MANILA MEMORIAL PARK CEMETERY,
INC.vs.
 PEDRO L. LINSANGAN
FACTS:
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. Baluyot issued handwritten and typewritten
receipts for these payments. 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 document confirming that while the
contract price is P132,250.00, Atty. Linsangan would
pay only the original price of P95,000.00.
Later on, Baluyot verbally advised Atty. Linsangan that
Contract No. 28660 was cancelled for reasons the latter
could not explain. For the alleged failure of MMPCI and
Baluyot to conform to their agreement, Atty. Linsangan
filed a Complaint for Breach of Contract and Damages
against the former.
MMPCI alleged that Contract No. 28660 was cancelled
conformably with the terms of the contract because of
non-payment of arrearages. 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. 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.
The trial court held MMPCI and Baluyot jointly and
severally liable. The Court of Appeals affirmed the
decision of the trial court.
ISSUES:
1. Whether or not there was a contract of agency
between Baluyot and MMPCI?
2. Whether or not MMPCI should be liable for Baluyot’s
act?
HELD:
First Issue. Yes. 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. As properly found both
by the trial court and the Court of Appeals, 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.
Second Issue. No. 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.
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.
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.
ORIENT AIR SERVCES AND HOTEL
REPRESENTATIVES V C
FACTS:
American Airlines, inc, an air carrier offering passenger
and air cargo transportation in the Phils, and Orient Air
Services and Hotel Representatives entered into a
General Sales Agency Agreement whereby the former
authorized the latter to act as its exclusive general sales
agent within the Phils for the sale of air passenger
transportation
Some of the pertinent provisions are:
Orient Air Services shall perform these services:
a. solict and promote passenger traffic for the services
of American and if necessary, employ staff competen
and sufficient to do so
b. provide and maintain a suitable area in its place of
business to be used exclusively for the transaction of
the business of American
c. arrange for distribution of American’s timetables,
tariffs and promotional material to sales agents nad the
general public in the assigned territory
d. service and supervise sales agents in the assigned
territory including if required by American the control of
remittances and commissions retained
e. hold out a passenger reservation facility to sales
agents and general public in the assigned territory
Alleging that Orient Air had reneged on its obligations
under the Agreement by failing to remit the net proceeds
of sale in the amount of US $ 254,400, American Air by
itself undertook the collection of the proceeds of tickets
sold originally by Orient Air and terminated forthwith the
Agreement
American Air instituted suit against Orient Air for
Accounting with Preliminary Attachment or
Garnishment, Mandatory Injunction and Restraining
Order averring the basis for the termination of the
Agreement as well as Orient Air’s previous record of
failures “to promptly settle past outstanding refunds of
which there were available funds in the possession of
the Orient Air to the damage and prejudice of American
Air
TC ruled in favor of Orient Air to which the Intermediate
Appelalate Court (now CA) affirmed TC’s decision with
modifications with respect to monetary awards granted.
ISSUE: W/N Orient Air is entitled to the 3% overriding
commission
RULING: Yes
It is a well settled principle that in the interpretation of a
contract, the entirety thereof must be taken into
consideration to ascertain the meaning of its provisions.
The various stipulations in the contract must be read
together to give effect to all
The Agreement, when interpreted in accordance with
the foregoing principles, entitles Orient Air to the 3%
overriding commission based on total revenue or as
referred to by the parties, “total flown revenues”.
As the designated General Sales Agent of American Air,
Orient Air was responsible for the promotion and
marketing of American Air’s services for air passenger
transportation and the solicitation of sales therefor. In
return for such efforts and services, Orient Air was to be
paid commissions of 2 kinds: first, a sales agency
commission, ranging from 7 to 8% of tariff fares and
charges from sales by Orient Air when made on
American Air ticket stock; and second, an overriding
commission of 3% of tariff fares and charges for all sales
of passenger transportation over American Air services.
The second type of commissions would accrue for sales
of American Air services made not on its ticket stocket
but on the ticket stock of other air carriers sold by such
carriers or other authorized ticketing facilities or travel
agents.
In addition, it is clear from the records that American Air
was the party responsible for the preparation of the
Agreement. Consequently, any ambiguity in this
“contract of adhesion” is to be taken “contra
proferentem” –construed against the party who cause
the ambiguity and could have avoided it by the exercise
of a little more care.
SEVILLA v. CA
G.R. Nos. L-41182-3; April 15, 1988
Ponente: J. Sarmiento
FACTS:
On Oct. 19, 1960, the Tourist World Service, Inc. leased
an office at Mabini St., Manila for the former's use as a
branch office. When the branch office was opened, the
same was run by the herein appellant Lina O. Sevilla
payable to Tourist World Service Inc. by any airline for
any fare brought in on the efforts of Mrs. Lina Sevilla,
4% was to go to Lina Sevilla and 3% was to be withheld
by the Tourist World Service, Inc.
On or about November 24, 1961, the Tourist World
Service, Inc. appears to have been informed that Lina
Sevilla was connected with a rival firm, the Philippine
Travel Bureau, and, since the branch office was anyhow
losing, the Tourist World Service considered closing
down its office.
This was firmed up by two resolutions of the board of
directors of Tourist World Service, Inc. dated Dec. 2,
1961, the first abolishing the office of the manager and
vice-president of the Tourist World Service, Inc., Ermita
Branch, and the second, authorizing the corporate
secretary to receive the properties of the Tourist World
Service then located at the said branch office. It further
appears that on Jan. 3, 1962, the contract with the
appellees for the use of the Branch Office premises was
terminated and while the effectivity thereof was Jan. 31,
1962, the appellees no longer used it. As a matter of
fact appellants used it since Nov. 1961. Because of this,
and to comply with the mandate of the Tourist World
Service, the corporate secretary Gabino Canilao went
over to the branch office, and, finding the premises
locked, and, being unable to contact Lina Sevilla, he
padlocked the premises on June 4, 1962 to protect the
interests of the Tourist World Service.
When neither the appellant Lina Sevilla nor any of her
employees could enter the locked premises, a
complaint was filed by the herein appellants against the
appellees with a prayer for the issuance of mandatory
preliminary injunction. Both appellees answered with
counterclaims. For apparent lack of interest of the
parties therein, the trial court ordered the dismissal of
the case without prejudice.
ISSUE:
 Whether the act of Tourist World Service in abolishing
its Ermita branch proper
HELD:
No, the act of Tourist World Service in abolishing its
Ermita branch is not proper.
The Supreme Court held that when the petitioner, Lina
Sevilla, agreed to manage Tourist World Service, Inc.'s
Ermita office, she must have done so pursuant to a
contract of agency.
In the case at bar, Sevilla solicited airline fares, but she
did so for and on behalf of her principal, Tourist World
Service, Inc. As compensation, she received 4% of the
proceeds in the concept of commissions. And as we
said, Sevilla herself, based on her letter of November
28, 1961, presumed her principal's authority as owner
of the business undertaking. We are convinced,
considering the circumstances and from the respondent
Court's recital of facts, that the parties had
contemplated a principal-agent relationship, rather than
a joint management or a partnership.
But unlike simple grants of a power of attorney, the
agency that we hereby declare to be compatible with the
intent of the parties, cannot be revoked at will. The
reason is that it is one coupled with an interest, the
agency having been created for the mutual interest of
the agent and the principal. Accordingly, the revocation
complained of should entitle the petitioner, Lina Sevilla,
to damages
G.R. No. L-25653
PLANA, J.:
Appeal by the Commissioner of Internal Revenue from
the decision of the Court of Tax Appeals in CTA Case
No. 1250 ordering the refund to respondent Manila
Machinery & Supply Co. of P21,620.36 allegedly
erroneously paid as commercial broker's percentage
tax.
The following partial stipulation of facts outlines the two
different modes of business operation of private
respondent (petitioner in the CTA):
"(1) as sales representative of certain United States
manufacturers and/or suppliers, petitioner's
transactions or activities are outlined as follows:
"(1) Philippine buyer ascertains from petitioner
whether or not a certain machinery or equipment it
desires to buy is available from the U.S. manufacturers
or suppliers represented by the former and, if available,
requests for price quotations of desired machinery or
equipment;
"(2) If agreeable, Philippine buyer places purchase
order either directly with the United States manufacturer
and/or supplier or with petitioner who forwards it to the
U.S. manufacturer;
"(3) Upon notification that the purchase order is
accepted, the Philippine buyer opens with a local bank
a letter of credit in favor of the United States
manufacturer or supplier to cover payment of the goods
ordered;
"(4) United States manufacturer or supplier ships the
goods to Philippine buyer and collects from the U.S.
correspondent of the local bank where the letter of credit
was opened, payment of the goods;
"(5) United States manufacturer or supplier credits the
petitioner for commission. (CTA rec., pp. 70-73.)
"(2) as distributor of United States manufacturers
and/or suppliers, its (petitioner's) transactions or
activities are outlined as follows:
"(1) Philippine buyer ascertains from petitioner
whether or not a certain machinery or equipment which
the said buyer desires to purchase is available from the
U.S. manufacturers or suppliers for whom petitioner
acts as distributor and, if available, requests for price
quotation of the desired machinery or equipment;
"(2) Petitioner furnishes the Philippine buyer with price
quotation based on price list f.o.b. factory which is
furnished petitioner and fixed by the United States
manufacturer or supplier;
"(3) If agreeable, Philippine buyer places the purchase
order with the petitioner;
"(4) Upon notice of the acceptance of the purchase
order, the buyer opens with a local bank a letter of credit
in favor of the petitioner's agent in San Francisco,
California, United States of America to cover the price
of the goods ordered;
"(5) Petitioner prepares the purchase instructions in
accordance with the purchase order of the Philippine
buyer and forwards the same to its agent in the United
States;
"(6) The said agent procures the goods from the U.S.
manufacturer or supplier;
"(7) United States manufacturer or supplier invoices
goods for petitioner's agent in San Francisco, California;
"(8) Petitioner's agent prepares sales invoice of the
petitioner and ships the goods to the Philippine buyer."
(CTA rec., pp. 70-73.)
It appears that during the tax period in question,
respondent taxpayer realized an income of
P630,635.62 from both its activities as sales
representative and as distributor of American
manufacturers/suppliers and paid thereon P37,837.94
as broker's percentage tax on the assumption that the
income consisted entirely of commissions. Later
however respondent sought a partial refund of
P21,620.36 on the ground that of the total income of
P630,635.62, P360,339.35 was not broker's
commission but simply overprice or profit (plus
exchange income on overprice) realized from ordinary
sales of machineries and equipment it had purchased
from American companies.
After the request for refund had been denied by the
Bureau of Internal Revenue, the taxpayer appealed to
the Court of Tax Appeals from which it obtained as
aforesaid a favorable judgment, which is now assailed.
The single issue posed in this petition for review is
whether the P360,339.35 earned by respondent
taxpayer in its capacity "as distributor" of American
machineries and equipment should be considered
as commission subject to commercial broker's tax
under the Tax Code orprofit from sales which is not
subject thereto.
The merit of respondent's stand is clear on the face of
the appealed decision -
"Petitioner (taxpayer) contends that it is not a
commercial broker within the definition provided in
Section 194(t) of the Revenue Code, which reads:
"(t) 'Commercial broker' includes all persons, other than
importers, manufacturer, producers, or bona fide
employees, who, for compensation or profit, sell or bring
about sales or purchases of merchandise for other
persons, or bring proposed buyers and sellers together,
or negotiate freights or other business for owners of
vessels, or other means of transportation, or for the
skippers, or consignors or consignees of freight carried
by vessels or other means of transportation. The term
includes commission merchants."
"One of the purposes of petitioner corporation, as stated
in its articles of incorporation, is to 'make and enter into
all kinds of contracts, agreements, and obligation with
any persons, corporation or corporations, or other
associations for the purchasing, acquiring, selling, or
otherwise disposing of goods, wares, and merchandise
of all kinds, either as principal or agent, upon
commission, consignment, or indent orders.' (BIR rec.,
pp. 43-48.) Petitioner is, therefore, authorized to act
either as principal or agent in the transaction of its
business. However, the evidence of record regarding
petitioner's transactions which gave rise to the income
in question indicates the status of petitioner as an
independent dealer and not as a commercial
broker. Petitioner's contracts with several U.S.
manufacturers indubitably show that it acted as an
independent dealer. Pertinent portions of these
contracts read:
Joy Manufacturing Company
"1. Subject to the terms and conditions hereinafter set
forth, the Company grants to the Distributor the
exclusive right to purchase for resale the following listed
articles and machines. x x x x, manufactured or sold by
the Company within the territory indicated hereinafter."
(Underscoring supplied; Distributor's Contract, CTA
rec., p. 78.)
Briggs & Straton Corporation
"'Distributor' is an individual or firm under agreement
with Briggs & Straton Corporation, whose principal
business is the resale of products or commodities at
wholesale to Dealers, etc., x x x x. Distributor shall not
act as the agent for the Company under this agreement,
nor shall Distributor have any right or power hereunder
to act for or to bind the company in any respect or to
pledge its credit. x x x x." (Underscoring supplied;
Distributor Agreement, CTA rec., p. 83.)
The Jeffrey Manufacturing Company
"The purpose of this agreement is to effect through the
Representative a wider sales outlet for the
Manufacturer's products. This is to be accomplished by
the Representative purchasing certain products,
hereinafter listed, and produced by the Manufacturer,
for resale, and diligently promoting their sale in the
Representative's territory." (Italics supplied; Export
Representative Agreement, CTA rec., 85.)
Toledo Scale Corporation
(a) To sell only to the Distributor Toledo Machines
"II. for use in the Distributor's territory, except the
following machines. x x x
The responsibility of the Company for
merchandise ordered by the Distributor x x x shall
end with its delivery f.o.b. factory, all risks of fire,
"IV. loss or damage after the shipment has been
delivered f.o.b. factory or while in possession of
any transportation company x x x, shall be borne
by the Distributor.
(h) x x x It is expressly the intention of the parties
"V. hereto that the Distributor's status is that of an
independent contractor." (Underscoring supplied;
 Export Distributor's Sales Agreement, CTA rec.,
pp. 90-93.)
"Respondent cites the agreement of petitioner with the
Toledo Scale Corporation (CTA rec., pp. 90-93.), which
authorizes petitioner to solicit sales of' certain products
of the latter corporation, as an indication of
brokerage. But respondent merely quoted that portion
wherein petitioner is authorized to act as agent or
representative but did not mention petitioner's equal
authority to act as distributor or independent dealer with
respect to the same corporation.
"A perusal of the records of the case at bar equally
yields the conclusion that petitioner, through its agent,
M.S. Smith in San Francisco, California, U.S.A. (BIR
rec., pp. 49-50), was the purchaser and owner of the
machineries it sent to the Philippine buyers. This
conclusion is established by the fact that when
petitioner received purchase orders from local buyers
and there was no stock available, it sent the orders to
its agent in California and required the latter 'to
purchase from x x x x' the U.S. manufacturers or
suppliers the items called for in the purchase orders
(See BIR rec., pp. 63, 79, 98, 111 & 124.) Petitioner was
in turn paid through the letters of credit opened by the
Philippine buyers with local banks in favor of agent M.S.
Smith. (See BIR rec., pp. 59-128.)
"The facts (1) that petitioner shouldered the losses
resulting from some of the transactions in questions
(See BIR rec., pp. 21-22); (2) that if petitioner had no
stock available in the Philippines, it forwarded the
purchase order to its agent in California who procured
the machineries from U.S. manufacturers (BIR rec.,
Exh. "1", pp. 53-56); and (3) that the U.S. Manufacturers
invoiced the goods to petitioner's agent in California
who prepared the sales invoice and shipped the goods
to the Philippine buyers (See CTA rec., Stifacts, pp. 70-
73) negate agency."
In effect, the instant petition controverts the factual
findings of the court a quo. It is well settled that in
passing upon petitions for review of the decisions of the
Court of Tax Appeals, this Court is generally confined to
questions of law. The findings of fact of said Court are
not to be disturbed unless clearly shown to be
unsupported by substantial evidence. (Rules of Court,
Rule 44, Section 2. Republic Act 1125, Sections 18-
19.) Substantial evidence has been construed to mean
not necessarily preponderant proof as is required in
ordinary civil action, but such kind of "relevant evidence
as a reasonable man might accept as adequate in
support of a conclusion." (De Lamera vs. Court of
Agrarian Relations, et al., 17 SCRA 368.) There is no
circumstance of record indicating that the findings of the
lower court are not supported by substantial evidence.
WHEREFORE, the appealed decision is affirmed.
SO ORDERED.
KER AND CO, LTD V. LINGAD
FACTS:
Ker and Co, Ltd. was assessed by then Commissioner
of Internal Revenue Domingo the sum of P 20,272.33
as the commercial broker’s percentage tax, surcharge
and compromise penalty.
