After trial the court a quo rendered judgment with the following dispositive portion

:
G.R. No. L-24332 January 31, 1978
A.
RAMON RALLOS, Administrator of the Estate of CONCEPCION RALLOS, petitioner,
vs.
FELIX GO CHAN & SONS REALTY CORPORATION and COURT OF APPEALS, respondents.

On Plaintiffs Complaint —

(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 Cebu — is
concerned;

Seno, Mendoza & Associates for petitioner.
Ramon Duterte for private respondent.
MUÑOZ PALMA, J.:

(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;

This is a case of an attorney-in-fact, Simeon Rallos, who after of his death of his principal, Concepcion
Rallos, sold the latter's undivided share in a parcel of land pursuant to a power of attorney which the
principal had executed in favor. The administrator of the estate of the went to court to have the sale
declared uneanforceable and to recover the disposed share. The trial court granted the relief prayed for,
but upon appeal the Court of Appeals uphold the validity of the sale and the complaint.

(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;

Hence, this Petition for Review on certiorari.

(5)

Ordering both defendants to pay the costs jointly and severally.

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. 11116 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.

B.

On GO CHANTS Cross-Claim:

On May 18, 1956 Ramon Rallos as administrator of the Intestate Estate of Concepcion Rallos filed a
complaint docketed as Civil Case No. R-4530 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 d 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 and (3) that plaintiff be indemnified by way
of attorney's 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 Corporation's Answer
contained a crossclaim against its co-defendant, Simon Rallos while the latter filed third-party complaint
against his sister, Gerundia Rallos While the case was pending in the trial court, both Simon and his
sister Gerundia died and they were substituted by the respective administrators of their estates.

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:

PAT CASE: AGENCY

(4)
Sentencing the defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to
pay to plaintiff in concept of reasonable attorney's fees the sum of P1,000.00; and

(1)
Sentencing the co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos,
to pay to defendant Felix Co Chan & Sons Realty Corporation the sum of P5,343.45, representing the
price of one-half (1/2) share of lot 5983;
(2)
Ordering co-defendant Juan T. Borromeo, administrator of the Estate of Simeon Rallos, to pay
in concept of reasonable attorney's fees to Felix Go Chan & Sons Realty Corporation the sum of
P500.00.

(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 Cerundia
Rallos, covering the same subject-matter of the third-party complaint, at bar. (pp. 98-100, Record on
Appeal)
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 reconsider of the decision but the same was denied in a resolution of March 4, 1965. 2
Page 1 of 150

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 proceedings to the issues, We shall briefly restate certain principles of law relevant to the matter
tinder 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 the 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:
(1)
Those entered into in the name of another person by one who hi - been given no authority or
legal representation or who has acted beyond his powers; ...
Out of the above given principles, sprung the creation and acceptance of the relationship of agency
whereby one party, caged 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, 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". 6
2.
There are various ways of extinguishing agency, 7 but her We are concerned only with one
cause — death 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. 1919.

Agency is extinguished.

xxx

xxx

xxx

3.
By the death, civil interdiction, insanity or insolvency of the principal or of the agent; ...
(Emphasis supplied)
PAT CASE: AGENCY

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 Them being an in. integration of the
personality of the principal integration 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 fact to notify the agent of the fact of death of the former. 9
The same rule prevails at common law — the death of the principal effects instantaneous and absolute
revocation of the authority of the agent unless the Power be coupled with an interest. 10 This is the
prevalent rule in American Jurisprudence where it is well-settled that a power without an interest confer.
red upon an agent is dissolved by the principal's death, and any attempted execution of the power
afterward is not binding on the heirs or representatives of the deceased. 11
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 former's sham 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 afore-mentioned.
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.
Page 2 of 150

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 latter's share in Lot No. 5983 to respondent corporation. The knowledge
of the death is clearly to be inferred from the pleadings filed by Simon 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 quo
13 and of respondent appellate court when the latter stated that Simon 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 Simon 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 rode 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 principal's 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:
... even granting arguemendo 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 6f 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 consideration the Court of Appeals reasoned
out that there is no provision in the 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. 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 fortiori that any act of an agent after the death of his principal is void ab initio unless the
same fags under the exception 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 aver 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 Manresa's Commentaries which We quote:
PAT CASE: AGENCY

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 iii 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 publicity known.
In case of a general power which does not specify the persons to whom represents' on 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)
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 agent's exercise of authority is regarded
as an execution of the principal's continuing will. 19 With death, the principal's will ceases or is the of
authority 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 die 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 said 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 land, stating that if a person purchases a registered land from one who acquired
it in bad faith — even to the extent of foregoing or falsifying the deed of sale in his favor — the registered
owner has no recourse against such innocent purchaser for value but only against the forger. 20
To support the correctness of this respondent corporation, in its brief, cites the case of Blondeau, et al., v.
Nano and Vallejo, 61 Phil. 625. We quote from the brief:
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 Nano 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:
Page 3 of 150

Page. That in all cases of registration provided by fraud. yet that where a payment has been made in ignorance of the death. 80. The Pennsylvania Case. 2 is the doctrine followed in Cassiday. 17 Mo. as a general principle.— There are several cases which seem to hold that although. McKenzie may evoke. But if it intended to say that his principle applies where there was 110 notice of death. 234. The same rule holds in the Scottish law. McKenzie. 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 which in part provides: xxx xxx xxx The production of the owner's 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. . in addition to the case in Campbell before cited. cited in 2 C. Misc. Without those title papers handed over to Nano with the acquiescence of Vallejo. 76. (15 Cal. speaking of Cassiday v. 549) Whatever conflict of legal opinion was generated by Cassiday v. 357. of any innocent holder for value of a certificate of title. the acts of the agent. 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. 353. emphasis supplied) To avoid any wrong impression which the Opinion in Cassiday v. and which by no possibility could he know? It would be unjust to the agent and unjust to the debtor. 81. and I cannot believe the common law is so unreasonable. 57 AmD 267. alone in announcing the principle in its broadest scope.. of the learned Judge may be regarded more as an extrajudicial indication of his views on the general subject.' 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. in an elaborate opinion. a payment of sailor's wages to a person having a power of attorney to receive them. from the accident circumstance of the death of the principal. was a mere dictum. Here the precise point is. and again We stress the indispensable requirement that the agent acted without knowledge or notice of the death of the Page 4 of 150 . mention may be made that the above represents the minority view in American jurisprudence. is believed to stand almost. or opportunity of twice I must be permitted to dissent from it. said: The opinion. but in this latter case it appeared that the estate of the deceased principal had received the benefit of the money paid. to wit: (1) that the agency is coupled with an interest (Art 1930). are exceptional. by this case. McKenzie in American jurisprudence.. Thus. In the civil law. a member of the Philippine Bar and the husband of Angela Blondeau. expressly provides for two exceptions to the general rule that death of the principal revokes ipso jure the agency. it stands alone among common law authorities and is opposed by an array too formidable to permit us to following it. the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice. no such conflict exists in our own for the simple reason that our statute. As between two innocent persons. . McKenzie. . 4 Watts & S. If. as the judgment of a of great respectability. has decided in 5 Esp. Agustin Nano had possession of Jose Vallejo's title papers. 1931). (39 Am.appellee must be overruled. It is referred to. Baldwin J. the principal plaintiff. 12. 39 AmD 76). (pp. except so far as it related to the particular facts. 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. 117. 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.. (Act No. But accordingly all power weight to this opinion. the same judge Lord Ellenboruogh. That a payment may be good today. Dec. If this had not been so and if thereafter the proper notation of the encumbrance could not have been made. where. We quote from that decision the following: . in the case of Dick v. the Civil Code. Thus in Clayton v. The leading case so holding is that of Cassiday v. 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. and pointing out that the opinion.. and seems to have been followed. therefore. the general question that a payment after the death of principal is not good. and therefore the representative of the estate might well have been held to be estopped from suing for it again. however. no objection can be taken to it. Exception No. McKenzie wherein payments made to an agent after the death of the principal were held to be "good".J. which he did not know. as they announce the doctrine under discussion. to the right. than as the adjudication of the Court upon the point in question. 549) So also in Travers v. he found them in due form including the power of attorney of Vallajo in favor of Nano. death revokes an agency and renders null every act of the agent thereafter performed. or bad tomorrow. 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.000. searched the registration record. (Pa) 282. McKenzie 4 Watts & S.. supra (Cassiday v. in so far. These cases. .17. 76. done bona fide in ignorance of the death of his principal are held valid and binding upon the heirs of the latter. 39 Am.00 to the defendant Vallejo. When Fernando de la Canters. Angela Blondeau would not have sent P12.. a fraud could not have been perpetuated. whether a payment to an agent when the Parties are ignorant of the death is a good payment. 19-21) The Blondeau decision.. the Court said.J.But there is a narrower ground on which the defenses of the defendant. Crane. 282. it is meant merely to decide PAT CASE: AGENCY the general proposition that by operation of law the death of the principal is a revocation of the powers of the attorney. 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. "the parties being ignorant of the death". (52. . Merrett. cited in 2 C. at least. has been held void when the principal was dead at the time of the payment. one of whom must suffer the consequence of a breach of trust. 496 as amended) 7.. however. such payment will be good. this view ii broadly announced. if not quite. the one who made it possible by his act of coincidence bear the loss.

and We affirm en toto the judgment rendered by then Hon. 1991 AMERICAN AIRLINES. 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. petitioner. the parties hereto agree as follows: 1. petitioner. The services to be performed by Orient Air Services shall include: (a) soliciting and promoting passenger traffic for the services of American and. American Airlines. quoted in pages 2 and 3 of this Opinion.: This case is a consolidation of two (2) petitions for review on certiorari of a decision 1 of the Court of Appeals in CA-G. Francisco A. Hernandez & Gatmaitan for American Airlines. an air carrier offering passenger and air cargo transportation in the Philippines. vs. The antecedent facts are as follows: On 15 January 1977.R. INCORPORATED. We set aside the ecision of respondent appellate court. Lava. No. respondents. with costs against respondent realty corporation at all instances. 76931 May 29. tariffs and promotional material to sales agents and the general public in the assigned territory.R. Amador E. Sycip. whereby the former authorized the latter to act as its exclusive general sales agent within the Philippines for the sale of air passenger transportation. G. Inc. Inc. including any United States military installation therein which are not serviced by an Air Carrier Representation Office (ACRO). and Andresito X. INCORPORATED. xxx xxx Remittances Orient Air Services shall remit in United States dollars to American the ticket stock or exchange orders. employing staff competent and sufficient to do so. J. Pertinent provisions of the agreement are reproduced. PADILLA. COURT OF APPEALS and AMERICAN AIR-LINES INCORPORATED. to wit: PAT CASE: AGENCY WITNESSETH In consideration of the mutual convenants herein contained.principal In the case before Us the agent Ramon Rallos executed the sale notwithstanding notice of the death of his principal Accordingly. (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.R. Salazar. Inc. Inc. In connection with scheduled or non-scheduled air passenger transportation within the United States. G. entered into a General Sales Agency Agreement (hereinafter referred to as the Agreement). 76933 May 29. xxx 4." which affirmed. if necessary. and Orient Air Services and Hotel Representatives (hereinafter referred to as Orient Air). COURT OF APPEALS and ORIENT AIR SERVICES & HOTEL REPRESENTATIVES. less commissions to which Orient Air Services is entitled hereunder. Page 5 of 150 . entitled "American Airlines. So Ordered. which dismissed the complaint and granted therein defendant's counterclaim for agent's overriding commission and damages. 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. (hereinafter referred to as American Air). Jr. No. respondents. Fornier for Orient Air Service and Hotel Representatives. Representation of American by Orient Air Services Orient Air Services will act on American's behalf as its exclusive General Sales Agent within the Philippines. vs. Branch IV. the decision 2 of the Regional Trial Court of Manila. vs. Inc. and (e) holding out a passenger reservation facility to sales agents and the general public in the assigned territory. on the 15th and last days of each month for sales made during the preceding half month. for the sale of air passenger transportation. (c) arranging for distribution of American's timetables. Gomez of the Court of First Instance of Cebu. the agent's act is unenforceable against the estate of his principal. CV-04294. not less frequently than semimonthly. (b) providing and maintaining a suitable area in its place of business to be used exclusively for the transaction of the business of American. Subject to periodic instructions and continued consent from American. IN VIEW OF ALL THE FOREGOING. No. Orient Air Services and Hotel Representatives. with modification. 1991 ORIENT AIR SERVICES & HOTEL REPRESENTATIVES.

defendant Orient Air denied the material allegations of the complaint with respect to plaintiff's entitlement to alleged unremitted amounts. Further. 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 other rate(s) as may be prescribed by the Air Traffic Conference of America. Branch 24. for Accounting with Preliminary Attachment or Garnishment. 11.821. xxx xxx x x x3 On 11 May 1981. American will pay Orient Air Services commission on transportation sold hereunder by Orient Air Services or its sub-agents as follows: (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 American's services and any connecting through air transportation. to the damage and prejudice of plaintiff. the trial court ruled in its favor. .00 by way of proper 3% overriding commission per month commencing from Page 6 of 150 . without prejudice to any of its rights under this Agreement.400. be terminated forthwith and American may. or suffer any of its goods to be taken in execution. or if it ceases to be in business. rendering a decision dated 16 July 1984. 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). 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. 1980 in the amount of US$84. 13. Mandatory Injunction and Restraining Order 4 averring the aforesaid basis for the termination of the Agreement as well as therein defendant's previous record of failures "to promptly settle past outstanding refunds of which there were available funds in the possession of the defendant. .000. 1977 to December 31. . this Agreement may. 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. American Air instituted suit against Orient Air with the Court of First Instance of Manila. 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. Either party may terminate the Agreement without cause by giving the other 30 days' notice by letter. (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 American's service by Orient Air Service or its sub-agents. xxx 5." 5 In its Answer 6 with counterclaim dated 9 July 1981. exchange orders. when made on American's ticket stock. xxx xxx 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 on 15 May 1981. xxx xxx Commissions IATA and ATC Rules PAT CASE: AGENCY 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. xxx 10. traffic material or other property or funds belonging to American. take possession of any ticket forms. all the foregoing premises considered. Orient Air claiming that American Air's precipitous conduct had occasioned prejudice to its business interests. Finding that the record and the evidence substantiated the allegations of the defendant. (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. less applicable commissions to which Orient Air Services is entitled hereunder. and such rules or resolutions shall control in the event of any conflict with the provisions hereof. at the option of American. 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. Four (4) days later.All monies collected by Orient Air Services for transportation sold hereunder on American's ticket stock or on exchange orders. are the property of American and shall be held in trust by Orient Air Services until satisfactorily accounted for to American. plaintiff is ordered to pay defendant the balance of the overriding commission on total flown revenue covering the period from March 16.31 plus the additional amount of US$8.40. contending that after application thereof to the commissions due it under the Agreement. the dispositive portion of which reads: WHEREFORE. plaintiff in fact still owed Orient Air a balance in unpaid overriding commissions. telegram or cable.

1981 until date of termination. Further. the case at bar. No. The appellate court's decision was also the subject of a Motion for Partial Reconsideration by Orient Air which prayed for the restoration of the trial court's ruling with respect to the monetary awards. in justification of its submission. 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. Since Orient Air was allowed to carry only the ticket stocks of American Air.00. Thus. is quoted as follows: WHEREFORE. hence.January 1.500.000. b) Overriding Commission 2) American is ordered to pay Orient the sum of US$7.11 representing the balance of the latter's overriding commission covering the period March 16. 1977 to December 31. Costs against plaintiff.8 American Air moved for reconsideration of the aforementioned decision. 1981. 9 Both parties appealed the aforesaid resolution and decision of the respondent court. to be entitled to the 3% overriding commission.000. 1981. "all sales of transportation over American Air's services are necessarily by Orient Air. invokes its designation as the exclusive General Sales Agent of American Air.00) pesos as and for exemplary damages. with the corresponding obligations arising from such agency. the Intermediate Appellate Court (now Court of Appeals) in a decision promulgated on 27 January 1986. or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10.440. the entirety thereof must be taken into consideration to ascertain the meaning of its provisions.. In effect. 13 After a careful examination of the records.00) pesos as and by way of attorney's fees. 5. until full payment.491. 76933. 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. The principal issue for resolution by the Court is the extent of Orient Air's right to the 3% overriding commission. American will pay Orient Air Services an overriding commission of 3% of the tariff fees and charges for all sales of transportation over American's services by Orient Air Services or its sub-agents. ruled thus: Orient's motion for partial reconsideration is denied insofar as it prays for affirmance of the trial court's award of exemplary damages and attorney's fees. affirmed the findings of the court a quo on their material points but with some modifications with respect to the monetary awards granted. 4) American is ordered to pay Orient exemplary damages of P200. 7 On appeal. No. 76931 and American Air as petitioner in G.000. 1981 the date the answer with counterclaim was filed. by resolution promulgated on 17 December 1986." 11 It is a well settled legal principle that in the interpretation of a contract.00 as the latter's overriding commission per month starting January 1. such as. By resolution 10 of this Court dated 25 March 1987 both petitions were consolidated. 12 The various stipulations in the contract must be read together to give effect to all. The latter. The Court of Appeals.00 as attorney's fees. Orient Air as petitioner in G. and the former not having opted to appoint any sub-agents. the sale must be made by Orient Air and the sale must be done with the use of American Air's ticket stocks. and the amount of Three Hundred Thousand (P300.R. Costs against American. (Emphasis supplied) 3) American is ordered to pay interest of 12% on said amounts from July 10. 1981 or its Philippine peso equivalent in accordance with the official rate of exchange legally prevailing on July 10. May 9. the date the counterclaim was filed In addition to the above commission. the promotion and solicitation for the services of its principal.000. otherwise referred to as "ticketed sales." As basis thereof. The decision of January 27. 5) American is ordered to pay Orient the sum of P25. primary reliance is placed upon paragraph 5(b) of the Agreement which. it is American Air's contention that Orient Air can claim entitlement to the disputed overriding commission based only on ticketed sales. plaintiff is directed to pay defendant the amount of One Million Five Hundred Thousand (Pl. by virtue of such exclusivity. Commissions a) . denied American Air's motion and with respect to that of Orient Air.. This is supposed to be the clear meaning of the underscored portion of the above provision. with the following modifications — 1) American is ordered to pay Orient the sum of US$53. but granted insofar as the rate of exchange is PAT CASE: AGENCY On the other hand. assailing the substance thereof and arguing for its reversal.R. It is the stand of American Air that such commission is based only on sales of its services actually negotiated or transacted by Orient Air. 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. when interpreted in accordance with the Page 7 of 150 . 1980. the Court finds merit in the contention of Orient Air that the Agreement. The dispositive portion of the appellate court's decision is as follows: concerned. in reiteration. the rest of the appealed decision is affirmed. the date the counterclaim was filed.

An additional point before finally disposing of this issue. Petitioner. Since. compels American Air to extend its personality to Orient Air. American's premise. Such an interpretation must at all times be avoided with every effort exerted to harmonize the entire Agreement. J. an overriding commission of 3% of tariff fares and charges for all sales of passenger transportation over American Air services.: Page 8 of 150 . 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. This Court sees no error in such modification and.. telegram or cable. . 17 (emphasis supplied) In an agent-principal relationship. in any way. a sales agency commission. Exh. Orient Air was clearly justified in retaining and refusing to remit the sums claimed by American Air. therefore. that respondent appellate court erred in affirming the rest of the decision of the trial court. Such a relationship can only be effected with the consent of the principal. ruled thus: It is not denied that Orient withheld remittances but such action finds justification from paragraph 4 of the Agreement. American Air's perception that Orient Air was remiss or in default of its obligations under the Agreement was. 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. construed against the party who caused the ambiguity and could have avoided it by the exercise of a little more care. EDWIN CUIZON and ERWIN CUIZON. 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. WHEREFORE. i. the respondent appellate court modified by reduction the trial court's award of exemplary damages and attorney's fees. Since the latter was still obligated to Orient Air by way of such commissions. the Court AFFIRMS the decision and resolution of the respondent Court of Appeals. F. without cause and basis. . 16 We now turn to the propriety of American Air's termination of the Agreement. in effect. which must not." We agree with the findings of the respondent appellate court. To rule otherwise. Consequently. The respondent appellate court. It is clear from the records that American Air was the party responsible for the preparation of the Agreement. therefore. DECISION CHICO-NAZARIO. therefore. the agent. and second. Such would be violative of the principles and essence of agency. and from paragraph 5(d) which specifically allows Orient to retain the full amount of its commissions. for the cancellation of the Agreement did not exist.. G. INC.e. thus. as stated ante. In so doing. entitles it to the 3% overriding commission based on total revenue. It is believed. Orient Air was to be paid commissions of two (2) kinds: first. the personality of the principal is extended through the facility of the agent.. As earlier established. set aside the portion of the ruling of the respondent appellate court reinstating Orient Air as general sales agent of American Air. vs. Respondents. a situation where the latter acted in accordance with the Agreement—that of retaining from the sales proceeds its accrued PAT CASE: AGENCY commissions before remitting the balance to American Air. becomes the principal. 15 We therefore agree with the respondent appellate court's declaration that: Any ambiguity in a contract. whose terms are susceptible of different interpretations. 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." (emphasis supplied) We.1âwphi1 We refer particularly to the lower court's decision ordering American Air to "reinstate defendant as its general sales agent for passenger transportation in the Philippines in accordance with said GSA Agreement. for which it should be held liable to Orient Air.foregoing principles." By affirming this ruling of the trial court. . 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. i. "total flown revenue. It is immediately observed that the precondition attached to the first type of commission does not obtain for the second type of commissions. dated 27 January 1986 and 17 December 1986. any ambiguity in this "contract of adhesion" is to be taken "contra proferentem". 14 To put it differently. respondent appellate court. ranging from 7-8% of tariff fares and charges from sales by Orient Air when made on American Air ticket stock.e. must be read against the party who drafted it. In return for such efforts and services. 167552 April 23. however. Thus. Orient Air was entitled to an overriding commission based on total flown revenue. be compelled by law or by any court. or as referred to by the parties. by legal fiction. No.R. On the matter of damages. when several interpretations of a provision are otherwise equally proper. WITH THE CONSENT OR AUTHORITY OF THE LATTER . 2007 EUROTECH INDUSTRIAL TECHNOLOGIES." As the designated exclusive General Sales Agent of American Air. in fact. 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. Costs against petitioner American Air. authorized to perform all acts which the latter would have him do. respectively. SO ORDERED. Orient Air was responsible for the promotion and marketing of American Air's services for air passenger transportation. Orient is entitled to the 3% override. on this issue. The latter's termination of the Agreement was. which provides for remittances to American less commissions to which Orient is entitled. affirms the same. and the solicitation of sales therefor. with the foregoing modification.

16 Petitioner is engaged in the business of importation and distribution of various European industrial equipment for customers here in the Philippines. Inc.20 After the filing of respondent EDWIN’s Memorandum21 in support of his special and affirmative defenses and petitioner’s opposition22 thereto. Cuizon. the trial court rendered its assailed Order dated 29 January 2002 dropping respondent EDWIN as a party defendant in this case.00) PESOS which receivables the ASSIGNOR is the lawful recipient.12 The generative facts of the case are as follows: On 25 June 1997. Cuizon is of legal age. in his transaction with petitioner and the latter was very much aware of this fact. despite the existence of the Deed of Assignment. 12034 dated 30 June 1995.4 When the sludge pump arrived from the United Kingdom. It has as one of its customers Impact Systems Sales ("Impact Systems") which is a sole proprietorship owned by respondent ERWIN Cuizon (ERWIN). on 28 June 1995.13 By way of special and affirmative defenses. a resident of Cebu City. respondents sought to buy from petitioner one unit of sludge pump valued at P250.000. Subsequently. respondents. petitioner delivered to respondents the sludge pump as shown by Invoice No. is of legal age. married. when it accepted Page 9 of 150 . petitioner PAT CASE: AGENCY On 8 January 1997. petitioner filed a Motion to Declare Defendant ERWIN in Default with Motion for Summary Judgment. Cebu City.000. according to him. 1. respondent EDWIN and Alberto de Jesus. Cuizon.00).000. Antonio T.000. TRANSFER.000.Before Us is a petition for review by certiorari assailing the Decision1 of the Court of Appeals dated 10 August 2004 and its Resolution2 dated 17 March 2005 in CA-G. the conduct of the pre-trial conference was deferred pending the resolution by the trial court of the special and affirmative defenses raised by respondent EDWIN. SP No.) That said ASSIGNOR does hereby ASSIGN. a resident of Cebu City.15 He. with application for preliminary attachment against herein respondents before the Regional Trial Court of Cebu City.338.7 Following the execution of the Deed of Assignment.00 with respondents making a down payment of fifty thousand pesos (P50. petitioner refused to deliver the same to respondents without their having fully settled their indebtedness to petitioner. and CONVEY unto the ASSIGNEE6 the said receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365. 3. general manager of petitioner. damages. Cuizon is the proprietor. From January to April 1995. The trial court granted petitioner’s motion to declare respondent ERWIN in default "for his failure to answer within the prescribed period despite the opportunity granted"18 but it denied petitioner’s motion for summary judgment in its Order of 31 August 2001 and scheduled the pre-trial of the case on 16 October 2001. which was the Impact Systems. 1995. Thus.3 of petitioner’s Complaint stating – 1. he was acting as mere agent of his principal. petitioner made several demands upon respondents to pay their obligations. made a down payment of P50. He is the Sales Manager of Impact Systems and is sued in this action in such capacity. however.) That the ASSIGNEE does hereby accept this assignment. Filipino. Respondent EDWIN is the sales manager of Impact Systems and was impleaded in the court a quo in said capacity. In support of this argument.000.29 as evidenced by Check Voucher No. CEB-19672. According to the trial court – A study of Annex "G" to the complaint shows that in the Deed of Assignment. petitioner points to paragraphs 1. where he may be served summons and other processes of the Honorable Court.2.00) pesos. respondents’ total obligations stood at P295. the principal. amounted to only P220. thereby showing that [Impact] Systems Sales ratified the act of Edwin B. with office located at 46-A del Rosario Street." The assailed Decision and Resolution affirmed the Order3 dated 29 January 2002 rendered by Judge Antonio T. defendant Edwin B. executed a Deed of Assignment of receivables in favor of petitioner. He is the proprietor of a single proprietorship business known as Impact Systems Sales ("Impact Systems" for brevity). petitioner’s counsel sent respondents a final demand letter wherein it was stated that as of 11 June 1996. Hon. Echavez ordering the dropping of respondent EDWIN Cuizon (EDWIN) as a party defendant in Civil Case No.17 On 26 June 1998.3. 09339 prepared by said power company and an official receipt dated 15 August 1995 issued by Impact Systems.000. Defendant Erwin H. According to him. the pertinent part of which states: 1. disputed the total amount of Impact Systems’ indebtedness to petitioner which. "Eurotech Industrial Technologies. Cuizon acted in behalf of or represented [Impact] Systems Sales.00. A study of Annex "H" to the complaint reveals that [Impact] Systems Sales which is owned solely by defendant Erwin H. ratified the act of Edwin B. the agent. the records further show that plaintiff knew that [Impact] Systems Sales. proceeded to collect from Toledo Power Company the amount of P365.) That ASSIGNOR5 has an outstanding receivables from Toledo Power Corporation in the amount of THREE HUNDRED SIXTY FIVE THOUSAND (P365. On 7 October 1996. that plaintiff corporation is represented by its general manager Alberto de Jesus in the contract which is dated June 28.135.00) PESOS as payment for the purchase of one unit of Selwood Spate 100D Sludge Pump.00 excluding interests and attorney’s fees. respondent EDWIN filed his Answer14 wherein he admitted petitioner’s allegations with respect to the sale transactions entered into by Impact Systems and petitioner between January and April 1995.10 Alarmed by this development. Defendant Edwin B.00 that Annex "H" is dated June 30. respondents were able to make partial payments to petitioner. Cuizon. 2. As a result. the trial court granted petitioner’s prayer for the issuance of writ of preliminary attachment.2 and 1. v.11 Because of respondents’ failure to abide by said final demand letter. respondent EDWIN alleged that he is not a real party in interest in this case. married. petitioner sold to Impact Systems various products allegedly amounting to ninety-one thousand three hundred thirty-eight (P91. that [Impact] Systems Sale is a single proprietorship entity and the complaint shows that defendant Erwin H. instituted a complaint for sum of money. 1995 or two days after the execution of Annex "G".19 However. Cuizon. Echavez.8 Allegedly unbeknownst to petitioner. 71397 entitled.R.

1897. who acts as such. that is.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.33 The elements of the contract of agency are: (1) consent. (4) the agent acts within the scope of his authority.23 Aggrieved by the adverse ruling of the trial court. however. is not personally liable to the party with whom he contracts. affirmed the 29 January 2002 Order of the court a quo.32 By this legal fiction. the present petition raising. 2002.26 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. the following: THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT EDWIN CUIZON. it is hereby AFFIRMED. 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. the Court directs that defendant Edwin B. (2) the object is the execution of a juridical act in relation to a third person. Article 1897 reinforces the familiar doctrine that an agent. AS AGENT OF IMPACT SYSTEMS SALES/ERWIN CUIZON. 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.34 In this case. In view of the Foregoing. Cuizon in excess of his powers since [Impact] Systems Sales made a down payment of P50. In the last instance. the parties do not dispute the existence of the agency relationship between respondents ERWIN as principal and EDWIN as agent. (3) the agent acts as a representative and not for himself.24 Petitioner’s motion for reconsideration was denied by the appellate court in its Resolution promulgated on 17 March 2005. As EDWIN did not sufficiently notify it of the extent of his powers as an agent. express or implied. As discussed elsewhere. The agent who acts as such is not personally liable to the party with whom he contracts. 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 first is when he expressly binds himself to the obligation and the second is when he exceeds his authority. While said collection did not revoke the agency relations of respondents. unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Likewise.the down payment of P50. 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. Petitioner contends that the Court of Appeals failed to appreciate the effect of ERWIN’s act of collecting the receivables from the Toledo Power Corporation notwithstanding the existence of the Deed of Assignment signed by EDWIN on behalf of Impact Systems. respondent EDWIN points to the Deed of Assignment which clearly states that he was acting as a representative of Impact Systems in said transaction. petitioner brought the matter to the Court of Appeals which. 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. The dispositive portion of the now assailed Decision of the Court of Appeals states: WHEREFORE. thus: Page 10 of 150 . We do not find merit in the petition.29 The underlying principle of the contract of agency is to accomplish results by using the services of others – to do a great variety of things like selling.000. however.27 PAT CASE: AGENCY In his Comment. the actual or real absence of the principal is converted into his legal or juridical presence – qui facit per alium facit per se. Plaintiff could not say that the subject contract was entered into by Edwin B. We disagree. Cuizon be dropped as party defendant.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. therefore. buying. and transporting.00 two days later. The Deed of Assignment clearly states that respondent EDWIN signed thereon as the sales manager of Impact Systems. Hence. Cuizon.00. In a contract of agency. petitioner claims that he should be made personally liable for the obligations of his principal. 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.25 To support its argument. cannot say that it was deceived by defendant Edwin B.31 It is said that the basis of agency is representation. as sole ground for its allowance. of the parties to establish the relationship. since in the instant case the principal has ratified the act of its agent and plaintiff knew about said ratification. BECAUSE HE HAS NEITHER ACTED BEYOND THE SCOPE OF HIS AGENCY NOR DID HE PARTICIPATE IN THE PERPETUATION OF A FRAUD. finding no viable legal ground to reverse or modify the conclusions reached by the public respondent in his Order dated January 29. the agent can be held liable if he does not give the third party sufficient notice of his powers. manufacturing. petitioner points to Article 1897 of the New Civil Code which states: Art. a person binds himself to render some service or to do something in representation or on behalf of another with the latter’s consent. The same provision. IS NOT PERSONALLY LIABLE.000. petitioner insists that ERWIN’s action repudiated EDWIN’s power to sign the Deed of Assignment. presents two instances when an agent becomes personally liable to a third person. We hold that respondent EDWIN does not fall within any of the exceptions contained in this provision. Plaintiff.

1987 to September 4.R. In that compromise agreement.: In this appeal by certiorari. We likewise take note of the fact that in this case. respondents. On several occasions during the period from April 27.40 As we declare that respondent EDWIN acted within his authority as an agent. LUZ. Let the records of this case be remanded to the Regional Trial Court. Branch 8. the brother of Brigida D. for the continuation of the proceedings against respondent Erwin Cuizon. respondent Narciso Deganos. who was not impleaded in the case. Branch 8. Under this. therefore.98. He neither paid the balance of the sales proceeds.463. Page 11 of 150 .00. the balance of his account plus interest thereon."39 To reiterate. we sustain his exclusion as a defendant in the suit before the court a quo. received several pieces of gold and jewelry from petitioners amounting to P382. who did not acquire any right nor incur any liability arising from the Deed of Assignment. no doubt in our mind that respondent EDWIN’s participation in the Deed of Assignment was "reasonably necessary" or was required in order for him to protect the business of his principal. or the party entitled to the avails of the suit. Deganos remitted only the sum of P53. No. 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. Petitioners were engaged in the business of purchase and sale of jewelry and respondent Brigida D. DECISION REGALADO. she and her husband. 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.000. the first part of Article 1897 declares that the principal is liable in cases when the agent acted within the bounds of his authority. In the absence of an agreement to the contrary. including interest. petitioner refused to deliver the one unit of sludge pump unless it received. we hold that Edwin Cuizon acted well-within his authority when he signed the Deed of Assignment. SP No. Four years later. the payment for Impact Systems’ indebtedness. Luz. petitioners assail the judgment of the Court of Appeals in CA-G. 71397. the total of his unpaid account to petitioners. he failed to comply with his aforestated undertakings. 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. signed a compromise agreement with petitioners. together with Deganos. 130148. [G. in full. Luz were charged with estafa[5] in the Regional Trial Court of Malolos.00) as down payment on 3 March 1995. ERNESTO M. On June 25. [1] These items and their prices were indicated in seventeen receipts covering the same. J.00. premises considered. petitioners instituted Civil Case No. Luz for recovery of a sum of money and damages.The powers of an agent are particularly broad in the case of one acting as a general agent or manager. the agent. affirming the Order dated 29 January 2002 of the Regional Trial Court.R. Luz. and EDWIN. 1994. Deganos obligated himself to pay petitioners. WHEREFORE. it follows that he is not a real party in interest who should be impleaded in this case. 1990. Cebu City. Cebu City. on installment basis. 412-M-90 in the Regional Trial Court of Malolos. but absolved respondent spouses Brigida D. with an application for preliminary attachment. both the agent and the principal are liable to the other contracting party.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. 1987.[4] Ernesto Luz was impleaded therein as the spouse of Brigida. PAT CASE: AGENCY SO ORDERED. 1997] JOSE BORDADOR and LYDIA BORDADOR. [2] Deganos was supposed to sell the items at a profit and thereafter remit the proceeds and return the unsold items to petitioners. reached the sum of P725. Bulacan. 785-M-94. x x x.R. and the remaining six indicated that they were received for Brigida D. However. appeared as a witness for Deganos and ultimately. Bulacan against Deganos and Brigida D. petitioners. Eleven of the receipts stated that they were received for a certain Evelyn Aquino. Luz. it must be pointed out that in case of excess of authority by the agent.37 it still persisted in negotiating with petitioner which culminated in the execution of the Deed of Assignment of its receivables from Toledo Power Company on 28 June 1995. Bulacan which found private respondent Narciso Deganos liable to petitioners for actual damages. Luz and Ernesto M. also known as Aida D. the business of his principal would have been adversely affected and he would have violated his fiduciary relation with his principal. like what petitioner claims exists here. vs. 49175 affirming the adjudication of the Regional Trial Court of Malolos. the agent is completely absolved of any liability. By January 1990.816. a niece of Deganos. is AFFIRMED. CV No. To recall. was their regular customer. Luz. Luz."41 In this respect. Had he not acted in the way he did. That criminal case appears to be still pending in said trial court. or on March 29. LUZ and NARCISO DEGANOS.35 Applying the foregoing to the present case. In the barangay proceedings. There is. Deganos and Brigida D. 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. Petitioners likewise belabor the subsequent resolution of the Court of Appeals which denied their motion for reconsideration of its challenged decision.207. nor did he return any unsold item to petitioners. petitioner is seeking to recover both from respondents ERWIN. However. [3] Petitioners eventually filed a complaint in the barangay court against Deganos to recover said amount. which was docketed as Criminal Case No. Brigida D. 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. Luz of liability. the law does not say that a third person can recover from both the principal and the agent.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. BRIGIDA D. A real party in interest is one who "stands to be benefited or injured by the judgment in the suit. December 15. the principal.

notwithstanding the fact that six of the receipts indicated that the items were received by him for the latter. as said conclusion of the trial court is contradicted by the PAT CASE: AGENCY finding of fact of the appellate court that (Deganos) acted as agent of his sister (Brigida Luz). petitioners quoted several letters sent to them by Brigida D. Here. Brigida.483. Luz was behind Deganos. Luz was ordered to pay P21.During the trial of the civil case. denied that she had anything to do with the transactions between petitioners and Deganos. much less with respect to the particular transactions involved. Luz. Both the Court of Appeals and the trial court. he claimed that the same was only in the sum of P382. several pieces of jewelry of substantial value without requiring a written authorization from his alleged principal. Deganos was ordered to pay petitioners the amount of P725.816. petitioners appealed the judgment of the court a quo to the Court of Appeals which affirmed said judgment. Brigida D.00 representing interest on the principal account which she had previously paid for. however. It cannot. Brigida. While the quoted statement in the findings of fact of the assailed appellate decision mentioned that Deganos ostensibly acted as an agent of Brigida. and her spouse are solidarily liable with him therefor. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another.[14] The evidence does not support the theory of petitioners that Deganos was an agent of Brigida D. Luz did have transactions with petitioners in the past. Luz. [8] Absent the required memorandum or any written document connecting the respondent Luz spouses with the subject receipts. [15] It is clear.483. that he neither acted as agent for nor was he authorized to act as an agent by Brigida D. After trial. Besides. She and her co-defendant spouse were absolved from any other or further liability. Petitioners insist that Deganos was the agent of Brigida D.463. The basis for agency is representation. the agreement between the parties was unenforceable under the Statute of Frauds. with the consent or authority of the latter. the items involved were already paid for and all that Brigida owed petitioners was the sum of P21. 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.00 and not P725.98. 1868. it was grossly and inexcusably negligent of petitioners to entrust to Deganos. Petitioners attempt to foist liability on respondent spouses through the supposed agency relation with Deganos is groundless and ill-advised. They likewise aver that Brigida testified in the trial court that Deganos took some gold articles from petitioners and delivered the same to her. or authorizing Deganos to act on their behalf. He further asserted that it was he alone who was involved in the transaction with the petitioners. while Deganos admitted that he had an unpaid obligation to petitioners. the actual conclusion and ruling of the Court of Appeals categorically stated that. therefore.00 representing the interest on her own personal loan. (Brigida Luz) never authorized her brother (Deganos) to act for and in her behalf in any transaction with Petitioners x x x. hence. 1990. found as a fact that the aforementioned letters concerned the previous obligations of Brigida to petitioners. not once or twice but on at least six occasions as evidenced by six receipts. Such concurrent factual findings are entitled to great weight. [12] In support of this contention.98. On the other hand. [9] As stated at the outset. on her part. Luz when he received the subject items of jewelry and. the latter never authorized him to act on her behalf with regard to the transactions subject of this case. Luz was unenforceable. as principal. 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. 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. plus legal interest thereon from June 25.463.98. there is no showing whatsoever that her statement referred to the items which are the subject matter of this case. because he failed to pay for the same. neither did she actually receive any of the articles in question. Luz wherein the latter acknowledged her obligation to petitioners and requested for more time to fulfill the same. therefore. [16] Page 12 of 150 . She claimed that she never authorized Deganos to receive any item of jewelry in her behalf and. and attorneys fees. with regard to the testimony of Brigida admitting delivery of the gold to her. [10] The motion for reconsideration filed by petitioners was subsequently dismissed. the alleged agreement between petitioners and Brigida D. [7] Said court was persuaded that Brigida D. On the other hand.463. He further claimed that he never delivered any of the items he received from petitioners to Brigida. [11] hence the present recourse to this Court. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. The Civil Code provides: Art. petitioners cannot plausibly claim in this appellate review that the letters were in the nature of acknowledgments by Brigida that she was the principal of Deganos in the subject transactions.[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 and that the latter should consequently be held solidarily liable with Deganos in his obligation to petitioners. plus interests and attorneys fees. [13] Petitioners further represent that the Court of Appeals recognized in its decision that Deganos was an agent of Brigida. the court below found that only Deganos was liable to petitioners for the amount and damages claimed. It held that while Brigida D. there is no showing that Brigida consented to the acts of Deganos or authorized him to act on her behalf. for that matter. hence Brigida can not be permitted to deny said authority to innocent third parties who dealt with Deganos under such belief. Luz as the latter clothed him with apparent authority as her agent and held him out to the public as such. but because there was no memorandum to this effect. that even assuming arguendo that Deganos acted as an agent of Brigida. and had nothing to do with the money sought to be recovered in the instant case. be validly said that she admitted her liability regarding the same. petitioners claimed that Deganos acted as the agent of Brigida D.

as already stated. that. be deemed irregular. Consequently. then signed and issued by the members of the Eleventh Division of said court within one and a half days from the elevation thereof by the division clerk of court to the office of the ponente.[26] It is ironic that while some litigants malign the judiciary for being supposedly slothful in disposing of cases. Instead of promulgating the present decision and resolution under review. therefore. that brief pleading filed by petitioners does not exhibit any esoteric or ponderous argument which could not be analyzed within an hour.R. [21] They charge that said appellate court. so they suggest. as already found by both the trial and intermediate appellate courts.[17] Petitioners now claim that the aforesaid dismissal by the Court of Appeals of the petition in CA-G. There is no showing whatsoever that the resolution was issued without considering the reply filed by petitioners. They claim that said resolution was drafted by the ponente. the Court of Appeals should have awaited the decision in the criminal case. by itself. entirely separate and distinct from the criminal action. Petitioners surprisingly postulate that the Court of Appeals had lost its jurisdiction to issue the denial resolution dated August 18. 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. especially because its ponente. Luz and Deganos had filed a demurrer to evidence and a motion for reconsideration in the aforestated criminal case. 1997. so as not to render academic or preempt the same or. 1997. SP No.The records show that neither an express nor an implied agency was proven to have existed between Deganos and Brigida D. Hence. On July 9. hundreds of more important cases were pending. It was allegedly impossible for the Court of Appeals to resolve the issue in just one and a half days. which it affirmed. PAT CASE: AGENCY Their fancied fear of possible conflict between the disposition of this civil case and the outcome of the pending criminal case is illusory. 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. 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. both of which were denied by the trial court. 39445 with respect to the criminal case is equivalent to a finding that there is sufficient evidence in the estafa case against Brigida D. In fact. 1997. By way of backdrop for this argument of petitioners. Luz. [23] Petitioners moved for reconsideration and the Court of Appeals ordered respondents to file a comment. Thus. it was the duty of the two branches of the Regional Trial Court concerned to independently proceed with the civil and criminal cases. as the same was tainted with irregularities and badges of fraud perpetrated by its court officers. [18] Petitioners have apparently lost sight of Article 33 of the Civil Code which provides that in cases involving alleged fraudulent acts. the same was denied by the trial court. as just stated. their petition therefor was dismissed. additionally. herein respondents Brigida D. 1997. Respondents filed the same on August 5. Evidently. that this civil case may proceed independently of the criminal case [20] especially because while both cases are based on the same facts. create two conflicting rulings. Luz and Deganos for estafa in the pending criminal case. SP No. Asuncion. through conspiracy and fraud on the part of its officers. was then recuperating from surgery and. gravely abused its discretion in issuing that resolution denying their motion for reconsideration. 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. 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. Luz and Deganos. It is worth noting that this civil case was instituted four years before the criminal case for estafa was filed. 39445 holding that there is sufficient evidence/proof against Brigida D. is null and void as it contradicted its ruling in CA-G. are devoid of factual and legal substance. Such civil action shall proceed independently of the criminal prosecution and shall require only a preponderance of evidence. petitioners. [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. a civil action for damages. [19] It is clear. but we are inclined to let that pass with a strict admonition that petitioners refrain from indulging in such conduct in litigations. 1997 [24] and petitioners filed their reply to said comment on August 15. Petitioners next allege that the Court of Appeals erred in ignoring the fact that the decision of the court below. 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. 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. [25] The Eleventh Division of said court issued the questioned resolution denying petitioners motion for reconsideration on August 18. the late Justice Maximiano C. 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. 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. the quantum of proof required for holding the parties liable therein differ.R. 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. may be brought by the injured party. worse. the Court of Appeals rendered judgment in this case affirming the trial courts decision. 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. born of wisdom and Page 13 of 150 . It is a legal presumption. 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. and that although there was a move to consolidate both cases. who were negligent in their transactions with Deganos.

. the petitioners had a cause of action to institute an ejectment suit against the former with the then City Court. 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. NON-PAYMENT OF RENTALS GIVES RIGHT TO EVICT. In such case. and Martinez. REGARDLESS OF THE ACTION FOR SPECIFIC PERFORMANCE TO ENFORCE OPTION TO PURCHASE WHICH WAS ALSO INSTITUTED. From there. the suit for specific performance to enforce the option to purchase was filed more than ten (10) years after accrual of the cause of action as provided under Article 1144 of the New Civil Code. Hence. There was no valid consent by the petitioners on the supposed sale entered into by Alice Dizon. concur. An implied new lease on a monthly basis does not ipso facto carry with it an implied revival of the option to purchase the leased premises. The filing by the Corporation of a suit with the RTC for specific performance did not divest the City Court of its jurisidiction over the ejectment case The decision of the City Court was affirmed by the Intermediate Appellate Court and the Supreme Court. the lessee was granted an option to purchase the lot for P3. especially since one of the petitioners appears to be a member of the Philippine Bar. When private respondent failed to pay the increased rental. SYLLABUS 1. The right to exercise the option to purchase expired with the termination of the original contract of lease for one year. CASE AT BAR. Petitioners have established a right to evict private respondent from the subject premises for nonpayment of rentals. It is thus reprehensible for them to cast aspersions on a court of law on the bases of conjectures or surmises.00 per month effective June 1976. Luz. Later. [28] The burden of proving irregularity in official conduct is on the part of petitioners and they have utterly failed to do so. and that judicial acts and duties have been and will be duly and properly performed. The Corporation. herein petitioners filed an action for ejectment to which the Corporation was ordered to vacate the leased premises. ID. the then City Court had exclusive jurisdiction over the ejectment suit. That was merely a preparatory statement of a principle of law.00 per square meter. Having failed to exercise the option to purchase within the stipulated one-year period. In this regard. The trial court merely said that if there was such an agency existing between them. expiring at the end of every month pursuant to Article 1687. Mendoza. the lease. Overland Express Lines. The other Page 14 of 150 . a demand to vacate is not even necessary for judicial action after the expiration of every month. as petitioners alleged agent. private respondent Corporation cannot now enforce its option. Since the rent was paid on a monthly basis. executed or partially executed.00 to Alice Dizon who allegedly acted as agent of petitioners pursuant to the supposed authority given by petitioner as payee thereof does not amount to a perfected contract of sale pursuant to the contract of lease with option to buy. as lessee. 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. CIVIL LAW.. such delivery resulted in the execution of the contract and removed the same from the coverage of the Statute of Frauds. even if verbal may be deemed to be on a monthly basis. Thereafter. the City Court (now MTC) had exclusive jurisdiction over the ejectment suit. in relation to Article 1673 of the Civil Code. and no delivery of any of the items subject of this case was ever made to the former. In this regard. The private respondent delivered a check of P300. 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. even assuming arguendo that the right to exercise the option still subsists at the time private respondent tendered the amount. no error having been committed by the Court of Appeals in affirming the judgment of the court a quo.000.000. ID. JJ. during which period. SPECIAL CONTRACTS. WHEREFORE. 2. Of note is the fact that the decision of the City Court was affirmed by both the Intermediate Appellate Court and this Court. Inc. The term of the lease was for one (1) year.000. Petitioners claim is speciously unmeritorious. and the receipt of the partial payment it made and to fix the period to pay the balance thereof. there was an implicit renewal of the contract of lease on a monthly basis. petitioners fault the trial courts holding that whatever contract of agency was established between Brigida D. The contract of lease expired without the private respondent. SYNOPSIS In 1974. there was a contract of lease for one (1) year with option to purchase. FAILURE TO EXERCISE OPTION TO PURCHASE WITHIN THE STIPULATED PERIOD. [27] that the proceedings of a judicial tribunal are regular and valid.experience. for failure to pay the increased rental of P8. EFFECT. Moreover.00. Puno. What was finally proven as a matter of fact is that there was no such contract between Brigida D.. 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. purchasing the property but remained in possession thereof. Luz and Narciso Deganos. Luz and Narciso Deganos is unenforceable under the Statute of Frauds as that aspect of this case allegedly is not covered thereby. hence. LEASE. the Corporation filed its own action for specific performance and fixing the period for obligation. private respondent cannot enforce its option to purchase anymore. and private respondent. Petitioners have established a right to evict private respondent from the subject premises for non-payment of rentals. the lease shall be on a per month basis with a monthly rental of P3. Subsequently.000. In this case. Where the rentals are paid monthly. with double costs against petitioners SO ORDERED.. Having failed to exercise the option to purchase within the stipulated one year period. ID. It sought to PAT CASE: AGENCY compel the execution of a deed of sale pursuant to the option to purchase. that official duty has been regularly performed. the period of lease is considered to be from month to month in accordance with Article 1687 of the New Civil Code. [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. questioned the jurisdiction of the City Court over the ejectment case. entered into a Contract of Lease with Option to Buy with herein petitioners involving a land in Quezon City. its challenged decision and resolution are hereby AFFIRMED and the instant petition is DENIED. Lastly. however.

Quezon City. INC. Therefore. 1985.. In consonance with the ruling in the case of Teodoro. On September 26. and JOSE A. FIDELINA D. NO.00. NOT APPRECIATED. extended the lease or whether petitioner actually paid the alleged P300. ID. JR. Branch VIII. DIZON. January 28. if any. until private respondent fully vacates the premises. Diliman. 1976 before the then City Court (now Metropolitan Trial Court) of Quezon City. Private respondents right to exercise the option to purchase expired with the termination of the original contract of lease for one year. private respondent was granted an option to purchase for the amount of P3. the parties may reciprocally demand performance. Thereafter.000. VIII-29155) on November 10. On November 22. [G. J.000. the lease shall be on a per month basis with a monthly rental of P3. private respondent filed before the Regional Trial Court (RTC) of Quezon City (Civil Case No. and to pay P20. 1984.00 a month starting December 1982. ID. pp. DIZON. respondents.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.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. DIZON. private respondent cannot seek relief on the basis of a supposed agency. BARTOLOME. subject to the provisions of the law governing the form of contracts. On review. 4. and OVERLAND EXPRESS LINES.00 as and by way of attorney's fees. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Dizon. AMPARO D. As provided in Article 1868 of the New Civil Code.00. DIZON. 1999] REGINA P.000. the City Court rendered judgment[2] ordering private respondent to vacate the leased premises and to pay the sum of P624. 3. 1985. FIDELINA D. BALZA. 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. to rule otherwise.000. the date of filing of the complaint. Thus. (Original Records.. From that moment. For failure of private respondent to pay the increased rental of P8. 1985 and likewise denied private respondent's subsequent motion for reconsideration in a resolution dated September 9. ESTER ABAD DIZON and JOSEPH ANTHONY DIZON. petitioners.[5] On October 7..R. Jr.. this Court dismissed the petition in a resolution dated June 19. No. the elements of a contract of sale are consent. BALZA. 1974.. (lessee) entered into a Contract of Lease with Option to Buy with petitioners[1] (lessors) involving a 1. are all merely incidental and do not remove the unlawful detainer case from the jurisdiction of respondent court. private respondent Overland Express Lines. ASUNCION. 122544: On May 23. January 28. GERARD A. vs. 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. 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. Under Article 1475 of the New Civil Code. 122544. as representative of private respondents in consideration of the option and. ID. 1999] REGINA P. 38-39). and price in money or its equivalent. INC. less payments made. 1982. ID. What seemed to be a simple ejectment suit was juxtaposed with procedural intricacies which finally found its way to this Court.80 square meter parcel of land situated at corner MacArthur Highway and South "H" Street. the sum of P8.: Two consolidated petitions were filed before us seeking to set aside and annul the decisions and resolutions of respondent Court of Appeals. HON.00 per square meter. plus 12% interest per annum from November 18. COURT OF APPEALS and OVERLAND EXPRESS LINES. 1974 up to May 15. It bears stressing that the absence of any of these essential elements negates the existence of a perfected contract of sale. MAXIMIANO C. 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. as petitioners alleged agent. Being negligent in this regard. RAYMUND A. vs. ESTER ABAD DIZON and JOSEPH ANTHONY DIZON. petitioners.. DIZON. 1976. BARTOLOME.. whether petitioner thereafter offered to pay the balance of the supposed purchase price.. During this period. until fully paid. COURT OF APPEALS. and private respondent. the above matters may be raised and decided in the unlawful detainer suit as. DIZON. petitioners filed an action for ejectment (Civil Case No. respondents.000. PAT CASE: AGENCY G. and JOSE A.000. 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.000. The most prudent thing private respondent should have done was to ascertain the extent of the authority of Dizon. GERARD A. Inc.000. DIZON. RAYMUND A. the alleged question of whether petitioner was granted an extension of the option to buy the property.755. whether such option. the then Intermediate Appellate Court[3] (now Court of Appeals) rendered a decision[4] stating that: "x x x. 1975.R. [G. CONTRACT OF AGENCY. there was no showing that petitioners consented to the act of Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. JR. CONTRACT OF SALE. DECISION MARTINEZ. Sale is a consensual contract and he who alleges it must show its existence by competent proof. 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. AMPARO D.00 to Fidela Dizon. R. 124741. would be a violation of the principle prohibiting multiplicity of suits. It sought to compel the execution of a deed of sale pursuant to the option to purchase and the receipt of Page 15 of 150 . No. object. vs. The term of the lease was for one (1) year commencing from May 16. DIZON." The motion for reconsideration was denied. Mirasol (supra).00 per month effective June 1976. WHEN PERFECTED.

R. On December 22. until payment of the balance of the purchase price. 46487 (annulment of the ejectment case). 1985 a complaint for Annulment of and Relief from Judgment with injunction and damages. it had the obligation to pay the amount of P1.[10] petitioners elevated the case via petition for certiorari questioning the authority of Alice A. RTC of Quezon City. 1992 on the ground that the same was a refiled case previously dismissed for lack of merit. 1982 which was granted in a resolution dated June 29. Q-45541 (specific performance case) and denying its motion for reconsideration in Civil Case No. thereby restraining the execution of the City Court's judgment on the ejectment case. and the writ of preliminary injunction previously issued was dissolved. No. and to deliver to the latter the said deed of sale. Upon denial of the motion for partial reconsideration (Civil Case No.R. Branch 104 issued an order[12] granting the issuance of a writ of preliminary injunction upon private respondent's posting of an injunction bond of P50. To grant the petition would be to allow the ejectment of the private respondent. 1989. Unable to secure an injunction. to have no right to eject private respondents. having been affirmed by the then Intermediate Appellate Court and the Supreme Court.000. entry of judgment was issued by this Court.[8] respondent Court of Appeals rendered a decision[9] upholding the jurisdiction of the City Court of Quezon City in the ejectment case.the partial payment. The motion for reconsideration of said decision was likewise denied.000. Branch 77. On July 14. and to fix the period to pay the balance. 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. which petitioners accepted (through Alice A. 1993. as well as the owner's duplicate of the certificate of title to said property upon payment of the balance of the purchase price by the plaintiff-appellant. private respondent filed a petition for certiorari. We cannot do that now in view of the decision of this Court in CA-G. on the other hand.00 in monthly rentals until full payment of the purchase price. In its decision. prohibition with preliminary injunction and/or restraining order with this Court (G. Q-45541) by respondent Court of Appeals. 1985. The Court of Appeals went further by stating that in fact. has become final and executory. As a consequence of private respondent's motion for reconsideration.00 pursuant to the Contract of Lease with Option to Buy. petitioners filed an urgent ex-parte motion for execution of the decision in Civil Case No. G. 1975 as partial payment for the leased property. 1993. plus 6% interest per annum. Nos. the trial court ordered the issuance of a third alias writ of execution. Branch 102 (Civil Case No. Assailing the aforequoted order after denial of their motion for partial reconsideration. private respondent can therefore assume that Alice A. On appeal. On April 28. Petitioners also assail the propriety of private respondent's exercise of the option when it tendered the said amount on June 20.000. 46487 is AFFIRMED. 1992. Aggrieved.00 on June 20. free from any lien or encumbrance whatsoever. NO. Dizon) and for which an official receipt was issued. On September 13. acting as agent of petitioners.000. In denying private respondent's motion for reconsideration. in favor of the plaintiff-appellant. the preliminary injunction was reinstated. CV Nos. 1986. ANNULLED and SET ASIDE. private respondent filed with the Regional Trial Court (RTC) of Quezon City. The plaintiff-appellant is ordered to pay P1. was the operative act that gave rise to a perfected contract of sale. then City Court of Quezon City. the trial court dismissed the complaint for annulment on the ground of res judicata. Dizon as agent of petitioners in receiving private respondent's partial payment amounting to P300. 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. 1993. Dizon. On November 26. 3829155 (ejectment case) to the Metropolitan Trial Court (MTC). 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." PAT CASE: AGENCY Page 16 of 150 . Petitioners' alleged right to eject private respondent has been demonstrated to be without basis in the said civil case. The petitioners have been shown. 1994. after all. Branch 104 a petition for certiorari and prohibition with preliminary injunction/restraining order (SP. a decision[7] was rendered dismissing private respondent's complaint in Civil Case No.[14] the Court of Appeals dismissed the petition and ruled that: "The avowed purpose of this petition is to enjoin the public respondent from restraining the ejectment of the private respondent. It opined that the payment by private respondent of P300. The two cases were thereafter consolidated before the RTC of Quezon City. Private respondent filed a motion to reconsider said resolution which was denied. PROC. On January 11. it ordered the immediate implementation of the third writ of execution without delay. In its decision[6] dated May 12. the appealed decision in Case No.700. Branch 38.00.700. Since private respondent did not consign to the court the balance of the purchase price and continued to occupy the subject premises. Branch 38. The appealed decision in Case No. 124741: Petitioners filed with respondent Court of Appeals a motion to remand the records of Civil Case No. 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. 1975 which purportedly resulted in a perfected contract of sale. was authorized by them to receive the money in their behalf. It also ordered private respondent to pay P3. private respondent had acquired the rights of a vendee in a contract of sale. 1992. 38-29155 with the MTC of Quezon City.00 per month from June 1976. The defendants-appellees are ordered to execute the deed of absolute sale of the property in question. for execution of the judgment[11] dated November 22. and that for failure of petitioners to deny receipt thereof. Q-46487) on November 15. 45541 is. as previously agreed upon by the parties. private respondent also filed before the RTC of Quezon City.R. SO ORDERED. 106750-51) which was dismissed in a resolution dated September 16.00 as attorney's fees. The dispositive portion of said decision reads: "WHEREFORE. 93-18722) challenging the enforceability and validity of the MTC judgment as well as the order for its execution. In an Order dated October 25. 25153-54.

25153-54 declared that the plaintiff-appellant (private respondent herein) acquired the rights of a vendee in a contract of sale. the date when it must be paid.[20] When private respondent failed to pay the increased rental of P8. the lease was for P3."[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. After the expiration thereof. 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. the parties may reciprocally demand performance. there was an implicit renewal of the contract of lease on a monthly basis. the lease. to do so would disturb the status quo of the parties since the petitioners are not in possession of the subject property. subject to the provisions of the law governing the form of contracts. the payee thereof. The term of the Contract of Lease with Option to Buy was for a period of one (1) year (May 16. CV Nos.[19] In such case. WHEREFORE. since the rent was paid on a monthly basis. as lessee. Considering said decision. the suit for specific performance to enforce the option to purchase was filed only on October 7.[18] Where the rentals are paid monthly.[21] In this case. 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.[24] Third.000. Sale is a consensual contract and he who alleges it must show its existence by competent proof.WHEREFORE.00 to Alice A. It bears stressing that the absence of any of these essential elements negates the existence of a perfected contract of sale. the period of lease is considered to be from month to month in accordance with Article 1687 of the New Civil Code. the petitioners had a cause of action to institute an ejectment suit against the former with the then City Court. the responsibility for repairs."[17] Hence. recognizing the right of the private respondent to possess the subject premises. From that moment. we should not allow ejectment. Of note is the fact that the decision of the City Court was affirmed by both the Intermediate Appellate Court and this Court. 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. this instant petition. Private respondents right to exercise the option to purchase expired with the termination of the original contract of lease for one year. expiring at the end of every month pursuant to Article 1687. the City Court (now MTC) had exclusive jurisdiction over the ejectment suit. SO ORDERED. private respondent cannot enforce its option to purchase anymore. There was no perfected contract of sale between petitioners and private respondent. Hence. Private respondent further contended that petitioners filing of the ejectment case against it based on the contract of lease with option to buy holds petitioners in estoppel to question the authority of petitioner Fidela Dizon. Petitioners have established a right to evict private respondent from the subject premises for nonpayment of rentals. the care of the property. etc. 1985 or more than ten (10) years after accrual of the cause of action as provided under Article 1144 of the New Civil Code. Admittedly.000. such as the amount of rental. PAT CASE: AGENCY Second. 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. purchasing the property but remained in possession thereof. The rationale of this Court is that: This is a reasonable construction of the provision. even if verbal may be deemed to be on a monthly basis. 1974 to May 15. which is based on the presumption that when the lessor allows the lessee to continue enjoying possession of the property for fifteen days after the expiration of the contract he is willing that such enjoyment shall be for the entire period corresponding to the rent which is customarily paid in this case up to the end of the month because the rent was paid monthly.000.00 as partial payment of the purchase price constituted a valid exercise of the option to buy. Thus. Under Article 1475 of the New Civil Code. there was a contract of lease for one (1) year with option to purchase. 1975. However. object. Moreover. Having failed to exercise the option within the stipulated one-year period. a demand to vacate is not even necessary for judicial action after the expiration of every month. in effect. in relation to Article 1673 of the Civil Code. no definite period beyond the one-year term of lease was agreed upon by petitioners and private respondent. and price in money or its equivalent.000. the motion for reconsideration is DENIED for lack of merit. It insisted that the payment of P300. the petition is DENIED due course and is accordingly DISMISSED. 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. First.R. 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[22] are only those terms which are germane to the lessees right of continued enjoyment of the property leased. We find both petitions impressed with merit.00 per month in June 1976. In this regard. even assuming arguendo that the right to exercise the option still subsists at the time private respondent tendered the amount on June 20. an implied new lease does not ipso facto carry with it any implied revival of private respondent's option to purchase (as lessee thereof) the leased premises.[25] Page 17 of 150 . Private respondent argued that it delivered the check of P300. SO ORDERED. Dizon who acted as agent of petitioners pursuant to the supposed authority given by petitioner Fidela Dizon. The contract of lease expired without the private respondent.000.00 per square meter.00 per month. 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.[23] Therefore. 1975) during which the private respondent was given an option to purchase said property at P3. the elements of a contract of sale are consent. Necessarily.

1985 of this Court. vs."[2] The SLDR also contains an additional note which reads: "subject for (sic) availability of a (sic) stock at NAWACO (warehouse). COURT OF APPEALS and CONSOLIDATED SUGAR CORPORATION. 1991. 1214 dated October 16. 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. The latter. private respondent gave P300. 1994 modifying said decision.000. which gave rise to the instant case. 33113 of the Court of Appeals are hereby REVERSED and SET ASIDE. 1984 of the then Intermediate Appellate Court (now Court of Appeals) and in the resolution dated June 19. The most prudent thing private respondent should have done was to ascertain the extent of the authority of Alice A. WHEREFORE.00 to petitioners (thru Alice A.. Being negligent in this regard. as well as the respondent court's resolution of September 30. SLDR No.[28] we explained the rule in dealing with an agent: Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. we now write finis to this controversy and shun further delay so as to ensure that this case would really attain finality. Aside from SLDR No."[3] On October 25. Each bag contained 50 kilograms and priced at P638. 33743 dated October 27. after 2. as well as the decision dated December 11. 1989.000 bags. 1214M had been "sold and endorsed" to it but that it had been refused further withdrawals of sugar from petitioner's warehouse despite the fact that only 2. 1989 in payment.In an attempt to resurrect the lapsed option. respondents. 1995 in CA-G. Dizon."[1] The transaction it covered was a "direct sale. 1982 in Civil Case No.00. 2000] Private respondent CSC surrendered SLDR No. SP No."[4] On October 27. STM sold to private respondent Consolidated Sugar Corporation (CSC) its rights in SLDR No.[26] As provided in Article 1868 of the New Civil Code. petitioner. 1214M.[27] there was no showing that petitioners consented to the act of Alice A.[5] CSC thus inquired when it would be allowed to withdraw the remaining 23. 1989 in the total quantity of 25. issued Official Receipt No. in view of the foregoing. 1213. 1214M. In the course of their dealings.00 which they received through Alice A. Branch VIII as affirmed in the decision dated September 26. CV No. Court of Appeals. PAT CASE: AGENCY Page 18 of 150 . 042 dated October 16. 1975. June 19.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the decision of the Court of Appeals dated February 24.000.. 1989 acknowledging receipt of the said checks in payment of 50. 1989. J. CSC wrote petitioner that it had been authorized by STM to withdraw the sugar covered by SLDR No.900. are bound at their peril. The decision dated March 29.R. and his ignorance of that authority will not be any excuse. the burden of proof is upon them to establish it.000 bags of sugar. 1214M. SO ORDERED. and in case either is controverted. Dizon. petitioner replied that it could not allow any further withdrawals of sugar against SLDR No. VICTORIAS MILLING CO. in Civil Case No. STM issued 16 checks in the total amount of P31. 1994 and the resolution dated October 19. petitioners are ordered to REFUND to private respondent the amount of P300. 1997 in CA-G. Let the records of this case be remanded to the trial court for immediate execution of the judgment dated November 22.750. If he does not make such inquiry.R. Both decision and resolution amended the judgment dated February 13. Persons dealing with an assumed agent..[6] However. whether the assumed agency be a general or special one.. On January 31. as petitioners alleged agent. 1214M for P 14. No. Among these was SLDR No. The facts of this case as found by both the trial and appellate courts are as follows: St. if they would hold the principal. in CA-G. 1214M covers 25. DECISION QUISUMBING. 1994. 90-118. Therese Merchandising (hereafter STM) regularly bought sugar from petitioner Victorias Milling Co. to ascertain not only the fact of the agency but also the nature and extent of the authority. Dated October 16. 1989.R. 1989. 1214M because STM had already dwithdrawn all the sugar covered by the cleared checks. Dizon) on the erroneous presumption that the said amount tendered would constitute a perfected contract of sale pursuant to the contract of lease with option to buy. and private respondent.000 bags. CV No. said checks also covered SLDR No. 1990 informing it that SLDR No. Dizon on June 20. in turn. For the long years that private respondent was able to thwart the execution of the ejectment suit rendered in favor of petitioners. 31717. petitioner refused to allow further withdrawals of sugar against SLDR No. CSC then sent petitioner a letter dated January 23. 117356. 1995 and the resolution dated April 23.000. of the Regional Trial Court of Makati City. [G. private respondent cannot seek relief on the basis of a supposed agency.00 per bag as "per sales order VMC Marketing No. 1990. There was no valid consent by the petitioners (as co-owners of the leased premises) on the supposed sale entered into by Alice A. Branch 147. CSC issued one check dated October 25. 1214M and a letter of authority from STM authorizing CSC "to withdraw for and in our behalf the refined sugar covered by Shipping List/Delivery Receipt-Refined Sugar (SDR) No. 1214M. Inc. 25153-54. In Bacaltos Coal Mines vs.R.000 bags had been released. However.000. he is chargeable with knowledge of the agents authority. both petitions are GRANTED. 1214M to the petitioner's NAWACO warehouse and was allowed to withdraw sugar.000 bags.000 bags had been withdrawn. That same day. VIII-29155 of the then City Court (now Metropolitan Trial Court) of Quezon City. Enclosed in the letter were a copy of SLDR No. 1989 and three checks postdated November 13. Dizon nor authorized her to act on their behalf with regard to her transaction with private respondent. INC. petitioner issued several Shipping List/Delivery Receipts (SLDRs) to STM as proof of purchases. (VMC).00 with petitioner as payee.

000. the Court hereby renders judgment in favor of the plaintiff and against defendant Victorias Milling Company: On appeal.000.000 bags against SLDR No. CSC sent petitioner a letter demanding the release of the balance of 23.00 in exemplary damages. Therese Merchandising for the amount of P31. did not bother to pursue its case against her.000. were not documents of title. PAT CASE: AGENCY Page 19 of 150 . Therese Merchandising.000. The testimony of Teresita Ng Go is further supported by Exhibit F.000.000.00.00 in unrealized profits.[8] Since STM had already drawn in full all the sugar corresponding to the amount of its cleared checks.' Since no settlement was reached at pre-trial. petitioner reiterated that all the sugar corresponding to the amount of STM's cleared checks had been fully withdrawn and hence.00 as attorney's fees.000 bags.000. The Court notes that the testimony of Arnulfo Caintic is merely a sweeping barren assertion that the purchase price has not been fully paid and is not corroborated by any positive evidence. which is 10% of the acquisition value of the undelivered bags of refined sugar in the amount of P13. CSC filed a complaint for specific performance.000.[7] CSC.000. P2. Petitioner's primary defense a quo was that it was an unpaid seller for the 23.000 bags. Petitioner also prayed that cross-defendant STM be ordered to pay it P10. which it had issued. The SLDRs prescribed delivery of the sugar to the party specified therein and did not authorize the transfer of said party's rights and interests. however. the case proceeded only against the latter. There is an insinuation by Arnulfo Caintic in his testimony that the postdated checks issued by the buyer in payment of the purchased price were dishonored. Therese Merchandising covered by SLDR No. in payment of the purchase price of the sugar covered by SLDR No. plus the costs.200.357. "WHEREFORE. it was discovered that Teresita Ng Go who testified for CSC was the same Teresita Ng Sy who could not be reached through summons. and P1. 1989 Victorias Milling Company issued official receipt no. CSC prayed that petitioner be ordered to deliver the 23. "2) Ordering defendant Victorias Milling Company to pay the amount of P920.00."[10] As earlier stated. SLDR No. 1990.950. there would be no more deliveries of the commodity to STM's account."[9] It made the following observations: "[T]he testimony of plaintiff's witness Teresita Ng Go.000.000 bags of sugar bought by her covered by SLDR No. and P1. On April 27.900. the trial court rendered its judgment favoring private respondent CSC. However. the trial court heard the case on the merits. P3.00 as exemplary damages. 1214M and sought the award of P1. 90-1118. October 16.00 as exemplary damages. Pursuant to this contract.570. said witness failed to present in Court any dishonored check or any replacement check. 1989 issued by St.000.00 as moral damages.00 for the 25. "On the other hand. docketed as Civil Case No.000.000 bags of refined sugar due under SLDR No.000.000 bags covered by SLDR No. 21214M Petitioner also alleged that CSC did not pay for the SLDR and was actually STM's co-conspirator to defraud it through a misrepresentation that CSC was an innocent purchaser for value and in good faith. Said checks appear to have been honored and duly credited to the account of Victorias Milling Company because on October 27. Since the former could not be served with summons. 1214. 1989 (date of the two SLDRs) is duly supported by Exhibits C to C15 inclusive which are post-dated checks dated October 27. Said witness likewise failed to present any bank record showing that the checks issued by the buyer. "1) Ordering defendant Victorias Milling Company to deliver to the plaintiff 23.950.500. Therefore. petitioner averred that the dealings between it and STM were part of a series of transactions involving only one account or one general contract of sale.000. the claim of defendant Victorias Milling Company that the purchase price of the 25. 1214 has not been fully paid is supported only by the testimony of Arnulfo Caintic. as attorney's fees.000. and the status of payment. Defendants were Teresita Ng Sy (doing business under the name of St. witness for defendant Victorias Milling Company. the SLDR no. the official reciept no.00 as attorney's fees. that she had fully paid the purchase price of P15. Seven days later.000.00 as unrealized profits. 34734 in favor of St. 1990. Petitioner explained that the SLDRs. but instead used her as its witness.000. 1214 the same has been fully paid as indicated by the word 'cleared' appearing under the column of 'status of payment.000. CSC's complaint alleged that STM had fully paid petitioner for the sugar covered by SLDR No. 1214M "for and in behalf" of STM.500. but mere delivery receipts issued pursuant to a series of transactions entered into between it and STM. the latter had no justification for refusing delivery of the sugar.000 bags of sugar bought by her covered by SLDR No. which is a computer printout of defendant Victorias Milling Company showing the quantity and value of the purchases made by St. Therese Merchandising) and herein petitioner. It is clear in Exhibit 'F' that with respect to the sugar covered by SLDR No. STM or any of its authorized agents could withdraw bags of sugar only against cleared checks of STM.000 bags of sugar purchased by St.000 bags of sugar covered by SLDR No. Petitioner also noted that CSC had represented itself to be STM's agent as it had withdrawn the 2.00 as exemplary damages and the amount of P1. 1213 on the same date. Therese Merchandising in favor of Victorias Milling Company at the time it purchased the 50.00 (Exhibits B and B-1). issued to cover the purchase. in view of the foregoing. During the trial. it could no longer authorize further delivery of sugar to CSC. the amount of P800.00 as attorney's fees and litigation expenses. P10. 1214 were dishonored.On March 2. as follows: Petitioner appealed the trial courts decision to the Court of Appeals. Teresita Ng Go.000. 1214 as well as the purchase price of P15. Petitioner also contended that it had no privity of contract with CSC.00 of the 25. Petitioner then prayed that CSC be ordered to pay it the following sums: P10.104. 1214M. "SO ORDERED. 1213 and 1214.

33] and Marianito L." (emphasis in the original) private respondent's withdrawing 2.. 1214M. and STM's empowering other persons as its agents to withdraw sugar against the same SLDR No.586 bags of sugar remained undelivered.was only one of 22 SLDRs issued to STM and since the latter had already withdrawn its full quota of sugar under the said SLDR. alleged that sugar delivery to the STM corresponded only to the value of cleared checks. (Formal Offer of Evidence for Plaintiff. 1994. except for 69 bags of sugar. Abalos.000 bags of sugar covered by SLDR No. Documentary evidence (Exhibit I. CSC was already precluded from seeking delivery of the 23. and precluded it from subsequently claiming and proving being an assignee of SLDR No. and that all sugar corresponded to cleared checks had been withdrawn.000 bags of sugar for STM. The Court of Appeals erred in not holding that STM's and private respondent's specially informing petitioner that respondent was authorized by buyer STM to withdraw sugar against SLDR No. p. 1214M "for and in our (STM) behalf. and which would justify review of its conclusion of facts by this Honorable Court.000 bags of refined sugar under SLDR No.. 1214M. The rationale for this is to afford the party against whom the evidence is presented to object thereto if he deems it necessary. Santos [TSN. Id. 58) cannot be used to prove the proposition that 12. therefore. 17 October 1990. the Court hereby MODIFIES the assailed judgment and orders defendant-appellant to: Both parties then seasonably filed separate motions for reconsideration. Hence. Records p. pp.000 bags of sugar from SLDR after which it was not allowed to withdraw anymore. and single transaction. p. The rule is explicit that courts should consider the evidence only for the purpose for which it was offered. "SO ORDERED. Rules of Court) and estopped from doing so. p. an agent of STM as held in Rallos v. Private respondent CSC countered that the sugar purchases involving SLDR No. as attorneys fees."[11] "1. " 2) Pay to plaintiff-appellee P792. PAT CASE: AGENCY " 3. the instant petition. independent.000 bags allegedly unwithdrawn. 1214M were separate and independent transactions and that the details of the series of purchases were contained in a single statement with a consolidated summary of cleared check payments and sugar stock withdrawals because this a more convenient system than issuing separate statements for each purchase. 80) show that plaintiff-appellee had sent demand letters to defendant-appellant asking the latter to allow it to withdraw the remaining 23. positing the following errors as grounds for review: "SO ORDERED. 10 October 1990. The appellate court considered the following issues: (a) Whether or not the transaction between petitioner and STM involving SLDR No. It did not present evidence to show how many bags of sugar had been withdrawn against SLDR No.918. "After a second look at the evidence. 18. Civil Code).00 which is 10% of the value of the undelivered bags of refined sugar. the appellate court modified its decision to read: "WHEREFORE. Rule 131."[12] " 2. and 36]) presented by plaintiff-appellee was to the effect that it had withdrawn only 2.000 bags of sugar from SLDR 1214M.586 bags of sugar covered by SLDR No.950. (Art. In its resolution dated September 30. On February 24. correct in its argument that Exhibit F' which was offered to prove that checks in the total amount of P15. 1279. "(2) Pay costs of suit. (People v. "Exhibit F' We relied upon in fixing the number of bags of sugar which remained undelivered as 12. 1431. The appellate court explained the rationale for the modification as follows: "There is merit in plaintiff-appellee's position. the Court of Appeals rendered its decision modifying the trial court's judgment.586 cannot be made the basis for such a finding. 1214M. 78.00 had been cleared. et al. "1) Deliver to plaintiff-appellee 12. Felix Go Chan & Realty Corp. had they been considered. precisely because of its theory that all sales in question were a series of one single transaction and withdrawal of sugar depended on the clearing of checks paid therefor.. 1994. 1 CA Rep 783). 1214M was a separate. and (c) Whether or not CSC as buyer from STM of the rights to 25. the Court hereby modifies the assailed judgment and orders defendant-appellant to: "(1) Deliver to plaintiff-appellee 23. The Court of Appeals erred in manifestly and arbitrarily ignoring and disregarding certain relevant and undisputed facts which.000. Defendant-appellant did not rebut plaintiff-appellee's assertions. 1214M and from suing by itself for its enforcement because it was conclusively presumed to be an agent (Sec. 81 SCRA 252.000 bags of sugar. Exhibit K. 1214M could compel petitioner to deliver 23. 2. We see no reason to overturn the findings of the trial court on this point. (b) Whether or not CSC had the capacity to sue on its own on SLDR No. Defendant-appellant. 1214M. The Court of Appeals misapplied the law on compensation under Arts."[13] "3) Pay the costs of suit. "Testimonial evidence (Testimonies of Teresita Ng [TSN. Plaintiff-appellee is. Id. rendered respondent like the other persons. on the other hand. 1285 and 1626 of the Civil Code when it ruled that compensation applied only to credits from one SLDR or contract and not to Page 20 of 150 . 1214M. to wit: "WHEREFORE. 16. would have shown that petitioner was not liable.

