were
reasonable. There was no need for him to have acted ex-abundantia cautela, such as
being present during the geodetic engineer's relocation survey or hiring an independent
geodetic engineer to countercheck for errors, for the final delivery of subdivision lots to
their owners is part of the regular course of everyday business of CTTEI. Because of
CTTEI's blunder, what Kee had hoped to forestall did in fact transpire. Kee's efforts all
went to naught.8
Good faith consists in the belief of the builder that the land he is building on is his and his
ignorance of any defect or flaw in his title 9 . And as good faith is presumed, petitioner has the
burden of proving bad faith on the part of Kee 10 .
At the time he built improvements on Lot 8, Kee believed that said lot was what he bought from
petitioner. He was not aware that the lot delivered to him was not Lot 8. Thus, Kee's good faith.
Petitioner failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's violation of paragraphs 22 and 26 of the
Contract of Sale on Installment.
We disagree. Such violations have no bearing whatsoever on whether Kee was a builder in good
faith, that is, on his state of mind at the time he built the improvements on Lot 9. These alleged
violations may give rise to petitioner's cause of action against Kee under the said contract
(contractual breach), but may not be bases to negate the presumption that Kee was a builder in
good faith.
Petitioner also points out that, as found by the trial court, the Contract of Sale on Installment
covering Lot 8 between it and Kee was rescinded long before the present action was instituted.
This has no relevance on the liability of petitioner, as such fact does not negate the negligence of
its agent in pointing out the wrong lot. to Kee. Such circumstance is relevant only as it gives
Jardinico a cause of action for unlawful detainer against Kee.
Petitioner next contends that Kee cannot "claim that another lot was erroneously pointed out to
him" because the latter agreed to the following provision in the Contract of Sale on installment, to
wit:
13. The Vendee hereby declares that prior to the execution of his contract he/she has
personally examined or inspected the property made subject-matter hereof, as to its
location, contours, as well as the natural condition of the lots and from the date hereof
whatever consequential change therein made due to erosion, the said Vendee shall bear
the expenses of the necessary fillings, when the same is so desired by him/her. 11
The subject matter of this provision of the contract is the change of the location, contour and
condition of the lot due to erosion. It merely provides that the vendee, having examined the
property prior to the execution of the contract, agrees to shoulder the expenses resulting from
such change.
We do not agree with the interpretation of petitioner that Kee contracted away his right to recover
damages resulting from petitioner's negligence. Such waiver would be contrary to public policy
and cannot be allowed. "Rights may be waived, unless the waiver is contrary to law, public order,
public policy, morals, or good customs, or prejudicial to a third person with a right recognized by
law." 12
The Second Issue: Petitioner's Liability
Kee filed a third-party complaint against petitioner and CTTEI, which was dismissed by the RTC
after ruling that there was no evidence from which fault or negligence on the part of petitioner and
CTTEI can be inferred. The Court of Appeals disagreed and found CTTEI negligent for the
erroneous delivery of the lot by Octaviano, its employee.
Petitioner does not dispute the fact that CTTEI was its agent. But it contends that the erroneous
delivery of Lot 9 to Kee was an act which was clearly outside the scope of its authority, and
consequently, CTTEI I alone should be liable. It asserts that "while [CTTEI] was authorized to sell
the lot belonging to the herein petitioner, it was never authorized to deliver the wrong lot to
Kee" 13 .
Petitioner's contention is without merit.
The rule is that the principal is responsible for the acts of the agent, done within the scope of his
authority, and should bear the damage caused to third persons 14 . On the other hand, the agent
who exceeds his authority is personally liable for the damage 15
CTTEI was acting within its authority as the sole real estate representative of petitioner when it