There was a request on the part of Ker for the
cancellation of such assessment which request was
turned down
As a result, it filed a petition for review with Court of Tax
Appeals
CTA: Ker taxable except as to the compromise penalty
of P500, the amount due from it being fixed at
P19,772.33
Such liability arose from a contract of Ker with the
United States Rubber International. The former being
referred to as the distributor and the latter specifically
designated as the company
The contract was to apply to transactions between the
former and Ker, as distributor from July 1, 1948 to
continue in force until terminated by either party giving
to the other 60 days’ notice
The shipments would cover products for “consumption
in Cebu, Bohol, Leyte Samar, Jolo, Negros Oriental and
Mindanao except province of Davao, Ker as distributor
being precluded from disposing such products
elsewhere than in the above places unless written
consent would first be obtained from the company
Ker as distributor is required to exert every effort to have
the shipment of the products in the maximum quantity
and to promote in every way the sale sale thereof.
Crucial stipulation: The company shall from time to time
consign to Ker and Ker will receive, accept and/hold
upon consignment the products specified under the
terms of this agreement in such quantities as in the
judgment of company may be necessary
It is further agreed that this agreement does not
constitute Ker the agent or legal representative of the
company for any purpose whatsoever
ISSUE:
W/N the relationship thus created is one of vendor and
vendee (contract of sale) or of broker and principal
(contract of agency)
RULING:
Broker and principal- contract of agency
By taking the contractual stipulations as a whole and not
just the disclaimer, it would seem that the contract
between them is a contract of agency
The CTA, in considering such stipulations provided in
the contract, concluded that all these circumstances are
irreconcilably antagonistic to the idea of an independent
merchant
CTA: upon analysis of the whole, together with actual
conduct of the parties thereto, that the relationship
between them is one of brokerage or agency
National Internal Revenue Code: defined Commercial
broker as all persons, other than importer,
manufacturers, producers or bona fide employees who,
for compensation or profit, sell or bring about sales or
purchase of merchandise for other persons or bring
proposed buyers and sellers together and also includes
commission merchants such as Ker in this case
The mere disclaimer in a contract that an entity like Ker
is not “the agent or legal representative for any purpose
whatsoever” does not suffice to yield the conclusion that
it is an independent merchant if the control over the
goods for resale of goods consigned is pervasive in
character
Thus, SC rejected Ker’s petition to reverse decision of
CTA
Nielson & Co. Inc. vs. Lepanto Consolidated Mining
Co.
[GR L-21601, 28 December 1968]
Facts: [GR L-21601, 17 December 1966; Zaldivar (J): 6
concur, 2 took no part] An operating agreement was
executed before World War II (on 30 January 1937)
between Nielson & Co. Inc. and the Lepanto
Consolidated Mining Co. whereby the former operated
and managed the mining properties owned by the latter
for a management fee of P2,500.00 a month and a 10%
participation in the net profits resulting from the
operation of the mining properties, for a period of 5
years. In 1940, a dispute arose regarding the
computation of the 10% share of Nielson in the profits.
The Board of Directors of Lepanto, realizing that the
mechanics of the contract was unfair to Nielson,
authorized its President to enter into an agreement with
Nielson modifying the pertinent provision of the contract
effective 1 January 1940 in such a way that Nielson
shall receive (1) 10% of the dividends declared and
paid, when and as paid, during the period of the contract
and at the end of each year, (2) 10% of any depletion
reserve that may be set up, and (3) 10% of any amount
expended during the year out of surplus earnings for
capital account. In the latter part of 1941, the parties
agreed to renew the contract for another period of 5
years, but in the meantime, the Pacific War broke out in
December 1941. In January 1942 operation of the
mining properties was disrupted on account of the war.
In February 1942, the mill, power plant, supplies on
hand, equipment, concentrates on hand and mines,
were destroyed upon orders of the United States Army,
to prevent their utilization by the invading Japanese
Army.
The Japanese forces thereafter occupied the mining
properties, operated the mines during the continuance
of the war, and who were ousted from the mining
properties only in August 1945. After the mining
properties were liberated from the Japanese forces,
LEPANTO took possession thereof and embarked in
rebuilding and reconstructing the mines and mill; setting
up new organization; clearing the mill site; repairing the
mines; erecting staff quarters and bodegas and
repairing existing structures; installing new machinery
and equipment; repairing roads and maintaining the
same; salvaging equipment and storing the same within
the bodegas; doing police work necessary to take care
of the materials and equipment recovered; repairing and
renewing the water system; and retimbering. The
rehabilitation and reconstruction of the mine and mill
was not completed until 1948. On 26 June 1948 the
mines resumed operation under the exclusive
management of LEPANTO. Shortly after the mines
were liberated from the Japanese invaders in 1945, a
disagreement arose between NIELSON and LEPANTO
over the status of the operating contract which as
renewed expired in 1947. Under the terms thereof, the
management contract shall remain in suspense in case
fortuitous event or force majeure, such as war or civil
commotion, adversely affects the work of mining and
milling. On 6 February 1958, NIELSON brought an
action against LEPANTO before the Court of First
Instance of Manila to recover certain sums of money
representing damages allegedly suffered by the former
in view of the refusal of the latter to comply with the
terms of a management contract entered into between
them on 30 January 1937, including attorney's fees and
costs. LEPANTO in its answer denied the material
allegations of the complaint and set up certain special
defenses, among them, prescription and laches, as bars
against the institution of the action.
After trial, the court a quo rendered a decision
dismissing the complaint with costs. The court stated
that it did not find sufficient evidence to establish
LEPANTO's counterclaim and so it likewise dismissed
the same. NIELSON appealed. The Supreme Court
reversed the decision of the trial court and enter in lieu
thereof another, ordering Lepanto to pay Nielson (1)
10% share of cash dividends of December, 1941 in the
amount of P17,500.00, with legal interest thereon from
the date of the filing of the complaint; (2) management
fee for January, 1942 in the amount of P2,500.00, with
legal interest thereon from the date of the filing of the
complaint; (3) management fees for the sixty-month
period of extension of the management contract,
amounting to P150,000.00, with legal interest from the
date of the filing of the complaint; (4) 10% share in the
cash dividends during the period of extension of the
management contract, amounting to P1,400,000.00,
with legal interest thereon from the date of the filing of
the complaint; (5) 10% of the depletion reserve set up
during the period of extension, amounting to
P53,928.88, with legal interest thereon from the date of
the filing of the complaint; (6) 10% of the expenses for
capital account during the period of extension,
amounting to P694,364.76, with legal interest thereon
from the date of the filing of the complaint; (7) to issue
and deliver to Nielson and Co. Inc. shares of stock of
Lepanto Consolidated Mining Co. at par value
equivalent to the total of Nielson's 10% share in the
stock dividends declared on November 28, 1949 and
August 22, 1950, together with all cash and stock
dividends, if any, as may have been declared and
issued subsequent to November 28, 1949 and August
22, 1950, as fruits that accrued to said shares; provided
that if sufficient shares of stock of Lepanto's are not
available to satisfy this judgment, Lepanto shall pay
Nielson an amount in cash equivalent to the market
value of said shares at the time of default, that is, all
shares of stock that should have been delivered to
Nielson before the filing of the complaint must be paid
at their market value as of the date of the filing of the
complaint; and all shares, if any, that should have been
delivered after the filing of the complaint at the market
value of the shares at the time Lepanto disposed of all
its available shares, for it is only then that Lepanto
placed itself in condition of not being able to perform its
obligation; (8) the sum of P50,000.00 as attorney's fees;
and (9) the costs.
Lepanto seeks the reconsideration of the decision
rendered on 17 December 1966.
Issue: Whether the management contract is a contract
of agency or a contract of lease of services.
Held: Article 1709 of the Old Civil Code, defining
contract of agency, provides that "By the contract of
agency, one person binds himself to render some
service or do something for the account or at the request
of another." Article 1544, defining contract of lease of
service, provides that "In a lease of work or services,
one of the parties binds himself to make or construct
something or to render a service to the other for a price
certain." In both agency and lease of services one of the
parties binds himself to render some service to the other
party. Agency, however, is distinguished from lease of
work or services in that the basis of agency is
representation, while in the lease of work or services the
basis is employment. The lessor of services does not
represent his employer, while the agent represents his
principal. Further, agency is a preparatory contract, as
agency "does not stop with the agency because the
purpose is to enter into other contracts." The most
characteristic feature of an agency relationship is the
agent's power to bring about business relations
between his principal and third persons. "The agent is
destined to execute juridical acts (creation, modification
or extinction of relations with third parties). Lease of
services contemplate only material (non-juridical) acts."
Herein, the principal and paramount undertaking of
Nielson under the management contract was the
operation and development of the mine and the
operation of the mill. All the other undertakings
mentioned in the contract are necessary or incidental to
the principal undertaking — these other undertakings
being dependent upon the work on the development of
the mine and the operation of the mill. In the
performance of this principal undertaking Nielson was
not in any way executing juridical acts for Lepanto,
destined to create, modify or extinguish business
relations between Lepanto and third persons. In other
words, in performing its principal undertaking Nielson
was not acting as an agent of Lepanto, in the sense that
the term agent is interpreted under the law of agency,
but as one who was performing material acts for an
employer, for a compensation. It is true that the
management contract provides that Nielson would also
act as purchasing agent of supplies and enter into
contracts regarding the sale of mineral, but the contract
also provides that Nielson could not make any
purchase, or sell the minerals, without the prior approval
of Lepanto. It is clear, therefore, that even in these
cases Nielson could not execute juridical acts which
would bind Lepanto without first securing the approval
of Lepanto. Nielson, then, was to act only as an
intermediary, not as an agent. Further, from the
statements in the annual report for 1936, and from the
provision of paragraph XI of the Management contract,
that the employment by Lepanto of Nielson to operate
and manage its mines was principally in consideration
of the know-how and technical services that Nielson
offered Lepanto. The contract thus entered into
pursuant to the offer made by Nielson and accepted by
Lepanto was a "detailed operating contract". It was not
a contract of agency. Nowhere in the record is it shown
that Lepanto considered Nielson as its agent and that
Lepanto terminated the management contract because
it had lost its trust and confidence in Nielson.
Africa vs Caltex
In March 1948, in Rizal Avenue, Manila, a tank truck
was hosing gasoline into the underground storage of
Caltex. Apparently, a fire broke out from the gasoline
station and the fire spread and burned several houses
including the house of Spouses Bernabe and Soledad
Africa. Allegedly, someone (a passerby) threw a
cigarette while gasoline was being transferred which
caused the fire. But there was no evidence presented to
prove this theory and no other explanation can be had
as to the real reason for the fire. Apparently also, Caltex
and the branch owner (Mateo Boquiren) failed to install
a concrete firewall to contain fire if in case one happens.
ISSUE: Whether or not Caltex and Boquiren are liable
to pay for damages.
HELD: Yes. This is pursuant to the application on the
principle of res ipsa loquitur (“the transaction speaks for
itself”) which states: “where the thing which caused
injury, without fault of the injured person, is under the
exclusive control of the defendant and the injury is such
as in the ordinary course of things does not occur if he
having such control use proper care, it affords
reasonable evidence, in the absence of the explanation,
that the injury arose from defendant’s want of care.” The
gasoline station, with all its appliances, equipment and
employees, was under the control of Caltex and
Boquiren. A fire occurred therein and spread to and
burned the neighboring houses. The persons who knew
or could have known how the fire started were Boquiren,
Caltex and their employees, but they gave no
explanation thereof whatsoever. It is a fair and
reasonable inference that the incident happened
because of want of care.
Note that ordinarily, he who charges negligence shall
prove it. However, res ipsa loquitur is the exception
because the burden of proof is shifted to the party
charged of negligence as the latter is the one who had
exclusive control of the thing that caused the injury
complained of.
DE LA PENA V HIDALGO
FACTS:
De la Pena y de Ramon and De Ramon, in her own
behalf and as the legal guardian of her son Roberto De
la Pena, filed in the CFI a written complaint against
Hidalgos
De La Pena y de Ramon, as the judicial administrator of
the estate of the deceased De la Pena y Gomiz, with the
consent of the court filed a second amended complaint
prosecuting his action solely against Frederico Hidalgo
CFI ruled in favor of plainiff-administrator for the sum of
P13, 606.19 and legal interest from the date of the filing
of the complaint and the costs of the trial.
De la Pena y Ramon filed a third amended complaint
with the permission of the court alleging, among other
things, as a first cause of action, when Frederico
Hidalgo had possession of and administered the
following properties to wit, 1 house and lot; at Calle San
Luis; another house and lot at Calle Cortada; another
house and lot at Calle San Luis, and a fenced lot on the
same street, all of the district of Ermita, and another
house and lot at Calle Looban de Paco, belonging to his
principal, De la Pena y Gomiz, according to the power
of attorey executed in his favor
Hidalgo, as such agent, collected the rents and income
from said properties, amounting to P50, 244, which
sum, collected in partial amounts and on different dates,
he should have deposited, in accordance with the verbal
agreement between the deceased and himself in the
general treasury of the Spanish Government at an
interest of 5% per annum, which interest on accrual was
likewise to be deposited in order that it also might bear
interest; that Hidalgo did not remit or pay to Gomiz,
during his lifetime, nor to any representative of the said
Gomiz, the sum aforestated nor any part thereof with
the sole exception of P1,289.03, nor has he deposited
the unpaid balance of said sum in the treasury,
according to agreement, wherefore he has become
liable to his principal and to the administrator for the said
sum, together with its interest amounting to P72,548.24
The court ruled in favor of De la Pena and said that
Hidalgo, as administrator of the estate of deceased
Gomiz, actually owed De la Pena
ISSUE: W/N Hidalgo is considered an agent of Gomiz
and as such must reimburse present administrator, De
la Pena
RULING: No
Gomiz, before embarking for Spain, executed before a
notary a power of attorney in favor of Hidalgo as his
agent and that he should represent him and administer
various properties he owned and possessed in Manila.
After Hidalgo occupied the position of agent and
administrator of De la Pena y Gomiz’s property for
several years, the former wrote to the latter requesting
him to designate a person who might substitute him in
his said position in the event of his being obliged to
absent himself from these Islannds
From the procedure followed by the agent, Hidalgo, it is
logically inferred that he had definitely renounced his
agency and that the agency was duly terminated
according to the provisions of art 1782
Although the word “Renounce” was not employed in
connection with the agency executed in his favor, yet
when the agent informs his principal that for reasons of
health and by medical advice he is about to depart from
the place where he is exercising his trust and where the
property subject to his administration is situated,
abandons the property, turns it over to a third party, and
transmits to his principal a general statement which
summarizes and embraces all the balances of his
accounts since he began to exercise his agency to the
date when he ceased to hold his trust, it then reasonable
and just to conclude that the said agent expressly and
definitely renounced his agency.
GREGORIO ARANETA, INC.
vs.
PAZ TUASON DE PATERNO and JOSE VIDAL
TUASON, J.:
SUMMARY: Gregorio Araneta Inc filed an action to
compel Paz Tuason to deliver to it, a clear title to the
lots described in Exhibit A free from all liens and
encumbrances, and a deed of cancellation of the
mortgage. Paz Tuason argues that the Deed of
Absolute Sale (Exhibit A) executed between her and
Gregorio Araneta Inc. is not valid as it is in violation of
Article 1459 which provides that an agent cannot buy
property under his management. She avers that Jose
Araneta, Araneta Inc’s President is her agent; that
Gregorio Araneta Inc. and Jose Araneta are identical
invoking the principle of equity to disregard the fiction of
corporate entity; and thus, Gregorio Araneta Inc. cannot
validly purchase her property. SC: Jose Araneta is not
Tuason’s agent but is a broker. (Hindi talaga sinabi na
broker siya expressly pero yung [broker] sa doctrine ay
si Jose.)
DOCTRINE: [A broker] is “nothing more than a go-
between or middleman between the defendant and the
purchaser, bringing them together to make the contract
themselves. There was no confidence to be betrayed
[since the broker] was not authorized to make a binding
contract for the [purported principal]. He was not to sell
and he did not sell the property. He was to look for a
buyer and the owner herself was to make, and did
make, the sale. He was not to fix the price of the sale
because the price had been already fixed in his
commission. He was not to make the terms of payment
because these, too, were clearly specified in his
commission. In fine, [the broker] was left no power or
discretion whatsoever, which he could abuse to his
advantage and to the owner's prejudice.
PARTIES:
 Paz Tuason: Mortgagor, Seller, Alleged Principal
 Jose Vidal: Mortgagee
 Jose Araneta: Alleged Agent, President of Gregorio
Araneta Inc.
 Gregorio Araneta Inc.: Buyer
FACTS:
 Paz Tuason de Paterno is the registered owner of a
40,703 sq.m. big block of residential land in the
district of Santa Mesa, Manila which was subdivided
into city lots.
 Most of these lots were occupied by lessees who
had contracts of lease which were to expire on Dec.
31,1952, and carried a stipulation that in the event
the owner and lessor should decide to sell the
property, the lessees were to be given priority over
other buyers if they should desire to buy their
leaseholds.
 Paz Tuason obtained from Jose Vidal several loans
totalling P90,098 and constituted a first mortgage
on the aforesaid property to secure the debt. She
obtained additional loans of P30,000 and P20,000
upon the same security.
o Each time, the previous contract of
mortgage was renewed and the amounts
received were consolidated.
o In the first novated contract (Jan. 1943),
the time of payment was fixed at 2 years
and in the second (April 1943) at 4 years.
o There was also a separate written
agreement entitled "Penalidad del
Documento de Novacion de Esta Fecha"
("Penalty Document Novation of This Date)
which, unlike the principal contracts, was
not registered.