The question of whether a contract is one of sale or agency depends on the intention of the parties as gathered from the whole scope and effect of the language employed..Whether or not the Court of Appeals erred in not ruling that the sale of sugar under SLDR No.. the issues now to be resolved are: (1). 78)." "5.. 000 bags.. without need of joining its imputed principal STM as coplaintiff."[14] The Civil Code defines a contract of agency as follows: It is clear from Article 1868 that the basis of agency is representation.Whether or not the Court of Appeals committed an error of law in not applying the "clean hands doctrine" to preclude CSC from seeking judicial relief. Here.[22] The control factor. (3). `F' an account stated and its balance binding. there is generally no agency.agrees to act under the control or direction of another .[19] and on the part of the agent. "This is to authorize Consolidated Sugar Corporation or its representative to withdraw for and in our behalf (stress supplied) the refined sugar covered by Shipping List/Delivery Receipt = Refined Sugar (SDR) No.[25] That the authorization given to CSC contained the phrase "for and in our (STM's) behalf" did not establish an agency."[24] In the instant case. and the non-availability of sugar freed petitioner from further obligation. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another. made the sale conditional and prevented STM or private respondent from acquiring title to the sugar. respondent's admission of its balance. and not an agent of STM. It is settled that an issue which was not raised during the trial in the court below could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play.Whether or not the Court of Appeals erred in applying the law on compensation to the transaction under SLDR No. 1214M were sold and transferred by STM to it . one person .. but also its nature and extent (Antonio vs. and erred in denying petitioner's right to setoff all its credits arising prior to notice of assignment from other sales or SLDRs against private respondent's claim as assignee under SLDR No. 1989 in the total quantity of 25. its only remedy being against its assignor.. Petitioner heavily relies upon STM's letter of authority allowing CSC to withdraw sugar against SLDR No. (4).. Ultimately.[17] On the part of the principal. 1214M had been "sold and endorsed" to it. and it is always a fact to be proved. 1214M was a conditional sale or a contract to sell and hence freed petitioner from further obligations. was not an agent of STM. 1214M. (a) its subject matter being generic. and STM's acquiescence thereto by silence for almost one year did not render Exh.It should be viewed in the context of all the circumstances obtaining.. 1214M so as to preclude petitioner from offsetting its credits on the other SLDRs. it appears plain to us that private respondent CSC was a buyer of the SLDFR form. (2). because the law on compensation applies precisely to two or more distinct contracts between the same parties (emphasis in the original). Indeed. The issues will be discussed in seriatim. and (b) the sale of sugar being subject to its availability at the Nawaco warehouse.. with the burden of proof resting upon the persons alleging the agency. Records. The Court of Appeals erred in not holding that the "clean hands" doctrine precluded respondent from seeking judicial reliefs (sic) from petitioner. in finding that CSC. therefore. the very word "agency" has come to connote control by the principal. 1214 dated October 16. 000 bags of sugar covered by the SLDR No.. The fact alone that it (STM) had authorized withdrawal of sugar by plaintiff-appellee "for and in our (STM's) behalf" should not be eyed as pointing to the existence of an agency relation .. Private respondent CSC was not subject to STM's control. defendant-appellant failed to sufficiently establish the existence of an agency relation between plaintiff-appellee and STM. the law makes no presumption of agency. justice.[21] One factor which most clearly distinguishes agency from other legal concepts is control. The Court of Appeals erred in not holding that the conditions of the assigned SLDR No. Page 21 of 150 . "6.the agent . has caused the courts to put contracts between principal and agent in a separate category.Whether or not the Court of Appeals erred in not ruling that CSC was an agent of STM and hence.[20] and in the absence of such intent. there must be an actual intention to appoint[18] or an intention naturally inferable from his words or actions.. more than any other. 1214M had been "sold and endorsed" to it by STM (Exhibit I. with the consent or authority of the latter. [27] The use of the words "sold and endorsed" means that STM and CSC intended a contract of sale..G.[15] Nonetheless. Anent the first issue. F between petitioner and STM.[23] The Court of Appeals. plaintiff-appellee informed defendant-appellant that SLDFR No. The Court of Appeals erred in concluding that the settlement or liquidation of accounts in Exh. p. what is decisive is the intention of the parties. to show not only the fact of its existence. now a matter for our consideration. 3536].. so as to extinguish or reduce its liability to 69 bags. Further. namely. and due process. Enriquez [CA].[26] That no agency was meant to be established by the CSC and STM is clearly shown by CSC's communication to petitioner that SLDR No... hence. The pertinent portion of said letter reads: PAT CASE: AGENCY "This Court has ruled that where the relation of agency is dependent upon the acts of the parties. 1214M as an assignee. we find from the records that petitioner raised this issue for the first time on appeal.the principal. 1214M to show that the latter was STM's agent. plaintiff-appellee has shown that the 25. 1214.those from two or more distinct contracts between the same parties. 51 O. estopped to sue upon SLDR No. the Court of Appeals opted to address this issue. opined: Simply stated. there must be an intention to accept the appointment and act on it. "Art."[16] "4. be made thus capacitating plaintiff-appellee to sue in its own name. Although it would seem STM represented plaintiff-appellee as being its agent by the use of the phrase "for and in our (STM's) behalf" the matter was cleared when on 23 January 1990.A conclusion that there was a valid sale and transfer to plaintiff-appellee may. 1868.

that petitioner had been paid for the sugar purchased under SLDR No. and the Court of Appeals concurred. DECISION PANGANIBAN. PAT CASE: AGENCY Page 22 of 150 .750. the affirmed Decision3 of Branch 34 of the Regional Trial Court (RTC) of Gapan. The sum of P1. TUAZON. And to pay the costs of suit. without being rebutted. Evidence on record shows. Petitioner is now estopped from alleging the contrary. pursuant to Article 1279 of the Civil Code. ALEJANDRO P. as follows: "1. the trial court found. the check drawer need not be impleaded in the Complaint.[30] And where the terms and conditions so stipulated are not contrary to law. Nueva Ecija. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court. MELECIO P. Spouses ANASTACIO and MARY T. Petitioners.[28] However. 2005 MARIA TUAZON. this case arose from the failure of petitioners to pay respondents’ predecessor-in-interest. the instant petition is DENIED for lack of merit. Regarding the third issue. We are now constrained to deem this matter purely speculative. The sum of P20. the suit is directed. but indorsed by herein Petitioner Maria Tuazon in favor of the said predecessor. petitioner insists that its debt has been offset by its claim for STM's unpaid purchases. ordering the defendants spouses Leonilo Tuazon and Maria Tuazon to pay the plaintiffs. we find here the records bare of convincing evidence whatsoever to support the petitioner's allegations of fraud. TUAZON.000. "3. 1214M contains the following terms and conditions: "It is understood and agreed that by payment by buyer/trader of refined sugar and/or receipt of this document by the buyer/trader personally or through a representative. morals. that the purchase of sugar covered by SLDR No. Said terms clearly establish a contract of sale.00. as moral damages "4. This fact was shown by the non-encashment of checks issued by a third person. to enable respondents to collect on the indebtedness. title to refined sugar is transferred to buyer/trader and delivery to him/it is deemed effected and completed (stress supplied) and buyer/trader assumes full responsibility therefore"[29] The aforequoted terms and conditions clearly show that petitioner transferred title to the sugar to the buyer or his assignee upon payment of the purchase price. 46535. with interests from the filing of the second amended complaint. x x x x x x x x x"4 SO ORDERED. "2. were not mutually creditors and debtors of each other. bereft of concrete proof. On the second issue. it refused to apply Article 1279 of the Civil Code to the present case. Thus. public policy or public order. Costs against petitioner.R. Under these circumstances. Petitioner clearly had the obligation to deliver said commodity to STM or its assignee." On the other hand. not a contract to sell. Noteworthy. challenging the July 31. disposed as follows: "WHEREFORE.[31] Having transferred title to the sugar in question. WHEREFORE. No. as assignee of STM. 1214M was a separate and independent transaction.050. 156262 July 14.: Stripped of nonessentials. No reversible error could thereby be imputed to respondent appellate court when. This conspiracy is allegedly evidenced by: (a) the fact that STM's selling price to CSC was below its purchasing price. J. 2002 Decision2 of the Court of Appeals (CA) in CA-GR CV No. despite careful scrutiny. The decretal portion of the assailed Decision reads: "WHEREFORE. Specifically. 1214M. the appeal is DISMISSED and the appealed decision is AFFIRMED. As to the fourth issue. However. it was not a serial part of a single transaction or of one account contrary to petitioner's insistence. 1214M is a conditional sale or a contract to sell.00. petitioner contends that the sale of sugar under SLDR No. Respondents. proceeding from the theory that the transactions entered into between petitioner and STM are but serial parts of one account. (b) CSC's refusal to pursue its case against Teresita Ng Go. The contract is the law between the contracting parties. SLDR No. Petitioner prays that the doctrine of "clean hands" should be applied to preclude CSC from seeking judicial relief. the present case involves the collection of a sum of money. judgment is hereby rendered in favor of the plaintiffs and against the defendants. G. Since said sugar had been fully paid for. as attorney’s fees. and (c) the authority given by the latter to other persons to withdraw sugar against SLDR No. the contract is valid and must be upheld. petitioner submits that STM and private respondent CSC have entered into a conspiracy to defraud it of its sugar. petitioner and CSC.00. not against the drawer. Hence. The sum of P50. petitioner is now obliged to deliver it to the purchaser or its assignee. but against the debtor who indorsed the checks in payment of the obligation. 1214M after she had sold her rights under said SLDR to CSC. on this score. no error was committed by the respondent appellate court when it held that CSC was not STM's agent and could independently sue petitioner. vs.and not an agency. good customs. HEIRS OF BARTOLOME RAMOS. with title to the sugar still remaining with the vendor.000. BUENAVENTURA.

the titles of these properties issued in the names of spouses Tuazon were cancelled and new ones were issued in favor of the [co-]defendants spouses Buenaventura."5 PAT CASE: AGENCY Since the trial court acquitted petitioners in all three of the consolidated criminal cases. with Alejandro Tuazon and Melecio Tuazon as additional defendants. petitioners moved to file a third-party complaint against her. and they failed to provide for the payment of these despite repeated demands made on them. this Petition.] x x x only 4.00. "[Respondents] averred that because spouses Tuazon anticipated that they would be sued. as evidenced by the fact that the checks had been drawn in her name. 1988. They argued that it was Evangeline Santos who was the buyer of the rice and issued the checks to Maria Tuazon as payments therefor."7 The Court’s Ruling The Petition is unmeritorious. [co-petitioner] Alejandro Tuazon x x x. The RTC. registered a fictitious Deed of Sale on July 19. Resultantly. In payment therefor. because she was the one who had purchased the merchandise from their predecessor. They alleged that it was Magdalena Ramos.6 Issues Petitioners raise the following issues for our consideration: "1. To dispute the contention of plaintiffs that they were the buyers of the rice. They assert that they were merely agents and should not be held answerable. "For their part. however. the CA held that petitioners had failed to prove the existence of an agency between respondents and Spouses Tuazon. who thereby became liable to subsequent holders for the amounts stated in those checks. [Co-petitioner] Melecio Tuazon.919. xxxxxxxxx [B]ut when these [checks] were encashed. who owned and traded the merchandise and Maria Tuazon was merely her agent. And it is for this reason that [petitioners] have been insisting on the inclusion of Evangeline Santos as an indispensable party. the spouses Tuazon issued x x x [several] Traders Royal Bank checks. 1988 x x x over a residential lot located at Nueva Ecija. official receipts or like evidence to prove this. they conspired with the other [defendants] to defraud them as creditors by executing x x x fictitious sales of their properties.] the checks were received [by petitioner] from Evangeline Santos and turned over to Ramos without knowing that these were not funded. They executed x x x simulated sale[s] [of three lots] in favor of the x x x spouses Buenaventura x x x[. spouses Leonilo and Maria Tuazon purchased a total of 8. "2.889 cavans valued at P1. to the damage and prejudice of [respondents]. defendants denied having purchased x x x rice from [Bartolome] Ramos.211.] as well as their residential lot and the house thereon[. 1988 of a Stake Toyota registered with the Land Transportation Office of Cabanatuan City on September 7.] all located at Nueva Ecija. That of this [quantity.437 cavans [have been paid for so far].] spouses Tuazon already knew that they had no available fund to support the checks. In good faith[. by the said ante-dated and simulated sales and the corresponding transfers there was no more property left registered in the names of spouses Tuazon answerable to creditors. Another simulated sale of a Toyota Willys was executed on January 25. and another simulated deed of sale dated July 12. First Issue: Agency Page 23 of 150 . and her non-inclusion was a fatal error. 1988 in favor of their other son. spouses Tuazon contended that these were sold because they were then meeting financial difficulties but the disposals were made for value and in good faith and done before the filing of the instant suit. Ruling of the Court of Appeals Sustaining the RTC. Those cases were later consolidated and amended to include Spouses Anastacio and Mary Buenaventura. wife of said deceased. Hence. The corresponding civil and criminal cases were filed by respondents against Spouses Tuazon. Having passed away before the pretrial.326 cavans of rice from [the deceased Bartolome] Ramos [predecessor-in-interest of respondents]. Contending that Evangeline Santos was an indispensable party in the case. Inasmuch as all the checks had been indorsed by Maria Tuazon. Refuting that the sale of several properties were fictitious or simulated. 1988 and June 5. 1988. they appealed only its decision finding them civilly liable to respondents. denied petitioners’ Motion. an indispensable party to the suit. Whether or not the Honorable Court of Appeals erred in rendering judgment against the petitioners despite x x x the failure of the respondents to include in their action Evangeline Santos. they argued that there was no sales invoice. Alejandro Tuazon and Melecio Tuazon. [Respondents] advanced that before issuing said checks[. Allegedly.The Facts The facts are narrated by the CA as follows: "[Respondents] alleged that between the period of May 2. Whether or not the Honorable Court of Appeals erred in ruling that petitioners are not agents of the respondents. Bartolome Ramos was substituted by his heirs. As a result of the said sales. leaving unpaid 3. The appellate court disbelieved petitioners’ contention that Evangeline Santos should have been impleaded as an indispensable party. a son of spouses Tuazon. she was primarily liable to respondents. all of the checks bounced due to insufficiency of funds. herein respondents. there was no need to implead Santos.

and that in case they were dishonored. PAT CASE: AGENCY G.is not an indispensable party in an action against Maria Tuazon. to establish the relationship. NAPOLEON GUTIERREZ AND OCTAVIO MARASIGAN III. The appellate court affirmed the decision of the Regional Trial Court (RTC) of Quezon City. there must be an intention on the part of the agent to accept the appointment and act upon it. 2014 ALVIN PATRIMONIO. they become principal debtors whose liability becomes identical to that of the original obligor.11 This Court finds no reversible error in the findings of the courts a quo that petitioners were the rice buyers themselves.00. The Factual Background The facts of the case.14 In the present case. (4) the limitation that the agent acts within the scope of his or her authority. especially when affirmed by the CA. petitioners raise the fact of agency as an affirmative defense. in accordance with Sections 31 and 63 of the Negotiable Instruments Law. the indorser of the checks. The Court notes that petitioners. Hence. Petitioner Maria Tuazon warranted that upon due presentment. Factual findings of the trial court.Well-entrenched is the rule that the Supreme Court’s role in a petition under Rule 45 is limited to reviewing errors of law allegedly committed by the Court of Appeals. they point to her as the person primarily liable for the obligation. an actual intention to appoint. Page 24 of 150 . sued Evangeline Santos for collection of the amounts represented by the bounced checks.12 As indorser. in accordance with Section 2 of Rule 3 of the Rules on Civil Procedure. but as a representative. v. (2) the object. Absent such mutual intent. on the part of the principal.15 Their filing a suit against her in their own names negates their claim that they acted as mere agents in selling the rice obtained from Bartolome Ramos. 2009 of the Court of Appeals (CA) in CA-G. in a separate civil case that they sought to be consolidated with the current one. nature and extent is incumbent upon the person alleging it.13 The law makes no presumption of agency.000. 187769. J.8 Petitioners have not given us sufficient reasons to deviate from this rule.18 Clearly. as they claim. Costs against petitioners. The trial court held that Petitioner Maria Tuazon had indorsed the questioned checks in favor of respondents. there must be. a final determination of the rights and interest of the parties may be made without any need to implead her. express or implied. Petitioner. as shown by the records.: Indispensable Party Assailed in this petition for review on certiorari1 under Rule 45 of the Revised Rules of Court is the decision2 dated September 24. June 04. are briefly summarized below. they were not mere agents of respondents in their rice dealership. according to their tenor. Evangeline Santos -. We hold that respondents’ cause of action is clearly founded on petitioners’ failure to pay the purchase price of the rice. one binds oneself to render some service or to do something in representation or on behalf of another. In this case. CV No. which is the execution of a juridical act in relation to a third person. are conclusive on the parties and this Court. they were mere agents of respondents. dismissing the complaint for declaration of nullity of loan filed by petitioner Alvin Patrimonio and ordering him to pay respondent Octavio 1arasigan III (Marasigan) the sum of P200. The question of whether a contract is one of sale or of agency depends on the intention of the parties. with the latter’s consent or authority. In the same manner. Branch 77. yet fail to prove its existence. she would pay the corresponding amount.R.R. The holder of a negotiable instrument need not even proceed against the maker before suing the indorser.9 The following are the elements of agency: (1) the parties’ consent. petitioners should have brought the suit against Santos for and on behalf of their alleged principal. DECISION Second Issue: BRION. Indispensable parties are defined as "parties in interest without whom no final determination can be had."19 The instant case was originally one for the collection of the purchase price of the rice bought by Maria Tuazon from respondents’ predecessor. it is clear that there is no privity of contract between respondents and Santos.17 After an instrument is dishonored by nonpayment. the Petition is DENIED and the assailed Decision AFFIRMED. In a contract of agency. indorsers cease to be merely secondarily liable. or both.16 That Santos was the drawer of the checks is thus immaterial to the respondents’ cause of action. 82301. by which the one who acts as an agent does so. SO ORDERED. No. Respondents. an intention naturally inferable from the principal’s words or actions. not for oneself. They insist that respondents’ Complaint against them is based on the bouncing checks she issued.as the drawer of the checks -. Petitioners argue that the lower courts erred in not allowing Evangeline Santos to be impleaded as an indispensable party.10 As the basis of agency is representation. proving its existence. WHEREFORE. the checks were to be accepted or paid. on their own behalf. If. 2008 and the resolution3 dated April 30. (3) the representation. there is generally no agency. hence. The declarations of agents alone are generally insufficient to establish the fact or extent of their authority.

the petitioner filed the present petition for review on certiorari under Rule 45 of the Revised Rules of Court. The petitioner elevated the case to the Court of Appeals (CA). he knew that the same was without a date. the petitioner filed before the Regional Trial Court (RTC) a Complaint for Declaration of Nullity of Loan and Recovery of Damages against Gutierrez and co-respondent Marasigan. Marasigan sought recovery from Gutierrez. 1994. with his check being used only as a security. although premised on different factual findings. 2003 in favor of Marasigan. It held that the loan may not be nullified since it is grounded on an obligation arising from law and ruled that the petitioner is still liable to pay Marasigan the sum of P200. Gutierrez went to Marasigan (the petitioner’s former teammate). 2008. Petitioner was already then a decorated professional basketball player while Gutierrez was a well-known sports columnist.00.” It was later revealed that petitioner’s account with the bank had been closed since May 28. the petitioner pre-signed several checks to answer for the expenses of Slam Dunk. 21001764 with the blank portions filled out with the words “Cash” “Two Hundred Thousand Pesos Only”. (3) the loan transaction was between Gutierrez and Marasigan. In the middle of 1993.The petitioner and the respondent Napoleon Gutierrez (Gutierrez) entered into a business venture under the name of Slam Dunk Corporation (Slum Dunk).00. He thereafter sent several demand letters to the petitioner asking for the payment of P200. The upper right portion of the check corresponding to the date was also filled out with the words “May 23. but his demands likewise went unheeded.4 It found that the petitioner. Marasigan is still not entitled to claim the check’s value as he was not a holder in due course. and hence.00 sometime in February 1994. to no avail. incomplete. After careful analysis. He also alleged that the loan was actually between Marasigan and Gutierrez with his check being used only as a security. the RTC ruled that he deliberately violated petitioner’s specific instructions and took advantage of the trust reposed in him by the latter. Gutierrez simultaneously delivered to Marasigan one of the blank checks the petitioner pre-signed with Pilipinas Bank.000. The CA also concluded that the check had been strictly filled out by Gutierrez in accordance with the petitioner’s authority. and (6) by reason of the bad faith in the dealings between the respondents. the CA affirmed the RTC ruling. and asserted that he was not privy to the parties’ loan agreement. Marasigan acceded to Gutierrez’ request and gave him P200. 1997. insisting that Marasigan is not a holder in due course. Nonetheless. 22 against the petitioner. Gutierrez assured Marasigan that he would be paid an interest of 5% per month from March to May 1994. The blank checks were entrusted to Gutierrez with the specific instruction not to fill them out without previous notification to and approval by the petitioner. Marasigan deposited the check but it was dishonored for the reason “ACCOUNT CLOSED. On September 24. was not complied with. these checks had no payee’s name. had the intention of issuing a negotiable instrument. In addition to the payment of the principal. Although signed. the CA agreed with the petitioner that Marasigan is not a holder in due course as he did not receive the check in good faith. The Issues The Ruling of the RTC PAT CASE: AGENCY Page 25 of 150 . The Petition The petitioner argues that: (1) there was no loan between him and Marasigan since he never authorized the borrowing of money nor the check’s negotiation to the latter. without the petitioner’s knowledge and consent. The RTC ruled on February 3.P. Consequently. On September 10. 42816. Only Marasigan filed his answer to the complaint. Gutierrez was declared in default.000. According to petitioner. a production outfit that produced mini-concerts and shows related to basketball. he is entitled to claim for damages. In the RTC’s order dated December 22. docketed as Criminal Case No. albeit with specific instructions to Gutierrez not to negotiate or issue the check without his approval.000. While under Section 14 of the Negotiable Instruments Law Gutierrez had the prima facie authority to complete the checks by filling up the blanks therein. (4) the check had not been completely and strictly filled out in accordance with his authority since the condition that the subject check can only be used provided there is prior approval from him. the arrangement was made so that he could verify the validity of the payment and make the proper arrangements to fund the account. On May 24. 1997. Greenhills Branch. In the course of their business.00”. (5) even if the check was strictly filled up as instructed by the petitioner. in issuing the pre-signed blank checks. Check No.000. (2) under Article 1878 of the Civil Code. date or amount. He completely denied authorizing the loan or the check’s negotiation. The Ruling of the CA After much contemplation and taking into account his relationship with the petitioner and Gutierrez.000.00 on the excuse that the petitioner needed the money for the construction of his house. He contended that when Marasigan received the check. to secure a loan in the amount of P200. After the CA denied the subsequent motion for reconsideration that followed. he filed a criminal case for violation of B. and the amount of “P200. It ordered the petitioner to pay Marasigan the face value of the check with a right to claim reimbursement from Gutierrez. 1993. a special power of attorney is necessary for an individual to make a loan or borrow money in behalf of another. 1994” but the petitioner contended that the same was not written by Gutierrez. the RTC declared Marasigan as a holder in due course and accordingly dismissed the petitioner’s complaint for declaration of nullity of the loan.

hinges on the very existence of the contract of loan – a question that. As a general rule..6 However.Reduced to its basics.5 In the present case. the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him. authority of the latter. Whether there is basis to hold the petitioner liable for the payment of the P200. this Court in Strong v. We unequivocably declared in Lim Pin v. United States lines Company. a special authority. or his failure to repudiate the agency. that. dismissal of the complaint for nullity of the loan. if not in writing. 225). and whether Marasigan is a holder in due course are also questions of fact. is essentially. for attorneys to compromise the litigation of their clients. which explicitly requires a written authority when the loan is contracted through an agent. may be nullified for being void. Liability Under the Contract of Loan The petitioner seeks to nullify the contract of loan on the ground that he never authorized the borrowing of money. from his silence or lack of action. 21 SCRA 863. 1878. He points to Article 1878. the authority must be duly established by competent and convincing evidence other than the self serving assertion of the party claiming that such authority was verbally given. Gutierrez-Repide (6 Phil. for example. 52 SCRA 210.00 loan. paragraph 7 of the Civil Code. Contracts of Agency May be Oral Unless The Law Requires a Specific Form x x x the Rules require. he should not be held liable for the face value of the check because he was not a party or privy to the agreement. Petitioner is Not Bound by the Contract of Loan.000. The Contract of Loan Entered Into by Gutierrez in Behalf of the Petitioner Should be Nullified for Being Void. We stated that.. Whether the petitioner authorized the borrowing. is not an absolute rule that admits of no exceptions. are beyond the scope of a Rule 45 petition. in a sale of a piece of land or any interest therein through an agent. Be that as it may. The requirements of a special power of attorney in Article 1878 of the Civil Code and of a special authority in Rule 138 of the Rules of Court refer to the nature of the authorization and not its form.e. As early as 1906.000.7 that the requirement under Article 1878 of the Civil Code refers to the nature of the authorization and not to its form. Whether respondent Gutierrez has completely filled out the subject check strictly under the authority given by the petitioner. as a petition for review under Rule 45 is limited only to questions of law. The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. Geraldez. then it must be duly established by evidence: I. the case presents to us the following issues:ChanRoblesVirtualawlibrary Whether the contract of loan in the amount of P200. As long as the mandate is express. The petitioner contends that absent such authority in writing.00 granted by respondent Marasigan to petitioner. thus:ChanRoblesVirtualawlibrary The rule that questions of fact are not the proper subject of an appeal by certiorari. as presented. to wit:ChanRoblesVirtualawlibrary Whether Marasigan is a holder in due course. knowing that another person is acting on his behalf without authority. And more recently.. (emphasis supplied) We note at the outset that the issues raised in this petition are essentially factual in nature. (emphasis supplied). the tribunals below arrived at two conflicting factual findings. et al. One notable exception is when the findings of fact of both the trial court and the CA are conflicting. et al. albeit with the same conclusion. unless the latter act be urgent and indispensable for the preservation of the things which are under administration. Art. such authority may be either oral or written. with the consent or PAT CASE: AGENCY Page 26 of 150 . Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself to render some service or to do something in representation or on behalf of another. Special powers of attorney are necessary in the following cases: The Court’s Ruling xxxx The petition is impressed with merit. Accordingly. or implied from the acts of the principal. (7) To loan or borrow money. one of fact. we will examine the parties’ evidence presented. The main point of inquiry of whether the contract of loan may be nullified. as a general rule." Agency may be express. 866: Vicente vs. through respondent Gutierrez. i. (Home Insurance Company vs. Liao Tian. whether Gutierrez completely filled out the subject check strictly under the petitioner’s authority. 680) stated that such a mandate may be either oral or written. the one vital thing being that it shall be express. a contract of agency may be oral. And while the same does not state that the special authority be in writing the Court has every reason to expect that. and Article 1878 paragraph 7 of the Civil Code expressly requires a special power of authority before an agent can loan or borrow money in behalf of the principal. it must be written when the law requires a specific form. Article 1878 does not state that the authority be in writing. if the special authority is not written. making their review necessary.

9 involving a loan contracted by de Villa secured by real estate mortgages in the name of East Cordillera Mining Corporation. the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs.. however. The contract of agency and the special fiduciary relationship inherent in this contract must exist as a matter of fact. whether verbally or in writing. i. the principal consents that the other party. In fact. While petitioner claims that Lilian was authorized by respondent. In the absence of any showing of any agency relations or special authority to act for and in behalf of the petitioner. but also its nature and extent. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter. (at p. For a contract of agency to exist. (emphasis supplied) Page 27 of 150 .. Records do not show that the petitioner executed any special power of attorney (SPA) in favor of Gutierrez. (citations omitted. if he has not acted in the name of the principal. implied or apparent. there is no basis to hold the corporation liable. It is not enough merely that the agent was in fact authorized to make the mortgage. contrary to the holding of the respondent Judges. This is more imperative when it is considered that the transaction dealt with involves checks. the petitioner is not bound by the parties’ loan agreement. DE VERA: Did you give Nap Gutierrez any Special Power of Attorney in writing authorizing him to borrow using your money? WITNESS: No. it will bind the agent only. In the absence of any authorization. emphasis supplied). Nov. Annie Mercado. Neither was there any subsequent ratification of his act. the loan was personal to de Villa." And there appears to be no contract of agency between Yambao and Andan so as to bind the latter for the acts of the former. Alicia P. and the creditor may validly refuse the same as payment of obligation. This principle was also reiterated in the case of Gozun v. the consent of both parties is essential. but also its nature and extent. 105)8 xxxx Marasigan however submits that the petitioner’s acts of pre-signing the blank checks and releasing them to Gutierrez suffice to establish that the petitioner had authorized Gutierrez to fill them out and contract the loan in his behalf. It is a general rule in the law of agency that. The law makes no presumption thereof.N. not only the fact of agency. nor was he aware of any such transaction:ChanRoblesVirtualawlibrary ALVIN PATRIMONIO (witness) ATTY. Andan declared in that sworn testimony before the investigating fiscal that Yambao is but her "messenger" or "part-time employee." There was no special fiduciary relationship that permeated their dealings. as "payee" or "indorsee. Alvin Patrimonio. xxxx Petitioner’s testimony failed to categorically state. the loan agreement Gutierrez entered into with Marasigan is null and void. no special power of attorney conferring authority on de Villa was ever presented. given to de Villa to borrow money from petitioner. Yabut:12cralawred Modesto Yambao's receipt of the bad checks from Cecilia Que Yabut or Geminiano Yabut. It must exist as a fact.10 where this court held:ChanRoblesVirtualawlibrary PAT CASE: AGENCY Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a loan from him. x x x There was no showing that respondent corporation ever authorized de Villa to obtain the loans on its behalf. The person alleging it has the burden of proof to show. not only the fact of its existence. As held in Yasuma v. Heirs of De Villa. whether the loan was made on behalf of respondent or of his wife. x x x (emphasis supplied). Marasigan’s submission fails to persuade us. the petitioner’s testimony confirmed that he never authorized Gutierrez (or anyone for that matter). on the first issue. to wit:ChanRoblesVirtualawlibrary The power to borrow money is one of those cases where corporate officers as agents of the corporation need a special power of attorney. it must upon its face purport to be made. xxxx The liability arising from the loan was the sole indebtedness of de Villa (or of his estate after his death). There was no basis to hold the corporation liable since there was no authority. (T. Thus. in Caloocan City cannot.e. without indicating therein that she was acting for and in behalf of respondent. express. to borrow money in his behalf. be licitly taken as delivery of the checks to the complainant Alicia P. which are not legal tender. Gutierrez could not enter into a contract of loan in behalf of the petitioner. in order to bind the principal by a mortgage on real property executed by an agent. and the agent consents so to act. It bears noting that Lilian signed in the receipt in her name alone. in the absence of an SPA conferring authority on de Villa. The person alleging it has the burden of proof to show. Jr. 11. signed and sealed in the name of the principal. sir. 630). He did not take delivery of the checks as holder. that the petitioner entrusted the blank pre-signed checks to Gutierrez is not legally sufficient because the authority to enter into a loan can never be presumed.11 As we held in People v. Andan at Caloocan City to fix the venue there. the agent. In the case at bar. 1999. xxxx Therefore. Furthermore.A review of the records reveals that Gutierrez did not have any authority to borrow money in behalf of the petitioner. otherwise. shall act on his behalf.. p.S. Mercado.

such contract could not have been perfected. .17cralawred In the present case. like any other contract. Without any evidence to prove Gutierrez’ authority. This act. namely: 1.13 Article 1318 of the Civil Code14 enumerates the essential requisites for a valid contract. as The Latter’s Consent Was Not Obtained. Liability Under the Instrument The answer is supplied by the applicable statutory provision found in (b) That he became the holder of it before it was overdue. is subject to the rules governing the requisites and validity of contracts in general. He was thus bound by the risk accompanying his trust on the mere assurances of Gutierrez. But if any such instrument. object certain which is the subject matter of the contract. No Contract of Loan Was Perfected Between Marasigan And Petitioner. consent of the contracting parties. and he may enforce it as if it had been filled up strictly in accordance with the authority given and within a reasonable time. the subject check was not completely filled out strictly under the authority he has given and second. if the holder is a holder in due course. True. In this case. Marasigan was not a holder in due course. and (2) it must be filled up within a reasonable time.The records show that Marasigan merely relied on the words of Gutierrez without securing a copy of the SPA in favor of the latter and without verifying from the petitioner whether he had authorized the borrowing of money or release of the check. the petitioner denied liability on the ground that the contract lacked the essential element of consent. It merely requires that the instrument be in the possession of a person other than the drawer or maker and from such possession. 14. This provision applies to an incomplete but delivered instrument. any amount. much less. While there may be a meeting of the minds between Gutierrez and Marasigan. if the maker or drawer delivers a pre-signed blank paper to another person for the purpose of converting it into a negotiable instrument. cause of the obligation which is established. If it was proven that the instrument had not been filled up strictly in accordance with the authority given and within a reasonable time. the person in possession thereof has a prima facie authority to complete it by filling up the blanks therein. such agreement cannot bind the petitioner whose consent was not obtained and who was not privy to the loan agreement. even remotely. Under this rule. Without the consent given by one party in a purported contract. consent to the contract of loan. the petitioner’s signature in the check cannot be taken. We agree with the petitioner. And a signature on a blank paper delivered by the person making the signature in order that the paper may be converted into a negotiable instrument operates as a prima facie authority to fill it up as such for (d) That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.16cralawred In order however that one who is not a holder in due course can enforce the instrument against a party prior to the instrument’s completion.Where the instrument is wanting in any material particular. and without notice that it had been previously dishonored. Blanks. only Gutierrez is bound by the contract of loan.15cralawred With the loan issue out of the way. however. after completion. thus:ChanRoblesVirtualawlibrary Sec. does not constitute sufficient authority to borrow money in his behalf and neither should it be construed as petitioner’s grant of consent to the parties’ loan agreement. 52 — A holder in due course is a holder who has taken the instrument under the following conditions: (a) That it is complete and regular upon its face. Another significant point that the lower courts failed to consider is that a contract of loan. 2. the maker can set this up as a personal defense and avoid liability. that person is deemed to have prima facie authority to fill it up. However. Marasigan is Not a Holder in Due Course The Negotiable Instruments Law (NIL) defines a holder in due course. if such was the fact. (emphasis supplied) PAT CASE: AGENCY Page 28 of 150 . the law presumes agency to fill up the blanks. Sec. is negotiated to a holder in due course. it is valid and effectual for all purposes in his hands. the petitioner contends that there is no legal basis to hold him liable both under the contract and loan and under the check because: first. one of which fell into the hands of Marasigan. as sufficient authorization. As we explained above. when may be filled. In order. Section 14 of the Negotiable Instruments Law (NIL) which states:ChanRoblesVirtualawlibrary (c) That he took it in good faith and for value. there is a conclusive presumption that authority to fill it up had been given and that the same was not in excess of authority. we now proceed to determine whether the petitioner can be made liable under the check he signed. the petitioner had issued several pre-signed checks to Gutierrez. two requisites must exist: (1) that the blank must be filled strictly in accordance with the authority given. II. that any such instrument when completed may be enforced against any person who became a party thereto prior to its completion. it must be filled up strictly in accordance with the authority given and within a reasonable time. there simply was no contract to speak of. Gutierrez did not have the petitioner’s written/verbal authority to enter into a contract of loan. however. and 3. together with the fact that the instrument is wanting in a material particular. Hence.

Section 52(c) of the NIL states that a holder in due course is one who takes the instrument “in good faith
and for value.” It also provides in Section 52(d) that in order that one may be a holder in due course, it is
necessary that at the time it was negotiated to him he had no notice of any infirmity in the instrument or
defect in the title of the person negotiating it.
Acquisition in good faith means taking without knowledge or notice of equities of any sort which could be
set up against a prior holder of the instrument.18 It means that he does not have any knowledge of fact
which would render it dishonest for him to take a negotiable paper. The absence of the defense, when
the instrument was taken, is the essential element of good faith.19cralawred
As held in De Ocampo v. Gatchalian:20cralawred
In order to show that the defendant had “knowledge of such facts that his action in taking the instrument
amounted to bad faith,” it is not necessary to prove that the defendant knew the exact fraud that was
practiced upon the plaintiff by the defendant's assignor, it being sufficient to show that the defendant had
notice that there was something wrong about his assignor's acquisition of title, although he did not have
notice of the particular wrong that was committed.
It is sufficient that the buyer of a note had notice or knowledge that the note was in some way tainted
with fraud. It is not necessary that he should know the particulars or even the nature of the fraud, since
all that is required is knowledge of such facts that his action in taking the note amounted bad faith.
The term ‘bad faith’ does not necessarily involve furtive motives, but means bad faith in a commercial
sense. The manner in which the defendants conducted their Liberty Loan department provided an easy
way for thieves to dispose of their plunder. It was a case of “no questions asked.” Although gross
negligence does not of itself constitute bad faith, it is evidence from which bad faith may be inferred. The
circumstances thrust the duty upon the defendants to make further inquiries and they had no right to shut
their eyes deliberately to obvious facts. (emphasis supplied).
In the present case, Marasigan’s knowledge that the petitioner is not a party or a privy to the contract of
loan, and correspondingly had no obligation or liability to him, renders him dishonest, hence, in bad faith.
The following exchange is significant on this point:ChanRoblesVirtualawlibrary
WITNESS: AMBET NABUS
Q:
Now, I refer to the second call… after your birthday. Tell us what you talked about?
A:
Since I celebrated my birthday in that place where Nap and I live together with the other crew, there were
several visitors that included Danny Espiritu. So a week after my birthday, Bong Marasigan called me up
again and he was fuming mad. Nagmumura na siya. Hinahanap niya si… hinahanap niya si Nap, dahil
pinagtataguan na siya at sinabi na niya na kailangan I-settle na niya yung utang ni Nap, dahil…
xxxx
WITNESS:
PAT CASE: AGENCY

Yes. Sinabi niya sa akin na kailangan ayusin na bago pa mauwi sa kung saan ang tsekeng tumalbog…
(He told me that we have to fix it up before it…) mauwi pa kung saan…
xxxx
Q:
What was your reply, if any?
A:
I actually asked him. Kanino ba ang tseke na sinasabi mo? (Whose check is it that you are referring to or
talking about?)
Q:
What was his answer?
A:
It was Alvin’s check.
Q:
What was your reply, if any?
A:
I told him do you know that it is not really Alvin who borrowed money from you or what you want to
appear…
xxxx
Q:
What was his reply?
A:
Yes, it was Nap, pero tseke pa rin ni Alvin ang hawak ko at si Alvin ang maiipit dito. (T.S.N., Ambet
Nabus, July 27, 2000; pp.65-71; emphasis supplied)21
Since he knew that the underlying obligation was not actually for the petitioner, the rule that a possessor
of the instrument is prima facie a holder in due course is inapplicable. As correctly noted by the CA, his
inaction and failure to verify, despite knowledge of that the petitioner was not a party to the loan, may be
construed as gross negligence amounting to bad faith.
Yet, it does not follow that simply because he is not a holder in due course, Marasigan is already totally
barred from recovery. The NIL does not provide that a holder who is not a holder in due course may not
in any case recover on the instrument.22 The only disadvantage of a holder who is not in due course is
that the negotiable instrument is subject to defenses as if it were non-negotiable.23 Among such
defenses is the filling up blank not within the authority.
On this point, the petitioner argues that the subject check was not filled up strictly on the basis of the
authority he gave. He points to his instruction not to use the check without his prior approval and argues
that the check was filled up in violation of said instruction.
Check Was Not Completed Strictly Under
The Authority Given by The Petitioner
Our own examination of the records tells us that Gutierrez has exceeded the authority to fill up the
blanks and use the check. To repeat, petitioner gave Gutierrez pre-signed checks to be used in their
Page 29 of 150

business provided that he could only use them upon his approval. His instruction could not be any
clearer as Gutierrez’ authority was limited to the use of the checks for the operation of their business,
and on the condition that the petitioner’s prior approval be first secured.
While under the law, Gutierrez had a prima facie authority to complete the check, such prima facie
authority does not extend to its use (i.e., subsequent transfer or negotiation) once the check is
completed. In other words, only the authority to complete the check is presumed. Further, the law used
the term "prima facie" to underscore the fact that the authority which the law accords to a holder is a
presumption juris tantum only; hence, subject to subject to contrary proof. Thus, evidence that there was
no authority or that the authority granted has been exceeded may be presented by the maker in order to
avoid liability under the instrument.

WHEREFORE, in view of the foregoing, judgment is hereby rendered GRANTING the petitioner Alvin
Patrimonio's petition for review on certiorari. The appealed Decision dated September 24, 2008 and the
Resolution dated April 30, 2009 of the Court of Appeals are consequently ANNULLED AND SET ASIDE.
Costs against the respondents.
SO ORDERED.
G.R. No. 174978

SALLY YOSHIZAKI, Petitioner,
vs.
JOY TRAINING CENTER OF AURORA, INC., Respondent.

In the present case, no evidence is on record that Gutierrez ever secured prior approval from the
petitioner to fill up the blank or to use the check. In his testimony, petitioner asserted that he never
authorized nor approved the filling up of the blank checks, thus:ChanRoblesVirtualawlibrary
ATTY. DE VERA:
Did you authorize anyone including Nap Gutierrez to write the date, May 23, 1994? WITNESS: No, sir.
Q:
Did you authorize anyone including Nap Gutierrez to put the word cash? In the check?
A:
No, sir.
Q:
Did you authorize anyone including Nap Gutierrez to write the figure P200,000 in this check?
A:
No, sir.
Q:
And lastly, did you authorize anyone including Nap Gutierrez to write the words P200,000 only xx in this
check?
A:
No, sir. (T.S.N., Alvin Patrimonio, November 11, 1999).24
Notably, Gutierrez was only authorized to use the check for business expenses; thus, he exceeded the
authority when he used the check to pay the loan he supposedly contracted for the construction of
petitioner's house. This is a clear violation of the petitioner's instruction to use the checks for the
expenses of Slam Dunk. It cannot therefore be validly concluded that the check was completed strictly in
accordance with the authority given by the petitioner.
Considering that Marasigan is not a holder in due course, the petitioner can validly set up the personal
defense that the blanks were not filled up in accordance with the authority he gave. Consequently,
Marasigan has no right to enforce payment against the petitioner and the latter cannot be obliged to pay
the face value of the check.

PAT CASE: AGENCY

July 31, 2013

DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioner Sally Yoshizaki to challenge the
February 14, 2006 Decision2 and the October 3, 2006 Resolution3 of the Court of Appeals (CA) in CAG.R. CV No. 83773.
The Factual Antecedents
Respondent Joy Training Center of Aurora, Inc. (Joy Training) is a non-stock, non-profit religious
educational institution. It was the registered owner of a parcel of land and the building thereon (real
properties) located in San Luis Extension Purok No. 1, Barangay Buhangin, Baler, Aurora. The parcel of
land was designated as Lot No. 125-L and was covered by Transfer Certificate of Title (TCT) No. T25334.4
On November 10, 1998, the spouses Richard and Linda Johnson sold the real properties, a Wrangler
jeep, and other personal properties in favor of the spouses Sally and Yoshio Yoshizaki. On the same
date, a Deed of Absolute Sale5 and a Deed of Sale of Motor Vehicle6 were executed in favor of the
spouses Yoshizaki. The spouses Johnson were members of Joy Training’s board of trustees at the time
of sale. On December 7, 1998, TCT No. T-25334 was cancelled and TCT No. T-260527 was issued in
the name of the spouses Yoshizaki.
On December 8, 1998, Joy Training, represented by its Acting Chairperson Reuben V. Rubio, filed an
action for the Cancellation of Sales and Damages with prayer for the issuance of a Temporary
Restraining Order and/or Writ of Preliminary Injunction against the spouses Yoshizaki and the spouses
Johnson before the Regional Trial Court of Baler, Aurora (RTC).8 On January 4, 1999, Joy Training filed
a Motion to Amend Complaint with the attached Amended Complaint. The amended complaint
impleaded Cecilia A. Abordo, officer-in-charge of the Register of Deeds of Baler, Aurora, as additional
defendant. The RTC granted the motion on the same date.9
Page 30 of 150

In the complaint, Joy Training alleged that the spouses Johnson sold its properties without the requisite
authority from the board of directors.10 It assailed the validity of a board resolution dated September 1,
199811 which purportedly granted the spouses Johnson the authority to sell its real properties. It averred
that only a minority of the board, composed of the spouses Johnson and Alexander Abadayan,
authorized the sale through the resolution. It highlighted that the Articles of Incorporation provides that
the board of trustees consists of seven members, namely: the spouses Johnson, Reuben, Carmencita
Isip, Dominador Isip, Miraflor Bolante, and Abelardo Aquino.12
Cecilia and the spouses Johnson were declared in default for their failure to file an Answer within the
reglementary period.13 On the other hand, the spouses Yoshizaki filed their Answer with Compulsory
Counterclaims on June 23, 1999. They claimed that Joy Training authorized the spouses Johnson to sell
the parcel of land. They asserted that a majority of the board of trustees approved the resolution. They
maintained that the actual members of the board of trustees consist of five members, namely: the
spouses Johnson, Reuben, Alexander, and Abelardo. Moreover, Connie Dayot, the corporate secretary,
issued a certification dated February 20, 199814 authorizing the spouses Johnson to act on Joy
Training’s behalf. Furthermore, they highlighted that the Wrangler jeep and other personal properties
were registered in the name of the spouses Johnson.15 Lastly, they assailed the RTC’s jurisdiction over
the case. They posited that the case is an intra-corporate dispute cognizable by the Securities and
Exchange Commission (SEC).16
After the presentation of their testimonial evidence, the spouses Yoshizaki formally offered in evidence
photocopies of the resolution and certification, among others.17 Joy Training objected to the formal offer
of the photocopied resolution and certification on the ground that they were not the best evidence of their
contents.18 In an Order19 dated May 18, 2004, the RTC denied the admission of the offered copies.
The RTC Ruling
The RTC ruled in favor of the spouses Yoshizaki. It found that Joy Training owned the real properties.
However, it held that the sale was valid because Joy Training authorized the spouses Johnson to sell the
real properties. It recognized that there were only five actual members of the board of trustees;
consequently, a majority of the board of trustees validly authorized the sale. It also ruled that the sale of
personal properties was valid because they were registered in the spouses Johnson’s name.20
Joy Training appealed the RTC decision to the CA.
The CA Ruling
The CA upheld the RTC’s jurisdiction over the case but reversed its ruling with respect to the sale of real
properties. It maintained that the present action is cognizable by the RTC because it involves recovery of
ownership from third parties.
It also ruled that the resolution is void because it was not approved by a majority of the board of trustees.
It stated that under Section 25 of the Corporation Code, the basis for determining the composition of the
PAT CASE: AGENCY

board of trustees is the list fixed in the articles of incorporation. Furthermore, Section 23 of the
Corporation Code provides that the board of trustees shall hold office for one year and until their
successors are elected and qualified. Seven trustees constitute the board since Joy Training did not hold
an election after its incorporation.
The CA did not also give any probative value to the certification. It stated that the certification failed to
indicate the date and the names of the trustees present in the meeting. Moreover, the spouses Yoshizaki
did not present the minutes that would prove that the certification had been issued pursuant to a board
resolution.21 The CA also denied22 the spouses Yoshizaki’s motion for reconsideration, prompting
Sally23 to file the present petition.
The Petition
Sally avers that the RTC has no jurisdiction over the case. She points out that the complaint was
principally for the nullification of a corporate act. The transfer of the SEC’s original and exclusive
jurisdiction to the RTC24 does not have any retroactive application because jurisdiction is a substantive
matter.
She argues that the spouses Johnson were authorized to sell the parcel of land and that she was a
buyer in good faith because she merely relied on TCT No. T-25334. The title states that the spouses
Johnson are Joy Training’s representatives.
She also argues that it is a basic principle that a party dealing with a registered land need not go beyond
the certificate of title to determine the condition of the property. In fact, the resolution and the certification
are mere reiterations of the spouses Johnson’s authority in the title to sell the real properties. She further
claims that the resolution and the certification are not even necessary to clothe the spouses Johnson
with the authority to sell the disputed properties. Furthermore, the contract of agency was subsisting at
the time of sale because Section 108 of Presidential Decree No. (PD) 1529 requires that the revocation
of authority must be approved by a court of competent jurisdiction and no revocation was reflected in the
certificate of title.25
The Case for the Respondent
In its Comment26 and Memorandum,27 Joy Training takes the opposite view that the RTC has
jurisdiction over the case. It posits that the action is essentially for recovery of property and is therefore a
case cognizable by the RTC. Furthermore, Sally is estopped from questioning the RTC’s jurisdiction
because she seeks to reinstate the RTC ruling in the present case.
Joy Training maintains that it did not authorize the spouses Johnson to sell its real properties. TCT No. T25334 does not specifically grant the authority to sell the parcel of land to the spouses Johnson. It further
asserts that the resolution and the certification should not be given any probative value because they
were not admitted in evidence by the RTC. It argues that the resolution is void for failure to comply with
the voting requirements under Section 40 of the Corporation Code. It also posits that the certification is
void because it lacks material particulars.
Page 31 of 150

3) As a consequence of the second issue. from his silence or lack of action. and 2) Whether or not there was a contract of agency to sell the real properties between Joy Training and the spouses Johnson. the fifth paragraph of the certification provides: We are aware that the issues at hand require us to review the pieces of evidence presented by the parties before the lower courts. This was beyond the ambit of the SEC’s original and exclusive jurisdiction prior to the enactment of Republic Act No. Article 1874 of the Civil Code provides that the contract of agency must be written for the validity of the sale of a piece of land or any interest therein. Shawnee. they will formulate and come up with by-laws which will address and serve as governing papers Page 32 of 150 ."31 Indeed. (3) and the certification. a petition for review on certiorari precludes this Court from entertaining factual issues. Court of Appeals34 that a special power of attorneymust express the powers of the agent in clear and unmistakable language for the principal to confer the right upon an agent to sell real estate. Richard A. states: A parcel of land x x x is registered in accordance with the provisions of the Property Registration Decree in the name of JOY TRAINING CENTER OF AURORA. a contract of agency may be oral. both of legal age. The allegations in the complaint and the status or relationship of the parties determine which court has jurisdiction over the nature of an action. Ks 66203. we are not duty-bound to analyze again and weigh the evidence introduced in and considered by the lower courts.33 Specifically. We find the petition unmeritorious.The Issues There is no contract of agency between Joy Training and the spouses Johnson to sell the parcel of land with its improvements The case comes to us with the following issues: 1) Whether or not the RTC has jurisdiction over the present case. 2000.35 In the present case. However. It is a well-settled rule that "disputes concerning the application of the Civil Code are properly cognizable by courts of general jurisdiction. states that special powers of attorney are necessary to convey real rights over immovable properties. INC. no such construction shall be given the document. PAT CASE: AGENCY Further. Our Ruling Article 1868 of the Civil Code defines a contract of agency as a contract whereby a person "binds himself to render some service or to do something in representation or on behalf of another. Joy Training seeks to nullify the sale of the real properties on the ground that there was no contract of agency between Joy Training and the spouses Johnson. A related provision. entered in the Registry of Deeds on March 5. or his failure to repudiate the agency." It may be express. by Sps. When there is any reasonable doubt that the language so used conveys such power.. the present case falls under the recognized exception that a review of the facts is warranted when the findings of the lower courts are conflicting.32 Accordingly. The RTC has jurisdiction over disputes concerning the application of the Civil Code Jurisdiction over the subject matter is the power to hear and determine cases of the general class to which the proceedings before a court belong. JOHNSON and LINDA S.A. We quote the pertinent portions of these documents for a thorough examination of Sally’s claim. U. and Linda J. T-25334. Article 1878 of the Civil Code. knowing that another person is acting on his behalf without authority. TCT No.30 The CA correctly ruled that the RTC has jurisdiction over the present case. The Supreme Court may review questions of fact in a petition for review on certiorari when the findings of fact by the lower courts are conflicting The special power of attorney mandated by law must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the authorized act. We unequivocably declared in Cosmic Lumber Corporation v. T-25334. with the consent or authority of the latter.28 It is conferred by law. RICHARD A. U. it must be written when the law requires a specific form. 8799 which only took effect on August 3. Citizen. (2) the resolution. Sally presents three pieces of evidence which allegedly prove that Joy Training specially authorized the spouses Johnson to sell the real properties: (1) TCT No. Otherwise. JOHNSON. and residents of P. we will examine the relevant pieces of evidence presented to the lower court. Johnson were given FULL AUTHORITY for ALL SIGNATORY purposes for the corporation on ANY and all matters and decisions regarding the property and ministry here. whether or not there was a valid contract of sale of the real properties between Joy Training and the spouses Yoshizaki. As a general rule. As a general rule.29 The same test applies in ascertaining whether a case involves an intra-corporate controversy. However.36 (emphasis ours) On the other hand. no special skill requiring the SEC’s technical expertise is necessary for the disposition of this issue and of this case. 1998. The purpose of the law in requiring a special power of attorney in the disposition of immovable property is to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another and to caution the buyer to assure himself of the specific authorization of the putative agent. Box 3246. the sale shall be void. or implied from the acts of the principal.S.S.O. The determination of the existence of a contract of agency and the validity of a contract of sale requires the application of the relevant provisions of the Civil Code. Rep. They will follow guidelines set forth according to their appointment and ministerial and missionary training and in that.

They also failed to show that the production of pieces of secondary evidence falls under the exceptions enumerated in Section 3.40 Thus. in Iloilo City. RICHARD A.R. 17117 entitled Timoteo Jusayan. The resolution which purportedly grants the spouses Johnson a special power of attorney is negated by the phrase "land and building owned by spouses Richard A. AND MICHAEL JUSAYAN Petitioners. J. Rule 130 of the Rules of Court. 1998. this Court will still arrive at the same conclusion. except when the party concerned has actual knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry. or the instructions as regards the agency.47 This rule applies when the ownership of a parcel of land is disputed and not when the fact of agency is contested. The second paragraph of Section 2543 of the Corporation Code expressly provides that a majority of the number of trustees as fixed in the articles of incorporation shall constitute a quorum for the transaction of corporate business.2 Antecedents PAT CASE: AGENCY Page 33 of 150 . 163928 January 21.44 Article 1877 of the Civil Code clearly states that "an agency couched in general terms comprises only acts of administration. Sally cannot also claim that she was a buyer in good faith. T-25334 merely states that Joy Training is represented by the spouses Johnson. JORGE SOMBILLA. even if the principal should state that he withholds no power or that the agent may execute such acts as he may consider appropriate.37 (emphasis ours) The resolution states: We. 5102156 filed with the Province of Aurora last 5th day of March. ALFREDO JUSAYAN. SO ORDERED.46 Joy Training effectively did not enter into a valid contract of sale with the spouses Yoshizaki. premises considered. No. They are to issue monthly and quarterly statements to all members of the corporation. The lower courts should not have relied on the resolution and the certification in resolving the case. or even though the agency should authorize a general and unlimited management. JOHNSON and LINDA S. 1999 in CAR Case No. and Linda J. The resolution is determinative of whether or not the Regional Trial Court (RTC) had original exclusive jurisdiction over the action commenced by the predecessor of the petitioners against the respondent. Johnson."42 Even if we disregard such phrase. the assailed Decision dated February 14. WHEREFORE. 2006 of the Court of Appeals are hereby AFFIRMED and the petition is hereby DENIED for lack of merit. At this point. the absence of a contract of agency renders the contract of sale unenforceable.1 whereby the Court of Appeals (CA) reversed the judgment in favor of the petitioners rendered on April 13. Sally bought the real properties at her own risk. the undersigned Board of Trustees (in majority) have authorized the sale of land and building owned by spouses Richard A. We adhere to the CA’s position that the basis for determining the board of trustees’ composition is the trustees as fixed in the articles of incorporation and not the actual members of the board. 2003.38 (emphasis ours) The above documents do not convince us of the existence of the contract of agency to sell the real properties. 2015 MANUEL JUSAYAN.1âwphi1 The spouses Yoshizaki did not produce the original documents during trial. she bears the risk of injury occasioned by her transaction with the spouses Johnson."45 The contract of sale is unenforceable Necessarily.: The Court resolves whether a lease of agricultural land between the respondent and the predecessor of the petitioners was a civil law lease or an agricultural lease. Johnson (as described in the title SN No. JOHNSON"39 only means that the spouses Johnson represented Joy Training in land registration. G. Respondent.41 Nonetheless. This is a religious. DECISION BERSAMIN. Jorge Sombillaby the RTC. the phrase "Rep.50 Thus. The Case Under review on certiorari is the decision promulgated on October 20. we declare that even if we consider the photocopied resolution and certification. the certification is a mere general power of attorney which comprises all of Joy Training’s business. Alfredo Jusayan and Michael Jusayan v. Moreover. and Linda J. She misapprehended the rule that persons dealing with a registered land have the legal right to rely on the face of the title and to dispense with the need to inquire further. These proceeds are going to pay outstanding loans against the project and the dissolution of the corporation shall follow the sale. Moreover. vs.49 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. but also the nature and extent of the agent’s authority. The title does not explicitly confer to the spouses Johnson the authority to sell the parcel of land and the building thereon. Manuel Jusayan. the general rule – that no evidence shall be admissible other than the original document itself when the subject of inquiry is the contents of a document – applies. we reiterate the established principle that persons dealing with an agent must ascertain not only the fact of agency. Branch 30. by Sps.over the center and corporation.48 A third person with whom the agent wishes to contract on behalf of the principal may require the presentation of the power of attorney. the resolution must be given scant consideration. 2006 and Resolution dated October 3. if only to erase doubts on the issues surrounding this case. nonprofit corporation and no profits or stocks are issued. TCT No.

In 1984.9 Ruling of the Court The petition for review lacks merit. proving its existence. 1971. On August 20.) Whether or not the relationship between the petitioners and respondent is that of agency or agricultural leasehold. (c) the agent acts as representative and not for himself. 1970.11 the elements of which are. and that he could not be dispossessed of his landholding without valid cause.3 wherein Wilson designated Jorge as his agent to supervise the tilling and farming of his riceland in crop year 1970-1971. the lease of an agricultural land can be either a civil law or an agricultural lease.10 The basis of the civil law relationship of agency is representation. Wilson entered into an agreement with respondent Jorge Sombilla (Jorge).13 The law does not presume agency. In agency.12 Whether or not an agency has been created is determined by the fact that one is representing and acting for another. 1999. or in both. and well within the exclusive jurisdiction of the Department of Agriculture (DAR) pursuant to Section 3(d) of Republic Act No.) Whether or not RTC. 1991.8 the CA reversed the RTC and dismissed the case. To properly resolve whether or not the relationship between Timoteo and Jorge was that of an agency or a tenancy. declaring that the contractual relationship between the parties was one of agricultural tenancy. On June 20.6 Jorge asserted that he enjoyed security of tenure as the agricultural lessee of Timoteo. namely: a. the agent binds himself to render some service or to do something in representation or on behalf of the principal. Timoteo and Jorge followed the arrangement. Wilson sold the four parcels of land to Timoteo Jusayan (Timoteo). rental was the legal term for the consideration of the lease.18 Specifically. Judgment of the CA Jorge appealed to the CA.16 Consequently. or to pay a price certain or ascertainable. namely. Pangilinan. Following Timoteo’s death on October 4.19 this Court differentiated between a leasehold tenancy and a civil law lease in the following manner. Timoteo did not benefit whenever the production increased. Unlike Jorge. Timoteo’s interest was limited to the delivery of the 110 cavans of palay annually without any concern about how the cultivation could be improved in order to yield more produce. one of the parties binds himself to give to another the enjoyment or use ofa thing for a price certain. (b) the object is the execution of a juridical act in relation to a third person. Jorge was acting for himself instead offor Timoteo. either in produce or in money.Wilson Jesena (Wilson) owned four parcels of land situated in New Lucena. with the consent or authority of the latter. In his answer. which was representation. the petitioners substituted him as the plaintiffs. in consideration of which the latter agrees to share the harvest with the landholder. In 1975.4 Jorge and Timoteo verbally agreed that Jorge would retain possession of the parcels of land and would deliver 110 cavans of palay annually to Timoteo without need for accounting of the cultivation expenses provided that Jorge would pay the irrigation fees. in Gabriel v.7 the RTC upheld the contractual relationship of agency between Timoteo and Jorge. and (d) the agent acts within the scope of his authority. Timoteo filed on June 30. Timoteo sent several letters to Jorge terminating his administration and demanding the return of the possession of the parcels of land. namely: (a) the relationship is established by the parties’ consent. 17117). the receipts substantially proved that the contractual relationship between Jorge and Timoteo was a lease. nature and extent is incumbent upon the person alleging it. Iloilo City as Regional Trial Court and Court of Agrarian Relations. Ruling of the RTC In its decision rendered on April 13. express or implied. hence. Iloilo. Yet. to prove the tenancy relationship. 1986 a complaint for recovery of possession and accounting against Jorge in the RTC (CAR Case No. and did not suffer whenever the production decreased. 2003. and ordered Jorge to deliver the possession of the parcels of land to the petitioners. In this regard. the parcels of land were transferred in the names of Timoteo’s sons. Jorge presented handwritten receipts15 indicating that the sacks of palay delivered to and received by one Corazon Jusayan represented payment of rental. While inpossession of the land. the physical possession of the land devoted to agriculture is given by its owner or legal possessor (landholder) to another (tenant) for the purpose of production through labor of the latter and of the members of his immediate farm household. By assenting to Jorge’s possession of the land sans accounting of the cultivation expenses and actual produce of the land provided that Jorge annually delivered to him 110 cavans of palay and paid the irrigation fees belied the very nature of agency. and for a period that may be definite or indefinite. In the judgment promulgated on October 20. had jurisdiction over the herein case. 6657 (Comprehensive Agrarian Reform Law of 1988).14 The claim of Timoteo that Jorge was his agent contradicted the verbal agreement he had fashioned with Jorge. Branch 30. On the other hand. Manuel. also termed as a lease hold tenancy. Issues The petitioners now appeal upon the following issues. namely: (1) the subject matter of a Page 34 of 150 . an analysis of the concepts of agency and tenancy is in order. and PAT CASE: AGENCY b. before the expiration of the agreement. Alfredo and Michael (petitioners).1âwphi1 In the civil law lease. and that the demand of Timoteo for the delivery of his share in the harvest and the payment of irrigation fees constituted an agrarian dispute that was outside the jurisdiction of the RTC. The verbal agreement between Timoteo and Jorge left all matters of agricultural production to the sole discretion of Jorge and practically divested Timoteo of the right to exercise his authority over the acts to be performed by Jorge. From 1971 to 1983.17 In the agricultural lease.5 Due to the failure of Jorge to render accounting and to return the possession of the parcels of land despite demands. therefore.

the law requires the leasehold tenant to personally attend to and cultivate the agricultural land. fumigating to eliminate plant pests24 and all other activities designed to promote the growth and care of the plants or trees and husbanding the earth. The sharing of the harvest in proportion to the respective contributions of the landholder and tenant. the landholding in leasehold tenancy is devoted to agriculture. (3) the tenantlessee must actually and personally till. 3844 provides that once there is an agricultural tenancy. that the general jurisdiction of the Regional Trial Courts to try agrarian reform matters was transferred to the DAR. the claim of the petitioners that the employment of Jorge as an Agricultural Technician at the Municipal Agriculture Office disqualified him as a tenant lacked factual or legal basis. as the one claiming to be an agricultural tenant.23 and grown plants like fruit trees that require watering. solely or with the aid of labor from his immediate farm household. so that it may bring forth more products or fruits. WHEREFORE. As the Court has already observed. 6657. the Courts of Agrarian Relations were integrated into the Regional Trial Courts and the jurisdiction of the Courts of Agrarian Relations was vested in the Regional Trial Courts.30 In that regard.25 In Tarona v. 1986.leasehold tenancy is limited to agricultural land.28 could be personally cultivated by a tenant by himself or with help of the members of his farm household. upon the passage of Batas Pambansa Blg. an agricultural land of an area of four hectares. paddies and irrigation canals in the landholding. cultivate or operate the land. DISMISSES the complaint for recovery of possession and accounting. It can be gleaned that in both civil law lease of an agricultural land and agricultural lease. the civil law lease is governed by the Civil Code.9 hectares involved herein were susceptible of cultivation by a single person with the help of the members of his immediate PAT CASE: AGENCY farm household. (3) as to purpose. An agricultural lessee cultivates by himself and with the aid of those of his immediate farm household.37 It was only on August 29. Section 36 of Republic Act No. Therefore.22 this Court has synthesized the elements of agricultural tenancy to wit: (1) the object of the contract or the relationship is an agricultural land that is leased or rented for the purpose of agricultural production. the agricultural tenant’s right to security of tenure is recognized and protected. 3844.36 In 1980. 229 took effect. and (4) the landlord-lessor. who is either the lawful owner or the legal possessor of the land. The only issue remaining to be resolved is whether or not Jorge personally cultivated the leased agricultural land. but includes the various phases of farm labor such as the maintenance.31 His ability to farm the seven hectares of land despite his regular employment as an Agricultural Technician at the Municipal Agriculture Office32 was not physically impossible for him to accomplish considering that his daughter. the lessor gives to the lessee the use and possession of the land for a price certain. the distinctive attribute that sets a civil law lease apart from an agricultural lease is the personal cultivation by the lessee. in civil law lease. otherwise called share tenancy. 129 (Judiciary Reorganization Act). Cultivation is not limited to the plowing and harrowing of the land. The landowner cannot eject the agricultural tenant from the land unless authorized by the proper court for causes provided by law. its production and the instances when the landholding was struck by drought definitely established that he personally cultivated the land. Page 35 of 150 . Section 7 of Republic Act No. 1987. which vested in the Department of Agrarian Reform (DAR) the "primary jurisdiction to determine and adjudicate agrarian reform matters" and the "exclusive original jurisdiction over all matters involving the implementation of agrarian reform" except disputes falling under the exclusive jurisdiction of the Department of Agriculture and the Department of Environment and Natural Resources. Moreover. (2) as to attention and cultivation. Although the purpose of the civil law lease and the agricultural lease may be agricultural cultivation and production. Although the CA has correctly categorized Jorge’s case as an agrarian dispute. The rule is settled that the jurisdiction of a court is determined by the statute in force at the time of the commencement of an action. by general industry. his knowledge of and familiarity with the landholding. repair and weeding of dikes.35 It is underscored. To date. but the leasehold tenancy is governed by special laws. (2) the size of the landholding is such that it is susceptible of personal cultivation by a single person with the assistance of the members of his immediate farm household. 3844. and(4) as to the law that governs.21 a relationship wherein a fixed consideration is paid instead of proportionately sharing the harvest as in share tenancy. the Court GRANTS the petition for review on certiorari by PARTIALLY AFFIRMING the decision of the Court of Appeals to the extent that it upheld the tenancy relationship of the parties. but that of a civil law lease may be rural or urban property. It is elementary that he who alleges the affirmative of the issue has the burden of proof. the purpose may be for any other lawful pursuits. as amended by Republic Act No. Court of Appeals. it covers attending to the care of the growing plants. had to prove all the requisites of his agricultural tenancy by substantial evidence. and ORDERS the petitioners to pay the costs of suit. the RTC still had jurisdiction over the dispute at the time the complaint was filed in the RTC on June 30. turning the soil. was cultivating one of the parcels of the land. the civil law lessee need not personally cultivate or work the thing leased. it ruled that the RTC lacked jurisdiction over the case based on Section 50 of Republic Act No. fertilizing. In Teodoro v. 6389. enumerates the several grounds for the valid dispossession of the tenant. We hold that the CA gravely erred.27 or even of an area as large as 17 hectares. the only permissible system of agricultural tenancy is leasehold tenancy. the law did not prohibit him as the agricultural lessee who generally worked the land himself or with the aid of member of his immediate household from availing himself occasionally or temporarily of the help of others in specific jobs. Nor was there any question that the parcels of agricultural land with a total area of 7. a member of his immediate farm household. leases the same to the tenant-lessee for a price certain or ascertainable either in an amount of money or produce.29 Hence. even when the lessee is in possession of the leased agricultural land and paying a consideration for it but is not personally cultivating the land.34 In short. when Executive Order No.33 Indeed. uprooting weeds. however. he or she is a civil law lessee.20 was abolished on August 8. that none of such grounds for valid dispossession of landholding was attendant in Jorge’s case. Macaraeg. 1963 under Republic Act No. Conversely.26 this Court ruled that a tenant is not required to be physically present in the land at all hours of the day and night provided that he lives close enough to the land to be cultivated to make it physically possible for him to cultivate it with some degree of constancy. Jorge.

1991. Philippines and within the jurisdiction of this Honorable Court. In her final bid to exonerate herself.4 Petitioner filed a motion for reconsideration before the appellate court on September 20. 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. On January 26. did." promulgated on August 30.00.000 without subsidiary imprisonment in case insolvency. 3.1 The Information reads: That on or about the 8th day of October 1987. COURT OF APPEALS and PEOPLE OF THE PHILIPPINES.3 On appeal.. Finding accused Rosa Lim GUILTY beyond reasonable doubt of the offense of estafa as defined and penalized under Article 315. misappropriated and converted the same to her own personal use and benefit. 1. paragraph 1(b) of the Revised Penal Code. but the motion was denied in a Resolution dated November 11. misapplied. the said accused with intent to gain. CR No. 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. 1991. 1989. To pay costs. 1991. wilfully.The parties are ordered to comply with their undertakings as agricultural lessor and agricultural lessee.35 solo worth P169. judgment is hereby rendered: PAT CASE: AGENCY 4.R. petitioner.R. respondents. SYNONYMOUS WITH GUILT: THE PROSECUTION MUST OVERTHROW THE Page 36 of 150 . Ordering her to return to the offended party Mrs.2 After arraignment and trial on the merits.: This is a petition to review the Decision of the Court of Appeals in CA-G. CONTRARY TO LAW. vs. THE RULES OF COURT AND THE DECISION OF THIS HONORABLE COURT IN NOT PASSING UPON THE FIRST AND THIRD ASSIGNED ERRORS IN PETITIONER'S BRIEF. DECISION HERMOSISIMA. petitioner filed the instant petition for review alleging the following grounds: I THE RESPONDENT COURT VIOLATED THE CONSTITUTION. 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. 102784 February 28. but the said accused once in possession thereof and far from complying with her obligation despite repeated demands therefor. unlawfully and feloniously defraud one VICTORIA SUAREZ. the Court of Appeals affirmed the judgment of conviction with the modification that the penalty imposed shall be six (6) years. in the following manner. an Information for Estafa was filed against petitioner Rosa Lim before Branch 92 of the Regional Trial Court of Quezon City. 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. paragraph 1 of the Revised Penal Code. and G. 10290. the dispositive portion of which reads: WHEREFORE. JR.000. then and there. No. ACCORDING TO THE FUNDAMENTAL LAW. 2. to wit: on the date and place aforementioned said accused got and received in trust from said complainant one (1) ring 3. in view of the foregoing. Victoria Suarez the ring or its value in the amount of P169. SO ORDERED. entitled "People v. Philippine Currency. in Quezon City. 1996 ROSA LIM. to TEN (10) YEARS of prision mayor as maximum. Rosa Lim. J. with unfaithfulness and/or abuse of confidence. the trial court rendered judgment. Sentencing her to suffer the Indeterminate penalty of FOUR (4) YEARS and TWO (2) MONTHS of prision correccional as minimum. eight (8) months and twenty-one (21) days to twenty (20) years in accordance with Article 315.

