D - e (Scra)

VOL.
197, MAY 29, 1991
645
Orient-Air Services and Hotel Representatives vs. Court of Appeals
G.R. No. 76931. May 29, 1991.*

ORIENT AIR SERVICES & HOTEL REPRESENTATIVES, petitioner, vs. COURT OF APPEALS and AMERICAN AIRLINES INCORPORATED, respondents.
G.R. No. 76933. May 29, 1991.*
AMERICAN AIRLINES, INCORPORATED, petitioner, vs.COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES,
INCORPORATED, respondents.
Contracts; The various stipulation in the contract must be read together to give effect to all. It is a well settled legal 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. After a careful examination of the records, the Court finds merit in the
contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to by the parties, total flown revenue.
Same; Same; Any ambiguity in the contract, the stipulations of which are susceptible of various interpretations, shall be construed
against the party who drafted it.An additional point before finally disposing of this issue. 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, i.e., construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. Thus,
Article 1377 of the Civil Code provides that the interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity. To put it differently, when several interpretations of a provision are otherwise equally proper, that interpretation or
construction is to be adopted which is most favorable to the party in whose favor the provision was made and who did not cause the
ambiguity. We therefore agree with the respondent
________________
*
SECOND DIVISION.
646
SUPREME COURT REPORTS ANNOTATED
46
appellate courts declaration that: Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read
against the party who drafted it.
Agency; An agent-principal relationship can only be effected with the consent of the principal, and must not, in any way be compelled by
law or by any court.By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its
personality to Orient Air. Such would be violative of the principles and essence of agency, defined by law as a contract whereby a person
binds himself to render some service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE
LATTER. (emphasis supplied) In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In
so doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a
relationship can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The
Agreement itself between the parties states that either party may terminate the Agreement without cause by giving the other 30 days notice
by letter, telegram or cable. (emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court
reinstating Orient Air as general sales agent of American Air.
PETITIONS for certiorari to review the decision of the Court of Appeals. Camilon, J.
The facts are stated in the opinion of the Court.
Francisco A. Lava, Jr. and Andresito X. Fornier for Orient Air Service and Hotel Representatives, Inc.
Sycip, Salazar, Hernandez & Gatmaitan for American Airlines, Inc.
PADILLA, J.:
This case is a consolidation of two (2) petitions for review on certiorari of a decision
of the Court of Appeals in CA-G.R. No.
________________
1
Penned by Justice Serafin B. Camilon and concurred in by Justices Jose C. Campos, Jr. and Desiderio P. Jurado.
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VOL. 197, MAY 29, 1991
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CV-04294, entitled American Airlines, Inc. vs. Orient Air Services and Hotel Representatives, Inc. which affirmed, with modification, the
decision2 of the Regional Trial Court of Manila, Branch IV, which dismissed the complaint and granted therein defendants counterclaim for
agents overriding commission and damages.
The antecedent facts are as follows:
On 15 January 1977, American Airlines, Inc. (hereinafter referred to as American Air), an air carrier offering passenger and air cargo
transportation in the Philippines, and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air), entered into a
General Sales Agency Agreement (hereinafter referred to as the Agreement), whereby the former authorized the latter to act as its exclusive
general sales agent within the Philippines for the sale of air passenger transportation. Pertinent provisions of the agreement are reproduced, to
wit:
WITNESSETH
In consideration of the mutual convenants herein contained, the parties hereto agree as follows:
1. 1.Representation of American by Orient Air Services
Orient Air Services will act on Americans behalf as its exclusive General Sales Agent within the Philippines, including any United States
military installation therein which are not serviced by an Air Carrier Representation Office (ACRO), for the sale of air passenger transportation.
The services to be performed by Orient Air Services shall include:
1. (a)soliciting and promoting passenger traffic for the services of American and, if necessary, employing staff competent and sufficient
to do so;
2. (b)providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the business of
American;
3. (c)arranging for distribution of Americans timetables, tariffs and promotional material to sales agents and the general public in the
assigned territory;
________________
2
Penned by Judge Herminio C. Mariano.
648
648
1. (d)servicing and supervising of sales agents (including such sub-agents as may be appointed by Orient Air Services with the prior
written consent of American) in the assigned territory including if required by American the control of remittances and commissions
retained; and
2. (e)holding out a passenger reservation facility to sales agents and the general public in the assigned territory.
In connection with scheduled or non-scheduled air passenger transportation within the United States, neither Orient Air Services nor its
sub-agents will perform services for any other air carrier similar to those to be performed hereunder for American without the prior written
consent of American. Subject to periodic instructions and continued consent from American, Orient Air Services may sell air passenger
transportation to be performed within the United States by other scheduled air carriers provided American does not provide substantially
equivalent schedules between the points involved.
xxx
xxx
xxx
1. 4.Remittances
Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders, less commissions to which Orient
Air Services is entitled hereunder, not less frequently than semi-monthly, on the 15th and last days of each month for sales made during the
preceding half month.
All monies collected by Orient Air Services for transportation sold hereunder on Americans ticket stock or on exchange orders, less
applicable commissions to which Orient Air Services is entitled hereunder, are the property of American and shall be held in trust by Orient Air
Services until satisfactorily accounted for to American.
1. 5.Commissions
American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its sub-agents as follows:
1. (a)Sales agency commission
American will pay Orient Air Services a sales agency commission for all sales of transportation by Orient Air Services or its sub-agents over
Americans services and any connecting through air tranportation, when made on Americans ticket stock, equal to the following percentages
of the tariff fares and charges:
(i) For transportation solely between points within the United States and between such points and Canada: 7% or such
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VOL. 197, MAY 29, 1991
649
other rate(s) as may be prescribed by the Air Traffic Conference of America.

(ii) For transportation included in a through ticket covering transportation between points other than those described above: 8% or such
other rate(s) as may be prescribed by the International Air Transport Association.
1. (b)Overriding commission
In addition to the above commission American will pay Orient Air Services an overriding commission of 3% of the tariff fares and charges
for all sales of transportation over Americans service by Orient Air Service or its sub-agents.
xxx
xxx
xxx
1. 10.Default
If Orient Air Services shall at any time default in observing or performing any of the provisions of this Agreement or shall become bankrupt
or make any assignment for the benefit of or enter into any agreement or promise with its creditors or go into liquidation, or suffer any of its
goods to be taken in execution, or if it ceases to be in business, this Agreement may, at the option of American, be terminated forthwith and
American may, without prejudice to any of its rights under this Agreement, take possession of any ticket forms, exchange orders, traffic
material or other property or funds belonging to American.
1. 11.IATA and ATC Rules
The provisions of this Agreement are subject to any applicable rules or resolutions of the International Air Transport Association and the Air
Traffic Conference of America, and such rules or resolutions shall control in the event of any conflict with the provisions hereof.
xxx
xxx
xxx
1. 13.Termination
American may terminate the Agreement on two days notice in the event Orient Air Services is unable to transfer to the United States the
funds payable by Orient Air Services to American under this Agreement. Either party may terminate the Agreement without cause by giving
the other 30 days notice by letter, telegram or cable.
650
650
xxx
xxx
xxx3
On 11 May 1981, alleging that Orient Air had reneged on its obligations under the Agreement by failing to promptly remit the net proceeds of
sales for the months of January to March 1981 in the amount of US $254,400.40, American Air by itself undertook the collection of the
proceeds of tickets sold originally by Orient Air and terminated forthwith the Agreement in accordance with Paragraph 13 thereof
(Termination). Four (4) days later, or on 15 May 1981, American Air instituted suit against Orient Air with the Court of First Instance of Manila,
Branch 24, for Accounting with Preliminary Attachment or Garnishment, Mandatory Injunction and Restraining Order, 4 averring the aforesaid
basis for the termination of the Agreement as well as therein defendants previous record of failures to promptly settle past outstanding
refunds of which there were available funds in the possession of the defendant, x x x to the damage and prejudice of plaintiff. 5
In its Answer6 with counterclaim dated 9 July 1981, defendant Orient Air denied the material allegations of the complaint with respect to
plaintiffs entitlement to alleged unremitted amounts, contending that after application thereof to the commissions due it under the
Agreement, plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. Further, the defendant contended that the actions
taken by American Air in the course of terminating the Agreement as well as the termination itself were untenable, Orient Air claiming that
American Airs precipitous conduct had occasioned prejudice to its business interests.
Finding that the record and the evidence substantiated the allegations of the defendant, the trial court ruled in its favor, rendering a
decision dated 16 July 1984, the dispositive portion of which reads:
________________
3
Rollo, pp. 110-118.
Rollo, p. 102.
Ibid ., p. 104.
Ibid., p. 121.
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651
WHEREFORE, all the foregoing premises considered, judgment is hereby rendered in favor of defendant and against plaintiff dismissing the
complaint and holding the termination made by the latter as affecting the GSA agreement illegal and improper and order the plaintiff to
reinstate defendant as its general sales agent for passenger tranportation in the Philippines in accordance with said GSA agreement; plaintiff
is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16, 1977 to
December 31, 1980 in the amount of US$84,821.31 plus the additional amount of US$8,000.00 by way of proper 3% overriding commission
per month commencing from January 1, 1981 until such reinstatement or said amounts in its Philippine peso equivalent legally prevailing at
the time of payment plus legal interest to commence from the filing of the counterclaim up to the time of payment. Further, plaintiff is directed
to pay defendant the amount of One Million Five Hundred Thousand (P1,500,000.00) pesos as and for exemplary damages; and the amount of
Three Hundred Thousand (P300,000.00) pesos as and by way of attorneys fees.
Costs against plaintiff.7
On appeal, the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986, affirmed the findings of the
court a quo on their material points but with some modifications with respect to the monetary awards granted. The dispositive portion of the
appellate courts decision is as follows:
WHEREFORE, with the following modifications
1. 1)American is ordered to pay Orient the sum ofUS$53,491.11 representing the balance of the latters overriding commission covering
the period March 16, 1977 to December 31, 1980, or its Philippine peso equivalent in accordance with the official rate of exchange
legally prevailing on July 10, 1981, the date the counterclaim was filed;
2. 2)American is ordered to pay Orient the sum of US$7,440.00as the latters overriding commission per month starting January 1,
1981 until date of termination, May 9, 1981 or its Philippine peso equivalent in accordance with the official rate of exchange legally
prevailing on July 10, 1981, the date the
________________
7
Rollo, p. 162.
652
652
1. counterclaim was filed;

2. 3)American is ordered to pay interest of 12% on said amounts from July 10, 1981 the date the answer with counterclaim was filed,
until full payment;
3. 4)American is ordered to pay Orient exemplary damages of P200,000.00;
4. 5)American is ordered to pay Orient the sum of P25,000.00 as attorneys fees.
the rest of the appealed decision is affirmed.
Costs against American.8
American Air moved for reconsideration of the aforementioned decision, assailing the substance thereof and arguing for its reversal. The
appellate courts decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration of the trial
courts ruling with respect to the monetary awards. The Court of Appeals, by resolution promulgated on 17 December 1986, denied American
Airs motion and with respect to that of Orient Air, ruled thus:
Orients motion for partial reconsideration is denied insofar as it prays for affirmance of the trial courts award of exemplary damages and
attorneys fees, but granted insofar as the rate of exchange is concerned. The decision of January 27, 1986 is modified in paragraphs (1) and
(2) of the dispositive part so that the payment of the sums mentioned therein shall be at their Philippine peso equivalent in accordance with
the official rate of exchange legally prevailing on the date of actual payment. 9
Both parties appealed the aforesaid resolution and decision of the respondent court, Orient Air as petitioner in G.R. No. 76931 and American
Air as petitioner in G.R. No. 76933. By resolution10 of this Court dated 25 March 1987 both petitions were consolidated, hence, the case at bar.
The principal issue for resolution by the Court is the extent of Orient Airs right to the 3% overriding commission. It is the
________________
8
Rollo, pp. 173-174.
Ibid ., p. 210.
10
Rollo, p. 212.
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VOL. 197, MAY 29, 1991
653
stand of American Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air, otherwise
referred to as ticketed sales. As basis thereof, primary reliance is placed upon paragraph 5(b) of the Agreement which, in reiteration, is
quoted as follows:
1. 5.Commissions
1. a)xxx xxx
2. b)Overriding
Commission
In addition to the above commission, American will pay Orient Air Services an overriding commission of 3% of the tariff fees and
charges for all sales of transportation over Americans services by Orient Air Services or its sub-agents. (italics supplied)
Since Orient Air was allowed to carry only the ticket stocks of American Air, and the former not having opted to appoint any sub-agents, it is
American Airs contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales. This is
supposed to be the clear meaning of the underscored portion of the above provision. Thus, to be entitled to the 3% overriding commission, the
sale must be made by Orient Air and the sale must be done with the use of American Airs ticket stocks.
On the other hand, Orient Air contends that the contractual stipulation of a 3% overriding commission covers the total revenue of American
Air and not merely that derived from ticketed sales undertaken by Orient Air. The latter, in justification of its submission, invokes its
designation as the exclusive General Sales Agent of American Air, with the corresponding obligations arising from such agency, such as, the
promotion and solicitation for the services of its principal. In effect, by virtue of such exclusivity, all sales of transportation over American
Airs services are necessarily by Orient Air. 11
It is a well settled legal principle that in the interpretation of a contract, the entirety thereof must be taken into consideration to ascertain
the meaning of its provisions.12 The various
________________
11
Rollo, p. 291.
12
NAESS Shipping Philippines, Inc. vs. NLRC, G.R. No. 73441, 4
654
654
stipulations in the contract must be read together to give effect to all. 13 After a careful examination of the records, the Court finds merit in the
contention of Orient Air that the Agreement, when interpreted in accordance with the foregoing principles, entitles it to the 3% overriding
commission based on total revenue, or as referred to by the parties, total flown revenue.
As the designated exclusive General Sales Agent of American Air, Orient Air was responsible for the promotion and marketing of American
Airs 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 two (2) kinds: first, a sales agency commission, ranging from 7-8% 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. It is immediately observed that the precondition attached to the first type of commission does not
obtain for the second type of commissions. The latter type of commissions would accrue for sales of American Air services made not on its
ticket stock but on the ticket stock of other air carriers sold by such carriers or other authorized ticketing facilities or travel agents. To rule
otherwise, i.e., to limit the basis of such overriding commissions to sales from American Air ticket stock would erase any distinction between
the two (2) types of commissions and would lead to the absurd conclusion that the parties had entered into a contract with meaningless
provisions. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement.
An additional point before finally disposing of this issue. 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, i.e., construed
against the party who caused the September 1987, 153 SCRA 657.
________________
13
North Negros Sugar Co. vs. Compania General de Tabacos, No. L-9277, 29 March 1957; Article 1374, Civil Code of the Philippines.
655
VOL. 197, MAY 29, 1991
655
ambiguity and could have avoided it by the exercise of a little more care. Thus, Article 1377 of the Civil Code provides that the interpretation
of obscure words or stipulations in a contract shall not favor the party who caused the obscurity. 14 To put it differently, when several
interpretations of a provision are otherwise equally proper, that interpretation or construction is to be adopted which is most favorable to the
party in whose favor the provision was made and who did not cause the ambiguity. 15 We therefore agree with the respondent appellate courts
declaration that:
Any ambiguity in a contract, whose terms are susceptible of different interpretations, must be read against the party who drafted it. 16
We now turn to the propriety of American Airs termination of the Agreement. The respondent appellate court, on this issue, ruled thus:
It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement, Exh. F, which provides
for remittances to American less commissions to which Orient is entitled, and from paragraph 5(d) which specifically allows Orient to retain the
full amount of its commissions. Since, as stated ante, Orient is entitled to the 3% override. Americans premise, therefore, for the cancellation
of the Agreement did not exist. x x x.
We agree with the findings of the respondent appellate court. As earlier established, Orient Air was entitled to an overriding commission based
on total flown revenue. American Airs perception that Orient Air was remiss or in default of its obligations under the Agreement was, in fact, a
situation where the latter acted in accordance with the Agreementthat of retain________________
14
Equitable Banking Corporation vs. Intermediate Appellate Court,G.R. No. 74451, 25 May 1988, 161 SCRA 518.
15
Government of the Philippine Islands vs. Derham Brothers and the International Banking Corporation, 36 Phil. 960.
16
Rollo, p. 169.
656
656
ing from the sales proceeds its accrued commissions before remitting the balance to American Air. Since the latter was still obligated to Orient
Air by way of such commissions. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. The
latters termination of the Agreement was, therefore, without cause and basis, for which it should be held liable to Orient Air.
On the matter of damages, the respondent appellate court modified by reduction the trial courts award of exemplary damages and
attorneys fees. This Court sees no error in such modification and, thus, affirms the same.
It is believed, however, that respondent appellate court erred in affirming the rest of the decision of the trial court. We refer particularly to
the lower courts decision ordering American Air to reinstate defendant as its general sales agent for passenger transportation in the
Philippines in accordance with said GSA Agreement.
By affirming this ruling of the trial court, respondent appellate court, in effect, compels American Air to extend its personality to Orient Air.
Such would be violative of the principles and essence of agency, defined by law as a contract whereby a person binds himself to render some
service or to do something in representation or on behalf of another, WITH THE CONSENT OR AUTHORITY OF THE LATTER. 17 (emphasis
supplied) In an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so doing, the agent,
by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship can only be
effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. The Agreement itself between the
parties states that either party may terminate the Agreementwithout cause by giving the other 30 days notice by letter, telegram or cable.
(emphasis supplied) We, therefore, set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as general sales
agent of American Air.
________________
17
Article 1868, Civil Code of the Philippines.
657
VOL. 197, MAY 29, 1991
657
People vs. Castillo
WHEREFORE, with the foregoing modification, the Court AFFIRMS the decision and resolution of the respondent Court of Appeals, dated 27
January 1986 and 17 December 1986, respectively. Costs against petitioner American Air.
SO ORDERED.

Bordador vs. Luz
G.R. No. 130148. December 15, 1997.*
JOSE BORDADOR and LYDIA BORDADOR, petitioners,vs. BRIGIDA D. LUZ, ERNESTO M. LUZ and NARCISO DEGANOS, respondents.
Actions; Appeals; Judgments; Concurrent factual findings of the trial court and the Court of Appeals are entitled to great weight.
Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that respondent spouses are not liable to them,
as said conclusion of the trial court is contradicted by the finding of fact of the appellate court that (Deganos) acted as agent of his sister
(Brigida Luz). In support of this contention, petitioners
_______________
SECOND DIVISION.
375
*
VOL. 283, DECEMBER 15, 1997
375
Bordador vs. Luz

quoted several letters sent to them by Brigida D. Luz wherein the latter acknowledged her obligation to petitioners and requested for
more time to fulfill the same. They likewise aver that Brigida testified in the trial court that Deganos took some gold articles from petitioners
and delivered the same to her. Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters
concerned the previous obligations of Brigida to petitioners, and had nothing to do with the money sought to be recovered in the instant case.
Such concurrent factual findings are entitled to great weight, hence, petitioners cannot plausibly claim in this appellate review that the letters
were in the nature of acknowledgements by Brigida that she was the principal of Deganos in the subject transactions.
Contracts; Agency; The basis for agency is representation.The basis for agency is representation. Here, there is no showing that Brigida
consented to the acts of Deganos or authorized him to act on her behalf, much less with respect to the particular transactions involved.
Petitioners attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised.
Same; Same; A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. Besides, it
was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as evidenced by six
receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A person dealing
with an agent is put upon inquiry and must discover upon his peril the authority of the agent.
Actions; Independent Civil Actions; Judgments; A final judgment rendered in a civil case absolving the defendant from civil liability is no
bar to a criminal action.Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving alleged
fraudulent acts, a civil action for damages, entirely separate and distinct from the criminal action, may be brought by the injured party. Such
civil action shall proceed independently of the criminal prosecution and shall require only a preponderance of evidence. It is worth noting that
this civil case was instituted four years before the criminal case for estafa was filed, and that although there was a move to consolidate both
cases, the same was denied by
376
3
76
Bordador vs. Luz
the trial court. Consequently, it was the duty of the two branches of the Regional Trial Court concerned to independently proceed with the
civil and criminal cases. It will also be observed that a final judgment rendered in a civil action absolving the defendant from civil liability is no
bar to a criminal action.
Courts; Speedy Disposition of Cases; It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of
cases, petitioners are making a show of calling out for justice because the Court of Appeals issued a resolution disposing of a case sooner than
expected of it.It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners are
making a show of calling out for justice because the Court of Appeals issued a resolution disposing of a case sooner than expected of it. They
would even deny the exercise of discretion by the appellate court to prioritize its action on cases in line with the procedure it has adopted in
disposing thereof and in declogging its dockets. It is definitely not for the parties to determine and dictate when and how a tribunal should act
upon those cases since they are not even aware of the status of the dockets and the internal rules and policies for acting thereon.
Same; Same; Presumption of Regularity; It is a legal presumption, born of wisdom and experience, that official duty has been regularly
performed; that the proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have been and will be duly and
properly performed.The fact that a resolution was issued by said court within a relatively short period of time after the records of the case
were elevated to the office of the ponente cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was
issued without considering the reply filed by petitioners. In fact, that brief pleading filed by petitioners does not exhibit any esoteric or
ponderous argument which could not be analyzed within an hour. It is a legal presumption, born of wisdom and experience, that official duty
has been regularly performed; that the proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have been and
will be duly and properly performed. The burden of proving irregularity in official conduct is on the part of petitioners and they have utterly
failed to do so. It is thus reprehensible for them to cast aspersions on a court of law on the bases of conjectures or surmises, especially since
one of the petitioners appears to be a member of the Philippine Bar.
377
377
Bordador vs. Luz

PETITION for review on certiorari of a decision of the Court of Appeals.
Florentino V. Floro, Jr. for petitioners.
Paulino N. Lorenzo for private respondents.
REGALADO, J.:
In this appeal by certiorari, petitioners assail the judgment of the Court of Appeals in CA-G.R. CV No. 49175 affirming the adjudication of the
Regional Trial Court of Malolos, Bulacan which found private respondent Narciso Deganos liable to petitioners for actual damages, but absolved
respondent spouses Brigida D. Luz and Ernesto M. Luz of liability. Petitioners likewise belabor the subsequent resolution of the Court of Appeals
which denied their motion for reconsideration of its challenged decision.
Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. Luz, also known as Aida D. Luz, was
their regular customer. On several occasions during the period from April 27, 1987 to September 4, 1987, respondent Narciso Deganos, the
brother of Brigida D. Luz, received several pieces of gold and jewelry from petitioners amounting to P382,816.00. 1These items and their prices
were indicated in seventeen receipts covering the same. Eleven of the receipts stated that they were received for a certain Evelyn Aquino, a
niece of Deganos, and the remaining six indicated that they were received for Brigida D. Luz. 2
Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. Deganos
remitted only the sum of P53,207.00. He neither paid the balance of the sales proceeds, nor did he return any unsold item to petitioners. By
January 1990, the
_______________
Rollo, 86.
Ibid., 203.
378
1
2
378
Bordador vs. Luz

total of his unpaid account to petitioners, including interest, reached the sum of P725,463.98. 3 Petitioners eventually filed a complaint in
the barangay court against Deganos to recover said amount.
In the barangay proceedings, Brigida D. Luz, who was not impleaded in the case, appeared as a witness for Deganos and ultimately, she
and her husband, together with Deganos, signed a compromise agreement with petitioners. In that compromise agreement, Deganos
obligated himself to pay petitioners, on installment basis, the balance of his account plus interest thereon. However, he failed to comply with
his aforestated undertakings.
On June 25, 1990, petitioners instituted Civil Case No. 412-M-90 in the Regional Trial Court of Malolos, Bulacan against Deganos and Brigida
D. Luz for recovery of a sum of money and damages, with an application for preliminary attachment. 4 Ernesto Luz was impleaded therein as
the spouse of Brigida.
Four years later, or on March 29, 1994, Deganos and Brigida D. Luz were charged with estafa 5 in the Regional Trial Court of Malolos,
Bulacan, which was docketed as Criminal Case No. 785-M-94. That criminal case appears to be still pending in said trial court.
During the trial of the civil case, petitioners claimed that Deganos acted as the agent of Brigida D. Luz when he received the subject items
of jewelry and, because he failed to pay for the same, Brigida, as principal, and her spouse are solidarily liable with him therefor.
On the other hand, while Deganos admitted that he had an unpaid obligation to petitioners, he claimed that the same was only in the sum
of P382,816.00 and not P725,463.98. He further asserted that it was he alone who was involved in the transaction with the petitioners; that he
neither acted as
_______________
Ibid., 85.
Ibid., 78-84.
5
Ibid., 111-112.
379
3
4
379
Bordador vs. Luz

agent for nor was he authorized to act as an agent by Brigida D. Luz, notwithstanding the fact that six of the receipts indicated that the items
were received by him for the latter. He further claimed that he never delivered any of the items he received from petitioners to Brigida.
Brigida, on her part, denied that she had anything to do with the transactions between petitioners and Deganos. She claimed that she
never authorized Deganos to receive any item of jewelry in her behalf and, for that matter, neither did she actually receive any of the articles
in question.
After trial, the court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while
Brigida D. Luz did have transactions with petitioners in the past, the items involved were already paid for and all that Brigida owed petitioners
was the sum of P21,483.00 representing interest on the principal account which she had previously paid for. 6
The trial court also found that it was petitioner Lydia Bordador who indicated in the receipts that the items were received by Deganos for
Evelyn Aquino and Brigida D. Luz. 7 Said court was persuaded that Brigida D. Luz was behind Deganos, but because there was no
memorandum to this effect, the agreement between the parties was unenforceable under the Statute of Frauds. 8 Absent the required
memoran_______________
6
7
8
Ibid., 85-97.
Ibid., 94.
Article 1403 of the Civil Code pertinently provides that the following contracts are unenforceable unless they are ratified:
1. 1.Those entered into in the name of another person by one who had been given no authority or legal representation, or who has acted
beyond his power.
2. 2.Those that do not comply with the Statute of Frauds as set forth in this number. In the following cases, an agreement hereafter made
shall be unenforceable by action, unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party
charged, or by his agent; evidence, therefore, of the agreement cannot be received without the writing or a secondary evidence of its
contents:
380
380
Bordador vs. Luz

dum or any written document connecting the respondent Luz spouses with the subject receipts, or authorizing Deganos to act on their behalf,
the alleged agreement between petitioners and Brigida D. Luz was unenforceable.
Deganos was ordered to pay petitioners the amount of P725,463.98, plus legal interest thereon from June 25, 1990, and attorneys fees.
Brigida D. Luz was ordered to pay P21,483.00 representing the interest on her own personal loan. She and her co-defendant spouse were
absolved from any other or further liability.9
As stated at the outset, petitioners appealed the judgment of the court a quo to the Court of Appeals which affirmed said judgment. 10 The
motion for reconsideration filed by petitioners was subsequently dismissed, 11 hence the present recourse to this Court.
The primary issue in the instant petition is whether or not herein respondent spouses are liable to petitioners for the latters claim for
money and damages in the sum of P725,463.98, plus interests and attorneys fees, despite the fact that the evidence does not show that they
signed any of the subject receipts or authorized Deganos to receive the items of jewelry on their behalf.
Petitioners argue that the Court of Appeals erred in adopting the findings of the court a quo that respondent spouses are not liable to them,
as said conclusion of the trial court is contradicted by the finding of fact of the appellate court that (Deganos) acted as agent of his sister
(Brigida
_______________
xxx
(b) A special promise to answer for the debt, default, or miscarriage of another;
x x x.
9
Rollo, 97.
Justice Maximiano C. Asuncion as ponente, with the concurrence of Justice Jesus M. Elbinias and Justice Ramon A. Barcelona of the
Eleventh Division of the Court of Appeals, affirmed the decision of the trial court in a decision dated July 9, 1997; Rollo, 9-13.
11
The resolution was dated August 18, 1997; Rollo, 70-A.
381
10
381
Bordador vs. Luz

Luz).12 In support of this contention, petitioners quoted several letters sent to them by Brigida D. Luz wherein the latter acknowledged her
obligation to petitioners and requested for more time to fulfill the same. They likewise aver that Brigida testified in the trial court that Deganos
took some gold articles from petitioners and delivered the same to her.
Both the Court of Appeals and the trial court, however, found as a fact that the aforementioned letters concerned the previous obligations
of Brigida to petitioners, and had nothing to do with the money sought to be recovered in the instant case. Such concurrent factual findings
are entitled to great weight, hence, petitioners cannot plausibly claim in this appellate review that the letters were in the nature of
acknowledgements by Brigida that she was the principal of Deganos in the subject transactions.
On the other hand, with regard to the testimony of Brigida admitting delivery of the gold to her, there is no showing whatsoever that her
statement referred to the items which are the subject matter of this case. It cannot, therefore, be validly said that she admitted her liability
regarding the same.
Petitioners insist that Deganos was the agent of Brigida D. Luz as the latter clothed him with apparent authority as her agent and held him
out to the public as such, hence Brigida can not be permitted to deny said authority to innocent third parties who dealt with Deganos under
such belief.13 Petition ers further represent that the Court of Appeals recognized in its decision that Deganos was an agent of Brigida. 14
The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz and that the latter should
consequently be held solidarily liable with Deganos in his obligation to petitioners. While the quoted statement in the findings of fact of the
assailed appellate decision men_______________
Rollo, 33-40.
Ibid., 40.
14
Ibid., 40-41.
382
12
13
382
Bordador vs. Luz

tioned that Deganos ostensibly acted as an agent of Brigida, the actual conclusion and ruling of the Court of Appeals categorically stated that,
(Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners x x x. 15 It is clear,
therefore, that even assuming arguendo that Deganos acted as an agent of Brigida, the latter never authorized him to act on her behalf with
regard to the transactions subject of this case.
The Civil Code provides:
Art. 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 basis for agency is representation. Here, there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her
behalf, much less with respect to the particular transactions involved. Petitioners attempt to foist liability on respondent spouses through the
supposed agency relation with Deganos is groundless and ill-advised.
Besides, it was grossly and inexcusably negligent of petitioners to entrust to Deganos, not once or twice but on at least six occasions as
evidenced by six receipts, several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. A
person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. 16
The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Luz.
Evidently, petitioners, who were negligent in their transactions with Deganos, cannot seek relief from the effects of their negligence by
conjuring a supposed agency relation between the two respondents where no evidence supports such claim.
_______________
Ibid., 12.
Toyota Shaw, Inc. vs. Court of Appeals, et al., G.R. No. 116650, May 23, 1995, 244 SCRA 320.
383
15
16
383
Bordador vs. Luz

Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court below, which it affirmed, is null and
void as it contradicted its ruling inCA-G.R. SP No. 39445 holding that there is sufficient evidence/proof against Brigida D. Luz and Deganos
for estafa in the pending criminal case. They further aver that said appellate court erred in ruling against them in this civil action since the
same would result in an inevitable conflict of decisions should the trial court convict the accused in the criminal case.
By way of backdrop for this argument of petitioners, herein respondents Brigida D. Luz and Deganos had filed a demurrer to evidence and
a motion for reconsideration in the aforestated criminal case, both of which were denied by the trial court. They then filed a petition for
certiorari in the Court of Appeals to set aside the denial of their demurrer and motion for reconsideration but, as just stated, their petition
therefor was dis-missed.17
Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G.R. SP No. 39445 with respect to the
criminal case is equivalent to a finding that there is sufficient evidence in the estafa case against Brigida D. Luz and Deganos. Hence, as
already stated, petitioners theorize that the decision and resolution of the Court of Appeals now being impugned in the case at bar would
result in a possible conflict with the prospective decision in the criminal case. Instead of promulgating the present decision and resolution
under review, so they suggest, the Court of Appeals should have awaited the decision in the criminal case, so as not to render academic or
preempt the same or, worse, create two conflicting rulings. 18
Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving alleged fraudulent acts, a civil
action for damages, entirely separate and distinct from the criminal action, may be brought by the
_______________
Rollo, 128-131.
Ibid., 41.
384
17
18
384
Bordador vs. Luz
injured party. Such civil action shall proceed independently of the criminal prosecution and shall require only a preponderance of evidence.
It is worth noting that this civil case was instituted four years before the criminal case for estafa was filed, and that although there was a
move to consolidate both cases, the same was denied by the trial court. Consequently, it was the duty of the two branches of the Regional
Trial Court concerned to independently proceed with the civil and criminal cases. It will also be observed that a final judgment rendered in a
civil action absolving the defendant from civil liability is no bar to a criminal action. 19
It is clear, therefore, that this civil case may proceed independently of the criminal case 20 especially because while both cases are based on
the same facts, the quantumof proof required for holding the parties liable therein differ. Thus, it is improvident of petitioners to claim that the
decision and resolution of the Court of Appeals in the present case would be preemptive of the outcome of the criminal case. Their fancied fear
of possible conflict between the disposition of this civil case and the outcome of the pending criminal case is illusory.
Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial resolution dated August 18, 1997, as
the same was tainted with irregularities and badges of fraud perpetrated by its court officers. 21 They charge that said appellate court, through
conspiracy and fraud on the part of its officers, gravely abused its discretion in issuing that resolution denying their motion for reconsideration.
They claim that said resolution was drafted by the ponente, then signed and issued by the members of the Eleventh Division of said court
within one and a half days from
_______________
Section 4, Rule 111, Rules of Court.
Salta vs. De Veyra, etc., et al., L-37733 and Philippine National Bank vs. Purisima, etc., et al., L-38035, jointly decided on September 30,
1992,117 SCRA 212.
21
Rollo, 47.
385
19
20
385
Bordador vs. Luz

the elevation thereof by the division clerk of court to the office of the ponente.
It is the thesis of petitioners that there was undue haste in issuing the resolution as the same was made without waiting for the lapse of the
ten-day period for respondents to file their comment and for petitioners to file their reply. It was allegedly impossible for the Court of Appeals
to resolve the issue in just one and a half days, especially because its ponente, the late Justice Maximiano C. Asuncion, was then recuperating
from surgery and, that, additionally, hundreds of more important cases were pending. 22
These lamentable allegation of irregularities in the Court of Appeals and in the conduct of its officers strikes us as a desperate attempt of
petitioners to induce this Court to give credence to their arguments which, as already found by both the trial and intermediate appellate
courts, are devoid of factual and legal substance. The regrettably irresponsible attempt to tarnish the image of the intermediate appellate
tribunal and its judicial officers through ad hominem imputations could well be contumacious, but we are inclined to let that pass with a strict
admonition that petitioners refrain from indulging in such conduct in litigations.
On July 9, 1997, the Court of Appeals rendered judgment in this case affirming the trial courts decision. 23Petitioners moved for
reconsideration and the Court of Appeals ordered respondents to file a comment. Respondents filed the same on August 5, 1997 24 and
petitioners filed their reply to said comment on August 15, 1997. 25 The Eleventh Division of said court issued the questioned resolution
denying petitioners motion for reconsideration on August 18, 1997. 26
It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases, petitioners
_______________
Ibid.,
Ibid.,
24
Ibid.,
25
Ibid.,
26
Ibid.,
386
22
23
386
48.
9-13.
160-167.
178-182.
70-A.
Bordador vs. Luz

are making a show of calling out for justice because the Court of Appeals issued a resolution disposing of a case sooner than expected of it.
They would even deny the exercise of discretion by the appellate court to prioritize its action on cases in line with the procedure it has adopted
in disposing thereof and in declogging its dockets. It is definitely not for the parties to determine and dictate when and how a tribunal should
act upon those cases since they are not even aware of the status of the dockets and the internal rules and policies for acting thereon.
The fact that a resolution was issued by said court within a relatively short period of time after the records of the case were elevated to the
office of the ponente cannot, by itself, be deemed irregular. There is no showing whatsoever that the resolution was issued without considering
the reply filed by petitioners. In fact, that brief pleading filed by petitioners does not exhibit any esoteric or ponderous argument which could
not be analyzed within an hour. It is a legal presumption, born of wisdom and experience, that official duty has been regularly
performed;27 that the proceedings of a judicial tribunal are regular and valid, and that judicial acts and duties have been and will be duly and
properly performed.28 The burden of proving irregularity in official conduct lies on the part of petitioners and they have utterly failed to do so. It
is thus reprehensible for them to cast aspersions on a court of law on the bases of conjectures or surmises, especially since one of the
petitioners appears to be a member of the Philippine Bar.
Lastly, petitioners fault the trial courts holding that whatever contract of agency was established between Brigida D. Luz and Narciso
Deganos is unenforceable under the Statute of Frauds as that aspect of this case allegedly is not covered
_______________
Section 3(m), Rule 131, Rules of Court.
Section 3(n), Rule 131, Rules of Court provides that it is presumed that a court, or judge acting as such, whether in the Philippines or
elsewhere, was acting in the lawful exercise of jurisdiction.
387
27
28
387
Bordador vs. Luz

thereby.29 They proceed on the premise that the Statute of Frauds applies only to executory contracts and not to executed or to partially
executed ones. From there, they move on to claim that the contract involved in this case was an executed contract as the items had already
been delivered by petitioners to Brigida D. Luz, hence, such delivery resulted in the execution of the contract and removed the same from the
coverage of the Statute of Frauds.
Petitioners claim is speciously unmeritorious. It should be emphasized that neither the trial court nor the appellate court categorically
stated that there was such a contractual relation between these two respondents. The trial court merely said that if there was such an agency
existing between them, the same is unenforceable as the contract would fall under the Statute of Frauds which requires the presentation of a
note or memorandum thereof in order to be enforceable in court. That was merely a preparatory statement of a principle of law. What was
finally proven as a matter of fact is that there was no such contract between Brigida D. Luz and Narciso Deganos, executed or partially
executed, and no delivery of any of the items subject of this case was ever made to the former.
WHEREFORE, no error having been committed by the Court of Appeals in affirming the judgment of the court a quo, its challenged decision
and resolution are hereby AFFIRMED and the instant petition is DENIED, with double costs against petitioners.
SO ORDERED.
Puno, Mendoza and Martinez, JJ., concur.
Petition denied; Challenged decision and resolution affirmed.
Notes.Presumption of regularity in the performance of official functions does not apply where it is patent that the
_______________
Rollo, 52.
388
29
388
Office of the Court Administrator vs. Ferrer

sheriffs return is defective. (Laus vs. Court of Appeals, 219 SCRA 688 [1993])
Suspicions and conjectures cannot overcome, in the absence of contrary proof, the disputable presumption that official duties have been
regularly performed. (The New Testament Church of God vs. Court of Appeals, 246 SCRA 266 [1995])
It is axiomatic that a decision of a lower court cannot be reversed for its failure to consider evidence which was not even presented by the
parties; Reliance on the presumption of regularity in the performance of official duties falls in the face of a serious imputation on noncompliance. (Pulido vs. Court of Appeals, 251 SCRA 673 [1995])
288
Dizon vs. Court of Appeals
G.R. No. 122544. January 28, 1999.*

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., petitioners,vs. COURT OF APPEALS and OVERLAND EXPRESS LINES, INC., respondents.
G.R. No. 124741. January 28, 1999.*
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., petitioners,vs. COURT OF APPEALS, HON. MAXIMIANO C. ASUNCION, and OVERLAND EXPRESS
LINES, INC., respondents.
Actions; Leases; Where the rentals are paid monthly, the lease, even if verbal may be deemed to be on a monthly basis, expiring at the
end of every month pursuant to Article 1687, in relation to Article 1673 of the Civil Code, and in such case, a demand to vacate is not even
necessary for judicial action after the expiration of every month.Admittedly, no definite period beyond the one-year term of lease was
agreed upon by petitioners and private respondent. However, since the rent was paid on a monthly basis, the period of lease is considered to
be from month to month in accordance with Article 1687 of the New Civil Code. Where the rentals are paid monthly, the lease, even if verbal
may be deemed to be on a monthly basis, expiring at the end of every month pursuant to Article 1687, in relation to Article 1673 of the Civil
Code. In such case, a demand to vacate is not even necessary for judicial action after the expiration of every month.
Same; Same; Options to Purchase; Ejectment; Specific Performance; Jurisdiction; The filing by the lessee of a suit with the Regional Trial
Court for specific performance to enforce the option to purchase does not divest the then City Court of its jurisdiction to take cognizance of
the ejectment case.When private respondent failed to
________________
*
FIRST DIVISION.
289
VOL. 302, JANUARY 28, 1999
289
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
private respondent of a suit with the Regional Trial Court 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
the Intermediate Appellate Court and this Court.
Same; Same; Same; Where a lessee fails to exercise the option to purchase within the stipulated period, he cannot enforce such option
anymore.Having failed to exercise the option within the stipulated one-year period, private respondent cannot enforce its option to purchase
anymore. Moreover, even assuming arguendothat the right to exercise the option still subsists at the time private respondent 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
ten (10) years after accrual of the cause of action as provided under Article 1144 of the New Civil Code.
Contracts; Leases; Options to Purchase; The other terms of the original contract of lease which are revived in the implied new lease
under Article 1670 of the New Civil Code are only those terms which are germane to the lessees right of continued enjoyment of the property
leasedan implied new lease does not ipso facto carry with it any implied revival of any option to purchase the leased premises.In this case,
there was a contract of lease for one (1) year with option to purchase. The contract of lease expired without the private respondent, 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.
The other terms of the original contract of lease which are revived in the implied new lease under Article 1670 of the New Civil Code are only
those terms which are germane to the lessees right of continued enjoyment of the property leased. Therefore, an implied new lease does
not ipso facto carry with it any implied revival of private respondents option to purchase (as lessee thereof) the leased premises. The
provision entitling the lessee the option to purchase the leased premises is not deemed incorporated in the impliedly renewed contract
because it is alien to the possession of the lessee.
290
90
Same; Same; Same; Presumptions; 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.Private respondents right to exercise the option to purchase
expired with the termination of the original contract of lease for one year. The rationale of this Court is that: 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 paidin 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.
Same; Sales; Sale is a consensual contract and he who alleges it must show its existence by competent proof.Under Article 1475 of the
New Civil Code, the contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract
and upon the price. From that moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the
form of contracts. Thus, the elements of a contract of sale are consent, object, and price in money or its equivalent. It bears stressing that the
absence of any of these essential elements negates the existence of a perfected contract of sale. Sale is a consensual contract and he who
alleges it must show its existence by competent proof.
Same; Same; Agency; 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.In an attempt to resurrect the lapsed option, private respondent gave P300,000.00 to petitioners
(thru Alice A. Dizon) on the erroneous presumption that the said
291
VOL. 302, JANUARY 28, 1999
291
amount tendered would constitute a perfected contract of sale pursuant to the contract of lease with option to buy. 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, and private respondent. 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. As provided in Article 1868 of the New Civil Code, 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 private respondent. The
most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. Dizon. Being negligent in this
regard, private respondent cannot seek relief on the basis of a supposed agency.
PETITIONS for review on certiorari of the decisions and resolutions of the Court of Appeals.
M.M. Lazaro & Associates for petitioners.
Alexander G. Castro for private respondents.

MARTINEZ, J.:
Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of respondent Court of Appeals.
What seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which finally found its way to this Court.
G.R. No. 122544:
On May 23, 1974, private respondent Overland Express Lines, Inc. (lessee) entered into a Contract of Lease with Option to Buy with
petitioners1 (lessors) involving a 1,755.80 square meter parcel of land situated at corner MacArthur
_______________
1
The original petitioners were Fidela P. Dizon, Regina Dizon, Amparo D. Bartolome, Ester A. Dizon, Alice A. Dizon and Fidelina D. Balza.
292
292
Highway and South H Street, Diliman, Quezon City. The term of the lease was for one (1) year commencing from May 16, 1974 up to May 15,
1975. During this period, private respondent was granted an option to purchase for the amount of P3,000.00 per square meter. Thereafter, the
lease shall be on a per month basis with a monthly rental of P3,000.00.
For failure of private respondent to pay the increased rental of P8,000.00 per month effective June 1976, petitioners filed an action for
ejectment (Civil Case No. VIII-29155) on November 10, 1976 before the then City Court (now Metropolitan Trial Court) of Quezon City, Branch
VIII. On November 22, 1982, the City Court rendered judgment 2 ordering private respondent to vacate the leased premises and to pay the sum
of P624,000.00 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 November 1982 at the monthly rental of P8,000.00, less payments made, plus
12% interest per annum from November 18, 1976, the date of filing of the complaint, until fully paid, the sum of P8,000.00 a month starting
December 1982, until private respondent fully vacates the premises, and to pay P20,000.00 as and by way of attorneys fees.
Private respondent 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.
On September 26, 1984, the then Intermediate Appellate Court3 (now Court of Appeals) rendered a decision4 stating that:
________________
2
Per Judge Fernando Gorospe, Jr.
The Intermediate Appellate Court took cognizance over the case after it was referred by the Supreme Court.
Penned by Justice Simeon M. Gopengco and concurred in by Justices Lino M. Patajo, Jose F. Racela, Jr. and Fidel P. Purisima; Annex A of
Petition; Rollo, p. 60.
4
293
VOL. 302, JANUARY 28, 1999
293
x x x, the alleged question of whether petitioner was granted an extension of the option to buy the property; whether such option, if any,
extended the lease or whether petitioner actually paid the alleged P300,000.00 to Fidela Dizon, as representative of private respondents in
consideration of the option and, whether petitioner 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 respondent court. In consonance with the ruling in the case of
Teodoro, Jr. vs. Mirasol (supra), 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. (Original Records, pp. 38-39).
The motion for reconsideration was denied. On review, this Court dismissed the petition in a resolution dated June 19, 1985 and likewise
denied private respondents subsequent motion for reconsideration in a resolution dated September 9, 1985. 5
On October 7, 1985, private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. Q-45541) 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. It sought 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. In an Order dated October 25, 1985, the trial court denied the issuance of a writ of
preliminary injunction on the ground that the decision of the then City Court for the ejectment of the private respondent, having been affirmed
by the then
________________
5
Whatever claims petitioner (private respondent herein) may have as to what it allegedly paid to and received by private respondent
Fidela Dizon, under the receipt issued by Mrs. Alicia Dizon, or with regard to the enforceability or non-enforceability of its stated option to buy,
against the private respondents (petitioners herein), which were matters merely raised as defenses of the petitioner in the unlawful detainer
suit filed against it may be better presented for ultimate resolution in a separate suit and before the proper forum; Annex A of Petition
in G.R. No. 124741; Rollo, p. 48.
294
294
Intermediate Appellate Court and the Supreme Court, has become final and executory.
Unable to secure an injunction, private respondent also filed before the RTC of Quezon City, Branch 102 ( Civil Case No. Q-46487) on
November 15, 1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. In its decision 6 dated May 12, 1986,
the trial court dismissed the complaint for annulment on the ground of res judicata, and the writ of preliminary injunction previously issued
was dissolved. It also ordered private respondent to pay P3,000.00 as attorneys fees. As a consequence of private respondents motion for
reconsideration, the preliminary injunction was reinstated, thereby restraining the execution of the City Courts judgment on the ejectment
case.
The two cases were thereafter consolidated before the RTC of Quezon City, Branch 77. On April 28, 1989, a decision 7 was rendered
dismissing private respondents complaint in Civil Case No. Q-45541 (specific performance case) and denying its motion for reconsideration
in Civil Case No. 46487 (annulment of the ejectment case). The motion for reconsideration of said decision was likewise denied.
On appeal,8 respondent Court of Appeals rendered a decision 9 upholding the jurisdiction of the City Court of Quezon City in the ejectment
case. It also concluded that there was a perfected contract of sale between the parties on the leased premises and that pursuant to the option
to buy agreement, private respondent had acquired the rights of a vendee in a contract of sale. It opined that the payment by private re______________
6
Per Judge Wilhelmo C. Fortun.
Per Judge Ignacio L. Salvador.
8
Docketed as CA-G.R. CV Nos. 25153-54, entitled OVERLAND EXPRESS LINES, INC., Plaintiff-Appellant vs. FIDELA P. DIZON, ET AL.,
Defendants-Appellees.
9
CA Decision (Eighth Division) dated March 29, 1994, penned by Justice Eubulo G. Verzola, and concurred in by Justice Ricardo J. Francisco,
Chairman and Justice Serafin V.C. Guingona; Annex A of Petition; Rollo, pp. 57-72.
295
VOL. 302, JANUARY 28, 1999
295
spondent of P300,000.00 on June 20, 1975 as partial payment for the leased property, which petitioners 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, and that for failure of petitioners to
deny receipt thereof, private respondent can therefore assume that Alice A. Dizon, acting as agent of petitioners, was authorized by them to
receive the money in their behalf. The Court of Appeals went further by stating that in fact, 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. Since
private respondent 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. The dispositive portion of said decision
reads:
WHEREFORE, the appealed decision in Case No. 46487 is AFFIRMED. The appealed decision in Case No. 45541 is, on the other hand,
ANNULLED and SET ASIDE. The defendants-appellees are ordered to execute the deed of absolute sale of the property in question, free from
any lien or encumbrance whatsoever, in favor of the plaintiff-appellant, and to deliver to the latter the said deed of sale, as well as the owners
duplicate of the certificate of title to said property upon payment of the balance of the purchase price by the plaintiff-appellant. The plaintiffappellant is ordered to pay P1,700.00 per month from June 1976, plus 6% interest per annum, until payment of the balance of the purchase
price, as previously agreed upon by the parties.
SO ORDERED.
Upon denial of the motion for partial reconsideration (Civil Case No. Q-45541) by respondent Court of Appeals,10petition______________
10
CA Resolution (Thirteenth Division) dated October 19, 1995, penned by Justice Eubulo G. Verzola, and concurred in by Justice Justo P.
Torres, Jr., Chairman and Justice Oswaldo D. Agcaoili; Annex B of Petition; Rollo, pp. 74-78.
296
296
ers elevated the case via petition for certiorari questioning the authority of Alice A. Dizon as agent of petitioners in receiving private
respondents partial payment amounting to P300,000.00 pursuant to the Contract of Lease with Option to Buy. Petitioners also assail the
propriety of private respondents 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:
Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 38-29155(ejectment case) to the
Metropolitan Trial Court (MTC), then City Court of Quezon City, Branch 38, for execution of the judgment 11 dated November 22, 1982 which was
granted in a resolution dated June 29, 1992. Private respondent filed a motion to reconsider said resolution which was denied.
Aggrieved, private respondent filed a petition forcertiorari, prohibition with preliminary injunction and/or restraining order with this Court
(G.R. Nos. 106750-51) which was dismissed in a resolution dated September 16, 1992 on the ground that the same was a refiled case
previously dismissed for lack of merit. On November 26, 1992, entry of judgment was issued by this Court.
On July 14, 1993, petitioners filed an urgent ex-partemotion for execution of the decision in Civil Case No. 38-29155 with the MTC of
Quezon City, Branch 38. On September 13, 1993, the trial court ordered the issuance of a third alias writ of execution. In denying private
respondents motion for reconsideration, it ordered the immediate implementation of the third writ of execution without delay.
On December 22, 1993, private respondent filed with the Regional Trial Court (RTC) of Quezon City, Branch 104 a petition for certiorari and
prohibition with preliminary in_______________
11
See note 2.
297
VOL. 302, JANUARY 28, 1999
297
junction/restraining order (SP. PROC. No. 93-18722) challenging the enforceability and validity of the MTC judgment as well as the order for its
execution.
On January 11, 1994, RTC of Quezon City, Branch 104 issued an order 12 granting the issuance of a writ of preliminary injunction upon
private respondents posting of an injunction bond of P50,000.00.
Assailing the aforequoted order after denial of their motion for partial reconsideration, petitioners filed a petition 13 for certiorari and
prohibition with a prayer for a temporary restraining order and/or preliminary injunction with the Court of Appeals. In its decision, 14 the Court of
Appeals dismissed the petition and ruled that:
_________________
12
Per Judge Maximiano C. Asuncion, ruling that:
After evaluating the evidence and arguments presented by the parties during the hearing of this case, the Court believes that the
petitioner (herein private respondent) will suffer an irreparable injury unless a writ of preliminary injunction be issued enjoining the
respondents (herein petitioners) or any person acting in their behalf from implementing the execution of the Judgment and the Resolution of
the MTC, Br. 38 of Quezon City. Likewise, in view of the pendency of cases before the Court of Appeals under CA-G.R. Nos. 25153-54 for
Specific Performance and for Annulment and Relief of Judgment, following the ruling of Supreme Court in the case of Vda. de Sayman vs. Court
of Appeals, 121 SCRA 650. That it is the rule when a petition for relief is filed, the Court may issue preliminary injunction as may be necessary
for the preservation of the rights of the parties. Further, it said that The judgment of the trial court, the enforcement of which is sought to be
restrained has not yet attained the status of being beyond modification or reversal. Hence, the enforcement of the same at this stage of the
proceedings is premature. (Annex A of Petition; Rollo, pp. 50-51).
Docketed as CA-G.R. SP No. 33113, entitled AMPARO DIZON, ET AL., Petitioners vs. HON. MAXIMIANO C. ASUNCION, as RTC Judge of
Quezon City, Branch 104 and OVERLAND EXPRESS LINES, INC., Respondents.
13
14
CA Decision (Thirteenth Division) dated December 11, 1995, penned by Justice Eubulo G. Verzola, and concurred in by Justice
298
298
The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of the private respondent. To grant the
petition would be to allow the ejectment of the private respondent. We cannot do that now in view of the decision of this Court in CA-G.R. CV
Nos. 25153-54. Petitioners alleged right to eject private respondent has been demonstrated to be without basis in the said civil case. The
petitioners have been shown, after all, to have no right to eject private respondents.
WHEREFORE, the petition is DENIED due course and is accordingly DISMISSED.
SO ORDERED.15
Petitioners motion for reconsideration was denied in a resolution 16 by the Court of Appeals stating that:
This court in its decision in CA-G.R. CV Nos. 25153-54 declared that the plaintiff-appellant (private respondent herein) acquired the rights of a
vendee in a contract of sale, in effect, recognizing the right of the private respondent to possess the subject premises. Considering said
decision, we should not allow ejectment; to do so would disturb the status quo of the parties since the petitioners are not in possession of the
subject property. It would be unfair and unjust to deprive the private respondent of its possession of the subject property after its rights have
been established in a subsequent ruling.
____________
Justo P. Torres, Jr., Chairman and Justice Oswaldo D. Agcaoili; Annex A of Petition; Rollo, pp. 46-53.
NOTE: CA-G.R. SP No. 33113 was transferred to the Thirteenth Division by virtue of the Resolution from the Fifteenth Division dated January
16, 1994 (pursuant to Section 7, Rule 3 of the Revised Internal Rules of the Court of Appeals) which states that a Special Case may be
consolidated to the Justice to whom the civil case is assigned for study or report when the cases involve the same parties and/or related
questions of fact and/or law.
15
Ibid., Rollo, p. 52.
CA Resolution (Special Former Thirteenth Division) dated April 23, 1997, penned by Justice Eubulo G. Verzola, and concurred in by Justice
Jaime M. Lantin (New member vice J. Torres, Jr.) and Justice B.A. Adefuin-dela Cruz (Vice J. Agcaoili, pursuant to Office Order No. 19-96-DP);
Annex B of Petition; Rollo, pp. 55-57.
16
299
VOL. 302, JANUARY 28, 1999
299
WHEREFORE, the motion for reconsideration is DENIED for lack of merit.

SO ORDERED.17
Hence, this instant petition.

We find both petitions impressed with merit.
First. Petitioners have established a right to evict private respondent from the subject premises for non-payment of rentals. The term of the
Contract of Lease with Option to Buy was for a period of one (1) year (May 16, 1974 to May 15, 1975) during which the private respondent was
given an option to purchase said property at P3,000.00 per square meter. After the expiration thereof, the lease was for P3,000.00 per month.
Admittedly, no definite period beyond the one-year term of lease was agreed upon by petitioners and private respondent. However, since
the rent was paid on a monthly basis, the period of lease is considered to be from month to month in accordance with Article 1687 of the New
Civil Code.18 Where the rentals are paid monthly, the lease, even if verbal
Rallos vs. Felix Go Chan & Sons Realty Corporation
No. L-24332. January 31, 1978.*

RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner, vs. FELIX GO CHAN & SONS REALTY CORPORATION and COURT
OF APPEALS, respondents.
Agency, its concept, essential elements and characteristics.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 essential elements of agency are:(l) there is
consent, express or implied, of the parties to establish the relationship: (2) the object is the execution of a juridical act in relation to a third
person; (3) the agent acts as a representative and not for himself; and (4) the agent acts within the scope of his authority. Agency is basically
personal, representative, and derivative in nature. 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.
______________
*
FIRST DIVISION.
252
52
Same: Same; Art. 1930 and Art. 1931 of the Civil Code providing that death of principal or agent extinguishing agency is only a general
rule; Rationale for the provision.Reason of the very nature of the relationship between principal and agent, agency is extinguished by the
death of the principal. Manresa explains that the rationale for the law is found in the juridical basis of agency which is representation. Laurent
says that the juridical tie between the principal and the agent is severed ipso jure upon the death of either without necessity for the heirs of
the principal to notify the agent of the fact of death of the former. The same rule prevails at common lawthe death of the principal effects
instantaneous and absolute revocation of the authority of the agent unless the power be coupled with an interest. This is the prevalent rule in
American jurisprudence where it is well-settled that a power without an interest conferred upon an agent is dissolved by the principals death,
and any attempted execution of the power afterwards is not binding on the heirs or representatives of the deceased.
Same; Same; Art. 1930 and Art. 1931 of the Civil Code exceptions to general rule provided in Art. 1919 of the Civil Code, that death of
principal revokes ipso jure the agency.Is the general rule provided for in Art. 1919 that the death of the principal or of the agent extinguishes
the agency, subject to any exception, and if so, is the instant case within that exception? That is the determinative point in issue in this
litigation x x x Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
Same; Same; Same; Contention that despite death of principal the act of attorney-in-fact in selling his principals share of the disputed
property is valid and enforceable since the buyer acted in good faith is untenable because of the established knowledge of the attorney-in-fact
of the death of his principal; Requisites of Art. 1931 that despite death of principal and of agent is valid not complied with. Under Art. 1931 of
the Civil Code, an act done by the agent after the death of his principal is valid and effective only under two conditions, viz: (1) that the agent
acted without knowledge of the death of the principal, and (2) that the third person who contracted with the agent himself acted in good faith.
Good faith here means that the third person was not aware of the death of the principal at the time he contracted with said agent. These two
requisites must concur: the absence of one will render the act of the agent invalid and unenforceable. In the instant case, it cannot be
questioned that the agent Simeon Rallos knew of the death of his principal at the time he
253
VOL. 81, JANUARY 31, 1978
253
sold the latters share in Lot No. 5983 to respondent corporation. x x x On the basis of the established knowledge of Simeon Rallos
concerning the death of his principal, Concepcion Rallos, Article 1931 of the Civil Code is inapplicable. The law expressly requires for its
application lack of knowledge on the part of the agent of the death of his principal; it is not enough that the third person acted in good faith.
Same; Same; Same; Same; General rule is that an act of agent after death of his principal is void ab initio unless the same falls under
exceptions in Arts. 1930 and 1931 of the Civil Code; Art 1931 being an exception to the general rule is to be strictly construed .In sustaining
the validity of the sale to respondent corporation, the Court of Appeals reasoned out that there is no provision in the Civil Code which provides
that whatever is done by an agent having knowledge of the death of his principal is void even with respect to third persons who may have
contracted with him in good faith and without knowledge of the death of the principal. We cannot see the merits of the foregoing argument as
it ignores the existence of the general rule enunciated in Art. 1919 that the death of the principal extinguishes the agency. That being the
general rule it follows a fortiori that any act of an agent after the death of his principal is void ab initio unless the same falls under the
exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931, being an exception to the general rule, is to be strictly
construed; it is not to be given an interpretation or application beyond the clear import of its terms for otherwise the courts will be involved in
a process of legislation outside of their judicial function.
Same; Same; Revocation by an act of the principal as a mode of terminating agency distinguished from revocation by operation of law
such as death of principal.Revocation by an act of the principal as a mode of terminating an agency is to be distinguished from revocation by
operation of law such as death of the principal which obtains in this case. The decision stressed that by reason of the very nature of the
relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal or agent. Although a revocation of
a power of attorney to be effective must be communicated to the parties concerned, yet a revocation by operation of law, such as by death of
the principal is, as a rule, instantaneously effective inasmuch as by legal fiction the agents exercise of authority is regarded as an execution
of the principals continuing will. With death, the principals will ceases or is terminated; the source of authority is extinguished.
254
54
Same; Same; Law does not impose a duty on the heirs of principal to notify agent of death of principal; If agent dies, his heirs must notify
principal thereof.The Civil Code does not impose a duty on the heirs of the principal to notify the agent of the death of said principal. What
the Code provides in Article 1932 is that, if the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such
measures as the circumstances may demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was
registered on the certificate of title of the property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal.
Same; Same; No parallel can be drawn between the case of attorney-in-fact who after death of his principal sold the latters share in the
land pursuant to a special power of attorney which the principal had executed in his favor and that of an innocent purchaser for value of
registered land.Holding that the good faith of a third person in dealing with an agent affords the former sufficient protection, respondent
court drew a parallel between the instant case and that of an innocent purchaser for value of a registered land, stating that if a person
purchases a registered land from one who acquired it in bad faitheven to the extent of forging or falsifying the deed of sale in his favorthe
registered owner has no recourse against such innocent purchaser for value but only against the forger. To support the correctness of this
parallelism, respondent corporation, in its brief, cites the case of Blondeau, et al. vs. Nano and Vallejo, 61 Phil. 625. x x x
TheBlondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who admittedly was an
agent of his sister and who sold the property of the latter after her death with full knowledge of such death. The situation is expressly covered
by a provision of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in
the same manner that the ruling in Blondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law.
Same; Same; Conflict of legal opinion in American jurisprudence does not hold true in Philippine law; Civil Code of the Philippines
expressly provides for two exceptions to general rule that death of the principal revokes the agency; Agents act of executing the sale of
property despite notice of death of his principal is unenforceable against the estate of the principal.One last point raised by respondent
corporation in support of the appealed decision is an 1842 ruling of the
255
255
Supreme Court of Pennsylvania in Cassiday v. McKenzie wherein payments made to an agent after the death of the principal were held to
be good, the parties being ignorant of the death. Let us take note that the Opinion of Justice Rogers was premised on the statement that
the parties were ignorant of the death of the principal. x x x To avoid any wrong impression which the Opinion in Cassiday v. McKenzie may
evoke, mention may be made that the above represents the minority view in American jurisprudence. x x x Whatever conflict of legal opinion
was generated by Cassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the simple reason that our statute,
the Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency, to wit: (1)
that the agency is coupled with an interest (Art. 1930), and (2) that the act of the agent was executed without knowledge of the death of the
principal and the third person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed
in Cassiday, and again We stress the indispensable requirementthat the agent acted without knowledge or notice of the death of the
principal. In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal. Accordingly, the
agents act is unenforceable against the estate of his principal.
PETITION for review on certiorari of the decision of the Court of Appeals.
Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
MUOZ PALMA, J.:
This is a case of an attorney-in-fact, Simeon Rallos, who after the death of his principal, Concepcion Rallos, sold the latters undivided share in
a parcel of land pursuant to a special power of attorney which the principal had executed in his favor. The administrator of the estate of the
deceased principal went to court to have the sale declared unenforceable and to recover the disposed share. The trial court granted the relief
prayed for, but upon appeal, the Court of Appeals upheld the validity of the sale and dismissed the complaint.
Hence, this Petition for Review on certiorari.
256
256
The following facts are not disputed. Concepcion and Gerundia both surnamed Rallos were sisters and registered co-owners of a parcel of land
known as Lot No. 5983 of the Cadastral Survey of Cebu covered by Transfer Certificate of Title No. 11118 of the Registry of Cebu. On April 21,
1954, the sisters executed a special power of attorney in favor of their brother, Simeon Rallos, authorizing him to sell for and in their behalf lot
5983. On March 3, 1955, Concepcion Rallos died. On September 12, 1955, Simeon Rallos sold the undivided shares of his sisters Concepcion
and Gerundia in lot 5983 to Felix Go Chan & Sons Realty Corporation for the sum of P10,686.90. The deed of sale was registered in the
Registry of Deeds of Cebu, TCT No. 11118 was cancelled, and a new Transfer Certificate of Title No. 12989 was issued in the named of the
vendee.
On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a complaint docketed as Civil Case No. R4530 of the Court of First Instance of Cebu, praying (1) that the sale of the undivided share of the deceased Concepcion Rallos in lot 5983 be
declared unenforceable, and said share be reconveyed to her estate; (2) that the Certificate of Title issued in the name of Felix Go Chan &
Sons Realty Corporation be cancelled and another title be issued in the names of the corporation and the Intestate estate of Concepcion
Rallos in equal undivided shares; and (3) that plaintiff be indemnified by way of attorneys fees and payment of costs of suit. Named party
defendants were Felix Go Chan & Sons Realty Corporation, Simeon Rallos, and the Register of Deeds of Cebu, but subsequently, the latter was
dropped from the complaint. The complaint was amended twice; defendant Corporations Answer contained a cross-claim against its codefendant, Simeon Rallos, while the latter filed third-party complaint against his sister, Gerundia Rallos. While the case was pending in the trial
court, both Simeon and his sister Gerundia died and they were substituted by the respective administrators of their estates.
After trial, the court a quo rendered judgment with the following dispositive portion:
257
257
1. A.On Plaintiffs Complaint

1. (1)Declaring the deed of sale, Exh. C, null and void insofar as the one-half pro-indiviso share of Concepcion Rallos in the property in
question,Lot 5983 of the Cadastral Survey of Cebuis concerned;
2. (2)Ordering the Register of Deeds of Cebu City to cancel Transfer Certificate of Title No. 12989 covering Lot 5983 and to issue in lieu
thereof another in the names of FELIX GO CHAN & SONS REALTY CORPORATION and the Estate of Concepcion Rallos in the proportion
of one-half (1/2) share each pro-indiviso;
3. (3)Ordering Felix Go Chan & Sons Realty Corporation to deliver the possession of an undivided one-half (1/2) share of Lot 5983 to the
herein plaintiff;
4. (4)Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to plaintiff in concept of reasonable
attorneys fees the sum of P1,000.00; and
5. (5)Ordering both defendants to pay the costs jointly and severally.
1. B.On GO CHANS Cross-claim:
1. (1)Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay to defendant Felix Go Chan &
Sons Realty Corporation the sum of P5,343.45, representing the price of one-half (1/2) share of lot 5983;
2. (2)Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay in concept of reasonable attorneys
fees to Felix Go Chan & Sons Realty Corporation the sum of P500.00.
1. C.On Third-Party Complaint of defendant Juan T. Borromeo administrator of Estate of Simeon Rallos, against Josefina Rallos, special
administratrix of the Estate of Gerundia Rallos:
1. (1)Dismissing the third-party complaint without prejudice to filing either a complaint against the regular administrator of the Estate of
Gerundia Rallos or a claim in the Intestate-Estate of Gerundia Rallos, covering the same subject-matter of the third-party complaint,
at bar. (pp. 98-100, Record on Appeal)
258
258
Felix Go Chan & Sons Realty Corporation appealed in due time to the Court of Appeals from the foregoing judgment insofar as it set aside the
sale of the one-half (1/2) share of Concepcion Rallos. The appellate tribunal, as adverted to earlier, resolved the appeal on November 20, 1964
in favor of the appellant corporation sustaining the sale in question. 1 The appellee-administrator, Ramon Rallos, moved for a reconsideration of
the decision but the same was denied in a resolution of March 4, 1965. 2
What is the legal effect of an act performed by an agent after the death of his principal? Applied more particularly to the instant case, We
have the query: is the sale of the undivided share of Concepcion Rallos in lot 5983 valid although it was executed by the agent after the death
of his principal? What is the law in this jurisdiction as to the effect of the death of the principal on the authority of the agent to act for and in
behalf of the latter? Is the fact of knowledge of the death of the principal a material factor in determining the legal effect of an act performed
after such death?
Before proceeding to the issues, We shall briefly restate certain principles of law relevant to the matter under consideration.
1. It is a basic axiom in civil law embodied in our Civil Code that no one may contract in the name of another without being authorized by
the latter, or unless he has by law a right to represent him. 3 A contract entered into in the name of another by one who has no authority or
legal representation, or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or impliedly, by the person on
whose behalf it has been executed, before it is revoked by the other contracting party. 4 Article 1403 (1) of the same Code also provides:
ART. 1403. The following contracts are unenforceable, unless they are justified:
______________
p. 40, rollo
p. 42, ibid.
Art. 1317, Civil Code of the Philippines
Ibid.
259
259
(1) Those entered into in the name of another person by one who has been given no authority or legal representation or who has acted
beyond his powers; x x x.
Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, called the
principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The
essential elements of agency are: (1) there is consent, express or implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agents acts as a representative and not for himself; and (4) the agent acts
within the scope of his authority. 5
Agency is basically personal, representative, andderivative in nature. 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. Qui facit per alium facit per se. He who acts
through another acts himself.6
2. There are various ways of extinguishing agency, 7 but here We are concerned only with one causedeath of the principal: Paragraph 3 of
Art. 1919 of the Civil Code which was taken from Art. 1709 of the Spanish Civil Code provides:
_______________
Art. 1868, Civil Code. 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.
5
Art. 1881, Civil Code. The agent must act within the scope of his authority. He may do such acts as may be conducive to the
accomplishment of the purpose of the agency.
11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 26 Scaevola, 243, 262; Tolentino, Comments, Civil Code of the Philippines, p. 340,
Vol. 5, 1959 Ed.
See also Columbia University Club v. Higgins, D.C.N.Y., 23 F. Supp. 572, 574; Farmers Nat. Grain Corp. v. Young, 109 P. 2d 180, 185.
6
74 C.J.S. 4; Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb. 87; Purnell v. City of Florence, 175 So. 417, 27 Ala. App.
516; Stroman Motor Co. v. Brown, 243 P. 133, 126 Ok. 36
See Art. 1919 of the Civil Code
260
260
ART. 1919. Agency is extinguished:

xx
xx
xx
3. By the death, civil interdiction, insanity or insolvency of the principal or of the agent; x x x. (Underline supplied)
By reason of the very nature of the relationship between principal and agent, agency is extinguished by the death of the principal or the
agent. This is the law in this jurisdiction. 8
Manresa commenting on Art. 1709 of the Spanish Civil Code explains that the rationale for the law is found in the juridical basis of agency
which is representation. There being an integration of the personality of the principal into that of the agent it is not possible for the
representation to continue to exist once the death of either is establish.Pothier agrees with Manresa that by reason of the nature of agency,
death is a necessary cause for its extinction.Laurent says that the juridical tie between the principal and the agent is severed ipso jure upon
the death of either without necessity for the heirs of the principal to notify the agent of the fact of death of the former. 9
The same rule prevails at common lawthe death of the principal effects instantaneous and absolute revocation of the authority of the
agent unless the power be coupled with an in-terest. 10 This is the prevalent rule in American Jurisprudence where it is well-settled that a power
without an interest conferred upon an agent is dissolved by the principals death, and any attempted execution of the power afterwards is not
binding on the heirs or representatives of the deceased. 11
______________
8
Hermosa v. Longara, 1953, 93 Phil. 977, 983; Del Rosario, et al. v. Abad, et al., 1958, 104 Phil. 648, 652
11 Manresa 572-573; Tolentino, supra, 369-370

2 Kent Comm. 641, cited in Williston on Contracts, 3rd Ed Vol. 2, p. 288
10
See Notes on Acts of agent after principals death, 39 Am. Dec. 81,83, citing Ewells Evans on Agency, 116; Dunlaps Paley on Agency,
186; Story on Agency, sec. 488; Harper v. Little. 11 Am. Dec. 25; Staples v. Bradbury, 23 Id. 494; Gale v. Tappan, 37 Id. 194; Hunt v.
Rousmanier, 2 Mason, 244, S.C. 8 Wheat, 174; Boones Executor v. Clarke, 3 Cranch CC. 389; Bank of Washington v. Peirson, 2 Wash. CC.
685; Scruggs v. Drivers Executor, 31 Ala. 274; McGriff v. Porter, 5 Fla. 373; Lincoln v. Emerson, 108 Mass, 87;Wilson v. Edmonds, 24
11
261
261
3. Is the general rule provided for in Article 1919 that the death of the principal or of the agent extinguishes the agency, subject to any
exception, and if so, is the instant case within that exception? That is the determinative point in issue in this litigation. It is the contention of
respondent corporation which was sustained by respondent court that notwithstanding the death of the principal, Concepcion Rallos, the act of
the attorney-in-fact, Simeon Rallos, in selling the formers share in the property is valid and enforceable inasmuch as the corporation acted in
good faith in buying the property in question.
Articles 1930 and 1931 of the Civil Code provide the exceptions to the general rule aforementioned.
ART. 1930. The agency shall remain in full force and effect even after the death of the principal, if it has been constituted in the common
interest of the latter and of the agent, or in the interest of a third person who has accepted the stipulation in his favor.
ART. 1931. Anything done by the agent, without knowledge of the death of the principal or of any other cause which extinguishes the
agency, is valid and shall be fully effective with respect to third persons who may have contracted with him in good faith.
Article 1930 is not involved because admittedly the special power of attorney executed in favor of Simeon Rallos was not coupled with an
interest.
Article 1931 is the applicable law. Under this provision, an act done by the agent after the death of his principal is valid and effective only
under two conditions, viz: (1) that the agent acted without knowledge of the death of the principal, and (2) that the third person who
contracted with the agent himself acted in good faith. Good faith here means that the third person was not aware of the death of the principal
at the time he contracted with said agent.These two requisites must concur: the absence of one will render the act of the agent invalid and
unenforceable.
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N.H. 517; Easton v. Ellis, 1 Handy (Ohio), 70; McDonald v. Blacks Administrators, 20 Ohio, 185; Michigan Ins. Co. v. Leavenworth, 30 Vt.
11; Huston v. Cantril, 11 Leigh, 136; Campanari v. Woodburn, 15 Com. B. 400
See also Williston on Contracts, 3rd Ed., Vol. 2, p. 289
262
262
In the instant case, it cannot be questioned that the agent, Simeon Rallos, knew of the death of his principal at the time he sold the latters
share in Lot No. 5983 to respondent corporation. The knowledge of the death is clearly to be inferred from the pleadings filed by Simeon Rallos
before the trial court.12 That Simeon Rallos knew of the death of his sister Concepcion is also a finding of fact of the court a quo13 and of
respondent appellate court when the latter stated that Simeon Rallos must have known of the death of his sister, and yet he proceeded with
the sale of the lot in the name of both his sisters Concepcion and Gerundia Rallos without informing appellant (the realty corporation) of the
death of the former.14
On the basis of the established knowledge of Simeon Rallos concerning the death of his principal, Concepcion Rallos, Article 1931 of the
Civil Code is inapplicable. The law expressly requires for its application lack of knowledge on the part of the agent of the death of his principal;
it is not enough that the third person acted in good faith. Thus in Buason & Reyes v. Panuyas, the Court applying Article 1738 of the old Civil
Code now Art. 1931 of the new Civil Code sustained the validity of a sale made after the death of the principal because it was not shown that
the agent knew of his principals demise. 15 To the same effect is the case of Herrera, et al. v. Luy Kim Guan, et al., 1961, where in the words of
Justice Jesus Barrera the Court stated:
x x x even granting arquendo that Luis Herrera did die in 1936, plaintiffs presented no proof and there is no indication in the record, that the
agent Luy Kim Guan was aware of the death of his principal at the time he sold the property. The death of the principal does not render the act
of an agent unenforceable, where the latter had no knowledge of such extinguishment of the agency. (1 SCRA 406, 412)
4. In sustaining the validity of the sale to respondent corporation, the Court of Appeals reasoned out that there is no provision in the Code
which provides that whatever is done by
_____________
see p. 15, 30-31, 64, 68-69, Record on Appeal
12
pp. 71-72, ibid.
13
p. 7 of the Decision at page 14, rollo
14
105 Phil. 795, 798
15
263
263
an agent having knowledge of the death of his principal is void even with respect to third persons who may have contracted with him in good
faith and without knowledge of the death of the principal. 16
We cannot see the merits of the foregoing argument as it ignores the existence of the general rule enunciated in Article 1919 that the
death of the principal extinguishes the agency. That being the general rule it follows a fortiorithat any act of an agent after the death of his
principal is void ab initio unless the same falls under the exceptions provided for in the aforementioned Articles 1930 and 1931. Article 1931,
being an exception to the general rule, is to be strictly construed; it is not to be given an interpretation or application beyond the clear import
of its terms for otherwise the courts will be involved in a process of legislation outside of their judicial function.
5. Another argument advanced by respondent court is that the vendee acting in good faith relied on the power of attorney which was duly
registered on the original certificate of title recorded in the Register of Deeds of the Province of Cebu, that no notice of the death was ever
annotated on said certificate of title by the heirs of the principal and accordingly they must suffer the consequences of such omission. 17
To support such argument reference is made to a portion in Manresas Commentaries which We quote:
If the agency has been granted for the purpose of contracting with certain persons, the revocation must be made known to them. But if the
agency is general in nature, without reference to particular person with whom the agent is to contract, it is sufficient that the principal exercise
due diligence to make the revocation of the agency publicly known.
In case of a general power which does not specify the persons to whom representation should be made, it is the general opinion that all
acts executed with third persons who contracted in good faith, without knowledge of the revocation, are valid. In such case, the principal may
exercise his right against the agent, who, knowing of the revocation, continued to assume a personality which he no longer had. (Manresa,
Vol. 11, pp. 561 and 575; pp. 15-16, rollo)
______________
p. 6 of Decision, at page 13, rollo
16
pp. 6-7 of Decision at pp. 13-14, ibid.
17
264
264
The above discourse, however, treats of revocation by an act of the principal as a mode of terminating an agency which is to be distinguished
from revocation by operation of law such as death of the principal which obtains in this case. On page six of this Opinion We stressed that by
reason of the very nature of the relationship between principal and agent, agency is extinguished ipso jure upon the death of either principal
or agent. Although a revocation of a power of attorney to be effective must be communicated to the parties concerned, 18 yet a revocation by
operation of law, such as by death of the principal is, as a rule, instantaneously effective inasmuch as by legal fiction the agents exercise of
authority is regarded as an execution of the principals continuing will.19 With death, the principals will ceases or is terminated; the source of
autnority is extinguished.
The Civil Code does not impose a duty on the heirs to notify the agent of the death of the principal. What the Code provides in Article 1932
is that, if the agent dies, his heirs must notify the principal thereof, and in the meantime adopt such measures as the circumstances may
demand in the interest of the latter. Hence, the fact that no notice of the death of the principal was registered on the certificate of title of the
property in the Office of the Register of Deeds, is not fatal to the cause of the estate of the principal.
6. Holding that the good faith of a third person in dealing with an agent affords the former sufficient protection, respondent court drew a
parallel between the instant case and that of an innocent purchaser for value of a registered land, stating that if a person purchases a
registered land from one who acquired it in bad faitheven to the extent of foregoing or falsifying the deed of sale in his favorthe registered
owner has no recourse against such innocent purchaser for value but only against the forger. 20
To support the correctness of this parallelism, respondent corporation, in its brief, cites the case ofBlondeau, et al. v. Nano and Vallejo, 61
Phil. 625. We quote from the brief:
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See Articles 1921 & 1922 of the Civil Code
18
2 C.J.S. 1174 citing American Jurisprudence in different States from Alabama to Washington; emphasis supplied.
19
p. 8, decision at page 15, rollo
20
265
265
In the case of Angel Blondeau et al. v. Agustin Nano et al., 61 Phil. 630, one Vallejo was a co-owner of lands with Agustin Nano. The latter had
a power of attorney supposedly executed by Vallejo in his favor. Vallejo delivered to Nano his land titles. The power was registered in the Office
of the Register of Deeds. When the lawyer-husband of Angela Blondeau went to that Office, he found all in order including the power of
attorney. But Vallejo denied having executed the power. The lower court sustained Vallejo and the plaintiff Blondeau appealed. Reversing the
decision of the court a quo, the Supreme Court, quoting the ruling in the case of Eliason v. Wilborn, 261 U.S. 457, held:
But there is a narrower ground on which the defenses of the defendant-appellee must be overruled. Agustin Nano had possession of Jose
Vallejos title papers. Without those title papers handed over to Nano with the acquiescence of Vallejo, a fraud could not have been
perpetuated. When Fernando de la Cantera, a member of the Philippine Bar and the husband of Angela Blondeau, the principal plaintiff,
searched the registration record, he found them in due form including the power of attorney of Vellajo in favor of Nano. If this had not been so
and if thereafter the proper notation of the encumbrance could not have been made, Angela Blondeau would not have lent P12,000.00 to the
defendant Vallejo. An executed transfer of registered lands placed by the registered owner thereof in the hands of another operates as a
representation to a third party that the holder of the transfer is authorized to deal with the land.
As between two innocent persons, one of whom must suffer the consequence of a breach of trust, the one who made it possible by his act
of confidence bear the loss. (pp. 19-21)
The Blondeau decision, however, is not on all fours with the case before Us because here We are confronted with one who admittedly was an
agent of his sister and who sold the property of the latter after her death with full knowledge of such death. The situation is expressly covered
by a provision of law on agency the terms of which are clear and unmistakable leaving no room for an interpretation contrary to its tenor, in
the same manner that the ruling inBlondeau and the cases cited therein found a basis in Section 55 of the Land Registration Law which in part
provides:
266
266
xx
xx
xx
The production of the owners duplicate certificate whenever any voluntary instrument is presented for registration shall be conclusive
authority from the registered owner to the register of deeds to enter a new certificate or to make a memorandum of registration in accordance
with such instruments, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming
under him in favor of every purchaser for value and in good faith: Provided, however. That in all cases of registration procured by fraud, the
owner may pursue all his legal and equitable remedies against the parties to such fraud, without prejudice, however, to the rights of any
innocent holder for value of a certificate of title. xx xx xx (Act No. 496 as amended)
7. One last point raised by respondent corporation in support of the appealed decision is an 1842 ruling of the Supreme Court of Pennsylvania
in Cassiday v. McKenziewherein payments made to an agent after the death of the principal were held to be good, the parties being
ignorant of the death. Let us take note that the Opinion of Justice Rogers was premised on the statement that the parties were ignorant of the
death of the principal. We quote from that decision the following:
x x x Here the precise point is, whether a payment to an agent when the parties are ignorant of the death is a good payment. In addition to
the case in Campbell before cited, the same judge Lord Ellenborough, has decided in 5 Esp. 117, the general question that a payment after the
death of principal is not good. Thus, a payment of sailors wages to a person having a power of attorney to receive them, has been held void
when the principal was dead at the time of the payment. If, by this case, it is meant merely to decide the general proposition that by operation
of law the death of the principal is a revocation of the powers of the attorney, no objection can be taken to it. But if it intended to say that his
principle applies where there was no notice of death, or opportunity of notice, I must be permitted to dissent from it.
x x x That a payment may be good today, or bad tomorrow, from the accidental circumstance of the death of the principal, which he did
not know, and which by no possibility could he know? It would be unjust to the agent and unjust to the debtor. In the civil law, the
267
267
acts of the agent, done bona fide in ignorance of the death of his principal, are held valid and binding upon the heirs of the latter. The same
rule holds in the Scottish law, and I cannot believe the common law is so unreasonable. . . . (39 Am. Dec. 76, 80, 81; emphasis supplied)
To avoid any wrong impression which the Opinion inCassiday v. McKenzie may evoke, mention may be made that the above represents the
minority view in American jurisprudence. Thus in Clayton v. Merrett, the Court said:
There are several cases which seem to hold that although, as a general principle, death revokes an agency and renders null every act of the
agent thereafter performed, yet that where a payment has been made in ignorance of the death, such payment will be good. The leading case
so holding is that of Cassiday v. McKenzie, 4 Watts & S. (Pa.) 282, 39 AmD 76, where, in an elaborate opinion, this view is broadly announced.
It is referred to, and seems to have been followed, in the case of Dick v. Page, 17 Mo. 234, 57 AmD 267; but in this latter case it appeared that
the estate of the deceased principal had received the benefit of the money paid, and therefore the representative of the estate might well
have been held to be estopped from suing for it again. . . . These cases, in so far, at least, as they announce the doctrine under discussion, are
exceptional. The Pennsylvania Case, supra (Cassiday v. McKenzie, 4 Watts & S. 282, 39 AmD 76), is believed to stand almost, if not quite, alone
in announcing the principle in its broadest scope. (52 Misc. 353, 357, cited in 2 C.J. 549)
So also in Travers v. Crane, speaking of Cassiday v. McKenzie, and pointing out that the opinion, except so far as it related to the particular
facts, was a mere dictum,Baldwin, J. said:
The opinion, therefore, of the learned Judge may be regarded more as an extrajudicial indication of his views on the general subject, than as
the adjudication of the Court upon the point in question. But accordingly all proper weight to this opinion, as the judgment of a Court of great
respectability, it stands alone among common law authorities, and is opposed by an array too formidable to permit us to follow it. (15 Cal.
12, 17, cited in 2 C.J. 549)
Whatever conflict of legal opinion was generated byCassiday v. McKenzie in American jurisprudence, no such conflict exists in our own for the
simple reason that our statute, the
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268
Civil Code, expressly provides for two exceptions to the general rule that death of the principal revokes ipso jurethe agency, to wit: (1) that the
agency is coupled with an interest (Art. 1930), and (2) that the act of the agent was executed without knowledge of the death of the principal
and the third person who contracted with the agent acted also in good faith (Art. 1931). Exception No. 2 is the doctrine followed
in Cassiday, and again We stress the indispensable requirementthat the agent acted without knowledge or notice of the death of the
principal. In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal. Accordingly, the
agents act is unenforceable against the estate of his principal.
IN VIEW OF ALL THE FOREGOING, We set aside the decision of respondent appellate court, and We affirm en toto the judgment rendered by
then Hon. Amador E. Gomez of the Court of First Instance of Cebu, quoted in pages 2 and 3 of this Opinion, with costs against respondent
realty corporation at all instances.
So Ordered.
Teehankee (Chairman), Makasiar, Fernandez andGuerrero, JJ., concur.
Decision set aside and judgment affirmed.
Notes.The death of the principal does not render the act of an agent unenforceable where the latter had no knowledge of the
extinguishment of the agency. (Herrera vs. Luy Kim Guan, 1 SCRA 406).
Ratification by the grantor or estoppel, consisting in benefiting from the loan must be expressly shown and proven during the trial.
(Philippine National Bank vs. Sta. Maria, 29 SCRA 303).
In an expropriation proceeding, the State cannot raise the alleged lack of authority of the counsel of the owner of the property to bind his
client in a compromise agreement because such lack of authority may be questioned only by the principal or client. (Commissioner of Public
Highways vs. San Diego, 31 SCRA 616).
269
269
Republic vs. Guarin
Where a person expressly authorized another to mortgage and borrow money for and in his name, the liability of the two to the creditor is only
joint, not joint and several or solidary. (Philippine National Bank vs. Sta. Maria, 29 SCRA 303).
Air carriers which are members of the International Air Transport Association are constituted as agents of each other in the issuing of
tickets and, therefore, bound by the mistakes committed by a member thereof which, in behalf of the petitioner airline confirmed the
passengers reservation for a first-class reservation. (Ortigas, Jr. vs. Lufthansa German Airlines, 65 SCRA 610).
Where a check is deposited with a collecting bank, the relationship created is that of agency, not creditor-debtor. The same rule follows
after the drawee-banks check was forged by one who previously encashed them. (Jai-Alai Corporation of the Philippines vs. Bank of the
Philippine Islands, 66 SCRA 29).
VOL. 498, AUGUST 7, 2006
93
Tan vs. G.V.T. Engineering Services
G.R. No. 153057. August 7, 2006.*

MR. & MRS. GEORGE R. TAN, petitioners, vs. G.V.T. ENGINEERING SERVICES, Acting through its Owner/Manager GERINO V. TACTAQUIN,
respondent.
Actions; Pleadings and Practice; Procedural Rules and Technicalities; Rules of procedure should be viewed as mere tools designed to aid
the courts in the speedy, just and inexpensive determination of the cases before them.This Court has held time and again that rules of
procedure should be viewed as mere tools designed to aid the courts in the speedy, just and inexpensive determination of the cases before
them. Liberal construction of the rules and the pleadings is the controlling principle to effect substantial justice. In fact, this Court is not
impervious to instances when rules of procedure must yield to the loftier demands of substantial justice and equity. Citing Aguam v. Court of
Appeals, 332 SCRA 784 (2000), this Court held in Barnes v. Quijano, 461 SCRA 533 (2005), that: The law abhors technicalities that impede the
cause of justice. The courts primary duty is to render or dispense justice. A litigation is not a game of technicalities. Lawsuits unlike duels
are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and
chief enemy, deserves scant consideration from courts. Litigations must be decided on their merits and not on technicality. Every party
litigant must be afforded the amplest opportunity for the proper and just determination of his cause, free from the unacceptable plea of
technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the policy of the court is to encourage hearings of
appeals on their merits and the rules of procedure ought not to be applied in a very rigid, technical sense; rules of procedure are used only to
help secure, not override substantial justice. It is a far better and more prudent course of action for the court to excuse a technical lapse and
afford the parties a review of the case on appeal to attain the ends of justice rather than dispose of the case on technicality and cause a grave
injustice to the parties, giving a false impression of speedy disposal of cases while actually resulting in more delay, if not a miscarriage of
justice.
_______________
*
FIRST DIVISION.
94
Captions; It would be an unjustifiable abandonment of the principles laid down in past cases if the Court would nullify the proceedings
had in the present case by the lower and appellate courts on the simple ground that the complaint filed with the trial court was not properly
captioned.There is no showing that respondents failure to place the correct caption in the complaint or to amend the same later resulted in
any prejudice on the part of petitioners. Thus, this Court held as early as the case of Alonso v. Villamor, 16 Phil. 315 (1910), that: No one has
been misled by the error in the name of the party plaintiff. If we should by reason of this error send this case back for amendment and new
trial, there would be on the retrial the same complaint, the same answer, the same defense, the same interests, the same witnesses, and the
same evidence. The name of the plaintiff would constitute the only difference between the old trial and the new. In our judgment there is not
enough in a name to justify such action. In the same manner, it would be an unjustifiable abandonment of the principles laid down in the
above-mentioned cases if the Court would nullify the proceedings had in the present case by the lower and appellate courts on the simple
ground that the complaint filed with the trial court was not properly captioned.
Appeals; Questions of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for review may only raise questions of law.
The Court upholds the factual findings of the trial and appellate courts with respect to petitioners liability for breach of their contract with
respondent. Questions of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for review may only raise questions of law.
Moreover, factual findings of the trial court, particularly when affirmed by the Court of Appeals, are generally binding on this Court. More so, as
in this case, where petitioners have failed to show that the courts below overlooked or disregarded certain facts or circumstances of such
import as would have altered the outcome of the case. The Court, thus, finds no reason to set aside the lower courts factual findings.
Damages; Those who in the performance of their obligations are guilty of fraud, negligence or delay and those who in any manner
contravene the tenor thereof are liable for damages.There is no question that petitioners are liable for damages for having breached their
contract with respondent. Article 1170 of the Civil Code provides that those who in the performance of their obligations are
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guilty of fraud, negligence or delay and those who in any manner contravene the tenor thereof are liable for damages. Moreover, the
Court agrees with the trial court that under Article 1234 of the Civil Code, if the obligation has been substantially performed in good faith, the
obligor may recover as though there had been a strict and complete fulfillment less damages suffered by the obligee. In the present case, it is
not disputed that respondent withdrew from the project on November 23, 1990. Prior to such withdrawal, respondents gave to petitioners its
22nd Billing, dated October 29, 1990, where the approximated percentage of work completed as of that date was 74% and the portion of the
contract paid by petitioners so far was P1,265,660.60. This was not disputed by petitioners. Hence, respondent was able to establish that he
has substantially performed his obligation in good faith.
Same; Where, at the time one of the parties withdrew from the contract, he had already performed in good faith a substantial portion of
his obligation, and where he was not at fault, the law provides that he is entitled to recover as though there has been a strict and complete
fulfillment of his obligation.As to the 5% retention fee which respondent seeks to recover, petitioners do not deny that they have retained
the same in their custody. The only contention petitioners advance is that respondent is not entitled to recover this fee because it is stipulated
under their contract that petitioners shall only give them to respondent upon completion of the project and the same is turned over to them. In
the present case, respondent was not able to complete the project. However, his failure to complete his obligation under the contract was not
due to his fault but because he was forced to withdraw therefrom by reason of the breach committed by petitioners. Nonetheless, as earlier
discussed, at the time that respondent withdrew from the contract, he has already performed in good faith a substantial portion of his
obligation. Considering that he was not at fault, the law provides that he is entitled to recover as though there has been a strict and complete
fulfillment of his obligation. On this basis, the Court finds no error in the ruling of the trial and appellate courts that respondent is entitled to
the recovery of 5% retention fee.
Same; Actual or compensatory damages cannot be presumed but must be proved with reasonable degree of certainty. The Court finds
that respondent was only able to establish the amount of
96
P20,772.05, which is the sum of all the retention fees appearing in the bills presented by respondent in evidence. Settled is the rule that
actual or compensatory damages cannot be presumed but must be proved with reasonable degree of certainty. A court cannot rely on
speculations, conjectures or guesswork as to the fact of damage but must depend upon competent proof that they have indeed been suffered
by the injured party and on the basis of the best evidence obtainable as to the actual amount thereof. It must point out specific facts that
could provide the gauge for measuring whatever compensatory or actual damages were borne. Considering that the documentary evidence
presented by respondent to prove the sum of retention fees sought to be recovered totals an amount which is less than that granted by the
trial court, it is only proper to reduce such award in accordance with the evidence presented.
Contracts; Relativity of Contracts; Contracts can only bind the parties who had entered into it and it cannot favor or prejudice third
personscontracts take effect only between the parties, their successors in interest, heirs and assigns. The Court finds no error on the part
of the CA in ruling that it is a basic principle in civil law, on relativity of contracts, that contracts can only bind the parties who had entered into
it and it cannot favor or prejudice third persons. Contracts take effect only between the parties, their successors in interest, heirs and assigns.
Moreover, every cause of action ex contractu must be founded upon a contract, oral or written, either express or implied. In the present case,
the complaint for specific performance filed by herein respondent with the trial court was based on the failure of the spouses Tan to faithfully
comply with the provisions of their contract. In other words, respondents cause of action was the breach of contract committed by the
spouses Tan. Cadag is not a party to this contract. Neither did he enter into any contract with respondent regarding the construction of the
subject house. Hence, considering that respondents cause of action was breach of contract and since there is no privity of contract between
him and Cadag, there is no obligation or liability to speak about and thus no cause of action arises. Clearly, Cadag, not being privy to the
transaction between respondent and the spouses Tan, should not be made to answer for the latters default.
Agency; The essence of agency being the representation of another, it is evident that the obligations contracted are for and on
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behalf of the principala consequence of this representation is the liability of the principal for the acts of his agent performed within the
limits of his authority that is equivalent to the performance by the principal himself who should answer therefor. Cadag was employed by the
spouses Tan to supervise the construction of their house. Acting as such, his role is merely that of an agent. The essence of agency being the
representation of another, it is evident that the obligations contracted are for and on behalf of the principal. A consequence of this
representation is the liability of the principal for the acts of his agent performed within the limits of his authority that is equivalent to the
performance by the principal himself who should answer therefor. In the present case, since there is neither allegation nor evidence that
Cadag exceeded his authority, all his acts are considered as those of his principal, the spouses Tan, who are, therefore, the ones answerable
for such acts.
PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
Piera, Marcella, Romero and Associates for petitioners.
Jose C. De la Rama for private respondent.
AUSTRIA-MARTINEZ, J.:
Assailed in the present petition for review on certiorariunder Rule 45 of the Rules of Court is the June 29, 2001 Decision 1 of the Court of
Appeals (CA) in CA-G.R. CV No. 59699 affirming with modification the Decision of the Regional Trial Court (RTC) of Quezon City, Branch 81 in
Civil Case No. Q90-7405; and its Resolution 2 promulgated on April 10, 2002 denying petitioners Motion for Partial Reconsideration.
The facts are as follows:
_______________
1
Penned by Justice Conrado M. Vasquez, Jr. and concurred in by Justices Martin S. Villarama, Jr. and Sergio L. Pestao.
Id.
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98
On October 18, 1989, the spouses George and Susan Tan (spouses Tan) entered into a contract with G.V.T. Engineering Services (G.V.T.),
through its owner/manager Gerino Tactaquin (Tactaquin) for the construction of their residential house at Ifugao St., La Vista, Quezon City. The
contract price was P1,700,000.00. Since the spouses Tan have no knowledge about building construction, they hired the services of Engineer
Rudy Cadag (Cadag) to supervise the said construction. In the course of the construction, the spouses Tan caused several changes in the plans
and specifications and ordered the deletion of some items in G.V.T.s scope of work. This brought about differences between the spouses Tan
and Cadag, on one hand, and Tactaquin, on the other. Subsequently, the latter stopped the construction of the subject house.
On December 4, 1990, G.V.T., through Tactaquin, filed a Complaint for specific performance and damages against the spouses Tan and
Cadag with the RTC of Quezon City contending that by reason of the changes in the plans and specifications of the construction project
ordered by Cadag and the spouses Tan, it was forced to borrow money from third persons at exorbitant interest; that several portions of their
contract were deleted but only to be awarded later to other contractors; that it suffered tremendous delay in the completion of the project
brought about by the spouses Tans delay in the delivery of construction materials on the jobsite; that all the aforementioned acts caused
undue prejudice and damage to it.
In their Answer with Counterclaims, the spouses Tan and Cadag alleged, among others, that G.V.T. performed several defective works; that
to avert further losses, the spouses Tan deleted some portions of the project covered by G.V.T.s contract and awarded other portions to
another contractor; that the changes ordered by the spouses Tan were agreed upon by the parties; that G.V.T., being a mere single
proprietorship has no legal personality and cannot be a party in a civil action.
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Trial ensued and the court a quo made the following factual findings:
To begin with, it is not disputed that there was delay in the delivery of the needed construction materials which in turn caused tremendous
delay in project completion. The documentary evidence on record shows that plaintiff, practically during the entire period that he was working
on the project, complained to defendants about the non-delivery on time of the materials on the project site (Exhs. D, G, H, H-1, H-2,
H-3, H-4, and H-5). Plaintiffs request for prompt delivery of materials fell on deaf ears.
xxxx
Plaintiffs losses as a result of the delay were aggravated by cancellation by defendants of major portions of the project such as skylight
roofing, installation of cement tiles, soil poisoning and finishing among others, which were all included in the construction agreement but were
assigned to other contractors (TSN, 9/6/91; Exh. I).
In his testimony, defendant Cadag declared that thirteen (13) items in the construction agreement were deleted mainly due to the lack of
technical know-how of the plaintiff, coupled with lack of qualified personnel; that he immediately notified the plaintiff upon discovering the
defective workmanship (TSN, 5/26/93); and that he became aware of the imperfection in plaintiffs work as early as during the plastering of
the walls (TSN, 10/12/97). The evidence is clear however that plaintiffs attention about the alleged faulty work was called for the first time
only on November 16, 1990 when plaintiff was furnished with defendants letter bearing date of November 10, 1990 (Exh. 20) as their reply
to plaintiffs letter of even date.
xxxx
It bears pointing out that defendant Cadag testified that during the construction of the house of defendant spouses he was at the job site
everyday to see to it that the construction was being done according to the plans and specifications (TSN, 9/31/94). He was assisted in the
project by the other supervising representatives of defendants spouses, namely, Engr. Rogelio Menguito, Engr. Armando Menguito and Arch.
Hans Palma who went to the project site
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100
to attend the weekly meetings. It thus appears that there was a close monitoring by the defendant of the construction by the plaintiff. 3
On the basis of the foregoing findings, the trial court concluded thus:
It is therefore the finding of this Court that defendants conclusions as to the workmanship and competence of plaintiff are unsupported and
without basis and that their act of deleting several major items from plaintiffs scope of work was uncalled for, if not done in bad faith.
Defendantss [sic] acts forced plaintiff to withdraw from the project.4
Accordingly, the RTC rendered a Decision5 with the following dispositive portion:
WHEREFORE, judgment is hereby rendered as follows:
1. 1.Ordering defendants Rodovaldo Cadag and spouses George and Susan Tan to pay plaintiff, jointly and severally:
1. a)the sum of P366,340.00 representing the balance of the contract price;
2. b)the amount of P49,578.56 representing the 5% retention fee;
3. c)the amount of P45,000.00 as moral damages;
4. d)the amount of P100,000.00 for and as attorneys fees; and

5. e)the amount of P17,000.00 as litigation expenses.
1. 2.Dismissing defendants counterclaims.
Costs against defendants.
IT IS ORDERED.6
_______________
3
RTC Decision, Original Records, pp. 470-472.
Id., at p. 472.
Penned by then Judge Wenceslao I. Agnir, Jr., now retired Justice of the Court of Appeals.
RTC Decision, supra, pp. 475-476.
101
VOL. 498, AUGUST 7, 2006
101
Aggrieved by the trial courts decision, the spouses Tan filed an appeal with the CA contending that the trial court erred in not dismissing the
complaint on the ground that G.V.T. has no legal capacity to sue; in not finding that it was G.V.T. which caused the delay in the construction of
the subject residential house; in awarding amounts in favor of G.V.T. representing the balance of the contract price, retention fee, moral
damages and attorneys fees; and in finding Cadag jointly and severally liable with the spouses Tan.
In its Decision of June 29, 2001, the CA affirmed with modification the judgment of the trial court, to wit:
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby MODIFIED by deleting the awards for moral damages, attorneys fees
and litigation expenses and dismissing the case against appellant Rodovaldo Cadag. In all other respect, the challenged judgment
is AFFIRMED. Costs against the appellant-spouses George and Susan Tan.
SO ORDERED.7
Both parties filed their respective Motions for Partial Reconsideration but these were denied by the CA in its Resolution of April 10, 2002. 8
Hence, herein petition by the spouses Tan based on the following assignments of errors:
1. 1.RESPONDENT COURT OF APPEALS ERRED IN NOT FINDING THAT PETITIONERS DID NOT VIOLATE THEIR CONSTRUCTION AGREEMENT
WITH THE PRIVATE RESPONDENT; HENCE, THEY CANNOT BE REQUIRED TO PAY THE AMOUNTS OF P366,340.00 REPRESENTING THE
BALANCE OF THE CONTRACT PRICE OF P1,700,000.00 AND P49,578.56 REPRESENTING 5 PERCENT RETENTION FEE.
xxxx
_______________
7
CA Records, p. 170.
Id., at p. 214.
102
102
1. 2.RESPONDENT COURT OF APPEALS LIKEWISE ERRED IN NOT ABSOLVING THE PETITIONERS FROM LIABILITY TO PRIVATE RESPONDENT.
xxxx
1. 3.RESPONDENT COURT OF APPEALS ALSO ERRED IN NOT ORDERING THE DISMISSAL OF CIVIL CASE NO. Q-90-7405 FOR LACK OF
JURISDICTION ON THE PART OF THE LOWER COURT. 9
Petitioners contend that since Tactaquin consented and acquiesced to the changes and alterations made in the plan of the subject house he
cannot complain and discontinue the construction of the said house. Petitioners assert that it would be highly unfair and unjust for them to be
required to pay the amount representing the cost of the remaining unfinished portion of the house after it was abandoned by Tactaquin, for to
do so would enable the latter to unjustly enrich himself at their expense. With respect to the retention fee, petitioners argue that this amount
is payable only after the house is completed and turned over to them. Since respondent never completed the construction of the subject
house, petitioners claim that they should not be required to pay the retention fee. Petitioners also contend that respondent failed to prove that
it is entitled to actual damages.
As to the second assigned error, petitioners contend that since the CA dismissed the complaint against Cadag it follows that they should
not also be held liable because they merely relied upon and followed the advice and instructions of Cadag whom they hired to supervise the
construction of their house.
Anent the last assigned error, petitioners argue that G.V.T., being a sole proprietorship, is not a juridical person and, hence, has no legal
personality to institute the complaint with the trial court. Consequently, the trial court did not acquire jurisdiction over the case and all
proceedings con_______________
9
Rollo, pp. 14-18.
103
VOL. 498, AUGUST 7, 2006
103
ducted by it are null and void. Petitioners contend that they raised this issue in their Answer to the Complaint and in their appeal to the CA.
In their Supplemental Petition, petitioners contend that under their contract with G.V.T., the latter agreed to employ only labor in the
construction of the subject house and that petitioners shall supply the materials; that it was error on the part of the CA and the trial court to
award the remaining balance of the contract price in favor of respondent despite the fact that some items from the latters scope of work were
deleted with its consent. Petitioners argue that since the above-mentioned items were deleted, it follows that respondent should not be
compensated for the work which it has not accomplished. Petitioners went further to claim that the value of the deleted items should, in fact,
be deducted from the original contract price. As to the delay in the construction of the subject house, petitioners assert that said delay was
attributable to respondent which failed to pay the wages of its workers who, in turn, refused to continue working; that petitioners were even
forced to pay the workers wages for the construction to continue.
In its Comment, respondent contends that the CA and the trial court are one in finding that petitioners are the ones responsible for breach
of contract, for unjustifiably deleting items agreed upon and delaying delivery of construction materials, and that these findings were never
rebutted by contrary evidence. Respondent asserts that findings of fact of the trial court especially when affirmed by the CA are conclusive on
the Supreme Court when supported by the evidence on record and that the Supreme Courts jurisdiction in cases brought before it from the
CAvia Rule 45 of the Rules of Court is limited to reviewing errors of law.
As to the second assigned error, respondent asserts that petitioners argument is fallacious because the courts ruling absolving Cadag
from liability is based on the fact that there is no privity of contract between him and respondent. This,
104
104
respondent argues, cannot be said with respect to it and petitioners.