 Paz Tuason decided to sell the entire property for
the net amount of P400,000 and entered into
negotiations with Gregorio Araneta, Inc. for this
purpose.
 Oct. 19, 1943: Contract called "Promesa de
Compra y Venta" ("Promise to Buy and Sell"
also Exhibit 1) was executed. It provided that
subject to the preferred right of the lessees and that
of Jose Vidal as mortgagee, Paz Tuason would sell
to Gregorio Araneta, Inc. and the latter would buy
for the said amount of P400,000 the entire estate
under these terms.
 For the Tenants:
o 40% paid together with the letter of
acceptance of the tenant
o 20 % at the execution of deed of sale
agreement (Contract to Sell??)
o 40% at the execution of deed of final sale,
which will be granted after the mortgage
has been canceled
o Par. 8: 5% commission corresponding to
Jose Araneta will be paid at the execution
of the deed of sale agreement
 He was referred to as
defendant's agent or broker
"who acts in this transaction"
and who as such was to receive
a commission of 5 per cent,
although the commission was to
be charged to the purchasers
o Par. 13: Paz Tuason promised, in
consideration of Jose Araneta's services
rendered to her, to assign to him all her
right, title and interest to and in certain lots
not embraced in the sales to Gregorio
Araneta, Inc. or the tenants
o At the expiry of the period (Dec. 31,1952),
Paz Tuason will grant the corresponding
 deeds of sale to tenants who have decided
to buy their lots.
o Any tenant who decides to buy the lot may
choose to order the immediate execution in
his favor of Deed of Final Sale if 50% of the
price besides the 40% included in his letter
of acceptance was paid and the remaining
10% paid immediately after mortgage was
canceled
 For Gregorio Araneta Inc:
o Paz Tuason, acknowledges receipt of
P190, 000 as an advance of the sale
price from Gregorio Araneta, Inc.
o The amount that Paz Tuason receives in
this act will be applied to pay her debt to
Jose Vidal
o The lots which were not bought by the
lessees will immediately be sold in favor of
Gregorio Araneta, Inc.
o Gregorio Araneta, Inc., to pay the sale price
as follows: 90% of upon execution of Deed
of Final Sale discounting P190,000 already
paid at the Execution of this Contract.
Remaining 10% will be paid once the
mortgage over property was canceled
o If P190, 000 exceeds the 90% of the price
to be paid by Gregorio Araneta Inc., the
balance will be paid immediately by Paz
Tuazon, taking it from the amounts
received from tenants on the sale of the lots
 Letters were sent the lessees giving them until Aug.
31, 1943, an option to buy the lots they occupied, at
the price and terms stated in said letters. Most took
advantage of the opportunity and after making the
stipulated payments were given their deeds of
conveyance.
 In the end, Lots 1, 8-16 and 18 (aggregate area of
14,810.20 sq.m.) remained unencumbered, except
for the mortgage to Jose Vidal.
 Dec. 2, 1943: Paz Tuason and Gregorio Araneta,
Inc. executed with regard to these lots an
ABSOLUTE?? DEED OF SALE (Exhibit A) the
terms of which, except in two respects, were similar
to those of the sale to the lessees
o Price: P139,083.32 (90% is P125,174.99)
o Paz (Vendor) having received P190,000
from Gregorio, Inc (Vendee) upon the
execution of "Promesa de Compra y Venta,
returned the excess balance of P64,825.01
 P190,000 was delivered by the
Vendee to the Vendor by virtue
of 4 checks issued by the
Gregorio Inc. against BPI – 1 in
favor of Paz (P13,476.62), 2 in
favor of Jose Vidal (P143,150 +
30,000), 1 in favor of City Treasurer
(3,373.38)
 Nov. 2, 1943: The return of
P64,825.01 was made by Paz to
Gregorio Inc. liquidated as follows:
Payments from tenants Dumas,
Sycip, Pabalan, del Rosario
amounted to P68,563.21 from
which 5% commissions of de
Pabalan, Tuason, Dumas
amounting to 3,244.97 and check
to Paz amounting to 493.23 were
deducted
o In view of the foregoing liquidation, the
vendor acknowledges fully and
unconditionally, having received
P125,174.99 of the present legal
currency and hereby expressly declares
that she will not hold the Vendee
responsible for any loss that she might
suffer due to the fact that 2 of the checks
paid to her by the Vendee were issued in
favor of Jose Vidal and the latter has, up
to the present time, not yet collected the
same.
o 10% balance of the purchase price
(P13,908.33) not yet paid will be paid by the
Vendee to the Vendor when the existing
mortgage over the property sold by the
Vendor to the Vendee is duly cancelled in
the office of the Register of Deeds, or
sooner at the option of the Vendee.
 Oct. 20, 1943: Before the execution of this Absolute
deeds of Sale, Paz Tuason had already offered to
Vidal the check for P143,150 mentioned in Exhibit
A, in full settlement of her mortgage obligation
o Vidal refused to receive that check or to
cancel the mortgage, contending that by
the separate agreement before mentioned
payment of the mortgage was not to be
effected totally or partially before the end of
4 years from April, 1943.
 Oct.-Nov. 1943: Paz Tuason, through Atty. Enrile,
commenced an action against Vidal but the record
of that case was destroyed and no copy of the
complaint was presented in evidence.
o They deposited with the clerk of court a
check for P143,150 previously turned
down by Vidal, another certified check
for P12,932.61, also drawn by Gregorio
Araneta, Inc., in favor of Vidal, and one
ordinary check for P30,000 issued by
Paz Tuazon.
o 3 checks were supposed to cover the whole
indebtedness to Vidal including the
principal and interest up to that time and the
penalty provided in the separate
agreement.
o The action against Vidal never came on for
trial and the record and the checks were
 destroyed during the war operations in Jan.
or Feb., 1945; and neither was the case
reconstituted afterward.
 This failure of the suit for the cancellation of Vidal's
mortgage, coupled with the destruction of the
checks tendered to the mortgagee, the nullification
of the bank deposit on which those checks had
been drawn, and the tremendous rise of real estate
value following the termination of the war, gave
occasion to the breaking off the schemes outlined
in Exhibits 1 and A
 Paz Tuason, after liberation, repudiated them for
certain reasons. She alleges that Exhibit A is not
valid because:
o There are discrepancies between the
Promise to Buy and Sell (Exhibit 1) and
Absolute Deed of Sale (Exhibit A)
 Exhibit 1, under par. 8, there was to
be no absolute sale to Gregorio
Araneta, Inc., unless Vidal's
mortgage was cancelled.
 Exhibit A had no counterpart in
Exhibit 1 by which Gregorio
Araneta Inc. would hold Paz
Tuason liable for the lost checks.
No person in his or her right senses
would knowingly have agreed to a
covenant so iniquitous and
unreasonable.
o There was undue rush on the part of
Gregorio Inc., to push across the sale.
o Paz Tuason was deceived into signing
 Attys. Salvador Araneta and J.
Antonio Araneta of Araneta &
Araneta, who had drawn Exhibit A,
did not inform her about its
contents
 Being English, she had not read
the deed of sale; that if she had not
trusted the said attorneys she
would not have been so foolish as
to affix her signature to a contract
so one-sided.
o Technical objections are made against the
deed of sale.
 Jose Araneta, since deceased,
was defendant's agent and at the
same time the president of
Gregorio Araneta, Inc.
 The law firm of Araneta & Araneta
who represent Gregorio Araneta,
Inc. were her attorneys also.
 Gregorio Araneta, Inc. thus filed an action to
compel Paz Tuason to deliver to the plaintiff a
clear title to the lots described in Exhibit A free
from all liens and encumbrances, and a deed of
cancellation of the mortgage to Vidal.
 Vidal was summoned by order of the court, and filed
a cross-claim against Paz Tuazon to foreclose his
mortgage.
MAIN ISSUE 1: Whether the deed of sale (Exhibit A) is
valid despite:
a) The alleged agreement in the Promise to Buy and
Sell (Exhibit 1, par. 8) that there was to be no
execution of the deed of absolute sale to Gregorio
Araneta, Inc., unless Vidal's mortgage was
cancelled? (Wrong interpretation, Deed of Sale
Valid)
b) Discrepancies between the Promise to Buy and Sell
and the Deed of Sale and allegations of fraud in the
execution of the Deed of Absolute Sale? (YES, no
fraud)
c) Being a sale between the agent and his
principal? (Jose Araneta is not an agent of
Tuason but a BROKER, Deed of Sale valid)
d) Being drawn by lawyers of the buyer who are at the
same time lawyers of the seller? (Araneta firm is not
the lawyer of Tuazon, Deed of sale valid)
RATIO 1:
Exhibit A Valid Despite Non-Cancellation of
Mortgage
 LC: Contract was invalid based on Exhibit 1, par. 8
that there was to be no absolute sale to Gregorio
Araneta, Inc., unless Vidal's mortgage was
cancelled.
 SC: The contemplated execution of an absolute
deed of sale was not contingent on the cancellation
of Vidal's mortgage but as provided “once
determined by Paz Tuason, may sell to Gregorio
Araneta, Inc."
 The lots which could be sold to Gregorio Araneta,
Inc. were definitely known by the expiry of the
tenants' option to buy. Exhibit A was then in a
condition to be made.
 Vidal's mortgage was not an obstacle to the sale.
An amount had been set aside to take care of it, and
the parties were confident that the suit against the
mortgagee would succeed. The only doubt in their
minds was in the amount to which Vidal was
entitled. The failure of the court to try and decide the
case was not foreseen either.
 There was no undue rush on the part of Gregorio
Inc., to push across the sale. The fact that similar
deeds were given to the lessees who bought their
leaseholds and these were never questioned by
Tuason dispels any suspicion of bad faith on
Gregorio Inc.
 If anyone was in a hurry it could have been Paz
Tuason as she was pressed for cash. The payment
of the mortgage was only an incident, or a
necessary means to effectuate the sale. Otherwise
 she could have settled her mortgage obligation
merely by selling a portion of her estate.
 Whatever the terms of Exhibit 1, Tuason and
Gregorio Araneta Inc. were at perfect liberty to
make a new agreement different from or even
contrary to the provisions of that document. The
validity of the subsequent sale must of necessity
depend on what it said and not on the provisions of
the promise to buy and sell.
Exhibit A Valid: No Fraud, Substantial Compliance
with Exhibit 1
 Except in two particulars, Exhibit A was a
substantial compliance with Exhibit 1 in furtherance
of which Exhibit A was made.
 FIRST DIFFERENCE: 10 % of the purchase price
should be paid only after Vidal's mortgage should
have been cancelled.
o It is not onerous or unusual that the vendee
should withhold a small portion of the
purchase price before all the impediments
to the final consummation of the sale had
been removed.
o The tenants who had bought their lots had
been granted the privilege to deduct as
much as 40%
o Seller has already received from the tenant
purchasers 90% of the purchase money.
o Had Gregorio Araneta, Inc. not insisted on
charging to Tuason the loss of the checks
deposited with the court, the sale in
question would have gone the smooth way
of the sales to the tenants as declared by
Dindo Gonzales, Paz's son in his
testimony.
 SECOND DIFFERENCE: The stipulation by which
Gregorio Araneta Inc. would hold Paz Tuason liable
for the lost checks. (See above in Exhibit A-bold and
underline)
o Difficult to believe that Paz Tuason was
deceived into signing Exhibit A, in spite of
the provision of which she and her son
complain of.
o Paz Tuason had an able attorney (JPEnrile)
who was assisting her in the suit against
Vidal and a son (Dindo Gonzales) who is
leading citizen and a business-man and
knew the English language very well if she
did not.
o She denied or at least pretended in her
answer to be ignorant of the existence of
Exhibit A, and only after she was
confronted with the signed copy of the
document on the witness did she spring up
the defense of fraud. It would look as if she
gambled on the chance that no signed copy
of the deed had been saved from the war.
o From the unreasonableness and inequity of
Exhibit A it is not to be presumed that she
did not understand it.
JOSE ARANETA: NOT AGENT BUT BROKER
 Paz Tuazon: Gregorio Inc.’s President, Jose
Araneta is Tuazon’s agent and applying the
principle stated in 18 C.J.S. 380: "The courts, at law
and in equity, will disregard the fiction of corporate
entity apart from the members of the corporation
when it is attempted to be used as a means of
accomplishing a fraud or an illegal act”, Jose
Araneta and Gregorio Inc. is one and the same.
Thus, Gregorio cannot buy Tuazon’s property.
 TC: Jose Araneta, Gregorio Inc’s President, was
not Paz Tuason's agent or broker. However,
hypothetically admitting the existence of an agency
relation between Paz Tuason and Jose Araneta,
Gregorio Araneta, Inc. was the purchaser and not
Jose Araneta citing the well-known distinction
between the corporation and its stockholders. The
sale to Gregorio Araneta, Inc. was not a sale to Jose
Araneta, the agent or broker.
 SC as to TC Ruling: TC disregarded evidence. In
par. 8 of Exhibit 1, Jose Araneta was referred to as
Tuason’s agent or broker "who acts in this
transaction" and who as such was to receive a
commission of 5 %, while in par. 13, Tuason
promised, in consideration of Jose Araneta's
services rendered to her, to assign to him all her
right, title and interest to and in certain lots not
embraced in the sales to Gregorio Araneta, Inc. or
the tenants.
 SC as to Corporate Theory: This principle does
not fit in with the facts of the case. Gregorio
Araneta, Inc. entered into the contract for itself and
for its benefit as a corporation. The contract and the
roles of the parties who participated therein were
exactly as they purported to be and were fully
revealed to the seller. There is no pretense, nor is
there reason to suppose, that if Paz Tuason had
known Jose Araneta to be Araneta, Inc's president,
she would not have gone ahead with the deal. It
would have made no difference, except for the
brokerage fee, whether Gregorio Araneta, Inc. or
Jose Araneta was the purchaser.
 SC Relation bet. Tuason&Araneta: Not w/n Art.
1459: Granting Jose & G.A.Inc. were identical and
that the acts of one where the acts of the other, the
relation between Tuason and Jose Araneta did not
fall within the purview of article 1459 of the Spanish
Civil Code.
o Art. 1459. The following persons cannot
take by purchase, even at a public or
judicial auction, either in person or through
the mediation of another: An agent, any
property of which the management or sale
may have been intrusted to him
 Agency is defined in article 1709 in broad terms,
and we have not come across any commentary or
decision dealing directly with the precise meaning
of agency as employed in article 1459.
o Manresa’s Opinion: Agent, in the sense
there used, is one who accepts another's
representation to perform in his name
certain acts of more or less transcendency.
o Scaevola’s Opinion: The agent's incapacity
to buy his principal's property rests in the
fact that the agent and the principal form
one juridicial person. In this connection,
the fear that greed might get the better of
the sentiments of loyalty and
disinterestedness which should animate an
administrator or agent, is the reason
underlying various classes of incapacity
enumerated in article 1459.
o American Courts: The law does not trust
human nature to resist the temptations
likely to arise of antogonism between the
interest of the seller and the buyer.
 The ban of par. 2 of Art. 1459 connotes the idea of
trust and confidence; and so where the
relationship does not involve considerations of good
faith and integrity the prohibition should not and
does not apply. To come under the prohibition, the
agent must be in a fiduciary with his principal.
CASE AT BAR (Parang what is a broker):
 Tested by this standard, Jose Araneta was not an
agent within the meaning of article 1459. He was to
be nothing more than a go-between or
middleman between the defendant and the
purchaser, bringing them together to make the
contract themselves. There was no confidence
to be betrayed.
 Jose Araneta was not authorized to make a
binding contract for the defendant. He was not
to sell and he did not sell the defendant's
property. He was to look for a buyer and the
owner herself was to make, and did make, the
sale.
 He was not to fix the price of the sale because
the price had been already fixed in his
commission. He was not to make the terms of
payment because these, too, were clearly
specified in his commission.
 In fine, Jose Araneta was left no power or
discretion whatsoever, which he could abuse to
his advantage and to the owner's prejudice.
Araneta&Araneta: Not Tuason’s Lawyers
 Since attorney Ponce Enrile was the defendant's
lawyer in the suit against Vidal, it was not likely that
she employed Atty. Salvador Araneta and J.
Antonio Araneta as her attorneys in her dealings
with Gregorio Araneta, Inc., knowing their identity
with the buyer.
 The fact that Attys. Salvador and Araneta and J.
Antonio Araneta drew Exhibits 1 and A could very
well have been written in furtherance of Gregorio
Araneta's own interest.
 Granting that Attorney Araneta and Araneta were
attorneys for the Tuason, yet they were not
forbidden to buy the property in question. Attorneys
are only prohibited from buying their client's
property which is the subject of litigation. (Art. 1459,
No. 5, Spanish Civil Code) The questioned sale was
effected before the subject thereof became involved
in the present action.