Suarez insofar as the pieces of jewelry were concerned. Suarez that she would consider buying the pieces of jewelry far her own use and that she would inform the private complainant of such decision before she goes back to Cebu. Austria. As a result. Rosa Lim admitted in court that she arrived in Manila from Cebu sometime in October 1987. 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 SHOULD SENTENCE THUS REQUIRED THAT EVERY INNOCENCE BE DULY TAKEN INTO ACCOUNT. Petitioner has a different version. she instructed the petitioner to give the pieces of jewelry to Aurelia Nadera who PAT CASE: AGENCY Page 37 of 150 . Irked. Suarez by telephone in order to inform her that she was no longer interested in the ring and bracelet. On or about October 8. 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. aside from making verbal demands. Suarez replied that she was busy at the time and so. She told Mrs. was the subject diamond ring returned to Mrs.000. 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. petitioner Rosa Lim who had come from Cebu received from private respondent Victoria Suarez the following two pieces of jewelry. Suarez to prepare the "necessary paper for me to sign because I was not yet prepare (d) to buy it. thru counsel. Petitioner denied that the transaction was for her to sell the two pieces of jewelry on commission basis.000. The real agreement between her and the private respondent was a sale on credit with Mrs. who introduced petitioner to private respondent. INDEPENDENTLY OF WHATEVER DEFENSE IS OFFERED BY THE ACCUSED. dated October 12. but failed to return the diamond ring or to turn over the proceeds thereof if sold. 1987. Thereafter. Quezon City. TO MEET THIS STANDARD. and that they were lodged at the Williams Apartelle in Timog. 1987. BOTH ORAL AND DOCUMENTARY.00 On October 12.00.PRESUMPTION OF INNOCENCE WITH PROOF OF GUILT BEYOND REASONABLE DOUBT. In response.170. Quezon City. The petitioner did as she was told and gave the two pieces of jewelry to Nadera as evidenced by a handwritten receipt. second. 10 would in turn give them back to the private complainant. private complainant. To prove that she did not agree to the terms of the receipt regarding the sale on commission basis. together with one Aurelia Nadera. for which reason. petitioner returned the bracelet to Vicky Suarez. petitioner signed it. Suarez as the owner-seller and petitioner as the buyer. as indicated by the bet 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. that I received from Vicky Suarez PINATUTUNAYAN KO na aking tinanggap kay ___________ the following jewelries: ang mga alahas na sumusunod: Description Mga Uri Price Halaga l ring 3. 11 Two issues need to be resolved: First.00 1 bracelet 9. 1987. 12 The contention is far from meritorious."9 After the document was prepared. THERE IS NEED FOR THE MOST CAREFUL SCRUTINY OF THE TESTIMONY OF THE STATE. wrote a letter8 to private respondent's counsel alleging that Rosa Lim had returned both ring and bracelet to Vicky Suarez sometime in September. The agreement was reflected in a receipt marked as Exhibit "A"6 for the prosecution. On December 15. petitioner had no longer any liability to Mrs. 195 SCRA 700)5 Herein the pertinent facts as alleged by the prosecution. petitioner. where Rosa Lim was temporarily billeted.000. wrote a demand letter7 to petitioner asking for the return of said ring or the proceeds of the sale thereof. The transaction took place at the Sir Williams Apartelle in Timog Avenue. the petitioner took the pieces of jewelry and told Mrs. (People v. par l(b) of the Revised Penal Code for which the petitioner herein stands convicted. THE STRONGEST SUSPICION MUST NOT BE PERMITTED TO SWAY JUDGMENT. 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. THE PROOF AGAINST HIM MUST SURVIVE THE TEST OF REASON.00 and one (1) bracelet worth P170. one (1) 3. Vicky Suarez filed a complaint for estafa under Article 315.000.00 total Kabuuan P 339. Mrs.000.35 dolo P 169.35 carat diamond ring worth P169. to be sold on commission basis. what was the real transaction between Rosa Lim and Vicky Suarez a contract of agency to sell on commission basis as set out in the receipt or a sale on credit. 1987 before departing for Cebu. petitioner called up Mrs. and. 1987.

ang aking gantimpala ay ang mapapahigit na halaga sa nakatakdang halaga sa itaas ng bawat alahas HINDI ko ipinahihintulutang ipa-u-u-tang o ibibigay na hulugan ang alin mang alahas. . she asked me if Aurelia was there and when I informed her that Aurelia was there. Q: And you gave the two (2) pieces of jewelry to Aurelia Nadera? A: Yes. and the third is when the form is required for the purpose of proving the existence 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. . . if I would be able to sell. she instructed me to give the pieces of jewelry to Aurelia who in turn will give it back to Vicky. I sign my name this . . Petitioner insists. Q: Why did Rosa Lim give the jewelries to you? Page 38 of 150 . to wit: Every will. . . Furthermore. 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. must be subscribed at the end thereof by the testator himself . . such as those provided in the Statute of Frauds in article 1403. . there are some provisions of the law which require certain formalities for particular contracts. hence it is valid and enforceable in whatever form it may be entered into. . . Rosa Lim testified to this effect on direct examination by her counsel: Q: ___________________ Signature of Persons who received jewelries (Lagda ng Tumanggap ng mga Alahas) Address: . 19 . . opened herself to all the legal obligations that may arise from their breach. except the last. . I was bound for Cebu. 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. The first is when the form is required for the validity of the contract. Neither does it indicate absence or vitiation of consent thereto on the part of Rosa Lim which would make the contract void or voidable. isasangla o ipananagot kahit sa anong paraan ang alin mang alahas sa ibang mga tao o tao. that the diamond ring had been returned to Vicky Suarez through Aurelia Nadera. Your Honor. She. In the case before us. . days from date of signing this receipt na nasa mabuting kalagayan upang ipagbili ng KALIWAAN (ALCONTADO) lamang sa loob ng . 14 This was supported by Aurelia Nadera in her direct examination by petitioner's counsel: Contracts shall be obligatory in whatever form they may have been entered into. to be sold in CASH ONLY within . . . . on the left margin. deposit. NILALAGDAAN ko ang kasunduang ito ngayong ika _____ ng dito sa Maynila. other than a holographic will. The moment she affixed her signature thereon. as aforesaid. there is only one type of legal instrument where the law strictly prescribes the location of the signature of the parties thereto. This is clear from Article 1356 of the New Civil Code which provides: And when she left the jewelries with you. day of . pledge or give as security or guaranty under any circumstance or manner. however. give for safekeeping: lend. the parties did not execute a notarial will but a simple contract of agency to sell on commission basis. This is in the case of notarial wills found in Article 805 of the Civil Code. . . thus making the position of petitioner's signature thereto immaterial. Q: And what was the reply of Vicky Suarez? A: She told me that she could not come to the apartelle since she was very busy. . 13 A contract of agency to sell on commission PAT CASE: AGENCY Q: Do you know if Rosa Lim in fact returned the jewelries? A: She gave the jewelries to me. ipagkakatiwala. petitioner became bound by all the terms stipulated in the receipt. . Rosa Lim's 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. basis does not belong to any of these three categories. I shall return all the jewelry within the period mentioned above. ilalagak. each and every page thereof. shall also sign. what did you do thereafter? A: On October 12. thus. provided all the essential requisites for their validity are present. kung maipagbili ko naman ay dagli kong isusulit at ibibigay ang buong pinagbilhan sa may-ari ng mga alahas sa kanyang bahay tahanan.in good condition. . . . However. . The testator or the person requested by him to write his name and the instrumental witnesses of the will. thus relieving her of any liability. . So. at Manila. . . kung hindi ko maipagbili ay isasauli ko ang lahat ng alahas sa loob ng taning na panahong nakatala sa itaas. ipahihiram. any jewelry to other person or persons. araw mula ng ating pagkalagdaan: if I could not sell. . .

or for administration. in affirming the trial court. or under any other obligation involving the duty to make delivery of or to return the same. 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. 1(b). to the prejudice of another. 142950. Weight of evidence is not determined mathematically by the numerical superiority of the witnesses testifying to a given fact. petitioner. are present in the case at bench. (3) That such misappropriation or conversion or denial is to the prejudice of another. would violate due process. Given the circumstances of the present case. It depends upon its practical effect in inducing belief on the part of the judge trying the case. 16< The issue as to the return of the ring boils down to one of credibility. petitioner Equitable PCI Bank begs to differ. appellant assumed the right to dispose of the jewelry as if it were hers. (2) That there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt. mortgaged the subject property to Page 39 of 150 . par. or other personal property be received by the offender in trust. 1982. third. as treasurer of Noddy Dairy Products. Costs against petitioner. or to return.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.: Can a person be evicted by virtue of a decision rendered in an ejectment case where she was not joined as a party? This was the issue that confronted the Court of Appeals. thereby committing conversion. Paragraph 1(b) of the Revised Penal Code. 18 Article 315. It contravenes the very terms of Exhibit A. It is well settled that we should not interfere with the judgment of the trial court in determining the credibility of witnesses. On February 4. a clear breach of trust.17 In the case at bench. or under any other obligation involving the duty to make delivery of. even though such obligation be totally or partially guaranteed by a bond. the same. it said. by delivering the ring to Aurelia without the express authority and consent of the complaining witness.R. . money. The instruction by the complaining witness to appellant to deliver the ring to Aurelia Nadera is vehemently denied by the complaining witness. ROSITA KU. First. goods. par. the petition is DENIED and the Decision of the Court of Appeals is hereby AFFIRMED. respondent Rosita Ku. WHEREFORE. 2001] EQUITABLE PCI BANK. and. Swindling (estafa). or for administration. Q: And when did Rosa Lim give to you the jewelries? A: Before she left for Cebu. or other property. J. goods. The respondent court. Second. what can you say about that? The elements of estafa with abuse of confidence under this subdivision are as follows. 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. No. or by denying having received such money. formerly EQUITABLE BANKING CORPORATION. [G. vs. And thus. respondent. To hold the contrary. and Ku Giok Heng. such misappropriation obviously caused damage and prejudice to the private respondent. Hence. said: . 15 (b) By misappropriating or converting. (1) That money. This claim (that the ring had been returned to Suarez thru Nadera) is disconcerting. goods. so if I gave it to Nadera. DECISION KAPUNAN. On rebuttal.00. or on commission. as Vice-President/General Manager of the same corporation. Revised Penal Code. 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. Inc. Any person who shall defraud another by any of the means mentioned hereinbelow shall be punished by: xxx xxx xxx PAT CASE: AGENCY xxx xxx All the elements of estafa under Article 315. We shall not disturb this finding of the respondent court. 1(b) of the Revised Penal Code provides: Art. 315.000. I will be exposing myself to a high risk. petitioner misappropriated or converted the jewelry to her own use. 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 A: That is not true sir. which resolved the issue in the negative. SO ORDERED. March 26. this petition. . or any other personal property received by the offender in trust or on commission. who declared that she did not authorize and/or instruct appellant to do so. because at that time Aurelia Nadera is highly indebted to me in the amount of P140. 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. these testimonies were belied by Vicky Suarez herself: xxx Q: 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 Exhibit "A" to Aurelia Nadera. punishable under Article 315..

[8] Appended as Annex A to petitioners Reply is an Affidavit[9] dated October 27.[7] Petitioners motion for extension to file this petition was filed on May 10. d) sub-lessees. subsequently failed to pay the loan secured by the mortgage. 2000. Petitioner alleged that it allowed Ku Giok Heng to remain in the property on the condition that the latter pay rent. rendered a decision enjoining the eviction of respondent from the premises. respondent Rosita Ku. and strangers to a case are not bound by judgment rendered by the court. 2000 or until June 9.[6] Thus. Ku Giok Heng denied that there was any lease agreement over the property.the Equitable Banking Corporation. on December 10. that the copy was duly delivered to and received by Joel Rosales (Authorized Representative) on April 24.] 191 SCRA 116). even if respondent were a resident of the property. petitioner was issued a certificate of sale. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. PAT CASE: AGENCY On May 10. 1994. On May 10. squatters or agents of the defendant fraudulently occupying the property to frustrate the judgment. 2000 issued by the Manila Central Post Office reveals.[4] Equitable Bank filed its petition. petitioner instituted an action for ejectment before the Quezon City Metropolitan Trial Court (MeTC) against respondents father Ku Giok Heng. 2000. now known as Equitable PCI Bank to secure Noddy Inc.[1] Ku Giok Heng did not appeal the decision of the MeTC. e) co-lessees. 1999 dismissed the same and ordered the execution of the MeTC decision. (David Enterprises vs. prompting petitioner to foreclose the property extrajudicially. Respondent is the daughter of Ku Giok Heng. the RTC on September 13. Respondent failed to redeem the property. an action before the Regional Trial Court (RTC) of Quezon City to nullify the decision of the MeTC. 1984. the MeTC rendered a decision in favor of petitioner and ordered Ku Giok Heng to. IBAA[. 2000. b) guests or other occupants of the premises with the permission of the defendant. the issuance of a writ of possession becomes a ministerial duty of the court. Quezon City. the title of which had been duly transferred in the name of the plaintiff. 2000 Page 40 of 150 . 2000. 2000 to file its petition for review of the CA decision. 2000. 2000. Ku Giok Hengs failure to pay rent prompted the MeTC to seek his ejectment. Generally. Respondent filed in the Court of Appeals (CA) a special civil action for certiorari assailing the decision of the RTC.[5] Nevertheless. Respondent nevertheless claims that the petition is defective. It ruled: x x x for his failure or refusal to pay rentals despite proper demands. 2000.[3] On June 13. sixteen (16) days from the petitioners receipt of the CA decision (April 24. The petition is meritorious. 1989. Inc. Thus. a judgment in an ejectment suit is binding not only upon the defendants in the suit but also against those not made parties thereto. Equitable PCI Bank filed in this Court a motion for an extension of 30 days from May 10. Upon proper application and proof of title. filed on December 20.s loan to Equitable.[2] The Court granted the motion for a 30-day extension counted from the expiration of the reglementary period and conditioned upon the timeliness of the filing of [the] motion [for extension]. no man shall be affected by any proceeding to which he is a stranger. 1994. deprived of due process. The bank alleged in its petition that it received a copy of the CA decision on April 25. demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act No. A Certification dated June 6. in fact. The absence of lease agreement or agreement for the payment of rentals is of no moment in the light of the prevailing Supreme Court ruling on the matter. vacate the premises. among other things. The property. As the winning bidder in the foreclosure sale. on March 31. the Register of Deeds canceled the Transfer Certificate of Title in the name of respondent and a new one was issued in petitioners name. Finding no merit in the complaint. 2000) and one (1) day beyond the reglementary period for filing the petition for review (May 9. a residential house and lot located in La Vista. c) transferees pendente lite. if they are: a) trespassers. On December 8. the defendant had not established his right for his continued possession of or stay in the premises acquired by the plaintiff thru foreclosure. The motion alleged that the Bank received the CA decision on April 25. she is nevertheless bound by the judgment of the MeTC in the action for ejectment despite her being a nonparty thereto. Thus: It is settled that the buyer in foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one (1) year after the registration of the sale is as such he is entitled to the possession of the property and the demand at any time following the consolidation of ownership and the issuance to him of a new certificate of title. Instead. however. The CA agreed and. The buyer can. She contended that she was not made a party to the ejectment suit and was. was registered in respondents name. 2000). the defendant in the action for ejectment. a point disputed by the parties. 2000. 3155 as amended. relatives and other privies of the defendant. contending that there was no need to name respondent Rosita Ku as a party in the action for ejectment since she was not a resident of the premises nor was she in possession of the property. he and his daughter. Noddy. or f) members of the family. Petitioner however maintains its honest representation of having received [a copy of the decision] on April 25. therefore.

letters. and brought them to the Mail and Courier Department. We held that: x x x practical considerations and the realities of the situation dictate that the service made by the bailiff on March 23. did not constitute notice to its counsel. Joel Rosales averred that [o]n occasions when I receive mail matters for said law office.. Petitioner argues that receipt on April 25. Makati City. vs. 405 4/F Equitable Bank Bldg. acceptance by the agent may also be express. An agency may be express but it may also be implied from the acts of the principal. Binondo. Court of Appeals. (7) On May 8. Niedo that Postmaster VI Alfredo C. from his silence. The Court is not wholly convinced by petitioners argument. it is only to help them receive their letters promptly. 2000 and not April 27. petitioner urges the Court. or lack of action. The Court held: It has been said time and again that the perfection of an appeal within the period fixed by the rules is mandatory and jurisdictional. as required by Sections 2[10] and 10. I received the registered letter sent by the Court of Appeals. (5) After sorting out these mail matters. in any event. That counsel treated April 25.. Pacific Asia Overseas Shipping Corporation vs. when I was informed by Atty. therefore. 2000. Manila. Mail and Courier Department. NLRC. knowing that another person is acting on his behalf without authority. I erroneously recorded them on page 422 of my logbook as having been received by me on said dated April 25. x x x. 2000 as the date of receipt was purportedly intended to obviate respondents possible argument that the 15-day period had to be counted from April 25. 2000. Court of Appeals. 2000.[18] one day. it is always in the power of this Court to suspend its own rules. for purposes of receiving their incoming mail matters. Siguenza vs. The Affidavit of Joel Rosales states that he is not the constituted agent of Curato Divina Mabilog Nedo Magturo Pagaduan Law Office. 2000 (copy of the said Notice with the date so stamped is attached as Annex C). and I am assigned with the Equitable PCI Bank. (8) I discovered this error only on September 6. [13] Likewise. to suspend its rules and admit the petition in the interest of justice. it is my official duty and responsibility to receive and pick-up from the Manila Central Post Office (CPO) the various mails. Court of Appeals[16] involved a delay of six days. the motion for extension to file the petition for review was even filed two (2) days before the lapse of the 15-day reglementary period. dela Costa St. (3) I am not the constituted agent of Curato Divina Mabilog Niedo Magturo Pagaduan Law Office whose former address is at Rm. however. Petitioner invokes Philippine National Bank vs. (9) I hereby confirm that this error was caused by an honest mistake. Niedo of said law office inquired from me as to my actual date of receipt of this letter. 125234 and Delivery No. correspondence. or to except a particular case from its operation. (2) Under the contract of services between the Bank and Unique. There is no showing that counsel had objected to this practice or took steps to put a stop to it. cor. Strong compelling reasons such as serving the ends of justice and preventing a grave miscarriage thereof warrant the suspension of the rules. (6) On April 27. 2000 by Joel Rosales. 2000. petitioner cites Philippine Long Distance Telephone Co. Metro Manila. inadequate for the Court to make a ruling in petitioners favor. who was mentioned in the Certification as having received the decision.[17] thirteen days.V.[15] where the petition was filed three (3) days late. 2000. Republic vs. I received it on April 25. issued a certification that I received the said mail on April 24. Following the argument to its logical conclusion. on April 25. 4880 (copy of envelope attached as Annex A) together with other mail matters. Atty. 262 Juan Luna St. This building. The Affidavit states: (1) I am an employee of Unique Industrial & Allied Services. PAT CASE: AGENCY The Court proceeded to enumerate cases where the rules on reglementary periods were suspended. NLRC. 2000. covered by Registry Receipt No. or from his silence or inaction according to the circumstances. whenever the purposes of justice require it. was on the ninth floor of the building. 262 Juan Luna St. the bailiff served the decision of the National Labor Relations Commission at the ground floor of the building of the petitioner therein. It was only when the Legal Services Division actually received a copy of the decision on March 26. Makati Avenue and H. On occasions when I receive mail matters for said law office..[11] Rule 13 of the Rules of Court. Cortes vs. The facts are. (Unique) a corporation duly organized and existing under Philippine laws with principal place of business at 1206 Vito Cruz St. as indicated in the notice of the decision. Manila. neither am I any such agent of the various other tenants of the said Building. Binondo. Jr.. Equitable PCI Bank Tower II.[14] In this case. rather than on the office of its counsel. 1981 that a proper and valid service may be deemed to have been made.[12] In said case. or his failure to repudiate the agency. 2000 (copy of page 422 is attached as Annex B). Manila. and I informed him that based on my logbook. Applying the foregoing provisions and jurisprudence. this letter was sent by the Mail and Courier Department to said Law Office whose receiving clerk Darwin Bawar opened the letter and stamped on the Notice of Judgment their actual date of receipt: April 27. To support this contention. although it may also be implied from his acts which carry out the agency. Inc. also houses various other offices or tenants not related to the Bank. 2000. of the Central Post Office. Roland A. and other mail matters intended for the banks various departments and offices at Equitable Bank Building. Mabanag.. the Philippine Long Distance Telephone Co.. 1981 at the ground floor of the petitioners building and not at the address of record of petitioners counsel on record at the 9th floor of the PLDT building cannot be considered a valid service. who was not an agent of its counsels law office. But.and executed by Joel Rosales. whose address. Court of Page 41 of 150 . 2000. petitioner submits that actual receipt by its counsel was on April 27. Malate. implying that counsel had allowed the practice of Rosales receiving mail in behalf of the former. (4) On April 24. it is only to help them receive their letters promptly. 2000. Manila. 2000. not April 25. Assuming the motion for extension was indeed one day late.

THE HONORABLE COURT OF APPEALS. That these two parcels of land were all inherited by the three. CONDE. If and when their possession over the said parcel of land be disturbed by other persons. That the document of SALE WITH THE RIGHT OF REPURCHASE got lost in spite of the diligent efforts to locate the same which was lost during the war.. petitioner. No. Philippines. Branch IX. subject to said right of repurchase. within ten (10) years from said date. Tacloban City (Civil Case No. 5. after having been duly sworn to in accordance with law free from threats and intimidation. On 28 November 1945. sold with right of repurchase. BERNARDO CONDE AND MARGARITA CONDE. I and Paciente Cordero who is my son-in-law will defend in behalf of the herein brother and sisters mentioned above. was transcribed in the "Registration Book" of the Registry of Deeds of Leyte on 14 November 1956 (Exhibit "2").: An appeal by certiorari from the Decision of respondent Court of Appeals 1 (CA-G. Bernardo Conde and the petitioner Dominga Conde. a new agreement shall be made between the parties and in no case title and ownership shall be vested in the hand of the party of the SECOND PART (the Alteras). married to Pio Altera (hereinafter referred to as the Alteras). signed a document in the Visayan dialect. PIO ALTERA (Sgd.R.[22] which also concerned a tardy appeal. MANILA PACIENTE CORDERO. for P165. show that on 7 April 1938. all brother and sisters. (4) if at the end of 10 years the said land is not repurchased. 2.. MEMORANDUM OF REPURCHASE OVER A PARCEL OF LAND SOLD WITH REPURCHASE WHICH DOCUMENT GOT LOST WHEREFORE. do hereby depose and say: 1. PIO ALTERA and PACIENTE CORDERO. the English translation of which reads: The Court finds these arguments to be persuasive. The decision of the Court of Appeals is REVERSED. to Casimira Pasagui. (Lot 840). Original Certificate of Title No. 1982 DOMINGA CONDE.Appeals. SO ORDERED. NLRC. the petition is GIVEN DUE COURSE and GRANTED. after returning the amount of P165. 840 to the Alteras "subject to the right of redemption by Dominga Conde. That we further covenant together with Paciente Cordero who is my son-in-law that from this day the said Dominga Conde. 48133.R. NICETAS ALTERA. which dismissed petitioner's Complaint for Quieting of Title and ordered her to vacate the property in dispute and deliver its possession to private respondents Ramon Conde and Catalina Conde. 1 or We have received together with Paciente Cordero who is my son-in-law the amount of ONE HUNDRED SIXTY-FIVE PESOS (P165.00.00 and the amounts paid by the spouses in concept of land tax . vs. PIO ALTERA bought with the right of repurchase two parcels of land from DOMINGA CONDE. Bernardo Conde and Margarita Conde will again take possession of the aforementioned parcel of land because they repurchased the same from me. Because it is about time to repurchase the land. 3. Court of Appeals. this very day November 28. The "Pacto de Retro Sale" further provided: . PAT CASE: AGENCY WE. Philippines. in the presence of two witnesses. xxx xxx xxx (Exhibit "B") On 17 April 1941. L-40242 December 15. No. 1983. 00) Philippine Currency of legal tender which was the consideration in that sale with the right of repurchase with respect to the two parcels of land. J. together with his wife. NLRC. both of legal age. Legasto vs.) PACIENTE CORDERO WITNESSES: Page 42 of 150 .. as heirs of Santiago Conde. I or We have hereunto affixed our thumbmark or signature to our respective names below this document or memorandum this 28th day of November 1945 at Burauen Leyte.[19] seven days. and City Fair Corporation vs. with an approximate area of one (1) hectare. son-in-law of the Alteras. That these two parcels of land which was the subject matter of a Deed of Sale with the Right of Repurchase consists only of one document which was lost. private respondent Paciente Cordero. RAMON CONDE.[21] two days. and residents of Burauen Leyte. respondents. G. MELENCIO-HERRERA. B110).[20] two days.. IN WITNESS WHEREOF. 1945. CATALINA T. " (Exhibit "1"). together with his wife. the Cadastral Court of Leyte adjudicated Lot No. as found by the Court of Appeals. The established facts. Bernardo Conde and Margarita Conde in the name of EUSEBIO AMARILLE to repurchase the same. 4. Now. N-534 in the name of the spouses Pio Altera and Casimira Pasagui. Olacao vs. 6. That I. because the same was already repurchased by them. especially in light of the merits of the petition. Margarita Conde. a parcel of agricultural land located in Maghubas Burauen Leyte.R) affirming the judgment of the Court of First Instance of Leyte. within ten (10) years counting from April 7. I have allowed the representative of Dominga Conde.

" 4 There is nothing in the document of repurchase to show that Paciente Cordero had signed the same merely to indicate that he had no objection to petitioner's right of repurchase. 3 That petitioner merely took advantage of the abandonment of the land by the Alteras due to the separation of said spouses. when she instituted this action. and particularly the matter of possession. to 1969. Land taxes have also been paid for by petitioner yearly from 1947 to 1969 inclusive (Exhibits "D" to "D-15". the lower Court rendered its Decision dismissing the Complaint and the counterclaim and ordering petitioner "to vacate the property in dispute and deliver its peaceful possession to the defendants Ramon Conde and Catalina T. petitioner filed. for quieting of title to real property and declaration of ownership. 6 Page 43 of 150 . to whom Pio Altera sold the disputed property in 1965. The purpose of the rule is to give stability to written agreements. petitioner exerted no effort to procure the signature of Pio Altera after he had recovered from his illness. and to remove the temptation and possibility of perjury. If the contract is plain and unequivocal in its terms he is ordinarily bound thereby. who are also private respondents herein. Petitioner's evidence is that Paciente Cordero signed the Memorandum of Repurchase in representation of his father-in-law Pio Altera. Private respondents. Their relationship to petitioner does not appear from the records.. Conde. and that petitioner's possession was in the concept of a tenant. as opined by both the Court a quo and the Appellate Court.1. remain bare assertions without proof. and that Cordero received the repurchase price of P65. which heretofore had been with the Alteras. or their failure to repudiate the agency. would be a departure from the parol evidence rule 5 and would defeat the purpose for which the doctrine is intended. Petitioner further states that she redeemed the property with her own money as her co-heirs were bereft of funds for the purpose. Besides. Petitioner maintains that because Pio Altera was very ill at the time.. ". AGUILLON To be noted is the fact that neither of the vendees-a-retro. (SGD. Paciente Cordero executed the deed of resale for and on behalf of his father-in-law. who was seriously sick on that occasion. To uphold his oral testimony on that point. It was executed in the Visayan dialect which he understood. and that he did not receive the amount of P165. if the vendors a retro failed to exercise their right of redemption after ten years. Conde. a Complaint (Civil Case No. It is the duty of every contracting party to learn and know its contents before he signs and delivers it. against Paciente Cordero and his wife Nicetas Altera. If. possession. 2 Possession of the lot in dispute having been adversely and uninterruptedly with petitioner from 1945 when the document of repurchase was executed. the Alteras must be deemed to have incurred in laches. OCT No. the vendee-a-retro. and "E"). Thus. 534 in the name of the Alteras specifically contained the condition that it was subject to the right of repurchase within 10 years from 1938. Private respondents Ramon Conde and Catalina Conde. adduced evidence that Paciente Cordero signed the document of repurchase merely to show that he had no objection to the repurchase. B110). Conde". and of his mother-in-law who was in Manila at the time. which would be afforded if parol evidence was admissible. and Casimira Pasagui Pio Altera having died in 1966). is the fact that from the execution of the repurchase document in 1945. On 30 June 1965 Pio Altera sold the disputed lot to the spouses Ramon Conde and Catalina T. After trial.) TEODORO C.00 from petitioner inasmuch as he had no authority from his parents-in-law who were the vendees-a-retro. as alleged. Private respondent must be held bound by the clear terms of the Memorandum of Repurchase that he had signed wherein he acknowledged the receipt of P165. . There is no question that neither of the vendees-a-retro signed the "Memorandum of Repurchase". Pio Altera nor Casimira Pasagui. On appeal.. If. Although the ten-year period had lapsed in 1965 and there was no annotation of any repurchase by petitioner. Pio Altera. PAT CASE: AGENCY Of significance. for their part. however. He cannot now be allowed to dispute the same. assuming that there was. as also admitted by them at the pre-trial. The pacto de retro document was eventually found.00 and assumed the obligation to maintain the repurchasers in peaceful possession should they be "disturbed by other persons". such a sale. indeed. he would have had no personality to object. It behooved Ramon Conde and Catalina Conde to have looked into the right of redemption inscribed on the title. Ramon Conde and his wife Catalina T. Nor has the document of sale been exhibited. the case is before us on review. neither did the Alteras repudiate the deed that their son-in-law had signed. has been in the hands of petitioner as stipulated therein.00. Contending that she had validly repurchased the lot in question in 1945. Branch IX. was a signatory to the deed. neither had the title been cleared of that encumbrance. Tacloban City. the Court of Appeals upheld the findings of the Court a quo that petitioner had failed to validly exercise her right of repurchase in view of the fact that the Memorandum of Repurchase was signed by Paciente Cordero and not by Pio Altera. and that there is nothing in said document to show that Cordero was specifically authorized to act for and on behalf of the vendee a retro. which. No new agreement was entered into by the parties as stipulated in the deed of pacto de retro. in the Court of First Instance of Leyte. by the same token. an implied agency must be held to have been created from their silence or lack of action. petitioner had done nothing to formalize her repurchase. on 16 January 1969. Reconsideration having been denied by the Appellate Court. neither have the vendees-a-retro done anything to clear their title of the encumbrance therein regarding petitioner's right to repurchase. cannot be said to be purchasers in good faith.. had been with petitioner since 1945. and that there was no formal authorization from the vendees for Paciente Cordero to act for and on their behalf. The purchasers were put on notice that some other person could have a right to or interest in the property. or for 24 years.

On or about July 21. Inc.00 or its peso equivalent at the time of payment. SO ORDERED. No. Branch 74 (RTC) rendered a Decision. Since flying with Frontier Air called for a higher fare of US$526. 188288 January 16. 2012 SPOUSES FERNANDO and LOURDES VILORIA. against respondent Continental Airlines. Fernando made inquiries and was told that there are seats available and he can travel on Amtrak anytime and any day he pleased. Mager. Fernando opted to request for a refund. As he was having second thoughts on traveling via Frontier Air. Branch 74. 2009 Decision1 of the Special Thirteenth Division of the Court of Appeals (CA) in CA-G. 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.000. CV No. Fernando purchased the tickets at US$400. WHEREFORE. Continental Airlines. however.00 each from a travel agency called "Holiday Travel" and was attended to by a certain Margaret Mager (Mager). No costs. California to Newark. Fernando sent a letter to CAI on February 11. SO ORDERED.00 as moral damages.4 In a letter dated March 24. J. Dominga Conde. As culled from the records.00 as exemplary damages. Defendant-appellant’s counterclaim is DENIED.00 per passenger and would mean traveling by night. Fernando went to the Greyhound Station where he saw an Amtrak station nearby. The imperatives of substantial justice. and the equitable principle of laches brought about by private respondents' inaction and neglect for 24 years. Fernando agreed to buy the said tickets after Mager informed them that there were no available seats at Amtrak.000. G. Fernando requested Mager to reschedule their flight to Newark to an earlier date or August 6. demanding a refund and alleging that Mager had deluded them into purchasing the subject tickets. From Amtrak. the Regional Trial Court of Antipolo City.R.3 In a letter dated February 24. 1997.2 PAT CASE: AGENCY Subsequently. the judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE. and has been paying land taxes thereon since then. Fernando went to Holiday Travel and confronted Mager with the Amtrak tickets. [P]40.C. Spouses Viloria were scheduled to leave for Newark on August 13. 88586 entitled "Spouses Fernando and Lourdes Viloria v. then said official is hereby ordered to cancel the same and. issue a new Transfer Certificate of Title in the name of petitioner. 1998. collectively called Spouses Viloria. below are the facts giving rise to such complaint. dated 03 April 2006. 1997 and return to San Diego on August 21.: This is a petition for review under Rule 45 of the Rules of Court from the January 30. CONTINENTAL AIRLINES. Continental Micronesia denied Fernando’s 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. two (2) round trip airline tickets from San Diego. According to Spouses Viloria. an intercity passenger train service provider in the United States.00 as attorney’s fees and costs of suit to plaintiffs-appellees is hereby REVERSED and SET ASIDE.. 1998. [P]100. DECISION REYES. awarding US$800. loom in petitioner's favor. 2006. Continental Micronesia informed Fernando that his complaint had been referred to the Customer Refund Services of Continental Airlines at Houston. Fernando then purchased two (2) tickets for Washington. giving due course to the complaint for sum of money and damages filed by petitioners Fernando Viloria (Fernando) and Lourdes Viloria (Lourdes). INC. New Jersey on board Continental Airlines. If the original of OCT No. N-534 of the Province of Leyte is still extant at the office of the Register of Deeds. and petitioner is hereby declared the owner of the disputed property. the repurchase by petitioner is supported by the admissions at the pre-trial that petitioner has been in possession since the year 1945.000. Lourdes. (CAI). Per the tickets.. Continental Micronesia informed Page 44 of 150 . Fernando reiterated his demand for a refund but Mager was firm in her position that the subject tickets are non-refundable. Inc. On April 3. Fernando decided to reserve two (2) seats with Frontier Air. [P]50. in lieu thereof.In sum. Fernando purchased for himself and his wife. 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. plus legal rate of interest from 21 July 1997 until fully paid. the date of the deed of repurchase." the dispositive portion of which states: WHEREFORE. Upon returning to the Philippines. although the contending parties were legally wanting in their respective actuations. Costs against plaintiffs-appellees. D. 1997. Petitioners. Texas. vs. telling her that she had misled them into buying the Continental Airlines tickets by misrepresenting that Amtrak was already fully booked.R. the Decision of the Regional Trial Court. 1997 and while in the United States. 1998.

00 as exemplary damages and P250. breached its undertaking under its March 24. its employees and agents did not act in bad faith as to entitle Spouses Viloria to moral and exemplary damages and attorney’s fees. According to CAI. In addition to the dubious circumstances under which the subject tickets were issued. Plaintiff Fernando clearly wanted to travel via AMTRAK. with the consent or authority of the latter.11 Furthermore.Fernando that the subject tickets may be used as a form of payment for the purchase of another Continental ticket. Fernando demanded for the refund of the subject tickets as he no longer wished to have them replaced. (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 non-transferable. Fernando claimed that CAI’s act of charging him with US$1. Mager by its offer in the letter dated March 24. Mager further relied on and exploited plaintiff Fernando’s need and told him that they must book a flight immediately or risk not being able to travel at all on the couple’s preferred date. which other airlines priced at US$856. (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier). Unfortunately. from his silence or lack of action. The RTC’s Ruling Following a full-blown trial. Plainly. cannot be used for the purchase of a ticket in his favor. the following are the pertinent New Civil Code provisions on agency: CAI interposed the following defenses: (a) Spouses Viloria have no right to ask for a refund as the subject tickets are non-refundable. CAI also invoked the following clause printed on the subject tickets: Art. Spouses Viloria filed a complaint against CAI. bound by her bad faith and misrepresentation. CAI is not liable for any of her acts. or his failure to repudiate the agency. As its very name implies.6 On September 8.000. particularly plaintiff Fernando. holding that Spouses Viloria are entitled to a refund in view of Mager’s misrepresentation in obtaining their consent in the purchase of the subject tickets. 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. Makati City to have the subject tickets replaced by a single round trip ticket to Los Angeles.40 so he would have to pay what will not be covered by the value of his San Diego to Newark round trip ticket. specifically the reservation and booking of local and foreign tours as well as the issuance of airline tickets for a commission or fee.00 as attorney’s fees. Mager of Holiday Travel agency to the plaintiff spouses on July 21. a travel agency binds itself to render some service or to do something in representation or on behalf of another.8 Agency may be oral. the RTC ruled that Mager is CAI’s agent. Defendant airline impliedly if not expressly acknowledged its principal-agent relationship with Ms. were tricked into buying Continental Airline tickets on Ms. As far as the RTC is concerned. with the consent or authority of the latter. 1997 and to pay P1. Agency may be express. (ii) applicable tariffs. there is no issue as to whether Mager was CAI’s agent in view of CAI’s implied recognition of her status as such in its March 24. California under his name. 1998 – an obvious attempt to assuage plaintiffs spouses’ hurt feelings.40 for a round trip ticket to Los Angeles. 1999.000. thus. Therein. praying that CAI be ordered to refund the money they used in the purchase of the subject tickets with legal interest from July 21. 1998 letter. knowing that another person is acting on his behalf without authority.7 Continental Airlines agent Ms. In fact.9 The relevant portion of the April 3. plaintiffs spouses fell prey to the airline’s and its agent’s unethical tactics for baiting trusting customers. 1869. In a letter dated June 21. 3. Fernando was informed that Lourdes’ ticket was non-transferable.5 On June 17. (d) CAI. 2006 Decision. (c) as Mager is not a CAI employee. 1868. one of the conditions attached to their contract of carriage is the non-transferability and non-refundability of the subject tickets. Mager was in bad faith when she was less candid and diligent in presenting to plaintiffs spouses their booking options. This court takes judicial notice of the common services rendered by travel agencies that represent themselves as such.867. and refusal to allow him to use Lourdes’ ticket. 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.00. P500. hence. Fernando went to Continental’s ticketing office at Ayala Avenue. By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another. He was also informed that a round trip ticket to Los Angeles was US$1.867."10 Citing Articles 1868 and 1869 of the Civil Code. 1998 letter. 2006 Decision states: PAT CASE: AGENCY Art. The services rendered by Ms. or implied from the acts of the principal.00 as moral damages. Continental Airlines agent Ms. 1999. but defendant’s agent misled him into purchasing Continental Airlines tickets instead on the fraudulent misrepresentation that Amtrak was fully booked. plaintiffs spouses. The act of a travel agent or agency being involved here.000. albeit with a re-issuance fee. the RTC rendered its April 3. unless the law requires a specific form. 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 Page 45 of 150 . Mager’s misleading misrepresentations. defendant Airline did not specifically denied (sic) this allegation.000. 2000. 1997 were no different from those offered in any other travel agency.

a person binds him/herself to render some service or to do something in representation or on behalf of another. As the basis of agency is representation. Agency is never presumed. Also. Page 46 of 150 . who have the burden of proof to establish the fact of agency. an actual intention to appoint. PAT CASE: AGENCY Finally. the transaction in issue was simply a contract of sale. defendant airline exhibited callous treatment of passengers.00. 2006 Decision allegedly lacks factual and legal bases.00. and (4) the agent acts within the scope of his/her authority. the CA held that CAI did not act in bad faith when they charged Spouses Viloria with the higher amount of US$1. contrary to Spouses Viloria’s claim. the word "non-refundable" clearly appears on the face of the subject tickets. which Spouses Viloria cannot intervene. this Court is being asked to review the findings and conclusions of the CA. (2) the object is the execution of a juridical act in relation to a third person. Proceeding from this premise. On the other hand. there must be an intention on the part of the agent to accept the appointment and act upon it. neither is it created by the mere use of the word in a trade or business name. CAI claimed that Spouses Viloria’s 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. the CA reversed the RTC’s April 3. with the consent or authority of the latter. on the part of the principal. 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. holding that CAI cannot be held liable for Mager’s act in the absence of any proof that a principal-agent relationship existed between CAI and Holiday Travel.12 The Appellate Court’s Ruling On appeal. Therefore. wherein Holiday Travel buys airline tickets from Continental Airlines and then. Furthermore. Spouses Viloria. express or implied. the contractual relationship between Holiday Travel and CAI is not an agency but that of a sale.867.14 The Petitioners’ Case In this Petition. Mager included. We find nothing except bare allegations of plaintiffs-appellees that Mager/Holiday Travel was acting in behalf of Continental Airlines. 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. 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. According to the CA. The trial court held the same view. (3) the agent acts as a representative and not for him/herself. 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. an intention naturally inferable from the principal’s words or actions. failed to present evidence demonstrating that Holiday Travel is CAI’s agent. With respect to Spouses Viloria’s claim that they are not aware of CAI’s restrictions on the subject tickets and that the terms and conditions that are printed on them are ambiguous. to ascertain not only the fact of agency but also the nature and extent of authority. CAI argued that Spouses Viloria’s 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$818.867.40 or more than double the then going rate of US$856. We do not agree. 1998 letter. there is no compulsion for CAI to charge the lower amount of US$856. any ambiguities should be construed against CAI. The Respondent’s Case In its Comment. no matter how expensive or exhorbitant said price may seem vis-à-vis those of the competing companies. The elements of agency are: (1) consent. By the contract of agency. the subject contract of carriage is a contract of adhesion. the advertisement pertains to airfares in September 2000 and not to airfares prevailing in June 1999. and in case either is controverted. 1998 letter. the grant of their prayer for a refund would violate the proscription against impairment of contracts. CAI denies any ambiguity and alleged that its representative informed Fernando that the subject tickets are non-transferable when he applied for the issuance of a new ticket. which constitute their contract with CAI. Specifically: Tickets may be reissued for up to two years from the original date of issue. of the parties to establish the relationship. therefore. The Spouses Viloria may not intervene with the business judgment of Continental Airlines. When defendant airline still charged plaintiffs spouses US$1.15 Also. through its employees. the burden of proof is upon them to establish it.40 for a round trip ticket to Los Angeles and when it refused to allow Fernando to use Lourdes’ ticket. there is generally no agency. the time when Fernando asked CAI to apply the value of the subject tickets for the purchase of a new one. sells it at a premium to clients.16 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.00 for the unused tickets when the same were presented within two (2) years from date of issue.13 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. We have perused the evidence and documents so far presented. Absent such mutual intent. which Spouses Viloria claim to be the fee charged by other airlines. as the latter’s reversal of the RTC’s April 3. The matter of fixing the prices for its services is CAI’s prerogative. From all sides of legal prism.US$1. Notably. As a common carrier.867. In the same manner. According to the CA. 2006 Decision. 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 CAI’s undertaking to re-issue new tickets to them within the period stated in their March 24.40 for a round trip ticket to Los Angeles. it is CAI’s 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. they contend that Continental Airlines should be held liable for the acts of Mager. the petitioners are no longer questioning the validity of the subject contracts and limited its claim for a refund on CAI’s alleged breach of its undertaking in its March 24. there must be.

20 Estoppel bars CAI from making such denial. and (4) the agent acts within the scope of his authority. this Court takes exception to the general rule that the CA’s findings of fact are conclusive upon Us and our jurisdiction is limited to the review of questions of law. "He who acts through another acts himself. Felix Go Chan & Sons Realty Corporation."19 Contrary to the findings of the CA. Spouses Viloria.18 this Court explained the nature of an agency and spelled out the essential elements thereof: Out of the above given principles. called the principal (mandante). 1998 letters. discrediting CAI’s denial that Holiday Travel is one of its agents. CAI did not deny that Holiday Travel is its authorized agent. 1998 and March 24.1avvphi1 Agency is basically personal. The essential elements of agency are: (1) there is consent. the failure to apply it in this case would result in gross travesty of justice. That CAI admits the authority of Holiday Travel to enter into contracts of carriage on its behalf is easily discernible from its February 24. and derivative in nature. PAT CASE: AGENCY We disagree. Prior to Spouses Viloria’s filing of a complaint against it. Alternatively. 2009 Decision and whether Spouses Viloria have the right to the reliefs they prayed for. A principal-agent relationship exists between CAI and Holiday Travel. (2) the object is the execution of a juridical act in relation to a third person. CAI never refuted that it gave Holiday Travel the power and authority to conclude contracts of carriage on its behalf. his act is the act of the principal if done within the scope of the authority. Page 47 of 150 . sprung the creation and acceptance of the relationship of agency whereby one party. The CA failed to consider undisputed facts. Is CAI justified in insisting that the subject tickets are non-transferable and non-refundable? e. With respect to the first issue. 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. on whose shoulders such burden rests. Does a principal-agent relationship exist between CAI and Holiday Travel? b. Assuming that CAI is bound by the acts of Holiday Travel’s agents and employees. Assuming that an agency relationship exists between CAI and Holiday Travel. 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. the CA failed to apply the fundamental civil law principles governing agency and differentiating it from sale. The first and second elements are present as CAI does not deny that it concluded an agreement with Holiday Travel. (3) the agent acts as a representative and not for himself. Issues To determine the propriety of disturbing the CA’s January 30. to act for and in his behalf in transactions with third persons. Holiday Travel was without capacity to bind CAI. As clearly extant from the records. called the agent (mandatario). presented evidence that fell short of indubitably demonstrating the existence of such agency. representative. is CAI bound by the acts of Holiday Travel’s agents and employees such as Mager? c. in erroneously characterizing the contractual relationship between CAI and Holiday Travel as a contract of sale. Furthermore. In Rallos v. The authority of the agent to act emanates from the powers granted to him by his principal. In fact. Is CAI justified in pegging a different price for the round trip ticket to Los Angeles requested by Fernando? f. 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. authorizes another. and this constitutes an unequivocal testament to Holiday Travel’s authority to act as its agent. Qui facit per alium facit se. 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. agency is never presumed and that he who alleges that it exists has the burden of proof. express or implied of the parties to establish the relationship. where it impliedly recognized the validity of the contracts entered into by Holiday Travel with Spouses Viloria. 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. which is a question of fact that would require this Court to review and reexamine the evidence presented by the parties below.CAI also denies that it is bound by the acts of Holiday Travel and Mager and that no principal-agency relationship exists between them. who relied on good faith on CAI’s acts in recognition of Holiday Travel’s authority. 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? This Court’s Ruling I.17 According to the CA. this Court deems it necessary to resolve the following issues: a. all the elements of an agency exist in this case. When Fernando informed CAI that it was Holiday Travel who issued to them the subject tickets. 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. 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. whereby Holiday Travel would enter into contracts of carriage with third persons on CAI’s behalf. 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. As an independent contractor.

in order to deny Spouses Viloria’s request for a refund or Fernando’s use of Lourdes’ ticket for the re-issuance of a new one. 48. the need to prove the principal’s own fault or negligence. Brooks. Page 48 of 150 . On the other hand. 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. All that he has to prove is the existence of the contract and the fact of its non-performance by the carrier. from his silence or lack of action. there being no pre-existing contractual relationship between them. hence. Williston on Sales. v. Ltd.24 "in an action based on a breach of contract of carriage. and terms. et al." (Salisbury v.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. the price and terms of which were subject to the company's control. There is no vinculum juris between the airline company and its agent’s 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 agent’s employees. but as the property of the principal.As categorically provided under Article 1869 of the Civil Code. Tiedeman on Sales. However. the contract is clearly a sale if the parties intended that the delivery of the property will effect a relinquishment of title. 1 Mechem on Sales. the principal retains ownership and control over the property and the agent merely acts on the principal’s behalf and under his instructions in furtherance of the objectives for which the agency was established. 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. knowing that another person is acting on his behalf without authority. while the essence of an agency to sell is the delivery to an agent.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. had already formulated the guidelines that would aid in differentiating the two (2) contracts. demand and receive the proceeds less the agent's commission upon sales made. and simultaneously claim that they are not bound by Mager’s supposed misrepresentation for purposes of avoiding Spouses Viloria’s claim for damages and maintaining the validity of the subject contracts. In an agency. In actions based on quasi-delict. not as his property. the aggrieved party does not have to prove that the common carrier was at fault or was negligent. A prior determination of the nature of the passenger’s cause of action is necessary. Sec. fix the price. 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. Court of Appeals. 1. It may likewise be argued that CAI cannot deny liability as it benefited from Mager’s acts. considering that CAI is the one bound by the contracts of carriage embodied by the tickets being sold by Holiday Travel on its behalf. 1. An examination of this Court’s pronouncements in China Air Lines will reveal that an airline company is not completely exonerated from any liability for the tort committed by its agent’s employees. or implied from the acts of the principal. does it necessarily follow that CAI is liable for the fault or negligence of Holiday Travel’s employees? Citing China Air Lines. On the other hand. Gillego. which were performed in compliance with Holiday Travel’s obligations as CAI’s agent. even as it delivered possession unto the dealer for resale to customers. and this conclusively indicates the existence of a principalagent relationship. control and ownership in such a way that the recipient may do with the property as he pleases. It may seem unjust at first glance that CAI would consider Spouses Viloria bound by the terms and conditions of the subject contracts. or his failure to repudiate the agency. 43. Therefore. If the passenger’s 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 company’s agent. Sec. II. if the passenger’s cause of action for damages against the airline company is based on contractual breach or culpa contractual. as early as 1970." Spouses Viloria’s cause of action on the basis of Mager’s alleged fraudulent misrepresentation is clearly one of tort or quasi-delict. Spouses Viloria did not present evidence that CAI was a party or had contributed to Mager’s complained act either by instructing or authorizing Holiday Travel and Mager to issue the said misrepresentation. Article 2180 of the Civil Code does not make the principal vicariously liable for the tort committed by its agent’s employees and the principal-agency relationship per se does not make the principal a party to such tort." Considering that the fundamental hallmarks of an agency are present.. Apart from their claim that CAI must be held liable for Mager’s supposed fraud because Holiday Travel is CAI’s agent. "[a]gency may be express. the transaction is a sale. this Court finds it rather peculiar that the CA had branded the contractual relationship between CAI and Holiday Travel as one of sale. The mere fact that the employee of the airline company’s agent has committed a tort is not sufficient to hold the airline company liable. Since the company retained ownership of the goods. 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. In Commissioner of Internal Revenue v. 1 Mechem on Agency. Constantino. which Mager entered into with them on CAI’s behalf. the records are devoid of any evidence by which CAI’s alleged liability can be substantiated. 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. who remains the owner and has the right to control sales. PAT CASE: AGENCY Considering that Holiday Travel is CAI’s 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. 94 SE 117. a principal can only be held liable for the tort committed by its agent’s 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. it was incumbent upon Spouses Viloria to prove that CAI was equally at fault. and not merely as an agent who must account for the proceeds of a resale. As this Court previously stated in China Air Lines and reiterated in Air France vs. it is not necessary that there be evidence of the airline company’s fault or negligence. The decisions say the transfer of title or agreement to transfer it for a price paid or promised is the essence of sale. The distinctions between a sale and an agency are not difficult to discern and this Court.

1344. Without such control. Apostol. 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. There is fraud when. This moral responsibility may consist in having failed to exercise due care in one's own acts.28 that: In Belen v. for according to the Civil Code: "It is an old and well-settled rule of the courts that the burden of proving the action is upon the plaintiff. to extend that liability. On the basis of the foregoing and given the allegation of Spouses Viloria that Fernando’s consent to the subject contracts was supposedly secured by Mager through fraudulent means. The circumstances of each case should be considered. clear. The deceit must be serious. The defendant is under no obligation to prove the negative averment. Hon. Court of Appeals. the "misrepresentation constituting the fraud must be established by full. he would not have agreed to. through insidious words or machinations of one of the contracting parties. the defendant is under no obligation to prove his exceptions. In order that fraud may make a contract voidable. Under Article 1338 of the Civil Code. on the tortfeasor."29 (citations omitted) Art. including their fruits and interest. Citing Belen v. whether absolute or limited. and that if he fails satisfactorily to show the facts upon which he bases his claim. this Court is required to determine whether Mager’s alleged misrepresentation constitutes causal fraud. or in having failed to exercise due care in the selection and control of one's agent or servants. 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.33 mere preponderance of evidence is not adequate: Fraud must also be discounted. by reasons of their status. 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. As ruled by this Court in Sierra v. Article 1390. through insidious words or machinations of one of the contracting parties. whether fraud attended the execution of a contract is factual in nature and this Court. Spouses Viloria failed to prove by clear and convincing evidence that Mager’s statement was fraudulent. Even on the assumption that CAI may be held liable for the acts of Mager.26 (emphasis supplied) It is incumbent upon Spouses Viloria to prove that CAI exercised control or supervision over Mager by preponderant evidence. Whether the subject contracts are annullable. that which cannot deceive a prudent person cannot be a ground for nullity. Mager’s 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."32 Also. To quote Tolentino again. Specifically. In fact. or in the control of persons who. the contract is considered voidable and may be annulled within four PAT CASE: AGENCY Art. Spouses Viloria failed to prove that (a) there were indeed available seats at Page 49 of 150 . The existence of control or supervision cannot be presumed and CAI is under no obligation to prove its denial or nugatory assertion. without a modicum of evidence that CAI exercised control over Holiday Travel’s employees or that CAI was equally at fault.However. This Court said: (4) years from the time of the discovery of the fraud. for reasons of public policy. Once a contract is annulled. Therefore. without them. so as to include responsibility for the negligence of those persons whose acts or omissions are imputable. In order that fraud may vitiate consent. this Court ruled that it was enough for defendant to deny an alleged employment relationship. et al. 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. fraud must be serious and its existence must be established by clear and convincing evidence. 1338. in relation to Article 1391 of the Civil Code.27 this Court ruled in Jayme v. there is nothing which could justify extending the liability to a person other than the one who committed the tort. the other is induced to enter into a contract which without them. may scrutinize the records if the findings of the CA are contrary to those of the RTC. Manila Railroad Co. Belen. taking into account the personal conditions of the victim. etc. no liability can be imposed on CAI for Mager’s supposed misrepresentation. provides that if the consent of the contracting parties was obtained through fraud.30 In Samson v. After meticulously poring over the records. by a legal fiction. the parties are obliged under Article 1398 of the same Code to restore to each other the things subject matter of the contract. still. and convincing evidence. Spouses Viloria are not entitled to a refund. As this Court explained in Cangco v. and not merely by a preponderance thereof. it should be serious and should not have been employed by both contracting parties. Similar to the dispute on the existence of an agency. a person’s vicarious liability is anchored on his possession of control.. on the contrary. not merely the incidental (dolo incidente). as discussed above. The fraud is serious when it is sufficient to impress. inducement to the making of the contract. the other is induced to enter into a contract which.:25 With respect to extra-contractual obligation arising from negligence. there is fraud when. he would not have agreed to. occupy a position of dependency with respect to the person made liable for their conduct. 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. without regard to the lack of moral culpability. or to lead an ordinarily prudent person into error."34 III. whether of act or omission. it must be the causal (dolo causante). Belen. to others who are in a position to exercise an absolute or limited control over them. 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.

with the payment of damages in either case. It is understood that there is a tacit ratification if. Simultaneous with their demand for a refund on the ground of Fernando’s vitiated consent. Implied ratification may take diverse forms. which is Fernando’s testimony that an Amtrak had assured him of the perennial availability of seats at Amtrak.00. which is consent." However. forfeiting their right to demand their annulment. Davao Corrugated Carton Corporation. Page 50 of 150 . Indeed. resolution. the next question is: "Do Spouses Viloria have the right to rescind the contract on the ground of CAI’s supposed breach of its undertaking to issue new tickets upon surrender of the subject tickets?" Even assuming that Mager’s representation is causal fraud. is absent. the defect is already present at the time of the negotiation and perfection stages of the contract.36 This is understood to be without prejudice to the rights of third persons who have acquired the thing. The power to rescind obligations is implied in reciprocal ones. CAI acted in bad faith and breached the subject contracts when it refused to apply the value of Lourdes’ ticket for Fernando’s 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. is based on the defendant’s breach of faith. as presently worded. one of the essential elements to a formation of a contract. for tickets purchased prior to October 30. CAI stated that "non-refundable tickets may be used as a form of payment toward the purchase of another Continental ticket for $75. there is nothing in the above-quoted section of CAI’s letter from which the restriction on the nontransferability of the subject tickets can be inferred. Spouses Viloria are actually asking for a rescission of the subject contracts based on contractual breach. such as by silence or acquiescence. Accordingly. 1997). "ratification extinguishes the action to annul a voidable contract.Amtrak for a trip to New Jersey on August 13. a violation of the reciprocity between the parties37 and in Solar Harvest. In fact.38 this Court ruled that a claim for a reimbursement in view of the other party’s failure to comply with his obligations under the contract is one for rescission or resolution. it is good faith that is.39 V. in annulment. In PAT CASE: AGENCY Clearly. by acts showing approval or adoption of the contract. v. Fraud is never lightly inferred. Considering that the subject contracts are not annullable on the ground of vitiated consent. the Vilorias had impliedly admitted the validity of the subject contracts. the defect is in the consummation stage of the contract when the parties are in the process of performing their respective obligations. the action referred to in Article 1191. to be wanting."35 Spouses Viloria failed to overcome this presumption. Spouses Viloria likewise asked for a refund based on CAI’s supposed bad faith in reneging on its undertaking to replace the subject tickets with a round trip ticket from Manila to Los Angeles. (b) Mager knew about this. According to Spouses Viloria. 1998 letter. This Court finds the only proof of Mager’s alleged fraud. unless there be just cause authorizing the fixing of a period. 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. 1997. all the elements to make the contract valid are present. other passengers may have cancelled their bookings and reservations with Amtrak. Contracts cannot be rescinded for a slight or casual breach. CAI cannot insist on the non-transferability of the subject tickets. in accordance with articles 1385 and 1388 and the Mortgage Law. 1393. 1997 at the time they spoke with Mager on July 21. Resolution. annulment under Article 1390 of the Civil Code and rescission under Article 1191 are two (2) inconsistent remedies. As CAI correctly pointed out and as Fernando admitted. states: Ratification of a voidable contract is defined under Article 1393 of the Civil Code as follows: The injured party may choose between the fulfilment and the rescission of the obligation. even after he has chosen fulfillment. in annulment. the existence of fraud cannot be proved by mere speculations and conjectures. Art. it is presumed that "a person is innocent of crime or wrong" and that "private transactions have been fair and regular.00. Inc. In resolution. by pursuing the remedy of rescission under Article 1191. per ticket. making it possible for Amtrak to accommodate them." Article 1191. A party cannot rely on the contract and claim rights or obligations under it and at the same time impugn its existence or validity. Spouses Viloria are nevertheless deemed to have ratified the subject contracts. The court shall decree the rescission claimed. if the latter should become impossible. IV. in case one of the obligors should not comply with what is incumbent upon him. or by acceptance and retention of benefits flowing therefrom. per ticket. the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right. 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. Assuming the contrary. litigants are enjoined from taking inconsistent positions. and (c) that she purposely informed them otherwise. with knowledge of the reason which renders the contract voidable and such reason having ceased. In doing so. Under the Rules of Court. He may also seek rescission. Indeed. reissue fee ($50. 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. the words used by CAI in its letter supports the position of Spouses Viloria. Under Article 1392 of the Civil Code. In its March 24. Ratification may be effected expressly or tacitly.

CAI cannot refuse to apply the value of Lourdes’ ticket as payment for Fernando’s purchase of a new ticket. 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. it cannot. 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. x x x (iii) carrier’s conditions of carriage and related regulations which are made part hereof (and are available on application at the offices of carrier) x x x. hence. 1998 cannot be doubted. and each shall bear his own damages.41 While CAI’s 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." Newspaper clippings are hearsay if they were offered for the purpose of proving the truth of the matter alleged. that CAI had obliged itself to issue to them tickets for any flight anywhere in the world upon their surrender of the subject tickets. 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. The petitioners failed to allege.00 and refuse to pay the difference between the price of the subject tickets and the amount fixed by CAI. which is inadmissible for being "hearsay evidence. twice removed. twice removed" and are therefore not only inadmissible but without any probative value at all whether objected to or not. The endorsability of the subject tickets is not an essential part of the underlying contracts and CAI’s failure to comply is not essential to its fulfillment of its undertaking to issue new tickets upon Spouses Viloria’s surrender of the subject tickets. In other words. as CAI admitted. As the 1st sentence of Article 1192 provides: Art. 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 takes note of CAI’s willingness to perform its principal obligation and this is to apply the price of the ticket in Fernando’s name to the price of the round trip ticket between Manila and Los Angeles. unless offered for a purpose other than proving the truth of the matter asserted. albeit tainted with its erroneous insistence that Lourdes’ ticket is non-transferable. (emphasis supplied) Therefore. albeit subject to a reduction coming from the value of the subject tickets. Spouses Viloria have no right to insist that a single round trip ticket between Manila and Los Angeles should be priced at around $856. The CA was correct in holding that it is CAI’s 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. Contrary to CAI’s claim. the liability of the first infractor shall be equitably tempered by the courts. however be considered substantial.1avvphi1 There is also no showing that Spouses Viloria were discriminated against in bad faith by being charged with a higher rate. Nonetheless. 1998 letter. 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. but only for such substantial and fundamental violations as would defeat the very object of the parties in making the agreement. Spouses Viloria’s 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. This Court made a similar ruling in Central Bank of the Philippines v. 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. Court of Appeals. CAI’s refusal to accept Lourdes’ ticket for the purchase of a new ticket for Fernando is only a casual breach. In this case. the same shall be deemed extinguished. which is not covered by the subject tickets. In its March 24. the right to rescind a contract for non-performance of its stipulations is not absolute. If it cannot be determined which of the parties first violated the contract. Moreover. the news article is admissible only as evidence that such publication does exist with the tenor of the news therein stated. or all of its passengers for that matter. much less prove. 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. hence. it was clearly stated that "[n]on-refundable tickets may be used as a form of PAT CASE: AGENCY 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. 1192. of all the terms and conditions governing their contract of carriage.43 The conflict as to the endorsability of the subject tickets is an altogether different matter." As a common carrier whose business is imbued with public interest.45 (citations omitted) The records of this case demonstrate that both parties were equally in default. As ruled in Feria v. CAI’s willingness to comply with its undertaking under its March 24.40 Whether a breach is substantial is largely determined by the attendant circumstances.00 is a newspaper advertisement for another airline company. 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. Court of Appeals. Moreover. 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. albeit under her name and for her exclusive use.46 Thus: Page 51 of 150 .Moreover. the exercise of extraordinary diligence requires CAI to inform Spouses Viloria.:44 [N]ewspaper articles amount to "hearsay evidence. Since the prohibition on transferability is not written on the face of the subject tickets and CAI failed to inform Spouses Viloria thereof. the contract between them remains. In case both parties have committed a breach of the obligation. The general rule is that rescission of a contract will not be permitted for a slight or casual breach. CAI’s liability for damages for its refusal to accept Lourdes’ ticket for the purchase of Fernando’s round trip ticket is offset by Spouses Viloria’s liability for their refusal to pay the amount.

[4] On the same day. Queao and one Ruby Ruebenfeldt (Ruebenfeldt) met with Naguiat. private respondent Aurora Queao (Queao) filed a complaint before the Pasay City RTC for cancellation of a Real Estate Mortgage she had entered into with petitioner Celestina Naguiat (Naguiat). which Naguiat granted. Shortly thereafter. No. Queao filed the case before the Pasay City RTC. CELESTINA T. After the Court of Appeals upheld the RTC decision. On the following day. the Security Bank check was dishonored for insufficiency of funds.00). adding that the checks were retained by Ruebenfeldt. The trial court eventually stopped the auction sale.000.[6] On 16 October 1980. and ordering Naguiat to return to Queao the owners duplicates of her titles to the mortgaged lots. At the meeting. and Queao issued to Naguiat a promissory note for the amount of TWO HUNDRED THOUSAND PESOS (P200. they are both liable for damages.[5] Queao also issued a Security Bank and Trust Company check.000. petitioner.[8] seeking the annulment of the mortgage deed. Three days before the scheduled sale. PAT CASE: AGENCY To secure the loan. demanding settlement of the loan. which was earlier issued to Naguiat by the Corporate Resources Financing Corporation. The Court of Appeals promulgated the decision now assailed before us that affirmed in toto the RTC decision. the mortgage deed enjoys the presumption that the recitals therein are true. the mortgage deed was notarized. 090990 (dated 11 August 1980) for the amount of Ninety Five Thousand Pesos (P95. who then scheduled the foreclosure sale on 14 August 1981. the instant Petition is DENIED. that is. the liability of the first infractor shall be equitably tempered by the courts. with interest at 12% per annum. J. On 11 August 1980. the present petition. She also issued her own Filmanbank Check No. x x x.00) and payable to the order of Naguiat.[7] [G. premises considered. Queao received a letter from Naguiats lawyer.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. Queao executed a Deed of Real Estate Mortgage dated 11 August 1980 in favor of Naguiat.00). Naguiat also questions the admissibility of various representations and pronouncements of Ruebenfeldt. for not paying his overdue P17. the RTC rendered judgment. COURT OF APPEALS and AURORA QUEAO. postdated 11 September 1980. vs. 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. Apart from the requirement that the defendant acted in a wanton.[9] On 8 March 1991. 12 September 1980. making no less than eleven assignments of error. which Naguiat appealed to the Court of Appeals. who purportedly was Naguiats agent. but the bank rejected the request pursuant to its policy not to honor such requests if the check is drawn against insufficient funds.: Before us is a Petition for Review on Certiorari under Rule 45. October 3. Naguiat questions the findings of facts made by the Court of Appeals. and surrendered to the latter the owners duplicates of the titles covering the mortgaged properties. The RTC rendered a decision. [10] Naguiat appealed the decision before the Court of Appeals. assailing the decision of the Sixteenth Division of the respondent Court of Appeals promulgated on 21 December 1994[1]. Naguiat instituted the present petition. also dated 11 August 1980 and for the amount of Ninety Five Thousand Pesos (P95. especially on the issue of whether Queao had actually received the loan proceeds which were supposed to be covered by the two checks Naguiat had issued or indorsed. Tolentino failed to comply with his obligation to pay his P17.R.000. Queao requested Security Bank to stop payment of her postdated check.00 debt. Queao told Naguiat that she did not receive the proceeds of the loan. invoking the rule on the non-binding effect of the admissions of third persons. for the amount of TWO HUNDRED THOUSAND PESOS (P200. 118375.000.00). payable on 11 September 1980. to the order of Queao. DECISION TINGA. the claimant must prove his entitlement to moral damages.000.00). Naguiat indorsed to Queao Associated Bank Check No. 2003] The operative facts follow: Queao applied with Naguiat for a loan in the amount of Two Hundred Thousand Pesos (P200. Article 1192 of the Civil Code provides that in case both parties have committed a breach of their reciprocal obligations. which affirmed in toto the decision handed down by the Regional Trial Court (RTC) of Pasay City. Naguiat claims that being a notarial instrument or public document.[2] The case arose when on 11 August 1981. NAGUIAT. Tolentino for damages.000.[11] Page 52 of 150 . Hence. SO ORDERED. declaring the questioned Real Estate Mortgage void. respondents.49 WHEREFORE. 065314. The proceeds of these checks were to constitute the loan granted by Naguiat to Queao. in the form of penalties and surcharges.[3] Naguiat applied for the extrajudicial foreclosure of the mortgage with the Sheriff of Rizal Province. oppressive and malevolent manner.000. 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. Island Savings Bank failed to comply with its obligation to furnish the entire loan and Sulpicio M.Since both parties were in default in the performance of their respective reciprocal obligations.48 The award of exemplary damages is likewise not warranted. Upon presentment on its maturity date.00 debt within 3 years as stipulated. declaring the Deed of Real Estate Mortgage null and void.

the rule is clear. [G. on her own and without Queao asking for it. Ruebenfeldt was not a stranger or an unauthorized person. to cover for Queaos alleged liability to Naguiat under the loan agreement. Naguiat insists that Ruebenfeldt was not her agent. but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. both the decisions of the appellate and trial courts are supported by the evidence on record and the applicable laws. In any event. there are established exceptions to the rule on the conclusiveness of the findings of facts of the lower courts. its validity would depend on the validity of the loan secured by it.[24] The Court of Appeals recognized the existence of an agency by estoppel[25] citing Article 1873 of the Civil Code. [27] The Court of Appeals is correct in invoking the said rule on agency by estoppel. Since Naguiat presented no such proof. as such. it follows that the checks were not encashed or credited to Queaos account.[16] Surely. More fundamentally.The resolution of the issues presented before this Court by Naguiat involves the determination of facts. For the Civil Code provides that the delivery of bills of exchange and mercantile documents such as checks shall produce the effect of payment only when they have been cashed. yielding as it does to clear and convincing evidence to the contrary. a function which this Court does not exercise in an appeal by certiorari. Page 53 of 150 . she cites the rule that a public document enjoys the presumption of validity and truthfulness of its contents. Naguiat instructed Ruebenfeldt to withhold from Queao the checks she issued or indorsed to Queao.[15] There is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts. Ruebenfeldt served as agent of Naguiat on the loan application of Queaos friend. however. PHILIPPINE AMUSEMENT AND GAMING CORPORATION. 163553 : December 11. it considered that at the very least. Against the common finding of the courts below. The PAT CASE: AGENCY SO ORDERED.[21] In this case. One who clothes another with apparent authority as his agent.[18] This Court has held that the presumption of truthfulness engendered by notarized documents is rebuttable. however. The Court of Appeals. Reubenfeldt actually drew a check for the sum of P220. Under Rule 45 which governs appeal by certiorari. and without which it cannot exist as an independent contract. In that situation. and holds him out to the public as such. The consideration of the mortgage contract is the same as that of the principal contract from which it receives life. the petition is denied and the assailed decision is affirmed. is correct in ruling that the presumption of truthfulness of the recitals in a public document was defeated by the clear and convincing evidence in this case that pointed to the absence of consideration. there is a question of fact when the doubt or difference arises as to the truth or the falsehood of alleged facts. not consensual. Court of Appeals rejected the argument. That being the case. holding that since Ruebenfeldt was an authorized representative or agent of Naguiat the situation falls under a recognized exception to the rule. to the prejudice of innocent third parties dealing with such person in good faith. The mere issuance of the checks did not result in the perfection of the contract of loan. and it was in connection with that transaction that Queao came to know Naguiat.[26] Apparently. All told. A loan contract is a real contract. is perfected only upon the delivery of the object of the contract. Naguiat questions the admissibility of the various written representations made by Ruebenfeldt on the ground that they could not bind her following the res inter alia acta alteri nocere non debet rule. the objects of the contract are the loan proceeds which Queao would enjoy only upon the encashment of the checks signed or indorsed by Naguiat.[20] It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected. it follows that the mortgage which is supposed to secure the loan is null and void.[19] On the other hand. Art. Respondent. Naguiat would have certainly presented the corresponding documentary evidence.[22] Still. Naguiat vigorously insists that Queao received the loan proceeds. and in the honest belief that he is what he appears to be. as a consequence of the interaction between Naguiat and Ruebenfeldt.00 payable to Naguiat.R. Petitioner. whose findings on these matters are received with respect and are in fact generally binding on the Supreme Court. If indeed the checks were encashed or deposited. pending delivery by the latter of additional collateral. v. NO. the existence of an agency relationship between Naguiat and Ruebenfeldt is supported by ample evidence. cannot be permitted to deny the authority of such person to act as his agent. absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually encashed or deposited. Suffice to say.[23] It was also Ruebenfeldt who accompanied Queao in her meeting with Naguiat and on that occasion.[14] A question of law which the Court may pass upon must not involve an examination of the probative value of the evidence presented by the litigants. as in this case. Capitalizing on the status of the mortgage deed as a public document. only questions of law may be raised[12] as the Supreme Court is not a trier of facts. As correctly pointed out by the Court of Appeals. 1934 of the Civil Code provides: An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties. we find no compelling reason to disturb the finding of the courts a quo that the lender did not remit and the borrower did not receive the proceeds of the loan.[29] WHEREFORE. Costs against petitioner.[28] A mortgage contract being a mere accessory contract. [13] The resolution of factual issues is the function of lower courts. such as the returned checks and the pertinent bank records. whatever was the true relationship between Naguiat and Ruebenfeldt is irrelevant in the face of the fact that the checks issued or indorsed to Queao were never encashed or deposited to her account of Naguiat. and. Marilou Farralese.000. but Naguiat did nothing to correct Queaos impression. 2009] YUN KWAN BYUNG.[17] But Naguiats case does not fall under any of the exceptions. Queao got the impression that Ruebenfeldt was the agent of Naguiat.

DECISION
CARPIO, J.:
The Case
Yun Kwan Byung (petitioner) filed this Petition for Review 1 assailing the Court of Appeals' Decision 2
dated 27 May 2003 in CA-G.R. CV No. 65699 as well as the Resolution 3 dated 7 May 2004 denying the
Motion for Reconsideration. In the assailed decision, the Court of Appeals (CA) affirmed the Regional
Trial Court's Decision 4 dated 6 May 1999. The Regional Trial Court of Manila, Branch 13 (trial court),
dismissed petitioner's demand against respondent Philippine Amusement and Gaming Corporation
(PAGCOR) for the redemption of gambling chips.
The Facts
PAGCOR is a government-owned and controlled corporation tasked to establish and operate gambling
clubs and casinos as a means to promote tourism and generate sources of revenue for the government.
To achieve these objectives, PAGCOR is vested with the power to enter into contracts of every kind and
for any lawful purpose that pertains to its business. Pursuant to this authority, PAGCOR launched its
Foreign Highroller Marketing Program (Program). The Program aims to invite patrons from foreign
countries to play at the dollar pit of designated PAGCOR-operated casinos under specified terms and
conditions and in accordance with industry practice. 5
The Korean-based ABS Corporation was one of the international groups that availed of the Program. In a
letter-agreement dated 25 April 1996 (Junket Agreement), ABS Corporation agreed to bring in foreign
players to play at the five designated gaming tables of the Casino Filipino Silahis at the Grand Boulevard
Hotel in Manila (Casino Filipino). The relevant stipulations of the Junket Agreement state:
1. PAGCOR will provide ABS Corporation with separate junket chips. The junket chips will be
distinguished from the chips being used by other players in the gaming tables.
ABS Corporation will distribute these junket chips to its players and at the end of the playing period, ABS
Corporation will collect the junket chips from its players and make an accounting to the casino treasury.
2. ABS Corporation will assume sole responsibility to pay the winnings of its foreign players and settle
the collectibles from losing players.
3. ABS Corporation shall hold PAGCOR absolutely free and harmless from any damage, claim or liability
which may arise from any cause in connection with the Junket Agreement.
5. In providing the gaming facilities and services to these foreign players, PAGCOR is entitled to receive
from ABS Corporation a 12.5% share in the gross winnings of ABS Corporation or 1.5 million US dollars,
whichever is higher, over a playing period of 6 months. PAGCOR has the option to extend the period. 6
PAT CASE: AGENCY

Petitioner, a Korean national, alleges that from November 1996 to March 1997, he came to the
Philippines four times to play for high stakes at the Casino Filipino. 7 Petitioner claims that in the course
of the games, he was able to accumulate gambling chips worth US$2.1 million. Petitioner presented as
evidence during the trial gambling chips with a face value of US$1.1 million. Petitioner contends that
when he presented the gambling chips for encashment with PAGCOR's employees or agents, PAGCOR
refused to redeem them. 8
Petitioner brought an action against PAGCOR seeking the redemption of gambling chips valued at
US$2.1 million. Petitioner claims that he won the gambling chips at the Casino Filipino, playing
continuously day and night. Petitioner alleges that every time he would come to Manila, PAGCOR would
extend to him amenities deserving of a high roller. A PAGCOR official who meets him at the airport would
bring him to Casino Filipino, a casino managed and operated by PAGCOR. The card dealers were all
PAGCOR employees, the gambling chips, equipment and furnitures belonged to PAGCOR, and
PAGCOR enforced all the regulations dealing with the operation of foreign exchange gambling pits.
Petitioner states that he was able to redeem his gambling chips with the cashier during his first few
winning trips. But later on, the casino cashier refused to encash his gambling chips so he had no
recourse but to deposit his gambling chips at the Grand Boulevard Hotel's deposit box, every time he
departed from Manila. 9
PAGCOR claims that petitioner, who was brought into the Philippines by ABS Corporation, is a junket
player who played in the dollar pit exclusively leased by ABS Corporation for its junket players. PAGCOR
alleges that it provided ABS Corporation with distinct junket chips. ABS Corporation distributed these
chips to its junket players. At the end of each playing period, the junket players would surrender the
chips to ABS Corporation. Only ABS Corporation would make an accounting of these chips to
PAGCOR's casino treasury. 10
As additional information for the junket players playing in the gaming room leased to ABS Corporation,
PAGCOR posted a notice written in English and Korean languages which reads:
NOTICE
This GAMING ROOM is exclusively operated by ABS under arrangement with PAGCOR, the former is
solely accountable for all PLAYING CHIPS wagered on the tables. Any financial
ARRANGEMENT/TRANSACTION between PLAYERS and ABS shall only be binding upon said
PLAYERS and ABS. 11
PAGCOR claims that this notice is a standard precautionary measure 12 to avoid confusion between
junket players of ABS Corporation and PAGCOR's players.
PAGCOR argues that petitioner is not a PAGCOR player because under PAGCOR's gaming rules,
gambling chips cannot be brought outside the casino. The gambling chips must be converted to cash at
the end of every gaming period as they are inventoried every shift. Under PAGCOR's rules, it is
impossible for PAGCOR players to accumulate two million dollars worth of gambling chips and to bring
the chips out of the casino premises. 13
Page 54 of 150

Since PAGCOR disclaimed liability for the winnings of players recruited by ABS Corporation and refused
to encash the gambling chips, petitioner filed a complaint for a sum of money before the trial court. 14
PAGCOR filed a counterclaim against petitioner. Then, trial ensued.

(f) The disbursement, administration, management and recording of foreign exchange currencies used in
the casino(s) shall be carried out in accordance with existing foreign exchange regulations, and
periodical reports of the transactions in such foreign exchange currencies by the Corporation shall be
duly recorded and reported to the Central Bank thru the designated Agent Bank; andcralawlibrary

On 6 May 1999, the trial court dismissed the complaint and counterclaim. Petitioner appealed the trial
court's decision to the CA. On 27 May 2003, the CA affirmed the appealed decision. On 27 June 2003,
petitioner moved for reconsideration which was denied on 7 May 2004.

(g) The Corporation shall issue the necessary rules and regulations for the guidance and information of
players qualified to participate in the foreign exchange gaming pit, in order to make certain that the terms
and conditions as above set forth are strictly complied with.

Aggrieved by the CA's decision and resolution, petitioner elevated the case before this Court.