made the delivery to Kee. In acting within its scope of authority, it was, however, negligent. It is
this negligence that is the basis of petitioner's liability, as principal of CTTEI, per Articles 1909 and
1910 of the Civil Code.
Pending resolution of the case before the Court of Appeals, Jardinico and Kee on July 24, 1987
entered into a deed of sale, wherein the former sold Lot 9 to Kee. Jardinico and Kee did not inform
the Court of Appeals of such deal.
The deed of sale contained the following provision:
1. That Civil Case No. 3815 entitled "Jardinico vs. Kee" which is now pending appeal with
the Court of Appeals, regardless of the outcome of the decision shall be mutually
disregarded and shall not be pursued by the parties herein and shall be considered
dismissed and without effect whatso-ever; 16
Kee asserts though that the "terms and conditions in said deed of sale are strictly for the parties
thereto" and that "(t)here is no waiver made by either of the parties in said deed of whatever
favorable judgment or award the honorable respondent Court of Appeals may make in their favor
against herein petitioner Pleasantville Development Corporation and/or private respondent C.T.
Torres Enterprises; Inc." 17
Obviously, the deed of sale can have no effect on the liability of petitioner. As we have earlier
stated, petitioner's liability is grounded on the negligence of its agent. On the other hand, what the
deed of sale regulates are the reciprocal rights of Kee and Jardinico; it stressed that they had
reached an agreement independent of the outcome of the case.
Petitioner further assails the following holding of the Court of Appeals:
2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville Development
Corporation are solidarily liable under the following circumstances:
a. If Eldred Jardinico decides to appropriate the improvements and, thereafter,
remove these structures, the third-party defendants shall answer for all
demolition expenses and the value of the improvements thus destroyed or
rendered useless;
b. If Jardinico prefers that Kee buy the land, the third-party defendants shall
answer for the amount representing the value of Lot 9 that Kee should pay to
Jardinico. 18
Petitioner contends that if the above holding would be carried out, Kee would be unjustly enriched
at its expense. In other words, Kee would be able to own the lot, as buyer, without having to pay
anything on it, because the aforequoted portion of respondent Court's Decision would require
petitioner and CTTEI jointly and solidarily to "answer" or reimburse Kee therefor.
We agree with petitioner.
Petitioner' s liability lies in the negligence of its agent CTTEI. For such negligence, the petitioner
should be held liable for damages. Now, the extent and/or amount of damages to be awarded is a
factual issue which should be determined after evidence is adduced. However, there is no
showing that such evidence was actually presented in the trial court; hence no damages could
flow be awarded.
The rights of Kee and Jardinico vis-a-vis each other, as builder in good faith and owner in good
faith, respectively, are regulated by law (i.e., Arts. 448, 546 and 548 of the Civil Code). It was error
for the Court of Appeals to make a "slight modification" in the application of such law, on the
ground of "equity". At any rate, as it stands now, Kee and Jardinico have amicably settled through
their deed of sale their rights and obligations with regards to Lot 9. Thus, we delete items 2 (a) and
(b) of the dispositive portion of the Court of Appeals' Decision [as reproduced above] holding
petitioner and CTTEI solidarily liable.
The Third Issue: Attorney's Fees
The MTCC awarded Jardinico attorney's fees and costs in the amount of P3,000.00 and P700.00,
respectively, as prayed for in his complaint. The RTC deleted the award, consistent with its ruling
that petitioner was without fault or negligence. The Court of Appeals, however, reinstated the
award of attorney's fees after ruling that petitioner was liable for its agent's negligence.
The award of attorney's fees lies within the discretion of the court and depends upon the
circumstances of each case 19 . We shall not interfere with the discretion of the Court of Appeals.
Jardinico was compelled to litigate for the protection of his interests and for the recovery of
damages sustained as a result of the negligence of petitioner's agent 20 .