ISSUE 2: Whether Exhibit A being valid, Tuason is liable
for the loss of the certified checks payable to Vidal for
P143,150 and P12,932.61 as consigned in court? (NO,
Araneta is liable for such loss, in effect no payment)
RATIO:
 The matter of who should bear this loss does not
depend upon the validity of the sale but on the
extent and scope of the clause.
 The checks were deposited with the certification
stating that they were to be "void if not presented for
payment within 90 days from date of acceptance."
 Under banking laws and practice, the funds
represented by the check were transferred from the
credit of the maker to that of the payee or holder,
and, thus the latter became the depositor of the
drawee bank, with rights and duties of one such
relation." But the transfer of the corresponding
funds from the credit of the depositor to that of that
of the payee had to be co-extensive with the life of
the checks, which in the case was 90 days.
 If the checks were not presented for payment within
that period, they became invalid and the funds were
automatically restored to the credit of the drawer
though not as a current deposit but as special
deposit
 The checks were never collected and the account
against which they were drawn was not used or
claimed by Gregorio Araneta, Inc.; and since that
account "was opened during the Japanese
occupation and in Japanese currency," the checks
"became obsolete as the account subject thereto is
considered null and void in accordance with
Executive Order No. 49 of the President of the
Philippines", according to the Bank.
 However, Paz Tuason cannot be responsible for
those checks after they expired. It would be like
holding an obligor to answer for the loss or
destruction of something which the obligee kept in
its safe with no power given the obligor to protect it
or interfere with the obligee's possession.
 Thus, the stipulation in Exhibit A that the defendant
or seller "shall not hold the vendee responsible for
any loss of these checks" was unconscionable, void
and unenforceable in so far as the said stipulation
would stretch the defendant's liability for the checks
 beyond 90 days and thus, was without
consideration. That Gregorio Araneta, Inc. knew
that Vidal had not cashed the checks within 90 days
is not, and could not successfully be denied.
 What Gregorio Inc, could have done? Keep the
funds accessible for the purpose of paying the
mortgage, by writing new checks either to Vidal or
to the defendant
ISSUE 3: Whether Vidal’s counterclaim should be
granted? (YES, W/ reservations)
 Vidal: Pay Loan, Interest, and Penalty up to this
date. Mortgage still exists.
 SC: The technical defects of the consignation did
not discharge the mortgage. However, as to the
payment of interest, Tuason to pay only up to
October 1943 when she offered to pay the loan
 Tuason's offer to pay Vidal in October, 1943, was in
accordance with the parties' contract and
terminated the debtor's obligation to pay interest.
The matter of the suspension of the running of
interest on the loan stands of a different footing and
is governed by different principles. These principles
regard reality rather than technicality, substance
rather than form.
 Good faith of the offer or and ability to make good
the offer should in simple justice excuse the debtor
from paying interest after the offer was rejected. A
debtor can not be considered delinquent who
offered checks backed by sufficient deposit or ready
to pay cash if the creditor chose that means of
payment.
 Technical defects of the offer cannot be adduced to
destroy its effects when the objection to accept the
payment was based on entirely different grounds. If
the creditor had told the debtor that he wanted cash
or an ordinary check, which Vidal now seems to
think Paz Tuason should have tendered, certainly
Vidal's wishes would have been fulfilled, gladly.
 The plain truth was that the mortgagee bent all his
efforts to put off the payment, and thanks to the
defects which he now, with obvious inconsistency,
points out, the mortgage has not perished with the
checks.
DISPOSITIVE:
 The contract of sale Exhibit A was valid and
enforceable, but the loss of the checks for P143,150
and P12,932.61 and invalidation of the
corresponding deposit is to be borne by the buyer,
Gregorio Araneta, Inc. the value of these checks as
well as the several payments made by Paz Tuason
to Gregorio Araneta, Inc. shall be deducted from the
sum of P190,000 which the buyer advanced to the
seller on the execution of Exhibit 1.
 Paz Tuason shall pay Jose Vidal the amount of the
mortgage and the stipulated interest up to October
20,1943, plus the penalty of P30,000, provided that
the loans obtained during the Japanese occupation
shall be reduced according to the Ballantyne scale
of payment, and provided that the date basis of the
computation as to the penalty is the date of the filing
of the suit against Vidal.
 Paz Tuason shall pay the amount that shall have
been found due under the contracts of mortgage
within 90 days from the time the court's judgment
upon the liquidation shall have become final,
otherwise the property mortgaged shall be ordered
sold provided by law.
 Vidal's mortgage is superior to the purchaser's right
under Exhibit A, which is hereby declared subject to
said mortgage. Should Gregorio Araneta, Inc. be
forced to pay the mortgage, it will be subrogated to
the right of the mortgagee.
 This case will be remanded to the court of origin with
instruction to hold a rehearing for the purpose of
liquidation as herein provided. The court also shall
hear and decide all other controversies relative to
the liquidation which may have been overlooked at
this decision, in a manner not inconsistent with the
above findings and judgment.
 The mortgagor is not entitled to suspension of
payment under the debt moratorium law or orders.
Among other reasons: the bulk of the debt was a
pre-war obligation and the moratorium as to such
obligations has been abrogated unless the debtor
has suffered war damages and has filed claim for
them; there is no allegation or proof that she has. In
the second place, the debtor herself caused her
creditor to be brought into the case which resulted
in the filing of the cross-claim to foreclose the
mortgage. In the third place, prompt settlement of
the mortgage is necessary to the settlement of the
dispute and liquidation between Gregorio Araneta,
Inc. and Paz Tuason. If for no other reason, Paz
Tuason would do well to forego the benefits of the
moratorium law.
Jai-Alai Corp vs BPI
Jai-Alai Corp. of the Phil. vs. Bank of the Phil. Islands
G.R. No. L-29432 August 6, 1975 66 SCRA 29
-forgery
FACTS:
Petitioner deposited 10 checks in its current account
with BPI. The checks which were acquired by petitioner
from Ramirez, a sales agent of the Inter-Island Gas
were all payable to Inter-Island Gas Service, Inc. or
order. After the checks had been submitted to Inter-
bank clearing, Inter-Island Gas discovered that all the
indorsements made on the checks purportedly by its
cashiers were forgeries. BPI thus debited the value of
the checks against petitioner's current account and
forwarded to the latter the checks containing the forged
indorsements which petitioner refused to accept.
ISSUE:
Whether BPI had the right to debit from petitioner's
current account the value of the checks with the forged
indorsements.
RULING:
BPI acted within legal bounds when it debited the
petitioner's account. Having indorsed the checks to
respondent bank, petitioner is deemed to have given the
warranty prescribed in Section 66 of the NIL that every
single one of those checks "is genuine and in all
respects what it purports to be." Respondent which
relied upon the petitioner's warranty should not be held
liable for the resulting loss.
Pacific Commercial vs Yatco
July 20, 1939Avancena, C.J.
The broker, unlike the commission merchant, has no
relationwith the thing he sells or buys. He is merely an
intermediary between the purchaser and the vendor.
Facts: Pacific sold for the account of Victoria Milling
Co.refined sugar up to the total amount of 1M. Pacific
received by way of commission 29K. Victoria Milling
paid merchant sales tax in its capacityas manufacturer
and owner of the sugar sold. Likewise, Pacific paid
taxalso. There were two ways in which Pacific made the
sales of sugarafter looking for purchasers and sending
the purchase order to VictoriaMilling:1)
the purchase is made for the delivery of the sugar EX-
WAREHOUSE
– any sense
sugar is first deposited in the warehouse of Pacific
before delivery to the purchaser.2)
the purchase is made for the delivery EX-SHIP
– Facts:
Pacificwould simply hand over the bill of lading to the
purchaserand collect the priceCFI of Manila: in the first
case, Pacific acted as a commissionmerchant; in the
second case as a broker
– The terms of the lease was for three (3)... years... the
ordered Yatco to return toPacific the amount collected
from it by way of tax on the sale of sugarto be delivered
EX-SHIP and denied prayer for return of amount paidfor
the sales of sugar to be delivered EX-
WAREHOUSE.Issues:1)
WON there is double taxation
– fishpond to the newly appointed... administrator.
NO2)
WON Pacific acted as a commission merchant as to
the sugardelivered ex-warehouse
– in effect, declared that the contract in favor of Escanlar
YES3)
WON Pacific acted as a mere commercial broker as to
thesugar delivered ex-ship
–
YESRatio:1)
There is no double taxation. Tax is not upon property
orproducts, but upon occupation or industry.2)
A commission merchant is one engaged in the
purchase orsale for another of personal property which,
for thispurpose, is placed in his possession and at his
disposal. Hemaintains a relation not only with his
principal and thepurchasers or vendors, but also with
the property which isthe property which is the subject
matter of transaction. Thedeposit of the sugar in the
warehouses of Pacific was madeupon its own account
and at its own risk until it was soldand taken by the
purchaser.3)
The broker has no relation with the thing he sells or
buys. Heis merely an intermediary between the
purchaser and thevendor. He acquired neither the
possession nor the custodyof the things sold. His only
office is to bring together theparties to the transaction.
The sugar was shipped by Pacificat its expense and
risk until it reached its destination, whereit was later
taken ex-ship by the purchaser. Pacific never
hadpossession of the sugar at any time. The bill of
lading sent tothe broker was sent only for the purpose
of turning it over tothe purchaser for the collection of the
price. The sugar didnot come to its possession in
MOISES SAN DIEGO v. ADELO NOMBRE, GR No. L-
19265, 1964-05-29
Adelo Nombre was the duly constituted judicial
administrator.
Nombre... leased one of the properties of the estate...
fishpond... to Pedro Escanlar, the other respondent
transaction having been done, admittedly, without
previous authority of approval of the Court where the
proceedings was pending
On January 17, 1961, Nombre was removed as
administrator by Order of the court... and one Sofronio
Campillanos was appointed in his stead
Respondent Escanlar was cited... to surrender the
Campillanos filed a motion asking for authority to
execute a lease contract of the same fishpond, in favor
of petitioner herein, Moises San Diego,... The
opposition notwithstanding, the Court on April 8, 1951,
was null and void, for want of judicial authority
Campillanos insisted on the invalidity of the contract in
favor of Escanlar;... legality of the contract of lease
entered into by the former administrator, Nombre, and
Pedro Escanlar
Respondents contend that this contract, not having
been authorized or approved by the Court, is null and
void
It
It has been... held that even in the absence of such
special power, a contract of lease for more than 6 years
is not entirely invalid;
No such limitation on the power of a judicial
administrator to grant a lease of property placed under
his custody is provided for in the present law.
Petitioner contends, that No. 8, Art. 1878 is the limitation
to the right of a judicial administrator to lease real
property without prior court authority and approval, if it
exceeds one year.
The lease contract in favor of Escanlar being for 3 years
and without such court... approval and authority is,
therefore, null and void
Upon the other hand, respondents maintain that there is
no limitation of such right; and that Article 1878 does not
apply in the instant case.
Issues:
whether a judicial administrator can validly... lease
property of the estate without prior judicial authority and
approval
New Civil Code on agency should apply to judicial
administrators
Ruling:
Lease has been considered an act of administration
Court of Appeals was correct in sustaining the validity of
the contract of lease in favor of Escanlar,
notwithstanding the lack of prior authority and approval.
While it... may be admitted that the duties of a judicial
administrator and an agent (petitioner alleges that both
act in representative capacity), are in some respects,
identical, the provisions on agency (Art. 1878, C.C.),
should not apply to a judicial administrator. A judicial...
administrator is appointed by the Court. He is not only
the representative of said Court, but also the heirs and
creditors of the estate (Chua Tan vs. del Rosario, 57
Phil., 411). A judicial administrator before entering into
his duties, is required to file a bond.
These circumstances are not true in case of agency.
The agent is only answerable to his principal. The
protection which the law gives the principal, in limiting
the powers and rights of an agent, stems from the fact
that control by the principal can only be thru
agreements,... whereas the acts of a judicial
administrator are subject to specific provisions of law
and orders of the appointing court.
Switzerland General Insurance Co., Ltd. v. Ramirez,
96 SCRA 297ANTONIO,
J.
:Facts:On December 24, 1975, petitioner, a foreign
insurance companyauthorized to do business in the
Philippines thru its agent, F. E. Zuellig Inc., filedan
admiralty case against Oyama Shipping Co., Ltd., a
foreign firm doingbusiness in the Philippines, and
Citadel Lines, Inc. which is the local agent of Oyama
Shipping Co., Inc.The complaint alleged that on
December 21, 1974, 60,000 bags of UreaNitrogen were
shipped from Niihama Japan, on board the S/S
St. Lourdes",owned and operated by Citadel Lines,
Inc. The goods were consigned to BordenInternational
Phils., Inc., and insured by petitioner for the sum
of P9,319,105.00against all risks.irtual law libraryThe
shipment was discharged from the vessel S/S "St.
Lourdes" shipsideinto lighters owned by Mabuhay
Brokerage Company, Inc., but when the samewas
subsequently delivered to and received by the
consignee, it was found tohave sustained losses and/or
damage amounting to P38.698.94. This amountwas
paid by petitioner insurance company to the
consignee/assured, by virtue of which payment it
became subrogated to the rights of
the latter.Issue:Whether or not Citadel Lines, Inc. may
be held primarily liable for theloss/damage found to
have been sustained by subject shipment while on
boardand/or still in the custody of the
said vessel.Held:Yes. The Code of Commerce
provides, among others, that the ship agentshall also be
liable for the indemnities in favor of third persons which
arise fromthe conduct of the captain in the care of the
goods which the vessel carried; buthe may exempt
himself therefrom by abandoning the vessel with all
herequipments and the freightage he may have earned
during the voyage. (Article587).chaCitadel Lines as the
ship agent for the vessel S/S "St. Lourdes" is liable tothe
petitioner, solidarily with its principal, Oyama Shipping
Co., Ltd
Equitable PCI v Ku
March 26, 2001
EQUITABLE PCI BANK, formerly EQUITABLE
BANKING CORPORATION
vs.
ROSITA KU
KAPUNAN, J.
SUMMARY: Litigation ensued between Rosita Ku and
Equitable. When CA ruled in favor of Rosita, Equitable
filed a motion for an extension of 30 days to file its
petition for review as it allegedly received the CA
decision on April 25, 2000. However, Rosita argues that
the petition is defective because Bank actually received
CA decision on April 24, 2000 when Joel Rosales, an
employee of Bank’s law firm received it from the Post
office and thus Equitable should have filed motion for
extension on May 9, 2000 not May 10. Equitable replied
that Joel is not an agent of the bank as expressly
mentioned in his affidavit. HELD: Bank filed petition
beyond reglementary period. There was perfection of
the agency as Joel Rosales averred in his affidavit that
“on occasions when I receive mail matters for said law
office, it is only to help them receive their letters
promptly,” implying that counsel had allowed the
practice of Rosales receiving mail in behalf of the
former. There is no showing that counsel had objected
to this practice or took steps to put a stop to
it. However, in the interest of justice, the petition was
still given due course.
DOCTRINE:
 PERFECTION FROM SIDE OF PRINCIPAL: An
agency may be express but it may also be implied
from the acts of the principal, from his silence, or
lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf
without authority.
 PERFECTION FROM SIDE OF AGENT: Likewise,
acceptance by the agent may also be express,
although it may also be implied from his acts which
carry out the agency, or from his silence or inaction
according to the circumstances (Art. 1870).
FACTS:
 Noddy Dairy Products Inc. incurred a loan from
Equitable Banking Corporation (now Equitable PCI
Bank)
 As security, Rosita Ku, treasurer of Noddy, Inc., and
Ku GiokHeng, VP/GM of Noddy Inc. and Rosita’s
father, mortgaged a residential house and lot
located in La Vista, QC which is registered in
Rosita’s name
 When Noddy, Inc. failed to pay the loan, Equitable
foreclosed the property extrajudicially and was
issued a certificate of sale after winning in the
foreclosure sale. Rosita failed to redeem the
property so the Register of Deeds canceled the TCT
in her name and a new one was issued in
Equitable’s name.
 May 10, ‘89: Equitable instituted an action for
ejectment before MeTC QC against Rosita’s father
Ku GiokHeng.
o It allowed Ku GiokHeng to remain in the
property on the condition that the latter pay
rent. However, Ku GiokHeng’s failed to
pay rent thus this action.
 Ku GiokHeng denied that there was any lease
agreement over the property.
 MeTC (Dec. 8, ‘94): In favor of Equitable and
ordered Ku Giok Heng to vacate the premises.
o No right for his continued possession of or
stay as title had been duly transferred to
Equitable. Buyer in foreclosure sale
becomes the absolute owner of the
property purchased if it is not redeemed
during the period of 1 year after the
registration of the sale
 Ku GiokHeng did not appeal the decision of the
MeTC.
 Dec. 20, ‘94: Instead, he and Rosita Ku, filed an
action before RTC QC to nullify the decision of the
MeTC.
 RTC (Sept. 13, ‘99): No merit; Dismissed complaint
and ordered the execution of the MeTC decision.