As to the last assigned error, respondent quoted portions of this Courts ruling in the case of Yao Ka Sin Trading v. Court of Appeals,10 as
cited by the CA in its challenged Decision. In the said case, the Court basically held that no one has been misled by the error in the name of
the party plaintiff and to send the case back to the trial court for amendment and new trial for the simple purpose of changing the name of the
plaintiff is not justified considering that there would be, on re-trial, the same complaint, answer, defense, interests, witnesses and evidence.
The Court finds the petition without merit.
The Court finds it proper to discuss first the issue regarding G.V.T.s lack of legal personality to sue.
Petitioners raised the issue of G.V.T.s lack of legal personality to be a party in a civil action as a defense in their Answer with Counterclaims
and, thus, are not estopped from raising this issue before the CA or this Court. 11 It is true that G.V.T. Engineering Services, being a sole
proprietorship, is not vested with a legal personality to bring suit or defend an action in court. A perusal of the records of the present case
shows that respondents complaint filed with the trial court as well as its Appellees Brief submitted to the CA and its Comment filed before this
Court are all captioned as G.V.T. Engineering Services acting through its owner/manager Gerino V. Tactaquin. In fact, the first paragraph of
the complaint refers to G.V.T. as the plaintiff. On this basis, it can be inferred that G.V.T. was the one which filed the complaint and that it is
only acting through its proprietor. However, subsequent allegations in the complaint show that the suit is actually brought by Tactaquin.
Averments therein refer to the plaintiff as a natural person. In fact, one of the prayers in the
_______________
10
G.R. No. 53820, June 15, 1992, 209 SCRA 763.
11
Records, pp. 77, 82.
105
VOL. 498, AUGUST 7, 2006
105
complaint is for the recovery of moral damages by reason of his sufferings, mental anguish, moral shock, sleepless nights, serious anxiety
and besmirch[ed] reputation as an Engineer and Contractor. It is settled that, as a rule, juridical persons are not entitled to moral damages
because, unlike a natural person, it cannot experience physical suffering or such sentiments as wounded feelings, serious anxiety, mental
anguish or moral shock.12 From these, it can be inferred that it was actually Tactaquin who is the complainant. As such, the proper caption
should have been Gerino Tactaquin doing business under the name and style of G.V.T. Engineering Services, as is usually done in cases filed
involving sole pro-prietorships. Nonetheless, these are matters of form and the Court finds the defect merely technical, which does not, in any
way, affect its jurisdiction.
This Court has held time and again that rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just
and inexpensive determination of the cases before them. 13 Liberal construction of the rules and the plead-ings is the controlling principle to
effect substantial justice.14 In fact, this Court is not impervious to instances when rules of procedure must yield to the loftier demands of
substantial justice and equity.15 Citing Aguam v. Court of Appeals,16this Court held in Barnes v. Quijano17 that:
The law abhors technicalities that impede the cause of justice. The courts primary duty is to render or dispense justice. A litigation is
_______________
Filipinas Broadcasting Network, Inc. v. Ago Medical and Educational Center-Bicol Christian College of Medicine , (AMEC-BCCM), G.R. No.
141994, January 17, 2005, 448 SCRA 413, 435.
12
13
Sanchez v. Court of Appeals, 452 Phil. 665, 673; 404 SCRA 540, 545 (2003).
14
Id.
15
Remulla v. Manlongat, G.R. No. 148189, November 11, 2004, 442 SCRA 226, 233.
16
388 Phil. 587; 332 SCRA 784 (2000).
17
G.R. No. 160753, June 28, 2005, 461 SCRA 533.
106
106
not a game of technicalities. Lawsuits unlike duels are not to be won by a rapiers thrust. Technicality, when it deserts its proper office as an
aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from courts. Litigations must be decided on
their merits and not on technicality. Every party litigant must be afforded the amplest opportunity for the proper and just determination of his
cause, free from the unacceptable plea of technicalities. Thus, dismissal of appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their merits and the rules of procedure ought not to be applied in a very rigid,
technical sense; rules of procedure are used only to help secure, not override substantial justice. It is a far better and more prudent course of
action for the court to excuse a technical lapse and afford the parties a review of the case on appeal to attain the ends of justice rather than
dispose of the case on technicality and cause a grave injustice to the parties, giving a false impression of speedy disposal of cases while
actually resulting in more delay, if not a miscarriage of justice. 18
More importantly, there is no showing that respondents failure to place the correct caption in the complaint or to amend the same later
resulted in any prejudice on the part of petitioners. Thus, this Court held as early as the case ofAlonso v. Villamor,19 that:
No one has been misled by the error in the name of the party plaintiff. If we should by reason of this error send this case back for amendment
and new trial, there would be on the retrial the same complaint, the same answer, the same defense, the same interests, the same witnesses,
and the same evidence. The name of the plaintiff would constitute the only difference between the old trial and the new. In our judgment there
is not enough in a name to justify such action. 20
In the same manner, it would be an unjustifiable abandonment of the principles laid down in the above-mentioned cases
_______________
18
Id., at p. 540.
19
16 Phil. 315 (1910).
20
Id., at p. 321.
107
VOL. 498, AUGUST 7, 2006
107
if the Court would nullify the proceedings had in the present case by the lower and appellate courts on the simple ground that the complaint
filed with the trial court was not properly captioned.
Coming to the merits of the case, the Court finds for the respondent.
As to the first assigned error, respondent did not refute petitioners contention that he gave his consent and acquiesced to the decision of
petitioners to change or alter the construction plan of the subject house. However, respondent contends that he did not agree to the deletions
made by petitioners of some of the items of work covered by their contract. Both the trial and appellate courts gave credence to respondents
contention when they ruled that petitioners were guilty of deleting several major items from plaintiffs (herein respondents) scope of
work21 or of unjustifiably deleting items agreed upon in the construction agreement and delaying the delivery of construction
materials22 thereby forcing respondent to withdraw from the project. From these acts of petitioners, both the trial and appellate courts made
categorical findings that petitioners are the ones guilty of breach of contract. The Court upholds the factual findings of the trial and appellate
courts with respect to petitioners liability for breach of their contract with respondent. Questions of facts are beyond the pale of Rule 45 of the
Rules of Court as a petition for review may only raise questions of law. 23Moreover, factual findings of the trial court, particularly when affirmed
by the Court of Appeals, are generally binding on this Court. 24 More so, as in this case, where petitioners have failed to show that the courts
below overlooked or disregarded certain facts or
_______________
21
RTC Decision, Records, p. 472.
22
CA Decision, CA Rollo, p. 168.
23
National Power Corporation v. Court of Appeals, G.R. No. 106804, August 12, 2004, 436 SCRA 195, 208.
24
Id.
108
108
circumstances of such import as would have altered the outcome of the case. 25 The Court, thus, finds no reason to set aside the lower courts
factual findings.
An examination of the records shows that respondent, indeed, refused to give his consent to the abovementioned deletions as evidenced
by his letters dated November 10, 1990 26 and November 23, 1990 27 addressed to the spouses Tan. Moreover, petitioners delay in the delivery
of construction materials is also evidenced by the minutes of the meeting held among the representatives of petitioners and respondent on
May 5, 199028 as well as the letter of respondent to petitioners dated June 15, 1990. 29
Having resolved that petitioners are guilty of breach of contract, the next question is whether they are liable to pay the amounts of
P366,340.00 and P49,578.56, which supposedly represent the balance of the price of their contract with respondent and 5% retention fee,
respectively.
There is no question that petitioners are liable for damages for having breached their contract with respondent. Article 1170 of the Civil
Code provides that those who in the performance of their obligations are guilty of fraud, negligence or delay and those who in any manner
contravene the tenor thereof are liable for damages. Moreover, the Court agrees with the trial court that under Article 1234 of the Civil Code, if
the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete
fulfillment less damages suffered by the obligee. In the present case, it is not disputed that respondent withdrew from the project on
November 23, 1990. Prior to
_______________
25
Metro Manila Transit Corporation v. Court of Appeals, 435 Phil. 129, 138; 386 SCRA 126, 133 (2002).
26
Exhibit B, Plaintiffs Exhibits (separate folder), p. 31.
27
Exhibit B-1, Plaintiffs Exhibits, p. 32.
28
Exhibit H-5, Plaintiffs Exhibits, p. 65.
29
Exhibit D, Plaintiffs Exhibits, p. 38.
109
VOL. 498, AUGUST 7, 2006
109
such withdrawal, respondents gave to petitioners its 22nd Billing, dated October 29, 1990, where the approximated percentage of work
completed as of that date was 74% and the portion of the contract paid by petitioners so far was P1,265,660.60. 30 This was not disputed by
petitioners. Hence, respondent was able to establish that he has substantially performed his obligation in good faith.
It is also established that a substantial part of the remaining items of work which were supposed to be done by respondent were deleted by
petitioners from his scope of work and awarded to other contractors, thus, forcing him to withdraw from the contract. These works include the
following: 1) soil poisoning; 2) T & G ceiling and flooring; 3) wood parquet; 4) vitrified floor tiles; 5) glazed and unglazed tiles; 6) washout; 7)
marble flooring; 8) vinyl flooring; 9) plywood sheeting; 10) plain GI sheets; 11) cement tiles; 12) skylights; 13) Fixtures electrical works; and,
14) Fixtures and accessories and plumbing works.31
The Court finds no cogent reason to depart from the ruling of the trial court, as affirmed by the CA, that since petitioners are guilty of
breach of contract by deleting the above-mentioned items from respondents scope of work, the value of the said items should be credited in
respondents favor. It is established that if the above-mentioned deleted items would have been performed by respondent, as it should have
been pursuant to their contract, the construction is already 96% completed. 32Hence, respondent should be paid 96% of the total contract price
of P1,700,000, or P1,632,000.00. The Court agrees with the trial court that since petitioners already paid respondent the total amount of
P1,265,660.00, the former should be held liable to pay the balance of P366,340.00.
_______________
30
Exhibit F, Plaintiffs Exhibits, p. 52.
31
Exhibit I, Plaintiffs Exhibits, p. 68.
32
Id.
110
110
As to the 5% retention fee which respondent seeks to recover, petitioners do not deny that they have retained the same in their custody. The
only contention petitioners advance is that respondent is not entitled to recover this fee because it is stipulated under their contract that
petitioners shall only give them to respondent upon completion of the project and the same is turned over to them. In the present case,
respondent was not able to complete the project. However, his failure to complete his obligation under the contract was not due to his fault
but because he was forced to withdraw therefrom by reason of the breach committed by petitioners. Nonetheless, as earlier discussed, at the
time that respondent withdrew from the contract, he has already performed in good faith a substantial portion of his obligation. Considering
that he was not at fault, the law provides that he is entitled to recover as though there has been a strict and complete fulfillment of his
obligation.33 On this basis, the Court finds no error in the ruling of the trial and appellate courts that respondent is entitled to the recovery of
5% retention fee.
The Court finds that respondent was only able to establish the amount of P20,772.05, which is the sum of all the retention fees appearing
in the bills presented by respondent in evidence. 34 Settled is the rule that actual or compensatory damages cannot be presumed but must be
proved with reasonable degree of certainty.35 A court cannot rely on specula_______________
33
CIVIL CODE, Article 1234, supra.
Exhibits L to L-24 which corresponds to item IV(a) of Defendants Exhibits 22-I, 22-J, 22-O, 22-P, 22-S, 22-U, 22-Z, 22BB, 22-FF, 22-JJ, 22-MM, 22-PP, 22-TT, 22-ZZ, 22-FFF, 22-III, 22-LLL, 22-PPP, 22-CCCC, 22-RRRR, 22-SSSS, 22TTTTT, 22-YYYYY and 22-DDDDDD, Defendants Additional Exhibits, separate folder, pp. 26, 27, 32, 33, 36, 38, 43, 45, 49, 53, 56, 59, 63,
69, 75, 78, 81, 85, 98, 113, 114, 141, 146 and 151.
34
35
Saguid v. Security Finance, Inc., G.R. 159467, December 9, 2005, 477 SCRA 256, 275.
111
VOL. 498, AUGUST 7, 2006
111
tions, conjectures or guesswork as to the fact of damage but must depend upon competent proof that they have indeed been suffered by the
injured party and on the basis of the best evidence obtainable as to the actual amount thereof. 36It must point out specific facts that could
provide the gauge for measuring whatever compensatory or actual damages were borne. 37 Considering that the documentary evidence
presented by respondent to prove the sum of retention fees sought to be recovered totals an amount which is less than that granted by the
trial court, it is only proper to reduce such award in accordance with the evidence presented.
As to the second assigned error, it is wrong for petitioners to argue that since Cadag, whom they hired to supervise the construction of
their house, was absolved by the court from liability, they should not also be held liable.
The Court finds no error on the part of the CA in ruling that it is a basic principle in civil law, on relativity of contracts, that contracts can
only bind the parties who had entered into it and it cannot favor or prejudice third persons. Contracts take effect only between the parties,
their successors in interest, heirs and assigns. 38 Moreover, every cause of action ex contractu must be founded upon a contract, oral or
written, either express or implied. 39 In the present case, the complaint for specific performance filed by herein respondent with the trial court
was based on the failure of the spouses Tan to faithfully comply with the provisions of their contract. In other words, respondents cause of
action was the breach of contract committed by the spouses Tan. Cadag is not a party to this contract. Neither did he enter into any contract
with respondent regarding the construction of the subject house.
_______________
36
Lagon v. Hooven Comalco Industries, Inc., 402 Phil. 404, 424-425;349 SCRA 363, 382-383 (2001).
37
Id., at p. 425; p. 383.
38
CIVIL CODE, Article 1311.
39
Smith Bell and Company v. Court of Appeals, 335 Phil. 194, 202; 267 SCRA 530, 538 (1997).
112
112
Hence, considering that respondents cause of action was breach of contract and since there is no privity of contract between him and Cadag,
there is no obligation or liability to speak about and thus no cause of action arises. Clearly, Cadag, not being privy to the transaction between
respondent and the spouses Tan, should not be made to answer for the latters default.
Furthermore, Cadag was employed by the spouses Tan to supervise the construction of their house. Acting as such, his role is merely that
of an agent. The essence of agency being the representation of another, it is evident that the obligations contracted are for and on behalf of
the principal.40 A consequence of this representation is the liability of the principal for the acts of his agent performed within the limits of his
authority that is equivalent to the performance by the principal himself who should answer therefor. 41 In the present case, since there is
neither allegation nor evidence that Cadag exceeded his authority, all his acts are considered as those of his principal, the spouses Tan, who
are, therefore, the ones answerable for such acts.
WHEREFORE, the petition is partly GRANTED. The appealed Decision and Resolution of the Court of Appeals are AFFIRMED with
MODIFICATION whereby the amount of retention fee which petitioners are ordered to pay is reduced from P49,578.56 to P20,772.05.
No costs.
SO ORDERED.
Panganiban (C.J., Chairperson), Ynares-Santiago,Callejo, Sr. and Chico-Nazario, JJ., concur.
_______________
40
Siredy Enterprises Inc. v. Court of Appeals, 437 Phil. 580, 592; 389 SCRA 34, 43 (2002).
41
Id.
113
VOL. 498, AUGUST 7, 2006
113
Beluso vs. Municipality of Panay (Capiz)
Petition partly granted, appealed decision and resolution affirmed with modification.
Notes.The Supreme Court, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, has the
discretion to treat a petition for certiorari as having been filed under Rule 45, especially if filed within the reglementary period for filing a
petition for review. (Republic vs. Court of Appeals, 345 SCRA 63[2000])
It suffices that a copy of a decision or resolution attached to a petition for review is a duplicate original. ( Lee vs. Court of Appeals, 345
SCRA 707 [2000])
Eurotech Industrial Technologies, Inc. vs. Cuizon
G.R. No. 167552. April 23, 2007.*

EUROTECH INDUSTRIAL TECHNOLOGIES, INC., petitioner, vs. EDWIN CUIZON and ERWIN CUIZON, respondents.
Agency; The underlying principle of the contract of agency is to accomplish results by using the services of othersto do a great variety
of things like selling, buying, manufacturing, and transporting.In a contract of agency, a person binds himself to render some service or to
do something in representation or on behalf of another with the latters consent. The underlying principle of the contract of agency is to
accomplish results by using the services of othersto do a great variety of things like selling, buying, manufacturing, and transporting. Its
purpose is to extend the personality of the principal or the party for whom another acts and from whom he or she derives the authority to act.
It is said that the basis of agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his
authority and said acts have the same legal effect as if they were personally executed by the principal. By this legal fiction, the actual or real
absence of the principal is converted into his legal or juridical presencequi facit per alium facit per se.
Same; Elements.The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the
relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for
himself; (4) the agent acts within the scope of his authority.
Same; Article 1897 of the Civil Code reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party
with whom he contracts; Exceptions.Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to
the party with whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third
person. The first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In
_______________
*
THIRD DIVISION.
585
VOL. 521, APRIL 23, 2007
585
the last instance, the agent can be held liable if he does not give the third party sufficient notice of his powers. We hold that respondent
EDWIN does not fall within any of the exceptions contained in this provision.
Same; Managers; The position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business
of the principal.The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As
discussed elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of
the principal, thus: The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position
presupposes a degree of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and
concerns which are incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the
contrary, a managing agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of
his principal entrusted to his management. x x x.
Same; In case of excess of authority by the agent, the law does not say that a third person can recover from both the principal and the
agent.We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and
EDWIN, the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent
EDWIN does not hold that in case of excess of authority, both the agent and the principal are liable to the other contracting party. To
reiterate, the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority.
Under this, the agent is completely absolved of any liability. The second part of the said provision presents the situations when the agent
himself becomes liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his
powers to the third person. However, it must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists
here, the law does not say that a third person can recover from both the principal and the agent.
586
86
Same; Actions; Parties; Words and Phrases; An agent acting within his authority as such, who did not acquire any right nor incur any
liability arising from a Deed, is not a real property in interest who should be impleaded; A real party in interest is one who stands to be
benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit.As we declare that respondent EDWIN acted
within his authority as an agent, who did not acquire any right nor incur any liability arising from the Deed of Assignment, it follows that he is
not a real party in interest who should be impleaded in this case. A real party in interest is one who stands to be benefited or injured by the
judgment in the suit, or the party entitled to the avails of the suit. In this respect, we sustain his exclusion as a defendant in the suit before
the court a quo.
Nilo G. Ahat for petitioner.
Zosa and Quijano Law Offices for respondents.

CHICO-NAZARIO, J.:
Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August 2004 and its Resolution 2 dated
17 March 2005 in CA-G.R. SP No. 71397 entitled, Eurotech Industrial Technologies, Inc. v. Hon. Antonio T. Echavez. The assailed Decision and
Resolution affirmed the Order3 dated 29 January 2002 rendered by Judge Antonio T. Echavez ordering the dropping of respondent EDWIN
Cuizon (EDWIN) as a party defendant in Civil Case No. CEB-19672.
_______________
1
Penned by Associate Justice Vicente L. Yap with Associate Justices Arsenio J. Magpale and Ramon M. Bato, Jr., concurring; Rollo, pp. 3336.
Id., at pp. 3739.
Id., at pp. 8384.
587
VOL. 521, APRIL 23, 2007
587
The generative facts of the case are as follows:

Petitioner is engaged in the business of importation and distribution of various European industrial equipment for customers here in the
Philippines. It has as one of its customers Impact Systems Sales (Impact Systems) which is a sole proprietorship owned by respondent
ERWIN Cuizon (ERWIN). Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the court a quo in said capacity.
From January to April 1995, petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand three hundred
thirty-eight (P91,338.00) pesos. Subsequently, respondents sought to buy from petitioner one unit of sludge pump valued at P250,000.00 with
respondents making a down payment of fifty thousand pesos (P50,000.00). 4 When the sludge pump arrived from the United Kingdom,
petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. Thus, on 28 June 1995,
respondent EDWIN and Alberto de Jesus, general manager of petitioner, executed a Deed of Assignment of receivables in favor of petitioner,
the pertinent part of which states:
1.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND
(P365,000.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump;
2.) That said ASSIGNOR does hereby ASSIGN, TRANSFER, and CONVEY unto the ASSIGNEE 6 the said receivables from Toledo Power
Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365,000.00) PESOS which receivables the ASSIGNOR is the lawful
recipient;
_______________
4
Annex H of the Complaint; Records, p. 18.
Referring to Impact Systems Sales.
Referring to petitioner Eurotech Industrial Technologies, Inc.
588
588
3.) That the ASSIGNEE does hereby accept this assignment. 7

Following the execution of the Deed of Assignment, petitioner delivered to respondents the sludge pump as shown by Invoice No. 12034 dated
30 June 1995.8
Allegedly unbeknownst to petitioner, respondents, despite the existence of the Deed of Assignment, proceeded to collect from Toledo
Power Company the amount of P365,135.29 as evidenced by Check Voucher No. 0933 9prepared by said power company and an official receipt
dated 15 August 1995 issued by Impact Systems. 10 Alarmed by this development, petitioner made several demands upon respondents to pay
their obligations. As a result, respondents were able to make partial payments to petitioner. On 7 October 1996, petitioners counsel sent
respondents a final demand letter wherein it was stated that as of 11 June 1996, respondents total obligations stood at P295,000.00 excluding
interests and attorneys fees.11 Because of respondents failure to abide by said final demand letter, petitioner instituted a complaint for sum
of money, damages, with application for preliminary attachment against herein respondents before the Regional Trial Court of Cebu City. 12
On 8 January 1997, the trial court granted petitioners prayer for the issuance of writ of preliminary attachment. 13
On 25 June 1997, respondent EDWIN filed his Answer 14wherein he admitted petitioners allegations with respect to the sale transactions
entered into by Impact Systems and
_______________
7
Annex G of the Complaint; Records, p. 17.
Annex H of the Complaint; id., at p. 18.
Annex I of the Complaint; id., at p. 19.
10
Annex J of the Complaint; id., at p. 20.
11
Annex L of the Complaint; id., at p. 22.
12
The case was raffled off to Branch 8 of the RTC Cebu City.
13
Records, p. 27.
14
Id., at pp. 3841.
589
VOL. 521, APRIL 23, 2007
589
petitioner between January and April 1995.15 He, however, disputed the total amount of Impact Systems indebtedness to petitioner which,
according to him, amounted to only P220,000.00.16
By way of special and affirmative defenses, respondent EDWIN alleged that he is not a real party in interest in this case. According to him,
he was acting as mere agent of his principal, which was the Impact Systems, in his transaction with petitioner and the latter was very much
aware of this fact. In support of this argument, petitioner points to paragraphs 1.2 and 1.3 of petitioners Complaint stating
1.2. Defendant Erwin H. Cuizon, is of legal age, married, a resident of Cebu City. He is the proprietor of a single proprietorship business known
as Impact Systems Sales (Impact Systems for brevity), with office located at 46-A del Rosario Street, Cebu City, where he may be served
summons and other processes of the Honorable Court.
1.3. Defendant Edwin B. Cuizon is of legal age, Filipino, married, a resident of Cebu City. He is the Sales Manager of Impact Systems and is
sued in this action in such capacity.17
On 26 June 1998, petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. The trial court granted
petitioners motion to declare respondent ERWIN in default for his failure to answer within the prescribed period despite the opportunity
granted18 but it denied petitioners motion for summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16
October 2001.19However, the conduct of the pre-trial conference was deferred pending the
_______________
15
Id., at p. 38.
16
Ibid.
17
Id., at p. 1.
18
Id., at p. 50.
19
Id., at p. 61.
590
590
resolution by the trial court of the special and affirmative defenses raised by respondent EDWIN. 20
After the filing of respondent EDWINs Memorandum21in support of his special and affirmative defenses and petitioners
opposition22 thereto, the trial court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in this
case. According to the trial court
A study of Annex G to the complaint shows that in the Deed of Assignment, defendant Edwin B. Cuizon acted in behalf of or represented
[Impact] Systems Sales; that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. Cuizon is
the proprietor; that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28, 1995. A
study of Annex H to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. Cuizon, made a down
payment of P50,000.00 that Annex H is dated June 30, 1995 or two days after the execution of Annex G, thereby showing that [Impact]
Systems Sales ratified the act of Edwin B. Cuizon; the records further show that plaintiff knew that [Impact] Systems Sales, the principal,
ratified the act of Edwin B. Cuizon, the agent, when it accepted the down payment of P50,000.00. Plaintiff, therefore, cannot say that it was
deceived by defendant Edwin B. Cuizon, since in the instant case the principal has ratified the act of its agent and plaintiff knew about said
ratification. Plaintiff could not say that the subject contract was entered into by Edwin B. Cuizon in excess of his powers since [Impact]
Systems Sales made a down payment of P50,000.00 two days later.
In view of the Foregoing, the Court directs that defendant Edwin B. Cuizon be dropped as party defendant. 23
_______________
20
Edwin Cuizons counsel requested that the Special and Affirmative Defenses in his Answer be treated as his Motion to Dismiss; Order
dated 16 October 2001; id., at p. 78.
21
Id., at pp. 8286.
22
Memorandum dated 16 November 2001; id., at pp. 8791.
23
Id., at pp. 9596.
591
VOL. 521, APRIL 23, 2007
591
Aggrieved by the adverse ruling of the trial court, petitioner brought the matter to the Court of Appeals which, however, affirmed the 29
January 2002 Order of the court a quo. The dispositive portion of the now assailed Decision of the Court of Appeals states:
WHEREFORE, finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order dated
January 29, 2002, it is hereby AFFIRMED.24
Petitioners motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. Hence, the present
petition raising, as sole ground for its allowance, the following:
THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON, AS AGENT OF IMPACT
SYSTEMS SALES/ERWIN CUIZON, IS NOT PERSONALLY LIABLE, BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID
HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. 25
To support its argument, petitioner points to Article 1897 of the New Civil Code which states:
Art. 1897. The agent who acts as such is not personally liable to the party with whom he contracts, unless he expressly binds himself or
exceeds the limits of his authority without giving such party sufficient notice of his powers.
Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWINs act of collecting the receivables from the Toledo Power
Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. While said collection did
not revoke the agency relations of respondents, petitioner insists that ER-
_______________
24
Rollo, p. 35.
25
Id., at p. 17.
592
592
WINs action repudiated EDWINs power to sign the Deed of Assignment. As EDWIN did not sufficiently notify it of the extent of his powers as
an agent, petitioner claims that he should be made personally liable for the obligations of his principal. 26
Petitioner also contends that it fell victim to the fraudulent scheme of respondents who induced it into selling the one unit of sludge pump
to Impact Systems and signing the Deed of Assignment. Petitioner directs the attention of this Court to the fact that respondents are bound
not only by their principal and agent relationship but are in fact full-blooded brothers whose successive contravening acts bore the obvious
signs of conspiracy to defraud petitioner.27
In his Comment,28 respondent EDWIN again posits the argument that he is not a real party in interest in this case and it was proper for the
trial court to have him dropped as a defendant. He insists that he was a mere agent of Impact Systems which is owned by ERWIN and that his
status as such is known even to petitioner as it is alleged in the Complaint that he is being sued in his capacity as the sales manager of the
said business venture. Likewise, respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a
representative of Impact Systems in said transaction.
We do not find merit in the petition.
In a contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another with
the latters consent.29 The underlying principle of the contract of agency is to accomplish results by using the services of othersto do a great
variety of things like selling,
_______________
26
Id., at pp. 2122.
27
Id., at pp. 2526.
28
Id., at pp. 98114.
29
Article 1868 of the Civil Code.
593
VOL. 521, APRIL 23, 2007
593
buying, manufacturing, and transporting. 30 Its purpose is to extend the personality of the principal or the party for whom another acts and
from whom he or she derives the authority to act.31 It is said that the basis of agency is representation, that is, the agent acts for and on behalf
of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by
the principal.32 By this legal fiction, the actual or real absence of the principal is converted into his legal or juridical presencequi facit per
alium facit per se.33
The elements of the contract of agency are: (1) consent, express or implied, of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself; (4) the agent acts within the
scope of his authority.34
In this case, the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as
agent. The only cause of the present dispute is whether respondent EDWIN exceeded his authority when he signed the Deed of Assignment
thereby binding himself personally to pay the obligations to petitioner. Petitioner firmly believes that respondent EDWIN acted beyond the
authority granted by his principal and he should therefore bear the effect of his deed pursuant to Article 1897 of the New Civil Code.
We disagree.
Article 1897 reinforces the familiar doctrine that an agent, who acts as such, is not personally liable to the party with
_______________
30
Reuschlein and Gregory, Agency and Partnership (1979 edition), p. 1.
31
3 Am Jur 2d, 1.
32
Padilla, Agency Text and Cases, (1986 edition), p. 2.
33
He who acts through another acts by or for himself; id., at 2.
34
Yu Eng Cho v. Pan American World Airways, Inc., 385 Phil. 453, 465;328 SCRA 717, 728 (2000).
594
594
whom he contracts. The same provision, however, presents two instances when an agent becomes personally liable to a third person. The first
is when he expressly binds himself to the obligation and the second is when he exceeds his authority. In the last instance, the agent can be
held liable if he does not give the third party sufficient notice of his powers. We hold that respondent EDWIN does not fall within any of the
exceptions contained in this provision.
The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. As discussed
elsewhere, the position of manager is unique in that it presupposes the grant of broad powers with which to conduct the business of the
principal, thus:
The powers of an agent are particularly broad in the case of one acting as a general agent or manager; such a position presupposes a degree
of confidence reposed and investiture with liberal powers for the exercise of judgment and discretion in transactions and concerns which are
incidental or appurtenant to the business entrusted to his care and management. In the absence of an agreement to the contrary, a managing
agent may enter into any contracts that he deems reasonably necessary or requisite for the protection of the interests of his principal
entrusted to his management. x x x.35
Applying the foregoing to the present case, we hold that Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment.
To recall, petitioner refused to deliver the one unit of sludge pump unless it received, in full, the payment for Impact Systems
indebtedness.36 We may very well assume that Impact Systems desperately needed the sludge pump for its business since after it paid the
amount of fifty thousand pesos (P50,000.00) as down payment on 3 March 1995, 37 it still persisted in negotiating with petitioner which
culminated in the execution of the Deed of Assignment
_______________
35
3 Am Jur 2d, 91, p. 602.
36
Records, p. 2.
37
Annex H of the Complaint; Records, p. 18.
595
VOL. 521, APRIL 23, 2007
595
of its receivables from Toledo Power Company on 28 June 1995. 38 The significant amount of time spent on the negotiation for the sale of the
sludge pump underscores Impact Systems perseverance to get hold of the said equipment. There is, therefore, no doubt in our mind that
respondent EDWINs participation in the Deed of Assignment was reasonably necessary or was required in order for him to protect the
business of his principal. Had he not acted in the way he did, the business of his principal would have been adversely affected and he would
have violated his fiduciary relation with his principal.
We likewise take note of the fact that in this case, petitioner is seeking to recover both from respondents ERWIN, the principal, and EDWIN,
the agent. It is well to state here that Article 1897 of the New Civil Code upon which petitioner anchors its claim against respondent EDWIN
does not hold that in case of excess of authority, both the agent and the principal are liable to the other contracting party. 39 To reiterate, the
first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. Under this, the
agent is completely absolved of any liability. The second part of the said provision presents the situations when the agent himself becomes
liable to a third party when he expressly binds himself or he exceeds the limits of his authority without giving notice of his powers to the third
person. However, it must be pointed out that in case of excess of authority by the agent, like what petitioner claims exists here, the law does
not say that a third person can recover from both the principal and the agent. 40
_______________
38
Annex G of the Complaint; id., at p. 17.
39
Philippine Products Company v. Primateria Societe Anonyme Pour Le Commerce Exterieur, 122 Phil. 698, 702; 15 SCRA 301, 305 (1965).
40
De Leon and De Leon, Jr., Comments and Cases on Partnership, Agency, and Trusts (1999 edition), p. 512.
596
596
As we declare that respondent EDWIN acted within his authority as an agent, who did not acquire any right nor incur any liability arising from
the Deed of Assignment, it follows that he is not a real party in interest who should be impleaded in this case. A real party in interest is one
who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. 41 In this respect, we sustain
his exclusion as a defendant in the suit before the court a quo.
WHEREFORE, premises considered, the present petition is DENIED and the Decision dated 10 August 2004 and Resolution dated 17 March
2005 of the Court of Appeals in CA-G.R. SP No. 71397, affirming the Order dated 29 January 2002 of the Regional Trial Court, Branch 8, Cebu
City, is AFFIRMED.
Let the records of this case be remanded to the Regional Trial Court, Branch 8, Cebu City, for the continuation of the proceedings against
respondent ERWIN CUIZON.
SO ORDERED.
VOL. 103, FEBRUARY 24, 1981
Caram, Jr., vs. Laureta
No. L-28740. February 24, 1981.*

FERMIN Z. CARAM, JR., petitioner, vs. CLARO L. LAURETA, respondent.
Civil Law; Sales; Double Sale; Purchaser of land in bad faith;A buyer of real estate should exercise ordinary care in purchasing land; Rule
of caveat emptor applies; Basis of bad faith.Even if Irespe and Aportadera did not have actual knowledge of the first sale, still, their actions
have not satisfied the requirement of good faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or lack of
title of his vendor, x x x In the instant case, Irespe and Aportadera had knowledge of circumstances which ought to have put them on inquiry.
Both of them knew that Matas certificate of title together with other papers pertaining to the land was taken by soldiers under the command
of Col. Claro L. Laureta. Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and
Aportadera should have investigated the nature of Lauretas possession. If they failed to exercise the ordinary care expected of a buyer of real
estate they must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor
and one who buys without checking the vendors title takes all the risks and losses consequent to such failure.
Same; Same; Same; Same; Principle that a person dealing with the owner of the registered land is not bound to go behind the certificate
of title and inquire into transactions on the land, not applicable; Reason.The principle that a person dealing with the owner of the registered
land is not bound to go behind the certificate and inquire into transactions the existence of which is not there intimated should not apply in
this case. It was of common knowledge that at
_______________
*
FIRST DIVISION
Carom, Jr., vs. Laureta
the time the soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there
were no officials to ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously
had sold the disputed property such sale could not have been registered.
Same; Same; Same; Same; Agency; Principal should be deemed a purchaser in bad faith if agents purchased the property in bad faith.
There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the
princple of agency, Caram, as principal, should also be deemed to have acted in bad faith.
Same; Same; Same; Possession; Possession in good faith, concept of.A possessor in good faith is one who is not aware that there exists
in his title or mode of acquisition any flaw which invalidates it. Laureta was first in possession of the property. He is also a possessor in good
faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. Such defect, however, was cured when,
after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action for annulment or to set up
nullity of the contract as a defense in an action to enforce the same.
Same; Same; Same; Contracts; Fraud; When fraud considered a ground for annulment of a contract.The petitioners conclusion that the
second deed of sale, Exhibit F, is a voidable contract is not correct. In order that fraud can be a ground for the annulment of a contract, it
must be employed prior to or simultaneous to the consent or creation of the contract. The fraud or dolo causantemust be that which
determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of contract is specifically described in Article
1338 of the New Civil Code of the Philippines as insidious words or machinations of one of the contracting parties which induced the other to
enter into a contract, and without them, he would not have agreed to.
Same, Same; Same; Same; Second deed of sale not a voidable contract; Reason.The second deed of sale in favor of Caram is not a
voidable contract. No evidence whatsoever was shown that through insidious words or machinations, the representatives of Caram, Irespe and
Aportadera had induced Mata to enter into the contract.
9
1
1
Same; Same; Same; Same; Prescription; Art. 1391 of the Civil Code requiring that annulment actions must be brought within four (4)
years from discovery of fraud not applicable; Action or defense for declaration of inexistence of a contract does not prescribe; Case at bar.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for
annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply. Moreover, Laureta has been in
continuous possession of the land since he bought it in June 1945. A more important reason why Lauretas action could not have prescribed is
that the second contract of sale, having been registered in bad faith, is null and void. Article 1410 of the Civil Code of the Philippines provides
that any action or defense for the declaration of the in-existence of a contract does not prescribe.
Same; Same; Same; Same; Necessity for determining the status of contracts in case of double sale of an immovable property.The fact
that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale registered in bad
faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a double sale of an
immovable property. To give full effect to this provision, the status of the two contracts must be determined and clarified. One contract must
be declared valid so that one vendee may exercise all the rights of an owner, while the other contract must be declared void to cut off all
rights which may arise from said contract. Otherwise, Article 1544 will be meaningless.
PETITION for certiorari to review the decision of the Court of Appeals.
FERNANDEZ, J.:
This is a petition for certiorari to revie w the decision of the Court of Appeals promulgated on January 29, 1968 in CA-G.R. NO. 35721-R entitled
Claro L. Laureta, plaintiff-appellee versus Marcos Mata, Codidi Mata and Fermin Caram Jr., defendants-appellants; Tampino (Mansaca), et al.
Intervenors10
10
appellants, affirming the decision of the Court of First Instance of Davao in Civil Case No. 3083.1
On June 25, 1959, Claro L. Laureta filed in the Court of First Instance of Davao an action for nullity, recovery of ownership and/or
reconveyance with damages and attorneys fees against Marcos Mata, Codidi Mata, Fermin Z. Caram Jr. and the Register of Deeds of Davao
City.2
On June 10, 1945, Marcos Mata conveyed a large tract of agricultural land covered by Original Certificate of Title No. 3019 in favor of Claro
Laureta, plaintiff, the respondent herein. The deed of absolute sale in favor of the plaintiff was not registered because it was not acknowledged
before a notary public or any other authorized officer. At the time the sale was executed, there was no authorized officer before whom the sale
could be acknowledged inasmuch as the civil government in Tagum, Davao was not as yet organized. Ho wever, the defendant Marcos Mata
delivered to Laureta the peaceful and la wful possession of the premises of the land together with the perti nent papers thereof such as the
Owners Duplicate Original Certificate of Title No. 3019, sketch plan, tax declaration, tax receipts and other papers related thereto. 3Since June
10, 1945, the plaintiff Laureta had been and is still in continuous, adverse and notorious occupation of said land, without being molested,
disturbed or stopped by any of the defendants or their representatives. In fact, Laureta had been paying realty taxes due thereon and had
introduced improvements worth not less than P20,000.00 at the time of the filing of the complaint. 4
On May 5, 1947, the same land covered by Original Certificate of Title No. 3019 was sold by Marcos Mata to defendant Fermin Z. Caram Jr.,
petitioner herein. The deed of sale in favor of Caram was ackno wledged before Atty. Abelardo
_______________
1
Annex A, Rollo, pp. 35-48. Written by Justice Nicasio Yatco and concurred in by Justice Salvador Esguerra and Justice Eulogio S. Serrano.
Record on Appeal, pp. 2-13, Rollo, p. 61.
Ibid., pp. 3-4.
Ibid., p. 10; TSN, January 22, 1964, pp. 108, 110-111.
11
11
Aportadera. On May 22, 1947, Marcos Mata, through Attys. Abelardo Aportadera and Gumercindo Arcilla, filed with the Court of First Instance
of Davao a petition for the issuance of a new Owners Duplicate of Original Certificate of Title No. 3019, alleging as ground therefor the loss of
said title in the evacuation place of defendant Marcos Mata in Magugpo, Tagum, Davao. On June 5, 1947, the Court of First Instance of Davao
issued an order directing the Register of Deeds of Davao to issue a new Owners Duplicate Certificate of Title No. 3019 in favor of Marcos Mata
and declaring the lost title as null and void. On December 9, 1947, the second sale between Marcos Mata and Fermin Caram Jr. was registered
with the Register of Deeds. On the same date, Transfer Certificate of Title No. 140 was issued in favor of Fermin Caram Jr. 5
On August 29, 1959, the defendants Marcos Mata and Codidi Mata filed their answer with counterclaim admitting the existence of a private
absolute deed of sale of his only property in favor o f Claro L. Laureta but alleging that he signed the same as he was subjected to duress,
threat and intimidation for the plaintiff was the commanding officer of the 10th division USFIP, operating in the unoccupied areas of Northern
Davao with its headquarters at Project No. 7 (Km. 60, Davao-Agusan Highways), in the Municipality of Tagum, Province of Davao; that Lauretas
words and requests were laws; that although the defendant Mata did not like to sell his property or sign the document without even
understanding the same, he was ordered to accept P650.00 Mindanao Emergency notes; and that due to his fear of harm or danger that will
happen to him or to his family, if he refused, he had no other alternative but to sign the document. 6
The defendants Marcos Mata and Codidi Mata also admit the existence of a record in the Registry of Deeds regarding a document allegedly
signed by him in favor of his co-defendant Fermin Caram Jr. but denies that he ever signed the document for he knew before hand that he had
signed a deed of sale in
_______________
5
Ibid., pp. 6-8.
Ibid., p. 27.
12
12
favor of the plaintiff and that the plaintiff was in possession of the certificate of title; that if ever his thumb mark appeared in the document
purportedly alienating the property to Fermin Caram Jr., his consent was obtained through fraud and misrepresentation for the defendant Mata
is illiterate and ignorant arid did not know what he was signing; and that he did not receive a consideration for the said sale. 7
The defendant Fermin Caram Jr. filed his answer on October 23, 1959 alleging that he has no knowledge or information about the previous
encumbrances, transactions, and alienations in favor of plaintiff until the filing of the complaints. 8
The trial court rendered a decision dated February 29, 1964, the dispositive portion of which reads: 9
1. 1.Declaring that the deed of sale, Exhibit A, executed by Marcos Mata in favor of Claro L. Laureta stands and prevails over the deed of
sale, Exhibit F, in favor of Fermin Caram, Jr.;
2. 2.Declaring as null and void the deed of sale Exhibit F, in favor of Fermin Caram, Jr.;
3. 3.Directing Marcos Mata to acknowledge the deed of sale, Exhibit A, in favor of Claro L. Laureta;
4. 4.Directing Claro L. Laureta to secure the approval of the Secretary of Agriculture and Natural Resources on the deed, Exhibit A, after
Marcos Mata shall have acknowledged the same before a notary public;
5. 5.Directing Claro L. Laureta to surrender to the Register of Deeds for the City and Province of Davao the Owners Duplicate of Original
Certificate of Title No. 3019 and the latter to cancel the same;
6. 5.Ordering the Register of Deeds for the City and Province of Davao to cancel Transfer Certificate of Title No. T-140 in the name of
Fermin Caram; Jr.;
7. 7.Directing the Register of Deeds for the City and Province of Davao to issue a title in favor of Claro L. Laureta, Filipino, resident of
Quezon City, upon presentation of the deed executed by Mar-
_______________
7
Ibid., p. 29.
Ibid., p. 39.
Ibid., pp. 126-127.
13
13
1. cos Mata in his favor. Exhibit A, duly acknowledged by him and approved by the Secretary of Agriculture and Natural Resources, and
2. 8.Dismissing the counterclaim and cross claim of Marcos Mata and Codidi Mata, the counterclaim of Caram, Jr., the answer in
intervention, counterclaim and cross-claim of the Mansacas.
The Court makes no pronouncement as to costs.
SO ORDERED.
The defendants appealed from the judgment to the Court of Appeals. 10 The appeal was docketed as CA-G.R. NO. 35721-R.
The Court of Appeals promulgated its decision on January 29, 1968 affirming the judgment of the trial court. In his brief, the petitioner
assigns the following errors:11
I
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT IRESPE AND APORTADERA WERE ATTORNEYS-IN-F ACT OF P ETITIONER
CARAM FOR THE PURPOSE OF BUYING THE PROPERTY IN QUESTION.
II
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT THE EVIDENCE ADDUCED IN THE TRIAL COURT CONS TITUTE LE GAL
EVIDENCE OF FRAUD ON THE PART OF IRESPE AND APORTADERA ATTRIBUTABLE TO P ETITIONER.
III
THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT KNOWLEDGE OF IRESPE AND APORTADERA
OF A PRIOR UNREGISTERED SALE OF A TITLED PROPERTY ATTRIBUTABLE TO P ETITIONER AND EQUIV ALENT IN LAW OF REGISTRATION OF SAID
SALE.
_______________
10
Ibid., pp. 128-129.
11
Brief for Petitioner, pp. 1-2, Rollo, p. 139.
14
14
IV
THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT AN ACTION FOR RECONVEYANCE ON THE GROUND OF FRAUD
PRESCRIBES WITHIN FOUR (4) YEARS.
The petitioner assails the finding of the trial court that the second sale of the property was made through his representatives, Pedro Irespe and
Atty. Abelardo Aportadera. He argues that Pedro Irespe was acting merely as a broker or intermediary with the specific task and duty to pay
Marcos Mata the sum of P1,000.00 for the latters property and to see to it that the requisite deed of sale covering the purchase was properly
executed by Marcos Mata; that the identity of the property to be bought and the price of the purchase had already been agreed upon by the
parties; and that the other alleged representative, Atty. Aportadera, merely acted as a notary public in the execution of the deed of sale.
The contention of the petitioner has no merit. The facts of record show that Mata, the vendor, and Caram, the second vendee had never met.
During the trial, Marcos Mata testified that he knows Atty. Aportadera but did not know Caram. 12 Thus, the sale of the property could have only
been through Carams representatives, Irespe and Aportadera. The petitioner, in his answer, admitted that Atty. Aportadera acted as his notary
public and attorney-in-fact at the same time in the purchase of the property. 13
The petitioner contends that he cannot be considered to have acted in bad faith because there is no direct proof showing that Irespe and
Aportadera, his alleged agents, had knowledge of the first sale to Laureta. This contention is also without merit.
The Court of Appeals, in affirming the decision of the trial court, said: 14
_______________
12
TSN, January 22, 1964, p. 98.
13
Record on Appeal, p. 38, Rollo, p. 61.
14
Rollo, pp. 45-47.
15
15
The trial court, in holding that appellant Caram, Jr. was not a purchaser in good faith, at the time he bought the same property from appellant
Mata, on May 5, 1947, entirely discredited the testimony of Aportadera. Thus it stated in its decision:
The testimony of Atty. Aportadera quoted elsewhere in this decision is hollow. There is every reason to believe that Irespe and he had
known of the sale of the property in question to Laureta on the day Mata and Irespe, accompanied by Leoning Mansaca, went to the office of
Atty. Aportadera for the sale of the same property to Caram, Jr., represented by Irespe as attorney-in-fact. Leoning Mansaca was with the two
Irespe and Matato engage the services of Atty. Aportadera in the annulment of the sale of his land to Laureta. When Leoning Mansaca
narrated to Atty. Aportadera the circumstances under which his property had been sold to Laureta, he must have included in the narration the
sale of the land of Mata, for the two properties had been sold on the same occasion and under the same circumstances. Even as early as
immediately after liberation, Irespe, who was the witness in most of the cases filed by Atty. Aportadera in his capacity as Provincial Fiscal of
Davao against Laureta, must have known of the purchases of lands made by Laureta when he was regimental commander, one of which was
the sale made by Mata. It was not a mere coincidence that Irespe was made guardian ad litem of Leoning Mansaca, at the suggestion of Atty.
Aportadera and attorney-in-fact of Caram, Jr.
The Court cannot help being convinced that Irespe, attorney-infact of Caram, Jr. had knowledge of the prior existing transaction, Exhibit A,
between Mata and Laureta over the land, subject matter of this litigation, when the deed, Exhibit F, was executed by Mata in favor of Caram,
Jr. And this knowledge has the effect of registration as to Caram, Jr. (R.A. pp. 123-124)
We agree with His Honors conclusion on this particular point, on two groundsthe first, the same concerns matters affecting the
credibility of a witness of which the findings of the trial court command great weight, and second, the same is borne out by the testimony of
Atty. Aportadera himself, (t.s.n., pp. 187-190, 213-215, Restauro).
Even if Irespe and Aportadera did not have actual knowledge of the first sale, still, their actions have not satisfied the requirement of good
faith. Bad faith is not based solely on the fact that a vendee had knowledge of the defect or
16
16
Caram. Jr., vs. Laureta
lack of title of his vendor. In the case of Leung Yee vs. F. L. Strong Machinery Co. and Williamson, this Court held:15
One who purchases real estate with knowledge of a defect or lack of title in his vendor can not claim that he has acquired title thereto in good
faith, as against the true owner of the land or of an interest therein, and the same rule must be applied to one who has knowledge of facts
which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his
vendor.
In the instant case, Irespe and Aportadera had kno wledge of circumstances which ought to have put them an inquiry. Both of them knew that
Matas certificate of title together with other papers pertaining to the land was taken by soldiers under the command of Col. Claro L.
Laureta.16Added to this is the fact that at the time of the second sale Laureta was already in possession of the land. Irespe and Aportadera
should have investigated the nature of Lauretas possession. If they failed to exercise the ordinary care expected of a buyer of real estate they
must suffer the consequences. The rule of caveat emptor requires the purchaser to be aware of the supposed title of the vendor and one who
buys without checking the vendors title takes all the risks and losses consequent to such failure. 17
The principle that a person dealing with the owner of the registered land is not bound to go behind the certificate and inquire into
transactions the existence of which is not there intimated 18 should not apply in this case. It was of common knowledge that at the time the
soldiers of Laureta took the documents from Mata, the civil government of Tagum was not yet established and that there were no officials to
ratify contracts of sale and make them registerable. Obviously, Aportadera and Irespe knew that even if Mata previously had sold the disputed
property such sale could not have been registered.
_______________
15
Leung Yee vs. Strong Machinery Co. and Williamson, 37 Phil. 644.
16
TSN, January 22, 1964, pp. 187-188.
17
Salvoro vs. Taega, 87 SCRA 349, 361.
18
Quimson vs. Suarez, 45 Phil. 906.
17
17
There is no doubt then that Irespe and Aportadera, acting as agents of Caram, purchased the property of Mata in bad faith. Applying the
principle of agency, Caram, as principal, should also be deemed to have acted in bad faith.
Article 1544 of the New Civil Code provides that:
Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first
taken possession thereof in good faith, if it should be movable property.
Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith first recordered it in the Registry
of Property.
Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence
thereof, to the person who presents the oldest title, provided there is good faith. (1473)
Since Caram was a registrant in bad faith, the situation is as if there was no registration at all. 19
The question to be determined now is, who was first in possession in good faith? A possessor in good faith is one who is not aware that
there exists in his title or mode of acquisition any fla w which invalidates it. 20 Laureta was first in possession of the property. He is also a
possessor in good faith. It is true that Mata had alleged that the deed of sale in favor of Laureta was procured by force. 21 Such defect,
however, was cured when, after the lapse of four years from the time the intimidation ceased, Marcos Mata lost both his rights to file an action
for annulment or to set up nullity of the contract as a defense in an action to enforce the same.
Anent the fourth error assigned, the petitioner contends that the second deed of sale, Exhibit F, is a voidable con_______________
19
Salvoro vs. Taega, 87 SCRA 363.
20
Article 526, Civil Code of the Philippines.
21
The trial court found that the contract in favor of Laureta is voidable, but, the action to annul the same has long prescribed. See Record
on Appeal, p. 120, Rollo, p. 61.
18
18
tract. Being a voidable contract, the action for annulment of the same on the ground of fraud must be brought within four (4) years from the
discovery of the fraud. In the case at bar, Laureta is deemed to have discovered that the land in question has been sold to Caram to his
prejudice on December 9, 1947, when the Deed of Sale, Exhibit F was recorded and entered in the Original Certificate of Title by the Register
of Deeds and a new Certificate of Title No. 140 was issued in the name of Caram. Therefore, when the present case was filed on June 29, 1959,
plaintiffs cause of action had long prescribed.
The petitioners conclusion that the second deed of sale, Exhibit F, is a voidable contract is not correct. In order that fraud can be a
ground for the annulment o f a contract, it must be employed prior to or simultaneous to the consent or creation of the contract. The fraud
or dolo causante mu st b e that which determines or is the essential cause of the contract. Dolo causante as a ground for the annulment of
contract is specifically described in Article 1338 of the New Civil Code of the Philippines as insidious words or machinations of one of the
contracting parties which induced the other to enter into a contract, and witho ut them, he wo uld not have agreed to.
The second deed of sale in favor of Caram is not a voidable contract. No evidence whatsoever was shown that through insidious words or
machinations, the representatives of Caram, Irespe and Aportadera had induced Mata to enter into the contract.
Since the second deed of sale is not a voidable contract, Article 1391, Civil Code of the Philippines which provides that the action for
annulment shall be brought within four (4) years from the time of the discovery of fraud does not apply.
Moreover, Laureta has been in continuous possession of the land since he bought it in June 1945.
A more important reason why Lauretas action could not have prescribed is that the second contract of sale, having been registered in bad
faith, is null and void. Article 1410 of the Civil Code of the Philippines provides that any action or defense for the declaration of the inexistence
of a contract does not prescribe.
19
19
In a Memorandum of Authorities22 submitted to this Court on March 13, 1978, the petitioner insists that the action of Laureta against Caram
has prescribed because the second contract of sale is not void under Article 1409 23 of the Civil Code of the Philippines which enumerates the
kinds of contracts which are considered void. Moreover, Article 1544 of the New Civil Code of the Philippines does not declare void a second
sale of immovable registered in bad faith.
The fact that the second contract is not considered void under Article 1409 and that Article 1544 does not declare void a deed of sale
registered in bad faith does not mean that said contract is not void. Article 1544 specifically provides who shall be the owner in case of a
double sale of an immovable property. To give full effect to this provision, the status of the two contracts must be declared valid so that one
vendee may contract must be declared void to cut off all rights which may arise from said contract .Otherwise, Article 1544 will be
meaningless.
The first sale in favor of Laureta prevails over the sale in favor of Caram.
_______________
22
Rollo, pp. 159-177.
23
Article 1409, Civil Code of the PhilippinesThe following contracts are inexistent and void from the beginning:
1. (1)Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy;
2. (2)Those which are absolutely simulated or fictitious;
3. (3)Those whose cause or object did not exist at the time of the transaction;
4. (4)Those whose object is outside the commerce of men;
5. (5)Those which contemplate an impossible service;
6. (6)Those where the intention of the parties relative to the principal object of the contract cannot be ascertained;
7. (7)Those expressly prohibited or declared void by law;
These contracts cannot be ratified. Neither can the right to set the defense of illegality be waived.
20
20
WHEREFORE, the petition is hereby denied and the decision of the Court of Appeals sought to be reviewed is affirmed, without pronouncement
as to costs.
SO ORDERED.
Makasiar. Guerrero, De Castro* and Melencio-Herrera, JJ., concur.
Petition denied.
Notes.The promissory note for the unpaid balance of the selling price of real property may be the basis of a vendors lien. ( Barretto vs.
Villanueva, 1 SCRA 288).
In a contract of sale which is executory as to both parties, the vendor is entitled to resell the goods if the purchaser fails to take delivery
and pay the purchase price. (Katigbak vs. Court of Appeals, 4 SCRA 243).
The general manager of a partnership, who se term had expired, may liquidate its business. His sale of the lots belonging to the firm, while
it was under receivership, is sanctioned by article 228 of the Code of Commerce, the law in force at the time of the sale. ( Ng Cho Cio vs. Ng
Diong, 1 SCRA 275).
The wife cannot invo ke her o wn failure to get the consent of her husband to invalidate a sale she had consummated. ( Novino vs. Court of
Appeals, 8 SCRA 279).
The provision of par. 3, Art. 1544 of the Civil Code does not not apply to a case where the sale in favor of one party was of the property
itself, while the transaction in favor of another was either a mere promise to assign or, at most, an actual assignment of the right to
repurchase. (Dichoso vs. Roxas, 5 SCRA 781).
A degree of registration may be set aside only on the ground of fraud in obtaining the same, not on the ground of failure of the vendee to
pay the purchase price. (Mendoza vs. Court of Appeals, 84 SCRA 67).
_______________
*
Mr. Justice de Castro was designated to sit with the First Division.
21
21
People vs. Casey
The legal presumption of good faith makes the buyer on innocent purchaser for value. (Demontao vs. Court of Appeals, 81 SCRA 286).
Innocent purchaser for value is where one purchased the land covered by the certificate of title he is not aware that the disputed portion
was not included in the area conveyed to him. (Vda. de Recinto vs. Inciong, 77 SCRA 196).
A purchaser in good faith is one who buys the property of another without notice that some other person has a right to, or interest in, such
property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of the claim or interest of some other
persons in the property. (Vda. de Recinto vs. Inciong, 77 SCRA 196).
The annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the
registration of such interest or right is not otherwise provided for by the Land Registration Act, and serves as a notice and warning to third
parties dealing with said property that some is claiming an interest on the same or a better right that the registered owner thereof. ( Sanchez,
Jr. vs. Court of Appeals, 69 SCRA 327).
VOL. 355, MARCH 28, 2001
559
Safic Alcan & Cie vs. Imperial Vegetable Oil Co., Inc.
G.R. No. 126751. March 28, 2001.*

SAFIC ALCAN & CIE, petitioner, vs. IMPERIAL VEGETABLE OIL CO., INC., respondent.
Agency; 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,It can be clearly seen from the foregoing provision of IVOs By-laws that Monteverde had no blanket authority to
bind IVO to any contract. He must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act
according to his discretion, that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the
IVO Board knew nothing of the 1986 contracts and that it did not authorize Monteverde to enter into speculative contracts. In fact, Monteverde
had earlier proposed that the company engage in such transactions but the IVO Board rejected his proposal. Since the 1986 contracts marked
a sharp departure from past IVO transactions, Safic should have obtained from Monteverde the prior authorization of the IVO Board. Safic can
not rely on the doctrine of implied agency because before the controversial 1986 contracts, IVO did not enter into identical contracts with
Safic. 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.
Same; The acts of an agent beyond the scope of his authority do not bind the principal unless the latter ratifies the same expressly or
impliedly.Under Article 1898 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless the
latter ratifies the same expressly or impliedly. It also bears emphasizing that when
_______________
*
FIRST DIVISION.
560
60
the third person knows that the agent was acting beyond his power or authority, the principal can not be held liable for the acts of the
agent. If the said third person is 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 principals ratification.
Corporation Law; It is the Board of Directors, not the President, that exercises corporate powers.There was no such ratification in this
case. When Monteverde entered into the speculative contracts with Safic, he did not secure the Boards approval. He also did not submit the
contracts to the Board after their consummation so there was, in fact, no occasion at all for ratification. The contracts were not reported in
IVOs export sales book and turn-out book. Neither were they reflected in other books and records of the corporation. It must be pointed out
that the Board of Directors, not Monteverde, exercises corporate power. Clearly, Monteverdes speculative contracts with Safic never bound
IVO and Safic can not therefore enforce those contracts against IVO.
Same; Pleadings and Practice; Appeals; A question that was never raised in the courts below can not be allowed to be raised for the first
time on appeal without offending basic rules of fair play, justice and due process.To bolster its cause, Safic raises the novel point that the IVO
Board of Directors did not set limitations on the extent of Monteverdes authority to sell coconut oil. It must be borne in mind in this regard
that a question that was never raised in the courts below can not be allowed to be raised for the first time on appeal without offending basic
rules of fair play, justice and due process. Such an issue was not brought to the fore either in the trial court or the appellate court, and would
have been disregarded by the latter tribunal for the reasons previously stated. With more reason, the same does not deserve consideration by
this Court.
Damages; The power of the courts to grant damages and attorneys fees demands factual, legal and equitable justification its basis
cannot be left to speculation and conjecture.Along the same vein, it is worthy to note that the quantities of oil covered by its 1987 contracts
with third parties do not match the quantities of oil provided under the 1986 contracts. Had Safic produced the documents that the trial court
required, a substantially correct determination of its actual damages would have been possible. This, unfortunately, was not the case. Suffice it
to state in this regard that [T]he power of the courts to grant damages and attorneys fees demands factual, legal and equitable justification;
its basis cannot be left to speculation and conjecture.
561
VOL. 355, MARCH 28, 2001
561

Sycip, Salazar, Hernandez & Gatmaitan for petitioners.
Abad and Associates for private respondent.
YNARES-SANTIAGO, J.:
Petitioner Safic Alcan & Cie (hereinafter, Safic) is a French corporation engaged in the international purchase, sale and trading of coconut oil.
It filed with the Regional Trial Court of Manila, Branch XXV, a complaint dated February 26, 1987 against private respondent Imperial Vegetable
Oil Co., Inc. (hereinafter, IVO), docketed as Civil Case No. 87-39597. Petitioner Safic alleged that on July 1, 1986 and September 25, 1986, it
placed purchase orders with IVO for 2,000 long tons of crude coconut oil, valued at US$222.50 per ton, covered by Purchase Contract Nos.
A601446 and A601655, respectively, to be delivered within the month of January 1987. Private respondent, however, failed to deliver the said
coconut oil and, instead, offered a wash out settlement, whereby the coconut oil subject of the purchase contracts were to be sold back to
IVO at the prevailing price in the international market at the time of wash out. Thus, IVO bound itself to pay to Safic the difference between the
said prevailing price and the contract price of the 2,000 long tons of crude coconut oil, which amounted to US$293,500.00. IVO failed to pay
this amount despite repeated oral and written demands.
Under its second cause of action, Safic alleged that on eight occasions between April 24, 1986 and October 31, 1986, it placed purchase
orders with IVO for a total of 4,750 tons of crude coconut oil, covered by Purchase Contract Nos. A601297A/B, A601384, A601385, A601391,
A601415, A601681, A601683 and A601770A1B/CA When IVO failed to honor its obligation under the wash out settlement narrated above,
Safic demanded that IVO make marginal deposits within forty-eight hours on the eight purchase contracts in amounts equivalent to the
difference between the contract price and the market price of the coconut oil, to com562
562
pensate it for the damages it suffered when it was forced to acquire coconut oil at a higher price. IVO failed to make the prescribed marginal
deposits on the eight contracts, in the aggregate amount of US$391,593.62, despite written demand therefor.
The demand for marginal deposits was based on the customs of the trade, as governed by the provisions of the standard N.I.O.P. Contract
and the FOSFA Contract, to wit:
N.I.O.P. Contract, Rule 54If the financial condition of either party to a contract subject to these rules becomes so impaired as to create a
reasonable doubt as to the ability of such party to perform its obligations under the contract, the other party may from time to time demand
marginal deposits to be made within forty-eight (48) hours after receipt of such demand, such deposits not to exceed the difference between
the contract price and the market price of the goods covered by the contract on the day upon which such demand is made, such deposit to
bear interest at the prime rate plus one percent (1%) per annum. Failure to make such deposit within the time specified shall constitute a
breach of contract by the party upon whom demand for deposit is made, and all losses and expenses resulting from such breach shall be for
the account of the party upon whom such demand is made. (Italics ours.) 1
FOSFA Contract, Rule 54BANKRUPTCY/INSOLVENCY: If before the fulfillment of this contract either party shall suspend payment, commit
an act of bankruptcy, notify any of his creditors that he is unable to meet his debts or that he has suspended payment or that he is about to
suspend payment of his debts, convene, call or hold a meeting either of his creditors or to pass a resolution to go into liquidation (except for a
voluntary winding up of a solvent company for the purpose of reconstruction or amalgamation) or shall apply for an official moratorium, have a
petition presented for winding up or shall have a Receiver appointed, the contract shall forthwith be closed, either at the market price then
current for similar goods or, at the option of the other party at a price to be ascertained by repurchase or resale and the difference between
the contract price and such closing-out price shall be the amount which the other party shall be entitled to claim shall be liable to account for
under this contract (sic).Should either party be dissatisfied with the price, the matter shall be referred to arbitration. Where no such resale or
repurchase takes place, the closing_______________
1
Complaint, Rollo, p. 49.
563
VOL. 355, MARCH 28, 2001
563
out price shall be fixed by a Price Settlement Committee appointed by the Federation. (Italics ours.) 2
Hence, Safic prayed that IVO be ordered to pay the sums of US$293,500.00 and US$391,593.62, plus attorneys fees and litigation expenses.
The complaint also included an application for a writ of preliminary attachment against the properties of IVO.
Upon Safics posting of the requisite bond, the trial court issued a writ of preliminary attachment. Subsequently, the trial court ordered that
the assets of IVO be placed under receivership, in order to ensure the preservation of the same.
In its answer, IVO raised the following special affirmative defenses: Safic had no legal capacity to sue because it was doing business in the
Philippines without the requisite license or authority; the subject contracts were speculative contracts entered into by IVOs then President,
Dominador Monteverde, in contravention of the prohibition by the Board of Directors against engaging in speculative paper trading, and
despite IVOs lack of the necessary license from Central Bank to engage in such kind of trading activity; and that under Article 2018 of the Civil
Code, if a contract which purports to be for the delivery of goods, securities or shares of stock is entered into with the intention that the
difference between the price stipulated and the exchange or market price at the time of the pretended delivery shall be paid by the loser to
the winner, the transaction is null and void.
IVO set up counterclaims anchored on harassment, paralyzation of business, financial losses, rumor-mongering and oppressive action.
Later, IVO filed a supplemental counterclaim alleging that it was unable to operate its business normally because of the arrest of most of its
physical assets; that its suppliers were driven away; and that its major creditors have inundated it with claims for immediate payment of its
debts, and China Banking Corporation had foreclosed its chattel and real estate mortgages.
During the trial, the lower court found that in 1985, prior to the date of the contracts sued upon, the parties had entered into and
consummated a number of contracts for the sale of crude coconut
_______________
2
Ibid., pp. 49-50.
564
564
oil. In those transactions, Safic placed several orders and IVO faithfully filled up those orders by shipping out the required crude coconut oil to
Safic, totalling 3,500 metric tons. Anent the 1986 contracts being sued upon, the trial court refused to declare the same as gambling
transactions, as defined in Article 2018 of the Civil Code, although they involved some degree of speculation. After all, the court noted, every
business enterprise carries with it a certain measure of speculation or risk. However, the contracts performed in 1985, on one hand, and the
1986 contracts subject of this case, on the other hand, differed in that under the 1985 contracts, deliveries were to be made within two
months. This, as alleged by Safic, was the time needed for milling and building up oil inventory. Meanwhile, the 1986 contracts stipulated that
the coconut oil were to be delivered within a period ranging from eight months to eleven to twelve months after the placing of orders. The
coconuts that were supposed to be milled were in all likelihood not yet growing when Dominador Monteverde sold the crude coconut oil. As
such, the 1986 contracts constituted trading in futures or in mere expectations.
The lower court further held that the subject contracts were ultra vires and were entered into by Dominador Monteverde without authority
from the Board of Directors. It distinguished between the 1985 contracts, where Safic likewise dealt with Dominador Monteverde, who was
presumably authorized to bind IVO, and the 1986 contracts, which were highly speculative in character. Moreover, the 1985 contracts were
covered by letters of credit, while the 1986 contracts were payable by telegraphic transfers, which were nothing more than mere promises to
pay once the shipments became ready. For these reasons, the lower court held that Safic cannot invoke the 1985 contracts as an implied
corporate sanction for the high-risk 1986 contracts, which were evidently entered into by Monteverde for his personal benefit.
The trial court ruled that Safic failed to substantiate its claim for actual damages. Likewise, it rejected IVOs counterclaim and supplemental
counterclaim.
Thus, on August 28, 1992, the trial court rendered judgment as follows:
565
VOL. 355, MARCH 28, 2001
565
WHEREFORE, judgment is hereby rendered dismissing the complaint of plaintiff Safic Alcan & Cie, without prejudice to any action it might
subsequently institute against Dominador Monteverde, the former President of Imperial Vegetable Oil Co., Inc, arising from the subject matter
of this case. The counterclaim and supplemental counterclaim of the latter defendant are likewise hereby dismissed for lack of merit. No
pronouncement as to costs.
The writ of preliminary attachment issued in this case as well as the order placing Imperial Vegetable Oil Co., Inc under receivership are
hereby dissolved and set aside.3
Both IVO and Safic appealed to the Court of Appeals, jointly docketed as CA-G.R. CV No. 40820.
IVO raised only one assignment of error viz.:
THE TRIAL COURT ERRED IN HOLDING THAT THE ISSUANCE OF THE WRIT OF PRELIMINARY ATTACHMENT WAS NOT THE MAIN CAUSE OF THE
DAMAGES SUFFERED BY DEFENDANT AND IN NOT AWARDING DEFENDANT-APPELLANT SUCH DAMAGES.
For its part, Safic argued that:
THE TRIAL COURT ERRED IN HOLDING THAT IVOS PRESIDENT, DOMINADOR MONTEVERDE, ENTERED INTO CONTRACTS WHICH WERE ULTRA
VIRES AND WHICH DID NOT BIND OR MAKE IVO LIABLE.
THE TRIAL COURT ERRED IN HOLDING THAT AFIC WAS UNABLE TO PROVE THE DAMAGES SUFFERED BY IT AND IN NOT AWARDING SUCH
DAMAGES.
THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS LIABLE UNDER THE WASH OUT CONTRACTS.
On September 12, 1996, the Court of Appeals rendered the assailed Decision dismissing the appeals and affirming the judgment appealed
from in toto.4
_______________
3
Rollo, p. 99; penned by Judge Leonardo I. Cruz.
Penned by Associate Justice Artemio G. Toquero, with Associate Justices Cancio C. Garcia and Eugenio S. Labitoria, concurring.
566
566
Hence, Safic filed the instant petition for review with this Court, substantially reiterating the errors it raised before the Court of Appeals and
maintaining that the Court of Appeals grievously erred when:
1. a.it declared that the 1986 forward contracts (i.e.,Contracts Nos. A601446 and A60155 (sic) involving 2,000 long tons of crude coconut
oil, and Contracts Nos. A601297A/B, A601385, A601391, A601415, A601681, A601683 and A601770A/B/C involving 4,500 tons of
crude coconut oil) were unauthorized acts of Dominador Monteverde which do not bind IVO in whose name they were entered into. In
this connection, the Court of Appeals erred when (i) it ignored its own finding that (a) Dominador Monteverde, as IVOs President, had
an implied authority to make any contract necessary or appropriate to the contract of the ordinary business of the company; and
(b) Dominador Monteverde had validly entered into similar forward contracts for and on behalf of IVO in 1985; (ii) it distinguished
between the 1986 forward contracts despite the fact that the Manila RTC has struck down IVOs objection to the 1986 forward
contracts (i.e. that they were highly speculative paper trading which the IVO Board of Directors had prohibited Dominador
Monteverde from engaging in because it is a form of gambling where the parties do not intend actual delivery of the coconut oil sold)
and instead found that the 1986 forward contracts were not gambling; (iii) it relied on the testimony of Mr. Rodrigo Monteverde in
concluding that the IVO Board of Directors did not authorize its President, Dominador Monteverde, to enter into the 1986 forward
contracts; and (iv) it did not find IVO, in any case, estopped from denying responsibility for, and liability under, the 1986 forward
contracts because IVO had recognized itself bound to similar forward contracts which Dominador Monteverde entered into (for and on
behalf of IVO) with Safic in 1985 notwithstanding that Dominador Monteverde was (like in the 1986 forWard contracts) not expressly
authorized by the IVO Board of Directors to enter into such forward contracts;
2. b.it declared that Safic was not able to prove damages suffered by it, despite the fact that Safic had presented not only testimonial,
but also documentary, evidence which proved the higher amount it had to pay for crude coconut oil ( vis--visthe contract price it was
to pay to IVO) when IVO refused to deliver the crude coconut oil bought by Safic under the 1986 forward contracts; and
3. c.it failed to resolve the issue of whether or not IVO is liable to Safic under the wash out contracts involving Contracts Nos. A601446
and A60155 (sic), despite the fact that Safic had properly raised the issue on
567
VOL. 355, MARCH 28, 2001
567
1. its appeal, and the evidence and the law support Safics position that IVO is so liable to Safic.
In fine, Safic insists that the appellate court grievously erred when it did not declare that IVOs President, Dominador Monteverde, validly
entered into the 1986 contracts for and on behalf of IVO.
We disagree.
Article III, Section 3 [g] of the By-Laws5 of IVO provides, among others, that
Section 3. Powers and Duties of the President.The President shall be elected by the Board of Directors from their own number.
He shall have the following duties:
xxx
xxx
xxx
[g] Have direct and active management of the business and operation of the corporation, conducting the same according to the orders,
resolutions and instruction of the Board of Directors and according to his own discretion whenever and wherever the same is not expressly
limited by such orders, resolutions and instructions.
It can be clearly seen from the foregoing provision of IVOs Bylaws that Monteverde had no blanket authority to bind IVO to any contract. He
must act according to the instructions of the Board of Directors. Even in instances when he was authorized to act according to his discretion,
that discretion must not conflict with prior Board orders, resolutions and instructions. The evidence shows that the IVO Board knew nothing of
the 1986 contracts6 and that it did not authorize Monteverde to enter into speculative contracts. 7 In fact, Monteverde had earlier proposed that
the company engage in such transactions but the IVO Board rejected his proposal. 8 Since the 1986 contracts marked a sharp departure from
past IVO transactions, Safic should have obtained from Monteverde the prior authorization of the IVO Board. Safic can not rely
_______________
5
Exhibit 5; Record, p. 764.
TSN, 23 June 1990, p. 18.
Ibid., pp. 5, 7, 8 and 18.
Id., p. 7.
568
568
on the doctrine of implied agency because before the controversial 1986 contracts, IVO did not enter into identical contracts with Safic. 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.9 In the case of Bacaltos Coal Mines v. Court of Appeals,10 we elucidated the rule on dealing with an agent thus:
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 agents 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).11
The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. Being remiss in
this regard, petitioner can not seek relief on the basis of a supposed agency.
Under Article 189812 of the Civil Code, the acts of an agent beyond the scope of his authority do not bind the principal unless the latter
ratifies the same expressly or impliedly. It also bears emphasizing that when the third person knows that the agent was acting
_______________
9
Dizon v. Court of Appeals, 302 SCRA 288 (1999), citing Article 1868, Civil Code and Bordador v. Luz, 283 SCRA 374 (1997).
10
245 SCRA 460 (1995).
Citing Pineda v. Court of Appeals, 226 SCRA 754 (1993); Veloso v. La Urbana, 58 Phil. 681 (1933); Harry E. Keller Electric Co. v.
Rodriguez, 44 Phil. 19 (1922); Deen v. Pacific Commercial Co., 42 Phil. 738 (1922) andStrong v. Repide, 6 Phil. 680 (1906).
11
12
ART. 1898. If the agent contracts in the name of the principal, extending the scope of his authority and the principal does not ratify the
contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the principals ratification.
569
VOL. 355, MARCH 28, 2001
569
beyond his power or authority, the principal can not be held liable for the acts of the agent. If the said third person is 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 principals
ratification.13
There was no such ratification in this case. When Monteverde entered into the speculative contracts with Safic, he did not secure the
Boards approval.14 He also did not submit the contracts to the Board after their consummation so there was, in fact, no occasion at all for
ratification. The contracts were not reported in IVOs export sales book and turn-out book. 15 Neither were they reflected in other books and
records of the corporation.16 It must be pointed out that the Board of Directors, not Monteverde, exercises corporate power. 17 Clearly,
Monteverdes speculative contracts with Safic never bound IVO and Safic can not therefore enforce those contracts against IVO.
To bolster its cause, Safic raises the novel point that the IVO Board of Directors did not set limitations on the extent of Monteverdes
authority to sell coconut oil. It must be borne in mind in this regard that a question that was never raised in the courts below can not be
allowed to be raised for the first time on appeal without offending basic rules of fair play, justice and due process. 18 Such an issue was not
brought to the fore either in the trial court or the appellate court, and would have been disregarded by the latter tribunal for the reasons
previously stated. With more reason, the same does not deserve consideration by this Court.
_______________
13
Cervantes v. Court of Appeals, 304 SCRA 25 (1999).
14
Id., p. 18.
15
TSN, 16 August 1990, pp. 3-6.
16
Ibid., pp. 7-9.
17
Section 23, Corporation Code.
Ysmael v. Court of Appeals, 318 SCRA 215 (1999), citing Medida v. Court of Appeals, 208 SCRA 887 (1992); see also Sumbad v. Court of
Appeals, 308 SCRA 575 (1999); Buag v. Court of Appeals, 303 SCRA 591(1999); Reburiano v. Court of Appeals, 301 SCRA 342 (1999); Spouses
Jimenez v. Patricia, Inc., G.R. No. 134651, 18 September 2000, 340 SCRA 525.
18
570
570
Be that as it may, Safics belated contention that the IVO Board of Directors did not set limitations on Monteverdes authority to sell coconut oil
is belied by what appears on the record. Rodrigo Monteverde, who succeeded Dominador Monteverde as IVO President, testified that the IVO
Board had set down the policy of engaging in purely physical trading thus:
Now you said that IVO is engaged in trading. With whom does it
usually trade its oil?
I am not too familiar with trading because as of March 1987, I was
not yet an officer of the corporation, although I was at the time

already a stockholder, I think IVO is engaged in trading oil.
As far as you know, what kind of trading was IVO engaged with?
It was purely on physical trading.
How did you know this?
As a stockholder, rather as member of [the] Board of Directors, I
frequently visited the plant and from my observation, as I have to

supervise and monitor purchases of copras and also the sale of the
same, I observed that the policy of the corporation is for the
company to engaged (sic) or to purely engaged (sic) in physical
trading.
What do you mean by physical trading?
Physical Trading meanswe buy and sell copras that are only
available to us. We only have to sell the available stocks in our

inventory.
And what is the other form of trading?
Atty. Fernando
No basis, your Honor.
Atty. Abad
Well, the witness said they are engaged in physical trading and what
I am saying [is] if there are any other kind or form of trading.
Court
Witness may answer if he knows.
571
VOL.
571
355,
MARCH
28, 2001
Witness
A.
Trading future [s] contracts wherein the trader commits a

price and to deliver coconut oil in the future in which he is
yet to acquire the stocks in the future.
Atty. Abad
Q.
Who established the so-called physical trading in IVO?
A.
The Board of Directors, sir.
Atty. Abad
Q.
How did you know that?
A.
There was a meeting held in the office at the factory and it

was brought out and suggested by our former president,
Dominador Monteverde, that the company should engaged
(sic) in future[s] contracts] but it was rejected by the Board
of Directors. It was only Ador Monteverde who then wanted
to engaged (sic) in this future [s] contract[s].
Q.
Do you know where this meeting took place?
A.
As far as I know it was sometime in 1985.
Q.
Do you know why the Board of Directors rejected the

proposal of Dominador Monteverde that the company should
engaged (sic) in future [s] contracts?
Atty. Fernando
Objection, your Honor, no basis.
Court
Why dont you lay the basis?
Atty. Abad
Q.
Were you a member of the board at the time?
A.
In 1975, I am already a stockholder and a member.
Q.
Then would [you] now answer my question?
Atty. Fernando
No basis, your Honor. What we are talking is about 1985.
Atty. Abad
Q.
When you mentioned about the meeting in 1985 wherein the

Board of Directors rejected the future[s] contracts], were you
already a member of the Board of Directors at that time?
A.
Yes, sir.
Q.
Do you know the reason why the said proposal of Mr.