In sum, we rule that Kee is a builder in good faith. The disposition of the Court of Appeals that Kee
"is entitled to the rights granted him under Articles 448, 546 and 548 of the New Civil Code" is
deleted, in view of the deed of sale entered into by Kee and Jardinico, which deed now governs
the rights of Jardinico and Kee as to each other. There is also no further need, as ruled by the
appellate Court, to remand the case to the court of origin "for determination of the actual value of
the improvements and the property (Lot 9), as well as for further proceedings in conformity with
Article 448 of the New Civil Code."

WHEREFORE , the petition is partially GRANTED. The Decision of the Court of Appeals is hereby
MODIFIED as follows:

(1) Wilson Kee is declared a builder in good faith;

(2) Petitioner Pleasantville Development Corporation and respondent C.T. Torres

Enterprises, Inc. are declared solidarily liable for damages due to negligence; however,
since the amount and/or extent of such damages was not proven during the trial, the
same cannot now be quantified and awarded;

(3) Petitioner Pleasantville Development Corporation and respondent C.T. Torres

Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to Jardinico as
attorney's fees, as well as litigation expenses; and

(4) The award of rentals to Jardinico is dispensed with.

SO ORDERED.

Navasa, C.J., Davide, Jr. and Melo, JJ., concur.

Francisco, J., took no part
 THIRD DIVISION
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.
CARPIO, J.:
The Case
Before us is a Petition for Review on Certiorari1 seeking to annul the Decision of the Court of
Appeals2 dated May 4, 1994 in CA-G.R. CV No. 37996, which affirmed in toto the decision3 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 attorney's 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 broker's commission from the De Castros. 4 The Court of
Appeals summarized the facts in this wise:
"x x x. Appellants5 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), appellee6 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.1âwphi1.nêt
On the other hand, appellants completely traverse appellee's 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 appellee's, 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 lion's 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 Artigo's 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 court's 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
ARTIGO'S 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 ATTORNEY'S FEES;
VI. NOT AWARDING THE DE CASTRO'S MORAL AND EXEMPLARY DAMAGES, AND
ATTORNEY'S FEES.
The Court's 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 Artigo's 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 court's 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. 8 Whenever 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 P 23,000,000.00 with 5% commission as agent's 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. Under this
note, a contract of agency was clearly constituted between Constante and Artigo. Whether
Constante appointed Artigo as agent, in Constante's individual or representative capacity, or both,
the De Castros cannot seek the dismissal of the case for failure to implead the other co-owners as
indispensable parties. The De Castros admit that the other co-owners are solidarily liable
under the contract of agency,10 citing Article 1915 of the Civil Code, which reads:
 Art. 1915. If two or more persons have appointed an agent for a common transaction or
undertaking, they shall be solidarily liable to the agent for all the consequences of the
agency.
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 parties. A noted commentator
explained Article 1915 thus –
"The rule in this article applies even when the appointments were made by the 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 act of constituting the
agency. By virtue of this solidarity, the agent can recover from any principal the
whole compensation and indemnity owing to him by the others. The parties,
however, may, by express agreement, negate this solidary responsibility. The solidarity
does not disappear by the mere partition effected by the principals after the
accomplishment of the agency.
If the undertaking is one in which several are interested, but only some create the agency,
only the latter are solidarily liable, without prejudice to the effects of negotiorum
gestio with respect to the others. And if the power granted includes various transactions
some of which are common and others are not, only those interested in each transaction
shall be liable for it."11
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 entire obligation. 12 The agent may
recover the whole compensation from any one of the co-principals, as in this case.
Indeed, Article 1216 of the Civil Code provides that a creditor may sue any of the solidary debtors.
This article reads:
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or
all of them simultaneously. The demand made against one of them shall not be an
obstacle to those which may subsequently be directed against the others, so long as the
debt has not been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.13 that –
"x x x solidarity does not make a solidary obligor an indispensable party in a suit
filed by the creditor. Article 1216 of the Civil Code says that the creditor `may proceed
against anyone of the solidary debtors or some or all of them simultaneously'." (Emphasis
supplied)
Second Issue: whether Artigo's claim has been extinguished by full payment, waiver or
abandonment
The De Castros claim that Artigo was fully paid on June 14, 1985, that is, Artigo was given "his
proportionate share and no longer entitled to any balance." According to them, Artigo was just one
of the agents involved in the sale and entitled to a "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. He did not even prepare the documents for the transaction as an active real
estate broker usually does.
The De Castros' arguments are flimsy.
A contract of agency which is not contrary to law, public order, public policy, morals 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 them and both are bound to comply with
its terms and conditions in good faith.
The mere fact that "other agents" intervened in the consummation of the sale and were paid their
respective commissions cannot vary the terms of the contract of agency granting Artigo a 5
percent commission based on the selling price. These "other agents" turned out to be employees
of Times Transit, the buyer Artigo introduced to the De Castros. This prompted the trial court to
observe:
"The alleged `second group' of agents came into the picture only during the so-called
`second negotiation' and it is amusing to note that these (sic) second group, prominent
among whom are Atty. Del Castillo and Ms. Prudencio, happened to be employees of
Times Transit, the buyer of the properties. And their efforts were limited to convincing
Constante to 'part away' with the properties because the redemption period of the
foreclosed properties is around the corner, so to speak. (tsn. June 6, 1991).
xxx
To accept Constante's 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 others to
renew it who are much willing to accept a commission far less than the 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 the buyer, Times
Transit and they have not bettered the offer secured by Mr. Artigo for P7 million.
It is to be noted also that while Constante was too particular about the unrenewed real
estate broker's license of Mr. Artigo, he did not bother at all to inquire as to the licenses of
Prudencio and Castillo. (tsn, April 11, 1991, pp. 39-40)."15 (Emphasis supplied)
In any event, we find that the 5 percent real estate broker's commission is reasonable and within
the standard practice in the real estate industry for transactions of this nature.
The De Castros also contend that Artigo's 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. Artigo's 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, Artigo's 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 Artigo's claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigo's 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 one's 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 court's 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 quo erred
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
Appeals24 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.1âwphi1.nêt