The trial court held that only PAGCOR could use foreign currency in its gaming tables. When PAGCOR
accepted only a fixed portion of the dollar earnings of ABS Corporation in the concept of a lease of
facilities, PAGCOR shared its franchise with ABS Corporation in violation of the PAGCOR's charter.
Hence, the Junket Agreement is void. Since the Junket Agreement is not permitted by PAGCOR's
charter, the mutual rights and obligations of the parties to this case would be resolved based on agency
and estoppel. 16

The Ruling of the Trial Court
The trial court ruled that based on PAGCOR's charter, 15 PAGCOR has no authority to lease any portion
of the gambling tables to a private party like ABS Corporation. Section 13 of Presidential Decree No.
1869 or the PAGCOR's charter states:
Sec. 13. Exemptions xxx
(4) Utilization of Foreign Currencies - The Corporation shall have the right and authority, solely and
exclusively in connection with the operations of the casino(s), to purchase, receive, exchange and
disburse foreign exchange, subject to the following terms and conditions:
(a) A specific area in the casino(s) or gaming pit shall be put up solely and exclusively for players and
patrons utilizing foreign currencies;
(b) The Corporation shall appoint and designate a duly accredited commercial bank agent of the Central
Bank, to handle, administer and manage the use of foreign currencies in the casino(s);
(c) The Corporation shall provide an office at casino(s) exclusively for the employees of the designated
bank, agent of the Central Bank, where the Corporation shall maintain a dollar account which will be
utilized exclusively for the above purpose and the casino dollar treasury employees;
(d) Only persons with foreign passports or certificates of identity (for Hong Kong patron only) duly issued
by the government or country of their residence will be allowed to play in the foreign exchange gaming
pit;
(e) Only foreign exchange prescribed to form part of the Philippine International Reserve and the
following foreign exchange currencies: Australian Dollar, Singapore Dollar, Hong Kong Dollar, shall be
used in this gaming pit;

PAT CASE: AGENCY

The trial court found that the petitioner wanted to redeem gambling chips that were specifically used by
ABS Corporation at its gaming tables. The gambling chips come in distinctive orange or yellow colors
with stickers bearing denominations of 10,000 or 1,000. The 1,000 gambling chips are smaller in size
and the words "no cash value" marked on them. The 10,000 gambling chips do not reflect the "no cash
value" sign. The senior treasury head of PAGCOR testified that these were the gambling chips used by
the previous junket operators and PAGCOR merely continued using them. However, the gambling chips
used in the regular casino games were of a different quality. 17
The trial court pointed out that PAGCOR had taken steps to warn players brought in by all junket
operators, including ABS Corporation, that they were playing under special rules. Apart from the different
kinds of gambling chips used, the junket players were confined to certain gaming rooms. In these rooms,
notices were posted that gambling chips could only be encashed there and nowhere else. A photograph
of one such notice, printed in Korean and English, stated that the gaming room was exclusively operated
by ABS Corporation and that ABS Corporation was solely accountable for all the chips wagered on the
gaming tables. Although petitioner denied seeing this notice, this disclaimer has the effect of a negative
evidence that can hardly prevail against the positive assertions of PAGCOR officials whose credibility is
also not open to doubt. The trial court concluded that petitioner had been alerted to the existence of
these special gambling rules, and the mere fact that he continued to play under the same restrictions
over a period of several months confirms his acquiescence to them. Otherwise, petitioner could have
simply chose to stop gambling. 18
In dismissing petitioner's complaint, the trial court concluded that petitioner's demand against PAGCOR
for the redemption of the gambling chips could not stand. The trial court stated that petitioner, a stranger
to the agreement between PAGCOR and ABS Corporation, could not under principles of equity be
charged with notice other than of the apparent authority with which PAGCOR had clothed its employees
and agents in dealing with petitioner. Since petitioner was made aware of the special rules by which he
was playing at the Casino Filipino, petitioner could not now claim that he was not bound by them. The
trial court explained that in an unlawful transaction, the courts will extend equitable relief only to a party
Page 55 of 150

who was unaware of all its dimensions and whose ignorance of them exposed him to the risk of being
exploited by the other. Where the parties enter into such a relationship with the opportunity to know all of
its ramifications, as in this case, there is no room for equitable considerations to come to the rescue of
any party. The trial court ruled that it would leave the parties where they are. 19
The Ruling of the Court of Appeals
In dismissing the appeal, the appellate court addressed the four errors assigned by petitioner.
First, petitioner maintains that he was never a junket player of ABS Corporation. Petitioner also denies
seeing a notice that certain gaming rooms were exclusively operated by entities under special
agreement. 20
The CA ruled that the records do not support petitioner's theory. Petitioner's own testimony reveals that
he enjoyed special accommodations at the Grand Boulevard Hotel. This similar accommodation was
extended to players brought in by ABS Corporation and other junket operators. Petitioner cannot
disassociate himself from ABS Corporation for it is unlikely that an unknown high roller would be
accorded choice accommodations by the hotel unless the accommodation was facilitated by a junket
operator who enjoyed such privilege. 21

agent is authorized by the principal to enter into a particular transaction, but instead of contracting on
behalf of the principal, the agent acts in his own name. 27
The CA concluded that no such legal fiction existed between PAGCOR and ABS Corporation. PAGCOR
entered into a Junket Agreement to lease to ABS Corporation certain gaming areas. It was never
PAGCOR's intention to deal with the junket players. Neither did PAGCOR intend ABS Corporation to
represent PAGCOR in dealing with the junket players. Representation is the basis of agency but
unfortunately for petitioner none is found in this case. 28
The CA added that the special gaming chips, while belonging to PAGCOR, are mere accessories in the
void Junket Agreement with ABS Corporation. In Article 1883, the phrase "things belonging to the
principal" refers only to those things or properties subject of a particular transaction authorized by the
principal to be entered into by its purported agent. Necessarily, the gambling chips being mere incidents
to the void lease agreement cannot fall under this category. 29
The CA ruled that Article 2152 30 of the Civil Code is also not applicable. The circumstances relating to
negotiorum gestio are non-existent to warrant an officious manager to take over the management and
administration of PAGCOR. 31
Fourth, petitioner asks for equitable relief. 32

The CA added that the testimonies of PAGCOR's employees affirming that notices were posted in
English and Korean in the gaming areas are credible in the absence of any convincing proof of ill motive.
Further, the specified gaming areas used only special chips that could be bought and exchanged at
certain cashier booths in that area. 22
Second, petitioner attacks the validity of the contents of the notice. Since the Junket Agreement is void,
the notice, which was issued pursuant to the Junket Agreement, is also void and cannot affect petitioner.
23
The CA reasoned that the trial court never declared the notice valid and neither did it enforce the
contents thereof. The CA emphasized that it was the act of cautioning and alerting the players that was
upheld. The trial court ruled that signs and warnings were in place to inform the public, petitioner
included, that special rules applied to certain gaming areas even if the very agreement giving rise to
these rules is void. 24
Third, petitioner takes the position that an implied agency existed between PAGCOR and ABS
Corporation. 25
The CA disagreed with petitioner's view. A void contract has no force and effect from the very beginning.
It produces no effect either against or in favor of anyone. Neither can it create, modify or extinguish the
juridical relation to which it refers. Necessarily, the Junket Agreement, being void from the beginning,
cannot give rise to an implied agency. The CA explained that it cannot see how the principle of implied
agency can be applied to this case. Article 1883 26 of the Civil Code applies only to a situation where the

The CA explained that although petitioner was never a party to the void Junket Agreement, petitioner
cannot deny or feign blindness to the signs and warnings all around him. The notices, the special
gambling chips, and the separate gaming areas were more than enough to alert him that he was playing
under different terms. Petitioner persisted and continued to play in the casino. Petitioner also enjoyed the
perks extended to junket players of ABS Corporation. For failing to heed these signs and warnings,
petitioner can no longer be permitted to claim equitable relief. When parties do not come to court with
clean hands, they cannot be allowed to profit from their own wrong doing. 33
The Issues
Petitioners raise three issues in this petition:
1. Whether the CA erred in holding that PAGCOR is not liable to petitioner, disregarding the doctrine of
implied agency, or agency by estoppel;
2. Whether the CA erred in using intent of the contracting parties as the test for creation of agency, when
such is not relevant since the instant case involves liability of the presumed principal in implied agency to
a third party; andcralawlibrary
3. Whether the CA erred in failing to consider that PAGCOR ratified, or at least adopted, the acts of the
agent, ABS Corporation. 34
The Ruling of the Court

PAT CASE: AGENCY

Page 56 of 150

Corporate Powers. Since the Junket Agreement violates PAGCOR's charter. The only form of gambling allowed by law is that stipulated under Presidential Decree No. as principal. 36 Presidential Decree No. A corporation as a creature of the State is presumed to exist for the common good. all forms of gambling are illegal. and carry out contracts of every kind and for any lawful purpose pertaining to the business of the Corporation. which refers to illegal gambling. PAGCOR. we deem it necessary to discuss the applicability of Republic Act No. The grantee must not perform its activities arbitrarily and whimsically but must abide by the limits set by its franchise and strictly adhere to its terms and conditionalities. PAGCOR cannot delegate its power in view of the legal principle of delegata potestas delegare non potest. PAGCOR executed an agreement with SAGE whereby the former grants the latter the authority to operate and maintain sports betting stations and Internet gaming operations. the charter and the quality of the service to be rendered and the duty of the grantee to the public in exercising the franchise are almost always defined in clear and unequivocal language. Thus. PAGCOR is not allowed under the same charter to relinquish or share its franchise. (Emphasis supplied)cralawlibrary xxx h) to enter into. with any person. the Court. states that no action can be maintained by the winner for the collection of what he has won in a game of chance. to whom it may be granted. by taking only a percentage of the earnings of ABS Corporation from its foreign currency collection. The Junket Agreement is in direct violation of PAGCOR's charter and is therefore void. 37 which modified Articles 195-199 of the Revised Penal Code and repealed inconsistent provisions. Courts will not enforce debts arising from illegal gambling Gambling is prohibited by the laws of the Philippines as specifically provided in Articles 195 to 199 of the Revised Penal Code. granting PAGCOR the power to enter into special agreement with third parties to share the privileges under its franchise for the operation of gambling casinos: Page 57 of 150 .The petition lacks merit. as amended. 38 prescribed stiffer penalties on illegal gambling. PAGCOR could share its gambling franchise with another entity. There is therefore a reserved right of the State to inquire how these privileges had been employed. 1602 (PD 1602). perform. in this case. but only by itself (i. under such conditions and regulations as the government may impose on them in the interest of the public. and economic growth of the nation. or corporation. PAT CASE: AGENCY Similarly. to operate. the mode of conducting the business.e. make. inasmuch as there is nothing in the charter to show that it has been expressly authorized to do so. Hence. Phil. agent or otherwise. 35 and is thus prohibited and punished to repress an evil that undermines the social. which gave PAGCOR its franchise to maintain and operate gambling casinos. Gambling is an act beyond the pale of good morals. . partake and share PAGCOR's franchise to operate a gambling activity. 41 xxx The Junket Agreement would be valid if under Section 3(h) of PAGCOR's charter. RA 9487 amended the PAGCOR charter. allowed ABS Corporation to operate gaming tables in the dollar pit. In essence. not in association with any other person or entity). partially granted the motions for clarification filed by respondents therein insofar as it prayed that PAGCOR has a valid franchise. but should be reserved for public control and administration.. the special privileges and franchises it receives are subject to the laws of the State and the limitations of its charter. In the case at bar.The Corporation shall have the following powers and functions. 40 the Court discussed the extent of the grant of the legislative franchise to PAGCOR on its authority to operate gambling casinos: A legislative franchise is a special privilege granted by the state to corporations. and whether they have been abused. While PAGCOR is allowed under its charter to enter into operator's or management contracts. It is a privilege of public concern which cannot be exercised at will and pleasure. PAGCOR has the sole and exclusive authority to operate a gambling activity. The grant of franchise is a special privilege that constitutes a right and a duty to be performed by the grantee. moral. gambling between the junket player and the junket operator under such agreement is illegal and may not be enforced by the courts. Although not raised as an issue by petitioner. It is Congress that prescribes the conditions on which the grant of the franchise may be made. In Senator Jaworski v. 1869. Amusement and Gaming Corp. we hold that PAGCOR has acted beyond the limits of its authority when it passed on or shared its franchise to SAGE. either by the government directly. association. Article 2014 42 of the Civil Code. in an En Banc Resolution dated 24 August 2001. 9487 43 (RA 9487) to the present case. maintain and/or manage the game of jai-alai. or by public agents. firm. Thus the manner of granting the franchise. the grant of authority gives SAGE the privilege to actively participate. After a circumspect consideration of the foregoing discussion and the contending positions of the parties. or in any manner incident thereto. The issue then turns on whether PAGCOR can validly share its franchise with junket operators to operate gambling casinos in the country. among others: In the Del Mar case where a similar issue was raised when PAGCOR entered into a joint venture agreement with two other entities in the operation and management of jai alai games. Section 3(h) of PAGCOR's charter states: Section 3. 39 As a rule.

Of the three floors. management agreements. Petitioner states that one factor which distinguishes agency from other legal precepts is control and the following undisputed facts show a relationship of implied agency: 1. 3. through its own manager. agency agreements. being an actual agency. First. The Junket Agreement was entered into between PAGCOR and ABS Corporation on 25 April 1996 when the PAGCOR charter then prevailing (PD 1869) prohibited PAGCOR from entering into any arrangement with a third party that would allow such party to actively participate in the casino operations. PAGCOR controlled the release. PAGCOR enforced. or any other similar agreements or arrangements with any person. but the one assuming to act as agent has apparent or ostensible. 56 5. PAGCOR conducted an inventory of the gambling chips. from his silence or lack of action. 51 Acts and conduct of PAGCOR negates the existence of an implied agency or an agency by estoppel PAGCOR sought the amendment of its charter precisely to address and remedy the legal impediment raised in Senator Jaworski v. including but not limited to investment agreements. withdrawal and return of all the gambling chips given to ABS Corporation in that part of the casino and at the end of the day. the principal may knowingly permit the agent to hold himself out as having such authority. 44 RA 9487 does not provide for any retroactivity of its provisions. appropriate.Section 1. Amusement and Gaming Corp. petitioner claims that he is a third party proceeding against the liability of a presumed principal and claims relief. It is a basic principle that laws should only be applied prospectively unless the legislative intent to give them retroactive effect is expressly declared or is necessarily implied from the language used. to address the issues raised by petitioner in his petition. association or corporation. whether as principal or as an agent. is hereby further amended to read as follows: xxx (2) Section 3(h) is hereby amended to read as follows: "SEC. operated by PAGCOR employees and using PAGCOR chips bearing the PAGCOR logo. make. alternatively. and carry out contracts of every kind and nature and for any lawful purpose which are necessary. 46 Thus. petitioner claims that even assuming that no actual agency existed between PAGCOR and ABS Corporation. manpower supply agreements. the court cannot assist petitioner in enforcing an illegal act. authority to represent another. 53 2. Alternatively. which is void. 49 The law makes no presumption of agency and proving its existence. ABS Corporation accounted for all gambling chips with the Commission on Audit (COA). RA 9487 cannot be applied to the present case. PAT CASE: AGENCY Petitioner alleges that there is an implied agency. apparent authority is based on estoppel and can arise from two instances. Corporate Powers. petitioner engaged in gambling with ABS Corporation and not with PAGCOR. there is still an agency by estoppel based on the acts and conduct of PAGCOR showing apparent authority in favor of ABS Corporation. there is no agency at all. firm. proper or incidental to any business or purpose of the PAGCOR. 55 4. knowing that another person is acting on his behalf without authority. the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. the official auditor of PAGCOR. all the rules and regulations on the operation of the gambling pit used by ABS Corporation. 45 and that in every case of doubt. Second. All laws operate prospectively absent a clear contrary language in the text. Phil. First. Implied agency." (Boldfacing supplied) Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal. Moreover. nature and extent is incumbent upon the person alleging it. "x x x "(h) to enter into. although not real. Second. The Philippine Amusement and Gaming Corporation (PAGCOR) franchise granted under Presidential Decree No. is a fact to be proved by deductions or inferences from other facts. Now. PAGCOR allowed ABS Corporation to use one whole floor for foreign exchange gambling. perform. 1869 otherwise known as the PAGCOR Charter. the doubt will be resolved against the retroactive operation of laws. 50 Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. and the principal becomes estopped to claim that the agent does not have such authority. Petitioner cannot sue PAGCOR to redeem the cash value of the gambling chips or recover damages arising from an illegal activity for two reasons. petitioner cannot avail of the provisions of RA 9487 as this was not the law when the acts giving rise to the claimed liabilities took place. 54 3. for a court to grant petitioner's prayer would mean enforcing the Junket Agreement. Unfortunately for petitioner. Three floors of the Grand Boulevard Hotel 52 were leased to PAGCOR for conducting gambling operations. on the basis of implied agency or agency by estoppel. This makes the gambling activity participated in by petitioner illegal. or his failure to repudiate the agency. conducted by PAGCOR dealers using PAGCOR facilities. 48 In an agency by estoppel. 57 Page 58 of 150 . 47 On the other hand. conclude. joint venture agreements.

in posting notices stating that the players are playing under special rules. The Junket Agreement was merely a contract of lease of facilities and services. PAGCOR's actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators. 61 There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. 2003 Resolution[2] of the Court of Appeals (CA) in CA-G. there is generally no agency. SO ORDERED. such as gambling contracts. In the entire duration that petitioner played in Casino Filipino. 59426. The basis for agency is representation. The Court of Appeals correctly used the intent of the contracting parties in determining whether an agency by estoppel existed in this case. which ruled in favor of petitioners. 64 Article 1409 of the Civil Code provides that contracts expressly prohibited or declared void by law. reversed and set aside the January 14. spouses Pedro San Agustin and Agatona Genil were able to acquire a 246-square meter parcel of land situated in Barangay Anos. 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. and that such junket players played specifically only in the third floor area and did not mingle with the regular patrons of PAGCOR. there must be an actual intention to appoint or an intention naturally inferable from his words or actions. The players used a different kind of chip than what was used in the regular gaming areas of PAGCOR.R. and that. G. and availing of the privileges extended only to players brought in by ABS Corporation. MINERVA SAN AGUSTIN-ATKINSON. and we affirm. The dispute stemmed from the following facts. EUFEMIA SAN AGUSTIN-MAGSINO. exercised the necessary precaution to warn the gaming public that no agency relationship exists. SPOUSES ISAGANI BELARMINO and LETICIA OCAMPO. and such must have produced a change of position to its detriment. while on the part of the agent.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ For the second assigned error. petitioner asserts that PAGCOR ratified the acts of ABS Corporation. nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. there must be an intention to accept the appointment and act on it. PURITA PAHUD. The players brought in by ABS Corporation were covered by a different set of rules in acquiring and encashing chips. "cannot be ratified. A void or inexistent contract is one which has no force and effect from the very beginning. The appellate court.Petitioner's argument is clearly misplaced. PAGCOR. For his third and final assigned error. J. FERDINAND SAN AGUSTIN. An agency by estoppel. During their lifetime. he was dealing only with ABS Corporation. The facts that he enjoyed special treatment upon his arrival in Manila and special accommodations in Grand Boulevard Hotel. 63 Such proof is lacking in this case. No. O-(1655) 0-15. 62 There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as claimant. Furthermore. Los Baos.R. Respondents. it is as if it has never been entered into and cannot be validated either by the passage of time or by ratification. 2003 Decision[1] and October 8. Petitioner cannot be considered as an innocent third party and he cannot claim entitlement to equitable relief as well. MILAGROS SAN AGUSTIN-FORTMAN. ZENAIDA SAN AGUSTIN-McCRAE. that the Junket Agreement is void. needs proof that the representations predated the action taken in reliance. in turn. and that he was playing in special gaming rooms are all indications that petitioner cannot claim good faith that he believed he was dealing with PAGCOR. Petitioners. . in the said decision and resolution. We disagree. 59 On the part of the principal. ISABELITA SAN AGUSTIN-LUSTENBERGER and VIRGILIO SAN AGUSTIN. CV No. Hence. RAUL SAN AGUSTIN. We AFFIRM the Court of Appeals' Decision dated 27 May 2003 as well as the Resolution dated 7 May 2004 as modified by this Decision. SOLEDAD PAHUD. we DENY the petition.[4] Agatona Genil died on September 13. which is similar to the doctrine of apparent authority requires proof of reliance upon the representations.: For our resolution is a petition for review on certiorari assailing the April 23. Laguna and covered by Original Certificate of Title (OCT) No. 2009 x------------------------------------------------------------------------------------x DECISION NACHURA. 58 that is. 1990 while Pedro San Agustin Page 59 of 150 . 1998 Decision[3] of the Regional Trial Court (RTC). PAT CASE: AGENCY The trial court has declared. petitioner claims that the intention of the parties cannot apply to him as he is not a party to the contract. and IAN LEE CASTILLA (represented by Mother and Attorney-in-Fact VIRGINIA CASTILLA). 160346 August 25." 65 WHEREFORE. 60 Absent such mutual intent.versus COURT OF APPEALS.

In disposing the issue.000.000. and Zenaida but without their apparent written authority.500. Pedro San Agustin and Agatona Genil in favor of the Intervenors-Third Party plaintiffs as valid and enforceable. 1991. (2) Ordering plaintiffs-appellees to return to intervenors-appellees the total amount they received from the latter.[14] When Eufemia and her co-heirs drafted an extra-judicial settlement of estate to facilitate the transfer of the title to the Pahuds.00 to defendant Fe (sic) San Agustin Magsino. O (1655) O-15 by the plaintiffs as heirs of deceased Sps. 1995 until actual payment of the same. Upon receipt of the balance. in the main. Branch 92 in Civil Case No. Virgilio refused to sign it. and a new one entered.[19] Virgilio then sold the entire property to spouses Isagani Belarmino and Leticia Ocampo (Belarminos) sometime in 1994. 2-a) signed by plaintiff Eufemia San Agustin attached to the unapproved Compromise Agreement (Exh. with the parties shouldering their respective responsibilities regarding the payment of attorney[]s fees to their respective lawyers. lawyer for Eufemia and her six (6) co-heirs.792. Isabelita and Virgilio. respondents appealed the decision to the CA arguing. in the course of the proceedings for judicial partition. 4. Minerva.[7] and also for Milagros. that the sale made by Eufemia for and on behalf of her other co-heirs to the Pahuds should have been declared void and inexistent for want of a written authority from her co-heirs. for brevity) their respective shares from the lot they inherited from their deceased parents for P525. Ferdinand. Eufemia. refused to sign the agreement because he knew of the previous sale made to the Pahuds. rendered by the Regional Trial Court of Calamba. 1994. and 5. namely: Isabelita on the basis of a special power of attorney executed on September 28. the CA ruled: WHEREFORE.[8] The deed of sale was also not notarized. 2) as not a valid sale in favor of defendant Virgilio San Agustin. PAT CASE: AGENCY 2.[6] Eufemia also signed the deed on behalf of her four (4) other co-heirs.500. the plaintiff shall formalize the sale of the 7/8 portion in favor of the Intervenor[s]-Third Party plaintiffs. a Compromise Agreement[17] was signed with seven (7) of the co-heirs agreeing to sell their undivided shares to Virgilio for P700. the foregoing considered. Laguna. The CA yielded and set aside the findings of the trial court. 1992.000.[15] On July 8.[10] The bank issued a release of mortgage and turned over the owners copy of the OCT to the Pahuds.00. SO ORDERED. 1991.[11] Over the following months. Laguna. 2011-93-C for Judicial Partition is hereby REVERSED and SET ASIDE.31 to the Los Baos Rural Bank where the subject property was mortgaged. Isagani and Leticia Belarmino[. 1994. declaring the parties as not entitled to any damages. 1993.00 by paying the balance of P87. On November 28.[22] Not satisfied. Ferdinand and Raul executed a Deed of Absolute Sale of Undivided Shares[5] conveying in favor of petitioners (the Pahuds. declaring the defendant Virgilio San Agustin and the Third-Party defendants spouses Isagani and Leticia Belarmino as in bad faith in buying the portion of the property already sold by the plaintiffs in favor of the Intervenors-Third Party Plaintiffs and the Third-Party Defendant Sps. O (1655)-O-15 registered in the names of Spouses Pedro San Agustin and Agatona Genil in favor of Third-party defendant Spouses Isagani and Leticia Belarmino as not a valid sale and as inexistent. The Belarminos immediately constructed a building on the subject property. (4) Declaring appellants-spouses as buyers in good faith and for value and are the owners of the subject property. plus an interest of 12% per annum from the time the complaint [in] intervention was filed on April 12. the sale of the 7/8 portion of the property covered by OCT No.died on September 14. in view of the foregoing.000.500. Eufemia acknowledged having received P700. 3. the Court orders: 1. Isagani and Leticia Belarmino in constructing the two-[storey] building in (sic) the property subject of this case. The compromise agreement was.00. as follows: (1) The case for partition among the plaintiffs-appellees and appellant Virgilio is now considered closed and terminated. however. The dispositive portion of the decision reads: WHEREFORE. the Pahuds paid P35. Zenaida. Dimetrio Hilbero.[9] On July 21.00. the Pahuds filed a complaint in intervention[21] in the pending case for judicial partition. Page 60 of 150 . the Pahuds made more payments to Eufemia and her siblings totaling to P350.[20] Aggrieved. No pronouncement as to costs. 4) made by defendant Virgilio San Agustin of the property covered by OCT No. After trial. Milagros.[12] They agreed to use the remaining P87. the RTC upheld the validity of the sale to petitioners. Both died intestate. Raul. declaring the document entitled Salaysay sa Pagsang-ayon sa Bilihan (Exh. but obligating the Intervenors-Third Party plaintiffs to complete the payment of the purchase price of P437.[18] On December 1.00[13] to defray the payment for taxes and the expenses in transferring the title of the property. declaring the sale (Exh.] as valid and binding. Minerva. survived by their eight (8) children: respondents Eufemia. Sometime in 1992. Virgilios co-heirs filed a complaint[16] for judicial partition of the subject property before the RTC of Calamba.00 from Virgilio. not approved by the trial court because Atty. the Pahuds immediately confronted Eufemia who confirmed to them that Virgilio had sold the property to the Belarminos. 1998. (3) Declaring the sale of appellant Virgilio San Agustin to appellants spouses. Alarmed and bewildered by the ongoing construction on the lot they purchased. the Decision dated January 14.

[32] Eufemia and her other co-heirs denied having sold their shares to the Pahuds.[25] a special power of attorney is necessary for an agent to enter into a contract by which the ownership of an immovable property is transmitted or acquired. This was. When a sale of a piece of land or any interest therein is through an agent. under Article 1878. They could have easily filed a case for annulment of the sale of their respective shares against Eufemia and the Pahuds. A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. representing the shares of Zenaida. either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute. During the pre-trial conference. The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos have superior rights over the property in question than petitioners despite the fact that the latter were prior in possession thereby misapplying the provisions of Article 1544 of the New Civil Code. Article 1431 of the Civil Code provides: Art. a power of attorney must so express the powers of the agent in clear and unmistakable language. in their Comment.[31] we nevertheless uphold its validity on the basis of the common law principle of estoppel.[33] Thus. Isabelita and her two brothers to the Pahuds sometime in 1992 should be valid only with respect to the 4/8 portion of the subject property. the ruling of the CA. True. Court of Appeals:[26] [T]he authority of an agent to execute a contract [of] sale of real estate must be conferred in writing and must give him specific authority. the Pahuds argue that the sale with respect to the 3/8 portion of the land should have been deemed ratified when the three co-heirs. The Court of Appeals committed grave and reversible error when it did not apply the second paragraph of Article 1317 of the New Civil Code insofar as ratification is concerned to the sale of the 4/8 portion of the subject property executed by respondents San Agustin in favor of petitioners. if not accordingly amended. in their petition. II. Initially. in principle. in fact. no such construction shall be given the document. Article 1874 of the Civil Code plainly provides: Art. however. expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned. by their subsequent admission. and Minerva. 1431.[23] Petitioners now come to this Court raising the following arguments: I. 1874. void.[35] the said co-heirs again admitted the sale made to petitioners. the authority of the latter shall be in writing. is void because Eufemia could not dispose of the interest of her coheirs in the said lot absent any written authority from the latter. Milagros. and Zenaida. as explicitly required by law. the previous denial was superseded. executed their respective special power of attorneys[29] authorizing Eufemia to represent them in the sale of their shares in the subject property.[27] In several cases. otherwise. Eufemia was not armed with the requisite special power of attorney to dispose of the 3/8 portion of the property. III. [24] Still. SO ORDERED. they opted to remain silent and left the task of raising the validity of the sale as an issue to their co-heir. Instead.No pronouncement as to costs. that the sale made by Eufemia. Through estoppel an admission or representation is rendered conclusive upon the person making it. in no instance did the three (3) heirs concerned assail the validity of the transaction made by Eufemia to the Pahuds on the basis of want of written authority to sell. For the principal to confer the right upon an agent to sell real estate. When there is any reasonable doubt that the language so used conveys such power. and cannot be denied or disproved as against the person relying thereon. ipso jure. The Court of Appeals committed grave and reversible error in holding that respondents spouses Belarminos are in good faith when they bought the subject property from respondent Virgilio San Agustin despite the findings of fact by the court a quo that they were in bad faith which clearly contravenes the presence of long line of case laws upholding the task of giving utmost weight and value to the factual findings of the trial court during appeals.[30] The focal issue to be resolved is the status of the sale of the subject property by Eufemia and her coheirs to the Pahuds. The sale with respect to the 3/8 portion. at the time of the sale to the Pahuds. it is not difficult to conclude. We find the transaction to be valid and enforceable.[36] Interestingly.[34] Moreover. The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that PAT CASE: AGENCY While the sale with respect to the 3/8 portion is void by express provision of law and not susceptible to ratification. Page 61 of 150 . [and] Based on the foregoing. they admitted that they had indeed sold 7/8 of the property to the Pahuds sometime in 1992. Such stringent statutory requirement has been explained in Cosmic Lumber Corporation v. either gratuitously or for a valuable consideration. we have repeatedly held that the absence of a written authority to sell a piece of land is. the sale shall be void. namely: Milagros. in their answer to the complaint in intervention. Also. Minerva.[28] precisely to protect the interest of an unsuspecting owner from being prejudiced by the unwarranted act of another.

1993 of the Court of Appeals in CA-G. and any injury or prejudice occasioned by such transaction must be borne by him. Cruz. Barrio Ugong. had they verified the status of the property by asking the neighboring residents. Laguna is REINSTATED with the MODIFICATION that the sale made by respondent Virgilio San Agustin to respondent spouses Isagani Belarmino and Leticia Ocampo is valid only with respect to the 1/8 portion of the subject property. the three co-heirs are now estopped from impugning the validity of the sale from assailing the authority of Eufemia to enter into such transaction. His mere refusal to believe that such defect exists.094 square meters. 1988. INC. 1998 Decision of Branch 92 of the Regional Trial Court of Calamba. a real estate broker of the CNP Real Estate Brokerage. Cristeta Polintan. and later claim that he acted in good faith on the belief that there was no defect in the title of the vendor. Accordingly. They cannot be allowed to rely on Eufemia. As a general rule. Inc.000.[37] By their continued silence.00 payable to the order of Dieselman. Pasig City. authorized Felicisima ("Mimi") Noble4 to sell the same lot.R. RANULLO.[41] In the case at bar. has no written authority from Dieselman to sell the lot. (AF Realty) at P2. or (3) if it is apparently authorized.: Petition for review on certiorari assailing the Decision dated December 10. their attorney-in-fact. being transferees pendente lite. In turn. thus. CRUZ. Accordingly. the silence and passivity of the three co-heirs on the issue bar them from making a contrary claim. however. (Dieselman for brevity) is a domestic corporation and a registered owner of a parcel of commercial lot consisting of 2. if afterwards it turns out that the title was. G.Virgilio. SANDOVAL-GUTIERREZ. for their part. 59426. CO.R. but remained in the name of Pedro San Agustin and Agatona Genil. 30133.00. Metro Manila. therefore. Jr. Cruz. petitioners. the Belarminos were fully aware that the property was registered not in the name of the immediate transferor. PAT CASE: AGENCY All these existing and readily verifiable facts are sufficient to suggest that the Belarminos knew that they were buying the property at their own risk. or his obvious neglect by closing his eyes to the possibility of the existence of a defect in the vendors title.00 per square meter. 2003 Resolution in CA-G. cannot argue that they purchased the property from Virgilio in good faith. Rodriguez Avenue. are REVERSED and SET ASIDE.[38] Nemo dat quod non habet. the subsequent sale made by the seven co-heirs to Virgilio was void because they no longer had any interest over the subject property which they could alienate at the time of the second transaction. are deemed buyers in mala fide. The Belarminos. through a letter3 dated May 19. and ZENAIDA R.[43] They knew that the property was still subject of partition proceedings before the trial court. DIESELMAN FREIGHT SERVICES. and MIDAS DEVELOPMENT CORPORATION. WHEREFORE.00 per square meter. CV No.282.[44] The Belarminos. defective. Clearly. Polintan received the check and signed an "Acknowledgement Receipt"6 indicating that the amount of Page 62 of 150 . (2) if it is within the implied authority of the agent to make for the principal.. Jr. 2002 AF REALTY & DEVELOPMENT. Zenaida. No. 39849 issued by the Registry of Deeds of the Province of Rizal. 111448 January 16. Virgilio. CV No. issued a letter denominated as "Authority To Sell Real Estate"2 to Cristeta N. could still alienate his 1/8 undivided share to the Belarminos. The trial court is ordered to proceed with the partition of the property with dispatch. The property is covered by Transfer Certificate of Title No.[39] But the rule excludes those who purchase with knowledge of the defect in the title of the vendor or of facts sufficient to induce a reasonable and prudent person to inquire into the status of the property. Polintan..1 On May 10. or a total of P6. he is deemed to have bought the property at his own risk. It is a basic rule in the law of agency that a principal is subject to liability for loss caused to another by the latters reliance upon a deceitful representation by an agent in the course of his employment (1) if the representation is authorized. SO ORDERED. Virgilio. the April 23. the January 14. to impugn the validity of the first transaction because to allow them to do so would be tantamount to giving premium to their sisters dishonest and fraudulent deed. Jr. negate their claim that they are purchasers for value in good faith. respondents. regardless of whether the agent was authorized by him or not to make the representation. Dieselman Freight Service Co. Cruz. they would have been able to talk to the Pahuds who occupy an adjoining business establishment[46] and would have known that a portion of the property had already been sold. in fact. located at 104 E. authorized Polintan "to look for a buyer/buyers and negotiate the sale" of the lot at P3. who is not privy to the said transaction. a purchaser of a real property is not required to make any further inquiry beyond what the certificate of title indicates on its face.500. 2003 Decision of the Court of Appeals as well as its October 8.[40] Such purchaser cannot close his eyes to facts which should put a reasonable man on guard. Undeniably. MANUEL C. vs. 1988.5 Zenaida Ranullo. and that the compromise agreement signed by the heirs was not approved by the RTC following the opposition of the counsel for Eufemia and her six other co-heirs. premises considered.[42] This fact alone is sufficient impetus to make further inquiry and.[45] Furthermore. Milagros and Minerva have caused the Pahuds to believe that they have indeed clothed Eufemia with the authority to transact on their behalf. Manuel C.000. will not make him an innocent purchaser for value. JR.R. board member and vice-president of AF Realty. Felicisima Noble then offered for sale the property to AF Realty & Development. a member of the board of directors of Dieselman. J. and they stand exactly in the shoes of the transferor and are bound by any judgment or decree which may be rendered for or against the transferor. In such a case.000. accepted the offer and issued a check in the amount of P300. 1992 and the Resolution (Amending Decision) dated August 5.

16 On August 5. However. the dispositive portion of which reads: "WHEREFORE. on August 13. promulgated an Amending Decision. 39849. P100. After trial. 1988.000.1âwphi1.00 per square meter. bound Dieselman in the sale of the lot to AF Realty. "The counterclaim of defendants is necessarily dismissed..00 as moral damages. Upon the other hand.000. and P500. Sr. Page 63 of 150 . 1988. upon motions for reconsideration filed by the parties. Polintan could only give Ranullo the original copy of TCT No. In its answer. Meanwhile. and in dismissing its counterclaim against Midas.00 represents the partial payment of the property but refundable within two weeks should AF Realty disapprove Ranullo's action on the matter.00 in escrow account with the PCIBank.7 The dispositive portion of the trial court's Decision reads: "WHEREFORE.000.00 as "earnest money" but required AF Realty to finalize the sale at P4. the tax declaration and tax receipt for the lot.00 as compensatory damages. The Court of Appeals then declared Dieselman and Cruz. Mr.10 Claiming that there was a perfected contract of sale between them. acknowledged receipt of the said P300. there being no bad faith on the part of the latter. the sale was not perfected. Pasig City a complaint for specific performance (Civil Case No. on July 30.000."17 AF Realty now comes to this Court via the instant petition alleging that the Court of Appeals committed errors of law. 56278. 1989 a Motion for Leave to Intervene in Civil Case No. 56278) against Dieselman and Cruz..00 as exemplary damages.000. and ordering defendants to pay plaintiffs attorney's fees in the amount of P50. hence Dieselman cannot be compelled to sell and convey it to AF Realty. judgment is hereby rendered ordering defendant to execute and deliver to plaintiffs the final deed of sale of the property covered by the Transfer Certificate of Title No. In its Decision dated December 10. Constrained to protect its interest in the property. compensatory and exemplary damages. AF Realty confirmed its intention to buy the lot. P400.00 as attorney's fees. the Court of Appeals reversed the judgment of the trial court holding that since Cruz. the perfected contract of sale between Dieselman and AF Realty bars Midas' intervention.000. The trial court also held that Midas acted in bad faith when it initially paid Dieselman P500.00 and to pay the costs. the lower court rendered the challenged Decision holding that the acts of Cruz.300. Dieselman and Midas Development Corporation (Midas) executed a Deed of Absolute Sale13 of the same property. 39849 of the Registry of Deed of Rizal. The focal issue for consideration by this Court is who between petitioner AF Realty and respondent Midas has a right over the subject lot.00 and is willing to pay the balance. terminated the offer and demanded from AF Realty the return of the title of the lot earlier delivered by Polintan.00. AF Realty alleged that the trial court erred in not holding Dieselman liable for moral.500. 1992. Jr. On August 2. plus the amount of P300. the Court of Appeals.000. Midas alleged that it has purchased the property and took possession thereof. Dieselman alleged that there was no meeting of the minds between the parties in the sale of the property and that it did not authorize any person to enter into such transaction on its behalf. Manuel F.00 per square meter. Cruz.00 as down payment and deposited the balance of P5.000.P300.000. including the improvements thereon. Midas delivered to Dieselman P500. 1988. The Decision promulgated on October 10. and a photocopy of the Articles of Incorporation of Dieselman.000. Hence. Cruz. The complaint prays that Dieselman be ordered to execute and deliver a final deed of sale in favor of AF Realty. Jr.00 as attorney's fees.300.000.800."15 Dissatisfied.00 as exemplary damages. 1993.000.9 However.00 unless.000. and P100. the notarial report of the sale was not submitted to the Clerk of Court of the Quezon City RTC and the balance of P5. in the case of the said P300.000.14 Consequently. Jr. Midas further averred that there was no bad faith on its part when it purchased the lot from Dieselman. 1992. the same is still deposited with the Court which should be restituted to plaintiffs. The agreed price was P2. Jr. should be made liable to pay the plaintiffs the damages and attorney's fees awarded therein. Branch 160. Manuel Cruz.12 AF Realty asked for payment of P1.000. Dieselman and Midas claimed that the trial court erred in finding that a contract of sale between Dieselman and AF Realty was perfected. On June 29. and that the Deed of Absolute Sale between Dieselman and Midas is valid.000.11 In its amended complaint. 1988.000. was not authorized in writing by Dieselman to sell the subject property to AF Realty. Ranullo asked Polintan for the board resolution of Dieselman authorizing the sale of the property. The trial court granted Midas' motion. jointly and severally liable to AF Realty for P100. Midas filed on April 3. Sr. all the parties appealed to the Court of Appeals.nêt PAT CASE: AGENCY "The counterclaim and/or the complaint in intervention are likewise dismissed "SO ORDERED. president of Dieselman.00 even without seeing the latter's title to the property. Moreover. is hereby AMENDED in the sense that only defendant Mr. AF Realty filed with the Regional Trial Court. Metro Manila District II. "SO ORDERED. Jr.8 AF Realty replied that it has paid an initial down payment of P300. foregoing considered.00 purportedly deposited in escrow by Midas with a bank was not established.

20 Absent such valid delegation/authorization. in respect to his power to act for the corporation. the law on agency under the Civil Code takes precedence.'s lack of such authority precludes him from conferring any authority to Polintan involving the subject realty. could not confer on Polintan any authority which he himself did not have. Polintan and Noble cannot bind Dieselman in the purported contract of sale. Nemo dat quod non habet. 1874. Just as a natural person may authorize another to do certain acts in his behalf. Jr. This is well stressed in Yao Ka Sin Trading vs. "While Cristeta Polintan was actually authorized by Cruz. Jr. much less to appoint other persons for the same purpose. Jr. but not in the course of. Felicisima Noble could not have possessed authority broader in scope. Cristeta Polintan and Felicisima Ranullo were not authorized by respondent Dieselman to sell its lot. neither could Polintan authorize Felicisima Noble. the rule is that the declarations of an individual director relating to the affairs of the corporation. the authority of the latter shall be in writing. for it is a legal truism in our jurisdiction that a spring cannot rise higher than its source. by-law." (Emphasis supplied) Page 64 of 150 . However. anent the sale of the subject property by Dieselman to intervenor Midas. thus: We agree with the Court of Appeals. to look for buyers and negotiate the sale of the subject property. it is not susceptible of ratification by clear mandate of Article 1409 of the Civil Code. in reversing the judgment of the trial court. the collective acts of respondent Cruz. 169 SCRA617. the alleged sale of the subject property was effected through persons who were absolutely without any authority whatsoever from Dieselman. Necessarily. the sale shall be void. the evidence must be strong and not merely preponderant x x x. Intermediate Appellate Court. A subsequently registered notice of lis pendens surely is not proof of bad faith. 1409. Thus. "The argument that Dieselman ratified the contract by accepting the P300. Being a void contract. The following contracts are inexistent and void from the very beginning: Section 23 of the Corporation Code expressly provides that the corporate powers of all corporations shall be exercised by the board of directors.000. Jr. Article 1874 of the same Code provides: "ART. or connected with. made the following ratiocination: "From the foregoing scenario. It must therefore be borne in mind that the 30 July 1988 deed of sale between Midas and Dieselman is a document duly certified by notary public under his hand and seal. and. When a sale of piece of land or any interest therein is through an agent. all acts within the powers of said corporation may be performed by agents of its selection. The notice of lis pendens was subsequently annotated on the title of the property by plaintiffs on 15 August 1988. Court of Appeals:23 "Since a corporation. the fact that the board of directors of Dieselman never authorized. Jr. are subject to the same rules. it is undisputed that respondent Cruz.21 xxx PAT CASE: AGENCY (7) Those expressly prohibited or declared void by law. to sell the property in question or to look for buyers and negotiate the sale of the subject property is undeniable. or members acting in their stead."18 In the instant case. otherwise. there is acceptance of the benefits involved. and agents when once appointed. such as the private respondent. has no written authority from the board of directors of respondent Dieselman to sell or to negotiate the sale of the lot. Jr. Baltazar. 194 SCRA 114) and to prove the defects and lack of consent in the execution thereof.The Court of Appeals.000. from AF Realty of the P300. Clearly. can act only through its officers and agents. Neither can the right to set up the defense of illegality be waived.22 We are not persuaded. liabilities." (Emphasis supplied) Pertinently. xxx xxx xxx "On the contrary. it should be noted that Cruz.. except so far as limitations or restrictions may be imposed by special charter. x x x. "These contracts cannot be ratified..19 Thus. Jr. In the same manner. "ART. Joson vs. being a mere extension of Polintan's purported authority. of whatever status or rank.00 as partial payment of the lot effectively binds respondent Dieselman. contracts or acts of a corporation must be made either by the board of directors or by a corporate agent duly authorized by the board. Cruz. the same general principles of law which govern the relation of agency for a natural person govern the officer or agent of a corporation. the supposed contract is void. the performance of authorized duties of such director. Involved in this case is a sale of land through an agent. and incapacities as are agents of individuals and private persons. Succinctly stated. the records bear out that Midas purchased the same from Dieselman on 30 July 1988. or statutory provisions." (Emphasis supplied) Considering that respondent Cruz. are held not binding on the corporation. verbally and in writing. as here. this subsequent annotation of the notice of lis pendens certainly operated prospectively and did not retroact to make the previous sale of the property to Midas a conveyance in bad faith. The sale of land through an agent without any written authority is void. so may the board of directors of a corporation validly delegate some of its functions to individual officers or agents appointed by it.00 as partial payment of the purchase price of the subject property is equally untenable. In this case the receipt by respondent Cruz. Such a deed of sale being public document acknowledged before a notary public is admissible as to the date and fact of its execution without further proof of its due execution and delivery (Bael vs. Petitioner AF Realty maintains that the sale of land by an unauthorized agent may be ratified where. Respondent Cruz. Jr.

the assailed Decision and Resolution of the Court of Appeals are hereby AFFIRMED with MODIFICATION in the sense that the award of damages and attorney's fees is deleted. 114311. admitted in her testimony25that a board resolution from respondent Dieselman authorizing the sale is necessary to bind the latter in the transaction.640. 2.[4] SO ORDERED. 37649 needed to segregate from Lot No. respondents. 1. and. should not be held liable for damages and attorney's fees. Jr.26 This notwithstanding.00. and to cause their eviction therefrom. vs. D-7750. the terms of which follow: Although the decision became final and executory it was not executed within the 5-year period from date of its finality allegedly due to the failure of petitioner to produce the owners duplicate copy of Title No. No. That as per relocation sketch plan dated June 5. Paz G. Villamil-Estrada as attorney-in-fact x x x to initiate.Upon the other hand.00 computed at P80. 443 before the Regional Trial Court of Dagupan. (f) the disposal of a corporate property indispensably requires a Board Resolution of its Directors. has no such written authority. such authority was in connection with.00/square meter. docketed as Civil Case No.[1] On 11 March 1985 Paz G. Jr. 4. (c) while the special power of attorney made mention of an authority to enter into a compromise agreement. D-10459 for the revival of judgment was served upon it that it came to know of the compromise agreement entered into between Paz G. WHEREFORE. Thus on 25 January 1993 respondent filed a complaint to revive the judgment. Villamil-Estrada. for having acted in bad faith. November 29. D-10459.: COSMIC LUMBER CORPORATION through its General Manager executed on 28 January 1985 a Special Power of Attorney appointing Paz G. As aptly noted by the Court of Appeals. J.00 alluded to as alleged consideration of said agreement was never received by the plaintiff. 443 the portion sold by the attorney-in-fact. (b) the authority of the attorney-in-fact was confined to the institution and filing of an ejectment case against third persons/squatters on the property of the plaintiff. the validity of the sale of the subject lot to respondent Midas is unquestionable. The award was made by reason of a breach of contract imputable to respondent Cruz. to appear at the pre-trial conference and enter into any stipulation of facts and/or compromise agreement so far as it shall protect the rights and interest of the corporation in the aforementioned lots. encumber or divest the plaintiff of its ownership over its real property or any portion thereof. D-7750.24 the sale was authorized by a board resolution of respondent Dieselman dated May 27.. to private respondent under the compromise agreement. VillamilEstrada. Respondent Dieselman is ordered to return to petitioner AF Realty its partial payment of P300. DECISION BELLOSILLO. in order that the corporation may take material possession of the entire lot. It bears stressing that petitioner Zenaida Ranullo. 3. We are no persuaded. and limited to. and other incidental expenses shall be shouldered by the defendant. That plaintiff hereby recognizes ownership and possession of the defendant by virtue of this compromise agreement over said portion of 333 square m. Forthwith. respondent Cruz. Whatever expenses of subdivision. 1996] COSMIC LUMBER CORPORATION. board member and vice-president of petitioner AF Realty who accepted the offer to sell the property.[5] Petitioner asserts that it was only when the summons in Civil Case No. That to buy peace said defendant pays unto the plaintiff through herein attorney-in-fact the sum of P26. petitioner. of lot 443 which portion will be located on the easternmost part as indicated in the sketch as annex A.1âwphi1. and for this purpose. Villamil-Estrada and respondent Isidro Perez upon which the trial court based its decision of 26 July 1993 in Civil Case No. 1985 prepared by Engineer Rodolfo dela Cruz the area at present occupied by defendant wherein his house is located is 333 square meters on the easternmost part of lot 443 and which portion has been occupied by defendant for several years now.000. upon learning of the fraudulent transaction. [G.nêt The Court of Appeals awarded attorney's fees and moral and exemplary damages in favor of petitioner AF Realty and against respondent Cruz.640. petitioner Ranullo tendered a partial payment for the unauthorized transaction. Clearly. such written authority was not presented to her. (e) the private defendant acted in bad faith in the execution of said agreement knowing fully well the want of authority of the attorney-in-fact to sell. In fact.[2] PAT CASE: AGENCY On 25 November 1985 Villamil-Estrada entered into a Compromise Agreement with respondent Perez. docketed as Civil Case No. the eviction of third persons/squatters thereat. and that respondent Cruz. COURT OF APPEALS and ISIDRO PEREZ. encumber or dispose of the real property of plaintiff. registration. Jr. petitioner sought annulment of the decision of the trial court before respondent Court of Appeals on the ground that the compromise agreement was void because: (a) the attorney-in-fact did not have the authority to dispose of. a fact which Page 65 of 150 . despite demand. by virtue of her power of attorney. Jr. institute and file any court action for the ejectment of third persons and/or squatters of the entire lot 9127 and 443 and covered by TCT Nos. instituted an action for the ejectment of private respondent Isidro Perez and recover the possession of a portion of Lot No. 1988. sell. for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot.R. Costs against petitioners. 37648 and 37649.[3] On 27 November 1985 the Compromise Agreement was approved by the trial court and judgment was rendered in accordance therewith. (d) the amount of P26.

1878. the nullity of the settlement between Villamil-Estrada and Perez impaired the jurisdiction of the trial court to render its decision based on the compromise agreement. of the Civil Code. certain requisites must first be established Page 66 of 150 .[10] A special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. Villamil-Estrada acted without or in obvious authority. to appear at the pre-trial and enter into any stipulation of facts and/or compromise agreement but only insofar as this was protective of the rights and interests of petitioner in the property.[12] For the principal to confer the PAT CASE: AGENCY right upon an agent to sell real estate. the authority of the latter shall be in writing.00 per square meter. When there is any reasonable doubt that the language so used conveys such power.[8] Petitioner challenges this verdict. The Court also observed that a defendant against whom a judgment based on a compromise is sought to be enforced may file a petition for certiorari to quash the execution. Under authority of Sec. namely. otherwise. Attorney-in-fact Villamil-Estrada did not possess the authority to sell or was she armed with a Board Resolution authorizing the sale of its property.[16] Thus. and the General Manager is not the proper officer to encumber a corporate property. rendered by a court without jurisdiction to do so. Villamil-Estrada who signed the compromise agreement may have been the attorney-in-fact but she could not legally bind petitioner thereto as she was not entrusted with a special authority to sell the land. as required in Art. and considering further that petitioner never received the proceeds of the sale.[13] It is therefore clear that by selling to respondent Perez a portion of petitioners land through a compromise agreement. 9127 and 443 so that petitioner could take material possession thereof.[14] the Court held x x x x this court does not hesitate to hold that the judgment in question is null and void ab initio. the sale shall be void. very much less than its assessed value of P250. (5). discoursing that the alleged nullity of the compromise judgment on the ground that petitioners attorney in fact Villamit-Estrada was not authorized to sell the subject property may be raised as a defense in the execution of the compromise judgment as it does not bind petitioner. It is not binding upon and cannot be executed against the petitioners.is wanting in said Civil Case No. Petitioner could not be in a position to question the compromise agreement in the action to revive the compromise judgment since it was never privy to such agreement. a power of attorney must so express the powers of the agent in clear and unmistakable language.[11] The express mandate required by law to enable an appointee of an agency (couched) in general terms to sell must be one that expressly mentions a sale or that includes a sale as a necessary ingredient of the act mentioned.[7] It also denied the motion for reconsideration filed by petitioner. When the sale of a piece of land or any interest thereon is through an agent. such authority being expressly confined to the ejectment of third persons or squatters of x x x lot x x x (No. The sale ipso jure is consequently void. In Alviar v. 9. Justice J.[9] Thus the authority of an agent to execute a contract for the sale of real estate must be conferred in writing and must give him specific authority. (2). par. it is evident that the court acquired no jurisdiction to render it. So is the compromise agreement. Thus it would appear that the obiter of the appellate court that the alleged nullity of the compromise agreement should be raised as a defense against its enforcement is not legally feasible. Court of First Instance of La Union.B. the judgment based thereon is necessarily void. more so when the land was being sold for a price of P80.) 443 x x x for the said squatters to remove their houses and vacate the premises in order that the corporation may take material possession of the entire lot x x x x We agree with petitioner. a party may now petition the Court of Appeals to annul and set aside judgments of Regional Trial Courts.[15] by Mr. In the context of the specific investiture of powers to Villamil-Estrada. D-7750. alienation by sale of an immovable certainly cannot be deemed protective of the right of petitioner to physically possess the same. the Intermediate Appellate Court (now Court of Appeals) shall exercise x x x x (2) Exclusive original jurisdiction over action for annulment of judgments of the Regional Trial Courts x x x x However. no such construction shall be given the document. This being the case. Montesa.[6] On 29 October 1993 respondent court dismissed the complaint on the basis of its finding that not one of the grounds for annulment. par. fraud or illegality was shown to exist. It is evident that the compromise upon which the judgment was based was not subscribed by them x x x x Neither could Attorney Ortega bind them validly in the compromise because he had no special authority x x x x As the judgment in question is null and void ab initio. of B. It argues that the decision of the trial court is void because the compromise agreement upon which it was based is void.P. 129. The authority granted Villamil-Estrada under the special power of attorney was explicit and exclusionary: for her to institute any action in court to eject all persons found on Lots Nos. lack of jurisdiction. where the Court declared that a judgment based on a compromise entered into by an attorney without specific authority from the client is void. which is null and void ab initio. but not as a ground for annulment of judgment because it does not affect the jurisdiction of the trial court over the action nor does it amount to extrinsic fraud. is without legal efficacy and may properly be impugned in any proceeding by the party against whom it is sought to be enforced x x x x This ruling was adopted in Jacinto v. a much-respected authority on civil law. He could not move to have the compromise set aside and then appeal from the order of denial since he was not a party to the compromise. Antipodal to the opinion expressed by respondent court in resolving petitioners motion for reconsideration. and for this purpose. Reyes. Neither can a conferment of the power to sell be validly inferred from the specific authority to enter into a compromise agreement because of the explicit limitation fixed by the grantor that the compromise entered into shall only be so far as it shall protect the rights and interest of the corporation in the aforementioned lots. Such judgment may be impugned and its execution restrained in any proceeding by the party against whom it is sought to be enforced. 443. Nowhere in this authorization was Villamil-Estrada granted expressly or impliedly any power to sell the subject property nor a portion thereof. either to conduct the general business of the principal or to execute a binding contract containing terms and conditions which are in the contract he did execute.00 per square meter. She was merely empowered to enter into a compromise agreement in the recovery suit she was authorized to file against persons squatting on Lot No. Blg.L. much less to order the execution thereof x x x x x x x A judgment.

the petition to annul the decision of the trial court in Civil Case No. There is extrinsic fraud within the meaning of Sec. BAUTISTA. x-----------------------x G.R. whereby the defeated party has been prevented from exhibiting fully his side of the case by fraud or deception practiced on him by his opponent. Petitioners. SO ORDERED.[22] Indeed. D-7750 for the recovery of possession of a portion of Lot No. D-7750 dated 27 November 1985. It must either be void for want of jurisdiction or for lack of due process of law. Fraud may assume different shapes and be committed in as many different ways and here lies the danger of attempting to define fraud. This is without prejudice to the right of petitioner to pursue its complaint against private respondent Isidro Perez in Civil Case No. Respondents. CV No. (2).[17] Conformably with law and the above-cited authorities. as well as the decision of the Regional Trial Court of Dagupan City in Civil Case No. the petition is GRANTED. 171464 November 27.: Before the Court are two consolidated petitions for review under Rule 45 assailing the January 27. her principal. Blg. But the general rule is intended to protect those who exercise good faith and not as a shield for unfair dealing. the basic tenets of agency rest on the highest considerations of justice. vs. or it has been obtained by fraud. not pertaining to the judgment itself. SPOUSES MILA JALANDONI AND ANTONIO JALANDONI AND MANILA CREDIT CORPORATION. a false promise of a compromise.[20] It may be argued that petitioner knew of the compromise agreement since the principal is chargeable with and bound by the knowledge of or notice to his agent received while the agent was acting as such. For man in his ingenuity and fertile imagination will always contrive new schemes to fool the unwary. each parcel of Page 67 of 150 . literally for a song. that a compromise agreement had been forged with the end-result that a portion of petitioners property was sold to the deforciant. Respondents. he is not really acting for the principal but is really acting for himself. 199341 MANILA CREDIT CORPORATION.4 Spouses Eduardo and Ma. 84648 and its October 12. are NULLIFIED and SET ASIDE. and Manila Credit Corporation MCC). The decision and resolution of respondent Court of Appeals dated 29 October 1993 and 10 March 1994. or where it operates upon matters.P. Emanating as it did from a void compromise agreement.R. these and similar cases which show that there has never been a real contest in the trial or hearing of the case are reasons for which a new suit may be sustained to set aside and annul the former judgment and open the case for a new and fair hearing. The Compromise Agreement entered into between Attorney-in-fact Paz G. being kept in ignorance by the acts of the plaintiff. G. and an agent will not be permitted to pervert his authority to his own personal advantage. DECISION MENDOZA. the trial court had no jurisdiction to render a judgment based thereon. the Register of Deeds of Makati City. of B. and quite contrary to the finding of the appellate court that the highly reprehensible conduct of attorney-in-fact Villamil-Estrada in Civil Case No. SPOUSES MILA AND ANTONIO JALANDONI. the Court of Appeals restricted the concept of fraudulent acts within too narrow limits. petitioner was not accorded even a fighting chance to repudiate the settlement so much so that the judgment based thereon became final and executory. or where an attorney fraudulently or without authority connives at his defeat. and SPOUSES ELISEO AND EMPERATRIZ C. Spouses Jalandoni were the registered owners of two (2) parcels of land. entirely outside the scope of his agency. 2013 SPOUSES ELISEO R.[23] WHEREFORE. Petitioner. 2010485 and 201049. The controversy stemmed from a complaint3 for cancellation of titles with damages filed by Spouses Mila and Antonio Jalandoni (Spouses Jalandoni) against Spouses Eliseo and Emperatriz Bautista (Spouses Baustista). 443. 2011 Resolution2 denying the motion for reconsideration filed by Manila Credit Corporation (MCC). it would be contrary to common sense to presume or to expect that he would communicate the facts to the principal. Thus completely kept unaware of its agents artifice. but to the manner in which it was procured so that there is not a fair submission of the controversy. 9. Teresa Tongco (Spouses Tongco). 2006 Amended Decision1 of the Court of Appeals CA) in CA G.before a final and executory judgment can be the subject of an action for annulment. covered by Transfer Certificate of Title (TCT) Nos. No.[21] The logical reason for this exception is that where the agent is committing a fraud. or real contest.[18] It would also appear. D-7750 before the Court of Appeals was proper. J. BAUTISTA. where it is one the effect of which prevents a party from hearing a trial. Not all the legal semantics in the world can becloud the unassailable fact that petitioner was deceived and betrayed by its attorney-in-fact. respectively. Verily. BAUTISTA AND EMPERA TRIZ C. or where the defendant never had knowledge of the suit. and his act in secret hostility to the interests of his principal transcends the power afforded him. vs. For sure. as by keeping him away from court. by fraud or deception practiced on him by his opponent. Villamil-Estrada and respondent Isidro Perez is declared VOID. equity and fair play. No. Hence there is a well-established exception to the general rule as where the conduct and dealings of the agent are such as to raise a clear presumption that he will not communicate to the principal the facts in controversy. or from presenting all of his case to the court.[19] Fraud is extrinsic where the unsuccessful party has been prevented from exhibiting fully his case. par. extrinsic fraud refers to any fraudulent act of the prevailing party in the litigation which is committed outside of the trial of the case. Villamil-Estrada deliberately concealed from petitioner. 129.R.6 The two lots were located in Muntinlupa City. In other words. 7750 constituted an extrinsic or collateral fraud by reason of which the judgment rendered thereon should have been struck down. when an agent is engaged in the perpetration of a fraud PAT CASE: AGENCY upon his principal for his own exclusive benefit.

that the community tax certificates indicated in the deeds of absolute sale were not issued to them and that the entries therein were forged and falsified. 3. (2) the real estate mortgage constituted on TCT Nos.493.9 In May 1997. 6.700.379. 206091. 205624 and 206091 and/or Transfer Certificates of Title No.493.00 by way of attorney s fees. MCC averred that they found no indication of any defect in the titles of Spouses Bautista. they be adjudged to pay MCC their total obligation under the promissory notes. prepare the necessary documents and cause the registration of the sale with the Register of Deeds. 1996 and May 4. The mortgage lien of defendant Manila Credit Corp.14 MCC filed its Brief15 praying for the affirmation of the RTC decision or in the event that the title of Spouses Bautista over the subject lots would be cancelled.7 dated April 4. Spouses Bautista were not innocent purchasers in good faith and for value for their failure to personally verify the original copies of the titles of the subject properties and to ascertain the authority of Nasino since they were not dealing with the registered owner. amounting to P1.and Spouses Bautista further alleged that in April 1996. Upon further investigation. WHEREFORE. In their appellants brief.8 Spouses Bautista claimed that in March 1996. properties. 4. and that since they were having difficulty paying the interests of their loan with the MCC.000.000. thus.000. On December 17. Page 68 of 150 . they found out that the bases for the cancellation of their titles were two deeds of absolute sale. more or less. 205624. Ordering defendant Eliseo and Emperatriz Bautista jointly and severally to pay the plaintiff Antonio and Mila J alandoni the amount of P50. Nasino showed them the photocopies of the titles covering the subject lands. After a routine credit investigation. purportedly executed and signed by them in favor of Spouses Baustista.320. 2. 2004. that he also contracted a loan with MCC in the amount of P3. Nasino informed Eliseo that the deeds of sale had been prepared and signed by Spouses Jalandoni. and that the Spouses Bautista were aware of the true value of the lots because they mortgaged one lot to Spouses Tongco for P1.00 per lot.00 by way of moral damages. legal and enforceable. The RTC. and that since Nasino was a wife of a friend. Spouses Baustista trusted her and gave her the authority to negotiate with Spouses Jalandoni on their behalf. that they eventually paid the loan with the Spouses Tongco.000. Ordering defendant Eliseo and Emperatriz Bautista jointly and severally to pay the plaintiff Antonio and Mila Jalandoni the amount of P1. that since they needed funds for a new project.land containing an area of Six Hundred (600) square meters.82 to MCC. On the other hand. the real estate mortgage was cancelled. they also mortgaged the lot covered by TCT No. signed the deeds of sale and gave Nasino the amount of P1.12 Spouses Jalandoni prayed that (1) the TCT Nos.200. 206091 and 205624 were issued to them.00 for each lot by way of actual damages. In their answer. SO ORDERED.000.000. and that its mortgage lien could not be prejudiced by the alleged falsification claimed by Spouses Jalandoni. They asserted that the owner's duplicate certificates of title were still in their possession. in view of all the foregoing. that Nasino told them that she would negotiate with the Spouses Jalandoni. the Court hereby renders judgment declaring: 1. The dispositive portion reads: Aggrieved.00 per lot. that they.000. Spouses Jalandoni and Spouses Bautista appealed the RTC decision before the CA.3 79. Both not satisfied.320. much less to receive the consideration of the sale.11 For its part. that their signatures appearing on the deeds of absolute sale were forged and that said deeds were null and void and transferred no title in favor of Spouses Bautista. as a security thereof. The RTC explained that Nasino had no authority to negotiate for the Spouses Jalandoni.13 With leave of court. it was discovered that their titles over the two lots had been cancelled and new TCT Nos.00 by way of exemplary damages. No pronouncement as to costs. and (3) the Register of Deeds of Muntinlupa City be ordered to reinstate TCT Nos. that they never met the Spouses Bautista. a certain Teresita Nasino (Nasino) offered to Eliseo Baustista (Eliseo) two parcels of land located in Muntinlupa City. that it exercised due diligence and prudence in the conduct of its business and conducted the proper investigation and inspection of the mortgaged PAT CASE: AGENCY 5 Ordering defendant Eliseo and Emperatriz Bautista jointly and severally to pay plaintiff Antonio and Mila Jalandoni the amount of P50. 201048 and 201049 in their names. 201048 and 201049 valid.000. the RTC rendered judgment10 declaring the sale of the subject lots void. that the parcels of land were sold at a bargain price because the owners were in dire need of money. that Spouses Bautista paid a grossly inadequate price of only P600. 206091 and 205624 were issued in the names of Spouses Baustista. in turn. Eliseo contracted a loan with Spouses Tongco using as a security the parcel of land covered by TCT No. that TCT Nos. that they did not appear before the notary public who notarized the deeds of absolute sale. 205624. Ordering defendant Eliseo and Emperatriz Bautista jointly and severally to pay the plaintiff Antonio and Mila J alandoni the amount of P100. nonetheless.00 and the other lot for P3. that upon their request.00. MCC reiterated its claim in its motion to dismiss that the venue of the case was improperly laid and that the complaint failed to state a cause of action against it as there was no allegation made in the complaint as to its participation in the alleged falsification. they offered to constitute a real estate mortgage over their two lots. 205624 and 201061 in the names of Spouses Bautista be declared null and void. Spouses Bautista asked for the reversal of the R TC decision and the dismissal of the complaint for lack of merit. 1996. 205624 and 201061 in favor of Manila Credit Corporation be nullified.82 and used as a security the lot covered by TCT No. over the Transfer Certificate of Title No. Spouses Jalandoni filed a complaint for cancellation of titles and damages claiming that they did not sell the subject lots and denied having executed the deeds of absolute sale. the Spouses Jalandoni applied for a loan with a commercial bank and. found MCC a mortgagee in good faith and upheld the validity of the mortgage contract between Spouses Bautista and MCC.

20 On September 26. COURT OF APPEALS. Nullifying the Real Estate Mortgages constituted on the lots covered by Transfer Certificates of Titles Nos. free from any mortgage or lien. 2.000.22 dated October 12. 2011 Resolution of the CA in CA G. 3. 2005. 5. AND ATTORNEY'S FEES.82 for the property covered by TCT No. Ordering defendants-appellants jointly and severally to pay plaintiffs-appellants the amount of Fifty Thousand Pesos (P50.R. Declaring null and void Transfer Certificates of Titles Nos.The CA. the CA. UMALI.000. 6.700. Ordering defendants-appellants jointly and severally to pay plaintiffs-appellants the amount of Twenty Five Thousand Pesos (P25. REPUBLIC VS. CV No. 2005 decision. 199341 are both questioning the January 27. MCC filed a motion for reconsideration19 praying for the reinstatement of the CA s September 30. whereas Spouses Jalandoni filed a partial motion for reconsideration.493.16 dated September 30. MORAL AND EXEMPLARY DAMAGES. however. 171464 and G. 171464. 206091. to first resolve the motion for reconsideration of the MCC. 205624 and 201061 in the name of defendants. 2006 Amended Decision and October 12. modified the RTC decision.21 Seeing the need. Considering that G. in an Amended Decision. No. PHILIPPINE NATIONAL BANK AND SUCH OTHER CASES UPHOLDING THE RIGHT OF AN INNOCENT MORTGAGEE FOR VALUE. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY COMMITTED AN ERROR IN FAILING TO APPLY THE CASES OF PINEDA VS. the Court directed the CA to resolve the motion. No. in a Resolution. No.appellants Spouses Eliseo Bautista and Emperatriz Bautista. 2007.R. Page 69 of 150 . COURT OF APPEALS.R. the CA. PENULLAR VS.R. denied the petition.00) by way of exemplary damages.000. THE COURT OF APPEALS ERRED IN RULING THAT (A) THE TCTs ISSUED UNDER PETITIONERS NAMES SHOULD BE ANNULLED.00) by way of attorney's fees. Spouses Bautista anchored their petition on the following ARGUMENTS: THE COURT OF APPEALS COMMITTED GRAVE ERROR IN FINDING THAT PETITIONERS ARE NOT BUYERS IN GOOD FAITH. who remained the lawful owners of the subject lots. the dispositive portion of Our Decision dated September 30 2005 is hereby amended to read as follows: 1. No. No. 2006. 2006 Amended Decision and October 12. Ordering the Register of Deeds of Muntinlupa City to reinstate Transfer Certificates of Title Nos.00 for the property covered by TCT No.379. filed a petition for review before the Court docketed as G. Consequently. 201048 and 201049 in the name of plaintiffs-appellants Spouses Mila J alandoni and Antonio J alandoni. in G. SO ORDERED. 171464.18 PAT CASE: AGENCY On February 24. 84648. COURT OF APPEALS. 205624 and 201061 by defendant-appellant Eliseo Bautista in favor of defendant-appellee Manila Credit Corporation. and 7. On December 6. ordering Spouses Bautista to pay Spouses Jalandoni actual damages in the amount of P1. The dispositive portion reads: WHEREFORE.R. the Cou1i consolidated the two petitions. the MCC filed a petition for review before this Court assailing the January 27.000. except for the dismissal of the appeal instituted by defendants-appellants spouses Eliseo Bautista and Emperatriz Bautista. in its Decision. Ordering defendants-appellants jointly and severally to pay plaintiffs-appellants the amount of Twenty Five Thousand Pesos (P25. The CA held that MCC s purported right over the subject properties could not be greater than that of Spouses Jalandoni. 199341. AND (B) THEY ARE LIABLE TO THE SPOUSES JALANDONI FOR ACTUAL. 4.17 denied Spouses Bautista s motion for reconsideration and ruled in favor of Spouses Jalandoni. 2011. In view thereof. On January 27. CABUHAT VS. Spouses Bautista filed a motion for reconsideration. In G. 205624 and P3. The Spouses Bautista.23 Whereas. the Court gave due course to the petition. MCC presented the following ASSIGNMENT OF ERRORS/ GROUNDS/ISSUES WHETHER OR NOT THE COURT OF APPEALS COMMITTED AN ERROR IN NULLIFYING THE REAL MORTGAGE CONSTITUTED ON THE SUBJECT PROPERTIES.R. Defendants-appellants Spouses Eliseo Bautista and Emperatriz Bautista are liable to pay their obligation under the Promissory Notes they executed in favor of defendant-appellee Manila Credit Corporation. 2011. the CA held in abeyance the resolution on MCC s motion for reconsideration.00) by way of moral damages. 2011 Resolution of the CA and that the issues raised are intertwined. 2006. PHILIPPINE NATIONAL BANK VS. in turn.

Their failure to take the necessary steps to determine the status of the subject lots and the extent of Nasino's authority puts them into bad light. they assert that these PAT CASE: AGENCY "A buyer 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. The foregoing fact alone would have prompted suspicion over the transaction considering that the same involves a valuable consideration. they aver that they were not privy to any fraud committed in the sale of the subject properties. the authority of the latter shall be in writing. In his testimony. whether the sale is gratuitously or for a valuable consideration. and (2) the continued failure and/or refusal of the supposed sellers to meet and communicate with him. who represented that she knew Spouses Jalandoni and that they were selling their properties at a bargain price because they were in dire need of money. the buyer was not aware of any claim or interest of some other person in the property. (b) the owner is in possession thereof. to wit: Art. (2) in case they were not. Based on the records. He is a buyer for value if he pays a full and fair price at the time of the purchase or before he has notice of the claim or interest of some other person in the property. Moreover. such Special Power of Attorney was not presented in evidence much less the tenor thereof referred to in the Deeds of Sale purportedly executed by the plaintiffs with Bautista. the sale is null and void.). this Court cannot sustain Bautista's allegation that Nasino was specifically authorized to transact for and in behalf of the plaintiffs over the vehement denial of the latter to the contrary. When a sale of a piece of land or any interest therein is through an agent. They stress that their purchase of the subject properties were all coursed through Nasino. the Court shall first discuss the validity of the sale. The testimony of Eliseo that Nasino was empowered by a special power of attorney to sell the subject lots was bereft of merit as the alleged special power attorney was neither presented in court nor was it referred to in the deeds of absolute sale. every person dealing with registered land may safely rely on the correctness of the certificate of title and is under no obligation to look beyond the certificate itself to determine the actual owner or the circumstances of its ownership. it is undisputed that the sale of the subject lots to Spouses Bautista was void. entitled to the protection of the law. unsubstantiated by evidence.27 Spouses Bautista insist that they were innocent purchasers for value.1âwphi1 There were several circumstances that should have placed them on guard and prompted them to conduct an investigation that went beyond the face of the title of the subject lots. Hence. x x x. and (3) at the time of the sale. the following conditions must be present: (a) the seller is the registered owner of the land. Special powers of attorney are necessary in the following cases: (1) x x x xxx (5) To enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. there might be circumstance apparent on the face of the certificate of title or situation availing which would excite suspicion as a reasonable prudent man to promptly inquire as in the instant case where the transfer is being facilitated by a person other than the registered owner. Before resolving the issue on whether Spouses Bautista were purchasers in good faith for value. In addition. Likewise.28 The issues to be resolved are (1) whether or not the Spouses Bautista were buyers in good faith and for value. July 17. otherwise. where only photocopies of the certificates of title were presented to defendant Bautista. (2) the price at which the subject lots were being sold. p. whether or not Spouses Jalandoni have a better right than MCC. COURT OF APPEALS. All these conditions must be present. or of any defect or restriction in the title of the seller or in his capacity to convey title to the property. The Court finds no merit in their arguments.31 Tested by these conditions. the sale shall be void.WHETHER OR NOT THE COURT OF APPEALS COMMITTED AN ERROR IN APPLYING THE CASE OF TORRES VS."29 "Good faith connotes an honest intention to abstain from taking unconscientious advantage of another.24 were regularly and validly issued in their names. Page 70 of 150 . Spouses Bautista cannot be deemed purchasers in good faith."30 To prove good faith. Nasino had no written authority from Spouses Jalandoni to sell the subject lots.25 In the case at bar. 32. the buyer is under obligation to exercise extra ordinary diligence by scrutinizing the certificates of title and examining all factual circumstances to enable him to ascertain the seller's title and capacity to transfer any interest in the property. Absent such authority in writing. The foregoing provisions explicitly require a written authority when the sale of a piece of land is through an agent. Articles 1874 of the Civil Code provides: Art. He also testified that a Special Power of Attorney was executed by the plaintiffs in favor of Nasino. defendant Eliseo Bautista admitted not having met the plaintiffs except when the instant case was filed in court (TSN. otherwise. 1878. the following circumstances would have placed Bautista on guard and should have behooved himself to inquire further considering: (1) the non-presentation of the owner's duplicate certificate. A1iicle 1878 paragraph 5 of the Civil Code specifically mandates that the authority of the agent to sell a real property must be conferred in writing. 1874. are not equivalent to proof under the Rules of Court. and. Considering that the Register of Deeds cancelled the titles of Spouses Jalandoni and subsequently issued new titles in their names. As correctly observed by the RTC: As a general rule.26 Bare allegations. 2003. However. However.

Generally. in the case of Tomas v. Court of Appeals. Moreover. coupled with valuable consideration. the burden of proof is upon them to establish it. They had in their possession the owner s duplicate of title all this time and they never handed it to anyone. the amount should be proportional to and in approximation of the suffering inflicted. good faith has yet to be established by the vendee or transferee. Spouses Jalandoni had not been negligent in any manner and indeed had not performed any act which gave rise to any claim by a third person. If the petitioner's contention as to indefeasibility of his title should be upheld. if they would hold the principal liable. it never handed or delivered to anyone its owner's duplicate of the transfer certificate of title. whatever rights MCC may have acquired over the subject lots cannot prevail over. they should have scrutinized all factual circumstances necessary to determine her authority to insure that there are no flaws in her title or her capacity to transfer the land. fright. Since Spouses Bautista did not deal with the registered owners but with Nasino. moral shock. and there is no evidence on record that he was party to the forgery or the simulation of the questioned contracts. Similarly. besmirched reputation. In light of the foregoing circumstances. who merely represented herself to be their agent. and similar injury resulting from a wrong. Court of Appeals. to entitle him to respect for his newly acquired title even as against the holder of an earlier and perfectly valid title. Imagine their surprise when they learned that the copy of their certificates of title with the Registry of Deeds had been cancelled and new ones issued in the names of Spouses Bautista. is hardly consistent with any pretense of good faith. but must yield to the superior rights of Spouses Jalandoni as no one can acquire a better right that the transferor has. Moral damages are treated as compensation to alleviate physical suffering. Nevertheless. exemplary damages may be imposed by way of example or correction for the public good. it is not required to go beyond their titles to determine the condition of the property and may rely on the correctness of the certificates of title.49 the Court stated that: We. Dy Buncio Co. mental anguish.43 For "the law protects and prefers the lawful holder of registered title over the transferee of a vendor bereft of any transmissible rights. The respondent had a valid title x x x It never parted with it.46 Torres v. Spouses Bautista's failure to observe the required degree of caution in ascertaining the genuineness and extent of Nasino's authority is tantamount to bad faith that precludes them from claiming the rights of a purchaser in good faith. but to serve as a deterrent against or as a negative incentive to curb socially deleterious actions. in the alternative. that Spouses Bautista Page 71 of 150 .45 which was relied upon by the Court in the cases of Baltazar v.34 As stated. for in the latter case."44 In the case of C. in its petition before the CA. such as a purchaser. and in case either is controverted. then the innocent registered owner has a better right over the mortgagee in good faith. Such disastrous results which would shake and destroy the stability of land titles had not been foreseen by those who had endowed with indefeasibility land titles issued under the Torrens system. MCC precisely asked.33 They should not have merely relied on her verbal representation that she was selling the subject lots on behalf of Spouses Jalandoni. It argues that since the mortgaged lots were registered lands.42 PAT CASE: AGENCY Where the owner. Inc. Thus.While it may be true that Bautista's participation over the transaction was merely limited to the signing of the Deeds of Sale.47 and in the more recent case of Sanchez v. a purchaser or mortgagee has a right to rely in good faith on the certificates of title of the mortgagor and is not obligated to undertake further investigation. than one who obtains his certificate from a totally void one. however.41 For indeed the Court in several cases declared that a void title may be the source of a valid title in the hands of an innocent purchaser for value.32 Spouses Bautista’s claim of good faith is negated by their failure to verify the extent and nature of Nasino’s authority. Philippine National Bank. Quinio. At any rate. as to prevail over judicial pronouncements to the effect that one dealing with a registered land.38 They are "imposed not to enrich one party or impoverish another. the law does not require a person dealing with registered land to go beyond the certificate of title to determine the liabilities attaching to the property.36 Though moral damages are not capable of pecuniary estimation. is under no obligation to look beyond the certificate of title of the vendor. being the most essential condition. indeed. Hodges v.N. Well settled is the rule that persons dealing with an assumed agency are bound at their peril. [Emphases supplied] Thus.37 On the other hand. it could not be charged with negligence in the keeping of its duplicate certificate of title or with any act which could have brought about the issuance of another certificate upon which a purchaser in good faith and for value could rely. which defendant Bautista invokes to claim the right to be protected as innocent purchaser for value. it claims to be a mortgagee in good faith and asserts that it had no participation in the forgery of the deeds of sale. then registered owners without the least fault on their part could be divested of their title and deprived of their property. find more weight and vigor in a doctrine which recognizes a better right for the innocent original registered owner who obtained his certificate of title through perfectly legal and regular proceedings. the Court finds the award of moral and exemplary damages in order. As a matter of fact. Eliseo’s claim that he did not require Nasino to give him a copy of the special power of attorney because he trusted her is unacceptable.40 In the absence of suspicion.35 Spouses Bautista next argue that they could not be held liable for moral and exemplary damages."39 Coming now to the petition of MCC. Spouses Jalandoni never relinquished their title over the subject lots.48 the Court held that: The claim of indefeasibility of the petitioner's title under the Torrens land title system would be correct if previous valid title to the same parcel of land did not exist. wounded feelings. failing to make the necessary inquiry under circumstances as would prompt a reasonably prudent man to do so as in the instant case. serious anxiety. to ascertain not only the fact of agency but also the nature and extent of authority. could not be charged with negligence in the keeping of its duplicate certificates of title or with any act which could have brought about the issuance of another title relied upon by the purchaser or mortgagee for value. the CA was correct and fair when it ordered Spouses Bautista to pay its obligation to MCC.50 Accordingly. social humiliation.