Dominador Monteverde to engage in future [s] contract [s]
was rejected by the Board of Directors?
572
57
A.
Because this future [s] contract is too risky and it partakes of

gambling.
Q.
Do you keep records of the Board meetings of the company?
A.
Yes, sir.
Q.
Do you have a copy of the minutes of your meeting in 1985?
A.
Incidentally our Secretary of the Board of Directors, Mr. Elfren

Sarte, died in 1987 or 1988, and despite [the] request of our office
for us to be furnished a copy he was not able to furnish us a copy. 19
xxx
xxx
xxx
Atty. Abad
Q.
You said the Board of Directors were against the company

engaging in future[s] contracts. As far as you know, has this policy
of the Board of Directors been observed or followed?
Witness
A.
Yes, sir.
Q.
flow far has this Dominador Monteverde been using the name of
I.V.O. in selling future contracts without the proper authority and
consent of the companys Board of Directors?
A.
Dominador Monteverde never records those transactions he

entered into in connection with these future [s] contracts in the
companys books of accounts.
Atty. Abad
Q.
What do you mean by that the future[s] contracts were not entered
into the books of accounts of the company?
Witness
A.
Those were not recorded at all in the books of accounts of the

company, sir.20
xxx
xxx
xxx
Q.
What did you do when you discovered these transactions?
A.
There was again a meeting by the Board of Directors of the

corporation and that we agreed to remove the president and then I
was made to replace him as president.
______________
19
TSN, 21 June 1990, pp. 4-8.
20
Ibid., pp. 12-13.
573
VOL. 355, MARCH
573
28, 2001
Q.
What else?
A.
And a resolution was passed disowning the illegal

activities of the former president.21
Petitioner next argues that there was actually no difference between the 1985 physical contracts and the 1986 futures contracts.
The contention is unpersuasive for, as aptly pointed out by the trial court and sustained by the appellate court
Rejecting IVOs position, SAFIC claims that there is no distinction between the 1985 and 1986 contracts, both of which groups of contracts
were signed or authorized by IVOs President, Dominador Monteverde. The 1986 contracts, SAFIC would bewail, were similarly with their 1985
predecessors, forward sales contracts in which IVO had undertaken to deliver the crude coconut oil months after such contracts were entered
into. The lead time between the closing of the deal and the delivery of the oil supposedly allowed the seller to accumulate enough copra to
mill and to build up its inventory and so meet its delivery commitment to its foreign buyers. SAFIC concludes that the 1986 contracts were
equally binding, as the 1985 contracts were, on IVO.
Subjecting the evidence on both sides to close scrutiny, the Court has found some remarkable distinctions between the 1985 and 1986
contracts, x x x
1. 1.The 1985 contracts were performed within an average of two months from the date of the sale. On the other hand, the 1986
contracts were to be performed within an average of eight and a half months from the dates of the sale. All the supposed
performances fell in 1987. Indeed, the contract covered by Exhibit J was to be performed 11 to 12 months from the execution of the
contract. These pattern (sic) belies plaintiffs contention that the lead time merely allowed for milling and building up of oil inventory.
It is evident that the 1986 contracts constituted trading in futures or in mere expectations. In all likelihood, the coconuts that were
supposed to be milled for oil were not yet on their trees when Dominador Monteverde sold the crude oil to SAFIC.
2. 2.The mode of payment agreed on by the parties in their 1985 contracts was uniformly thru the opening of a letter of credit LC by
SAFIC in favor of IVO. Since the buyers letter of credit guarantees payment to the seller as soon as the latter is able to present the
shipping documents
______________
21
Id., p. 18.
574
574
1. covering the cargo, its opening usually mark[s] the fact that the transaction would be consummated. On the other hand, seven out of
the ten 1986 contracts were to be paid by telegraphic transfer upon presentation of the shipping documents. Unlike the letter of
credit, a mere promise to pay by telegraphic transfer gives no assurance of [the] buyers compliance with its contracts. This fact
lends an uncertain element in the 1986 contracts.
2. 3.Apart from the above, it is not disputed that with respect to the 1985 contracts, IVO faithfully complied with Central Bank Circular
No. 151 dated April 1, 1963, requiring a coconut oil exporter to submit a Report of Foreign Sales within twenty-four (24) hours after
the closing of the relative sales contract with a foreign buyer of coconut oil. But with respect to the disputed 1986 contracts, the
parties stipulated during the hearing that none of these contracts were ever reported to the Central Bank, in violation of its above
requirement. (See Stipulation of Facts dated June 13, 1990). The 1986 sales were, therefore suspect.
3. 4.It is not disputed that, unlike the 1985 contracts, the 1986 contracts were never recorded either in the 1986 accounting books of IVO
or in its annual financial statement for 1986, a document that was prepared prior to the controversy. (Exhibits 6 to 6-0 and 7 to 7-1).
Emelita Ortega, formerly an assistant of Dominador Monteverde, testified that they were strange goings-on about the 1986 contract.
They were neither recorded in the books nor reported to the Central Bank. What is more, in those unreported cases where profits
were made, such profits were ordered remitted to unknown accounts in California, U.S.A., by Dominador Monteverde.
xxx
xxx
xxx
Evidently, Dominador Monteverde made business for himself, using the name of IVO but concealing from it his speculative transactions.
Petitioner further contends that both the trial and appellate courts erred in concluding that Safic was not able to prove its claim for damages.
Petitioner first points out that its wash out agreements with Monteverde where IVO allegedly agreed to pay US$293,500.00 for some of the
failed contracts was proof enough and, second, that it presented purchases of coconut oil it made from others during the period of IVOs
default.
We remain unconvinced. The so-called wash out agreements are clearly ultra vires and not binding on IVO. Furthermore, such
agreements did not prove Safics actual losses in the transactions in question. The fact is that Safic did not pay for the coconut oil that it
supposedly ordered from IVO through Monteverede. Safic
575
VOL. 355, MARCH 28, 2001
575
only claims that, since it was ready to pay when IVO was not ready to deliver, Safic suffered damages to the extent that they had to buy the
same commodity from others at higher prices.
The foregoing claim of petitioner is not, however, substantiated by the evidence and only raises several questions, to wit: 1.] Did Safic
commit to deliver the quantity of oil covered by the 1986 contracts to its own buyers? Who were these buyers? What were the terms of those
contracts with respect to quantity, price and date of delivery? 2.] Did Safic pay damages to its buyers? Where were the receipts? Did Safic
have to procure the equivalent oil from other sources? If so, who were these sources? Where were their contracts and what were the terms of
these contracts as to quantity, price and date of delivery?
The records disclose that during the course of the proceedings in the trial court, IVO filed an amended motion 22 for production and
inspection of the following documents: a.] contracts of resale of coconut oil that Safic bought from IVO; b.] the records of the pooling and sales
contracts covering the oil from such pooling, if the coconut oil has been pooled and sold as general oil; c] the contracts of the purchase of oil
that, according to Safic, it had to resort to in order to fill up alleged undelivered commitments of IVO; d.] all other contracts, confirmations,
invoices, wash out agreements and other documents of sale related to (a), (b) and (c). This amended motion was opposed by Safic. 23 The trial
court, however, in its September 16, 1988 Order,24 ruled that:
From the analysis of the parties respective positions, conclusion can easily be drawn therefrom that there is materiality in the defendants
move: firstly, plaintiff seeks to recover damages from the defendant and these are intimately related to plaintiffs alleged losses which it
attributes to the default of the defendant in its contractual commitments; secondly, the documents are specified in the amended motion. As
such, plaintiff would entertain no confusion as to what, which documents to locate and produce considering plaintiff to be (without doubt) a
reputable going concern in the management of the affairs which is serviced by competent,
______________
22
Record, pp. 494-497.
23
Ibid., pp. 498-501.
24
Id., pp. 502-505.
576
576
industrious, hardworking and diligent personnel; thirdly, the desired production and inspection of the documents was precipitated by the
testimony of plaintiffs witness (Donald OMeara) who admitted, in open court, that they are available. If the said witness represented that the
documents, as generally described, are available, reason there would be none for the same witness to say later that they could not be
produced, even after they have been clearly described.
Besides, if the Court may additionally dwell on the issue of damages, the production and inspection of the desired documents would be of
tremendous help in the ultimate resolution thereof. Plaintiff claims for the award of liquidated or actual damages to the tune of US$391,593.62
which, certainly, is a huge amount in terms of pesos, and which defendant disputes. As the defendant cannot be precluded in taking
exceptions to the correctness and validity of such claim which plaintiffs witness (Donald OMeara) testified to, and as, by this nature of the
plaintiffs claim for damages, proof thereof is a must which can be better served, if not amply ascertained by examining the records of the
related sales admitted to be in plaintiffs possession, the amended motion for production and inspection of the defendant is in order.
The interest of justice will be served best, if there would be a full disclosure by the parties on both sides of all documents related to the
transactions in litigation.
Notwithstanding the foregoing ruling of the trial court, Safic did not produce the required documents, prompting the court a quo to assume
that if produced, the documents would have been adverse to Safics cause. In its efforts to bolster its claim for damages it purportedly
sustained, Safic suggests a substitute mode of computing its damages by getting the average price it paid for certain quantities of coconut oil
that it allegedly bought in 1987 and deducting this from the average price of the 1986 contracts. But this mode of computation is flawed
because: 1.] it is conjectural since it rests on average prices not on actual prices multiplied by the actual volume of coconut oil per contract;
and 2.] it is based on the unproven assumption that the 1987 contracts of purchase provided the coconut oil needed to make up for the failed
1986 contracts. There is also no evidence that Safic had contracted to supply third parties with coconut oil from the 1986 contracts and that
Safic had to buy such oil from others to meet the requirement.
577
VOL. 355, MARCH 28, 2001
577
Along the same vein, it is worthy to note that the quantities of oil covered by its 1987 contracts with third parties do not match the quantities
of oil provided under the 1986 contracts. Had Safic produced the documents that the trial court required, a substantially correct determination
of its actual damages would have been possible. This, unfortunately, was not the case. Suffice it to state in this regard that [T]he power of the
courts to grant damages and attorneys fees demands factual, legal and equitable justification; its basis cannot be left to speculation and
conjecture.25
WHEREFORE, in view of all the foregoing, the petition is DENIED for lack of merit.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Kapunan and Pardo, JJ., concur.
Puno, J., On official leave.
Petition denied.
Notes.In the absence of an authority from the board of directors, no person, not even the officers of the corporation, can validly bind the
corporation. (Premium Marble Resources, Inc. vs. Court of Appeals, 264 SCRA 11[1996])
Questions of policy and of management are left to the honest decision of the officers and directors of a corporation, and the courts are
without authority to substitute their judgment for that of the board of directorsthe board is the business manager of the corporation, and as
long as it acts in good faith, its orders are not reviewable by the courts. (Philippine Stock Exchange, Inc. vs. Court of Appeals, 281 SCRA
232 [1997])
The general principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of
incorporation, bylaws, or relevant provisions of law. (San Juan
______________
Ranola v. Court of Appeals, 322 SCRA 1 (2000), citing Scott Consultants & Resource Development Corporation, Inc. v. Court of
Appeals, 242 SCRA 393 (1995); People v. Castro, 282 SCRA 212 (1997).
25
578
FABIOLA SEVERINO, plaintiff and appellee, vs.GUILLERMO SEVERINO, defendant and appellant. FELICITAS VILLANUEVA, intervenor and
appellee.
1. 1.PRINCIPAL AND AGENT; ADVERSE TITLE; ESTOPPEL.The relations of an agent to his principal are fiduciary and in regard to the
property forming the subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal.
344
34
PHILIPPINE REPORTS ANNOTATED
Severino vs. Severino
1. 2.ID.; REAL PROPERTY; CONVEYANCE BY AGENT TO PRINCIPAL.An action in personam will lie against an agent to compel him to
return or retransfer to his principal, or the latter's estate, the real property committed to his custody as such agent and also to
execute the necessary documents of conveyance to effect such retransfer.
1. 3.ID.; ID.; ID.; REGISTRATION OF LAND.The principal's right of action to compel a reconveyance is not extinguished through the
registration of the land in favor of the agent; though the final decree of registration may not be reopened after the expiration of one
year from the date of its entry, there appears to be no reason why the agent should not be compelled, through a suit in equity, to
make such reparation as may lie within his power for the breach of trust committed by him, and as long as the land stands registered
in his name such reparation may take the form of a conveyance or transfer of the title to thecestui que trust, i. e., the principal.
1. 4.LAND REGISTRATION; ACTION TO COMPEL CONVEYANCE; EVIDENCE. There is a strong presumption in favor of the regularity and
validity of a registered title, and in order to maintain an action to compel the transfer of the title to a cestui que trust, proof of the
fiduciary relations and of the breach of trust must be clear and convincing.
1. 5.CIVIL PROCEDURE; RECOGNITION OF NATURAL CHILD; PARTIES.In an action for a judicial declaration of the right of a person to be
recognized as a natural child of a deceased person, the potential heirs of the deceased are necessary parties.
APPEAL from a judgment of the Court of First Instance of Occidental Negros, Villa-Real, J.
The facts are stated in the opinion of the court.
Serafin P. Hilado and A. P. Seva for appellant.
Jose Ma. Arroyo, Jose Lopez Vito, and Fisher & DeWittfor appellees.
OSTRAND, J.:
This is an action brought by the plaintiff as the alleged natural daughter and sole heir of one Melecio Severino, deceased, to compel the
defendant Guillermo Severino to convey to her four parcels of land described in the complaint, or in def ault thereof to pay her the sum of
P800,000 in damages for wrongfully causing said land to be reg345
345
stered in his own name. Felicitas Villanueva, in her capacity as administratrix of the estate of Melecio Severino, has filed a complaint in
intervention claiming the same relief as the original plaintiff, except in so far as she prays that the conveyance be made, or damages paid, to
the estate instead of to the plaintiff Fabiola Severino. The defendant answered both complaints with a general denial.
The lower court rendered a judgment recognizing the plaintiff Fabiola Severino as the acknowledged natural child of the said Melecio
Severino and ordering the defendant to convey 428 hectares of the land in question to the intervenor as administratrix of the estate of the
said Melecio Severino, to deliver to her the proceeds in his possession of a certain mortgage placed thereon by him and to pay the costs. From
this judgment only the defendant appeals.
The land described in the complaint forms one continuous tract and consists of lots Nos. 827, 828, 834, and 874 of the cadaster of Silay,
Province of Occidental Negros, which measure, respectively, 61 hectares, 74 ares, and 79 centiares; 76 hectares, 34 ares, and 79 centiares; 52
hectares, 86 ares, and 60 centiares and 608 hectares, 77 ares and 28 centiares, or a total of 799 hectares, 75 ares, and 46 centiares.
The evidence shows that Melecio Severino died on the 25th day of May, 1915; that some 428 hectares of the land were recorded in the
Mortgage Law Register in his name in the year 1901 by virtue of possessory information proceedings instituted on the 9th day of May of that
year by his brother Agapito Severino in his behalf; that during the lifetime of Melecio Severino the land was worked by the defendant,
Guillermo Severino, his brother, as administrator for and on behalf of the said Melecio Severino; that after Melecio's death, the defendant
Guillermo Severino continued to occupy the land; that in 1916 a parcel survey was made of the lands in the municipality of Silay, including the
land here in question, and cadastral proceed346
346
ings were instituted for the registration of the land titles within the surveyed area; that in the cadastral proceedings the land here in question
was described as four separate lots numbered as above stated; that Roque Hofilea, as lawyer for Guillermo Severino, filed answers in behalf
of the latter in said proceedings claiming the lots mentioned as the property of his client; that no opposition was presented in the proceedings
to the claims of Guillermo Severino and the court therefore decreed the title in his favor, in pursuance of which decree certificates of title were
issued to him in the month of March, 1917.
It may be f urther observed that at the time of the cadastral proceedings the plaintiff Fabiola Severino was a minor; that Guillermo Severino
did not appear personally in the proceedings and did not there testify; that the only testimony in support of his claim was that of his attorney
Hofilea, who swore that he knew the land and that he also knew that Guillermo Severino inherited the land from his father and that he, by
himself, and through his predecessors in interest, had possessed the land for thirty years.
The appellant presents the following nine assignments of error:
1. "1.The trial court erred in admitting the evidence that was offered by plaintiff in order to establish the fact that said plaintiff was the
legally acknowledged natural child of the deceased Melecio Severino.
2. "2.The trial court erred in finding that, under the evidence presented, plaintiff was the legally acknowledged natural child of Melecio
Severino.
3. "3.The trial court erred in rejecting the evidence offered by defendant to establish the absence of fraud on his part in securing title to
the lands in Nacayao.
4. "4.The trial court erred in concluding that the evidence adduced by plaintiff and intervenor established that defendant was guilty of
fraud in procuring title to the lands in question in his name.
347
347
1. "5.The trial court erred in declaring that the land that was f ormerly placed in the name of Melecio Severino had an extent of either
434 or 428 hectares at the time of his death.
2. "6.The trial court erred in declaring that the value of the land in litigation is P500 per hectare.
3. "7.The trial court erred in granting the petition of the plaintiff f or an attachment without first giving the defendant an opportunity to
be heard.
4. "8.The trial court erred in ordering the conveyance of 428 hectares of land by defendant to the administratrix.
5. "9.The trial court erred in failing or refusing to make any finding as to the defendant's contention that the petition for attachment was
utterly devoid of any reasonable ground."
In regard to the first two assignments of error, we agree with the appellant that the trial court erred in making a declaration in the present
case as to the recognition of Fabiola Severino as the natural child of Melecio Severino. We have held in the case of Briz vs. Briz and
Remigio (43 Phil., 763), that "The legitimate heirs or kin of a deceased person who would be prejudiced by a declaration that another person is
entitled to recognition as the natural child of such decedent, are necessary and indispensable parties to any action in which a judgment
declaring the right to recognition is sought." In the present action only the widow, the alleged natural child, and one of the brothers of the
deceased are parties; the other potential heirs have not been included. But, inasmuch as the judgment appealed from is in favor of the
intervenor and not of the plaintiff, except to the extent of holding that the latter is a recognized natural child of the deceased, this question is,
from the view we take of the case, of no importance in its final disposition. We may say, however, in this connection, that the point urged in
appellant's brief that it does not appear affirmatively f rom the evidence that, at the time of
348
348
the conception of Fabiola, her mother was a single woman, may be sufficiently disposed of by a reference to article 130 of the Civil Code and
subsection 1 of section 334 of the Code of Civil Procedure which create the presumption that a child born out of wedlock is natural rather than
illegitimate. The question of the status of the plaintiff Fabiola Severino and her right to share in the inheritance may, upon notice to all the
interested parties, be determined in the probate proceedings for the settlement 'of the estate of the deceased.
The fifth assignment of error relates to the finding of the trial court that the land belonging to Melecio Severino had an area of 428
hectares. The appellant contends that the court should have found that there were only 324 hectares inasmuch as one hundred hectares of
the original area were given to Melecio's brother Donato during the lifetime of the father Ramon Severino. As it appears that Ramon Severino
died in 1896 and that the possessory information proceedings, upon which the finding of the trial court as to the area of the land is principally
based, were not instituted until the year 1901, we are not disposed to disturb the conclusions of the trial court on this point. Moreover, in the
year 1913, the defendant Guillermo Severino testified under oath, in the case of Montelibanovs. Severino, that the area of the land owned by
Melecio Severino and of which he (Guillermo) was the administrator, embraced an area of 424 hectares. The fact that Melecio Severino, in
declaring the land for taxation in 1906, stated that the area was only 324 hectares and 60 ares while entitled to some weight is not conclusive
and is not sufficient to overcome the positive- statement of the defendant and the recitals in the record of the possessory information
proceedings.
The sixth assignment of error is also of minor importance in view of the fact that in the dispositive part of the decision of the trial court, the
only relief given is an order requiring the appellant to convey to the administratrix the
349
349
land in question, together with such parts of the proceeds of the mortgage thereon as remain in his hands. We may say furher that the court's
estimate of the value of the land does not appear unreasonable and that, upon the evidence before us, it will not be disturbed.
The seventh and ninth assignments of error relate to theex parte granting by the trial court of a preliminary attachment in the case and the
refusal of the court to dissolve the same. We find no merit whatever in these assignments and a detailed discussion of them is unnecessary.
The third, fourth, and eighth assignments of error involve the vital points in the case, are inter-related and may be conveniently considered
together.
The defendant argues that the gist of the instant action is the alleged fraud on his part in causing the land in question to be registered in
his name; that the trial court therefore erred in rejecting his offer of evidence to the effect that the land was owned in common by all the heirs
of Ramon Severino and did not belong to Melecio Severino exclusively; that such evidence, if admitted, would have shown that he did not act
with fraudulent intent in taking title to the land; that the trial court erred in holding him estopped from denying Melecio's title; that more than
a year having elapsed since the entry of the final decree adjudicating the land to the defendant, said decree cannot now be reopened; that the
ordering of the defendant to convey the decreed land to ;the administratrix is, for all practical purposes, equivalent to the reopening of the
decree of registration; that under section 38 of the Land Registration Act the defendant has an indefeasible title to the land; and that the
question of ownership of the land being thus judicially settled, the question as to the previous relations between the parties cannot now be
inquired into.
Upon no point can the defendant's contentions be sustained. It may first be observed that this is not an action under section 38 of the Land
Registration Act to reopen or set aside a decree; it is an action in personamagainst
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an agent to compel him to return, or retransfer, to the heirs or the estate of its principal, the property committed to his custody as such agent,
to execute the necessary documents of conveyance to effect such retransfer or, in default thereof, to pay damages.
That the defendant came into the possession of the property here in question as the agent of the deceased Melecio Severino in the
administration of the property, cannot be successfully disputed. His testimony in the case of Montelibano vs. Severino (civil case No. 902 of
the Court of First Instance of Occidental Negros and which forms a part of the evidence in the present case) is, in fact, conclusive in this
respect. He there stated under oath that from the year 1902 up to the time the testimony was given, in the year 1913, he had been
continuously in charge and occupation of the land as the encargado or administrator of Melecio Severino; that he had always known the land
as the property of Melecio Severino; and that the possession of the latter had been peaceful, continuous, and exclusive. In his answer filed in
the same case, the same defendant, through his attorney, disclaimed all personal interest in the land and averred that it was wholly the
property of his brother Melecio.
Neither is it disputed that the possession enjoyed by the defendant at the time of obtaining his decree was of the same character as that
held during the lifetime of his brother, except in so far as shortly before the trial of the cadastral case the defendant had secured from his
brothers and sisters a relinquishment in his favor of such rights as they might have in the land.
The relations of an agent to his principal are fiduciary and it is an elementary and very old rule that in regard to property forming the
subject-matter of the agency, he is estopped from acquiring or asserting a title adverse to that of the principal. His position is analogous to
that of a trustee and he cannot consistently, with the principles of good faith, be allowed to create in himself an interest
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351
in opposition to that of his principal or cestui que trust.Upon this ground, and substantially in harmony with the principles of the Civil
Law (see sentence of the supreme court of Spain of May 1, 1900)', the English Chancellors held that in general whatever a trustee does for the
advantage of the trust estate inures to the benefit of thecestui que trust. (Greenlaw vs. King, 5 Jur., 18; Ex parteBurnell, 7 Jur., 116; Ex
parte Hughes, 6 Ves., 617; Ex parteJames, 8 Ves., 337; Oliver vs. Court, 8 Price, 127.) The same principle has been consistently adhered to in
so many American cases and is so well established that exhaustive citations of authorities are superfluous and we shall therefore limit
ourselves to quoting a few of the numerous judicial expressions upon the subject. The principle is well stated in the case
of Gilbert vs; Hewetson (79 Minn., 326) :
"A receiver, trustee, attorney, agent, or any other person occupying fiduciary relations respecting property or persons, is utterly disabled
from acquiring for his own benefit the property committed to his custody f or management. This rule is entirely independent of the f act
whether any fraud has intervened. No fraud in fact need be shown, and no excuse will be heard from the trustee. It is to avoid the necessity of
any such inquiry that the rule takes so general a form. The rule stands on the moral obligation to refrain from placing one's self in positions
which ordinarily excite conflicts between self-interest and integrity. It seeks to remove the temptation that might arise out of such a relation to
serve one's self-interest at the expense of one's integrity and duty to another, by making it impossible to profit by yielding to temptation. It
applies universally to all who come within its principle."
In the case of Massie vs. Watts (6 Cranch, 148), the United States Supreme Court, speaking through Chief Justice Marshall, said:
"But Massie, the agent of Oneale, has entered and surveyed a portion of that land for himself and obtained a
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352
patent for it in his own name. According to the clearest and best established principles of equity, the agent who so acts becomes a trustee for
his principal. He cannot hold the land under an entry for himself otherwise than as trustee for his principal."
In the case of Felix vs. Patrick (145 U. S., 317), the United States Supreme Court, after examining the authorities, said:
"The substance of these authorities is that, wherever a person obtains the legal title to land by any artifice or concealment, or by making
use of facilities intended for the benefit of another, a court of equity will impress upon the land so held by him a trust in favor of the party who
is justly entitled to them, and will order the trust executed by decreeing their conveyance to the party in whose favor the trust was
created." (Citing Bank of Metropolis vs.Guttschlick, 14 Pet., 19, 31; Moses vs. Murgatroyd, 1 Johns. Ch., 119; Cumberland vs. Codrington, 3
Johns. Ch., 229, 261; Neilson vs. Blight, 1 Johns. Cas., 205; Weston vs.Barker, 12 Johns., 276.)
The same doctrine has also been adopted in the Philippines. In the case of Uy Aloc vs. Cho Jan Ling (19 Phil., 202), the facts are stated by
the court as follows:
"From the facts proven at the trial it appears that a number of Chinese merchants raised a fund by voluntary subscription with which they
purchased a valuable tract of land and erected a large building to be used as a sort of club house for the mutual benefit of the subscribers to
the fund. The subscribers organized themselves into an irregular association, which had no regular articles of association, and was not
incorporated or registered in the commercial registry or elsewhere. The association not having any existence as a legal entity, it was agreed to
have the title to the property placed in the name of one of the members, the defendant, Cho Jan Ling, who on his part accepted the trust, and
agreed to hold the property as the agent of the members of the association. After the
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club building was completed with the funds of the members of the association, Cho Jan Ling collected some P25,000 in rents for which he
failed and refused to account, and upon proceedings being instituted to compel him to do so, he set up title in himself to the club property as
well as to the rents accruing therefrom, falsely alleging that he had bought the real estate and constructed the building with his own funds,
and denying the claims of the members of the association that it was their funds which had been used for that purpose."
The decree of the court provided, among other things, for the conveyance of the club house and the land on which it stood f rom the
defendant, Cho Jan Ling, in whose name it was registered, to the members of the association. In affirming the decree, this court said:
"In the case at bar the legal title of the holder of the registered title is not questioned; it is admitted that the members of the association
voluntarily obtained the inscription in the name of Cho Jan Ling, and that they had no right to have that inscription cancelled; they do not seek
such cancellation, and on the contrary they allege and prove that the duly registered legal title to the property is in Cho Jan Ling, but they
maintain, and we think that they rightly maintain, that he holds it under an obligation, both express and implied, to deal with it exclusively f or
the benefit of the members of the association, and subject to their will."
In the case of Camacho vs. Municipality of Baliuag (28 Phil., 466), the plaintiff, Camacho, took title to the land in his own name, while acting as
agent for the municipality. The court said:
"There have been a number of cases before this court in which a title to real property was acquired by a person in his own name, while acting
under a fiduciary capacity, and who afterwards sought to take advantage of the confidence reposed in him by claiming the ownership of the
property for himself. This court has invariably held such
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evidence competent as between the fiduciary and the cestui que trust.
*
"What judgment ought to be entered in this case? The court below simply absolved the defendant from the complaint. The defendant
municipality does not ask for a cancellation of the deed. On the contrary, the deed is relied upon to supplement the oral evidence showing that
the title to the land is in the defendant. As we have indicated in Consunji vs. Tison, 15 Phil., 81, and Uy Alocvs. Cho Jan Ling, 19 Phil., 202, the
proper procedure in such a case, so long as the rights of innocent third persons have not intervened, is to compel a conveyance to the rightful
owner. This ought and can be done under the issues raised and the proof presented in the case at bar."
The case of Sy-Juco and Viardo vs. Sy-Juco (40 Phil., 634) is also in point.
As will be seen from the authorities quoted, an agent is not only estopped from denying his principal's title to the property, but he is also
disabled from acquiring interests therein adverse to those of his principal during the term of the agency. But the defendant argues that his title
has become res adjudicata through the decree of registration and cannot now be disturbed.
This contention may, at first sight, appear to possess some force, but on closer examination it proves untenable. The decree of registration
determined the legal title to the land as of the date of the decree; as to that there is no question. That, under section 38 of the Land
Registration Act, this decree became conclusive after one year from the date of the entry is not disputed and no one attempts to disturb the
decree or the proceedings upon which it is based; the plaintiff in intervention merely contends that in equity the legal title so acquired inured
to the benefit of the estate of Melecio Severino, the defendant's principal andcestui que trust and asks that this superior equitable
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holder of the legal title, to transfer it to the estate.

We have already shown that before the issuance of the decree of registration it was the undoubted duty of the defendant to restore the
property committed to his custody to his principal, or to the latter's estate, and that the principal had a right of action in personam to enforce
the performance of this duty and to compel the defendant to execute the necessary conveyance to that effect. The only question remaining
for consideration is, therefore, whether the decree of registration extinguished this personal right of action.
In Australia and New Zealand, under statutes in this respect similar to ours, courts of equity exercise general jurisdiction in matters of fraud
and error with reference to Torrens registered lands, and giving attention to the special provisions of the Torrens acts, will issue such orders
and directions to all the parties to the proceedings as may seem just and proper under the circumstances. They may order parties to make
deeds of conveyance and if the order is disobeyed, they may cause proper conveyances to be made by a Master in Chancery or Commissioner
in accordance with the practice in equity (Hogg, Australian Torrens System, p. 847).
In the United States courts have even gone so far in the exercise of their equity jurisdiction as to set aside final decrees after the expiration
of the statutory period of limitation for the reopening of such decrees (Baart vs.Martin, 99 Minn., 197). But, considering that equity follows the
law and that our statutes expressly prohibit the reopening of a decree after one year from the date of its entry, this practice would probably be
out of question here, especially so as the ends of justice may be attained by other equally effective, and less objectionable means.
Turning to our own Land Registration Act, we find no indication there of an intention to cut off, through the is356
356
suance of a decree of registration, equitable rights or remedies such as those here in question. On the contrary, section 70 of the Act provides:
"Registered lands and ownership therein, shall in all respects be subject to the same burdens and incidents attached by law to unregistered
land. Nothing contained in this Act shall in any way be construed to relieve registered land or the owners thereof from any rights incident to
the relation of husband and wife, or from liability to attachment on mesne process or levy on execution, or from liability to any lien of any
description established by law on land and the buildings thereon, or the interest of the owner in such land or buildings, or to change the laws
of descent, or the rights of partition between coparceners, joint tenants and other cotenants, or the right to take the same by eminent domain,
or to relieve such land from liability to be appropriated in any lawful manner for the payment of debts, or to change or affect in any other way
any other rights or liabilities created by law and applicable to unregistered land, except as otherwise expressly provided in this Act or in the
amendments hereof."
Section 102 of the Act, after providing for actions for damages in which the Insular Treasurer, as the Custodian of the Assurance Fund is a
party, contains the following proviso:
"Provided, however, That nothing in this Act shall be construed to deprive the plaintiff of any action which he may have against any person
for such loss or damage or deprivation of land or of any estate or interest therein without joining the Treasurer of the Philippine Archipelago as
a defendant therein."
That an action such as the present one is covered by this proviso can hardly admit of doubt. Such was also the view taken by this court in
the case of Medina Ong-Quingco vs.Imaz and Warner, Barnes & Co. (27 Phil., 314), in which the plaintiff was seeking to take advantage of his
possession of a certificate of title to deprive the defendant
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357
of land included in that certificate and sold to him by the former owner before the land was registered. The court decided adversely to plaintiff
and in so doing said:
"As between them no question as to the indefeasibility of a Torrens title could arise. Such an action could have been maintained at any
time while the property remained in the hands of the purchaser. The peculiar force of a Torrens title would have been brought into play only
when the purchaser had sold to an innocent third person for value the lands described in his conveyance. * * * Generally speaking, as between
the vendor and the purchaser the same rights and remedies exist with reference to land registered under Act No. 496, as exist in relation to
land not so registered."
In Cabanos vs. Register of Deeds of Laguna and Obiana (40 Phil., 620), it was held that, while a purchaser of land under a pacto de
retro cannot institute a real action f or the recovery thereof where the vendor under said sale has caused such lands to be registered in his
name without said vendee's consent, yet he may have his personal action based on the contract of sale to compel the execution of an
unconditional deed for the said lands when the period for repurchase has passed.
Torrens titles being based on judicial decrees there is, of course, a strong presumption in favor of their regularity or validity, and in order to
maintain an action such as the present the proof as to the fiduciary relation of the parties and of the breach of trust must be clear and
convincing. Such proof is, as we have seen, not lacking in this case.
But once the relation and the breach of trust on the part of the fiduciary is thus established, there is no reason, neither practical nor legal,
why he should not be compelled to make such reparation as may lie within his power for the injury caused by his wrong, and as long as the
land stands registered in the name of the party who is guilty of the breach of trust and no rights of innocent third parties
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are adversely affected, there can be no reason why such reparation should not, in the proper case, take the form of a conveyance or transfer
of the title to the cestui que trust.No reasons of public policy demand that a person guilty of fraud or breach of trust be permitted to use his
certificate of title as a shield against the consequences of his own wrong.
The judgment of the trial court is in accordance with the facts and the law. In order to prevent unnecessary delay and further litigation it
may, however, be well to attach some additional directions to its dispositive clauses. It will be observed that lots Nos. 827, 828, and 834 of a
total area of approximately 191 hectares, lie wholly within the area to be conveyed to the plaintiff in intervention and these lots may,
therefore, be so conveyed without subdivision. The remaining 237 hectares to be conveyed lie within the western part of lot No. 874 and
before a conveyance of this portion can be effected a subdivision of that lot must be made and a technical description of the portion to be
conveyed, as well as of the remaining portion of the lot, must be prepared. The subdivision shall be made by an authorized surveyor and in
accordance with the provisions of Circular No. 31 of the General Land Registration Office, and the subdivision and technical descriptions shall
be submitted to the Chief of that office for his approval. Within thirty days after being notified of the approval of said subdivision and technical
descriptions, the defendant Guillermo Severino shall execute good and sufficient deed or deeds of conveyance in favor of the administratrix of
the estate of the deceased Melecio Severino for said lots Nos. 827, 828, 834, and the 237 hectares segregated from the western part of lot No.
874 and shall deliver to the register of deeds his duplicate certificates of title for all of the four lots in order that said certificates may be
cancelled and new certificates issued. The cost of the subdivision and the fees of the register of deeds will be paid by the plaintiff in
intervention. It is so ordered.
Republic vs. Evangelista
G.R. No. 156015. August 11, 2005.*

REPUBLIC OF THE PHILIPPINES, represented by LT. GEN. JOSE M. CALIMLIM, in his capacity as former Chief of the Intelligence Service, Armed
Forces of the Philippines (ISAFP), and former Commanding General, Presidential Security Group (PSG), and MAJ. DAVID B. DICIANO, in his
capacity as an Officer of ISAFP and former member of the PSG, petitioners, vs. HON. VICTORINO EVANGELISTA, in his capacity as Presiding
Judge, Regional Trial Court, Branch 223, Quezon City, and DANTE LEGASPI, represented by his attorney-in-fact, Paul Gutierrez, respondents.
Agency; A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed
by the principal on his agent.Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to
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*
SECOND DIVISION.
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render some service or do something in representation or on behalf of another, known as the principal, with the consent or authority of
the latter. A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by
the principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the
agent ceases when the will or permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will.
Same; An exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends
upon the agency.An exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract
depends upon the agency. The reason for its irrevocability is because the agency becomes part of another obligation or agreement. It is not
solely the rights of the principal but also that of the agent and third persons which are affected. Hence, the law provides that in such cases,
the agency cannot be revoked at the sole will of the principal.
Same; When an agency is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the
agency ceases to be revocable at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement .In the
case at bar, we agree with the finding of the trial and appellate courts that the agency granted by Legaspi to Gutierrez is coupled with interest
as a bilateral contract depends on it. It is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to manage the
treasure hunting activities in the subject land; to file any case against anyone who enters the land without authority from Legaspi; to engage
the services of lawyers to carry out the agency; and, to dig for any treasure within the land and enter into agreements relative thereto. It was
likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be found in the land.Pursuant to this authority and to
protect Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to prosecute the case for
damages and injunction against petitioners. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza 30% of Legaspis share in
whatever treasure may be recovered in the subject land. It is clear that the treasure that may be found in the land is the subject matter
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46
of the agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez and Atty.
Adaza have an interest in the subject matter of the agency, i.e., in the treasures that may be found in the land. This bilateral contract depends
on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the principal Legaspi. When an agency is
constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to be revocable at
the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement. Consequently, the Deed of Revocation
executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution of the case at bar is unaffected.
Injunction; Preliminary Injunction; Requisites; A writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to by a
litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action .We hold that the
issuance of the writ of preliminary injunction is justified. A writ of preliminary injunction is an ancilliary or preventive remedy that is resorted to
by a litigant to protect or preserve his rights or interests and for no other purpose during the pendency of the principal action. It is issued by
the court to prevent threatened or continuous irremediable injury to the applicant before his claim can be thoroughly studied and adjudicated.
Its aim is to preserve thestatus quo ante until the merits of the case can be heard fully, upon the applicants showing of two important
conditions, viz.: (1) the right to be protected prima facie exists; and, (2) the acts sought to be enjoined are violative of that right.
Same; Same; Evidence; At the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is needed to
establish the applicants rights or interests in the subject matter of the main actionthe applicant is required only to show that he has an
ostensible right to the final relief prayed for in his complaint.It is crystal clear that at the hearing for the issuance of a writ of preliminary
injunction, mere prima facie evidence is needed to establish the applicants rights or interests in the subject matter of the main action. It is not
required that the applicant should conclusively show that there was a violation of his rights as this issue will still be fully litigated in the main
case. Thus, an applicant for a writ is required
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only to show that he has an ostensible right to the final relief prayed for in his complaint.
Courts; Judges; Bias and Partiality; A judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or the
correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the part of the judge, is
not sufficient to show bias or partiality;To be disqualifying, it must be shown that the bias and prejudice stemmed from an extrajudicial source
and result in an opinion on the merits on some basis other than what the judge learned from his participation in the case. We have carefully
examined the records and we find no sufficient basis to hold that respondent judge should have recused himself from hearing the case. There
is no discernible pattern of bias on the rulings of the respondent judge. Bias and partiality can never be presumed. Bare allegations of
partiality will not suffice in an absence of a clear showing that will overcome the presumption that the judge dispensed justice without fear or
favor. It bears to stress again that a judges appreciation or misappreciation of the sufficiency of evidence adduced by the parties, or the
correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the part of respondent
judge, is not sufficient to show bias or partiality. As we held in the case ofWebb vs. People, the adverse and erroneous rulings of a judge on the
various motions of a party do not sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be shown that the bias and
prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what the judge learned from
his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as based on the evidence
adduced, do not prove bias or prejudice. We also emphasized that repeated rulings against a litigant, no matter how erroneously, vigorously
and consistently expressed, do not amount to bias and prejudice which can be a bases for the disqualification of a judge.
The Solicitor General for petitioner.
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Homobono Adaza for private respondent.

Rashid A. Saber for Intervenor.
PUNO, J.:
The case at bar stems from a complaint for damages, with prayer for the issuance of a writ of preliminary injunction, filed by private
respondent Dante Legaspi, through his attorney-in-fact Paul Gutierrez, against petitioners Gen. Jose M. Calimlim, Ciriaco Reyes and Maj. David
Diciano before the Regional Trial Court (RTC) of Quezon City.1
The Complaint alleged that private respondent Legaspi is the owner of a land located in Bigte, Norzagaray, Bulacan. In November 1999,
petitioner Calimlim, representing the Republic of the Philippines, and as then head of the Intelligence Service of the Armed Forces of the
Philippines and the Presidential Security Group, entered into a Memorandum of Agreement (MOA) with one Ciriaco Reyes. The MOA granted
Reyes a permit to hunt for treasure in a land in Bigte, Norzagaray, Bulacan. Petitioner Diciano signed the MOA as a witness. 2 It was further
alleged that thereafter, Reyes, together with petitioners, started, digging, tunneling and blasting works on the said land of Legaspi. The
complaint also alleged that petitioner Calimlim assigned about 80 military personnel to guard the area and encamp thereon to intimidate
Legaspi and other occupants of the area from going near the subject land.
On February 15, 2000, Legaspi executed a special power of attorney (SPA) appointing his nephew, private respondent Gutierrez, as his
attorney-in-fact. Gutierrez was given the power to deal with the treasure hunting activities on Legaspis land and to file charges against those
who may
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1
Complaint, dated February 29, 2000; Rollo, pp. 84-90.
Petitioners have since retired from government service.
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enter it without the latters authority.3 Legaspi agreed to give Gutierrez 40% of the treasure that may be found in the land.
On February 29, 2000, Gutierrez filed a case for damages and injunction against petitioners for illegally entering Legaspis land. He hired
the legal services of Atty. Homobono Adaza. Their contract provided that as legal fees, Atty. Adaza shall be entitled to 30% of Legaspis share
in whatever treasure may be found in the land. In addition, Gutierrez agreed to pay Atty. Adaza P5,000.00 as appearance fee per court hearing
and defray all expenses for the cost of the litigation. 4 Upon the filing of the complaint, then Executive Judge Perlita J. Tria Tirona issued a 72hour temporary restraining order (TRO) against petitioners.
The case5 was subsequently raffled to the RTC of Quezon City, Branch 223, then presided by public respondent Judge Victorino P.
Evangelista. On March 2, 2000, respondent judge issued another 72-hour TRO and a summary hearing for its extension was set on March 7,
2000.
On March 14, 2000, petitioners filed a Motion to Dismiss 6 contending: first, there is no real party-in-interest as the SPA of Gutierrez to bring
the suit was already revoked by Legaspi on March 7, 2000, as evidenced by a Deed of Revocation, 7 and, second, Gutierrez failed to establish
that the alleged armed men guarding the area were acting on orders of petitioners. On March 17, 2000, petitioners also filed a Motion for
Inhibition8 of the respondent judge on the ground of alleged partiality in favor of private respondent.
On March 23, 2000, the trial court granted private respondents application for a writ of preliminary injunction on the
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3
Rollo, p. 91.
Rollo, p. 177.
Docketed as Civil Case No. Q-00-40115.
Rollo, pp. 95-103.
Revocation of SPA, Rollo, p. 92.
Rollo, pp. 105-122.
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550
following grounds: (1) the diggings and blastings appear to have been made on the land of Legaspi, hence, there is an urgent need to maintain
the status quo to prevent serious damage to Legaspis land; and, (2) the SPA granted to Gutierrez continues to be valid. 9 The trial court
ordered thus:
WHEREFORE, in view of all the foregoing, the Court hereby resolves to GRANT plaintiffs application for a writ of preliminary injunction. Upon
plaintiffs filing of an injunction bond in the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00), let a Writ of Preliminary Injunction
issue enjoining the defendants as well as their associates, agents or representatives from continuing to occupy and encamp on the land of the
plaintiff LEGASPI as well as the vicinity thereof; from digging, tunneling and blasting the said land of plaintiff LEGASPI; from removing whatever
treasure may be found on the said land; from preventing and threatening the plaintiffs and their representatives from entering the said land
and performing acts of ownership; from threatening the plaintiffs and their representatives as well as plaintiffs lawyer.
On even date, the trial court issued another Order 10denying petitioners motion to dismiss and requiring petitioners to answer the complaint.
On April 4, 2000, it likewise denied petitioners motion for inhibition. 11
On appeal, the Court of Appeals affirmed the decision of the trial court. 12
Hence this petition, with the following assigned errors:
I
WHETHER THE CONTRACT OF AGENCY BETWEEN LEGASPI AND PRIVATE RESPONDENT GUTIERREZ HAS BEEN EFFECTIVELY REVOKED BY
LEGASPI.
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9
Order, dated March 23, 2000, Rollo, pp. 124-127.
10
Order, dated March 23, 2000, Rollo, pp. 128-130.
11
Rollo, pp. 131-132.
12
Decision, dated November 8, 2000, penned by Associate Justice Eubulo G. Verzola and concurred in by Associate Justices Marina L. Buzon
and Perlita J. Tria-Tirona; Rollo, pp. 72-80.
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II
WHETHER THE COMPLAINT AGAINST PETITIONERS SHOULD BE DISMISSED.
III
WHETHER RESPONDENT JUDGE OUGHT TO HAVE INHIBITED HIMSELF FROM FURTHER PROCEEDING WITH THE CASE.
We find no merit in the petition.
On the first issue, petitioners claim that the special power of attorney of Gutierrez to represent Legaspi has already been revoked by the
latter. Private respondent Gutierrez, however, contends that the unilateral revocation is invalid as his agency is coupled with interest.
We agree with private respondent.
Art. 1868 of the Civil Code provides that by the contract of agency, an agent binds himself to render some service or do something in
representation or on behalf of another, known as the principal, with the consent or authority of the latter. 13
A contract of agency is generally revocable as it is a personal contract of representation based on trust and confidence reposed by the
principal on his agent. As the power of the agent to act depends on the will and license of the principal he represents, the power of the agent
ceases when the will or permission is withdrawn by the principal. Thus, generally, the agency may be revoked by the principal at will. 14
However, an exception to the revocability of a contract of agency is when it is coupled with interest, i.e., if a bilateral contract depends
upon the agency.15 The reason for its irrevocability is because the agency becomes part of another obligation or agreement. It is not solely the
rights of the principal
_______________
13
Saums v. Parfet, 270 Mich. 165, 258 N.W. 235.
14
Agency, Vicente J. Francisco, p. 353.
15
Art. 1927, Civil Code.
552
552
but also that of the agent and third persons which are affected. Hence, the law provides that in such cases, the agency cannot be revoked at
the sole will of the principal.
In the case at bar, we agree with the finding of the trial and appellate courts that the agency granted by Legaspi to Gutierrez is coupled
with interest as a bilateral contract depends on it. It is clear from the records that Gutierrez was given by Legaspi, inter alia, the power to
manage the treasure hunting activities in the subject land; to file any case against anyone who enters the land without authority from
Legaspi; to engage the services of lawyers to carry out the agency; and, to dig for any treasure within the land and enter into agreements
relative thereto. It was likewise agreed upon that Gutierrez shall be entitled to 40% of whatever treasure may be found in the land. Pursuant to
this authority and to protect Legaspis land from the alleged illegal entry of petitioners, agent Gutierrez hired the services of Atty. Adaza to
prosecute the case for damages and injunction against petitioners. As payment for legal services, Gutierrez agreed to assign to Atty. Adaza
30% of Legaspis share in whatever treasure may be recovered in the subject land. It is clear that the treasure that may be found in the land is
the subject matter of the agency; that under the SPA, Gutierrez can enter into contract for the legal services of Atty. Adaza; and, thus Gutierrez
and Atty. Adaza have an interest in the subject matter of the agency,i.e., in the treasures that may be found in the land. This bilateral contract
depends on the agency and thus renders it as one coupled with interest, irrevocable at the sole will of the principal Legaspi. 16 When an agency
is constituted as a clause in a bilateral contract, that is, when the agency is inserted in another agreement, the agency ceases to be revocable
at the pleasure of the principal as the agency shall now follow the condition of the bilateral agreement. 17
_______________
16
Cox v. Freeman, 1951 OK 16, 204 Okla. 138, 227 P. 2d 670.
17
Civil Code of the Philippines Annotated, Ambrosio Padilla, 1987 ed., Vol. VI, p. 447.
553
VOL. 466, AUGUST 11, 2005
553
Consequently, the Deed of Revocation executed by Legaspi has no effect. The authority of Gutierrez to file and continue with the prosecution
of the case at bar is unaffected.
On the second issue, we hold that the issuance of the writ of preliminary injunction is justified. A writ of preliminary injunction is an
ancilliary or preventive remedy that is resorted to by a litigant to protect or preserve his rights or interests and for no other purpose during the
pendency of the principal action. 18 It is issued by the court to prevent threatened or continuous irremediable injury to the applicant before his
claim can be thoroughly studied and adjudicated. 19 Its aim is to preserve the status quo ante until the merits of the case can be heard fully,
upon the applicants showing of two important conditions,viz.: (1) the right to be protected prima facie exists; and, (2) the acts sought to be
enjoined are violative of that right.20
Section 3, Rule 58 of the 1997 Rules of Civil Procedure provides that a writ of preliminary injunction may be issued when it is established:
1. (a)that the applicant is entitled to the relief demanded, the whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or
perpetually;
2. (b)that the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work
injustice to the applicant; or
3. (c)that a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or
_______________
18
Philippine National Bank v. Ritratto Group, Inc., 362 SCRA 216(2001).
19
Republic of the Philippines v. Silerio, 272 SCRA 280 (1997).
20
Heirs of Joaquin Asuncion v. Commission on Audit, 304 SCRA 322(1999).
554
554
1. suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or
proceeding, and tending to render the judgment ineffectual.
It is crystal clear that at the hearing for the issuance of a writ of preliminary injunction, mere prima facie evidence is needed to establish the
applicants rights or interests in the subject matter of the main action. 21 It is not required that the applicant should conclusively show that
there was a violation of his rights as this issue will still be fully litigated in the main case. 22 Thus, an applicant for a writ is required only to
show that he has an ostensible right to the final relief prayed for in his complaint.23
In the case at bar, we find that respondent judge had sufficient basis to issue the writ of preliminary injunction. It was established, prima
facie, that Legaspi has a right to peaceful possession of his land, pendente lite. Legaspi had title to the subject land. It was likewise
established that the diggings were conducted by petitioners in the enclosed area of Legaspis land. Whether the land fenced by Gutierrez and
claimed to be included in the land of Legaspi covered an area beyond that which is included in the title of Legaspi is a factual issue still
subject to litigation and proof by the parties in the main case for damages. It was necessary for the trial court to issue the writ of preliminary
injunction during the pendency of the main case in order to preserve the rights and interests of private respondents Legaspi and Gutierrez.
On the third issue, petitioners charge that the respondent judge lacked the neutrality of an impartial judge. They fault the respondent
judge for not giving credence to the testimony of their surveyor that the diggings were conducted outside the
_______________
21
Buayan Cattle Co., Inc. v. Quintillan, 128 SCRA 276 (1984).
22
Developers Group of Companies, Inc. v. Court of Appeals, 219 SCRA 715 (1993).
23
Saulog v. Court of Appeals, 262 SCRA 51 (1996).
555
VOL. 466, AUGUST 11, 2005
555
land of Legaspi. They also claim that respondent judges rulings on objections raised by the parties were biased against them.
We have carefully examined the records and we find no sufficient basis to hold that respondent judge should have recused himself from
hearing the case. There is no discernible pattern of bias on the rulings of the respondent judge. Bias and partiality can never be presumed.
Bare allegations of partiality will not suffice in an absence of a clear showing that will overcome the presumption that the judge dispensed
justice without fear or favor. 24 It bears to stress again that a judges appreciation or misappreciation of the sufficiency of evidence adduced by
the parties, or the correctness of a judges orders or rulings on the objections of counsels during the hearing, without proof of malice on the
part of respondent judge, is not sufficient to show bias or partiality. As we held in the case of Webb vs. People,25the adverse and erroneous
rulings of a judge on the various motions of a party do not sufficiently prove bias and prejudice to disqualify him. To be disqualifying, it must be
shown that the bias and prejudice stemmed from an extrajudicial source and result in an opinion on the merits on some basis other than what
the judge learned from his participation in the case. Opinions formed in the course of judicial proceedings, although erroneous, as long as
based on the evidence adduced, do not prove bias or prejudice. We also emphasized that repeated rulings against a litigant, no matter how
erroneously, vigorously and consistently expressed, do not amount to bias and prejudice which can be a bases for the disqualification of a
judge.
Finally, the inhibition of respondent judge in hearing the case for damages has become moot and academic in view of the latters death
during the pendency of the case. The main
_______________
24
Spouses Causin v. Judge Demecillo, A.M. No. RTJ-04-1860, September 8, 2004, 437 SCRA 594.
25
276 SCRA 243 (1997).
556
556
case for damages shall now be heard and tried before another judge.
IN VIEW WHEREOF, the impugned Orders of the trial court in Civil Case No. Q-00-40115, dated March 23 and April 4, 2000, are AFFIRMED.
The presiding judge of the Regional Trial Court of Quezon City to whom Civil Case No. Q-00-40115 was assigned is directed to proceed with
dispatch in hearing the main case for damages. No pronouncement as to costs.
SO ORDERED.
Austria-Martinez, Callejo, Sr., Tinga and Chico-Nazario, JJ., concur.
Impugned orders of trial court affirmed.

Notes.It is common practice for the buyer to inform the seller who referred him. Agents working on commission basis will not normally
pass up a commission by not informing their principal of a referred buyer. (People vs. Castillo, 333 SCRA 506 [2000])
The fiduciary relationship inherent in ordinary contracts of agency is replaced by material consideration in an agency coupled with interest
which bars the removal or dismissal of the agent as attorney-in-fact on the ground of alleged loss of trust and confidence. ( Bacaling vs.
Muya,380 SCRA 714 [2002])
DOMINGO DE LA CRUZ, plaintiff and appellant, vs.NORTHERN THEATRICAL ENTERPRISES INC.,, ET AL, defendants and appellees,
1. 1.EMPLOYER AND EMPLOYEE; DAMAGES CAUSED TO EMPLOYEE BY A STRANGER CAN NOT BE RECOVERED FROM EMPLOYER GIVING
LEGAL ASSISTANCE TO EMPLOYEE is NOT A LEGAL BUT A MORAL OBLIGATION.A claim of an employee against his employer for
damages caused to the former by a stranger or outsider while said employee was in the performance of his duties, presents a novel
question which under present legislation can not be decided in favor of the employee. While it is to the interest of the
740
74
De la Cruz vs. Northern Theatrical Enterprises, Inc., et al.
1. employer to give legal help to, and defend, its employees charged criminally in court, in order to show that he was ,not guilty of any
crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to be
insolvent, the employer would be subsidiarily liable, such legal assistance might be regarded as a moral obligation but it does not at
present count with the sanction of man-made laws. If the employer is not legally obliged to give legal assistance to its employee and
provide him with a lawyer, naturally said employee may not recover from his employer the amount he may have paid a lawyer hired
by him.
1. 2.ID.; ID.; PARTIES WHO MAY BE HELD RESPONSIBLE FOR DAMAGES. If despite the absence of any criminal responsibility on the part
of the employee he was accused of homicide, the responsibility for the improper accusation may be laid at the door of the heirs of
the deceased at whose instance the action was filed by the State through the Fiscal. This responsibility can not be transferred to his
employer, who in no way intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole
affair was that it employed plaintiff to perform a specific duty or task, which was performed lawfully and without negligence.
APPEAL from a judgment of the Court of First Instance of Ilocos Norte. Belmonte, J.
Conrado Rubio for appellant.
Ruiz, Ruiz, Ruiz, Ruiz, and Benjamin Guerrero for appellees.
MONTEMAYOR, J.:
The facts in this case based on an agreed statement of facts are simple. In the year 1941 the Northern Theatrical Enterprises Inc., a domestic
corporation operated a movie house in Laoag, Ilocos Norte, and among the persons employed by it was the plaintiff DOMINGO DE LA CRUZ,
hired as a special guard whose duties were to guard the main entrance of the cine, to maintain peace and order and to report the commission
of disorders within the premises. As such guard he carried a revolver. In the afternoon of July 4, 1941, one Benjamin Martin wanted to crash
741
VOL. 95, AUGUST 31, 1954
741
De la Cruz vs. Northern Theatrical Enterprises, Inc. , et al.
the gate or entrance of the movie house. Infuriated by the refusal of plaintiff De la Cruz to let him in without first providing himself with a
ticket, Martin attacked him with a bolo. De la Cruz defended himself as best he could until he was cornered, at which moment to save himself
he shot the gate crasher, resulting in the latter's death.
For the killing, De la Cruz was charged with homicide in Criminal Case No. 8449 of the Court of First Instance of Ilocos Norte. After a reinvestigation conducted by the Provincial Fiscal the latter filed a motion to dismiss the complaint, which was granted by the court in January
1943. On July 8, 1947, De la Cruz was again accused of the same crime of homicide, in Criminal Case No. 431 of the same Court. After trial, he
was finally acquitted of the charge on January 31, 1948. In both criminal cases De la Cruz employed a lawyer to defend him. He demanded
from his former employer reimbursement of his expenses but was refused, after which he filed the present action against the movie
corporation and the three members of its board of directors, to recover not only the amounts he had paid his lawyers but also moral damages
said to have been suffered, due to his worry, his neglect of his interests and his family as well in the supervision of the cultivation of his land, a
total of P1 5,000. On the basis of the complaint and the answer filed by defendants wherein they asked for the dismissal of the complaint, as
well as the agreed statement of facts, the Court of First Instance of Ilocos Norte after rejecting the theory of the plaintiff that he was an agent
of the defendants and that as such agent he was entitled to reimbursement of the expenses incurred by him in connection with the agency
(Arts. 1709-1729 of the old Civil Code), found that plaintiff had no cause of action and dismissed the complaint without costs. De la Cruz
appealed directly to this Tribunal for the reason that only questions of law are involved in the appeal.
We agree with the trial court that the relationship between the movie corporation and the plaintiff was not that
742
742
of principal and agent because the principle of representation was in no way involved. Plaintiff was not employed to represent the defendant
corporation in its dealings with third parties. He was a mere employee hired to perform a certain specific duty or task, that of acting as special
guard and staying at the main entrance of the movie house to stop gate crashers and to maintain peace and order within the premises. The
question posed by this appeal is whether an employee or servant who in line of duty and while in the performance of the task assigned to him,
performs an act which eventually results in his incurring in expenses, caused not directly by his master or employer or his fellow servants or
by reason of his performance of his duty, but rather by a third party or stranger not in the employ of his employer, may recover said damages
against his employer,
The learned trial court in the last paragraph of its decision dismissing the complaint said that "after studying many laws or provisions of
law to find out what law is applicable to the facts submitted and admitted by the parties, has found none and it has no other alternative than
to dismiss the complaint." The trial court is right. We confess that we are not aware of any law or judicial authority that is directly applicable to
the present case, and realizing the importance and far-reaching effect of a ruling on the subject-matter we have searched, though vainly, for
judicial authorities and enlightenment. All the laws and principles of law we have found, as regards master and servants, or employer and
employee, refer to cases of physical injuries, light or serious, resulting in loss of a member of the body or of any one of the senses, or
permanent physical disability or even dealth, suffered in line of duty and in the course of the performance of the duties assigned to the
servant or employee, and these cases are mainly governed by the Employer's Liability Act and the Workmen's Compensation Act. But a case
involving damages caused to an employee by a stranger or
743
VOL. 95, AUGUST 81, 1954
743
outsider while said employee was in the perf ormance of his duties, presents a novel question which under present legislation we are neither
able nor prepared to decide in favor of the employee.
In a case like the present or a similar case of say a driver employed by a transportation company, who while in the course of employment
runs over and inflicts physical injuries on or causes the death of a pedestrian; and such driver is later charged criminally in court, one can
imagine that it would be to the interest of the employer to give legal help to and defend its employee in order to show that the latter was not
guilty of any crime either deliberately or through negligence, because should the employee be finally held criminally liable and he is found to
be insolvent, the employer would be subsidiarily liable. That is why, we repeat, it is to the interest of the employer to render legal assistance
to its employee. But we are not prepared to say and to hold that the giving of said legal assistance to its employees is a legal obligation. While
it might yet and possibly be regarded as a moral obligation, it does not at present count with the sanction of man-made laws.
If the employer is not legally obliged to give, legal assistance to its employee and provide him with a lawyer, naturally said employee may
not recover the amount he may have paid a lawyer hired by him.
Viewed from another angle it may be said that the damage suffered by the plaintiff by reason of the expenses incurred by him in
remunerating his lawyer, is not caused by his act of shooting to death the gate crasher but rather by the filing of the charge of homicide which
made it necessary for him to defend himself with the aid of counsel. Had no criminal charge been filed against him, there would have been no
expenses incurred or damage suffered. So the damage suffered by plaintiff was caused rather by the improper filing of the criminal charge,
possibly at the instance of the heirs of the deceased gate crasher and by the State through the Fiscal. We say improper filing,
744
744
Transport Contractors, Inc. vs. Public Service Commission, et al.
judging by the results of the court proceedings, namely, acquittal. In other words, the plaintiff was innocent and blameless. If despite his
innocence and despite the absence of any criminal responsibility on his part he was accused of homicide, then the responsibility for the
improper accusation may be laid at the door of the heirs of the deceased and the State, and so theoretically, they are the parties that may be
held responsible civilly ex or damages and if this is so, we fail to see how this responsibility can be transferred to the employer who in no way
intervened, much less initiated the criminal proceedings and whose only connection or relation to the whole affairs was that he employed
plaintiff to perform a specific duty or task, which task or duty was performed lawfully and without negligence.
Still another point of view is that the damages incurred here consisting of the payment of the lawyer's fee did not flow directly from the
performance of his duties but only indirectly because there was an efficient, intervening cause, namely, the filing of the criminal charges. In
other words, the shooting to death of the deceased by the plaintiff was not the proximate cause of the damages suffered but may be regarded
as only a remote cause, because from the shooting to the damages suff ered there was not that natural and continuous sequence required to
fix civil responsibility.
In view of the foregoing, the judgment of the lower court is affirmed. No costs.
Bengzon, Padilla, Reyes, A., Bautista Angelo,Labrador, Concepcion, and Reyes, J. B. L., JJ., concur.
SHELL v FIREMENs INSURANCE CORPORATION

THE
SHELL
COMPANY
OF
THE
PHILIPPINES,
LTD., petitioner,
vs.
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY COMMERCIAL CASUALTY INSURANCE CO., SALVADOR SISON,
PORFIRIO DE LA FUENTE and THE COURT OF APPEALS (First Division),respondents.
Ross,
Selph,
Carrascoso
J. A. Wolfson and Manuel Y. Macias for respondents.
PADILLA, J.:
&
Janda
for
petitioner.
Appeal by certiorari under Rule 46 to review a judgment of the Court of Appeals which reversed that of the Court of First Instance of Manila
and sentenced ". . . the defendants-appellees to pay, jointly and severally, the plaintiffs-appellants the sum of P1,651.38, with legal interest
from December 6, 1947 (Gutierrez vs. Gutierrez, 56 Phil., 177, 180), and the costs in both instances."
The Court of Appeals found the following:
Inasmuch as both the Plaintiffs-Appellants and the Defendant-Appellee, the Shell Company of the Philippine Islands, Ltd. accept the
statement of facts made by the trial court in its decision and appearing on pages 23 to 37 of the Record on Appeal, we quote
hereunder such statement:
This is an action for recovery of sum of money, based on alleged negligence of the defendants.
It is a fact that a Plymounth car owned by Salvador R. Sison was brought, on September 3, 1947 to the Shell Gasoline and Service
Station, located at the corner of Marques de Comillas and Isaac Peral Streets, Manila, for washing, greasing and spraying. The operator
of the station, having agreed to do service upon payment of P8.00, the car was placed on a hydraulic lifter under the direction of the
personnel of the station.
What happened to the car is recounted by Perlito Sison, as follows:
Q. Will you please describe how they proceeded to do the work?
A. Yes, sir. The first thing that was done, as I saw, was to drive the car over the lifter. Then by the aid of the two grease men
they raised up my car up to six feet high, and then washing was done. After washing, the next step was greasing. Before
greasing was finished, there is a part near the shelf of the right fender, right front fender, of my car to be greased, but the the
grease men cannot reached that part, so the next thing to be done was to loosen the lifter just a few feet lower. Then upon
releasing the valve to make the car lower, a little bit lower . . .
Q. Who released the valve?
A. The greasemen, for the escape of the air. As the escape of the air is too strong for my ear I faced backward. I faced toward
Isaac Peral Street, and covered my ear. After the escaped of the air has been finished, the air coming out from the valve, I
turned to face the car and I saw the car swaying at that time, and just for a few second the car fell., (t.s.n. pp. 22-23.)
The case was immediately reported to the Manila Adjustor Company, the adjustor of the firemen's Insurance Company and the Commercial
Casualty Insurance Company, as the car was insured with these insurance companies. After having been inspected by one Mr. Baylon,
representative of the Manila Adjustor Company, the damaged car was taken to the shops of the Philippine Motors, Incorporated, for repair
upon order of the Firemen's Insurance Company and the Commercial Casualty Company, with the consent of Salvador R. Sison. The car was
restored to running condition after repairs amounting to P1,651.38, and was delivered to Salvador R. Sison, who, in turn made assignments of
his rights to recover damages in favor of the Firemen's Insurance Company and the Commercial Casualty Insurance Company.
On the other hand, the fall of the car from the hydraulic lifter has been explained by Alfonso M. Adriano, a greaseman in the Shell
Gasoline and Service Station, as follows:
Q. Were you able to lift the car on the hydraulic lifter on the occasion, September 3, 1947?
A. Yes, sir.
Q. To what height did you raise more or less?
A. More or less five feet, sir.
Q. After lifting that car that height, what did you do with the car?
A. I also washed it, sir.
Q. And after washing?
A. I greased it.
Q. On that occasion, have you been able to finish greasing and washing the car?
A. There is one point which I could not reach.
Q. And what did you do then?
A. I lowered the lifter in order to reach that point.
Q. After lowering it a little, what did you do then?
A. I pushed and pressed the valve in its gradual pressure.
Q. Were you able to reach the portion which you were not able to reach while it was lower?
A. No more, sir.
Q. Why?
A. Because when I was lowering the lifter I saw that the car was swinging and it fell.
THE COURT. Why did the car swing and fall?
WITNESS: 'That is what I do not know, sir'. (t.s.n., p.67.)
The position of Defendant Porfirio de la Fuente is stated in his counter-statement of facts which is hereunder also reproduced:
In the afternoon of September 3, 1947, an automobile belonging to the plaintiff Salvador Sison was brought by his son, Perlito Sison, to
the gasoline and service station at the corner of Marques de Comillas and Isaac Peral Streets, City of Manila, Philippines, owned by the
defendant The Shell Company of the Philippine Islands, Limited, but operated by the defendant Porfirio de la Fuente, for the purpose of
having said car washed and greased for a consideration of P8.00 (t.s.n., pp. 19-20.) Said car was insured against loss or damage by
Firemen's Insurance Company of Newark, New Jersey, and Commercial Casualty Insurance Company jointly for the sum of P10,000
(Exhibits "A', "B", and "D").
The job of washing and greasing was undertaken by defendant Porfirio de la Fuente through his two employees, Alfonso M. Adriano, as
greaseman and one surnamed de los Reyes, a helper and washer (t.s.n., pp. 65-67). To perform the job the car was carefully and
centrally placed on the platform of the lifter in the gasoline and service station aforementioned before raising up said platform to a
height of about 5 feet and then the servicing job was started. After more than one hour of washing and greasing, the job was about to
be completed except for an ungreased portion underneath the vehicle which could not be reached by the greasemen. So, the lifter was
lowered a little by Alfonso M. Adriano and while doing so, the car for unknown reason accidentally fell and suffered damage to the
value of P1, 651.38 (t.s.n., pp. 65-67).
The insurance companies after paying the sum of P1,651.38 for the damage and charging the balance of P100.00 to Salvador Sison in
accordance with the terms of the insurance contract, have filed this action together with said Salvador Sison for the recovery of the
total amount of the damage from the defendants on the ground of negligence (Record on Appeal, pp. 1-6).
The defendant Porfirio de la Fuente denied negligence in the operation of the lifter in his separate answer and contended further that
the accidental fall of the car was caused by unforseen event (Record on Appeal, pp. 17-19).
The owner of the car forthwith notified the insurers who ordered their adjustor, the Manila Adjustor Company, to investigate the incident and
after such investigation the damaged car, upon order of the insures and with the consent of the owner, was brought to the shop of the
Philippine Motors, Inc. The car was restored to running condition after thereon which amounted to P1,651.38 and returned to the owner who
assigned his right to collect the aforesaid amount to the Firemen's Insurance Company and the Commercial Casualty Insurance Company.
On 6 December 1947 the insures and the owner of the car brought an action in the Court of First Instance of Manila against the Shell Company
of the Philippines, Ltd. and Porfirio de la Fuente to recover from them, jointly and severally, the sum of P1,651.38, interest thereon at the legal
rate from the filing of the complaint until fully paid, the costs. After trial the Court dismissed the complaint. The plaintiffs appealed. The Court
of Appeals reversed the judgment and sentenced the defendant to pay the amount sought to be recovered, legal interest and costs, as stated
at the beginning of this opinion.
In arriving at the conclusion that on 3 September 1947 when the car was brought to the station for servicing Profirio de la Fuente, the operator
of the gasoline and service station, was an agent of the Shell Company of the Philippines, Ltd., the Court of Appeals found that
. . . De la Fuente owned his position to the Shell Company which could remove him terminate his services at any time from the said
Company, and he undertook to sell the Shell Company's products exculusively at the said Station. For this purpose, De la Fuente was
placed in possession of the gasoline and service station under consideration, and was provided with all the equipments needed to
operate it, by the said Company, such as the tools and articles listed on Exhibit 2 which the hydraulic lifter (hoist) and accessories,
from which Sison's automobile fell on the date in question (Exhibit 1 and 2). These equipments were delivered to De la Fuente on a socalled loan basis. The Shell Company took charge of its care and maintenance and rendered to the public or its customers at that
station for the proper functioning of the equipment. Witness Antonio Tiongson, who was sales superintendent of the Shell Company,
and witness Augusto Sawyer, foreman of the same Company, supervised the operators and conducted periodic inspection of the
Company's gasoline and service station, the service station in question inclusive. Explaining his duties and responsibilities and the
reason for the loan, Tiongson said: "mainly of the supervision of sales or (of) our dealers and rountinary inspection of the equipment
loaned by the Company" (t.s.n., 107); "we merely inquire about how the equipments are, whether they have complaints, and whether
if said equipments are in proper order . . .", (t.s.n., 110); station equipments are "loaned for the exclusive use of the dealer on
condition that all supplies to be sold by said dealer should be exclusively Shell, so as a concession we loan equipments for their
use . . .," "for the proper functioning of the equipments, we answer and see to it that the equipments are in good running order usable
condition . . .," "with respect to the public." (t.s.n., 111-112). De la Fuente, as operator, was given special prices by the Company for
the gasoline products sold therein. Exhibit 1 Shell, which was a receipt by Antonio Tiongson and signed by the De la Fuente,
acknowledging the delivery of equipments of the gasoline and service station in question was subsequently replaced by Exhibit 2
Shell, an official from of the inventory of the equipment which De la Fuente signed above the words: "Agent's signature" And the
service station in question had been marked "SHELL", and all advertisements therein bore the same sign. . . .
. . . De la Fuente was the operator of the station "by grace" of the Defendant Company which could and did remove him as it pleased;
that all the equipments needed to operate the station was owned by the Defendant Company which took charge of their proper care
and maintenance, despite the fact that they were loaned to him; that the Defendant company did not leave the fixing of price for
gasoline to De la Fuente; on the other hand, the Defendant company had complete control thereof; and that Tiongson, the sales
representative of the Defendant Company, had supervision over De la Fuente in the operation of the station, and in the sale of
Defendant Company's products therein. . . .
Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his
services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the
company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took
charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the
company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the operator;
and that the receipt signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an
agent of the company and not an independent contractor should not be disturbed.
To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties,
should there be a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their
respective obligation stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title
given the contract by the parties, the former must prevail over the latter.
It was admitted by the operator of the gasoline and service station that "the car was carefully and centrally placed on the platform of the
lifter . . ." and the Court of Appeals found that
. . . the fall of Appellant Sison's car from the hydraulic lift and the damage caused therefor, were the result of the jerking and swaying
of the lift when the valve was released, and that the jerking was due to some accident and unforeseen shortcoming of the mechanism
itself, which caused its faulty or defective operation or functioning,
. . . the servicing job on Appellant Sison's automobile was accepted by De la Fuente in the normal and ordinary conduct of his business
as operator of his co-appellee's service station, and that the jerking and swaying of the hydraulic lift which caused the fall of the
subject car were due to its defective condition, resulting in its faulty operation. . . .
As the act of the agent or his employees acting within the scope of his authority is the act of the principal, the breach of the undertaking by
the agent is one for which the principal is answerable. Moreover, the company undertook to "answer and see to it that the equipments are in
good running order and usable condition;" and the Court of Appeals found that the Company's mechanic failed to make a thorough check up of
the hydraulic lifter and the check up made by its mechanic was "merely routine" by raising "the lifter once or twice and after observing that
the operator was satisfactory, he (the mechanic) left the place." The latter was negligent and the company must answer for the negligent act
of its mechanic which was the cause of the fall of the car from the hydraulic lifter.
The judgment under review is affirmed, with costs against the petitioner.
Domingo vs. Domingo
No. L-30573. October 29, 1971.

VICENTE M. DOMINGO,represented by his heirs, ANTONINA RAYMUNDO VDA. DE DOMINGO, RICARDO, CESAR, AMELIA, VICENTE JR., SALVADOR,
IRENE and JOSELITO, all surnamed DOMINGO, petitioners-appellants, vs. GREGORIO M. DOMINGO,respondent-appellee, TEOFILO P. PURISIMA,
intervenor-respondent.
Agency; Obligations of an agent.Articles 1891 and 1909 of the Civil Code demand the utmost good faith, fidelity, honesty, candor and
fairness on the part of the agent to his principal. The agent has an absolute obligation to make a full disclosure or complete account to his
principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not countenance
any stipulation exempting the agent from such an obligation and considers such an exemption as void.
Same; Failure of agent to make full disclosure makes him guilty of breach of his loyalty to the principal.An agent who takes a secret
profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the same to bis principal is guilty of a breach of
his loyalty to the latter and forfeits his right to collect the commission that may be due him, even if the principal does not suffer any injury by
reason of such breach of fidelity, or that he obtained better results or that the agency is a gratuitous one, or that usage or custom allows it;
because the rule is to prevent the possibility of any wrong, not to remedy or repair an actual damage.
Same; Duty of fidelity when not applicable.The duty embodied in Article 1891 of the Civil Code does not apply if the agent or broker
acted only as a middleman with the task of merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the
terms and conditions of the transaction.
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Domingo vs. Domingo
PETITION for review by certiorari of a decision of the Court of Appeals.

Teofilo Leonin for petitioners-appellants.
Osorio, Osorio & Osorio for respondent-appellee.

Teofilo P. Purisima in his own behalf as intervenor-respondent.
MAKASIAR, J.:
Petitioner-appellant Vicente M. Domingo, now deceased and represented by his heirs, Antonina Raymundo vda. de Domingo, Ricardo, Cesar,
Amelia, Vicente Jr., Salvacion, Irene and Joselito, all surnamed Domingo, sought the reversal of the majority decision dated March 12, 1969 of
the Special Division of Five of the Court of Appeals affirming the judgment of the trial court, which sentenced the said Vicente M. Domingo to
pay Gregorio M. Domingo P2,307.50 and the intervenor Teofilo P. Purisima P2,607.50 with legal interest on both amounts from the date of the
filing of the complaint, to pay Gregorio Domingo Pl,000.00 as moral and exemplary damages and P500.00 as attorneys fees plus costs.
The following facts were found to be established by the majority of the Special Division of Five of the Court of Appeals:
In a document Exhibit A executed on June 2, 1956, Vicente M. Domingo granted Gregorio Domingo, a real estate broker, the exclusive
agency to sell his lot No. 883 of Piedad Estate with an area of about 88,477 square meters at the rate of P2.00 per square meter (or for P176,954.00) with a commission of 5% on the total price, if the property is sold by Vicente or by anyone else during the 30-day duration of the
agency or if the property is sold by Vicente within three months from the termination of the agency to a purchaser to whom it was submitted
by Gregorio during the continuance of the agency with notice to Vicente. The said agency contract was in triplicate, one
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Domingo vs. Domingo
copy was given to Vicente, while the original and another copy were retained by Gregorio.
On June 3, 1956, Gregorio authorized the intervenor Teofilo P. Purisima to look for a buyer, promising him one-half of the 5% commission.
Thereafter, Teofilo Purisima introduced Oscar de Leon to Gregorio as a prospective buyer.
Oscar de Leon submitted a written offer which was very much lower than the price of P2.00 per square meter (Exhibit B). Vicente
directed Gregorio to tell Oscar de Leon to raise his offer. After several conferences between Gregorio and Oscar de Leon, the latter raised his
offer to P109,000.00 on June 20, 1956 as evidenced by Exhibit C, to which Vicente agreed by signing Exhibit C. Upon demand of Vicente,
Oscar de Leon issued to him a check in the amount of Pl,000.00 as earnest money, after which Vicente advanced to Gregorio the sum of
P300.00. Oscar de Leon confirmed his former offer to pay for the property at P1.20 per square meter in another letter, Exhibit D.
Subsequently, Vicente asked for an additional amount of P1,000.00 as earnest money, which Oscar de Leon promised to deliver to him.
Thereafter, Exhibit C was amended to the effect that Oscar de Leon will vacate on or about September 15, 1956 his house and lot at Denver
Street, Quezon City which is part of the purchase price. It was again amended to the effect that Oscar will vacate his house and lot on
December 1, 1956, because his wife was on the family way and Vicente could stay in lot No. 883 of Piedad Estate until June 1, 1957, in a
document dated June 30, 1956 (the year 1957 therein is a mere typographical error) and marked Exhibit D. Pursuant to his promise to
Gregorio, Oscar gave him as a gift orpropina the sum of One Thousand Pesos (Pl,000.00) for succeeding in persuading Vicente to sell his lot at
P1.20 per square meter or a total in round figure of One Hundred Nine Thousand Pesos (P109,000.00). This gift of One Thousand Pesos
(P1,000.00) was not disclosed by Gregorio to Vicente. Neither did Oscar pay Vicente the additional amount of One Thousand Pesos (P1,000.00)
by way of earnest money. When the deed of sale was not executed
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Domingo vs. Domingo
on August 1, 1956 as stipulated in Exhibit C nor on August 15, 1956 as extended by Vicente, Oscar told Gregorio that he did not receive his
money from his brother in the United States, for which reason he was giving up the negotiation including the amount of One Thousand Pesos
(P1,000.00) given as earnest money to Vicente and the One Thousand Pesos (P1,000.00) given to Gregorio as propina or gift. When Oscar did
not see him after several weeks, Gregorio sensed something fishy. So, he went to Vicente and read a portion of Exhibit A marked Exhibit A1to the effect that Vicente was still committed to pay him 5% commission, if the sale is consummated within three months after the
expiration of the 30-day period of the exclusive agency in his favor from the execution of the agency contract on June 2, 1956 to a purchaser
brought by Gregorio to Vicente during the said 30-day period. Vicente grabbed the original of Exhibit A and tore it to pieces. Gregorio held his
peace, not wanting to antagonize Vicente further, because he had still the duplicate of Exhibit A. From his meeting with Vicente, Gregorio
proceeded to the office of the Register of Deeds of Quezon City, where he discovered Exhibit G, a deed of sale executed on September 17,
1956 by Aaraparo Diaz, wife of Oscar de Leon, over their house and lot at No. 40 Denver Street, Cubao, Quezon City, in favor of Vicente as
down payment by Oscar de Leon on the purchase price of Vicentes lot No. 883 of Piedad Estate. Upon thus learning that Vicente sold his
property to the same buyer, Oscar de Leon and his wife, he demanded in writing payment of his commission on the sale price of One Hundred
Nine Thousand Pesos (P109.000.00), Exhibit H. He also conferred with Oscar de Leon, who told him that Vicente went to him and asked him
to eliminate Gregorio in the transaction and that he would sell his property to him for One Hundred Four Thousand Pesos (P104,000.00). In
Vicentes reply to Gregorios letter, Exhibit H, Vicente stated that Gregorio is not entitled to the 5 % commission because he sold the
property not to Gregorios buyer, Oscar de Leon, but to another buyer, Amparo Diaz, wife of Oscar de Leon.
The Court of Appeals found from the evidence that Ex135
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Domingo vs. Domingo
hibit A, the exclusive agency contract, is genuine; that Amparo Diaz, the vendee, being the wife of Oscar de Leon, the sale by Vicente of his
property is practically a sale to Oscar de Leon since husband and wife have common or identical interests; that Gregorio and intervenor Teofilo
Purisima were the efficient cause in the consummation of the sale in favor of the spouses Oscar de Leon and Amparo Diaz; that Oscar de Leon
paid Gregorio the sum of One Thousand Pesos (P1,000.00) as propina or gift and not as additional earnest money to be given to the plaintiff,
because Exhibit 66, Vicentes letter addressed to Oscar de Leon with respect to the additional earnest money, does not appear to have been
answered by Oscar de Leon and therefore there is no writing or document supporting Oscar de Leons testimony that he paid an additional
earnest money of One Thousand Pesos (P1,000.00) to Gregorio for delivery to Vicente, unlike the first amount of One Thousand Pesos
(P1,000.00) paid byOscar de Leon to Vicente as earnest money, evidenced by the letter Exhibit 4; and that Vicente did not even mention
such additional earnest-money in his two replies Exhibits I and J to Gregorios letter of demand of the 5% commission.
The three issues in this appeal are (1) whether the failure on the part of Gregorio to disclose to Vicente the payment to him by Oscar de
Leon of the amount of One Thousand Pesos (P1,000.00) as gift or propina for having persuaded Vicente to reduce the purchase price from
P2.00 to P1.20 per square meter, so constitutes fraud as to cause a forfeiture of his 5% commission on the sale price; (2) whether Vicente or
Gregorio should be liable directly to the intervenor Teofilo Purisima for the latters share in the expected commission of Gregorio by reason of
the sale; and (3) whether the award of legal interest, moral and exemplary damages, attorneys fees and costs, was proper.
Unfortunately, the majority opinion penned by Justice Edilberto Soriano and concurred in by Justice Juan Enriquez did not touch on these
issues which were extensively discussed by Justice Magno Gatmaitan in his dissenting opinion. However, Justice Esguerra, in his concurring
opinion, affirmed that it does not constitute breach of
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Domingo vs. Domingo
trust or fraud on the part of the broker and regarded the same as merely part of the whole process of bringing about the meeting of the minds
of the seller and the purchaser and that the commitment from the prospective buyer that he would give a reward to Gregorio if he could effect
better terms for him from the seller, independent of his legitimate commission, is not fraudulent, because the principal can reject the terms
offered by the prospective buyer if he believes that such terms are onerous or disadvantageous to him. On the other hand, Justice Gatmaitan,
with whom Justice Antonio Caizares concurred, held the view that such an act on the part of Gregorio was fraudulent and constituted a
breach of trust, which should deprive him of his right to the commission.
The duties and liabilities of a broker to his employer are essentially those which an agent owes to his principal. 1
Consequently, the decisive legal provisions are found in Articles 1891 and 1909 of the New Civil Code.
Art. 1891. Every agent is bound to render an account of his transactions and to deliver to the principal whatever he may have received by
virtue of the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall be void.
x
Art. 1909. The agent is responsible not only for fraud, but also for negligence, which shall be judged with more or less rigor by the courts,
according to whether the agency was or was not for a compensation.
Article 1891 of the New Civil Code amends Article 1720 of the old Spanish Civil Code which provides that:
Art. 1720. Every agent is bound to give an account of his transaction and to pay to the principal whatever he may have received by virtue
of the agency, even though what he has received is not due to the principal.
The modification contained in the first paragraph of
_______________
12 Am. Jur. 2d 835; 134 ALR 1346; 1 ALR 2d 987; Brown vs. Coates. 67 ALR 2d 943; Haymes vs. Rogers, 17 ALR 2d 896; Moore vs. Turner,
32 ALR 2d 713.
1
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Domingo vs. Domingo
Article 1891 consists in changing the phrase to pay to to deliver, which latter term is more comprehensive than the former.
Paragraph 2 of Article 1891 is a new addition designed to stress the highest loyalty that is required to an agent condemning as void any
stipulation exempting the agent from the duty and liability imposed on him in paragraph one thereof.
Article 1909 of the New Civil Code is essentially a reinstatement of Article 1726 of the old Spanish Civil Code which reads thus:
Art. 1726. The agent is liable not only for fraud, but also for negligence, which shall be judged with more or less severity by the courts,
according to whether the agency was gratuitous or for a price or reward.
The aforecited provisions demand the utmost good faith, fidelity, honesty, candor and fairness on the part of the agent, the real estate broker
in this case, to his principal, the vendor. The law imposes upon the agent the absolute obligation to make a full disclosure or complete account
to his principal of all his transactions and other material facts relevant to the agency, so much so that the law as amended does not
countenance any stipulation exempting the agent from such an obligation and considers such an exemption as void. The duty of an agent is
likened to that of a trustee. This is not a technical or arbitrary rule but a rule founded on the highest and truest principle of morality as well as
of the strictest justice.2
Hence, an agent who takes a secret profit in the nature of a bonus, gratuity or personal benefit from the vendee, without revealing the
same to his principal, the vendor, is guilty of a breach of his loyalty to the principal and forfeits his right to collect the commission from his
principal, even if the principal does not suffer any injury by reason of such breach of fidelity, or that he obtained better results or that the
agency is a gratuitous one, or that usage or custom allows it; because the rule is to prevent the pos-
_______________
2
See also Manresa, Vol. 2, p. 461, 4th ed.
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Domingo vs. Domingo
sibility of any wrong, not to remedy or repair an actual damage. 3 By taking such profit or bonus or gift or propina from the vendee, the agent
thereby assumes a position wholly inconsistent with that of being an agent for his principal, who has a right to treat him, insofar as his
commission is concerned, as if no agency had existed. The fact that the principal may have been benefited by the valuable services of the said
agent does not exculpate the agent who has only himself to blame for such a result by reason of his treachery or perfidy.
This Court has been consistent in the rigorous application of Article 1720 of the old Spanish Civil Code. Thus, for failure to deliver sums of
money paid to him as an insurance agent for the account of his employer as required by said Article 1720, said insurance agent was convicted
of estafa.4 An administrator of an estate was likewise liable under the same Article 1720 for failure to render an account of his administration
to the heirs unless the heirs consented thereto or are estopped by having accepted the correctness of his account previously rendered. 5
Because of his responsibility under the aforecited Aricle 1720, an agent is likewise liable for estafa for failure to deliver to his principal the
total amount collected by him in behalf of his principal and cannot retain the commission pertaining to him by subtracting the same from his
collections.6
A lawyer is equally liable under said Article 1720 if he fails to deliver to his client all the money and property received by him for his client
despite his attorneys lien. 7The duty of a commission agent to render a full account of his operations to his principal was reiterated in Duhart,
etc. vs. Macias.8
The American jurisprudence on this score is well-nigh unanimous.
_______________
12 Am. Jur. 2d Sec. 171, 811-12.
U.S. vs. Kiene, 7 Phil. 736.
Ojinaga vs. Estate of Perez, 9 Phil. 185.
U.S.vs. Reyes, 36 Phil. 791.
In. Re: Bamberger, 49 Phil. 962.
54 Phil. 513.
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Domingo vs. Domingo
Where a principal has paid an agent or broker a commission while ignorant of the fact that the latter has been unfaithful, the principal may
recover back the commission paid, since an agent or broker who has been unfaithful is not entitled to any compensation.
x
In discussing the right of the principal to recover commissions retained by an unfaithful agent, the court inLittle vs. Phipps (1911) 208
Mass. 331, 94 NE 260, 34 LRA(NS) 1046, said: It is well settled that the agent is bound to exercise the utmost good faith in his dealings with
his principal. As Lord Cairns said, this rule is not a technical or arbitrary rule. It is a rule founded on the highest and truest principles of
morality. Parker vs. McKenna (1874) LR 10 Ch(Eng) 96, 118... If the agent does not conduct himself with entire fidelity towards his principal,
but is guilty of taking a secret profit or commission in regard the matter in which he is employed, he loses his right to compensation on the
ground that he has taken a position wholly inconsistent with that of agent for his employer, and which gives his employer, upon discovering it,
the right to treat him so far as compensation, at least, is concerned as if no agency had existed. This may operate to give to the principal the
benefit of valuable services rendered by the agent, but the agent has only himself to blame for that result.
The intent with which the agent took a secret profit has been held immaterial where the agent has in fact entered into a relationship
inconsistent with his agency, since the law condemns the corrupting tendency of the inconsistent relationship. Little vs. Phipps (1911) 94 NE
260.9
As a general rule, it is a breach of good faith and loyalty to his principal for an agent, while the agency exists, so to deal with the subject
matter thereof, or with information acquired during the course of the agency, as to make a profit out of it for himself in excess of his lawful
compensation; and if he does so he may be held as a trustee and may/ be compelled to account to his principal for all profits, advantages,
rights, or privileges acquired by him in such dealings, whether in performance or in violation of his duties, and be required to transfer them to
his principal upon being reimbursed for his expenditures for the same, unless the principal has consented to or ratified the transaction
knowing that benefit or
_______________
9
134 ALR, Ann. pp. 1346,1347-1348; see also 1 ALR 2d, 987.
140
140
Domingo vs. Domingo
profit would accrue, or had accrued, to the agent, or unless with such knowledge he has allowed the agent so as to change his condition that
he cannot be put in status quo. The application of this rule is not affected by the fact that the principal did not suffer any injury by reason of
the agents dealings, or that he in fact obtained better results; nor is it affected by the fact that there is a usage or custom to the contrary, or
that the agency is a gratuitous one. (Italics supplied.)10
In the case at bar, defendant-appellee Gregorio Domingo as the broker, received a gift or propina in the amount of One Thousand Pesos
(Pl,000.00) from the prospective buyer Oscar de Leon, without the knowledge and consent of his principal, herein petitioner-appellant Vicente
Domingo. His acceptance of said substantial monetary gift corrupted his duty to serve the interests only of his principal and undermined his
loyalty to his principal, who gave him a partial advance of Three Hundred Pesos (P300.00) on his commission. As a consequence, instead of
exerting his best to persuade his prospective buyer to purchase the property on the most advantageous terms desired by his principal, the
broker, herein defendant-appellee Gregorio Domingo, succeeded in persuading his principal to accept the counter-offer of the prospective
buyer to purchase the property at P1.20 per square meter or One Hundred Nine Thousand Pesos (P109,000.00) in round figure for the lot of
88,477 square meters, which is very much lower than the price of P2.00 per square meter or One Hundred Seventy-Six Thousand Nine
Hundred Fifty-Four Pesos (P176.954.00) for said lot originally offered by his principal.
The duty embodied in Article 1891 of the New Civil Code will not apply if the agent or broker acted only as a middleman with the task of
merely bringing together the vendor and vendee, who themselves thereafter will negotiate on the terms and conditions of the transaction.
Neither would the rule apply if the agent or broker had informed the principal of the gift or bonus or profit he received from the purchaser and
his principal did not object there_______________
10
3 CJS, 53-54; see also 12 Am. Jur. 2d 835-841, 908-912.
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VOL. 42, OCTOBER 29,1971
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Domingo vs.Domingo
to.11 Herein defendant-appellee Gregorio Domingo was not merely a middleman of the petitioner-appellant Vicente Domingo and the buyer
Oscar de Leon. He was the broker and agent of said petitioner-appellant only. And therein petitioner-appellant was not aware of the gift of One
Thousand Pesos (Pl,000.00) received by Gregorio Domingo from the prospective buyer; much less did he consent to his agents accepting such
a gift.
The fact that the buyer appearing in the deed of sale is Amparo Diaz, the wife of Oscar de Leon, does not materially alter the situation;
because the transaction, to be valid, must necessarily be with, the consent of the husband Oscar de Leon, who is the administrator of their
conjugal assets including their house and lot at No. 40 Denver Street, Cubao, Quezon City, which were given as part of and constituted the
down payment on, the purchase price of herein petitioner-appellants lot No. 883 of Piedad Estate. Hence, both in law and in fact, it was still
Oscar de Leon who was the buyer.
As a necessary consequence of such breach of trust, defendant-appellee Gregorio Domingo must forfeit his right to the commission and
must return the part of the commission he received from his principal.
Teofilo Purisima, the sub-agent of Gregorio Domingo, can only recover from Gregorio Domingo his one-half share of whatever amounts
Gregorio Domingo received by virtue of the transaction as his sub-agency contract was with Gregorio Domingo alone and not with Vicente
Domingo, who was not even aware of such sub-agency. Since Gregorio Domingo received from Vicente Domingo and Oscar de Leon
respectively the amounts of Three Hundred Pesos (P300.00) and One Thousand Pesos (P1,000.00) or a total of One Thousand Three Hundred
Pesos (P1,300.00)one-half of the same, which is Six Hundred Fifty Pesos (P650.00), should be paid by Gregorio Domingo to Teofilo Purisima.
Because Gregorio Domingos clearly unfounded complaint
________________
11
12 Am. Jur. 2d, 835-841, 908-912; Raymond vs. Davis, Jan. 3, 1936, 199 NE 321, 102 ALR, 1112-1115, 1116-1121.
142
142
Philippine National Railways vs. Domingo
caused Vicente Domingo mental anguish and serious anxiety as well as wounded feelings, petitioner-appellant Vicente Domingo should be
awarded moral damages in the reasonable amount of One Thousand Pesos (P1,000.00) and attorneys fees in the reasonable amount of One
Thousand Pesos (P1,000.00), considering that this case has been pending for the last fifteen (15) years from its filing on October 3, 1956.
WHEREFORE, the judgment is hereby rendered, reversing the decision of the Court of Appeals and directing the defendant-appellee
Gregorio Domingo: (1) to pay to the heirs of Vicente Domingo the sum of One Thousand Pesos (P1,000.00) as moral damages and One
Thousand Pesos (P1,000.00) as attorneys fees; (2) to pay Teofilo Purisima the sum of Six Hundred Fifty Pesos (P650.00); and (3) to pay the
costs.
Manotok Brothers, Inc. vs. Court of Appeals
G.R. No. 94753. April 7, 1993.*

MANOTOK BROTHERS, INC., petitioner, vs. THE HONORABLE COURT OF APPEALS, THE HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF
MANILA (Branch VI), and SALVADOR SALIGUMBA, respondents.
Civil Law; Agency; Private respondent, as efficient procuring cause in bringing about sale, is entitled to agents commission. At first
sight, it would seem that private respondent is not entitled to any commission as he was not successful in consummating the sale between the
parties, for the sole reason that when the Deed of Sale was finally executed, his extended authority had already expired. By this alone, one
might be misled to believe that this case squarely falls within the ambit of the established principle that a broker or agent is not entitled to any
commission until he has successfully done the job given to him. Going deeper however into the case would reveal that it is within the coverage
of the exception rather than of the general rule, the exception being that enunciated in the case of Prats vs. Court of Appeals. In the said case,
this Court ruled in favor of claimant-agent, despite the expiration of his authority, when a sale was finally
_______________
*
SECOND DIVISION.
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VOL. 221, APRIL 7, 1993
225
consummated. In its decision in the abovecited case, this Court said, that while it was respondent courts (referring to the Court of
Appeals) factual findings that petitioner Prats (claimant-agent) was not the efficient procuring cause in bringing about the sale (prescinding
from the fact of expiration of his exclusive authority), still petitioner was awarded compensation for his services. And We quote:
In equity, however, the Court notes that petitioner had diligently taken steps to bring back together respondent Doronila and the SSS. x x x x
x x Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos (P100,000.00) by way of compensation for
his efforts and assistance in the transaction, which however was finalized and consummated after the expiration of his exclusive authority x x
x. (Italics supplied.) From the foregoing, it follows then that private respondent herein, with more reason, should be paid his commission.
Same; Same; Same.Contrary to what petitioner advances, the case of Danon vs. Brimo, on which it heavily anchors its justification for
the denial of private respondents claim, does not apply squarely to the instant petition. Claimant-agent in said case fully comprehended the
possibility that he may not realize the agents commission as he was informed that another agent was also negotiating the sale and thus,
compensation will pertain to the one who finds a purchaser and eventually effects the sale. Such is not the case herein. On the contrary,
private respondent pursued with his goal of seeing that the parties reach an agreement, on the belief that he alone was transacting the
business with the City Government as this was what petitioner made it to appear.
PETITION for certiorari of the decision of the Court of Appeals.
Antonio C. Ravelo for petitioner.
Remigio M. Trinidad for private respondent.
CAMPOS, JR., J.:
Petitioner Manotok Brothers, Inc., by way of the instant Petition docketed as G.R. No. 94753 sought relief from this Courts Resolution dated
May 3, 1989, which reads:
226
226
G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court of Appeals).Considering the manifestation of compliance by
counsel for petitioner dated April 14, 1989 with the resolution of March 13, 1989 which required the petitioner to locate private respondent
and to inform this Court of the present address of said private respondent, the Court Resolved to DISMISS this case, as the issues cannot be
joined as private respondents and counsels addresses cannot be furnished by the petitioner to this court. 1
In addition, petitioner prayed for the issuance of a preliminary injunction to prevent irreparable injury to itself pending resolution by this Court
of its cause. Petitioner likewise urged this Court to hold in contempt private respondent for allegedly adopting sinister ploy to deprive
petitioner of its constitutional right to due process.
Acting on said Petition, this Court in a Resolution 2 dated October 1, 1990 set aside the entry of judgment made on May 3, 1989 in case G.R.
No. 78898; admitted the amended petition; and issued a temporary restraining order to restrain the execution of the judgment appealed from.
The amended petition3 admitted by this Court sought relief from this Courts Resolution abovequoted. In the alternative, petitioner begged
leave of court to re-file its Petition for Certiorari 4 (G.R. No. 78898) grounded on the allegation that petitioner was deprived of its opportunity to
be heard.
The facts as found by the appellate court, revealed that petitioner herein (then defendant-appellant) is the owner of a certain parcel of land
and building which were formerly leased by the City of Manila and used by the Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc
Manila.
By means of a letter 5 dated July 5, 1966, petitioner authorized herein private respondent Salvador Saligumba to negotiate with the City of
Manila the sale of the aforementioned property for not less than P425,000.00. In the same writing, petitioner agreed to pay private respondent
a five percent (5%) commission in the
_______________
1
Rollo of G.R. No. 94753, p. 12.
Ibid., p. 77.
Ibid., p. 47.
Rollo of G.R. No. 78898, p. 12.
Supra, note 1 at p. 156.
227
VOL. 221, APRIL 7, 1993
227
event the sale is finally consummated and paid.