 Rosita filed in CA a special civil action
for certiorari assailing the decision of the RTC as
she was not made a party to the ejectment suit and
was, therefore, deprived of due process.
 CA (Mar. 31, 2000): Agreed with Rosita. Enjoined
the eviction of Rosita from the premises.
 May 10, 2000: Equitable filed in SC a motion for
an extension of 30 days from May 10, 2000 or until
June 9, 2000 to file its petition for review of the CA
decision as the Bank has received the CA
decision on April 25, 2000.
o April 25, 2000 – Received CA Decision (15
days reglementary period to file petition for
review OR file motion for extension)
o May 10,2000 – Filed motion for extension
for 30 days
o June 9, 2000 – w/n 30 days
 SC: Granted the motion for a 30-day extension
“counted from the expiration of the reglementary
period” and “conditioned upon the timeliness of
the filing of the motion for extension.”
 June 13, 2000: Equitable Bank filed its petition,
contending that there was no need to name Rosita
Ku as a party in the action for ejectment since she
was not a resident of the premises nor was she in
possession of the property.
o FOOTNOTE: The last day to file the petition
was on June 9, 2000 but because of the
Court’s 99th Anniversary Celebration,
business transactions were suspended on
said date per Memorandum Circular No.
03-2000.
 Rosita argues that the petition is defective because
of non-compliance with reglementary period.
o Bank received CA decision not on April 25,
2000 but on April 24, 2000
o April 24, 2000 - copy “was duly delivered to
and received by Joel Rosales (Authorized
Representative)” as evidenced by a
Certification issued by the Manila Central
Post Office
o May 10, 2000 – When Equitable filed its
motion for extension to file petition for
review, it was 1 day beyond the
reglementary period for filing the petition for
review OR motion to extend w/c must be
filed on May 9, 2000 - 15 days from the
receipt of CA decision
 Bank’s Reply: Reiterates “its honest
representation of having received a copy of CA
decision on April 25, 2000.” Receipt on April 24,
2000 by Joel Rosales, who was not an agent of its
 counsel’s law office cannot be considered receipt of
the CA Decision by the Bank (or its counsel).
 Rosales’ Affidavit
o Employee of Unique Industrial & Allied
Services, Inc. and assigned with the
Equitable PCI Bank, Mail and Courier
Department w/ official duty and
responsibility to receive and pick-up from
the Manila Central Post Office the various
mails, letters, correspondence, and other
mail matters intended for the bank’s various
departments and offices at Equitable Bank
Building
o I am not the constituted agent of
“Curato-Divina-Mabilog-Nedo-Magturo-
Pagaduan Law Office” for purposes of
receiving their incoming mail matters;
neither am I any such agent of the
various other tenants of the said
Building. On occasions when I receive
mail matters for said law office, it is only
to help them receive their letters
promptly.
o April 24, 2000: Received CA Decision
together with other mail matters, and
brought them to the Mail and Courier
Department;
o April 25, 2000: After sorting out mail
matters, erroneously recorded them on
page 422 of logbook as having been
received on April 25, 2000
o April 27, 2000: Decision was sent by the
Mail and Courier Department to said Law
Office whose receiving clerk opened the
letter and stamped on the “Notice of
Judgment” their actual date of
receipt: “April 27, 2000”
o May 8, 2000: Atty. Roland A. Niedo of said
law office inquired as to actual date of
receipt of letter, and informed him that
based on logbook, it was received on April
25, 2000.
o Error was caused by an honest mistake.
 Bank also argues such receipt did not constitute
notice to its counsel, as required by Sec. 2 and 10,
Rule 13 of ROC. CA decision actually received on
April 27, 2000.
o SEC. 2. Filing and service defined. – Filing
is the act of presenting the pleading or other
paper of the clerk of court. Service is the act
of providing a party with a copy of the
pleading or paper concerned. If any party
has appeared by counsel, service upon
him shall be made upon his counsel or
one of them, unless service upon the party
himself is ordered by the court. Where one
counsel appears for several parties, he
shall only be entitled to one copy of any
paper served upon him by the opposite
side.
o PLDT vs. NLRC: It was only when the
Legal Services Division actually received
a copy of the decision that a proper and
valid service may be deemed to have been
made.
o Actual receipt by its counsel was actually
on April 27, 2000, not April 25, 2000. The
motion for extension to file the petition for
review was even filed 2 days before the
lapse of the 15-day reglementary period
 Assuming the motion for extension was indeed one
day late, Bank urges SC to suspend its rules and
admit the petition in the interest of justice.
ISSUES:
1) Whether Joel Rosales can be considered the agent
of Bank’s counsel and thus service to him was
considered service to Bank? (YES) [Whether the act of
the law firm in allowing its employee to occasionally
receive its mail can be construed to mean an agency
relationship? YES]
2) Whether, in the interest of justice, the rules on
reglementary periods can be suspended in this case?
(YES)
3) Whether a person can be evicted by virtue of a
decision rendered in an ejectment case where she was
not joined as a party? (YES)
RATIO:
1) Joel Rosales is an agent of Bank’s counsel.
 Although the Affidavit of Joel Rosales states that he
is “not the constituted agent of ‘Curato-Divina-
Mabilog-Nedo-Magturo-Pagaduan Law Office”, an
agency may be express but it may also be implied
from the acts of the principal, from his silence, or
lack of action, or his failure to repudiate the agency,
knowing that another person is acting on his behalf
without authority. (Art. 1869)
 Likewise, acceptance by the agent may also be
express, although it may also be implied from his
acts which carry out the agency, or from his silence
or inaction according to the circumstances (Art.
1870).
 CASE AT BAR: Joel Rosales averred that “on
occasions when I receive mail matters for said law
office, it is only to help them receive their letters
promptly,” implying that counsel had allowed the
practice of Rosales receiving mail in behalf of
the former. There is no showing that counsel
had objected to this practice or took steps to put
a stop to it.
2) Court gives due course to petition in spite of
noncompliance with periods in light of the merits of the
petition.
 The perfection of an appeal within the period fixed
by the rules is mandatory and jurisdictional. But, it
is always in the power of this Court to suspend its
own rules, or to except a particular case from its
 operation, whenever the purposes of justice require
it. Strong compelling reasons such as serving the
ends of justice and preventing a grave miscarriage
thereof warrant the suspension of the rules.
 The Court proceeded to enumerate cases where
the rules on reglementary periods were suspended
(6 days; 13 days; 1 day; 7 days; 2 days; tardy
appeal).
3) Even if Rosita were a resident of the property, she is
nevertheless bound by the judgment of the MeTC in the
action for ejectment despite her being a non-party
thereto as the daughter of Ku GiokHeng, the defendant
in the action for ejectment.
 Generally, no man shall be affected by any
proceeding to which he is a stranger, and strangers
to a case are not bound by judgment rendered by
the court. (Matuguina vs. CA) Nevertheless, a
judgment in an ejectment suit is binding not only
upon the defendants in the suit but also against
those not made parties thereto, if they are:
o a) trespassers, squatters or agents of the
defendant fraudulently occupying the
property to frustrate the judgment;
o b) guests or other occupants of the
premises with the permission of the
defendant;
o c) transferees pendente lite;
o d) sub-lessees;
o e) co-lessees; or
o f) members of the family, relatives and
other privies of the defendant. (Oro Cam
Enterprises, Inc. vs. CA)
DISPOSITIVE: Petition GIVEN DUE
COURSE and GRANTED. CA decision REVERSED.
DOMINGA CONDE vs. CA
FACTS:
On 7 April 1938, Margarita Conde, Bernardo
Conde and Dominga Conde, as heirs of Santiago
Conde, sold with right to repurchase, within 10 years
from said date, a 1 hectare parcel of agricultural land
situated in Burauen, Leyte to Casimira Pasagui and Pio
Altera for P165. Three years later, Original Certificate of
Title No. N-534 covering the land in question was issued
in the name of the Alteras subject to the stipulated right
of repurchase by the Condes. On 28 November 1945,
Paciente Cordero, son-in-law of the Alteras and their
representative, signed a document in Bisaya stating that
the Memorandum of Repurchase got lost during World
War II despite all diligent searches being made; that the
two parcels of land were inherited by the Condes; that
Eusebio Amarille was authorized by the Condes to
repurchase the land; that they received P165 in
consideration of the sale; and that the Condes, by virtue
of the repurchase, shall repossess the said parcels of
land. Neither the vendees-a-retro, Pio Altera nor
Casimira Pasagui, were signatories to that document.
Many years later, the pacto de retro document was
found. In June 1965, Pio Altera sold the disputed lot to
Ramon and Catalina Conde, whose relationship to
Dominga does not appear on record. Consequently, in
1969, Dominga filed with the CFI of Leyte a complaint
for quieting of title and declaration of ownership against
all the respondents. The trial court dismissed the
complaint and ordered Dominga to vacate the premises
and to deliver the disputed land to respondents. The
Court of Appeals affirmed the decision and ruled that
Dominga failed to validly exercise her right to
repurchase because the Memorandum of Repurchase
was not signed by the Alteras but by Paciente, who was
not authorized to sign for the said vendees-a-retro.
ISSUE:
Whether or not there was an implied agency
when Cordero signed the Memorandum of Repurchase.
HELD:
Yes. Although the contending parties were
legally wanting in their respective actuations, for
example Dominga did nothing to formalize her
repurchase while the Alteras did nothing to clear their
title of the encumbrance therein regarding Dominga’s
right to repurchase, the repurchase by Dominga is
supported by her admission that she had been in
possession since 1945, the date of the repurchase, and
has been paying land taxes thereon since then. No new
agreement was entered into by the parties as stipulated
in the deed of pacto de retro, if the vendors-a-retro failed
to exercise their right of redemption within 10 years. If,
as alleged, Dominga did not exert an effort to procure
Pio Altera’s signature after he had recovered from
illness, neither did the Alteras repudiate the deed signed
by their son-in-law for 24 years, from which the Alteras
are deemed to have incurred in laches. Thus, an implied
agency must have been held to have been created by
their silence or lack of action, or their failure to repudiate
the agency created. (Art. 1869, New Civil Code).
Wherefore, Dominga is declared the owner of the land
in question.
183 Phil. 54
MELENCIO-HERRERA, J.:
These two Petitions seek a review on certiorari of the
same Decision of the Court of Appeals promulgated on
June 6, 1969 in CA-G.R. Non 32934-R, entitled "Delfin
Perez vs. Philippine National Bank, et al., " which
reversed the Decision dated March 20, 1963 of the
Court of First Instance of Davao, Branch II, in Civil Case
No. 3064, with the same title.
There is no dispute as to the following facts:
The spouses Leandro Solomon and Lepcadia
Bustamante (Solomon spouses, for short) were the
registered owners of Lot No. 230 of the cadastral survey
of Davao, with an area of 126,497 square meters,
situated in the Municipality (now city) of Davao, and
registered under Original Certificate of Title No. 152 of
the Registry of Deeds of Davao.[1]
In 1932, the Solomon spouses mortgaged the land in
favor of the Banco Nacional Filipino, now the Philippine
National Bank (briefly referred to as the Bank), to secure
a loan of five hundred pesos (P500.00). For failure to
pay the loan on maturity, the mortgage was foreclosed,
the property was sold at public auction, and a Certificate
of Sale was executed in favor of the Bank on December
28, 1934.[2] It was not until "June 27, 1958, 4 P.M.",
however, that the Certificate of Sale was registered,
OCT No. 152 cancelled, and in its stead, TCT No. 8042
issued in the name of the Bank.
The next day, after the execution of the Certificate of
Sale, or on December 29, 1934, the Solomon spouses
and the Bank, represented by Amado F. Cortes,
Manager of the Davao Branch, entered into a contract
denominated as "Promesa de Venta" whereby the
Bank, as the owner of the property, bound itself to sell
to the Solomon spouses for the consideration of
P802.26, all its rights, title and interest to said property,
the said amount to be payable in eight equal annual
amortizations commencing on December 29, 1935; and
that upon full payment of the amortizations, the Bank
would execute a final deed of sale in favor of the
Solomon spouses. Possession of the property was
likewise turned over to said spouses upon the execution
of the contract. Further, it was stipulated that if the
Solomon spouses should fail to pay any of the
amortizations or to comply with any provision, the
contract shall be automatically rescinded and
cancelled and all payments made by the spouses shall
be considered as rentals for the use and occupation of
the property, and the Bank shall be free to take
possession of the land and sell it to a third person.[3]
Payments were regularly made by the Solomon
spouses under said contract except for the seventh and
eighth amortizations due on December 29, 1941 and on
December 29, 1942, respectively, thus leaving an
outstanding balance of P217.23.
War broke out on December 8, 1941. Leandro Solomon
died on January 8, 1943 and Leocadia Bustamante died
on March 20, 1943. Delfin Perez, as sole heir of the
deceased spouses (he being the son of Leocadia
Bustamante by her first husband Jose Perez, and the
stepson of Leandro Solomon), succeeded into the
possession of the land in question.[4]
On March 12, 1948, or approximately seven (7) years
after default, Delfin Perez offered to pay the last two
amortizations plus accrued interest, with the request
that a Deed of Sale be executed in his favor, which offer
was rejected by the Bank Manager, Amado Lagdameo,
on the ground that the "Promesa de Venta" was
executed by the Bank in favor of the Solomon spouses.
Upon suggestion of the Bank Manager, Delfin Perez
filed an action in Court for a declaration of heirship. On
September 25, 1956, the Court of First Instance of
Davao, in Special Case No. 441, declared him as the
sole and only heir of the Solomon spouses.[5]
On May 9, 1957, Delfin Perez notified the Bank of the
Court Order declaring him as such heir and manifested
his desire to pay off the remaining obligation of his
deceased parents. On June 13, 1957, upon request of
Delfin Perez, the Bank Manager, B. Maceda, issued a
statement of account on the loan of the deceased
spouses showing that the total amount due the Bank as
of June 15, 1957 was P535.45, and informed Delfin
Perez that "as soon as (he) could cause full payment of
the above account, (they) shall cause the release of the
mortgage."[6] Delfin Perez offered to pay the balance but
the Bank Manager asked him to increase the price.[7] On
June 26, 1958, Delfin Perez wrote the Bank asking that
he be allowed to buy the land in question for P600.00.
This was followed by another letter, dated July 22, 1958,
wherein Perez reiterated his offer, this time for
P3,000.00, accompanied by a tender of payment of
P300.00. Perez at the same time requested that the
Bank permit him to pay the said sum of P3;000.00 in ten
(10) years, in ten (10) equal installments with interest at
8% per annum.[8]
On August 8, 1958, the Bank, through its Manager, B.
Maceda, wrote Perez a letter informing him of the
comment of the head office on his "offer to purchase"
the former property of the deceased spouses to the
effect that although the amount offered covers fully the
total claim of the Bank, yet it is too low compared to the
market value of the property; and of the suggestion of
the head office that Perez should be prevailed upon to
improve his offer and reduce the term of payment from
ten (10) to five (5) years only. The Manager also asked
Perez to give his opinion on the matter.[9]
On August 15, 1958, Perez wrote the Bank that he was
raising his "offer to buy" from P3,000.00 to P5,000.00
payable in five (5) years or in five (5) equal yearly
installments with 8% interest per annum. The offer of
P5,000.00 was later increased to P7,000.00 and finally
to P8,000.00. However, all these offers were turned
down by the Bank.[10]
On October 6, 1958, Perez had his adverse claim
inscribed on the Bank's Certificate of Title.[11]
On May 18, 1959, the Bank advised Perez that a third
party was offering to buy the property for P13,500.00
and asked him if he would equal the offer. Delfin Perez
failed to equal the offer. On July 1, 1959, the Bank sold
the property to the spouses, Joaquin de Castro and
Graciana Pasia, and on July 2, 1959, Transfer
Certificate of Title No. T-8583 was issued in the name
of the De Castro spouses.[12]
Upon learning that the Bank had sold the property,
Perez filed, on July 7, 1959, a Complaint for Specific
Performance and Damages against the Bank, which
was amended on July 21, 1959, to include the De
Castro spouses as defendants (Civil Case No. 3064,
CFI, Davao, Branch II, "Delfin Perez vs. Philippine
National Bank, et al.").[13] The Complaint, as amended,
prayed that the Bank be ordered to accept from Perez
payment of the outstanding balance in the amount of
P535.45 in accordance with the document "Promesa de
Venta" which allegedly is, in effect, a perfected contract
of sale; that the Register of Deeds of Davao be ordered
to cancel Transfer Certificate of Title No. 8042, and, in
lieu thereof, to issue another in the name of Perez; and
that defendants be ordered to pay Perez, jointly and
severally, the amount of P1,000.00 as actual damages
and P2,000.00 as attorney's fees.[14]
On July 9, 1959, the Bank wrote Perez informing him
of the disapproval of his offer to purchase the property
and returning to him, by way of a manager's check, the
amount of P800.00 which represented the "earnest
money" for said offer to buy.[15]
The Bank filed an Answer on July 16, 1959, and an
Amended Answer on August 1, 1959, both with
counterclaims. The Bank alleged principally that the
"Promesa de Venta" had been automatically rescinded
and cancelled upon the failure of the Solomon spouses
to pay the last two installments; that it had afforded
Perez all the opportunity to reacquire the property but
he failed to do so; that as registered owner of the
property, it had the perfect right to sell the same; that it
sold the land to the De Castro spouses after
negotiations with Perez for his repurchase of the
property failed.