00.000. G.00).00.00) from the price set by Ybaez. i. 171464 and the Manila Credit Corporation in G.00 went to Ybaez. 163720 Petitioner . GENEVIEVE LIM.000. Lim remitted to Saban the amounts of One Hundred Thirteen Thousand Two Hundred Fifty Seven Pesos (P113. Lim also issued four (4) postdated checks[8] in favor of Saban for the remaining P236.[2] The late Eduardo Ybaez (Ybaez).000. that the vendees agreed to purchase the lot at the price of Six Hundred Thousand Pesos (P600.[4] It appears. 2004 x-------------------------------------------------------------------x DECISION TINGA. These checks were Bank of the Philippine Islands (BPI) Check No. declaring the four (4) checks issued by Lim as stale and non-negotiable. as well as Sabans commission for the sale. Saban further averred that Ybaez and Lim connived to deprive him of his sales commission by withholding payment of the first three checks. 1994. 2011 Resolution of the Court of Appeals in CA G. Ybaez claimed that Saban was not entitled to any commission because he concealed the actual selling price from him and because he was not a licensed real estate broker. Upon motion of his counsel. Saban appealed the trial courts Decision to the Court of Appeals.000.000. In his Answer. CHICO-NAZARIO. 1994 for P25.. No.. the RTC rendered its Decision[11] dismissing Sabans complaint.743. Ybaez and his wife were able to sell the lot to the petitioner Genevieve Lim (Lim) and the spouses Benjamin and Lourdes Lim (the Spouses Lim) on March 10.000. No.000. BPI Check No.00.[14] Page 72 of 150 .[3] Through Sabans efforts.000. V No. for her part.R. 1994.000.000. and FLORENCIO SABAN. On October 27. CV No. Seventh Division. 2003. 1994 addressed to Lim.000. 021491B dated June 20. 60392. 1997.00. 1994 for P25. CALLEJO. SR. 84648 are AFFIRMED. the owner of a 1. P200.51 WHEREFORE.00. It held that Saban was entitled to his commission amounting to P236.e.00. JJ. 1994. After the sale. The price of the lot as indicated in the Deed of Absolute Sale is Two Hundred Thousand Pesos (P200. and absolving Lim from any liability towards Saban.00) for payment of taxes due on the transaction as well as Fifty Thousand Pesos (P50. 2006 Amended Decision and October 12.00. Lim.R.00) as brokers commission. In his Complaint. Under the Agency Agreement. 1112645 dated June 12. Saban filed a Complaint for collection of sum of money and damages against Ybaez and Lim with the Regional Trial Court (RTC) of Cebu City on August 3.R. argued that she was not privy to the agreement between Ybaez and Saban.00). Saban alleged that Lim and the Spouses Lim agreed to purchase the lot for P600.000.versus AUSTRIA-MARTINEZ. In the letter Ybaez asked Lim to cancel all the checks issued by her in Sabans favor and to extend another partial payment for the lot in his (Ybaezs) favor. instead of coursing it through Saban. TINGA.[5] Lim also issued in the name of Saban four postdated checks in the aggregate amount of Two Hundred Thirty Six Thousand Seven Hundred Forty Three Pesos (P236.743.[6] After the four checks in his favor were dishonored upon presentment.00) and to mark up the selling price to include the amounts needed for payment of taxes. however. and P113. Ybaez was able to convince Lim to cancel all four checks. in CA-G.R. Ybaez died during the pendency of the case before the RTC. SO ORDERED. entered into an Agreement and Authority to Negotiate and Sell (Agency Agreement) with respondent Florencio Saban (Saban) on February 8.00. Respondent. the appellate court promulgated its Decision[12] reversing the trial courts ruling. The January 27. inclusive of taxes and other incidental expenses of the sale. 199341 are both DENIED. BPI Check No.743. and Equitable PCI Bank Check No. She also alleged that she agreed with Ybaez that the purchase price of the lot was only P200.000-square meter lot in Cebu City (the lot).be adjudged to pay its total obligation under the promissory note. P50. 1112646 dated June 26. with a mark-up of Four Hundred Thousand Pesos (P400. transfer of title and other expenses incident to the sale. No.000. Ybaez authorized Saban to look for a buyer of the lot for Two Hundred Thousand Pesos (P200. Of the total purchase price of P600.00 was given to Saban to cover taxes and other expenses incidental to the sale.R.00 allegedly went to Lims agent.257. Ybaez sent a letter dated June 10. PAT CASE: AGENCY Subsequently.[10] On May 14.: Before the Court is a Petition for Review on Certiorari assailing the Decision[1] dated October 27. Promulgated December 16.[7] The case was assigned to Branch 20 of the RTC.743.257. He also claimed that Lim failed to make good the fourth check which was dishonored because the account against which it was drawn was closed. and that she issued stop payment orders for the three checks because Ybaez requested her to pay the purchase price directly to him. the petitions of Spouses Bautista in G.[9] Saban alleged that Ybaez told Lim that he (Saban) was not entitled to any commission for the sale since he concealed the actual selling price of the lot from Ybaez and because he was not a licensed real estate broker. 2003 of the Court of Appeals. J. 1994 for P168.[13] The Court of Appeals ruled that Ybaezs revocation of his contract of agency with Saban was invalid because the agency was coupled with an interest and Ybaez effected the revocation in bad faith in order to deprive Saban of his commission and to keep the profits for himself.00). the trial court dismissed the case only against him without any objection from the other parties. 1112647 dated June 19.00. 1994 for P18.

000. without receiving value therefor. et al. for the purpose of lending her name to a third person.[24] The Court held that it would be in the height of injustice to permit the principal to terminate the contract of agency to the prejudice of the broker when he had already reaped the benefits of the brokers efforts. the P113. through his (Sabans) efforts.[21] The issues for the Courts resolution are whether Saban is entitled to receive his commission from the sale. She signed the checks as drawer. As such. or if a partner is appointed manager of a partnership in the contract of partnership and his removal from the management is unjustifiable.00 earmarked for taxes and other expenses incidental to the sale and Sabans commission as broker for Ybaez. Sellner. According to Saban.257. the Court does not agree with the appellate courts pronouncement that Sabans agency was one coupled with an interest. since she had two co-vendees (the Spouses Lim) who should share such liability.000. Saban maintains that Lim agreed to purchase the lot for P600.00 which would be paid to Ybaez.[23] the Court recognized the right of a broker to his commission for finding a suitable buyer for the sellers property even though the seller himself consummated the sale with the buyer. The Court ruled that the sellers withdrawal in bad faith of the brokers authority cannot unjustly deprive the brokers of their commissions as the sellers duly constituted agents. To deprive Saban of his commission subsequent to the sale which was consummated through his efforts would be a breach of his contract of agency with Ybaez which expressly states that Saban would be entitled to any excess in the purchase price after deducting the P200.[15] Lim filed a Motion for Reconsideration of the appellate courts Decision.[16] Not satisfied with the decision of the Court of Appeals. the contract of agency very clearly states that Saban is entitled to the excess of the mark-up of the price of the lot after deducting Ybaezs share of P200. Page 73 of 150 . PAT CASE: AGENCY The Court affirms the appellate courts finding that the agency was not revoked since Ybaez requested that Lim make stop payment orders for the checks payable to Saban only after the consummation of the sale on March 10.000. or for the interest of the principal and of third persons. the P50. especially considering that Saban had completely performed his obligations under his contract of agency with Ybaez by finding a suitable buyer to preparing the Deed of Absolute Sale between Ybaez and Lim and her co-vendees.[19] Lim prays that should she be found liable to pay Saban the amount of his commission. Lim argues that the appellate court ignored the fact that after paying her agent and remitting to Saban the amounts due for taxes and transfer of title.00 due to Ybaez and the transfer taxes and other incidental expenses of the sale.00. which consisted of the P200.000. she is liable to pay Saban as the holder for value of the checks. whether it is Lim who is liable to pay Saban his sales commission. Lim acted as an accommodation party. Ybaez executed the Deed of Absolute Sale of the lot with Lim and the Spouses Lim.[26] Sabans entitlement to his commission having been settled. the agency is not one coupled with an interest. she should only be held liable to the extent of one-third (1/3) of the amount. The appellate court further ruled that. Saban had already performed his obligation as Ybaezs agent when.[20] In his Comment. However. as the agent of Ybaez. He insists that Lim and Ybaez connived to unjustly deprive him of his commission from the negotiation of the sale. When an agents interest is confined to earning his agreed compensation. Lim assumed the obligation to pay him his commission. an agency is deemed as one coupled with an interest where it is established for the mutual benefit of the principal and of the agent. and.[22] In Macondray & Co. v. The Court gives due course to the petition.[17] She further contends that she is not liable for Ybaezs debt to Saban under the Agency Agreement as she is not privy thereto.The appellate court found that Ybaez and Lim connived to deprive Saban of his commission.. the Court must now determine whether Lim is the proper party against whom Saban should address his claim.[25] the Court upheld the right of the brokers to their commissions although the seller revoked their authority to act in his behalf after they had found a buyer for his properties and negotiated the sale directly with the buyer whom he met through the brokers efforts.[18] Lim also assails the findings of the appellate court that she issued the checks as an accommodation party for Ybaez and that she connived with the latter to deprive Saban of his commission. and it cannot be revoked by the principal so long as the interest of the agent or of a third person subsists. but her Motion was denied by the Court of Appeals in a Resolution dated May 6. since an agents interest in obtaining his compensation as such agent is an ordinary incident of the agency relationship. 2004. an agency cannot be revoked if a bilateral contract depends upon it. In Infante v.00 due to her broker. Under Article 1927 of the Civil Code. but agrees with the result reached by the Court of Appeals. 1994. At that time. In an agency coupled with an interest. she paid the balance of the purchase price directly to Ybaez.000. Cunanan. The pronouncements of the Court in the aforecited cases are applicable to the present case. and that Saban has no one but himself to blame for consenting to the dismissal of the case against Ybaez and not moving for his substitution by his heirs. assuming that Saban is entitled thereto. or if it is the means of fulfilling an obligation already contracted. in issuing the checks in payment of Sabans commission. Stated differently. Moreover. the agents interest must be in the subject matter of the power conferred and not merely an interest in the exercise of the power because it entitles him to compensation. It declared that Lim is liable to pay Saban the amount of the purchase price of the lot corresponding to his commission because she issued the four checks knowing that the total amount thereof corresponded to Sabans commission for the sale. Lim filed the present petition.00 and the taxes and other incidental expenses of the sale.

The absence of the second requisite becomes pellucid when it is noted at the outset that Lim issued the checks in question on account of her transaction.000.[31] The appellate court therefore had sufficient basis for concluding that Ybaez and Lim connived to deprive Saban of his commission by dealing with each other directly and reducing the purchase price of the lot and leaving nothing to compensate Saban for his efforts. In that case. The Court upheld the right of Cunanan and Mijares to their commission. and received the balance of P130.00). And she had to pay the agreed purchase price in consideration for the sale of the lot to her and her co-vendees.257.[33] The appellate court however erred in ruling that Lim is liable on the checks because she issued them as an accommodation party.00 for payment of taxes and P50.[34] As gleaned from the text of Section 29 of the Negotiable Instruments Law.. she paid directly to Ybaez the amount of One Hundred Thousand Pesos (P100.00). acceptor or indorser. This the Court cannot countenance. acceptor. while the lot represented the cause or consideration on the side of Lim. Subsequently. or a total of Five Hundred Sixty Three Thousand Two Hundred Fifty Seven Pesos (P563. According to the trial court.000.00 earmarked for taxes and P50. Lim is not a party to the contract.00 as his commission. [Infante] took advantage of the services rendered by [Cunanan and Mijares]. without receiving value therefor.000. (2) he did not receive value for the signature.000.[27] Lim.00 from his asking price of P200.[35] Ergo. claims that on March 10. Infante sold the properties directly to Noche for Thirty One Thousand Pesos (P31.00.00 after talking to Ybaez and ultimately realizing that Sabans commission is even more than what Ybaez received as his share of the purchase price as vendor. Cunanan.00. the record reveals that she had knowledge of the fact that Ybaez set the price of the lot at P200. due to the latters demise on November 11.00 on March 10.00. and (3) he signed for the purpose of lending his name to some other person. the amounts covered by the checks form part of the cause or consideration from Ybaezs end. and the P113.000.00).00 less the amounts of P200.[30] It thus appears that he received P100. along with the other purchasers.000. Consejo Infante asked Jose Cunanan and Juan Mijares to find a buyer for her two lots and the house built thereon for Thirty Thousand Pesos (P30. and Lim and her co-vendees. This act is unfair as would amount to bad faith. 1994. But the situation varies if one of the parties takes advantage of the benevolence of the other and acts in a manner that would promote his own selfish interest.000. acknowledged receipt (through Saban) of the P113. but believing that she could evade payment of their commission.000. Lim made the following payments for the lot: P113.00 (taxes). Cunanan and Mijares thereafter introduced Noche to Infante.[32] in view of the trial courts dismissal of Sabans complaint as against Ybaez.000.000. as vendor.00 went directly to Ybaez. The accommodation party may of course seek reimbursement from the party accommodated. She promised to pay them five percent (5%) of the purchase price plus whatever overprice they may obtain for the property. P50. Specifically.000. and the undisputed fact that Lim had not yet paid the balance of P200.257.00) on June 28.00 and that the P600. Saban may claim such excess from Ybaezs estate.000. for the purpose of lending his name to some other person. 1994. she drew the checks in payment of the balance of the purchase price of the lot subject of the transaction. Section 29 of the Negotiable Instruments Law defines an accommodation party as a person who has signed the negotiable instrument as maker.00 on June 28.00) only. 1994. or an excess of P30.00 for taxes. therefore. 1994.000.743. In other words.Sabans right to receive compensation for negotiating as broker for Ybaez arises from the Agency Agreement between them.This act of subversion cannot be sanctioned and cannot serve as basis for [Infante] to escape payment of the commission agreed upon.00 for commission. or indorser. This is the situation in which [Cunanan and Mijares] were placed by [Infante]. this change of mind resulted to the prejudice of Saban whose efforts led to the completion of the sale between the latter. while Lim signed as drawer of the checks she did not satisfy the two other remaining requisites.00 and waived the difference. Lim received value for her signature on the checks.00the price agreed upon by her and Sabanwas more than the amount set by Ybaez because it included the amount for payment of taxes and for Sabans commission as broker for Ybaez.257. on the other hand. it is just and proper for her to pay Saban the balance of P200. et al. This act cannot be sanctioned without according the party prejudiced the reward which is due him. The ruling of the Court in Infante v. is a matter that would not give rise to a legal consequence if [Cunanan and Mijares] agreed to call off the PAT CASE: AGENCY transaction in deference to the request of [Infante]. Furthermore. The only logical conclusion is that Lim changed her mind about agreeing to purchase the lot at P600.000. the date of execution of the Deed of Absolute Sale.[29] or a total of Three Hundred Ninety Three Thousand Two Hundred Fifty Seven Pesos (P393.257.00 (commission). cited earlier.000. Ybaez rounded off the amount to P400.000.00 (due to Ybaez). there would be no reason for her to issue those checks which is the balance of P600.000. Obviously.00. and P400. acknowledged that Lim and her co-vendees paid him P400. If she did not agree thereto. the latter told Cunanan and Mijares that she was no longer interested in selling the property and asked them to sign a document stating that their written authority to act as her agents for the sale of the properties was already cancelled. with Ybaez which was a sale and. However.257. However. since Ybaez received a total of P230. a total of P230.000. 1994. drawer.000. viz: (1) he signed the instrument as maker. she made use of a ruse by inducing them to sign the deed of cancellation. for his part. In the case at bar. a reciprocal contract.00 from Lim. the accommodation party is one who meets all these three requisites. as vendee.000.00 in Sabans favor belies her claim that she and her co-vendees did not agree to purchase the lot at P600. Page 74 of 150 .00 directly to Ybaez. Apparently. Considering the circumstances surrounding the case.000.000. if that remedy is still available. Cunanan and Mijares offered the properties to Pio Noche who in turn expressed willingness to purchase the properties.00 for her broker.00.00 of the purchase price of P600.000.257.000. The accommodation party is liable on the instrument to a holder for value even though the holder at the time of taking the instrument knew him or her to be merely an accommodation party.[28] and One Hundred Thirty Thousand Pesos (P130. drawer. explaining that [Infante] had changed her mind even if respondent had found a buyer who was willing to close the deal.00 which he said was the full amount for the sale of the lot. with Sabans express consent. Ybaez. P50. and gave to Saban P113.00) .000. Thus. Lims act of issuing the four checks amounting to P236.257. although the amount actually paid by Lim was P393.000. is enlightening for the facts therein are similar to the circumstances of the present case.

The brokers told the petitioners that they were authorized by respondent Fernandez to offer the property for sale. 1995 in order to sign the Deed of Absolute Sale. offered to sell to the petitioners. The petitioners also demanded the turnover of the subject properties to them within fifteen days from receipt of the said letter. asking that the Deed of Absolute Sale covering the property be executed in accordance with their verbal agreement dated November 27. Agapito that due to the appearance of alleged tenants who are demanding for a one-hectare share. Antonio K. in Civil Case No. etc. respondent Fernandez wrote the petitioners on February 14. LITONJUA and AURELIO K. It was also agreed upon that on the said date. 1995. JOSEFINA LUISA PIAMONTE. I informed my broker. to obtain credit or to raise money. The truth of the matter is that you were the one who emphatically stated that you would prepare a Contract to Sell and requested us to come back first week of December as you would be leaving the country then. or any other person for that matter. CRISTETA TICZON. also of the Register of Deeds of San Pablo City. thereby. represented by GREGORIO T.Neither is there any indication that Lim issued the checks for the purpose of enabling Ybaez. T-36766 of the Register of Deeds of San Pablo City. In the afternoon of November 27. what you were demanding from us was to apprise you of the status of the property.) Another thing. 1995. and to execute a deed of absolute sale thereon. DOMINIC TICZON. I made an assurance at that time that there was no liens/encumbrances and tenants on my property (TCT 36755). BENITEZ. DECISION CALLEJO. JR. are the owners of a parcel of land located in San Pablo City. 36754.[5] 2) It is not true that we agreed to meet on December 8. EVANGELINE JILL R. JOHN DOES and JANE DOES.. Nonetheless. vs. Ms. the petition is DISMISSED. TICZON. represented by MARY MEDIATRIX T. otherwise. MARY ANN GRACE FERNANDEZ. I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. CV No. the heirs of Paz Ticzon Eleosida. I specifically instructed her to inform you thru your broker that we will not be attending the meeting to be held sometime first week of December. Page 75 of 150 . which reversed and set aside the June 23. for the price of PAT CASE: AGENCY Unfortunately. He informed the petitioners that respondent Fernandez was encountering some problems with the tenants and was trying to work out a settlement with them. covered by Transfer Certificate of Title (TCT) No. 64940. The petitioners were shown a locator plan and copies of the titles showing that the owners of the properties were represented by Mary Mediatrix Fernandez and Gregorio T. We have not demanded and received from you any earnest money. They also agreed that the owners would shoulder the capital gains tax. 2004] ANTONIO K.098.R. LITONJUA. No. some people suddenly appeared and claiming to be tenants for the entire properties (including those belonging to my other relatives. J. whether we would be able to ascertain that there are really no tenants. Jr. the petitioners wrote respondent Fernandez on January 5. Eleosida.[6] The petitioners and respondent Fernandez agreed that the petitioners would buy the property consisting of 36. covered by TCT No. respondents. 1999 Decision[2] of the Regional Trial Court of Pasig City. represented by Gregorio T. The heirs of Domingo B. 1996[10] and clarified her stand on the matter in this wise: This is a petition for review on certiorari of the Decision[1] of the Court of Appeals in CA-G. The petitioners and respondent Fernandez also agreed to meet on December 8. [G. 65629. 1) It is not true I agreed to shoulder registration fees and other miscellaneous expenses. FERNANDEZ. my cousin and I have thereby changed our mind and that the sale will no longer push through. The Case for the Petitioners Sometime in September 1995. in view of the foregoing.[4] On the other hand. The petitioners would also remit the purchase price to the owners. 2001 denying the petitioners motion for reconsideration of the aforesaid decision. In fact. the Barangay Captain now refuses to give a certification that our properties are not tenanted. in the course of which they saw some people gathering coconuts.500. thereafter. as well as its Resolution dated April 30. respectively. However. through respondent Fernandez. Litonjua. TICZON. HEIRS OF PAZ TICZON ELEOSIDA. WHEREFORE. Thereafter. Ms. 148116. the petitioners sent her another Letter[9] dated February 1. 1995. authorizing her to sell the property for and in their behalf. SR. 36754 and 36766. SO ORDERED.742 square meters. ELEOSIDA. April 14. I do not recall we ever discussed about them. HEIRS OF DOMINGO B..R.. respondent Fernandez would present a special power of attorney executed by the owners of the property. or the total sum of P5. In view thereof. to relay to Mr.: P150 per square meter. only Agapito Fisico attended the meeting. Mrs. transfer tax and the expenses for the documentation of the sale. Ticzon[3] are the owners of a parcel of land located in San Pablo City. they would have no option but to protect their interest through legal means. the petitioners met with respondent Fernandez and the two brokers at the petitioners office in Mandaluyong City. made two ocular inspections of the property.[8] When the petitioners received no response from respondent Fernandez. Eleosida. 1996. 1995 to finalize the sale. Branch 68. ERLINDA T. thereby totally debunking the presence of the third requisite of an accommodation party. the parcels of land covered by TCT Nos. but we did not assure you that we would be back on the first week of December. Lulu Alimario. demanding that their transaction be finalized by January 30. Lourdes Alimario and Agapito Fisico who worked as brokers.[7] After a few weeks of waiting. Litonjua and Aurelio K. Alimario and I left your office. petitioners. Upon receipt of the above letter. The petitioners. 1996.

2. Again. 1996.000.500. setting the date of sale and payment on 30 January 1996. Appended thereto was a copy of respondent Fernandez letter to the petitioners dated January 16. 5. in response to the latters January 5. Defendants cannot unilaterally. In their complaint.000.00 per square meter.00 per square meter on 27 November 1995. and continue to suffer. there was no reply. pursued the purchase of the subject parcels of lands.[14] 6. After a brief negotiation. plaintiffs suffered. 8.1 Defendants received the same on 6 February 1996.990 square meters of the two (2) aforementioned parcels of land at P150. Consequently. 13. 11.00.500.[11] Paragraph 6 thereof unquestionably shows defendants previous agreement as above-mentioned and their unjustified breach of their obligations under it. 1995. despite their willingness and ability to pay the agreed purchase price. The parties also unequivocally agreed to the following: (a) The transfer tax and all the other fees and expenses for the titling of the subject property in plaintiffs names would be for defendants account. after due hearing. 12.00 for the aforementioned 33.000. P1. fraudulent and malevolent manner in violating the contract to sell. plaintiffs.00 in moral damages.00 in exemplary damages. actual damages. 36766 and 36754 measuring a total of 36. PAT CASE: AGENCY 4. plaintiffs sent a letter of even date to defendants. On 14 February 1996. (b) Execute a Contract to Sell with terms agreed upon by the parties. Defendants thus reneged on their commitment a second time. On 1 February 1996. By way of example or correction for the public good. processing of aggregate products and manufacture of construction materials.5 Million. defendants are liable to plaintiff for exemplary damages in the amount of P500. On April 12. On 27 November 1995. 9. 7. 1996.[12] 10. In the meantime. 1996.1 Defendants received the letter on 12 January 1996 but did not reply to it. defendant Fernandez sent a written communication of the same date to plaintiffs enclosing therein a copy of her 16 January 1996 letter to plaintiffs which plaintiffs never received before.000. defendants suddenly had a change of heart and no longer wished to sell the same. defendants offered to sell to plaintiffs two (2) parcels of land covered by Transfer Certificates of Title Nos. 1996 letter. San Pablo City.000. Plaintiffs. the following: 4.[16] She claimed that while the petitioners offered to buy the property during the meeting of November 27.[15] On July 5. inter alia. Defendants repeatedly assured plaintiffs that the two (2) subject parcels of land were free from all liens and encumbrances and that no squatters or tenants occupied them. Plaintiffs also suffered sleepless nights and mental anxiety on account of defendants fraudulent actuations for which reason defendants are liable to plaintiffs for moral damages in the amount of at least P1. consisting in unrealized profits and cost of money. P500. Defendants bad faith and refusal to honor their just obligations to plaintiffs constrained the latter to litigate and to engage the services of undersigned counsel for a fee in the amount of at least P250. respondent Fernandez filed her Answer to the complaint. (a) Secure at defendants expense all clearances from the appropriate government agencies that will enable defendants to comply with their obligations under the Contract to Sell.no obligations exist.098. and relying in good faith on the commitment of defendants. defendants committed and specifically agreed to sell to plaintiffs 33.000. 14. (b) The plaintiffs would pay the entire purchase price of P5.990 square meters of land in plaintiffs office on 8 December 1995. P5. whimsically and capriciously cancel a perfected contract to sell. By reason of defendants above-described fraudulent actuations. judgment be rendered in their favor ordering the respondents to 7. the petitioners filed the instant Complaint for specific performance with damages[13] against respondent Fernandez and the registered owners of the property. we hope that in the future we will eventually be able to transact business since we still have other properties in San Pablo City.990 square meters of land for P150. true to their word. Defendants acted in a wanton. the petitioners alleged.00 in actual damages. On 5 January 1996. have to date been unable to take delivery of the title to the subject property. Defendant Fernandez stated in her 16 January 1996 letter that despite the meeting of minds among the parties over the 33. The petitioners prayed that. plaintiffs again sent a letter of even date to defendants demanding execution of the Deed of Sale.00. P250. 3. (c) Solidarily pay the plaintiffs the following amounts: 8. by reason of defendants failure to honor their just obligations. Plaintiffs intended to use the subject property for their subdivision project to support plaintiffs quarry operations. in the amount of at least P5 Million.742 square meters in Barrio Concepcion. 1. she did not accept the Page 76 of 150 .00 in attorneys fees.000.

JOHN DOES and JANE DOES.[22] On February 28. a perfected contract to sell.00) Pesos as and by way of attorneys fees.00 and exemplary damages in the amount of not less than P500.000. The petitioners offered to buy the property at P150 per square meter. TICZON. she informed the petitioners that she had changed her mind in pursuing the negotiations in a Letter dated January 18. CRISTETA TICZON. 1996. indeed. indeed. in view of the foregoing. She was later informed by Alimario that the petitioners were interested to buy the properties.000. LITONJUA and AURELIO K. She was surprised to receive a letter from the petitioners dated January 5. Agapito Fisico. along with Alimario and another person. EVANGELINE JILL R. On November 27. After trial on the merits. and informed him that there was a prospective buyer of the property but that there were tenants thereon. respondent Fernandez requested Joy Marquez to secure a barangay clearance stating that the property was free of any tenants. 1997. HEIRS OF PAZ TICZON ELEOSIDA. She also maintained that even assuming arguendo that she had. 1996. She specifically alleged that the said contract to sell was unenforceable for failure to comply with the statute of frauds. Respondent Fernandez then asked Alimario to apprise the petitioners of the foregoing developments. 1996 Letter.00.[17] FERNANDEZ. TICZON. On the COUNTERCLAIM. 1999. thus. V. THE LOWER COURT ERRED IN NOT HOLDING THAT A SPECIAL POWER OF ATTORNEY WAS REQUIRED IN ORDER THAT DEFENDANT-APPELLANT FERNANDEZ COULD NEGOTIATE THE SALE ON BEHALF OF THE OTHER REGISTERED CO-OWNERS OF THE TWO LOTS. the same was not binding upon her in the absence of any consideration distinct and separate from the price. THE LOWER COURT ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT OF SALE OF THE TWO LOTS ON NOVEMBER 27. with costs against the plaintiffs. the respondents ascribed the following errors to the court a quo: On September 24.[23] The appellate court ruled that the petitioners failed to prove that a sale or a contract to sell over the property between the petitioners and the private respondent had been perfected. JOHN DOES and JANE DOES.000. BENITEZ. and 2. 1996 WAS A CONFIRMATION OF THE PERFECTED SALE AND CONSTITUTED AS WRITTEN EVIDENCE THEREOF. ERLINDA T. Dismissing the Complaint.000. Her cousin told her that he was not selling his share of the property and that he was not agreeable to the price of P150 per square meter. II. (2) in the event that there was. ordering defendants to: 1. through their agent. HEIRS OF DOMINGO B. prayed that judgment be rendered as follows: 1. the trial court rendered judgment in favor of the petitioners on June 23. After the meeting. PAT CASE: AGENCY The petitioners submit the following issues for the Courts resolution: A. I. that she could not bind the owners of the properties as she had no written authority to sell the same. the instant petition for review on certiorari under Rule 45 of the Revised Rules of Court. declared the other respondents in default for failure to file their responsive pleading within the reglementary period. the appellate court promulgated its decision reversing and setting aside the judgment of the trial court and dismissing the petitioners complaint. 2001. represented by GREGORIO T. DOMINIC TICZON.[18] At the pre-trial conference held on March 2.000. She no longer informed the other owners of the petitioners offer.offer. B. ordering plaintiffs to pay defendant moral damages in the amount of not less than P2. FERNANDEZ. She contacted a cousin of hers. WHETHER OR NOT THE CONTRACT FALLS UNDER THE COVERAGE OF THE STATUTE OF FRAUDS. WHETHER OR NOT THERE WAS A PERFECTED CONTRACT OF SALE BETWEEN THE PARTIES. Nonetheless. 1995. III. She was surprised to learn that the clearance could not be secured. represented by MARY MEDIATRIX T. THE LOWER COURT ERRED IN HOLDING THAT THE LETTER OF DEFENDANT-APPELLANT FERNANDEZ DATED JANUARY 16. 1995. execute a Contract of Sale and/or Absolute Deed of Sale with the terms agreed upon by the parties and to secure all clearances from the concerned government agencies and removal of any tenants from the subject property at their expense to enable defendants to comply with their obligations under the perfected agreement to sell. 1998. the Court hereby renders judgment in favor of plaintiffs ANTONIO K. the parties agreed that the following issues were to be resolved by the trial court: (1) whether or not there was a perfected contract to sell. Hence. she met with the petitioners in the latters office and told them that she was at the conference merely to hear their offer. THE LOWER COURT ERRED IN NOT HOLDING THAT THE VERBAL CONTRACT OF SALE AS CLAIMED BY PLAINTIFFS-APPELLEES ANTONIO LITONJUA AND AURELIO LITONJUA WAS UNENFORCEABLE. pay to plaintiffs the sum of Two Hundred Thousand (P200. also one of the owners of the property. upon motion of the petitioners.[21] On appeal to the Court of Appeals. made a commitment or promise to sell the property to the petitioners. she sent a Reply-Letter dated February 14. THE LOWER COURT ERRED IN AWARDING ATTORNEYS FEES IN THE DISPOSITIVE PORTION OF THE DECISION WITHOUT STATING THE BASIS IN THE TEXT OF SAID DECISION. thus. JOSEFINA LUISA PIAMONTE. the trial court. IV. 1996.00 and attorneys fees and reimbursement expenses of litigation in the amount of P300. whether or not the respondents breached the said contract to sell. and (3) the corollary issue of damages. When she received petitioners February 1.[19] Respondent Fernandez testified that she requested Lourdes Alimario to look for a buyer of the properties in San Pablo City on a best offer basis. ELEOSIDA. She.[20] the dispositive portion of which reads: WHEREFORE. 2. as well as the respondents counterclaim. LITONJUA and against defendants MARY MEDIATRIX T. no verbal contract to sell was ever perfected. Page 77 of 150 .

affirm the decision of the appellate court. or by his agent.[30] In Rosencor Development Corporation vs. On the first and second assignment of errors. in this case. thereby. as well as respondent Fernandez when she testified. The petitioners contend that the perfection of the said contract is evidenced by the January 16. In the following cases an agreement hereafter made shall be unenforceable by action. as it is often stated. According to the petitioners. The petitioners thus contend that the appellate courts declaration that there was no perfected contract of sale between the petitioners and the respondents-owners is belied by the evidence. depending for their existence on the unassisted memory of witnesses. However. in their answer to the complaint. 1996 Letter of respondent Fernandez. we find no justification to grant the petition. The statute is satisfied or. WHETHER OR NOT THE DEFENDANTS DECLARED IN DEFAULT ARE BENEFITED BY THE ASSAILED DECISION OF THE COURT OF APPEALS. 1996 is hardly the note or memorandum contemplated under Article 1403(2)(e) of the New Civil Code.[31] the term statute of frauds is descriptive of statutes which require certain classes of contracts to be in writing. such as where the factual findings of the Court of Appeals and the trial court are conflicting or contradictory. admitted the authenticity and due execution of the said letter. As the findings of fact of the appellate court are deemed continued. Besides. I regret to formally inform you now that we are no longer selling the property until all problems are fully settled. which reads: PAT CASE: AGENCY (2) Those that do not comply with the Statute of Frauds as set forth in this number. The petitioners contention is bereft of merit. the findings of the trial court and its conclusion based on the said findings contradict those of the appellate court. stated the reasons beyond the control of the defendant-appellant. through respondent Fernandez.[26] Indeed.[25] This rule. In view thereof. To read a definite previous agreement for the sale of the property in favor of plaintiffs-appellees into the contents of this letter is to unduly restrict the freedom of the contracting parties to negotiate and prejudice the right of every property owner to secure the best possible offer and terms in such sale transactions. However. 1403. thus. The letter specifically makes reference to a sale which respondent Fernandez agreed to initially. therefore. but which the latter withdrew because of the emergence of some people who claimed to be tenants on both parcels of land. or for the sale of real property or of an interest therein. I specifically instructed her to inform you thru your broker that we will not be attending the meeting to be held sometime first week of December. We. Consequently. is not without exceptions. be in writing. why the sale could no longer push through because of the problem with tenants. unless the same. the latter did not object thereto.[29] The appellate court based its ruling on the following disquisitions: In the case at bar. a contract or bargain is taken within the statute by making and executing a note or memorandum of the contract which Page 78 of 150 . The following contracts are unenforceable. In its decision. therefore. thus. or secondary evidence of its contents: (e) An agreement for the leasing for a longer period than one year. by requiring certain enumerated contracts and transactions to be evidenced by a writing signed by the party to be charged. as sellers. the respondents-owners thereby ratified the said contract of sale. when the petitioner Antonio Litonjua testified on the contract of sale entered into between themselves and the respondentsowners.[27] The pertinent portions of the said letter are as follows: [M]y cousin and I have thereby changed our mind and that the sale will no longer push through. removing it from the coverage of the statute of frauds.Art. no obligations exist[28] The petitioners argue that the letter is a sufficient note or memorandum of the perfected contract. the pleadings of the parties. the defendant-appellant may not be held liable in this action for specific performance with damages. We have not demanded and received from you any earnest money. however. We believe. The purpose of the statute is to prevent fraud and perjury in the enforcement of obligations. in fact. she was clearly referring to the decision to sell the property at all (not necessarily to plaintiffs-appellees) and not in selling the property to herein plaintiffs-appellees as defendant-appellant had not yet made the final decision to sell the property to said plaintiffs-appellees. the respondents-owners. thereby concluding that defendantappellant had unilaterally cancelled the sale or backed out of her previous commitment.[24] The petition has no merit. unless they are ratified: C. When defendant-appellant used the words changed our mind. this Court is not duty-bound to analyze and calibrate all over again the evidence adduced by the parties in the court a quo. and the law. Hence. The general rule is that the Courts jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the appellate court. 1996 of defendant-appellant can hardly be said to constitute the note or memorandum evidencing the agreement of the parties to enter into a contract of sale as it is very clear that defendant-appellant as seller did not accept the condition that she will be the one to pay the registration fees and miscellaneous expenses and therein also categorically denied she had already committed to execute the deed of sale as claimed by the plaintiffs-appellees. the appellate court ruled that the Letter of respondent Fernandez dated January 16. the letter dated January 16. of the agreement cannot be received without the writing. The trial court zeroed in on the statement of the defendant-appellant that she and her cousin changed their minds. the petitioners assert that there was a perfected contract of sale between the petitioners as buyers and the respondents-owners. upon careful review of the records of this case. and subscribed by the party charged. evidence. that the trial court committed a reversible error in finding that there was a perfected contract of sale or contract to sell under the foregoing circumstances. but merely regulates the formalities of the contract necessary to render it enforceable. This conclusion is buttressed by the last paragraph of the subject letter stating that we are no longer selling the property until all problems are fully settled. or some note or memorandum thereof. The letter. the tenor of the letter actually reveals a consistent denial that there was any such commitment on the part of defendant-appellant to sell the subject lands to plaintiffs-appellees. The statute does not deprive the parties of the right to contract with respect to the matters therein involved. Court of Appeals.

such note or memorandum must be signed by the said party or by his agent duly authorized in writing.[49] The failure of respondent Fernandez to object to parol evidence to prove (a) the essential terms and conditions of the contract asserted by the petitioners and. and if they would hold the principal liable. petitioner Antonio Litonjua declared that the petitioners agreed to buy from the respondents-owners 36.[43] However. In their complaint. There is no documentary evidence on record that the respondents-owners specifically authorized respondent Fernandez to sell their properties to another. sir. both in her answer to the complaint and when she testified.[32] The application of such statute presupposes the existence of a perfected contract. There is no evidence on record that the respondents-owners ratified all the actuations of respondent Fernandez in connection with her dealings with the petitioners. the letter made reference to only one property. and I was just there to listen to his proposal because that time.[34] To be binding on the persons to be charged. as buyers.is sufficient to state the requirements of the statute. the petitioners claim was belied by respondent Fernandez when she testified. MALVAR.990 square meters. 1996 a written authority to sell the properties. 1996. in their Letter dated February 1. said letter is not binding on the respondents as owners of the subject properties. I cannot agree on anything yet since it is just a preliminary meeting.[41] In this case. Page 79 of 150 . we were just looking for the best offer and I did not have yet any written authorities from my brother and sisters and relatives. as sellers. It must be stressed that the petitioners are noted businessmen who ought to be very familiar with the intricacies of business transactions. with a total area of 36. As such.[35] In City of Cebu v. they alleged to have agreed to buy from the respondents-owners 33. brother and sisters. and. or some other writing to which it refers or within which it is connected. to ascertain not only the fact of agency but also the nature and extent of authority. In their Letter to respondent Fernandez dated January 5.742 square meters.742 square meters at P150 per square meter or for the total price of P5. Heirs of Rubi.[37] or to create or convey real rights over immovable property.[47] However.[33] Such note or memorandum must contain the essential elements of the contract expressed with certainty that may be ascertained from the note or memorandum itself. T-36755. the petition is DENIED. Costs against the petitioners.098. Q And what else was taken up? A Mr. and so. (c) the names of the respondents-owners of the properties. (b) an accurate description of the property subject of the sale.500.[44] PAT CASE: AGENCY The petitioners cannot feign ignorance of respondent Fernandez lack of authority to sell the properties for the respondents-owners. such as the sale of real property. and the petitioners.[40] The declarations of the agent alone are generally insufficient to establish the fact or extent of her authority. 1996[46] is not a note or memorandum within the context of Article 1403(2) because it does not contain the following: (a) all the essential terms and conditions of the sale of the properties.[38] or for any other act of strict dominion. Contrary to the petitioners contention. it must be complete in itself and cannot rest partly in writing and partly in parol. 1996. sir. CAROLINA HERNANDEZ-NIEVERA. and in case either is controverted. including the petitioners.[50] IN LIGHT OF ALL THE FOREGOING. JR.742 square meters. and MARGARITA H. the petitioners declared that they agreed to buy a portion of the properties consisting of 33.[36] we held that the exchange of written correspondence between the parties may constitute sufficient writing to evidence the agreement for purposes of complying with the statute of frauds.. In this case. the only evidence adduced by the petitioners to prove that respondent Fernandez was authorized by the respondents-owners is the testimony of petitioner Antonio Litonjua that respondent Fernandez openly represented herself to be the representative of the respondents-owners. Furthermore. the terms and conditions of the contract and a description of the property sufficient to render it capable of identification. what else did you tell to the plaintiffs? A I told them that I was there representing myself as one of the owners of the properties. the letter of January 16.[48] When he testified. that covered by TCT No.[39] Any sale of real property by one purporting to be the agent of the registered owner without any authority therefor in writing from the said owner is null and void. the burden of proof is upon them to prove it. Article 1878 of the New Civil Code provides that a special power of attorney is necessary to enter into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration. 1996 relied upon by the petitioners was signed by respondent Fernandez alone. The note or memorandum must contain the names of the parties. without any authority from the respondents-owners. We note that the petitioners themselves were uncertain as to the specific area of the properties they were seeking to buy.[45] In this case. we agree with the findings of the appellate court that there was no perfected contract of sale between the respondents-owners. the petitioners stated that they agreed to buy the two lots. HERNANDEZ. thus: Q Madam Witness. I should make an assurance that there are no tenants in our properties. (b) her authority to sell the properties for the respondents-registered owners did not and should not prejudice the respondents-owners who had been declared in default. However. The settled rule is that persons dealing with an assumed agent are bound at their peril. for a note or memorandum to satisfy the statute.[42] and that she promised to present to the petitioners on December 8. Antonio Litonjua told me that they will be leaving for another country and he requested me to come back on the first week of December and in the meantime. I have to secure authorities and relate the matters to my relatives.990 square meters of the total acreage of the two lots consisting of 36. Petitioners. The Letter dated January 16. The decision of the appellate court is AFFIRMED IN TOTO. DEMETRIO P. respondent Fernandez specifically denied that she was authorized by the respondents-owners to sell the properties. SO ORDERED. without resorting to parol evidence.

00 January 31. The facts follow.R. 2011 DECISION PERALTA.432.556. 1997.500. 2000 10.: This Rule 45 petition for review assails the October 19.of Title (TCT) Nos.00 April 30.735. Area II Option money of PESOS: EIGHT MILLION FIVE HUNDRED THOUSAND (Php8.000. the second installment due on or before December 15. T-3134.735. a method of sourcing development funds by the issuance of participation certificates against the direct backing assets of the projects. G. T-3133.00 October 31. should the VENDEE exercise the option to purchase the parcels of land within the stipulated period.000.[2] as well as the January 11. Schedule of payments shall be as follows: January 31.735.00 October 31.580. 1999 10.270.432. PMRDC conveyed to HIGC the constituent assets of the two projects.00 April 30. CV No. the realty measured 4.000.[8] The execution of the projects would be funded largely through securitization. 2004 judgment[4] rendered by the Regional Trial Court (RTC) of San Pablo City. the first installment due on or before November 20. PMRDC entered into a Memorandum of Agreement (MOA) whereby it was given the option to buy pieces of land owned by petitioners Carolina Hernandez-Nievera (Carolina). Margarita H.[9] whereby LBP would act as the nominal issuer of such certificates with the Asset Pool itself acting as the real issuer. T-3138.R.00 Page 80 of 150 .456. T-3139 and T-3140 on the one hand.735. 1999 10. 2. Demetrio. in turn. The MOA materially provides: . Malvar (Margarita) and Demetrio P. Project Movers Realty & Development Corporation (PMRDC). the VENDEE shall have the option to purchase the above-described parcels of land within a period of twelve (12) months from the date of this instrument and that the VENDEE shall pay the vendor option money in the following amounts and on the dates herein specified: Area I PESOS: SIX MILLION (Php6. with prayer for preliminary injunction and damages. J. Sometime in 1995.SIX (Php3.[10] HIGC. 83852.00). 1999 Php 10. under authority of a Special Power of Attorney to Sell or Mortgage.735. it entered through its president.00 July 30. one of the respondents herein.000.451 square meters and was segregated by agreement into Area I and Area II.00) shall be payable within two (2) years in eight (8) quarterly installments covered by postdated checks. The said decision had reversed and set aside the August 30. 1997. 2000 10. into various agreements with co-respondents Home Insurance & Guaranty Corporation (HIGC)[5] and Land Bank of the Philippines (LBP).000.735. 2000 10. [11] On November 13. 2005 Decision[1] of the Court of Appeals in CAG. SP5742(2000) one for rescission of a memorandum of agreement and declaration of nullity of a deed of assignment and conveyance.00 July 31. 1.511. respectively pertaining to the parcels covered by Transfer Certificate PAT CASE: AGENCY 1. Balance of the TWENTY FIVE (25%) PERCENT downpayment exclusive of the option money for Area I is PESOS: TEN MILLION FOUR HUNDRED EIGHTY-TWO THOUSAND TWO HUNDRED SIXTY-TWO (Php10. in connection with the construction of the Isabel Homes housing project in Batangas and of the Monumento Plaza commercial and recreation complex in Caloocan City.883. respondent Mario Villamor (Villamor). MARIO P.00) and for Area II is PESOS: THREE MILLION SIX HUNDRED FORTY-FIVE THOUSAND FIVE HUNDRED FIFTY. (Demetrio). THAT. T-3137.[12] signed the MOA also in behalf of Carolina and Margarita.432. T-3135 and T-3136. THAT.432. VILLAMOR and LAND BANK OF THE PHILIPPINES.262.432. 1997. 1999 10. 2000 10.00) payable within thirty (30) days after conveyance to the Isabel Homes Asset Pool.00) payable in two (2) equal installments of PESOS: THREE MILLION (Php3.645.735. Branch 32 in Civil Case No. the VENDEE shall complete the TWENTY-FIVE (25%) PERCENT downpayment inclusive of the option money within the said stipulated period. The balance of the purchase price in the amount of PESOS: EIGHTY-FIVE MILLION EIGHT HUNDRED EIGHTY-THREE FOUR HUNDRED FIFTY-SIX (Php85. Laguna.[6] whereas LBP agreed to act as trustee of the resulting Asset Pool[7] for a consideration. THAT.735. Hernandez. the consideration for the sale of the parcels of land (Areas I and II) shall be TWENTY-FIVE PESOS (Php 25.00). No.432. Jr.versus WILFREDO HERNANDEZ.00) per square meter or a total of PESOS: ONE HUNDRED FOURTEEN MILLION FIVE HUNDRED ELEVEN TWO HUNDRED SEVENTY (Php114. T-3132. HOME INSURANCE AND GUARANTY CORPORATION. 2006 Resolution[3] in the same case which denied reconsideration. PROJECT MOVERS REALTY AND DEVELOPMENT CORPORATION. is a duly organized domestic corporation engaged in real estate development. would provide guaranty coverage to these participation certificates in accordance with its Contract of Guaranty with PMRDC and LBP. 171165 x---------------------------------------------------------------------------------------x February 14. and on the other by TCT Nos. both installments to be covered by postdated checks upon signing of this Agreement. Respondents.432. all issued by the Register of Deeds of Laguna.482.00).432. In the aggregate. In its Asset Pool Formation Agreement.

T-3133. the Court of Appeals issued the assailed Decision reversing and setting aside the trial courts decision as follows: Page 81 of 150 .[22] The dispositive portion of the decision reads: WHEREFORE. THAT.[20] With that final word. declared the MOA to be an option contract and ordered its rescission. to be delivered to plaintiffs immediately and the plaintiffs are ordered to issue a corresponding receipt of said certificates of title signed by all the plaintiffs to be submitted to the OIC-Branch Clerk of Court of this Court within five (5) days from receipt of said titles. THAT. shall agree to convey the parcels of land to any bank or financial institution by way of mortgage or to a Trustee by way of a Trust Agreement at any time from the date of this instrument. Actual damages of P500. the following: a.[17] PMRDC admittedly did not avail of its option to purchase the lands in Area II in the twelve months that passed after the execution of the MOA. and accordingly. c. the lands within Area I were then mortgaged to Solid Bank for which petitioners received consideration from PMRDC. Branch 32 for the rescission of the MOA. 2.[13] As an implementation of the MOA. on January 8. which are in the custody of the Court. Moral damages of P200.000. T-3135 and T-3136 were transferred and assigned to the Asset Pool in exchange for a number of shares of stock which supposedly had already been issued in the name and in favor of Demetrio. the same however allegedly bounced. transfer tax and documentary stamps tax shall be for the account of the VENDOR.[14] Later on.3. all in the names of the plaintiffs.[15] Thus. respondents filed a notice of appeal and elevated the matter to the Court of Appeals. T-3132. judgment is hereby rendered in the favor of the plaintiffs and against the defendants as follows: 1. it entered with LBP and Demetrio the latter purportedly acting under authority of the same special power of attorney as in the MOA into a Deed of Assignment and Conveyance (DAC)[16] whereby the lands within Area II covered by TCT Nos.[23] Aggrieved. PMRDC. THAT. e. Although PMRDC delivered to petitioners certain checks representing the money. d. b. 5. FREE FROM ALL LIENS AND ENCUMBRANCES. petitioners demanded the return of the corresponding TCTs. THAT. Laguna. PREMISES CONSIDERED. Ordering defendants Mario Villamor and Wilfredo Hernandez to pay plaintiffs. And the costs of the suit. SO ORDERED. however.[18] Hence.00. Rescinding the Memorandum of Agreement (MOA) executed between the plaintiffs and Project Movers Realty [&] Development Corporation (PMRDC). Land Bank of the Philippines and Demetrio Hernandez whose signature is forged. stated that the TCTs could no longer be delivered back to petitioners as the covered properties had already been conveyed and assigned to the Asset Pool pursuant to the March 23. T-3134 and T-3135. adjudged respondents PMRDC and Villamor liable to petitioner for damages.000. It.00. 1998. Exemplary damages of P200. T-3133. 2004.00. and peaceful possession of the said described parcels of land after all considerations have been fully paid. through Villamor. all taxes including capital gains tax. In the correspondence that ensued. 1999. on March 23. They prayed for the issuance of a writ of preliminary injunction and for the payment of damages. the option money shall be forfeited in favor of the VENDOR and that the VENDEE shall return to the VENDOR all the Transfer Certificates of Title covering the said described parcels of land within a period of THIRTY (30) DAYS from the stipulated period. 2005. PROVIDED. 4.00. 3. the trial court. T-3134. as well as for the declaration of nullity of the DAC. Ordering Transfer Certificate of Title Nos.[21] Ruling for petitioners. petitioners instituted an action before the RTC of San Pablo City.000. should the VENDEE fail to exercise its option to purchase the said described parcels of land within the stipulated period. HOWEVER.000. 1999 letter to Demetrio. 1998 DAC. On October 19. the VENDOR. 7.[19] In its January 21. petitioners disowned PAT CASE: AGENCY Demetrios signature in the DAC and labeled it a mere forgery. likewise. T-3132. Attorneys fees in the amount of P300. Declaring null and void the Deed of Assignment and Conveyance (DAC) executed between Project Movers Realty [&] Development Corporation. declared the DAC null and void as it made a definite finding of forgery of Demetrios signature as well as fraud in its execution. These pieces of land are the subject of the present controversy as far as they are affected by the explicit provision in the DAC which dispensed with the stipulated obligation of PMRDC in the MOA to pay option money should it opt to buy the properties. the VENDOR hereby warrants valid title to. jointly and severally. 4. that the VENDOR is not liable for any mortgage or loans or obligations that will be incurred by way of mortgage of Trust Agreement that the VENDEE might enter into. PMRDC saw the need to convey additional properties to and augment the value of its Asset Pool to support the collateralization of additional participation certificates to be issued. 6. Boldly. at the request of the VENDEE. they asserted that the fraudulent execution of the DAC was made possible through the connivance of all the respondents. on August 30. It is agreed that the VENDOR shall have the sole responsibility in the settlement of the tenants and eviction of the tenants and eviction of the occupants of the described parcels of land after all consideration have been fully paid by the VENDEE to the VENDOR. They explained that Demetrio could not have entered into the said agreement as his power of attorney was limited only to selling or mortgaging the properties and not conveying the same to the Asset Pool.

likewise. becomes even more unremarkable in light of the fact that the DAC involved in this case is a notarized deed guaranteed by public attestation in accordance with law. The decision dated August 30. completely changed the original obligations of PMRDC as provided in the MOA. Branch 32. have agreed to novate the terms of the MOA by extinguishing the core obligations of PMRDC on the payment of option money. they aver that the novation of the MOA by the DAC is unmistakable as the DAC itself has made an express reference to the MOA provisions on the payment of option money and. has altogether been expressly obliterated by the terms of the DAC whereby petitioners. who believe Demetrios power of attorney was broad enough to effectuate a novation of PMRDCs core obligations in the MOA or.[41] The 4th and 5th whereas-clauses in the DAC read as follows: Page 82 of 150 . PMRDC and Villamor advance that petitioners allegation of fraud and forgery are all factual matters that are inappropriate in a Rule 45 petition.WHEREFORE. based on the foregoing. This thesis is perched on petitioners argument that the MOA could not have possibly been novated by the DAC because first. SP-5742 (2000) is REVERSED and SET ASIDE and a new one is entered declaring the Deed of Conveyance valid and thus. It noted further that it was premature to order the release of the subject TCTs to petitioners at this stage of the proceedings. Third. unsubstantiated as it is.[34] In addition.[40] Yet the inquiry on the validity of the DAC does not terminate with the finding alone of the genuineness of Demetrios signature therein. except the self-serving testimony of petitioners themselves. by subsequent agreement embodied in the DAC. acting as trustee thereof. at the least. and that the deliberate refusal of PMRDC to perform such obligation gives ground for the rescission of the MOA. Respondents maintain. that said obligation. HIGC maintains that these factual PAT CASE: AGENCY matters remain to be mere allegations which nothing in the records of the case could conclusively prove.[38] Second. it upheld the validity of the DAC. because petitioners also stand against its validity on the ground of Demetrios non-authority to execute the same. HIGC explains that contrary to petitioners belief. because that would amount to an execution of the decision. the trial had terminated without the results of the examination being submitted in evidence.[25] The Court of Appeals noted that the incompatibility in the terms of the MOA and the DAC clearly signified the intention of the parties to have the MOA novated by subsequent agreement and have the properties conveyed to the Asset Pool in exchange for PMRDC shares to be issued to Demetrio.[26] With the denial of their motion for reconsideration.[32] and LBP[33] are of the same view. Wilfredo Hernandez. SO ORDERED. both represented by the Office of the Government Corporate Counsel (OGCC). following the legal presumption of regularity in the execution of notarized deeds. Petitioners cause stems from the failure of PMRDC to restore to petitioners the possession of the TCTs of the lands within Area II upon its failure to exercise the option to purchase within the 12-month period stipulated in the MOA. been substituted instead by the obligation to issue participation certificates in Demetrios name but which.[28] They also point out that the DAC itself is infirm insofar as it stipulated to convey the lands to the Asset Pool as the latter supposedly is neither a registered corporation nor a partnership and does not possess a legal personality. For their part. positive and convincing evidence by the party alleging the same. implement the provisions thereof through the DAC. Petitioners insist that the obligation of PMRDC to deliver back the TCTs arises on its failure to exercise the option to purchase the lands according to the terms of the MOA. This. hence. But petitioners stand against the validity of the DAC on the ground that the signature of Demetrio therein was spurious. dependent as it is on the exercise of the option to purchase.[30] More importantly.[29] Commenting on the petition. This seems to suggest that with the execution of the DAC.[24] Central to the ruling of the Court of Appeals is its contrary finding that the allegation of forgery of Demetrios signature in the DAC was not established by the evidence and. the claim of forgery.[36] The Court denies the petition.[31] HIGC and its president.[27] petitioners filed the instant petition for review attributing error to the Court of Appeals in declining to rescind the MOA and declare the DAC null and void. the appeal is GRANTED. No costs. the transfer of the properties under the DAC is valid as the conveyance has been made to the Asset Pool with LBP. respondents. hence.[39] nevertheless.[37] The burden to prove the allegation of forgery in this case has not been conclusively discharged by petitioners because first. while in fact Demetrio at the trial of the case had committed to have the subject signature examined by an expert. San Pablo City in Civil Case No. however. They claim that the execution of the DAC would be beyond the power of Demetrio to perform as his authority is limited only to selling or mortgaging the properties and does not include assigning and conveying said properties to the Asset Pool in consideration of shares of stocks for his lone benefit. nothing in the records supports the allegation except only perhaps Demetrios explicit selfserving disavowal of his signature in open court. 2004 of the Regional Trial Court. Demetrios signature therein has been forged. and second. an entity with juridical entity. the Transfer Certificates of Title subject of this case are ordered returned to HIGC. PMRDC has already entered into the exercise of its option except that its obligation to deliver the option money has. such that the execution thereof enjoys the legal presumption of regularity in the absence of compelling proof to the contrary. in relation to each other. has expressly modified the pertinent terms thereof. according to the appellate court. supposedly pertain to that certain provision in the MOA which authorizes the conveyance of the properties to the Asset Pool in exchange for corporate shares. Demetrio could not have validly assented to the DAC in behalf of Carolina and Margarita because his special power was limited only to selling or mortgaging the properties and excludes conveying and assigning the said properties to the Asset Pool for consideration.[35] Addressing the issue of forgery and fraud in the execution of the DAC. through Demetrio as attorney-in-fact. invoke the 4th and 5th whereas-clauses in the DAC which. has not yet been performed by PMRDC. Firmly settled is the jurisprudential rule that forgery cannot be presumed from a mere allegation but rather must be proved by clear.

aptly citing the case of California Bus Lines. is that in the execution of the DAC. that no such request was ever intimated to them at any time during the subsistence of the PMRDCs right to exercise the option to buy. Paragraph 5 reads: 5. private banking or financial institution. We agree. PMRDC and LANDOWNER have entered into a Memorandum of Agreement whereby the former agreed to convey to the Isabel Homes Asset Pool certain real properties located at Sta. otherwise. 1997. whereby the LANDOWNER shall dispense with the option money as a requisite to the sale and purchase of the properties by PMRDC. to sign. cause or principal conditions thereof. necessarily and consequently has resulted in a novation of PMRDCs integral obligations. the terms of his special power of attorney allow much leeway to accommodate not only the terms of the MOA but also those of the subsequent agreement in the DAC which. and the latter obligation novates the first. In particular. Suffice it to say that price is understood to mean the cost at which something is obtained. The test of incompatibility is whether the two obligations can stand together. the VENDOR at the request of the VENDEE shall agree to convey the parcels of land to any bank or financial institution by way of mortgage or to a Trustee by way of a Trust Agreement at any time from the date of this instrument. THAT. effect a novation of the MOA. The incompatibility must take place in any of the essential elements of the obligation such as its object. PROVIDED. however. in fine. In fact. on November 3. PAT CASE: AGENCY Thus. the change would be merely modificatory in nature and insufficient to extinguish the original obligation. representing his shared interest with Carolina and Margarita. that the VENDOR is not liable for any mortgage or loans or obligations that will be incurred by way of mortgage of Trust Agreement that the VENDEE might enter into. the presence of novation and thereby produce the effect of extinguishing an obligation by another which substitutes the same.[45] What petitioners miss. the power to sell is quite controversial because it is the sale transaction which bears close resemblance to the deal contemplated in the DAC. Inc. The second is when the old and the new obligations are incompatible on every point. part of the testimony of Atty. i. Demetrios special power of attorney granting the powers to sell and/or mortgage reads in part: 1. and extinguish the stipulated obligations of PMRDC therein.e. Laguna. Corollarily.[42] It is in the context of this vesture of power that Demetrio. If they cannot.[43] Petitioners profess. The powers conferred on Demetrio were exclusive only to selling and mortgaging the properties.[48] thus There are two ways which could indicate. partnership. it becomes clear that Demetrios special power of attorney to sell is sufficient to enable him to make a binding commitment under the DAC in behalf of Carolina and Margarita.WHEREAS. On this score. in this case. each one having its independent existence. To further attain the authority herein given. with the latter replacing the cash equivalent of the option money initially agreed to be paid by PMRDC under the MOA. Between these two specific powers. to do and perform such acts and things that may be necessary or incidental to fully carry out the authority herein granted. is that the power conferred on Demetrio to sell for such price or amount[46] is broad enough to cover the exchange contemplated in the DAC between the properties and the corresponding corporate shares in PMRDC. respondents had relied on Demetrios special power of attorney and also on his supposed agreement to be paid in kind. State Investment House. The first is when novation has been explicitly stated and declared in unequivocal terms. they are incompatible. we surmise that the clause could be referring to paragraph 5 of the MOA which stipulates a commitment on the part of petitioners to give their consent to an assignment and conveyance of the properties to the Asset Pool but only once a request therefor is made by PMRDC.. execute and deliver such deeds. government or semi-government banking or financial institution for such price or amount and under such terms and conditions as our aforesaid attorney-in-fact may deem just and proper. changes that breed incompatibility must be essential in nature and not merely accidental. in shares of stock. HOWEVER. But respondents are quick to reason that a request is unnecessary because Demetrio has been legally enabled by his special power to give such consent and accordingly execute the DAC.[47] While indeed we find no provision in the MOA such as that alluded to in the aforequoted 4th whereasclause in the DAC which purportedly embodies an agreement by the parties to assign and convey the subject properties to the Asset Pool. Inc. Indeed. v. instruments and other papers that may be required or necessary. or the consideration given for the purchase of a thing. entered into the MOA with PMRDC. To sell and/or mortgage in favor of any person. we quote with approval the decision of the Court of Appeals. and agreed to convey absolutely and unqualifiedly the same properties directly to the Isabel Homes Asset Pool for and in exchange of shares of stock or equity in PMRDC. It is likewise within this same context that Demetrio later on entered into the DAC and accordingly extinguished the previously subsisting obligation of PMRDC to deliver the stipulated option money and replaced said obligation with the delivery instead of participation certificates in favor of Demetrio.[49] Page 83 of 150 . as consideration for the assignment and conveyance of the subject properties to the Asset Pool. it does include the authority to extinguish PMRDCs obligation under the MOA to deliver option money and agree to a more flexible term by agreeing instead to receive shares of stock in lieu thereof and in consideration of the assignment and conveyance of the properties to the Asset Pool. the LANDOWNER and PMRDC have agreed to revise and modify the said Memorandum of Agreement. counsel for respondent HIGC and head of its legal department at the time. parcels of land more particularly described as follows: xxx 2. Danilo Javier. 3. or at least that he could assent to the implementation of the MOA provisions in the way that transpired. Maria.[44] [WHEREAS]. To carry out the authority aforestated. however. corporation. or something which one ordinarily accepts voluntarily in exchange for something else.

LTD. [53] we explained that the legal department of LBP is not expressly authorized by its charter to appear in behalf of the corporation in any proceeding as the mandate of the law is explicit enough to place the said department under the OGCCs power of control and supervision.35 MT (gross) bagged urea from Novorossisk. Ltd. and UNION INSURANCE SOCIETY OF CANTON. and we have to recognize such function as part of public policy. CRUZ. on private practitioners.: Transcontinental Fertilizer Company of London chartered from Hongkong Island Shipping Company of Hongkong the motor vessel named "Hongkong Island" for the shipment of 8073. For the purpose of filing petitions and making submissions before this Court. x x x At the same time. x x x[54] WHEREFORE. as the principal law office of the LBP..R. MARITIME AGENCIES & SERVICES. x x x Certainly. Chapter 3[50] of the Revised Administrative Code of 1987 has designated the OGCC to act as the principal law office of government-owned or controlled corporations (GOCCs) in connection with any judicial or quasi-judicial proceeding. there would be no impediment to the litigation to maintain.R. and not the LBP Legal Department. Book IV. Zapa Aguillardo & Associates for petitioner in G. the performance of such functions cannot deprive the OGCCs role as overseer of the LBP Legal Department and its mandate of exercising control and supervision over all GOCC legal departments. and Macondray & Co. such control and supervision imply express participation by the OGCC as principal legal counsel of LBP. respondents. are hereby AFFIRMED. No. in CA. it establishes the proper hierarchical order in that the LBP Legal Department remains under the control and supervision of the OGCC. 77674 UNION INSURANCE SOCIETY OF CANTON. Inc. vs. It should also be noted that the aforementioned Section 10. 1979. The October 19. LTD. Since GOCCs fall within the same governmental framework. INC.[51] In Land Bank of the Philippines v. Chapter 3 of the Administrative Code of 1987 can be invoked by adverse parties or by the courts in citing as deficient the exclusive representation of LBP by its Legal Department. Bito.. the Court finds no useful purpose in addressing all the other issues raised in this petition. SO ORDERED. its perspective is less myopic than that maintained by a particular legal department of a GOCC. A final note. We held in that case: [Section 10] mandates the OGCC. Book IV. petitioner. or more irregularly. Title III. G. if neither the adverse parties nor the courts of jurisdiction choose to contest this point.. Nowhere in the records is it shown that the OGCC has ever entered its appearance in this case as principal legal counsel of respondent LBP. Chapter 3 of the Administrative Code of 1987 authorizes the OGCC to receive the attorney's fees adjudged in favor of their client GOCCs. petitioner. HONGKONG ISLAND CO. 77638 July 12. Title III. It is not inconceivable that left to its own devices.. No. No. the parties signing for this purpose a Uniform General Charter dated August 9. the legal department of a given GOCC may adopt a legal PAT CASE: AGENCY July 12. COURT OF APPEALS. Yet between the two respondents GOCCs in this case LBP and HIGC it is only the latter for which the OGCC has entered its appearance.R. 2006 Resolution of the Court of Appeals.In view of the foregoing. G. the non-participation of the OGCC in litigations pursued by GOCCs would deprive the former of its due funding as authorized by law. it would be detrimental to have GOCCs foisted into adversarial positions by their respective legal departments. the Petition is DENIED.[52] citing Land Bank of the Philippines v.. Martinez.R. USSR to the Philippines.G. 1990 MARITIME AGENCIES & SERVICES. 77638. 1 Page 84 of 150 . and/or VIVA CUSTOMS BROKERAGE. 2005 Decision and January 11. Book IV. Moreover. We do not doubt that the LBP Legal Department carries out vital legal services to LBP. or that at the very least it has given express conformity to the LBP legal departments representation. No. Misa & Lozada for Hongkong Island Co.. Odessa. CV No. Section 10. J. Then again. INC. or the exercise of control and supervision by the OGCC over the acts of the GOCCs legal departments. Panlilio-Luciano. this is another reason why we cannot sustain Attys. Beramo and Berbao's position that the OGCC need not participate in litigations pursued by LBP. LTD. the existence of the OGCC does not render the LBP Legal Department a superfluity. For reasons such as proximity and comfort. 77674. the GOCC may find it convenient to rely instead on its in-house legal departments. 83852. there is indubitable wisdom in having one overseer over all these legal departments which would ensure that the legal positions adopted by the GOCCs would not conflict with each other or the government. Section 10. x x x position inconsistent with or detrimental to other GOCCs. Evidently. COURT OF APPEALS.R. Hence. vs. It may strike as disruptive to the flow of a GOCCs daily grind to require the participation of the OGCC as its principal law office.. such fees accruing to a special fund of the OGCC. respondents. Hence. Since the jurisdiction of the OGCC includes all GOCCs. However. Title III. Yet the statutory role of the OGCC as principal law office of GOCCs is one of long-standing. 1990 Del Rosario & Del Rosario for petitioner in G.

4 In G. 1980. this time against Viva Customs Brokerage. 1981 until the whole amount is fully paid.. which rendered a decision on November 28.54 plus 12% interest from April 20. Inc. 13 (b) defendant Maritime Agencies & Services. No. and/or Viva Customs Brokerage. There are three general categories of charters. This brings us to the basic question of who. the dispositive portion of which reads: A voyage charter being a private carriage. 14 WHEREFORE. 3 In G. for the amount of P87. 2 The goods were insured by the consignee with the Union Insurance Society of Canton. finding the charterer Transcontinental Fertilizer Co.163. the complaint was amended to drop Viva and implead Macondray Company. 1980.400. although the owner retains possession and control.. its principal not having been impleaded and so not subject to the jurisdiction of our courts.. while manning and supplying the ship as well. Par. represented by its agent Maritime Agencies & Services.23. It also argues that the respondent court erred in applying Articles 1734 and 1735 of the Civil Code in determining the charterer's liability. represented by Macondray Co.400. with legal interest and attorney's fees. Owners are to be responsible for loss of or damage to the goods or for delay in delivery of the goods only in case the loss.00 as attorney's fees and to pay one-half (1/2) of the costs. 77674. 8 These two cases were consolidated and given due course.54. The vessel arrived in Manila on October 3." the time charter and the voyage charter. as a new defendant. 3. As subrogee of the consignee. Inc.030. representing C & F value of the 1. the consignee filed another formal claim. 1981. then proceeded to Cebu on October 19.Of the total shipment. 1979.000.383 shortlanded bags. representing the value of 574 bags of net unrecovered spillage. although they pointed out that they were not involved in the petitions. 11 On January 4. Ltd. Inc.00.86 pursuant to the insurance contract. the decision appealed from is modified. copy furnished Macondray. the consignee then went to Union.. the charterer obtaining the right to use the vessel and carry whatever cargo it chooses. and Macondray Company. Defendant Hongkong Island Co.. and unloaded part of the consignee's goods. Inc. and A voyage charter is a contract for the hire of a vessel for one or a series of voyages usually for the purpose of transporting goods for the charterer. the consignee filed a formal claim against Maritime. All complied. against Hongkong Island Company. to discharge the rest of the cargo. Ltd. a complaint for reimbursement of this amount. The basic principle is that "the responsibility for cargo loss falls on the one who agreed to perform the duty involved" in accordance with the terms of most voyage charters.. the charterer obtaining the right to direct the movements of the vessel during the chartering period. 6 These claims having been rejected.163.214.. Ltd.779. 2. the trial court rendered judgment holding the defendants liable as follows: A time charter is a contract to use a vessel for a particular period of time. Ltd. 5. after trial. Inc. Inc.54 plus interest at 12% plus attorney's fees of P1. to pay the plaintiff the sum of P36.163. Inc. was appointed as the charterer's agent and Macondray Company. Petitioner appealed the decision to the Court of Appeals. 1979. which on demand paid the total indemnity of P113. 77638.23. On October 31. The voyage charter is a contract of affreightment and is considered a private carriage..00 against all risks. the parties being required to submit simultaneous memoranda. Inc. Ltd. plus 12% interest from April 20.030. 12 (a) defendants Hongkong Island Co. 1981 until the whole amount is fully paid.000. the demise or "bareboat charter. Union asks for the modification of the decision of the respondent court so as to make Maritime solidarily and solely liable. Maritime Agencies & Services. and its local agent Macondray & Co. shall be liable for the cargo. Ltd.04 to be discharged in Manila and the remaining 2.. 5 On January 12.. to wit. stowage and discharging at the ports visited. No.R. 2 of the Uniform General Charter read: Maritime and Union filed separate motions for reconsideration which were both denied.00 as attorney's fees and to pay one-half (1/2) of the costs. 9 Tested by those definitions. damage or delay has been caused by the improper or negligent stowage of the goods or by personal want of due diligence on the part of the Owners or their Manager to make the PAT CASE: AGENCY Page 85 of 150 . Maritime Agencies & Services. 1979. Union then filed on September 19.04 MT was for the account of Atlas Fertilizer Company as consignee. 7 On April 20. Maritime pleads non-liability on the ground that it was only the charterer's agent and should not answer for whatever responsibility might have attached to the principal. P600. the parties may freely contract respecting liability for damage to the goods and other matters.000 MT in Cebu. liable for the amount of P87. 1986. to pay the plaintiff the sum of P87. the agreement entered into in the cases at bar should be considered. while the owner was responsible for the care of the cargo during the voyage. 10 This is true in the present cases where the charterer was responsible for loading. The movants are now before us to question the decision of the respondent court. A demise involves the transfer of full possession and control of the vessel for the period covered by the contract. including Hongkong Island Company. P1. for P6.123. Thus. Inc. are accordingly exempted from any liability. for the amount of P36. in this kind of charter.R. as the owner's agent. 1984.

as on board. runners and ropes. Act No. while Clause 17 of Additional Clauses to Charter party provided: But we do agree that the period for filing the claim is one year. that fact shall not effect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. Also slings. the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered. becomes a private carrier. it was made liable for the acts of the ship captain who was responsible for the cargo while under the custody of the vessel. As regards the goods damaged or lost during unloading. v. v. as on board. applying the provisions of the Civil Code on common carriers and of the Code of Commerce on the duties of the ship captain. if required at loading and discharging ports the vessel is to give free use of winches and power to drive them gear. Shore winchmen are to be employed and they are to be for Charterers' or Shippers' or Receivers' account as the case may be. as agreed upon by the parties and as shown in the tally sheets. The loss/damage to the cargo was sustained while it was still on board or under the custody of the vessel. Ltd. 17 where it was held: The cargo shall be loaded. In the cases at bar. Vessel is also to give free use of sufficient light. It is a well-settled principle that the agent shall be liable for the act or omission of the principal only if the latter is undisclosed. 1962. when the last item was delivered to the consignee. 15 the trial court rejected similar stipulations as contrary to public policy and. For this the ship owner should be held liable. Provided. the evidence showed that it represented the vessel when it took charge of the unloading of the cargo and issued cargo receipts (or tally sheets) in its own name. And the Owners are responsible for no loss or damage or delay arising from any other cause whatsoever.. held the vessel liable in damages for loss of part of the cargo it was carrying. However. Inasmuch as the action was filed on December 21. stowed and discharged free of expense to the vessel under the Master's supervision. be responsible. American Steamship Agencies.. we do not find that case is applicable. that if a notice of loss for damage. prevails over the general provisions of the Civil Code on prescription of actions. which could only mean that they were damaged or lost on board the vessel before unloading of the shipment. is not given as provided for in this section. even from the neglect or default of the Captain or crew or some other person employed by the Owners onboard or ashore for whose acts they would. Ramirez. either apparent or concealed. equipped and supplied or by the personal act or default of the Owners or their Manager. It is not denied that the entire cargo shipped by the charterer in Odessa was covered by a clean bill of lading. as a mere agent. we held that the one-year period was correctly reckoned by the trial court from December 19. if required for night work. The liability imposable upon it cannot be borne by Maritime which. As for the charterer's agent. but for this clause." The difficulty is that Transcontinental has not been impleaded in these cases and so is beyond our jurisdiction.vessel in all respects seaworthy and to secure that she is properly manned. this ruling cannot benefit Hongkong. 1980. Inc. As the charterer was itself the carrier. when. even if in fact so caused. having assumed this activity under the charter party "free of expense to the vessel. This Court reversed.383 bags were shortlanded. which is what matters anyway. Such policy has no force where the public at large is not involved.. 65 which. Claims against the Page 86 of 150 . the charterer is liable therefor. Under the facts of this case. Time lost through breakdown of winches or derricks is not to count as laytime. 19 Such doctrine we find reasonable. Philippines. The provisions of our Civil Code on common carriers were taken from Anglo-American law. the charterer represented itself on the face of the bill of lading as the carrier. Manila Railroad Co. as in the case of a ship totally chartered for the use of a single party. v. the trial court found that 1. 1961. declaring as follows: The one-year period in the cases at bar should commence on October 20. Inc. This period was applied by the Court in the case of Union Carbide. it was barred by the statute of limitations. in accordance with the Carriage of Goods by Sea Act. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void only if the strict public policy governing common carriers is applied. Nevertheless. In Home Insurance Co. That one-year period expired on December 19. the cargo was discharged from the carrying vessel and delivered to the Manila Port Service. Under American jurisprudence. The consequence is that the action is considered prescribed as far as Macondray is concerned but not against its principal. In that case. a stipulation exempting the owner from liability for the negligence of its agent is not against public policy. and is deemed valid. is not answerable for injury caused by its principal. The vessel owner and the charterer did not stipulate in the Charter party on their separate respective liabilities for the cargo. as a special law. PAT CASE: AGENCY Union seeks to hold Maritime liable as ship agent on the basis of the ruling of this Court in the case of Switzerland General Insurance Co. 1962. or from unseaworthiness of the vessel on loading or commencement of the voyage or at any time whatsoever. Section 3(6) of that Act provides as follows: In any event. 1979. smell or evaporation from other goods or by the inflammable or explosive nature or insufficient package of other goods not to be considered as caused by improper or negligent stowage. 1981. a common carrier undertaking to carry a special cargo or chartered to a special person only. As a private carrier. 20 However. Damage caused by contact with or leakage. but tardily against Macondray on April 20. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. 18 Union's complaint was filed against Hongkong on September 19. the presumption is that they were damaged or lost during the voyage as a result of their negligent improper stowage. 16 As the bags were in good order when received in the vessel. This was adopted and embodied by our legislature in Com. because there was no showing in that case that the vessel was at fault.

even if they are not assigned as errors in their appeal. Maritime acted in representation of the charterer and not of the vessel. 167812 December 19. until its final discharge at the port of Manila.vessel for the losses/damages sustained by that cargo were also received and processed by it.R. if they are questions raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or the lower court ignore(d). be properly considered by said court in deciding a case. vs. it cannot be held liable for the acts of its known principal resulting in injury to Union. It thus cannot be considered a ship agent. there are a number of cases which appear to accord to the appellate court a broad discretionary power to waive this lack of proper assignment of errors and consider errors not assigned. First of all. Secondly. 1980. and only those assigned will be considered. and as for Maritime. the liability of Macondray can no longer be enforced because the claim against it has prescribed. an unassigned error closely related to the error properly assigned. petitioner.k. or upon which the determination of the question raised by the error properly assigned is dependent. Tomol 24 and Article 2209 of the Civil Code. 77674 and submitted their comment and later their memorandum. the vessel's responsibility commence upon the actual delivery to.390 bags of urea fertilizer.R No. SO ORDERED. Notably. not on April 20.030.i•t•c-aüsl Thus. as its local agent in the Philippines. Inc. WHEREFORE. if it finds that their consideration is necessary in arriving at a just decision of the case. Hongkong and Macondray point out in their memorandum that the appealed decision is not assailed insofar as it favors them and so has become final as to them. will be considered by the appellate court notwithstanding the failure to assign it as error. As a mere charterer's agent. representing the value of the 574 bags of unrecovered spillages having occurred after the shipment was discharged from the vessel unto the exlighters as well as during the discharge from the lighters to the truck which transported the shipment to the consignee's warehouses should be for the account of the defendant Maritime Agencies & Services. Ltd. ‘DON PEPITO MERCADO. the Court is clothed with ample authority to review matters. and should commence. but on September 19. Mercado a. 23 PAT CASE: AGENCY G. CV No. after the goods were already outside the custody of the vessel. Transcontinental was disclosed as the charterer's principal and there is no question that Maritime acted within the scope of its authority. At any rate. MERCADO a.a. the charterer's agent was also considered a ship agent and so was held to be solidarily liable with its principal. Judge Artemon de Luna of the Regional Trial Court of Manila held: The Court.. J. as "shipowner" and represented by the defendant Macondray & Co.: On challenge via petition for review on certiorari is the Court of Appeals’ Decision of December 8. respondent. The parties shall bear their respective costs. we have held that: Besides. We do not think so. The charterer did not represent itself as a carrier and indeed assumed responsibility ability only for the unloading of the cargo. We affirm the factual findings but must modify the legal conclusions. As previously discussed. the decision of the respondent court is SET ASIDE and that of the trial court is REINSTATED as above modified.383 bags". may. conformably to our ruling in Reformina v. 21 In his decision dated January 4. 763091 reversing the trial court’s decision2 against Jose Teofilo T. Page 87 of 150 . it cannot be held solidarily liable with Transcontinental for the losses/damages to the cargo outside the custody of the vessel. 1981. they may nevertheless be considered in the interest of justice for a proper decision of the case. The facts in the cases at bar are different. should be responsible for the value of the bags of urea fertilizer which were shortlanded. No. DECISION CARPIO MORALES. 1984.R. 2005 in CA-G. The remainder of the claim in the amount of P36. xxx xxx xxx Issues.54. where they discussed at length their position vis-a-vis the claims of the other parties. we note that they were formally impleaded as respondents in G. though not specifically raised in the pleadings in the appellate court.a.e. The interest must also be reduced to the legal rate of 6%. 2004 and Resolution of April 14.. Defendant Hongkong Island Co. we reiterate the rule that even if issues are not formally and specifically raised on appeal. and receipt by the carrier or its authorized agent.163.. Inc.547 bags were "discharged ex-vessel" and there were "shortlanded" "1. Don Pepito Mercado (respondent) and accordingly dismissing the complaint of Jesus M. As a result. finds nothing to disprove the finding of the marine and cargo surveyors that of the 66. valued at P87. Under the contract for the transportation of goods. 65. JOSE TEOFILO T. GOZUN. Gozun (petitioner). In supervising the unloading of the cargo and issuing Daily Operations Report and Statement of Facts indicating and describing the day-to-day discharge of the cargo. 22 xxx xxx xxx While an assignment of error which is required by law or rule of court has been held essential to appellate review. on the basis of the evidence. i. in the interest of justice. date of the filing of the original complaint.. 2006 JESUS M. This sum should be the principal and primary liability and responsibility of the carrying vessel.23.k.

