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GREGORIO DESTREZA VS. ATTY. MA.

GRACIA
RIOZA-PLAZO AND MA. FE ALARAS

Facts:
On November 16, 1989 Pedro L. Rioza (Rioza)
died, leaving several heirs, which included respondents
Ma. Gracia R. Plazo (Plazo) and Ma. Fe R. Alaras
(Alaras).

In the course of settling Riozas estate, respondent


Plazo wrote a letter dated April 30, 1991 to the Registry of
Deeds of Nasugbu, Batangas requesting for certified true
copies of all titles in Riozas name, including a sugarland
located at Barangay Utod, Nasugbu, Batangas covered
by (TCT) 40353. Plazo also asked that she be shown the
originals of the titles but they were not available. To
inquire on the matter, she talked to the Register of Deeds,
Atty. Alexander Bonuan. According to Bonuan, he had the
titles in his personal files and there were no transactions
involving them.

On June 5, 1991 respondent Plazo wrote a letter to


Bonuan, reiterating her request for copies of the titles.
Since the latter was abroad, it was the acting Register of
Deeds who granted her request and furnished her with
certified true copies of the titles, except that of TCT 40353
which was missing.

In an effort to find TCT 40353, respondent Plazo found


another title, TCT 55396, at the Assessors Office
covering the same Utod sugarland and canceling the
missing TCT 40353. The new title, entered on July 18,
1989, was in the name of petitioner Gregorio M. Destreza
and his wife Bernarda Butiong. Respondent Plazo also
went to the BIR of Batangas City to inquire on any record
involving the sale of the Utod sugarland. But on August
15, 1991 the Revenue District Officer certified that the
BIRs office did not have any record of sale of the
sugarland covered by TCT 40353.

Finally, respondent Alaras testified that on August 1,


1989, her late father, Rioza, gave her the title of a land
that he wanted to mortgage to her uncle. Rioza told her
that the land was about five hectares and was located at
Barangay Utod, Nasugbu, Batangas. She did not,
however, look at the number of the title. A week later,
unable to secure a mortgage from her uncle, she returned
the title to her father and never saw it again.

Their discovery prodded respondents Plazo and Alaras to


file a complaint against the Destreza spouses and the
Register of Deeds before the RTC of Nasugbu. They
claim serious irregularities in the issuance of TCT 55396
to petitioner Destreza. They asked, among others, that
TCT 55396 be nullified, that TCT 40353 be restored, and
that the Destrezas be ordered to reconvey the land to the
Rioza estate.

In his answer, Register of Deeds Bonuan denied that TCT


40353 was missing since he had the title safe in his office
and no transaction affecting it had been recorded. With
regard to TCT 55396, he explained that the new title had
not yet been released to the Destreza spouses because
they were yet to submit certain required documents.
Bonuan claimed that during his lifetime, the late Rioza,
asked him for a photocopy of TCT 55396. As a courtesy
to the ex-mayor, Bonuan gave him a copy.

In compliance with the RTCs order, Bonuan gave the


court certified copies of TCTs 40353 and 55396 as well as
the duplicate original of the deed of absolute sale dated
June 15, 1989 between Rioza and the Destreza
spouses.

On the part of the Destreza spouses, petitioner Destreza


testified that on June 16, 1989 he bought the Utod
sugarland from Rioza through Toribio Ogerio, a
common kumpadre. He paid him P1M. Destreza did not
get a copy of the deed of sale nor a receipt for the
payment but Rioza accompanied him to the Register of
Deeds. After about a month, but not later than July 15,
1989, Destreza returned to the Register of Deeds and got
a copy of TCT 55396 in his name.

After the sale, petitioner Destreza immediately took


possession of the land, plowing and planting on it even
until the case was filed. No communication or demand
letter from respondents Plazo and Alaras disturbed his
occupation until he received the summons for suit.