Petitioner, on March 4, 1967, executed another letter 6extending the authority of private respondent for 120 days. Thereafter, another
extension was granted to him for 120 more days, as evidenced by another letter 7 dated June 26, 1967.
Finally, through another letter8 dated November 16, 1967, the corporation with Rufino Manotok, its President, as signatory, authorized
private respondent to finalize and consummate the sale of the property to the City of Manila for not less than P410,000.00. With this letter
came another extension of 180 days.
The Municipal Board of the City of Manila eventually, 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. Notwithstanding the
realization of the sale, private respondent never received any commission, which should have amounted to P20,554.50. This was due to the
refusal of petitioner to pay private respondent said amount as the former does not recognize the latters role as agent in the transaction.
Consequently, on June 29, 1969, private respondent filed a complaint against petitioner, alleging that he had successfully negotiated the
sale of the property. He claimed that it was because of his efforts that the Municipal Board of Manila passed Ordinance No. 6603 which
appropriated the sum for the payment of the property subject of the sale.
Petitioner claimed otherwise. It denied the claim of private

_______________
6
Ibid., 160.
Ibid., p. 161.
Ibid., p. 162.
228
228
respondent on the following grounds: (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; and (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. As a counterclaim, petitioner (then defendant-appellant) demanded the sum of P4,000.00 as attorneys fees and for moral damages.
Thereafter, trial ensued. Private respondent, then plaintiff, testified as to the efforts undertaken by him to ensure the consummation of the
sale. He recounted that it first began at a meeting with Rufino Manotok at the office of Fructuoso Ancheta, principal of C.M. Recto High School.
Atty. Dominador Bisbal, then president of the PTA, was also present. The meeting was set precisely to ask private respondent to negotiate the
sale of the school lot and building to the City of Manila. Private respondent then went to Councilor Mariano Magsalin, the author of the
Ordinance which appropriated the money for the purchase of said property, to present the project. He also went to the Assessors Office for
appraisal of the value of the property. While these transpired and his letters of authority expired, Rufino Manotok always renewed the formers
authorization until the last was given, which was to remain in force until May 14, 1968. After securing the report of the appraisal committee,
he went to the City Mayors Office, which indorsed the matter to the Superintendent of City Schools of Manila. The latter office approved the
report and so private respondent went back to the City Mayors Office, which thereafter indorsed the same to the Municipal Board for
appropriation. Subsequently, on April 26, 1968, Ordinance No. 6603 was passed by the Municipal Board for the appropriation of the sum
corresponding to the purchase price. Petitioner received the full payment of the purchase price, but private respondent did not receive a single
centavo as commission.
Fructuoso Ancheta and Atty. Dominador Bisbal both testified acknowledging the authority of private respondent regarding the transaction.
Petitioner presented as its witnesses Filomeno Huelgas and the petitioners President, Rufino Manotok.
229
VOL. 221, APRIL 7, 1993
229
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.
Rufino Manotok confirmed that he knew Huelgas and that there was an agreement between the two of them regarding the gratification.
On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings from 1965 to 1967 but he never offered to help in the
acquisition of said property. Moreover, he testified that Huelgas was aware of the fact that it was private respondent who was negotiating the
sale of the subject property.
Thereafter, the then Court of First Instance (now, Regional Trial Court) rendered judgment sentencing petitioner and/or Rufino Manotok to
pay unto private respondent the sum of P20,540.00 by way of his commission fees with legal interest thereon from the date of the filing of the
complaint until payment. The lower court also ordered petitioner to pay private respondent the amount of P4,000.00 as and for attorneys
fees.9
Petitioner appealed said decision, but to no avail. Respondent Court of Appeals affirmed the said ruling of the trial court. 10
Its Motion for Reconsideration having been denied by respondent appellate court in a Resolution dated June 22, 1987, petitioner
seasonably elevated its case on Petition for Review on Certiorari on August 10, 1987 before this Court, docketed as G.R. No. 78898.
Acting on said Petition, this Court issued a Minute Resolution 11 dated August 31, 1987 ordering private respondent to comment on said
Petition.
_______________
9
Decision rendered by then Court of First Instance, Branch VI, Manila in Civil Case No. 76997, Rollo, pp. 13-18.
Penned by Associate Justice Vicente V. Mendoza and concurred in by Associate Justices Manuel C. Herrera and Jorge S. Imperial. Rollo, pp.
19-28.
10
11
Supra, note 4 at p. 67. 229
230
230
It appearing that the abovementioned Resolution was returned unserved with the postmasters notation Unclaimed, this Court in another
Resolution12 dated March 13, 1989, required petitioner to locate private respondent and to inform this Court of the present address of private
respondent within ten (10) days from notice. As petitioner was unsuccessful in its efforts to locate private respondent, it opted to manifest that
private respondents last address was the same as that address to which this Courts Resolution was forwarded.
Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing petitioners case on the ground that the issues raised in the
case at bar cannot be joined. Thus, the above-entitled case became final and executory by the entry of judgment on May 3, 1989.
Thereafter, on January 9, 1990 private respondent filed a Motion to Execute the said judgment before the court of origin. Upon discovery of
said development, petitioner verified with the court of origin the circumstances by which private respondent obtained knowledge of the
resolution of this Court. Sensing a fraudulent scheme employed by private respondent, petitioner then instituted this instant Petition for Relief,
on August 30, 1990. On September 13, 1990, said petition was amended to include, in the alternative, its petition to re-file its Petition for
Certiorari (G.R. No. 78898).
The sole issue to be addressed in this petition is whether or not private respondent is entitled to the five percent (5%) agents commission.
It is petitioners contention that as a broker, private respondents 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.
Private respondent, on the other hand, opposes petitioners position maintaining that it was because of his efforts that a purchase actually
materialized between the parties.
We rule in favor of private respondent.
At first sight, it would seem that private respondent is not
_______________
12
Ibid., p. 69.
231
VOL. 221, APRIL 7, 1993
231
entitled to any commission as he was not successful in consummating the sale between the parties, for the sole reason that when the Deed of
Sale was finally executed, his extended authority had already expired. By this alone, one might be misled to believe that this case squarely
falls within the ambit of the established principle that a broker or agent is not entitled to any commission until he has successfully done the job
given to him.13
Going deeper however into the case would reveal that it is within the coverage of the exception rather than of the general rule, the
exception being that enunciated in the case of Prats vs. Court of Appeals.14 In the said case, this Court ruled in favor of claimant-agent, despite
the expiration of his authority, when a sale was finally consummated.
In its decision in the abovecited case, this Court said, that while it was respondent courts (referring to the Court of Appeals) factual
findings that petitioner Prats (claimant-agent) was not the efficient procuring cause in bringing about the sale (prescinding from the fact of
expiration of his exclusive authority), still petitioner was awarded compensation for his services. And We quote:
In equity, however, the Court notes that petitioner had diligently taken steps to bring back together respondent Doronila and the SSS,
xxx
xxx
The court has noted on the other hand that Doronila finally sold the property to the Social Security System at P3.25 per square meter
which was the very same price counter-offered by the Social Security System and accepted by him in July, 1967 when he alone was dealing
exclusively with the said buyer long before Prats came into the picture but that on the other hand Prats efforts somehow were instrumental in
bringing them together again and finally consummating the transaction at the same price of P3.25 per square meter, although such
finalization was after the expiration of Prats extended exclusive authority.
xxx
xxx
Under the circumstances, the Court grants in equity the sum of One Hundred Thousand Pesos (P100,000.00) by way of compensation for
his efforts and assistance in the transaction, which however was finalized and consummated after the expiration of his exclusive author_______________
13
Ramos vs. Court of Appeals, 63 SCRA 331 (1975).
14
81 SCRA 360 (1978).
232
232
ity x x x.15 (Italics supplied.)
From the foregoing, it follows then that private respondent herein, with more reason, should be paid his commission. While in Prats vs. Court of
Appeals, the agent was not even the efficient procuring cause in bringing about the sale, unlike in the case at bar, it was still held therein that
the agent was entitled to compensation. In the case at bar, 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.
In an earlier case,16 this Court ruled that when there is a close, proximate and causal connection between the agents efforts and labor and
the principals sale of his property, the agent is entitled to a commission.
We agree with respondent Court that the City of Manila ultimately became the purchaser of petitioners property mainly through the efforts
of private respondent. Without discounting the fact that when Municipal Ordinance No. 6603 was signed by the City Mayor on May 17, 1968,
private respondents authority had already expired, it is to be noted that the ordinance was approved on April 26, 1968 when private
respondents authorization was still in force. Moreover, the approval by the City Mayor came only three days after the expiration of private
respondents 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.
Contrary to what petitioner advances, the case of Danon vs. Brimo,17 on which it heavily anchors its justification for the denial of private
respondents claim, does not apply squarely to the instant petition. Claimant-agent in said case fully comprehended the possibility that he may
not realize the agents commission as he was informed that another agent was also negotiating the sale and thus, compensation will pertain to
the one who
_______________
15
Ibid., pp. 383-385.
16
Reyes vs. Manaoat, et al., 8 C.A. Rep. 2d 368 (1965).
17
42 Phil. 133 (1921)
233
VOL. 221, APRIL 7, 1993
233
finds a purchaser and eventually effects the sale. Such is not the case herein. On the contrary, private respondent pursued with his goal of
seeing that the parties reach an agreement, on the belief that he alone was transacting the business with the City Government as this was
what petitioner made it to appear.
While it may be true that Filomeno Huelgas followed-up the matter with Councilor Magsalin, the author of Municipal Ordinance No. 6303
and Mayor Villegas, his intervention regarding the purchase came only after the ordinance had already been passedwhen the buyer has
already agreed to the purchase and to the price for which said property is to be paid. Without the efforts of private respondent then, Mayor
Villegas would have nothing to approve in the first place. It was actually private respondents labor that had set in motion the intervention of
the third party that produced the sale, hence he should be amply compensated.
WHEREFORE, in the light of the foregoing and finding no reversible error committed by respondent Court, the decision of the Court of
Appeals is hereby AFFIRMED. The temporary restraining order issued by this Court in its Resolution dated October 1, 1990 is hereby lifted.
SO ORDERED.
INLAND REALTY v CA
Herein petitioners Inland Realty Investment Service, Inc. (hereafter, "Inland Realty") and Roman M. de los Reyes seek the reversal of the
Decision[1] of the Intermediate Appellate Court (now Court of Appeals) [2] which affirmed the trial court's dismissal [3] of petitioners' claim for
unpaid agent's commission for brokering the sales transaction involving 9,800 shares of stock in Architects' Bldg., Inc. (hereafter, "Architects'")
between private respondent Gregorio Araneta, Inc. (hereafter, "Araneta, Inc.") as seller and Stanford Microsystems, Inc. (hereafter, "Stanford")
as buyer.
Petitioners come to us with a two-fold agenda: (1) to obtain from us a declaration that the trial court and the respondent appellate court
gravely erred when appreciating the facts of the case by disregarding Exhibits "L," a Letter dated October 28, 1976 signed by Gregorio Araneta
II, renewing petitioners' authority to act as sales agent for a period of thirty (30) days from same date, and Exhibit "M," a Letter dated
November 16, 1976 signed by petitioner de los Reyes, naming four (4) other prospective buyers, respectively; and (2) to obtain from us a
categorical ruling that a broker is automatically entitled to the stipulated commission merely upon securing for, and introducing to, the seller
the particular buyer who ultimately purchases from the former the object of the sale, regardless of the expiration of the broker's contract of
agency and authority to sell.
Before we proceed to address petitioners' objectives, there is a need to unfold the facts of the case. For that purpose, we quote hereunder
the findings of fact of the Court of Appeals with which petitioners agree, except as to the respondent appellate court's non-inclusion of the
aforementioned Exhibits "L" and "M":
"From the evidence, the following facts appear undisputed: On September 16, 1975, defendant corporation thru its co-defendant Assistant
General Manager J. Armando Eduque, granted to plaintiffs a 30-day authority to sell its x x x 9,800 shares of stock in Architects' Bldg., Inc. as
follows:
'September 16, 1975
TO WHOM IT MAY CONCERN:
This is to authorize Mr. R.M. de los Reyes, representing Inland Realty, to sell on a first come first served basis the total holdings of Gregorio
Araneta, Inc. in Architects' [Bldg.], Inc. equivalent to 98% or 9,800 shares of stock at the price of P1,500.00 per share for a period of 30 days.
(SGD.) J. ARMANDO EDUQUE
Asst. General Manager'
Plaintiff Inland Realty Investment Service, Inc. (Inland Realty for short) is a corporation engaged [in], among others x x x the real estate
business [and] brokerages, duly licensed by the Bureau of Domestic Trade x x x. [Inland Realty] planned their sales campaign, sending
proposal letters to prospective buyers. One such prospective buyer to whom a proposal letter was sent to was Stanford Microsystems, Inc. x x
x [that] counter-proposed to buy 9,800 shares offered at P1,000.00 per share or for a total of P9,800,000.00, P4,900,000.00 payable in five
years at 12% per annum interest until fully paid.
Upon plaintiffs' receipt of the said counter-proposal, it immediately [sic] wrote defendant a letter to register Stanford Microsystems, Inc. as one
of its prospective buyers x x x. Defendant Araneta, Inc., thru its Assistant General Manager J. Armando Eduque, replied that the price offered
by Stanford was too low and suggested that plaintiffs see if the price and terms of payment can be improved upon by Stanford x x x. Other
prospective buyers were submitted to defendants among whom were Atty. Maximo F. Belmonte and Mr. Joselito Hernandez. The authority to
sell given to plaintiffs by defendants was extended several times: the first being on October 2, 1975, for 30 days from said date (Exh. 'J'), the
second on October 28, 1975 for 30 days from said date (Exh. 'L') and on December 2, 1975 for 30 days from said date (Exh. 'K').
Plaintiff Roman de los Reyes, manager of Inland Realty's brokerage division, who by contract with Inland Realty would be entitled to 1/2 of the
claim asserted herein, testified that when his company was initially granted the authority to sell, he asked for an exclusive authority and for a
longer period but Armando Eduque would not give, but according to this witness, the life of the authority could always be extended for the
purpose of negotiation that would be continuing.
On July 8, 1977, plaintiffs finally sold the 9,800 shares of stock [in] Architects' [Bldg.], Inc. to Stanford Microsystems, Inc. for P13,500,000.00 x
x x.
On September 6, 1977, plaintiffs demanded formally [from] defendants, through a letter of demand, for payment of their 5% broker['s]
commission at P13,500,000.00 or a total amount ofP675,000.00 x x x which was declined by [defendants] on the ground that the claim has no
factual or legal basis."[4]
Ascribing merit to private respondents' defense that, after their authority to sell expired thirty (30) days from December 2, 1975, or on
January 1, 1976, petitioners abandoned the sales transaction and were no longer privy to the consummation and documentation thereof, the
trial court dismissed petitioners' complaint for collection of unpaid broker's commission.
Petitioners appealed, but the Court of Appeals was unswayed in the face of evidence of the expiration of petitioners' agency contract and
authority to sell on January 1, 1976 and the consummation of the sale to Stanford on July 8, 1977 or more than one (1) year and five (5)
months after petitioners' agency contract and authority to sell expired.Respondent appellate court dismissed petitioners' appeal in this wise:
" x x x The resolution would seem to hinge on the question of whether plaintiff was instrumental in the final consummation of the sale to
Stanford which was the same name of the company submitted to defendants as a prospective buyer although their price was considered by
defendant to be too low and defendants wrote to plaintiff if the price may be improved upon by Stanford x x x. This was on October 13,
1975. After that, there was an extension for 30 days from October 28, 1975 of the authority (Exh. 'L') and another on December 2, 1975 for
another 30 days from the said date x x x. x x x There is nothing in the record or in the testimonial evidence that the authority extended 30
days from the last date of extension was ever reserved nor extended, nor has there been any communication made to defendants that the
plaintiff was actually negotiating with Stanford a better price than what was previously offered by it x x x.
In fact there was no longer any agency after the last extension. Certainly, the length of time which had transpired from the date of last
extension of authority to the final consummation of the sale with Stanford of about one (1) year and five (5) months without any
communication at all from plaintiffs to defendants with respect to the suggestion of defendants that Stanford's offer was too low and
suggested if plaintiffs may make it better. We have a case of proposal and counter-proposal which would not constitute a definite closing of the
transaction just because it was plaintiff who solely suggested to defendants the name of Stanford as buyer x x x." [5]
Unable to accept the dismissal of its claim for unpaid broker's commission, petitioners filed the instant petition for review asking us (1) to
pass upon the factual issue of the alleged extension of their agency contract and authority to sell and (2) to rule in favor of a broker's
automatic entitlement to the stipulated commission merely upon securing for, and introducing to, the seller, the particular buyer who
ultimately purchases from the former the object of the sale, regardless of the expiration of the broker's contract of agency and authority to
sell.
We find for private respondents.
I
Petitioners take exception to the finding of the respondent Court of Appeals that their contract of agency and authority to sell expired
thirty (30) days from its last renewal on December 2, 1975. They insist that, in the Letter dated October 28, 1976, Gregorio Araneta III, in
behalf of Araneta, Inc., renewed petitioner Inland Realty's authority to act as agent to sell the former's 9,800 shares in Architects' for another
thirty (30) days from same date. This Letter dated October 28, 1976, petitioners claim, was marked as Exhibit "L" during the trial proceedings
before the trial court.
This claim is a blatant lie. In the first place, petitioners have conspicuously failed to attach a certified copy of this Letter dated October 28,
1976. They have, in fact, not attached even a machine copy thereof. All they gave this court is their word that said Letter dated October 28,
1976 does exist, and on that basis, they expect us to accordingly rule in their favor.
Such naivety, this court will not tolerate. We will not treat lightly petitioners' attempt to mislead this court by claiming that the Letter
dated October 28, 1976 was marked as Exhibit "L" by the trial court, when the truth is that the trial court marked as Exhibit "L", and the
respondent Court of Appeals considered as Exhibit "L," private respondent Araneta, Inc.'s Letter dated October 28, 1975, not 1976. Needless
to say, this blatant attempt to mislead this court, is contemptuous conduct that we sternly condemn.
II
The Letter dated November 16, 1976, claimed by petitioners to have been marked as Exhibit "M", has no probative value, considering
that its very existence remains under a heavy cloud of doubt and that hypothetically assuming its existence, its alleged content, namely, a
listing of four (4) other prospective buyers, does not at all prove that the agency contract and authority to sell in favor of petitioners was
renewed or revived after it expired on January 1, 1976. As in the case of the Letter dated October 28, 1976, petitioners have miserably failed
to attach any copy of the Letter dated November 16, 1976. A copy thereof would not help petitioners' failing cause, anyway, especially
considering that said letter was signed by petitioner De los Reyes and would therefore take on the nature of a self-serving document that has
no evidentiary value insofar as petitioners are concerned.
III
Finally, petitioners asseverate that, regardless of whether or not their agency contract and authority to sell had expired, they are
automatically entitled to their broker's commission merely upon securing for and introducing to private respondent Araneta, Inc. the buyer in
the person of Stanford which ultimately acquired ownership over Araneta, Inc.'s 9,800 shares in Architects'.
Petitioners' asseverations are devoid of merit.
It is understandable, though, why petitioners have resorted to a campaign for an automatic and blanket entitlement to brokerage
commission upon doing nothing but submitting to private respondent Araneta, Inc., the name of Stanford as prospective buyer of the latter's
shares in Architects'. Of course petitioners would advocate as such because precisely petitioners did nothing but submit Stanford's name as
prospective buyer. Petitioners did not succeed in outrightly selling said shares under the predetermined terms and conditions set out by
Araneta, Inc., e.g., that the price per share is P1,500.00. They admit that they could not dissuade Stanford from haggling for the price
ofP1,000.00 per share with the balance of 50% of the total purchase price payable in five (5) years at 12% interest per annum. From
September 16, 1975 to January 1, 1976, when petitioners' authority to sell was subsisting, if at all, petitioners had nothing to show that they
actively served their principal's interests, pursued to sell the shares in accordance with their principal's terms and conditions, and performed
substantial acts that proximately and causatively led to the consummation of the sale to Stanford of Araneta, Inc.'s 9,800 shares in Architects'.
The Court of Appeals cannot be faulted for emphasizing the lapse of more than one (1) year and five (5) months between the expiration
of petitioners' authority to sell and the consummation of the sale to Stanford, to be a significant index of petitioners' non-participation in the
really critical events leading to the consummation of said sale, i.e., the negotiations to convince Stanford to sell at Araneta, Inc.'s asking price,
the finalization of the terms and conditions of the sale, the drafting of the deed of sale, the processing of pertinent documents, and the
delivery of the shares of stock to Stanford. Certainly, when the lapse of the period of more than one (1) year and five (5) months between the
expiration of petitioners' authority to sell and the consummation of the sale, is viewed in the context of the utter lack of evidence of
petitioners' involvement in the negotiations between Araneta, Inc. and Stanford during that period and in the subsequent processing of the
documents pertinent to said sale, it becomes undeniable that the respondent Court of Appeals did not at all err in affirming the trial court's
dismissal of petitioners' claim for unpaid brokerage commission.
Petitioners were not the efficient procuring cause [6] in bringing about the sale in question on July 8, 1977 and are, therefore, not entitled to
the stipulated broker's commission of "5% on the total price."
WHEREFORE, the instant petition is HEREBY DISMISSED.
Tan vs. Gullas
G.R. No. 143978. December 3, 2002.*

MANUEL B. TAN, GREGG M. TECSON and ALEXANDER SALDAA, petitioners, vs. EDUARDO R. GULLAS and NORMA S. GULLAS, respondents.
Civil Law; Contracts; Broker defined.In Schmid and Oberly v. RJL Martinez Fishing Corporation, we defined a broker as one who is
engaged, for others, on a commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator
between other parties, never acting in his own name but in the name of those who employed him. x x x a broker is one whose occupation is
to bring the parties together, in matters of trade, commerce or navigation. (Emphasis supplied)
Same; Same; Evidence; The trial courts evaluation of the witnesses is accorded great respect and finality.The trial courts evaluation of
the witnesses is accorded great respect and finality in the absence of any indication that it overlooked certain facts or circumstances of weight
and influence, which if reconsidered, would alter the result of the case.
Yulando L. Ursal for petitioners.
Francisco M. Malilong, Jr. for private respondents.
_______________
*
FIRST DIVISION.
335
335
Tan vs. Gullas
YNARES-SANTIAGO, J.:
This is a petition for review seeking to set aside the decision 1 of the Court of Appeals 2 in CA-G.R. CV No. 46539, which reversed and set aside
the decision3 of the Regional Trial Court of Cebu City, Branch 22 in Civil Case No. CEB-12740.
The records show that private respondents, Spouses Eduardo R. Gullas and Norma S. Gullas, were the registered owners of a parcel of land
in the Municipality of Minglanilla, Province of Cebu, measuring 104,114 sq. m., with Transfer Certificate of Title No. 31465. 4 On June 29, 1992,
they executed a special power of attorney5authorizing petitioners Manuel B. Tan, a licensed real estate broker, 6 and his associates Gregg M.
Tecson and Alexander Saldaa, to negotiate for the sale of the land at Five Hundred Fifty Pesos (P550.00) per square meter, at a commission of
3% of the gross price. The power of attorney was non-exclusive and effective for one month from June 29, 1992. 7
On the same date, petitioner Tan contacted Engineer Edsel Ledesma, construction manager of the Sisters of Mary of Banneaux, Inc.
(hereafter, Sisters of Mary), a religious organization interested in acquiring a property in the Minglanilla area.
In the morning of July 1, 1992, petitioner Tan visited the property with Engineer Ledesma. Thereafter, the two men accompanied Sisters
Michaela Kim and Azucena Gaviola, representing the Sisters of Mary, to see private respondent Eduardo Gullas in his office at the University of
Visayas. The Sisters, who had already seen and inspected the land, found the same suitable for their
_______________
1
Dated May 29, 2000, Rollo, p. 16.
Penned by Associate Justice Mariano M. Umali and concurred in by Associate Justices Conrado M. Vazquez, Jr. and Eriberto U. Rosario, Jr.
Penned by Judge Pampio A. Abarintos, promulgated on March 11, 1994, Rollo, p. 8.
Annex F, Record, p. 16.
Annex A, Record, pp. 8-9.
Folder of Exhibits, Exhibit 1.
Ibid., Exhibits A and A-3.
336
336
Tan vs. Gullas
purpose and expressed their desire to buy it. 8 However, they requested that the selling price be reduced to Five Hundred Thirty Pesos
(P530.00) per square meter instead of Five Hundred Fifty Pesos (P550.00) per square meter. Private respondent Eduardo Gullas referred the
prospective buyers to his wife.
It was the first time that the buyers came to know that private respondent Eduardo Gullas was the owner of the property. On July 3, 1992,
private respondents agreed to sell the property to the Sisters of Mary, and subsequently executed a special power of attorney 9 in favor of
Eufemia Caete, giving her the special authority to sell, transfer and convey the land at a fixed price of Two Hundred Pesos (P200.00) per
square meter.
On July 17, 1992, attorney-in-fact Eufemia Caete executed a deed of sale in favor of the Sisters of Mary for the price of Twenty Million
Eight Hundred Twenty Two Thousand Eight Hundred Pesos (P20,822,800.00), or at the rate of Two Hundred Pesos (P200.00) per square
meter.10The buyers subsequently paid the corresponding taxes. 11Thereafter, the Register of Deeds of Cebu Province issuedTCT No. 75981 in
the name of the Sisters of Mary of Banneaux, Inc.12
Earlier, on July 3, 1992, in the afternoon, petitioners went to see private respondent Eduardo Gullas to claim their commission, but the
latter told them that he and his wife have already agreed to sell the property to the Sisters of Mary. Private respondents refused to pay the
brokers fee and alleged that another group of agents was responsible for the sale of land to the Sisters of Mary.
On August 28, 1992, petitioners filed a complaint 13against the defendants for recovery of their brokers fee in the sum of One Million Six
Hundred Fifty Five Thousand Four Hundred Twelve and 60/100 Pesos (P1,655,412.60), as well as moral and exemplary
_______________
8
Records, p. 131.
Folder of Exhibits, Exhibit C, dated July 4, 1992.
10
Ibid., Exhibit D.
11
Id., Exhibit E.
12
Id., Exhibit F.
13
Records, pp. 1-7.
337
337
Tan vs. Gullas
damages and attorneys fees. They alleged that they were the efficient procuring cause in bringing about the sale of the property to the
Sisters of Mary, but that their efforts in consummating the sale were frustrated by the private respondents who, in evident bad faith, malice
and in order to evade payment of brokers fee, dealt directly with the buyer whom petitioners introduced to them. They further pointed out
that the deed of sale was undervalued obviously to evade payment of the correct amount of capital gains tax, documentary stamps and other
internal revenue taxes.
In their answer, private respondents countered that, contrary to petitioners claim, they were not the efficient procuring cause in bringing
about the consummation of the sale because another broker, Roberto Pacana, introduced the property to the Sisters of Mary ahead of the
petitioners.14 Private respondents maintained that when petitioners introduced the buyers to private respondent Eduardo Gullas, the former
were already decided in buying the property through Pacana, who had been paid his commission. Private respondent Eduardo Gullas admitted
that petitioners were in his office on July 3, 1992, but only to ask for the reimbursement of their cellular phone expenses.
In their reply and answer to counterclaim, 15 petitioners alleged that although the Sisters of Mary knew that the subject land was for sale
through various agents, it was petitioners who introduced them to the owners thereof.
After trial, the lower court rendered judgment in favor of petitioners, the dispositive portion of which reads:
WHEREFORE, UPON THE AEGIS OF THE FOREGOING, judgment is hereby rendered for the plaintiffs and against the defendants. By virtue
hereof, defendants Eduardo and Norma Gullas are hereby ordered to pay jointly and severally plaintiffs Manuel Tan, Gregg Tecson and
Alexander Saldaa;
1. 1)The sum of SIX HUNDRED TWENTY FOUR THOUSAND AND SIX HUNDRED EIGHTY FOUR PESOS (P624,684.00) as brokers fee with
legal interest at the rate of 6% per annum from the date of filing of the complaint; and
_______________
14
Records, pp. 28-34.
15
Id., at pp. 35-38.
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Tan vs. Gullas
1. 2)The sum of FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees and costs of litigation.
For lack of merit, defendants counterclaim is hereby DISMISSED.
IT IS SO ORDERED.16
Both parties appealed to the Court of Appeals. Private respondents argued that the lower court committed errors of fact and law in holding
that it was petitioners efforts which brought about the sale of the property and disregarding the previous negotiations between private
respondent Norma Gullas and the Sisters of Mary and Pacana. They further alleged that the lower court had no basis for awarding brokers fee,
attorneys fees and the costs of litigation to petitioners. 17
Petitioners, for their part, assailed the lower courts basis of the award of brokers fee given to them. They contended that their 3%
commission for the sale of the property should be based on the price of P55,180.420.00, or at P530.00 per square meter as agreed upon and
not on the alleged actual selling price of P20,822,800,00 or at P200.00 per square meter, since the actual purchase price was undervalued for
taxation purposes. They also claimed that the lower court erred in not awarding moral and exemplary damages in spite of its finding of bad
faith; and that the amount of P50,000.00 as attorneys fees awarded to them is insufficient. Finally, petitioners argued that the legal interest
imposed on their claim should have been pegged at 12% per annum instead of the 6% fixed by the court. 18
The Court of Appeals reversed and set aside the lower courts decision and rendered another judgment dismissing the complaint. 19
Hence, this appeal.
Petitioners raise following issues for resolution:
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16
Records, p. 206.
17
Rollo, p. 21.
18
Id., at pp. 21-22.
19
Rollo, pp. 32-33.
339
339
Tan vs. Gullas
I.
THE APPELLATE COURT GROSSLY ERRED IN THEIR FINDING THAT THE PETITIONERS ARE NOT ENTITLED TO THE BROKERAGE COMMISSION.
II.
IN DISMISSING THE COMPLAINT, THE APPELLATE COURT HAS DEPRIVED THE PETITIONERS OF MORAL AND EXEMPLARY DAMAGES,
ATTORNEYS FEES AND INTEREST IN THE FOREBEARANCE OF MONEY.
The petition is impressed with merit.
The records show that petitioner Manuel B. Tan is a licensed real estate broker, and petitioners Gregg M. Tecson and Alexander Saldaa are
his associates. InSchmid and Oberly v. RJL Martinez Fishing Corporation,20we defined a broker as one who is engaged, for others, on a
commission, negotiating contracts relative to property with the custody of which he has no concern; the negotiator between other parties,
never acting in his own name but in the name of those who employed him. x x x a broker is one whose occupation is to bring the parties
together, in matters of trade, commerce or navigation. (Emphasis supplied)
During the trial, it was established that petitioners, as brokers, were authorized by private respondents to negotiate for the sale of their
land within a period of one month reckoned from June 29, 1992. The authority given to petitioners was non-exclusive, which meant that
private respondents were not precluded from granting the same authority to other agents with respect to the sale of the same property. In
fact, private respondent authorized another agent in the person of Mr. Bobby Pacana to sell the same property. There was nothing illegal or
amiss in this arrangement, per se, considering the non-exclusivity of petitioners authority to sell. The problem arose when it eventually turned
out that these agents were entertaining one and the same buyer, the Sisters of Mary.
As correctly observed by the trial court, the argument of the private respondents that Pacana was the one entitled to the stipu_______________
20
166 SCRA 493 (1988).
340
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Tan vs. Gullas
lated 3% commission is untenable, considering that it was the petitioners who were responsible for the introduction of the representatives of
the Sisters of Mary to private respondent Eduardo Gullas. Private respondents, however, maintain that they were not aware that their
respective agents were negotiating to sell said property to the same buyer.
Private respondents failed to prove their contention that Pacana began negotiations with private respondent Norma Gullas way ahead of
petitioners. They failed to present witnesses to substantiate this claim. It is curious that Mrs. Gullas herself was not presented in court to
testify about her dealings with Pacana. Neither was Atty. Nachura who was supposedly the one actively negotiating on behalf of the Sisters of
Mary, ever presented in court.
Private respondents contention that Pacana was the one responsible for the sale of the land is also unsubstantiated. There was nothing on
record which established the existence of a previous negotiation among Pacana, Mrs. Gullas and the Sisters of Mary. The only piece of
evidence that the private respondents were able to present is an undated and unnotarized Special Power of Attorney in favor of Pacana. While
the lack of a date and an oath do not necessarily render said Special Power of Attorney invalid, it should be borne in mind that the contract
involves a considerable amount of money. Hence, it is inconsistent with sound business practice that the authority to sell is contained in an
undated and unnotarized Special Power of Attorney. Petitioners, on the other hand, were given the written authority to sell by the private
respondents.
The trial courts evaluation of the witnesses is accorded great respect and finality in the absence of any indication that it overlooked certain
facts or circumstances of weight and influence, which if reconsidered, would alter the result of the case. 21
Indeed, it is readily apparent that private respondents are trying to evade payment of the commission which rightfully belong to petitioners
as brokers with respect to the sale. There was no dispute as to the role that petitioners played in the transaction. At the
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21
People v. Realin, 301 SCRA 495 (1999); Yam v. Court of Appeals, 303 SCRA 1 (1999); People v. Maglatay, 304 SCRA 272 (1999).
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Tan vs. Gullas
very least, petitioners set the sale in motion. They were not able to participate in its consummation only because they were prevented from
doing so by the acts of the private respondents. In the case of Alfred Hahn v. Court of Appeals and Bayerische Motoren Werke
Aktiengesellschaft (BMW)22we ruled that, An agent receives a commission upon the successful conclusion of a sale. On the other hand,
a brokerearns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. (Italics ours). Clearly,
therefore, petitioners, as brokers, should be entitled to the commission whether or not the sale of the property subject matter of the contract
was concluded through their efforts.
Having ruled that petitioners are entitled to the brokers commission, we should now resolve how much commission are petitioners entitled
to?
Following the stipulation in the Special Power of Attorney, petitioners are entitled to 3% commission for the sale of the land in question.
Petitioners maintain that their commission should be based on the price at which the land was offered for sale, i.e., P530.00 per square meter.
However, the actual purchase price for which the land was sold was only P200.00 per square meter. Therefore, equity considerations dictate
that petitioners commission must be based on this price. To rule otherwise would constitute unjust enrichment on the part of petitioners as
brokers.
In the matter of attorneys fees and expenses of litigation, we affirm the amount of P50,000.00 awarded by the trial court to the
petitioners.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The May 29, 2000 decision of the Court of Appeals is REVERSED and SET
ASIDE. The decision of the Regional Trial Court of Cebu City, Branch 22, in Civil Case No. CEB-12740 ordering private respondents Eduardo
Gullas and Norma S. Gullas to pay jointly and severally petitioners Manuel B. Tan, Gregg Tecson and Alexander Saldaa the sum of Six Hundred
Twenty-Four Thousand and Six Hundred Eighty-Four Pesos (P624,684.00) as brokers fee with legal interest at the rate of 6% per annum from
the filing of the complaint; and the sum of Fifty Thousand Pesos
MACONDRAY & Co., INC., plaintiff and appellee, vs.GEORGE C. SELLNER, defendant and appellant.
1. 1."MARKET VALUE;" DEFINITION.The following definitions of "market value" cited and applied. The "market value" of property is the
price which the property will bring in a fair market after fair and reasonable efforts have been made to find a purchaser who will give
the highest price for it; or the price that would in all probability result from fair negotiations where the seller is willing to sell and the
buyer desires to buy.
1. 2.BROKERS; RIGHT TO COMMISSIONS.The business of a real estate broker or agent, generally, is only to find a purchaser, and the
settled rule as stated by the courts is that, in the absence of an express contract between broker and his principal, the implication
generally is that the broker becomes entitled to the usual commissions whenever he brings to his principal a party who is able and
willing to take the property and enter into a valid contract upon the terms then named by the principal, although the particulars may
be arranged and the matter negotiated and completed between the principal and the purchaser directly.
1. 3.VENDOR AND PURCHASER; TIME FOR EXAMINATION OF TITLES.The contract of sale of real estate usually specifies a time in which
the purchaser may examine the title before completing the purchase. If no time be specified he will be entitled to a reasonable time
for that purpose.
1. 4.ID. ; ID.Where the purchase of land is made upon condition the title is found good, the purchaser is entitled to a reasonable time in
which to determine whether he will take the title the vendor has, or reject it. He cannot keep the contract open indefinitely, so as to
avail himself of a rise in the value of the property or relieve himself in case of a depreciation.
APPEAL from a judgment of the Court of First Instance of Manila. Crossfield, J.
The facts are stated in the opinion of the court.
D. R. Williams for appellant.
Haussermann, Cohn & Fisher for appellee.
CARSON, J.:
This action was brought to recover the sum of P17,175 by way of damages alleged to have been suffered by the
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VOL. 33, FEBRUARY 2, 1916.
371
Macondray & Co. vs. Sellner.
plaintiff as a result of the sale of a parcel of land which it is alleged was made by the def endant f or and on behalf of the plaintiff after
authority to make the sale had been revoked. Judgment was rendered in favor of the plaintiff for the sum of P3,435, together with interest at 6
per cent per annum f rom the date of the institution of this action. From this judgment defendant appealed, and brought the case here on his
duly certified bill of exceptions.
Early in 1912 the defendant, a real estate broker, sold the parcel of land described in the .complaint to the plaintiff company for P17,175.
The formal deed of sale was not executed and accepted until July 29, 1912, the agreement to purchase being conditioned on the delivery of a
Torrens title, which was not secured until early in that month. In the meantime the land was flooded by high tides, and the plaintiff company
became highly dissatisfied with its purchase. When the final transfer was made the plaintiff company informed defendant that the land was
wholly unsuited for use as a coal-yard, for which it had been purchased, and requested him to find another purchaser. At that time it was
expressly understood and agreed that the plaintiff company was willing to dispose of the land for P17,175, and that defendant was to have as
his commission for securing a purchaser anything over that amount which he could get.
A short time thereafter,- defendant reported to plaintiff that he had a purchaser f or the land in the person of Antonio M. Barretto, who was
willing to pay P2.75 per square meter, or a total of P18,892.50. Plaintiff thereupon executed a formal deed of conveyance which, together with
the certificate of title (Torrens), was delivered to defendant, with the understanding that he was to conclude the sale, deliver the title-deed and
certificate to Barretto, and receive from him the purchase price. The deed was dated August 21, 1912. Thereafter defendant advised Barretto
that plaintiff had executed the title-deed and that he was ready to close the deal. Barretto agreed to accept the land if, upon examination, the
title and the deed should prove satisfactory; and defendant left the deed of conveyance with him, with the
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372
Macondray & Co. vs. Sellner,
understanding that if the title and the deed of conveyance were as represented, Barretto would give him his check f or the amount of the
purchase price. Defendant retained possession of the Torrens certificate of title. A few days afterwards Barretto was compelled to go to
Tayabas on business and was detained by a typhoon which delayed his return until the 31st. of August.
During Barretto's absence the plaintiff company advised defendant that he must consummate the sale and collect the purchase money
without delay upon Barretto's return to Manila. On the arrival of Barretto on Saturday, August 31st, defendant called upon him and informed
him that the plaintiff company desired to close up the transaction at once, and Barretto, who was somewhat indisposed from his trip, promised
to examine the papers as soon as he could get to them, and assured the defendant that he would send his check for the purchase price in a
day or two if he f ound the documents in proper shape. These assurances were reported to Young, the plaintiff company's general manager
and representative throughout the transaction, on Monday morning, September 2d. Young then f ormally notified def endant that unless the
purchase price was paid before five o'clock of that same afternoon the deal would be off. Defendant again called upon Barretto, who informed
him that if he would turn over the Torrens certificate of title he would let him have a check for the purchase price. Defendant sent the
certificate as requested, but did not receive the check.until thirty-six hours afterwards, on Wednesday morning. On receipt of Barretto's check
he immediately tendered plaintiff company a check for the agreed selling price, P17,175. Plaintiff's manager refused to accept the check and
soon thereafter filed this action, claiming that the sale had been "cancelled" upon the failure of defendant to turn over the purchase price on
the afternoon of Monday, September 2d.
The following is a copy of plaintiff company's letter to defendant advising him that the sale would be "cancelled" unless the purchase price
was paid at five o'clock of the day on which it was written.
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VOL. 33, FEBRUARY 2,1916.
373
"SEPT. 2, 1912,
"Mr. GEO. C. SELLNER, Manila.
"DEAR SIR: In accordance with our conversation today, this is to notify you that we consider the sale of our lot in Nagtajan to Antonio M.
Barretto as cancelled in view of the nonpayment of the purchase price before five o'clock this afternoon.
"Please confirm.
"Yours
(Sgd.)
"General Manager"
very
truly,
MACONDRAY
"CARLOS
&
Co.,
INC.,
YOUNG,
As to the facts just narrated there is practically no dispute, the only matters of fact as to which there is any real contention in the record being
limited to questions as to the value of the land, and as to the original instructions to defendant in regard to the delivery of the title deeds.
Plaintiff's manager testified that as he had no confidence in Barretto, he expressly instructed defendant not to deliver the title deeds until
Barretto turned over the purchase price. Defendant swore that he had received no such instructions. Upon this conflict of testimony we do not
deem it necessary to make an express finding, because, as we view the transaction, it could in no event affect our disposition of this appeal.
We are of opinion that the disputed evidence clearly discloses that on August 21st the plaintiff company, through the defendant real estate
broker, agreed to sell the land to Barretto for P18,892.50, and that Barretto agreed to buy the land at that price on the usual condition
precedent that before turning over the purchase price the title deeds and deed of transf er f rom the company should be f ound to be in due
and legal form. That f or the purpose of consummating the sale the plaintiff company turned over to the defendant a deed of transfer to
Barretto, together with a Torrens title certificate to the land, executed as of the day when the agreement to sell was entered into. That the
defendant, with full authority from plaintiff company, agreed to deliver the deed and certificate to Barretto on payment of the purchase price.
That f rom the very nature of the transaction
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374
it was understood that the purchaser should have a reasonable time in which to examine the deed of transfer and the other documents of title,
and that defendant exercising an authority impliedly if not expressly conferred upon him, gave the purchaser a reasonable time in which to
satisfy himself as to the legality and correctness of the documents of title. That the company through its manager Young, acquiesced in and
ratified what had been done by defendant in this regard when, with full knowledge of all the facts, Young advised the defendant, during
Barretto's absence in Tayabas, that the deal must be closed up without delay on Barretto's return to Manila.
No reason appears, nor has any reason been assigned for the demand by the plaintiff company for the delivery of the purchase price at the
hour specified under threat in the event of failure to make payment at that hour it would decline to carry out the agreement, other than that
the manager of the plaintiff company had been annoyed by the delays which occurred during the earlier stage of the negotiations, and had
changed his mind as to the desirability of making the sale at the price agreed upon, either because he believed that he could get a better
price elsewhere, or that the land was worth more to his company than the price he had agreed to take for it. It is very evident that plaintiff
company's manager hoped that by setting a limit of a few hours upon the time within which he would receive the money, his company would
be relieved of the obligation ,to carry out its contract.
Upon the question of the value of the land we think that the evidence clearly discloses that at the date of the sale its actual and its true
market value was not more than the amount paid for it by Barretto, that is to say, P18,892.50. The evidence discloses that it had been in the
hands of an expert real estate agent for many months prior to the sale, with every inducement to him to secure the highest cash price which
could be gotten for it. That he actually sold it to the plaintiff company, a few months prior to the sale to Barretto, for P17,175. That the plaintiff
company was highly dissatisfied with its purchase, and readily agreed to
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375
resell at that price. That the defendant, in his capacity as a real estate agent, with a personal and direct interest in securing the highest
possible price for the land, sold it to Barretto for P18,892.50.
The only evidence in the record tending to prove that the land had a higher market value than the price actually paid for it under such
circumstances is the testimony of a rival real estate broker, who had never been on the land, but claimed that he was f amiliar with its general
location from maps and discription, and asserted that in his opinion it was worth considerably more than the price actually paid for it, and that
he thought he could have sold the land for P3 a meter, or approximately P20,610. Of course an expert opinion of this kind, however sincere
and honest the witness may have been in forming it, is wholly insufficient to maintain a finding that the land was worth any more than it
actually brought when sold under the conditions above set f orth.
It may be that the land has a speculative value much higher than the actual market value at the time of the sale, so that if held for an
opportune turn in the market, or until a buyer of some special need for it happened to .present himself, a price approximating that indicated
by this witness might be secured f or it. But the question of f act ruled upon is the actual market value of the land at the time of its sale to
Barretto, and not any speculative value which might be assigned to it in anticipation of unknown, indefinite and uncertain contingencies.
Among other definitions of "market value" to be found in "Words and Phrases," vol. 5, p. 4383, and supported by citation of authority, are
the following:
"The 'market value' of property is the price which the property will bring in a fair market after fair and reasonable efforts have been made
to find a purchaser who will give the highest price for it.
*
"The market value of land is the price that would in all probability result from fair negotiations where the seller is willing to sell and the
buyer desires to buy."
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376
Upon the foregoing statement of the f acts disclosed by the record, we are of opinion that the judgment entered in the court below should be
reversed and the complaint dismissed without costs in this instance.
1. Even were we to admit, which we do not, that the plaintiff company had the right to terminate the negotiations at the time indicated by
its manager, and to direct its real estate agent not to make the sale to Barretto after the hour indicated, nevertheless we would be compelled
to hold, upon the evidence before us, that the plaintiff company has no cause of action for monetary damages against the defendant real
estate agent.
The measure of the damages which the plaintiff would be entitled to recover from the real estate agent for the unauthorized sale of its
property would be the actual market value of the property, title to which had been lost as a result of the sale. We are not now considering any
question as to the right of the owner, under such circumstances, to recover the property from the purchaser, or damages for its detention or
the like; but merely his right to recover monetary damages from his agent should he elect, as the plaintiff company did in this case, to ratify
the sale and recoup from the agent any loss resulting from his alleged unauthorized consummation of the sale.
The market value of the land in question was P18,892.50. Of this the plaintiff company has received P17,175, leaving a balance of
P1,717.50 unpaid. But, whatever may be the view which should be taken as to the right of the plaintiff company to terminate the negotiations
for the sale of the property to Barretto at the time fixed by it in its letter to the defendant real estate agent, there can be no question as to the
liability of the plaintiff company to the real estate agent, in the event that it did so terminate the negotiations, f or the amount of the
commission which it agreed to pay him should he find a purchaser for the land at the price agreed upon in his agency contract. The
commission agreed upon was all over P17,175 which. the defendant could secure from the property, and it is clear that allowing the defendant
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377
this commission, and offsetting it against the unpaid balance of the market value of the land, the plaintiff company is not entitled to a money
judgment against the defendant.
We do not mean to question the general doctrine as to the power of a principal to revoke the authority of his agent at will, in the absence
of a contract fixing the duration of the agency (subject, however, to some well defined exceptions). Our ruling is that at the time fixed by the
manager of the plaintiff company f or the termination of the negotiations, the defendant real estate agent had already earned the
commissions agreed upon, and could not be deprived thereof by the arbitrary action of the plaintiff company in declining to execute the
contract of sale for some reason personal to itself.
The question as to what constitutes a sale so as to entitle a real estate broker to his commissions is extensively annotated in the case
of Lunney vs. Healey(Nebraska) 56313 reported in 44 Law Rep. Ann., 593 [Note], and the long line of authorities there cited support the
following rule:
"The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in
the absence of an express contract between the broker and his principal, the implication generally is that the broker becomes entitled to the
usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon
the terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the
principal and the purchaser directly."
In the case of Watson vs. Brooks (17 Fed. Rep., 540; 8 Sawy., 316), it was held that a sale of real property, entitling a broker to his
commissions, was an agreement by the vendor to convey the title thereto, or an estate therein to the vendee for a certain valuable
consideration then or thereafter to be paid, and was complete without conveyance, although the legal title remained in the vendor.
The rights of a real estate broker to be protected against the arbitrary revocation of his agency, without remunera378
378
tion for services rendered in finding a suitable purchaser prior to the revocation, are clearly and forcefully stated in the following citation from
the opinion in the case ofBlumenthal vs. Goodall (89 Cal., 251).
"The act of the agent in finding a purchaser required time and labor for its completion, and within three days of the execution of the
contract, and prior to its revocation, he had placed the matter in the position that success was practically certain and immediate, and it would
be the height of injustice to permit the principal then to withdraw the authority and terminate the agency as against an express, provision of
the contract, and perchance reap the benefit of the agent's labors, without being liable to him for his com-missions. This would be to make the
contract an unconscionable one, and would offer a premium for fraud by enabling one of the parties to take advantage of his own wrong and
secure the labor of the other without remuneration."
2. We are of opinion that under all the circumstances surrounding the negotiations as disclosed by the practically undisputed evidence of
record, the plaintiff company could not lawfully terminate the negotiations at the time it attempted to do so and thereafter decline to convey
the land to Barretto, who had accepted an offer of sale made to him by the plaintiff's duly authorized agent, subject only to an examination of
the documents of title, and stood ready to pay the purchase price upon the delivery of the duly executed deed of conveyance and other
necessary documents of title. We are not now considering the right or the power of the plaintiff company to terminate or revoke the agency of
the def endant at that time. The revocation of the agent's authority at that time could in no wise relieve the plaintiff company of its obligation
to sell the land to Barretto for the price and on the terms agreed upon before the agency was revoked.
If we are correct in our conclusions in this regard, it f ollows, of course that no matter what was the actual value
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VOL. 33, FEBRUARY 2, 1916.
379
of the land, the plaintiff company suffered no damage by the delivery of the title deeds to Barretto, and the consummation of the sale by the
defendant upon the terms and at the price agreed upon prior to the revocation of his agency.
Without considering any of the disputed questions of f act it clearly appears that before the manager of the plaintiff company wrote the
letter dated September 2, 1912, which is set forth in the foregoing statement of facts, and before the conversation was had to which that
letter refers, the defendant real estate agent had offered to sell the land to Barretto for P18,892.50 and that he did so with the knowledge and
consent, and under the authority of the plaintiff company. It further clearly appears that this offer had been duly accepted by Barretto, who
stood ready and willing to pay over the agreed purchase price, upon the production and delivery of the necessary documents of title, should
these documents be f ound, upon examination, to be executed in due and legal form. The only question, then, which we need consider, is
whether the plaintiff company could lawfully "cancel" or rescind this agreement for the sale and purchase of the land, on the sole ground that
the purchase price was not paid at the hour designated in the letter to the defendant.
The only reasons assigned for the sudden and arbitrary demand for the payment of the purchase price which was made with the manifest
hope that it would defeat the agent's deal with Barretto, are that the plaintiff company's manager had become satisfied that the land was
worth more than he had agreed to accept f or it; and that he was piqued and annoyed at the delays which marked the earlier stages of the
negotiations.
Time does not appear to have been of the essence of the contract. The agreement to sell was made without any express stipulation as to
the time within which the purchase price was to be paid, except that the purchaser reserved the right to examine the documents of title bef
ore making payment of the purchase price, though it was understood that
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380
the sale was for cash upon the delivery of the documents of title executed in due form. Under the agreement with the agent of the plaintiff
company, the purchaser had a perf ect right to examine the documents of title; and in the absence of an express agreement fixing the time to
be allowed therefore, he was clearly entitled to such time as might be reasonably necessary for that purpose.
The plaintiff company, through its agent, had given Barretto an opportunity to examine the documents of title, with the express
understanding that if they were satisfactory he would hand the agent his cheek for the purchase price, and it is very clear that the plaintiff
company could not arbitrarily, and for its own convenience, deprive Barretto of this opportunity to make such examination of the documents
as might be reasonably necessary.
Of course we are not to be understood as denying the right of the vendor to couple his agreement to sell with a stipulation that the
purchase price must be paid at a specific day, hour and minute; nor that the obligation to pay over the purchase price forthwith may not be
inferred from all the circumstances surrounding the transaction in a particular case. Time may be, and often is of the very essence of the
contract. But in a contract for the sale of real estate, where no agreement to the contrary appears, it may fairly be assumed that it .was the
intention of the parties to allow a reasonable time for the examination of the documents of title; and in any case in which time has been
expressly allowed f or that purpose, the vendor cannot arbitrarily demand the payment of the purchase price before the expiration of the time
reasonably necessary therefor.
The doctrine supported by citation of authority is set forth as follows on page 165, "Maupin on Marketable Title to Real Estate:"
"The contract of sale usually specifies a time in which the purchaser may examine the title before completing the purchase. If no time be
specified, he will be entitled to a reasonable time for that purpose, but cannot keep the
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381
contract open indefinitely so as to avail himself of a rise in the value of the property or escape loss in case of depreciation. He cannot be
required to pay the purchase money bef ore he has examined the abstract, unless he has expressly stipulated so to do. It has been held that if
the contract provide that the purchaser shall be furnished an abstract of title, and shall have a specified time in which to examine the title and
pay the purchase money, the purchaser must determine in that time whether he will take the title, and that he cannot tender the purchase
money after that time, even though no abstract of the title was furnished.
"The purchaser is entitled to a reasonable time within which to determine by investigation the validity of apparent liens disclosed by the
record. After the purchaser has examined the abstract, or investigated the title in the time allowed for that purpose, it is his duty to point out
or make known his objections to the title, if any, so as to give the vendor an opportunity to remove them."
In the case of Hoyt vs. Tuxbury (70 111., 331, 332), the rule is stated as follows:
"Where the purchase of land is made upon condition the title is found good, the purchaser is only entitled to a reasonable time in which to
determine whether he will take the title the vendor has, or reject it. He cannot keep the contract open indefinitely, so as to avail of a rise in the
value of the property, or relieve himself in case of a depreciation."
In the case of Easton vs. Montgomery (90 Cal., 307), the rule is set forth as follows:
"A contract for the sale of land which provides 'title to prove good or no sale,' without specifying the time within which the examination is
to be made, implies a reasonable time."
In 39 Cyc., 1332, the general rule, supported by numerous citations, is set forth as follows:
"If the contract of sale does not specify the time of
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performance, a reasonable time will be implied. In other words a reasonable time for performance will be allowed, and perf ormance within a
reasonable time will be required. What is a reasonable time necessarily depends upon the facts and circumstances of the particular case. The
rule permitting and requiring performance within a reasonable time applies both to the time for making and executing the conveyance by the
vendor, and to the time for making or tendering payment by the purchaser; and where some precedent act or demand is necessary, the rule
applies to the time of performance after such act is done, or after such demand has been made. It also applies to the time within which any
condition precedent is to be performed, or within which a contingency upon which the transaction depends is to happen, and to the
performance of various acts by the parties such as the f urnishing of an abstract of title, or making a survey, or any act which is to precede or
may affect the time of conveyance or payment, or which one of the parties may do at his option which may affect the rights of the parties
under the contract. If the purchaser is entitled to an examination of the title a reasonable time therefor will be implied."
Under all the circumstances surrounding the transaction in the case at bar, as they appear from the evidence of record, we have no
hesitation in holding that the plaintiff company's letter of September 2, 1912 demanding payment before five o'clock of the afternoon of that
day, under penalty of the cancellation of its agreement to sell, was an arbitrary and unreasonable attempt to deny to the purchaser the
reasonable opportunity to inspect the documents of title, to which he was entitled by virtue of the express agreement of the plaintiff
company's agent before any attempt was made to revoke his agency. It follows that Barretto's right to enforce the agreement to sell was in no
wise affected by the attempt of the plaintiff company to "cancel" the agreement; and that the plaintiff company suffered no damage by the
consummation of the agreement
383
383
Tambunting vs. Santos.
by the acceptance of the stipulated purchase price by the defendant real estate agent.
Perhaps we should indicate that in arriving at these conclusions we have not found it necessary to pass upon the disputed question of fact,
as to whether or not the plaintiff company's manager instructed the defendant not to deliver the title-deed until he had received the purchase
price. On this point there is a direct conflict of evidence. But as we understand the transaction, it was clearly understood that the purchaser
would have a reasonable opportunity to inspect and examine the documents of title before paying over a large sum of money in exchange
therefor, whether the agent did or did not have the authority to make actual delivery of the title deed for that purpose,
Twenty days hereafter let judgment be entered reversing the judgment entered in the court below without costs in this instance, and
directing the dismissal of the complaint with the costs in first instance against the plaintiff company, and ten days thereafter let the record be
returned to the court wherein it originated. So ordered.
Arellano, C. J., Torres, Moreland, Trent, and Araullo, JJ., concur.
Guardex Enterprises vs. NLRC
G.R. No. 66541. November 20, 1990.*

GUARDEX ENTERPRISES and/or MARCELINA A. ESCANDOR, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and JUMBEE ORBETA,
respondents.
Civil Law; Agency; Fact that the representation allowance of P250.00 was meant to cover the expenses for the follow-up offered by
Orbeta does not of itself suggest the creation of an agency.Furthermore, it seems fairly evident that the representation allowance of P250
was meant to cover the expenses for the follow-up offered by Orbetaan ambiguous fact which does not of itself suggest the creation of an
agency and is not at all inconsistent with the theory of its absence in this case.
Same; Same; Same; Orbeta had nothing to do with the sale of the fire truck and is not therefore entitled to any commission.Even a
finding that under these circumstances, an agency had indeed been constituted will not save the day for Orbeta, because nothing in the
record tends to prove that he succeeded in carrying out its terms or even as much as attempted to do so. The evidence in fact clearly
indicates otherwise. The terms of Escandors letter of August 14, 1978assuming that it was indeed an authority to sell, as Orbeta insists
are to the effect that entitlement to the P15,000 commission is contingent on the purchase by a customer of a fire truck, the implicit condition
being that the agent would earn the commission if he was instrumental in bringing the sale about. Orbeta certainly had nothing to do with the
sale of the fire truck, and is not therefore entitled to any commission at all.
_______________
*
FIRST DIVISION.
488
88
Labor Law; National Labor Relations Commission;Jurisdiction; The issue in the case at bar is the existence of a contract of agency and not
employment or lease of services.It has of course already been stated at the outset that, given the sole issue raised by the parties
concededly from the cases inception (e.i., whether or not Orbeta is Escandors agent as regards the sale of a fire truck to Rubberworld), the
competence to resolve the controversy did not pertain to either the Labor Arbiter or the NLRC. The jurisdiction vested in them by the Labor
Code extends, generally speaking, only to cases arising from employer-employee relationships. What has all along been at issue here, as
advanced by the parties themselves and as is evident from the facts, is the existence of a contract of agencynot employment or lease of
services.
PETITION for certiorari to review the judgment of the National Labor Relations Commission.
Rogelio B. De Guzman for petitioners.
Vicente R. Guzman for private respondent.
NARVASA, J.:
A claim for alleged unpaid commissions of an agent is what is basically involved in the action at bar. Somehow, it twice escaped outright
rejection for lack of jurisdiction in the Department of Labor where the case was resolved at the first instance and on appeal. Both the Labor
Arbiter and the National Labor Relations Commission appeared unaware of the utter lack of labor-related issues in the parties conflicting
contentions as to the existence of agencyrelations between them, and proceeded to decide the case. Neither of them of course had
competence to do so. Be that as it may, the instant petition for certiorari will be decided on its merits to the end that the controversy may now
be laid to rest without further proceedings.
The protagonists in this case are:

1. 1)Marcelina A. Escandorengaged, under the name and style of Guardex Enterprises, in (a) the manufacture and sale of fire-fighting
equipment such as fire extinguishers, fire hose cabinets and related products, and (b) occasionally, the building or fabrication of fire
trucks; and
489
VOL. 191, NOVEMBER 20, 1990
489
1. 2)Jumbee Orbetaa freelance salesman.1

It appears that Orbeta somehow learned that Escandor had offered to fabricate a fire truck for Rubberworld (Phil.) Inc. He wrote to Escandor
inquiring about the amount of commission for the sale of a fire truck. Escandor wrote back on the same day to advise that it was P15,000.00
per unit. Four days later, Orbeta offered to look after (follow-up) Escandors pending proposal to sell a fire truck to Rubberworld, and asked for
P250.00 as representation expenses. Escandor agreed and gave him the money.
When no word was received by Escandor from Orbeta after three days, she herself inquired in writing from Rubberworld about her offer of
sale of a fire truck. Having apparently received an encouraging response, Escandor sent Rubberworld a revised price quotation some ten days
later.
In the meantime, Orbeta sold to other individuals some of Escandors fire extinguishers, receiving traveling expenses in connection
therewith as well as the corresponding commissions. He then dropped out of sight.
About seven months afterwards, Escandor herself finally concluded a contract with Rubberworld for the latters purchase of a fire truck. The
transaction was consummated with the delivery of the truck and full payment thereof by Rubberworld.
At this point, Orbeta suddenly reappeared and asked for his commission for the sale of the fire truck to Rubberworld. Escandor refused,
saying that he had had nothing to do with the offer, negotiation and consummation of the sale.
Insisting that he was entitled to the commission, Orbeta filed a complaint against Escandor with the Ministry of Labor. The Labor Arbiter
agreed with him and rendered judgment in his favor, on August 26, 1982. That judgment was affirmed by the National Labor Relations
Commission on December 29, 1983, on appeal taken by Escandor. 2Hence, this petition for certiorari, to annul those judgments as having been
rendered with grave abuse of discretion if not indeed without or in excess of jurisdiction.
_______________
1
Rollo, p. 14.
Id., pp. 52-53.
490
490
It is claimed that an implied agency had been created between Escandor and Orbeta on the basis of the following circumstances:
1. 1)the alleged verbal authority given to him to offer a fire truck to Rubberworld;
2. 2)the alleged written authority to sell the truck contained in a letter of Escandors dated August 14, 1978;
3. 3)Escandors having given Orbeta P250.00 as representation expenses; and
4. 4)Orbetas submission of a price quotation to Rubberworld and his having arranged a meeting between Escandor and Rubberworlds
Purchasing Manager.
The circumstances have not been correctly read by Orbeta and his co-respondents.
Escandor denies that she had ever given Orbeta any such verbal authority. Indeed, months prior to Orbetas approaching Escandor, the
latter had already made a written offer of a fire truck to Rubberworld. All that she consented to was for Orbeta to follow up that pending
offer. In truth, it does not even appear that on the strength of this arrangementvague as it wasOrbeta undertook the promised follow-up
at all. He reported nothing of his efforts or their fruits to Escandor. It was Escandor who, in the months that followed her initial meeting with
Orbeta, determinedly pushed the Rubberworld deal. Orbeta was simply nowhere to be found. Furthermore, it seems fairly evident that the
representation allowance of P250 was meant to cover the expenses for the follow-up offered by Orbetaan ambiguous fact which does not
of itself suggest the creation of an agency and is not at all inconsistent with the theory of its absence in this case.
Even a finding that under these circumstances, an agency had indeed been constituted will not save the day for Orbeta, because nothing
in the record tends to prove that he succeeded in carrying out its terms or even as much as attempted to do so. The evidence in fact clearly
indicates otherwise. The terms of Escandors letter of August 14, 1978assuming that it was indeed an authority to sell, as Orbeta insists
are to the effect that entitlement to the P15,000 commission is contingent on the purchase by a customer of a fire truck, the implicit condition
being that the agent would earn the commission if he was
491
VOL. 191, NOVEMBER 20, 1990
491
instrumental in bringing the sale about. Orbeta certainly had nothing to do with the sale of the fire truck, and is not therefore entitled to any
commission at all.
Furthermore, even if Orbeta is considered to have been Escandors agent for the time he was supposed to follow up the offer to sell, such
agency would have been deemed revoked upon the resumption of direct negotiations between Escandor and Rubberworld, Orbeta having in
the meantime abandoned all efforts (if indeed any were exerted) to secure the deal in Escandors behalf.
It has of course already been stated at the outset that, given the sole issue raised by the parties concededly from the cases inception (i.e.,
whether or not Orbeta is Escandors agent as regards the sale of a fire truck to Rubberworld), the competence to resolve the controversy did
not pertain to either the Labor Arbiter or the NLRC. The jurisdiction vested in them by the Labor Code extends, generally speaking, only to
cases arising from employer-employee relationships.3 What has all along been at issue here, as advanced by the parties themselves and as is
evident from the facts, is the existence of a contract ofagency4not employment or lease of services. It is indeed a puzzle how the
fundamental differences between the two5alto-
_______________
which arise from contracts of labor treated of in Chapter 3, Title VIII Book IV of the Civil Code. As provided by Art. 1700 thereof, an
employment contract or lease of service (as it is referred to in Arts. 1642 and 1644 of the Civil Code) is subject to the special laws on labor
unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjectswhich in this
jurisdiction is the Labor Code and other labor laws. SEE Art. 217 of the Labor Code for the jurisdiction of the Labor Arbiter and the NLRC.
3
Treated of in Title X, Book IV, Civil Code (Arts. 1868, et seq.)
Both involve the rendition of services by one party to the other, but the similarity ends there. The basis of agency is representation, the
agent being the representative of his principal, while the basis of lease of service is employment. (Nielson & Company, Inc. vs. Lepanto
Consolidated Mining, 26 SCRA 540). Agency is merely a preparatory contract which empowers the agent to execute juridical acts to bring
about contractual relations between his principal and third persons
5
492
492
gether escaped not only the parties counsel in this case but also the tribunals before which it had been brought. Nevertheless, since no one
has thought to question their authority even up to this late stage, as in fact all the parties appear to have completely accepted the validity of
their exercise of jurisdiction over the case, the Court has opted, as already stated, to render judgment on its merits and end the controversy
once and for all.6
WHEREFORE, the petition for certiorari is GRANTED, and the judgment of the National Labor Relations Commission dated December 29,
1983, and that of the Labor Arbiter dated August 26, 1982, are hereby REVERSED and SET ASIDE and another one rendered dismissing
respondent Jumbee Orbetas claim for unpaid commissions.
SO ORDERED.
BIENVENIDO R. MEDRANO and IBAAN RURAL BANK, petitioners, vs. COURT OF APPEALS, PACITA G. BORBON, JOSEFINA E. ANTONIO and ESTELA
A. FLOR, respondents.
Agency; Brokers; Words and Phrases; 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 concernhe is one whose occupation is to bring parties together, in matters
of trade, commerce or navigation.The records disclose that respondent Pacita Borbon is a licensed real estate broker and respondents
Josefina Antonio and Estela A. Flor are her associates. 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. A
broker is one whose occupation is to bring parties together, in matters of trade, commerce or navigation. For the respondents participation in
finding a buyer for the petitioners property, the petitioners refuse to pay them commission, asserting that they are not the efficient procuring
cause of the sale, and that the letter of authority signed by petitioner Medrano is not binding against the petitioners.
_______________
*
SECOND DIVISION.
78
Medrano vs. Court of Appeals
Same; Same; Same; The term of procuring cause, in describing a brokers activity, refers to a cause originating a series of events
which, without break in their continuity, result in accomplishment of prime objective of the employment of the brokerproducing a purchaser
ready, willing and able to buy real estate on the owners terms.Procuring cause is meant to be the proximate cause. The term procuring
cause, in describing a brokers activity, refers to a cause originating a series of events which, without break in their continuity, result in
accomplishment of prime objective of the employment of the brokerproducing a purchaser ready, willing and able to buy real estate on the
owners terms. A broker will be regarded as the procuring cause of a sale, so as to be entitled to commission, if his efforts are the foundation
on which the negotiations resulting in a sale are begun. 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
broker.
Same; Same; When there is a close, proximate and causal connection between the brokers efforts and the principals sale of his
property, the broker is entitled to a commission.The evidence on record shows that the respondents were instrumental in the sale of the
property to Lee. Without their intervention, no sale could have been consummated. They were the ones who set the sale of the subject land in
motion. Upon being informed by Flor that Medrano was selling his mango orchard, Borbon lost no time in informing Lee that they had found a
property according to his specifications. An ocular inspection of the property together with Lee was immediately planned; unfortunately, it
never pushed through for reasons beyond the respondents control. Since Lee was in a hurry to see the property, he asked the respondents
the exact address and the directions on how to reach Ibaan, Batangas. The respondents thereupon instructed him to look for Teresa Ganzon,
an officer of the Ibaan Rural Bank and the person to talk to regarding the property. While the letter-authority issued in favor of the respondents
was non-exclusive, no evidence was adduced to show that there were other persons, aside from the respondents, who informed Lee about the
property for sale. Ganzon testified that no advertisement was made announcing the sale of the lot, nor did she give any authority to other
brokers/agents to sell the subject property. The fact that it was Lee who personally called Borbon and asked for directions prove that it was
79
7
9
only through the respondents that Lee learned about the property for sale. Significantly, too, Ms. Teresa Ganzon testified that there were
no other persons other than the respondents who inquired from her about the sale of the property to Lee. It can thus be readily inferred that
the respondents were the only ones who knew about the property for sale and were responsible in leading a buyer to its consummation. All
these circumstances lead us to the inescapable conclusion that the respondents were the procuring cause of the sale. When there is a close,
proximate and causal connection between the brokers efforts and the principals sale of his property, the broker is entitled to a commission.
Same; Same; It has been held that a broker earns his pay merely by bringing the buyer and the seller together, even if no sale is
eventually madethe essential feature of a brokers conventional employment is merely to procure a purchaser for a property ready, able,
and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser.We find the argument specious. The
letter of authority must be read as a whole and not in its truncated parts. Certainly, it was not the intention of Medrano to expect the
respondents to do just that (to negotiate) when he issued the letter of authority. The clear intention is to reward the respondents for procuring
a buyer for the property. Before negotiating a sale, a broker must first and foremost bring in a prospective buyer. It has been held that
abroker earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually made. The essential feature of a
brokers conventional employment is merely to procure a purchaser for a property ready, able, and willing to buy at the price and on the terms
mutually agreed upon by the owner and the purchaser. And it is not a prerequisite to the right to compensation that the broker conduct the
negotiations between the parties after they have been brought into contact with each other through his efforts. The case of Macondray v.
Sellner is quite instructive: The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated
by the courts is that, in the absence of an express contract between the broker and his principal, the implication generally is that the broker
becomes entitled to the usual commissions whenever he brings to his principal a party who is able and willing to take the property and enter
into a valid contract upon the terms then named by the principal, although the
80
particulars may be arranged and the matter negotiated and completed between the principal and the purchaser directly.
Same; Same; The principal can not renege on the promise to pay commission on the flimsy excuse that he is not the registered owner of
the property where the evidence shows that he comported himself to be the owner of the property. Anent the validity of the letter-authority
signed by Medrano, we find no reversible error with the findings of the appellate and trial courts that the petitioners are liable thereunder.
Such factual findings deserve this Courts respect in the absence of any cogent reason to reverse the same. Medranos obligation to pay the
respondents commission for their labor and effort in finding a purchaser or a buyer for the described parcel of land is unquestionable. In the
absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a contract, and is considered as the law between the
parties. As such, Medrano can not renege on the promise to pay commission on the flimsy excuse that he is not the registered owner of the
property.
Balgos & Perezi for petitioners.
Sycip, Salazar, Hernandez & Gatmaitan for respondents.
CALLEJO, SR., J.:

This is a petition for review of the Decision 1 of the Court of Appeals (CA) affirming in toto the Decision2 of the Regional Trial Court (RTC) of
Makati City, Branch 135, in Civil Case No. 15664 which awarded to the respondents their 5% brokers commission.
The facts are as follows:
_______________
Penned by Associate Justice Jose L. Sabio, Jr., with Associate Justices Ma. Alicia Austria-Martinez (now an Associate Justice of the Supreme
Court) and Hilarion L. Aquino (retired), concurring.
1
Penned by Judge Omar U. Amin.
81
81
Bienvenido R. Medrano was the Vice-Chairman of Ibaan Rural Bank, a bank owned by the Medrano family. In 1986, Mr. Medrano asked Mrs.
Estela Flor, a cousin-in-law, to look for a buyer of a foreclosed asset of the bank, 3 a 17-hectare mango plantation priced at P2,200,000.00,
located in Ibaan, Batangas.4
Mr. Dominador Lee, a businessman from Makati City, was a client of respondent Mrs. Pacita G. Borbon, a licensed real estate broker. The
two met through a previous transaction where Lee responded to an ad in a newspaper put up by Borbon for an 8-hectare property in Lubo,
Batangas, planted with atis trees. Lee expressed that he preferred a land with mango trees instead. Borbon promised to get back to him as
soon as she would be able to find a property according to his specifications.
Borbon relayed to her business associates and friends that she had a ready buyer for a mango orchard. Flor then advised her that her
cousin-in-law owned a mango plantation which was up for sale. She told Flor to confer with Medrano and to give them a written authority to
negotiate the sale of the property.5 Thus, on September 3, 1986, Medrano issued the Letter of Authority, as follows:
Mrs.
Pacita
Campos
Tindalo, Makati, M.M.
Mrs.
Estela
23
Quezon City, M.M.
G.
A.
Borbon
Flor
&
Rueda
&
Miss
Miss
Josefina
Maria
Yumi
E.
S.
Mabini
Dear Mesdames:
This letter will serve as your authority* to negotiate with any prospective buyer for the sale of a certain real estate property more
_______________
3
Records, p. 8.
TSN, 4 January 1989, p. 6.
TSN, 4 December 1987, pp. 7-8.
82
82
specifically a mango plantation which is described more particularly therein below:

Location : Barrio Tulay-na-Patpat, Ibaan, Batangas
Lot Area : 17 hectares (more or less) per attached Appendix A
Antonio
Building
Karasig
Street
Improvements : 720 all fruit-bearing mango trees (carabao variety) and other trees
Price : P 2,200,000.00
For your labor and effort in finding a purchaser thereof, I hereby bind myself to pay you a commission of 5% of the total purchase price to
be agreed upon by the buyer and seller.
Very
(Sgd.)
B.R.
Owner
truly
yours,
Medrano
* Subject to price sale.6

The respondents arranged for an ocular inspection of the property together with Lee which never materializedthe first time was due to
inclement weather; the next time, no car was available for the tripping to Batangas. 7 Lee then called up Borbon and told her that he was on his
way to Lipa City to inspect another property, and might as well also take a look at the property Borbon was offering. Since Lee was in a hurry,
the respondents could no longer accompany him at the time. Thus, he asked for the exact address of the property and the directions on how
to reach the lot in Ibaan from Lipa City. Thereupon, Lee was instructed to get in touch with Medranos daughter and also an officer of the bank,
Mrs. Teresa Ganzon, regarding the property.8
_______________
6
Exhibit B, Records, p. 153.
TSN, 4 December 1987, pp. 9-10; TSN, 15 March 1989, p. 9.
TSN, 15 March 1989, p. 10.
83
83
Two days after the visit, respondent Josefina Antonio called Lee to inquire about the result of his ocular inspection. Lee told her that the mango
trees looked sick so he was bringing an agriculturist to the property. Three weeks thereafter, Antonio called Lee again to make a follow-up of
the latters visit to Ibaan. Lee informed her that he already purchased the property and had made a down payment of P1,000,000.00. The
remaining balance of P1,200,000.00 was to be paid upon the approval of the incorporation papers of the corporation he was organizing by the
Securities and Exchange Commission. According to Antonio, Lee asked her if they had already received their commission. She answered no,
and Lee expressed surprise over this.9
A Deed of Sale was eventually executed on November 6, 1986 between the bank, represented by its President/General Manager Teresa M.
Ganzon (as Vendor) and KGB Farms, Inc., represented by Dominador Lee (as Vendee), for the purchase price of P1,200,000.00. 10 Since the sale
of the property was consummated, the respondents asked from the petitioners their commission, or 5% of the purchase price. The petitioners
refused to pay and offered a measly sum of P5,000.00 each. 11 Hence, the respondents were constrained to file an action against herein
petitioners.
The petitioners alleged that Medrano issued the letter of authority in favor of all the respondents, upon the representation of Flor that she
had a prospective buyer. Flor was the only person known to Medrano, and he had never met Borbon and Antonio. Medrano had asked that the
name of their prospective buyer be immediately registered so as to avoid confusion later on, but Flor failed to do so. Furthermore, the other
officers of the bank had never met nor dealt with the respondents in connection with the sale of the property. Ganzon also
_______________
9
TSN, 11 May 1989, pp. 8-9.
10
Exhibit D, Records, p. 178.
11
TSN, 15 March 1989, p. 14.
84
84
asked Lee if he had an agent and the latter replied that he had none. The petitioners also denied that the purchase price of the property was
P2,200,000.00 and alleged that the property only cost P1,200,000.00. The petitioners further contended that the letter of authority signed by
Medrano was not binding or enforceable against the bank because the latter had a personality separate and distinct from that of Medrano.
Medrano, on the other hand, denied liability, considering that he was not the registered owner of the property, but the bank. The petitioners,
likewise, filed a counterclaim as they were constrained to hire the services of counsel and suffered damages. 12
After the case was submitted for decision, Medrano died, but no substitution of party was made at this time. 13
The trial court resolved the case based on the following common issues:
1. 1.Whether or not the letter of authority is binding and enforceable against the defendant Bank only or both defendants; and
2. 2.Whether or not the plaintiffs are entitled to any commission for the sale of the subject property. 14
On September 21, 1994, the trial court rendered a Decision in favor of the respondents. The petitioners were ordered to pay, jointly and
severally, the 5% brokers commission to herein respondents. The trial court found that the letter of authority was valid and binding as against
Medrano and the Ibaan Rural Bank. Medrano signed the said letter for and in behalf of the bank, and as owner of the property, promising to
pay the respondents a 5% commission for their efforts in looking for a purchaser of the property. He is, therefore, estopped from denying
liability on the basis of the letter of authority he issued in favor of the respondents. The trial court further
_______________
12
Records, pp. 8-10.
13
Id., at p. 320.
14
Id.
85
85
stated that the sale of the property could not have been possible without the representation and intervention of the respondents. As such,
they are entitled to the brokers commission of 5% of the selling price of P1,200,000.00 as evidenced by the deed of sale. 15 The fallo of the
decision reads as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against the defendants, for the latter, jointly
and severally:
1. 1.To pay plaintiffs the sum of P60,000.00 representing their five percent (5%) commission of the purchase price of the property sold
based on Exh. D or 9 plus legal interest from date of filing of the herein complaint until fully paid;
2. 2.To pay plaintiffs the sum of P20,000.00 as and for attorneys fees;
3. 3.To pay the plaintiffs the sum of P10,000.00 as litigation expenses;
4. 4.To pay the costs of the proceedings.16
Unable to agree with the RTC decision, petitioner Ibaan Rural Bank filed its notice of appeal. 17
On October 10, 1994, the heirs of Bienvenido Medrano filed a Motion for Reconsideration 18 praying that the late Bienvenido Medrano be
substituted by his heirs. They further prayed that the trial courts decision as far as Medrano was concerned be set aside and dismissed
considering his demise. The trial court denied the motion for reconsideration. 19 Hence, the heirs of Medrano also filed their notice of appeal. 20
On appeal, the petitioners reiterated their stance that the letter of authority was not binding and enforceable, as the
_______________
15
Id., at p. 229.
16
Id., at p. 321.
17
Id., at p. 322.
18
Id., at pp. 325-327.
19
Id., at pp. 370-371.
20
Id., at p. 372.
86
86
same was signed by Medrano, who was not actually the owner of the property. They refused to give the respondents any commission, since
the latter did not perform any act to consummate the sale. The petitioners pointed out that the respondents (1) did not verify the real owner of
the property; (2) never saw the property in question; (3) never got in touch with the registered owner of the property; and (4) neither did they
perform any act of assisting their buyer in having the property inspected and verified. 21 The petitioners further raised the trial courts error in
not dismissing the case against Bienvenido Medrano considering his death.
On May 3, 2001, the CA promulgated the assailed decision affirming the finding of the trial court that the letter of authority was valid and
binding. Applying the principle of agency, the appellate court ruled that Bienvenido Medrano constituted the respondents as his agents,
granting them authority to represent and act on behalf of the former in the sale of the 17-hectare mango plantation. The CA also ruled that the
trial court did not err in finding that the respondents were the procuring cause of the sale. Suffice it to state that were it not for the
respondents, Lee would not have known that there was a mango orchard offered for sale.
The CA further ruled that an action for a sum of money continues even after the death of the defendant, and shall remain as a money claim
against the estate of the deceased.
Undaunted by the CAs unfavorable decision, the petitioners filed the instant petition, raising eight (8) assignments of errors, to wit:
1. I.THE COURT OF APPEALS ERRED WHEN IT FOUND THE PRIVATE RESPONDENTS TO BE THE PROCURING CAUSE OF THE SALE;
_______________
21
Rollo, p. 39.
87
87
1. II.THE COURT OF APPEALS ERRED IN GIVING CREDENCE TO THE LETTER-AUTHORITY OF PETITIONER MR. MEDRANO;
2. III.THE COURT OF APPEALS MADE A MISTAKE WHEN IT CORRECTLY RECOGNIZED THE EXTENT OF THE PRIVATE RESPONDENTS
OBLIGATION AND AUTHORITY CONTAINED IN MEDRANOS LETTER-AUTHORITY AND YET ERRONEOUSLY GRANTED THE PRIVATERESPONDENTS DEMAND, NOTWITHSTANDING THE NON-PERFORMANCE OF THEIR OBLIGATION THEREUNDER;
3. IV.THE COURT OF APPEALS ERRED IN PRESUMING BAD FAITH UPON THE PETITIONERS;
4. V.THE COURT OF APPEALS ERRED IN PLACING THE BURDEN OF PROOF UPON THE DEFENDANTS-PETITIONERS;
5. VI.THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSION WITH EVIDENCE AND INSTEAD RELIED ON INFERENCE;
6. VII.THE COURT OF APPEALS FAILED TO SUBSTANTIATE ITS CONCLUSION WITH EVIDENCE AND MERELY RELIED ON SPECULATION AND
SURMISE;
7. VIII.THE COURT OF APPEALS MISAPPRECIATED THE FACTS PRESENTED BEFORE IT, AND CONSEQUENTLY FAILED TO CONSIDER
REASONABLY THE TWO (2) BASIC ARGUMENTS OF THE PETITIONERS. 22
The petition is denied.
The records disclose that respondent Pacita Borbon is a licensed real estate broker 23 and respondents Josefina Antonio and Estela A. Flor
are her associates.24 A broker is generally defined as one who is engaged, for others, on a commission,
_______________
22
Rollo, pp. 16-17.
23
Exhibit A, Records, p. 168.
24
TSN, 4 December 1987, p. 6.
88
88
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. A
broker is one whose occupation is to bring parties together, in matters of trade, commerce or navigation. 25 For the respondents participation
in finding a buyer for the petitioners property, the petitioners refuse to pay them commission, asserting that they are not the efficient
procuring cause of the sale, and that the letter of authority signed by petitioner Medrano is not binding against the petitioners.
Procuring cause is meant to be the proximate cause. 26The term procuring cause, in describing a brokers activity, refers to a
cause originating a series of events which, without break in their continuity, result in accomplishment of prime objective of the employment of
the brokerproducing a purchaser ready, willing and able to buy real estate on the owners terms. 27 A broker will be regarded as the
procuring cause of a sale, so as to be entitled to commission, if his efforts are the foundation on which the negotiations resulting in a sale
are begun.28 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 broker. 29
Indeed, the evidence on record shows that the respondents were instrumental in the sale of the property to Lee. Without their intervention,
no sale could have been consummated. They were the ones who set the sale of the subject land in
_______________
25
Tan v. Gullas, 393 SCRA 334 (2002).
26
Blacks Law Dictionary, Fifth Edition.
27
Clark v. Ellsworth, 66 Ariz. 119, 184 P.2d 821 (1947).
28
See Mohamed v. Robbins, 23 Ariz. App. 195, 531 P.2d 928, 930 (1975).
29
Danon v. Brimo, 48 Phil. 133 (1921).
89
89
motion.30 Upon being informed by Flor that Medrano was selling his mango orchard, Borbon lost no time in informing Lee that they had found a
property according to his specifications. An ocular inspection of the property together with Lee was immediately planned; unfortunately, it
never pushed through for reasons beyond the respondents control. Since Lee was in a hurry to see the property, he asked the respondents
the exact address and the directions on how to reach Ibaan, Batangas. The respondents thereupon instructed him to look for Teresa Ganzon,
an officer of the Ibaan Rural Bank and the person to talk to regarding the property. While the letter-authority issued in favor of the respondents
was non-exclusive, no evidence was adduced to show that there were other persons, aside from the respondents, who informed Lee about the
property for sale. Ganzon testified that no advertisement was made announcing the sale of the lot, nor did she give any authority to other
brokers/agents to sell the subject property. 31 The fact that it was Lee who personally called Borbon and asked for directions prove that it was
only through the respondents that Lee learned about the property for sale. 32 Significantly, too, Ms. Teresa Ganzon testified that there were no
other persons other than the respondents who inquired from her about the sale of the property to Lee. 33 It can thus be readily inferred that the
respondents were the only ones who knew about the property for sale and were responsible in leading a buyer to its consummation. All these
circumstances lead us to the inescapable conclusion that the respondents were the procuring cause of the sale. When there is a close,
proximate and causal connection between the bro-
_______________
30
Tan v. Gullas, supra.
31
TSN, 11 September 1990, p. 5.
32
TSN, 4 December 1987, p. 11.
33
TSN, 11 September 1990, p. 5.
90
90
kers efforts and the principals sale of his property, the broker is entitled to a commission. 34
The petitioners insist that the respondents are not entitled to any commission since they did not actually perform any acts of negotiation
as required in the letter-authority. They refuse to pay the commission since according to them, the respondents participation in the
transaction was not apparent, if not nil. The respondents did not even look at the property themselves; did not introduce the buyer to the
seller; did not hold any conferences with the buyer, nor take part in concluding the sale. For the non-compliance of this obligation to
negotiate, the petitioners argue, the respondents are not entitled to any commission.
We find the argument specious. The letter of authority must be read as a whole and not in its truncated parts. Certainly, it was not the
intention of Medrano to expect the respondents to do just that (to negotiate) when he issued the letter of authority. The clear intention is to
reward the respondents for procuring a buyer for the property. Before negotiating a sale, a broker must first and foremost bring in a
prospective buyer. It has been held that a broker earns his pay merely by bringing the buyer and the seller together,even if no sale is
eventually made.35 The essential feature of a brokers conventional employment is merely to procure a purchaser for a property ready, able,
and willing to buy at the price and on the terms mutually agreed upon by the owner and the purchaser. And it is not a prerequisite to the right
to compensation that the broker conduct the negotiations between the parties after they have been brought into contact with each other
through his efforts.36The case of Macondray v. Sellner 37 is quite instructive:
_______________
34
Manotok Brothers, Inc. v. Court of Appeals, 221 SCRA 224 (1993).
35
Tan v. Gullas, supra.
36
Wickersham v. T. D. Harris, 313 F.2d 468 (1963).
37
33 Phil. 370 (1916).
91
91
The business of a real estate broker or agent, generally, is only to find a purchaser, and the settled rule as stated by the courts is that, in the
absence of an express contract between the broker and his principal, the implication generally is that the broker becomes entitled to the usual
commissions whenever he brings to his principal a party who is able and willing to take the property and enter into a valid contract upon the
terms then named by the principal, although the particulars may be arranged and the matter negotiated and completed between the principal
and the purchaser directly.
Notably, there are cases where the right of the brokers to recover commissions were upheld where they actually took no part in the
negotiations, never saw the customer, and even some in which they did nothing except advertise the property, as long as it can be shown that
they were the efficient cause of the sale.38
In the case at bar, the role of the respondents in the transaction is undisputed. Whether or not they participated in the negotiations of the
sale is of no moment. Armed with an authority to procure a purchaser and with a license to act as broker, we see no reason why the
respondents can not recover compensation for their efforts when, in fact, they are the procuring cause of the sale. 39
Anent the validity of the letter-authority signed by Medrano, we find no reversible error with the findings of the appellate and trial courts
that the petitioners are liable thereunder. Such factual findings deserve this Courts respect in the absence of any cogent reason to reverse the
same. Medranos obligation to pay the respondents commission for their labor and effort in finding a purchaser or a buyer for the described
parcel of land is unquestionable. In the absence of fraud, irregularity or illegality in its execution, such letter-authority serves as a contract,
and is considered as the law
_______________
38
Libby v. Ivers & Pond Piano Co., 317 Mass. 478, 58 N.E.2d 834(1945); Gleason v. Nelson, 162 Mass. 245, 38 N.E. 497 (1894); Clark v.
Ellsworth, supra.
39
Wickersham v. Harris, supra.
92
92
between the parties. As such, Medrano can not renege on the promise to pay commission on the flimsy excuse that he is not the registered
owner of the property. The evidence shows that he comported himself to be the owner of the property. His testimony is quite telling:
Mr. Medrano, do you know any of the plaintiffs in this case, Pacita
Borbon, Josefina Antonio, and Stella (sic) F. Flor?
WITNESS
I know only Stella (sic) F. Flor. The rest, I do not know them. I have
never met them, up to now.
How about the co-defendant Ibaan Rural Bank?
I know co-defendant Ibaan Rural Bank, having been the founder and
at one time or another, I have served several capacities from
President to Chairman of the Board.
Are you familiar with a certain parcel of land located at Barrio Tulay
na Patpat, Ibaan, Batangas, with an area of 17 hectares?
Yes, Sir. I used to own that property but later on mortgaged it to