000.000. 1998 a complaint15 against respondent to collect the remaining amount of P1. the plaintiff having proven its (sic) cause of action by preponderance of evidence.3 leaflets containing the slate of party candidates. respondent. respondent claimed that it was his first time to see the receipt.8 Meanwhile. disclaiming knowledge of the Comelec rule that if a campaign material is donated. reiterating his allegations in his Answer. To pay the plaintiff the sum of P1. To pay the sum of P50. the "cash advance" obtained by Lilian. the dispositive portion of which reads: WHEREFORE.000 his wife gave petitioner as he thought that it was just proper to compensate him for a job well done. He added that all contracts involving his personal expenses were coursed through and signed by him to ensure compliance with pertinent election laws.00 plus 12% interest per annum from the filing of this complaint until fully paid.000.10 Petitioner later sent respondent a Statement of Account11 in the total amount of P2. By petitioner’s claim. the trial court rendered judgment in favor of petitioner. which surprised him because he knew fully well that the campaign materials were donations. In his Answer with Compulsory Counterclaim.00 as attorney’s fees and the costs of suit. Lilian Soriano (Lilian) obtained from petitioner "cash advance" of P253. petitioner.696 for Metro Angeles Printing.177. he did print campaign materials like posters bearing respondent’s photograph. who was authorized to approve details with regard to printing materials. He alleged that the various campaign materials delivered to him were represented as donations from his family. however. Joseph Printing Press.5 poll watcher identification cards. owned by his daughter Jennifer Gozun and mother Epifania Macalino Gozun. owner of JMG Publishing House.000.177.177.6 and stickers. he (petitioner) having actively volunteered to help in his campaign. Upon respondent’s request. At the witness stand. those were partly donated. respondent denied having given her authority to do so and having received the same. respondent failed to settle the balance of his account to petitioner. had obtained from him a cash advance of P253.In the local elections of 1995. and that he came to know about petitioner’s claim against him only after receiving a copy of the complaint. respondent’s wife had told him that respondent already approved his price quotation and that he could start printing the campaign materials. Pampanga. failed to heed the demand. that he no longer questioned the P1. On petitioner’s claim that Lilian. 2.310 for JMG Publishing House. the Court hereby renders a decision in favor of the plaintiff ordering the defendant as follows: 1."18 Acknowledging that petitioner is engaged in the printing business. Petitioner and respondent being compadres. Lilian acknowledged on petitioner’s 1995 diary9 receipt of the amount.000.13 Respondent. it must be so stated on its face. submitted to respondent draft samples and price quotation of campaign materials.16 respondent denied having transacted with petitioner or entering into any contract for the printing of campaign materials. respondent’s sister-in-law.000 represented "compensation [to petitioner] who helped a lot in the campaign as a gesture of goodwill.14 Petitioner thus filed with the Regional Trial Court of Angeles City on November 25.000 allegedly for the allowances of poll watchers who were attending a seminar and for other related expenses. respondent vied for the gubernatorial post in Pampanga. respondent explained that he sometimes discussed with petitioner strategies relating to his candidacy. petitioner availed of the services and facilities of Metro Angeles Printing and of St.7 Petitioner delivered the campaign materials to respondent’s headquarters along Gapan-Olongapo Road in San Fernando.000. albeit he belatedly came to know from his wife and Cabalu that the P1. respondent. waited for more than three (3) years for respondent to honor his promise but to no avail. on March 31. P837. claimed that petitioner was his over-all coordinator in charge of the conduct of seminars for volunteers and the monitoring of other matters bearing on his candidacy. Page 88 of 150 . and that while his campaign manager. Given the urgency and limited time to do the job order.906 itemized as follows: P640.000. respectively. however.900 for St. acknowledged that nothing of that sort was written on all the materials made by petitioner. friends and political PAT CASE: AGENCY supporters.906. on his (respondent’s) behalf. confirm if it was his understanding that the campaign materials delivered by petitioner were donations from third parties. Pampanga. On August 11. compelling petitioner to endorse the matter to his counsel who sent respondent a demand letter. they having been principal sponsors at the weddings of their respective daughters. and P253. hence. respondent could not.19 Upon questioning by the trial court. respondent’s wife partially paid P1.20 Finally.000 to petitioner who issued a receipt12 therefor. presented him some campaign materials. Joseph Printing Press.906 plus "inflationary adjustment" and attorney’s fees.21 As adverted to earlier. Juanito "Johnny" Cabalu (Cabalu). Despite repeated demands and respondent’s promise to pay. 1995. 1995. that his wife was not authorized to enter into a contract with petitioner regarding campaign materials as she knew her limitations.4 sample ballots.000. P446. a printing shop located in San Fernando.17 When confronted with the official receipt issued to his wife acknowledging her payment to JMG Publishing House of the amount of P1.

a special authority. when it dismissed the complaint.29 Since nothing in this case involves the preservation of things under administration."31 (Emphasis and underscoring supplied) Petitioner submits that his following testimony suffices to establish that respondent had authorized Lilian to obtain a loan from him. Joseph Printing Press on the ground that the complaint was not brought by the real party in interest. Lilian Soriano in behalf of Mrs.310. Finally.310 (after excluding the P253. Metro Angeles Printing – P837. And while the same does not state that the special authority be in writing the Court has every reason to expect that. The requirements are met if there is a clear mandate from the principal specifically authorizing the performance of the act. On the accounts claimed to be due JMG Publishing House – P640.27 Petitioner’s testimony failed to categorically state. the present petition. the appellate court.000.00. As the appellate court observed: Page 89 of 150 .000) had already been settled. and holds him out to the public as such. the latter’s claim of P640.000 to petitioner. sir. Camps34 which holds that one who clothes another with apparent authority as his agent. if not in writing. unless they are ratified. . Thus. noting that respondent’s wife had paid P1.28 However. however. We stated that. . the Court of Appeals reversed the trial court’s decision and dismissed the complaint for lack of cause of action. borrow money. the agency may be oral. the appellate court. Gutierrez-Repide (6 Phil. PAT CASE: AGENCY Invoking Article 187333 of the Civil Code. Hence. then it must be duly established by evidence: "…the Rules require. will you kindly tell the Court and explain what does that caption means? xxxx A : It is the amount representing the money borrowed from me by the defendant when one morning they came very early and talked to me and told me that they were not able to go to the bank to get money for the allowances of Poll Watchers who were having a seminar at the headquarters plus other election related expenses during that day. following Macke v. the statement of account marked as Exhibit "A" states that the amount was received by Lilian "in behalf of Mrs. when it dismissed the complaint on the ground that there is no evidence. a special power of attorney is necessary for an agent to. unless the law requires a specific form. . it held that petitioner’s claim for P253. the Court of Appeals held that other than petitioner’s testimony.000. . Q : Considering that this is a substantial amount which according to you was taken by Lilian Soriano.900. Lim Pin v. and St. this Court in Strong v. with respect to the amounts due to the Metro Angeles Press and St. petitioner submits that respondent informed him that he had authorized Lilian to obtain the loan. did you happen to make her acknowledge the amount at that time? x x x x25 A : Yes.000.26 Contracts 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 are classified as unauthorized contracts and are declared unenforceable. Liao Tian. 680) stated that such a mandate may be either oral or written. it states given on 3-31-95 received by Mrs. with the consent or authority of the latter. noting that since the owners of the last two printing presses were not impleaded as parties to the case and it was not shown that petitioner was authorized to prosecute the same in their behalf. hence. if the special authority is not written. Petitioner’s submission does not persuade. The one thing vital being that it shall be express.30 held that the requirement of a special power of attorney refers to the nature of the authorization and not to its form.SO ORDERED. In reversing the trial court’s decision.696. applying Article 131724 of the Civil Code. held that petitioner could not collect the amounts due them. other than petitioner’s own testimony.000 is unenforceable.32 (Emphasis supplied) By the contract of agency a person binds himself to render some service or to do something in representation or on behalf of another. Annie Mercado. Annie Mercado. Soriano was authorized by the respondent to receive the cash advance from the petitioner in the amount of P253. . respondent cannot be permitted to deny the authority. Joseph Printing Press – P446.22 Also as earlier adverted to. viz: Q : Another caption appearing on Exhibit "A" is cash advance. As early as 1906. a determination of whether Soriano had the special authority to borrow money on behalf of respondent is in order. .00." Generally. It noted that the acknowledgment receipt23 signed by Lilian did not specify in what capacity she received the money. the same be duly established by evidence other than the self-serving assertion of counsel himself that such authority was verbally given him. as in this case. While petitioner claims that Lilian was authorized by respondent. sir. faulting the appellate court to have erred: 1. . amount P253. whether the loan was made on behalf of respondent or of his wife. for attorneys to compromise the litigation of their clients. there was no evidence to support his claim that Lilian was authorized by respondent to borrow money on his behalf. . unless it be urgent and indispensable for the preservation of the things which are under administration. 2. And more recently. et al. to prove that Lilian R. .

to sign. or P924. in not declaring petitioner as a real party in interest insofar as recovery of the cost of campaign materials made by petitioner’s mother and sister are concerned. 1990 of the Court of Appeals. the petition is GRANTED. Rizal. reversing the decision of the Regional Trial Court of Makati. however. petitioner explains that he was the one who personally and directly contracted with respondent and he merely sub-contracted the two printing establishments in order to deliver on time the campaign materials ordered by respondent.35 (Underscoring supplied) It bears noting that Lilian signed in the receipt in her name alone. It is a general rule in the law of agency that. GRIÑO-AQUINO. the same being my paraphernal property. Limbaring. Branch 57. in order to bind the principal by a mortgage on real property executed by an agent. Thus. Branch 150. it will bind the agent only. 2002 Decision of the Regional Trial Court of Angeles City.906.. Gallardo. they are the ones who would benefit from and could violate it.000. which dismissed the private respondents' complaint and awarded damages to the petitioner. Exhibit "B" [the receipt issued by petitioner] presented by plaintiff-appellee to support his claim unfortunately only indicates the Two Hundred Fifty Three Thousand Pesos (P253. respondent has the obligation to pay the total cost of printing his campaign materials delivered by petitioner in the total of P1. otherwise.924. and for whose benefit it was not expressly made. in light of the foregoing discussions. S-79238 situated at Las Piñas. upon the wrong notion that they should have been. Respondent counters that the claim of sub-contracting is a change in petitioner’s theory of the case which is not allowed on appeal. 1981. She thus bound herself in her personal capacity and not as an agent of respondent or anyone for that matter. less the partial payment of P1. respondents. The trial court’s decision is modified in that the amount payable by respondent to petitioner is reduced to P924. G.. AQUINO. x x x36 (Emphasis and underscoring supplied) On the amount due him and the other two printing presses.R. Rural Bank of Bombon. cannot maintain an action on it.906. Only the contracting parties are bound by the stipulations in the contract.00) was received by one Lilian R. HON. .0000. INC. The trial court’s findings on the matter were affirmed by the appellate court. RECEIVED BY RECEIVED FROM JMG THE AMOUNT OF 253.37 this Court ruled: PAT CASE: AGENCY In sum. as consistently held by the Court. but were not. petitioner. petitioner is the real party in interest in this case. and in that connection. It is not enough merely that the agent was in fact authorized to make the mortgage. Maggay & Associates for petitioner.000 TWO HUNDRED FIFTY THREE THOUSAND PESOS (SIGNED) LILIAN R. if he has not acted in the name of the principal. Ederlinda M. J. executed a special power of attorney in favor of Rufina S. it must upon its face purport to be made. Aquino authorizing him: 1.M. . WHEREFORE.000. is REINSTATED mutatis mutandis. The Decision dated December 8.38 (Underscoring supplied) In light thereof. or execute any deed of mortgage and Page 90 of 150 . one who is not a party to a contract.39 It erred. To secure a loan from any bank or lending institution for any amount or otherwise mortgage the property covered by Transfer Certificate of Title No.906. The April 10. GALLARDO. EDERLINDA M. impleaded as plaintiffs.120 ADVANCE MONEY FOR TRAINEE – The parties to a contract are the real parties in interest in an action upon it. 1992 RURAL BANK OF BOMBON (CAMARINES SUR). 2005 of the Court of Appeals are hereby REVERSED and SET ASIDE.: This petition for review seeks reversal of the decision dated September 18. One cannot do so. No. L. On January 12. but without specifying for what reason the said amount was delivered and in what capacity did Lilian R. In Oco v. Soriano received [sic] the money. 95703 August 3. a person cannot be bound by contracts he did not authorize to be entered into his behalf. married to Daniel Manzo. SORIANO 3-31-95" Nowhere in the note can it be inferred that defendant-appellant was connected with the said transaction. vs. even if the contract performed by the contracting parties would incidentally inure to one's benefit. DANIEL MANZO and RUFINO S. 2004 and the Resolution dated April 14. signed and sealed in the name of the principal. Under Article 1317 of the New Civil Code. SO ORDERED. The note reads: "3-31-95 261. COURT OF APPEALS. without indicating therein that she was acting for and in behalf of respondent. Soriano on 31 March 1995.

Camarines Sur. in Civil Case No. Inc. Since the Special Page 91 of 150 . S-79238. as attorney-in-fact of Ederlinda Gallardo.. 1986. appointed defendant Rural Bank as attorney in fact. Inc. On motion of the plaintiff. per the title (TCT No. M. S-79238 (19963-A). (hereafter. alleging that the Court of Appeals erred: 2. Isabel. (Cam. declaring the deed of real estate mortgage dated August 26. that the mortgagor in the deed was defendant Aquino instead of plaintiff Gallardo whose address up to now is Manuyo. and that defendant Aquino. Aquino asked for payment to him of moral damages in the sum of P50. and in case of judicial foreclosure as receiver with corresponding power to sell and that although without any express authority from Gallardo. defendant Aquino waived Gallardo's rights under Section 12. Rollo). PAT CASE: AGENCY UPON ALL THESE. executed between Rufino S. unauthorized. which on September 18. 1984.000. Aquino as attorney-in-fact for Gallardo. It also filed a crossclaim against Aquino for P350. Camarines Sur" instead of Gallardo's postal address at Las Piñas. ." (p. 1981. 11. S-79238) and in the deed vesting power of attorney to Aquino. Metro Manila. Of late. of the Rules of Court and the proper venue of the foreclosure suit. void. in declaring that the Deed of Real Estate Mortgage was unauthorized. that correspondence relative to the mortgage was sent to Aquino's address at "Sta. 8330 in Branch 141. in the real estate mortgage. the summary judgment entered by the lower court is hereby REVERSED and in lieu thereof.36. in favor of the Rural Bank of Bombon. The plaintiff in Civil Case No. Calabanga. The Rural Bank contends that the real estate mortgage executed by respondent Aquino is valid because he was expressly authorized by Gallardo to mortgage her property under the special power of attorney she made in his favor which was duly registered and annotated on Gallardo's title. executed by Rufino S. The court lifted the writ of preliminary injunction it previously issued. ordering said injunction made permanent. and that they (plaintiffs) were allegedly surprised to discover that the property was mortgaged to pay personal loans obtained by Aquino from the Bank solely for personal use and benefit of Aquino. Inc. (p. The Bank moved to dismiss the complaint and filed counter-claims for litigation expenses. 1981. she asked him to pay the Bank but defendant Aquino set terms and conditions which plaintiff did not agree to. exemplary damages. 1981. 1984. Aquino in his answer said that the plaintiff authorized him to mortgage her property to a bank so that he could use the proceeds to liquidate her obligation of P350. 1990. 6062) shall have become final and executory. . Camarines Sur. RTC Makati. and unenforceable against the private respondent Ederlinda Gallardo. The deed stated that the property was being given as security for the payment of "certain loans. Las Piñas. in favor of the Rural Bank of Bombon (Cam. On April 23.) Hence. Sur).000 to him. void and unenforceable against plaintiff Ederlinda Gallardo. Calabanga.00). at San Vicente. thru the Honorable Fernando P. 1.000 with interest. Camarines Sur. On August 26. Both assignments of error boil down to the lone issue of the validity of the Deed of Real Estate Mortgage dated August 26. the Bank filed a complaint against Ederlinda Gallardo and Rufino Aquino for "Foreclosure of Mortgage" docketed as Civil Case No. a Deed of Real Estate Mortgage was executed by Rufino S. on August 30. Sur). (p.000 and lawyer's fees of P35. Camarines Sur. On January 6. the foreclosure case and the annulment case (Civil Case No. Rollo. Agdamag. judgment is hereby RENDERED. and attorney's fees. however. in not upholding the validity of the Real Estate Mortgage executed by Rufino S. 1984. ordering the reinstatement of the preliminary injunction issued at the onset of the case and at the same time. Bulacan. the spouses Ederlinda Gallardo and Daniel Manzo filed an action against Rufino Aquino and the Bank because Aquino allegedly left his residence at San Pascual. Appellee Rural Bank to pay the costs. Gallardo delivered to Aquino both the special power of attorney and her owner's copy of Transfer Certificate of Title No. 8330. 46.sign other document requisite and necessary in securing said loan and to receive the proceeds thereof in cash or in check and to sign the receipt therefor and thereafter endorse the check representing the proceeds of loan. She discovered that Aquino first resided at Sta. other bank charges and damages if the mortgage be declared unauthorized. 1986. advances. Calabanga. Meanwhile. issued an order suspending the foreclosure proceedings until after the decision in the annulment case (Civil Case No. the trial court rendered a summary judgment in Civil Case No. Hagonoy. and transferred to an unknown place in Bicol. The dispositive portion of the decision reads: On January 23. and then later. and Rufino S. 10. Isabel. the trial court. On January 16.M. the trial court. 6062 appealed to the Court of Appeals. The obligation to pay the Rural Bank devolved on Gallardo. Rollo). Aquino. Aquino with the marital consent of his wife Bibiana Aquino with the appellee Rural Bank of Bombon.000. this petition for review by the Rural Bank of Bombon. 6062) were consolidated.) Thereupon. Rule 39. Aquino in favor of the Rural Bank of Bombon (Camarines Sur). or other accommodations obtained by the mortgagor from the mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350. Rollo. reversed the trial court. 6062. temporarily restrained the Rural Bank "from enforcing the real estate mortgage and from foreclosing it either judicially or extrajudicially until further orders from the court" (p. defendant Rural Bank) over the three parcels of land covered by TCT No. dismissing the complaint for annulment of mortgage and declaring the Rural Bank entitled to damages the amount of which will be determined in appropriate proceedings. plus interest at the rate of fourteen (14%) per annum .

advances or other accommodation obtained by the Mortgagor from the Mortgagee in the total sum of Three Hundred Fifty Thousand Pesos only (P350. Aquino's wife has not been appointed co-agent of defendant Aquino and her signature on the deed and on the promissory notes can only mean that the obligation was personally incurred by them and for their own personal account. it must upon its face purport to be made." thus: " (T)his MORTGAGE executed by Rufino S. 1981. The deed of mortgage stipulated that the amount obtained from the loans shall be used or applied only for "fishpond (bangus and sugpo production). September 23 and October 26. In such case the agent is the one directly bound in favor of the person with whom he has contracted. otherwise. Aquino. However clearly the body of the mortgage may show and intend that it shall be the act of the principal. Gallardo. 40-41. Under the facts the defendant Rural Bank appeared to have ignored the representative capacity of Aquino and dealt with him and his wife in their personal capacities.) Petitioner claims that the Deed of Real Estate Mortgage is enforceable against Gallardo since it was executed in accordance with Article 1883 which provides: Art. vs. 538: It is a general rule in the law of agency that. September 23. (pp. Ederlinda Gallardo. 536. As pointed out by the appellant. However. applied in "Philippine Sugar Estates Development Co. a special power of attorney is required. It results. Under Art. It is not enough merely that the agent was in fact authorized to make the mortgage. If an agent acts in his own name. In view of this rule. that the amounts were the personal loans of defendant Aquino. At the beginning of the deed mention was made of "attorney-in-fact of Ederlinda H. the defendant Rural Bank in its Answer had not categorically denied the allegation in the complaint that defendant Aquino in the deed of mortgage was the intended user and beneficiary of the loans and not the plaintiff. No such special power of attorney for Gallardo to be a surety of Aquino had been executed. Aquino's act of signing the Deed of Real Estate Mortgage in his name alone as mortgagor. It held: The Special Power of Attorney above quoted shows the extent of authority given by the plaintiff to defendant Aquino. Aquino who signed the deed as "wife of mortgagor.00)" although at the time no such loan or advance had been obtained.) The decision of the Court of Appeals is correct. And the special power of attorney could not be stretched to include the authority to obtain a loan in said defendant Aquino's own benefit. The appellant is correct in claiming that the defendant Rural Bank should not have agreed to extend or constitute the mortgage on the properties of Gallardo who had no existing indebtedness with it at the time. Isabel . it will bind the agent only. Rollo. Gallardo. was merely descriptive of the person of defendant Aquino. The promissory notes were dated August 31. then it could be for the use and benefit of the attorney-in-fact. 1981. 1981 which were subsequent to the execution of the deed of mortgage. were each signed by Rufino Aquino on top of a line beneath which is written "signature of mortgagor" and by Bibiana P. with the execution of the mortgage under the circumstances and assuming it to be valid but because the loan taken was to be used exclusively for Aquino's business in the "bangus" and "sugpo" production. . in order to bind the principal by a mortgage on real property executed by an agent. borne out from what were written on the deed. Defendant Aquino even signed it plainly as mortgagor with the marital consent yet of his wife Bibiana P. except when the contract involves things belonging to the principal. Page 92 of 150 . In effect. 1981 and October 26. 42-43. Poizat." but which of itself. yet. of legal age. the principal has no right of action against the persons with whom the agent has contracted. 1883.Power of Attorney did not specify or indicate that the loan would be for Gallardo's benefit. . (pp. Aquino on top of a line under which is written "signature of spouse. if he has not acted in the name of the principal. This is especially true where the agent himself is a party to the instrument. Gallardo in effect becomes a surety who is made primarily answerable for loans taken by Aquino in his personal capacity in the event Aquino defaults in such payment." without any mention that execution thereof was for and in behalf of the plaintiff as mortgagor. the Court of Appeals ruled otherwise. it is not valid as to the principal. unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal. The Court of Appeals further observed: It will also be observed that the deed of mortgage was executed on August 26. Rollo. if in fact the agent has acted in his own name and has set his own hand and seal to the mortgage. married to Bibiana Panganiban with postal address at Sta.000. neither have such persons against the principal." 48 Phil. This case is governed by the general rule in the law of agency which this Court. But defendant Aquino in executing the deed of Real Estate Mortgage in favor of the rural bank over the three parcels of land covered by Gallardo's title named himself as the mortgagor without stating that his signature on the deed was for and in behalf of Ederlinda Gallardo in his capacity as her attorney-in-fact. Aquino attorney in fact of Ederlinda H.. 1981 therein clearly stipulating that it was being executed "as security for the payment of certain loans. Said appellee Rural Bank also did not conduct an inquiry on whether the subject loans were to benefit the interest of the principal (plaintiff Gallardo) rather than that of the agent although the deed of mortgage was explicit that the loan was for purpose of the bangus and sugpo production of defendant Aquino. 1878 of the Civil Code. bound himself alone in his personal capacity as a debtor of the petitioner Bank and not as the agent or attorney-in-fact of Gallardo. signed and sealed in the name of the principal." As pointed out by the plaintiff. without any indication that he was signing for and in behalf of the property owner. as if the transaction were his own. Neither is it ordinarily PAT CASE: AGENCY sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney. to obligate the principal as a guarantor or surety. Filipino." xxx xxx xxx The three (3) promissory notes respectively dated August 31.

MANUEL CUADY and LILIA CUADY. which dismissed the complaint in Civil Case No. vs. Finance Corporation P460. private respondents Manuel Cuady and Lilia Cuady obtained from Supercars. counsel for the petitioner. vs. Atty. the Cuadys stopped paying their monthly installments on the promissory note (Ibid.A.00 representing penalties or surcharges for tardy monthly installments (Rollo. But instead of heeding the request of the Cuadys. Finance Corporation sued them in the Regional Trial Court of Manila. 82040 August 27.R. There was also stipulated a penalty of P10. the law requires that a power of attorney to mortgage or sell real property should be executed with all of the formalities required in a deed. Said motion was. On August 7. Supercars. It should be noted that this is a mortgage upon real property. and to claim from the insurer the face value of the car insurance policy and apply the same to the payment of their remaining account and give them the surplus thereof. To secure the faithful and prompt compliance of the obligation under the said promissory note. the reason being that the "handling" counsel. 1977..A.A. 1977. together with the chattel mortgage. pp.R. Finance Corporation's evidence was presented on even date and the presentation of Cuady's evidence was set on August 15. in view of the failure of the Cuadys to pay the remaining installments on the note.A. The unfortunate happening was reported to the B. 3-4). Presiding Judge of Regional Trial Court of Manila. which amount covered the cost of one unit of Ford Escort 1300. CV-06522 entitled "B.) WHEREFORE. Branch 43. On July 25. payable on monthly installments of P1. 1984. Finance Corporation did not respond favorably to their request. No.A. 1977. petitioner. such a signature would not bind her as a mortgagor in real property. Inc. p. 1988 denying petitioner's motion for reconsideration.A. when the Cuadys failed to renew said insurance coverage themselves. On June 29. On August 15. The Cuadys wrote B. B.A. the case was set for trial on the merits on April 25. the Cuadys owe B. Said obligation was evidenced by a promissory note executed by private respondents in favor of Supercars. For such reasons. For the same reason that the personal signature of Poizat. 1991 BA FINANCE CORPORATION. and (2) the resolution dated February 9. as we did in Philippine Sugar Estates Development Co. B. PARAS. however. 1984. Ferdinand Macibay was temporarily assigned in Cebu City and would not be back until after August 15.65 as of July 18. to B. inclusive of PAT CASE: AGENCY interest at 14% per annum. any loss under the policy shall be payable to the B. finding no reversible error in the decision of the Court of Appeals. Parenthetically. Finance Corporation.A. 1984. as the assignee of the mortgage lien obtained the renewal of the insurance coverage over the aforementioned motor vehicle for the year 1980 with Zenith Insurance Corporation. Poizat. however. 1987 in CA-G. Under the terms and conditions of the said insurance coverage.. Finance Corporation prevailed upon the former to just have the car repaired. we AFFIRM it in toto.00 starting August 16. Finance Corporation (Memorandum for Private Respondents. the aforementioned motor vehicle figured in an accident and was badly damaged. Said motion was granted in an order dated September 26. Finance Corporation to consider the same as a total loss.1984. and on the 16th day of the next 35 months from September 16.A. 8210478. Inc. Not long thereafter. pp. the car bogged down. filed a motion for postponement.A. supra. J. the title to which was in her name. Manuel Cuady and Lilia Cuady. the Cuady spouses constituted a chattel mortage on the aforementioned motor vehicle.730. the title to which cannot be divested except by sale on execution or the formalities of a will or deed.80. denied by the trial court on August 10. Finance Corporation filed a motion for reconsideration of the order of the trial court denying its motion for postponement. No. the date of hearing. respondents.The above provision of the Civil Code relied upon by the petitioner Bank. 1977 until full payment thereof. we hold. 1984. Herein respondent Aquino acted purportedly as an agent of Gallardo. B. if any. pp.098. thus: Page 93 of 150 . 45). four-door sedan. Hon. HON. Branch 43. In addition thereto.A. G. Urmeneta & Associates for petitioner. Atty. the trial court allowed private respondents to adduce evidence ex-parte in the form of an affidavit to be sworn to before any authorized officer. 548. 1). 1984. The Cuadys asked the B. assigned the promissory note. Finance Corporation. is not applicable to the case at bar. When B. the B. (p. Zenith Insurance Corporation. standing alone. Finance Corporation.:p This is a petition for review on certiorari which seeks to reverse and set aside (1) the decision of the Court of Appeals dated July 21. Costs against the petitioner. 27-29). Defendants-Appellees. 1982. Bautista for private respondents. The Cuadys paid a total of P36.A.00 for every month of late installment payment. Plaintiff-Appellant. that Gallardo's property is not liable on the real estate mortgage: There is no principle of law by which a person can become liable on a real mortgage which she never executed either in person or by attorney in fact. 1980. thus leaving an unpaid balance of P2.A.80.574. 1984. Finance Corporation and to the insurer. the facts are as follows: On July 15. On April 18. Noel Ebarle.344. COURT OF APPEALS. Valera.A. 1980. but actually acted in his personal capacity. for the recovery of the said remaining installments (Memorandum for the Petitioner. As gathered from the records. Involved herein are properties titled in the name of respondent Gallardo against which the Bank proposes to foreclose the mortgage constituted by an agent (Aquino) acting in his personal capacity. Pompeyo L. Under these circumstances. vs. After the termination of the pre-trial conference." affirming the decision of the Regional Trial Court of Manila.15 to the B. would not convey the title of his wife in her own real property. Finance Corporation requesting the latter to pursue their prior instruction of enforcing the total loss provision in the insurance coverage. a credit of P39.574. SO ORDERED. Finance Corporation. Inc. Branch 43. obligating themselves to pay the latter or order the sum of P39. B.

p. pp. Finance Corporation has waived its right to collect the unpaid balance of the Cuady spouses on the promissory note for failure of the former to enforce the total loss provision in the insurance coverage of the motor vehicle subject of the chattel mortgage. and continued to ignore the yearning of the Cuadys to enforce the total loss provision in the insurance policy. 1-2).) On the allegation that the respondent court's findings that B. It is the contention of B.A. Finance Corporation was deemed subrogated to the rights and obligations of Supercars. Hence. The decretal portion of the said decision reads as follows: WHEREFORE. p. without any pronouncement as to costs. the said vehicle bogged down shortly thereafter.A. in the event that the mortgaged car suffers any loss or damage (Rollo. may suffer. to be sworn to before any person authorized to administer oaths.A. Finance Corporation was constituted attorney-in-fact with full power and authority to file. together with the chattel mortgage constituted on the motor vehicle in question in favor of the former. (Ibid. Consequently. p. paving the way for the trial court to render its decision on January 18. Inc. follow-up. Under the established facts and circumstances. Finance Corporation is bound by its acceptance to carry out the agency. Article VIII of the Constitution. and finding no reversible error in the judgment appealed from.. the records show that instead of acting on the instruction of the Cuadys to enforce the total loss provision in the insurance policy. (Ibid. 11). On the other hand.A. B. Accordingly. Finance Corporation to file a claim for total loss with the Page 94 of 150 . prosecute. On July 11. this present recourse. to sign execute and deliver the corresponding papers. never complied with the above-mentioned order. (Ibid. the case was submitted for decision. In granting B. 1984. p. the Cuadys. As heretofore mentioned. and to collect from the latter the proceeds of insurance to the extent of its interests.. 143) On appeal. 31). Thus. 1988 (Ibid. considering that the circumstances obtaining in the case at bar do not fall under Article 1231 of the Civil Code relative to the modes of extinguishment of obligations (Memorandum for the Petitioner. compromise or settle insurance claims. p. despite the undeniable fact that Rea Auto Center. under Article 1884 of the Civil Code of the Philippines. the Cuady spouses created in the former's favor an agency. 91) but also the remaining balance on the promissory note (Memorandum for the Respondents. 33) B. the respondent appellate court * affirmed the decision of the trial court.. SO ORDERED.A. Inc. the Court DISMISSES the complaint without costs. Finance Corporation that even if it failed to enforce the total loss provision in the insurance policy of the motor vehicle subject of the chattel mortgage. be payable to BA FINANCE CORP. Unquestionably. B.. In this connection. within ten days from notice hereof. there is no reason to depart from the ruling set down by the respondent appellate court. as their respective rights and interest may appear" (Rollo. when B. 1990. not to mention the amount equivalent to the unpaid balance on the promissory note. Under the deed of chattel mortgage.. the non-payment of which account was due to the stubborn refusal and failure of appellant mortgagee to avail of the insurance money which became due and demandable after the insured motor vehicle was badly damaged in a vehicular accident covered by the insurance risk. this Court gave due course to the petition and required the parties to submit their respective memoranda. p. appellees herein.A. unfair and inequitable to require the chattel mortgagors. to still pay the unpaid balance of their mortgage debt on the said car. B.The Court grants plaintiff's motion for reconsideration dated August 22. the principal in the case at bar. . the same is hereby AFFIRMED.A. the Court of Appeals said: . Finance Corporation the aforementioned powers and prerogatives. Thus. Finance Corporation steadfastly refused and refrained from proceeding against the insurer for the payment of a clearly valid insurance claim. Finance Corporation lost not only its opportunity to collect the insurance proceeds on the mortgaged motor vehicle in its capacity as the assignee of the said insurance proceeds pursuant to the memorandum in the insurance policy which states that the "LOSS: IF ANY. said failure does not operate to extinguish the unpaid balance on the promissory note. p. Finance Corporation is bound by the terms and conditions of the chattel mortgage executed between the Cuadys and Supercars.. under this policy shall PAT CASE: AGENCY B. misrepaired and rendered it completely useless and unserviceable (Ibid. B. however. the Cuadys suffered pecuniary loss in the form of salvage value of the motor vehicle in question. it is unjust.. the dispositive portion of which reads as follows: IN VIEW WHEREOF. in compliance with the provision of Section 13. The parties having complied with the submission of their memoranda. 1985. 16-17). through its nonperformance.A. Finance Corporation failed to claim for the damage to the car was not supported by evidence.A. but the motion was denied by the respondent appellate court in a resolution dated February 9. and is liable for damages which. receipts and documents to the Insurance Company as may be necessary to prove the claim. the repair shop chosen was not able to restore the aforementioned motor vehicle to its condition prior to the accident.. after consultation among the undersigned members of this Division. The petition is devoid of merit.A. when the latter assigned the promissory note. The subsequent request of the Cuadys for the B. 38).A. The real issue to be resolved in the case at bar is whether or not B. 89). Finance Corporation. the petitioner insisted on just having the motor vehicle repaired. in the sense that plaintiff is allowed to adduce evidence in the form of counter-affidavits of its witnesses. (Rollo. the auto repair shop chosen by the insurer itself to repair the aforementioned motor vehicle. to which private respondents reluctantly acceded..A. Finance Corporation moved for the reconsideration of the above decision. the Cuadys insist that owing to its failure to enforce the total loss provision in the insurance policy.A. B. pp.

that he has appointed his daughter Patricia Llamas to be his attorney-in-fact and not in favor of Virginia Rubio Laygo Lim (Lim for brevity) who was the one who represented him in the sale of the disputed lots in favor Page 95 of 150 . Petitioners. the instant petition is DENIED." For the heirs of Luz Baloloy (Baloloys for brevity): Respondent has no cause of action. Rubio. that with respect to the heirs of Luz Baloloy. 10). assisted by her husband EDGAR ESCUETA. let alone in the Court of Appeals. No. al. that respondent was and is ready and willing to pay Ignacio Rubio and the heirs of Luz Baloloy upon presentation of their individual certificates of title. In her amended complaint. they also refused and still refuse to perform the delivery of the two certificates of title covering their share in the disputed lots. 4-5). 140 SCRA 44 [1985]).A.A.000]. etc. cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play. and heavily relied thereon. prompting the Cuadys to stop paying the remaining balance on the promissory note (Memorandum for the Respondents. Respondent. because the subject contract of sale has no more force and effect as far as the Baloloys are concerned. obtains in the instant case (Luzon Brokerage Corporation v. entitled "Rufina Lim v.86 and P450. when it denied the petitioner's motion for reconsideration praying that the counsel be allowed to cross-examine the affiant. free from whatever lien and encumbrance. et. Finance Corporation for the first time on appeal. second. or quiet title to. Court of Appeals. the Court cannot and will not generally do.000. justice and due process (Galicia v. DECISION PAT CASE: AGENCY The facts2 appear as follows: Respondent Rufina Lim filed an action to remove cloud on. that Ignacio Rubio refused and still refuses to deliver to [respondent] the certificates of title covering his share on the two lots. issues not raised and/or ventilated in the trial court. respectively. namely. CV No. and. and other co-heirs. 1998 and January 11. In their separate amended answers. to be sure. This Court does not have to unduly dwell on this issue which was only raised by B. 2007 CORAZON L. B. As to petitioner Corazon Escueta. J. since they have withdrawn their offer to sell for the reason that respondent failed to pay the balance of the purchase price as orally promised on or before May 1. 176 SCRA 483 [1989]). with preliminary injunction and issuance of [a hold-departure order] from the Philippines against Ignacio E. Court of Appeals.: This is an appeal by certiorari1 to annul and set aside the Decision and Resolution of the Court of Appeals (CA) dated October 26. This. because Rubio has not entered into a contract of sale with her. RUBIO. vs. Ramos v. For petitioners Ignacio Rubio (Rubio for brevity) and Corazon Escueta (Escueta for brevity): Respondent has no cause of action. in CA-G. it is alleged that a simulated deed of sale involving said lots was effected by Ignacio Rubio in her favor. 137162 AZCUNA. 48282. Polo. and that the simulated deed of sale by Rubio to Escueta has raised doubts and clouds over respondent’s title. 1999. ESCUETA. subject to certain specific exceptions none of which. BALOLOY and BAYANI R. 175 SCRA 70 [1989]. et al. respectively. Dulos Realty & Development Corporation v. Finally. the same was not formally admitted as part of the evidence for the private respondents (Memorandum for the Petitioner. petitioners denied the material allegations of the complaint and alleged inter alia the following: G. that the balance of the purchase price would be paid to each heir upon presentation of their individual certificate[s] of [title]. v. et al. that Ignacio Rubio refused to receive the other half of the down payment which is P[100. A review of the records of the case shows that B. It was only when the petitioner filed the instant petition with this Court that it later raised the aforementioned issue. and the decision appealed from is AFFIRMED. De la Santa v. that it was agreed in the contract of sale that the vendors would secure certificates of title covering their respective hereditary shares. THE HEIRS OF LUZ R. Corazon L. however. BALOLOY. pp. 1990 in her favor. Bayani. 157 SCRA 425 [1988].. SO ORDERED. p. 1990. As ruled by this Court in a long line of cases.A.R.R. et al. Moreover. of course. that said vendors executed a contract of sale dated April 10. Court of Appeals. real property. namely: Alejandrino. January 24. PREMISES CONSIDERED. in spite of her knowledge that the disputed lots have already been sold by Ignacio Rubio to respondent. The doctrine is. Escueta. when in truth and in fact.169. Finance Corporation would have this Court review and reverse the factual findings of the respondent appellate court. 153 SCRA 712 [1987].insurer fell on deaf ears. Dihiansan. Finance Corporation failed to directly raise or ventilate in the trial court nor in the respondent appellate court the validity of the evidence adduced ex-parte by private respondents. IGNACIO E... RUFINA LIM. Intermediate Appellate Court. BALOLOY. Court of Appeals.A. respondent averred inter alia that she bought the hereditary shares (consisting of 10 lots) of Ignacio Rubio [and] the heirs of Luz Baloloy. B. It is axiomatic that the judgment of the Court of Appeals is conclusive as to the facts and may not ordinarily be reviewed by the Supreme Court. Respondent amended her complaint to include specific performance and damages. when it seriously considered the evidence adduced ex-parte by the Cuadys. 179 SCRA 375 [1989]. that Ignacio Rubio and the heirs of Luz Baloloy received [a down payment] or earnest money in the amount of P102. Finance Corporation contends that respondent trial court committed grave abuses of discretion in two instances: First. ALEJANDRINO R.

Upon motion of respondent. This was denied by the trial court in an order dated September 16.5 SO ORDERED. as follows: IN VIEW OF THE FOREGOING.4 On appeal. 1994 is DISMISSED.000 respondent claimed he received as down payment for the lots is a simple transaction by way of a loan with Lim. However. Thereafter. the complaint [and] amended complaint are dismissed against [petitioners] Corazon L. 3. 2. [petitioner] Ignacio E. the trial court declared the Baloloys in default. WHEREFORE. 1994 and Supplemental Petition dated July 7. the validity of the subject contract of sale in favor of [respondent] is upheld. Consequently. SO ORDERED. Page 96 of 150 . c. Hence.000] or consignation of said amount in Court. the appeal of the Baloloys from the Order denying the Petition for Relief from Judgment and Orders dated July 4. appeal to the Court of Appeals was taken challenging the order denying the petition for relief. Rubio is directed to execute a Deed of Absolute Sale conditioned upon the payment of the balance of the purchase price by [respondent] within 30 days from the receipt of the entry of judgment of this Decision. that the P100. [For] failure of [petitioners] Alejandrino Baloloy and Bayani Baloloy to execute the Absolute Deed of Sale over their hereditary share in the property covered by TCT No. The [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to immediately execute an [Absolute] Deed of Sale over their hereditary share in the properties covered by TCT No. respondent was allowed to adduce evidence ex parte.3 Petitioners’ Motion for Reconsideration of the CA Decision was denied.000] as moral damages and P[20.000] and P[20. With costs against [petitioners] Alejandrino Baloloy and Bayani Baloloy. Further[.] with a consideration of P[1.] insofar as the shares of Alejandrino Baloloy and Bayani Baloloy are concerned[. Without pronouncement as to costs. the trial court rendered its assailed Decision. 74392 and TCT No. Ignacio E. 1994. 1994. but reversed the later decision. The adverse claim annotated at the back of TCT No. the Clerk of Court is ordered to execute the necessary Absolute Deed of Sale in behalf of the Baloloys in favor of [respondent. this Court rules: 1. a. b. T-74394 in favor of [respondent]. RUBIO IS NOT BOUND BY THE CONTRACT OF SALE BETWEEN VIRGINIA LAYGOLIM AND RUFINA LIM.] with interest at the rate of six percent (6%) per annum from April 10. the Decision dismissing [respondent’s] complaint is REVERSED and SET ASIDE and a new one is entered. THE HONORABLE COURT OF APPEALS ERRED IN DENYING THE PETITION FOR RELIEF FROM JUDGMENT FILED BY THE BALOLOYS. Accordingly.000]. after payment to them by [respondent] the amount of P[1. T-74392 and TCT No.] the amount of P102. Hence. After trial. [1990] until the same is fully paid. The counterclaim of [petitioners] [is] also dismissed.500.] [is] ordered cancelled. They then filed a motion to lift the order declaring them in default. The issues are: I Trial on the merits ensued between respondent and Rubio and Escueta. the trial court rendered a partial decision dated July 23.000] as attorney’s fees. The Baloloys filed a petition for relief from judgment and order dated July 4. namely: Alejandrino Baloloy and Bayani Baloloy.] and the Register of Deeds. 1993 against the Baloloys. the appeal of Rubio and Escueta on the denial of their counterclaim is DISMISSED. T-74392 and TCT No. LIM CONSIDERING THAT: SO ORDERED. II THE HONORABLE COURT OF APPEALS ERRED IN REINSTATING THE COMPLAINT AND IN AWARDING MORAL DAMAGES AND ATTORNEY’S FEES IN FAVOR OF RESPONDENT RUFINA L. the contracts of sale between Rubio and Escueta involving Rubio’s share in the disputed properties is declared NULL and VOID. Rubio[.000] for attorney’s fees. Escueta. the CA affirmed the trial court’s order and partial decision. which was denied by the trial court in an order dated November 27. Rufina Lim[. IGNACIO E. 74394. The Baloloys failed to appear at the pre-trial.169. judgment is hereby rendered in favor of [respondent] and against [petitioners.80[. this petition. The Order appealed from is AFFIRMED. Rubio is ordered to return to the [respondent]. upon all the foregoing premises considered. The dispositive portion of its assailed Decision reads: PAT CASE: AGENCY A.of respondent. 1991. Balolo[y].] [petitioners] Alejandrino Baloloy and Bayani Baloloy are ordered to jointly and severally pay [respondent] moral damages in the amount of P[50.050. the dispositive portion of which reads as follows: IN VIEW OF THE FOREGOING. d. Rubio and Escueta are ordered to pay jointly and severally the [respondent] the amount of P[20. heirs] of Luz R. T-74394[. 1994 and supplemental petition dated July 7.

"11 He must "see to it that his client receives such notice and attends the pretrial. In the Baloloys’ answer to the original complaint and amended complaint. but the payment of respondent’s debt. there was fraud. Second. the sale by Virginia to respondent is not binding. ESCUETA IS VALID. RUBIO AND CORAZON L."9 Besides. IV The petition lacks merit." PAT CASE: AGENCY SEC." which constituted Virginia as her true and lawful attorney-in-fact in selling Rubio’s properties. and the latter was not empowered to designate a substitute attorney-in-fact. and all subsequent proceedings. ESCUETA ACTED IN UTMOST GOOD FAITH IN ENTERING INTO THE CONTRACT OF SALE WITH IGNACIO E. and not more than six (6) months after such judgment or final order was entered. they cannot raise it at this late stage of the proceedings. the CA did not consider the circumstances surrounding petitioners’ failure to appear at the pre-trial and to file the petition for relief on time. the allegations relating to the personal circumstances of the Baloloys are clearly admitted. not that they have not received the notice or been informed of the scheduled pre-trial. As to the failure to appear at the pre-trial. Fourth. orders. Besides. "An admission. filed within sixty (60) days after the petitioner learns of the judgment. the contract between respondent and Virginia is a contract to sell. They intended to reserve ownership of the property to petitioners pending full payment of the purchase price. Not having raised the ground of lack of a special power of attorney in their motion. Bayani Baloloy was properly declared in default. The real character of the contract is not the title given."12 What the Baloloys and their former counsel have alleged instead in their Motion to Lift Order of As In Default dated December 11. and must be accompanied with Page 97 of 150 . a purchaser need not inquire beyond what appears in a Torrens title. the same must be resolved against respondent. Respondent failed to faithfully fulfill her part of the obligation. because petitioner Bayani was in the United States. Even assuming that the contract is ambiguous.10 The notices of pre-trial had been sent to both the Baloloys and their former counsel of record. There was no service of the notice of pre-trial or order. Section 3 of Rule 38 of the Rules of Court states: Dealing with an assumed agent. these are conditions precedent for the perfection of the sale. the issue is whether the contract of sale between petitioners and respondent is valid. but the intention of the parties. The amount encashed by Rubio represented not the down payment."6 The "factual admission in the pleadings on record [dispenses] with the need x x x to present evidence to prove the admitted fact. Furthermore. Being served with notice. – A petition provided for in either of the preceding sections of this Rule must be verified. 3. contents and verification. THE CONTRACT ENTERED INTO BETWEEN RUFINA LIM AND VIRGINIA LAYGO-LIM IS A CONTRACT TO SELL AND NOT A CONTRACT OF SALE.net THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS’ COUNTERCLAIMS. Besides. Llamas even disowned her signature appearing on the "Joint Special Power of Attorney. C. Pre-trial is mandatory. His acceptance and encashment of the check was not a ratification of the contract of sale. Certainly. he is "charged with the duty of notifying the party represented by him. petitioner Alejandrino was not clothed with a power of attorney to appear on behalf of Bayani at the pre-trial conference. verbal or written. the order declaring him in default is void. Petitioners argue. as follows: First. Bayani Baloloy was represented by his attorney-in-fact. Third. The Special Power of Attorney was constituted in favor of Llamas. therefore. Thus. does not require proof. CORAZON L. Petitioner Rubio did not authorize Virginia to transact business in his behalf pertaining to the property. Neither did the former counsel of record inform him. III THE CONTRACT OF SALE EXECUTED BETWEEN IGNACIO E.lawphil. the party who caused the same."7 It cannot. Time for filing petition. respondent should ascertain not only the fact of agency. For lack of representation.B. 1991 is the belated receipt of Bayani Baloloy’s special power of attorney in favor of their former counsel. RUFINA LIM FAILED TO FAITHFULLY COMPLY WITH HER OBLIGATIONS UNDER THE CONTRACT TO SELL THEREBY WARRANTING THE CANCELLATION THEREOF. made by a party in the course of the proceedings in the same case. Briefly. RUBIO. "be controverted by the party making such admission. The contract of sale between petitioners and respondent is valid. but also the nature and extent of the former’s authority. Alejandrino Baloloy. accident and/or excusable neglect. there is no showing that a palpable mistake has been committed in their admission or that no admission has been made by them. they are now deemed to have waived it. Together with taxes and other fees due on the properties. or other proceeding to be set aside. not a contract of sale. All proofs submitted by them "contrary thereto or inconsistent therewith should be ignored whether objection is interposed by a party or not. D. Consequently. and [is] conclusive"8 as to them. Rubio had the right to sell his properties to Escueta who exercised due diligence in ascertaining ownership of the properties sold to her. or decision are void. Virginia exceeded the authority for failing to comply with her obligations under the "Joint Special Power of Attorney. or such proceeding was taken. final order.

however. without substantiation. Ignacio Rubio merely denies the contract of sale. fees.] included in its petition the two Orders dated May 6. Jr. the contract she executed in favor of respondent is not void. Moreover. 1993 on April 5. 1317. when such other person x x x was chargeable with that duty x x x. Page 98 of 150 . that what he received was a loan. not in the individual names of the heirs. A perusal of the certificates of title alone will reveal that the subject properties are registered in common. not the down payment for the sale of the subject properties. expressly or impliedly. before it is revoked by the other contracting party. Applying the above-quoted provision to the special power of attorney executed by Ignacio Rubio in favor of his daughter Patricia Llamas. it also implies the tacit. a second buyer of the property who may have had actual or constructive knowledge of such defect in the seller’s title. 1892. 1993 as evidenced by Registry return cards which bear the numbers 02597 and 02598 signed by Mr. The first Order denied Baloloys’ motion to fix the period within which plaintiffs-appellants pay the balance of the purchase price. cannot be a registrant in good faith. no fraud. if not express. the records further show that the Baloloys received the partial decision on September 13."13 As aptly put by the appellate court: Even assuming that Virginia Lim has no authority to sell the subject properties.. cannot be considered in the determination of the reglementary period within which to file the said petition for relief. The second Order refers to the grant of partial execution. confirmation of the said sale effected" by Virginia Lim in favor of respondent. By authorizing Virginia Lim to sell the subject properties."22 Applying Article 1544 of the Civil Code. as the case may be. mistake.affidavits showing the fraud.23 Even the argument that a purchaser need not inquire beyond what appears in a Torrens title does not hold water. but that which precludes him from repudiating an obligation voluntarily assumed after having accepted benefits therefrom. He claims.14 There is no proof of extrinsic fraud that "prevents a party from having a trial x x x or from presenting all of his case to the court"15 or an "accident x x x which ordinary prudence could not have guarded against. the Baloloys have ratified the contract of sale when they accepted and enjoyed its benefits. Arsenio Villalon. or by other circumstances not involving fault of the moving party. and would put a premium on fraud or misrepresentation. it is clear that she is not prohibited from appointing a substitute. but simply unenforceable. authority given by her father. but he shall be responsible for the acts of the substitute: (1) When he was not given the power to appoint one x x x. Not only has the title to the subject properties passed to the latter upon delivery of the thing sold. shall be unenforceable. but there is also no stipulation in the contract that states the ownership is to be reserved in or "retained by the vendor until full payment of the price. constitute ratification of the contract of sale and "produce the effects of an express power of agency. 1994.] apparently in an attempt to cure the lapse of the aforesaid reglementary period to file a petition for relief from judgment[. or at least was charged with the obligation to discover such defect. The petition for relief was filed by the new counsel on July 4. consequently. based on the principle of election. and thus. Similarly."21 Indeed. and. Nothing in the contract "prevents the obligation of the vendor to convey title from becoming effective"24 or gives "the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period. mistake."19 among which is precisely the sale of the subject properties in favor of respondent. and the facts constituting the petitioner’s good and substantial cause of action or defense. or excusable negligence exists in order that the petition for relief may be granted. There is no reason for the Baloloys to ignore the effects of the above-cited rule. accident. 1994 which means that 90 days have already lapsed or 30 days beyond the 60 day period. 1994. "The 60-day period is reckoned from the time the party acquired knowledge of the order. The agent may appoint a substitute if the principal has not prohibited him from doing so. Virginia Lim and respondent have entered into a contract of sale. by the person on whose behalf it has been executed. Patricia merely acted within the limits of the PAT CASE: AGENCY A contract entered into in the name of another by one who has no authority or legal representation."16 There is also no proof of either a "mistake x x x of law"17 or an excusable negligence "caused by failure to receive notice of x x x the trial x x x that it would not be necessary for him to take an active part in the case x x x by relying on another person to attend to the case for him. for which reason it is obvious that respondent cannot be expected to pay the stipulated taxes. or excusable negligence relied upon. 1994 and June 29. or who has acted beyond his powers. His acceptance and encashment of the check. These Orders are only consequences of the partial decision subject of the petition for relief."18 Article 1892 of the Civil Code provides: Art. on the aspect of damages. under the second paragraph of Article 1317 of the Civil Code which reads: The evidence on record as far as this issue is concerned shows that Atty. the first buyer may seek reconveyance of the property subject of the sale. The reckoning of the 60 day period therefore is the date when the said counsel of record received a copy of the partial decision which was on April 5. the former counsel of record of the Baloloys received a copy of the partial decision dated June 23. i. In case a title is issued to the second buyer. Such second buyer cannot defeat the first buyer’s title. x x x The Baloloys[. said former counsel is still their counsel of record. and by reason of which the party applying has probably been impaired in his rights. "The doctrine of estoppel applicable to petitioners here is not only that which prohibits a party from assuming inconsistent positions. To countenance such repudiation would be contrary to equity. At that time."25 Petitioners themselves have failed to deliver their individual certificates of title. Art. Alejandrino Baloloy.e. Furthermore. unless it is ratified."20 "[H]is action necessarily implies that he waived his right of action to avoid the contract. and expenses. 1994. accident. judgment or proceedings and not from the date he actually read the same. but she will have to be "responsible for the acts of the sub-agent.

Metro Manila. since the minds of the contracting parties meet in the terms of the agreement.28 It constitutes an advance payment to "be deducted from the total price. "In the sale of immovable property. 130423 November 18.6 Trial on the merits thereafter ensued.750. there is actual delivery as manifested by acts simultaneous with and subsequent to the contract of sale when respondent not only took possession of the subject properties but also allowed their use as parking terminal for jeepneys and buses. after having sold them to respondent. as long as no demand for rescission of the contract has been made upon him either judicially or by a notarial act.: PAT CASE: AGENCY Page 99 of 150 . respondents. which was raffled to Branch 255 of the Regional Trial Court of Las Pinas. even though it may have been stipulated that upon failure to pay the price at the time agreed upon the rescission of the contract shall of right take place. The information alleged: CONTRARY TO LAW."26 Ignacio Rubio. did then and there willfully."31 The records do not show that Ignacio Rubio asked for a rescission of the contract. and their co-heirs sold their hereditary shares for a price certain to which respondent agreed to buy and pay for the subject properties. dated That on or about and sometime during the period from July 1992 up to September 1992. the said accused received in trust from the complainant Leonida E. YNARES-SANTIAGO. The Decision and Resolution of the Court of Appeals in CA-G.5 Petitioner pleaded not guilty to the charge upon arraignment. Costs against petitioners. which caused her to likewise fail to pay her obligation to Quilatan. By oral agreement of the parties. Moreover. nakatira sa Mother Earth Subd. WHEREFORE.R. DECISION Subsequently. COURT OF APPEALS and THE PEOPLE OF THE PHILIPPINES. Quilatan in the aforestated total amount of P567. Quilatan various pieces of jewelry in the total value of P567.750. Las Pinas. Leonida Quilatan delivered pieces of jewelry to petitioner Virgie Serona to be sold on commission basis. Navarette. "[I]t shall be considered as part of the price and as proof of the perfection of the contract."32 Unknown to Quilatan. Ignacio Rubio could no longer sell the subject properties to Corazon Escueta. 1999. vs. (2) determinate subject matter. ay kumuha ng mga alahas kay Gng. such as: (1) consent or meeting of the minds. "The offer and the acceptance are concurrent. J.R. Rufina G. No. 1992. Quilatan required her to execute an acknowledgment receipt (Exhibit B) indicating their agreement and the total amount due. G. sent a formal letter of demand2 to petitioner for failure to settle her obligation. to the damage and prejudice of complainant Leonida E."30 In the present case. Philippines. Upon petitioner’s failure to pay on September 24. both within 30 days from receipt of the items. 48282."29 Article 1477 of the same Code also states that "[t]he ownership of the thing sold shall be transferred to the vendee upon actual or constructive delivery thereof. the vendee may pay.00. to wit: Ako. and within the jurisdiction of this Honorable Court. 1992.. petitioner had earlier entrusted the jewelry to one Marichu Labrador for the latter to sell on commission basis. Petitioner was not able to collect payment from Labrador. she failed and refused to account for said jewelry or the proceeds of sale thereof. in the Municipality of Las Pinas.00 to be sold on commission basis under the express duty and obligation of remitting the proceeds thereof to the said complainant if sold or returning the same to the latter if unsold but the said accused once in possession of said various pieces of jewelry.750. Leonida Quilatan na may kabuohang halaga na P567. CV No.00 para ipagbili para ako magkakomisyon at ibibigay ang benta kung mabibili o ibabalik sa kanya ang mga nasabing alahas kung hindi mabibili sa loob ng 30 araw. 1998 and January 11. earnest money has been given by respondent. an information for estafa under Article 315. the Baloloys. Quilatan. During the period from July 1992 to September 1992. What he adduced was a belated revocation of the special power of attorney he executed in favor of Patricia Llamas."[A]ll the elements of a valid contract of sale under Article 1458 of the Civil Code are present. unlawfully and feloniously misappropriate and convert the same for her own personal use and benefit and despite oral and written demands. petitioner. Quilatan executed a complaint affidavit3 against petitioner before the Office of the Assistant Provincial Prosecutor. petitioner shall remit payment or return the pieces of jewelry if not sold to Quilatan. "[I]n a contract of sale. and (3) price certain in money or its equivalent. through counsel."27 In fact.1 The receipt was signed by petitioner and a witness. Thereafter. Las Pinas. paragraph 1(b)4 of the Revised Penal Code was filed against petitioner. even after the expiration of the period. September 24. Consequently. with unfaithfulness and abuse of confidence and with intent to defraud. are hereby AFFIRMED. respectively. SO ORDERED. the vendor loses ownership over the property and cannot recover it until and unless the contract is resolved or rescinded x x x. HON. the petition is DENIED. the execution itself of the contract of sale is constructive delivery. October 26. 2002 VIRGIE SERONA. si Virginia Serona.

petitioner was prompt in settling her obligation.00 and returned P43. and as the amount misappropriated is P424.750.17 On November 17. thereby causing her to default in paying Quilatan. the appealed decision finding the accused-appellant guilty beyond reasonable doubt of the crime of estafa is hereby AFFIRMED with the following MODIFICATION: Considering that the amount involved is P424. Labrador also explained that in the past. (2) that there be misappropriation or conversion of such money or property by the offender or denial on his part of such receipt.00 as cost for the unreturned jewelries. subsequently the payments were remitted late. WHEREFORE. par.000.18 While the first. Marichu Labrador confirmed that she received pieces of jewelry from petitioner worth P441. and to pay the costs.13 II RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS MISAPPROPRIATION OR CONVERSION ON THE PART OF PETITIONER WHEN SHE FAILED TO RETURN THE SUBJECT JEWELRIES (sic) TO PRIVATE COMPLAINANT.8 that petitioner still owed her in the amount of P424.00 the penalty provided under the first paragraph of Article 315 of the Revised Penal Code has to be imposed which shall be in the maximum period plus one (1) year for every additional P10. she too had directly transacted with Quilatan for the sale of jewelry on commission basis.00 worth of jewelriy.16 petitioner filed the instant petition under Rule 45. SO ORDERED.14 Petitioner appealed to the Court of Appeals. third and fourth elements are concededly present. or for administration. she submits that she neither abused the confidence reposed upon her by Quilatan nor converted or misappropriated the subject jewelry. petitioner delivered the jewelry to Labrador under the same terms upon which it was originally entrusted to her. the same. alleging that: On the other hand. We find merit in the petition. or to return.15 Upon denial of her motion for reconsideration. She claimed that she entrusted the pieces of jewelry to Marichu Labrador who failed to pay for the same. that her giving the pieces of jewelry to a sub-agent for sale on commission basis did not violate her undertaking with Quilatan.000. the said accused is hereby sentenced to suffer the penalty of imprisonment ranging from FOUR (4) YEARS and ONE (1) DAY of prision correccional as minimum to TEN (10) YEARS and ONE (1) DAY of prision mayor as maximum. it cannot be said that she misappropriated or converted the same.10 She presented handwritten receipts (Exhibits 1 & 2)11 evidencing payments made to Quilatan prior to the filing of the criminal case. we find the second element of misappropriation or conversion to be lacking in the case at bar. 1(b) of the Revised Penal Code.035."19 Page 100 of PAT CASE: AGENCY 150 . Hence. Petitioner did not ipso facto commit the crime of estafa through conversion or misappropriation by delivering the jewelry to a sub-agent for sale on commission basis. to suffer the accessory penalties provided by law. the trial court rendered a decision finding petitioner guilty of estafa. The elements of estafa through misappropriation or conversion as defined in Article 315.00.9 SO ORDERED.000. Moreover. in the light of the foregoing. Applying the Indeterminate Sentence Law. she got jewelry from petitioner instead. however. the court finds the accused Virgie Serona guilty beyond reasonable doubt. I RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN CONCLUDING THAT THERE WAS AN ABUSE OF CONFIDENCE ON THE PART OF PETITIONER IN ENTRUSTING THE SUBJECT JEWELRIES (sic) TO HER SUB-AGENT FOR SALE ON COMMISSION TO PROSPECTIVE BUYERS. 1992 and testified that she sold the jewelry to a person who absconded without paying her. or under any other obligation involving the duty to make delivery of. 1(b) of the Revised Penal Code are: (1) that the money. In particular.Quilatan testified that petitioner was able to remit P100.00. petitioner admitted that she received several pieces of jewelry from Quilatan and that she indeed failed to pay for the same. to pay the sum of P424. She identified an acknowledgment receipt (Exhibit 3)12 signed by her dated July 5.00 albeit the total penalty should not exceed Twenty (20) Years (Art. or on commission. 1994.750.750. It was established that petitioner had not derived any personal benefit from the loss of the jewelry. good or other personal property is received by the offender in trust. 315). Consequently. due to her outstanding account with the latter.7 that at the start. (3) that such misappropriation or conversion or denial is to the prejudice of another. the dispositive portion of which reads: Petitioner argues that the prosecution failed to establish the elements of estafa as penalized under Article 315. accused-appellant is hereby SENTENCED to suffer the penalty of imprisonment ranging from Four (4) Years and One (1) Day of Prision Correccional as minimum to Twenty (20) Years of Reclusion Temporal. and (4) that there is a demand made by the offended party on the offender. We are unable to agree with the lower courts’ conclusion that this fact alone is sufficient ground for holding that petitioner disposed of the jewelry "as if it were hers. which affirmed the judgment of conviction but modified the penalty as follows: WHEREFORE. par.750.00. the penalty should be imposed in its maximum period adding one (1) year for each additional P10. however.000. thereby committing conversion and a clear breach of trust.00.

In People v. Neither does it appear that petitioner was verbally forbidden by Quilatan from passing on the jewelry to another person before the acknowledgment receipt was executed or at any other time. it was established that the inability of petitioner as agent to comply with her duty to return either the pieces of jewelry or the proceeds of its sale to her principal Quilatan was due.R.26 the Court. in turn. the petition is GRANTED. Flores24 and U. by reason of the fact that the rings were delivered also for sale on commission to sub-agents who failed to account for the rings or the proceeds of its sale. Thus.30 petitioner is liable to pay complainant Quilatan the value of the unpaid pieces of jewelry. there is no conversion since the pieces of jewelry were not devoted to a purpose or use different from that agreed upon. The accused in Panes. meanwhile. CR No. petitioner is not entirely free from any liability towards Quilatan. the pieces of jewelry were given by petitioner to Labrador to achieve the very same end for which they were delivered to her in the first place. She further acknowledged that she owed petitioner P441. in Lim v. it cannot be said that petitioner misappropriated the jewelry or delivered them to Labrador "without right. an agent who is not prohibited from appointing a subagent but does so without express authority is responsible for the acts of the sub-agent. her acquittal is in order. the accused received a ring to sell under the condition that she would return it the following day if not sold and without authority to retain the ring or to give it to a sub-agent. In the foregoing cases. accused-appellant likewise failed to make good his obligation to the complainant thereby giving rise to the charge of estafa. 1997 are REVERSED and SET ASIDE. plus legal interest. but also every attempt to dispose of the property of another without right. The words "convert" and "misappropriated" connote an act of using or disposing of another’s property as if it were one’s own. it was held that there was conversion or misappropriation. considering that the factual background of the cited cases differ from those which obtain in the case at bar. or of devoting it to a purpose or use different from that agreed upon. then the accused would be answerable for the acts of his coconspirators. The lower courts’ reliance on People v. the agents to whom personal property was entrusted for sale. Consequently. If there is no such evidence. with the obligation to return the same in a few days if not sold.00. v. there being no prohibition to do so and the chattel being delivered to the subagent before the owner demands its return or before such return becomes due. Nepomuceno. Page 101 of PAT CASE: AGENCY 150 . in fact.27 held that: In cases of estafa the profit or gain must be obtained by the accused personally. thereby negating any criminal intent on the part of petitioner.23 SO ORDERED. In absolving the accused-appellant of the crime charged. of the Revised Penal Code. In other words. The decision of the Court of Appeals in CA-G. the appointment of Labrador as petitioner’s sub-agent was not expressly prohibited by Quilatan. Accordingly.22 the accused-appellant was acquitted of estafa on facts similar to the instant case. The abuse of confidence that is characteristic of this offense is missing under the circumstances. through his own acts.1997 and its resolution dated August 28. it cannot be said that petitioner’s act of entrusting the jewelry to Labrador is characterized by abuse of confidence because such an act was not proscribed and is. but is held civilly liable in the amount of P424. There is no showing that petitioner derived personal benefit from or conspired with Labrador to deprive Quilatan of the jewelry or its value. Then too. Labrador testified that she obligated herself to sell the jewelry in behalf of petitioner also on commission basis or to return the same if not sold. Court of Appeals. was obliged to return the jewelry he received upon demand. there is no estafa within contemplation of the law. 17222 dated April 30. The rule is that an accused acquitted of estafa may nevertheless be held civilly liable where the facts established by the evidence so warrant. as the acknowledgment receipt. Where." Aside from the fact that no condition or limitation was imposed on the mode or manner by which petitioner was to effect the sale. Similarly. as in the present case. does not contain any such limitation. par. we held: WHEREFORE. legally sanctioned. and his mere negligence in permitting another to take advantage or benefit from the entrusted chattel cannot constitute estafa under Article 315.It must be pointed out that the law on agency in our jurisdiction allows the appointment by an agent of a substitute or sub-agent in the absence of an express agreement to the contrary between the agent and the principal. however. direct or circumstantial.S. The essence of estafa under Article 315. it is also consistent with usual practice for the seller to necessarily part with the valuables in order to find a buyer and allow inspection of the items for sale. conclusively proves the inability to return the same is solely due to malfeasance of a subagent to whom the first agent had actually entrusted the property in good faith. unless of course the evidence should disclose that the agent acted in conspiracy or connivance with the one who carried out the actual misappropriation. In Flores.750.21 Furthermore. petitioner herein must be acquitted. Consequently.00 as actual damages. To misappropriate for one’s own use includes not only conversion to one’s personal advantage.20 In the case at bar. citing Nepomuceno and the case of People v. Panes25 to justify petitioner’s conviction is misplaced.035. but passed on the same to a sub-agent even after demand for its return had already been made. without subsidiary imprisonment in case of insolvency. and if the proof is clear that the accused herself was the innocent victim of her sub-agent’s faithlessness. Accused-appellant therein undertook to sell two diamond rings in behalf of the complainant on commission basis. Labrador admitted that she received the jewelry from petitioner and sold the same to a third person. we hold that the first agent can not be held guilty of estafa by either misappropriation or conversion.28 (Italics copied) In the case at bar. Exhibit B. paragraph 1-b. However. and for the same purpose for which it was received. 1(b) is the appropriation or conversion of money or property received to the prejudice of the owner. Notwithstanding the above. Petitioner Virgie Serona is ACQUITTED of the crime charged. Trinidad. Notably. to the failure of Labrador to abide by her agreement with petitioner.29 Considering that the civil action for the recovery of civil liability arising from the offense is deemed instituted with the criminal action.

(b) with authorization letters dated 19 June 1996 issued by Ronas on behalf of Soriamont. 98-89047. Ordering [Soriamont and Ronas] to pay the cost of the suit. who was doing business under the name PTS. but only for the period 21 October 1993 to 21 January 1994.[9] Sprint filed with the RTC on 2 June 1998 a Complaint[4] for Sum of Money against Soriamont and Ronas. Ordering [Soriamont and Ronas] to pay [Sprint]. 98-89047. INC. wherein the former agreed to lease a number of chassis units to the latter for the transport of container vans. and (e) despite demands. The dispositive portion of the RTC Decision reads: Page 102 of PAT CASE: AGENCY 150 . in the amount of Five Hundred Thirty-Seven Thousand Eight Hundred Pesos (P537. of Manila. (Sprint) after the alleged failure of herein petitioner Soriamont Steamship Agencies. Soriamont and Ronas failed to pay the rental fees for the subject equipment. CV No. Inc. were executed as part of his regular functions as an officer of Soriamont. No. Respondents. According to the RTC. in Civil Case No. SORIAMONT STEAMSHIP AGENCIES. actual damages. 74987. thus.. It denied entering into an ELA with respondent Sprint on 17 December 1993 as alleged in the Complaint. he was declared by the RTC to be in default. 174610 July 14. and failed to return the same. 14215 and No. doing business under the style PAPA TRANSPORT SERVICES. Patrick Ronas (Ronas) is its general manager. the RTC rendered its Decision in Civil Case No. Ordering [Soriamont and Ronas]. 1998 and until full satisfaction thereof. Ronas was likewise not a party-in-interest in the case since his actions. The appellate court affirmed with modification the Decision[3] dated 22 April 2002 of the Regional Trial Court (RTC). of the purported loss of the subject equipment sometime in June 1997.800.R. is the Decision[1] dated 22 June 2006 and Resolution[2] dated 7 September 2006 of the Court of Appeals in CA-G. INC.R. (Soriamont) to return the chassis units it leased from Sprint and pay the accumulated rentals for the same. Assailed in this Petition for Review on Certiorari. On the other hand.000. docketed as Civil Case No. Since Papa failed to file an answer to the Third-Party Complaint. 2009 x---------------------------------------------------x DECISION 2. Branch 46.504. Ordering [Soriamont and Ronas]. Consistent with their stance. 14222. and PATRICK RONAS. denominated as Equipment Lease Agreement (ELA) with Soriamont. jointly and severally.: 3. it entered into a lease agreement. two chassis units (subject equipment). assailed in the Complaint. PTS and another trucker. were able to withdraw on 22 and 25 June 1996. 98-89047 on 22 April 2002. Its co-respondent Ricardo Cruz Papa (Papa) is engaged in the trucking business under the business name Papa Transport Services (PTS).42) as interest and penalties accrued as of March 31. J. from the container yard of Sprint.versus - Sprint. while absolving Ronas and Papa from any liability. to pay [Sprint] the amount of Fifty-Three Thousand Five Hundred Four Pesos and Forty-Two centavos (P53. granting the Complaint for Sum of Money of herein respondent Sprint Transport Services. Inc. prayed for the RTC to render judgment: 1. Soriamont further argued that it was not a party-in-interest in Civil Case No. 98-89047. RICARDO CRUZ PAPA.. Sprint is a domestic corporation engaged in transport services.a letter dated 17 June 1997. finding Soriamont liable for the claim of Sprint. and to replace or return the same to Sprint. since it was PTS and Rebson Trucking that withdrew the subject equipment from the container yard of Sprint. Soriamont and Ronas averred in their Third-Party Complaint that it was PTS and Rebson Trucking that withdrew the subject equipments from the container yard of Sprint. Petitioners. jointly and severally. SPRINT TRANSPORT SERVICES.[5] evidenced by Equipment Interchange Receipts No. to pay [Sprint] the amount equivalent to twenty-five percent (25%) of the total amount claimed for and as attorneys fees plus Two Thousand Pesos (P2. Soriamont authorized PTS to withdraw the subject equipment.00) per court appearance. Rebson Trucking.00) representing unpaid rentals and the replacement cost for the lost chassis units. through After trial. G. (d) Sprint was subsequently informed by Ronas. . The following are the factual and procedural antecedents: Soriamont is a domestic corporation providing services as a receiving agent for line load contractor vessels.[7] Soriamont admitted therein to having a lease agreement with Sprint.[6] Soriamont and Ronas filed with the RTC their Answer with Compulsory Counterclaim. CHICO-NAZARIO. 4. under Rule 45 of the Revised Rules of Court. (c) Soriamont and Ronas failed to pay rental fees for the subject equipment since 15 January 1997. Sprint alleged in its Complaint that: (a) on 17 December 1993. jointly and severally. Soriamont and Ronas filed a Third-Party Complaint[8] against Papa.

Aggrieved. the appealed Decision dated April 22. from the container yard of Sprint. subject to the modification that the specific rate of legal interest per annum on both the P320. MR. withdrew Sprint Chassis 2-07 with Plate No.124.[10] II. WHEREFORE.42 representing the unpaid rentals. and damages for the subsequent loss. (2) on 22 and 25 June 1996. (3) Soriamont authorized the withdrawal by PTS and Rebson Trucking of the subject equipment from the container yard of Sprint. CV No. Resultantly. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING HEREIN PETITIONERS STEAMSHIP AGENCIES SOLELY LIABLE.WHEREFORE. and (4) the subject pieces of equipment were never returned to Sprint. Soriamont. NUP-533 Serial MOTZ-160080. NUP-261 Serial No. PRIVATE RESPONDENT PAPA TRUCKING WAS THE LAST IN POSSESSION OF THE SAID SUBJECT CHASSIS AND IT SHOULD BE HELD SOLELY LIABLE FOR THE LOSS THEREOF.000. Three hundred twenty thousand pesos (P320. P20. Hence.00 representing the value of the two chassis units. III. found the following facts to be borne out by the records: (1) Sprint and Soriamont entered into an ELA whereby the former leased chassis units to the latter for the specified daily rates. and on the P270.000. Soriamont[12] filed the present Petition for Review with the following assignment of errors: I. and against [herein petitioner] Soriamont Steamship Agencies.124. the actions taken by PTS as regards the subject equipment were binding on Soriamont. Soriamont relayed that it was still trying to locate the subject equipment. with Soriamont as the principal and PTS as an agent. pursuant to the existing ELA between Soriamont and Sprint. but it contained an automatic renewal clause. 74987. Defendant Patrick Ronas and [herein respondent] Ricardo Cruz Papa are absolved from liability. ordering the latter to pay the former the following: In a Resolution dated 7 September 2006. to be increased to twelve percent (12%) from the finality of this Decision until its full satisfaction.00 as attorneys fees. and Sprint Chassis 2-55 with Plate No. The rate of interest shall be increased to 12% per annum once this decision becomes final and executory. and requested the former to refrain from releasing more equipment to respondent PTS and Rebson Trucking. judgment is hereby rendered in favor of [herein respondent] Sprint Transport Services. THE TESTIMONY OF MR.42) representing unpaid rentals with interest at the legal rate from the filing of the complaint. The authorization issued by Soriamont to PTS established an agency relationship. in its Decision dated 22 June 2006. VALENCIA. Page 103 of PAT CASE: AGENCY 150 . THE LIABILITY OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS SUBJECT OF THE THIRD-PARTY COMPLAINT WAS TOTALLY IGNORED. through PTS and Rebson Trucking. The Court of Appeals. ENRICO G. Inc. ICAZ-165118. THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR WHEN IT IGNORED A MATERIAL INCONSISTENCY IN THE TESTIMONY OF PRIVATE RESPONDENT SPRINT TRANSPORTS WITNESS. Soriamont filed an appeal of the foregoing RTC Decision to the Court of Appeals. docketed as CA-G.R. the Court of Appeals denied the Motion for Reconsideration of Soriamont for failing to present any cogent and substantial matter that would warrant a reversal or modification of its earlier Decision. EVIDENCE ON RECORD SHOW THAT IT WAS PRIVATE RESPONDENT PAPA TRUCKING WHICH WITHDREW THE SUBJECT CHASSIS.000) representing the value of the two chassis units with interest at the legal rate from the filing of the complaint. Two hundred seventy thousand one hundred twenty four & 42/100 pesos (P270. is six percent (6%). THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR IN LIMITING AS SOLE ISSUE FOR RESOLUTION OF WHETHER OR NOT AN AGENCY RELATIONSHIP EXISTED BETWEEN PRIVATE RESPONDENT SPRINT TRANSPORT AND HEREIN PETITIONERS SORIAMONT STEAMSHIP AGENCIES AND PRIVATE RESPONDENT PAPA TRUCKING BUT TOTALLY DISREGARDING AND FAILING TO RULE ON THE LIABILITY OF PRIVATE RESPONDENT PAPA TRUCKING TO HEREIN PETITIONERS. The ELA covered the period 21 October 1993 to 21 January 1994. Inc. VALENCIA WAS ERRONEOUSLY MADE THE BASIS FOR HOLDING HEREIN PETITIONERS LIABLE FOR THE LOSS OF THE SUBJECT CHASSIS. In a letter to Sprint dated 19 June 1997. [11] The Court of Appeals and the RTC sustained the contention of Sprint that PTS was authorized by Soriamont to secure possession of the subject equipment from Sprint. of the subject equipment. 2002 of the trial court is affirmed. the Court of Appeals decreed: We find the Petition to be without merit. making the latter liable to Sprint for the unpaid rentals for the use..