On August 4, 1959, the De Castro spouses presented
their Answer with counterclaim and a cross-claim
against the Bank.[16] The spouses alleged that they were
purchasers in good faith, for valuable consideration,
since Perez's adverse claim was not even inscribed at
the back of the duplicate copy of TCT No. T8042, which
was in the possession of the Bank at the time the
property was sold. By way of counterclaim, they prayed
that Perez be ordered to vacate the land; to account for
the produce since July 1, 1959, and to pay reasonable
rentals for the use and occupation of the land at
P400.00 per month. On their cross-claim, they prayed
that the Bank be ordered to refund the sum of
P13,500.00 plus expenses and attorney's fees in the
event that the Bank is declared without title to the
property in question.
After due hearing, the Court of First Instance of Davao
rendered a Decision, dated March 20, 1963, dismissing
Perez's Complaint and resolving the counterclaim of the
De Castro spouses by ordering Perez to vacate the land
in litigation and to deliver possession thereof to the De
Castro spouses.[17]
Perez appealed to the Court of Appeals (CA-G.R. No.
32934-R), which in a Decision* promulgated on June 6,
1969, reversed the trial Court's Decision; declared null
and void the sale of the property in question by the Bank
in favor of the De Castro spouses stating that they were
not buyers in good faith since their title, issued only on
July 7, 1959, carried the annotation of adverse claim;
ordered the Bank to return to the De Castro spouses the
price the latter paid for the land, without any interest,
"the latter being in possession of the property;" and
allowed Perez to redeem or purchase the said property,
upon payment of the last two installments due thereon,
with interest at the rate stipulated in the "Promesa de
Venta."[18]
The Bank moved for reconsideration but this was
denied by the Court of Appeals in its Resolution of July
22, 1969.[19] The De Castro spouses also moved for
reconsideration but their Motion was likewise denied by
the Court of Appeals in its Resolution of September 18,
1969.[20]
Hence, these Petitions for Review
on Certiorari separately filed by the Bank and the De
Castro spouses against the Court of Appeals and Delfin
Perez.
The De Castro spouses manifested in their
Petition[21] that pursuant to their agreement with the
Bank's counsel, they were adopting the same grounds
relied upon by the Bank in its Petition in L-30831 due to
the unity and inseparability of their causes and
defenses. The De Castro spouses reiterated in their
Brief (p. 2) that they were adopting the Brief filed by the
Bank, although they added two additional assignments
of error (infra).
On February 3, 1977, this Court received a
Manifestation from Perez's counsel that Perez had died.
On March 16, 1979, the Heirs of Perez also manifested
that he died on July 1, 1976 and prayed that they be
substituted in his stead.[22] That Motion is hereby
granted and Perez's heirs hereby deemed substituted
for him, namely, Leona Vda. de Perez, Lourdes P.
Copas, Milagros P. Barrera, Trinidad P. Alberto, Sofio,
Mercedes, Carlito, Ricardo and Laurente, all surnamed
Perez (p. 144, Rollo of L-30831),
The errors assigned by both sets of petitioners read:
I
"RESPONDENT COURT ERRED IN APPLYING
ARTICLE 1191 OF THE NEW CIVIL CODE TO THE
CASE AT BAR.
II
"RESPONDENT COURT ERRED IN NOT FINDING OR
DECLARING THAT THE 'PROMESA DE VENTA' WAS
AUTOMATICALLY RESCINDED BY THE FAILURE OF
THE VENDEES THEREIN TO COMPLY WITH THE
TERMS AND CONDITIONS THEREOF.
III
"RESPONDENT COURT ERRED IN NOT
UPHOLDING PARAGRAPH 8 OF THE 'PROMESA DE
VENTA'.
IV
"RESPONDENT COURT ERRED IN HOLDING
PETITIONER IN ESTOPPEL.
V
"RESPONDENT COURT ERRED IN HOLDING THAT
THE BASIC ISSUE IN THE PRESENT CASE IS
WHETHER DELFIN PEREZ MAY STILL REDEEM THE
PROPERTY SUBJECT OF THE 'PROMESA DE
VENTA'.
VI
"RESPONDENT COURT ERRED IN APPLYING THE
RULE REQUIRING REGISTRATION OF
CERTIFICATE OF SALE TO START RUNNING OF
REDEMPTION PERIOD.
VII
"RESPONDENT COURT ERRED IN ALLOWING
RESPONDENT DELFIN PEREZ THE RIGHT OF
REDEMPTION OR OF PURCHASE.
VIII
"RESPONDENT COURT ERRED IN DECLARING
NULL AND VOID THE SALE OF THE PROPERTY IN
QUESTION BY PETITIONER IN FAVOR OF
SPOUSES DE CASTRO AND PASIA.
IX
"RESPONDENT COURT ERRED IN ORDERING THE
RETURN OF THE PRICE PAID BY THE SPOUSES DE
CASTRO AND PASIA FOR THE LAND IN QUESTION.
X latter did, and on September 25, 1956, the Court of First
"RESPONDENT COURT ERRED IN REVERSING THE
DECISION OF THE TRIAL COURT."[23]
The two additional Assignments of Error made by the
De Castro spouses read:
"FIRST ADDITIONAL ASSIGNMENT OF ERROR
"RESPONDENT COURT ERRED IN FINDING THAT
SPOUSES DE CASTRO AND PASIA HAD BEEN IN
POSSESSION OF THE PROPERTY.
"SECOND ADDITIONAL ASSIGNMENT OF ERROR
"ASSUMING, WITHOUT ADMITTING THAT THE SALE
OF THE PROPERTY IN QUESTION BY THE PHILIP-
PINE NATIONAL BANK IN FAVOR OF THE SPOUSES
DE CASTRO AND PASIA WAS NULL AND VOID AND,
THEREFORE, THE PRICE PAID FOR THE
PROPERTY SHOULD BE
RETURNED, RESPONDENT COURT ERRED IN
ORDERING THE RETURN OF THE PRICE WITHOUT
ANY INTEREST."[24]
On equitable principles, particularly on the ground of
estoppel, we must rule against petitioner Bank. "The
doctrine of estoppel is based upon the grounds of public
policy, fair dealing, good faith and justice, and its
purpose is to forbid one to speak against his own act,
representations, or commitments to the injury of one to
whom they were directed and who reasonably relied
thereon. The doctrine of estoppel springs from equitable
principles and the equities in the case. It is designed to
aid the law in the administration of justice where without
its aid injustice might result".[25] It has been applied by
this Court wherever and whenever special
circumstances of a case so demand.[26]
Applied to the case at bar, these special circumstances
may be stated thus: Firstly, the clear intendment of the
Bank was to allow the Solomon spouses to reacquire
ownership of the property. Thus, the day after the
Certificate of Sale was issued in favor of the Bank, the
latter executed the "Promesa de Venta" in favor of the
Solomon spouses giving the latter eight years within
which to reacquire their land. During those eight years,
the spouses were allowed to remain in continued
possession of the subject property. Secondly,
notwithstanding the sale in its favor in 1934, the Bank
did not register the same until June 27, 1958, or 24
years later. And from the death of his last surviving
parent in 1943, the Bank never disturbed Perez's
possession of the property. Thirdly, when on March 12,
1948, Perez offered to pay the last two amortizations on
the land, plus accrued interest, with the request that a
Deed of Sale be executed in his favor, his offer was
rejected by the Bank Manager, Amado Lagdameo, not
on the ground that the "Promesa de Venta" had been
automatically rescinded and the right to redeem was
lost, as now alleged by petitioners, but on the ground
that the "Promesa de Venta" was executed by the Bank
in favor of the Solomon spouses. It was, in fact,
suggested by the Bank Manager that Perez file an
action in Court for declaration of heirship, which the
Instance of Davao in Special Case No. 441, declared
him as the sole and only heir of the Solomon spouses.
Perez notified the Bank on May 9, 1957 of that Court
Order and again manifested his desire to pay off the
remaining obligation of his deceased parents. Upon
Perez request, the Bank Manager, this time, B. Maceda,
issued a statement of account on the loan showing that
the total amount due as of June 15, 1957 was P535.45,
and informed Perez that "as soon as (he) could cause
full payment of the above account, (they) shall cause
the release of the mortgage." Perez relied on this
commitment, offered to pay the outstanding balance but
the Bank Manager asked him to increase the "price"
offered. Perez made subsequent tenders until his offer
reached the amount of P8, 000.00 but the Bank still
refused to allow him to redeem the same. In other
words, during all the ten years of negotiation the Bank
led Perez to believe that he would be allowed to redeem
the property, only to renege on that commitment when
it sold the property for P13, 500.00 to the De Castro
spouses.
Perez justifiably and reasonably relied upon the
assurance of the Bank's Manager that he would be
allowed to pay the remaining obligation of his deceased
parents and he acted on that basis. Even fair dealing
alone would have required the Bank to abide by its
representations, but it did not. Clearly, the equities of
the case are with Perez.
The Bank's argument that it is not bound by the acts of
its Branch Manager in Davao, is not well taken for well
settled is the rule that if a private corporation
intentionally or negligently clothes its officers or agents
with apparent power to perform acts for it, the
corporation will be estopped to deny that such apparent
authority is real as to innocent third persons dealing in
good faith with such officers or agents.[27]
The Bank's reliance and insistence on the automatic
rescission clause contained in the "Promesa de Venta"
should not be controlling. In the first place, by allowing
the Solomon spouses and after them, their son Perez,
to be in continued possession of the property and by not
registering the sale until years later, the Bank itself was
not adhering strictly to its terms. Secondly, our rulings
upholding the validity of automatic rescission clauses
contained in contracts to sell industrial and commercial
real estate on installments upon failure to pay the
stipulated installments, and allowing the retention or
forfeiture as rentals of the installments previously paid,
should not be made applicable to the present case
because the "Promesa de Venta" was not essentially a
contract to sell real estate on installments but was more
of a contract for the redemption of the mortgaged
property of the Solomon spouses foreclosed by
petitioner Bank.[28] Thirdly, the record shows that the
Solomon spouses religiously paid their annual
installments and it was only due to the outbreak of the
war and their untimely deaths in 1941 and 1943,
respectively, that they failed to make payments of the
last two amortizations which became due in December,
1941 and December, 1942. The non-fulfillment of the
obligation was not of their own making, and they can be
exempted from responsibility therefor under Article
1174 of the Civil Code.[29] War, or its effects, or other
factors which could not have been foreseen or avoided
by a party to a contract, such as uncertain conditions of
peace and order then prevailing which the Court may
take judicial notice of, are deemed sufficient causes that
could justify the non-fulfillment of a contract and exempt
the party from responsibility.[30] Fourthly, the breach
may be considered slight. The original loan secured by
the subject property was P500.00; the redemption price
agreed upon in the "Promesa de Venta" was P802.26;
while the outstanding balance in December, 1941 was
P217.23 only. The obligation may be said to have been
substantially performed. The original loan was almost
paid up by the Solomon spouses and could have been
paid but for the war and their supervening deaths during
the Japanese occupation.
Worthy of note also is the fact that the Bank registered
the sheriff's Certificate of Sale of the foreclosed
property, which was issued on December 28, 1934, only
on "June 27, 1958, 4 P.M." OCT No. 152 in the name of
the Solomon spouses was also cancelled only on said
date and TCT No. 8042 issued in the name of the Bank.
"The redemption period, for purposes of determining the
time when a final deed of sale may be executed or
issued and the ownership of the registered land
consolidated in the purchaser at an extrajudicial
foreclosure sale under Act 3135, should be reckoned
from the date of registration of the certificate of sale in
the office of the register of deeds concerned and not
from the date of the public auction
sale."[31] Consequently, the right of redemption could
still be validly exercised within one year from June 27,
1958, the date of registration. From the facts before us,
Perez offered to redeem the property as early as March
12, 1948.
One last point. From December 28, 1934, the date when
the Bank acquired the subject property in an
extrajudicial foreclosure sale, up to July 1, 1959, the
date when it sold the same to the De Castro spouses,
petitioner Bank held the property for more than twenty-
four (24) years, in violation of Section 39 of Act No.
2612, the law of its creation, which provides:
"SEC. 39. The National Bank is hereby authorized to
purchase and own such real estate as may be
necessary for the purpose of carrying on its business. It
is also authorized to hold such real estate as it may find
necessary to acquire in the collection of debts due to the
said bank or to its branches; but real estate acquired in
the collection of debts shall be sold by the said bank
within three years after the date of its acquisition."
and the provision of the subsequent PNB Charter, RA
1300, which took effect on June 16, 1955 (as amended),
whereby the period of disposal of real estate acquired
in the collection of debts is within 5 years after the date
of its acquisition.
The subsequent sale of the property to the De Castro
spouses cannot prevail over the adverse claim of Perez,
which was inscribed on the Bank's Certificate of Title on
October 6, 1958. That should have put said spouses on
notice and they can claim no better legal right over and
above that of Perez. The Transfer Certificate of Title
issued in the spouses' names on July 7, 1959 (Exhs. V,
V-1-a) also carried the said annotation of adverse claim.
Consequently, they are not entitled to any interest on
the price they paid for the property.
WHEREFORE, we hereby affirm the judgment of the
Court of Appeals with the following modifications:
a) The Philippine National Bank is ordered to accept
from Delfin Perez, or the heirs who have herein been
substituted for him, the sum of P535.45, the total
amount due the Bank as of June 15, 1957, and, after
receipt thereof, to execute the corresponding Deed of
Sale in favor of Perez;
b) The Register of Deeds of Davao is ordered to
cancel Transfer Certificate of Title Nos. 8042 and T-
8583 in the name of the Philippine National Bank and
the De Castro spouses, respectively, and to issue a new
one in the name of Delfin Perez; his heirs, who have
been substituted for him, may pursue the necessary
legal steps for the transfer of the property in their
names.
c) The Philippine National Bank is further ordered to
return to the De Castro spouses the price of
P13,500.00, which they paid for the property.
With costs against petitioners.
SO ORDERED.
AF Realty and Development vs Dieselman
In 1988, Manuel Cruz, Jr., a board member of
Dieselman Freight Services, Co. (DFS) authorized
Cristeta Polintan to sell a 2,094 sq. m. parcel of land
owned by DFS. Polintan in turn authorized Felicisima
Noble to sell the same lot. Noble then offered AF Realty
& Development, Co., represented by Zenaida Ranullo,
the land at the rate of P2,500.00 per sq. m. AF Realty
accepted the offer and issued a P300,000 check as
downpayment.
However, it appeared that DFS did not authorize Cruz,
Jr. to sell the said land. Nevertheless, Manuel Cruz, Sr.
(father) and president of DFS, accepted the check but
modified the offer. He increased the selling price to
P4,000.00 per sq. m. AF Realty, in its response, did not
exactly agree nor disagree with the counter-offer but
only said it is willing to pay the balance (but was not
clear at what rate). Eventually, DFS sold the property to
someone else.
Now AF Realty is suing DFS for specific performance. It
claims that DFS ratified the contract when it accepted
the check and made a counter-offer.
ISSUE: Whether or not the sale made through an agent
was ratified.
HELD: No. There was no valid agency created. The
Board of Directors of DFS never authorized Cruz, Jr. to
sell the land. Hence, the agreement between Cruz, Jr.
and Polintan, as well as the subsequent agreement
between Polintan and Noble, never bound the
corporation. Therefore the sale transacted by Noble
purportedly on behalf of Polintan and
ultimately purportedly on behalf of DFS is void.
Being a void sale, it cannot be ratified even if Cruz, Sr.
accepted the check and made a counter-offer. (Cruz,
Sr. returned the check anyway). Under Article 1409 of
the Civil Code, void transactions can never be ratified
because they were void from the very beginning.
Dizon v CA
January 28, 1999
G.R. No. 122544
REGINA P. DIZON, AMPARO D. BARTOLOME,
FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON,
GERARD A. DIZON, and JOSE A. DIZON, JR.,
vs.
COURT OF APPEALS and OVERLAND EXPRESS
LINES, INC.
G.R. No. 124741
REGINA P. DIZON, AMPARO D. BARTOLOME,
FIDELINA D. BALZA, ESTER ABAD DIZON and
JOSEPH ANTHONY DIZON, RAYMUND A. DIZON,
GERARD A. DIZON, and JOSE A. DIZON, JR
vs.
COURT OF APPEALS, HON. MAXIMIANO C.
ASUNCION, and OVERLAND EXPRESS LINES, INC.
MARTINEZ, J.:
SUMMARY: Upon non-payment of rental, petitioners
filed an action for ejectment against Overland which
was granted by the City Court. However, Overland
argues that it has exercised its option to buy the land
when it paid P300,000 to Alice Dizon, petitioners’ agent,
as partial payment for the land. Thus, it filed an action
for Specific Performance and Fixing of Period for
Obligation to compel the execution of a deed of sale
pursuant to the option to purchase and the receipt of the
partial payment, and to fix the period to pay the balance
which was dismissed by the RTC but was granted by
the CA. In a subsequent petition, CA also recognized
the perfection of the contract of sale between petitioners
and Overland. SC: No perfected contract of sale. Alice
Dizon was not authorized to accept such payment.