RTC: TCT 55396 was yet inexistent on July 15, 1989


when petitioner Destreza claims he already received a
copy from the Register of Deeds. It declared that the
deed of sale between Rioza and Destreza is not a public
document for the failure of the notary public to submit his
report to the RTC notarial section. RTC nullified the Deed
of Sale and TCT 55396 and ordered the Register of
Deeds of Nasugbu, Batangas to restore TCT 40353 in the
name of the late Rioza.

CA: affirmed with modification the judgment of the RTC.


Although the CA found that the deed of sale may be
presumed regularly executed despite the notary's failure
to report the transaction to the RTC Notarial Section,
Destrezas themselves destroyed such presumption when
they failed to prove its authenticity and genuineness.
Further, the Destrezas claim that they paid
Rioza P100,000.00 when the price stated in the deed of
sale was only P60,000.00 placed the veracity of the deed
in doubt. Thus, the CA affirmed the RTC decision with the
modification that Riozas estate did not have to pay any
amount to the Destrezas. The CA denied the latters
motion for reconsideration.

Issue: Whether or not sufficient evidence warranted


the nullification of the deed of sale that the late
Rioza executed in favor of the Destrezas.

Ruling
The CA held that the Destrezas could not just rely on the
deed of sale in their favor or on the TCT issued in their
names. They needed to present further evidence to prove
the authenticity and genuineness of that deed. Having
failed to do so, the CA theorized that it was justified in
annulling that deed of sale and the corresponding TCT.

The ruling of the CA was correct. Indeed, the notarized


deed of sale should be admitted as evidence despite the

failure of the Notary Public in submitting his notarial report


to the notarial section of the RTC Manila. It is the
swearing of a person before the Notary Public and the
latters act of signing and affixing his seal on the deed
that is material and not the submission of the notarial
report.

Parties who appear before a notary public to have their


documents notarized should not be expected to follow up
on the submission of the notarial reports. They should not
be made to suffer the consequences of the negligence of
the Notary Public in following the procedures prescribed
by the Notarial Law. Thus, the notarized deed of sale
executed by Rioza is admissible as evidence of the sale
of the Utod sugarland to the Destrezas.

The CA, however, made a mistake with regard to the


assignment of the burden of proof. No rule requires a
party, who relies on a notarized deed of sale for
establishing his ownership, to present further evidence of
such deeds genuineness lest the presumption of its due
execution be for naught. Under the rules of evidence,
"Every instrument duly acknowledged or proved and
certified as provided by law, may be presented in
evidence without further proof, the certificate of
acknowledgment being prima facie evidence of the
execution of the instrument or document involved."

Here, Atty. Crispulo Ducusin notarized the deed of sale


that Rioza acknowledged as his free act and deed on
June 17, 1989. By signing and affixing his notarial seal on
the deed, Atty. Ducusin converted it from a private
document to a public document. As such, the deed of
sale is entitled to full faith and credit upon its face. And
since Rioza, the executor of the deed, is already dead,
the notarized deed of absolute sale is the best evidence
of his consent to the sale of the Utod sugarland to the
Destreza spouses. Parenthetically, it is not disputed that
the Destrezas immediately and openly occupied the land
right after the sale and continuously cultivated it from then
on.
The burden of proof is the duty of a party to present such
amount of evidence on the facts in issue as the law
deems necessary for the establishment of his
claim. Here, since respondents Plazo and Alaras claim,
despite the Destrezas evidence of title over the property
and open possession of it, that grave and serious doubts
plague TCT 55396, the burden is on them to prove such

claim. Only when they are successful in doing so will the


court be justified in nullifying the notarized deed of sale
that their father Rioza executed in favor of the
Destrezas.