In civil cases, the party having the burden of proof must establish his case by a preponderance of
evidence. Stated differently, the general rule in civil cases is that a party having the burden of proof of an
essential fact must produce a preponderance of evidence thereon (I Moore on Facts, 4, cited in Vicente
J. Francisco, The Revised Rules of Court in the Philippines, Vol. VII, Part II, p. 542, 1973 Edition). By
preponderance of evidence is meant simply evidence which is of greater weight, or more convincing than
that which is offered in opposition to it (32 C.J.S., 1051), The term 'preponderance of evidence' means
the weight, credit and value of the aggregate evidence on either side and is usually considered to be
synonymous with the terms `greater weight of evidence' or 'greater weight, of the credible evidence.'
Preponderance of the evidence is a phrase which, in the last analysis, means probability of the truth.
Preponderance of the evidence means evidence which is more convincing to the court as worthy of
belief than that which is offered in opposition thereto. x x x." (20 Am. Jur., 1100-1101)

Soriamont anchors its defense on its denial that it issued an authorization to PTS to withdraw the subject
equipment from the container yard of Sprint. Although Soriamont admits that the authorization letter
dated 19 June 1996 was under its letterhead, said letter was actually meant for and sent to Harman
Foods as shipper. It was then Harman Foods that tasked PTS to withdraw the subject equipment from
Sprint. Soriamont insists that the Court of Appeals merely presumed that an agency relationship existed
between Soriamont and PTS, since there was nothing in the records to evidence the same. Meanwhile,
there is undisputed evidence that it was PTS that withdrew and was last in possession of the subject
equipment. Soriamont further calls attention to the testimony of Enrico Valencia (Valencia), a witness for
Sprint, actually supporting the position of Soriamont that PTS did not present any authorization from
Soriamont when it withdrew the subject equipment from the container yard of Sprint. Assuming, for the
sake of argument that an agency relationship did exist between Soriamont and PTS, the latter should not
have been exonerated from any liability. The acts of PTS that resulted in the loss of the subject
equipment were beyond the scope of its authority as supposed agent of Soriamont. Soriamont never
ratified, expressly or impliedly, such acts of PTS.

After a review of the evidence on record, we rule that the preponderance of evidence indeed supports
the existence of an agency relationship between Soriamont and PTS.

Soriamont is essentially challenging the sufficiency of the evidence on which the Court of Appeals based
its conclusion that PTS withdrew the subject equipment from the container yard of Sprint as an agent of
Soriamont. In effect, Soriamont is raising questions of fact, the resolution of which requires us to reexamine and re-evaluate the evidence presented by the parties below.

It is true that a person dealing with an agent is not authorized, under any circumstances, to trust blindly
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, they must ascertain not only the fact of agency, but also the nature and extent of
authority, and in case either is controverted, the burden of proof is upon them to prove it. Sprint has
successfully discharged this burden.

Basic is the rule in this jurisdiction that only questions of law may be raised in a petition for review under
Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to it from
the Court of Appeals is limited to reviewing errors of law, the findings of fact of the appellate court being
conclusive. We have emphatically declared that it is not the function of this Court to analyze or weigh
such evidence all over again, its jurisdiction being limited to reviewing errors of law that may have been
committed by the lower court.[13]

The ELA executed on 17 December 1993 between Sprint, as lessor, and Soriamont, as lessee, of
chassis units, explicitly authorized the latter to appoint a representative who shall withdraw and return
the leased chassis units to Sprint, to wit:

These questions of fact were threshed out and decided by the trial court, which had the firsthand
opportunity to hear the parties conflicting claims and to carefully weigh their respective sets of evidence.
The findings of the trial court were subsequently affirmed by the Court of Appeals. Where the factual
findings of both the trial court and the Court of Appeals coincide, the same are binding on this Court. We
stress that, subject to some exceptional instances, only questions of law not questions of fact may be
raised before this Court in a petition for review under Rule 45 of the Revised Rules of Court.[14]

EQUIPMENT LEASE AGREEMENT
between
SPRINT TRANSPORT SERVICES, INC. (LESSOR)
And
SORIAMONT STEAMSHIP AGENCIES, INC.
(LESSEE)
TERMS and CONDITIONS

Given that Soriamont is precisely asserting in the instant Petition that the findings of fact of the Court of
Appeals are premised on the absence of evidence and are contradicted by the evidence on record,[15]
we accommodate Soriamont by going over the same evidence considered by the Court of Appeals and
the RTC.

xxxx
4. Equipment Interchange Receipt (EIR) as mentioned herein is a document accomplished every time a
chassis is withdrawn and returned to a designated depot. The EIR relates the condition of the chassis at
the point of on-hire/off-hire duly acknowledged by the LESSOR, Property Custodian and the LESSEES
authorized representative.

In Republic v. Court of Appeals,[16] we explained that:

Page 104 of

PAT CASE: AGENCY
150

A. The representative of Soriamont Steamship Agencies, Inc., Your Honor.
xxxx
Atty. Porciuncula:
5. Chassis Withdrawal/Return Slip as mentioned herein is that document where the LESSEE authorizes
his representative to withdraw/return the chassis on his behalf. Only persons with a duly accomplished
and signed authorization slip shall be entertained by the LESSOR for purposes of withdrawal/return of
the chassis. The signatory in the Withdrawal/Return Slip has to be the signatory of the corresponding
Lease Agreement or the LESSEEs duly authorized representative(s).[17] (Emphases ours.)

Q. And when were these chassis withdrawn, Mr. Witness?
A. June 1996, Sir.
Q. Will you kindly tell this Honorable Court what do you mean by withdrawing the chassis units from your
container yard?

Soriamont, though, avers that the aforequoted ELA was only for 21 October 1993 to 21 January 1994,
and no longer in effect at the time the subject pieces of equipment were reportedly withdrawn and lost by
PTS. This contention of Soriamont is without merit, given that the same ELA expressly provides for the
automatic renewal thereof in paragraph 24, which reads:
There shall be an automatic renewal of the contract subject to the same terms and conditions as
stipulated in the original contract unless terminated by either party in accordance with paragraph no. 23
hereof. However, in this case, termination will take effect immediately.[18]

Witness:
Before they can withdraw the chassis they have to present withdrawal authority, Sir.
Atty. Porciuncula:
And what is this withdrawal authority?

There being no showing that the ELA was terminated by either party, then it was being automatically
renewed in accordance with the afore-quoted paragraph 24.

A. This is to prove that they are authorizing their representative to get from us a chassis unit.
Q. And who is this authorization send to you, Mr. Witness?

It was, therefore, totally regular and in conformity with the ELA that PTS and Rebson Trucking should
appear before Sprint in June 1996 with authorization letters, issued by Soriamont, for the withdrawal of
the subject equipment.[19] On the witness stand, Valencia testified, as the operations manager of Sprint,
as follows:

A. Sometime a representative bring to our office the letter or the authorization or sometime thru fax, Sir.
Q. In this particular incident, Mr. Witness, how was it sent?

Atty. Porciuncula:

A. By fax, Sir.

Q. Mr. Witness, as operation manager, are you aware of any transactions between Sprint Transport
Services, Inc. and the defendant Soriamont Steamship Agencies, Inc.?

Q. Is this standard operating procedure of Sprint Transport Services, Inc.?

A. Yes, Sir.

A. Yes, Sir, if the trucking could not bring to our office the original copy of the authorization they have to
send us thru fax, but the original copy of the authorization will be followed.

Q. What transactions are these, Mr. Witness?

Atty. Porciuncula:

A. They got from us chassis, Sir.
Court:

Q. Mr. Witness, I am showing to you two documents of Soriamont Steamship Agencies, Inc. letter head
with the headings Authorization, are these the same withdrawal authority that you mentioned awhile
ago?

Q. Who among the two, who withdrew?

A. Yes, Sir.
Page 105 of

PAT CASE: AGENCY
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Q. Mr. Witness, after this what happened next?
Atty. Porciuncula:
Your Honor, at this point may we request that these documents identified by the witness be marked as
Exhibits JJ and KK, Your Honor.

A. After they presented to us the withdrawal authority, we called up Soriamont Steamship Agencies, Inc.
to verify whether the one sent to us through truck and the one sent to us through fax are one and the
same.

Court:

Q. Then what happened next, Mr. Witness?

Mark them.

A. Then after the verification whether it is true, then we asked them to choose the chassis units then my
checker would see to it whether the chassis units are in good condition, then after that we prepared the
outgoing Equipment Interchange Receipt, Sir.

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

Q. Mr. Witness, could you tell this Honorable Court what an outgoing Equipment Interchange Receipt
means?

A. The representative of Soriamont Steamship Agencies, Inc., the Papa Trucking, Sir.

A. This is a document proving that the representative of Soriamont Steamship Agencies, Inc. really
withdraw (sic) the chassis units, Sir.

Q. And are these trucking companies authorized to withdraw these chassis units?
A. Yes, Sir, it was stated in the withdrawal authority.

xxxx

Atty. Porciuncula:

Atty. Porciuncula:

Q. Showing you again Mr. Witness, this authorization previously marked as Exhibits JJ and KK, could
you please go over the same and tell this Honorable Court where states there that the trucking
companies which you mentioned awhile ago authorized to withdraw?

Q. Going back Mr. Witness, you mentioned awhile ago that your company issued outgoing Equipment
Interchange Receipt?

A. Yes, Sir, it is stated in this withdrawal authority.

A. Yes, Sir.

Atty. Porciuncula:

Q. Are there incoming Equipment Interchange Receipt Mr. Witness?

At this juncture, Your Honor, may we request that the Papa trucking and Rebson trucking identified by
the witness be bracketed and mark as our Exhibits JJ-1 and KK-1, Your Honor.

A. We have not made Incoming Equipment Interchange Receipt with respect to Soriamont Steamship
Agencies, Inc., Sir.

Court:

Q. And why not, Mr. Witness?

Mark them. Are these documents have dates?

A. Because they have not returned to us the two chassis units.[20]

Atty. Porciuncula:

In his candid and straightforward testimony, Valencia was able to clearly describe the standard operating
procedure followed in the withdrawal by Soriamont or its authorized representative of the leased chassis
units from the container yard of Sprint. In the transaction involved herein, authorization letters dated 19
June 1996 in favor of PTS and Rebson Trucking were faxed by Sprint to Soriamont, and were further

Yes, Your Honor, both documents are dated June 19, 1996.

Page 106 of

PAT CASE: AGENCY
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this Court cannot merely presume PTS liable to Soriamont as its agent. The agent who acts as such is not personally liable to the party with whom he contracts. It bears to stress that it was Soriamont that had an existing ELA with Sprint. regardless of its source. reveals that PTS did have previous authority from Soriamont to withdraw the leased chassis units from Sprint. the rate of interest. Eastern Shipping Lines. principal. Valencias testimony established that Sprint exercised due diligence in its dealings with PTS. No interest. or its authorized representative. However. as agent. As the Court of Appeals and the RTC found. by the lessee. quasi-contracts. When an obligation. is proper and with legal basis. for the lease of the subject equipment. the outgoing Equipment Interchange Receipts shall be signed. sent to Sprint by Ronas. which provides: 1. and it consists in the payment of a sum of money.. a scrutiny of the Equipment Interchange Receipts will show that these documents merely identified Harman Foods as the shipper/consignee. And for PTS to be personally liable. Accordingly. Harman Foods. The provisions under Title XVIII on Damages of the Civil Code govern in determining the measure of recoverable damages. The only thing proven was that Soriamont. With regard particularly to an award of interest in the concept of actual and compensatory damages. In the absence of stipulation. the interest due should be that which may have been stipulated in writing. Court of Appeals. 2. it is vital that Soriamont be able to prove that PTS damaged or lost the said equipment because it acted contrary to or in excess of the authority granted to it by Soriamont. which stated: As we are currently having a problem with regards to the whereabouts of the subject trailers. to wit: Finally. II. which actually designated PTS and Rebson Trucking as truckers. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. and on the P270. Under Article 2209 of the Civil Code. i. upon the withdrawal of the leased chassis units. When an obligation. Soriamont argues that PTS is liable for the loss of the subject equipment. then an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. however. as the agent of Soriamont. may we request your kind assistance in refraining from issuing any equipment to the above trucking companies. and the location of said shipping line. the monetary judgment in favor of Sprint does not involve a loan or forbearance of money. be on the amount finally adjudged. In the absence of evidence showing that PTS acted contrary to or in excess of the authority granted to it by its Page 107 of PAT CASE: AGENCY 150 . Soriamont cites Article 1897 of the Civil Code. in any case. the contravenor can be held liable for damages. v. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. Finally. however. i. contracts..00. the proper imposable rate of interest is six (6%) percent. we can only hold that the driver of PTS signed the receipts for the subject equipment as the authorized representative of Soriamont.[22] the interim period from the finality of the judgment awarding a monetary claim until payment thereof is deemed to be equivalent to a forbearance of credit. or even to Soriamont as its agent. as follows: Alternatively.. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made.124. if PTS is found to be its agent. then.verified by Sprint through a telephone call to Soriamont. 1169. as declared in Eastern Shipping Lines. Moreover. In this case. thus. I. withdrew the two chassis units from Sprint.42. unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. representing the unpaid rentals awarded in favor of Sprint. a loan or forbearance of money. and that these have never been returned to Sprint. the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). Given the lack of evidence that PTS was in any way responsible for the loss of the subject equipment. To recall. When the obligation is breached. when an obligation not constituting a loan or forbearance of money is breached. Further. Soriamont. the interest due shall itself earn legal interest from the time it is judicially demanded. on behalf of Soriamont. hence. the subject equipment was withdrawn and used by PTS with the authority of Soriamont. Considering our preceding discussion. the letter[21] dated 17 June 1997.e.e. v. through PTS. as stated in the ELA. not constituting a loan or forbearance of money. necessitating an express request from Soriamont for Sprint to discontinue recognizing said authority. i. since PTS acted beyond its authority as agent. where the demand is established with reasonable certainty.e. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. not Harman Foods. law. Court of Appeals[23] explained. The burden falls upon Soriamont to prove its affirmative allegation that PTS acted in any manner in excess of its authority as agent. Art. Soriamont. 1897. it cannot be held liable to Sprint. delicts or quasidelicts is breached. Clearly. Soriamont cannot rely on the outgoing Equipment Interchange Receipts as proof that the withdrawal of the subject equipment was not authorized by it. representing the value of the subject equipment. resulting in the loss of the subject equipment. but by the shipper/consignee. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. the adjustment by the Court of Appeals with respect to the applicable rate of legal interest on the P320. Soriamont did not adduce any evidence at all to prove said allegation. the rate of interest shall be 12% per annum to be computed from default. is breached.000. Inc. is imposed. The actual base for the computation of legal interest shall. as well as the accrual thereof. Furthermore. and no other. there is no reason for us to depart from the general rule that the findings of fact of the Court of Appeals and the RTC are already conclusive and binding upon us. Inc. hence.

the other party may from time to time demand marginal deposits to be made within forty-eight (48) hours after receipt of such demand. vs. the contract shall forthwith be closed.O. the closing-out price shall be fixed by a Price Settlement Committee appointed by the Federation. the matter shall be referred to arbitration. from the time the judgment becomes final until its full satisfaction.. 87-39597. 2001] FOSFA Contract. a complaint dated February 26. failed to deliver the said coconut oil and. coconut oil at a higher price. 1987 against private respondent Imperial Vegetable Oil Co. Where no such resale or repurchase takes place. Page 108 of PAT CASE: AGENCY 150 . 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. N.750 tons of crude coconut oil. however. IVO failed to pay this amount despite repeated oral and written demands. in the aggregate amount of US$391. The Decision dated 22 June 2006 and Resolution dated 7 September 2006 of the Court of Appeals in CA-G. 74987 are hereby AFFIRMED. IVO bound itself to pay to Safic the difference between the said prevailing price and the contract price of the 2. Private respondent. the applicable rate of legal interest shall be twelve percent (12%). premises considered.)[1] The demand for marginal deposits was based on the customs of the trade. SO ORDERED. the subject contracts were speculative contracts entered into by IVOs then President. the rate of legal interest. offered a wash out settlement. petitioner. respectively. A601391. whether the case falls under paragraph 1 or paragraph 2. which amounted to US$293. Upon Safics posting of the requisite bond. Should either party be dissatisfied with the price. IMPERIAL VEGETABLE OIL CO. 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. INC. Contract. valued at US$222. Inc. 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. this interim period being deemed to be by then an equivalent of a forbearance of credit. Contract and the FOSFA Contract. Hence.)[2] SAFIC ALCAN & CIE. have a petition presented for winding up or shall have a Receiver appointed. 1986 and October 31.000 long tons of crude coconut oil.3. A601385. the trial court issued a writ of preliminary attachment. IVO). Under its second cause of action. in order to ensure the preservation of the same. sale and trading of coconut oil.. plus attorneys fees and litigation expenses. to wit: WHEREFORE.593. 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. It filed with the Regional Trial Court of Manila.. Petitioner Safic alleged that on July 1. 1986 and September 25.50 per ton. above. 1986. When the judgment of the court awarding a sum of money becomes final and executory. (Underscoring ours. in contravention of the prohibition by the Board of Directors against engaging in speculative paper trading.00 and US$391.: Petitioner Safic Alcan & Cie (hereinafter. A601683 and A601770A/B/C/. Thus. covered by Purchase Contract Nos. [G. A601297A/B. A601446 and A601655. 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.500.I. such deposit to bear interest at the prime rate plus one percent (1%) per annum. Safic alleged that on eight occasions between April 24. Safic prayed that IVO be ordered to pay the sums of US$293. as governed by the provisions of the standard N. No. Branch XXV. IVO failed to make the prescribed marginal deposits on the eight contracts.62.593. respondent. it placed purchase orders with IVO for 2. the trial court ordered that the assets of IVO be placed under receivership. March 28. (Underscoring ours. despite written demand therefor. A601415. A601384. J.I.P.000 long tons of crude coconut oil. this interim period being deemed to be by then an equivalent to a forbearance of credit. covered by Purchase Contract Nos. Inc.R. Costs against petitioner Soriamont Steamship Agencies.R. CV No. A601681.P. either at the market price then current for similar goods or. Thus. Rule 54 If 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. Dominador Monteverde. convene. DECISION YNARES-SANTIAGO. to compensate it for the damages it suffered when it was forced to acquire In its answer. and all losses and expenses resulting from such breach shall be for the account of the party upon whom such demand is made. Consistent with the foregoing jurisprudence.62. to be delivered within the month of January 1987. (hereinafter.[24] when the judgment awarding a sum of money becomes final and executory.00. it placed purchase orders with IVO for a total of 4. 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. 1986. Subsequently. instead.500.O. commit an act of bankruptcy. and later on affirmed in more recent cases. Rule 54 BANKRUPTCY/INSOLVENCY: If before the fulfillment of this contract either party shall suspend payment. 126751. The complaint also included an application for a writ of preliminary attachment against the properties of IVO. 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. the rate of legal interest shall be 12% per annum from such finality until its satisfaction. shall be 12% per annum from such finality until its satisfaction. the instant Petition for Review on Certiorari is hereby DENIED. When IVO failed to honor its obligation under the wash out settlement narrated above. docketed as Civil Case No. Safic) is a French corporation engaged in the international purchase. 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).

and Contracts Nos. Contracts Nos. ENTERED INTO CONTRACTS WHICH WERE ULTRA VIRES AND WHICH DID NOT BIND OR MAKE IVO LIABLE. as defined in Article 2018 of the Civil Code. and that under Article 2018 of the Civil Code. viz: For its part. and (b) Dominador Monteverde had validly entered into similar forward contracts for and on behalf of IVO in 1985. the trial court refused to declare the same as gambling transactions. substantially reiterating the errors it raised before the Court of Appeals and maintaining that the Court of Appeals grievously erred when: a. A601385. IVO set up counterclaims anchored on harassment. However.. CV No. Meanwhile. the transaction is null and void. After all. although they involved some degree of speculation. IVO raised only one assignment of error. as alleged by Safic. deliveries were to be made within two months.and despite IVOs lack of the necessary license from Central Bank to engage in such kind of trading activity.500 tons of crude coconut oil) were unauthorized acts of Dominador Monteverde which do not bind IVO in whose name they were entered into.. Safic placed several orders and IVO faithfully filled up those orders by shipping out the required crude coconut oil to Safic. on one hand. the former President of Imperial Vegetable Oil Co. This.[4] Hence. (ii) it distinguished between the 1986 The trial court ruled that Safic failed to substantiate its claim for actual damages. every business enterprise carries with it a certain measure of speculation or risk. arising from the subject matter of this case. rumormongering and oppressive action.500 metric tons. 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. Inc. the 1985 contracts were covered by letters of credit. It distinguished between the 1985 contracts. the contracts performed in 1985. jointly docketed as CA-G. which were evidently entered into by Monteverde for his personal benefit. prior to the date of the contracts sued upon. and the 1986 contracts subject of this case. Safic filed the instant petition for review with this Court. The coconuts that were supposed to be milled were in all likelihood not yet growing when Dominador Monteverde sold the crude coconut oil. THE TRIAL COURT ERRED IN HOLDING THAT SAFIC WAS UNABLE TO PROVE THE DAMAGES SUFFERED BY IT AND IN NOT AWARDING SUCH DAMAGES. A601683 and A601770A/B/C involving 4. had an implied authority to make any contract necessary or appropriate to the contract of the ordinary business of the company. A601446 and A60155 (sic) involving 2. judgment is hereby rendered dismissing the complaint of plaintiff Safic Alcan & Cie. that its suppliers were driven away. which were nothing more than mere promises to pay once the shipments became ready. the Court of Appeals erred when (i) it ignored its own finding that (a) Dominador Monteverde. as IVOs President. A601681. which were highly speculative in character. 1996. on August 28. and the 1986 contracts. As such. In those transactions.000 long tons of crude coconut oil. Inc. WHEREFORE. totalling 3. Later.[3] During the trial. The counterclaim and supplemental counterclaim of the latter defendant are likewise hereby dismissed for lack of merit. A601415. the 1986 contracts stipulated that the coconut oil were to be delivered within period ranging from eight months to eleven to twelve months after the placing of orders. while the 1986 contracts were payable by telegraphic transfers. THE TRIAL COURT ERRED IN NOT HOLDING THAT IVO IS LIABLE UNDER THE WASH OUT CONTRACTS. For these reasons. without prejudice to any action it might subsequently institute against Dominador Monteverde. 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 1986 contracts constituted trading in futures or in mere expectations. Moreover. 1992. the Court of Appeals rendered the assailed Decision dismissing the appeals and affirming the judgment appealed from in toto. A601391. if a contract which purports to be for the delivery of goods. Both IVO and Safic appealed to the Court of Appeals. who was presumably authorized to bind IVO. No pronouncement as to costs. the lower court held that Safic cannot invoke the 1985 contracts as an implied corporate sanction for the high-risk 1986 contracts. on the other hand.. Likewise. In this connection. 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. where Safic likewise dealt with Dominador Monteverde.R.e. under receivership are hereby dissolved and set aside. was the time needed for milling and building up oil inventory. and China Banking Corporation had foreclosed its chattel and real estate mortgages. Thus. DOMINADOR MONTEVERDE. Safic argued that: THE TRIAL COURT ERRED IN HOLDING THAT IVOS PRESIDENT. 40820. the lower court found that in 1985. The writ of preliminary attachment issued in this case as well as the order placing Imperial Vegetable Oil Co. the court noted.. financial losses. paralyzation of business. A601297A/B. differed in that under the 1985 contracts. 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. the parties had entered into and consummated a number of contracts for the sale of crude coconut oil. On September 12. the trial court rendered judgment as follows: Page 109 of PAT CASE: AGENCY 150 . Anent the 1986 contracts being sued upon. it declared that the 1986 forward contracts (i. it rejected IVOs counterclaim and supplemental counterclaim. and that its major creditors have inundated it with claims for immediate payment of its debts.

[7] In fact. despite the fact that Safic had properly raised the issue on its appeal. if they would hold the principal. conducting the same according to the orders. Rodrigo Monteverde in concluding that the IVO Board of Directors did not authorize its President. the burden of proof is upon them to establish it. If the said third person is aware of such limits of authority. despite the fact that Safic had presented not only testimonial. it failed to resolve the issue of whether or not IVO is liable to Safic under the wash out contracts involving Contracts Nos.[10] we elucidated the rule on dealing with an agent thus: b.[13] We disagree. the same does not deserve consideration by this Court. to enter into the 1986 forward contracts. Monteverdes speculative contracts with Safic never bound IVO and Safic can not therefore enforce those contracts against IVO.forward contracts despite the fact that the Manila RTC has struck down IVOs objection to the 1986 forward contracts (i. in any case.[9] In the case of Bacaltos Coal Mines v. exercises corporate power. Monteverde had earlier proposed that the company engage in such transactions but the IVO Board rejected his proposal. unless the latter undertook to secure the principals ratification. He shall have the following duties: xxxxxxxxx [g] Have direct and active management of the business and operation of the corporation. (iii) it relied on the testimony of Mr. 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. The contracts were not reported in IVOs export sales book and turn-out book. in fact. Powers and Duties of the President. and the evidence and the law support Safics position that IVO is so liable to Safic. the principal can not be held liable for the acts of the agent. among others.e. Being remiss in this regard. Safic should have obtained from Monteverde the prior authorization of the IVO Board. With more reason. evidence which proved the higher amount it had to pay for crude coconut oil (vis--vis the 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. Persons dealing with an assumed agent. and would have been disregarded by the latter tribunal for the reasons previously stated. 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. he is chargeable with knowledge of the agents authority. The evidence shows that the IVO Board PAT CASE: AGENCY There was no such ratification in this case. Court of Appeals. A601446 and A60155 (sic).[17] Clearly. 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. it declared that Safic was not able to prove damages suffered by it. Article III. he is to blame. 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.[11] c. If he does not make such inquiry. and Every person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. IVO did not enter into identical contracts with Safic. Dominador Monteverde.[15] Neither were they reflected in other books and records of the corporation. that Section 3.[18] Such an issue was not brought to the fore either in the trial court or the appellate court. petitioner can not seek relief on the basis of a supposed agency. To bolster its cause. and liability under. no occasion at all for ratification. not Monteverde. and in case either is controverted. are bound at their peril. In fine. Safic can not rely on the doctrine of implied agency because before the controversial 1986 contracts. Page 110 of 150 . 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. knew nothing of the 1986 contracts[6] and that it did not authorize Monteverde to enter into speculative contracts. Section 3 [g] of the By-Laws[5] of IVO provides. and (iv) it did not find IVO. 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. When Monteverde entered into the speculative contracts with Safic.[8] Since the 1986 contracts marked a sharp departure from past IVO transactions. justice and due process. validly entered into the 1986 contracts for and on behalf of IVO.[16] It must be pointed out that the Board of Directors. estopped from denying responsibility for. resolutions and instructions. to ascertain not only the fact of the agency but also the nature and extent of the authority. 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. 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. The President shall be elected by the Board of Directors from their own number. and his ignorance of that authority will not be any excuse. It also bears emphasizing that when the third person knows that the agent was acting beyond his power or authority. resolutions and instructions. Even in instances when he was authorized to act according to his discretion. that discretion must not conflict with prior Board orders.[14] He also did not submit the contracts to the Board after their consummation so there was. but also documentary. Dominador Monteverde. He must act according to the instructions of the Board of Directors. and is not entitled to recover damages from the agent. Safic insists that the appellate court grievously erred when it did not declare that IVOs President. The most prudent thing petitioner should have done was to ascertain the extent of the authority of Dominador Monteverde. he did not secure the Boards approval. whether the assumed agency be a general or special one. Under Article 1898[12] of the Civil Code.

your Honor. Q. A. Do you know where this meeting took place? A. Fernando Q. As far as you know. Q. Q. Abad Atty. It was purely on physical trading. Rodrigo Monteverde. We only have to sell the available stocks in our inventory. I observed that the policy of the corporation is for the company to engaged (sic) or to purely engaged (sic)in physical trading. I frequently visited the plant and from my observation. I think IVO is engaged in trading oil. Abad. Atty. What do you mean by physical trading? A. Then would [you] now answer my question? Witness Atty. There was a meeting held in the office at the factory and it was brought out and suggested by our former president. Who established the so-called physical trading in IVO? A. your Honor. although I was at the time already a stockholder. As a stockholder. 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. Q.Be that as it may. A. testified that the IVO Board had set down the policy of engaging in purely physical trading thus: A. your Honor. Dominador Monteverde. what kind of trading was IVO engaged with? Q. Atty. who succeeded Dominador Monteverde as IVO President. The Board of Directors. What we are talking is about 1985. How did you know this? A. Abad Well. Were you a member of the board at the time? Court A. Fernando Court No basis. Abad Atty. Fernando No basis. I am already a stockholder and a member. I am not too familiar with trading because as of March 1987. Witness may answer if he knows. Q. And what is the other form of trading? Objection. sir. As far as I know it was sometime in 1985. How did you know that? A. Q. 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. Physical Trading means we buy and sell copras that are only available to us. In 1975. Why dont you lay the basis? Atty. no basis. that the company should engaged (sic) in future[s] contract[s] but it was rejected by the Board of Directors. 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. Q. Now you said that IVO is engaged in trading. It was only Ador Monteverde who then wanted to engaged (sic) in this future[s] contract[s]. Q. 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. as I have to supervise and monitor purchases of copras and also the sale of the same. I was not yet an officer of the corporation. With whom does it usually trade its oil? Q. rather as member of [the] Board of Directors. PAT CASE: AGENCY Page 111 of 150 .

died in 1987 or 1988. These pattern (sic) belies plaintiffs contention that the lead time merely allowed for milling and building up of oil inventory. All the supposed performances fell in 1987. forward sales contracts in which IVO had undertaken to deliver the crude coconut oil months after such contracts were entered into.V. What else? Q. And a resolution was passed disowning the illegal activities of the former president. sir. 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. 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. Q. Atty. Since the buyers letter of credit guarantees payment to Page 112 of 150 . 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. were similarly with their 1985 predecessors. Indeed. The 1985 contracts were performed within an average of two months from the date of the sale. sir. The 1986 contracts. were you already a member of the Board of Directors at that time? xxxxxxxxx A. Do you have a copy of the minutes of your meeting in 1985? A. In all likelihood.[19] xxxxxxxxx Atty. How far has this Dominador Monteverde been using the name of I. Incidentally our Secretary of the Board of Directors. When you mentioned about the meeting in 1985 wherein the Board of Directors rejected the future[s] contract[s]. as the 1985 contracts were. You said the Board of Directors were against the company engaging in future[s] contracts. on IVO. sir. and despite [the] request of our office for us to be furnished a copy he was not able to furnish us a copy. the contract covered by Exhibit J was to be performed 11 to 12 months from the execution of the contract. SAFIC would bewail. x x x 1. Dominador Monteverde. Petitioner next argues that there was actually no difference between the 1985 physical contracts and the 1986 futures contracts. Do you keep records of the Board meetings of the company? A. 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. as aptly pointed out by the trial court and sustained by the appellate court Rejecting IVOs position. Dominador Monteverde to engage in future[s] contract[s] was rejected by the Board of Directors? A. Q. What do you mean by that the future[s] contracts were not entered into the books of accounts of the company? PAT CASE: AGENCY Subjecting the evidence on both sides to close scrutiny.Witness Atty. Those were not recorded at all in the books of accounts of the company. Yes. the Court has found some remarkable distinctions between the 1985 and 1986 contracts. sir. Abad Q. Because this future[s] contract is too risky and it partakes of gambling. Witness A. A. Elfren Sarte. What did you do when you discovered these transactions? Q.[20] Q. SAFIC claims that there is no distinction between the 1985 and 1986 contracts. has this policy of the Board of Directors been observed or followed? The contention is unpersuasive for. both of which groups of contracts were signed or authorized by IVOs President. Abad Q. Do you know the reason why the said proposal of Mr. It is evident that the 1986 contracts constituted trading in futures or in mere expectations.[21] A. Yes. 2. Mr. As far as you know. Q. in selling future contracts without the proper authority and consent of the companys Board of Directors? A. On the other hand. SAFIC concludes that the 1986 contracts were equally binding. the 1986 contracts were to be performed within an average of eight and a half months from the dates of the sale.O. Yes. Q. Dominador Monteverde never records those transactions he entered into in connection with these future[s] contracts in the companys books of accounts. Abad A.

the desired production and inspection of the documents was precipitated by the testimony of plaintiffs witness (Donald OMeara) who admitted. Besides. if not amply ascertained by examining the records of the related sales admitted to be in plaintiffs possession. But with respect to the disputed 1986 contracts. Petitioner first points out that its wash out agreements with Monteverde where IVO allegedly agreed to pay US$293. the 1986 contracts were never recorded either in the 1986 accounting books of IVO or in its annual financial statement for 1986. the documents would have been adverse to Safics cause. Petitioner further contends that both the trial and appellate courts erred in concluding that Safic was not able to prove its claim for damages. The 1986 sales were. The so-called wash out agreements are clearly ultra vires and not binding on IVO. 1990). according to Safic.the seller as soon as the latter is able to present the shipping documents covering the cargo. Apart from the above. that they are available.] all other contracts. however. seven out of the ten 1986 contracts were to be paid by telegraphic transfer upon presentation of the shipping documents. confirmations. in violation of its above requirement. This fact lends an uncertain element in the 1986 contracts. industrious. Notwithstanding the foregoing ruling of the trial court. 1963. if the coconut oil has been pooled and sold as general oil. Dominador Monteverde made business for himself. Furthermore. What is more.] Did Safic pay damages to its buyers? Where were the receipts? Did Safic have to procure the equivalent oil from other sources? If so.] the contracts of the purchase of oil that. reason there would be none for the same witness to say later that they could not be produced. They were neither recorded in the books nor reported to the Central Bank. 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. prompting the court a quo to assume that if produced. (b) and (c). therefore suspect. Plaintiff claims for the award of liquidated or actual damages to the tune of US$391. however. the amended motion for production and inspection of the defendant is in order. a document that was prepared prior to the controversy. if the Court may additionally dwell on the issue of damages. such agreements did not prove Safics actual losses in the transactions in question. This amended motion was opposed by Safic. as generally described.593. are available. 151 dated April 1. Safic suffered damages to the extent that they had to buy the same commodity from others at higher prices. Safic did not produce the required documents. it had to resort to in order to fill up alleged undelivered commitments of IVO.500. substantiated by the evidence and only raises several questions. second. price and date of delivery? 2. IVO faithfully complied with Central Bank Circular No. Unlike the letter of credit. thirdly. in its September 16. conclusion can easily be drawn therefrom that there is materiality in the defendants move: firstly. There is also no evidence that Safic had contracted to supply third parties with Page 113 of 150 . and as. the parties stipulated during the hearing that none of these contracts were ever reported to the Central Bank. by Dominador Monteverde. a mere promise to pay by telegraphic transfer gives no assurance of [the] buyers compliance with its contracts.A. that it presented purchases of coconut oil it made from others during the period of IVOs default. proof thereof is a must which can be better served. wash out agreements and other documents of sale related to (a).] contracts of resale of coconut oil that Safic bought from IVO. If the said witness represented that the documents.] 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. by this nature of the plaintiffs claim for damages. On the other hand. As such. who were these sources? Where were their contracts and what were the terms of these contracts as to quantity. b.00 for some of the failed contracts was proof enough and. in open court..] the records of the pooling and sales contracts covering the oil from such pooling. to wit: 1. even after they have been clearly described. formerly an assistant of Dominador Monteverde. 4. and 2. testified that they were strange goings-on about the 1986 contract. secondly. the documents are specified in the amended motion. such profits were ordered remitted to unknown accounts in California.[24] ruled that: From the analysis of the parties respective positions.] it is conjectural since it rests on average prices not on actual prices multiplied by the actual volume of coconut oil per contract. 3. it is not disputed that with respect to the 1985 contracts. (See Stipulation of Facts dated June 13. In its efforts to bolster its claim for damages it purportedly sustained. IVO filed an amended motion[22] for production and inspection of the following documents: a. (Exhibits 6 to 6-0 and 7 to 7-I). unlike the 1985 contacts. 1988 Order. certainly. xxxxxxxxx Evidently. As the defendant cannot be precluded in taking exceptions to the correctness and validity of such claim which plaintiffs witness (Donald OMeara) testified to. 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. since it was ready to pay when IVO was not ready to deliver. The fact is that Safic did not pay for the coconut oil that it supposedly ordered from IVO through Monteverede. the production and inspection of the desired documents would be of tremendous help in the ultimate resolution thereof.62 which. using the name of IVO but concealing from it his speculative transactions. The foregoing claim of petitioner is not. Emelita Ortega. its opening usually mark[s] the fact that the transaction would be consummated.[23] The trial court. We remain unconvinced. hardworking and diligent personnel. is a huge amount in terms of pesos. plaintiff would entertain no confusion as to what.] 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. invoices. But this mode of computation if flawed because: 1. 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. if there would be a full disclosure by the parties on both sides of all documents related to the transactions in litigation. d. It is not disputed that. Safic only claims that. U. c. The interest of justice will be served best. price and date of delivery? PAT CASE: AGENCY The records disclose that during the course of the proceedings in the trial court. in those unreported cases where profits were made.S. 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. and which defendant disputes.

496. open and continuous long before the alleged registration of the subject property in the name of Antonio Francisco. P5. COURT OF APPEALS. inherited the land from their late father Tranquilino Cervantes who purchased the same on January 22. who in turn purchased the property from Vicente Espino. 2200-Pangasinan and registered in the name of Antonio G. (2) declaring the validity of the Deed of Sale dated January 22. 1985. VENANCIO FRANCISCO.00 per hearing. with an area of seven thousand seven hundred thirty-three (7. Lot No. together with his brother Claro and sister Macrina-Teresita. In dispute are certain portions of a parcel of land (Parcel 1.[10] Page 114 of 150 . declared under Tax Declaration No. a substantially correct determination of its actual damages would have been possible. exclusive. GUILLERMO (GIL) FRANCISCO. unfortunately. HON.00 as litigating expenses. now Tax Declaration No. over the questioned parcel of land was lawful and in the concept of owner.00 as moral damages. 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. (3) ordering the plaintiffs. Pangasinan. 473 and assessed at P2. P50. During his lifetime. plaintiffs. and Marcelino Nievera from Estefania Ignacio Vda. were illegally occupying and had declared in their names portions of said property as follows: Antonio Cervantes 398 square meters.000. legal and equitable justification. Francisco who was the registered owner of the subject property. ARMANDO ABAD and ADORACION ORDUNA. P5. jointly and severally. 445..R. respondents. the late Juan Abad. defendants Abad prayed that the plaintiffs be ordered to pay them P10. (2) pay reasonable rentals from the time this complaint was filed up to the time they vacate the land. moral damages and the costs. who in turn earlier purchased the property from plaintiffs predecessors-in-interest. the latter being known as a mere trustee or overseer.[25] WHEREFORE. in view of all the foregoing.000. DECISION DE LEON. Tranquilino Cervantes introduced improvements in the land without any objection from the plaintiffs or their predecessors-in-interest. filed an amended complaint alleging that they were the heirs of the late Antonio G. By virtue of the Deed of Extrajudicial Partition executed by the heirs of Tranquilino Cervantes. the petition is DENIED for lack of merit. alleged that their possession.442 square meters. 118982. was not the case. No.D. its basis cannot be left to speculation and conjecture. and that between the actual owners-possessors before the registration under Act No. but the latter refused to do so.[3] A portion with an area of 3. to pay him the sum of P5.00 as actual and other incidental expenses. (3) pay actual damages amounting to P4. P50. JR.00 as moral damages.00. together with that of their predecessors-in-interest. No.00 as attorneys fees. This.000. 1947 from Juan Abad.[5] Hence. The questioned parcel was a portion of the land jointly purchased by their parent. De F. Along the same vein. Bugallon. 496 and a usurper-trustee who applied and successfully registered the same land in his name. covered and described in TCT No.000. the ownership of the contested premises were allegedly transmitted to them. 316.[6] In his answer.000.00 as exemplary damages.[7] Defendants spouses Armando and Adoracion Abad. SO ORDERED. this action for recovery of land wherein the plaintiffs prayed that the defendants be ordered to (1) vacate immediately the portions of land that they are occupying and to recognize plaintiffs ownership thereof. notorious. P5. Armando Abad and Adoracion Ordua .733) square meters. Cervantes prayed that judgment be rendered: (1) dismissing the complaint against him for lack of cause of action. petitioners.[9] As counterclaim. Suffice it to state in this regard that [T]he power of the courts to grant damages and attorneys fees demands factual. even dating back before the year 1920.00 as exemplary damages and costs of suit. plus costs. February 19. the former should prevail over the latter. [G.000.000. APOLONIA FRANCISCO and VIRGINIA FRANCISCO. 496 as amended by P. LOIDA CERVANTES. Francisco.[8] Defendants Abad alleged that the imprescriptibility and indefeasibility of the Torrens Title do not apply to the case at bar because registration by the applicant-registrant was done in bad faith and by way of actual fraudulent acts. denied the material allegations of the complaint. defendant Antonio Cervantes. 1.00 as reasonable attorneys fees. under Act No. P20. vs. Pangasinan.000. declared under Tax Declaration No. Totaez. that Act No. 2001] LORETA BRAVO CERVANTES. When Juan Abad died. plan Psu-131830) situated in Poblacion. and that they recently discovered that the defendants.coconut oil from the 1986 contracts and that Safic had to buy such oil from others to meet the requirement. LEAH CERVANTES.768 square meters was earlier ceded to the Municipality of Bugallon. who purchased the same from Antonio Fernandez. the defendant spouses acquired the subject property partly by inheritance and partly by purchase.000. on the other hand. now deceased. 16211 (for Recovery of Land with Damages) ordering herein petitioners to vacate the respective parcel of land which they are occupying and to recognize private respondents ownership thereof. 1947.: Before us is a petition for review on certiorari of the Decision[1] of the Court of Appeals dated August 25. herein petitioners. and in defense claimed legal possession over one of the parcels of land in question alleging that he. herein private respondents. whose possession and ownership of the property was public. appearance fees computed at P300. CHRISTY CERVANTES. herein petitioner.480. SPS. Their possession was for more than 70 years. CHARME CERVANTES. PAT CASE: AGENCY Plaintiffs demanded that the defendants vacate the subject premises. In his counterclaim. Had Safic produced the documents that the trial court required. 1994 affirming the decision[2] of the Regional Trial Court of Pangasinan in Civil Case No.[4] On July 8. 1529 was never intended to shield the fraudulent and unlawful acts of the applicant-registrant in order to divest the actual owner and possessor thereof before the registration. J.00 as attorneys fees.

If there is/are somebody who is/are guilty of laches in this case. Who are the lawful owners of the parcels of land in question? 2. the resolution of the issue of ownership of the subject premises called for examination of the respective evidence of the parties. 3. WHEREFORE. Petitioners ascribe to the Court of Appeals the following errors: 1. and to recognize the plaintiffs ownership thereof. open and notorious possession. an examination of the evidence on record particularly Exhibits D-2 and F-2. Vicente Espino. petitioners asserted that as shown in the pre-trial order. considering that the next entry showed that one Pablo Zalazar also purchased the same parcel 2 of Lot No.[13] Petitioners motion for reconsideration was denied by the Court of Appeals in a Resolution dated February 13. PAT CASE: AGENCY Petitioners faulted the Court of Appeals for concluding that private respondents are the lawful owners of the parcels of land in question based on a doubtful mutilated entry in TCT No. 1995.[15] Moreover. 1994.000. while the sale to Pablo Zalazar involved Lot No. It is in this connection that they questioned the correctness and authenticity of the mutilated portion on page 3 of TCT No. Antonio Francisco. Plan Psu-131830. Contrary to the conclusion of the Court of Appeals.[19] Nevertheless. IT IS AN ERROR (NOT) TO CONSIDER SUBSEQUENT ACTS OF THE PARTIES AFTER THE SALE TO ASCERTAIN THE IDENTITY OF THE LAND SUBJECT OF THE SALE. SO ORDERED. the sale to Vicente Espino. 3. the trial court rendered judgment in favor of the plaintiffs. who are in physical possession of the lots have been paying their obligation as landowners as shown by their respective tax declarations and tax receipts.[20] Clearly. An issue which was neither raised in the complaint nor ventilated during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rule of fair play. where their respective houses were erected fifty (50) years ago.Based on the Pre-trial Order dated July 8. Lot 1. the dispositive portion of which reads: WHEREFORE. the true identity of the land sold was mutilated and it was made to appear in handwriting that Vicente Espino purchased parcel 2 of Lot No. Whether or not the parties are entitled for damages as claimed in their respective pleadings. 2200 or a portion thereof during the pre-trial and trial on the merits in the trial court. petitioners. the parties agreed that the issues are the following: 3. which were the photocopy of TCT No. purchased parcel 2 of Lot No.000. judgment is hereby rendered in favor of the plaintiffs and against the defendants. 1. 3 instead of parcel 1 of Lot No. There was no evidence adduced to show that the handwritten words were the correct words before the mutilation. there is a waiver of any objection to its admissibility. it would be the defendants. 1985. showed that the sale to Vicente Espino involved Lot No. they failed to obtain a title over the parcels in question.00 by way of reasonable attorneys fees and P10. ARE THE LAWFUL OWNERS OF THE LANDS IN QUESTION BASED ON A DOUBTFUL MUTILATED ENTRY IN TCT NO. Petitioners further argued that the private respondents inaction for 50 years showed that they were not the owners of the subject parcels of land. 2200. On the other hand. Because for a considerable long period of time. 2200 (Exhibit D) showing that their predecessor-in-interest. and b) ordering the defendants to pay actual damages in the amount of P4. which in part reads: Thus.[22] Petitioners cannot prove their Page 115 of 150 . The argument of petitioners is without merit. petitioners did not object to the formal offer in evidence of TCT No. the alleged predecessor-in-interest of the Abad spouses did not involve the parcel of land. HEREIN PRIVATE RESPONDENTS. which contained the encumbrances affecting TCT No. to wit: a) ordering the defendants to vacate immediately the parcel of land they are occupying. finding no reversible error in the decision appealed herefrom the same is hereby AFFIRMED in toto. this Court hereby declares that the plaintiffs are the owners of the parcels of land subject of this action having acquired it from their late father. petitioners did not raise in issue the authenticity of the now contested TCT No. 1987. 2200. justice and due process. neither can it be defeated by prescription. A title once registered under the Torrens System cannot be defeated even by adverse. 2200. IT IS AN ERROR NOT TO RECOGNIZE THE DEFENDANTS. They argued that under the entry compraventa Vicente Espino on said page. D-1 and D-2. and realty taxes were not paid by them. they did not admit the authenticity of Exhibits D. Further.[12] The Court of Appeals affirmed the decision of the trial court in its Decision promulgated on August 25. Antonio Francisco by hereditary succession. 2200 in the name of Antonio Francisco.[16] Further. AS LAWFUL OWNERS OF THEIR RESPECTIVE RESIDENTIAL LOTS. subject matter of this case. 2. SO ORDERED. It is a fundamental principle in land registration that the certificate of title serves as evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein. IT IS AN ERROR TO CONCLUDE THAT THE PLAINTIFFS.[14] 1. HEREIN PETITIONERS. 2200 as Exhibit D and Series[17] and Exhibit F and Series.00 by way of moral damages and to pay the costs. Prescription and laches cannot be raised against the plaintiffs.[18] hence. the determination of issues at the pre-trial conference bars the consideration of other questions on appeal. As observed by the Court of Appeals. 7.[11] On October 28.[21] in this case the private respondents father. which is parcel 1. 3.

Simply stated. Not being the owner of the parcel in question. Reyes.[25] Further. San Agustin. 2200 issued in the name of the late Antonio Francisco. No. I The Deed of Absolute Sale (Exhibit 2) entered between Juan Abad and Tranquilino Cervantes. thus: The Court of Appeals affirmed the decision of the trial court in toto. has no probative value also for being irrelevant. We affirm the decision of the Court of Appeals with modification. This clearly shows that what Juan Abad sold to Tranquilino Cervantes on January 22. 2200 (Exhibit A) which the parcel in question is included.00. together with his wife Candida. L-109937 March 21. 2200.[23] decree of registration upon which it is based. that the sale of the parcel in question was made by Juan Abad to Tranquilino Cervantes (father of defendant Antonio Cervantes) on January 22.ownership of the subject parcels of land through tax declarations and corresponding tax receipts inasmuch as they are not conclusive evidence of ownership. DBP deducted the amount of P1. Dans accomplished and submitted the "MRI Application for Insurance" and the "Health Statement for DBP MRI Pool. Basilan Branch. was approved by DBP on August 4. his son and daughter-in-law. Juan B. 26434 and its resolution denying reconsideration thereof. Simply put. WHEREFORE. 1947 was a parcel of land that did not belong to the former. the late father of the herein plaintiffs. the sale of the parcel in question made by Juan Abad to Tranquilino Cervantes did not affect the title of Antonio Francisco over said parcel. 1994 DEVELOPMENT BANK OF THE PHILIPPINES. The Deed of Extra-Judicial Partition of Real and Personal Property with Sale has no probative value because it is selfserving. QUIASON. Totaez to Juan Abad and Marcelino Nievera were never proven in court.476. thus: The purchases alleged by the defendants-spouses on the questioned parcel of land beginning from their alleged primitive predecessor-in-interest Vicente Espino to Estefania Ignacio Vda. this is the same deed wherein this Court has already passed upon concerning its efficacy and ruled in the early part of this decision that it has no effect whatsoever to TCT No. 2200. 1947 took place when the said TCT No. the trial court found that defendant. respondents. 1924. The assailed Decision of the Court of Appeals and its Resolution denying the motion for reconsideration are hereby AFFIRMED. there was no property that they could partition among themselves because said property subject of the partition did not belong to their late father Juan Abad but to the late Antonio Francisco. 2200 issued in the name of Antonio Francisco. Taking into consideration the documentary evidence presented by the plaintiffs. SO ORDERED. applied for a loan of P500. then 76 years of age. in the reduced amount of P300. the assailed Decision of the Court of Appeals should be as it is hereby affirmed. 1987 and released on August 11. It is because said parcel of land already belonged to Antonio Francisco for having obtained a title over said parcel of land covered by TCT No. petitioner. particularly that of TCT No. Hence.[24] Likewise. represented by CANDIDA G." PAT CASE: AGENCY Page 116 of 150 . after the expiration of the one year period from the issuance of the A loan. Office of the Legal Counsel for petitioner. In May 1987. it sought to partition the parcel of land which is already covered by TCT No. 43 Phil. The documentary evidence they presented before this Court were not sufficient to establish their right over the parcel in question. vs. serves as evidence of an indefeasible title to the property in favor of the person whose name appears thereinAntonio Francisco. the trial court correctly held that defendants Abad had no right to the parcel of land they were occupying. Dans. G. Further. DANS. 1987. De F. among others. 2200 was issued on November 8.R CV No. the same being in accordance with law and the evidence. J. 1987.00 as payment for the MRI premium. on the other hand. Said TCT No. the father of the plaintiffs. The Tax Declaration issued in the name of the defendants-spouses and the corresponding Tax Receipts have no probative value also as against the TCT No. herein petitioner Cervantes. Besides. DANS.R. or more than twenty-two (22) years before the aforesaid sale between Juan Abad and Tranquilino Cervantes. On August 15. TCT No. 2200 was already existing in the name of Antonio Francisco. COURT OF APPEALS and the ESTATE OF THE LATE JUAN B. the petition is DENIED for lack of merit. Dans.00 with the Development Bank of the Philippines (DBP). was advised by DBP to obtain a mortgage redemption insurance (MRI) with the DBP Mortgage Redemption Insurance Pool (DBP MRI Pool). it becomes incontrovertible (Pamintuan vs.000. Well-settled is the rule that one cannot sell what he does not own and this rule has much force when the subject of the sale is a titled land that belongs to another person.: This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court to reverse and set aside the decision of the Court of Appeals in CA-G. It is because they are not proofs of ownership. 558). Besides. Juan Abad did not transmit any right whatsoever with respect to the parcel in question. had no right to the parcel of land which he and his siblings were occupying. and the DBP MORTGAGE REDEMPTION INSURANCE POOL. As the principal mortgagor.000. Santayana. Molo & Alegre for DBP Mortgage Redemption Insurance Pool. 2200 issued in the name of the late Antonio Francisco. From the proceeds of the loan.

000. On October 21. 1987.476. At the pre-trial. Branch I. that required Dans. to secure MRI coverage. The DBP Page 117 of 150 . 1993. 1990. and (2) when the full premium is paid during the continued good health of the applicant.00 plus legal rate of interest as amortization payment paid under protest. as a matter of policy and practice. being over the acceptance age limit of 60 years at the time of application.500. and (3) that damages be awarded. 1992. Accordingly.000. found the case ripe for summary judgment. On March 10. the MRI coverage shall take effect: (1) when the application shall be approved by the insurance pool. Hence. 1987. It is understood and agreed that no insurance coverage shall be effected unless and until this application is approved and the full premium is paid during my continued good health (Records. The Counterclaims of Defendants DBP and DBP MRI POOL are hereby dismissed. The DBP offered to refund the premium of P1.00 as costs of litigation and other expenses.00. did not approve the application of Dans. DBP made Dans fill up and sign his application for MRI. ordering the latter: The liability of DBP is another matter. likewise. On September 23. On September 3. the trial court rendered a decision in favor of respondent Estate and against DBP. the trial court narrowed down the issues and. required him to apply for MRI. must concur. less the DBP service fee of 10 percent. in view of the foregoing consideration and in the furtherance of justice and equity. the DBP MRI Pool cannot be held liable on a contract that does not exist. the MRI premium of Dans. and other relief just and equitable.00 which the deceased had paid.476. Under the aforementioned provisions. Respondent Estate therefore prayed: (1) that the sum of P139. relayed this information to the DBP MRI Pool. respondent Estate. Basilan. When Dan's loan was released on August 11. which DBP credited to its account with full knowledge that it was payment for Dan's premium. The DBP. There is also no showing that it accepted the sum of P1. 1. however. hence. In a decision dated September 7. To consider the mortgage loan of P300. "5-Bank") with the following declaration: I hereby declare and agree that all the statements and answers contained herein are true. Four days latter. The DBP's motion for reconsideration was denied in a resolution dated April 20. 1987. without opposition from the parties. To pay plaintiff in the amount of P10. On February 10. The pool. after the trial court found no privity of contract between it and the deceased. which may serve as basis for the judgment.000. There was. DBP and the DBP MRI Pool admitted all the documents and exhibits submitted by respondent Estate. She. the appellate court affirmed in toto the decision of the trial court. the power to approve MRI applications is lodged with the DBP MRI Pool.On August 20. the DBP MRI Pool was advised of the credit.00 as attorney's fees. DBP already deducted from the proceeds thereof the MRI premium. The DBP and the DBP MRI Pool separately filed their answers. Dans.00 including all interest accumulated or otherwise to have been settled. 1987. which it paid under protest for the loan. despite knowledge of his age ineligibility. this recourse. 4. no perfected contract of insurance. Dans died of cardiac arrest. p. 40). which the DBP later offered. filed a complaint with the Regional Trial Court. (2) that the mortgage debt of the deceased be declared fully paid. The Cross-claim of Defendant DBP is likewise dismissed (Rollo. the DBP MRI Pool notified DBP that Dans was not eligible for MRI coverage. DBP apprised Candida Dans of the disapproval of her late husband's MRI application.00. demanding payment of the face value of the MRI or an amount equivalent to the loan. against DBP and the insurance pool for "Collection of Sum of Money with Damages. 1989. however. being joined conjunctively. 1987. the Court finds judgment for the plaintiff and against Defendant DBP. These two conditions. as a result. was credited by DBP to the savings account of the DBP MRI Pool. complete and correct to the best of my knowledge and belief and form part of my application for insurance. with the former asserting a cross-claim against the latter. 2. as well as his health statement." Respondent Estate alleged that Dans became insured by the DBP MRI Pool when DBP.000.500. refused to accept an ex gratia settlement of P30. The dispositive portion of the decision read as follows: Undisputably. The DBP MRI Pool. was absolved from liability. II When Dans applied for MRI. WHEREFORE. and later collected the insurance premium thereon. 79) The DBP appealed to the Court of Appeals. Instead of allowing Dans to look for his own insurance carrier or some other form of insurance policy. The trial court declared DBP in estoppel for having led Dans into applying for MRI and actually collecting the premium and the service fee. To return and reimburse plaintiff the amount of P139. As a result of these admissions. the trial court ordered the parties to submit their respective position papers and documentary evidence. the borrower.00. p. Consequently. satisfied or set-off by virtue of the insurance coverage of the late Juan B. be reimbursed. upon notice. he filled up and personally signed a "Health Statement for DBP MRI Pool" (Exh. To pay plaintiff the amount of P10. 3. but Candida Dans refused to accept the same. through Candida Dans as administratrix. DBP compelled him to apply with the DBP MRI Pool for MRI coverage. PAT CASE: AGENCY It was DBP. with full knowledge of Dans' age at the time of application.

70. and on the twenty-third day from the date of release of his loan. Every person who. cannot be for the entire value of the insurance policy. The same may be recovered in acts referred to in Article 2219 of the Civil Code. There is no showing that Dans knew of the limitation on DBP's authority to solicit applications for MRI. 1907). Choa Tek Hee v. One is entitled to an adequate compensation only for such pecuniary loss suffered by him as he has duly proved (Civil Code of the Philippines. there is no absolute certainty that Dans could obtain an insurance coverage from another company. Inasmuch as the non-disclosure of the limits of the agency carries with it the implication that a deception was perpetrated on the unsuspecting client. Lauderdale. 2199). the provisions of Articles 19. The DBP's liability. shall indemnify the latter for the same. 422 [1992]. Philippine Publishing Co.00 to respondent Estate in ex gratia settlement of its claim and that DBP's non-disclosure of the limits of its authority amounted to a deception to its client. As an insurance agent. but must be actually proved with a reasonable degree of certainty (Refractories Corporation v. WHEREFORE. The maximum age for MRI acceptance is 60 years as clearly and specifically provided in Article 1 of the Group Mortgage Redemption Insurance Policy signed in 1984 by all the insurance companies concerned (Exh. Considering that DBP had offered to pay P30. to be recoverable.. then the latter is liable for damages to him (V Tolentino. With costs against petitioner. 447 [1916]). No proof of pecuniary loss is required in the assessment of said kind of damages (Civil Code of Philippines. 176 SCRA 539 [1989]. Dans would have secured an MRI from another insurance company. Art.000. i. Under Article 1987 of the Civil Code of the Philippines. Speculative damages are too remote to be included in an accurate estimate of damages (Sun Life Assurance v. willfully or negligently causes damage to another.later submitted both the application form and health statement to the DBP MRI Pool at the DBP Main Building. Considering his advanced age. is highly speculative.. In dealing with Dans." The DBP is not authorized to accept applications for MRI when its clients are more than 60 years of age (Exh. Knowing all the while that Dans was ineligible for MRI coverage because of his advanced age. Article 2208 [11]). on the nineteenth day after applying for the MRI. 75). DBP deducted 10 percent of the premium collected by it from Dans.-CV No. Agency 307 [1952]. and (2) to PAY said Estate the amount of Fifty Thousand Pesos (P50. must not only be capable of proof. While Dans is not entitled to compensatory damages. or in affirming.00) as moral damages and the amount of Ten Thousand Pesos (P10. 46 N. As service fee. "1-Pool"). Article 20 provides: PAT CASE: AGENCY Page 118 of 150 . p. 2216). Commentaries and Jurisprudence on the Civil Code of the Philippines. The assessment of moral damages is left to the discretion of the court according to the circumstances of each case (Civil Code of the Philippines. who willfully causes loss or injury to another in a manner that is contrary to morals. and deducting its agent's commission and service fee. the decision of the Court of Appeals in CA G.00 with legal interest from the date of the filing of the complaint until fully paid. 34 Phil. Art. Intermediate Appellate Court. Rueda Hermanos. DBP exceeded the scope of its authority when it accepted Dan's application for MRI by collecting the insurance premium. Dans the amount of P1.000. or concealing the authority under which he assumes to act (Francisco.00) as attorney's fees. he is entitled to moral damages. The rule that the agent is liable when he acts without authority is founded upon the supposition that there has been some wrong or omission on his part either in misrepresenting. Article 21 provides: Any person. contrary to law. citing Hall v.e. DBP was wearing two legal hats: the first as a lender. The liability of an agent who exceeds the scope of his authority depends upon whether the third person is aware of the limits of the agent's powers. however. unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Art.00 would be reasonable.Y. in the exercise of his rights and in the performance of his duties. It must also be noted that Dans died almost immediately. citing Sentencia [Cuba] of September 25. DBP had full knowledge that Dan's application was never going to be approved. 26434 is MODIFIED and petitioner DBP is ORDERED: (1) to REIMBURSE respondent Estate of Juan B. 844 [1918]).000. good customs or public policy shall compensate the latter for the damage.. "the agent who acts as such is not personally liable to the party with whom he contracts.000. Article 19 provides: Every person must. V. act with justice give everyone his due and observe honesty and good faith.476. thereby leading him and his family to believe that they had already fulfilled all the requirements for the MRI and that the issuance of their policy was forthcoming. Makati Metro Manila. and the second as an insurance agent. DBP made Dans go through the motion of applying for said insurance. Damages. an award of moral damages in the amount of P50. If the third person dealing with an agent is unaware of the limits of the authority conferred by the principal on the agent and he (third person) has been deceived by the non-disclosure thereof by the agent. To assume that were it not for DBP's concealment of the limits of its authority. "1-Pool").R. 2216). 37 Phil. 20 and 21 of the Civil Code of the Philippines come into play. The award of attorney's fees is also just and equitable under the circumstances (Civil Code of the Philippines. Apparently. and therefore would have been fully insured by the time he died.

651. First. the Court of Appeals declared said decision a nullity for failure to comply with the requirement in Section 14. respondent corporation alleged that on several occasions in 1979 and 1980. Article VIII of the 1987 Constitution that decisions of courts should clearly and distinctly state the facts and the law on which they are based.00.SO ORDERED. 7 A motion for the reconsideration of said judgment of respondent court was subsequently denied in a resolution dated January 23.520. the Court of Appeals affirmed the judgment of the trial court in a decision promulgated on September 27. Although she had only one store located at 27 Diamond Street. Public Attorney's Office for petitioners.631. the court a quo rendered a decision on February 17. Q-34718 of the then Court of First Instance of Quezon City. Likewise. REGALADO. 1994 NORA S.00 500346 Cash 5/15/80 10.00 Further. In its complaint. petitioners had an outstanding account of P94.00 500326 600 Fulls returned 5/10/80 23. 1989. petitioners allegedly had an outstanding balance of P20. Jubay for private respondent. 5 In compliance with the directive of the Court of Appeals.. and ultimately. our course of action in this case and the denouement of the controversy therein takes into account the jurisprudential rule that in the present recourse we would normally have restricted ourselves to questions of law and eschewed questions of fact were it not for our perception that the lower courts manifestly overlooked certain relevant factual considerations resulting in a misapprehension thereof.60. INC. The details of said receipts are as follows: TPR No. petitioners purchased and received on credit various products from its Quezon City plant. is engaged in the business of manufacturing.40 therein.00 which.357. CV No. whether the proponent of the corresponding claim has preponderated or rested on an equipoise or fallen short of preponderance. On March 17. plus legal interest of 6% per annum from the filing of the action until full payment of the amount adjudged. Her husband and copetitioner. that position shall necessarily affect our analysis of the rules on the burden of proof and the burden of evidence.R. Eugenio. petitioners also purchased and received on credit various products from respondent's Muntinlupa plant and. Marikina. G. In sum. 1980. plus 12% interest per annum until the principal amount shall have been fully paid. on various occasions in 1980. 1981. the reduced amount of P64. 1980.437. Alfredo Y.000.546. Date of Issue Amount 500320 600 Fulls returned 5/6/80 PAT CASE: AGENCY P23. respondents. is a falsification.520. In addition. 1991. ordering petitioners.: Private respondent Pepsi-Cola Bottling Company of the Philippines. Eugenio in Sales Invoice No.40 as of July 11. EUGENIO. Branch 9 (now Regional Trial Court. Eugenio had a regular charge account in both the Quezon City plant (under the name "Abigail Minimart" *) as well as in the Muntinlupa plant (under the name "Nora Store") of respondent corporation. 6 On appeal therefrom. 10623. docketed as Civil Case No. however. 8 We agree with petitioners and respondent court that the crux of the dispute in the case at bar is whether or not the amounts in the aforementioned trade provisional receipts should be credited in favor of herein petitioner spouses. HON. Eugenio and Alfredo Y. 85366 dated May 15. J.560. as defendants therein to jointly and severally pay private respondent the amount of P74. In a so-called encyclopedic sense. Altogether. it would be respondent corporation which would be indebted to them in the sum of P3. 4 On appeal in CA-G. the lower court rendered a second decision on September 29. EUGENIO and ALFREDO Y. as well as P20. petitioners supposedly had an outstanding balance of P38. As of December 31. jointly and severally. showing payments in the total sum of P80. Petitioner Nora S.00 as attorney's fees. petitioners. private respondent filed a complaint for a sum of money against petitioners Nora S.856.R.00 2 ————— Total P80. Petitioners contended that had the amounts in the TPRs been credited in their favor. petitioners were this time ordered to pay. 1980 in the amount of P5. 1992. 1989.500. they would not be indebted to Pepsi-Cola. making bottling and selling soft drinks and beverages to the general public. used to be a route manager of private respondent in its Quezon City plant.00 500344 600 Fulls returned 5/14/80 23. Emerald Village.02 representing overpayment.20 there. In this new decision. Eugenio was a dealer of the soft drink products of private respondent corporation. Metro Manila. petitioners argue that if the aforementioned amounts were credited in their favor. Romualdo M. The Court of Appeals accordingly remanded the records of the case to the trial court. directing it to render another decision in accordance with the requirements of the Constitution. vs. as of December 31. petitioners maintain that the signature purporting to be that of petitioner Nora S.000. 1 In their defense. COURT OF APPEALS and PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES. 3 which was included in the computation of their alleged debt. Inc. Branch 97).849. 1981 regarding alleged "non-payment of debts to Page 119 of 150 .188. Antonio N. It appears that on August 1. Rosario. private respondent through the head of its Legal Department. so the complaint alleged. the backdrop. sent an inter-office correspondence to petitioner Alfredo Eugenio inviting him for an interview/interrogation on August 3. No.00 made by Abigail's Store. they failed to pay despite oral and written demands. it was claimed that petitioners had an unpaid obligation for the loaned "empties" from the same plant in the amount of P35.00. Atty. petitioners presented four trade provisional receipts (TPRs) allegedly issued to and received by them from private respondent's Route Manager Jovencio Estrada of its Malate Warehouse (Division 57). After trial on the merits. 1986. 1982. Eugenio.520. Quezon City. 103737 December 15. Consequentially.

private respondent alleged that petitioner Alfredo Y. Nora Store) was reduced to P21. It is elementary that under the measure on hearsay evidence.357. a perusal of the alleged stenographic notes. 85366. this Court made a finding that the retirement papers allegedly filed in the name of this petitioner were forged. And. may be given in evidence against the adverse party who had the opportunity to cross-examine him. 1982. absent any conduct on the part of the accused amounting to a waiver of his right to cross-examine. Eugenio requested that he be allowed to retire and the existing accounts be deducted from his retirement pay. respondent court disagreed with herein petitioners that the testimony on the alleged denial of Jovencio Estrada regarding his signatures on the disputed TPRs. "(t)he testimony of Jovencio Estrada at the aforementioned investigation categorically denying that he issued and signed the disputed TPRs is. such hearsay evidence has no probative value whatsoever. there was no opportunity for Eugenio to object. as well as his affidavit dated February 5. seek sanctuary in this exception to the hearsay evidence rule.651.40 Firstly. 26 After the meeting. except as otherwise provided in the Rules. The liability of petitioners as to the loaned empties (Muntinlupa plant.00 after a reevaluation of the value of the loaned empties. which are derived from his own perception. a witness can testify only to those facts which he knows of his personal knowledge. Eugenio submitted to Atty. after which Eugenio was likewise asked other questions. on this point. however. the amount of P5. to conduct an investigation to verify this claim of petitioners. The finding of labor arbiter. the supposed investigation conducted by Azurin was neither a judicial trial nor an administrative hearing under statutory regulations and safeguards. Atty. According to Azurin. assistant personnel Page 120 of PAT CASE: AGENCY 150 . which was a spurious document. Estrada allegedly denied that he issued and signed the aforesaid TPRs. 13 Likewise. 14 Thereafter.437. 23 In the present case. 18 This makes two falsified documents to be foisted against petitioners. Thereafter. petitioners' counsel having seasonably objected at the trial to such testimony of Azurin as hearsay. but that he later withdrew his retirement plan. Except for the terse statement of respondent court that since petitioner Alfredo Eugenio was supposedly present on December 4. Rosario the aforementioned four TPRs. Even in a formal prior trial itself. was deducted from their liability in their trade account with the Muntinlupa plant. during the investigation on December 4. 1982 21 wherein he affirmed his denial. Estrada failed to appear as a witness at the trial.the company. Surprisingly. a statement of overdue accounts were prepared showing that petitioners owed respondent corporation the following amounts: manager. assuming arguendo that these notes are admissible in evidence.00 16 It is true that the testimony or deposition of a witness deceased or unable to testify.631." 22 there was no further explanation on this unusual doctrinal departure. it should be noted that Estrada never testified thereafter in court and what he is supposed to have done or said was merely related by Azurin. It was only Azurin who testified that during the investigation he conducted.00 A reconciliation of petitioners' account was then conducted.686.00 under Invoice No.20 (as of 12/3/80) 10 Loaned Empties P35. 24 Muntinlupa Plant Nora Store Trade Account P32. Quezon City Plant Abigail Minimart Regular Account P20.686. in fact. In fact.20 15 Loaned Empties P21.437. judicial or administrative. 1981. that is.856. showed that this petitioner was indeed illegally dismissed. On said date. inefficiency. petitioner Alfredo Y. Azurin's testimony cannot constitute legal proof as to the truth of Estrada's denial. if the opportunity for cross-examination did not exist therein or if the accused was not afforded opportunity to fully crossexamine the witness when the testimony was offered. and that he never filed an application for retirement." 9 The interview was reset to August 4. evidence relating to the testimony given therein is thereafter inadmissible in another proceeding. and loss of trust and confidence. 20 At this point. Eugenio and Isip signed the reconciliation sheets reflecting these items: The rule is clear and explicit. therefore. 25 Private respondent cannot. Rosario ordered Daniel Azurin. given in a former case or proceeding.40 (as of 7/11/81) 11 Now. it is not admissible in evidence. For that matter. involving the same parties and subject matter. he subsequently filed a complaint for illegal dismissal. Estrada supposedly denied having signed the TPRs. not hearsay. would show that the "investigation" was more of a free-flowing question and answer type of discussion wherein Estrada was asked some questions. much less to cross-examine Estrada. Under the hearsay evidence rule. 1981. Quezon City Plant Abigail Minimart Trade Account P20. It was merely an inter-office interview conducted by a personnel officer through an ad hoc arrangement.726.20 17 —————— Total P74. however.849. said supposed affidavit is inexplicably dated February 5. 19 He also presented a supposed affidavit which Estrada allegedly executed during that investigation to affirm his verbal statements therein. are hearsay evidence because Estrada was not presented as a witness to testify and be cross-examined thereon. 1981 to enable said petitioner to bring along with him their union president. Muntinlupa Plant Nora's Store Trade Account P38. Luis Isip. Said petitioner disputed that allegation and. even if not objected to and thereby admissible. Secondly. With their aforesaid accounts still unpaid. later affirmed by the Supreme Court.40 (as of 1980) 12 ————— Total P94. Indeed.