Fourth Issue: whether award of moral damages and attorney's fees is proper

The De Castros claim that Artigo failed to prove that he is entitled to moral damages and
attorney's 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 attorney's fees in favor of Artigo.
The award of damages and attorney's 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. 25 Moral 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, attorney's fees are awarded in
instances where "the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim."27 There is no reason to disturb the trial court's
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 P 45,000.00 in attorney's 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 broker's
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.

SO ORDERED.

Puno, and Panganiban, JJ., concur.

Sandoval-Gutierrez, J., no part due to close family relation with a party.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-41420 July 10, 1992
CMS LOGGING, INC., petitioner,
vs.
THE COURT OF APPEALS and D.R. AGUINALDO CORPORATION, respondents.
NOCON, J.:
This is a petition for review on certiorari from the decision dated July 31, 1975 of the Court of
Appeals in CA-G.R. No. 47763-R which affirmed in toto the decision of the Court of First Instance
of Manila, Branch VII, in Civil Case No. 56355 dismissing the complaint filed by petitioner CMS
Logging, Inc. (CMS, for brevity) against private respondent D.R. Aguinaldo Corporation
(DRACOR, for brevity) and ordering the former to pay the latter attorney's fees in the amount of
P1,000.00 and the costs.
The facts of the case are as follows: Petitioner CMS is a forest concessionaire engaged in the
logging business, while private respondent DRACOR is engaged in the business of exporting and
selling logs and lumber. On August 28, 1957, CMS and DRACOR entered into a contract of
agency 1 whereby the former appointed the latter as its exclusive export and sales agent for all
logs that the former may produce, for a period of five (5) years. The pertinent portions of the
agreement, which was drawn up by DRACOR, 2 are as follows:
1. SISON [CMS] hereby appoints DRACOR as his sole and exclusive export
sales agent with full authority, subject to the conditions and limitations hereinafter
set forth, to sell and export under a firm sales contract acceptable to SISON, all
logs produced by SISON for a period of five (5) years commencing upon the
execution of the agreement and upon the terms and conditions hereinafter
provided and DRACOR hereby accepts such appointment;
xxx xxx xxx
3. It is expressly agreed that DRACOR shall handle exclusively all negotiations of
all export sales of SISON with the buyers and arrange the procurement and
schedules of the vessel or vessels for the shipment of SISON's logs in
accordance with SISON's written requests, but DRACOR shall not in anyway [sic]
be liable or responsible for any delay, default or failure of the vessel or vessels to
comply with the schedules agreed upon;
xxx xxx xxx
9. It is expressly agreed by the parties hereto that DRACOR shall receive five
(5%) per cent commission of the gross sales of logs of SISON based on F.O.B.
invoice value which commission shall be deducted from the proceeds of any
and/or all moneys received by DRACOR for and in behalf and for the account of
SISON;
By virtue of the aforesaid agreement, CMS was able to sell through DRACOR a total of
77,264,672 board feet of logs in Japan, from September 20, 1957 to April 4, 1962.
About six months prior to the expiration of the agreement, while on a trip to Tokyo, Japan, CMS's
president, Atty. Carlos Moran Sison, and general manager and legal counsel, Atty. Teodoro R.
Dominguez, discovered that DRACOR had used Shinko Trading Co., Ltd. (Shinko for brevity) as
agent, representative or liaison officer in selling CMS's logs in Japan for which Shinko earned a
commission of U.S. $1.00 per 1,000 board feet from the buyer of the logs. Under this