But more than plausible evidence was required of Plazo


and Alaras. An allegation of fraud with regard to the
execution of a notarized deed of absolute sale is a grave
allegation. It cannot be declared on mere speculations. In
fact, to overcome the presumption of regularity and due
execution of a notarized deed, there must be clear and
convincing evidence showing otherwise. The burden of
proof to overcome the presumption lies on the one
contesting the same. Without such evidence, the
presumption remains undiminished.
The Courts present task, therefore, is to determine if
respondents Plazo and Alaras evidence that their father
did not sell the subject land to the Destrezas is clear and
convincing.
1. Plazo and Alaras point out that Destrezas acquisition
of a copy of TCT 55396 is questionable. Destreza said
that he got a copy of the TCT on July 15, 1989 but such
TCT was entered into the registry of title only on July 18,
1989. Moreover, Bonuan, the Register of Deeds, testified
that he had not yet issued that TCT to the Destrezas
because of some lacking documents. He did, however,
say that he released a copy of it to ex-mayor Rioza upon
the latters request.
These circumstances may appear perplexing but the
problem is that they did not touch the validity of the deed
of sale. And it does not help that the trial did not really
address them. Plazo and Alaras did not confront
petitioner
Gregorio
Destreza
regarding
these
circumstances when he took the witness stand. It would
be pure speculation to declare that the Destrezas
defrauded Rioza based solely on them.
Here, the supposed irregularity lies in the release of a
copy of the title to the Destrezas even before it had been
entered into the books of the Register of Deeds.
Furthermore, the Destrezas were able to acquire a copy
of it when they still needed to submit some registration
requirements. But the premature release of a copy of the
registered title cannot affect the validity of the contract of
sale between Rioza and the Destrezas. Registration
only serves as the operative act to convey or affect the
land insofar as third persons are concerned. It does not
add anything to the efficacy of the contract of sale
between the buyer and the seller. In fact, if a deed is not

registered, the deed will continue to operate as a contract


between the parties.
Furthermore, the declaration of Bonuan that he furnished
ex-mayor Rioza with a copy of TCT 55396 strengthens
the case of the Destrezas. It shows that Rioza knew of
and gave consent to the sale of his Utod sugarland to
them considering that he even helped facilitate the
registration of the deed of sale. This negates any possible
suggestion that the Destrezas merely fabricated the sale
of the Utod sugarland on the evidence that the Notary
Public failed to submit his notarial report. Whatever
irregularity in registration may have been incurred, it did
not affect the validity of the sale.
2. Alaras claims that on August 1, 1989, months after the
sale of the Utod sugarland to the Destrezas, her father
Rioza asked her to mortgage some land. He gave Alaras
the title to it, impressing on her that such title covered a
land in Barangay Utod. But this does not prove that the
sale of the Utod sugarland to the Destrezas is void.
Alaras admitted that she did not see the number of the
title handed to her. Nor did she identify in court any
specific title as the one she got. To be of value to her
cause, Alaras needed to testify that TCT 40353 remained
uncancelled in her fathers hands even after the
supposed entry of TCT 55396 in the Registry of
Deeds. But she did not so testify.

3. Plazo and Alaras also question the testimony of


Gregorio Destreza that he paid P100,000.00 to Rioza
when the figure appearing on the deed of sale was
only P60,000.00. Again, this is not sufficient ground to
nullify such deed. The fact remains that Rioza sold his
land to the Destrezas under that document and they paid
for it. The explanation for the difference in the prices can
be explained only by Rioza and Gregorio Destreza.
Unfortunately, Rioza had died. On the other hand, Plazo
and Alaras chose not to confront Destreza regarding that
difference when the latter took the witness stand.
In sum, the Court finds the notarized deed of sale that the
late Pedro Rioza executed in favor of the Destrezas
valid and binding upon them and their successors-ininterest. It served as authority to the Register of Deeds to
register the conveyance of the property and issue a new
title in favor of the Destrezas. That the Destrezas
occupied and cultivated the land openly for seven years
before and after Riozas death negates any scheme to
steal the land.