Ibaan Rural Bank.
And what, if any, [did] the bank do to your property after you have
mortgaged the same to it?
After many demands for payment or redemption of my mortgage,

which I failed to do so, the Ibaan Rural Bank sold it.
After it was foreclosed?
Yes, Sir.
Do you recall having made any transaction with plaintiff Stella (sic) F.
Flor regarding the property?
Yes, Sir. Since she is the first cousin of my wife, I remember [that]
she came to my office once and requested for a letter of authority
which I issued [in] September 1986, I think, and I gave her the letter
of authority.40
_______________
40
TSN, 6 November 1990, pp. 5-6.
93
93
As to the liability of the bank, we quote with favor the disquisition of the respondent court, to wit:
Further, the appellants cannot use the flimsy excuse (only to evade liability) that (w)hat Mr. Medrano represented to the plaintiffs-appellees,
without the knowledge or consent of the defendant Bank, did not bind the Bank. Res inter alios acta alteri nocere non debet. (page 8 of the
Appellants Brief; page 35 of theRollo). While it may be true that technically the Ibaan Rural Bank did not authorize Bienvenido R. Medrano to
sell the land under litigation or that the latter was no longer an officer of the said bank, still, these circumstances do not convince this Court
fully well to absolve the bank. Note that, as former President of the said bank, it is improbable that he (Bienvenido R. Medrano) was completely
oblivious of the developments therein. By reason of his past association with the officers of the said bank (who are, in fact, his relatives), it is
unbelievable that Bienvenido R. Medrano could simply have issued the said letter of authority without the knowledge of the said officers.
Granting por aguendothat Bienvenido R. Medrano did not act on behalf of the bank, however, We doubt that he had no financial and/or
material interest in the said salea fact that could not possibly have eluded Our attention. 41
From all the foregoing, there can be no other conclusion than the respondents are indeed the procuring cause of the sale. If not for the
respondents, Lee would not have known about the mango plantation being sold by the petitioners. The sale was consummated. The bank had
profited from such transaction. It would certainly be iniquitous if the respondents would not be rewarded their commission pursuant to the
letter of authority.
WHEREFORE, the petition is DENIED due course. The Decision of the Court of Appeals is AFFIRMED.
SO ORDERED.
EDUARDO V. LITONJUA, JR. and ANTONIO K. LITONJUA, petitioners, vs. ETERNIT CORPORATION (now ETERTON MULTI-RESOURCES
CORPORATION), ETEROUTREMER, S.A. and FAR EAST BANK & TRUST COMPANY, respondents.
Actions; Pleadings and Practice; Appeals; Certiorari;Exceptions; It must be stressed that issues of facts may not be raised in the Court
under Rule 45 of the Rules of Court because the Court is not a trier of facts.It must be stressed that issues of facts may not be raised in the
Court under Rule 45 of the Rules of Court because the Court is not a trier of facts. It is not to re-examine and assess the evidence on record,
whether testimonial and documentary. There are, however, recognized exceptions where the Court may delve into and resolve factual issues,
namely: (1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension
of facts; (5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case
and the same is contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those
of the trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a
different conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted
by the evidence on record.
Corporation Law; Corporations; Property; Sales; The general principles of agency govern the relation between the corporation and its
officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law .A corporation is a juridical person separate
and distinct from its members or stockholders and is not
_______________
*
FIRST DIVISION.
205
VOL. 490, JUNE 8, 2006
205
Litonjua, Jr. vs. Eternit Corporation
affected by the personal rights, obligations and transactions of the latter. It may act only through its board of directors or, when
authorized either by its by-laws or by its board resolution, through its officers or agents in the normal course of business. The general
principles of agency govern the relation between the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or
relevant provisions of law.
Same; Same; Same; Same; The property of a corporation, however, is not the property of the stockholders or members, and as such,
may not be sold without express authority from the board of directors.The property of a corporation, however, is not the property of the
stockholders or members, and as such, may not be sold without express authority from the board of directors. Physical acts, like the offering of
the properties of the corporation for sale, or the acceptance of a counter-offer of prospective buyers of such properties and the execution of
the deed of sale covering such property, can be performed by the corporation only by officers or agents duly authorized for the purpose by
corporate by-laws or by specific acts of the board of directors. Absent such valid delegation/authorization, the rule is that the declarations of
an individual director relating to the affairs of the corporation, but not in the course of, or connected with, the performance of authorized
duties of such director, are not binding on the corporation.
Same; Same; Same; Same; Agency; Any sale of real property of a corporation by a person purporting to be an agent thereof but without
written authority from the corporation is null and void.While a corporation may appoint agents to negotiate for the sale of its real properties,
the final say will have to be with the board of directors through its officers and agents as authorized by a board resolution or by its by-laws. An
unauthorized act of an officer of the corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of
directors. Any sale of real property of a corporation by a person purporting to be an agent thereof but without written authority from the
corporation is null and void. The declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority.
Same; Same; Same; Same; Same; Consent of both principal and agent is necessary to create an agency.By the contract of agency, a
person binds himself to render some service or to do something in
206
06
representation on behalf of another, with the consent or authority of the latter. Consent of both principal and agent is necessary to create
an agency. The principal must intend that the agent shall act for him; the agent must intend to accept the authority and act on it, and the
intention of the parties must find expression either in words or conduct between them.
Same; Same; Same; Same; Same; An agency may be expressed or implied from the act of the principal, from his silence or lack of action,
or failure to repudiate the agency.An agency may be expressed or implied from the act 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. Acceptance by the agent may be
expressed, or implied from his acts which carry out the agency, or from his silence or inaction according to the circumstances. Agency may be
oral unless the law requires a specific form. However, to create or convey real rights over immovable property, a special power of attorney is
necessary. Thus, when a sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing,
otherwise, the sale shall be void.
Same; Same; Same; Same; Same; A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the
agentsstatements as to the extent of his powerssuch person must not act negligently but must use reasonable diligence and prudence to
ascertain whether the agent acts within the scope of his authority.A person dealing with a known agent is not authorized, under any
circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act negligently but must use
reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. The settled rule is that, persons
dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only the fact of agency but
also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it.
Same; Same; Same; Same; Same; Agency by Estoppel; Requisites; For an agency by estoppel to exist, the following must be established .
For an agency by estoppel to exist, the following must be established: (1) the principal manifested a representation of the agents authority
or knowingly allowed the agent to assume such
207
VOL. 490, JUNE 8, 2006
207
authority; (2) the third person, in good faith, relied upon such representation; (3) relying upon such representation, such third person has
changed his position to his detriment. An agency by estoppel, which is similar to the doctrine of apparent authority, requires proof of reliance
upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance.
Jimenez, Gonzales, Liwanag, Bello, Valdez, Caluya & Fernandez for petitioners.
Eufemio Law Offices for respondents Eternit Corporation and Eteroutremer, S.A.
Carlito P. Viniegra for FEBTC (now BPI).
CALLEJO, SR., J.:
On appeal via a Petition for Review on Certiorari is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 51022, which affirmed the
Decision of the Regional Trial Court (RTC), Pasig City, Branch 165, in Civil Case No. 54887, as well as the Resolution2 of the CA denying the
motion for reconsideration thereof.
The Eternit Corporation (EC) is a corporation duly organized and registered under Philippine laws. Since 1950, it had been engaged in the
manufacture of roofing materials and pipe products. Its manufacturing operations were conducted on eight parcels of land with a total area of
47,233 square meters. The properties, located in Mandaluyong City, Metro Manila, were covered by Transfer Certificates of Title Nos.
_______________
Penned by Associate Justice Remedios A. Salazar-Fernando, with Associate Justices Fermin A. Martin, Jr. and Salvador J. Valdez, Jr. (retired),
concurring; Rollo, pp. 40-53.
1
Rollo, pp. 54-55.
208
208
451117, 451118, 451119, 451120, 451121, 451122, 451124 and 451125 under the name of Far East Bank & Trust Company, as trustee.
Ninety (90%) percent of the shares of stocks of EC were owned by Eteroutremer S.A. Corporation (ESAC), a corporation organized and
registered under the laws of Belgium. 3 Jack Glanville, an Australian citizen, was the General Manager and President of EC, while Claude
Frederick Delsaux was the Regional Director for Asia of ESAC. Both had their offices in Belgium.
In 1986, the management of ESAC grew concerned about the political situation in the Philippines and wanted to stop its operations in the
country. The Committee for Asia of ESAC instructed Michael Adams, a member of ECs Board of Directors, to dispose of the eight parcels of
land. Adams engaged the services of realtor/broker Lauro G. Marquez so that the properties could be offered for sale to prospective buyers.
Glanville later showed the properties to Marquez. Marquez thereafter offered the parcels of land and the improvements thereon to Eduardo B.
Litonjua, Jr. of the Litonjua & Company, Inc. In a Letter dated September 12, 1986, Marquez declared that he was authorized to sell the
properties for P27,000,000.00 and that the terms of the sale were subject to negotiation. 4
Eduardo Litonjua, Jr. responded to the offer. Marquez showed the property to Eduardo Litonjua, Jr., and his brother Antonio K. Litonjua. The
Litonjua siblings offered to buy the property for P20,000,000.00 cash. Marquez apprised Glanville of the Litonjua siblings offer and relayed the
same to Delsaux in Belgium, but the latter did not respond. On October 28, 1986, Glanville telexed Delsaux in Belgium, inquiring on his
position/counterproposal to the offer of the Litonjua siblings. It was only on February 12, 1987 that Delsaux sent a telex to Glanville stating
that, based on the Belgian/Swiss decision,
_______________
3
Id., at pp. 11, 61.
Id., at pp. 394-395.
209
VOL. 490, JUNE 8, 2006
209
the final offer was US$1,000,000.00 and P2,500,000.00 to cover all existing obligations prior to final liquidation. 5
Marquez furnished Eduardo Litonjua, Jr. with a copy of the telex sent by Delsaux. Litonjua, Jr. accepted the counterproposal of Delsaux.
Marquez conferred with Glanville, and in a Letter dated February 26, 1987, confirmed that the Litonjua siblings had accepted the counterproposal of Delsaux. He also stated that the Litonjua siblings would confirm full payment within 90 days after execution and preparation of all
documents of sale, together with the necessary governmental clearances. 6
The Litonjua brothers deposited the amount of US$1,000,000.00 with the Security Bank & Trust Company, Ermita Branch, and drafted an
Escrow Agreement to expedite the sale.7
Sometime later, Marquez and the Litonjua brothers inquired from Glanville when the sale would be implemented. In a telex dated April 22,
1987, Glanville informed Delsaux that he had met with the buyer, which had given him the impression that he is prepared to press for a
satisfactory conclusion to the sale. 8 He also emphasized to Delsaux that the buyers were concerned because they would incur expenses in
bank commitment fees as a consequence of prolonged period of inaction. 9
Meanwhile, with the assumption of Corazon C. Aquino as President of the Republic of the Philippines, the political situation in the
Philippines had improved. Marquez received a telephone call from Glanville, advising that the sale would no longer proceed. Glanville followed
it up with a Letter dated May 7, 1987, confirming that he had been instructed by his
_______________
5
Id., at p. 396.
Id., at pp. 397-398.
Id., at p. 240.
Id., at p. 241.
Id.
210
210
principal to inform Marquez that the decision has been taken at a Board Meeting not to sell the properties on which Eternit Corporation is
situated.10
Delsaux himself later sent a letter dated May 22, 1987, confirming that the ESAC Regional Office had decided not to proceed with the sale
of the subject land, to wit:
May
Mr.
L.G. Marquez, Inc.
334
6767
Makati,
Philippines
22,
L.G.
Makati
Stock
Ayala
Metro
1987
Marquez
Exchange
Dear Sir:
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.
Bldg.
Avenue
Manila
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the Philippines are ( sic)
concerned. Considering [the] new political situation since the departure of MR. MARCOS and a certain stabilization in the
Philippines, the Committee has decided not to stop our operations in Manila. In fact, production has started again last week,
and (sic) to recognize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later state, we would consult you
again.
xxx
Yours
(Sgd.)
C.F. DELSAUX
sincerely,
cc. To: J. GLANVILLE (Eternit Corp.)11

_______________
10
Id., at p. 399.
11
Id., at pp. 349-400.
211
VOL. 490, JUNE 8, 2006
211
When apprised of this development, the Litonjuas, through counsel, wrote EC, demanding payment for damages they had suffered on account
of the aborted sale. EC, however, rejected their demand.
The Litonjuas then filed a complaint for specific performance and damages against EC (now the Eterton Multi-Resources Corporation) and
the Far East Bank & Trust Company, and ESAC in the RTC of Pasig City. An amended complaint was filed, in which defendant EC was
substituted by Eterton Multi-Resources Corporation; Benito C. Tan, Ruperto V. Tan, Stock Ha T. Tan and Deogracias G. Eufemio were impleaded
as additional defendants on account of their purchase of ESAC shares of stocks and were the controlling stockholders of EC.
In their answer to the complaint, EC and ESAC alleged that since Eteroutremer was not doing business in the Philippines, it cannot be
subject to the jurisdiction of Philippine courts; the Board and stockholders of EC never approved any resolution to sell subject properties nor
authorized Marquez to sell the same; and the telex dated October 28, 1986 of Jack Glanville was his own personal making which did not bind
EC.
On July 3, 1995, the trial court rendered judgment in favor of defendants and dismissed the amended complaint. 12 The fallo of the decision
reads:
WHEREFORE, the complaint against Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is dismissed on the
ground that there is no valid and binding sale between the plaintiffs and said defendants.
The complaint as against Far East Bank and Trust Company is likewise dismissed for lack of cause of action.
The counterclaim of Eternit Corporation now Eterton Multi-Resources Corporation and Eteroutremer, S.A. is also dismissed for lack of
merit.13
_______________
13
Id., at pp. 174-175.
12
Id., at pp. 163-175.
212
212
The trial court declared that since the authority of the agents/realtors was not in writing, the sale is void and not merely unenforceable, and as
such, could not have been ratified by the principal. In any event, such ratification cannot be given any retroactive effect. Plaintiffs could not
assume that defendants had agreed to sell the property without a clear authorization from the corporation concerned, that is, through
resolutions of the Board of Directors and stockholders. The trial court also pointed out that the supposed sale involves substantially all the
assets of defendant EC which would result in the eventual total cessation of its operation. 14
The Litonjuas appealed the decision to the CA, alleging that (1) the lower court erred in concluding that the real estate broker in the
instant case needed a written authority from appellee corporation and/or that said broker had no such written authority; and (2) the lower
court committed grave error of law in holding that appellee corporation is not legally bound for specific performance and/or damages in the
absence of an enabling resolution of the board of directors. 15 They averred that Marquez acted merely as a broker or go-between and not as
agent of the corporation; hence, it was not necessary for him to be empowered as such by any written authority. They further claimed that an
agency by estoppel was created when the corporation clothed Marquez with apparent authority to negotiate for the sale of the properties.
However, since it was a bilateral contract to buy and sell, it was equivalent to a perfected contract of sale, which the corporation was obliged
to consummate.
In reply, EC alleged that Marquez had no written authority from the Board of Directors to bind it; neither were Glanville and Delsaux
authorized by its board of directors to offer the property for sale. Since the sale involved substantially all of
_______________
14
Id., at pp. 173-174.
15
Id., at pp. 47-48.
213
VOL. 490, JUNE 8, 2006
213
the corporations assets, it would necessarily need the authority from the stockholders.
On June 16, 2000, the CA rendered judgment affirming the decision of the RTC. 16 The Litonjuas filed a motion for reconsideration, which was
also denied by the appellate court.
The CA ruled that Marquez, who was a real estate broker, was a special agent within the purview of Article 1874 of the New Civil Code.
Under Section 23 of the Corporation Code, he needed a special authority from ECs board of directors to bind such corporation to the sale of its
properties. Delsaux, who was merely the representative of ESAC (the majority stockholder of EC) had no authority to bind the latter. The CA
pointed out that Delsaux was not even a member of the board of directors of EC. Moreover, the Litonjuas failed to prove that an agency by
estoppel had been created between the parties.
In the instant petition for review, petitioners aver that:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS NO PERFECTED CONTRACT OF SALE.
II
THE APPELLATE COURT COMMITTED GRAVE ERROR OF LAW IN HOLDING THAT MARQUEZ NEEDED A WRITTEN AUTHORITY FROM
RESPONDENT ETERNIT BEFORE THE SALE CAN BE PERFECTED.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT GLANVILLE AND DELSAUX HAVE THE NECESSARY AUTHORITY TO SELL THE SUBJECT
PROPERTIES, OR AT THE VERY LEAST, WERE KNOWINGLY PERMITTED BY RESPONDENT ETERNIT TO DO ACTS WITHIN THE SCOPE OF AN
APPARENT
_______________
16
Id., at pp. 40-53.
214
214
AUTHORITY, AND THUS HELD THEM OUT TO THE PUBLIC AS POSSESSING POWER TO SELL THE SAID PROPERTIES. 17
Petitioners maintain that, based on the facts of the case, there was a perfected contract of sale of the parcels of land and the improvements
thereon for US$1,000,000.00 plus P2,500,000.00 to cover obligations prior to final liquidation. Petitioners insist that they had accepted the
counter-offer of respondent EC and that before the counter-offer was withdrawn by respondents, the acceptance was made known to them
through real estate broker Marquez.
Petitioners assert that there was no need for a written authority from the Board of Directors of EC for Marquez to validly act as
broker/middleman/intermediary. As broker, Marquez was not an ordinary agent because his authority was of a special and limited character in
most respects. His only job as a broker was to look for a buyer and to bring together the parties to the transaction. He was not authorized to
sell the properties or to make a binding contract to respondent EC; hence, petitioners argue, Article 1874 of the New Civil Code does not apply.
In any event, petitioners aver, what is important and decisive was that Marquez was able to communicate both the offer and counter-offer
and their acceptance of respondent ECs counter-offer, resulting in a perfected contract of sale.
Petitioners posit that the testimonial and documentary evidence on record amply shows that Glanville, who was the President and General
Manager of respondent EC, and Delsaux, who was the Managing Director for ESAC Asia, had the necessary authority to sell the subject
property or, at least, had been allowed by respondent EC to hold themselves out in the public as having the power to sell the subject
properties. Petitioners identified such evidence, thus:
_______________
17
Id., at p. 15.
215
VOL. 490, JUNE 8, 2006
215
1. 1.The testimony of Marquez that he was chosen by Glanville as the then President and General Manager of Eternit, to sell the
properties of said corporation to any interested party, which authority, as hereinabove discussed, need not be in writing.
2. 2.The fact that the NEGOTIATIONS for the sale of the subject properties spanned SEVERAL MONTHS, from 1986 to 1987;
3. 3.The COUNTER-OFFER made by Eternit through GLANVILLE to sell its properties to the Petitioners;
4. 4.The GOOD FAITH of Petitioners in believing Eternits offer to sell the properties as evidenced by the Petitioners ACCEPTANCE of the
counter-offer;
5. 5.The fact that Petitioners DEPOSITED the price of [US]$1,000,000.00 with the Security Bank and that an ESCROW agreement was
drafted over the subject properties;
6. 6.Glanvilles telex to Delsaux inquiring WHEN WE(Respondents) WILL IMPLEMENT ACTION TO BUY AND SELL;
7. 7.More importantly, Exhibits G and H of the
allegedly REJECTED by both Glanville and Delsaux.18
Respondents,
which
evidenced
the
fact
that
Petitioners
offer
was
Petitioners insist that it is incongruous for Glanville and Delsaux to make a counter-offer to petitioners offer and thereafter reject such offer
unless they were authorized to do so by respondent EC. Petitioners insist that Delsaux confirmed his authority to sell the properties in his letter
to Marquez, to wit:
Dear Sir,
Re: Land of Eternit Corporation
I would like to confirm officially that our Group has decided not to proceed with the sale of the land which was proposed to you.
The Committee for Asia of our Group met recently (meeting every six months) and examined the position as far as the Philippines are ( sic)
concerned. Considering the new political situation since the departure of MR. MARCOS and a certain stabilization in
_______________
18
Id., at pp. 29-30.
216
216
the Philippines, the Committee has decided not to stop our operations in Manila[.] [I]n fact production started again last week, and (sic) to
reorganize the participation in the Corporation.
We regret that we could not make a deal with you this time, but in case the policy would change at a later stage we would
consult you again.
In the meantime, I remain
Yours sincerely,
C.F. DELSAUX19
Petitioners further emphasize that they acted in good faith when Glanville and Delsaux were knowingly permitted by respondent EC to sell the
properties within the scope of an apparent authority. Petitioners insist that respondents held themselves to the public as possessing power to
sell the subject properties.
By way of comment, respondents aver that the issues raised by the petitioners are factual, hence, are proscribed by Rule 45 of the Rules of
Court. On the merits of the petition, respondents EC (now EMC) and ESAC reiterate their submissions in the CA. They maintain that Glanville,
Delsaux and Marquez had no authority from the stockholders of respondent EC and its Board of Directors to offer the properties for sale to the
petitioners, or to any other person or entity for that matter. They assert that the decision and resolution of the CA are in accord with law and
the evidence on record, and should be affirmed in toto.
Petitioners aver in their subsequent pleadings that respondent EC, through Glanville and Delsaux, conformed to the written authority of
Marquez to sell the properties. The authority of Glanville and Delsaux to bind respondent EC is evidenced by the fact that Glanville and
Delsaux negotiated for the sale of 90% of stocks of respondent EC to Ruperto Tan on June 1, 1997. Given the significance of their positions and
_______________
19
Id., at pp. 30-31.
217
VOL. 490, JUNE 8, 2006
217
their duties in respondent EC at the time of the transaction, and the fact that respondent ESAC owns 90% of the shares of stock of respondent
EC, a formal resolution of the Board of Directors would be a mere ceremonial formality. What is important, petitioners maintain, is that
Marquez was able to communicate the offer of respondent EC and the petitioners acceptance thereof. There was no time that they acted
without the knowledge of respondents. In fact, respondent EC never repudiated the acts of Glanville, Marquez and Delsaux.
The petition has no merit.
Anent the first issue, we agree with the contention of respondents that the issues raised by petitioner in this case are factual. Whether or
not Marquez, Glanville, and Delsaux were authorized by respondent EC to act as its agents relative to the sale of the properties of respondent
EC, and if so, the boundaries of their authority as agents, is a question of fact. In the absence of express written terms creating the
relationship of an agency, the existence of an agency is a fact question.20 Whether an agency by estoppel was created or whether a person
acted within the bounds of his apparent authority, and whether the principal is estopped to deny the apparent authority of its agent are,
likewise, questions of fact to be resolved on the basis of the evidence on record. 21 The findings of the trial court on such issues, as affirmed by
the CA, are conclusive on the Court, absent evidence that the trial and appellate courts ignored, misconstrued, or misapplied facts and
circumstances of substance which, if considered, would warrant a modification or reversal of the outcome of the case. 22
_______________
20
Weathersby v. Gore, 556 F.2d 1247 (1977).
21
Cavic v. Grand Bahama Development Co., Ltd., 701 F.2d 879 (1983).
Culaba v. Court of Appeals, G.R. No. 125862, April 15, 2004, 427 SCRA 721, 729; Litonjua v. Fernandez, G.R. No. 148116, April 14,
2004,427 SCRA 478, 489.
22
218
218
It must be stressed that issues of facts may not be raised in the Court under Rule 45 of the Rules of Court because the Court is not a trier of
facts. It is not to re-examine and assess the evidence on record, whether testimonial and documentary. There are, however, recognized
exceptions where the Court may delve into and resolve factual issues, namely:
(1) When the conclusion is a finding grounded entirely on speculations, surmises, or conjectures; (2) when the inference made is manifestly
mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when the Court of Appeals, in making its findings, went beyond the issues of the case and the
same is contrary to the admissions of both appellant and appellee; (7) when the findings of the Court of Appeals are contrary to those of the
trial court; (8) when the findings of fact are conclusions without citation of specific evidence on which they are based; (9) when the Court of
Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the
evidence on record.23
We have reviewed the records thoroughly and find that the petitioners failed to establish that the instant case falls under any of the foregoing
exceptions. Indeed, the assailed decision of the Court of Appeals is supported by the evidence on record and the law.
It was the duty of the petitioners to prove that respondent EC had decided to sell its properties and that it had empowered Adams,
Glanville and Delsaux or Marquez to offer the properties for sale to prospective buyers and to accept any counter-offer. Petitioners likewise
failed to prove that their counter-offer had been accepted by respondent EC, through Glanville and Delsaux. It must be stressed that when
specific performance is sought of a contract made with an agent, the
_______________
23
Nokom v. National Labor Relations Commission, 390 Phil. 1228, 1242-1243; 336 SCRA 97, 110 (2000) (citations omitted).
219
VOL. 490, JUNE 8, 2006
219
agency must be established by clear, certain and specific proof. 24

Section 23 of Batas Pambansa Bilang 68, otherwise known as the Corporation Code of the Philippines, provides:
SEC. 23. The Board of Directors or Trustees.Unless otherwise provided in this Code, the corporate powers of all corporations formed under
this Code shall be exercised, all business conducted and all property of such corporations controlled and held by the board of directors or
trustees to be elected from among the holders of stocks, or where there is no stock, from among the members of the corporation, who shall
hold office for one (1) year and until their successors are elected and qualified.
Indeed, a corporation is a juridical person separate and distinct from its members or stockholders and is not affected by the personal rights,
obligations and transactions of the latter. 25 It may act only through its board of directors or, when authorized either by its by-laws or by its
board resolution, through its officers or agents in the normal course of business. The general principles of agency govern the relation between
the corporation and its officers or agents, subject to the articles of incorporation, by-laws, or relevant provisions of law. 26
Under Section 36 of the Corporation Code, a corporation may sell or convey its real properties, subject to the limitations prescribed by law
and the Constitution, as follows:
SEC. 36. Corporate powers and capacity.Every corporation incorporated under this Code has the power and capacity:
xxxx
7. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and otherwise deal with such real and per-
_______________
24
Blair v. Sheridan, 10 S.E. 414 (1889).
25
Philippine National Bank v. Ritratto Group, Inc., 414 Phil. 494, 503;362 SCRA 216, 223 (2001).
26
San Juan Structural and Steel Fabricators, Inc. v. Court of Appeals,357 Phil. 631, 644; 296 SCRA 631, 645 (1998).
220
220
sonal property, including securities and bonds of other corporations, as the transaction of a lawful business of the corporation may reasonably
and necessarily require, subject to the limitations prescribed by the law and the Constitution.
The property of a corporation, however, is not the property of the stockholders or members, and as such, may not be sold without express
authority from the board of directors. 27Physical acts, like the offering of the properties of the corporation for sale, or the acceptance of a
counter-offer of prospective buyers of such properties and the execution of the deed of sale covering such property, can be performed by the
corporation only by officers or agents duly authorized for the purpose by corporate by-laws or by specific acts of the board of
directors.28 Absent such valid delegation/authorization, the rule is that the declarations of an individual director relating to the affairs of the
corporation, but not in the course of, or connected with, the performance of authorized duties of such director, are not binding on the
corporation.29
While a corporation may appoint agents to negotiate for the sale of its real properties, the final say will have to be with the board of
directors through its officers and agents as authorized by a board resolution or by its by-laws. 30 An unauthorized act of an officer of the
corporation is not binding on it unless the latter ratifies the same expressly or impliedly by its board of directors. Any sale of real property of a
corporation by a person purporting to be an agent thereof but without written authority from the corporation is null and void. The
_______________
27
Traders Royal Bank v. Court of Appeals, G.R. No. 78412, September 26, 1989, 177 SCRA 788, 792.
28
BPI Leasing Corporation v. Court of Appeals, G.R. No. 127624, November 18, 2003, 416 SCRA 4, 11.
29
AF Realty & Development, Inc. v. Dieselman Freight Services, Co.,424 Phil. 446, 454; 373 SCRA 385, 391 (2002).
30
De Liano v. Court of Appeals, 421 Phil. 1033, 1052; 370 SCRA 349, 372 (2001).
221
VOL. 490, JUNE 8, 2006
221
declarations of the agent alone are generally insufficient to establish the fact or extent of his/her authority. 31
By the contract of agency, a person binds himself to render some service or to do something in representation on behalf of another, with
the consent or authority of the latter. 32 Consent of both principal and agent is necessary to create an agency. The principal must intend that
the agent shall act for him; the agent must intend to accept the authority and act on it, and the intention of the parties must find expression
either in words or conduct between them.33
An agency may be expressed or implied from the act 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. Acceptance by the agent may be expressed, or implied from his
acts which carry out the agency, or from his silence or inaction according to the circumstances. 34 Agency may be oral unless the law requires a
specific form.35 However, to create or convey real rights over immovable property, a special power of attorney is necessary. 36 Thus, when a
sale of a piece of land or any portion thereof is through an agent, the authority of the latter shall be in writing, otherwise, the sale shall be
void.37
In this case, the petitioners as plaintiffs below, failed to adduce in evidence any resolution of the Board of Directors of respondent EC
empowering Marquez, Glanville or Delsaux as its agents, to sell, let alone offer for sale, for and in its behalf, the eight parcels of land owned by
respondent EC including
_______________
31
Litonjua v. Fernandez, supra note 22, at p. 493.
32
Article 1868, NEW CIVIL CODE.
33
Ellison v. Hunsinger, 75 S.E. 2d. 884 (1953); Dominion Insurance Corporation v. Court of Appeals, 426 Phil. 620, 626; 376 SCRA 239, 243
(2002).
34
CIVIL CODE, Art. 1870.
35
CIVIL CODE, Art. 1869, paragraph 2.
36
CIVIL CODE, Art. 1878(12).
37
CIVIL CODE, Art. 1874.
222
222
the improvements thereon. The bare fact that Delsaux may have been authorized to sell to Ruperto Tan the shares of stock of respondent
ESAC, on June 1, 1997, cannot be used as basis for petitioners claim that he had likewise been authorized by respondent EC to sell the parcels
of land.
Moreover, the evidence of petitioners shows that Adams and Glanville acted on the authority of Delsaux, who, in turn, acted on the
authority of respondent ESAC, through its Committee for Asia, 38 the Board of Directors of respondent ESAC, 39 and the Belgian/Swiss component
of the management of respondent ESAC. 40 As such, Adams and Glanville engaged the services of Marquez to offer to sell the properties to
prospective buyers. Thus, on September 12, 1986, Marquez wrote the petitioner that he was authorized to offer for sale the property for
P27,000,000.00 and the other terms of the sale subject to negotiations. When petitioners offered to purchase the property for P20,000,000.00,
through Marquez, the latter relayed petitioners offer to Glanville; Glanville had to send a telex to Delsaux to inquire the position of respondent
ESAC to petitioners offer. However, as admitted by petitioners in their Memorandum, Delsaux was unable to reply immediately to the telex of
Glanville because Delsaux had to wait for confirmation from respondent ESAC. 41When Delsaux finally responded to Glanville on February 12,
1987, he made it clear that, based on the Belgian/Swiss decision the final offer of respondent ESAC was US$1,000,000.00 plus
P2,500,000.00 to cover all existing obligations prior to final liquidation. 42 The offer of Delsaux emanated only from the Belgian/Swiss
decision, and not the entire management or Board of Directors of respondent ESAC. While it is true that petitioners accepted the counter-offer
of respondent ESAC, respondent EC was not
_______________
38
Exhibits H and H-1, Rollo, p. 166.
39
Exhibits G and G-1, Id.
40
Exhibits C and C-1, Id., at p. 165.
41
Rollo, p. 396.
42
Exhibits C and C-1, Rollo, p. 165.
223
VOL. 490, JUNE 8, 2006
223
a party to the transaction between them; hence, EC was not bound by such acceptance.
While Glanville was the President and General Manager of respondent EC, and Adams and Delsaux were members of its Board of Directors,
the three acted for and in behalf of respondent ESAC, and not as duly authorized agents of respondent EC; a board resolution evincing the
grant of such authority is needed to bind EC to any agreement regarding the sale of the subject properties. Such board resolution is not a mere
formality but is a condition sine qua non to bind respondent EC. Admittedly, respondent ESAC owned 90% of the shares of stocks of
respondent EC; however, the mere fact that a corporation owns a majority of the shares of stocks of another, or even all of such shares of
stocks, taken alone, will not justify their being treated as one corporation. 43
It bears stressing that in an agent-principal relationship, the personality of the principal is extended through the facility of the agent. In so
doing, the agent, by legal fiction, becomes the principal, authorized to perform all acts which the latter would have him do. Such a relationship
can only be effected with the consent of the principal, which must not, in any way, be compelled by law or by any court. 44
The petitioners cannot feign ignorance of the absence of any regular and valid authority of respondent EC empowering Adams, Glanville or
Delsaux to offer the properties for sale and to sell the said properties to the petitioners. A person dealing with a known agent is not authorized,
under any circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act negligently but must
use reasonable diligence and prudence to ascertain
_______________
43
Philippine National Bank v. Ritratto Group, Inc., supra note 25, at p. 503; p. 223.
44
Orient Air Services and Hotel Representatives v. Court of Appeals,274 Phil. 927, 939; 197 SCRA 645, 656 (1991).
224
224
whether the agent acts within the scope of his authority. 45The settled rule is that, persons dealing with an assumed agent are bound at their
peril, and if they would hold the principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in
case either is controverted, the burden of proof is upon them to prove it. 46 In this case, the petitioners failed to discharge their burden; hence,
petitioners are not entitled to damages from respondent EC.
It appears that Marquez acted not only as real estate broker for the petitioners but also as their agent. As gleaned from the letter of
Marquez to Glanville, on February 26, 1987, he confirmed, for and in behalf of the petitioners, that the latter had accepted such offer to sell
the land and the improvements thereon. However, we agree with the ruling of the appellate court that Marquez had no authority to bind
respondent EC to sell the subject properties. A real estate broker is one who negotiates the sale of real properties. His business, generally
speaking, is only to find a purchaser who is willing to buy the land upon terms fixed by the owner. He has no authority to bind the principal by
signing a contract of sale. Indeed, an authority to find a purchaser of real property does not include an authority to sell. 47
Equally barren of merit is petitioners contention that respondent EC is estopped to deny the existence of a principalagency relationship
between it and Glanville or Delsaux. For an agency by estoppel to exist, the following must be established: (1) the principal manifested a
representation of the agents authority or knowingly allowed the agent to assume such authority; (2) the third person, in good faith, relied
upon such representation; (3) relying upon such representation,
_______________
45
Hill v. Delta Loan and Finance Company, 277 S.W. 2d 63, 65.
46
Litonjua v. Fernandez, supra note 22, at p. 494; Culaba v. Court of Appeals, supra note 22, at p. 730; BA Finance Corporation v. Court of
Appeals, G.R. No. 94566, July 3, 1992, 211 SCRA 112, 116.
47
Donnan v. Adams, 71 S.W. 580.
225
VOL. 490, JUNE 8, 2006
225
such third person has changed his position to his detriment. 48 An agency by estoppel, which is similar to the doctrine of apparent authority,
requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in
reliance.49 Such proof is lacking in this case. In their communications to the petitioners, Glanville and Delsaux positively and unequivocally
declared that they were acting for and in behalf of respondent ESAC.
Neither may respondent EC be deemed to have ratified the transactions between the petitioners and respondent ESAC, through Glanville,
Delsaux and Marquez. The transactions and the various communications inter se were never submitted to the Board of Directors of respondent
EC for ratification.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioners.
SO ORDERED.
Panganiban (C.J., Chairperson), Austria-Martinezand Chico-Nazario, JJ., concur.
Ynares-Santiago, J., On Leave.
Petition denied.
Note.The basis of agency is representationpersons dealing with an assumed agent are bound at their peril to ascertain not only the
fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish it.
(Culaba vs. Court of Appeals, 427 SCRA 721 [2004])
SPOUSES FERNANDO and LOURDES VILORIA, petitioners, vs. CONTINENTAL AIRLINES, INC., respondent.
Civil Law; Agency; Essential Elements of Agency.In Rallos v. Felix Go Chan & Sons Realty Corporation, 81 SCRA 251 (1978), this Court
explained the nature of an agency and spelled out the essential elements thereof: Out of the above given principles, sprung the creation and
acceptance of the relationship of agencywhereby one party, called the principal (mandante), authorizes another, called the agent
(mandatario), to act for and in his behalf in transactions with third persons. The essential elements of agency are: (1) there is consent, express
or implied of the parties to establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent
acts as a representative and not for himself, and (4) the agent acts within the scope of his authority. Agency is basically personal,
representative, and derivative in nature. 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. Qui facit per alium facit se. He who acts through another acts himself.
Same; Same; Sale and Agency, Distinguished.The distinctions between a sale and an agency are not difficult to discern and this
Court, as early as 1970, had already formulated the guidelines that would aid in differentiating the two (2) contracts. In Commissioner of
Internal Revenue v. Constantino, 31 SCRA 779 (1970), this Court extrapolated that the primordial differentiating consideration between the
two (2) contracts is the transfer of ownership or title over the property subject of the contract. In an agency, the principal retains ownership
and control over the property and the agent merely acts on the principals behalf and under his instructions in furtherance of the objectives for
which the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will
effect a relinquishment of title, control and ownership in such a way that the recipient may do with the property as he pleases.
_______________
* SECOND DIVISION.
58
5
8
Viloria vs. Continental Airlines, Inc.
Same; Common Carriers; Quasi-delicts; Air Transportation; Vicarious Liability; An airline company is not completely exonerated from any
liability for the tort committed by its agents employees.An airline company is not completely exonerated from any liability for the tort
committed by its agents employees. A prior determination of the nature of the passengers cause of action is necessary. If the passengers
cause of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the employee of the airline
companys agent, there must be an independent showing that the airline company was at fault or negligent or has contributed to the
negligence or tortuous conduct committed by the employee of its agent. The mere fact that the employee of the airline companys agent has
committed a tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline company and its agents
employees and the contractual relationship between the airline company and its agent does not operate to create a juridical tie between the
airline company and its agents employees. Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed
by its agents employees and the principal-agency relationship per se does not make the principal a party to such tort; hence, the need to
prove the principals own fault or negligence.
Same; Same; Same; Same; In an action based on a breach of contract of carriage, the aggrieved party does not have to prove that the
common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its non-performance by
the carrier.If the passengers cause of action for damages against the airline company is based on contractual breach or culpa contractual, it
is not necessary that there be evidence of the airline companys fault or negligence. As this Court previously stated in China Air Lines and
reiterated in Air France vs. Gillego, 638 SCRA 472 (2010), in an action based on a breach of contract of carriage, the aggrieved party does not
have to prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its
non-performance by the carrier.
Same; Contracts; Voidable Contracts; Fraud; Prescription; If the consent of the contracting parties was obtained through fraud, the
contract is considered voidable and may be annulled within four (4)
59
VOL. 663, JANUARY 16, 2012
5
9

years from the time of the discovery of the fraud.Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent
of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four (4) years from the
time of the discovery of the fraud. Once a contract is annulled, the parties are obliged under Article 1398 of the same Code to restore to each
other the things subject matter of the contract, including their fruits and interest.
Same; Same; Same; Same; There is fraud when, through insidious words or machinations of one of the contracting parties, the other is
induced to enter into a contract which, without them, he would not have agreed to. Under Article 1338 of the Civil Code, there is fraud when,
through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to. In order that fraud may vitiate consent, it must be the causal ( dolo causante), not merely the incidental (dolo
incidente), inducement to the making of the contract. In Samson v. Court of Appeals, 238 SCRA 397 (1994), causal fraud was defined as a
deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other. Also, fraud must be
serious and its existence must be established by clear and convincing evidence.
Same; Same; Same; Voidable contracts may be ratified expressly or impliedly. Implied ratification may take diverse forms, such as by
silence or acquiescence; by acts showing approval or adoption of the contract; or by acceptance and retention of benefits flowing therefrom.
Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows: Art. 1393. Ratification may be effected expressly
or tacitly. It is understood that there is a tacit ratification if, with knowledge of the reason which renders the contract voidable and such reason
having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. Implied
ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by
acceptance and retention of benefits flowing therefrom.
Same; Same; Same; A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its
existence or validity.Annulment under Article 1390 of the Civil
60
6
0
Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution, all the elements to make the contract valid are
present; in annulment, one of the essential elements to a formation of a contract, which is consent, is absent. In resolution, the defect is in the
consummation stage of the contract when the parties are in the process of performing their respective obligations; in annulment, the defect is
already present at the time of the negotiation and perfection stages of the contract. Accordingly, by pursuing the remedy of rescission under
Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts, forfeiting their right to demand their annulment. A party
cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Indeed, litigants are
enjoined from taking inconsistent positions.
Same; Common Carriers; As a common carrier whose business is imbued with public interest, the exercise of extraordinary diligence
requires the airline company to inform all of its passengers of all the terms and conditions governing their contract of carriage.Contrary to
CAIs claim, that the subject tickets are non-transferable cannot be implied from a plain reading of the provision printed on the subject tickets
stating that [t]o the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (a)
provisions contained in this ticket, x x x (iii) carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier) x x x. As a common carrier whose business is imbued with public interest, the exercise of
extraordinary diligence requires CAI to inform Spouses Viloria, or all of its passengers for that matter, of all the terms and conditions governing
their contract of carriage. CAI is proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its
passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated. Since the prohibition on
transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to apply the
value of Lourdes ticket as payment for Fernandos purchase of a new ticket.
Same; Contracts; Rescission; The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only
for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement.The right to
61
VOL. 663, JANUARY 16, 2012
6
1

rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a contract will not be
permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very object of the parties
in making the agreement. Whether a breach is substantial is largely determined by the attendant circumstances.
Remedial Law; Evidence; Newspaper Clippings; Hearsay Evidence Rule; Newspaper clippings are hearsay if they were offered for the
purpose of proving the truth of the matter alleged.The only evidence the petitioners presented to prove that the price of a round trip ticket
between Manila and Los Angeles at that time was only $856.00 is a newspaper advertisement for another airline company, which is
inadmissible for being hearsay evidence, twice removed. Newspaper clippings are hearsay if they were offered for the purpose of proving
the truth of the matter alleged. As ruled in Feria v. Court of Appeals, 325 SCRA 525 (2000): [N]ewspaper articles amount to hearsay evidence,
twice removed and are therefore not only inadmissible but without any probative value at all whether objected to or not, unless offered for a
purpose other than proving the truth of the matter asserted. In this case, the news article is admissible only as evidence that such publication
does exist with the tenor of the news therein stated.
Quasha, Ancheta, Pea & Nolasco for petitioners.
Quisumbing, Torres for respondent.
REYES,J.:
This is a petition for review under Rule 45 of the Rules of Court from the January 30, 2009 Decision 1 of the Special
_______________
1 Penned by Associate Justice Monina Arevalo-Zenarosa, with Associate Justices Isaias P. Dicdican and Ramon M. Bato, Jr., concurring; Rollo,
pp. 42-54.
62
62

Thirteenth Division of the Court of Appeals (CA) in CA-G.R. CV No. 88586 entitled Spouses Fernando and Lourdes Viloria v. Continental
Airlines, Inc., the dispositive portion of which states:
WHEREFORE, the Decision of the Regional Trial Court, Branch 74, dated 03 April 2006, awarding US$800.00 or its peso equivalent at the
time of payment, plus legal rate of interest from 21 July 1997 until fully paid, [P]100,000.00 as moral damages, [P]50,000.00 as exemplary
damages, [P]40,000.00 as attorneys fees and costs of suit to plaintiffs-appellees is herebyREVERSED and SET ASIDE.
Defendant-appellants counterclaim is DENIED.
Costs against plaintiffs-appellees.
SO ORDERED.2
On April 3, 2006, the Regional Trial Court of Antipolo City, Branch 74 (RTC) rendered a Decision, giving due course to the complaint for sum
of money and damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes), collectively called Spouses Viloria,
against respondent Continental Airlines, Inc. (CAI). As culled from the records, below are the facts giving rise to such complaint.
On or about July 21, 1997 and while in the United States, Fernando purchased for himself and his wife, Lourdes, two (2) round trip airline
tickets from San Diego, California to Newark, New Jersey on board Continental Airlines. Fernando purchased the tickets at US$400.00 each
from a travel agency called Holiday Travel and was attended to by a certain Margaret Mager (Mager). According to Spouses Viloria, Fernando
agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak, an intercity passenger train service
provider in the United States. Per the tickets, Spouses Viloria were scheduled to leave for New_______________
2 Id., at p. 53.
63
VOL. 663, JANUARY 16, 2012
63
ark on August 13, 1997 and return to San Diego on August 21, 1997.
Subsequently, Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6, 1997. Mager informed him
that flights to Newark via Continental Airlines were already fully booked and offered the alternative of a round trip flight via Frontier Air. Since
flying with Frontier Air called for a higher fare of US$526.00 per passenger and would mean traveling by night, Fernando opted to request for a
refund. Mager, however, denied his request as the subject tickets are non-refundable and the only option that Continental Airlines can offer is
the re-issuance of new tickets within one (1) year from the date the subject tickets were issued. Fernando decided to reserve two (2) seats with
Frontier Air.
As he was having second thoughts on traveling viaFrontier Air, Fernando went to the Greyhound Station where he saw an Amtrak station
nearby. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased.
Fernando then purchased two (2) tickets for Washington, D.C.
From Amtrak, Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets, telling her that she had misled them into
buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked. Fernando reiterated his demand for a refund
but Mager was firm in her position that the subject tickets are non-refundable.
Upon returning to the Philippines, Fernando sent a letter to CAI on February 11, 1998, demanding a refund and alleging that Mager had
deluded them into purchasing the subject tickets. 3
_______________
3 Id., at p. 64.
64
64

In a letter dated February 24, 1998, Continental Micronesia informed Fernando that his complaint had been referred to the Customer
Refund Services of Continental Airlines at Houston, Texas. 4
In a letter dated March 24, 1998, Continental Micronesia denied Fernandos request for a refund and advised him that he may take the
subject tickets to any Continental ticketing location for the re-issuance of new tickets within two (2) years from the date they were issued.
Continental Micronesia informed Fernando that the subject tickets may be used as a form of payment for the purchase of another Continental
ticket, albeit with a re-issuance fee.5
On June 17, 1999, Fernando went to Continentals ticketing office at Ayala Avenue, Makati City to have the subject tickets replaced by a
single round trip ticket to Los Angeles, California under his name. Therein, Fernando was informed that Lourdes ticket was non-transferable,
thus, cannot be used for the purchase of a ticket in his favor. He was also informed that a round trip ticket to Los Angeles was US$1,867.40 so
he would have to pay what will not be covered by the value of his San Diego to Newark round trip ticket.
In a letter dated June 21, 1999, Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. In
addition to the dubious circumstances under which the subject tickets were issued, Fernando claimed that CAIs act of charging him with
US$1,867.40 for a round trip ticket to Los Angeles, which other airlines priced at US$856.00, and refusal to allow him to use Lourdes ticket,
breached its undertaking under its March 24, 1998 letter. 6
On September 8, 2000, Spouses Viloria filed a complaint against CAI, praying that CAI be ordered to refund the money they used in the
purchase of the subject tickets with legal
_______________
4 Id., at p. 65.
5 Id., at p. 67.
6 Id., at p. 68.
65
VOL. 663, JANUARY 16, 2012
65

interest from July 21, 1997 and to pay P1,000,000.00 as moral damages, P500,000.00 as exemplary damages and P250,000.00 as attorneys
fees.7
CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable; (b)
Fernando cannot insist on using the ticket in Lourdes name for the purchase of a round trip ticket to Los Angeles since the same is nontransferable; (c) as Mager is not a CAI employee, CAI is not liable for any of her acts; (d) CAI, its employees and agents did not act in bad faith
as to entitle Spouses Viloria to moral and exemplary damages and attorneys fees. CAI also invoked the following clause printed on the subject
tickets:
3.To the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject to: (i) provisions
contained in this ticket, (ii) applicable tariffs, (iii) carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier), except in transportation between a place in the United States or Canada and any place
outside thereof to which tariffs in force in those countries apply. 8
According to CAI, one of the conditions attached to their contract of carriage is the non-transferability and non-refundability of the subject
tickets.
The RTCs Ruling
Following a full-blown trial, the RTC rendered its April 3, 2006 Decision, holding that Spouses Viloria are entitled to a refund in view of
Magers misrepresentation in obtaining their consent in the purchase of the subject tickets. 9 The relevant portion of the April 3, 2006 Decision
states:
_______________
7 Id., at pp. 69-76.
8 Id., at p. 80.
9 Id., at pp. 77-85.
66
66

Continental Airlines agent Ms. Mager was in bad faith when she was less candid and diligent in presenting to plaintiffs spouses their
booking options. Plaintiff Fernando clearly wanted to travel via AMTRAK, but defendants agent misled him into purchasing Continental Airlines
tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. In fact, defendant Airline did not specifically denied ( sic) this
allegation.
Plainly, plaintiffs spouses, particularly plaintiff Fernando, were tricked into buying Continental Airline tickets on Ms. Magers misleading
misrepresentations. Continental Airlines agent Ms. Mager further relied on and exploited plaintiff Fernandos need and told him that they must
book a flight immediately or risk not being able to travel at all on the couples preferred date. Unfortunately, plaintiffs spouses fell prey to the
airlines and its agents unethical tactics for baiting trusting customers. 10
Citing Articles 1868 and 1869 of the Civil Code, the RTC ruled that Mager is CAIs agent, hence, bound by her bad faith and
misrepresentation. As far as the RTC is concerned, there is no issue as to whether Mager was CAIs agent in view of CAIs implied recognition of
her status as such in its March 24, 1998 letter.
The act of a travel agent or agency being involved here, the following are the pertinent New Civil Code provisions on agency:
Art.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.
Art.1869.Agency may be express, or implied from the acts of the principal, from his silence or lack of action, or his failure to
repudiate the agency, knowing that another person is acting on his behalf without authority.
Agency may be oral, unless the law requires a specific form.
_______________
10 Id., at p. 84.
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VOL. 663, JANUARY 16, 2012
67

As its very name implies, a travel agency binds itself to render some service or to do something in representation or on behalf of another,
with the consent or authority of the latter. This court takes judicial notice of the common services rendered by travel agencies that represent
themselves as such, specifically the reservation and booking of local and foreign tours as well as the issuance of airline tickets for a
commission or fee.
The services rendered by Ms. Mager of Holiday Travel agency to the plaintiff spouses on July 21, 1997 were no different from those offered
in any other travel agency. Defendant airline impliedly if not expressly acknowledged its principal-agent relationship with Ms. Mager by its offer
in the letter dated March 24, 1998an obvious attempt to assuage plaintiffs spouses hurt feelings. 11
Furthermore, the RTC ruled that CAI acted in bad faith in reneging on its undertaking to replace the subject tickets within two (2) years from
their date of issue when it charged Fernando with the amount of US$1,867.40 for a round trip ticket to Los Angeles and when it refused to
allow Fernando to use Lourdes ticket. Specifically:
Tickets may be reissued for up to two years from the original date of issue. When defendant airline still charged plaintiffs spouses
US$1,867.40 or more than double the then going rate of US$856.00 for the unused tickets when the same were presented within two (2) years
from date of issue, defendant airline exhibited callous treatment of passengers. 12
The Appellate Courts Ruling
On appeal, the CA reversed the RTCs April 3, 2006 Decision, holding that CAI cannot be held liable for Magers act in the absence of any
proof that a principal-agent relationship existed between CAI and Holiday Travel. According to the CA, Spouses Viloria, who have the burden of
proof to establish the fact of agency, failed to present evidence demonstrat_______________
11 Id., at p. 83.
12 Id., at p. 84.
68
68
ing that Holiday Travel is CAIs agent. Furthermore, contrary to Spouses Vilorias claim, the contractual relationship between Holiday Travel and
CAI is not an agency but that of a sale.
Plaintiffs-appellees assert that Mager was a sub-agent of Holiday Travel who was in turn a ticketing agent of Holiday Travel who was in turn
a ticketing agent of Continental Airlines. Proceeding from this premise, they contend that Continental Airlines should be held liable for the acts
of Mager. The trial court held the same view.
We do not agree. By the contract of agency, a person binds him/herself to render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter. The elements of agency are: (1) consent, express or implied, of the parties to
establish the relationship; (2) the object is the execution of a juridical act in relation to a third person; (3) the agent acts as a representative
and not for him/herself; and (4) the agent acts within the scope of his/her authority. As the basis of agency is representation, there must be, on
the part of the principal, an actual intention to appoint, an intention naturally inferable from the principals words or actions. In the same
manner, there must be an intention on the part of the agent to accept the appointment and act upon it. Absent such mutual intent, there is
generally no agency. It is likewise a settled rule that persons dealing with an assumed agent are bound at their peril, if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to establish it. Agency is never presumed, neither is it created by the mere use of the word in a trade or business
name. We have perused the evidence and documents so far presented. We find nothing except bare allegations of plaintiffs-appellees that
Mager/Holiday Travel was acting in behalf of Continental Airlines. From all sides of legal prism, the transaction in issue was simply a contract of
sale, wherein Holiday Travel buys airline tickets from Continental Airlines and then, through its employees, Mager included, sells it at a
premium to clients.13
_______________
13 Id., at pp. 50-51.
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VOL. 663, JANUARY 16, 2012
69

The CA also ruled that refund is not available to Spouses Viloria as the word non-refundable was clearly printed on the face of the subject
tickets, which constitute their contract with CAI. Therefore, the grant of their prayer for a refund would violate the proscription against
impairment of contracts.
Finally, the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher amount of US$1,867.40 for a round
trip ticket to Los Angeles. According to the CA, there is no compulsion for CAI to charge the lower amount of US$856.00, which Spouses Viloria
claim to be the fee charged by other airlines. The matter of fixing the prices for its services is CAIs prerogative, which Spouses Viloria cannot
intervene. In particular:
It is within the respective rights of persons owning and/or operating business entities to peg the premium of the services and items which
they provide at a price which they deem fit, no matter how expensive or exhorbitant said price may seem vis--vis those of the competing
companies. The Spouses Viloria may not intervene with the business judgment of Continental Airlines. 14
The Petitioners Case
In this Petition, this Court is being asked to review the findings and conclusions of the CA, as the latters reversal of the RTCs April 3, 2006
Decision allegedly lacks factual and legal bases. Spouses Viloria claim that CAI acted in bad faith when it required them to pay a higher
amount for a round trip ticket to Los Angeles considering CAIs undertaking to re-issue new tickets to them within the period stated in their
March 24, 1998 letter. CAI likewise acted in bad faith when it disallowed Fernando to use Lourdes ticket to purchase a round trip to Los
Angeles given that there is nothing in Lourdes ticket indicating that it is non-transferable. As a
_______________
14 Id., at p. 52.
70
70

common carrier, it is CAIs duty to inform its passengers of the terms and conditions of their contract and passengers cannot be bound by such
terms and conditions which they are not made aware of. Also, the subject contract of carriage is a contract of adhesion; therefore, any
ambiguities should be construed against CAI. Notably, the petitioners are no longer questioning the validity of the subject contracts and
limited its claim for a refund on CAIs alleged breach of its undertaking in its March 24, 1998 letter.
The Respondents Case
In its Comment, CAI claimed that Spouses Vilorias allegation of bad faith is negated by its willingness to issue new tickets to them and to
credit the value of the subject tickets against the value of the new ticket Fernando requested. CAI argued that Spouses Vilorias sole basis to
claim that the price at which CAI was willing to issue the new tickets is unconscionable is a piece of hearsay evidencean advertisement
appearing on a newspaper stating that airfares from Manila to Los Angeles or San Francisco cost US$818.00. 15 Also, the advertisement pertains
to airfares in September 2000 and not to airfares prevailing in June 1999, the time when Fernando asked CAI to apply the value of the subject
tickets for the purchase of a new one. 16CAI likewise argued that it did not undertake to protect Spouses Viloria from any changes or
fluctuations in the prices of airline tickets and its only obligation was to apply the value of the subject tickets to the purchase of the newly
issued tickets.
With respect to Spouses Vilorias claim that they are not aware of CAIs restrictions on the subject tickets and that the terms and conditions
that are printed on them are ambiguous, CAI denies any ambiguity and alleged that its representative informed Fernando that the subject
tickets are non_______________
15 Id., at p. 214.
16 Id., at p. 215.
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VOL. 663, JANUARY 16, 2012
71

transferable when he applied for the issuance of a new ticket. On the other hand, the word non-refundable clearly appears on the face of the
subject tickets.
CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency relationship exists between them. As
an independent contractor, Holiday Travel was without capacity to bind CAI.
Issues
To determine the propriety of disturbing the CAs January 30, 2009 Decision and whether Spouses Viloria have the right to the reliefs they
prayed for, this Court deems it necessary to resolve the following issues:
a.Does a principal-agent relationship exist between CAI and Holiday Travel?
b.Assuming that an agency relationship exists between CAI and Holiday Travel, is CAI bound by the acts of Holiday Travels agents and
employees such as Mager?
c.Assuming that CAI is bound by the acts of Holiday Travels agents and employees, can the representation of Mager as to unavailability
of seats at Amtrak be considered fraudulent as to vitiate the consent of Spouse Viloria in the purchase of the subject tickets?
d.Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable?
e.Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by Fernando?
f.Alternatively, did CAI act in bad faith or renege its obligation to Spouses Viloria to apply the value of the subject tickets in the purchase
of new ones when it refused to allow Fernando to use Lourdes ticket and in charging a higher price for a round trip ticket to Los
Angeles?72
72

This Courts Ruling
I.A
principal-agent
relationship
exists
between
CAI
and
Holiday
Travel.
With respect to the first issue, which is a question of fact that would require this Court to review and re-examine the evidence presented by
the parties below, this Court takes exception to the general rule that the CAs findings of fact are conclusive upon Us and our jurisdiction is
limited to the review of questions of law. It is well-settled to the point of being axiomatic that this Court is authorized to resolve questions of
fact if confronted with contrasting factual findings of the trial court and appellate court and if the findings of the CA are contradicted by the
evidence on record.17
According to the CA, agency is never presumed and that he who alleges that it exists has the burden of proof. Spouses Viloria, on whose
shoulders such burden rests, presented evidence that fell short of indubitably demonstrating the existence of such agency.
We disagree. The CA failed to consider undisputed facts, discrediting CAIs denial that Holiday Travel is one of its agents. Furthermore, in
erroneously characterizing the contractual relationship between CAI and Holiday Travel as a contract of sale, the CA failed to apply the
fundamental civil law principles governing agency and differentiating it from sale.
In Rallos v. Felix Go Chan & Sons Realty Corporation,18this Court explained the nature of an agency and spelled out the essential elements
thereof:
_______________
17 See Heirs of Jose Lim v. Lim, G.R. No. 172690, March 3, 2010, 614 SCRA 141, 147; Ontimare, Jr. v. Spouses Elep, G.R. No. 159224,
January 20, 2006, 479 SCRA 257, 265.
18 171 Phil. 222; 81 SCRA 251 (1978).
73
VOL. 663, JANUARY 16, 2012
73
Out of the above given principles, sprung the creation and acceptance of the relationship of agency whereby one party, called the
principal (mandante), authorizes another, called the agent (mandatario), to act for and in his behalf in transactions with third persons. The
essential elements of agency are: (1) there is consent, express or implied of the parties to establish the relationship; (2) the object is the
execution of a juridical act in relation to a third person; (3) the agent acts as a representative and not for himself, and (4) the agent acts within
the scope of his authority.
Agency is basically personal, representative, and derivative in nature. 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. Qui facit per alium facit se. He who acts
through another acts himself.19
Contrary to the findings of the CA, all the elements of an agency exist in this case. The first and second elements are present as CAI does
not deny that it concluded an agreement with Holiday Travel, whereby Holiday Travel would enter into contracts of carriage with third persons
on CAIs behalf. The third element is also present as it is undisputed that Holiday Travel merely acted in a representative capacity and it is CAI
and not Holiday Travel who is bound by the contracts of carriage entered into by Holiday Travel on its behalf. The fourth element is also
present considering that CAI has not made any allegation that Holiday Travel exceeded the authority that was granted to it. In fact, CAI
consistently maintains the validity of the contracts of carriage that Holiday Travel executed with Spouses Viloria and that Mager was not guilty
of any fraudulent misrepresentation. That CAI
_______________
19 Id., at pp. 226-227; p. 259, citing Articles 1868 and 1881, New Civil Code; 11 Manresa 422-423; 4 Sanchez Roman 478, 2nd Ed.; 25
Scaevola, 243, 262; Tolentino, Comments, Civil Code of the Philippines, p. 340, vol. 5, 1959 Ed., Columbia University Club v. Higgins, D.C.N.Y.,
23 f. Supp. 572, 574; Valentine Oil Co. v. Young, 109 P. 2d 180, 185; 74 C.J.S. 4;Valentine Oil Co. v. Powers, 59 N.W. 2d 160, 163, 157 Neb.
87; Purnell v. City of Florence, 175 So. 417, 27 Ala. App. 516; Stroman Motor Co. v. Brown; 243 P. 133, 126 Ok. 36.
74
74

admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24, 1998 and March
24, 1998 letters, where it impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. When Fernando
informed CAI that it was Holiday Travel who issued to them the subject tickets, CAI did not deny that Holiday Travel is its authorized agent.
Prior to Spouses Vilorias filing of a complaint against it, CAI never refuted that it gave Holiday Travel the power and authority to conclude
contracts of carriage on its behalf. As clearly extant from the records, CAI recognized the validity of the contracts of carriage that Holiday
Travel entered into with Spouses Viloria and considered itself bound with Spouses Viloria by the terms and conditions thereof; and this
constitutes an unequivocal testament to Holiday Travels authority to act as its agent. This Court cannot therefore allow CAI to take an
altogether different position and deny that Holiday Travel is its agent without condoning or giving imprimatur to whatever damage or prejudice
that may result from such denial or retraction to Spouses Viloria, who relied on good faith on CAIs acts in recognition of Holiday Travels
authority. Estoppel is primarily based on the doctrine of good faith and the avoidance of harm that will befall an innocent party due to its
injurious reliance, the failure to apply it in this case would result in gross travesty of justice. 20 Estoppel bars CAI from making such denial.
As categorically provided under Article 1869 of the Civil Code, [a]gency may be express, or implied from the acts of the principal, from his
silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority.
_______________
20 Philippine Airlines, Inc. v. Court of Appeals, 325 Phil. 303, 323; 255 SCRA 48, 66 (1996).
75
VOL. 663, JANUARY 16, 2012
75

Considering that the fundamental hallmarks of an agency are present, this Court finds it rather peculiar that the CA had branded the
contractual relationship between CAI and Holiday Travel as one of sale. The distinctions between a sale and an agency are not difficult to
discern and this Court, as early as 1970, had already formulated the guidelines that would aid in differentiating the two (2) contracts.
In Commissioner of Internal Revenue v. Constantino,21 this Court extrapolated that the primordial differentiating consideration between the two
(2) contracts is the transfer of ownership or title over the property subject of the contract. In an agency, the principal retains ownership and
control over the property and the agent merely acts on the principals behalf and under his instructions in furtherance of the objectives for
which the agency was established. On the other hand, the contract is clearly a sale if the parties intended that the delivery of the property will
effect a relinquishment of title, control and ownership in such a way that the recipient may do with the property as he pleases.
Since the company retained ownership of the goods, even as it delivered possession unto the dealer for resale to customers, the price and
terms of which were subject to the companys control, the relationship between the company and the dealer is one of agency, tested under
the following criterion:
The difficulty in distinguishing between contracts of sale and the creation of an agency to sell has led to the establishment of rules by the
application of which this difficulty may be solved. The decisions say the transfer of title or agreement to transfer it for a price paid or promised
is the essence of sale. If such transfer puts the transferee in the attitude or position of an owner and makes him liable to the transferor as a
debtor for the agreed price, and not merely as an agent who must account for the proceeds of a resale, the transaction is a sale; while the
essence of an agency to sell is the delivery to an agent, not as his property, but as the property of the principal, who remains the owner and
has the right to control sales,
_______________
21 G.R. No. L-25926, February 27, 1970, 31 SCRA 779.
76
76

fix the price, and terms, demand and receive the proceeds less the agents commission upon sales made. 1 Mechem on Sales, Sec. 43; 1
Mechem on Agency, Sec. 48; Williston on Sales, 1; Tiedeman on Sales, 1. (Salisbury v. Brooks, 94 SE 117, 118-119)22
As to how the CA have arrived at the conclusion that the contract between CAI and Holiday Travel is a sale is certainly confounding,
considering that CAI is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its behalf. It is
undisputed that CAI and not Holiday Travel who is the party to the contracts of carriage executed by Holiday Travel with third persons who
desire to travel via Continental Airlines, and this conclusively indicates the existence of a principal-agent relationship. That the principal is
bound by all the obligations contracted by the agent within the scope of the authority granted to him is clearly provided under Article 1910 of
the Civil Code and this constitutes the very notion of agency.
II.In
actions
based
on
quasi-delict,
a
principal
can
only
be
held
liable
for
the
tort
committed
by
its
agents
employees
if
it
has
been
established
by
preponderance
of
evidence
that
the
principal
was
also
at fault
or
negligent
or
that
the
principal
exercise
control
and
supervision over them.
Considering that Holiday Travel is CAIs agent, does it necessarily follow that CAI is liable for the fault or negligence of Holiday Travels
employees? Citing China Air Lines, Ltd. v. Court of Appeals, et al.,23 CAI argues that it cannot be held liable for the actions of the employee of
its ticketing agent in the absence of an employer-employee relationship.
_______________
22 Id., at p. 785.
23 264 Phil. 15; 185 SCRA 449 (1990).
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77

An examination of this Courts pronouncements inChina Air Lines will reveal that an airline company is not completely exonerated from any
liability for the tort committed by its agents employees. A prior determination of the nature of the passengers cause of action is necessary. If
the passengers cause of action against the airline company is premised on culpa aquiliana or quasi-delict for a tort committed by the
employee of the airline companys agent, there must be an independent showing that the airline company was at fault or negligent or has
contributed to the negligence or tortuous conduct committed by the employee of its agent. The mere fact that the employee of the airline
companys agent has committed a tort is not sufficient to hold the airline company liable. There is no vinculum juris between the airline
company and its agents employees and the contractual relationship between the airline company and its agent does not operate to create a
juridical tie between the airline company and its agents employees. Article 2180 of the Civil Code does not make the principal vicariously
liable for the tort committed by its agents employees and the principal-agency relationship per se does not make the principal a party to such
tort; hence, the need to prove the principals own fault or negligence.
On the other hand, if the passengers cause of action for damages against the airline company is based on contractual breach or culpa
contractual, it is not necessary that there be evidence of the airline companys fault or negligence. As this Court previously stated in China Air
Lines and reiterated in Air France vs. Gillego,24 in an action based on a breach of contract of carriage, the aggrieved party does not have to
prove that the common carrier was at fault or was negligent. All that he has to prove is the existence of the contract and the fact of its nonperformance by the carrier.
Spouses Vilorias cause of action on the basis of Magers alleged fraudulent misrepresentation is clearly one of tort or
_______________
24 G.R. No. 165266, December 15, 2010, 638 SCRA 472.
78
78

quasi-delict, there being no pre-existing contractual relationship between them. Therefore, it was incumbent upon Spouses Viloria to prove
that CAI was equally at fault.
However, the records are devoid of any evidence by which CAIs alleged liability can be substantiated. Apart from their claim that CAI must
be held liable for Magers supposed fraud because Holiday Travel is CAIs agent, Spouses Viloria did not present evidence that CAI was a party
or had contributed to Magers complained act either by instructing or authorizing Holiday Travel and Mager to issue the said
misrepresentation.
It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and conditions of the subject contracts,
which Mager entered into with them on CAIs behalf, in order to deny Spouses Vilorias request for a refund or Fernandos use of Lourdes ticket
for the re-issuance of a new one, and simultaneously claim that they are not bound by Magers supposed misrepresentation for purposes of
avoiding Spouses Vilorias claim for damages and maintaining the validity of the subject contracts. It may likewise be argued that CAI cannot
deny liability as it benefited from Magers acts, which were performed in compliance with Holiday Travels obligations as CAIs agent.
However, a persons vicarious liability is anchored on his possession of control, whether absolute or limited, on the tortfeasor. Without such
control, there is nothing which could justify extending the liability to a person other than the one who committed the tort. As this Court
explained inCangco v. Manila Railroad Co.:25
With respect to extra-contractual obligation arising from negligence, whether of act or omission , it is competent for the legislature
to electand our Legislature has so electedto limit such liability to cases in which the person upon whom such an obli_______________
25 38 Phil. 768 (1918).
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VOL. 663, JANUARY 16, 2012
79

gation is imposed is morally culpable or, on the contrary, for reasons of public policy, to extend that liability, without regard to the
lack of moral culpability, so as to include responsibility for the negligence of those persons whose acts or omissions are
imputable, by a legal fiction, to others who are in a position to exercise an absolute or limited control over them. The legislature
which adopted our Civil Code has elected to limit extra-contractual liabilitywith certain well-defined exceptionsto cases in which moral
culpability can be directly imputed to the persons to be charged. This moral responsibility may consist in having failed to exercise due care in
ones own acts, or in having failed to exercise due care in the selection and control of ones agent or servants, or in the control of persons who,
by reasons of their status, occupy a position of dependency with respect to the person made liable for their conduct. 26 (emphasis supplied)
It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by preponderant evidence. The
existence of control or supervision cannot be presumed and CAI is under no obligation to prove its denial or nugatory assertion. CitingBelen v.
Belen,27 this Court ruled in Jayme v. Apostol,28that:
In Belen v. Belen, this Court ruled that it was enough for defendant to deny an alleged employment relationship. The defendant is under no
obligation to prove the negative averment. This Court said:
It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff, and that if he fails
satisfactorily to show the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions. This [rule] is
in harmony with the provisions of Section 297 of the Code of Civil Procedure holding that each party must prove his own affirmative
allegations, etc.29 (citations omitted)
_______________
26 Id., at pp. 775-776.
27 13 Phil. 202 (1909).
28 G.R. No. 163609, November 27, 2008, 572 SCRA 41.
29 Id., at pp. 51-52.
80
80
Therefore, without a modicum of evidence that CAI exercised control over Holiday Travels employees or that CAI was equally at fault, no
liability can be imposed on CAI for Magers supposed misrepresentation.
III.Even
on
the
assumption
that
CAI
may
be
held
liable
for
the
acts
of
Mager,
still,
Spouses
Viloria
are
not
entitled
to
a
refund.
Magers
statement
cannot
be
considered
a
causal
fraud
that
would
justify
the
annulment
of
the
subject
contracts
that
would
oblige
CAI
to
indemnify
Spouses
Viloria
and
return
the
money
they paid for the subject tickets.
Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud,
the contract is considered voidable and may be annulled within four (4) years from the time of the discovery of the fraud. Once a contract is
annulled, the parties are obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract,
including their fruits and interest.
On the basis of the foregoing and given the allegation of Spouses Viloria that Fernandos consent to the subject contracts was supposedly
secured by Mager through fraudulent means, it is plainly apparent that their demand for a refund is tantamount to seeking for an annulment
of the subject contracts on the ground of vitiated consent.
Whether the subject contracts are annullable, this Court is required to determine whether Magers alleged misrepresentation constitutes
causal fraud. Similar to the dispute on the existence of an agency, whether fraud attended the execution of a contract is factual in nature and
this Court, as discussed above, may scrutinize the records if the findings of the CA are contrary to those of the RTC.81
VOL. 663, JANUARY 16, 2012
81

Under Article 1338 of the Civil Code, there is fraud when, through insidious words or machinations of one of the contracting parties, the
other is induced to enter into a contract which, without them, he would not have agreed to. In order that fraud may vitiate consent, it must be
the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. 30 InSamson v. Court of
Appeals,31 causal fraud was defined as a deception employed by one party prior to or simultaneous to the contract in order to secure the
consent of the other.32
Also, fraud must be serious and its existence must be established by clear and convincing evidence. As ruled by this Court in Sierra v. Hon.
Court of Appeals, et al.,33 mere preponderance of evidence is not adequate:
Fraud must also be discounted, for according to the Civil Code:
Art.1338.There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to
enter into a contract which without them, he would not have agreed to.
Art.1344.In order that fraud may make a contract voidable, it should be serious and should not have been employed by both
contracting parties.
To quote Tolentino again, the misrepresentation constituting the fraud must be established by full, clear, and convincing evidence, and not
merely by a preponderance thereof. The deceit must be serious. The fraud is serious when it is sufficient to impress, or to lead an ordinarily
prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity. The circum_______________
30 See Tongson v. Emergency Pawnshop Bula, Inc., G.R. No. 167874, 15 January 2010, 610 SCRA 150, 159, citing Woodhouse v. Halili, 93
Phil 526, 537 (1953).
31 G.R. No. 108245, November 25, 1994, 238 SCRA 397.
32 Id., at p. 404.
33 G.R. No. 90270, July 24, 1992, 211 SCRA 785.
82
82

stances of each case should be considered, taking into account the personal conditions of the victim. 34
After meticulously poring over the records, this Court finds that the fraud alleged by Spouses Viloria has not been satisfactorily established
as causal in nature to warrant the annulment of the subject contracts. In fact, Spouses Viloria failed to prove by clear and convincing evidence
that Magers statement was fraudulent. Specifically, Spouses Viloria failed to prove that (a) there were indeed available seats at Amtrak for a
trip to New Jersey on August 13, 1997 at the time they spoke with Mager on July 21, 1997; (b) Mager knew about this; and (c) that she
purposely informed them otherwise.
This Court finds the only proof of Magers alleged fraud, which is Fernandos testimony that an Amtrak had assured him of the perennial
availability of seats at Amtrak, to be wanting. As CAI correctly pointed out and as Fernando admitted, it was possible that during the
intervening period of three (3) weeks from the time Fernando purchased the subject tickets to the time he talked to said Amtrak employee,
other passengers may have cancelled their bookings and reservations with Amtrak, making it possible for Amtrak to accommodate them.
Indeed, the existence of fraud cannot be proved by mere speculations and conjectures. Fraud is never lightly inferred; it is good faith that is.
Under the Rules of Court, it is presumed that a person is innocent of crime or wrong and that private transactions have been fair and
regular.35 Spouses Viloria failed to overcome this presumption.
_______________
34 Id., at p. 793, citing Tolentino, Commentaries on the Civil Code, Vol. 4, pp. 508, 514.
35 Trinidad v. Intermediate Appellate Court, G.R. No. 65922, December 3, 1991, 204 SCRA 524, 530, citing Rule 131, Sections 5(a) and
5(p).
83
VOL. 663, JANUARY 16, 2012
83

IV.Assuming
the
contrary,
Spouses
Viloria
are
nevertheless
deemed
to
have ratified the subject contracts.
Even assuming that Magers representation is causal fraud, the subject contracts have been impliedly ratified when Spouses Viloria
decided to exercise their right to use the subject tickets for the purchase of new ones. Under Article 1392 of the Civil Code, ratification
extinguishes the action to annul a voidable contract.
Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows:
Art.1393.Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the
reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act
which necessarily implies an intention to waive his right.
Implied ratification may take diverse forms, such as by silence or acquiescence; by acts showing approval or adoption of the contract; or by
acceptance and retention of benefits flowing therefrom.36
Simultaneous with their demand for a refund on the ground of Fernandos vitiated consent, Spouses Viloria likewise asked for a refund
based on CAIs supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los
Angeles.
In doing so, Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. Resolution, the action
referred to in Article 1191, is based on the defendants breach of faith, a violation of the reciprocity
_______________
36 Acua v. Batac Producers Coop. Mktg. Ass., 126 Phil. 896, 902; 20 SCRA 526, 533 (1967).
84
84

between the parties37 and in Solar Harvest, Inc. v. Davao Corrugated Carton Corporation,38 this Court ruled that a claim for a reimbursement in
view of the other partys failure to comply with his obligations under the contract is one for rescission or resolution.
However, annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. In resolution,
all the elements to make the contract valid are present; in annulment, one of the essential elements to a formation of a contract, which is
consent, is absent. In resolution, the defect is in the consummation stage of the contract when the parties are in the process of performing
their respective obligations; in annulment, the defect is already present at the time of the negotiation and perfection stages of the contract.
Accordingly, by pursuing the remedy of rescission under Article 1191, the Vilorias had impliedly admitted the validity of the subject contracts,
forfeiting their right to demand their annulment. A party cannot rely on the contract and claim rights or obligations under it and at the same
time impugn its existence or validity. Indeed, litigants are enjoined from taking inconsistent positions. 39
V.Contracts
cannot
be
rescinded
for a slight or casual breach.
CAI
cannot
insist
on
the
nontransferability of the subject tickets.
Considering that the subject contracts are not annullable on the ground of vitiated consent, the next question is: Do Spouses Viloria have
the right to rescind the contract on the
_______________
37 Heirs of Sofia Quirong, v. Development Bank of the Philippines, G.R. No. 173441, December 3, 2009, 606 SCRA 543, 550.
38 G.R. No. 176868, July 26, 2010, 625 SCRA 448.
39 Gonzales v. Climax Mining Ltd., 492 Phil. 682, 697; 452 SCRA 607, 625 (2005).
85
VOL. 663, JANUARY 16, 2012
85

ground of CAIs supposed breach of its undertaking to issue new tickets upon surrender of the subject tickets?
Article 1191, as presently worded, states:
The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
The injured party may choose between the fulfilment and the rescission of the obligation, with the payment of damages in either case. He may
also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period.
This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with articles 1385 and
1388 and the Mortgage Law.
According to Spouses Viloria, CAI acted in bad faith and breached the subject contracts when it refused to apply the value of Lourdes ticket
for Fernandos purchase of a round trip ticket to Los Angeles and in requiring him to pay an amount higher than the price fixed by other airline
companies.
In its March 24, 1998 letter, CAI stated that non-refundable tickets may be used as a form of payment toward the purchase of another
Continental ticket for $75.00, per ticket, reissue fee ($50.00, per ticket, for tickets purchased prior to October 30, 1997).
Clearly, there is nothing in the above-quoted section of CAIs letter from which the restriction on the non-transferability of the subject
tickets can be inferred. In fact, the words used by CAI in its letter supports the position of Spouses Viloria, that each of them can use the ticket
under their name for the purchase of new tickets whether for themselves or for some other person.86
86

Moreover, as CAI admitted, it was only when Fernando had expressed his interest to use the subject tickets for the purchase of a round trip
ticket between Manila and Los Angeles that he was informed that he cannot use the ticket in Lourdes name as payment.
Contrary to CAIs claim, that the subject tickets are non-transferable cannot be implied from a plain reading of the provision printed on the
subject tickets stating that [t]o the extent not in conflict with the foregoing carriage and other services performed by each carrier are subject
to: (a) provisions contained in this ticket, x x x (iii) carriers conditions of carriage and related regulations which are made part hereof (and are
available on application at the offices of carrier) x x x. As a common carrier whose business is imbued with public interest, the exercise of
extraordinary diligence requires CAI to inform Spouses Viloria, or all of its passengers for that matter, of all the terms and conditions governing
their contract of carriage. CAI is proscribed from taking advantage of any ambiguity in the contract of carriage to impute knowledge on its
passengers of and demand compliance with a certain condition or undertaking that is not clearly stipulated. Since the prohibition on
transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria thereof, CAI cannot refuse to apply the
value of Lourdes ticket as payment for Fernandos purchase of a new ticket.
CAIs
refusal
to
accept
Lourdes
ticket
for
the
purchase
of
a
new
ticket
for
Fernando is only a casual breach.
Nonetheless, the right to rescind a contract for non-performance of its stipulations is not absolute. The general rule is that rescission of a
contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental violations as would defeat the very
object of the
87
VOL. 663, JANUARY 16, 2012
87

parties in making the agreement.40 Whether a breach is substantial is largely determined by the attendant circumstances. 41
While CAIs refusal to allow Fernando to use the value of Lourdes ticket as payment for the purchase of a new ticket is unjustified as the
non-transferability of the subject tickets was not clearly stipulated, it cannot, however be considered substantial. The endorsability of the
subject tickets is not an essential part of the underlying contracts and CAIs failure to comply is not essential to its fulfillment of its undertaking
to issue new tickets upon Spouses Vilorias surrender of the subject tickets. This Court takes note of CAIs willingness to perform its principal
obligation and this is to apply the price of the ticket in Fernandos name to the price of the round trip ticket between Manila and Los Angeles.
CAI was likewise willing to accept the ticket in Lourdes name as full or partial payment as the case may be for the purchase of any ticket,
albeit under her name and for her exclusive use. In other words, CAIs willingness to comply with its undertaking under its March 24, 1998
cannot be doubted, albeit tainted with its erroneous insistence that Lourdes ticket is non-transferable.
Moreover, Spouses Vilorias demand for rescission cannot prosper as CAI cannot be solely faulted for the fact that their agreement failed to
consummate and no new ticket was issued to Fernando. Spouses Viloria have no right to insist that a single round trip ticket between Manila
and Los Angeles should be priced at around $856.00 and refuse to pay the difference between the price of the subject tickets and the amount
fixed by CAI. The petitioners failed to allege, much
_______________
40 See Barredo v. Leao, G.R. No. 156627, June 4, 2004, 431 SCRA 106, 115.
41 See Central Bank of the Philippines v. Spouses Bichara, 385 Phil. 553, 565; 328 SCRA 807, 818 (2000), citing Vermen Realty
Development Corporation v. Court of Appeals, et al., 224 SCRA 549, 555 (1993).
88
88

less prove, that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon their surrender of the subject tickets.
In its March 24, 1998 letter, it was clearly stated that [n]on-refundable tickets may be used as a form of payment toward the purchase of
another Continental ticket42 and there is nothing in it suggesting that CAI had obliged itself to protect Spouses Viloria from any fluctuation in
the prices of tickets or that the surrender of the subject tickets will be considered as full payment for any ticket that the petitioners intend to
buy regardless of actual price and destination. The CA was correct in holding that it is CAIs right and exclusive prerogative to fix the prices for
its services and it may not be compelled to observe and maintain the prices of other airline companies. 43
The conflict as to the endorsability of the subject tickets is an altogether different matter, which does not preclude CAI from fixing the price
of a round trip ticket between Manila and Los Angeles in an amount it deems proper and which does not provide Spouses Viloria an excuse not
to pay such price, albeit subject to a reduction coming from the value of the subject tickets. It cannot be denied that Spouses Viloria had the
concomitant obligation to pay whatever is not covered by the value of the subject tickets whether or not the subject tickets are transferable or
not.
There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged with a higher rate. The only
evidence the petitioners presented to prove that the price of a round trip ticket between Manila and Los Angeles at that time was only $856.00
is a newspaper advertisement for another airline company, which is inadmissible for being hearsay evidence, twice removed. Newspaper
clippings are hearsay if they were offered for the purpose of
_______________
42 Rollo, p. 67.
43 Id., at p. 52.
89
VOL. 663, JANUARY 16, 2012
89

proving the truth of the matter alleged. As ruled in Feria v. Court of Appeals:44
[N]ewspaper articles amount to hearsay evidence, twice removed and are therefore not only inadmissible but without any probative value
at all whether objected to or not, unless offered for a purpose other than proving the truth of the matter asserted. In this case, the news article
is admissible only as evidence that such publication does exist with the tenor of the news therein stated. 45 (citations omitted)
The records of this case demonstrate that both parties were equally in default; hence, none of them can seek judicial redress for the
cancellation or resolution of the subject contracts and they are therefore bound to their respective obligations thereunder. As the 1st sentence
of Article 1192 provides:
Art.1192.In case both parties have committed a breach of the obligation, the liability of the first infractor shall be
equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed
extinguished, and each shall bear his own damages. (emphasis supplied)
Therefore, CAIs liability for damages for its refusal to accept Lourdes ticket for the purchase of Fernandos round trip ticket is offset by
Spouses Vilorias liability for their refusal to pay the amount, which is not covered by the subject tickets. Moreover, the contract between them
remains, hence, CAI is duty bound to issue new tickets for a destination chosen by Spouses Viloria upon their surrender of the subject tickets
and Spouses Viloria are obliged to pay whatever amount is not covered by the value of the subject tickets.
This Court made a similar ruling in Central Bank of the Philippines v. Court of Appeals.46 Thus:
_______________
44 382 Phil. 412; 325 SCRA 525 (2000).
45 Id., at p. 423; p. 536.
46 223 Phil. 266; 139 SCRA 46 (1985).
90
90

Since both parties were in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his P17,000.00 debt
within 3 years as stipulated, they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations, the liability of the
first infractor shall be equitably tempered by the courts. WE rule that the liability of Island Savings Bank for damages in not furnishing the
entire loan is offset by the liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his overdue
P17,000.00 debt. x x x.47
Another consideration that militates against the propriety of holding CAI liable for moral damages is the absence of a showing that the
latter acted fraudulently and in bad faith. Article 2220 of the Civil Code requires evidence of bad faith and fraud and moral damages are
generally not recoverable in culpa contractual except when bad faith had been proven. 48 The award of exemplary damages is likewise not
warranted. Apart from the requirement that the defendant acted in a wanton, oppressive and malevolent manner, the claimant must prove his
entitlement to moral damages.49
WHEREFORE, premises considered, the instant Petition is DENIED.
SO ORDERED.
Carpio (Chairperson), Perez, Sereno and Perlas-Bernabe,** JJ., concur.
_______________
47 Id., at pp. 276-277; pp. 55-56.
48 See Yobido v. Court of Appeals, 346 Phil. 1, 13; 281 SCRA 1, 11 (1997).
49 Mahinay v. Atty. Velasquez, Jr., 464 Phil. 146, 150; 419 SCRA 118, 122 (2004).
** Additional Member in lieu of Associate Justice Arturo D. Brion per Special Order No. 1174 dated January 9, 2012.
91
VOL. 663, JANUARY 16, 2012
91

Petition denied.
Notes.Although initially, the burden of proof was with the passenger to prove that there was a breach of contract of carriage, the burden
of evidence shifted to the airline when the former adduced sufficient evidence to prove the facts he had allegedat that point, the airline had
the burden of going forward to controvert Chiongs prima faciecase, the burden of evidence to establish its claim.(Northwest Airlines, Inc. vs.
Chiong, 543 SCRA 308 [2008])
Article 1874 of the Civil Code requires a written authority before an agent can sell an immovable property, likewise, a special power of
attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired for a valuable
consideration. (Alcantara vs. Nido, 618 SCRA 333 [2010])
Where the cause of action against the driver was based on delict, it is error to hold the employer jointly and severally liable with him,
based on quasi-delict under Articles 2176 and 2180 of the Civil Codethese legal provisions pertain to the vicarious liability of an employer for
quasi-delicts that an employee has committed and do not apply to civil liability arising from delict; If at all, the employers liability may only be
subsidiary. (Calang vs. People, 626 SCRA 679 [2010])
Lim vs. Court of Appeals
G.R. No. 102784. February 28, 1996.*

ROSA LIM, petitioner, vs. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES, respondents.
Civil Law; Contracts; Fact that accuseds signature appears on the upper portion of the receipt does not have the effect of altering the
terms of the transaction from a contract of agency to sell on commission basis to a contract of sale .Rosa Lims signature indeed appears on
the upper portion of the receipt immediately below the description of the items taken. We find that this fact does not have the effect of
altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of sale. Neither does it indicate
absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. The moment she affixed her
signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to all the legal obligations that
may arise from their breach.
Same; Same; A contract of agency to sell on commission basis does not belong to any of the three categories, hence it is valid and
enforceable in whatever form it may be entered into.However, there are some provisions of the law which require certain formalities for
particular contracts. The first is when the form is required for the validity of the contract; the second is when it is required to make the
contract effective as against third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the
purpose of proving the existence of the contract, such as those provided in the Statute of Frauds in Article 1403. A contract of agency to sell
on commission basis does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered
into.
Criminal Procedure; Evidence; Credibility of Witnesses;Weight of evidence is not determined mathematically by the numerical superiority
of the witnesses testifying to a given fact.The issue as to the return of the ring boils down to one of credibility. Weight of evidence is not
determined mathematically by the numerical superiority of the witnesses testifying to a given fact. It depends
_______________
*
FIRST DIVISION.
171
171
upon its practical effect in inducing belief on the part of the judge trying the case. In the case at bench, both the trial court and the Court
of Appeals gave weight to the testimony of Vicky Suarez that she did not authorize Rosa Lim to return the pieces of jewelry to Nadera.
Same; Same; Same; Court should not interfere with the judgment of the trial court in determining the credibility of witnesses.We shall
not disturb this finding of the respondent court. It is well settled that we should not interfere with the judgment of the trial court in determining
the credibility of witnesses, unless there appears in the record some fact or circumstance of weight and influence which has been overlooked
or the significance of which has been misinterpreted. The reason is that the trial court is in a better position to determine questions involving
credibility having heard the witnesses and having observed their deportment and manner of testifying during the trial.
PETITION for review of a decision of the Court of Appeals.
Zosa & Quijano Law Offices for petitioner.

The Solicitor General for respondents.
HERMOSISIMA, JR., J.:
This is a petition to review the Decision of the Court of Appeals in CA-G.R. CR No. 10290, entitled People v. Rosa Lim, promulgated on August
30, 1991.
On January 26, 1989, an Information for Estafa was filed against petitioner Rosa Lim before Branch 92 of the Regional Trial Court of Quezon
City.1 The Information reads:
That on or about the 8th day of October 1987, in Quezon City, Philippines and within the jurisdiction of this Honorable Court, the said accused
with intent to gain, with unfaithfulness and/or abuse of confidence, did, then and there, wilfully, unlawfully and feloniously defraud one
VICTORIA SUAREZ, in the following manner, to wit: on
_______________
1
Docketed as Criminal Case No. Q-89-2216.
172
172
the date and place aforementioned said accused got and received in trust from said complainant one (1) ring 3.35 solo worth P169,000.00,
Philippine Currency, with the obligation to sell the same on commission basis and to turn over the proceeds of the sale to said complainant or
to return said jewelry if unsold, but the said accused once in possession thereof and far from complying with her obligation despite repeated
demands therefor, misapplied, misappropriated and converted the same to her own personal use and benefit, to the damage and prejudice of
the said offended party in the amount aforementioned and in such other amount as may be awarded under the provisions of the Civil Code.
CONTRARY TO LAW.2
After arraignment and trial on the merits, the trial court rendered judgment, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered:
1. 1.Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa as defined and penalized under Article 315,
paragraph 1(b) of the Revised Penal Code;
2. 2.Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of prision correccional as minimum, to
TEN (10) YEARS of prision mayor as maximum;
3. 3.Ordering her to return to the offended party Mrs. Victoria Suarez the ring or its value in the amount of P169,000 without subsidiary
imprisonment in case insolvency; and
4. 4.To pay costs.3
On appeal, the Court of Appeals affirmed the judgment of conviction with the modification that the penalty imposed shall be six (6) years,
eight (8) months and twenty-one (21) days to twenty (20) years in accordance with Article 315, paragraph 1 of the Revised Penal Code. 4
Petitioner filed a motion for reconsideration before the appellate court on September 20, 1991, but the motion was
_______________
2
Records, p. 1.
Ibid., p. 168.
Rollo, p. 66.
173
173
denied in a Resolution dated November 11, 1991.