arrangement, Shinko was able to collect a total of U.S. $77,264.67. 3
CMS claimed that this commission paid to Shinko was in violation of the agreement and that it
(CMS) is entitled to this amount as part of the proceeds of the sale of the logs. CMS contended
that since DRACOR had been paid the 5% commission under the agreement, it is no longer
entitled to the additional commission paid to Shinko as this tantamount to DRACOR receiving
double compensation for the services it rendered.
After this discovery, CMS sold and shipped logs valued at U.S. $739,321.13 or
P2,883,351.90, 4 directly to several firms in Japan without the aid or intervention of DRACOR.
CMS sued DRACOR for the commission received by Shinko and for moral and exemplary
damages, while DRACOR counterclaimed for its commission, amounting to P144,167.59, from the
sales made by CMS of logs to Japanese firms. In its reply, CMS averred as a defense to the
counterclaim that DRACOR had retained the sum of P101,167.59 as part of its commission for the
sales made by CMS. 5 Thus, as its counterclaim to DRACOR's counterclaim, CMS demanded
DRACOR return the amount it unlawfully retained. DRACOR later filed an amended counterclaim,
alleging that the balance of its commission on the sales made by CMS was P42,630.82, 6 thus
impliedly admitting that it retained the amount alleged by CMS.
In dismissing the complaint, the trial court ruled that no evidence was presented to show that
Shinko received the commission of U.S. $77,264.67 arising from the sale of CMS's logs in Japan,
though the trial court stated that "Shinko was able to collect the total amount of $77,264.67 US
Dollars (Exhs. M and M-1)." 7 The counterclaim was likewise dismissed, as it was shown that
DRACOR had waived its rights to the balance of its commission in a letter dated February 2, 1963
to Atty. Carlos Moran Sison, president of CMS. 8 From said decision, only CMS appealed to the
Court of Appeals.
The Court of Appeals, in a 3 to 2 decision, 9 affirmed the dismissal of the complaint since "[t]he
trial court could not have made a categorical finding that Shinko collected commissions from the
buyers of Sison's logs in Japan, and could not have held that Sison is entitled to recover from
Dracor the amount collected by Shinko as commissions, plaintiff-appellant having failed to prove
by competent evidence its claims." 10
Moreover, the appellate court held:
There is reason to believe that Shinko Trading Co. Ltd., was paid by defendant-
appellee out of its own commission of 5%, as indicated in the letter of its
president to the president of Sison, dated February 2, 1963 (Exhibit "N"), and in
the Agreement between Aguinaldo Development Corporation (ADECOR) and
Shinko Trading Co., Ltd. (Exhibit "9"). Daniel R. Aguinaldo stated in his said
letter:
. . . , I informed you that if you wanted to pay me for the service, then it would be
no more than at the standard rate of 5% commission because in our own case,
we pay our Japanese agents 2-1/2%. Accordingly, we would only add a similar
amount of 2-1/2% for the service which we would render you in the Philippines. 11
Aggrieved, CMS appealed to this Court by way of a petition for review on certiorari, alleging (1)
that the Court of Appeals erred in not making a complete findings of fact; (2) that the testimony of
Atty. Teodoro R. Dominguez, regarding the admission by Shinko's president and director that it
collected a commission of U.S. $1.00 per 1,000 board feet of logs from the Japanese buyers, is
admissible against DRACOR; (3) that the statement of DRACOR's chief legal counsel in his
memorandum dated May 31, 1965, Exhibit "K", is an admission that Shinko was able to collect the
commission in question; (4) that the fact that Shinko received the questioned commissions is
deemed admitted by DRACOR by its silence under Section 23, Rule 130 of the Rules of Court