KINGS PROPERTIES CORP., VS. CANUTO A. GALIDO


G.R. No. 170023, November 27, 2009
FACTS :
This case involves an action for cancellation of
certificates
of
title,
registration
of
deed
of sale and issuance of certificates of title filed by
Canuto A. Galido (respondent) before RTC of Antipolo
City.
On 18 April 1966, the heirs of Domingo Eniceo, namely
Rufina Eniceo and Maria Eniceo, were awarded with
Homestead Patent consisting of four parcels of land
located in San Isidro, Antipolo, Rizal.
The Antipolo property with a total area of 14.8882
hectares was registered under Original Certificate of Title
(OCT) No. 535.
The issuance of the homestead patent was subject to the
following conditions:
To have and to hold the said tract of land, with the
appurtenances thereunto of right belonging unto the said
Heirs of Domingo Eniceo and to his heir or heirs and
assigns forever, subject to the provisions of sections 118,
121, 122 and 124 of Commonwealth Act No. 141, as
amended, which provide that except in favor of the
Government or any of its branches, units or institutions,
the land hereby acquired shall be inalienable and
shall not be subject to incumbrance for a period of
five (5) years next following the date of this patent,
and shall not be liable for the satisfaction of any debt
contracted prior to the expiration of that period; that
it shall not be alienated, transferred or conveyed after
five (5) years and before twenty-five (25) years next
following the issuance of title, without the approval of
the Secretary of Agriculture and Natural Resources; that
it shall not be incumbered, alienated, or transferred to
any person, corporation, association, or partnership not
qualified to acquire public lands under the said Act and its
amendments; x x x
On September 1973, a deed of sale covering the Antipolo
property was executed between Rufina Eniceo and Maria
Eniceo as vendors and respondent as vendee.

The RTC rendered a decision finding that the certified


true copy of OCT No. 535 contained no annotation in
favor of any person, corporation or entity. The RTC
ordered the Registry of Deeds to issue a second owners
copy of OCT No. 535 in favor of the Eniceo heirs and
declared the original owners copy of OCT NO. 535
cancelled and considered of no further value.
Petitioner states that as early as 1991, respondent knew
of the RTC decision because respondent filed a criminal
case against Rufina Eniceo and Leonila Bolinas (Bolinas)
for giving false testimony upon a material fact during the
trial. They alleged that sometime in 1995, Bolinas came
to the office of Alberto Tronio Jr. (Tronio), petitioners
general manager, and offered to sell the Antipolo property.
During an on-site inspection, Tronio saw a house and
ascertained that the occupants were Bolinas relatives.
Tronio also went to the Registry of Deeds to verify the
records on file and ascertained that OCT No. 535 was
clean and had no lien and encumbrances. After the
necessary verification, petitioner decided to buy the
Antipolo property.
On 20 March 1995, the Eniceo heirs executed a deed of
absolute sale in favor of petitioner covering lots 3 and 4 of
the Antipolo property for P500,000.
On 17 August 1995, the Secretary of the Department of
Environment and Natural Resources (DENR Secretary)
approved the deed of sale between the Eniceo heirs and
respondent.
On January 1996, respondent filed a civil complaint with
the trial court against the Eniceo heirs and petitioner
praying for the cancellation of the certificates of title
issued in favor of petitioner, and the registration of the
deed of sale and issuance of a new transfer certificate of
title in favor of respondent.
The trial court rendered its decision dismissing the case
for lack of legal and factual basis.
However, the CA reversed the trial courts decision.
Hence this petition.

Issue:
Rufina Eniceo and Maria Eniceo sold the Antipolo
property to respondent for P250,000. A certain Carmen 1.
WON the deed of sale should be annulled on the
Aldana delivered the owners duplicate copy of OCT No.
ground that the DENR Secretary gave his approval after
535 to respondent.
21 years from the date the deed of sale in favor of
respondent was executed. NO! it cannot be annulled.
On 1988, the Eniceo heirs registered with the (Registry of
Deeds) a Notice of Loss of the owners copy of OCT No.
535.
Held:

First. The contract between the Eniceo heirs and


respondent executed on 10 September 1973 was a
perfected contract of sale. A contract is perfected once
there is consent of the contracting parties on the object
certain and on the cause of the obligation. In the present
case, the object of the sale is the Antipolo property and
the price certain is P250,000.
The contract of sale has also been consummated
because the vendors and vendee have performed their
respective obligations under the contract. In a contract of
sale, the seller obligates himself to transfer the ownership
of the determinate thing sold, and to deliver the same to
the buyer, who obligates himself to pay a price certain to
the seller.[40] The execution of the notarized deed of sale
and the delivery of the owners duplicate copy of OCT No.
535 to respondent is tantamount to a constructive delivery
of the object of the sale.
Petitioner invokes THE BELATED APPROVAL BY THE
DENR SECRETARY, made within 25 years from the
issuance of the homestead, to nullify the sale of the
Antipolo property.
SC = The sale of the Antipolo property cannot be
annulled on the ground that the DENR Secretary gave his
approval after 21 years from the date the deed of sale in
favor of respondent was executed. Section 118 of
Commonwealth Act No. 141 or the Public Land Act (CA
141), as amended by Commonwealth Act No. 456, reads:
SEC. 118. EXCEPT IN FAVOR OF THE GOVERNMENT
OR ANY OF ITS BRANCHES, UNITS, OR
INSTITUTIONS,
OR
LEGALLY
CONSTITUTED
BANKING CORPORATIONS, LANDS ACQUIRED
UNDER FREE PATENT OR HOMESTEAD PROVISIONS
SHALL NOT BE SUBJECT TO ENCUMBRANCE OR
ALIENATION FROM THE DATE OF THE APPROVAL
OF THE APPLICATION AND FOR A TERM OF FIVE
YEARS FROM AND AFTER THE DATE OF THE
ISSUANCE OF THE PATENT OR GRANT X X X
No alienation, transfer, or conveyance of any
homestead after five years and before twenty-five years
after the issuance of title shall be valid without the
approval of the Secretary of Agriculture and Natural
Resources, which approval shall not be denied except on
constitutional and legal grounds.
In this case, there is no apparent or legal grounds for
the Secretary to disapprove the sale.
The failure to secure the approval of the Secretary
does not ipso facto make a sale void. The approval
may be secure later, producing the effect of ratifying

and adopting the transaction as if the sale has been


previously authorized.

FORGERY
Petitioner alleges that the deed of sale is a forgery.
However, as correctly held by the CA, forgery can never
be presumed. The party alleging forgery is mandated to
prove it with clear and convincing evidence. Whoever
alleges forgery has the burden of proving it. In this case,
petitioner and the Eniceo heirs failed to discharge this
burden.

Equitable Mortgage
Petitioner contends that the deed of sale in favor of
respondent is an equitable mortgage because the Eniceo
heirs remained in possession of the Antipolo property
despite the execution of the deed of sale.
An equitable mortgage is one which although lacking in
some formality, or form or words, or other requisites
demanded by a statute, nevertheless reveals the intention
of the parties to charge real property as security for a
debt, and contains nothing impossible or contrary to
law. The essential requisites of an equitable mortgage
are:
1.
The parties entered into a contract denominated
as a contract of sale; and
2.
Their intention was to secure existing debt by way
of a mortgage.
The presumption of equitable mortgage under Article
1602 of the Civil Code is not conclusive. It may be
rebutted by competent and satisfactory proof of the
contrary
.
Apart from the fact that the Eniceo heirs remained in
possession of the Antipolo property, petitioner has failed
to substantiate its claim that the contract of sale
was intended to secure an existing debt by way of
mortgage. In fact, mere tolerated possession is not
enough to prove that the transaction was an equitable
mortgage.
Furthermore, petitioner has not shown any proof that the
Eniceo heirs were indebted to respondent. On the
contrary, the deed of sale executed in favor of respondent
was drafted clearly to convey that the Eniceo heirs sold
and transferred the Antipolo property to respondent. The
deed of sale even inserted a provision about defrayment