There was no showing that the co-owners authorized
her to enter into a contract of sale with Overland. Latter
should have ascertained the extent of her authority.
DOCTRINE: A co-owner does not become an agent of
the other co-owners, and therefore any exercise of an
option to buy a piece of land transacted with one co-
owner does not bind the other co-owners of the land.
The basis for agency is representation and a person
dealing with an agent is put upon inquiry and must
discover upon his own peril the authority of the agent.
Since there was no showing that the other co-owners
consented to the act of one co-owner nor authorized her
to act on their behalf with regard to her transaction with
purported buyer, the most prudent thing the purported
buyer should have done was ascertain the extent of the
authority of said co-owner. Being negligent in this
regard, the purported buyer cannot seek relief on the
basis of a supposed agency. (AS cited in Villanueva)
NOTE: In relation to Article 1873
FACTS:
G. R. NO. 122544:
 May 23, 1974: Overland Express Lines, Inc.
(lessee) entered into a Contract of Lease with
Option to Buy with Dizon et. al. (lessors) involving a
1,755.80 square meter parcel of land
o Situated at corner MacArthur Highway and
South "H" Street, Diliman, Quezon City.
o For 1 year commencing from May 16, 1974
up to May 15, 1975.
o During this period, Overland was granted
an option to purchase for P3,000 per
square meter. Thereafter, the lease shall
be on a per month basis with a monthly
rental of P3,000
 June 20, 1975: Overland allegedly paid P300,000
as partial payment for the leased property,
which an Alice A. Dizon accepted and for which
an official receipt was issued
 June 1976: Increased rental of P8,000 per month
was made effective. Overland failed to pay.
 Dizon et. al. filed an action for ejectment before City
Court (MeTC) of QC.
 City Court: Ordered Overland to vacate the leased
premises and to pay the sum of P624,000
representing rentals in arrears and/or as damages
in the form of reasonable compensation for the use
 and occupation of the premises during the period of
illegal detainer from June 1976 to Nov. 1982
 Overland filed a certiorari petition praying for the
issuance of a restraining order enjoining the
enforcement of said judgment and dismissal of the
case for lack of jurisdiction of the City Court.
 IAC: City Court has jurisdiction. Overland to vacate.
o Questions of whether Overland was
granted an extension of the option to buy
the property; whether such option, if any,
extended the lease or whether Overland
actually paid the alleged P300k to Fidela
Dizon, and, whether Overland thereafter
offered to pay the balance of the supposed
purchase price, are all merely incidental
and do not remove the unlawful detainer
case from the jurisdiction of City Court.
o Teodoro, Jr. vs. Mirasol: The above matters
may be raised and decided in the unlawful
detainer suit as, to rule otherwise, would be
a violation of the principle prohibiting
multiplicity of suits.
o MR denied.
 SC: Dismissed the petition in a resolution and
denied subsequent MR
 Oct. 7, 1985: Overland filed before RTC QC an
action for Specific Performance and Fixing of
Period for Obligation with prayer for the issuance
of a restraining order pending hearing on the
prayer for a writ of preliminary injunction.
o Compel the execution of a deed of sale
pursuant to the option to purchase and
the receipt of the partial payment, and to
fix the period to pay the balance.
 RTC: Denied the issuance of a writ of preliminary
injunction on the ground that City Court decision for
the ejectment of Overland, having been affirmed by
IAC and SC, has become final and executory.
 Nov. 15, 1985: Unable to secure an injunction,
Overland also filed before RTC QC, Br. 102 a
complaint for Annulment of and Relief from
Judgment with injunction and damages.
 RTC: Dismissed the complaint for annulment on the
ground of res judicata, and the writ of preliminary
injunction previously issued was
dissolved. Overland to pay P3,000.00 as attorney's
fees.
 However, upon MR, the preliminary injunction was
reinstated, thereby restraining the execution of the
City Court's judgment on the ejectment case.
 2 cases were consolidated before RTC QC
 RTC: Dismissed complaint for specific performance
case and denied MR in annulment of the ejectment
case.
 MR denied
 CA: In favor of Overland. Dizon et. al ordered to
execute the deed of absolute sale of the property in
question, free from any lien or encumbrance
whatsoever and to deliver deed of sale, as well as
the owner's duplicate of the certificate of title to said
property upon payment of the balance of the
purchase price by Overland.
o There was a perfected contract of sale
between the parties on the leased premises
and that pursuant to the option to buy
agreement, Overland had acquired the
rights of a vendee in a contract of sale.
o The payment by Overland of P300,000 as
partial payment for the leased property,
which Dizon et. al accepted (through Alice
A. Dizon) and for which an official receipt
was issued, was the operative act that gave
rise to a perfected contract of sale
o For failure of Dizon et. al. to deny receipt
thereof, Overland can therefore assume
that Alice A. Dizon, acting as agent of
petitioners, was authorized by them to
receive the money in their behalf.
o What was entered into was a "conditional
contract of sale" wherein ownership over
the leased property shall not pass to the
private respondent until it has fully paid the
purchase price.
o Since Overland did not consign to the court
the balance of the purchase price and
continued to occupy the subject premises,
it had the obligation to pay the amount
of P1,700.00 in monthly rentals until full
payment of the purchase price.
 Upon denial of the motion for partial
reconsideration, Dizon et. al elevated the
case via petition for certiorari :
o Questioned the authority of Alice A. Dizon
as agent of Dizon et. al in receiving
Overland's partial payment amounting
to P300,000pursuant to the Contract of
Lease with Option to Buy.
o Assail propriety of Overland's exercise of
the option when it tendered the said amount
on June 20, 1975 which purportedly
resulted in a perfected contract of sale.
G. R. NO. 124741
 Dizon et. al filed with CA a motion to remand the
records of ejectment case to MTC for execution of
the judgment which was granted in a
resolution. Overland filed a motion to reconsider
said resolution which was denied.
 Overland thus filed a petition for certiorari,
prohibition with preliminary injunction and/or
restraining order with SC which was dismissed in a
resolution on the ground that the same was a refiled
case previously dismissed for lack of merit. Entry
of judgment was issued by this Court.
 July 14, 1993: Dizon et. al filed an urgent ex-
parte motion for execution of the decision with the
MTC
 MTC: Ordered the issuance of a third alias writ of
execution.
 MR filed, denied. MTC ordered the immediate
implementation of the third writ of execution without
delay.
 Overland thus filed with RTC-QC a petition
for certiorari and prohibition with preliminary
injunction/restraining order challenging the
enforceability and validity of the MTC judgment as
well as the order for its execution.
 RTC: Granted the issuance of a writ of preliminary
injunction upon posting of an injunction bond
of P50k
 Dizon et. al filed a petition for certiorari and
prohibition with a prayer for a TRO and/or
preliminary injunction with CA.
 CA: Dismissed petition. Purpose of petition is to
enjoin RTC from restraining the ejectment of
Overland. To grant the petition would be to allow
the ejectment of the Overland which CA cannot do.
Right to eject Overland has been demonstrated to
be without basis in the said civil case.
 CA: MR filed, denied.
o Overland acquired the rights of a vendee in
a contract of sale, in effect, recognizing the
right of Overland to possess the subject
premises.
o CA cannot not allow ejectment as it would
disturb the status quo of the parties since
Dizon et. al. are not in possession of the
subject property.
o It would be unfair and unjust to deprive
Overland of its possession of the subject
property after its rights have been
established in a subsequent ruling.
 2 consolidated petitions were filed before SC
seeking to set aside and annul CA decisions and
resolutions
o There was no perfected contract of sale.
Alice Dizon was not authorized to receive
payment.
ISSUE: Whether there was a perfected contract of sale
between Overland and Dizon et. al upon delivery of
partial payment to Dizon’s agent? (NO)
RATIO:
NO AUTHORITY OF AGENT/NO PERFECTED
CONTRACT OF SALE
 There was no perfected contract of sale between
Overland and Dizon et. al.
 Overland: It delivered the check of P300,000 to
Alice A. Dizon who acted as agent of petitioners
pursuant to the supposed authority given by Fidela
Dizon, the payee thereof. Dizons’ filing of the
ejectment case against it, based on the contract of
lease with option to buy, holds them in estoppel to
question the authority of Fidela Dizon. The
payment of P300,000 as partial payment of the
purchase price constituted a valid exercise of the
option to buy.
 SC: No meeting of minds. There was no consent on
the part of the co-owners. There was no valid
consent by the petitioners (as co-owners of the
leased premises) on the supposed sale entered into
by Alice A. Dizon, as petitioners’ alleged agent.
 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
(Bordador vs. Luz).
 As provided in Article 1868, there was no showing
that petitioners consented to the act of Alice A.
Dizon nor authorized her to act on their behalf with
regard to her transaction with overland.
o Article 1868. 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.”
 The most prudent thing Overland should have done
was to ascertain the extent of the authority of Alice
A. Dizon. Being negligent in this regard, Overland
cannot seek relief on the basis of a supposed
agency.
 Rule in dealing with an agent: “Every person dealing
with an agent is put upon inquiry and must discover
upon his peril the authority of the agent. If he does
not make such inquiry, he is chargeable with
knowledge of the agent’s authority, and his
ignorance of that authority will not be any excuse.
Persons dealing with an assumed agent, whether
the assumed agency be a general or special one,
are bound at their peril, if they would hold the
principal, to ascertain not only the fact of the agency
but also the nature and extent of the authority, and
in case either is controverted, the burden of proof is
upon them to establish it.” (Bacaltos Coal Mines vs.
CA)
As to Finality of Ejectment
 Petitioners have established a right to evict
Overland from the subject premises for non-
payment of rentals. When Overland failed to pay
the increased rental of P8,000.00 per month in June
1976, the petitioners had a cause of action to
institute an ejectment suit against the former with
the then City Court.
 In this regard, the City Court (now MTC) had
exclusive jurisdiction over the ejectment suit. The
filing by Overland of a suit with the RTC for specific
performance to enforce the option to purchase did
not divest the then City Court of its jurisdiction to
take cognizance over the ejectment case. Of note
 is the fact that the decision of the City Court was
affirmed by both IAC and SC.
As to Validity of Option to Buy
 Having failed to exercise the option within the
stipulated one-year period, Overland cannot
enforce its option to purchase anymore. Even
assuming that the right to exercise the option still
subsists at the time Overland tendered the amount
on June 20, 1975, the suit for specific performance
to enforce the option to purchase was filed only on
October 7, 1985 or more than 10 years after accrual
of the cause of action as provided under Article
1144.
 The contract of lease expired without Overland, as
lessee, purchasing the property but remained in
possession thereof. Hence, there was an implicit
renewal of the contract of lease on a monthly
basis. However, an implied new lease does
not ipso facto carry with it any implied revival of
Overland's option to purchase (as lessee thereof)
the leased premises because it is alien to the
possession of the lessee.
 Overland’s right to exercise the option to purchase
expired with the termination of the original contract
of lease for one year.
 “This is a reasonable construction of the provision,
which is based on the presumption that when the
lessor allows the lessee to continue enjoying
possession of the property for fifteen days after the
expiration of the contract he is willing that such
enjoyment shall be for the entire period
corresponding to the rent which is customarily paid
– in this case up to the end of the month because
the rent was paid monthly.
 Necessarily, if the presumed will of the parties
refers to the enjoyment of possession the
presumption covers the other terms of the contract
related to such possession, such as the amount of
rental, the date when it must be paid, the care of the
property, the responsibility for repairs, etc.
 But no such presumption may be indulged in with
respect to special agreements which by nature are
foreign to the right of occupancy or enjoyment
inherent in a contract of lease.(Villanueva vs. CA)
DISPOSITIVE: Both petitions GRANTED. CA
decisions and resolutions REVERSED and SET
ASIDE. Remanded to the trial court for immediate
execution of City Court (MeTC) judgment as affirmed in
IAC (CA) and in SC resolution (Overland to vacate).
However, Dizon et. al/ are ordered to REFUND to
Overland P300,000 which they received through Alice
A. Dizon on June 20, 1975.
MANOTOK BROTHERS, INC. VS. COURT OF
APPEALS
CASE NUMBER: G.R. No. 94753
DATE: April 7, 1993.
PONENTE: Campos Jr., J.
FACTS:
The petitioner in this case is the owner of a parcel of
land and building which was leased to the City of Manila
and was used by Claro M. Recto High school.
Respondent here, Salvador Saligumba was the agent
of the petitioner who negotiated with the city for the sale
of the said property.
Accordingly as such, he was given letters of authority
that allowed him to negotiate the property at a price not
less than 425k
He was to get a 5% commission from the said sale
His authority was extended several times, the last one
lasting for 180 days from November 16, 1987, also it
was at this time that petitioner allowed the sale to be
consummated for the amount of 410k.
However, it was only on April 26, 1968, passed
Ordinance No. 6603, appropriating the sum of
P410,816.00 for the purchase of the property which
private respondent was authorized to sell.
Said ordinance however, was signed by the City
Mayor only on May 17, 1968, one hundred eighty three
(183) days after the last letter of authorization.
On January 14, 1969, the parties signed the deed of
sale of the subject property. The initial payment of
P200,000.00 having been made, the purchase price
was fully satisfied with a second payment on April 8,
1969 by a check in the amount of P210,816.00.
Respondent now asks that the 5% commission be
paid to him in the amount of P20,554.50.
But petitioners refused to pay up, arguing that:
(1) Private respondent would be entitled to a
commission only if the sale was consummated and the
price paid within the period given in the respective
letters of authority;
(2) Private respondent was not the person
responsible for the negotiation and consummation of
the sale; instead it was Filomeno E. Huelgas, the PTA
president for 1967-1968 of the Claro M. Recto High
School.
Petitioner presented as its witnesses Filomeno
Huelgas and the petitioner's President, Rufino Manotok.
Huelgas testified to the effect that after being inducted
as PTA president in August, 1967 he followed up the
sale from the start with Councilor Magsalin until after it
was approved by the Mayor on May 17, 1968
He also said that he came to know Rufino Manotok
only in August, 1968, at which meeting the latter told him
that he would be given a "gratification" in the amount of
P20,000.00 if the sale was expedited.
Petitioner’s contention that as a broker, private
respondent's job is to bring together the parties to a
transaction.
Accordingly, if the broker does not succeed in
bringing the minds of the purchaser and the vendor to
an agreement with respect to the sale, he is not entitled
to a commission.
 The Court ruled in favor of the respondent, with the
CA affirming the RTC decision. Hence the appeal
ISSUE: is the private respondent entitled to the 5%
commission? -> Yes
RULING:
Court says: it is to be noted that the ordinance was
approved on April 26, 1968 when private respondent's
authorization was still in force.
Moreover, the approval by the City Mayor came only
three days after the expiration of private respondent's
authority.
It is also worth emphasizing that from the records, the
only party given a written authority by petitioner to
negotiate the sale from July 5, 1966 to May 14, 1968
was private respondent.
When there is a close, proximate and causal
connection between the agent's efforts and labor
and the principal's sale of his property, the agent is
entitled to a commission.
Private respondent is the efficient procuring cause for
without his efforts, the municipality would not have
anything to pass and the Mayor would not have anything
to approve.
The SC agrees with respondent Court that the City of
Manila ultimately became the purchaser of petitioner's
property mainly through the efforts of private
respondent.
Disposition: Decision of the RTC is affirmed.
COLLECTOR (NOW COMMISSIONER) OF INTERNAL
REVENUE PETITIONER, VS. TAN ENG HONG,
RESPONDENT.
REGALA, J.:
This is an appeal from the decision of the Court of
Appeals in C.T.A. Case No. 436 entitled "Tan Eng
Hong, Petitioner vs. Collector of Internal Revenue,
Respondent," absolving Tan Eng Hong from certain tax
liabilities a a commercial broker.
Sometime in 1952, the Philippine Council for United
States Aid (PHILCUSA) called a public bidding for the
supply of certain materials which it intended to give as
aid to the Philippines. Tan Eng Hong won the bid so
that from 1952 to 1955, inclusive, he made deliveries to
PHILCUSA of the bidded goods for which he received
in payment the total sum of P94,685.71. The Bureau of
Internal Revenue determined that the various
transactions under the above bid were carried out by
Tan Eng Hong as a commercial broker and,
accordingly, assessed against the sum received, fixed
and percentage taxes and surcharge in the amount of
P7,513.94.
Taking issue with the Bureau's ruling that he was acting
as a commercial broker in supplying the goods under
the above bid, Tan Eng Hong went to the Court of Tax
Appeals, under C.T.A. Case No. 436, on a petition for
review. After clue trial and hearing, the said court
rendered judgment with the following dispositive portion
"WHEREFORE, in view of the foregoing considerations,
the decision appealed from is hereby reversed, and the
deficiency assessment for fixed and percentage taxes
in the total sum of P7,513.94 issued by the respondent
Collector of Internal Revenue is hereby cancelled and
withdrawn. Without pronouncement as to costs."