when it failed to reply to Atty. Carlos Moran Sison's letter dated February 6, 1962; (5) that
DRACOR is not entitled to its 5% commission arising from the direct sales made by CMS to
buyers in Japan; and (6) that DRACOR is guilty of fraud and bad faith in its dealings with CMS.
With regard to CMS's arguments concerning whether or not Shinko received the commission in
question, We find the same unmeritorious.
To begin with, these arguments question the findings of fact made by the Court of Appeals, which
are final and conclusive and can not be reviewed on appeal to the Supreme Court. 12
Moreover, while it is true that the evidence adduced establishes the fact that Shinko is DRACOR's
agent or liaison in Japan, 13 there is no evidence which established the fact that Shinko did receive
the amount of U.S. $77,264.67 as commission arising from the sale of CMS's logs to various
Japanese firms.
The fact that Shinko received the commissions in question was not established by the testimony of
Atty. Teodoro R. Dominguez to the effect that Shinko's president and director told him that Shinko
received a commission of U.S. $1.00 for every 1,000 board feet of logs sold, since the same is
hearsay. Similarly, the letter of Mr. K. Shibata of Toyo Menka Kaisha, Ltd. 14
is also hearsay since
Mr. Shibata was not presented to testify on his letter.
CMS's other evidence have little or no probative value at all. The statements made in the
memorandum of Atty. Simplicio R. Ciocon to DRACOR dated May 31, 1965, 15 the letter dated
February 2, 1963 of Daniel
R. Aguinaldo, 16 president of DRACOR, and the reply-letter dated January 9, 1964 17 by
DRACOR's counsel Atty. V. E. Del Rosario to CMS's demand letter dated September 25, 1963
can not be categorized as admissions that Shinko did receive the commissions in question.
The alleged admission made by Atty. Ciocon, to wit —
Furthermore, as per our records, our shipment of logs to Toyo Menka Kaisha,
Ltd., is only for a net volume of 67,747,732 board feet which should enable
Shinko to collect a commission of US $67,747.73 only
can not be considered as such since the statement was made in the context of
questioning CMS's tally of logs delivered to various Japanese firms.
Similarly, the statement of Daniel R. Aguinaldo, to wit —
. . . Knowing as we do that Toyo Menka is a large and reputable company, it is
obvious that they paid Shinko for certain services which Shinko must have
satisfactorily performed for them in Japan otherwise they would not have paid
Shinko
and that of Atty. V. E. Del Rosario,
. . . It does not seem proper, therefore, for CMS Logging, Inc., as principal, to
concern itself with, much less question, the right of Shinko Trading Co., Ltd. with
which our client debt directly, to whatever benefits it might have derived form the
ultimate consumer/buyer of these logs, Toyo Menka Kaisha, Ltd. There appears
to be no justification for your client's contention that these benefits, whether they
can be considered as commissions paid by Toyo Menka Kaisha to Shinko
Trading, are to be regarded part of the gross sales.
can not be considered admissions that Shinko received the questioned commissions
since neither statements declared categorically that Shinko did in fact receive the
commissions and that these arose from the sale of CMS's logs.
As correctly stated by the appellate court:
It is a rule that "a statement is not competent as an admission where it does not,
under a reasonable construction, appear to admit or acknowledge the fact which
is sought to be proved by it". An admission or declaration to be competent must
 have been expressed in definite, certain and unequivocal language (Bank of the demanded and collected from the government the money the collection of which he entrusted to
Philippine Islands vs. Fidelity & Surety Co., 51 Phil. 57, 64). 18 his attorney-in-fact, constituted revocation of the agency in favor of the attorney-in-fact.