of registration expenses to effect the transfer of title to


respondent.
The Court notes that the Eniceo heirs have not appealed
the CAs decision, hence, as to the Eniceo heirs, the CAs
decision that the contract was a sale and not an equitable
mortgage is now final. Since petitioner merely assumed
the rights of the Eniceo heirs, petitioner is now estopped
from questioning the deed of sale dated 10 September
1973.
Petitioner is not a buyer in good faith
In Agricultural and Home Extension Development
Group v. Court of Appeals,[58] a buyer in good faith is
defined as 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 person in the
property.
Petitioner purchased the Antipolo property only on March
1995 and 5 April 1995 as shown by the dates in the
deeds of sale. On the same dates, the registry of deeds
issued new TCTs in favor of petitioner with the annotated
adverse claim. Consequently, the adverse claim
registered prior to the second sale charged petitioner with
constructive notice of the defect in the title of Eniceo
heirs.
Being a first buyer, he is necessarily a buyer in good faith
compared to subsequent buyers. The good faith in the 1 st
buyer remains all throughout despite his subsequent
acquisition of actual or constructive knowledge of the first
sale. Therefore, petitioner cannot be deemed as a
purchaser in good faith when they bought and registered
the Antipolo property.
Laches
PETITIONER :
THAT DESPITE RESPONDENTS
KNOWLEDGE OF THE SUBSEQUENT SALE IN 1991,
RESPONDENT STILL FAILED TO HAVE THE DEED OF
SALE REGISTERED WITH THE REGISTRY OF DEEDS.
The essence of laches is the failure or neglect, for an
unreasonable and unexplained length of time, to do that
which, through due diligence, could have been done
earlier, thus giving rise to a presumption that the party
entitled to assert it had either abandoned or declined to
assert it.
Respondent discovered in 1991 that a new owners copy
of OCT No. 535 was issued to the Eniceo heirs.

Respondent filed a criminal case against the Eniceo heirs


for false testimony. When respondent learned that the
Eniceo heirs were planning to sell the Antipolo property,
respondent caused the annotation of an adverse claim.
On 16 January 1996, when respondent learned that OCT
No. 535 was cancelled and new TCTs were issued,
respondent filed a civil complaint with the trial court
against the Eniceo heirs and petitioner. Respondents
actions negate petitioners argument that respondent is
guilty of laches.
True, unrecorded sales of land brought under Presidential
Decree No. 1529 or the Property Registration Decree
(PD 1529) are effective between and binding only upon
the immediate parties. The registration required in
Section 51 of PD 1529 is intended to protect innocent
third persons, that is, persons who, without knowledge of
the sale and in good faith, acquire rights to the
property. Petitioner, however, is not an innocent
purchaser for value.

SPOUSES FERNANDO & LOURDES VILORIA


vs. CONTINENTAL AIRLINES, INC. (CAI)

CA: reversed RTC-Antipolo Citys decision and ruled that


CAI cannot be held liable for Magers act in the absence
of any proof that a principal-agent relationship existed
between CAI and HT, as the contract was not an agency
but that of a sale. Hence, this petition.

FACTS

Fernando agreed to buy airline tickets on board CAI after


Margaret Mager of Holiday Travel (HT) agency informed
him that there were no available seats at Amtrak.
Subsequently, Fernando requested Mager to reschedule
their flight. Mager informed him that flights to Newark,
New Jersey, USA via CAI were fully booked and offered
the alternative flight via Frontier Air. Since alternative
flight would be more costly and would mean traveling by
night, Fernando opted to request for a refund. Mager
denied his request as said tickets were non-refundable.
When Fernando saw an Amtrak station nearby, he made
inquiries and was told that there were seats available
anytime. Fernando confronted Mager with the Amtrak
tickets, telling her that she had misled them into buying
CAI tickets by misrepresenting that Amtrak was already
fully booked. Fernando reiterated his demand for a refund
but Mager denied it.