In her final bid to exonerate herself, petitioner filed the instant petition for review alleging the following grounds:
I
THE RESPONDENT COURT VIOLATED THE CONSTITUTION, THE RULES OF COURT AND THE DECISION OF THIS HONORABLE COURT IN NOT
PASSING UPON THE FIRST AND THIRD ASSIGNED ERRORS IN PETITIONERS BRIEF;
II
THE RESPONDENT COURT FAILED TO APPLY THE PRINCIPLE THAT THE PAROL EVIDENCE RULE WAS WAIVED WHEN THE PRIVATE
PROSECUTOR CROSS-EXAMINED THE PETITIONER AND AURELIA NADERA AND WHEN COMPLAINANT WAS CROSS-EXAMINED BY THE COUNSEL
FOR THE PETITIONER AS TO THE TRUE NATURE OF THE AGREEMENT BETWEEN THE PARTIES WHEREIN IT WAS DISCLOSED THAT THE TRUE
AGREEMENT OF THE PARTIES WAS A SALE OF JEWELRIES AND NOT WHAT WAS EMBODIED IN THE RECEIPT MARKED AS EXHIBIT A WHICH WAS
RELIED UPON BY THE RESPONDENT COURT IN AFFIRMING THE JUDGMENT OF CONVICTION AGAINST HEREIN PETITIONER; and
III
THE RESPONDENT COURT FAILED TO APPLY IN THIS CASE THE PRINCIPLE ENUNCIATED BY THIS HONORABLE COURT TO THE EFFECT THAT
ACCUSATION IS NOT, ACCORDING TO THE FUNDAMENTAL LAW, SYNONYMOUS WITH GUILT; THE PROSECUTION MUST OVERTHROW THE
PRESUMPTION OF INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE DOUBT. TO MEET THIS STANDARD, THERE IS NEED FOR THE MOST
CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE, BOTH ORAL AND DOCUMENTARY, INDEPENDENTLY OF WHATEVER DEFENSE IS OFFERED
BY THE ACCUSED. ONLY IF THE JUDGE BELOW AND THE APPELLATE TRIBUNAL COULD ARRIVE AT A CONCLUSION THAT THE CRIME HAD BEEN
COMMITTED PRECISELY BY THE PERSON ON TRIAL UNDER SUCH AN EXACTING TEST
174
174
SHOULD SENTENCE THUS REQUIRED THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. THE PROOF AGAINST HIM MUST SURVIVE THE
TEST OF REASON; THE STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY JUDGMENT. (People vs. Austria, 195 SCRA 700) 5
Herein the pertinent facts as alleged by the prosecution.
On or about October 8, 1987, petitioner Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following
two pieces of jewelry: one (1) 3.35 carat diamond ring worth P169,000.00 and one (1) bracelet worth P170,000.00, to be sold on commission
basis. The agreement was reflected in a receipt marked as Exhibit A 6 for the prosecution. The transaction took place at the Sir Williams
Apartelle in Timog Avenue, Quezon City, where Rosa Lim was temporarily billeted.
On December 15, 1987, petitioner returned the bracelet to Vicky Suarez, but failed to return the diamond ring or to turn over the proceeds
thereof if sold. As a result, private complainant, aside from making verbal demands, wrote a demand letter 7 to petitioner asking for the return
of said ring or the proceeds of the sale thereof. In response, petitioner, thru counsel, wrote a letter 8 to private respondents counsel alleging
that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September, 1987, for which reason, petitioner had no longer
any liability to Mrs. Suarez insofar as the pieces of jewelry were concerned. Irked, Vicky Suarez filed a complaint for estafa under Article 315,
par 1(b) of the Revised Penal Code for which the petitioner herein stands convicted.
Petitioner has a different version.
Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987, together with one Aurelia
_______________
5
Rollo, pp. 13-14.
Records, p. 49.
Exhibit B; Records, p. 50.
Exhibit C; Records, p. 51.
175
175
Nadera, who introduced petitioner to private respondent, and that they were lodged at the Williams Apartelle in Timog, Quezon City. Petitioner
denied that the transaction was for her to sell the two pieces of jewelry on commission basis. She told Mrs. Suarez that she would consider
buying the pieces of jewelry for her own use and that she would inform the private complainant of such decision before she goes back to
Cebu. Thereafter, the petitioner took the pieces of jewelry and told Mrs. Suarez to prepare the necessary paper for me to sign because I was
not yet prepare(d) to buy it.9 After the document was prepared, petitioner signed it. To prove that she did not agree to the terms of the receipt
regarding the sale on commission basis, petitioner insists that she signed the aforesaid document on the upper portion thereof and not at the
bottom where a space is provided for the signature of the person(s) receiving the jewelry. 10
On October 12, 1987 before departing for Cebu, petitioner called up Mrs. Suarez by telephone in order to inform her that she was no longer
interested in the ring and bracelet. Mrs. Suarez replied that she was busy at the time and so, she instructed the petitioner to give the pieces of
jewelry to Aurelia Nadera who would in turn give them back to the private complainant. The petitioner did as she was told and gave the two
pieces of jewelry to Nadera as evidenced by a handwritten receipt, dated October 12, 1987. 11
Two issues need to be resolved: First, what was the real transaction between Rosa Lim and Vicky Suareza contract of agency to sell on
commission basis as set out in the receipt or a sale on credit; and, second, was the subject diamond ring returned to Mrs. Suarez through
Aurelia Nadera?
Petitioner maintains that she cannot be liable for estafa since she never received the jewelries in trust or on commission basis from Vicky
Suarez. The real agreement between her and the private respondent was a sale on credit with Mrs.
_______________
9
TSN, June 29, 1989, p. 5.
10
Exhibits 1, 1-b; Records, p. 49.
11
Exhibits 2, 2-a; Records, p. 93.
176
176
Suarez as the owner-seller and petitioner as the buyer, as indicated by the fact that petitioner did not sign on the blank space provided for the
signature of the person receiving the jewelry but at the upper portion thereof immediately below the description of the items taken. 12
The contention is far from meritorious.
The receipt marked as Exhibit A which establishes a contract of agency to sell on commission basis between Vicky Suarez and Rosa Lim is
herein reproduced in order to come to a proper perspective:
THIS IS TO CERTIFY, that I received from Vicky SuarezPINATUTUNAYAN KO na aking tinanggap kay ________________
the following jewelries:
ang mga alahas na sumusunod:
Description
Price
Mga Uri
Halaga
1 ring 3.35 solo
P169,000.00
1 bracelet
170,000.00
total Kabuuan
P339,000.00
in good condition, to be sold in CASH ONLY within . . . days from date of signing this receipt na nasa mabuting kalagayan upang ipagbili ng
KALIWAAN (ALCONTADO) lamang sa loob ng . . . araw mula ng ating pagkalagdaan:
if I could not sell, I shall return all the jewelry within the period mentioned above; if I would be able to sell, I shall immediately deliver and
account the whole proceeds of sale thereof to the owner of the jewelries at his/her residence; my compensation or commission shall be the
over-price on the value of each jewelry quoted above. I am prohibited to sell any jewelry on credit or by installment; deposit, give for
safekeeping; lend, pledge or give as security or guaranty under any circumstance or manner, any jewelry to other person or persons.
kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na panahong nakatala sa itaas; kung maipag_______________
12
Exhibit 1, supra.
177
177
bili ko naman ay dagli kong isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan; ang aking
gantimpala ay ang mapapahigit na halaga sa nakatakdang halaga sa itaas ng bawat alahas HINDI ko pinahihintulutang ipa-u-u-tang o ibibigay
na hulugan ang alin mang alahas, ilalagak, ipagkakatiwala; ipahihiram; isasangla o ipananagot kahit sa anong paraan ang alin mang alahas sa
ibang mga tao o tao.
I sign my name this . . . day of . . . 19 . . . at Manila, NILALAGDAAN ko ang kasunduang ito ngayong ika ___ ng dito sa Maynila.
________________________
Signature of Persons who
received jewelries (Lagda
ng Tumanggap ng mga Alahas)
Address:..........................................................
Rosa Lims signature indeed appears on the upper portion of the receipt immediately below the description of the items taken. We find that
this fact does not have the effect of altering the terms of the transaction from a contract of agency to sell on commission basis to a contract of
sale. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable.
The moment she affixed her signature thereon, petitioner became bound by all the terms stipulated in the receipt. She, thus, opened herself to
all the legal obligations that may arise from their breach. This is clear from Article 1356 of the New Civil Code which provides:
Contracts shall be obligatory in whatever form they may have been entered into, provided all the essential requisites for their validity are
present. x x x.
However, there are some provisions of the law which require certain formalities for particular contracts. The first is when the form is required
for the validity of the contract; the second is when it is required to make the contract effective as against
178
178
third parties such as those mentioned in Articles 1357 and 1358; and the third is when the form is required for the purpose of proving the
existence of the contract, such as those provided in the Statute of Frauds in Article 1403. 13 A contract of agency to sell on commission basis
does not belong to any of these three categories, hence it is valid and enforceable in whatever form it may be entered into.
Furthermore, there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto.
This is in the case of notarial wills found in Article 805 of the Civil Code, to wit:
Every will, other than a holographic will, must be subscribed at the end thereof by the testator himself x x x.
The testator or the person requested by him to write his name and the instrumental witnesses of the will, shall also sign, as aforesaid, each
and every page thereof, except the last, on the left margin x x x.
In the case before us, the parties did not execute a notarial will but a simple contract of agency to sell on commission basis, thus making the
position of petitioners signature thereto immaterial.
Petitioner insists, however, that the diamond ring had been returned to Vicky Suarez through Aurelia Nadera, thus relieving her of any
liability. Rosa Lim testified to this effect on direct examination by her counsel:
And when she left the jewelries with you, what did you do
thereafter?
A:
On October 12, I was bound for Cebu. So I called up Vicky through

telephone and informed her that I am no longer interested in the
bracelet and ring and that I will just return it.
Q:
And what was the reply of Vicky Suarez?
A:
She told me that she could not come to the apartelle since
_______________
13
Tolentino, Arturo, Commentaries and Jurisprudence on the Civil Code of the Philippines, Volume IV, 1991 ed., p. 543.
179
VOL.
254,
179
FEBRUARY
28, 1996
she was very busy. So, she asked me if Aurelia was there
and when I informed her that Aurelia was there, she
instructed me to give the pieces of jewelry to Aurelia
who in turn will give it back to Vicky.
Q:
And you gave the two (2) pieces of jewelry to Aurelia

Nadera?
A:
Yes, Your Honor.14
This was supported by Aurelia Nadera in her direct examination by petitioners counsel:
Do you know if Rosa Lim in fact returned the jewelries?
A:
She gave the jewelries to me.
Q:
Why did Rosa Lim give the jewelries to you?
A:
Rosa Lim called up Vicky Suarez the following morning and told
Vicky Suarez that she was going home to Cebu and asked if she
could give the jewelries to me.
Q:
And when did Rosa Lim give to you the jewelries?
A:
Before she left for Cebu.15
On rebuttal, these testimonies were belied by Vicky Suarez herself:
It has been testified to here also by both Aurelia Nadera and Rosa
Lim that you gave authorization to Rosa Lim to turn over the two
(2) pieces of jewelries mentioned in Exh ibit A to Aurelia Nadera,
what can you say about that?
A:
That is not true sir, because at that time Aurelia Nadera is highly
indebted to me in the amount of P140,000.00, so if I gave it to
Nadera, I will be exposing myself to a high srisk. 16
The issue as to the return of the ring boils down to one of credibility. Weight of evidence is not determined mathematically by the numerical
superiority of the witnesses testifying to a given fact. It depends upon its practical effect in inducing
_______________
14
TSN, June 29, 1989, pp. 7-8.
15
TSN, November 16, 1989, p. 12.
16
TSN, November 21, 1989, p. 9.
180
180
belief on the part of the judge trying the case. 17 In the case at bench, both the trial court and the Court of Appeals gave weight to the
testimony of Vicky Suarez that she did not authorize Rosa Lim to return the pieces of jewelry to Nadera. The respondent court, in affirming the
trial court, said:
x x x This claim (that the ring had been returned to Suarez thru Nadera) is disconcerting. It contravenes the very terms of Exhibit A. The
instruction by the complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently denied by the complaining witness, who
declared that she did not authorize and/or instruct appellant to do so. And thus, by delivering the ring to Aurelia without the express authority
and consent of the complaining witness, appellant assumed the right to dispose of the jewelry as if it were hers, thereby committing
conversion, a clear breach of trust, punishable under Article 315, par. 1(b), Revised Penal Code.
We shall not disturb this finding of the respondent court. It is well settled that we should not interfere with the judgment of the trial court in
determining the credibility of witnesses, unless there appears in the record some fact or circumstance of weight and influence which has been
overlooked or the significance of which has been misinterpreted. The reason is that the trial court is in a better position to determine questions
involving credibility having heard the witnesses and having observed their deportment and manner of testifying during the trial. 18
Article 315, par. 1(b) of the Revised Penal Code provides:
ART. 315. Swindling (estafa).Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by:
xxx
xxx
xxx
1. (b)By misappropriating or converting, to the prejudice of another, money, goods, or any other personal property received by the
offender in trust or on commission, or for administration, or under
_______________
17
Francisco, Ricardo J., Evidence, 1993 ed., p. 11.
18
People v. Lagrosa, Jr., 230 SCRA 298 [1994].
181
181
1. any other obligation involving the duty to make delivery of or to return the same, even though such obligation be totally or partially
guaranteed
by
a
bond;
or
by
denying
having
received
such
money,
goods,
or
other
property.
xxx
xxx
xxx
The elements of estafa with abuse of confidence under this subdivision are as follows: (1) That money, goods, or other personal property be
received by the offender in trust, or on commission, or for administration, or under any other obligation involving the duty to make delivery of,
or to return, the same; (2) That there be misappropriation or conversion of such money or property by the offender or denial on his part of
such receipt; (3) That such misappropriation or conversion or denial is to the prejudice of another; and (4) That there is a demand made by the
offended party to the offender (Note: The 4th element is not necessary when there is evidence of misappropriation of the goods by the
defendant)19
All the elements of estafa under Article 315, Paragraph 1(b) of the Revised Penal Code, are present in the case at bench. First, the receipt
marked as Exhibit A proves that petitioner Rosa Lim received the pieces of jewelry in trust from Vicky Suarez to be sold on commission basis.
Second, petitioner misappropriated or converted the jewelry to her own use; and, third, such misappropriation obviously caused damage and
prejudice to the private respondent.
WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioner.
Oliver v PHILIPPINE SAVINGS BANK

This is a petition for review on certiorari seeking to reverse and set aside the October 25, 2013 Decision 1 and the September 12, 2014
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 95656, which reversed the July 22, 2010 Order 3 of the Regional Trial Court, Branch
276, Muntinlupa City (RTC) in Civil Case No. 99-278, a case for injunction and damages.
Petitioner Mercedes Oliver (Oliver) was a depositor of respondent Philippine Savings Bank (PSBank) with account number 2812-07991-6.
dent Lilia Castro (Castro) was the Assistant Vice President of
the Acting Branch Manager of PSBank San Pedro, Laguna.
Olivers Position
In her Complaint,4 dated October 5, 1999, Oliver alleged that sometime in 1997, she made an initial deposit of P12 million into her PSBank
account. During that time, Castro convinced her to loan out her deposit as interim or bridge financing for the approved loans of bank
borrowers who were waiting for the actual release of their loan proceeds.
Under this arrangement, Castro would first show the approved loan documents to Oliver. Thereafter, Castro would withdraw the amount
needed from Olivers account. Upon the actual release of the loan by PSBank to the borrower, Castro would then charge the rate of 4% a
month from the loan proceeds as interim or bridge financing interest. Together with the interest income, the principal amount previously
withdrawn from Olivers bank account would be deposited back to her account. Meanwhile, Castro would earn a commission of 10% from the
interest.
Their arrangement went on smoothly for months. Due to the frequency of bank transactions, Oliver even entrusted her passbook to Castro.
Because Oliver earned substantial profit, she was further convinced by Castro to avail of an additional credit line in the amount of P10 million.
The said credit line was secured by a real estate mortgage on her house and lot in Ayala Alabang covered by Transfer Certificate of
Title (TCT) No. 137796.5
Oliver instructed Castro to pay P2 million monthly to PSBank starting on September 3, 1998 so that her credit line for P10 million would be
fully paid by January 3, 1999.
Beginning September 1998, Castro stopped rendering an accounting for Oliver. The latter then demanded the return of her passbook. When
Castro showed her the passbook sometime in late January or early February 1995, she noticed several erasures and superimpositions therein.
She became very suspicious of the many erasures pertaining to the December 1998 entries so she requested a copy of her transaction history
register from PSBank.
When her transaction history register 6 was shown to her, Oliver was surprised to discover that the amount of P4,491,250.00 (estimated at P4.5
million) was entered into her account on December 21, 1998. While a total of P7 million was withdrawn from her account on the same day,
Oliver asserted that she neither applied for an additional loan of P4.5 million nor authorized the withdrawal of P7 million. She also discovered
another loan for P1,396,310.45, acquired on January 5, 1999 and allegedly issued in connection with the P10 million credit line.
In Olivers passbook, 7 there were no entries from December 17, 1998 to December 27, 1998. The transaction history register, however,
showed several transactions on these very same dates including the crediting of P4.5 million and the debiting of P7 million on December 21,
1998. Oliver then learned that the additional P4.5 million and P1,396,310.45 loans were also secured by the real estate mortgage, 8 dated
January 8, 1998, covering the same property in Ayala Alabang. Oliver received two collection letters, 9 dated May 13, 1999 and June 18, 1999,
from PSBank referring to the non-payment of unpaid loans, to wit: (1) P4,491,250.00 from the additional loan and (2) P1,396,310.45 from the
P10 million credit line. 10 In response, Oliver protested that she neither availed of the said loans nor authorized the withdrawal of P7 million
from her account.11 She also claimed that the P10 million loan from her credit line was already paid in full. 12
On July 14, 1999, a final demand letter 13 was sent to Oliver by PSBank, requiring her to pay the unpaid loans. Oliver, however, still refused to
pay. Subsequently, Oliver received a notice of sale 14 involving the property in Ayala Alabang, issued by Notary Public Jose Celestino Torres on
September 15, 1999. The said notice informed her of the impending extra-judicial foreclosure and sale of her house and lot to be held on
October 21, 1999.
As a result, Oliver filed the subject complaint against PSBank and Castro.
Castros Position
In her Answer,15 Castro admitted that she and Oliver agreed that the latter would lend out money to borrowers at 4% to 5% interest per month
provided that the former would screen them. She also acknowledged having been instructed by Oliver to pay the bank P2 million every month
to settle the P10 million credit line. Nonetheless, Castro informed Oliver that the payment thereof was subject to the availability of funds in her
account. She disclosed that she made some alterations and erasures in Olivers passbook so as to reconcile the passbook with the computer
printout of the bank, but denied any attempt to hide the passbook as she was able to return it sometime in January 1999.
Castro also denied the deceit imputed against her. She asserted that their arrangement was not "interim or bridge financing" inasmuch as the
loans were entirely new and distinct from that granted by PSBank. When Olivers clients multiplied, Castro advised her to apply for a credit line
of P10 million. The said credit line was first approved in December 1997 with a term of one year. 16
Sometime in August 1998, Castro informed Oliver about the impending expiration of her credit line. Subsequently, Oliver applied for another
loan in the amount of P4.5 million as evidenced by a promissory note, 17 dated December 21, 1998. On January 5, 1999, another promissory
note18 was executed by Oliver to cover a loan in the amount of P1,396,310.45.
Castro asserted that, on December 21, 1998, upon Olivers instruction, a total of P7 million was withdrawn from the latters account and was
then deposited to the account of one Ben Lim (Lim) on the same date. Lim was a businessman who borrowed money from Oliver. Castro knew
him because he was also a depositor and borrower of PSBank San Pedro Branch. 19
As to the amount of P1,396,310.45, Castro explained that it was a separate and personal loan obtained by her from Oliver. To secure the
payment of such obligation, Castro mortgaged a property located in Camella Homes III in Tunasan, Muntinlupa City.
Castro admitted that on October 19, 1999, she was terminated by PSBank because of certain problems regarding client accommodation and
loss of confidence.20
PSBanks Position
In its defense, PSBank averred that Oliver applied for a credit line of P10 million which was granted by the bank and which secured by a real
estate mortgage. Because Oliver failed to pay the P10 million loan, she obtained another loan in the amount of P4.5 million, as evidenced by a
promissory note. Days later, she again acquired a separate loan amounting to P1,396,310.45 as shown by another promissory note. Both loans
were secured by a real estate mortgage, dated January 8, 1998, and the proceeds thereof were issued as proved by the release tickets, 21 dated
December 21, 1998 and January 5, 1999, respectively. 22
The RTC Decision
In its March 30, 2010 Decision,23 the RTC dismissed the complaint and rendered judgment in favor of PSBank and Castro. According to the RTC,
PSBank and Castro should not be held liable for the loan of P4.5 million and the withdrawal of the P7 million. Castro was able to submit the
Debit Credit Memo24 and the Savings Account Check Deposit Slip 25 to prove that there were some previous loan transactions between Oliver
and Lim. Considering that neither PSBank nor Castro obtained the P7 million, there was no obligation on their part to return the amount.
Moreover, the trial court stated that Oliver failed to controvert PSBanks allegation that she had unpaid loan obligations. Thus, it concluded
that PSBank had the right to foreclose the mortgaged property. The fallo reads:
WHEREFORE, finding lack of merit, the instant case is hereby DISMISSED. Accordingly, the Writ of Preliminary Injunction is hereby LIFTED and
SET ASIDE.
SO ORDERED.26
Oliver seasonably filed her motion for reconsideration. 27 She insisted that the P7 million was unlawfully withdrawn. She claimed that what
happened in this case was a "cash savings withdrawal" and that there should have been a corresponding withdrawal slip for such
transaction. Also, if indeed the P7 million was withdrawn from her account and was credited to the account of Lim, the deposit slip for his
account should have been presented.
The RTC Order
On July 22, 2010, the RTC resolved the motion and issued an order reversing its earlier decision. According to the RTC, Olivers assertion that
the withdrawal was made without her consent prevailed in the absence of any proof to the contrary. The cash savings withdrawal slips should
have been offered in evidence by either PSBank or Castro to settle the issue of whether the amount of P7 million was actually withdrawn by
Oliver or by her authorized representative or agent.
The RTC also rejected the position of PSBank and Castro that the erasures and alterations in Olivers passbook were made simply to reconcile
the same with the transaction history register of the bank because even after the alleged corrections, the said documents still contained
different entries. Although Oliver and Lim had previous transactions, none of them pertained to the P7 million purportedly transferred on
December 21, 1998.
With regard to PSBank, the RTC stated that it failed to exercise utmost diligence in safekeeping Olivers deposit. Had it not been for the
unauthorized, withdrawal which was attributable to the bank and Castro, the P4.5 million and the P1,396,310.45 loans would not have
remained outstanding, considering that the improperly withdrawn P7 million was more than sufficient to discharge those liabilities. 28 The
dispositive portion of the order reads:
WHEREFORE, premises considered, the Motion for Reconsideration is hereby GRANTED. The Decision dated March 30, 2010 is hereby
reconsidered and set aside. In lieu thereof, a new one is hereby rendered ordering the defendants Lilia Castro and Philippine Savings Bank to
jointly and solidarily pay plaintiff Dra. Mercedes Oliver, the sums of
1. P1,111,850.77 as actual damages;
2. P100,000.00 as moral damages;
3. P100,000.00 as attorneys fees; and
4. P100,000.00 as exemplary damages
Moreover, the Writ of Preliminary Injunction is hereby made permanent.
SO ORDERED.29
Aggrieved, Castro and PSBank appealed before the CA.
The CA Decision
On October 25, 2013, the CA granted the appeal. It reversed the July 22, 2010 of the RTC order and reinstated its March 30, 2010 decision. The
appellate court found no compelling evidence to prove that fraud attended the processing and release of the P4.5 million loan as well as the
withdrawal of P7 million from Olivers account. The CA found that Oliver admitted signing the loan documents, the promissory notes and the
release tickets pertaining to the obligations that she had contracted with PSBank. In addition, the CA stated that Oliver also failed to establish
her assertion that she was manipulated and defrauded into signing the said loan documents.
The CA also found that PSBank exercised extraordinary diligence in handling Olivers account, thus, the awards of damages were deleted. The
dispositive portion of the CA decision reads:
WHEREFORE, the Appeal is hereby GRANTED. The Order dated 22 July 2010 of the Regional Trial Court of Muntinlupa City, Branch 276, is
REVERSED and SET ASIDE, and another one entered REINSTATING the Decision dated March 30, 2010, in Civil Case No. 99-278.
SO ORDERED.30
Oliver filed her motion for reconsideration but the same was denied in the CA Resolution, dated September 12, 2014.
Hence, this petition.
ISSUES
I
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE PETITIONER FAILED TO SHOW COMPELLING
EVIDENCE TO PROVE THAT FRAUD ATTENDED THE PROCESSING AND RELEASE OF THE LOAN OF P4.5 MILLION AS WELL AS THE
WITHDRAWAL OF P7 MILLION PESOS FROM HER ACCOUNT.
II
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THERE WAS NO EVIDENCE TO PROVE THAT
THE SUM OF P7 MILLION WAS DEBITED FROM THE ACCOUNT OF PETITIONER SANS HER AUTHORIZATION.
III
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT THE RESPONDENTS TREATED THE
PETITIONERS ACCOUNT WITH EXTRAORDINARY DILIGENCE.
IV
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN IT FAILED TO HOLD THAT THE RESPONDENTS ARE JOINTLY
AND SEVERALLY LIABLE TO THE PETITIONER FOR DAMAGES. 31
In her petition for review,32 Oliver insisted that she had no knowledge of any loan released because she never availed of any new loan from
PSBank. Neither the P4.5 million loan nor the cash withdrawal of P7 million was reflected in her passbook.
Oliver further argued that the burden of proving that the withdrawal was made with her authority would lie on the part of PSBank and Castro.
The cash savings withdrawal slip containing the signature of Oliver should have been presented in court. While the respondents claimed that
the amount withdrawn was lent to Lim, the latter was never called to the witness stand as PSBank and Castro opted not to present him in
court. Castro, aside from her self-serving testimony, failed to present any concrete proof to show that Oliver indeed lent the withdrawn P7
million cash to Lim.
Finally, Oliver averred that the erasures and alterations in her passbook undeniably established that Castro manipulated the same to conceal
the loan release and the cash withdrawal from her account.
In her Comment,33 Castro countered that the CA had more opportunity and facilities to examine the facts. Hence, there was no reason to
depart from the rule that the findings of fact of the CA were final and conclusive and could not be reviewed on appeal. She asserted that there
was no proof that the P7 million was withdrawn without Olivers authority. She added that Oliver was an astute businesswoman who knew her
clients and bank deposits and who was knowledgeable of her bank transactions and was aware of her loaned amounts from the bank.
In its Comment,34 PSBank asserted that the issues and arguments propounded by Oliver had been judiciously passed upon. On the stated facts
alone, the petition, which was akin to a motion for reconsideration, should be denied outright for being pro forma.
In her Reply,35 Oliver faulted PSBank and Castro for failing to present the cash withdrawal slip which would show her signature to prove that
the money was withdrawn with her authority. She also reiterated that Lim should have been presented as a witness to substantiate their
defense that he actually received the amount of P7 million.
The Courts Ruling
The petition is impressed with merit.
There
between
loans were properly acquired
was
Oliver
an
and
implied
Castro;
agency
the
A contract of agency may be inferred from all the dealings between Oliver and Castro. Agency can be express or implied from the acts of the
principal, from his silence or lack of action, or his failure to repudiate the agency knowing that another person is acting on his behalf without
authority.36 The question of whether an agency has been created is ordinarily a question which may be established in the same way as any
other fact, either by direct or circumstantial evidence. The question is ultimately one of intention. 37
In this case, Oliver and Castro had a business agreement wherein Oliver would obtain loans from the bank, through the help of Castro as its
branch manager; and after acquiring the loan proceeds, Castro would lend the acquired amount to prospective borrowers who were waiting for
the actual release of their loan proceeds. Oliver would gain 4% to 5% interest per month from the loan proceeds of her borrowers, while Castro
would earn a commission of 10% from the interests. Clearly, an agency was formed because Castro bound herself to render some service in
representation or on behalf of Oliver, in the furtherance of their business pursuit. 38
For months, the agency between Oliver and Castro benefited both parties. Oliver, through Castros representations, was able to obtain loans,
relend them to borrowers, and earn interests; while Castro acquired commissions from the transactions. Oliver even gave Castro her passbook
to facilitate the transactions.
Accordingly, the laws on agency apply to their relationship. Article 1881 of the New Civil Code provides that the agent must act within the
scope of his authority. He may do such acts as may be conducive to the accomplishment of the purpose of the agency. Thus, as long as the
agent acts within the scope of the authority given by his principal, the actions of the former shall bind the latter.
Oliver claims that the P4.5 million loan, released on December 21, 1998, and the P1,396,310.45 loan, released on January 5, 1999, were not
acquired with her consent. Castro and PSBank, on the other hand, countered that these loans were obtained with Olivers full consent. The
Court finds that the said loans were acquired with Olivers authority. The promissory notes 39 and the release tickets40 for the said loans bore
her signatures. She failed to prove that her signatures appearing on the loan documents were forged. Hence, the loan documents were reliable
and these proved that the loans were processed by Castro within the scope of her authority. As the loans were validly obtained, PSBank
correctly stated that Oliver had incurred a debt of P4.5 million and P1,396,310.45, or a total of P5,888,149.33.
P7
improperly
agent
scope of authority
million
acted
beyond
was
withdrawn;
her
Although it was proven that Oliver authorized the loans, in the aggregate amount of P5,888,149.33, there was nothing in the records which
proved that she also allowed the withdrawal of P7 million from her bank account. Oliver vehemently denied that she gave any authority
whatsoever to either Castro or PSBank to withdraw the said amount. In her judicial affidavit before the RTC, Castro initially claimed that Oliver
authorized the withdrawal of P7 million from her bank account, to wit:
Q: Do you know when was this 4.5 million pesos loan was credited to plaintiffs deposit account?
A: Based on the Transaction Ledge of PS Bank, the 4.5 million pesos was credit to plaintiffs deposit account on 21 December 21 1998
Q: What happened after the 4.5 million pesos loan was credited to plaintiffs account?
A: Upon plaintiffs instruction, 7 million was withdrawn from her account including her loaned amount to be deposited at Mr. Ben Lims
account at PS Bank, San Pedro Branch.41
[Emphasis Supplied]
During her cross-examination, however, Castro could no longer remember whether Oliver gave her the authority to withdraw the P7 million
from her account. The transcript of stenographic notes reads:
Q: You said here, your statement here, "Upon Plaintiffs instruction". So, my question is, who did the Plaintiff instruct you, was it you?
A: I cannot remember, sir.

Q: You are not definite? Your statement here it is categorical. Its on page 9 of 17 in the Judicial Affidavit, the question is "What happened after
the 4.5 million Pesos loan was credited to the Plaintiffs account" And your answer was, "Upon Plaintiffs instruction Seven (7) million was
withdrawn from her account. My question is, this phrase, upon plaintiffs instruction, who did the Plaintiffs (sic) instruct, was it you?
A: I cannot remember, sir because I still have other officers other than me, who were assisting me during that time, so it could be the
instruction even I said upon the instruction of the plaintiff, but I cannot remember if I was the one who received the instruction from
the plaintiff. It could be other officers of mine during that time, sir.
Q: May I remind you, this is Seven (7) million Pesos?
A: Yes, sir.42
[Emphasis Supplied]
Verily, Castro, as agent of Oliver and as branch manager of PS Bank, utterly failed to secure the authorization of Oliver to withdraw such
substantial amount. As a standard banking practice intended precisely to prevent unauthorized and fraudulent withdrawals, a bank manager
must verify with the client-depositor to authenticate and confirm that he or she has validly authorized such withdrawal. 43
Castros lack of authority to withdraw the P7 million on behalf of Oliver became more apparent when she altered the passbook to hide such
transaction. It must be remembered that Oliver entrusted her passbook to Castro. In the transaction history register for her account, it was
clear that there was a series of dealings from December 17, 1998 to December 23, 1998. When compared with Olivers passbook, the latter
showed that the next transaction from December 16, 1998 was on December 28, 1998. It was also obvious to the naked eye that the
December 28, 1998 entry in the passbook was altered. As aptly observed by the RTC, nowhere in the testimony of Castro could be gathered
that she made a detailed, plausible and acceptable explanation as to why she had to make numerous corrections in the entries in the
passbook.44 Even after the corrections allegedly done to reconcile the records, the passbook and the transaction history register still contained
different entries.
Curiously, though she asserts that Oliver obtained a loan of P4.5 million and authorized the withdrawal of P7 million, 45 Castro could not explain
why these transactions were not reflected in the passbook which was in her possession. Bearing in mind that the alleged unauthorized
withdrawal happened on December 21, 1998, while Castro was questionably withholding the passbook, the Court is of the impression that she
manipulated the entries therein to conceal the P7 million withdrawal.
Further, Castro claims that Oliver instructed her to withdraw the P7 million from her bank account and to deposit the same in Lims account.
Glaringly, Lim was not presented as a witness to substantiate her defense. Even though she testified that the P7 million transfer from Olivers
account to Lims was duly documented, Castro never presented a single documentary proof of that specific transaction.
The Court is convinced that Castro went beyond the scope of her authority in withdrawing the P7 million from Olivers bank account. Her flimsy
excuse that the said amount was transferred to the account of a certain Lim deserves scant consideration. Hence, Castro must be held liable
for prejudicing Oliver.46
PSBank
exercise
degree
required
institutions
failed
the
of
of
to
highest
diligence
banking
Aside from Castro, PSBank must also be held liable because it failed to exercise utmost diligence in the improper withdrawal of the P7 million
from Olivers bank account.
In the case of banks, the degree of diligence required is more than that of a good father of a family. Considering the fiduciary nature of their
relationship with their depositors, banks are duty bound to treat the accounts of their clients with the highest degree of care. The point is that
as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the accounts of its
depositors with meticulous care, always having in mind the fiduciary nature of their relationship. 47
In Simex International v. Court of Appeals, 48 the Court held that the depositor expected the bank to treat his account with the utmost fidelity,
whether such account consisted only of a few hundred pesos or of millions. The bank must record every single transaction accurately, down to
the last centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the amount of money the
depositor can dispose of as he sees fit, confident that the bank will deliver it as and to whomever he directs. A blunder on the part of the bank,
such as the dishonor of a check without good reason, can cause the depositor not a little embarrassment if not also financial loss and perhaps
even civil and criminal litigation.49
Time and again, the Court has emphasized that the bank is expected to ensure that the depositors funds shall only be given to him or his
authorized representative. In Producers Bank of the Phil. v. Court of Appeals, 50 the Court held that the usual banking procedure was that
withdrawals of savings deposits could only be made by persons whose authorized signatures were in the signature cards on file with the bank.
In the said case, the bank therein allowed an unauthorized person to withdraw from its depositors savings account, thus, it failed to exercise
the required diligence of banks and must be held liable.
With respect to withdrawal slips, the Court declared in Philippine National Bank v. Pike51 that "[o]rdinarily, banks allow withdrawal by someone
who is not the account holder so long as the account holder authorizes his representative to withdraw and receive from his account by signing
on the space provided particularly for such transactions, usually found at the back of withdrawal slips." There, the bank violated its fiduciary
duty because it allowed a withdrawal by a representative even though the authorization portion of the withdrawal slip was not signed by the
depositor.
Finally, in Cagungun v. Planters Development Bank, 52 a case very similar to the present one, the depositors therein entrusted their passbook to
the bank employees for some specific transactions. The bank employees went beyond their authority and were able to withdraw from the
depositors account without the latters consent. The bank was held liable therein for the acts of its employees because it failed to safeguard
the accounts of its depositors.
In the case at bench, it must be determined whether the P7 million was withdrawn from the bank with the authority of Oliver. As testified to by
Castro, every withdrawal from the bank was duly evidenced by a cash withdrawal slip, a copy of which is given both to the bank and to its
client.53 Contrary to the position of the CA and that of the respondents, Oliver cannot be required to produce the cash withdrawal slip for the
said transaction because, precisely, she consistently denied giving authority to withdraw such amount from her account.
Necessarily, the party that must have access to such crucial document would either be PSBank or Castro. They must present the said cash
withdrawal slip, duly signed by Oliver, to prove that the withdrawal of P7 million was indeed sanctioned. Unfortunately, both PSBank and
Castro failed to present the cash withdrawal slip.
During the trial, the counsel of PSBank conceded that the cash withdrawal slip for the P7 million transaction could not be located, to quote:
ATTY DEJARESCO: Your Honor, excuse me just a comment for the record we asked for two (2) years, Your Honor to subpoena this from the
bank, the bank never produce (sic) the withdrawal slip two (2) years (sic), Your Honor, this case was delayed by the previous Court for two (2)
years. Your Honor, no withdrawal slip was produced by the bank, Your Honor. I would just like to place it on record.
COURT: Were there subpoenas issued by the bank, was there an order?
ATTY. DEJARESCO: Yes Your Honor, I think the good counsel was the counsel at that time would you able to confirm that it took us two (2) years
to subpoena and subpoena (sic) this withdrawal slip because there must be an authority to withdraw, and it there is a signature of the plaintiff,
we will admit that.
ATTY. CORPUZ: I remember having manifested that the withdrawal slip cannot be located.
ATTY. DEJARESCO: Lets put that on record, Your Honor.
ATTY. CORPUS: (sic) I remember having made that manifestation, Your Honor.
COURT: Thats the reason why no document was produced in Court by the PS Bank?
ATTY. CORPUS: (sic) With respect to the withdrawal slip only, Your Honor on December 21.
ATTY. DEJARESCO: Of that Seven (7) million from the account.
COURT: Make that on record.

ATTY. CORPUS: Yes, Your Honor.54
[Emphasis Supplied]
Castro, as agent of Oliver, could not produce either the said withdrawal slip allegedly authorizing the withdrawal of the P7 million, her
testimony is quoted as follows:
ATTY. DEJARESCO:
Q: Can you show poof of the withdrawal slip?
A: The withdrawal slip.
Q: Im asking you do you have proof?
A: None, sir.
Q: You cannot produce in Court in support of your Judicial Affidavit?
A: None.
Q: And you cannot produce that in Court?
A: As far as the withdrawal slip as for myself, none. 55
[Emphasis Supplied]
From the foregoing, there was a clear showing of PSBanks failure to exercise the degree of diligence that it ought to have exercised in dealing
with its clients. It could not prove that the withdrawal of P7 million was duly authorized by Oliver. As a banking institution, PSBank was
expected to ensure that such substantial amount should only be transacted with the consent and authority of Oliver. PSBank, however,
reneged on its fiduciary duty by allowing an encroachment upon its depositors account without the latters permission. Hence, PSBank must
be held liable for such improper transaction.
PSBank
failed
burden
solidarily liable
and
to
discharge
and
must
be
Castro
their
held
The party who alleges a fact has the burden of proving it. Section 1, Rule 131 of the Rules of Court defines "burden of proof" as "the duty of a
party to present evidence on the facts in issue necessary to establish his claim or defense by the amount of evidence required by law." In civil
cases, the burden of proof rests upon the plaintiff, who is required to establish his case by a preponderance of evidence. Once the plaintiff
establishes his case, the burden of evidence shifts to the defendant, who, in turn, bears the burden to establish his defense. 56
Here, Oliver alleged that she did not authorize the withdrawal of P7 million from her account. To establish her allegation, Oliver presented the
following: (1) the transaction history register which showed the withdrawal of P7 million from her account on December 21, 1998; (2) the
passbook which contained alterations to conceal the withdrawal on December 21, 1998 while in the possession of Castro; and (3) testimonial
evidence that she did not allow the withdrawal of the said amount. 57 The Court is of the view that Oliver had sufficiently discharged her burden
in proving that P7 million was withdrawn from her account without her authorization. Hence, the burden was shifted to the respondents to
refute the allegation of Oliver.
As discussed above, both Castro and PSBank failed to establish the burden of their defense. They failed to present proof that Oliver authorized
the said transaction. They could have presented either the cash withdrawal slip for the P7 million on December 21, 1999 or Lims testimony to
prove the transfer of funds to the latters account, but they did neither. Without an iota of proof to substantiate the validity of the said
transaction, the respondents unlawfully deprived Oliver of her funds.
Indeed, the bank should be solidarily liable with its employee for the damages committed to its depositor.58 Under Article 2180 of the Civil
Code, employers shall be held primarily and solidarily liable for damages caused by their employees acting within the scope of their assigned
tasks.
Castro, as acting branch manager of PSBank ,was able to facilitate the questionable transaction as she was also entrusted with Olivers
passbook. In other words, Castro was the representative of PSBank, and, at the same time, the agent of Oliver, earning commissions from their
transactions. Oddly, PSBank, either consciously or through sheer negligence, allowed the double dealings of its employee with its client. Such
carelessness and lack of protection of the depositors from its own employees led to the unlawful withdrawal of the P7 million from Olivers
account. Although Castro was eventually terminated by PSBank because of certain problems regarding client accommodation and loss of
confidence, the damage to Oliver had already been done. Thus, both Castro and PSBank must be held solidarily liable.
Award
invalid foreclosure
of
damages;
To recapitulate, the loans of Oliver from PSBank which were secured by real estate mortages amounted to P5,888,149.33. Finding PSBank and
Castro solidarily liable to Oliver in the amount of P7 million because it was improperly withdrawn from her bank account, the Court agrees with
the RTC that had it not been for the said unauthorized withdrawal, Olivers debts amounting to P5,888,149.33 would have been satisfied.
Consequently, PSBanks foreclosure of the real estate mortgage covering the two (2) loans in the total amount of P5,888,149.33 was improper.
With PSBank being found liable to Oliver for P7 million, after offsetting her loans would have PSBank and Castro still owing her P1,111,850.77,
which must be suitably paid in the form of actual damages.
The award of moral damages must also be upheld. Specifically, in culpa contractual or breach of contract, like in the present case, moral
damages are recoverable only if the defendant has acted fraudulently or in bad faith, or is found guilty of gross negligence amounting to bad
faith, or in wanton disregard of his contractual obligations. Verily, the breach must be wanton, reckless, malicious, or in bad faith, oppressive
or abusive.59
Here, Castro and PSBank were utterly reckless in allowing the withdrawal of a huge amount from Oliver's account without her
consent.1wphi1 The bank's negligence is a result of lack of due care and caution required of managers and employees of a firm engaged in a
business so sensitive and demanding.60 Hence, the award of Pl00,000.00 as moral damages is warranted.
The award of exemplary damages is also proper due to the failure of Castro and PSBank to prevent the unauthorized withdrawal from Oliver's
account. The law allows the grant of exemplary damages to set an example for public good. 61 The Court, however, finds that the amount of
exemplary damages must be decreased to P50,000.00.
Finally; the Court agrees with the RTC that Castro and PSBank should be held solidarily liable for attorney's fees. Article 2208 of the Civil Code
is clear that attorney's fees may be recovered when exemplary damages are awarded or when the plaintiff, through the defendant's act or
omission, has been compelled to litigate with thirds persons. A decreased amount of P50,000.00 attorney's fees should be sufficient.
WHEREFORE, the petition is GRANTED. The October 25, 2013 Decision and the September 12, 2014 Resolution of the Court of Appeals in
CA-G.R. CV No. 95656 are REVERSED and SET ASIDE. The July 22, 2010 Order of the Regional Trial Court, Branch 276, Muntinlupa City in
Civil Case No. 99-278 is hereby REINSTATED with theMODIFICATION that the award of exemplary damages and attorney's fees be
decreased to P50,000.00 each
SPOUSES ROLANDO and HERMINIA SALVADOR, petitioners, vs. SPOUSES ROGELIO and ELIZABETH RABAJA and ROSARIO GONZALES,
respondents.
Remedial Law; Civil Procedure; Supreme Court; Jurisdiction; As a general rule, the Supreme Courts (SCs) jurisdiction in a Rule 45
petition is limited to the review of pure questions of law.As a general rule, the Courts jurisdiction in a Rule 45 petition is limited to the
review of pure questions of law. A question of law arises when the doubt or difference exists as to what the law is on a certain state of facts.
Negatively put, Rule 45 does not allow the review of questions of fact. A question of fact exists when the doubt or difference arises as to the
truth or falsity of the allegations.
Same; Same; Default; The failure to attend the pretrial conference does not result in the default of an absent party. Under the 1997 Rules
of Civil Procedure, a defendant is only declared in default if he fails to file his Answer within the reglementary period .On the procedural
aspect, the Court reiterates the rule that the failure to attend the pretrial conference does not result in the default of an absent party. Under
the 1997 Rules of Civil Procedure, a defendant is only declared in default if he fails to file his Answer within the reglementary period. On the
other hand, if a defendant fails to attend the pretrial conference, the plaintiff can present his evidence ex parte. Sections 4 and 5, Rule 18 of
the Rules of Court provide: Sec.4. Appearance of parties.It shall be the duty of the parties and their counsel to appear at the pretrial. The
nonappearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully
authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into stipulations
or admissions of facts and of documents. Sec.5. Effect of failure to appear.The failure of the plaintiff to appear when so required pursuant to
the next preceding section shall be cause for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the
court. A
_______________
* SECOND DIVISION.
655
655
Salvador vs. Rabaja

similar failure on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parteand the
court to render judgment on the basis thereof.
Same; Same; Pre-Trial; If the absent party at the pretrial is the plaintiff, then his case shall be dismissed. If it is the defendant who fails to
appear, then the plaintiff is allowed to present his evidence ex parte and the court shall render judgment based on the evidence presented .
The failure of a party to appear at the pretrial has indeed adverse consequences. If the absent party is the plaintiff, then his case shall be
dismissed. If it is the defendant who fails to appear, then the plaintiff is allowed to present his evidence ex parte and the court shall render
judgment based on the evidence presented. Thus, the plaintiff is given the privilege to present his evidence without objection from the
defendant, the likelihood being that the court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or
present its own evidence. The stringent application of the rules on pretrial is necessitated from the significant role of the pretrial stage in the
litigation process. Pretrial is an answer to the clarion call for the speedy disposition of cases. Although it was discretionary under the 1940
Rules of Court, it was made mandatory under the 1964 Rules and the subsequent amendments in 1997. The importance of pretrial in civil
actions cannot be overemphasized.
Civil Law; Agency; A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the
power of attorney, or the instructions as regards the agency.Persons dealing with an agent must ascertain not only the fact of agency, but
also the nature and extent of the agents authority. A third person with whom the agent wishes to contract on behalf of the principal may
require the presentation of the power of attorney, or the instructions as regards the agency. The basis for agency is representation and a
person dealing with an agent is put upon inquiry and must discover on his own peril the authority of the agent. According to Article 1990 of the
New Civil Code, insofar as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if
such act is within the terms of the power of attorney, as written. In this case, Spouses Rabaja did not recklessly enter into a contract to sell
with Gonzales. They required her presentation of the power of attorney before they transacted with her prin
656
656
Salvador vs. Rabaja

cipal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to rely on it.
Same; Breach of Contract; Moral Damages; Article 2220 of the New Civil Code provides that to award moral damages in a breach of
contract, the defendant must act fraudulently or in bad faith.The award of damages to Spouses Rabaja cannot be sustained by this Court.
The filing alone of a civil action should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is
not among the grounds for moral damages. Article 2220 of the New Civil Code provides that to award moral damages in a breach of contract,
the defendant must act fraudulently or in bad faith. In this case, Spouses Rabaja failed to sufficiently show that Spouses Salvador acted in a
fraudulent manner or with bad faith when it breached the contract of sale. Thus, the award of moral damages cannot be warranted.
Same; Exemplary Damages; As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary
damages may be imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary damages may
be imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.
The claimant must first establish his right to moral, temperate, liquidated or compensatory damages. In this case, considering that Spouses
Rabaja failed to prove moral or compensatory damages, then there could be no award of exemplary damages.
Same; Attorneys Fees; The settled rule is that no premium should be placed on the right to litigate and that not every winning party is
entitled to an automatic grant of attorneys fees.With regard to attorneys fees, neither Spouses Rabaja nor Gonzales is entitled to the
award. The settled rule is that no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic
grant of attorneys fees. The RTC reasoned that Gonzales was forced to litigate due to the acts of Spouses Salvador. The Court does not agree.
Gonzales, as agent of Spouses Salvador, should have expected that she would be called to litigation in connection with her fiduciary duties to
the principal.
657
657
Salvador vs. Rabaja

Roberto C. Bermejo for petitioners.
Leonides, Respicio & Associates Law Office for Sps. Rabaja.
MENDOZA,J.:
This is a petition for review on certiorari seeking to reverse and set aside the August 22, 2011 Decision 1 and the January 5, 2012
Resolution2 of the Court of Appeals (CA) in C.A.-G.R. CV No. 90296 which affirmed with modification the March 29, 2007 Decision of the
Regional Trial Court Branch 214 (RTC-Branch 214), Mandaluyong City in Civil Case No. MC-03-2175, for rescission of a contract (rescission
case).
The Facts
This case stemmed from a dispute involving the sellers, petitioner spouses Rolando and Herminia Salvador ( Spouses Salvador); the sellers
agent, Rosario Gonzales (Gonzales); and the buyers, respondent Spouses Rogelio and Elizabeth Rabaja (Spouses Rabaja), over a parcel of land
situated at No. 25, Merryland Village, 375 Jose Rizal Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT)
No. 13426 and registered in the names of Spouses Salvador. From 1994 until 2002, Spouses Rabaja were leasing an apartment in the subject
lot.
Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were looking for a buyer of the subject
_______________
1 Penned by Associate Justice Agnes Reyes-Carpio, with Associate Justices Fernanda Lampas-Peralta and Priscilla J. Baltazar-Padilla,
2 Id., at pp. 75-76.
658
658
Salvador vs. Rabaja

property. Petitioner Herminia Salvador (Herminia) personally introduced Gonzales to them as the administrator of the said property.
Spouses Salvador even handed to Gonzales the owners duplicate certificate of title over the subject property. On July, 3, 1998, Spouses
Rabaja made an initial payment of P48,000.00 to Gonzales in the presence of Herminia. Gonzales then presented the Special Power of
Attorney3 (SPA), executed by Rolando Salvador (Rolando) and dated July 24, 1998. On the same day, the parties executed the Contract to
Sell4 which stipulated that for a consideration of P5,000,000.00, Spouses Salvador sold, transferred and conveyed in favor of Spouses Rabaja
the subject property. Spouses Rabaja made several payments totalling P950,000.00, which were received by Gonzales pursuant to the SPA
provided earlier as evidenced by the check vouchers signed by Gonzales and the improvised receipts signed by Herminia.
Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did not receive any payment from Gonzales.
This prompted Spouses Rabaja to suspend further payment of the purchase price; and as a consequence, they received a notice to vacate the
subject property from Spouses Salvador for nonpayment of rentals.
Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In turn, Spouses Rabaja filed an action for
rescission of contract against Spouses Salvador and Gonzales, the subject matter of the present petition.
In the action for ejectment, the complaint was filed before the Metropolitan Trial Court of Mandaluyong City, Branch 60 (MeTC), where it
was docketed as Civil Case No. 17344. In its August 14, 2002 Decision, 5 the MeTC ruled in favor of Spouses Salvador finding that valid grounds
existed for the eviction of Spouses Rabaja from the subject property and ordering them
_______________
3 Id., at p. 101.
4 Id., at p. 102.
5 Records, pp. 433-436.
659
659
Salvador vs. Rabaja

to pay back rentals. Spouses Salvador were able to garnish the amount of P593,400.00 6 from Spouses Rabajas time deposit account
pursuant to a writ of execution issued by the MeTC. 7 Spouses Rabaja appealed to the Regional Trial Court, Branch 212, Mandaluyong City (RTCBr. 212) which reversed the MeTC ruling in its March 1, 2005 decision. 8 The RTC-Br. 212 found that no lease agreement existed between the
parties. Thereafter, Spouses Salvador filed an appeal with the CA which was docketed as C.A.-G.R. S.P. No. 89259. On March 31, 2006, the
CA ruled in favor of Spouses Salvador and reinstated the MeTC ruling ejecting Spouses Rabaja. 9 Not having been appealed, the CA decision in
C.A.-G.R. S.P. No. 89259 became final and executory on May 12, 2006. 10
Meanwhile, the rescission case filed by Spouses Rabaja against Spouses Salvador and Gonzales and docketed as Civil Case No. MC No. 032175 was also raffled to RTC-Br. 212. In their complaint, 11 dated July 7, 2003, Spouses Rabaja demanded the rescission of the contract to sell
praying that the amount of P950,000.00 they previously paid to Spouses Salvador be returned to them. They likewise prayed that damages be
awarded due to the contractual breach committed by Spouses Salvador.
Spouses Salvador filed their answer with counterclaim and cross-claim 12 contending that there was no meeting of the minds between the
parties and that the SPA in favor of Gonzales was falsified. In fact, they filed a case for falsification against Gonzales, but it was dismissed
because the original of
_______________
6 Id., at p. 432.
7 Id., at p. 438.
8 Id., at pp. 439-446.
9 Penned by Associate Justice Amelita Tolentino, with Associate Justices Portia Alio Hormachuelos and Justice Vicente S. E. Veloso,
10 Id., at p. 146.
11 Id., at pp. 79-83.
12 Id., at pp. 84-90.
660
660
Salvador vs. Rabaja

the alleged falsified SPA could not be produced. They further averred that they did not receive any payment from Spouses Rabaja through
Gonzales. In her defense, Gonzales filed her answer 13 stating that the SPA was not falsified and that the payments of Spouses Rabaja
amounting to P950,000.00 were all handed over to Spouses Salvador.
The pretrial conference began but attempts to amicably settle the case were unsuccessful. It was formally reset to February 4, 2005, but
Spouses Salvador and their counsel failed to attend. Consequently, the RTC issued the pretrial order 14 declaring Spouses Salvador in default
and allowing Spouses Rabaja to present their evidence ex parte against Spouses Salvador and Gonzales to present evidence in her favor.
A motion for reconsideration, 15 dated March 28, 2005, was filed by Spouses Salvador on the said pre-trial order beseeching the liberality of
the court. The rescission case was then re-raffled to RTC-Br. 214 after the Presiding Judge of RTC-Br. 212 inhibited herself. In the Order, 16dated
October 24, 2005, the RTC-Br. 214 denied the motion for reconsideration because Spouses Salvador provided a flimsy excuse for their
nonappearance in the pretrial conference.
Thereafter, trial proceeded and Spouses Rabaja and Gonzales presented their respective testimonial and documentary evidence.
RTCs Ruling
On March 29, 2007, the RTC-Br. 214 rendered a decision 17 in favor of Spouses Rabaja. It held that the signature of Spouses Salvador affixed
in the contract to sell appeared to be authen_______________
13 Id., at pp. 91-94.

14 Id., at pp. 105-112.
15 Id., at pp. 113-115.
16 Id., at pp. 124-125.
17 Penned by Judge Edwin D. Sorongon; id., at pp. 126-134.
661
661
Salvador vs. Rabaja

tic. It also held that the contract, although denominated as contract to sell, was actually a contract of sale because Spouses Salvador, as
vendors, did not reserve their title to the property until the vendees had fully paid the purchase price. Since the contract entered into was a
reciprocal contract, it could be validly rescinded by Spouses Rabaja, and in the process, they could recover the amount of P950,000.00 jointly
and severally from Spouses Salvador and Gonzales. The RTC stated that Gonzales was undoubtedly the attorney-in-fact of Spouses Salvador
absent any taint of irregularity. Spouses Rabaja could not be faulted in dealing with Gonzales who was duly equipped with the SPA from
Spouses Salvador.
The RTC-Br. 214 then ruled that the amount of P593,400.00 garnished from the time deposit account of Spouses Rabaja, representing the
award of rental arrearages in the separate ejectment suit, should be returned by Spouses Salvador. 18 The court viewed that such amount was
part of the purchase price of the subject property which must be returned. It also awarded moral and exemplary damages in favor of Spouses
Rabaja and attorneys fees in favor of Gonzales. The dispositive portion of the said decision reads:
WHEREFORE, this court renders judgment as follows:
a. Ordering the Contract to Sell entered into by the plaintiff and defendant spouses Rolando and Herminia Salvador on July 24, 1998 as
RESCINDED;
b. Ordering defendant spouses Rolando and Herminia Salvador and defendant Rosario S. Gonzales jointly and severally liable to pay
plaintiffs:
1. the amount of NINE HUNDRED FIFTY THOUSAND PESOS (P950,000.00), rep_______________
18 Id., at p. 132.
662
662
Salvador vs. Rabaja

resenting the payments made by the latter for the purchase of subject property;
2. the amount of TWENTY THOUSAND PESOS (P20,000.00), as moral damages;
3. the amount of TWENTY THOUSAND PESOS (P20,000.00), as exemplary damages;
4. the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00), as attorneys fees;
5. the cost of suit.
c. Ordering defendant Spouses Rolando and Herminia Salvador to pay plaintiffs the amount of FIVE HUNDRED NINETY THREE THOUSAND
PESOS (P593,000.00) (sic), representing the amount garnished from the Metrobank deposit of plaintiffs as payment for their alleged back
rentals;
d. Ordering the defendant Spouses Rolando and Herminia Salvador to pay defendant Rosario Gonzales on her cross-claim in the amount of
ONE HUNDRED THOUSAND PESOS (P100,000.00);
e. Dismissing the counterclaims of the defendants against the plaintiff.
SO ORDERED.19
Gonzales filed a motion for partial reconsideration, but it was denied by the RTC-Br. 114 in its Order, 20 dated September 12, 2007.
Undaunted, Spouses Salvador and Gonzales filed an appeal before the CA.
_______________
19 Id., at pp. 133-134.
20 CA Rollo, p. 64.
663
663
Salvador vs. Rabaja

CAs Ruling
On March 29, 2007, the CA affirmed the decision of the RTC-Br. 114 with modifications. It ruled that the contract to sell was indeed a
contract of sale and that Gonzales was armed with an SPA and was, in fact, introduced to Spouses Rabaja by Spouses Salvador as the
administrator of the property. Spouses Rabaja could not be blamed if they had transacted with Gonzales.
The CA then held that Spouses Salvador should return the amount of P593,400.00 pursuant to a separate ejectment case, reasoning that
Spouses Salvador misled the court because an examination of C.A.-G.R. S.P. No. 89260showed that Spouses Rabaja were not involved in
that case. C.A.-G.R. S.P. No. 59260 was an action between Spouses Salvador and Gonzales only and involved a completely different residential
apartment located at 302-C Jupiter Street, Dreamland Subdivision, Mandaluyong City.
The CA, however, ruled that Gonzales was not solidarily liable with Spouses Salvador. The agent must expressly bind himself or exceed the
limit of his authority in order to be solidarily liable. It was not shown that Gonzales as agent of Spouses Salvador exceeded her authority or
expressly bound herself to be solidarily liable. The decretal portion of the CA decision reads:
WHEREFORE, the appeal is PARTLY GRANTED. The assailed Decision dated March 29, 2007 and the Order dated September 12, 2007, of the
Regional Trial Court, Branch 214, Mandaluyong City, in Civil Case No. MC-03-2175, are AFFIRMED with MODIFICATION in that Rosario Gonzalez
is not jointly and severally liable to pay Spouses Rabaja the amounts enumerated in paragraph (b) of the Decision dated March 29, 2007.
SO ORDERED.21
_______________
21 Rollo, pp. 72-73.
664
664
Salvador vs. Rabaja

Spouses Salvador filed a motion for reconsideration but it was denied by the CA in its January 5, 2012 Resolution.
Hence, this petition.
ASSIGNMENT OF ERRORS
I
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY ABUSED ITS DISCRETION IN DECLARING
PETITIONERS IN DEFAULT AND IN DEPRIVING THEM OF THE OPPORTUNITY TO CROSS-EXAMINE RESPONDENTS SPS. RABAJA AS
WELL AS TO PRESENT EVIDENCE FOR AND IN THEIR BEHALF, GIVEN THE MERITORIOUS DEFENSES RAISED IN THEIR ANSWER
THATCATEGORICALLY AND DIRECTLY DISPUTE RESPONDENTS SPS. RABAJAS CAUSE OF ACTION.
II
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY ERRED IN GIVING CREDENCE TO THE
TESTIMONY OF RESPONDENT GONZALES THAT PAYMENTS WERE INDEED REMITTED TO AND RECEIVED BY PETITIONER HERMINIA
SALVADOR EVEN AS THE IMPROVISED RECEIPTS WERE EVIDENTLY MADE UP AND FALSIFIED BY RESPONDENT GONZALES.
III
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY ERRED IN RESCINDING THE CONTRACT TO
SELL WHEN THERE IS NOTHING TO RESCIND AS NO VALID CONTRACT TO SELL WAS ENTERED INTO, AND IN DIRECTING THE
REFUND OF THE AMOUNT OF P950,000.00 WHEN THE EVIDENCE
665
665
Salvador vs. Rabaja

CLEARLY SHOWS THAT SAID AMOUNT WAS PAID TO AND RECEIVED BY RESPONDENT GONZALES ALONE WHO
MISAPPROPRIATED THE SAME.
IV
THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURTS DECISION FOR PETITIONERS TO RETURN THE AMOUNT OF
P543,400.00 REPRESENTING RENTALS IN ARREARS GARNISHED OR WITHDRAWN BY VIRTUE OF A WRIT OF EXECUTION ISSUED
IN AN EJECTMENT CASE WHICH WAS TRIED AND DECIDED BY ANOTHER COURT.
V
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY ERRED IN AWARDING DAMAGES TO
RESPONDENTS SPS. RABAJA, THERE BEING NO FACTUAL AND LEGAL BASES FOR SUCH AWARD.
VI
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE TRIAL COURT GRAVELY ERRED IN AWARDING P100,000.00 TO
RESPONDENT GONZALES AS ATTORNEYS FEES WHEN RESPONDENT GONZALES, IN FACT, COMMITTED FORGERY AND
FALSIFICATION IN DEALING WITH THE PROPERTY OF PETITIONERS AND MISAPPROPRIATED THE MONIES PAID TO HER BY
RESPONDENTS SPS. RABAJA, THUS GIVING PREMIUM TO HER FRAUDULENT ACTS. 22
The foregoing can be synthesized into three main issues.First, Spouses Salvador contend that the order of default
_______________
22 Id., at pp. 23-24.
666
666
Salvador vs. Rabaja
must be lifted because reasonable grounds exist to justify their failure to attend the pretrial conference on February 4, 2005. Second,
Spouses Salvador raise in issue the veracity of the receipts given by Gonzales, the SPA and the validity of the contract to sell. They claim that
the improvised receipts should not be given credence because these were crude and suspicious, measuring only by 2 x 2 inches which showed
that Gonzales misappropriated the payments of Spouses Rabaja for herself and did not remit the amount of P950,000.00 to them. As there
was no consideration, then no valid contract to sell existed. Third, Spouses Salvador argue that the ejectment case, from which the amount of
P593,400.00 was garnished, already became final and executory and could not anymore be disturbed. Lastly, the award of damages in favor of
Spouses Rabaja and Gonzales was improper absent any legal and factual bases.
On January 21, 2013, Spouses Salvador filed their supplemental petition 23 informing the Court that RTC-Br. 213 had rendered a decision in
Civil Case No. MC00-1082, an action for rescission of the SPA. The said decision held that Spouses Salvador properly revoked the SPA in favor
of Gonzales due to loss of trust and confidence. On September 11, 2013, Gonzales filed her comment to the supplemental
petition,24 contending that the RTC-Branch 213 decision had no bearing because it had not yet attained finality. On even date, Spouses Rabaja
filed their Comment,25 asserting that the present petition is a mere rehash of the previous arguments of Spouses Salvador before the CA. On
November 15, 2013, Spouses Salvador replied that they merely wanted to show that the findings by the RTC-Br. 213 should be given weight as
a full-blown trial was conducted therein.26
_______________
23 Id.,
24 Id.,
25 Id.,
26 Id.,
667
at
at
at
at
pp.
pp.
pp.
pp.
242-247.
296-299.
308-310.
314-316.
667
Salvador vs. Rabaja

The Courts Ruling
As a general rule, the Courts jurisdiction in a Rule 45 petition is limited to the review of pure questions of law. A question of law arises
when the doubt or difference exists as to what the law is on a certain state of facts. Negatively put, Rule 45 does not allow the review of
questions of fact. A question of fact exists when the doubt or difference arises as to the truth or falsity of the allegations. 27
The present petition presents questions of fact because it requires the Court to examine the veracity of the evidence presented during the
trial, such as the improvised receipts, the SPA given to Gonzales and the contract to sell. Even the petitioner spouses themselves concede and
ask the Court to consider questions of fact, 28 but the Court finds no reason to disturb the findings of fact of the lower courts absent any
compelling reason to the contrary.
The failure of Spouses Salvador to attend pretrial conference warrants the presentation of evidence ex parte by Spouses Rabaja
On the procedural aspect, the Court reiterates the rule that the failure to attend the pretrial conference does not result in the default of an
absent party. Under the 1997 Rules of Civil Procedure, a defendant is only declared in default if he fails to file his Answer within the
reglementary period.29 On the other
_______________
27 Land Bank of the Philippines v. Yatco Agricultural Enterprises, G.R. No. 172551, January 15, 2014, 713 SCRA 370, 379.
28 Rollo, p. 33.
29 Sec.3, Rule9.Default; declaration of.
If the defending party fails to answer within the time allowed therefor, the court shall, upon motion of the claiming party with notice to the
defending party, and proof of such failure, declare the defending party in default. Thereupon, the court shall proceed to render judg668
668
Salvador vs. Rabaja

hand, if a defendant fails to attend the pretrial conference, the plaintiff can present his evidence ex parte. Sections 4 and 5, Rule 18 of the
Rules of Court provide:
Sec.4.Appearance of parties.
It shall be the duty of the parties and their counsel to appear at the pretrial. The nonappearance of a party may be excused only if a valid
cause is shown therefor or if a representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to
submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and of documents.
Sec.5.Effect of failure to appear.
The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for dismissal of the action. The
dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on the part of the defendant shall be cause to
allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.
[Emphasis supplied]
The case of Philippine American Life & General Insurance Company v. Joseph Enario30 discussed the difference between the nonappearance
of a defendant in a pretrial conference and the declaration of a defendant in default in the present Rules of Civil Procedure. The decision
instructs:
_______________
ment granting the claimant such relief as his pleading may warrant, unless the court in its discretion requires the claimant to submit
evidence. Such reception of evidence may be delegated to the clerk of court.
xxxx
30 645 Phil. 166, 174-175; 630 SCRA 607, 614-615 (2010).
669
669
Salvador vs. Rabaja

Prior to the 1997 Revised Rules of Civil Procedure, the phrase as in default was initially included in Rule 20 of the old rules, and which
read as follows:
Sec.2.A party who fails to appear at a pretrial conference may be nonsuited or considered as in default.
It was, however, amended in the 1997 Revised Rules of Civil Procedure. Justice Regalado, in his book, REMEDIAL LAW COMPENDIUM,
explained the rationale for the deletion of the phrase as in default in the amended provision, to wit:
1.This is a substantial reproduction of Section 2 of the former Rule 20 with the change that, instead of defendant being declared as in
default by reason of his nonappearance, this section now spells out that the procedure will be to allow the ex partepresentation of plaintiffs
evidence and the rendition of judgment on the basis thereof. While actually the procedure remains the same, the purpose is one of semantical
propriety or terminological accuracy as there were criticisms on the use of the word default in the former provision since that term is
identified with the failure to file a required answer, not appearance in court.
Still, in the same book, Justice Regalado clarified that while the order of default no longer obtained, its effects were retained, thus:
Failure to file a responsive pleading within the reglementary period, and not failure to appear at the hearing, is the sole ground for an order
of default, except the failure to appear at a pretrial conference wherein the effects of a default on the part of the defendant are followed, that
is, the plaintiff shall be allowed to present evidence ex parte and a judgment based thereon may be rendered against defendant.
670
670
Salvador vs. Rabaja

From the foregoing, the failure of a party to appear at the pretrial has indeed adverse consequences. If the absent party is the plaintiff,
then his case shall be dismissed. If it is the defendant who fails to appear, then the plaintiff is allowed to present his evidence ex parte and the
court shall render judgment based on the evidence presented. Thus, the plaintiff is given the privilege to present his evidence without
objection from the defendant, the likelihood being that the court will decide in favor of the plaintiff, the defendant having forfeited the
opportunity to rebut or present its own evidence. 31 The stringent application of the rules on pretrial is necessitated from the significant role of
the pretrial stage in the litigation process. Pretrial is an answer to the clarion call for the speedy disposition of cases. Although it was
discretionary under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the subsequent amendments in 1997. 32 The
importance of pretrial in civil actions cannot be overemphasized. 33
There is no dispute that Spouses Salvador and their counsel failed to attend the pretrial conference set on February 4, 2005 despite proper
notice. Spouses Salvador aver that their nonattendance was due to the fault of their counsel as he forgot to update his calendar. 34 This excuse
smacks of carelessness, and indifference to the pretrial stage. It simply cannot be considered as a justifiable excuse by the Court. As a result
of their inattentiveness, Spouses Salvador could no longer present any evidence in their favor. Spouses Rabaja, as plaintiffs, were properly
allowed by the RTC to present evidence ex parte against Spouses Salvador as defendants. Considering that Gonzales as codefendant was able
to attend the
_______________
31 Tolentino v. Laurel, G.R. No. 181368, February 22, 2012, 666 SCRA 561, 569-570.
32 Balatico Vda. de Agatep v. Rodriguez, 619 Phil. 632, 642; 604 SCRA 634, 641 (2009).
33 Chingkoe v. Republic, G.R. No. 183608, July 31, 2013, 702 SCRA 677.
34 Rollo, p. 114.
671
671
Salvador vs. Rabaja

pretrial conference, she was allowed to present her evidence. The RTC could only render judgment based on the evidence presented during
the trial.
Gonzales, as agent of Spouses Salvador, could validly receive the payments of Spouses Rabaja
Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with the courts below in finding that the
contract entered into by the parties was essentially a contract of sale which could be validly rescinded. Spouses Salvador insist that they did
not receive the payments made by Spouses Rabaja from Gonzales which totalled P950,000.00 and that Gonzales was not their duly authorized
agent. These contentions, however, must fail in light of the applicable provisions of the New Civil Code which state:
Art.1900.So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if
such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to
an understanding between the principal and the agent.
xxxx
Art.1902.A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of
attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons who
have relied upon the power of attorney or instructions shown them.
xxxx
Art.1910.The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.
672
672
Salvador vs. Rabaja

Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of the agents authority. A third
person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney, or the
instructions as regards the agency. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must
discover on his own peril the authority of the agent.35
According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is deemed to have been performed within
the scope of the agents authority, if such act is within the terms of the power of attorney, as written. In this case, Spouses Rabaja did not
recklessly enter into a contract to sell with Gonzales. They required her presentation of the power of attorney before they transacted with her
principal. And when Gonzales presented the SPA to Spouses Rabaja, the latter had no reason not to rely on it.
The law mandates an agent to act within the scope of his authority which what appears in the written terms of the power of attorney
granted upon him.36 The Court holds that, indeed, Gonzales acted within the scope of her authority. The SPA precisely stated that she could
administer the property, negotiate the sale and collect any document and all payments related to the subject property. 37 As the agent acted
within the scope of his authority, the principal must comply with all the obligations. 38 As correctly held by the CA, considering that it was not
shown that Gonzales exceeded her authority or that she expressly bound herself to be liable, then she could not be
_______________
35 Yoshizaki v. Joy Training Center of Aurora, Inc., G.R. No. 174978, July 31, 2013, 702 SCRA 631.
36 Country Bankers Insurance Corporation v. Keppel Cebu Shipyard, G.R. No. 166044, June 18, 2012, 673 SCRA 427, 451.
37 Rollo, p. 174.
38 Article 1910, New Civil Code.
673
Salvador vs. Rabaja
673
considered personally and solidarily liable with the principal, Spouses Salvador. 39
Perhaps the most significant point which defeats the petition would be the fact that it was Herminia herself who personally introduced
Gonzalez to Spouses Rabaja as the administrator of the subject property. By their own ostensible acts, Spouses Salvador made third persons
believe that Gonzales was duly authorized to administer, negotiate and sell the subject property. This fact was even affirmed by Spouses
Salvador themselves in their petition where they stated that they had authorized Gonzales to look for a buyer of their property. 40 It is already
too late in the day for Spouses Salvador to retract the representation to unjustifiably escape their principal obligation.
As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses Rabaja properly made payments to
Gonzales, as agent of Spouses Salvador; and it was as if they paid to Spouses Salvador. It is of no moment, insofar as Spouses Rabaja are
concerned, whether or not the payments were actually remitted to Spouses Salvador. Any internal matter, arrangement, grievance or strife
between the principal and the agent is theirs alone and should not affect third persons. If Spouses Salvador did not receive the payments or
they wish to specifically revoke the SPA, then their recourse is to institute a separate action against Gonzales. Such action, however, is not any
more covered by the present proceeding.
The amount of P593,400.00 should not be returned by Spouses Salvador
Nevertheless, the assailed decision of the CA must be modified with respect to the amount of P593,400.00 garnished by
_______________
39 Rollo, p. 71.
40 Id., at p. 14.
674
674
Salvador vs. Rabaja

Spouses Salvador and ordered returned to Spouses Rabaja. The RTC ordered the return of the amount garnished holding that it constituted
a part of the purchase price. The CA ruled that Spouses Salvador misled the Court when they improperly cited C.A.-G.R. S.P. No. 89260 to
prove their entitlement to the said amount. Both courts erred in their ruling.
First, the garnishment of the amount of P593,400.00 against Spouses Rabaja was pursuant to the CA decision in C.A.-G.R. S.P. No. 89259,
an entirely different case involving an action for ejectment, and it does not concern the rescission case which is on appeal before this Court.
Moreover, the decision on the ejectment case is final and executory and an entry of judgment has already been made. 41 Nothing is more
settled in law than that when a final judgment is executory, it thereby becomes immutable and unalterable. The judgment may no longer be
modified in any respect, even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court which rendered it or by the highest Court of the land. The
doctrine is founded on consideration of public policy and sound practice that, at the risk of occasional errors, judgments must become final at
some definite point in time.42
The March 31, 2006 CA decision 43 in C.A.-G.R. S.P. No. 89259 has long been final and executory and cannot any more be disturbed by
the Court. Public policy dictates that once a judgment becomes final, executory and unappealable, the prevailing party should not be denied
the fruits of his victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement of a judgment sets at naught the
role
_______________
41 Id., at p. 146.
42 Mauleon v. Porter, G.R. No. 203288, July 18, 2014, 730 SCRA 229.
43 Rollo, pp. 136-145.
675
675
Salvador vs. Rabaja

and purpose of the courts to resolve justiciable controversies with finality. 44
Meanwhile, in ruling that the garnishment was improper and thus ordering the return of the garnished amount, the CA referred to its
decision in C.A.-G.R. S.P. No. 89260. Spouses Salvador, however, clarified in its motion for reconsideration 45 before the CA and in the present
petition46 that the garnishment was pursuant to C.A.-G.R. S.P. No. 89259, and not C.A.-G.R. S.P. No. 89260, another ejectment case involving
another property. A perusal of the records reveals that indeed the garnishment was pursuant to the ejectment case in the MeTC, docketed as
Civil Case No. 17344,47 where Spouses Rabaja were the defendants. The MeTC decision was then reinstated by the CA in C.A.-G.R. S.P. No.
89259, not C.A.-G.R. S.P. No. 89260. There, a writ of execution 48 and notice of pay49 were issued against Spouses Rabaja in the amount of
P591,900.00.
Second, Spouses Rabajas appeal with the RTC never sought relief in returning the garnished amount. 50 Such issue simply emerged in the
RTC decision. This is highly improper because the courts grant of relief is limited only to what has been prayed for in the complaint or related
thereto, supported by evidence, and covered by the partys cause of action. 51
If Spouses Rabaja would have any objection on the manner and propriety of the execution, then they must institute their opposition to the
execution proceeding a separate case. Spouses Rabaja can invoke the Civil Code provisions on legal
_______________
44 Edillo v. Dulpina, 624 Phil. 587, 600-601; 610 SCRA 590, 602 (2010).
45 CA Rollo, p. 143.
46 Rollo, p. 36.
47 Records, pp. 433-436.
48 Id., at p. 437.
49 Id., at p. 438.
50 Rollo, pp. 79-82.
51 Diona v. Balangue, G.R. No. 173559, January 7, 2013, 688 SCRA 22, 35.
676
676
Salvador vs. Rabaja

compensation or setoff under Articles 1278, 1279 and 1270. 52 The two obligations appear to have respectively offset each other,
compensation having taken effect by operation of law pursuant to the said provisions of the Civil Code, since all the requisites provided in Art.
1279 of the said Code for automatic compensation are duly present.
No
exemplary damages
award
of
actual,
moral
and
The award of damages to Spouses Rabaja cannot be sustained by this Court. The filing alone of a civil action should not be a ground for an
award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages. 53 Article 2220 of
the New Civil Code provides that to award moral damages in a breach of contract, the defendant must act fraudulently or in bad faith.
_______________
52 Art.1278.Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.
Art.1279.In order that compensation may be proper, it is necessary:
(1)That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same
quality if the latter has been stated;
(3)That the two debts be due;
(4)That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the
debtor.
xxx
Art. 1290.When all the requisites mentioned in Article 1279 are present, compensation takes effect by operation of law, and
extinguishes both debts to the concurrent amount, even though the creditors and debtors are not aware of the compensation.
53 Rudolf Lietz, Inc. v. Court of Appeals, 514 Phil. 634, 644; 478 SCRA 451, 460 (2005).
677
677
Salvador vs. Rabaja

In this case, Spouses Rabaja failed to sufficiently show that Spouses Salvador acted in a fraudulent manner or with bad faith when it breached
the contract of sale. Thus, the award of moral damages cannot be warranted.
As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary damages may be imposed by way of
example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. 54 The claimant must first
establish his right to moral, temperate, liquidated or compensatory damages. In this case, considering that Spouses Rabaja failed to prove
moral or compensatory damages, then there could be no award of exemplary damages.
With regard to attorneys fees, neither Spouses Rabaja nor Gonzales is entitled to the award. The settled rule is that no premium should be
placed on the right to litigate and that not every winning party is entitled to an automatic grant of attorneys fees. 55 The RTC reasoned that
Gonzales was forced to litigate due to the acts of Spouses Salvador. The Court does not agree. Gonzales, as agent of Spouses Salvador, should
have expected that she would be called to litigation in connection with her fiduciary duties to the principal.
In view of all the foregoing, the CA decision should be affirmed with the following modifications:
1. The order requiring defendant Spouses Rolando and Herminia Salvador to pay plaintiffs the amount of Five Hundred Ninety-Three
Thousand (P593,000.00) Pesos, representing the amount garnished from the Metrobank deposit of plaintiffs as for their back rentals should be
deleted;
_______________
54 Metropolitan Bank and Trust Company v. Rosales, G.R. No. 183204, January 13, 2014, 713 SCRA 75.
55 First Lepanto-Taisho Insurance Corporation v. Chevron Philippines, Inc., G.R. No. 177839, January 18, 2012, 663 SCRA 309, 325.
678
678
Salvador vs. Rabaja

2. The award of moral damages in the amount of Twenty Thousand (P20,000.00) Pesos; exemplary damages in the amount of Twenty
Thousand (P20,000.00) Pesos, and attorneys fees in the amount of One Hundred Thousand (P100,000.00) Pesos in favor of Spouses Rabaja
should be deleted; and
3. The award of attorneys fees in amount of One Hundred Thousand (P100,000.00) Pesos in favor of Gonzales should be deleted.
The other amounts awarded are subject to interest at the legal rate of 6% per annum, to be reckoned from the date of finality of this
judgment until fully paid.
WHEREFORE, the petition is PARTLY GRANTED. The March 29, 2007 Decision of the Regional Trial Court, Branch 214, Mandaluyong City,
in Civil Case No. MC-03-2175, is MODIFIED to read as follows:
WHEREFORE, this Court renders judgment as follows:
a. Ordering the Contract to Sell entered into by Spouses Rogelio and Elizabeth Rabaja and Spouses Rolando and Herminia Salvador on
July 24, 1998 as RESCINDED;
b. Ordering Spouses Rolando and Herminia Salvador to pay Spouses Rogelio and Elizabeth Rabaja:
1. The amount of Nine Hundred Fifty Thousand (P950,000.00) Pesos, representing the payments made by the latter for the purchase of the
subject property; and
2. The cost of suit;
c. Dismissing the counterclaims of Spouses Rolando and Herminia Salvador and Rosario Gonzales against Spouses Rogelio and Elizabeth
Rabaja.
The amounts awarded are subject to interest at the legal rate of 6% per annum to be reckoned from the date of finality of this judgment
until fully paid.
679
679
Salvador vs. Rabaja

As aforestated, this is without prejudice to the invocation by either party of the Civil Code provisions on legal compensation or setoff under
Articles 1278, 1279 and 1270.
SO ORDERED.
Carpio (Chairperson), Velasco, Jr.,** Del Castillo andLeonen, JJ., concur.
Petition partly granted, judgment modified.
Notes.Plaintiff duty-bound to set the case for pretrial after the last pleading is served and filed; Failure to comply with this duty makes
the case susceptible to dismissal for failure to prosecute for an unreasonable length of time or failure to comply with the rules. (Espiritu vs.
Lazaro, 605 SCRA 566 [2009])
Where the failure of a party and its counsel to appear during the pretrial was compounded by their inaction, resulting in the finality and
eventual execution of the default judgment, such party cannot put all the blame for this fiasco on its counsel and then claim that it was denied
due process under the badge of extrinsic fraud. (Amihan Bus Lines, Inc. vs. Romars International Gases Corporation, 623 SCRA 406 [2010])
o0o
COUNTRY BANKERS INSURANCE CORPORATION, petitioner, vs. KEPPEL CEBU SHIPYARD, UNIMARINE SHIPPING LINES, INC., PAUL RODRIGUEZ,
PETER RODRIGUEZ, ALBERT HONTANOSAS, and BETHOVEN QUINAIN, respondents.
Civil Law; Agency; In a contract of agency, a person, the agent, binds himself to represent another, the principal, with the latters
_______________
* FIRST DIVISION.
428
28
Country Bankers Insurance Corporation vs. Keppel Cebu Shipyard
consent or authority; By this legal fiction of representation, the actual or legal absence of the principal is converted into his legal or
juridical presence.In a contract of agency, a person, the agent, binds himself to represent another, the principal, with the latters consent or
authority. Thus, agency is based on representation, where the agent acts for and in behalf of the principal on matters within the scope of the
authority conferred upon him. Such acts have the same legal effect as if they were personally done by the principal. By this legal fiction of
representation, the actual or legal absence of the principal is converted into his legal or juridical presence.
Same; Same; Guaranty; Suretyship; Special Power of Attorney; Under Article 1878(11) of the Civil Code, a special power of attorney is
necessary to obligate the principal as a guarantor or surety.The scope of an agents authority is what appears in the written terms of the
power of attorney granted upon him. Under Article 1878(11) of the Civil Code, a special power of attorneyis necessary to obligate the
principal as a guarantor or surety.
Same; Same; An agents act, even if done beyond the scope of his authority, may bind the principal if he ratifies them, whether expressly
or tacitly.Under Articles 1898 and 1910, an agents act, even if done beyond the scope of his authority, may bind the principal if he ratifies
them, whether expressly or tacitly. It must be stressed though that only the principal, and not the agent, can ratify the unauthorized acts,
which the principal must have knowledge of.
Same; Same; Agency by Estoppel; The principal is solidarily liable with the agent even when the latter has exceeded his authority, if the
principal allowed him to act as though he had full powers.Article 1911, on the other hand, is based on the principle of estoppel, which is
necessary for the protection of third persons. It states that the principal is solidarily liable with the agent even when the latter has exceeded
his authority, if the principal allowed him to act as though he had full powers. However, for an agency by estoppel to exist, the following must
be established: 1. The principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority;
2. The third person, in good faith, relied upon such representation; and 3. Relying upon such representation, such third person has changed his
position to his detriment.429
VOL. 673, JUNE 18, 2012
429
Same; Same; Same; Persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to
ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is
upon them to prove it.As this Court held inLitonjua, Jr. v. Eternit Corp., 490 SCRA 204, 224-225 (2006): A person dealing with a known agent
is not authorized, under any circumstances, blindly to trust the agents; statements as to the extent of his powers; such person must not act
negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within the scope of his authority. The settled
rule is that, persons dealing with an assumed agent are bound at their peril, and if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to prove it.
In this case, the petitioners failed to discharge their burden; hence, petitioners are not entitled to damages from respondent EC.
Velasquez and Associates for petitioner.
Angara, Abello, Concepcion, Regala and Cruz for respondent Keppel Cebu Shipyard, Inc.
Albert L. Hontanosas for himself and for respondents Unimarine Shipping Lines, Inc., Paul Rodriguez and Peter Rodriguez.
Lorenzo S. Paylado for respondent B. Quinain.
LEONARDO-DE CASTRO,**J.:
This is a petition for review on certiorari1 to reverse and set
_______________
** Acting Chairperson, Per Special Order No. 1226 dated May 30, 2012.
430
430
aside the January 29, 2004 Decision 2 and October 28, 2004 Resolution 3 of the Court of Appeals in CA-G.R. CV No. 58001, wherein the Court
of Appeals affirmed with modification the February 10, 1997 Decision 4 of the Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No.
CBB-13447.
Hereunder are the undisputed facts as culled from the records of the case.
On January 27, 1992, Unimarine Shipping Lines, Inc. (Unimarine), a corporation engaged in the shipping industry, contracted the services
of Keppel Cebu Shipyard, formerly known as Cebu Shipyard and Engineering Works, Inc. (Cebu Shipyard), for dry docking and ship repair works
on its vessel, the M/V Pacific Fortune.5
On February 14, 1992, Cebu Shipyard issued Bill No. 26035 to Unimarine in consideration for its services, which amounted to
P4,486,052.00.6 Negotiations between Cebu Shipyard and Unimarine led to the reduction of this amount to P3,850,000.00. The terms of this
agreement were embodied in Cebu Shipyards February 18, 1992 letter to the President/General Manager of Unimarine, Paul Rodriguez, who
signed his conformity to said letter, quoted in full below:
18
Ref No.: LL92/0383
February
1992
UNIMARINE
C/O
Gorordo Avenue, Lahug, Cebu City
SHIPPING
LINES,
Autographics,
INC.
Inc.
_______________
1 Under Rule 45 of the 1997 Rules of Court.
2 Rollo, pp. 31-55; penned by Associate Justice Jose C. Reyes, Jr. with Associate Justices Romeo A. Brawner and Rebecca De Guia-Salvador,
concurring.
3 Id., at pp. 57-58.
4 CA Rollo, pp. 25-33.
5 Rollo, pp. 81-82.
6 Id., at pp. 94-114.
431
VOL. 673, JUNE 18, 2012
431
Attention:
Mr.
President/General Manager
Paul
This is to confirm our agreement on the shiprepair bills charged for the repair of MV Pacific Fortune, our invoice no. 26035.
The shiprepair bill (Bill No. 26035) is agreed at a negotiated amount of P3,850,000.00 excluding VAT.
Rodriguez
Unimarine Shipping Lines, Inc. (Unimarine) will pay the above amount of [P3,850,000.00] in US Dollars to be fixed at the prevailing USDollar
to Philippine Peso exchange rate at the time of payment. The payment terms to be extended to Unimarine is as follows:
Installments
Amount
Due Date
1st Installment
P2,350,000.00
30 May 1992
2nd Installment
P1,500,000.00
30 Jun 1992
Unimarine will deposit post-dated checks equivalent to the above amounts in Philippine Peso and an additional check amount of P385,000.00,
representing 10% [Value Added Tax] VAT on the above bill of P3,850,000.00. In the event that Unimarine fails to make full payment on the
above due dates in US Dollars, the post-dated checks will be deposited by CSEW in payment of the amounts owned by Unimarine and
Unimarine agree that the 10% VAT (P385,000.00) shall also become payable to CSEW.
Unimarine in consideration of the credit terms extended by CSEW and the release of the vessel before full payment of the above debt, agree
to present CSEW surety bonds equal to 120% of the value of the credit extended. The total bond amount shall be P4,620,000.00.
Yours faithfully,
CEBU SHIPYARD & ENGG WORKS, INC
Conforme:
(SGD)
(SGD
_______________
SEET
Treasurer/VP-Admin.
KENG
TAT
Unimarine
Lines, Inc.7
_______________
7 Id., at p. 115.
432
432
PAUL
RODRIGUEZ
Shipping
In compliance with the agreement, Unimarine, through Paul Rodriguez, secured from Country Bankers Insurance Corp. (CBIC), through the
latters agent, Bethoven Quinain (Quinain), CBIC Surety Bond No. G (16) 29419 8 (the surety bond) on January 15, 1992 in the amount of
P3,000,000.00. The expiration of this surety bond was extended to January 15, 1993, through Endorsement No. 33152 9 (the endorsement),
which was later on attached to and formed part of the surety bond. In addition to this, Unimarine, on February 19, 1992, obtained another
bond from Plaridel Surety and Insurance Co. (Plaridel), PSIC Bond No. G (16)-00365 10 in the amount of P1,620,000.00.
On February 17, 1992, Unimarine executed a Contract of Undertaking in favor of Cebu Shipyard. The pertinent portions of the contract read
as follows:
Messrs, Uni-Marine Shipping Lines, Inc. (the Debtor) of Gorordo Avenue, Cebu City hereby acknowledges that in consideration of Cebu
Shipyard & Engineering Works, Inc.(Cebu Shipyard) at our request agreeing to release the vessel specified in part A of the Schedule
(name of vessel) prior to the receipt of the sum specified in part B of the Schedule (Moneys Payable) payable in respect of certain works
performed or to be performed by Cebu Shipyard and/or its subcontractors and/or material and equipment supplied or to be supplied by Cebu
Shipyard and/or its subcontractors in connection with the vessel for the party specified in part C of the Schedule (the Debtor), we hereby
unconditionally, irrevocably undertake to make punctual payment to Cebu Shipyard of the Moneys Payable on the terms and conditions as set
out in part B of the Schedule. We likewise hereby expressly waive whatever right of excussion we may have under the law and equity.
This contract shall be binding upon Uni-Marine Shipping Lines, Inc., its heirs, executors, administrators, successors, and assigns and
_______________
8 Id., at pp. 116-117.
9 Id., at p. 118.
10 Id., at pp. 119-120.
433
VOL. 673, JUNE 18, 2012
433
shall not be discharged until all obligation of this contract shall have been faithfully and fully performed by the Debtor. 11
Because Unimarine failed to remit the first installment when it became due on May 30, 1992, Cebu Shipyard was constrained to deposit the
peso check corresponding to the initial installment of P2,350,000.00. The check, however, was dishonored by the bank due to insufficient
funds.12Cebu Shipyard faxed a message to Unimarine, informing it of the situation, and reminding it to settle its account immediately. 13
On June 24, 1992, Cebu Shipyard again faxed a message 14 to Unimarine, to confirm Paul Rodriguezs promise that Unimarine will pay in full
the P3,850,000.00, in US Dollars on July 1, 1992.
Since Unimarine failed to deliver on the above promise, Cebu Shipyard, on July 2, 1992, through a faxed letter, asked Unimarine if the
payment could be picked up the next day. This was followed by another faxed message on July 6, 1992, wherein Cebu Shipyard reminded
Unimarine of its promise to pay in full on July 28, 1992. On August 24, 1992, Cebu Shipyard again faxed 15 Unimarine, to inform it that interest
charges will have to be imposed on their outstanding debt, and if it still fails to pay before August 28, 1992, Cebu Shipyard will have to enforce
payment against the sureties and take legal action.
On November 18, 1992, Cebu Shipyard, through its counsel, sent Unimarine a letter, 16 demanding payment, within seven days from receipt
of the letter, the amount of P4,859,458.00, broken down as follows:
_______________
11 Id., at p. 121.
12 Id., at p. 85.
13 Id., at p. 123.
14 Id., at p. 124.
15 Id., at pp. 125-127.