CMS's contention that DRACOR had admitted by its silence the allegation that Shinko received
the commissions in question when it failed to respond to Atty. Carlos Moran Sison's letter dated
February 6, 1963, is not supported by the evidence. DRACOR did in fact reply to the letter of Atty.
Sison, through the letter dated March 5, 1963 of F.A. Novenario, 19 which stated:
This is to acknowledge receipt of your letter dated February 6, 1963, and
addressed to Mr. D. R. Aguinaldo, who is at present out of the country.
Since the contract of agency was revoked by CMS when it sold its logs to Japanese firms without
the intervention of DRACOR, the latter is no longer entitled to its commission from the proceeds of
such sale and is not entitled to retain whatever moneys it may have received as its commission for
said transactions. Neither would DRACOR be entitled to collect damages from CMS, since
damages are generally not awarded to the agent for the revocation of the agency, and the case at
bar is not one falling under the exception mentioned, which is to evade the payment of the agent's
commission.

xxx xxx xxx
We have no record or knowledge of any such payment of commission made by
Toyo Menka to Shinko. If the payment was made by Toyo Menka to Shinko, as
stated in your letter, we knew nothing about it and had nothing to do with it.
The finding of fact made by the trial court, i.e., that "Shinko was able to collect the total amount of
$77,264.67 US Dollars," can not be given weight since this was based on the summary prepared
by CMS itself, Exhibits "M" and "M-1".
Moreover, even if it was shown that Shinko did in fact receive the commissions in question, CMS
is not entitled thereto since these were apparently paid by the buyers to Shinko for arranging the
sale. This is therefore not part of the gross sales of CMS's logs.
However, We find merit in CMS's contention that the appellate court erred in holding that
DRACOR was entitled to its commission from the sales made by CMS to Japanese firms.
Regarding CMS's contention that the Court of Appeals erred in not finding that DRACOR had
committed acts of fraud and bad faith, We find the same unmeritorious. Like the contention
involving Shinko and the questioned commissions, the findings of the Court of Appeals on the
matter were based on its appreciation of the evidence, and these findings are binding on this
Court.
In fine, We affirm the ruling of the Court of Appeals that there is no evidence to support CMS's
contention that Shinko earned a separate commission of U.S. $1.00 for every 1,000 board feet of
logs from the buyer of CMS's logs. However, We reverse the ruling of the Court of Appeals with
regard to DRACOR's right to retain the amount of P101,536.77 as part of its commission from the
sale of logs by CMS, and hold that DRACOR has no right to its commission. Consequently,
DRACOR is hereby ordered to remit to CMS the amount of P101,536.77.
WHEREFORE, the decision appealed from is hereby MODIFIED as stated in the preceding
paragraph. Costs de officio.
SO ORDERED.

The principal may revoke a contract of agency at will, and such revocation may be express, or Narvasa, C.J., Padilla and Regalado JJ., concur.
implied, 20 and may be availed of even if the period fixed in the contract of agency as not yet
expired. 21 As the principal has this absolute right to revoke the agency, the agent can not object
thereto; neither may he claim damages arising from such revocation, 22 unless it is shown that
such was done in order to evade the payment of agent's commission. 23

In the case at bar, CMS appointed DRACOR as its agent for the sale of its logs to Japanese firms.
Yet, during the existence of the contract of agency, DRACOR admitted that CMS sold its logs
directly to several Japanese firms. This act constituted an implied revocation of the contract of
agency under Article 1924 of the Civil Code, which provides:

Art. 1924 The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.

In New Manila Lumber Company, Inc. vs. Republic of the Philippines, 24 this Court ruled that the
act of a contractor, who, after executing powers of attorney in favor of another empowering the
latter to collect whatever amounts may be due to him from the Government, and thereafter