ISSUE

Fernando sent a letter to CAI demanding a refund.


Continental Micronesia denied his request and advised
him that he may take said tickets to any CAI ticketing
location for re-issuance of new tickets. When Fernando
went to CAIs ticketing office to have the tickets replaced
by a single round trip ticket to Los Angeles under his
name, he was informed that Lourdes ticket was nontransferable, thus, cannot be used for the purchase of a
ticket in his favor.

HELD

Sps. Viloria filed a complaint against CAI. CAI interposed,


among other things, that it should not be liable for
Magers acts because she was not a CAI employee.
Citing Articles 1868 and 1869 of the Civil Code,

RTC-Antipolo City ruled that Mager was CAIs agent,


hence, bound by her bad faith and misrepresentation.

a. Does a principal-agent relationship exist between CAI


and Holiday Travel? Yes.
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?
No.
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?

Yes. SC ruled that there was principal-agent relationship


because all the elements of an agency1 existed between
CAI and HT. The first and second elements were present
as CAI did not deny that it concluded an agreement with
HT, whereby the latter would enter into contracts of
carriage with third persons on CAIs behalf. The third
element was present as it was undisputed that HT merely
acted in a representative capacity and it was CAI and not
HT who was bound by the contracts of carriage entered
into by the latter on its behalf. The fourth element was
also present considering that CAI had not made any
allegation that HT exceeded the authority that was
granted to it. In fact, CAI consistently maintained validity
of the contracts of carriage that HT executed with Sps.

Viloria and that Mager was not guilty of fraudulent


misrepresentation.

SC, as early as 1970, had already formulated the


guidelines that would aid in differentiating the two
contracts. In Commissioner of Internal Revenue v.
Constantino, SC extrapolated that the primordial
differentiating consideration between the two 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. 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.

As to the subsequent issue on whether or not CAI would


be bound by the acts of HTs agents, SC mentioned that
an examination of its pronouncements in China Air Lines,
Ltd. v. Court of Appeals, et al. [264 Phil 15 (1990)] 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 SC stated in China Air Lines, "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."

SC denied the petition.


Spouses Viloria: 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 and 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.
CAI: 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 evidence an
advertisement appearing on a newspaper stating that
airfares from Manila to Los Angeles or San Francisco cost
US$818.00. CAI 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.
I. A principal-agent relationship exists between CAI
and Holiday Travel.
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,18 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.1avvphi1
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
were present as CAI did not deny that it concluded an
agreement with HT, whereby the latter would enter into
contracts of carriage with third persons on CAIs behalf.
The third element was present as it was undisputed that
HT merely acted in a representative capacity and it was
CAI and not HT who was bound by the contracts of
carriage entered into by the latter on its behalf. The fourth
element was also present considering that CAI had not
made any allegation that HT exceeded the authority that
was granted to it. In fact, CAI consistently maintained
validity of the contracts of carriage that HT executed with
Sps. Viloria and that Mager was not guilty of fraudulent
misrepresentation.

SC, as early as 1970, had already formulated the


guidelines that would aid in differentiating the two
contracts. In Commissioner of Internal Revenue v.
Constantino, SC extrapolated that the primordial
differentiating consideration between the two 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. 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.

Spouses Vilorias cause of action on the basis of Magers


alleged fraudulent misrepresentation is clearly one of tort
or 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.
With respect to extra-contractual obligation arising
from negligence, whether of act or omission, it is
competent for the legislature to elect and our
Legislature has so elected to limit such liability to
cases in which the person upon whom such an obligation
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 liability with certain well-defined
exceptions to cases in which moral culpability can be
directly imputed to the persons to be charged. 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.
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.
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
. 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 circumstances 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.
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.
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.
In its March 24, 1998 letter, CAI stated that "nonrefundable 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 nontransferability 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.
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 nontransferable 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.
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.
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.
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 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
ticket"42 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.1avvphi1
. 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,:44
WHEREFORE, premises considered, the instant Petition
is DENIED.