16 Id., at pp. 128-129.
434
434
B#26035 MV PACIFIC FORTUNE
4,486,052.00
LESS: ADJUSTMENT:
CN#00515-03/19/92
(636,052.00)
-----------------3,850,000.00
Add: VAT
on
repair
bill
no.
26035
385,000.00
------------------
4,235,000.00
Add: Interest/penalty
Debit
Debit
Note
Note
No.
No.
02381
02382
charges:
189,888.00
434,570.00
------------------
4,859,458.0017
Due to Unimarines failure to heed Cebu Shipyards repeated demands, Cebu Shipyard, through counsel, wrote the sureties CBIC 18 on
November 18, 1992, and Plaridel, 19on November 19, 1992, to inform them of Unimarines nonpayment, and to ask them to fulfill their
obligations as sureties, and to respond within seven days from receipt of the demand.
However, even the sureties failed to discharge their obligations, and so Cebu Shipyard filed a Complaint dated January 8, 1993, before the
RTC, Branch 18 of Cebu City, against Unimarine, CBIC, and Plaridel. This was docketed as Civil Case No. CBB-13447.
CBIC, in its Answer,20 said that Cebu Shipyards complaint states no cause of action. CBIC alleged that the surety bond was issued by its
agent, Quinain, in excess of his authority. CBIC claimed that Cebu Shipyard should have doubted the authority of Quinain to issue the surety
bond based on the following:
_______________
17 Id., at p. 130.
18 Id., at pp. 131-132.
19 Id., at p. 133.
20 Id., at pp. 136-143.
435
VOL. 673, JUNE 18, 2012
435
1.The nature of the bond undertaking (guarantee payment), and the amount involved.
2.The surety bond could only be issued in favor of the Department of Public Works and Highways, as stamped on the upper right portion
of the face of the bond.21 This stamp was covered by documentary stamps.
3.The issuance of the surety bond was not reported, and the corresponding premiums were not remitted to CBIC. 22
CBIC added that its liability was extinguished when, without its knowledge and consent, Cebu Shipyard and Unimarine novated their
agreement several times. Furthermore, CBIC stated that Cebu Shipyards claim had already been paid or extinguished when Unimarine
executed an Assignment of Claims 23 of the proceeds of the sale of its vessel M/V Headline in favor of Cebu Shipyard. CBIC also averred that
Cebu Shipyards claim had already prescribed as the endorsement that extended the surety bonds expiry date, was not reported to CBIC.
Finally, CBIC asseverated that if it were held to be liable, its liability should be limited to the face value of the bond and not for exemplary
damages, attorneys fees, and costs of litigation. 24
Subsequently, CBIC filed a Motion to Admit Cross and Third Party Complaint 25 against Unimarine, as cross defendant; Paul Rodriguez, Albert
Hontanosas, and Peter Rodriguez, as signatories to the Indemnity Agreement they executed in favor of CBIC; and Bethoven Quinain, as the
agent
_______________
21 Id., at p. 236.
22 Id., at p. 137.
23 CA Rollo, p. 27.
24 Rollo, pp. 138-141.
25 Id., at pp. 144-145.
436
436
who issued the surety bond and endorsement in excess of his authority, as third party defendants. 26
CBIC claimed that Paul Rodriguez, Albert Hontanosas, and Peter Rodriguez executed an Indemnity Agreement, wherein they bound
themselves, jointly and severally, to indemnify CBIC for any amount it may sustain or incur in connection with the issuance of the surety bond
and the endorsement.27 As for Quinain, CBIC alleged that he exceeded his authority as stated in the Special Power of Attorney, wherein he was
authorized to solicit business and issue surety bonds not exceeding P500,000.00 but only in favor of the Department of Public Works and
Highways, National Power Corporation, and other government agencies. 28
On August 23, 1993, third party defendant Hontanosas filed his Answer with Counterclaim, to the Cross and Third Party Complaint.
Hontanosas claimed that he had no financial interest in Unimarine and was neither a stockholder, director nor an officer of Unimarine. He
asseverated that his relationship to Unimarine was limited to his capacity as a lawyer, being its retained counsel. He further denied having any
participation in the Indemnity Agreement executed in favor of CBIC, and alleged that his signature therein was forged, as he neither signed it
nor appeared before the Notary Public who acknowledged such undertaking. 29
Various witnesses were presented by the parties during the course of the trial of the case. Myrna Obrinaga testified for Cebu Shipyard. She
was the Chief Accountant in charge of the custody of the documents of the company. She corroborated Cebu Shipyards allegations and
produced in court the documents to support Cebu Shipyards claim. She also testified that while it was true that the proceeds of the sale of
_______________
26 CA Rollo, pp. 42-43.
27 Rollo, p. 150.
28 Id., at pp. 233-234.
29 Id., at pp. 153-155.
437
VOL. 673, JUNE 18, 2012
437
Unimarines vessel, M/V Headline, were assigned to Cebu Shipyard, nothing was turned over to them. 30
Paul Rodriguez admitted that Unimarine failed to pay Cebu Shipyard for the repairs it did on M/V Pacific Fortune, despite the extensions
granted to Unimarine. He claimed that he signed the Indemnity Agreement because he trusted Quinain that it was a mere pre-requisite for the
issuance of the surety bond. He added that he did not bother to read the documents and he was not aware of the consequences of signing an
Indemnity Agreement. Paul Rodriguez also alleged to not having noticed the limitation Valid only in favor of DPWH stamped on the surety
bond.31 However, Paul Rodriguez did not contradict the fact that Unimarine failed to pay Cebu Shipyard its obligation. 32
CBIC presented Dakila Rianzares, the Senior Manager of its Bonding Department. Her duties included the evaluation and approval of all
applications for and reviews of bonds issued by their agents, as authorized under the Special Power of Attorney and General Agency Contract
of CBIC. Rianzares testified that she only learned of the existence of CBIC Surety Bond No. G (16) 29419 when she received the summons for
this case. Upon investigation, she found out that the surety bond was not reported to CBIC by Quinain, the issuing agent, in violation of their
General Agency Contract, which provides that all bonds issued by the agent be reported to CBICs office within one week from the date of
issuance. She further stated that the surety bond issued in favor of Unimarine was issued beyond Quinains authority. Rianzares added that
she was not aware that an endorsement pertaining to the surety bond was also issued by Quinain. 33
_______________
30 CA Rollo, p. 27.
31 Id., at p. 28.
32 Id., at p. 30.
33 Id., at pp. 28-29.
438
438
After the trial, the RTC was faced with the lone issue of whether or not CBIC was liable to Cebu Shipyard based on Surety Bond No. G (16)
29419.34
On February 10, 1997, the RTC rendered its Decision, the fallo of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff Cebu Shipyard & Engineering Works, Incorporated and against the
defendants:
1.Ordering the defendants Unimarine Shipping Lines, Incorporated, Country Bankers Insurance Corporation and Plaridel Surety and
Insurance Corporation to pay plaintiff jointly and severally the amount of P4,620,000.00 equivalent to the value of the surety bonds;
2.Ordering further defendant Unimarine to pay plaintiff the amount of P259,458.00 to complete its entire obligation of P4,859,458.00;
3.To pay plaintiff jointly and severally the amount of P100,000.00 in attorneys fees and litigation expenses;
4.For Cross defendant Unimarine Shipping Lines, Incorporated and Third party defendants Paul Rodriguez, Peter Rodriguez and Alber[t]
Hontanosas: To indemnify jointly and severally, cross plaintiff and third party plaintiff Country Bankers Insurance Corporation whatever amount
the latter is made to pay to plaintiff.35
The RTC held that CBIC, in its capacity as surety is bound with its principal jointly and severally to the extent of the surety bond it issued in
favor of [Cebu Shipyard] because although the contract of surety is in essence secondary only to a valid principal obligation, his liability to
[the] creditor is said to be direct, primary[,] and absolute, in other words, he is bound by the principal. 36The RTC added:
_______________
34 Id., at p. 31.
35 Id., at p. 33.
36 Id., at p. 31.
439
VOL. 673, JUNE 18, 2012
439
Solidary obligations on the part of Unimarine and CBIC having been established and expressly stated in the Surety Bond No. 29419 (Exh.
C), [Cebu Shipyard], therefore, is entitled to collect and enforce said obligation against any and or both of them, and if and when CBIC pays,
it can compel its co-defendant Unimarine to reimburse to it the amount it has paid. 37
The RTC found CBICs contention that Quinain acted in excess of his authority in issuing the surety bond untenable. The RTC held that CBIC
is bound by the surety bond issued by its agent who acted within the apparent scope of his authority. The RTC said:
[A]s far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if such act is
within the terms of the powers of attorney as written, even if the agent has in fact exceeded the limits of his authority according to an
understanding between the principal and the agent.38
All the defendants appealed this Decision to the Court of Appeals.
Unimarine, Paul Rodriguez, Peter Rodriguez, and Albert Hontanosas argued that Unimarines obligation under Bill No. 26035 had been
extinguished by novation, as Cebu Shipyard had agreed to accept the proceeds of the sale of the M/V Headline as payment for the ship repair
works it did on M/V Pacific Fortune. Paul Rodriguez and Peter Rodriguez added that such novation also freed them from their liability under the
Indemnity Agreement they signed in favor of CBIC. Albert Hontanosas in turn reiterated that he did not sign the Indemnity Agreement. 39
_______________
37 Id.
38 Id., at p. 33.
39 Id., at pp. 21-22.
440
440
CBIC, in its Appellants Brief, 40 claimed that the RTC erred in enforcing its liability on the surety bond as it was issued in excess of Quinains
authority. Moreover, CBIC averred, its liability under such surety had been extinguished by reasons of novation, payment, and prescription.
CBIC also questioned the RTCs order, holding it jointly and severally liable with Unimarine and Plaridel for the amount of P4,620,000.00, a sum
larger
than
the
face
value
of
CBIC
Surety
Bond
No.
G (16) 29419, and why the RTC did not hold Quinain liable to indemnify CBIC for whatever amount it was ordered to pay Cebu Shipyard.
On January 29, 2004, the Court of Appeals promulgated its decision, with the following dispositive portion:
WHEREFORE, in view of the foregoing, the respective appeal[s] filed by Defendants-Appellants Unimarine Shipping Lines, Inc. and
Country Bankers Insurance Corporation; Cross-Defendant-Appellant Unimarine Shipping Lines, Inc. and; Third-Party Defendants-Appellants Paul
Rodriguez, Peter Rodriguez and Albert Hontanosas are hereby DENIED. The decision of the RTC in Civil Case No. CEB-13447 dated February
10, 1997 isAFFIRMED with modification that Mr. Bethoven Quinain, CBICs agent is hereby held jointly and severally liable with CBIC by virtue
of Surety Bond No. 29419 executed in favor of plaintiff-appellee CSEW. 41
In its decision, the Court of Appeals resolved the following issues, as it had summarized from the parties pleadings:
I.Whether or not UNIMARINE is liable to [Cebu Shipyard] for a sum of money arising from the ship-repair contract;
II.Whether or not the obligation of UNIMARINE to [Cebu Shipyard] has been extinguished by novation;
III.Whether or not Defendant-Appellant CBIC, allegedly being the Surety of UNIMARINE is liable under Surety Bond No. 29419[;]
_______________
40 Id., at pp. 39-63.
41 Rollo, pp. 54-55.
441
VOL. 673, JUNE 18, 2012
441
IV.Whether or not Cross Defendant-Appellant UNIMARINE and Third-Party Defendants-Appellants Paul Rodriguez, Peter Rodriguez, Albert
Hontanosas and Third-Party Defendant Bethoven Quinain are liable by virtue of the Indemnity Agreement executed between them and Cross
and Third Party Plaintiff CBIC;
V.Whether or not Plaintiff-Appellee [Cebu Shipyard] is entitled to the award of P100,000.00 in attorneys fees and litigation expenses. 42
The Court of Appeals held that it was duly proven that Unimarine was liable to Cebu Shipyard for the ship repair works it did on the
formers M/V Pacific Fortune. The Court of Appeals dismissed CBICs contention of novation for lack of merit. 43 CBIC was held liable under the
surety bond as there was no novation on the agreement between Unimarine and Cebu Shipyard that would discharge CBIC from its obligation.
The Court of Appeals also did not allow CBIC to disclaim liability on the ground that Quinain exceeded his authority because third persons had
relied upon Quinains representation, as CBICs agent. 44 Quinain was, however, held solidarily liable with CBIC under Article 1911 of the Civil
Code.45
Anent the liability of the signatories to the Indemnity Agreement, the Court of Appeals held Paul Rodriguez, Peter Rodriguez, and Albert
Hontanosas jointly and severally liable thereunder. The Court of Appeals rejected Hontanosas claim that his signature in the Indemnity
Agreement was forged, as he was not able to prove it. 46
The Court of Appeals affirmed the award of attorneys fees and litigation expenses to Cebu Shipyard since it was able to clearly establish
the defendants liability, which they tried to
_______________
42 Id., at p. 38.
43 Id., at pp. 39-40.
44 Id., at pp. 44-46.
45 Id., at p. 53.
46 Id., at pp. 49-51.
442
442
dodge by setting up defenses to release themselves from their obligation. 47

CBIC48 and Unimarine, together with third party defendants-appellants 49 filed their respective Motions for Reconsideration. This was,
however, denied by the Court of Appeals in its October 28, 2004 Resolution for lack of merit.
Unimarine elevated its case to this Court via a petition for review on certiorari, docketed as G.R. No. 166023, which was denied in a
Resolution dated January 19, 2005.50
The lone petitioner in this case, CBIC, is now before this Court, seeking the reversal of the Court of Appeals decision and resolution on the
following grounds:
A.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN APPLYING THE PROVISIONS OF ARTICLE 1911 OF THE CIVIL CODE TO
HOLD PETITIONER LIABLE FOR THE ACTS DONE BY ITS AGENT IN EXCESS OF AUTHORITY.
B.
THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT AN EXTENSION OF THE PERIOD FOR THE
PERFORMANCE OF AN OBLIGATION GRANTED BY THE CREDITOR TO THE PRINCIPAL DEBTOR IS NOT SUFFICIENT TO RELEASE
THE SURETY.
C.
ASSUMING THAT PETITIONER IS LIABLE UNDER THE BOND, THE HONORABLE COURT OF APPEALS NONETHE_______________
47 Id., at p. 54.
48 CA Rollo, pp. 240-252.
49 Id., at pp. 253-256.
50 Rollo, p. 389.
443
VOL. 673, JUNE 18, 2012
443
LESS SERIOUSLY ERRED IN AFFIRMING THE SOLIDARY LIABILITY OF PETITIONER BEYOND THE VALUE OF THE BOND.
D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING PETITIONER JOINTLY AND SEVERALLY LIABLE FOR ATTORNEYS FEES
IN THE AMOUNT OF P100,000.00.51
Issue
The crux of the controversy lies in CBICs liability on the surety bond Quinain issued to Unimarine, in favor of Cebu Shipyard.
CBIC avers that the Court of Appeals erred in interpreting and applying the rules governing the contract of agency. It argued that the
Special Power of Attorney granted to Quinain clearly set forth the extent and limits of his authority with regard to businesses he can transact
for and in behalf of CBIC. CBIC added that it was incumbent upon Cebu Shipyard to inquire and look into the power of authority conferred to
Quinain. CBIC said:
The authority to bind a principal as a guarantor or surety is one of those powers which requires a Special Power of Attorney pursuant to
Article 1878 of the Civil Code. Such power could not be simply assumed or inferred from the mere existence of an agency . A person
who enters into a contract of suretyship with an agent without confirming the extent of the latters authority does so at his peril. x x x. 52
CBIC claims that the foregoing is true even if Quinain was granted the authority to transact in the business of insurance in general, as the
authority to bind the principal in a
_______________
51 Id., at pp. 13-14.
52 Id., at p. 15.
444
444
contract of suretyship could nonetheless never be presumed.53 Thus, CBIC claims, that:
[T]hird persons seeking to hold the principal liable for transactions entered into by an agent should establish the following, in case the same
is controverted:
6.6.1.The fact or existence of the agency.
6.6.2.The nature and extent of authority.54
To go a little further, CBIC said that the correct Civil Code provision to apply in this case is Article 1898. CBIC asserts that Cebu Shipyard
was charged with knowledge of the extent of the authority conferred on Mr. Quinain by its failure to perform due diligence investigations. 55
Cebu Shipyard, in its Comment56 first assailed the propriety of the petition for raising factual issues. In support, Cebu Shipyard claimed that
the Court of Appeals application of Article 1911 of the Civil Code was founded on findings of facts that CBIC now disputes. Thus, the question
is not purely of law.
Discussion
The fact that Quinain was an agent of CBIC was never put in issue. What has always been debated by the parties is the extent of authority
or, at the very least, apparent authority, extended to Quinain by CBIC to transact insurance business for and in its behalf.
In a contract of agency, a person, the agent, binds himself to represent another, the principal, with the latters consent
_______________
53 Id., at p. 16.
54 Id., at p. 18.
55 Id., at p. 19.
56 Id., at pp. 248-287.
445
VOL. 673, JUNE 18, 2012
445
or authority.57 Thus, agency is based on representation, where the agent acts for and in behalf of the principal on matters within the scope of
the authority conferred upon him.58 Such acts have the same legal effect as if they were personally done by the principal. By this legal fiction
of representation, the actual or legal absence of the principal is converted into his legal or juridical presence. 59
The RTC applied Articles 1900 and 1911 of the Civil Code in holding CBIC liable for the surety bond. It held that CBIC could not be allowed
to disclaim liability because Quinains actions were within the terms of the special power of attorney given to him. 60 The Court of Appeals
agreed that CBIC could not be permitted to abandon its obligation especially since third persons had relied on Quinains representations. It
based its decision on Article 1911 of the Civil Code and found CBIC to have been negligent and less than prudent in conducting its insurance
business for its failure to supervise and monitor the acts of its agents, to regulate the distribution of its insurance forms, and to devise
schemes to prevent fraudulent misrepresentations of its agents. 61
This Court does not agree. Pertinent to this case are the following provisions of the Civil Code:
Art.1898.If the agent contracts in the name of the principal, exceeding the scope of his authority, and the principal does not ratify the
contract, it shall be void if the party with whom the agent contracted is aware of the limits of the powers granted by the principal. In this case,
however, the agent is liable if he undertook to secure the principals ratification.
_______________
57 Civil Code, Art. 1868.
58 Id., Art. 1881.
59 Siredy Enterprises, Inc. v. Court of Appeals, 437 Phil. 580, 591; 389 SCRA 34, 42-43 (2002).
60 CA Rollo, pp. 31-32.
61 Rollo, pp. 46-47.
446
446
Art.1900.So far as third persons are concerned, an act is deemed to have been performed within the scope of the agents authority, if
such act is within the terms of the power of attorney, as written, even if the agent has in fact exceeded the limits of his authority according to
an understanding between the principal and the agent.
Art.1902. A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power
of attorney, or the instructions as regards the agency. Private or secret orders and instructions of the principal do not prejudice third persons
who have relied upon the power of attorney or instructions shown to them.
Art.1910.The principal must comply with all the obligations which the agent may have contracted within the scope of his authority.
As for any obligation wherein the agent has exceeded his power, the principal is not bound except when he ratifies it expressly or tacitly.
Art.1911. Even when the agent has exceeded his authority, the principal is solidarily liable with the agent if the former allowed the
latter to act as though he had full powers.
Our law mandates an agent to act within the scope of his authority. 62 The scope of an agents authority is what appears in the written terms
of the power of attorney granted upon him. 63 Under Article 1878(11) of the Civil Code, a special power of attorney is necessary to obligate
the principal as a guarantor or surety.
In the case at bar, CBIC could be held liable even if Quinain exceeded the scope of his authority only if Quinains act of issuing Surety Bond
No. G (16) 29419 isdeemed to have been performed within the written terms of the power of attorney he was granted. 64
_______________
62 CIVIL CODE, Art. 1881.
63 Id., Art. 1900.
64 Id.
447
VOL. 673, JUNE 18, 2012
447
However, contrary to what the RTC held, the Special Power of Attorney accorded to Quinain clearly states the limits of his authority and
particularly provides that in case of surety bonds, it can only be issued in favor of the Department of Public Works and Highways, the National
Power Corporation, and other government agencies; furthermore, the amount of the surety bond is limited to P500,000.00, to wit:
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That, COUNTRY BANKERS INSURANCE CORPORATION, a corporation duly organized and existing under and by virtue of the laws of the
Philippines, with head offices at 8th Floor, G.F. Antonino Building, T.M. Kalaw Street, Ermita, Manila, now and hereinafter referred to as the
Company hereby appointsBETHOVEN B. QUINAIN with address at x x x to be its General Agent and Attorney-in-Fact, for and in its place, name
and stead, and for its own use and benefit, to do and perform the following acts and things:
1.To conduct, manage, carry on and transact insurance business as usually pertains to a General Agency of Fire, Personal Accident, Bond,
Marine, Motor Car (Except Lancer).
2. To accept, underwrite and subscribe policies of insurance for and in behalf of the Company under the terms and conditions specified in
the General Agency Contract executed and entered into by and between it and its said Attorney-in-Fact subject to the following Schedule of
Limits:
- SCHEDULE OF LIMITS a.FIRE:
xxxx
b.PERSONAL ACCIDENT:
xxxx
c.MOTOR CAR:
x x x x448
448
d.MARINE:
xxxx
e.BONDS:
xxxx
Surety
Bond
(in
favor
Natl.
agencies)65........................... 500,000.00
of
Dept.
Power
of
Corp.
Pub.
Works
&
and
other
Highways,
Government
CBIC does not anchor its defense on a secret agreement, mutual understanding, or any verbal instruction to Quinain. CBICs stance is
grounded on its contract with Quinain, and the clear, written terms therein. This Court finds that the terms of the foregoing contract
specifically provided for the extent and scope of Quinains authority, and Quinain has indeed exceeded them.
Under Articles 1898 and 1910, an agents act, even if done beyond the scope of his authority, may bind the principal if he ratifies them,
whether expressly or tacitly. It must be stressed though that only the principal, and not the agent, can ratify the unauthorized acts, which the
principal must have knowledge of.66 Expounding on the concept and doctrine of ratification in agency, this Court said:
Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. The
substance of the doctrine is confirmation after conduct, amounting to a substitute for a prior authority. Ordinarily, the principal must have full
knowledge at the time of ratification of all the material facts and circumstances relating to the unauthorized act of the person who assumed to
act as agent.Thus, if material facts were suppressed or unknown, there can be no valid ratification and this regardless of the
purpose or lack thereof in concealing such facts and regardless of the parties be_______________
65 Rollo, pp. 233-234.
66 Manila Memorial Park Cemetery, Inc. v. Linsangan, G.R. No. 151319, November 22, 2004, 443 SCRA 377, 394.
449
VOL. 673, JUNE 18, 2012
449
tween whom the question of ratification may arise.Nevertheless, this principle does not apply if the principals ignorance of the material
facts and circumstances was willful, or that the principal chooses to act in ignorance of the facts. However, in the absence of
circumstances putting a reasonably prudent man on inquiry, ratification cannot be implied as against the principal who is
ignorant of the facts.67 (Emphases supplied.)
Neither Unimarine nor Cebu Shipyard was able to repudiate CBICs testimony that it was unaware of the existence of Surety Bond No. G
(16) 29419 and Endorsement No. 33152. There were no allegations either that CBIC should have been put on alert with regard to Quinains
business transactions done on its behalf. It is clear, and undisputed therefore, that there can be no ratification in this case, whether express or
implied.
Article 1911, on the other hand, is based on the principle of estoppel, which is necessary for the protection of third persons. It states that
the principal is solidarily liable with the agent even when the latter has exceeded his authority, if the principal allowed him to act as though he
had full powers. However, for an agency by estoppel to exist, the following must be established:
1.The principal manifested a representation of the agents authority or knowingly allowed the agent to assume such authority;
2.The third person, in good faith, relied upon such representation; and
3.Relying upon such representation, such third person has changed his position to his detriment. 68
In Litonjua, Jr. v. Eternit Corp.,69 this Court said that [a]n agency by estoppel, which is similar to the doctrine of appar_______________
67 Id., at pp. 394-395.
68 Litonjua, Jr. v. Eternit Corp., G.R. No. 144805, June 8, 2006, 490 SCRA 204, 224-225.
4450
4450
ent authority, requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action
taken in reliance.70
This Court cannot agree with the Court of Appeals pronouncement of negligence on CBICs part. CBIC not only clearly stated the limits of
its agents powers in their contracts, it even stamped its surety bonds with the restrictions, in order to alert the concerned parties. Moreover,
its company procedures, such as reporting requirements, show that it has designed a system to monitor the insurance contracts issued by its
agents. CBIC cannot be faulted for Quinains deliberate failure to notify it of his transactions with Unimarine. In fact, CBIC did not even receive
the premiums paid by Unimarine to Quinain.
Furthermore, nowhere in the decisions of the lower courts was it stated that CBIC let the public, or specifically Unimarine, believe that
Quinain had the authority to issue a surety bond in favor of companies other than the Department of Public Works and Highways, the National
Power Corporation, and other government agencies. Neither was it shown that CBIC knew of the existence of the surety bond before the
endorsement extending the life of the bond, was issued to Unimarine. For one to successfully claim the benefit of estoppel on the ground that
he has been misled by the representations of another, he must show that he was not misled through his own want of reasonable care and
circumspection.71
It is apparent that Unimarine had been negligent or less than prudent in its dealings with Quinain. In Manila Memorial Park Cemetery, Inc.
v. Linsangan,72 this Court held:
_______________
69 Id.
70 Id., at p. 225.
71 Manila Memorial Park Cemetery, Inc. v. Linsangan, supra note 66 at p. 397.
72 Id., at pp. 391-392.
451
VOL. 673, JUNE 18, 2012
451
It is a settled rule that persons dealing with an agent are bound at their peril, if they would hold the principal liable, to ascertain not only
the fact of agency but also the nature and extent of authority, and in case either is controverted, the burden of proof is upon them to establish
it. The basis for agency is representation and a person dealing with an agent is put upon inquiry and must discover upon his peril the authority
of the agent. If he does not make such an inquiry, he is chargeable with knowledge of the agents authority and his ignorance of that authority
will not be any excuse.
In the same case, this Court added:
[T]he ignorance of a person dealing with an agent as to the scope of the latters authority is no excuse to such person and the fault cannot be
thrown upon the principal. A person dealing with an agent assumes the risk of lack of authority in the agent. He cannot charge the principal by
relying upon the agents assumption of authority that proves to be unfounded. The principal, on the other hand, may act on the presumption
that third persons dealing with his agent will not be negligent in failing to ascertain the extent of his authority as well as the existence of his
agency.73
Unimarine undoubtedly failed to establish that it even bothered to inquire if Quinain was authorized to agree to terms beyond the limits
indicated in his special power of attorney. While Paul Rodriguez stated that he has done business with Quinain more than once, he was not
able to show that he was misled by CBIC as to the extent of authority it granted Quinain. Paul Rodriguez did not even allege that he asked for
documents to prove Quinains authority to contract business for CBIC, such as their contract of agency and power of attorney. It is also worthy
to note that even with the Indemnity Agreement, Paul Rodriguez signed it on Quinains mere assurance and without truly understanding the
consequences of the terms of the said agreement. Moreover, both Unimarine and Paul Rodriguez could have inquired directly from CBIC to
verify the validity and effectivity of the surety
_______________
73 Id., at p. 392.
452
452
bond and endorsement; but, instead, they blindly relied on the representations of Quinain. As this Court held inLitonjua, Jr. v. Eternit Corp.:74
A person dealing with a known agent is not authorized, under any circumstances, blindly to trust the agents; statements as to the extent of
his powers; such person must not act negligently but must use reasonable diligence and prudence to ascertain whether the agent acts within
the scope of his authority. The settled rule is that, persons dealing with an assumed agent are bound at their peril, and if they would hold the
principal liable, to ascertain not only the fact of agency but also the nature and extent of authority, and in case either is controverted, the
burden of proof is upon them to prove it. In this case, the petitioners failed to discharge their burden; hence, petitioners are not entitled to
damages from respondent EC.75
In light of the foregoing, this Court is constrained to release CBIC from its liability on Surety Bond No. G (16) 29419 and Endorsement No.
33152. This Court sees no need to dwell on the other grounds propounded by CBIC in support of its prayer.
WHEREFORE, this petition is hereby GRANTED and the complaint against CBIC is DISMISSED for lack of merit. The January 29, 2004
Decision and October 28, 2004 Resolution of the Court of Appeals in CA-G.R. CV No. 58001 is MODIFIED insofar as it affirmed CBICs liability on
Surety Bond No.
Siasat vs. Intermediate Appellate Court
No. L-67889. October 10, 1985.*

PRIMITIVO SIASAT and MARCELINO SIASAT, petitioners, vs. INTERMEDIATE APPELLATE COURT and TERESITA NACIANCENO, respondents.
Civil Law; Agency; General Agency; Where general words were employed in an agreement that no restrictions were intended as to the
manner the agency was to be carried out or in the place where it was to be executed, a general agency is constituted. One does not have to
undertake a close scrutiny of the document embodying the agreement between the petitioners and the respondent to deduce that the latter
was instituted as a general agent. Indeed, it can easily be seen by the way general words were employed in the agreement that no restrictions
were intended as to the manner the agency was to be carried out or in the place where it was to be executed. The power granted to the
respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of sale of petitioners'
merchandise with any entity or organization.
Same; Same; Same; Contract of agency, not entered through fraudulent representations where no efforts were exerted to limit the scope
of the agency; Case at bar.lf the circumstances were as claimed by the petitioners, they would have exerted efforts to protect
________________
*
FIRST DIVISION.
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VOL. 139, OCTOBER 10, 1985
239
their interests by limiting the respondent's authority. There was nothing to prevent the petitioners from stating in the contract of agency
that the respondent could represent them only in the Visayas. Or to state that the Department of Education and Culture and the Department
of National Defense, which alone would need a million pesos worth of flags, are outside the scope of the agency. As the trial court opined, it is
incredible that they could be so careless after being in the business for fifteen years.
Same; Same; Same; Evidence; General rule that when the terms of an agreement have been reduced to writing, it is to be considered as
construing all such terms and there can be between the parties and their successors-in-interest no evidence of the terms of the agreement
other than the contents of the writing.Acardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that
"when the terms of an agreement have been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can
be between the parties and their successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing",
except in cases specifically mentioned in the same rule. Petitioners have failed to show that their agreement falls under any of these
exceptions. The respondent was given ample authority to transact with the Department in behalf of the petitioners.
Same; Same; Same; Contracts; Fact that there were two purchase orders and two deliveries of merchandise does not involve two
separate contracts but only one transaction; Case at bar.The petitioners' evidence does not necessarily prove that there were two separate
transactions. Exhibit "6" is a general indorsement made by Secretary Manuel for the purchase of the national flags for public schools. It
contains no reference to the number of flags to be ordered or the amount of funds to be released. Exhibit "7" is a letter request for a "similar
authority" to purchase flags from the United Flag Industry. This was, however, written by Dr. Narciso Albarracin who was appointed Acting
Secretary of the Department after Secretary Manuel's tenure, and who may not have known the real nature of the transaction. If the contracts
were separate and distinct from one another, the whole or at least a substantial part of the government's supply procurement process would
have been repeated. In this case, what were issued were mere indorsements for the release of funds and authorization for the next purchase.
Same; Same; Same; Entitlement of agent to her stipulated commission on the second delivery of the merchandise despite revocation
240
2
40
of the agency effected after the first delivery as only one transaction is involved; Revocation of agency does not prevent earning of sales
commission where the contract of sale had already been perfected and partly executed.Since only one transaction was involved, we deny
the petitioners' contention that respondent Nacianceno is not entitled to the stipulated commission on the second delivery because of the
revocation of the agency effected after the first delivery. The revocation of agency could not prevent the respondent from earning her
commission because as the trial court opined, it came too late, the contract of sale having been already perfected and partly executed.
Same; Same; Same; Same; Forged Signature; Fact that the agent signed certain documents using her full name does not rule out the
possibility of her signing a mere acknowledgment with her initial for the given name and the surname written in full. Thestated basis is
inadequate to sustain the respondent's allegation of forgery. A variance in the manner the respondent signed her name can not be considered
as conclusive proof that the questioned signature is a forgery. The mere fact that the respondent signed thirteen documents using her full
name does not rule out the possibility of her having signed the notation "Fully Paid", with her initial for the given name and the surname
written in full. What she was signing was a mere acknowledgment.
Same; Same; Same; Same; Forgery cannot be presumed, but must be proved.While the experts testified in a civil case, the principles
developed in criminal cases involving forgery are applicable. Forgery cannot be presumed. It must be proved.
Same; Same; Same; Revocation of agency; Absence of fraud and bad faith in revocation of agency by the principal; Fraud and bad faith
are not presumed, but must be alleged with sufficient facts; Revocation of agency, not done by principal to avoid payment of the commission.
Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts. To support a judgment for damages, facts
which justify the inference of a lack or absence of good faith must be alleged and proven. (Bacolod-Murcia Milling Co., Inc. v. First Farmers
Milling Co., Inc., Etc., 103 SCRA 436). There is no evidence on record from which to conclude that the revocation of the agency was
deliberately effected by the petitioners to avoid payment of the respondent's commission. What appears before us is only the petitioner's use
in court of such a factual allegation as a defense against the respondent's claim. This alone does not
241
VOL. 139, OCTOBER 10, 1985
241
per se make the petitioners guilty of bad faith for that defense should have been fully litigated.
Same; Same; Damages; Moral damages, cannot be awarded, absent a wrongful act or omission or of fraud or bad faith.Moraldamages
cannot be awarded in the absence of a wrongful act or omission or of fraud or bad faith. (R & B Surety & Insurance Co., Inc. v. Intermediate
Appellate Court, 129 SCRA 736). We therefore, rule that the award of P 25,000.00 as moral damages is without basis.
Same; Same; Same; A ttorney 's Fees; No award of attorney's fees where the agent did not come to court with clean hands and that the
principals believed they could legally revoke the agency and did not have to pay a commission for the second delivery of the merchandise.
The underlying circumstances of this case lead us to rule out any award of attorney's fees. For one thing, the respondent did not come to court
with completely clean hands. For another, the petitioners apparently believed they could legally revoke the agency in the manner they did and
deal directly with education officials handling the purchase of Philippine flags. They had reason to sincerely believe they did not have to pay a
commission for the second delivery of flags.
Same; Same; 30% commission or P300,000 fee for a P1 million price for purchase of flags awarded to an agent of the merchandise or the
facilitator of documents, abhorred; Procurement policies of the Department of Education in its purchase of Philippine flags thru an agent
instead of directly through the manufacturers, not proper.We cannot close this case without commenting adversely on the inexplicably
strange procurement policies of the Department of Education and Culture in its purchase of Philippine flags. There is no reason why a shocking
30% of the taxpayers' money should go to an agent or facilitator who had no flags to sell and whose only work was to secure and handcarry
the indorsements of education and budget officials. There are only a few manufacturers of flags in our country with the petitioners claiming to
have supplied flags for our public schools on earlier occasions. If public bidding was deemed unnecessary, the Department should have
negotiated directly with flag manufacturers. Considering the sad plight of underpaid and overworked classroom teachers whose pitiful salaries
and allowances cannot sometimes be paid on time, a P300,000.00 fee for a P1,000,000.00 purchase of flags is not only clearly unnecessary
but a scandalous waste of public funds as well.
242
242
PETITION for certiorari to review the decision of the Intermediate Appellate Court.
Payawal, Jimenez & A ssociates for petitioners.
Nelson A Loyola for private respondent.
GUTIERREZ, JR., J.:
This is a petition for review of the decision of the Intermediate Appellate Court affirming in toto the judgment of the Court of First Instance of
Manila, Branch XXI, which ordered the petitioner to pay respondent the thirty percent (30%) commission on 15,666 pieces of Philippine flags
worth P936,960.00, moral damages, attorney's fees and the costs of the suit.
Sometime in 1974, respondent Teresita Nacianceno succeeded in convincing officials of the then Department of Education and Culture,
hereinafter called Department, to purchase without public bidding, one million pesos worth of national flags for the use of public schools
throughout the country. The respondent was able to expedite the approval of the purchase by handcarrying the different indorsements from
one office to another, so that by the first week of September, 1974, all the legal requirements had been complied with, except the release of
the purchase orders, When Nacianceno was informed by the Chief of the Budget Division of the Department that the purchase orders could not
be released unless a formal offer to deliver the flags in accordance with the required specifications was first submitted for approval, she
contacted the owners of the United Flag Industry on September 17, 1974. The next day, after the transaction was discussed, the following
document (Exhibit A) was drawn up:
"Mrs. Tessie Nacianceno,
"This is to formalize our agreement for you to represent United Flag Industry to deal with any entity or organization, private or government
in connection with the marketing of our productsflags and all its accessories.
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VOL. 139, OCTOBER 10, 1985
243
"For your service, you will be entitled to a commission of thirty (30%) percent.
Signed
Mr.
Owner and Gen. Manager"
Primitivo
Siasat
On October 16, 1974, the first delivery of 7,933 flags was made by the United Flag Industry. The next day, on October 17, 1974, the
respondent's authority to represent the United Flag Industry was revoked by petitioner Primitivo Siasat.
According to the findings of the courts below, Siasat, after receiving the payment of P469,980.00 on October 23, 1974 for the first delivery,
tendered the amount of P23,900.00 or five percent (5%) of the amount received, to the respondent as payment of her commission. The latter
allegedly protested. She refused to accept the said amount insisting on the 30% commission agreed upon. The respondent was prevailed upon
to accept the same, however, because of the assurance of the petitioners that they would pay the commission in full after they delivered the
other half of the order. The respondent states that she later on learned that petitioner Siasat had already received payment for the second
delivery of 7,833 flags. When she confronted the petitioners, they vehemently denied receipt of the payment, at the same time claiming that
the respondent had no participation whatsoever with regard to the second delivery of flags and that the agency had already been revoked.
The respondent originally filed a complaint with the Complaints and Investigation Office in Malacaang but when nothing came of the
complaint, she filed an action in the Court of First Instance of Manila to recover the following commissions: 25% as balance on the first delivery
and 30% on the second delivery.
The trial court decided in favor of the respondent. The dispositive portion of the decision reads as follows:
"WHEREFORE, judgment is hereby rendered sentencing Primitivo Siasat to pay to the plaintiff the sum of P281,988.00, minus the sum
P23,900.00, with legal interest from the date of this decision, and ordering the defendants to pay jointly and solidarily the sum of
244
244
P25,000.00 as moral damages, and P25,000.00 as attorney's fees, also with legal interest from the date of this decision, and the costs."
The decision was affirmed in toto by the Intermediate Appellate Court. After their motion for reconsideration was denied, the petitioners went
to this Court on a petition for review on August 6,1984.
In assailing the appellate court's decision, the petition tenders the following arguments: first, the authorization making the respondent the
petitioner's representative merely states that she could deal with any entity in connection with the marketing of their products for a
commission of 30%. There was no specific authorization for the sale of 15,666 Philippine flags to the Department; second, there were two
transactions involved evidenced by the separate purchase orders and separate delivery receipts, Exhibit 6-C for the purchase and delivery on
October 16, 1974, and Exhibits 7 to 7-C, for the purchase and delivery on November 6, 1974. The revocation of agency effected by the parties
with mutual consent on October 17, 1974, therefore, forecloses the respondent's claim of 30% commission on the second transaction; and
last, there was no basis for the granting of attorney's fees and moral damages because there was no showing of bad faith on the part of the
petitioner. It was respondent who showed bad faith in denying having received her commission on the first delivery. The petitioner's
counterclaim, therefore, should have been granted.
This petition was initially dismissed for lack of merit in a minute resolution. On a motion for reconsideration, however. this Court gave due
course to the petition on November 14, 1984.
After a careful review of the records, we are constrained to sustain with some modifications the decision of the appellate court.
We find petitioners' argument regarding respondent's incapacity to represent them in the transaction with the Department untenable.
There are several kinds of agents. To quote a commentator on the matter:
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VOL. 139, OCTOBER 10, 1985
245
"An agent may be (1) universal; (2) general, or (3) special. A universal agent is one authorized to do all acts for his principal which can lawfully
be delegated to an agent. So far as such a condition is possible, such an agent may be said to have universal authority. (Mec. Sec. 58).
"A general agent is one authorized to do all acts pertaining to a business of a certain kind or at a particular place, or all acts pertaining to a
business of a particular class or series. He has usually authority either expressly conferred in general terms or in effect made general by the
usages, customs or nature of the business which he is authorized to transact.
"An agent, therefore, who is empowered to transact all the business of his principal of a particular kind or in a particular place, would, for
this reason, be ordinarily deemed a general agent. (Mec. Sec. 60).
"A special agent is one authorized to do some particular act or to act upon some particular occasion. He acts usually in accordance with
specific instructions or under limitations necessarily implied from the nature of the act to be done." (Mec. Sec. 61) (Padilla, Civil Law, The Civil
Code Annotated, Vol. VI, 1969 Edition, p. 204).
One does not have to undertake a close scrutiny of the document embodying the agreement between the petitioners and the respondent to
deduce that the latter was instituted as a general agent. Indeed, it can easily be seen by the way general words were employed in the
agreement that no restrictions were intended as to the manner the agency was to be carried out or in the place where it was to be executed.
The power granted to the respondent was so broad that it practically covers the negotiations leading to, and the execution of, a contract of
sale of petitioners' merchandise with any entity or organization.
There is no merit in petitioners' allegations that the contract of agency between the parties was entered into under fraudulent
representation because respondent "would not disclose the agency with which she was supposed to transact and made the petitioner believe
that she would be dealing with the Visayas", and that "the petitioner had known of the transactions and/or project for the said purchase of the
Philippine flags by the Department of Education and Culture and precisely it was the one being f ollowed up also by petitioner.''
246
246
If the circumstances were as claimed by the petitioners, they would have exerted efforts to protect their interests by limiting the respondent's
authority. There was nothing to prevent the petitioners from stating in the contract of agency that the respondent could represent them only in
the Visayas. Or to state that the Department of Education and Culture and the Department of National Defense, which alone would need a
million pesos worth of flags, are outside the scope of the agency. As the trial court opined, it is incredible that they could be so careless af ter
being in the business for fifteen years.
A cardinal rule of evidence embodied in Section 7 Rule 130 of our Revised Rules of Court states that "when the terms of an agreement have
been reduced to writing, it is to be considered as containing all such terms, and, therefore, there can be between the parties and their
successors-in-interest, no evidence of the terms of the agreement other than the contents of the writing", except in cases specifically
mentioned in the same rule. Petitioners have failed to show that their agreement falls under any of these exceptions. The respondent was
given ample authority to transact with the Department in behalf of the petitioners. Equally without merit is the petitioners' proposition that the
transaction involved two separate contracts because there were two purchase orders and two deliveries.
The petitioners' evidence is overcome by other pieces of evidence proving that there was only one transaction. The indorsement of then
Assistant Executive Secretary Roberto Reyes to the Budget Commission on September 3, 1974 (Exhibit "C") attests to the fact that out of the
total budget of the Department for the fiscal year 1975, "P1,000,000.00 is for the purchase of national flags." This is also reflected in the
Financial and Work Plan Request for Allotment (Exhibit "F") submitted by Secretary Juan Manuel for fiscal year 1975 which however, divided
the allocation and release of the funds into three, corresponding to the second, third, and fourth quarters of the said year. Later
correspondence between the Department and the Budget Commission (Exhibits "D" and "E") show that the first allotment of P500,000.00 was
released during the second quarter. However, due to the necessity of furnishing all of the public
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VOL. 139, OCTOBER 10, 1985
247
schools in the country with the Philippine flag, Secretary Manuel requested for the immediate release of the programmed allotments intended
for the third and fourth quarters. These circumstances explain why two purchase orders and two deliveries had to be made on one transaction.
The petitioners' evidence does not necessarily prove that there were two separate transactions. Exhibit "6" is a general indorsement made
by Secretary Manuel for the purchase of the national flags for public schools. It contains no reference to the number of flags to be ordered or
the amount of funds to be released. Exhibit "7" is a letter request for a "similar authority" to purchase flags from the United Flag Industry. This
was, however, written by Dr. Narciso Albarracin who was appointed Acting Secretary of the Department after Secretary Manuel's tenure, and
who may not have known the real nature of the transaction.
If the contracts were separate and distinct from one another, the whole or at least a substantial part of the government's supply
procurement process would have been repeated. In this case, what were issued were mere indorsements for the release of funds and
authorization for the next purchase.
Since only one transaction was involved, we deny the petitioners' contention that respondent Nacianceno is not entitled to the stipulated
commission on the second delivery because of the revocation of the agency effected after the first delivery. The revocation of agency could
not prevent the respondent from earning her commission because as the trial court opined, it came too late, the contract of sale having been
already perf ected and partly executed.
In Macondray & Co. v. Sellner (33 Phil. 370, 377), a case analogous to this one in principle, this Court held:
"We do not mean to question the general doctrine as to the power of a principal to revoke the authority of his agent at will, in the absence of a
contract fixing the duration of the agency (subject, however, to some well defined exceptions). Our ruling is that at the time fixed by the
manager of the plaintiff company for the termination of the negotiations, the defendant real estate agent had already earned the commissions
agreed upon, and could not be deprived
248
248
thereof by the arbitrary action of the plaintiff company in declining to execute the contract of sale for some reason personal to itself."
The principal cannot deprive his agent of the commission agreed upon by cancelling the agency and, thereafter, dealing directly with the
buyer. (Infante v. Cunanan, 93 Phil. 691).
The appellate court's citation of its previous ruling inHeimbrod, et al v. Ledesma (C.A. 49 O.G. 1507) is correct:
"The appellee is entitled to recovery. No citation is necessary to show that the general law of contracts the equitable principle of estoppel, and
the expense of another, uphold payment of compensation for services rendered."
There is merit, however, in the petitioners' contention that the agent's commission on the first delivery was fully paid. The evidence does not
sustain the respondent's claim that the petitioners paid her only 5% and that their right to collect another 25% commission on the first
delivery must be upheld.
When respondent Nacianceno asked the Malacaang Complaints and Investigation Office to help her collect her commission, her statement
under oath referred exclusively to the 30% commission on the second delivery, The statement was emphatic that "now" her demand was for
the 30% commission on the second release of P469,980.00. The demand letter of the respondent's lawyer dated November 13, 1984 asked
petitioner Siasat only for the 30% commission due from the second delivery. The fact that the respondent demanded only the commission on
the second delivery without reference to the alleged unpaid balancewhich was only slightly less than the amount claimedcan only mean
that the commission on the first delivery was already fully paid. Considering the sizeable sum involved, such an omission is too glaringly
remiss to be regarded as an oversight.
Moreover, the respondent's authorization letter (Exhibit "5") bears her signature with the handwritten words "Fully Paid'', inscribed above it.
The respondent contested her signature as a forgery. Handwriting experts from two government agencies testified on the
249
VOL. 139, OCTOBER 10, 1985
249
matter. The reason given by the trial court in ruling for the respondent is too flimsy to warrant a finding of forgery.
The court stated that in thirteen documents presented as exhibits, the private respondent signed her name as "Tessie Nacianceno" while in
this particular instance, she signed as "T. Nacianceno."
The stated basis is inadequate to sustain the respondent's allegation of forgery. A variance in the manner the respondent signed her name
can not be considered as conclusive proof that the questioned signature is a forgery. The mere fact that the respondent signed thirteen
documents using her full name does not rule out the possibility of her having signed the notation. "Fully Paid", with her initial for the given
name and the surname written in full. What she was signing was a mere acknowledgment.
This leaves the expert testimony as the sole basis for the verdict of f orgery.
In support of their allegation of full payment as evidenced by the signed authorization letter (Exhibit "5-A"), the petitioners presented as
witness Mr. Francisco Cruz, Jr. a senior document examiner of the Philippine Constabulary Crime Laboratory. In rebuttal, the respondent
presented Mr. Arcadio Ramos, a junior document examiner of the National Bureau of Investigation.
While the experts testified in a civil case, the principles developed in criminal cases involving forgery are applicable. Forgery cannot be
presumed. It must be proved.
In Borromeo v. Court of Appeals (131 SCRA 318, 326) we held that:
xxx
xxx
xxx
"x x x Where the evidence, as here, gives rise to two probabilities, one consistent with the defendant's innocence and another indicative of
his guilt, that which is favorable to the accused should be considered. The constitutional presumption of innocence continues until overthrown
by proof of guilt beyond reasonable doubt, which requires moral certainty which convinces and satisfies the reason and conscience of those
who are to act upon it. (People v. Clores, et al.,
250
250
125 SCRA 67; People v. Bautista, 81 Phil. 78).

We ruled in another case that where the supposed expert's testimony would constitute the sole ground for conviction and there is equally
convincing expert testimony to the contrary, the constitutional presumption of innocence must prevail. (Lorenzo Ga. Cesar v. Hon.
Sandiganbayan and People of the Philippines, 134 SCRA 105) In the present case, the circumstances earlier mentioned taken with the
testimony of the PC senior document examiner lead us to rule against forgery.
We also rule against the respondent's allegation that the petitioners acted in bad faith when they revoked the agency given to the
respondent.
Fraud and bad faith are matters not to be presumed but matters to be alleged with sufficient facts. To support a judgment for damages,
facts which justify the inference of a lack or absence of good faith must be alleged and proven. ( BacolodMurcia Milling Co., Inc. vs. First
Farmers Milling Co., Inc., Etc., 103 SCRA 436).
There is no evidence on record from which to conclude that the revocation of the agency was deliberately effected by the petitioners to
avoid payment of the respondent's commission. What appears before us is only the petitioner's use in court of such a factual allegation as a
defense against the respondent's claim. This alone does not per se make the petitioners guilty of bad f aith f or that defense should have been
fully litigated.
Moral damages cannot be awarded in the absence of a wrongful act or omission or of fraud or bad faith. ( R & B Surety & Insurance Co., Inc.
vs. Intermediate Appellate Court, 129 SCRA 736).
We therefore, rule that the award of P25,000.00 as moral damages is without basis.
The additional award of P25,000.00 damages by way of attorney's fees, was given by the courts below on the basis of Article 2208,
Paragraph 2, of the Civil Code, which provides: "When the defendant's act or omission has compelled the plaintiff to litigate with third persons
or to incur expenses to protect his interests;" attorney's fees may be awarded as
251
VOL. 139, OCTOBER 10, 1985
251
damages. (Pirovano, et al. v. De la Rama Steamship Co., 96 Phil. 335).

The underlying circumstances of this case lead us to rule out any award of attorney's fees. For one thing, the respondent did not come to
court with completely clean hands. For another, the petitioners apparently believed they could legally revoke the agency in the manner they
did and deal directly with education officials handling the purchase of Philippine flags. They had reason to sincerely believe they did not have
to pay a commission for the second delivery of flags.
We cannot close this case without commenting adversely on the inexplicably strange procurement policies of the Department of Education
and Culture in its purchase of Philippine flags. There is no reason why a shocking 30% of the taxpayers' money should go to an agent or
facilitator who had no flags to sell and whose only work was to secure and handcarry the indorsements of edacation and budget officials.
There are only a few manufacturers of flags in our country with the petitioners claiming to have supplied flags for our public schools on earlier
occasions. If public bidding was deemed unnecessary, the Department should have negotiated directly with flag manufacturers. Considering
the sad plight of underpaid and overworked classroom teachers whose pitiful salaries and allowances cannot sometimes be paid on time, a
P300,000.00 fee for a P1,000,000.00 purchase of flags is not only clearly unnecessary but a scandalous waste of public funds as well.
WHEREFORE, the decision of the respondent court is hereby MODIFIED. The petitioners are ordered to pay the respondent the amount of
ONE HUNDRED FORTY THOUSAND NINE HUNDRED AND NINETY FOUR PESOS (P140,994.00) as her commission on the second delivery of flags
with legal interest from the date of the trial court's decision, No pronouncement as to costs.
SO ORDERED.
SPOUSES REX AND CONCEPCION AGGABAO, petitioners, vs. DIONISIO Z. PARULAN, JR. and MA. ELENA PARULAN, respondents.
Civil Law; Family Code; The Family Code has expressly repealed several titles under the Civil Code .To start with, Article 254 the Family
Code has expressly repealed several titles under the Civil Code, among them the entire Title VI in which the provisions on the property
relations between husband and wife, Article 173 included, are found.
Same; Same; Conjugal Property; Sales; It is settled that any alienation or encumbrance of conjugal property made during the effectivity
of the Family Code is governed by Article 124 of the Family Code.The sale was made on March 18, 1991, or after August 3, 1988, the
effectivity of the Family Code. The proper law to apply is, therefore, Article 124 of the Family Code, for it is settled that any alienation or
encumbrance of conjugal property made during the effectivity of the Family Code is governed by Article 124 of the Family Code.
Same; Same; Same; Same; According to Article 256 of the Family Code, the provisions of the Family Code may apply retroactively
provided no vested rights are impaired.According to Article 256 of the Family Code, the provisions of the Family Code may apply
retroactively provided no vested rights are impaired. In Tumlos v. Fernandez, 330 SCRA 718 (2000), the Court rejected the petitioners
argument that the Family Code did not apply because the acquisition of the contested property had occurred prior to the effectivity of
the Family Code, and pointed out that Article 256 provided that the Family Code could apply retroactively if the application would not
prejudice vested or acquired rights existing before the effectivity of the Family Code. Herein, however, the petitioners did not show any vested
right in the property acquired prior to August 3, 1988 that exempted their situation from the retroactive application of the Family Code.
_______________
* THIRD DIVISION.
563
VOL. 629, SEPTEMBER 1, 2010
563
Aggabao vs. Parulan, Jr.
Same; Same; Same; Same; The power of administration does not include acts of disposition or encumbrance, which are acts ofstrict
ownership.We stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict
ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa, for the two powers may only be
exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article 1878). Specifically, the apparent
authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did not include or extend to the
power to administer the property.
Same; Same; Same; Same; In the absence of the other spouses consent, the transaction should be construed as a continuing offer on
the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse
or upon authorization by the court before the offer is withdrawn by either or both offerors.On the other hand, we agree with Dionisio that the
void sale was a continuing offer from the petitioners and Ma. Elena that Dionisio had the option of accepting or rejecting before the offer was
withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the second paragraph of Article 124 of the Family Code makes
this clear, stating that in the absence of the other spouses consent, the transaction should be construed as a continuing offer on the part of
the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance by the other spouse or upon
authorization by the court before the offer is withdrawn by either or both offerors.
Same; Same; Same; Same; Buyer in Good Faith; Who is Deemed a Purchaser in Good Faith; The status of a buyer in good faith is never
presumed but must be proven by the person invoking it.A purchaser in good faith is one who buys the property of another, without notice
that some other person has a right to, or interest in, such property, and pays the full and fair price for it at the time of such purchase or before
he has notice of the claim or interest of some other persons in the property. He buys the property with the belief that the person from whom
he receives the thing was the owner and could convey title to the property. He cannot close his eyes to facts that should put a reasonable man
on his guard and still
564
64
claim he acted in good faith. The status of a buyer in good faith is never presumed but must be proven by the person invoking it.
Same; Same; Same; Same; Article 124 of the Family Code categorically requires the consent of both spouses before the conjugal
property may be disposed of by sale, mortgage, or other modes of disposition; Requisite diligence to be observed by buyers of conjugal
property.Article 124 of the Family Code categorically requires the consent of both spouses before the conjugal property may be disposed of
by sale, mortgage, or other modes of disposition. In Bautista v. Silva, 502 SCRA 334 (2006), the Court erected a standard to determine the
good faith of the buyers dealing with a seller who had title to and possession of the land but whose capacity to sell was restricted, in that the
consent of the other spouse was required before the conveyance, declaring that in order to prove good faith in such a situation, the buyers
must show that they inquired not only into the title of the sellerbut also into the sellers capacity to sell. Thus, the buyers of conjugal property
must observe two kinds of requisite diligence, namely: (a) the diligence in verifying the validity of the title covering the property; and ( b) the
diligence in inquiring into the authority of the transacting spouse to sell conjugal property in behalf of the other spouse.

Espina & Yumul-Espina for petitioners.
Parulan, Soncuya, Rama & Trinidad Law Offices for respondent Dionisio Parulan, Jr.
BERSAMIN,J.:
On July 26, 2000, the Regional Trial Court (RTC), Branch 136, in Makati City annulled the deed of absolute sale executed in favor of the
petitioners covering two parcels of registered land the respondents owned for want of the written consent of respondent husband Dionisio
Parulan, Jr. On July
565
565
2, 2004, in CA-G.R. CV No. 69044,1 the Court of Appeals (CA) affirmed the RTC decision.
Hence, the petitioners appeal by petition for review oncertiorari, seeking to reverse the decision of the CA. They present as the main issue
whether the sale of conjugal property made by respondent wife by presenting a special power of attorney to sell (SPA) purportedly executed
by respondent husband in her favor was validly made to the vendees, who allegedly acted in good faith and paid the full purchase price,
despite the showing by the husband that his signature on the SPA had been forged and that the SPA had been executed during his absence
from the country.
We resolve the main issue against the vendees and sustain the CAs finding that the vendees were not buyers in good faith, because they
did not exercise the necessary prudence to inquire into the wifes authority to sell. We hold that the sale of conjugal property without the
consent of the husband was not merely voidable but void; hence, it could not be ratified.
Antecedents
Involved in this action are two parcels of land and their improvements (property) located at No. 49 Miguel Cuaderno Street, Executive
Village, BF Homes, Paraaque City and registered under Transfer Certificate of Title (TCT) No. 63376 2 and TCT No. 633773 in the name of
respondents Spouses Maria Elena A. Parulan (Ma. Elena) and Dionisio Z. Parulan, Jr. (Dionisio), who have been estranged from one another.
_______________
1 Rollo, pp. 55-66; penned by Associate Justice Jose C. Mendoza (now a Member of this Court), with Associate Justice Eugenio S. Labitoria
(retired) and Associate Justice Edgardo P. Cruz (retired) concurring.
2 Id., at pp. 174-175.
3 Id., at pp. 176-178.
566
566
In January 1991, real estate broker Marta K. Atanacio (Atanacio) offered the property to the petitioners, who initially did not show interest
due to the rundown condition of the improvements. But Atanacios persistence prevailed upon them, so that on February 2, 1991, they and
Atanacio met with Ma. Elena at the site of the property. During their meeting, Ma. Elena showed to them the following documents, namely: ( a)
the owners original copy of TCT No. 63376; (b) a certified true copy of TCT No. 63377; (c) three tax declarations; and (d) a copy of the special
power of attorney (SPA) dated January 7, 1991 executed by Dionisio authorizing Ma. Elena to sell the property. 4 Before the meeting ended,
they paid P20,000.00 as earnest money, for which Ma. Elena executed a handwritten Receipt of Earnest Money, whereby the parties stipulated
that: (a) they would pay an additional payment of P130,000.00 on February 4, 1991; ( b) they would pay the balance of the bank loan of the
respondents amounting to P650,000.00 on or before February 15, 1991; and (c) they would make the final payment of P700,000.00 once Ma.
Elena turned over the property on March 31, 1991. 5
On February 4, 1991, the petitioners went to the Office of the Register of Deeds and the Assessors Office of Paraaque City to verify the
TCTs shown by Ma. Elena in the company of Atanacio and her husband (also a licensed broker). 6 There, they discovered that the lot under TCT
No. 63376 had been encumbered to Banco Filipino in 1983 or 1984, but that the encumbrance had already been cancelled due to the full
payment of the obligation.7 They noticed that the Banco Filipino loan had been effected through an SPA executed by Dionisio in favor of Ma.
Elena.8 They found on TCT No. 63377 the annotation of an existing mortgage in favor of the Los Baos
_______________
4 Id., at p. 23.
5 Id., at p. 123.
6 Id., at p. 23.
7 Id., at pp. 23-24.
8 Id., at p. 23.
567
567
Rural Bank, also effected through an SPA executed by Dionisio in favor of Ma. Elena, coupled with a copy of a court order authorizing Ma. Elena
to mortgage the lot to secure a loan of P500,000.00.9
The petitioners and Atanacio next inquired about the mortgage and the court order annotated on TCT No. 63377 at the Los Baos Rural
Bank. There, they met with Atty. Noel Zarate, the banks legal counsel, who related that the bank had asked for the court order because the lot
involved was conjugal property.10
Following their verification, the petitioners delivered P130,000.00 as additional down payment on February 4, 1991; and P650,000.00 to
the Los Baos Rural Bank on February 12, 1991, which then released the owners duplicate copy of TCT No. 63377 to them. 11
On March 18, 1991, the petitioners delivered the final amount of P700,000.00 to Ma. Elena, who executed a deed of absolute sale in their
favor. However, Ma. Elena did not turn over the owners duplicate copy of TCT No. 63376, claiming that said copy was in the possession of a
relative who was then in Hongkong. 12 She assured them that the owners duplicate copy of TCT No. 63376 would be turned over after a week.
On March 19, 1991, TCT No. 63377 was cancelled and a new one was issued in the name of the petitioners.
Ma. Elena did not turn over the duplicate owners copy of TCT No. 63376 as promised. In due time, the petitioners learned that the
duplicate owners copy of TCT No. 63376 had been all along in the custody of Atty. Jeremy Z. Parulan, who
_______________
9 Id., at p. 23-24.
10 Id.
11 Id., at pp. 24-25.
12 Id., at p. 57.
568
568
appeared to hold an SPA executed by his brother Dionisio authorizing him to sell both lots.13
At Atanacios instance, the petitioners met on March 25, 1991 with Atty. Parulan at the Manila Peninsula. 14 For that meeting, they were
accompanied by one Atty. Olandesca.15 They recalled that Atty. Parulan smugly demanded P800,000.00 in exchange for the duplicate
owners copy of TCT No. 63376, because Atty. Parulan represented the current value of the property to be P1.5 million. As a counter-offer,
however, they tendered P250,000.00, which Atty. Parulan declined, 16 giving them only until April 5, 1991 to decide.
Hearing nothing more from the petitioners, Atty. Parulan decided to call them on April 5, 1991, but they informed him that they had already
fully paid to Ma. Elena.17
Thus, on April 15, 1991, Dionisio, through Atty. Parulan, commenced an action (Civil Case No. 91-1005entitled Dionisio Z. Parulan, Jr.,
represented by Jeremy Z. Parulan, as attorney in fact, v. Ma. Elena Parulan, Sps. Rex and Coney Aggabao), praying for the declaration of the
nullity of the deed of absolute sale executed by Ma. Elena, and the cancellation of the title issued to the petitioners by virtue thereof.
In turn, the petitioners filed on July 12, 1991 their own action for specific performance with damages against the respondents.
Both cases were consolidated for trial and judgment in the RTC. 18
_______________
13 Id., at p. 110.
14 Id., at p. 26.
15 Id., at p. 110.
16 Id., at p. 26.
17 Id., at p. 105.
18 Id., at pp. 14-15.
569
569
Ruling of the RTC

After trial, the RTC rendered judgment, as follows:
WHEREFORE, and in consideration of the foregoing, judgment is hereby rendered in favor of plaintiff Dionisio A. Parulan, Jr. and against
defendants Ma. Elena Parulan and the Sps. Rex and Concepcion Aggabao, without prejudice to any action that may be filed by the Sps.
Aggabao against co-defendant Ma. Elena Parulan for the amounts they paid her for the purchase of the subject lots, as follows:
1.The Deed of Absolute Sale dated March 18, 1991 covering the sale of the lot located at No. 49 M. Cuaderno St., Executive Village, BF
Homes, Paraaque, Metro Manila, and covered by TCT Nos. 63376 and 63377 is declared null and void.
2.Defendant Mrs. Elena Parulan is directed to pay litigation expenses amounting to P50,000.00 and the costs of the suit.
SO ORDERED.19
The RTC declared that the SPA in the hands of Ma. Elena was a forgery, based on its finding that Dionisio had been out of the country at the
time of the execution of the SPA; 20that NBI Sr. Document Examiner Rhoda B. Flores had certified that the signature appearing on the SPA
purporting to be that of Dionisio and the set of standard sample signatures of Dionisio had not been written by one and the same person; 21 and
that Record Officer III Eliseo O. Terenco and Clerk of Court Jesus P. Maningas of the Manila RTC had issued a certification to the effect that Atty.
Alfred Datingaling, the Notary Public who had notarized the SPA, had not been included in the list of Notaries Public in Manila for the year
1990-1991.22
_______________
19 Id., at p. 56.
20 Id., at p. 58.
21 Id., at p. 59.
22 Id., at pp. 58-59.
570
570
The RTC rejected the petitioners defense of being buyers in good faith because of their failure to exercise ordinary prudence, including
demanding from Ma. Elena a court order authorizing her to sell the properties similar to the order that the Los Baos Rural Bank had required
before accepting the mortgage of the property.23 It observed that they had appeared to be in a hurry to consummate the transaction despite
Atanacios advice that they first consult a lawyer before buying the property; that with ordinary prudence, they should first have obtained the
owners duplicate copies of the TCTs before paying the full amount of the consideration; and that the sale was void pursuant to Article 124 of
the Family Code.24
Ruling of the CA
As stated, the CA affirmed the RTC, opining that Article 124 of the Family Code applied because Dionisio had not consented to the sale of
the conjugal property by Ma. Elena; and that the RTC correctly found the SPA to be a forgery.
The CA denied the petitioners motion for reconsideration. 25
Issues
The petitioners now make two arguments: (1) they were buyers in good faith; and (2) the CA erred in affirming the RTCs finding that the
sale between Mrs. Elena and the petitioners had been a nullity under Article 124 of theFamily Code.
The petitioners impute error to the CA for not applying the ordinary prudent mans standard in determining their status as buyers in good
faith. They contend that the more appropriate law to apply was Article 173 of the Civil Code, not Article 124 of the Family Code; and that even
if the SPA held
_______________
23 Id., at pp. 59-60.
24 Id., at p. 60.
25 Supra, at note 3.
571
571
by Ma. Elena was a forgery, the ruling in Veloso v. Court of Appeals26 warranted a judgment in their favor.
Restated, the issues for consideration and resolution are as follows:
1)Which between Article 173 of the Civil Code and Article 124 of the Family Code should apply to the sale of the conjugal property
executed without the consent of Dionisio?
2)Might the petitioners be considered in good faith at the time of their purchase of the property?
3)Might the ruling in Veloso v. Court of Appeals be applied in favor of the petitioners despite the finding of forgery of the SPA?
Ruling
The petition has no merit. We sustain the CA.
1.
Article
124, Family
properties
of the Family Code
Code,
made
applies
after
to
sale
the
of
conjugal
effectivity
The petitioners submit that Article 173 of the Civil Code, not Article 124 of the Family Code, governed the property relations of the
respondents because they had been married prior to the effectivity of the Family Code; and that the second paragraph of Article 124 of
the FamilyCode should not apply because the other spouse held the administration over the conjugal property. They argue that
notwithstanding his absence from the country Dionisio still held the administration of the conjugal property by virtue of his execution of the
SPA in favor of his brother; and that even assuming that Article 124 of the Family Codeproperly applied, Dionisio ratified the
_______________
26 G.R. No. 102737, August 21, 1996, 260 SCRA 593.
572
572
sale through Atty. Parulans counter-offer during the March 25, 1991 meeting.
We do not subscribe to the petitioners submissions.
To start with, Article 25427 the Family Code has expressly repealed several titles under the Civil Code, among them the entire Title VI in
which the provisions on the property relations between husband and wife, Article 173 included, are found.
Secondly, the sale was made on March 18, 1991, or after August 3, 1988, the effectivity of the Family Code. The proper law to apply is,
therefore, Article 124 of the Family Code, for it is settled that any alienation or encumbrance of conjugal property made during the effectivity
of the Family Code is governed by Article 124 of the Family Code.28
Article 124 of the Family Code provides:
Article124.The administration and enjoyment of the conjugal partnership property shall belong to both spouses jointly. In case of
disagreement, the husbands decision shall prevail, subject to recourse to the court by the wife for proper remedy, which must be availed of
within five years from the date of the contract implementing such decision.
In the event that one spouse is incapacitated or otherwise unable to participate in the administration of the conjugal
properties, the other spouse may assume sole powers of administration. These powers do
_______________
27 Article 254.Titles III, IV, V, VI, VII, VIII, IX, XI and XV of Book I of Republic Act No. 386, otherwise known as the Civil Code of the
Philippines, as amended, and Articles 17, 18, 19, 27, 28, 29, 30, 31, 39, 40, 41 and 42 of Presidential Decree No. 603, otherwise known as the
Child and Youth Welfare Code, as amended, and all laws, decrees, executive orders, proclamations, rules and regulations, or parts thereof,
inconsistent herewith are hereby repealed.
28 Alfredo v. Borras, G.R. No. 144225, June 17, 2003, 404 SCRA 145; Heirs of Ignacia Aguilar-Reyes v. Mijares, G.R. No. 143826, August 28,
2003, 410 SCRA 97;Sps. Guiang v. Court of Appeals, G.R. No. 125172, June 26, 1998, 291 SCRA 372.
573
573
not include disposition or encumbrance without authority of the court or the written consent of the other spouse. In the
absence of such authority or consent, the disposition or encumbrance shall be void. However, the transaction shall be construed as
a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding contract upon the acceptance
by the other spouse or authorization by the court before the offer is withdrawn by either or both offerors.
Thirdly, according to Article 256 29 of the Family Code,the provisions of the Family Code may apply retroactively provided no vested rights
are impaired. In Tumlos v. Fernandez,30 the Court rejected the petitioners argument that the Family Code did not apply because the
acquisition of the contested property had occurred prior to the effectivity of the Family Code, and pointed out that Article 256 provided that
the Family Code could apply retroactively if the application would not prejudice vested or acquired rights existing before the effectivity of
theFamily Code. Herein, however, the petitioners did not show any vested right in the property acquired prior to August 3, 1988 that exempted
their situation from the retroactive application of the Family Code.
Fourthly, the petitioners failed to substantiate their contention that Dionisio, while holding the administration over the property, had
delegated to his brother, Atty. Parulan, the administration of the property, considering that they did not present in court the SPA granting to
Atty. Parulan the authority for the administration.
Nonetheless, we stress that the power of administration does not include acts of disposition or encumbrance, which are acts of strict
ownership. As such, an authority to dispose cannot proceed from an authority to administer, and vice versa,
_______________
29 Article 256.This Code shall have retroactive effect insofar as it does not prejudice or impair vested or acquired rights in accordance
with the Civil Code or other laws.
30 G.R. No. 137650, April 12, 2000, 330 SCRA 718.
574
574
for the two powers may only be exercised by an agent by following the provisions on agency of the Civil Code (from Article 1876 to Article
1878). Specifically, the apparent authority of Atty. Parulan, being a special agency, was limited to the sale of the property in question, and did
not include or extend to the power to administer the property. 31
Lastly, the petitioners insistence that Atty. Parulans making of a counter-offer during the March 25, 1991 meeting ratified the sale merits
no consideration. Under Article 124 of the Family Code, the transaction executedsans the written consent of Dionisio or the proper court order
was void; hence, ratification did not occur, for a void contract could not be ratified. 32
On the other hand, we agree with Dionisio that the void sale was a continuing offer from the petitioners and Ma. Elena that Dionisio had the
option of accepting or rejecting before the offer was withdrawn by either or both Ma. Elena and the petitioners. The last sentence of the
second paragraph of Article 124 of the Family Code makes this clear, stating that in the absence of the other spouses consent, the transaction
should be construed as a continuing offer on the part of the consenting spouse and the third person, and may be perfected as a binding
contract upon the acceptance by the other spouse or upon authorization by the court before the offer is withdrawn by either or both offerors.
Veloso vs. Court of Appeals
G.R. No. 102737. August 21, 1996.*