The sole and principal predicate of the trial court's
decision abovementioned was its finding that "petitioner
Tan Eng Hong was not a broker but the importer of the
goods sold to PHILCUSA." Consequently, the instant
appeal refers alone to the correctness or error of the
above finding that Tan Eng Hong was not a commercial
broker. The commissioner of Internal Revenue urges
that he was so.
To resolve the issue, it is necessary to discuss the
specific details of the transactions in dispute. Inasmuch
as there is no dispute by the parties herein on the trial
court's account of it, We deem it best to reproduce the
said account hereunder:
"To start with, PHILCUSA announces that 'Sealed bids
* * * will be received * * * and then publicly opened for
furnishing commodities for delivery C & W Manila.' (Exh.
7, pp. 44-46 BIR rec.; Exh. H, p. 65 CTA rec.) The
petitioner, as a qualified bidder, submits his signed
proposal together with a proposal bond. He 'offers and
agrees, if this (his) bid be accepted within 20 calendar
days from the date of opening, to furnish any or all of
the items of which prices are quoted, at the price set
opposite each item and delivered at the point(s)
specified * * *.' (Exh. 7, pp. 44-46, BIR rec; Exh. H, p. 65
CTA rec.) The quotations of the petitioner is in
Philippine currency for the C & F Philippine Port
Value. In computing his bid, the total C & F dollar cost
is converted to pesos on the basis of P2.00 to P1.00,
and his profit in pesos which he personally and solely
fixes, is then added thereto in order to arrive at the
correct total quotation.
"If the bid of the petitioner is accepted by PHILCUSA,
he receives a letter of award wherein he is required to
inform PHILCUSA of the (1) Net C & F dollar cost to his
suppliers per item and per each supplier's group; (2)
Names and addresses of his suppliers; and (3) Names
of independent inspection firms that will undertake the
inspection prior to the shipment of the goods. Hence, it
is only after the petitioner has been finally awarded the
bid contract that PHILCUSA comes to know of the
names of the foreign suppliers of the commodities to be
imported and the sole purpose seems to be to secure
and facilitate the dollar payment of the imported goods
to said suppliers abroad. Then, the petitioner is also
requested to submit a performance bond and to apply
at the Philippine National Bank for the corresponding
letter (s) of credit in favor of his suppliers abroad. (Exh.
Z, p. 32 CTA rec.) However, he is not required to secure
an import license for the goods imported for PHILCUSA.
"Accordingly, the petitioner applies for a letter of credit
with the Philippine National Bank in his own name and
for his own account and in favor of his suppliers
abroad. He pays the usual bank charges, but is not
required to make payment of pesos into the counterpart
fund nor pay the foreign exchange premium as no actual
sale of dollars is involved. He is also exempt from the
payment of the following: (1) Foreign exchange tax; (2)
sales tax; (3) customs duties; (4) municipal taxes; (5)
arrastre charges; and (6) delivery charges, except when
otherwise provided in the contract. The dollars that
are being used in all the PHILCUSA purchases belong
to the United States Mutual Security Administration
(hereinaftered to as MSA) and are actually paid for by
the Philippine Government by general payments from
the special appropriation directly into the counterpart
fund. (Par. 14, Exh. F., pp. 55-56 CTA rec, also Exh. 8,
pp. 19-20 BIR rec.) And most probably for this reason,
the petitioner authorizes the Philippine National Bank to
"deliver all documents drawn under this credit to
PHILCUSA." (Exh. G. p. 64 CTA rec.)
In carrying out a commercial venture under the
aforequoted arrangement, did Tan Eng Hong act as a
commercial broker?
We do not think so.
In the case of Kuenzle & Streiff, Inc. vs. The
Commissioner of Internal Revenue, G. R. No. L 17648,
October 31, 1964, this Court held that the essential
feature of a broker is the fact that he acts not for himself,
but for a third person. As was therein held:
"Section 194 (t) of the Revenue Code defines a
commercial broker in the following manner:
(t) 'Commercial broker' includes all persons, other than
importers, manufacturers, producers, or bona fide
employees, who, for compensation or profit, sell or bring
about sales or purchases of merchandise for other
persons, or bring proposed buyers and sellers together,
or negotiate freights or other business for owners of
vessels, or other means of transportation, or for the
shoppers, or consignors or consignees of freight carried
by vessels or other means of transportation. The term
includes commission merchants.'
There does not seem to be any room for doubt that the
petitioner falls within the above definition. Under the
said section, as well as by the ruling handed down in at
least two cases by this Court, the essential feature of a
broker is the fact that he acts not for himself, but, for a
third person. (Kerr & Co., Ltd. vs. Collector of Internal
Revenue, 70 Phil. 36; Behn, Meyers & Co.,
Ltd. vs. Nolting and Garcia In Behn 35 Phil. 274) In
Behn Meyer case, We said:
"* * * A broker is generally defined as one who is
engaged, for others, on a commission, negotiating
contracts relative to property with the custody of which
he has no concern; the negotiator between other
parties, never acting in his own name but in the name of
those who employed him; he is strictly a middleman and
for some purposes the agent of both parties (Italics
ours).
It seems obvious from the facts of this case that Tan
Eng Hong undertook the importation of the goods
needed by PHILCUSA for himself and not for
PHILCUSA. In effecting the importation of the said
goods, he was discharging his own, personal obligation
as the winner in the bidding called by PHILCUSA. He
imported the commodities not because PHILCUSA had
asked him to but because he had obligated himself to
deliver the same to PHILCUSA when he participated
and won in the public bidding called by the said
agency. Tan Eng Hong would have been liable in
damages to PHILCUSA if he had failed to import the
said goods so that when he carried out the importation,
he was, first and foremost, serving his own interest and
no one else's.
Upon the records of this case, it appears that Tan Eng
Hong signed and submitted his bids or proposals under
his name and the corresponding letters of credit were
sent to his business address. The letters of credit,
performance bonds, invoices and all other documents
relative to the transactions were in his name. The bid
contracts were strictly between Tan Eng Hong and
PHILCUSA just as the formers contracts with his foreign
supplier were strictly between them alone, i.e., Tan Eng
Hong and the foreign supplier only. The foreign supplier
and PHILCUSA had no privity of contractual relations
whatsoever to the end that neither of them could have
had any claim against each other for whatever fault or
breach Tan Eng Hong might have committed relevant to
the transactions in dispute. It would indeed be quite
difficult to sustain any assertion that Tan Eng Hong was
acting for and in behalf of PHILCUSA or his foreign
supplier or both.
The broker must be the efficient agent or the procuring
cause of the sale. The means employed by him and his
efforts must result in the sale. He must find the
purchaser, and the sale must proceed from his efforts
acting as a broker. (Reyes vs. Mosqueda, 99 Phil, 241;
53 Off. Gaz., 2158). This condition may not be said to
obtain in the case on hand. Tan Eng Hong did not
merely bring PHILCUSA and his foreign supplier to
come to an agreement for the sale of certain
commodities. It was he himself who contracted with his
foreign supplier for the purchase of the said goods. If,
for one reason or another PHILCUSA had refused to
accept the delivery of the said goods to it by Tan Eng
Hong, the foreign supplier could not have compelled
PHILCUSA otherwise. Similarly if somehow the foreign
supplier had defaulted in the performance of its
obligations to Tan Eng Hong, PHILCUSA could not
have had any action or remedy against the said foreign
supplier. All these indicate the distinct and independent
personality of Tan Eng Hong as an importer and a
commercial broker.
Infante vs. Cunanan
G.R L- 5180 August 31, 1953
Bautista Angelo, J:
Facts:
Infante was the owner of the land with a house built on
it. Cunanan and Mijares were contracted to sell the
property from which they would receive commission.
Noche agreed to purchase the lot but Infante informed
C & M about her change of mind to sell the lot and had
them sign a document stating that their authority to sell
was already cancelled. Subsequently, Infante sold the
lot & house to Noche. Defendants herein demanded for
their commission. RTC ordered Infante to pay
commission. CA affirmed.
Issue:
Whether or not petitioner was duty bound to pay
commission notwithstanding that authority to sell has
been cancelled.
Ruling:
A principal may withdraw the authority given to an agent
at will. But respondents agreed to cancel the authority
given to them upon assurance by petitioner that should
property be sold to Noche, they would be given
commission.
That petitioner had changed her mind even if
respondents had found a buyer who was willing to close
the deal, is a matter that would give rise to a legal
consequence if respondents agree to call off to
transaction in deference to the request of the petitioner.
Petitioner took advantage of the services of
respondents, but believing that she could evade
payment of their commission, she made use of a ruse
by inducing them to sign the deed of cancellation. This
act of subversion cannot be sanctioned and cannot
serve as basis for petitioner to escape payment of the
commissions agreed upon.
Siredy Enterprises vs CA
Conrado De Guzman is an architect-contractor doing
business under the name and style of Jigscon
Construction.
Siredy
Enterprises, Inc. (hereafter Siredy) is the owner and
developer of Ysmael Village, a subdivision in Sta.
Cruz, Marilao,
Bulacan. The president of Siredy is Ismael E. Yanga.
As stated in its Articles of Incorporation,
the primary corporate purpose of Siredy is to acquire
lands, subdivide and develop
them, erect buildings and houses thereon, and sell,
lease or otherwise dispose of said properties to
interested buyers.
Sometime before October 1978, Yanga executed an
undated Letter of Authority duly signed by Yanga
which constituted
Hermogenes Santos as Siredys agent,
whose authority included entering into a contract for
the building of housing units at
Ysmael Village.
Thereafter, Santos entered into a Deed of Agreement
with De Guzman.
From October 1978 to April 1990, De Guzman
constructed 26 residential units at Ysmael Village.
Thirteen (13) of these
were fully paid but the other 13 remained unpaid.
The total contractual price of these 13 unpaid houses
is P412,154.93
which was verified and confirmed to be correct by
Santos, per an Accomplishment Billing
that the latter signed. Yanga is not
a signatory to the said contact.
De Guzman tried but failed to collect the unpaid
account from petitioner.
Thus, he instituted the action below for specific
performance against Siredy, Yanga, and Santos who
all denied liability.
During the trial, Santos disappeared and his
whereabouts remain unknown.
Issue:
W/N Hermogenes B. Santos was a duly constituted
agent of Siredy, with authority to enter into contracts
for the
construction of residential units in Ysmael Village and
thus the capacity to bind Siredy to the Deed of
Agreement.
Held:
Siredy Enterprises, Inc. is ordered to pay Conrado de
Guzman actual damages with legal interest.
Ratio:
By the relationship of agency, one party called the
principal authorizes another called the agent to act for
and in his behalf in
transactions with third persons. The authority of the
agent to act emanates from the powers granted to him
by his principal;
his act is the act of the principal if done within the
scope of the authority. He who acts through another
acts himself.
On its face, the Letter of Authority executed by Yanga
clearly and unequivocally constituted Santos to do and
execute,
among other things, the act of negotiating and entering
into contract or contracts
to build
Housing Units on the subdivision
B. H. MACKE ET AL V JOSE CAMPS
FACTS:
* B. H. Macke and W.H. Chandler, partners
doing business under thee firm name of Macke,
Chandler And Company, allege that during the months
of February and March 1905, they sold to Jose Camps
and delivered at his place of business, known as the
:Washington Café,” various bills of goods amounting to
P351.50; that Camps has only paid on account of said
goods the sum of P174; that there is still due them on
account of said goods the sum of P177.50
* Plaintiffs made demand for the payment from
defendant and that the latter failed and refused to pay
the said balance or any part of it
* Macke, one of the plaintiffs, testified that on
the order of one Ricardo Flores, who represented
himself to be the agent of Jose Camps, he shipped the
said goods to the defendant at the Washington Café;
that Flores (agent) later acknowledged the receipt of the
said goods and made various payments thereon
amounting in all to P174; that believes that Flores is still
the agent of Camps; and that when he went to the
Washington Café for the purpose of collecting his bill he
found Flores, in the absence of Camps, apparently in
charge of the business and claiming to be the business
manager of Camps, said business being that of a hotel
with a bar and restaurant annexed.
* A written contract was introduced as
evidence, from which it appears that one Galmes, the
former of “Washington Café” subrented the building
wherein the business was conducted, to Camps for 1
year for the purpose of carrying on that business,
Camps obligating himself not to sublet or subrent the
building or the business without the consent of the said
Galmes. *This contract was signed by Camps
and the name of Ricardo Flores as a witness and
attached thereon is an inventory of the furniture and
fittings which also is signed by Camps with the word
“sublessee” below the name, and at the foot of this
inventory the word “received” followed by the name
“Ricardo Flores” with the words “managing agent”
immediately following his name.
ISSUE: W/N Ricardol Flores was the agent of Camps
Ruling: Yes
Evidence is sufficient to sustain a finding that
Flores is the agent of Camps in the management of the
bar of the Washington Café with authority to bind
Camps, his principal, for the payment of the goods
The contract sufficiently establishes the fact
that Camps was the owner of the business and of the
bar, and the title of “managing agent” attached to the
signature of Flores which appears on that contract,
together with the fact that at the time the purchases
were made, Flores was apparently in charge of the
business performing the duties usually intrusted to a
managing agent leave little room for doubt that he was
there as the authorized agent of Camps.
Agency by Estoppel --- One who clothes
another with apparent authority as his agent, and holds
him out to the public as such, can not be permitted to
deny the authority of such person to act as his agent, to
the prejudice of innocent third persons dealing with such
person in good faith and in the honest belief that he is
what he appears to be.
Estopple---- “Whenever a party has, by his own
declaration, act or omission, intentionally and
deliberately led another to believe a particular thing true,
and to act upon such belief, he can not, in any litigation
arising out of such declaration, act, or omission be
permitted to falsify; and unless the contrary appears, the
authority of the agent must be presumed to include all
the necessary and usual means of carrying his agency
into effect.
**PNB VS TAN ONG SZE
SHOPPER’S PARADISE REALTY &
DEVELOPMENT CORPORATION vs ROQUE
G.R. No. 148775. January 13, 2004
FACTS: Petitioner Shopper’s Paradise Realty &
Development Corporation, represented by its
president, Veredigno Atienza, entered into a twenty-
five year lease with Dr. Felipe C. Roque, now
deceased, over a parcel of land in the name of
Roque. Petitioner issued to Dr. Roque a check for
P250,000.00 by way of “reservation payment.”
Simultaneously, petitioner and Dr. Roque likewise
entered into a memorandum of agreement for the
construction, development and operation of a
commercial building complex on the
property. Conformably with the agreement, petitioner
issued a check for another P250,000.00
“downpayment” to Dr. Roque.
The contract of lease and the memorandum of
agreement, both notarized,were never annotated on
the Certificate of title because of the untimely demise
of Roque. Roque’s death constrained petitioner to
deal with respondent Efren P. Roque, one of the
surviving children of the late Dr. Roque, but the
negotiations broke down due to some
disagreements. In a letter, respondent advised
petitioner “to desist from any attempt to enforce the
aforementioned contract of lease and memorandum of
agreement”. On 15 February 1995, respondent filed a
case for annulment of the contract of lease and the
memorandum of agreement, with a prayer for the
issuance of a preliminary injunction before the RTC
alleging that he had long been the absolute owner of
the subject property by virtue of a deed of donation
inter vivos executed in his favor by his parents, Dr.
Felipe Roque and Elisa Roque, and that the late Dr.
Felipe Roque had no authority to enter into the
assailed agreements with petitioner. The donation
was made in a public instrument duly acknowledged
by the donor-spouses before a notary public and duly
accepted on the same day by respondent before the
notary public in the same instrument of donation. The
title to the property, however, remained in the name of
Dr. Felipe C. Roque, and it was only transferred to and
in the name of respondent sixteen years later.

Respondent, while he resided in the United States of

America, delegated to his father the mere
administration of the property. Respondent came to
know of the assailed contracts with petitioner only after
retiring to the Philippines upon the death of his father.

The trial court dismissed the complaint of respondent.

On appeal, the CA reversed the decision of the trial

court and held to be invalid the Contract of Lease and
Memorandum of Agreement.

ISSUE: W/N there was valid donation to respondent?

HELD: YES. The existence, albeit unregistered, of the
donation in favor of respondent is undisputed. The
trial court and the appellate court have not erred in
holding that the non-registration of a deed of donation
does not affect its validity. As being itself a mode of
acquiring ownership, donation results in an effective
transfer of title over the property from the donor to the
donee. In donations of immovable property, the law
requires for its validity that it should be contained in a
public document, specifying therein the property
donated and the value of the charges which the donee
must satisfy. The Civil Code provides, however, that
“titles of ownership, or other rights over immovable
property, which are not duly inscribed or annotated in
the Registry of Property (now Registry of Land Titles
and Deeds) shall not prejudice third persons.” It is
enough, between the parties to a donation of an
immovable property, that the donation be made in a
public document but, in order to bind third persons, the
donation must be registered in the registry of Property
(Registry of Land Titles and Deeds