FRANCISCO A. VELOSO, petitioner, vs. COURT OF AP-PEALS, AGLALOMA B. ESCARIO, assisted by her husband GREGORIO L. ESCARIO, the
REGISTER OF DEEDS FOR THE CITY OF MANILA, respondents.
Agency; Powers of Attorney; Evidence; Notarial Law; A nota-rized power of attorney carries with it the evidentiary weight conferred upon
it with respect to its due execution. An examination of the records showed that the assailed power of attorney was valid and regular on its
face. It was notarized and as such, it carries the evi-dentiary weight conferred upon it with respect to its due execution.
Same; Same; Where the general power of attorney expressly authorizes the agent or attorney in fact the power to sell, there is no need
to execute a separate and special power of attorney.Thus, there was no need to execute a separate and special power of attorney since the
general power of attorney had expressly authorized the agent or attorney in fact the power to sell the subject property. The special power of
attorney can be included in the general power when it is specified therein the act or transaction for which the special power is required.
Same; Same; Evidence; Forgery; Mere variance of the signatures cannot be considered as conclusive proof that the same were forged
forgery cannot be presumed.We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of
forgery. Mere variance of the signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be presumed.
Petitioner, however, failed to prove his allegation and simply relied on the apparent difference of the signatures. His denial had not established
that the signature on the power of attorney was not his.
Same; Same; Same; Same; Forgery should be proved by clear and convincing evidence and whoever alleges it has the burden of proving
the same.Documents acknowledged before a notary public
_______________
*
SECOND DIVISION.
594
94
have the evidentiary weight with respect to their due execution. The questioned power of attorney and deed of sale, were notarized and
therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the said documents and alleged that his signature had
also been falsified. He presented samples of his signature to prove his contention. Forgery should be proved by clear and convincing evidence
and whoever alleges it has the burden of proving the same. Just like the petitioner, witness Atty. Tubig merely pointed out that his signature
was different from that in the power of attorney and deed of sale. There had never been an accurate examination of the signature, even that
of the petitioner.
Same; Same; Same; Same; Test to Determine Forgery.To determine forgery, it was held in Cesar vs. Sandiganbayan (quoting Osborn,
The Problem of Proof) that: The process of identification, therefore, must include the determination of the extent, kind, and significance of this
resemblance as well as of the variation. It then becomes necessary to determine whether the variation is due to the operation of a different
personality, or is only the expected and inevitable variation found in the genuine writing of the same writer. It is also necessary to decide
whether the resemblance is the result of a more or less skillful imitation, or is the habitual and characteristic resemblance which naturally
appears in a genuine writing. When these two questions are correctly answered the whole problem of identification is solved.
Same; Same; Sales; Words and Phrases; A purchaser in good faith is one who buys property of another, without notice that some other
person has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has
notice of the claim or interest of some other person in the property.We agree with the conclusion of the lower court that private respondent
was an innocent purchaser for value. Respondent Aglaloma relied on the power of attorney presented by petitioners wife, Irma. Being the wife
of the owner and having with her the title of the property, there was no reason for the private respondent not to believe in her authority.
Moreover, the power of attorney was notarized and as such, carried with it the presumption of its due execution. Thus, having had no inkling
on any irregularity and having no participation thereof, private respondent was a buyer in good faith. It has been consistently held that a
purchaser in good faith is one who buys property of another, without notice that some other person
595
VOL. 260, AUGUST 21, 1996
595
has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has
notice of the claim or interest of some other person in the property.
Same; Same; Same; The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title
through fraud.Even granting for the sake of argument, that the petitioners signature was falsified and consequently, the power of attorney
and the deed of sale were null and void, such fact would not revoke the title subsequently issued in favor of private respondent Aglaloma. In
Tenio-Obsequio vs. Court of Appeals, it was held, viz: The right of an innocent purchaser for value must be respected and protected, even if
the seller obtained his title through fraud. The remedy of the person prejudiced is to bring an action for damages against those who caused or
employed the fraud, and if the latter are insolvent, an action against the Treasurer of the Philippines may be filed for recovery of damages
against the Assurance Fund.
Same; Same; Same; Estoppel; Words and Phrases; The principle of equitable estoppel states that where one or two innocent persons
must suffer a loss, he who by his conduct made the loss possible must bear it. Finally, the trial court did not err in applying equitable
estoppel in this case. The principle of equitable estoppel states that where one or two innocent persons must suffer a loss, he who by his
conduct made the loss possible must bear it.
Bernas Law Offices for petitioner.
Edgardo A. Arandia for private respondent.
TORRES, JR., J.:
This petition for review assails the decision of the Court of Appeals, dated July 29, 1991, the dispositive portion of which reads:
596
596
WHEREFORE, the decision appealed from is hereby AFFIRMED IN TOTO. Costs against appellant. 1
The following are the antecedent facts:
Petitioner Francisco Veloso was the owner of a parcel of land situated in the district of Tondo, Manila, with an area of one hundred seventy
seven (177) square meters and covered by Transfer Certificate of Title No. 49138 issued by the Registry of Deeds of Manila. 2 The title was
registered in the name of Francisco A. Veloso, single, 3 on October 4, 1957. 4 The said title was subsequently cancelled and a new one, Transfer
Certificate of Title No. 180685, was issued in the name of Aglaloma B. Escario, married to Gregorio L. Escario, on May 24, 1988. 5
On August 24, 1988, petitioner Veloso filed an action for annulment of documents, reconveyance of property with damages and preliminary
injunction and/or restraining order. The complaint, docketed as Civil Case No. 88-45926, was raffled to the Regional Trial Court, Branch 45,
Manila. Petitioner alleged therein that he was the absolute owner of the subject property and he never authorized anybody, not even his wife,
to sell it. He alleged that he was in possession of the title but when his wife, Irma, left for abroad, he found out that his copy was missing. He
then verified with the Registry of Deeds of Manila and there he discovered that his title was already cancelled in favor of defendant Aglaloma
Escario. The transfer of property was supported by a General Power of Attorney 6 dated November 29, 1985 and Deed of Absolute Sale, dated
November 2, 1987, executed by Irma Veloso, wife of the petitioner and appearing as his attorney-in-fact, and defendant
_______________
1
Decision, Rollo, p. 59, penned by J.N. Lapea, Jr. and concurred in by J.R. Pronove and J.C. Santiago.
Exh. A, Annex A, Records, pp. 12 and 155.
Exh. A-1, Ibid.
Exh. A-2, Ibid.
Exh. B, Annex B, Exh. 3, Records, pp. 15 and 157.
Records, pp. 96-97.
597
VOL. 260, AUGUST 21, 1996
597
Aglaloma Escario.7 Petitioner Veloso, however, denied having executed the power of attorney and alleged that his signature was falsified. He
also denied having seen or even known Rosemarie Reyes and Imelda Santos, the supposed witnesses in the execution of the power of
attorney. He vehemently denied having met or transacted with the defendant. Thus, he contended that the sale of the property, and the
subsequent transfer thereof, were null and void. Petitioner Veloso, therefore, prayed that a temporary restraining order be issued to prevent
the transfer of the subject property; that the General Power of Attorney, the Deed of Absolute Sale and the Transfer Certificate of Title No.
180685 be annulled; and the subject property be reconveyed to him.
Defendant Aglaloma Escario in her answer alleged that she was a buyer in good faith and denied any knowledge of the alleged irregularity.
She allegedly relied on the general power of attorney of Irma Veloso which was sufficient in form and substance and was duly notarized. She
contended that plaintiff (herein petitioner), had no cause of action against her. In seeking for the declaration of nullity of the documents, the
real party in interest was Irma Veloso, the wife of the plaintiff. She should have been impleaded in the case. In fact, Plaintiffs cause of action
should have been against his wife, Irma. Consequently, defendant Escario prayed for the dismissal of the complaint and the payment to her of
damages.8
Pre-trial was conducted. The sole issue to be resolved by the trial court was whether or not there was a valid sale of the subject property. 9
During the trial, plaintiff (herein petitioner) Francisco Veloso testified that he acquired the subject property from the Philippine Building
Corporation, as evidenced by a Deed of Sale dated October 1, 1957. 10 He married Irma Lazatin on
_______________
7
Records, pp. 94-95.
Answer, Records, pp. 43-47.
Order, Records, pp. 74-76.
10
Exh. F, Records, pp. 163-164.
598
598
January 20, 1962.11 Hence, the property did not belong to their conjugal partnership. Plaintiff further asserted that he did not sign the power of
attorney and as proof that his signature was falsified, he presented Allied Bank Checks Nos. 16634640, 16634641 and 16634643, which
allegedly bore his genuine signature.
Witness for the plaintiff Atty. Julian G. Tubig denied any participation in the execution of the general power of attorney. He attested that he
did not sign thereon, and the same was never entered in his Notarial Register on November 29, 1985.
In the decision of the trial court dated March 9, 1990, 12defendant Aglaloma Escario was adjudged the lawful owner of the property as she
was deemed an innocent purchaser for value. The assailed general power of attorney was held to be valid and sufficient for the purpose. The
trial court ruled that there was no need for a special power of attorney when the special power was already mentioned in the general one. It
also declared that plaintiff failed to substantiate his allegation of fraud. The court also stressed that plaintiff was not entirely blameless for
although he admitted to be the only person who had access to the title and other important documents, his wife was still able to possess the
copy. Citing Section 55 of Act 496, the court held that Irmas possession and production of the certificate of title was deemed a conclusive
authority from the plaintiff to the Register of Deeds to enter a new certificate. Then applying the principle of equitable estoppel, plaintiff was
held to bear the loss for it was he who made the wrong possible. Thus:
WHEREFORE, the Court finds for the defendants and against plaintiff
1. a.declaring that there was a valid sale of the subject property in favor of the defendant;
_______________
11
Exh. H, Records, p. 166.
12
Decision, Records, pp. 283-292.
599
VOL. 260, AUGUST 21, 1996
599
1. b.denying all other claims of the parties for want of legal and factual basis.
Without pronouncement as to costs.
SO ORDERED.
Not satisfied with the decision, petitioner Veloso filed his appeal with the Court of Appeals. The respondent court affirmed in toto the findings
of the trial court.
Hence, this petition for review before Us.
This petition for review was initially dismissed for failure to submit an affidavit of service of a copy of the petition on the counsel for private
respondent.13 A motion for reconsideration of the resolution was filed but it was denied in a resolution dated March 30, 1992. 14 A second
motion for reconsideration was filed and in a resolution dated Aug. 3, 1992, the motion was granted and the petition for review was
reinstated.15
A supplemental petition was filed on October 9, 1992 with the following assignment of errors:
I
The Court of Appeals committed a grave error in not finding that the forgery of the power of attorney (Exh. C) had been adequately proven,
despite the preponderant evidence, and in doing so, it has so far departed from the applicable provisions of law and the decisions of this
Honorable Court, as to warrant the grant of this petition for review on certiorari.
II
There are principles of justice and equity that warrant a review of the decision.
_______________
13
Resolution, February 3, 1992, Rollo, p. 65.
14
Rollo, p. 72.
15
Rollo, p. 93.
600
600
III
The Court of Appeals erred in affirming the decision of the trial court which misapplied the principle of equitable estoppel since the
petitioner did not fail in his duty of observing due diligence in the safekeeping of the title to the property.
We find petitioners contentions not meritorious.
An examination of the records showed that the assailed power of attorney was valid and regular on its face. It was notarized and as such, it
carries the evidentiary weight conferred upon it with respect to its due execution. While it is true that it was denominated as a general power
of attorney, a perusal thereof revealed that it stated an authority to sell, to wit:
2. To buy or sell, hire or lease, mortgage or otherwise hypothecate lands, tenements and hereditaments or other forms of real property, more
specifically TCT No. 49138, upon such terms and conditions and under such covenants as my said attorney shall deem fit and proper. 16
Thus, there was no need to execute a separate and special power of attorney since the general power of attorney had expressly authorized the
agent or attorney in fact the power to sell the subject property. The special power of attorney can be included in the general power when it is
specified therein the act or transaction for which the special power is required.
The general power of attorney was accepted by the Register of Deeds when the title to the subject property was cancelled and transferred
in the name of private respondent. In LRC Consulta No. 123, Register of Deeds of Albay, Nov. 10, 1956, it stated that:
Whether the instrument be denominated as general power of attorney or special power of attorney, what matters is the extent of the
power or powers contemplated upon the agent or attorney in
________________
16
Records, pp. 96-97.
601
VOL. 260, AUGUST 21, 1996
601
fact. If the power is couched in general terms, then such power cannot go beyond acts of administration. However, where the power to sell is
specific, it not being merely implied, much less couched in general terms, there can not be any doubt that the attorney in fact may execute a
valid sale. An instrument may be captioned as special power of attorney but if the powers granted are couched in general terms without
mentioning any specific power to sell or mortgage or to do other specific acts of strict dominion, then in that case only acts of administration
may be deemed conferred.
Petitioner contends that his signature on the power of attorney was falsified. He also alleges that the same was not duly notarized for as
testified by Atty. Tubig himself, he did not sign thereon nor was it ever recorded in his notarial register. To bolster his argument, petitioner had
presented checks, marriage certificate and his residence certificate to prove his alleged genuine signature which when compared to the
signature in the power of attorney, showed some difference.
We found, however, that the basis presented by the petitioner was inadequate to sustain his allegation of forgery. Mere variance of the
signatures cannot be considered as conclusive proof that the same were forged. Forgery cannot be presumed. 17 Petitioner, however, failed to
prove his allegation and simply relied on the apparent difference of the signatures. His denial had not established that the signature on the
power of attorney was not his.
We agree with the conclusion of the lower court that private respondent was an innocent purchaser for value. Respondent Aglaloma relied
on the power of attorney presented by petitioners wife, Irma. Being the wife of the owner and having with her the title of the property, there
was no reason for the private respondent not to believe in her authority. Moreover, the power of attorney was notarized and as such, carried
with it the presumption of its due execution. Thus, having had no inkling on any irregularity and having no participation thereof, private
respondent was a buyer in good
_______________
17
Tenio-Obsequio vs. Court of Appeals, G.R. 107967, March 1, 1994.
602
602
faith. It has been consistently held that a purchaser in good faith is one who buys property of another, without notice that some other person
has a right to, or interest in such property and pays a full and fair price for the same, at the time of such purchase, or before he has notice of
the claim or interest of some other person in the property. 18
Documents acknowledged before a notary public have the evidentiary weight with respect to their due execution. The questioned power of
attorney and deed of sale, were notarized and therefore, presumed to be valid and duly executed. Atty. Tubig denied having notarized the said
documents and alleged that his signature had also been falsified. He presented samples of his signature to prove his contention. Forgery
should be proved by clear and convincing evidence and whoever alleges it has the burden of proving the same. Just like the petitioner, witness
Atty. Tubig merely pointed out that his signature was different from that in the power of attorney and deed of sale. There had never been an
accurate examination of the signature, even that of the petitioner. To determine forgery, it was held in Cesar vs. Sandiganbayan 19 (quoting
Osborn, The Problem of Proof) that:
The process of identification, therefore, must include the determination of the extent, kind, and significance of this resemblance as well as of
the variation. It then becomes necessary to determine whether the variation is due to the operation of a different personality, or is only the
expected and inevitable variation found in the genuine writing of the same writer. It is also necessary to decide whether the resemblance is
the result of a more or less skillful imitation, or is the habitual and characteristic resemblance which naturally appears in a genuine writing.
When these two questions are correctly answered the whole problem of identification is solved.
Even granting for the sake of argument, that the petitioners signature was falsified and consequently, the power of
________________
18
Bautista, et al. vs. Court of Appeals, G.R. 106042, Feb. 28, 1994.
19
G.R. Nos. 54719-50, 17 January 1985.
603
VOL. 260, AUGUST 21, 1996
603
attorney and the deed of sale were null and void, such fact would not revoke the title subsequently issued in favor of private respondent
Aglaloma. In Tenio-Obsequio vs. Court of Appeals, 20 it was held, viz:
The right of an innocent purchaser for value must be respected and protected, even if the seller obtained his title through fraud. The remedy
of the person prejudiced is to bring an action for damages against those who caused or employed the fraud, and if the latter are insolvent, an
action against the Treasurer of the Philippines may be filed for recovery of damages against the Assurance Fund.
Finally, the trial court did not err in applying equitable estoppel in this case. The principle of equitable estoppel states that where one or two
innocent persons must suffer a loss, he who by his conduct made the loss possible must bear it. From the evidence adduced, it should be the
petitioner who should bear the loss. As the court a quofound:
Besides, the records of this case disclosed that the plaintiff is not entirely free from blame. He admitted that he is the sole person who has
access to TCT No. 49138 and other documents appertaining thereto (TSN, May 23, 1989, pp. 7-12). However, the fact remains that the
Certificate of Title, as well as other documents necessary for the transfer of title were in the possession of plaintiffs wife, Irma L. Veloso,
consequently leaving no doubt or any suspicion on the part of the defendant as to her authority. Under Section 55 of Act 496, as amended,
Irmas possession and production of the Certificate of Title to defendant operated as conclusive authority from the plaintiff to the Register of
Deeds to enter a new certificate.21
Considering the foregoing premises, we found no error in the appreciation of facts and application of law by the lower court which will warrant
the reversal or modification of the appealed decision.
_______________
20
G.R. 109767, March 1, 1994.
21
Decision, Records, p. 291.
604
604
Borja, Jr. vs. Commission on Elections
ACCORDINGLY, the petition for review is hereby DENIED for lack of merit.
SO ORDERED.
Regalado (Chairman), Romero, Puno and Mendoza, JJ., concur.
Petition denied.
Notes.The passage of time and a persons increase in age may have decisive influences in his writing characteristics, thus, in order to
bring about an accurate comparison and analysis, the standards of comparison must be as close as possible in point of time to the suspected
signature. (Causapin vs. Court of Appeals, 233 SCRA 615 [1994])
The fact that a deed of sale is a notarized document does not necessarily justify the conclusion that the said sale is undoubtedly a true
conveyance to which the parties thereto are irrevocably and undeniably bound. Conduct to be given jural effect, must be jural in its subject.
(Suntay vs. Court of Appeals, 251 SCRA 430 [1995])
HERMANOS v ORENSE
GUTIERREZ
vs.
ENGRACIO ORENSE, defendant-appellant.
William
A.
Kincaid,
Rafael de la Sierra for appellee.
Thos.
HERMANOS, plaintiff-appellee,
L.
Hartigan,
and
Ceferino
M.
Villareal
for
appellant.
TORRES, J.:
Appeal through bill of exceptions filed by counsel for the appellant from the judgment on April 14, 1913, by the Honorable P. M. Moir, judge,
wherein he sentenced the defendant to make immediate delivery of the property in question, through a public instrument, by transferring and
conveying to the plaintiff all his rights in the property described in the complaint and to pay it the sum of P780, as damages, and the costs of
the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint, afterwards amended, in the Court of First Instance of Albay against
Engacio Orense, in which he set forth that on and before February 14, 1907, the defendant Orense had been the owner of a parcel of land,
with the buildings and improvements thereon, situated in the pueblo of Guinobatan, Albay, the location, area and boundaries of which were
specified in the complaint; that the said property has up to date been recorded in the new property registry in the name of the said Orense,
according to certificate No. 5, with the boundaries therein given; that, on February 14, 1907, Jose Duran, a nephew of the defendant, with the
latter's knowledge and consent, executed before a notary a public instrument whereby he sold and conveyed to the plaintiff company, for
P1,500, the aforementioned property, the vendor Duran reserving to himself the right to repurchase it for the same price within a period of
four years from the date of the said instrument; that the plaintiff company had not entered into possession of the purchased property, owing
to its continued occupancy by the defendant and his nephew, Jose Duran, by virtue of a contract of lease executed by the plaintiff to Duran,
which contract was in force up to February 14, 1911; that the said instrument of sale of the property, executed by Jose Duran, was publicly and
freely confirmed and ratified by the defendant Orense; that, in order to perfect the title to the said property, but that the defendant Orense
refused to do so, without any justifiable cause or reason, wherefore he should be compelled to execute the said deed by an express order of
the court, for Jose Duran is notoriously insolvent and cannot reimburse the plaintiff company for the price of the sale which he received, nor
pay any sum whatever for the losses and damages occasioned by the said sale, aside from the fact that the plaintiff had suffered damage by
losing the present value of the property, which was worth P3,000; that, unless such deed of final conveyance were executed in behalf of the
plaintiff company, it would be injured by the fraud perpetrated by the vendor, Duran, in connivance with the defendant; that the latter had
been occupying the said property since February 14, 1911, and refused to pay the rental thereof, notwithstanding the demand made upon him
for its payment at the rate of P30 per month, the just and reasonable value for the occupancy of the said property, the possession of which the
defendant likewise refused to deliver to the plaintiff company, in spite of the continuous demands made upon him, the defendant, with bad
faith and to the prejudice of the firm of Gutierrez Hermanos, claiming to have rights of ownership and possession in the said property.
Therefore it was prayed that judgment be rendered by holding that the land and improvements in question belong legitimately and exclusively
to the plaintiff, and ordering the defendant to execute in the plaintiff's behalf the said instrument of transfer and conveyance of the property
and of all the right, interest, title and share which the defendant has therein; that the defendant be sentenced to pay P30 per month for
damages and rental of the property from February 14, 1911, and that, in case these remedies were not granted to the plaintiff, the defendant
be sentenced to pay to it the sum of P3,000 as damages, together with interest thereon since the date of the institution of this suit, and to pay
the costs and other legal expenses.
The demurrer filed to the amended complaint was overruled, with exception on the part of the defendant, whose counsel made a general
denial of the allegations contained in the complaint, excepting those that were admitted, and specifically denied paragraph 4 thereof to the
effect that on February 14, 1907, Jose Duran executed the deed of sale of the property in favor of the plaintiff with the defendant's knowledge
and consent.1awphil.net
As the first special defense, counsel for the defendant alleged that the facts set forth in the complaint with respect to the execution of the
deed did not constitute a cause of action, nor did those alleged in the other form of action for the collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the lawful owner of the property claimed in the complaint, as his ownership
was recorded in the property registry, and that, since his title had been registered under the proceedings in rem prescribed by Act No. 496, it
was conclusive against the plaintiff and the pretended rights alleged to have been acquired by Jose Duran prior to such registration could not
now prevail; that the defendant had not executed any written power of attorney nor given any verbal authority to Jose Duran in order that the
latter might, in his name and representation, sell the said property to the plaintiff company; that the defendant's knowledge of the said sale
was acquired long after the execution of the contract of sale between Duran and Gutierrez Hermanos, and that prior thereto the defendant did
not intentionally and deliberately perform any act such as might have induced the plaintiff to believe that Duran was empowered and
authorized by the defendant and which would warrant him in acting to his own detriment, under the influence of that belief. Counsel therefore
prayed that the defendant be absolved from the complaint and that the plaintiff be sentenced to pay the costs and to hold his peace forever.
After the hearing of the case and an examination of the evidence introduced by both parties, the court rendered the judgment
aforementioned, to which counsel for the defendant excepted and moved for a new trial. This motion was denied, an exception was taken by
the defendant and, upon presentation of the proper bill of exceptions, the same was approved, certified and forwarded to the clerk of his
court.
This suit involves the validity and efficacy of the sale under right of redemption of a parcel of land and a masonry house with the nipa roof
erected thereon, effected by Jose Duran, a nephew of the owner of the property, Engracio Orense, for the sum of P1,500 by means of a notarial
instrument executed and ratified on February 14, 1907.
After the lapse of the four years stipulated for the redemption, the defendant refused to deliver the property to the purchaser, the firm of
Gutierrez Hermanos, and to pay the rental thereof at the rate of P30 per month for its use and occupation since February 14, 1911, when the
period for its repurchase terminated. His refusal was based on the allegations that he had been and was then the owner of the said property,
which was registered in his name in the property registry; that he had not executed any written power of attorney to Jose Duran, nor had he
given the latter any verbal authorization to sell the said property to the plaintiff firm in his name; and that, prior to the execution of the deed
of sale, the defendant performed no act such as might have induced the plaintiff to believe that Jose Duran was empowered and authorized by
the defendant to effect the said sale.
The plaintiff firm, therefore, charged Jose Duran, in the Court of First Instance of the said province, with estafa, for having represented himself
in the said deed of sale to be the absolute owner of the aforesaid land and improvements, whereas in reality they did not belong to him, but to
the defendant Orense. However, at the trial of the case Engracio Orense, called as a witness, being interrogated by the fiscal as to whether he
and consented to Duran's selling the said property under right of redemption to the firm of Gutierrez Hermanos, replied that he had. In view of
this statement by the defendant, the court acquitted Jose Duran of the charge of estafa.
As a result of the acquittal of Jose Duran, based on the explicit testimony of his uncle, Engacio Orense, the owner of the property, to the effect
that he had consented to his nephew Duran's selling the property under right of repurchase to Gutierrez Hermanos, counsel for this firm filed a
complainant praying, among other remedies, that the defendant Orense be compelled to execute a deed for the transfer and conveyance to
the plaintiff company of all the right, title and interest with Orense had in the property sold, and to pay to the same the rental of the property
due from February 14, 1911.itc-alf
Notwithstanding the allegations of the defendant, the record in this case shows that he did give his consent in order that his nephew, Jose
Duran, might sell the property in question to Gutierrez Hermanos, and that he did thereafter confirm and ratify the sale by means of a public
instrument executed before a notary.
It having been proven at the trial that he gave his consent to the said sale, it follows that the defendant conferred verbal, or at least implied,
power of agency upon his nephew Duran, who accepted it in the same way by selling the said property. The principal must therefore fulfill all
the obligations contracted by the agent, who acted within the scope of his authority. (Civil Code, arts. 1709, 1710 and 1727.)
Even should it be held that the said consent was granted subsequently to the sale, it is unquestionable that the defendant, the owner of the
property, approved the action of his nephew, who in this case acted as the manager of his uncle's business, and Orense'r ratification produced
the effect of an express authorization to make the said sale. (Civil Code, arts. 1888 and 1892.)
Article 1259 of the Civil Code prescribes: "No one can contract in the name of another without being authorized by him or without his legal
representation according to law.
A contract executed in the name of another by one who has neither his authorization nor legal representation shall be void, unless it
should be ratified by the person in whose name it was executed before being revoked by the other contracting party.
The sworn statement made by the defendant, Orense, while testifying as a witness at the trial of Duran for estafa, virtually confirms and
ratifies the sale of his property effected by his nephew, Duran, and, pursuant to article 1313 of the Civil Code, remedies all defects which the
contract may have contained from the moment of its execution.
The sale of the said property made by Duran to Gutierrez Hermanos was indeed null and void in the beginning, but afterwards became
perfectly valid and cured of the defect of nullity it bore at its execution by the confirmation solemnly made by the said owner upon his stating
under oath to the judge that he himself consented to his nephew Jose Duran's making the said sale. Moreover, pursuant to article 1309 of the
Code, the right of action for nullification that could have been brought became legally extinguished from the moment the contract was validly
confirmed and ratified, and, in the present case, it is unquestionable that the defendant did confirm the said contract of sale and consent to its
execution.
On the testimony given by Engacio Orense at the trial of Duran for estafa, the latter was acquitted, and it would not be just that the said
testimony, expressive of his consent to the sale of his property, which determined the acquittal of his nephew, Jose Duran, who then acted as
his business manager, and which testimony wiped out the deception that in the beginning appeared to have been practiced by the said Duran,
should not now serve in passing upon the conduct of Engracio Orense in relation to the firm of Gutierrez Hermanos in order to prove his
consent to the sale of his property, for, had it not been for the consent admitted by the defendant Orense, the plaintiff would have been the
victim of estafa.
If the defendant Orense acknowledged and admitted under oath that he had consented to Jose Duran's selling the property in litigation to
Gutierrez Hermanos, it is not just nor is it permissible for him afterward to deny that admission, to the prejudice of the purchaser, who gave
P1,500 for the said property.
The contract of sale of the said property contained in the notarial instrument of February 14, 1907, is alleged to be invalid, null and void under
the provisions of paragraph 5 of section 335 of the Code of Civil Procedure, because the authority which Orense may have given to Duran to
make the said contract of sale is not shown to have been in writing and signed by Orense, but the record discloses satisfactory and conclusive
proof that the defendant Orense gave his consent to the contract of sale executed in a public instrument by his nephew Jose Duran. Such
consent was proven in a criminal action by the sworn testimony of the principal and presented in this civil suit by other sworn testimony of the
same principal and by other evidence to which the defendant made no objection. Therefore the principal is bound to abide by the
consequences of his agency as though it had actually been given in writing (Conluvs. Araneta and Guanko, 15 Phil. Rep., 387; Gallemit vs.
Tabiliran, 20 Phil. Rep., 241; Kuenzle & Streiff vs. Jiongco, 22 Phil. Rep., 110.)
The repeated and successive statements made by the defendant Orense in two actions, wherein he affirmed that he had given his consent to
the sale of his property, meet the requirements of the law and legally excuse the lack of written authority, and, as they are a full ratification of
the acts executed by his nephew Jose Duran, they produce the effects of an express power of agency.
The judgment appealed from in harmony with the law and the merits of the case, and the errors assigned thereto have been duly refuted by
the foregoing considerations, so it should be affirmed.
FRANCISCO v GSIS
Appeal by the Government Service Insurance System from the decision of the Court of First Instance of Rizal (Hon. Angel H. Mojica, presiding),
in its Civil Case No. 2088-P, entitled "Trinidad J. Francisco, plaintiff, vs. Government Service Insurance System, defendant", the dispositive part
of which reads as follows:
WHEREFORE, judgment is hereby rendered: (a) Declaring null and void the consolidation in the name of the defendant, Government
Service Insurance System, of the title of the VIC-MARI Compound; said title shall be restored to the plaintiff; and all payments made by
the plaintiff, after her offer had been accepted by the defendant, must be credited as amortizations on her loan; and (b) Ordering the
defendant to abide by the terms of the contract created by plaintiff's offer and it's unconditional acceptance, with costs against the
defendant.
The plaintiff, Trinidad J. Francisco, likewise appealed separately (L-18155), because the trial court did not award the P535,000.00 damages and
attorney's fees she claimed. Both appeals are, therefore, jointly treated in this decision.
The following facts are admitted by the parties: On 10 October 1956, the plaintiff, Trinidad J. Francisco, in consideration of a loan in the amount
of P400,000.00, out of which the sum of P336,100.00 was released to her, mortgaged in favor of the defendant, Government Service Insurance
System (hereinafter referred to as the System) a parcel of land containing an area of 18,232 square meters, with twenty-one (21) bungalows,
known as Vic-Mari Compound, located at Baesa, Quezon City, payable within ten (10) years in monthly installments of P3,902.41, and with
interest of 7% per annum compounded monthly.
On 6 January 1959, the System extrajudicially foreclosed the mortgage on the ground that up to that date the plaintiff-mortgagor was in
arrears on her monthly installments in the amount of P52,000.00. Payments made by the plaintiff at the time of foreclosure amounted to
P130,000.00. The System itself was the buyer of the property in the foreclosure sale.
On 20 February 1959, the plaintiff's father, Atty. Vicente J. Francisco, sent a letter to the general manager of the defendant corporation, Mr.
Rodolfo P. Andal, the material portion of which recited as follows:
Yesterday, I was finally able to collect what the Government owed me and I now propose to pay said amount of P30,000 to the
GSIS if it would agree that after such payment the foreclosure of my daughter's mortgage would be set aside. I am aware that
the amount of P30,000 which I offer to pay will not cover the total arrearage of P52,000 but as regards the balance, I propose
this arrangement: for the GSIS to take over the administration of the mortgaged property and to collect the monthly
installments, amounting to about P5,000, due on the unpaid purchase price of more than 31 lots and houses therein and the
monthly installments collected shall be applied to the payment of Miss Francisco's arrearage until the same is fully covered. It
is requested, however, that from the amount of the monthly installments collected, the sum of P350.00 be deducted for
necessary expenses, such as to pay the security guard, the street-caretaker, the Meralco Bill for the street lights and sundry
items.
It will be noted that the collectible income each month from the mortgaged property, which as I said consists of installments
amounting to about P5,000, is more than enough to cover the monthly amortization on Miss Francisco's loan. Indeed, had she
not encountered difficulties, due to unforeseen circumstances, in collecting the said installments, she could have paid the
amortizations as they fell due and there would have been really no need for the GSIS to resort to foreclosure.
The proposed administration by the GSIS of the mortgaged property will continue even after Miss Francisco's account shall
have been kept up to date. However, once the arrears shall have been paid, whatever amount of the monthly installments
collected in excess of the amortization due on the loan will be turned over to Miss Francisco.
I make the foregoing proposal to show Francisco's sincere desire to work out any fair arrangement for the settlement of her
obligation. I trust that the GSIS, under the broadminded policies of your administration, would give it serious consideration.
Sincerely,.
s/
t/ VICENTE J. FRANCISCO
Vicente
J.
Francisco
On the same date, 20 February 1959, Atty. Francisco received the following telegram:.
VICENTE
SAMANILLO BLDG. ESCOLTA.
FRANCISCO
GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR DAUGHTER
ANDAL"
On 28 February 1959, Atty. Francisco remitted to the System, through Andal, a check for P30,000.00, with an accompanying letter, which
reads:
I am sending you herewith BPI Check No. B-299484 for Thirty Thousand Pesos (P30,000.00) in accordance with my letter of February
20th and your reply thereto of the same date, which reads:
GSIS BOARD APPROVED YOUR REQUEST RE REDEMPTION OF FORECLOSED PROPERTY OF YOUR DAUGHTER
xxx
xxx
xxx
The defendant received the amount of P30,000.00, and issued therefor its official receipt No. 1209874, dated 4 March 1959. It did not,
however, take over the administration of the compound. In the meantime, the plaintiff received the monthly payments of some of the
occupants thereat; then on 4 March 1960, she remitted, through her father, the amount of P44,121.29, representing the total monthly
installments that she received from the occupants for the period from March to December 1959 and January to February 1960, minus
expenses and real estate taxes. The defendant also received this amount, and issued the corresponding official receipt.
Remittances, all accompanied by letters, corresponding to the months of March, April, May, and June, 1960 and totalling P24,604.81 were also
sent by the plaintiff to the defendant from time to time, all of which were received and duly receipted for.
Then the System sent three (3) letters, one dated 29 January 1960, which was signed by its assistant general manager, and the other two
letters, dated 19 and 26 February 1960, respectively, which were signed by Andal, asking the plaintiff for a proposal for the payment of her
indebtedness, since according to the System the one-year period for redemption had expired.
In reply, Atty. Francisco sent a letter, dated 11 March 1960, protesting against the System's request for proposal of payment and inviting its
attention to the concluded contract generated by his offer of 20 February 1959, and its acceptance by telegram of the same date, the
compliance of the terms of the offer already commenced by the plaintiff, and the misapplication by the System of the remittances she had
made, and requesting the proper corrections.
By letter, dated 31 May 1960, the defendant countered the preceding protest that, by all means, the plaintiff should pay attorney's fees of
P35,644.14, publication expenses, filing fee of P301.00, and surcharge of P23.64 for the foreclosure work done; that the telegram should be
disregarded in view of its failure to express the contents of the board resolution due to the error of its minor employees in couching the correct
wording of the telegram. A copy of the excerpts of the resolution of the Board of Directors (No. 380, February 20, 1959) was attached to the
letter, showing the approval of Francisco's offer
... subject to the condition that Mr. Vicente J. Francisco shall pay all expenses incurred by the GSIS in the foreclosure of the mortgage.
Inasmuch as, according to the defendant, the remittances previously made by Atty. Francisco were allegedly not sufficient to pay off her
daughter's arrears, including attorney's fees incurred by the defendant in foreclosing the mortgage, and the one-year period for redemption
has expired, said defendant, on 5 July 1960, consolidated the title to the compound in its name, and gave notice thereof to the plaintiff on 26
July 1960 and to each occupant of the compound.
Hence, the plaintiff instituted the present suit, for specific performance and damages. The defendant answered, pleading that the binding
acceptance of Francisco's offer was the resolution of the Board, and that Andal's telegram, being erroneous, should be disregarded. After trial,
the court below found that the offer of Atty. Francisco, dated 20 February 1959, made on behalf of his daughter, had been unqualifiedly
accepted, and was binding, and rendered judgment as noted at the start of this opinion.
The defendant-appellant corporation assigns six (6) errors allegedly committed by the lower court, all of which, however, are resolvable on the
single issue as to whether or not the telegram generated a contract that is valid and binding upon the parties.
Wherefore, the parties respectfully pray that the foregoing stipulation of facts be admitted and approved by this Honorable Court, without
prejudice to the parties adducing other evidence to prove their case not covered by this stipulation of facts. 1wph1.t
We find no reason for altering the conclusion reached by the court below that the offer of compromise made by plaintiff in the letter, Exhibit
"A", had been validly accepted, and was binding on the defendant. The terms of the offer were clear, and over the signature of defendant's
general manager, Rodolfo Andal, plaintiff was informed telegraphically that her proposal had been accepted. There was nothing in the
telegram that hinted at any anomaly, or gave ground to suspect its veracity, and the plaintiff, therefore, can not be blamed for relying upon it.
There is no denying that the telegram was within Andal's apparent authority, but the defense is that he did not sign it, but that it was sent by
the Board Secretary in his name and without his knowledge. Assuming this to be true, how was appellee to know it? Corporate transactions
would speedily come to a standstill were every person dealing with a corporation held duty-bound to disbelieve every act of its responsible
officers, no matter how regular they should appear on their face. This Court has observed in Ramirez vs. Orientalist Co., 38 Phil. 634, 654-655,
that
In passing upon the liability of a corporation in cases of this kind it is always well to keep in mind the situation as it presents itself to
the third party with whom the contract is made. Naturally he can have little or no information as to what occurs in corporate meetings;
and he must necessarily rely upon the external manifestations of corporate consent. The integrity of commercial transactions can only
be maintained by holding the corporation strictly to the liability fixed upon it by its agents in accordance with law; and we would be
sorry to announce a doctrine which would permit the property of a man in the city of Paris to be whisked out of his hands and carried
into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner
disclosed in this case. As already observed, it is familiar doctrine that if a corporation knowingly permits one of its officers, or any
other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as possessing power to do
those acts, the corporation will, as against any one who has in good faith dealt with the corporation through such agent, be estopped
from denying his authority; and where it is said "if the corporation permits" this means the same as "if the thing is permitted by the
directing power of the corporation."
It has also been decided that
A very large part of the business of the country is carried on by corporations. It certainly is not the practice of persons dealing with
officers or agents who assume to act for such entities to insist on being shown the resolution of the board of directors authorizing the
particular officer or agent to transact the particular business which he assumes to conduct. A person who knows that the officer or
agent of the corporation habitually transacts certain kinds of business for such corporation under circumstances which necessarily
show knowledge on the part of those charged with the conduct of the corporate business assumes, as he has the right to assume, that
such agent or officer is acting within the scope of his authority. (Curtis Land & Loan Co. vs. Interior Land Co., 137 Wis. 341, 118 N.W.
853, 129 Am. St. Rep. 1068; as cited in 2 Fletcher's Encyclopedia, Priv. Corp. 263, perm. Ed.)
Indeed, it is well-settled 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. (2 Fletcher's Encyclopedia, Priv. Corp. 255, Perm. Ed.)
Hence, even if it were the board secretary who sent the telegram, the corporation could not evade the binding effect produced by the
telegram..
The defendant-appellant does not disown the telegram, and even asserts that it came from its offices, as may be gleaned from the letter,
dated 31 May 1960, to Atty. Francisco, and signed "R. P. Andal, general manager by Leovigildo Monasterial, legal counsel", wherein these
phrases occur: "the telegram sent ... by this office" and "the telegram we sent your" (emphasis supplied), but it alleges mistake in couching
the correct wording. This alleged mistake cannot be taken seriously, because while the telegram is dated 20 February 1959, the defendant
informed Atty. Francisco of the alleged mistake only on 31 May 1960, and all the while it accepted the various other remittances, starting on
28 February 1959, sent by the plaintiff to it in compliance with her performance of her part of the new contract.
The inequity of permitting the System to deny its acceptance become more patent when account is taken of the fact that in remitting the
payment of P30,000 advanced by her father, plaintiff's letter to Mr. Andal quoted verbatim the telegram of acceptance. This was in itself notice
to the corporation of the terms of the allegedly unauthorized telegram, for as Ballentine says:
Knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to
matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. (Ballentine,
Law on Corporations, section 112.)
since a corporation cannot see, or know, anything except through its officers.
Yet, notwithstanding this notice, the defendant System pocketed the amount, and kept silent about the telegram not being in accordance with
the true facts, as it now alleges. This silence, taken together with the unconditional acceptance of three other subsequent remittances from
plaintiff, constitutes in itself a binding ratification of the original agreement (Civil Code, Art. 1393).
ART. 1393. Ratification may be effected expressly or tacitly. It is understood that there is a tacit ratification if, with knowledge of the
reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an
act which necessarily implies an intention to waive his right.
Nowhere else do the circumstances call more insistently for the application of the equitable maxim that between two innocent parties, the one
who made it possible for the wrong to be done should be the one to bear the resulting loss..
The defendant's assertion that the telegram came from it but that it was incorrectly worded renders unnecessary to resolve the other point on
controversy as to whether the said telegram constitutes an actionable document..
Since the terms offered by the plaintiff in the letter of 20 February 1959 (Exhibit "A") provided for the setting aside of the foreclosure effected
by the defendant System, the acceptance of the offer left the account of plaintiff in the same condition as if no foreclosure had taken place. It
follows, as the lower court has correctly held, that the right of the System to collect attorneys' fees equivalent to 10% of the due (P35,694.14)
and the expenses and charges of P3,300.00 may no longer be enforced, since by the express terms of the mortgage contract, these sums
were collectible only "in the event of foreclosure."
The court a quo also called attention to the unconscionability of defendant's charging the attorney's fees, totalling over P35,000.00; and this
point appears well-taken, considering that the foreclosure was merely extra-judicial, and the attorneys' work was limited to requiring the
sheriff to effectuate the foreclosure. However, in view of the parties' agreement to set the same aside, with the consequential elimination of
such incidental charges, the matter of unreasonableness of the counsel fees need not be labored further.
Turning now to the plaintiff's separate appeal (Case G.R. No. L-18155): Her prayer for an award of actual or compensatory damages for
P83,333.33 is predicated on her alleged unrealized profits due to her inability to sell the compound for the price of P750,000.00 offered by one
Vicente Alunan, which sale was allegedly blocked because the System consolidated the title to the property in its name. Plaintiff reckons the
amount of P83,333.33 by placing the actual value of the property at P666,666.67, a figure arrived at by assuming that the System's loan of
P400,000.00 constitutes 60% of the actual value of the security. The court a quo correctly refused to award such actual or compensatory
damages because it could not determine with reasonable certainty the difference between the offered price and the actual value of the
property, for lack of competent evidence. Without proof we cannot assume, or take judicial notice, as suggested by the plaintiff, that the
practice of lending institutions in the country is to give out as loan 60% of the actual value of the collateral. Nor should we lose sight of the
fact that the price offered by Alunan was payable in installments covering five years, so that it may not actually represent true market values.
Nor was there error in the appealed decision in denying moral damages, not only on account of the plaintiff's failure to take the witness stand
and testify to her social humiliation, wounded feelings, anxiety, etc., as the decision holds, but primarily because a breach of contract like that
of defendant, not being malicious or fraudulent, does not warrant the award of moral damages under Article 2220 of the Civil Code (Ventanilla
vs. Centeno, L-14333, 28 Jan. 1961; Fores vs. Miranda, L-12163, 4 March 1959).
There is no basis for awarding exemplary damages either, because this species of damages is only allowed in addition to moral, temperate,
liquidated, or compensatory damages, none of which have been allowed in this case, for reasons herein before discussed (Art. 2234, Civil
Code; Velayo vs. Shell Co. of P.I., L-7817, Res. July 30, 1957; Singson, et al. vs. Aragon and Lorza, L-5164, Jan. 27, 1953, 49 O.G. No. 2, 515).
As to attorneys' fees, we agree with the trial court's stand that in view of the absence of gross and evident bad faith in defendant's refusal to
satisfy the plaintiff's claim, and there being none of the other grounds enumerated in Article 2208 of the Civil Code, such absence precludes a
recovery. The award of attorneys' fees is essentially discretionary in the trial court, and no abuse of discretion has been shown.
FOR THE FOREGOING REASONS, the appealed decision is hereby affirmed, with costs against the defendant Government Service Insurance
System, in G.R. No.L-18287.
MACKE et al v CAMPS
The plaintiffs in this action, B. H. Macke and W. H. Chandler, partners doing business under the firm name of Macke, Chandler & Company,
allege that during the months of February and March, 1905, they sold to the defendant and delivered at his place of business, known as the
"Washington Cafe," various bills of goods amounting to P351.50; that the defendant has only paid on account of said accounts the sum of
P174; that there is still due them on account of said goods the sum of P177.50; that before instituting this action they made demand for the
payment thereof; and that defendant had failed and refused to pay the said balance or any part of it up to the time of the filing of the
complaint.
B. H. Macke, one of the plaintiffs, testified that on the order of one Ricardo Flores, who represented himself to be agent of the defendant, he
shipped the said goods to the defendants at the Washington Cafe; that Flores later acknowledged the receipt of said goods and made various
payments thereon amounting in all to P174; that on demand for payment of balance of the account Flores informed him that he did not have
the necessary funds on hand, and that he would have to wait the return of his principal, the defendant, who was at that time visiting in the
provinces; that Flores acknowledged the bill for the goods furnished and the credits being the amount set out in the complaint; that when the
goods were ordered they were ordered on the credit of the defendant and that they were shipped by the plaintiffs after inquiry which satisfied
the witness as to the credit of the defendant and as to the authority of Flores to act as his agent; that the witness always believed and still
believes that Flores was the agent of the defendant; and that when he went to the Washington Cafe for the purpose of collecting his bill he
found Flores, in the absence of the defendant in the provinces, apparently in charge of the business and claiming to be the business manager
of the defendant, said business being that of a hotel with a bar and restaurant annexed.
A written contract dated May 25, 1904, was introduced in evidence, from which it appears that one Galmes, the former owner of the business
now know as the "Washington Cafe," subrented the building wherein the business was conducted, to the defendant for a period of one year,
for the purpose of carrying on that business, the defendant obligating himself not to sublet or subrent the building or the business without the
consent of the said Galmes. This contract was signed by the defendant and the name of Ricardo Flores appears thereon as a witness, and
attached thereto is an inventory of the furniture and fittings which also is signed by the defendant with the word "sublessee" ( subarrendatario)
below the name, and at the foot of this inventory the word "received" (recibo) followed by the name "Ricardo Flores," with the words
"managing agent" (el manejante encargado) immediately following his name.
Galmes was called to the stand and identified the above- described document as the contract and inventory delivered to him by the
defendant, and further stated that he could not tell whether Flores was working for himself or for some one else that it to say, whether
Flores was managing the business as agent or sublessee.
The defendant did not go on the stand nor call any witnesses, and relies wholly on his contention that the foregoing facts are not sufficient to
establish the fact that he received the goods for which payment is demanded.
In the absence of proof of the contrary we think that this evidence is sufficient to sustain a finding that Flores was the agent of the defendant
in the management of the bar of the Washington Cafe with authority to bind the defendant, his principal, for the payment of the goods
mentioned in the complaint.
The contract introduced in evidence sufficiently establishes the fact that the defendant was the owner of 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
in question were made, Flores was apparently in charge of the business, performing the duties usually entrusted to managing agent, leave
little room for doubt that he was there as authorized agent of the defendant. One who clothes another 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 parties dealing with such person in good faith and in the following preassumptions or deductions, which the law expressly directs to be
made from particular facts, are deemed conclusive:
(1) "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 such declaration, act, or omission, be permitted to falsify it" (subsec.
1, sec. 333, Act no. 190); and unless the contrary appears, the authority of an agent must be presumed to include all the necessary and usual
means of carrying his agency into effect. (15 Conn., 347; 90 N. C. 101; 15 La. Ann, 247; 43 Mich., 364; 93 N. Y., 495; 87 Ind., 187.)
That Flores, as managing agent of the Washington Cafe, had authority to buy such reasonable quantities of supplies as might from time to
time be necessary in carrying on the business of hotel bar may fairly be presumed from the nature of the business, especially in view of the
fact that his principal appears to have left him in charge during more or less prolonged periods of absence; from an examination of the items
of the account attached to the complaint, we are of opinion that he was acting within the scope of his authority in ordering these goods are
binding on his principal, and in the absence of evidence to the contrary, furnish satisfactory proof of their delivery as alleged in the complaint.
The judgment of the trial court is affirmed with the costs of his instance against the appellant. After expiration of twenty days judgment will be
rendered in accordance herewith, and ten days thereafter the case remanded to the lower court for proper action. So ordered
LINAN v PUNO
The facts upon which the decision in this case depends are as follows:
(1) The the plaintiff, in the month of May, 1908, and for a long time prior thereto, was the owner of a certain parcel of land particularly
described in paragraph 2 of the complaint.
(2) That on the 16th day of May, 1908, the plaintiff executed the following document, which conferred upon the defendant Marcos P. Puno the
power, duties and obligations therein contained:
I, Diego Lian, of age, married, a resident of Daet, Province of Ambos Camarines, Philippine Islands, and at the present time
temporarily residing in this city of Tarlac, capital of the Province of Tarlac, P.I., set forth that I hereby confer sufficient power, such as
the law requires, upon Mr. Marcos P. Puno, likewise a resident of this city of Tarlac, capital of the Province of Tarlac, in order that in my
name and representation he may administer the interest I possess within this municipality of Tarlac, purchase, sell, collect and pay, as
well as sue and be sued before any authority, appear before the courts of justice and administrative officers in any proceeding or
business concerning the good administration and advancement of my said interests, and may, in necessary cases, appoint attorneys
at law or attorneys in fact to represent him.
The meaning, purport, and power conferred by this document constitute the very gist of the present action.
(3) That in June, 1911, the defendant Puno, for the sum of P800, sold and delivered said parcel of land to the other defendants.
The plaintiff alleges that the said document (Exhibit A) did not confer upon the defendant Puno the power to sell the land and prayed that the
sale be set aside; that the land be returned to him, together with damages.
The defendants at first presented a demurrer to the complaint, which was overruled. To the order overruling the demurrer the defendants duly
excepted. They later answered. In their answer they first denied generally and specially all of the important facts stated in the complaint. In
their special answer or defense they admitted the sale of the land by Puno to the other defendants and alleged that the same was a valid sale
and prayed to be relieved from the liability under the complaint, with their costs.
Upon the issue thus presented the lower court decided: (1) That the document Exhibit A did not give Puno authority to sell the land; (2) that
the sale was illegal and void; (3) That defendants should return to the land to the plaintiff; and (4) That the defendants should pay to the
plaintiff the sum of P1,000 as damages, P400 of which the defendant Puno should alone be responsible for, and to pay the costs.
From that decision the defendants appealed to this court and made the following assignments of error:
I. The lower court erred in overruling the demurrer filed by the appellants to the complaints.
II. The lower court erred in holding that the appellant Marcos P. Puno was not authorized to sell the land in question and that the sale
executed by the said Marcos P. Puno to the other appellants, Enrique, Vicente, Aquilina and Remedios, surnamed Maglanok, is null and
void.
III. The lower court erred in ordering the appellee, Diego Lian, to return to the appellants, Enrique, Vicente, Aquilina, and Remedios
Maglanok the sum of P800, the selling price of the land question.
III. And, finally, the lower court erred in sentencing the appellants to pay to the appellee the sum of P1,000, the value of the products
collected, and to pay the costs.
IV. And, finally, the lower court erred in sentencing the appellant to pay to the appellee the sum of P1,000, the value of the products
collected, and to pay the costs.
With reference to the first assignment of error, we are of the opinion that the facts stated in the opinion are sufficient to constitute a cause of
action.
With reference to the second assignment of error, the plaintiff alleges that the power of attorney, as contained in Exhibit A, did not authorize
the defendant Puno had full and complete power and authority to do what he did. The lower court held that Exhibit A only gave Puno power
and authority to administer the land; that he was not authorized to sell it. Omitting the purely explanatory parts of Exhibit A, it reads as
follows: "I, Diego Lian, ... set forth that I ... confer sufficient power, such as the law requires, upon Mr. Marcos P. Puno ... in order that in my
name and representation he may administer ... purchase, sell, collect and pay ... in any proceeding or business concerning the good
administration and advancement of my said interests, and may, in necessary cases, appoint at law or attorneys in fact to represent him."
Contracts of agency as well as general powers of attorney must be interpreted in accordance with the language used by the parties. the real
intention of the parties is primarily to be determined from the language used. The intention is to be gathered from the whole instrument. In
case of doubt resort must be had to the situation, surroundings and relations of the parties. Whenever it is possible, effect is to be given to
every word and clause used by the parties. It is to be presumed that the parties said what they intended to say and that they used each word
or clause with some purpose and that purpose is, if possible, to be ascertained and enforced. The intention of the parties must be sustained
rather than defeated. If the contract be open to two constructions, one of which would uphold while the other would overthrow it, the former is
to be chosen. So, if by one construction the contract would be illegal, and by another equally permissible construction it would be lawful, the
latter must be adopted. The acts of the parties in carrying out the contract will be presumed to be done in good faith. The acts of the parties
will be presumed to have been done in conformity with and not contrary to the intent of the contract. The meaning of generals words must be
construed with reference to the specific object to be accomplished and limited by the recitals made in reference to such object.
With these general observations in mind, ,let us examine the terms of the power conferred upon the defendant Puno (Exhibit A) and ascertain,
if possible, what was the real intent of the plaintiff. The lower court held that the "only power conferred was the power to administer." Reading
the contract we find it says that the plaintiff "I confer ... power ... that ... he may administer ... purchase, sell, collect and pay ... in any
proceeding or business concerning the good administration and advancement of my said interests." The words "administer, purchase, sell,"
etc., seem to be used coordinately. Each has equal force with the other. There seems to be no good reason for saying that Puno had authority
to administer and not to sell when "to sell" was as advantageous to the plaintiff in the administration of his affairs as "to administer." To hold
that the power was "to administer" only when the power "to sell" was equally conferred would be to give to special words of the contract a
special and limited meaning to the exclusion of other general words of equal import.
The record contains no allegation on proof that Puno acted in bad faith or fraudulently in selling the land. It will be presumed that he acted in
good faith and in accordance with his power as he understood it. That his interpretation of his power, as gathered from the contract (Exhibit
A), is tenable cannot, we believe, be successfully denied. In view of that fact and view of the fact that, so far as the record shows, the other
defendants acted in good faith, we are of the opinion that the contract, liberally construed, as we think it should be, justifies the interpretation
given it by Puno. In reaching this conclusion, we have taken into account the fact that the plaintiff delayed his action to annul said sale from
the month of June, 1911, until the 15th of February, 1913. Neither have we overlooked the fact in the brief of the appellants that the plaintiff
has not returned, nor offered to return, nor indicated a willingness to return, the purchase price. (Art. 1308 of the Civil Code; Manikis vs. Blas,
No. 7585.1).
In view of all the foregoing, we are of the opinion that the lower court committed the error complained of in the second assignment, and,
without discussing the other assignments of error, we are of the opinion, and so hold, that the judgment of the lower court should be and is
hereby revoked and that the appellants should be relieved from all liability under the complaint. Without any finding as to costs, it is so
ordered.
Arellano, C.J., Torres, Carson, and Araullo, JJ., concur.
Separate Opinions
TRENT, J., dissenting:
The power of attorney, the identity of the land sold, the fact of sale, and the identity of the parties are admitted.
I agree with the majority that "the meaning, purport, and power conferred by this document (Exhibit A, the power of attorney) constitute the
very gist of the present action," and that the acted in good faith. But I cannot see how "the fact that the plaintiff delayed his action to annul
said sale from the month of June, 1911, to February, 15, 1913," and the fact that the appellants have charged in their brief that the "plaintiff
has not returned, nor offered, to return, ,nor indicated a willingness to return the purchase price," can affect in any way the issues involved in
this case. the record shows that the land is situated in the Province of Tarlac and the plaintiff lives in the Province of Ambos Camarines. The
record fails to show whether or not the plaintiff has returned, or offered to return, or is willing to return to the vendees the purchase price of
the land. The charge in appellant's brief that the plaintiff has not done these things is not proof and should not be taken as establishing a fact
or facts.
The controlling question is, Was Puno authorized under the power of attorney, which is set out in full in the majority opinion, to sell the real
estate of his principal? The solution of this question must depend solely and exclusively upon the language used in that power of attorney
Exhibit A. There is no claim that the plaintiff enlarged the powers of his agent Puno after the execution of Exhibit A or that he ratified the sale
in question after it had been made.
Article 1713 of the Civil Code reads:
An agency in general only includes acts of administration.

In order to compromise, alienate, mortgage, or to execute any other act of a strict ownership an express commission is required.
The power to compromise does not give authority to place the matter in the hands of arbitrators or amicable compromisers.
The Director General de los Registros, in its resolution of November 20, 1900 (90 Juris. Civ., 677), construed a power of attorney given by a
father to his son, authorizing the latter to administer the property of his principal, "to lease and to rent his principal's reality to the persons and
for the time, price and conditions he deems best, and also to make ejectments, to sign documents, to make collections, to make changes in
anything belonging to his principal, and to compromise any questions that may arise." Under color of this authority, the son leased for a period
of twelve years several parcels of land and charged several other parcels with pensiones de censos in favor of a third person. I quote from the
syllabus: "In the present case, the lessor was authorized by his principal to lease and to rent the latter's realty to the persons and for the price,
time and conditions that seemed best to him, and such authorization must be understood to have been granted for the simple contract of
lease, which produces only personal obligations, and consequently cannot be regarded as extended, without express command, to the
stipulation of such conditions as might alter the nature of the contract by transforming it into a partial conveyance of ownership in the things
leased, as happened in said case, wherein the agent has thereby exceeded the limits of his agency."
A quite similar power of attorney was disposed of in the same manner in the resolution of October 26, 1904 (99Juris. Civ., 245) where an agent
leased property for thirty years under color of authority to lease the property "for the time, price, and conditions" which he might think
desirable.
In the Resolution of April 5, 1907 (Juris. Civ., 68), the facts were as follows: A power of attorney executed by a wife authorized her husband to
administer a vineyard belonging to her as might be necessary for its preservation, improvement, and increase. Under this power the husband
entered into an agreement with several other adjoining owners with reference to the irrigation of their respective properties by means of an
aqueduct. To insure the accomplishment of various stipulations inserted in this contract, the various parties thereto hypothecated their
respective properties and sought to have the same inscribed in the property registry. Registration was denied on the ground, among others,
that the power of attorney in question did not authorize the husband to perform any act of strict ownership, but only those of administration.
In commenting upon article 1713, Manresa quotes approvingly from Goyena as follows: "As Garcia Goyena says, 'The law, which must look
after the interests of all, cannot permit a man to express himself in vague and general way with reference to the right he confers upon another
for the purposes of alienation or hypothecation, whereby he might easily be despoiled of all he possessed and be brought to ruin; such
excessive authority must be set down in the most formal and explicit terms; and when this is not done, the law reasonably presumes that the
principal did not mean to confer it.' " (Vol. 11, p. 460.)
Bonel, in commenting upon the same article, says: "Our code, in looking after the interests of all and thereby furnishing a proof of common
sense, does not permit a vague expression in a general and indefinite manner of the right one confers upon another to make alienations and
hypothecations, for in this way a man could with good faith on his part be despoiled of all he possessed and be brought to ruin; hence it
provides that such excessive authority must be set down in the most favorable and explicit terms; and when this is not done, reason and
common sense induce the presumption that the principal did not mean to confer it." (Vol. 4, p. 728.)
The supreme court of Louisiana, which also interprets the civil law, was considering the following power of attorney in Lafourche Transportation
Co. vs. Pugh (52 La. Ann., 1517); "We ... have appointed, ... (defendant) our true and lawful agent and attorney in fact, for us, and in our name,
place and stead, to manage, control, take charge of, compromise and do any and all things, necessary and requisite, touching and concerning
our interests in the succession of the late Robert Lawrence Pugh, and to make any and all settlements for us, and in our behalf, with the
legatees under the last will and testament of the said R. L. Pugh, vesting our said attorney and agent with full power and authority, to do any
and all acts that we might do if personally present . . .."
The remarks of the court are brief and instructive; "It further appears that, neither at the date of the execution of the note and act of mortgage
sued on, nor any at any other time, has W.W. Pugh held any other procuration, the attempt the prove the contrary having failed. there is no
doubt that, at the time that the note and act or mortgage were executed, he supposed that the power of attorney held by him conferred the
authority which he undertook to exercise, but the bare reading of it shows that it did not."
In Lord vs. Sherman (2 Cal., 498), a power of attorney authorized an agent to "attend to all business affairs appertaining to real or personal
estate, bank business, or business at the customhouse, or insurance or law business, or the commencement, settlement, or defending any suit
or suits in law or equity. Also for me and in my name, place, and stead, to sign, seal, execute, and deliver all and any instrument under seal
that he may think proper in and about my said business, either individually or as a member of the firm of Shermans & Stork. Also to settle,
compromise, and adjust, pay and discharge all claims and demands, accounts due or owing to me, or from me, or in which I am interested,
and give all proper receipts or discharges therefor, whether under seal or not; and to attend to all my business for me of any name or nature,
whether real or personal, that may arise during my absence, and whether to use my name in and about the same, the same as I could do if
personally present. Also to make, indorse, or accept any drafts, bills of exchange, or promissory notes. Also to settle and adjust all claims, etc."
The court said: "The power of attorney contains no authority to convey real estate, eo nomine. The power given `to attend to all business
affairs appertaining to real or personal estate' is too indefinite to sustain a transfer or real estate, more particularly that acquired long
subsequent to its execution."
In Billings vs. Morrow (7 Cal., 171), a power of attorney was in question which authorized the agent "for me and in my name to superintend my
real and personal estate, to make contracts, to settle outstanding debts, and generally to do all things that concern my interest in any way,
real or personal whatsoever, giving my said attorney full power to use my name to release others or bind myself, as he may deem proper and
expedient; ..." The court said: "It requires but a glance at this instrument to perceive that no authority is contained in it to convey real estate.
The power is limited and special, and cannot be extended by implication to other acts more important in their character than those expressly
provided in the body of the instrument. The rule may be thus stated; that where the authority to perform specific acts is given in the power,
and general words are also employed, such words are limited to the particular acts authorized."
In Clark & Skyles on Agency, section 213, it is said: All powers conferrred upon an agent by a formal instrument are to receive a strict
interpretation, and the authority is never extended by intendment or construction beyond that which is given in terms or is necessary for
carrying the authority into effect, and that authority must be strictly pursued."
Upon the same point Story says in his work on Agency, section 68: "Indeed formal instruments of this sort are ordinarily subjected to a strict
interpretation, and the authority is never extended beyond that which is given in terms, or which is necessary and proper for carrying the
authority so given into full effect."
In Reynolds vs. Rowley (4 La. Ann., 396), it was said: "We take it for granted that, under the common law as with us, powers of attorneys are
subjected to a strict interpretation, and that the authority is never extended beyond that which is given in terms, or which is necessary and
proper for carrying the authority so given into full effect; that language, however general in its form, when used in connection with a particular
subject matter, will be presumed to be used in subordination to that matter, and therefore is to be construed and limited accordingly; that a
general power to buy property for the constituent, or to make any contracts, and do any other acts whatever, which he could if personally
present, must be construed to apply only to buying or contracting connected with his ordinary business, and would not authorize any contracts
of an extraordinary character to be made."
In Clark & Skyles on Agency, section 227, it is said: "In order that an agent may have authority to sell real estate it is necessary that such
authority should be clearly and distinctly given to him, in such a manner that a reasonably prudent person would have no hesitancy in seeing
that such a power was given. We have herefore seen that all written powers will be strictly construed and will not be extended beyond their
obvious purpose; and unless power to sell real estate is clearly given to him, the agent cannot sell it."
In sections 261 to 265 of the same work, the general scope of powers delegated by the authority to manage the business of the principal is
discussed. It is there stated that aside from the particular facts and circumstances surrounding the parties, it is a general rule that an agency
to manage implies authority to with the property or in the business what has previously been done by the principals, or by others with their
express or implied consent; or further to do what is necessary or usual and customary to do with the property, or in business of the same kind
in the same locality. But the power to dispose of the business or embark on some unusual enterprise with the principal's capital is not included
in such an agency.
The rule that formal powers of attorney must be strictly construed and limited in their scope to what is expressly stated and to such incidental
powers as may be necessary in the fulfillment of the powers expressly given is well settled, both in Anglo-American and in the civil law. The
authorities supporting this doctrine are legion. So, general expressions conferring power an agent, such as "to do any and every act," "do and
transact all manner of business," to lease real property "for the time, price and with the conditions which he deems desirable," "attend to all
business affairs appertaining to real or personal estate," "to my real and personal estate," "to superintend my real and personal estate" are to
be construed in subordination to the express powers granted, and not to refer to other unusual or extraordinary powers of which no mention is
made in the instrument. In addition to the cases given above which illustrate the rule, many others may be found in the books of the same
character. Likewise, it is a rule uniformly stated that the power to sell real estate must necessarily be express, and cannot be implied from any
general language used.
Let us now examine the power of attorney executed by the plaintiff and see if, according to the rules stated, it can be held to include the
power to sell real estate. There is no description of the plaintiff's property in Tarlac. The document simply designates his property as
"interests." This, of course, would ordinarily be taken to include every species of property, real or personal, owned by him in that municipality.
That the power to administer these "interests" is expressly delegated admits of no denial, as well as to the power to appear in court, the power
to engage counsel, and to appoint sub-agents. But we are interested in determining if the power is expressly delegated (for that is the only
manner in which it could have been given) to sell real estate. The grammatical construction of the instrument admits of its division into two
portions, as follows: "(a) He may administer such interests as I possess within this municipality of Tarlac; (b) And may buy, sell, collect, and
pay, ... in any way whatsoever for the good administration and furtherance of my said interests."
Certainly, the power to sell real estate is not expressly delegated in the first division. True, in the second section are the words "buy," "sell," "in
any way whatsoever," and which, standing alone, might easily refer to either real or personal property or both. But these powers are restricted
by the stated purpose for which the grant is given; that is, "for the good administration and furtherance of my said interests." This qualifying
phrase brings these general words "buy" and "sell" "in any way whatsoever" down to the level of administrative acts. The agent may buy or
sell for the good administration and furtherance of the principal's interests, but he may not sell those interests themselves. As a matter of fact,
the second division is but little more than a repetition of the first, with the added feature that it enumerates a number of those powers
customarily incident to the management of a principal's business by his agent.
It develops that the plaintiff owned a parcel of agricultural land in the municipality of Tarlac. This was one of the "interests" which the
defendant Puno was to "administer." Manifestly, the power to "buy" seed, farming implements, and material for the repair and preservation of
that land, and the power to "sell" its products were incidental powers of a general power of management of such an "interest." The full extent
of the plaintiff's business "interests" in the municipality of Tarlac is not disclosed by the record. But it is clear that he was not engaged in the
business of buying and selling real estate. Assuming that his "interests" in the said municipality were of almost any other description, it is
evident that the sale of real estate by the defendant agent was an extraordinary act, not capable of being classified as an act of
administration. I am unable to discover any express delegation of power to sell "real estate" in the document in question. Not only is "real
estate" not expressly mentioned, but the words "buy" and "sell," which, it is argued, delegate that power, are, by the grammatical construction
of the document, subordinated to the "good administration and furtherance" of the plaintiff's "interests."
For the foregoing reasons I do not agree to the disposition of this case.
DELA PENA v HIDALGO
On May 23, 1906, Jose dela Pea y de Ramon, and Vicenta de Ramon, in her own behalf and as the legal guardian of her son Roberto de la
Pea, filed in the Court of First Instance of Manila a written complaint against of Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, and,
after the said complaint, already amended, had been answered by the defendants Antonio and Francisco Hidalgo, and the other defendant,
Federico Hidalgo, had moved for the dismissal of this complaint, the plaintiff, Jose de la Pea y de Ramon, as the judicial administrator of the
estate of the deceased Jose de la Pea y Gomiz, with the consent of the court filed a second amended complaint prosecuting his action solely
against Federico Hidalgo, who answered the same in writing on the 21st of may and at the same time filed a counterclaim, which was also
answered by the defendant.
On October 22, 1907, the case was brought up for hearing and oral testimony was adduced by both parties, the exhibits introduced being
attached to the record. In view of such testimony and of documentary evidence, the court, on March 24, 1908, rendered judgment in favor of
the plaintiff-administrator for the sum of P13,606.19 and legal interest from the date of the filing of the complaint on May 24, 1906, and the
costs of the trial.
Both the plaintiff and the defendant filed notice of appeal from this judgment and also asked for the annulment of the same and for a new
trial, on the ground that the evidence did not justify the said judgment and that the latter was contrary to law. The defendant, on April 1, 1908,
presented a written motion for new hearing, alleging the discovery of new evidence favorable to him and which would necessarily influence
the decision such evidence or to introduce it at the trial of the case, notwithstanding the fact that he had used all due diligence. His petition
was accompanied by affidavits from Attorney Eduardo Gutierrez Repilde and Federico Hidalgo, and was granted by order of the court of the 4th
of April.
At this stage of the proceedings and on August 10, 1908, the plaintiff Pea y De Ramon filed a third amended complaint, with the permission
of the court, alleging, among other things, as a first cause of action, that during the period of time from November 12, 1887, to January 7,
1904, when Federico Hidalgo had possession of and administered the following properties, to wit; one house and lot at No. 48 Calle San Luis;
another house and lot at No. 6 Calle Cortada; another house and lot at 56 Calle San Luis, and a fenced lot on the same street, all of the district
of Ermita, and another house and lot at No. 81 Calle Looban de Paco, belonging to his principal, Jose de la Pea y Gomiz, according to the
power of attorney executed in his favor and exhibited with the complaint under letter A, the defendant, as such agent, collected the rents and
income from the 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, the defendant, in the general treasury of the Spanish
Government at an interest of 5 per cent per annum, which interest on accrual was likewise to be deposited in order that it also might bear
interest; that the defendant did not remit or pay to Jose de la Pea y Gomiz, during the latter's lifetime, nor to nay representative of the said
De la Pea y Gomiz, the sum aforestated nor any part thereof, with the sole exception of P1,289.03, nor has he deposited the unpaid balance
of the said sum in the treasury, according to agreement, wherefore he has become liable to his principal and to the defendant-administrator
for the said sum, together with its interest, which amounts to P72,548.24 and that, whereas the defendant has not paid over all nor any part of
the last mentioned sum, he is liable for the same, as well as for the interest thereon at 6 per cent per annum from the time of the filing of the
complaint, and for the costs of the suit.
In the said amended complaint, the plaintiff alleged as a second cause of action: That on December 9, 1887, Gonzalo Tuason deposited in the
general treasury of the Spanish Government, to the credit of Pea y Gomiz, the sum of 6,360 pesos, at 5 per cent interest per annum, and on
December 20, 1888, the defendant, as the agent of Pea y Gomiz, withdrew the said amount with its interest, that is, 6,751.60 pesos, and
disposed of the same for his own use and benefit, without having paid all or any part of the said sum to Pea y Gomiz, or to the plaintiff after
the latter's death, notwithstanding the demands made upon him: wherefore the defendant now owes the said sum of 6,751.60 pesos, with
interest at the rate of 5 per cent per annum, compounded annually, from the 20th of December, 1888, to the time of the filing of this
complaint, and from the latter date at 6 per cent, in accordance with law.
The complaint recites as a third cause of action: that, on or about November 25, 1887, defendant's principal, Pea y Gomiz, on his voyage to
Spain, remitted from Singapore, one of the ports to call, to Father Ramon Caviedas, a Franciscan friar residing in this city, the sum of 6,000
pesos with the request to deliver the same, which he did, to defendant, who, on receiving this money, appropriated it to himself and converted
it to his own use and benefit, since he only remitted to Pea y Gomiz in Sapin, by draft, 737.24 pesos, on December 20, 1888; and, later, on
December 21, 1889, he likewise remitted by another draft 860 pesos, without having returned or paid the balance of the said sum,
notwithstanding the demands made upon him so to do: wherefore the defendant owes to the plaintiff, for the third cause of action, the sum of
P4,402.76, with interest at the rate of 5 per cent per annum, compounded yearly, to the time of the filing of the complaint and with interest at
6 per cent from that date, as provided by law.
As a fourth cause of action the plaintiff alleges that, on or about January 23, 1904, on his arrival from Spain and without having any knowledge
or information of the true condition of affairs relative to the property of the deceased Pea y Gomiz and its administration, he delivered and
paid to the defendant at his request the sum of P2,000, derived from the property of the deceased, which sum the defendant has not returned
notwithstanding the demands made upon him so to do.
Wherefore the plaintiff petitions the court to render judgment sentencing the defendant to pay, as first cause of action, the sum of P72,548.24,
with interest thereon at the rate of 6 per cent per annum from May 24, 1906, the date of the filing of the complaint, and the costs; as a second
cause of action, the sum of P15,774.19, with interest at the rate of 6 per cent per annum from the said date of the filing of the complaint, and
costs; as a third cause of action, P9,811.13, with interest from the aforesaid date, and costs; and, finally, as a fourth cause of action, he prays
that the defendant be sentenced to refund the sum of P2,000, with interest thereon at the rate of 6 per cent per annum from the 23d of
January, 1904, and to pay the costs of trial.
The defendant, Federico Hidalgo, in his answer to the third amended complaint, sets forth: That he admits the second, third, and fourth
allegations contained in the first, second, third, and fourth causes of action, and denies generally and specifically each one and all of the
allegations contained in the complaint, with the exception of those expressly admitted in his answer; that, as a special defense against the
first cause of action, he, the defendant, alleges that on November 18, 1887, by virtue of the powers conferred upon him by Pea y Gomiz, he
took charge of the administration of the latter's property and administered the same until December 31, 1893, when for reasons of health he
ceased to discharge the duties of said position; that during the years 1889, 1890, 1891, and 1892, the defendant continually by letter
requested Pea y Gomiz, his principal, to appoint a person to substitute him in the administration of the latter's property, inasmuch as the
defendant, for reasons of health, was unable to continue in his trust; that, on March 22, 1894, the defendant Federico Hidalgo, because of
serious illness, was absolutely obliged to leave these Islands and embarked on the steamer Isla de Luzon for Sapin, on which date the
defendant notified his principal that, for the reason aforestated, he had renounced his powers and turned over the administration of his
property to Antonio Hidalgo, to whom he should transmit a power of attorney for the fulfillment, in due form, of the trust that the defendant
had been discharging since January 1, 1894, or else execute a power of attorney in favor of such other person as he might deem proper;
That prior to the said date of March 22, the defendant came, rendered accounts to his principal, and on the date when he embarked for Spain
rendered the accounts pertaining to the years 1892 and 1893, which were those that yet remained to be forwarded, and transmitted to him a
general statement of accounts embracing the period from November 18, 1887, to December 31, 1893, with a balance of 6,774.50 pesos in
favor of Pea y Gomiz, which remained in the control of the acting administrator, Antonio Hidalgo; that from the 22nd of March, 1894, when
the defendant left these Islands, to the date of his answer to the said complaint, he has not again intervened nor taken any part directly or
indirectly in the administration of the property of Pea y Gomiz, the latter's administrator by express authorization having been Antonio
Hidalgo, from January 1, 1894, to October, 1902, who, on this latter date, delegated his powers to Francisco Hidalgo, who in turn administered
the said property until January 7, 1904; that the defendant, notwithstanding his having rendered, in 1894, all his accounts to Jose Pea y
Gomiz, again rendered to the plaintiff in 1904 those pertaining to the period from 1887 to December 31, 1893, which accounts the plaintiff
approved without any protest whatever and received to his entire satisfaction the balance due and the vouchers and documents and
documents relating to the property of the deceased Pea y Gomiz and issued to the defendant the proper acquaintance therefor.
As a special defense to the second cause of action, the defendant alleged that, on December 9, 1886, Jose de la Pea y Gomiz himself
deposited in the caja general de depositos (General Deposit Bank) the sum of 6,000 pesos, at 6 per cent interest for the term of one year, in
two deposit receipts of 3,000 pesos each, which two deposit receipts, with the interest accrued thereon, amounted to 6,360 pesos, ad were
collected by Gonzalo Tuason, through indorsement by Pea y Gomiz, on December 9, 1887, and on this same date Tuason, in the name of Pea
y Gomiz, again deposited the said sum of 6,360 pesos in the General Deposit Bank, at the same rate of interest, for the term of one year and
in two deposit receipts of 3,180 pesos each, registered under Nos. 1336 and 1337; that, on December 20, 1888, father Ramon Caviedas, a
Franciscan friar, delivered to the defendant, Federico Hidalgo, by order of De la Pea y Gomiz, the said two deposit receipts with the request to
collect the interest due thereon viz., 741.60 pesos an to remit it by draft on London, drawn in favor of De la Pea y Gomiz, to deposit again the
6,000 pesos in the said General Deposit Bank, for one year, in a single deposit, and in the latter's name, and to deliver to him, the said Father
Caviedas, the corresponding deposit receipt and the draft on London for their transmittal to Pea y Gomiz: all of which was performed by the
defendant who acquired the said draft in favor of De la Pea y Gomiz from the Chartered Bank of India, Australia and China, on December 20,
1888, and delivered the draft, together with the receipt from the General Deposit Bank, to Father Caviedas, and on the same date, by letter,
notified Pea y Gomiz of the transactions executed; that on December 20, 1889, the said Father Hidalgo, by order of Pea y Gomiz, the
aforesaid deposit receipt from the General Deposit Bank, with the request to remit, in favor of his constituent, the interest thereon, amounting
to 360 pesos, besides 500 pesos of the capital, that is 860 pesos in all, and to again deposit the rest, 5,500 pesos, in the General Deposit Bank
for another year in Pea y Gomiz's own name, and to deliver to Father Caviedas the deposit receipt and the draft on London, for their
transmittal to his constituent; all of which the defendant did; he again deposited the rest of the capital, 5,500 pesos, in the General Deposit
Bank, in the name of Pea y Gomiz, for one year at 5 per cent interest, under registry number 3,320, and obtained from the house of J. M.
Tuason and Co. a draft on London for 860 pesos in favor of Pea y Gomiz, on December 21, 1889, and thereupon delivered the said receipt and
draft to Father Caviedas, of which acts, when performed, the defendant advised Pea y Gomiz by letter of December 24, 1889' and that, on
December 20, 1890, the said Father Ramon Caviedas delivered to the defendant, by order of Pea y Gomiz, the said deposit receipt for 5,500
pesos with the request that he withdraw from the General Deposit Bank the capital and accrued interest, which amounted all together to 5,775
pesos, and that he deliver this amount to Father Caviedas, which he did, in order that it might be remitted to Pea y Gomiz.
The defendant denied each of the allegations contained in the third cause of action, and avers that they are all false and calumnious.
He likewise makes a general and specific denial of all the allegations of the fourth cause of action.
As a counterclaim the defendant alleges that Jose Pea y Gomiz owed and had not paid the defendant, up to the date of his death, the sum of
4,000 pesos with interest at 6 per cent per annum, and 3,600 pesos, and on the plaintiff's being presented with the receipt subscribed by his
father, Pea y Gomiz, on the said date of January 15th, and evidencing his debt, plaintiff freely and voluntarily offered to exchange for the said
receipt another document executed by him, and transcribed in the complaint. Defendant further alleges that, up to the date of his
counterclaim, the plaintiff has not paid him the said sum, with the exception of 2,000 pesos. Wherefore the defendant prays the court to
render judgment absolving him from the complaint with the costs against the plaintiff, and to adjudge that the latter shall pay to the
defendant the sum 9,000 pesos, which he still owes defendant, with legal interest thereon from the date of the counterclaim, to wit, May 21,
1907, and to grant such other and further relief as may be just and equitable.
On the 25th of September, 1908, and subsequent dates, the new trial was held; oral testimony was adduced by both parties, and the
documentary evidence was attached to the record of the proceedings, which show that the defendant objected and took exception to the
introduction of certain oral and documentary evidence produced by the plaintiff. On February 26, 1909, the court in deciding the case found
that the defendant, Federico Hidalgo, as administrator of the estate of the deceased Pea y Gomiz, actually owed by the plaintiff, on the date
of the filing of the complaint, the sum of P37,084.93; that the plaintiff was not entitled to recover any sum whatever from the defendant for
the alleged second, third, and fourth causes of action; that the plaintiff actually owed the defendant, on the filing of the complaint, the sum of
P10,155, which the defendant was entitled to deduct from the sum owing by him to the plaintiff. Judgment was therefore entered against the
defendant, Federico Hidalgo, for the payment of P26,629.93, with interest thereon at the rate of 6 per cent per annum from May 23, 1906, and
the costs of the trial.
Both parties filed written exceptions to this judgment and asked, separately, for its annulment and that a new trial be ordered, on the grounds
that the findings of fact contained in the judgment were not supported nor justified by the evidence produced, and because the said judgment
was contrary to law, the defendant stating in writing that his exception and motion for a new trial referred exclusively to that part of the
judgment that was condemnatory to him. By order of the 10th of April, 1909, the motions made by both parties were denied, to which they
excepted and announced their intention to file their respective bills of exceptions.
By written motions of the 24th of March, 1909, the plaintiff prayed for the execution of the said judgment, and the defendant being informed
thereof solicited a suspension of the issuance of the corresponding writ of execution until his motion for a new trial should be decided or his
bill of exceptions for the appeal be approved, binding himself to give such bond as the court might fix. The court, therefore, by order of the
25th of the same month, granted the suspension asked for, conditioned upon the defendants giving a bond, fixed at P34,000 by another order
of the same date, to guarantee compliance with the judgment rendered should it be affirmed, or with any other decision that might be
rendered in the case by the Supreme Court. This bond was furnished by the defendant on the 26th of the same month.
On April 16 and May 4, 1909, the defendant and the plaintiff filed their respective bills of exceptions, which were certified to and approved by
order of May 8th and forwarded to the clerk of this court.
Before proceeding to examine the disputed facts to make such legal findings as follows from a consideration of the same and of the questions
of law to which such facts give rise, and for the purpose of avoiding confusion and obtaining the greatest clearness and an easy
comprehension of this decision, it is indispensable to premise: First, that as before related, the original and first complaint filed by the plaintiff
was drawn against Federico Hidalgo, Antonio Hidalgo, and Francisco Hidalgo, the three persons who had successively administered the
property of Jose de la Pea y Gomiz, now deceased; but afterwards the action was directed solely against Federico Hidalgo, to the exclusion of
the other defendants, Antonio and Francisco Hidalgo, in the second and third amended complaints, the latter of the date of August 10, 1908,
after the issuance by the court of the order of April 4th of the same year, granting the new trial solicited by the defendant on his being notified
of the ruling of the 24th of the previous month of March; second, that the administration of the property mentioned, from the time its owner
left these Islands and returned to Spain, lasted from November 18, 1887, to January 7, 1904; and third that, the administration of the said
Federico, Antonio, and Francisco Hidalgo, having lasted so long, it is necessary to divide it into three periods in order to fix the time during
which they respectively administered De la Pea's property: During the first period, from November 18, 1887, to December 31, 1893, the
property of the absent Jose de la Pea y Gomiz was administered by his agent, Federico Hidalgo, under power of attorney; during the second
period, from January 1, 1894, to September, 1902, Antonio Hidalgo administered the said property, and during the third period, from October,
1902, to January 7, 1904, Francisco Hidalgo was its administrator.
Before Jose de la Pea y Gomiz embarked for Spain, on November 12, 1887, he executed before a notary a power of attorney in favor of
Federico Hidalgo, Antonio L. Rocha, Francisco Roxas and Isidro Llado, so that, as his agents, they might represent him and administer, in the
order in which they were appointed, various properties he owned and possessed in Manila. The first agent, Federico Hidalgo, took charge of
the administration of the said property on the 18th of November, 1887.
After Federico Hidalgo had occupied the position of agent and administrator of De la Pea'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 Islands, as one of those appointed in the said power of attorney had died and the others did not wish to take charge of the
administration of their principal's property. The defendant, Hidalgo, stated that his constituent, Pea y Gomiz, did not even answer his letters,
to approve or object to the former's accounts, and did not appoint or designate another person who might substitute the defendant in his
administration of his constituent's property. These statements were neither denied nor proven to be the record show any evidence tending to
disapprove them, while it does show, attached to the record and exhibited by the defendant himself, several letters written by Hidalgo and
addressed to Pea y Gomiz, which prove the said statements, and also a letter from the priest Pedro Gomiz, a relative of the deceased Jose de
la Pea y Gomiz, addressed to Federico Hidalgo, telling the latter that the writer had seen among the papers of the deceased several letters
from the agent, Federico Hidalgo, in which the latter requested the designation of a substitute, because he had to leave this country for Spain,
and also asked for the approval or disapproval of the accounts of his administration which had been transmitted to his constituent, Pea y
Gomiz.
For reasons of health and by order of his physician, Federico Hidalgo was obliged, on March 22, 1894, to embark for Spain, and, on preparing
for his departure, he rendered the accounts of his administration corresponding to the last quarters, up to December 31, 1893, not as yet
transmitted, and forwarded them to his constituent with a general statement of all the partial balances, which amounted to the sum total of
6,774.50 pesos, by letter of the date of March 22, 1894, addressed to his principal, Pea y Gomiz. In this letter the defendant informed the
latter of the writer's intended departure from this country and of his having provisionally turned over the administration of the said property to
his cousin, Antonio Hidalgo, upon whom the writer had conferred a general power of attorney, but asking, in case that this was not sufficient,
that Pea send to Antonio Hidalgo a new power of attorney.
This notifications is of the greatest importance in the decision of this case. The plaintiff avers that he found no such letter among his father's
papers after the latter's death, for which reason he did not have it in his possession, but on the introduction of a copy thereof by the defendant
at the trial, it was admitted without objection by the plaintiff (p. 81 of the record); wherefore, in spite of the denial of the plaintiff and of his
averment of his not having found that said original among his father's papers, justice demands that it be concluded that this letter of the 22d
of March, 1894, was sent to, and was received by Jose de la Pea y Gomiz, during his lifetime, for its transmittal, with inclosure of the last
partial accounts of Federico Hidalgo's administration and of the general resume of balances, being affirmed by the defendant, the fact of the
plaintiff's having found among his deceased father's paper's the said resume which he exhibited at the trial, shows conclusively that it was
received by the deceased, as well as the letter of transmittal of the 22nd of March, 1894, one of the several letters written by Hidalgo, which
the said priest, Father Gomiz, affirms that he saw among the papers of the deceased Pea, the dates of which ran from 1890 to 1894; and it is
also shown by the record that the defendant Hidalgo positively asserted that the said letter of March was the only one that he wrote to Pea
during the year 1894; From all of which it is deduced that the constituent, Pea y Gomiz, was informed of the departure of his agent from
these Islands for reasons of health and because of the physician's advice, of the latter's having turned over the administration of the property
to Antonio Hidalgo, and of his agent's the defendant's petition that he send a new power of attorney to the substitute.
The existence, amount the papers of the deceased, of the aforementioned statement of all accounts rendered, which comprise the whole
period of the administration of the property of the constituent by the defendant, Federico Hidalgo, from November 18, 1887, to December 31,
1893 a statement transmitted with the last partial accounts which were a continuation of those already previously received and the said
letter of March 22, 1894, fully prove that Jose de la Pea y Gomiz also received the said letter, informed himself of its contents, and had full
knowledge that Antonio Hidalgo commenced to administer his property from January of that year. They likewise prove that he did no see fit to
execute a new power of attorney in the letter's favor, nor to appoint or designate a new agent to take charge of the administration of his
property that had been abandoned by the defendant, Federico Hidalgo.
From the procedure followed by the agent, Federico Hidalgo, it is logically inferred that he had definitely renounced his agency was duly
terminated, according to the provisions of article 1732 of the Civil Code, because, although in the said letter of March 22, 1894, the word
"renounce" was not employed in connection with the agency or power of attorney 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 a third party, without stating when he may return to
take charge of the administration, renders accounts of its revenues up to a certain date, December 31, 1893, 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, and asks that a power of attorney in due form in due form be executed and transmitted to another person who
substituted him and took charge of the administration of the principal's property, it is then reasonable and just to conclude that the said agent
expressly and definitely renounced his agency, and it may not be alleged that the designation of Antonio Hidalgo to take charge of the said
administration was that of a mere proceed lasted for more than fifteen years, for such an allegation would be in conflict with the nature of the
agency.
This renouncement was confirmed by the subsequent procedure, as well as of the agent as of the principal, until the latter died, on August 2,
1902, since the principal Pea did not disapprove the designation of Antonio Hidalgo, nor did he appoint another, nor send a new power of
attorney to the same, as he was requested to by the previous administrator who abandoned his charge; and the trial record certainly contains
no proof that the defendant, since he left these Islands in March, 1894, until January, 1904, when he returned to this city, took any part
whatever, directly or even indirectly, in the said administration of the principal's property, while Antonio Hidalgo was the only person who was
in charge of the aforementioned administration of De la Pea y Gomiz's property and the one who was to represent the latter in his business
affairs, with his tacit consent. From all of which it is perfectly concluded (unless here be proof to the contrary, and none appears in the record),
that Antonio Hidalgo acted in the matter of the administration of the property of Jose de la Pea y Gomiz by virtue of an implied agency
derived from the latter, in accordance with the provisions of article 1710 of the Civil Code.
The proof of the tacit consent of the principal, Jose de la Pea y Gomiz, the owner of the property administered a consent embracing the
essential element of a legitimate agency, article 1710 before cited consists in that Pea, knowing that on account of the departure of
Federico Hidalgo from the Philippines for reasons of health, Antonio Hidalgo took charge of the administration of his property, for which
Federico Hidalgo, his agent, who was giving up his trust, requested him to send a new power of attorney in favor of the said Antonio Hidalgo,
nevertheless he, Jose de la Pea y Gomiz, saw fit not to execute nor transmit any power of attorney whatever to the new administrator of his
property and remained silent for nearly nine years; and, in that the said principal, being able to prohibit the party designated, Antonio Hidalgo,
from continuing in the exercise of his position as administrator, and being able to appoint another agent, did neither the one nor the other.
Wherefore, in permitting Antonio Hidalgo to administer his property in this city during such a number of years, it is inferred, from the
procedure and silence of the owner thereof, that he consented to have Antonio Hidalgo administer his property, and in fact created in his favor
an implied agency, as the true and legitimate administrator.
Antonio Hidalgo administered the aforementioned property of De la Pea y Gomiz, not in the character of business manager, but as agent by
virtue of an implied agency vested in him by its owner who was not unaware of the fact, who knew perfectly well that the said Antonio Hidalgo
took charge of the administration of that property on account of the obligatory absence of his previous agent for whom it was an impossibility
to continue in the discharge of his duties.
It is improper to compare the case where the owner of the property is ignorant of the officious management of the third party, with the case
where he had perfect knowledge of the management and administration of the same, which administration and management, far from being
opposed by him was indeed consented to by him for nearly nine years, as was done by Pea y Gomiz. The administration and management, by
virtue of an implied agency, is essentially distinguished from that management of another's business, in this respect, that while the former
originated from a contract, the latter is derived only from a qausi-contract.
The implied agency is founded on the lack of contradiction or opposition, which constitutes simultaneous agreement on the part of the
presumed principal to the execution of the contract, while in the management of another's business there is no simultaneous consent, either
express or implied, but a fiction or presumption of consent because of the benefit received.
The distinction between an agency and a business management has been established by the jurisprudence of the supreme court (of Spain) in
its noteworthy decision of the 7th of July, 1881, setting up the following doctrine:
That laws 28 and 32, title 12 Partida 3, refer to the expenses incurred in things not one's own and without power of attorney from
those to whom they belong, and therefore the said laws are not applicable to this suit where the petition of the plaintiff is founded on
the verbal request made to him by the defendant or the latter's employees to do some hauling, and where, consequently, questions
that arise from a contract that produces reciprocal rights and duties can not be governed by the said laws.
It being absolutely necessary for Federico Hidalgo to leave this city and abandon the administration of the property of his principal, Pea y
Gomiz, for reasons of health, he made delivery of the property and of his administration to Antonio Hidalgo and gave notice of what he had
done to his constituent, Pea, in order that the latter might send a new power of attorney to Antonio Hidalgo, the person charged with the
administration of the property. Pea y Gomiz did not send the power of attorney requested, did not oppose or prohibit Antonio Hidalgo's
containing to administer his property, and consented to his doing so for nearly nine years. Consequently the second administrator must be
considered as a legitimate agent of the said principal, as a result of the tacit agreement on the latter's part, and the previous agent, who
necessarily abandoned and ceased to hold his position, as completely free and clear from the consequences and results of the second
administration, continued by a third party and accepted by his principal; for it is a fact, undenied nor even doubted, that the said first
administrator had to abandon this country and the administration of Pea's property for reasons of health, which made it possible for him to
continue in the discharge of his duties without serious detriment to himself, his conduct being in accordance with the provisions of article 1736
of the Civil Code.
In the power of attorney executed by Pea y Gomiz in this city on November 12, 1887, in favor of, among others, Federico Hidalgo, no
authority was conferred upon the latter by his principal to substitute the power or agency in favor of another person; wherefore the agent
could not, by virtue of the said power of attorney, appoint any person to substitute or relieve him in the administration of the principal's
property, for the lack of a clause of substitution in the said instrument authorizing him so to do.
The designation of Antonio Hidalgo was not made as a result of substitution of the power of attorney executed by Pea in favor of the
defendant, but in order that the principal's property should not be abandoned, inasmuch as, for the purposes of the discharge of the duties of
administrator of the same, the agent, who was about to absent himself from this city, requested his principal to send to the party, provisionally
designated by the former, a new power of attorney, for the reason that the general power of attorney which Federico Hidalgo had left,
executed in favor of his cousin Antonio Hidalgo, was so executed in his own name and for his own affairs, and not in the name of Pea y
Gomiz, as the latter had not authorized him to take such action.
If the owner of the property provisionally administered at the time by Antonio Hidalgo, saw fit to keep silent, even after having received the
aforesaid letter of March 22, 1894, and during the lapse of nearly ten years, without counter commanding or disapproving the designation of
the person who took charge of the administration of his property, knowing perfectly well that his previous agent was obliged, by sickness and
medical advice to leave this city where such property was situated, he is not entitled afterwards to hold amenable the agent who had to
abandon this country for good and valid reasons, inasmuch as the latter immediately reported to his principal the action taken by himself and
informed him of the person who had taken charge of the administration of his property, which otherwise would have been left abandoned.
From the time of that notification the agent who, for legitimate cause, ceased to exercise his trust, was free and clear from the results and
consequences of the management of the person who substituted him with the consent, even only a tacit one, of the principal, inasmuch as the
said owner of the property could have objected to could have prohibited the continuance in the administration thereof, of the party designated
by his agent, and could have opportunely appointed another agent or mandatory of his own confidence to look after his property and if he did
not do so, he is obliged to abide by the consequences of his negligence and abandonment and has no right to claim damages against his
previous agent, who complied with his duty and did all that he could and ought to have done, in accordance with the law.
The defendant Federico Hidalgo, having ceased in his administration of the property belonging to Pea y Gomiz, on account of physical
impossibility, which cessation he duly reported to his principal and also informed him of the person who relieved him as such administrator,
and for whom he had requested a new power of attorney, is only liable for the results and consequences of his administration during the
period when the said property was in his charge, and therefore his liability can not extend beyond the period of his management, as his
agency terminated by the tacit or implied approval of his principal, judging from the latter's silence in neither objecting to nor in anywise
prohibiting Antonio Hidalgo's continuing to administer his property, notwithstanding the lapse of the many years since he learned by letter of
the action taken by his previous agent, Federico Hidalgo.
Moreover, this latter, in announcing the termination of his agency, transmitted the last partial accounts that he had not rendered, up to
December 31, 1893, together with a general statement of all the resulting balances covering the period of his administration, and Jose de la
Pea y Gomiz remained silent and offered no objection whatever to the said accounts and did not manifest his disapproval of the same nor of
the general statement, which he must have received in April or may, 1894, to the time he died, in August, 1902; and when his son, the
plaintiff, came to this city in company with the defendant, Federico Hidalgo, they traveled together from Spain and arrived in Manila during
one of the early days of January, 1904, the former, for the purpose of taking charge of the estate left by his father, and after the plaintiff had
examined the accounts kept by Federico Hidalgo, his deceased father's first agent, he approved them and therefore issued in favor of the
defendant the document, Exhibit 5, found on page 936 of the second record of trial, dated January 15, 1904, in which Jose de la Pea y de
Ramon acknowledged having received from his deceased father's old agent the accounts, balances, and vouchers to his entire satisfaction,
and gave an acquittance in full settlement of the administration that had been commended to the defendant Hidalgo.
This document, written in the handwriting of the plaintiff, Pea y de Ramon, appears to be executed in a form considered to be sufficient by its
author, and, notwithstanding the allegations of the said plaintiff, the record contains no proof of any kind of Federico Hidalgo's having obtained
it by coercion, intimidation, deceit, or fraud; neither is its shown to have been duly impugned as false, criminally or civilly, for the statements
therein made by the plaintiff are too explicit and definite to allow, without proof of some vice or defect leading to nullification, of its being
considered as void and without value or legal effect.
With respect to the responsibility contracted by the defendant, as regards the payment of the balance shown by the accounts rendered by
him, it is not enough that the agent should have satisfactorily rendered the accounts pertaining to his trust, but it is also indispensable that it
be proved that he had paid to his principal, or to the owner of the property administered, the balance resulting from his accounts. This
balance, which was allowed in the judgment appealed from, notwithstanding the allegations of the plaintiff, which were not deemed as
established, amounts to P6,774.50, according to the proofs adduced at the trial. It was the imperative duty of the administrator, Federico
Hidalgo, to transmit this sum to his principal, Jose de la Pea y Gomiz, as the final balance of the accounts of his administration, struck on
December 31, 1893, and by his failure so to do and delivery of the said sum to his successor, Antonio Hidalgo, he acted improperly, and must
pay the same to the plaintiff.
Antonio Hidalgo took charge of the administration of Pea y Gomiz's property from January, 1894, to September, 1902, that is, during the
second period of administration of the several properties that belonged to the deceased Pea.
Although the plaintiff, in his original complaint, had included the said Antonio Hidalgo as one of the responsible defendants, yet he afterwards
excluded him, as well from the second as from the third amended complaint, and consequently the liability that might attach to Antonio
Hidalgo was not discussed, nor was it considered in the judgment of the lower court; neither can it be in the decision, for the reason that the
said Antonio Hidalgo is not a party to this suit. However, the said liability of Antonio Hidalgo is imputed to Federico Hidalgo, and so it is that, in
the complain t, the claim is made solely against Federico Hidalgo, in order that the latter might be adjudged to pay the amounts which
constitute the balance owing from him who might be responsible, Antonio Hidalgo, during the period of this latter's administration.
Federico Hidalgo, in our opinion, could not and can not be responsible for the administration of the property that belonged to the deceased
Pea y Gomiz, which was administered by Antonio Hidalgo during eight years and some months, that is, during the second period, because of
the sole fact of his having turned over to the latter the administration of the said property on his departure from this city of Spain. Neither law
nor reason obliged Federico Hidalgo to remain in this country at the cost of his health and perhaps of his life, even though he were the
administrator of certain property belonged to Pea y Gomiz, since the care of the property and interests of another does not require sacrifice
on the part of the agent of his own life and interests. Federico Hidalgo was obliged to deliver the said property belonging to Pea y Gomiz to
Antonio Hidalgo for good and valid reasons, and reasons, and in proceeding in the manner aforesaid he complied with the duty required of him
by law and justice and acted as a diligent agent. If the principal, Jose de la Pea Gomiz, the owner of the property mentioned, although
informed opportunely of what had occurred saw fit to keep silent, not to object to the arrangements made, not to send the power of attorney
requested by Federico Hidalgo in favor of Antonio Hidalgo, and took no action nor made any inquiry whatever to ascertain how his property
was being administered by the second agent, although to the time of his death more than eight years had elapsed, the previous agent, who
ceased in the discharge of his duties, can in nowise be held liable for the consequences of such abandonment, nor for the results of the
administration of property by Antonio Hidalgo, for the reason that, since his departure from this country, he has not had the least intervention
nor even indirect participation in the aforementioned administration of the said Antonio Hidalgo who, under the law, was the agent or
administrator by virtue of an implied agency, which is equivalent in its results to an express agency, executed by the owner of the property.
Consequently, Federico Hidalgo is not required to render accounts of the administration corresponding to the second period mentioned, nor to
pay the balance that such accounts may show to be owing.
At the first trial of this cause, Federico Hidalgo, testified under oath that his principal, Jose Pea y Gomiz, did not agree to the appointment of
Antonio Hidalgo, chosen by the witness, not to such appointee's taking charge of the administration of his property. Aside from the fact that
the trial record does not show honor on what date Pea expressed such disagreement it is certain that, in view of the theory of defense
maintained by the defendant Hidalgo could have said, by means of a no, that his principal did not agree to the appointment of the said
Antonio Hidalgo, and the intercalation of the word no in the statement quoted is more inexplicable in that the attorney for the adverse party
moved that the said answer be stricken from the record, as he objected to its appearing therein.
Were it true that the principal Jose de la Pea by Gomiz, had neither agreed to the designation of Antonio Hidalgo, nor to the latter's
administering his property, he would immediately have appointed another agent and administrator, since he knew that Federico Hidalgo had
left the place where his property was situated and that it would be abandoned, had he not wished that Antonio Hidalgo should continue to
administer it. If the latter continued in the administration of the property for so long a time, nearly nine years, it was because the said Pea
agreed and gave his consent to the acts performed by his outgoing agent, and for this reason the answer given by Federico Hidalgo
mistakenly, or not, that his principal, Pea, did not agree to the appointment of Antonio Hidalgo, is immaterial and does not affect the terms of
this decision.
If the defendant is not responsible for the results of the administration of said property administered by Antonio Hidalgo during the second
period before referred to, neither is he responsible for that performed during the third period by Francisco Hidalgo, inasmuch as the latter was
not even chosen by the defendant who, on October 1, 1902, when Francisco Hidalgo took charge of Peas' property that had been turned over
to him by Antonio Hidalgo, was in Spain and had no knowledge of nor intervention in such delivery; wherefore the defendant can in no manner
be obliged to pay to the plaintiff any sum that may be found owing by Francisco Hidalgo.
The trial judge taking into consideration that, by the evidence adduced at the hearing, it was proved that Francisco Hidalgo rendered
accounts to the plaintiff of the administration of the property in question during the said third period, that is, for one year, three months, and
someday, and that he delivered to the plaintiff the balance of 1,280.03 pesos, for which the latter issued to the said third administrator the
document Exhibit 2, written in his own handwriting under date of January 7, 1904, and the signature which, affixed by himself, he admitted in
his testimony was authentic, on its being exhibited to him found that the plaintiff, Pea y de Ramon, was not entitled to recover any sum
whatever for the rents pertaining to the administration of his property by the said Francisco Hidalgo.
All the reasons hereinbefore given relate to the first cause of action, whereby claim is made against Federico Hidalgo for the payment of the
sum of P72,548.24 and interest at the rate of 6 per cent per centum, and they have decided some of the errors assigned by the appellants in
their briefs to the judgment appealed from.
Two amounts are have claimed which have one and the same origin, yet are based on two causes of action, the second and the third alleged
by the plaintiff; and although the latter, afterwards convinced by the truth and of the impropriety of his claim, had to waive the said third
cause of action during the second hearing of this cause (pp. 57 and 42 of the record of the evidence), the trial judge, on the grounds that the
said second and third causes of action refer to the same certificates of deposit of the treasury of the Spanish Government, found, in the
judgment appealed from, that the plaintiff was not entitled to recover anything for the aforesaid second and third causes of action a finding
that is proper and just, although qualified as erroneous by the plaintiff in his brief.
It appears, from the evidence taken in this cause, that Jose de la Pea y Gomiz, according to the certificates issued by the chief of the division
his lifetime, after having in 1882 withdrawn from the General Deposit Bank of the Spanish Government a deposit of 17,000 pesos and its
interest deposit any sum therein until December 9, 1886, when he deposited two amounts of 3,000 pesos each, that is, 6,000 pesos in all, the
two deposit receipts for the same being afterwards endorsed in favor of Gonzalo Tuason. The latter, on December 9, 1887, withdrew the
deposit and took out the said two amounts, together with the interest due thereon, and on the same date redeposited them in the sum of
6,360 pesos at 5 per cent per annum in the name of Jose de la Pea y Gomiz. On the 20th of December of the following year, 1888, the
defendant Hidalgo received from his principal, Pea y Gomiz, through Father Ramon Caviedas, the two said letters of credit, in order that he
might withdraw from the General Deposit Bank the two amounts deposited, together with the interest due thereon, amounting to 741 pesos,
and with this interest purchase a draft on London in favor of its owner and then redeposit the original capital of 6,000 pesos. This, the
defendant Hidalgo did and then delivered the draft and the deposit receipt to Father Caviedas, of all of which transactions he informed his
principal by letter of the same date, transcribed on page 947 of the second trial record.
In the following year, 1889, Father Ramon Caviedas again delivered to the defendant Hidalgo the aforementioned deposit receipt with the
request to withdraw from the General Deposit bank the sum deposited and to purchase a draft of 860 pesos on London in favor of their owner,
Jose de la Pea y Gomiz, and, after deducting the cost of the said draft from the capital and interest withdrawn from deposit, amounting to
6,360 pesos, to redeposit the remainder, 5,500 pesos, in the bank mentioned, in accordance with the instructions from Pea y Gomiz: All of
which was done by the defendant Hidalgo, who delivered to Father Caviedas the receipt for the new deposit of 5,500 pesos as accredited by
the reply-letter, transcribed on page 169 of the record, and by the letter addressed by Hidalgo to Pea, of the date of December 20 of that
year and shown as an original exhibit by the plaintiff himself on page 29 of the record of the evidence.
Lastly, in December, 1890, Father Caviedas, aforementioned, delivered to the defendant Hidalgo the said deposit receipt for 5,500 pesos in
order that he might withdraw this amount from deposit and deliver it with the interest thereon to the former for the purpose of remitting it by
draft to Jose de la Pea; this Hidalgo did, according to a reply-letter from Father Caviedas, the original of which appears on page 979 of the file
of exhibits and is copied on page 171 of the trial record, and is apparently confirmed by the latter in his sworn testimony.
So that the two amounts of 3,000 pesos each, expressed in two deposit receipts received from De la Pea y Gomiz by Father Ramon Caviedas
and afterwards delivered to Francisco Hidalgo for the successive operations of remittance and redeposit in the bank before mentioned, are the
same and only ones that were on deposit in the said bank in the name of their owner, Pea y Gomiz. The defendant Hidalgo made two
remittances by drafts of London, one in 1888 for 741.60 pesos, through a draft purchased from the Chartered Bank, and another in 1889 for
860 pesos, through a draft purchased from the house of Tuason & Co., and both in favor of Pea y Gomiz, who received through Father Ramon
Caviedas the remainder, 5,500 pesos, of the sums deposited. For these reasons, the trial judge was of the opinion that the certificates of
deposit sent by Pea y Gomiz to Father Ramon Caviedas and those received from the latter by the defendant Hidalgo were identicals, as were
likewise the total amounts expressed by the said receipts or certificates of deposit, from the sum of which were deducted the amounts
remitted to Pea y Gomiz and the remainder deposited after each anual operation until, finally, the sum of 5,500 pesos was remitted to its
owner, Pea y Gomiz, according to his instructions, through the said Father Caviedas. The lower court, in concluding its judgment, found that
the plaintiff was entitled to recover any sum whatever for the said second and third causes of action, notwithstanding that, as hereinbefore
stated, the said plaintiff withdrew the third cause of action. This finding of the court, with respect to the collection of the amounts of the
aforementioned deposit receipts, is perfectly legal and in accordance with justice, inasmuch as it is a sustained by abundant and conclusive
documentary evidence, which proves in an incontrovertible manner the unrighteousness of the claim made by the plaintiff in twice seeking
payment, by means of the said second and third causes of action, of the said sum which, after various operations of deposit and remittance
during three years, was finally returned with its interest to the possession of its owner, Pea y Gomiz.
From the trial had in this case, it also appears conclusively proved that Jose de la Pea y Gomiz owed, during his lifetime, to Federico Hidalgo,
7,600 pesos, 4,000 pesos of which were to bear interest at the rate of 6 per cent per annum, and the remainder without any interest, and that,
notwithstanding the lapse of the period of three years, from November, 1887, within which he bound himself to repay the amount borrowed,
and in spite of his creditor's demand of payment, made by registered letter, the original copy of which is on page 38 of the file of exhibits and
a transcription thereof on page 930 of the first and second record of the evidence, the debt was not paid up to the time of the debtor's death.
For such reasons, the trial court, in the judgment appealed from, found that there was a preponderance of evidence to prove that this loan had
been made and that the plaintiff actually owed the defendant the sum loaned, as well as the interest thereon, after deducting therefrom the
2,000 pesos which the defendant received from the plaintiff on account of the credit, and that the former was entitled to recover.
It appears from the pleadings and evidence at the trial that in January, 1904, on the arrival in this city of Federico de la Pea de Ramon, and on
the occasion of the latter's proceeding to examine the accounts previously rendered, up to December 31, 1893, by the defendant Hidalgo to
the plaintiff's father, then deceased, Hidalgo made demand upon the plaintiff, Pea y de Ramon, for the payment of the said debt of his father,
although the creditor Hidalgo acceded to the requests of the plaintiff to grant the latter an extension of time until he should be able to sell one
of the properties of the estate. It was at that time, according to the defendant, that the plaintiff Pea took up the instrument of indebtedness,
executed by his deceased father during his lifetime, and delivered to the defendant in exchange therefor the document of the date of January
15, 1904, found on page 924 of the second record of evidence, whereby the plaintiff, Jose de la Pea, bound himself to pay his father's debt of
11,000 pesos, owing to the defendant Hidalgo, out of the proceeds of the sale of some of the properties specified in the said document, which
was written and signed by the plaintiff in his own handwriting.
The plaintiff not only executed the said document acknowledging his father's debt and binding himself to settle it, but also, several days after
the sale of a lot belonging to the estate, paid to the creditor on account the sum of 2,000 pesos, according to the receipt issued by the latter
and exhibited on page 108 of the first record of evidence.
The said document, expressive of the obligation contracted by the plaintiff Pea y de Ramon that he would pay to the defendant the debt of
plaintiff's deceased father, amounting to 11,000 pesos, out of the proceeds from some of the properties of the estate, has not been denied nor
impugned as false; and not withstanding the averment made by the plaintiff that when he signed he lacked information and knowledge of the
true condition of the affairs concerning Hidalgo's connection with the property that be absolutely no proof whatever is shown in the trial record
of the creditor's having obtained the said document through deceit or fraud circumstances in a certain manner incompatible with the
explicit statements contained therein. For these reasons, the trial court, weighing the whole of the evidence furnished by the record, found
that the loan of the said 7,600 pesos was truly and positively made, and that the plaintiff must pay the same to the defendant, with the
interest thereon, and that he was not entitled to recover the 2,000 pesos, as an undue payment made by him to the defendant creditor. For
the foregoing reason the others errors assigned by the plaintiff to the judgment appealed from are dismissed.
With respect to the obligation to pay the interest due on the amounts concerned in this decision, it must be borne in mind that, as provided by
article 1755 of the Civil Code, interest shall only be owed when it has been expressly stipulated, and that should the debtor, who is obliged to
pay a certain sum of money, be in default and fail to fulfill the agreement made with his creditor, he must pay, as indemnity for losses and
damages, the interest agreed upon, and should there be no express stipulation, the legal interest (art. 1108 of the Civil Code); but, in order
that the debtor may be considered to be in default and obliged to pay the indemnity, it is required, as a general rule, that his creditor shall
demand of such debtor the fulfillment of his obligation, judicially or extrajudicially, except in such cases as are limitedly specified in article
1100 of the Civil Code.
It was not expressly stipulated that either the balance of the last account rendered by the defendant Federico Hidalgo in 1893, or the sum
which the plaintiff bound himself to pay to the defendant, in the instrument of the 15th of January, 1904, should bear interest; nor is there
proof that a judicial or extrajudicial demand was made, on the part of the respective creditors concerned, until the date of complaint, on the
part of the plaintiff, and that of the counterclaim, on the part of the defendant. Therefore no legal interest is owing for the time prior to the
respectives dates of the complaint and counterclaim.
By virtue, then, of the reasons herein before set forth, it is proper, in our opinion, to adjudge, as we do hereby adjudge, that the defendant,
Federico Hidalgo, shall pay to the plaintiff, Jose de la Pea y de Ramon, as administrator of the estate of the deceased Jose de la Pea y Gomiz,
the sum of P6,774.50, and the legal interest thereon at the rate of 6 per cent per annum from 23rd of May, 1906, the date of the filing of the
original complaint in this case; that we should and hereby do declare that the said defendant Federico Hidalgo, is not bound to gibe nor render
accounts of the administration of the property of the said deceased Jose de la Pea y Gomiz administered, respectively, by Antonio Hidalgo,
from January, 1894, to September 30, 1902, and by Francisco Hidalgo, from October 1, 1902, to January 7, 1904, and therefore the defendant,
Federico Hidalgo, not being responsible for the results of the administration of the said property administered by the said Antonio and
Francisco Hidalgo, we do absolve the said defendant from the complaint filed by the plaintiff, in so far as it concerns the accounts pertaining to
the aforesaid two periods of administration and relates to the payment of the balances resulting from such accounts; and that we should and
hereby do absolve the defendant Hidalgo from the complaint with respect to the demand for the payment of the sums of P15,774.19 and
P2,000, with their respective interests, on account of the second and the fourth cause of action, respectively, and because the plaintiff
renounced and withdrew his complaint, with respect to the third cause of action; and that we should and do likewise adjudge, that the plaintiff,
Jose de la Pea y de Ramon, shall pay to Federico Hidalgo, by reason of the counterclaim, the sum of P9,000 with legal interest thereon at the
rate of 6 per cent per annum from 21st of may, 1907, the date of the counterclaim.
The judgment appealed from, together with that part thereof relative to the statement it contains concerning the equivalence between the
Philippine peso and the Mexican peso, is affirmed in so far as it is in agreement with the findings of this decision, and the said judgment is
reversed in so far as it is not in accordance herewith. No special finding is made as to costs assessed in either instance, and to the plaintiff is
reserved any right that he may be entitled to enforce against Antonio Hidalgo.

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VOL.

197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

G.R. No. 76931. May 29, 1991.*

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

of the Court of Appeals in CA-G.R. No.

VOL. 197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

Penned by Judge Herminio C. Mariano.

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

VOL. 197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

other rate(s) as may be prescribed by the Air Traffic Conference of America.

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

Rollo, pp. 110-118.

VOL. 197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

1. counterclaim was filed;

Rollo, pp. 173-174.

VOL. 197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

NAESS Shipping Philippines, Inc. vs. NLRC, G.R. No. 73441, 4

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

VOL. 197, MAY 29, 1991

Orient-Air Services and Hotel Representatives vs. Court of Appeals

SUPREME COURT REPORTS ANNOTATED

Orient-Air Services and Hotel Representatives vs. Court of Appeals

Article 1868, Civil Code of the Philippines.

VOL. 197, MAY 29, 1991

People vs. Castillo

SUPREME COURT REPORTS ANNOTATED

VOL. 283, DECEMBER 15, 1997

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED

Bordador vs. Luz

VOL. 283, DECEMBER 15, 1997

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED

Bordador vs. Luz

VOL. 283, DECEMBER 15, 1997

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED

Bordador vs. Luz

VOL. 283, DECEMBER 15, 1997

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED

Bordador vs. Luz

VOL. 283, DECEMBER 15, 1997

Bordador vs. Luz

SUPREME COURT REPORTS ANNOTATED