. Lastly. in contradistinction to petitioners who even had to seek the help of the Public Attorney's Office to defend them here." 33 There is. it is likewise barred as evidence by the hearsay evidence rule. After every transaction. 31 However. as earlier explained. the stenographer was not even presented to authenticate the stenographic notes submitted to the trial court. xerox copy of my 201 File is attached hereto as Annex 'F' of this affidavit. "in so far as the private respondent's customers are concerned. and necessarily aware that his alleged denial of his signatures on said TPRs and his affidavit rendered the same vulnerable to the challenge that they are hearsay and inadmissible. The whole document was marked for identification but the signatures were not. The next inquiry then would be as to what exactly is the nature of the TPRs insofar as they are used in the day-to-day business transactions of the company." 36 Now. "the questioned TPR's are merely 'provisional' and were. 30 The alleged affidavit of Estrada states". In the case at bar. 28 This is aside from the fact that. neither is the affidavit of Estrada admissible. to be officially confirmed by plaintiff within fifteen (15) days by delivering the original copy thereof stamped paid and signed by its cashier to the customer. in turn. not even the aforementioned 201 File.In fact. Yet. for as long as they pay their obligations to the sales representative of the private respondent using the latter's official receipt. These trade provisional receipts are bound and given in booklets to the company sales representatives. As correctly explained by petitioners. This is a situation that irresistibly arouses judicial curiosity. did not receive those amounts from the latter. through acts imputable to petitioners. respondent corporation did nothing more. as well as the collections made. and to shift the burden of evidence to the adverse party. through coercive process if necessary. . Private respondent having failed to rebut the aforestated presumptions in favor of valid payment by petitioners. although herein private respondent insinuated that Estrada was not presented as a witness because he had disappeared. Respondent court made the further observation that "Estrada was even asked by Atty. as it were. Defendants-appellants (herein petitioners) failed to present the original copies of the TPRs in question. 32 We do not agree with the strained implication intended to be adverse to petitioners. these would necessarily continue to stand in their favor in this case. or that he was eloigned. The TPRs presented in evidence by petitioners are disputably presumed as evidentiary of payments made on account of petitioners. It had the resources to do so. All unused TPRs. 27 The supposed stenographic notes on which respondent corporation relies is unauthenticated and necessarily inadmissible for the purpose intended. showing that they were never confirmed by the plaintiff. under proper acknowledgment by them and with a record of the distribution thereof. however. which may thus be either omitted or misunderstood by the one writing them. Estrada's disappearance has not been explained up to the present. containing a specimen of the signature of Estrada which the Court can use as a basis for comparison. no evidence whatsoever was offered to show or even intimate that this was due to any machination or instigation of petitioners. Respondent corporation was fully aware that its case rested. Neither was any document containing a specimen of Estrada's signature presented by private respondent in the formal offer of its exhibits. no plausible explanation was given by respondent corporation. if not suspicion. said Page 121 of PAT CASE: AGENCY 150 . ." 34 and not for the purpose of presenting any alleged signature of Estrada on the document as a basis for comparison. 37 The role of presumptions in the law on evidence is to relieve the party enjoying the same of the evidential burden to prove the proposition that he contends for. A copy of the stenographic report of the entire testimony at the former trial must be supported by the oath of the stenographer that it is a correct transcript of his notes of the testimony of the witness as a sine qua non for its competency and admissibility in evidence. presumably for curative purposes as it were. turned on the genuineness of Estrada's signatures thereon. nor did they demand from plaintiff the confirmed original copies thereof. . Estrada was an employee of private respondent. who is its duly authorized agent with respect to petitioners. without any indication whatsoever as to which of the signatures is Estrada's. are turned over by the sales representative to the appropriate company officer. is further underscored by the fact that it was executed more than two months after the investigation. that the comparison that was made as to the authenticity of the signature appearing in the TPRs and that of my signature showed that there was an apparent dissimilarity between the two signatures. Azurin at said investigation to sign three times to provide specimens of his genuine signature. hence it can be assumed that it could easily trace or ascertain his whereabouts. In fact. aside from cursorily dismissing the non-presentation of Estrada in court by the glib assertion that he could not be found. . it was merely introduced by the private respondent "in order to show that Jovencio Estrada had been investigated and categorically denied having collected from Abigail Minimart and denying having signed the receipts claimed by Alfredo Eugenio to be his payment. by its comparison made by the witness or the court with writings admitted or treated as genuine by the party against whom the evidence is offered or proved to be genuine to the satisfaction of the judge. when a collection is made the customer is given by the sales representative a copy of the trade provisional receipt. 29 The dubiety of that affidavit. but assuming that Estrada signed the stenographic notes. on the issue of whether the TPRs were authentic and which issue. There is no showing that his absence was procured. no showing that he did. among other means. 35 Obviously. by their nature. There are presumptions juris tantum in law that private transactions have been fair and regular and that the ordinary course of business has been followed. the triplicate copy or customer's copy. except for the self-serving statement that Estrada had disappeared. the authenticity of a handwriting may be proven. a search of the Folder of Exhibits in this case does not reveal that private respondent ever submitted any document. the Court would still be unable to make the necessary comparison because two signatures appear on the right margin of each and every page of the stenographic notes. even assuming arguendo that herein private respondent's cashier never received the amounts reflected in the TPRs. that is. properly filled up to reflect the completed transaction. although formally offered. According to respondent court. affidavits are generally not prepared by the affiants themselves but by another who uses his own language in writing the affiant's statements. Thirdly. as printed at the bottom of said receipts. Private respondent could not have been unaware of the importance of Estrada's testimony and the consequent legal necessity for presenting him in the trial court. Besides. still private respondent failed to prove that Estrada.

therefore. All told.00 is spurious and should accordingly be deducted from the disputed amount of P74. is ANNULLED and SET ASIDE. Since petitioners had made a payment of P80. or his successor-in-interest or any person authorized to receive it. such as deliveries made. Still pursuing its ruling in favor of respondent corporation. 39 As far as third persons are concerned. on November. L-116650 May 23. 1981 does now show more than 1. Its default inevitably depletes the weight of its evidence which cannot just be taken in vacuo. 1981. being more specific and detailed in nature. 1981 when petitioners were able to talk to Nanette that they were able to find and retrieve said TPRs.849. Rosario assured him that any receipt he may submit later will be credited in his favor. Furthermore. Q-34718. CV No. reject as attenuated the comment of the trial court that the TPRs. with the result that for lack of the requisite quantum of evidence." 42 On the other hand. Thus. affirming that of the trial court in Civil Case No. and not the specific particulars.710. Plant Controller of Pepsi-Cola . his daughter Nanette. a statement of an overdue amount is only a summary of the account. the Court of Appeals makes the following observation: . Yet the Statement of Overdue Account pertaining to Abigail Minimart (Exhs.payment extinguishes their obligations.A. Three months later. No. even if the agent has in fact exceeded the limits of his authority according to an understanding between the principal and his agent. 43 In addition. that at the time the reconciliation meeting was held. . Obviously. A statement of account.40. 40 In fact.40. simply reflecting the balance due thereon. "D1" to "D-3") which appellant-husband and his representative Luis Isip signed on August 3. 26901. with the corresponding investigation into the matter. G. Having allegedly returned 600 Fulls to the plaintiff's representative on May 6. Azurin to verify the TPRs. 1981. and 14. Atty. He added that during the reconciliation meeting. it is significant that SO ORDERED. particularly since the entries therein were surprisingly entered irrespective of their chronological order. unlike a bare statement of overdue payments. A perusal of the statement of overdue accounts shows that. 10. appellant-wife's Abigail Store must have received more than 1. private respondent's own witness. respondent corporation did not take proper action if indeed some receipts were actually lost. "smacks too much of an afterthought. if such is within the terms of the power of attorney. Accordingly. admitted that "it is the responsibility of the collector to turn over the collection. Rosario. except for a reference number given for each entry." 44 The reconciliation meeting was held on August 4. Private respondent PepsiCola Bottling Company of the Philippines. it has not discharged the burden of preponderant proof necessary to prevail in this case. 1980." 38 Otherwise. The substantive law is that payment shall be made to the person in whose favor the obligation has been constituted. an act is deemed to have been performed within the scope of the agent's authority. Eugenio could have had easy access to blank forms of the TPRs because he was a former route manager no evidence whatsoever was presented by private respondent in support of that theory. which Eugenio submitted after the reconciliation meeting.60 representing overpayment made to the former. 46 That amount is not disputed by respondent corporation and should no longer be deducted from the total liability of petitioner in the sum of P74. Atty. it would unreasonably cast the burden of supervision over its employees from respondent corporation to its customers. It is entirely possible that the statement of overdue account merely reflects the outstanding debt of a particular client. We are accordingly intrigued by such an unkind assertion of respondent corporation since Azurin himself admitted that their accounting department could not even inform them regarding the persons to whom the TPRs were issued.560. when he presented the TPRs to private respondent. and this was not disputed.R. A scrutiny of the reconciliation sheet shows that said amount had already been deducted upon the instruction of one Mr. Atty. as it was still subject to such receipts as may thereafter be presented by petitioners. petitioners claimed that the signature of petitioner Nora S. Eugenio in Sales Invoice No.00. the judgment of respondent Court of Appeals in C.60. Respondent court cannot make its aforequoted categorical deduction unless supporting documents accompanying the statement of overdue amounts were submitted to enable easy and accurate verification of the facts. we are constrained to hold that respondent corporation has dismally failed to comply with the pertinent rules for the admission of the evidence by which it sought to prove its contentions. in the amount of P5. "D". WHEREFORE. had eloped and she had possession of the TPRs. 45 It was only in November. is hereby ORDERED to pay petitioners Nora and Alfredo Eugenio the amount of P5. Except for its speculation that petitioner Alfredo Y. Muntinlupa Plant. 85366. Rosario directed Mr. therefore.R.800 cases of soft drinks from plaintiff before those dates. G. no further details were volunteered nor offered. 1995 Page 122 of PAT CASE: AGENCY 150 . 1980 or the month before. petitioner Alfredo Y.800 cases of soft drinks were delivered to Abigail Minimart by plaintiff's Quezon City Plant (which supposedly issued the disputed TPRs) in May. Inc. there was consequently an overpayment of P5. Eugenio submitted the four TPRs. as written. He explained.631. such as the publication of the fact of loss of the receipts. one can not use the statement of overdue amounts as conclusive proof of deliveries done within a particular time frame. We regret the inaccuracy in said theory of respondent court which was impelled by its sole and limited reliance on a mere statement of overdue amounts. Coloma. there are questions left unanswered and begging for cogent explanations why said respondent did not or could not comply with the evidentiary rules. the amount stated in the reconciliation sheet was not final. Unlike a statement of account which truly reflects the day-to-day movement of an account. hence he signed the reconciliation documents. allows one to readily see and verify if indeed deliveries were made during a specific period of time. who was helping his wife manage the store. .710." 41 We.849.

m.970. 1. a sales representative of Toyota." Bernardo assured Sosa that a unit would be ready for pick up at 10:00 a. Sosa emphasized to Bernardo that he needed the Lite Ace not later than 17 June 1989 because he.m. Sosa & Popong Bernardo of Toyota Shaw. Metro Manila. on behalf of his father. Finance pertaining to the application for financing.m. signed the documents of Toyota and B.m.. INC. Finance. (hereinafter Toyota) and respondent Luna L. vs. Price prevailing and in effect at time of selling will apply. on 17 June 1989.00 3. Hence. Gilbert.) POPONG BERNARDO. respondents. According to Sosa." to be financed by "B. After waiting for about an hour. At 2:00 p. went to the Toyota office at Shaw Boulevard. DAVIDE. on the 17th of June at 10 a. all necessary documents will be submitted to TOYOTA SHAW.TOYOTA SHAW. named Popong Bernardo.. Sosa on June 15. upon arrival of Mr. that same day. Pasig. The document reads as follows: 4 June 1989 The next day. . a perfected contract of sale. this petition for review on certiorari. as previously agreed upon but at 2:00 p. 2 on which Gilbert signed under the subheading CONFORME. and for this Gilbert. . The petitioner disagrees. INC.00 will be paid by Mr. that the model series of the vehicle is a "Lite Ace 1500" described as "4 Dr minibus". Sometime in June of 1989. 928. Sosa wanted to purchase a Toyota Lite Ace. Very truly yours. his home province. Sosa and Gilbert met Bernardo at the latter's office. a) downpayment—P 53.000. Sosa from the Province (Marinduque) where the unit will be used on the 19th of June.00 CHMO fee—P 2. Was this document. Inc. 1989. Sosa and Gilbert went to Toyota to deliver the downpayment of P100. 2. INC. breach of which would entitle the private respondent to damages and attorney's fees? The trial court and the Court of Appeals took the affirmative view. Inc. But upon contacting Toyota Shaw.00 accessories—P 29. INC. It also contains the following pertinent provisions: (Sgd.m. They met Bernardo who then accomplished a printed Vehicle Sales Proposal (VSP) No. (POPONG BERNARDO) a week after.. The antecedents as disclosed in the decisions of both the trial court and the Court of Appeals. checked and approved the VSP. So on 14 June 1989. This document shows that the customer's name is "MR..715. This sale is subject to availability of unit. 2. Inc.148. There they met Popong Bernardo. LUNA SOSA" with home address at No.m. petitioner." It was also agreed upon by the parties that the balance of the purchase price would be paid by credit financing through B. his family.A. the Sales Supervisor of Bernardo. Luna L. CONDITIONS OF SALES 1. Bernardo then signed the aforequoted "Agreements Between Mr. It was then a seller's market and Sosa had difficulty finding a dealer with an available unit for sale. that payment is by "installment." Page 123 of PAT CASE: AGENCY 150 .00 service fee—P 500.00 the downpayment of P100. Bernardo called Gilbert to inform him that the vehicle would not be ready for pick up at 10:00 a. Stated Price is subject to change without prior notice.. J. Rodrigo Quirante.. INC. On 17 June 1989.A. where he would celebrate his birthday on the 19th of June. the TOYOTA SHAW.00.000. He added that if he does not arrive in his hometown with the new car.: At the heart of the present controversy is the document marked Exhibit "A" 1 for the private respondent. 15 June 1989. Bernardo informed them that the Lite Ace was being readied for delivery. LITE ACE yellow. as well as in the pleadings of petitioner Toyota Shaw. Sosa and his son. and that the "BALANCE TO BE FINANCED" is "P274. Inc.00 broken down as follows: AGREEMENTS BETWEEN MR. at around 9:30 a. he would become a "laughing stock. COURT OF APPEALS and LUNA L. JR. . 2316 Guijo Street.A. b)insurance—P 13. binding upon the petitioner. Sosa (hereinafter Sosa) are as follows.00 c)BLT registration fee—P 1." The spaces provided for "Delivery Terms" were not filled-up.000.067.137. will be pick-up [sic] and released by TOYOTA SHAW. and a balikbayan guest would use it on 18 June 1989 to go to Marinduque. which was signed by a sales representative of Toyota Shaw." 3 with the initial cash outlay of P100. executed and signed by the petitioner's sales representative. Bernardo told them that the car could not be delivered because "nasulot ang unit ng ibang malakas. SOSA. he was told that there was an available unit.000. United Parañaque II. SOSA & POPONG BERNARDO OF TOYOTA SHAW.00.

It further alleged that a particular unit had already been reserved and earmarked for Sosa but could not be released due to the uncertainty of payment of the balance of the purchase price. and Sosa did not have a sufficient cause of action against it. 40043. O." 13 Moreover. Toyota appealed to the Court of Appeals. within five days from receipt. (b) whether or not Sosa has any legal and demandable right to the delivery of the vehicle despite the nonPage 124 of PAT CASE: AGENCY 150 .00 for exemplary damages." 15 The court further declared that "Luna Sosa proved his social standing in the community and suffered besmirched reputation.00 attorney's fees plus P2. As to Toyota's contention that Bernardo had no authority to bind it through Exhibit "A. 3. inter alia.000.000. Sosa asked that his downpayment be refunded. and execution of the sales agreement/invoice. that the Lite Ace was not delivered to Sosa because of the disapproval by B. Sosa had not completed the documents required by the financing company. of the downpayment of P100. he demanded the refund. Toyota now comes before this Court via this petition and raises the core issue stated at the beginning of the ponencia and also the following related issues: (a) whether or not the standard VSP was the true and documented understanding of the parties which would have led to the ultimate contract of sale. As special and affirmative defenses. Sosa sent two letters to Toyota." the "AGREEMENTS BETWEEN MR.00. and (iii) his relatives. Sosa's counsel. ordering the defendant to pay the cost of suit. 11 the trial court rendered on 18 February 1992 a decision in favor of Sosa.000.000." was a valid perfected contract of sale between Sosa and Toyota which bound Toyota to deliver the vehicle to Sosa. ordering the defendant to pay the plaintiff the sum of P10. judgment is hereby rendered in favor of the plaintiff and against the defendant: 9. neighbors and other provincemates. and further agreed with Sosa that Toyota acted in bad faith in selling to another the unit already reserved for him. wounded feelings and sleepless nights for which he ought to be compensated. Toyota did so on the very same day by issuing a Far East Bank check for the full amount of P100. (ii) his balikbayan-guest canceled his scheduled first visit to Marinduque in order to avoid the inconvenience of taking public transportation. In the first letter. demanded one million pesos representing interest and damages.000.00 lawyer's transportation fare per trip in attending to the hearing of this case. ordering the defendant to pay the sum of P30." the trial court held that the extent of Bernardo's authority "was not made known to plaintiff." 16 Accordingly.00 was returned to and received by Sosa." Thereafter. Caballes. ordering the defendant to pay the plaintiff the sum of P2. with a warning that legal action would be taken if payment was not made within three days. 4. Toyota then gave Sosa the option to purchase the unit by paying the full purchase price in cash but Sosa refused. friends.000. plaintiff suffered embarrassment.000.R. however. the defendants had made known to the plaintiff the impression that Popong Bernardo is an authorized sales executive as it permitted the latter to do acts within the scope of an apparent authority holding him out to the public as possessing power to do these acts. "[f]rom the beginning of the transaction up to its consummation when the downpayment was made by the plaintiff.000. It also interposed compulsory counterclaims. Toyota contends. it alleged that: the VSP did not state date of delivery.000. humiliation." for as testified to by Quirante. and that Bernardo signed Exhibit "A" in his personal capacity. "they do not volunteer any information as to the company's sales policy and guidelines because they are internal matters.00 plus interest from the time he paid it and the payment of damages with a warning that in case of Toyota's failure to do so he would be constrained to take legal action.00. and hence bound the defendants. 9 He alleges." Under the circumstances. The case was docketed as CA-G. Dissatisfied with the trial court's judgment. submission of all documents. 10 1.00). that: WHEREFORE. viewed from the above findings. continuously irked him about "his Brand-New Toyota Lite Ace — that never was. 4 the receipt of which was shown by a check voucher of Toyota. 7 Toyota's counsel answered through a letter dated 27 November 1989 8 refusing to accede to the demands of Sosa. ridicule.000. 2. that Bernardo had no authority to sign Exhibit "A" for and in its behalf. SOSA AND POPONG BERNARDO. and as a matter of policy. 6 The second." 14 Bernardo then "was an agent of the defendant Toyota Shaw. mental anguish and sleepless nights because: (i) he and his family were constrained to take the public transportation from Manila to Lucena City on their way to Marinduque. dated 27 June 1989 and signed by him. dated 4 November 1989 and signed by M.00 transportation fare per trip of the plaintiff in attending the hearing of this case. But even before this answer was made and received by Sosa. Finance of the credit financing application of Sosa. Inc. As a result of defendant's failure and/or refusal to deliver the vehicle to plaintiff. it disposed as follows: After it became clear that the Lite Ace would not be delivered to him. Toyota alleged that no sale was entered into between it and Sosa. CV No.After trial on the issues agreed upon during the pre-trial session. In its answer to the complaint. "without prejudice to our future claims for damages. the latter filed on 20 November 1989 with Branch 38 of the Regional Trial Court (RTC) of Marinduque a complaint against Toyota for damages under Articles 19 and 21 of the Civil Code in the total amount of P1. the vehicle could not and would not be released prior to full compliance with financing requirements.000. the P100. again. 12 It ruled that Exhibit "A. the venue was improperly laid. SO ORDERED.A. 17 the Court of Appeals affirmed in toto the appealed decision. 5 which Sosa signed with the reservation. and 5. defendant should be made liable to the plaintiff for moral damages in the amount of One Million Pesos (P1. ordering the defendant to pay to the plaintiff the sum of P75.230. In its decision promulgated on 29 July 1994.00 for moral damages.

No obligation on the part of Toyota to transfer ownership of a determinate thing to Sosa and no correlative obligation on the part of the latter to pay therefor a price certain appears therein.148. otherwise it should not have mentioned B. From that moment. business and office machines and equipment." 23 This Court had already ruled that a definite agreement on the manner of payment of the price is an essential element in the formation of a binding and enforceable contract of sale. there was then no meeting of minds on the sale on installment basis. Neither logic nor recourse to one's imagination can lead to the conclusion that Exhibit "A" is a perfected contract of sale. leases. It is. 24 Since B. three parties are thus involved: the buyer who executes a note or notes for the unpaid balance of the price of the thing purchased on installment. in a sale on installment basis which is financed by a financing company. 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.D. and the other to pay therefor a price certain in money or its equivalent. that he was not dealing with Toyota but with Popong Bernardo and that the latter did not misrepresent that he had the authority to sell any Toyota vehicle. of course. Exhibit "A" shows the absence of a meeting of minds between Toyota and Sosa. and the financing company which is subrogated in the place of the seller. But nothing was mentioned about the full purchase price and the manner the installments were to be paid. was acceptable to Toyota. INC. It is not a contract of sale.D. or other evidence of indebtedness. subject to the provisions of the law governing the form of contracts. commercial. as the VSP executed the following day confirmed. the parties may reciprocally demand performance. conception. which is the fulfillment or performance of the terms agreed upon in the contract. The provision on the downpayment of P100.A. the seller who assigns the notes or discounts them with a financing company.00 made no specific reference to a sale of a vehicle. Sosa was well aware from its title. Financing companies are defined in Section 3(a) of R. which is the moment when the parties come to agree on the terms of the contract.. the downpayment of the purchase price was P53. Finance in the VSP. or by buying and selling contracts. heavy equipment and industrial machinery. A contract of sale may be absolute or conditional. 5980. Finance did not approve Sosa's application. 18 This is so because the agreement as to the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. or generation. as amended by P. 1454 and P. viz.A. (c) whether or not Toyota acted in good faith when it did not release the vehicle to Sosa. (a) preparation. 1458. as "corporations or partnerships. It was incumbent upon Sosa to act with ordinary prudence and reasonable diligence to know the extent of Bernardo's authority as an agent 20 in respect of contracts to sell Toyota's vehicles. Finance Corporation. SOSA & POPONG BERNARDO OF TOYOTA SHAW. Sosa did not even sign it. it could only refer to a sale on installment basis. Finance Corp. which is the period of negotiation and bargaining. 1793. appliances and other movable property. There are three stages in the contract of sale. It must be emphasized that thereunder. which are primarily organized for the purpose of extending credit facilities to consumers and to industrial. Article 1458 of the Civil Code defines a contract of sale as follows: At the most. What is clear from Exhibit "A" is not what the trial court and the Court of Appeals appear to see. For another. No. to be assumed that B. 22 Art.00 while the balance to be paid on installment should be financed by B. except those regulated by the Central Bank of the Philippines. Page 125 of PAT CASE: AGENCY 150 .payment of the consideration and the non-approval of his credit application by B. (b) perfection or birth of the contract. Definiteness as to the price is an essential element of a binding agreement to sell personal property. A person dealing with an agent is put upon inquiry and must discover upon his peril the authority of the agent. or agricultural enterprises. chattel mortgages. For one thing. 19 Accordingly.000. ending at the moment of agreement of the parties.A. written in bold letters. or by leasing of motor vehicles. the Insurance Commission and the Cooperatives Administration Office. If it was intended for a contract of sale. AGREEMENTS BETWEEN MR. 21 We find merit in the petition. No. No. He knew that Bernardo was only a sales representative of Toyota and hence a mere agent of the latter.A.A. as the creditor of the installment buyer. and and Article 1475 specifically provides when it is deemed perfected: (c) consummation or death. and (d) whether or not Toyota may be held liable for damages. The second phase of the generation or negotiation stage in this case was the execution of the VSP.A. Finance. Exhibit "A" may be considered as part of the initial phase of the generation or negotiation stage of a contract of sale. 1475. Moreover. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing. either by discounting or factoring commercial papers or accounts receivables. namely: Art.

JOSE G. The counterclaim therein is likewise DISMISSED.00. 1989 at around 9:30 o'clock in the morning. the legal reason for the award of attorney's fees..We are inclined to believe Toyota's version that B."cralaw virtua1aw library The award then of moral and exemplary damages and attorney's fees and costs of suit is without legal basis.. Plaintiff demanded for an explanation.5. 3. therefore. NOTICE TO AGENT CONSIDERED NOTICE TO PRINCIPAL. 89-14 is DISMISSED. of June 17. the passenger must purchase a new ticket for the remaining portion of the journey." while the Sosas had already been waiting for an hour for the delivery of the vehicle in the afternoon of 17 June 1989. holding that it would be unfair to charge respondents therein with automatic knowledge or notice of conditions in contracts of adhesion. GANA. Petitioner. 2. 3. Neither can it be said that. .3). GANA. defendant's sales representative. or compensatory damages. Respondents. the court must explicitly state in the body of the decision. and this created an impression against his business standing and reputation. .m. MANUEL GANA. he is likewise not entitled to exemplary damages. When the latter refused. Teresita was the agent of the GANAS and notice to her of the rejection of the request for extension of the validity of the tickets was notice to the GANAS. 3. and 11 of the Stipulations of Fact between the parties in the Trial Court.2 and 3. nor when it required the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila segment of their trip. . 40043 as well as that of Branch 38 of the Regional Trial Court of Marinduque in Civil Case No. ROBERTO GANA. To all legal intents and purposes. (Deceased). — The ruling relied on by respondent Appellate Court. It is claimed that Bernardo said. MARIA TERESA GANA. To complete the trip. Since Sosa is not entitled to moral damages and there being no award for temperate. Mr. in paragraph 7 of his complaint. or compensatory damages. — From the foregoing rules. 1983. Valte for Petitioner. The VSP was a mere proposal which was aborted in lieu of subsequent events. He should not have announced his plan to buy a Toyota Lite Ace knowing that he might not be able to pay the full purchase price. it imposed additional charges representing fare differentials. included in paragraphs 9. It follows that the VSP created no demandable right in favor of Sosa for the delivery of the vehicle to him. A ticket can no longer be used for travel if its validity has expired before the passenger completes his trip (parag. This procedure is well in accord with the IATA tariff rules. . the vehicle was delivered to another who was "mas malakas" does not inspire belief and was obviously a delayed afterthought. ID. is inapplicable. and relatives that he was buying a Toyota Lite Ace which they expected to see on his birthday. On June 17.2) That is the time allowed a passenger to begin and to complete his trip (parags. DISHONOR OF TICKET UPON EXPIRATION NOT A BREACH OF CONTRACT. WHEREFORE. Napoleon Garcia for Private Respondents. and not only in the dispositive portion thereof. it was motivated by self-interest or unjust enrichment considering that an increase of fares took effect. . Finance disapproved Sosa's application for which reason it suggested to Sosa that he pay the full purchase price. her principals. 10. December 29. 3. "Pasensiya kayo.m. he suffered humiliation. CLOTILDE VDA. dated 31 March 1973. ID. v. in order to pick-up the vehicle but the defendant for reasons known only to its representatives. 1971. according to Bernardo. liquidated. temperate. refused and/or failed to release the vehicle to the plaintiff.. and EMILY SAN JUAN. Plaintiff and his son went to defendant's office on June 17 1989 at 2:00 p. No reason thus exists for such an award. of that day instead. Benjamin S. . when upon sale of the new tickets. it is settled that for attorney's fees to be granted. the instant petition is GRANTED. — Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA). in KLM vs Court of Appeals..: Page 126 of PAT CASE: AGENCY 150 . RAMON GANA. At the bottom of this claim is nothing but misplaced pride and ego. SYLLABUS 1.1). but nothing was given. DE AREVALO. shame. . CLARA A. as authorized by the Civil Aeronautics Board (CAB) in April. it is clear that AIR FRANCE cannot be faulted for breach of contract when it dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on said date. AIRPLANE TICKET. It was he who brought embarrassment upon himself by bragging about a thing which he did not own yet. CIVIL LAW. townmates. Also. CONTRACT OF CARRIAGE. . CV NO. nasulot ang unit ng ibang malakas..1. Toyota cancelled the VSP and returned to him his P100. the only ground upon which Sosa claimed moral damages is that since it was known to his friends. and its non-delivery did not cause any legally indemnifiable injury. The challenged decision of the Court of Appeals in CAG. HONORABLE COURT OF APPEALS.000. Besides.m. DECISION MELENCIO-HERRERA. an airplane ticket is valid for one year. L-57339. 89-14 are REVERSED and SET ASIDE and the complaint in Civil Case No. NO LONGER VALID FOR TRAVEL IF IT HAS EXPIRED BEFORE COMPLETION OF TRIP. J. and sleepless nights when the van was not delivered. AGENCY. ID. exemplary or corrective damages are imposed by way of example or correction for the public good. . ID. Popong Bernardo. The van became the subject matter of talks during his celebration that he may not have paid for it. called plaintiff's house and informed the plaintiff's son that the vehicle will not be ready for pick-up at 10:00 a. Sosa's version that the VSP was cancelled because. However. OBLIGATIONS AND CONTRACT. Sosa solemnly states: [G.A. SO ORDERED.No pronouncement as to costs. Under Article 2229 of the Civil Code. 65 SCRA 237(1975). in addition to moral. 1989 but at 2:00 p. 26 No such explicit determination thereon was made in the body of the decision of the trial court. The passenger must undertake the final portion of his journey by departing from the last point at which he has made a voluntary stop before the expiry of this limit (parag. No.R. JAIME JAVIER GANA.] AIR FRANCE.R. ID. liquidated.

violated airline tariff rules and regulations and was beyond the scope of his authority as a travel agent. They were able to return only after pre-payment in Manila. "not valid after the"). the principal plaintiff.R. which decreed:chanrobles. Et.00.00 as moral damages. respondent Appellate Court set aside and reversed the Trial Court’s judgment in a Decision. and awarding instead P90. Sometime in February. Air France is hereby ordered to pay appellants moral damages in the total sum of NINETY THOUSAND PESOS (P90." 2 Reconsideration sought by AIR FRANCE was denied. petitioner’s recourse before this instance. and for the Tokyo/Manila return trip on AIR FRANCE Flight 187 on 22 May 1970. a Secretary of the Sta. The SAS sticker indicates thereon that it was "Revalidated by: the Philippine Travel Bureau. Jose Gana. Sociedad Nacionale Air France". Clara Lumber Company. and the GANAS had to purchase new tickets. Notwithstanding the warnings. the decision appealed from is set aside. During the pendency of the appeal.00 for each passenger. who used to handle travel arrangements for the personnel of the Sta.com:cralaw:red AIR FRANCE traversed the material allegations of the Complaint and alleged that the GANAS brought upon themselves the predicament they found themselves in and assumed the consequential risks.000."cralaw virtua1aw library In the meantime. which were due to expire on 8 May 1971. Ella gave the same negative answer and warned her that although the tickets could be used by the GANAS if they left on 7 May 1971. attached to the tickets validating stickers for the Osaka/Tokyo flight. Branch No. Apparently. died. 1971. Ella.90 per US$1. the GANAS departed from Manila in the afternoon of 7 May 1971 on board AIR FRANCE Flight 184 for Osaka. the late Jose G. The tickets were returned to Ella who was informed that extension was not possible unless the fare differentials resulting from the increase in fares triggered by an increase of the exchange rate of the US dollar to the Philippine peso and the increased travel tax were first paid. v. Page 127 of PAT CASE: AGENCY 150 . for the Osaka/Tokyo flight on 17 May 1971. The GANAS also paid travel taxes of P100. Japan. hence. With that assurance. to which we gave due course. Gana. on his own. for the extension of the validity of their tickets. the tickets would no longer be valid for the rest of their trip because the tickets would then have expired on 8 May 1971. 2" (as shown by a circular rubber stamp) and signed "Ador". and the date is handwritten in the center of the circle. Al. Ella sent the tickets to Cesar Rillo. The GANAS paid a total of US$2.528. The GANAS did not depart on 8 May 1970. On 29 May 1975. the GANAS had scheduled their departure on 7 May 1971 or one day before the expiry date. Teresita replied that it will be up to the GANAS to make the arrangements. that travel agent Ella’s affixing of validating stickers on the tickets without the knowledge and consent of AIR FRANCE. Civil Case No. They finally flew back to Manila on separate Air France Flights on 19 May 1971 for Jose Gana and 26 May 1971 for the rest of the family. the GANAS have made out a case for breach of contract of carriage entitling them to an award of damages. However. 84111 for damages arising from breach of contract of carriage. 1970. and that AIR FRANCE was not guilty of any fraudulent conduct or bad faith. Incorporated.00) plus costs. Japan Airlines refused to honor the tickets because of their expiration.com. Said tickets were bought at the then prevailing exchange rate of P3.ph : virtual law library "WHEREFORE. the GANAS were booked for the Manila/Osaka segment on AIR FRANCE Flight 184 for 8 May 1970. On 25 August 1971.000. the GANAS commenced before the then Court of First Instance of Manila. Then appear "SO ORDERED. Ella made no more attempt to contact AIR FRANCE as there was no more time. petitioner AIR FRANCE assails the Decision of then respondent Court of Appeals 1 promulgated on 15 December 1980 in CA-G. Manager of the Philippine Travel Bureau. through their relatives. 16 May (Date). The aforesaid tickets were valid until 8 May 1971. 1040 (Time). a duly authorized travel agent. In this petition for review on certiorari. The GANAS appealed to respondent Appellate Court. On 15 December 1980. the Trial Court dismissed the Complaint based on Partial and Additional Stipulations of Fact as well as on the documentary and testimonial evidence. 58164-R. Sometime in January. the date written under the printed words "Non valable apres de" (meaning. numbering nine (the GANAS). There is no question with respect to this leg of the trip. purchased from AIR FRANCE through Imperial Travels. entitled "Jose G. nine (9) "open-dated" air passage tickets for the Manila/Osaka/Tokyo/Manila route. They encountered the same difficulty with respect to their return trip to Manila as AIR FRANCE also refused to honor their tickets. No. Teresita requested travel agent Ella to arrange the revalidation of the tickets.chanrobles. The crucial issue is whether or not.under printed headings the notations: JL 108 (Flight). Clara Lumber Company where Jose Gana was the Director and Treasurer. Jose Gana sought the assistance of Teresita Manucdoc. one a JAL sticker and the other an SAS (Scandinavian Airways System) sticker. At this time.85 for their economy and first class fares. which reversed the Trial Court’s judgment dismissing the Complaint of private respondents for damages arising from breach of contract of carriage. Teresita enlisted the help of Lee Ella. Office Manager of AIR FRANCE. Ella then returned the tickets to Teresita and informed her of the impossibility of extension. of the readjusted rates. Branch III. In the morning of the very day of their scheduled departure on the first leg of their trip. OK (status). On 24 April 1970. under the environmental milieu. Gana and his family. AIR FRANCE exchanged or substituted the aforementioned tickets with other tickets for the same route.

"The passenger must undertake the final portion of his journey by departing from the last point at which he has made a voluntary stop before the expiry of this limit (parag. To all legal intents and purposes. the GANAS would make other arrangements. 3. "A I told her. You said so to Mrs. it is up for the Ganas to make the arrangement. .1.). without clearing the same with AIR FRANCE allegedly because of the imminent departure of the GANAS on the same day so that he could not get in touch with Air France. Tokyo and Manila. it was motivated by self-interest or unjust enrichment considering that an increase of fares took effect. but they could take care of that when they arrived in Osaka. . 6 was certainly in contravention of IATA rules although as he had explained.5.2 and 3. At that time I told her if the tickets being used . Manucdoc. and her answer was it is up for the Ganas to make the arrangement.1). VALTE "Q What arrangement? "Q "A The arrangement for the airline because the tickets would expire on May 7. dated 31 March 1973. sir. 1971. is subject to the above general rule and must be adjusted accordingly. Teresita was the agent of the GANAS and notice to her of the rejection of the request for extension of the validity of the tickets was notice to the GANAS. Court of Appeals. .ph "6. This procedure is well in accord with the IATA tariff rules which provide:jgc:chanrobles. . therefore. who handled travel arrangements for the GANAS. I asked Mrs. that they could not be extended. 3. an airplane ticket is valid for one year. after being told this by Mr. was duly informed by travel agent Ella of the advice of Rillo. Any ticket sold prior to a change of fare or charge (increase or decrease) occurring between the date of commencement of the journey. To complete the trip. it is clear that AIR FRANCE cannot be faulted for breach of contract when it dishonored the tickets of the GANAS after 8 May 1971 since those tickets expired on said date. I was telling her what about their bookings on the return. nor when it required the GANAS to buy new tickets or have their tickets re-issued for the Tokyo/Manila segment of their trip. it imposed additional charges representing fare differentials. and her answer was. Rillo? Page 128 of PAT CASE: AGENCY 150 .chanrobles law library From the foregoing rules. The GANAS cannot defend by contending lack of knowledge of those rules since the evidence bears out that Teresita. 10.. her principals. 1971 when they were checking the tickets.’ May I know from you what did you mean by this testimony of yours? "All journeys must be charged for at the fare (or charge) in effect on the date on which transportation commences from the point of origin. the Office Manager of Air France. . . . and 11 of the Stipulations of Fact between the parties in the Trial Court. . "Q What do you mean? "A The Ganas will make the arrangement from Osaka. . as authorized by the Civil Aeronautics Board (CAB) in April. 65 SCRA 237 (1975). "Q The SAS validating sticker for the Osaka/Tokyo flight affixed by Ella showing reservations for JAL Flight 108 for 16 May 1971. 3." 4 "A That was on the day when they were asking me on May 7. additional tax and additional exchange during that time. No adjustment is necessary if the increase or decrease in fare (or charge) occurs when the journey is already commenced. he did so upon Teresita’s assurance that for the onward flight from Osaka and return." . I asked her what about the tickets onward from the return from Tokyo. . Manucdoc what about the return onward portion because they would be traveling to Osaka. in turn. when upon sale of the new tickets. Pursuant to tariff rules and regulations of the International Air Transportation Association (IATA). What did you tell Mrs.1 General Rule. that the tickets in question could not be extended beyond the period of their validity without paying the fare differentials and additional travel taxes brought about by the increased fare rate and travel taxes. A ticket can no longer be used for travel if its validity has expired before the passenger completes his trip (parag.3. the passenger must purchase a new ticket for the remaining portion of the journey" (ibid. I had this question which reads as follows: ‘But did she say anything to you when you said that the tickets were about to expire?’ Your answer was: ‘I am the one who asked her. in KLM v.com. and they insisted on leaving. "Q Referring you to page 33 of the transcript of the last session. holding that it would be unfair to charge respondents therein with automatic knowledge or notice of conditions in contracts of adhesion. APPLICABLE FARE ON THE DATE OF DEPARTURE "3. included in paragraphs 9.We are constrained to reverse respondent Appellate Court’s affirmative ruling thereon. Manucdoc that I was going to get the tickets. Neither can it be said that. because I told her that they could leave on the seventh. They could be extended by paying the additional fare. A new ticket must be issued and the difference is to be collected or refunded as the case may be. What about their travel on the return? She told me it is up for the Ganas to make the arrangement. That is the time allowed a passenger to begin and to complete his trip (parags.2) . because that is the reason why they accepted again the tickets when we returned the tickets again. . is inapplicable. 5 The ruling relied on by respondent Appellate Court. Manucdoc? "A Yes.) 3 TARIFF RULES "3. I told Mrs. "ATTY.

2003. Pedroso claims Renato Valle was her insurance agent since 1972 and Valle collected her monthly premiums. J. her investment of P10. they could complete the trip even thereafter. and the Amended Complaint filed by private respondents hereby dismissed. Pedroso told respondent Jennifer N. Palacio. Manucdoc when you told her that? If you can remember. also a Filipinas Life insurance policyholder. With the assistance of their lawyer.R. was written on an interoffice memorandum form of Filipinas Life prepared by Alcantara. No. After a second investment. The formal written request. to beat the deadline and in the thought that by commencing the trip the day before the expiry date. vs.000 was returned to her after she made a written request for its refund. A month after. In the first week of January 1977. Pedroso is a policyholder of a 20-year endowment life insurance issued by petitioner Filipinas Life Assurance Company (Filipinas Life). PEDROSO and JENNIFER N. Pedroso inquired about the promotional investment and Apetrior confirmed that there was such a promotion. Subsequently. she made 7 to 8 more investments in varying amounts. the administrative assistant. 2002 and August 5.R. when Pedroso tried to withdraw her investment. petitioner. finding petitioner as defendant and the co-defendants below jointly and severally liable to the plaintiffs. It should be recalled that AIR FRANCE was even unaware of the validating SAS and JAL stickers that Ella had affixed spuriously. Valle issued Pedroso his personal check for P800 for the 8%5 prepaid interest and a Filipinas Life "Agent’s Receipt" No. MARQUEZ. Palacio made a total investment of P49. despite demands. 159489 February 4.000 in cash. the judgment under review is hereby reversed and set aside. they went to Filipinas Life Escolta Office to collect their respective investments.4 In return. Valle did not want to return some P17. CLEMENTE N. Pedroso personally went to the Escolta branch where Alcantara gave her the P10. From the records. dated February 3. respondents. the check. as well as having known agent Valle for quite some time. with the endorsement of Alcantara at the back. G. the validating stickers that Ella affixed on his own merely reflect the status of reservations on the specified flight and could not legally serve to extend the validity of a ticket or revive an expired one. but Filipinas Life. PEDROSO. who referred her to the branch manager. . DECISION QUISUMBING. respondents filed an action for the recovery of a sum of money. Relying on the representations made by the petitioner’s duly authorized representatives Apetrior and Alcantara. The appellate court had affirmed the Decision3 dated October 10. about the investment plan. Escolta Branch. It was offering 8% prepaid interest a month for certain amounts deposited on a monthly basis. INC. The antecedent facts are as follows: The circumstance that AIR FRANCE personnel at the ticket counter in the airport allowed the GANAS to leave is not tantamount to an implied ratification of travel agent Ella’s irregular actuations. Upon maturity of Pedroso’s subsequent investments.: Page 129 of PAT CASE: AGENCY 150 . Branch 3. refused to return her money. it is up for the Ganas to make the arrangement. Enticed. was deposited in the account of Filipinas Life with the Commercial Bank and Trust Company (CBTC). 33568.000 worth of it. She was even told she could "push through with the check" she issued. .6 The conclusion is inevitable that the GANAS brought upon themselves the predicament they were in for having insisted on using tickets that were due to expire in an effort. 1989 of the Regional Trial Court (RTC) of Manila. . However."Q Exactly what were the words of Mrs. TERESITA O. SO ORDERED. Hence.2 dated November 29. Consequently. and to inquire why they had not seen Valle for quite some time. No costs. 1977 for P10. 7 This petition for review on certiorari seeks the reversal of the Decision1 and Resolution. she initially invested and issued a post-dated check dated January 7.000 but at a lower rate of 5%8 prepaid interest a month. Besides. respectively. Palacio also tried to withdraw hers. CV No. But their attempts were futile. "Q This was in Tagalog or in English? "A I think it was in English. Respondent Teresita O. what were her exact words? "A Her words only. of the Court of Appeals in CA-G. Valle would take back from Pedroso the corresponding yellow-colored agent’s receipt he issued to the latter. she called the Escolta office and talked to Francisco Alcantara. Pedroso waited for the maturity of her initial investment. 807838.).000. Japan Air Lines and AIR FRANCE merely acted within their contractual rights when they dishonored the tickets on the remaining segments of the trip and when AIR FRANCE demanded payment of the adjusted fare rates and travel taxes for the Tokyo/Manila flight. It should be recalled that the GANAS left Manila the day before the expiry date of their tickets and that "other arrangements" were to be made with respect to the remaining segments. totaling P37. Valle told her that the Filipinas Life Escolta Office was holding a promotional investment program for policyholders. Angel Apetrior. PALACIO thru her Attorneyin-Fact PONCIANO C. 2008 FILIPINAS LIFE ASSURANCE COMPANY (now AYALA LIFE ASSURANCE.5509 but at only 5% prepaid interest. 1977. now herein respondents.7 To collect the amount. perhaps. WHEREFORE.

CHINA AIRLINES. The act of the agent is considered that of the principal itself. "He who does a thing by an agent is considered as doing it himself. Respondents assert they exercised all the diligence required of them in ascertaining the authority of petitioner’s agents. Branch 3.550. in this case.13 When the agent exceeds his authority. In our considered view. Apetrior and Alcantara was outside the scope of their authority as agents of Filipinas Life such that. Petitioner now comes before us raising a single issue: WHETHER OR NOT THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN AFFIRMING THE DECISION OF THE LOWER COURT HOLDING FLAC [FILIPINAS LIFE] TO BE JOINTLY AND SEVERALLY LIABLE WITH ITS CODEFENDANTS ON THE CLAIM OF RESPONDENTS INSTEAD OF HOLDING ITS AGENT. For reasons of public interest and policy. Alcantara. Qui per alium facit per seipsum facere videtur. with the consent or authority of the latter. it is now estopped to deny said authority. 2002 and August 5. the acts of an agent beyond the scope of his authority do not bind the principal. respectively. were confirmed by its officers Apetrior and Alcantara. These were received by Valle and remitted to Filipinas Life. holding a supervisory position. of the Court of Appeals in CA-G. [G. Filipinas Life’s official documents and facilities were used in consummating the transactions. While it is true that a person dealing with an agent is put upon inquiry and must discover at his own peril the agent’s authority. the Court of Appeals affirmed the trial court’s ruling and subsequently denied the motion for reconsideration. hence. respondents contend that Filipinas Life authorized Valle to solicit investments from them. Filipinas Life thru Alcantara and Apetrior expressly and knowingly ratified Valle’s acts. expressly or impliedly. Filipinas Life had clothed Valle with apparent authority. In fact. 2003] Considering the issue raised in the light of the submissions of the parties. confirmed that Valle had authority. When respondents sought confirmation. No. J.R. DANIEL CHIOK. held Filipinas Life and its co-defendants Valle.15 In other words. according to respondents.10 Filipinas Life cannot profess ignorance of Valle’s acts. It cannot even be denied that Filipinas Life benefited from the investments deposited by Valle in the account of Filipinas Life. unless the principal ratifies them. Filipinas Life. Manila.12 The general rule is that the principal is responsible for the acts of its agent done within the scope of its authority. the agent becomes personally liable for the damage.16 Ratification in agency is the adoption or confirmation by one person of an act performed on his behalf by another without authority. the ticket-issuing airline acts as principal in a contract of carriage and is thus liable for the acts and the omissions of any errant carrier to which it may have endorsed any sector of the entire.R. petitioner. The Case Page 130 of PAT CASE: AGENCY 150 . a person binds himself to render some service or to do something in representation or on behalf of another. Innocent third persons should not be prejudiced if the principal failed to adopt the needed measures to prevent misrepresentation. July 30. but claims that it was only a life insurance company and was not engaged in the business of collecting investment money. as the principal. Even if Valle’s representations were beyond his authority as a debit/insurance agent. the petition is DENIED for lack of merit. These transactions. The Decision and Resolution. and it is Filipinas Life that failed in its duty to ensure that its agents act within the scope of their authority. Valle’s authority to solicit and receive investments was also established by the parties. whose authenticity were not disputed. Apetrior and Alcantara jointly and solidarily liable to the respondents. 152122. DECISION PANGANIBAN.000 and P49. Costs against the petitioner. we find that the petition lacks merit. SOLELY LIABLE TO THE RESPONDENTS. vs. By the contract of agency. respectively. and should bear the damage caused to third persons. dated November 29. respondent.14 But even when the agent exceeds his authority. RENATO VALLE. the principal is still solidarily liable together with the agent if the principal allowed the agent to act as though the agent had full powers. On the other hand. is liable for obligations contracted by its agent Valle. the RTC. and Apetrior. much more so if the principal ratified his agent’s acts beyond the latter’s authority. It contends that the investment scheme offered to respondents by Valle.: It appears indisputable that respondents Pedroso and Palacio had invested P47.11 WHEREFORE. respondents did exercise due diligence in removing all doubts and in confirming the validity of the representations made by Valle. using Filipinas Life’s official receipts."18 Simply put. A common carrier has a peculiar relationship with and an exacting responsibility to its passengers.After trial. 2003. the branch manager. SO ORDERED. CV No. continuous trip. 33568 are AFFIRMED. did the Court of Appeals err in holding petitioner and its co-defendants jointly and severally liable to the herein respondents? Filipinas Life does not dispute that Valle was its agent. it cannot be held liable to the respondents.17 On appeal. The Court of Appeals committed no reversible error nor abused gravely its discretion in rendering the assailed decision and resolution.

297:4402:004:370:5 and asked Chao if this ticket could be used to book him for the said flight. Further. he went to the PAL office and sought to reconfirm his flight back to Manila. It did not. Costs against defendants-appellants. 82-13690. The latter then wrote the following. Carmen directed PAL personnel to transfer counters. 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No.m. Chiok took his trip from Manila to Taipei using [the] CAL ticket. He then informed PAL personnel that. 1981. the trips covered by the ticket were pre-scheduled and confirmed by the former. National Capital Judicial Region. however. Ltd. being the founding director of the Philippine Polysterene Paper Corporation. Regional Trial Court. since one is the agent of the other. Later. When he arrived in Taipei.[4] Thereafter. Carie Chao (hereafter referred to as Chao). Manila. PR 311 was cancelled because of a typhoon in Manila. 1981 because of a business option which he ha[d] to execute on said date. The CAL office attached a yellow sticker appropriately indicating that his flight status was OK. in Civil Case No. with Branch 31. Carmen informed Chiok that his name did not appear in PALs computer list of passengers and therefore could not be permitted to board PAL Flight No. PALs terminal supervisor. filed a Complaint on November 9.00. he ha[d] to reach Manila on November 25. Said ticket was exclusively endorseable to Philippine Airlines. PR 311 were automatically booked for its next flight. against PAL and CAL. and informed the latter that Chioks name was not in the computer list of passengers.00. (c) Taipei $8.500.00. Subsequently. PR 311 and attached its own sticker. WHEREFORE.000. as defendants. he went to the CAL office and confirmed his Hongkong to Manila trip on board PAL Flight No. WHEREFORE. It disposed as follows: On November 25. is hereby MODIFIED by deleting that portion regarding defendants-appellants liabilities for the payment of the actual damages amounting to HK$14. for which reason he lost the business option aforementioned. PR 307. he alleged that defendants are solidarily liable for the damages he suffered. defendant PAL refused to accommodate him in Flight No. The challenged Decision disposed as follows: Meanwhile.128. He was then informed that all the confirmed ticket holders of PAL Flight No.Before the Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court. he complained to Carmen. 1982 for damages.00.[6] The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and severally liable to respondent. Chiok lost his clutch bag containing the following. which contained cosmetics worth HK$14. Cathay Pacific stewardess Lok Chan (hereafter referred to as Lok) ha[d] taken and received Chioks plane ticket and his luggage. (g) a tie clip with a garnet birthstone and diamond worth P1. Consequently. The PAL office confirmed his return trip on board Flight No. 1981. booked and confirmed the formers trip.000.00. who previously confirmed his flight back to Manila. The Facts Chiok then decided to use another CAL ticket with No. Chiok requested Carmen to put into writing the alleged reason why he was not allowed to take his flight. ridiculed and humiliated him in the presence of so many people. However. and (h) a [pair of] Christian Dior reading glasses. The latter sought to recover his luggage but found only 2 which were placed at the end of the passengers line.000. (e) a three-piece set of gold (18 carats) cross pens valued at P3.000. docketed as Civil Case No. 1991 of Branch 31. PAL personnel informed him that he could now check-in. specifically Carmen. National Capital Judicial Region. 307.000. 45832. PR 311 scheduled to depart that evening. Thereafter. When Chiok reached Hongkong. (CAL for brevity) airline passenger ticket number 297:4402:004:278:5 for air transportation covering Manila-Taipei-Hongkong-Manila. Regional Trial Court. which was to leave the next day. to wit: (a) $2. he was placed on stand-by and at around 7:30 p. He also alleged that PALs personnel. 2001 Decision[2] and the February 7. On November 24. The facts are narrated by the CA[5] as follows: On September 18. which number was R/MN62. He alleged therein that despite several confirmations of his flight.. Ltd. (b) HK$2. In the ensuing commotion. Chiok proceeded to Hongkong International Airport for his return trip to Manila.80 and US$2. premises considered.800. As this juncture. Chiok went to the airport.128. Before he left for said trip. Chiok went to the PAL check-in counter and it was Carmen who attended to him.00 while all other respects are AFFIRMED. Chiok proceeded to PALs Hongkong office and confronted PALs reservation officer. on top of the PAL check-in counter. once again. Realizing that his new Samsonite luggage was missing. including his clutch bag. the assailed Decision dated July 5.80. The assailed Resolution denied Petitioners Motion for Partial Reconsideration. Chiok saw a poster stating that PAL Flight No. 1981.00. Daniel Chiok (hereafter referred to as Chiok) purchased from China Airlines. Manila. 82-13690. (d) P2. The latter. PR 311. Chao told Chiok that his name was on the list and pointed to the latter his computer number listed on the PAL confirmation sticker attached to his plane ticket. seeking to reverse the August 7. (f) a Cartier watch worth about P7. to wit: PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. 1981. Lok called the attention of Carmen Chan (hereafter referred to as Carmen). judgment is hereby rendered in favor of plaintiff and against the defendants to jointly and severally pay: Page 131 of PAT CASE: AGENCY 150 . (PAL for brevity). rule on their respective cross-claims. Subsequently.500. Subsequently. Chiok had already placed his travel documents. this time on board PAL Flight No. Chiok as plaintiff. on November 21. upon reaching the PAL counter.

128. in spite of the confirmations he had secured for Flight PR 311. Attorney[]s fees equivalent to 10% of the amounts due and demandable and awarded in favor of the plaintiff. the latter cannot be bound by the conditions by which the carrier assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences in its own lines. and does not apply if the damage is caused by the willful misconduct on the part of the carriers employee or agent acting within the scope of his employment. 6.000. 65 SCRA 237 and in magnifying its misconduct by denying the petitioners Motion for Reconsideration on a mere syllabus. Where the passage tickets provide that the carriage to be performed thereunder by several successive carriers is to be regarded as a single operation. Ruling that the airlines negligence was the proximate cause of his excoriating experience. however. Petitioner likewise prayed for a ruling on its cross-claim against PAL. CA. in relation to Section 5(d) of Rule 56 and paragraph 2 of Revised Circular No. because the lost piece of luggage and clutch bag had not actually been checked in or delivered to PAL for transportation to Manila. 2002. contending that the appellate court had erroneously relied on a mere syllabus of KLM v. Moreover. responsibility for the entire trip and shall be held accountable for the breach of that guaranty whether the breach occurred in its own lines or in those of the other carriers. P50. inasmuch as the latters employees had acted negligently. Court of Appeals[8] as follows: Denying the Motion.000. the CA quoted a purported ruling of this Court in KLM Royal Dutch Airlines v.000.[7] On August 28. Ruling of the Court of Appeals Affirming the RTC. 5. docketed as GR No. On PALs appeal. the passenger can take action only against the carrier who performed the transportation during which the accident or the delay occurred presupposes the occurrence of either an accident or delay in the course of the air trip. It would be unfair and inequitable to charge a passenger with automatic knowledge or notice of a condition which purportedly would excuse the carrier from liability. as found by the trial court. P200. 3. the carrier who issued the ticket must inform the passenger of the conditions prescribed in the ticket or. petitioner raises the following issues for the Courts consideration: 1. this Court denied PALs appeal. and the ticket-issuing carrier assumes full Page 132 of PAT CASE: AGENCY 150 .128. and that only PAL. 4. 1-88 of this Court. petitioner filed a Motion for Partial Reconsideration. the variance was more apparent than real since the difference [was] only in form and not in substance. where the notice is written at the back of the ticket in letters so small that one has to use a magnifying glass to read the words.[10] Article 30 of the Warsaw providing that in case of transportation to be performed by various successive carriers.1. US$2.[9] 2. Rule 45. 2001. the appellate court sustained the award of moral and exemplary damages. ascertain that the passenger read them before he accepted the passage ticket.00 by way of moral damages.00 by way of exemplary damages or corrective damages. Actual damages in the amount of HK$14. the carrier which issued the tickets for the entire trip in effect guaranteed to the passenger that the latter shall have sure space in the various carriers which would ferry him through the various segments of the trip. The costs of this proceedings. the appellate court held that the carrier had reneged on its obligation to transport respondent when. The two carriers appealed the RTC Decision to the CA. The Court of Appeals committed judicial misconduct in finding liability against the petitioner on the basis of a misquotation from KLM Royal Dutch Airlines vs. Absent any showing that the carriers officials or employees discharged this responsibility to the passenger. and The CA. not on the actual ruling therein. for failure to serve the CA a copy of the Petition as required by Section 3.00 or its equivalent at the time of the loss of the clutch bag containing the money. the CA held that while the portion it had cited appeared to be different from the wording of the actual ruling. Only the appeal of CAL[11] remains in this Court. the Court of Appeals debunked petitioners claim that it had merely acted as an issuing agent for the ticket covering the Hong Kong-Manila leg of respondents journey. not CAL. CAL and PAL filed separate Petitions to assail the CA Decision. 2001 Resolution. As to the alleged misquotation. In its October 3.80 and US$2. Court of Appeals. was liable for the actual carriage of that segment. in the very least.. To preclude any doubt that the contract was fairly and freely agreed upon when the passenger accepted the passage ticket. his name did not appear in the computerized list of passengers. In support of its Decision. Issues In its Memorandum.00. it argued that respondent was fully aware that the booking for the PAL sector had been made only upon his request. the appellate court ruled that petitioner had failed to raise any new matter or issue that would warrant a modification or a reversal of the Decision. 149544.000.80 or its equivalent in Philippine Currency at the time of the loss of the luggage consisting of cosmetic products. et al. deleted the RTCs award of actual damages amounting to HK$14. PALs Motion for Reconsideration was denied with finality on January 21. unofficial at that.

[13] 2. KLM sought to be excused for the wrongful conduct of Aer Lingus by arguing that its liability for damages was limited only to occurrences on its own sectors. through its manager there. CA In KLM v. The Courts Ruling The Petition is not meritorious. As noted by the Court of Appeals that condition was printed in letters so small that one would have to use a magnifying glass to read the words. The tour included a Barcelona-Lourdes route. held that the difference between the actual ruling and the syllabus was more apparent than real. the respondents must first be given an opportunity to be heard before sanctions can be imposed. We agree with petitioner that the CA committed a lapse when it relied merely on the unofficial syllabus of our ruling in KLM v. which is diametrically incompatible with the theory of the KLM that the respondents entered into a series of independent contracts with the carriers which took them on the various segments of their trip. CA. we can only determine whether the error in quotation would be sufficient to reverse or modify the CA Decision. the passage tickets of the respondents provide that the carriage to be performed thereunder by several successive carriers is to be regarded as a single operation. the KLM was chargeable with the duty and responsibility of specifically informing the respondents of conditions prescribed in their tickets or. The respondents. Moreover. inexplicably fails to show that any effort was exerted by the KLM officials or employees to discharge in a proper manner this responsibility to the respondents. refused to transport the respondents to their planned and contracted destination. Moreover.2. the present action is an appeal from the CAs Decision. At the KLM office Page 133 of PAT CASE: AGENCY 150 . the passenger could take action only against the carrier that had performed the transportation when the accident or delay occurred. instead.[12] When sued for breach of contract. 3. it cited Article 30 of the Warsaw Convention. By merely including the lapse as an assigned error here without any adequate and proper administrative case therefor. Second. the petitioner therein issued tickets to the Mendoza spouses for their world tour. To support its argument. The respondents dealt exclusively with the KLM which issued them tickets for their entire trip and which in effect guaranteed to them that they would have sure space in Aer Lingus flight 861. to ascertain that the respondents read them before they accepted their passage tickets. it would be unfair and inequitable to charge the respondents with automatic knowledge or notice of the said condition so as to preclude any doubt that it was fairly and freely agreed upon by the respondents when they accepted the passage tickets issued to them by the KLM. as maintained by the respondents and the Court of Appeals. In holding KLM liable for damages. On the day of their departure. in Frankfurt. Consequently. we cannot rule on the CA justices administrative liability. These two suits are independent of and separate from each other and cannot be mixed in the same proceedings. A thorough search of the record. however.[14] By the same token. naturally had the right to expect that their tickets would be honored by Aer Lingus to which. CA. Indeed. judges should do no less by strictly abiding by this rule when they quote cases that support their judgments and decisions. what is here manifest. the KLM had indorsed and in effect guaranteed the performance of its principal In the case at bar. As the airline which issued those tickets with the knowledge that the respondents would be flown on the various legs of their journey by different air carriers. petitioner cannot expect the imposition of an administrative sanction. in the legal sense. The argument that the KLM should not be held accountable for the tortious conduct of Aer Lingus because of the provision printed on the respondents' tickets expressly limiting the KLM's liability for damages only to occurrences on its own lines is unacceptable. Germany. The Court of Appeals committed an error of law when it did not apply applicable precedents on the case before it. Canon 3 of the Code of Judicial Conduct enjoins them to perform official duties diligently by being faithful to the law and maintaining their professional competence. due process requires that in administrative proceedings. such misconduct was allegedly aggravated when the CA. The applicability insisted upon by the KLM of article 30 of the Warsaw Convention cannot be sustained. in the very least. not an administrative case against the magistrates concerned. is that the Aer Lingus. we ruled as follows: First Issue: Alleged Judicial Misconduct 1. the airline rudely off-loaded them. lawyers and litigants are mandated to quote decisions of this Court accurately. Applicability of KLM v. under that assurance of the internationally prestigious KLM. since this case is not administrative in nature. neither of which took place at the Barcelona airport. 3. stating that when transportation was to be performed by various successive carriers. if any. in an attempt to justify its action. for this lapse. which was serviced by the Irish airline Aer Lingus. we hold that the respondents cannot be bound by the provision in question by which KLM unilaterally assumed the role of a mere ticket-issuing agent for other airlines and limited its liability only to untoward occurrences on its own lines. That article presupposes the occurrence of either an accident or a delay. However. however. CA. This position of KLM we reject. Under the circumstances. Petitioner charges the CA with judicial misconduct for quoting from and basing its ruling against the two airlines on an unofficial syllabus of this Courts ruling in KLM v. First. they obtained a confirmation from Aer Lingus of their seat reservations on its Flight 861. The Court of Appeals committed a non sequitur when it did not rule on the cross-claim of the petitioner.

As such. the ticket-issuing airline is the principal in a contract of carriage. A member airline which enters into a contract of carriage consisting of a series of trips to be performed by different carriers is authorized to receive the fare for the whole trip and through the required process of interline settlement of accounts by way of the IATA clearing house an airline is duly compensated for the segment of the trip serviced. Petitioner posits that the CA Decision must be annulled. for the purposes of this Convention. petitioner -. in effect guaranteed that the carrier. assure him of a space therein and transport him on a particular segment of his trip. Intermediate Appellate Court[20] and China Airlines v. Such contract of carriage has always been treated in this jurisdiction as a single operation. 4. Court of Appeals. when the petitioner accepted the unused portion of the conjunction tickets. and it shall not lose its international character merely because one contract or a series of contracts is to be performed entirely within a territory subject to the sovereignty. The petitioners argument that it is not a designated carrier in the original conjunction tickets and that it issued its own ticket is not decisive of its liability. which is still being updated. x x x Members of the IATA are under a general pool partnership agreement wherein they act as agent of each other in the issuance of tickets to contracted passengers to boost ticket sales worldwide and at the same time provide passengers easy access to airlines which are otherwise inaccessible in some parts of the world.[21] Jurisprudence Supports CA Decision Page 134 of PAT CASE: AGENCY 150 . CA. when used to support a judgment or ruling. Singapore Airlines. injury and embarrassment suffered by the respondents at the hands of a supercilious boor of the Aer Lingus.e. to be one undivided transportation. This also serves as proof that defendantappellant CAL.[24] we have noted that under a general pool partnership agreement.760 and having the same points of departure and destination. i.[17] In the absence of this primary source. they may resort to unofficial sources like the SCRA. The breach of that guarantee was aggravated by the discourteous and highly arbitrary conduct of an official of the Aer Lingus which the KLM had engaged to transport the respondents on the BarcelonaLourdes segment of their itinerary. with the former endorsing to PAL the Hong Kong-to-Manila segment of the journey. we have found after careful deliberation that the assailed Decision is supported in substance by KLM v. It is but just and in full accord with the policy expressly embodied in our civil law which enjoins courts to be more vigilant for the protection of a contracting party who occupies an inferior position with respect to the other contracting party. It elucidated on this point as follows: By the very nature of their contract. not only because it was rooted on an erroneous quotation.engagement to carry out the respondents' scheduled itinerary previously and mutually agreed upon between the parties. Court of Appeals. Thus. the petitioner tacitly recognized its commitment under the IATA pool arrangement to act as agent of the principal contracting airline. the petitioner thereby assumed the obligation to take the place of the carrier originally designated in the original conjunction ticket. The misquotation by the CA cannot serve as basis for the reversal of its ruling.[22] to which the Philippines is a party.[19] Second Issue: Liability of the Ticket-Issuing Airline We now come to the main issue of whether CAL is liable for damages. regardless of those instances when actual carriage was to be performed by another carrier. to avert similar incidents in the future. while the endorsee-airline is the agent..was liable regardless of the fact that PAL was to perform or had performed the actual carriage. This jurisprudential rule is supported by the Warsaw Convention. the Philippine Reports. that the KLM should be held responsible for the abuse. In American Airlines v.[18] We remind them that the Courts ponencia. or under a ticket and any conjunction ticket issued therewith. entered it in the IATA clearing house and undertook to transport the private respondent over the route covered by the unused portion of the conjunction tickets. if it has been regarded by the parties as a single operation. whenever practicable. such as defendant-appellant PAL would honor his ticket.[15] Article 1. this Court hereby exhorts members of the bar and the bench to refer to and quote from the official repository of our decisions. Notwithstanding the errant quotation. is regarded as a single operation. The new ticket was simply a replacement for the unused portion of the conjunction ticket. but also because it disregarded jurisprudence. as to the segment of the trip the petitioner agreed to undertake. Booking and reservation among airline members are allowed even by telephone and it has become an accepted practice among them. and by the existing practices of the International Air Transport Association (IATA). notably China Airlines v.[16] Article 15 of IATA-Recommended Practice similarly provides: Carriage to be performed by several successive carriers under one ticket. whether it has been agreed upon under the form of a single contract or of a series of contracts. or authority of the same High Contracting Party. Section 3 of the Warsaw Convention states: Transportation to be performed by several successive air carriers shall be deemed. both tickets being for the same amount of US$ 2.[23] In the instant case. mandate. It is significant to note that the contract of air transportation was between petitioner and respondent. the CA ruled that under the contract of transportation.as the ticketissuing carrier (like KLM) -. should be quoted accurately. defendant-appellant CAL is clearly liable under the contract of carriage with [respondent] and remains to be so. Geneva to New York. The issuance of a confirmed CAL ticket in favor of [respondent] covering his entire trip abroad concretely attests to this. suzerainty. By constituting itself as an agent of the principal carrier the Nonetheless.

1981.[30] and it became demandable when he presented himself for the trip on November 24. Instead. To make matters worse. Moral damages cannot be awarded in breaches of carriage contracts. the petitioner in British Airways v. this Court has stressed that the business of common carriers is imbued with public interest and duty. particularly Chan. but on that of another airline. and to the likelihood that his business affairs in the city would be jeopardized because of a mistake on their part. In the same way that we ruled against British Airways and Lufthansa in the aforementioned cases. Hence. as the principal in the contract of carriage. presented himself for the latter. concerning Damages. As a rule also. which we quote: It is relevant to point out that the employees of PAL were utterly insensitive to his need to be in Manila on November 25.petitioners undertaking should be taken as part of a single operation under the contract of carriage executed by the private respondent and Singapore Airlines in Manila. In Lopez v. in addition to actual damages. is proper. [are] acts evidently indistinguishable or no different from fraud. As a rule. he had every reason to expect that he would be put on the replacement flight as a confirmed passenger. That duty arose when its agent confirmed his reservation for Flight PR 311. even when the breach of contract had occurred. However.as in the present recourse -. In the instant case.[33] Article 1764.[25] In the case at bar. Article 2206 shall also apply to the death of a passenger caused by the breach of contract by a common carrier. under the circumstances. In Saludo v. By merely looking at his ticket and validation sticker. (Italics supplied) There is no occasion for us to invoke Article 1764 here.[39] the manner in Page 135 of PAT CASE: AGENCY 150 . they must require them to be so. PAL acted as the carrying agent of CAL.[29] we defined bad faith as a breach of a known duty through some motive of interest or ill will. except in the two instances contemplated in Articles 1764 and 2220 of the Civil Code. they must not merely give cursory instructions to their personnel to be more accommodating towards customers. where in breaching the contract of carriage the defendant airline is shown to have acted fraudulently. Likewise. he was harangued and prevented from boarding the original and the replacement flights. Court of Appeals.[36] (Italics supplied) Article 2220. passengers and the general public. The acts of PALs employees. it is evident that the glitch was the airlines fault. no serious attempt was made by PAL to secure the all-important transportation of respondent to Manila on the following day. only questions of law -. Thus. did not terminate the carriers responsibility to its passengers. PR 307. clearly fell short of the extraordinary standard of care that the law requires of common carriers.[38] As narrated in Chans oral deposition. following the jurisprudence cited above. 1981.[35] we said: xxxxxxxxx x x x [T]he carrier's utter lack of care and sensitivity to the needs of its passengers.[28] Indeed. therefore. malice and bad faith.[37] the Court reminded airline companies that due to the nature of their business. The Decision followed our ruling in Lufthansa German Airlines v. [32] Moral and Exemplary Damages Both the trial and the appellate courts found that respondent had satisfactorily proven the existence of the factual basis for the damages adjudged against petitioner and PAL. even though it may have been only a ticket issuer for the Hong Kong-Manila sector. however. on the following day. Willful injury to property may be a legal ground for awarding moral damages if the court should find that. clearly constitutive of gross negligence. Court of Appeals. [27] in which we had held that the obligation of the ticket-issuing airline remained and did not cease. PAL breached its duty to transport him. Court of Appeals[26] was held liable. 1981. the award of moral and exemplary damages. the law governing them imposes an exacting standard. such damages are justly due. We must therefore determine if CAL or its agent (PAL) is guilty of bad faith that would entitle respondent to moral damages. After he had been directed to pay the terminal fee. It was that mistake that had caused the omission of his name from the passenger list despite his confirmed flight ticket. recklessness and wanton disregard of the rights of the latter.[31] That responsibility was subsisting when respondent. As the rule now stands. to board Flight PR 307. This fact. the Supreme Court is not a trier of facts.may be raised in petitions for review under Rule 45. holding a confirmed ticket for the former flight. Pan American World Airways. regardless of the fact that another airline had undertaken to carry the passengers to one of their destinations. PAL voluntarily obligated itself to automatically transfer all confirmed passengers of PR 311 to the next available flight. The records amply establish that he secured repeated confirmations of his PR 311 flight on November 24.[34] In Singson v. It is true that due to a typhoon. the findings of fact of the CA affirming those of the RTC will not be disturbed by this Court. his pieces of luggage were removed from the weighing-in counter despite his protestations. PAL was unable to transport respondent on Flight PR 311 on November 24. we also rule that CAL cannot evade liability to respondent. PAL allowed a group of non-revenue passengers. not on its own flight. the known duty of PAL was to transport herein respondent from Hong Kong to Manila. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Court of Appeals. who had no confirmed tickets or reservations. with malice or in bad faith. 1981. Time and time again. Damages in cases comprised in this Section shall be awarded in accordance with Title XVIII of this Book.

A and A-1. [he] was also automatically transferred to flight 307 the following day? xxxxxxxxx A Should be. status of Mr. are they not notified of the cancellation? A May I x x x look at them. Chiok has been entered in Philippine Airlines computer. what should have been done by Reservations Office when a flight is cancelled for one reason or another? A Correct. A If there is enough time.K.which the airline discharged its responsibility to respondent and its other passengers manifested a lack of the requisite diligence and due regard for their welfare.K. Miss Chan what do you understand by these entries here R bar M N 6 V?[41] A This is what we call a computer reference. 24 November to flight 307. Q O. another sticker Exh.. correct? Q Per procedure. A I think all these passengers were not notified because of a typhoon and Philippine Airlines Reservation were [sic] not able to call every passenger by phone. A I believe they were not. I dont know. A-1-B for 24 November is O. Now do you remember how many passengers x x x were transferred from flight 311.] then the Reservations Office will not be able to do that. is O. Fruto: Yes. 25 November 81? Q Should be. O. Calica: Q Now you stated in your answer to the procedure taken. Will you please go over this ticket and tell the court whether this is the ticket that was used precisely by Mr.[42] Q No. Miss Chan. Q You agree with me.] were automatically transferred to 307 as a protection for the passengers. 24 November[. no. it says O. This is a computer reference showing that the name of Mr. Q Now you said that flight PR 311 on 24th November was cancelled due to [a] typhoon and naturally the passengers on said flight had to be accommodated on the first flight the following day or the first flight subsequently. A Yes. but believe me. Atty. Reservations Office x x x call[s] up all the passengers and tell[s] them the reason. I was on day-off. but [there is] no validation. Atty. But if there [is] no time[. and this is his computer number.[40] Q So that since following the O.K. correct? A The procedure will be: all the confirmed passengers from [PR] 311 24th November [are] automatically transfer[red] to [PR] 307. And you will also agree with me that in this ticket of flight 311. Now of course you will agree with me Miss Chan that this yellow stub here which has been marked as Exh. O. show[s] that the status on flight 311. A-1-A. The pertinent portions of the Oral Deposition are reproduced as follows: A Yes. no. [W]ill you tell the Honorable Deposition Officer the procedure followed by Philippine Airlines in the handling of passengers of cancelled flight[s] like that of PR 311 which was cancelled due to [a] typhoon? A I believe I saw it. 25 November 81? A [Are you] now asking me whether he used this ticket with this sticker? A I can only give you a very brief idea because that was supposed to be air bus so it should be able to accommodate 246 people.K.K. of course. xxxxxxxxx Page 136 of PAT CASE: AGENCY 150 . Q I see. [are you] asking me whether I saw this ticket? Atty. That was the ticket he used. Chiok when he checked-in at [F]light 307. on this. Q You saw it. A Yes. x x x. 24th November.] what do you do with the passengers on the cancelled flight who are expected to check-in on the flights if this flight is cancelled or not operating due to typhoon or other reasons[?] In other words.? Q Aside from this procedure[. Chioks reservation [on] flight 311.K. but how many [exactly]. I [will] show you a ticket which has been marked as Exh.] as a protection for all disconfirmed passengers. Yes. that all confirmed passengers on flight 311. 25th November[. Fruto: Q Did you say were not notified? Q I see.K.

in which case..not only once. 1981 -. we thereby deleted the award of moral and exemplary damages against it. That sticker also contained the entry RMN6V. as shown by the flow of telexes from one of the airlines offices to the others. CA. 1981 PR 311 flight and. A Swire House building is not directly under Philippine Airlines. PAL is an indispensable party. the passenger likewise becomes entitled to recover moral damages. Since he had secured confirmation of his flight -. Court of Appeals[47] is likewise inapplicable. we found no bad faith or malice in the airlines breach of its contractual obligation. Since the status of respondent on Flight PR 311 was OK. The status of this flight was marked OK on a validating sticker placed on his ticket. complete. A Yes. We now look into the propriety of the ruling on CALs cross-claim against PAL. For purposes of a ruling on the cross-claim. Court of Appeals. A Yes. there are situations where the negligence of the carrier is so gross and Page 137 of PAT CASE: AGENCY 150 . Intermediate Appellate Court. . Chiok already told you that he just [came] from the Swire Building where Philippine Airlines had [its] offices and that he told you that his space for 311 25 November 81 was confirmed? In the present case. we cannot apply our 1989 ruling in China Airlines v.[44] which petitioner urges us to adopt. And besides around six o clock theyre close[d] in Central.[45] Having found no gross negligence or recklessness. In that case. Such cross-claim may include a claim that the party against whom it is asserted is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant. In view of the foregoing. Mr. Cross-claim. consequently. Third Issue: Propriety of the Cross-Claim Q And did you not try to call up Swire Building-. we rule that moral and exemplary[50] damages were properly awarded by the lower courts. in the list of the replacement flight PR 307.initially from CAL and subsequently from the PAL office in Hong Kong. In that case. Q So..[46] Section 8 of Rule 6 of the Rules of Court reads: Sec. He insisted on that flight? A Yes. and without whom no final determination of the case can be had.[51] A Yes. as a matter of right testified to by PALs witness. Ms Chan explicitly acknowledged that such entry was a computer reference that meant that respondents name had been entered in PALs computer. 8.[43] Under the foregoing circumstances. Q So this Swire Building is an agency authorized by Philippine Airlines to issue tickets for and on behalf of Philippine Airlines and also. In BA Finance Corporation v.[48] We held that. This Courts 1992 ruling in China Airlines v. he should have been automatically transferred to and allowed to board Flight 307 the following day.Philippine Airlines and verify indeed if Mr. Chiok was there? Q And also to confirm spaces for and on behalf of Philippine Airlines. petitioner failed to exhibit the same care and sensitivity to respondents needs. considering that the RTC had found that it was PALs employees who had acted negligently. we stress that respondent had repeatedly secured confirmations of his PR 311 flight on November 24. the breach of contract and the negligence of the carrier in effecting the immediate flight connection for therein private respondent was incurred in good faith. In Singson v. it is just an agency for selling Philippine Airlines ticket.PALs negligence was so gross and reckless that it amounted to bad faith. or where the carrier is guilty of fraud or bad faith.[52] the Court stated: x x x. between six and eight oclock in the evening of 25 November 81. In his absence there cannot be a resolution of the dispute of the parties before the court which is effective. or equitable.A cross claim is any claim by one party against a co-party arising out of the transaction or occurrence that is the subject matter either of the original action or of a counterclaim therein.reckless as to virtually amount to bad faith. Q That is what he told you. but twice -by personally going to the carriers offices where he was consistently assured of a seat thereon -. The partys interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. petitioner therein had exercised diligent efforts in assisting the private respondent change his flight schedule. Petitioner submits that the CA should have ruled on the cross-claim. In the instant case.[49] we said: x x x Although the rule is that moral damages predicated upon a breach of contract of carriage may only be recoverable in instances where the mishap results in the death of a passenger. An indispensable party is one whose interest will be affected by the courts action in the litigation. Clearly resulting from negligence on the part of PAL was its claim that his name was not included in its list of passengers for the November 24.

1946. dated November 13. Jose G. all contrary to the rules and regulations of the plaintiff Bank. Because of the form heavy disbursements made by the Cotabato Agency in the form of crop loans and because of exhaustion of its funds.R. J. the Bank held in Manila a conference in of all its manager and Agents. the plaintiff Bank passed the corresponding resolution (Exhibit B) authorizing the granting of ten-month special crop loans to bona fide food producers. representing the uncollected balance of the special crop loans improperly released by said defendants. 1946. requesting authority from the central office to secure cash from the Zamboanga Agency.xxxxxxxxx The uncontroverted facts in the present case may be briefly stated as follows. loans in the total amount of a little over eight and half million pesos. In pursuance of said instructions and to cooperate with the Administration. in granting said crop loans. After approval by Buencamino.000 daily.803. instructed the plaintiff Philippine National Bank to extend special facilities to farmers in the form of crop loans in order to enable them to rehabilitate their farms. addressed to the Cotabato Agency stating among other things that the purposes of these funds (to be obtained from the Zamboanga Agency was to meet the release of the second installment crop loans being granted which according to the telegram aggregated P60. Labunao for appellee. in its Cotabato Agency. Flores.57. and damage to or abandonment of farm lands. one of the Assistant Managers of said Department drafted the corresponding rules and regulations regarding the granting of said specials crops loans. President Roxas in order to foment and encourage food production. on June 14.18. a copy of which was personally delivered to defendant Ferrer. they acted negligently and did not exercise the care and precaution required of them in order to prevent the release of crop loans to persons who were neither qualified borrowers nor entitled to the assistance being rendered by the Government and the Bank. plaintiff-appellee. not being a party in the present case. emphasizing to him the necessity of exercising diligence and care in the granting of the crop loans to see to it that they are granted only to bona fide planters.000 borrowers. said to have been disbursed and released by them as special crop loans. said Agency had granted to over 5. Assistant Agent of the Cotabato Agency attended the conference in representation of said Agency. FERRER. The theory on which the Bank's claim and complaint are based is that the two defendants Bagamaspad and Ferrer acting as Agent and Assistant Agent of the Cotabato Agency. Besides circularizing its branches and agencies with these rules and regulations. The Cotabato Agency under the management of the two defendants began granting these special crop loans in July. in the years 1946 and 1947. defendants-appellants. and by March of the following year. land-owners or tenants. land-owners or their tenants. the Court has no jurisdiction over it. SO ORDERED. the plaintiff Philippine National Bank. vs. Nemesio P. L-3407 June 29. petitioner failed to include the airline in the present recourse. due to payments made by some of the borrowers. G. for appellants. Without the presence of indispensable parties to a suit or proceeding. PALs interest may be affected by any ruling of this Court on CALs cross-claim. Exhibit E. a banking corporation organized and operating under the laws of the Philippines. These rules and regulations were later amplified by another circular letter (Exhibit D). The letter reminded the Agency's that the Central Page 138 of PAT CASE: AGENCY 150 . as well as repeating to him the advice of Vicente Carmona. 1947. The two defendants appealed from that decision. was entrusted with the supervision of the granting of these loans. with main office in the City of Manila and agencies in different provinces like the province of Cotabato. Replying to this telegram. in granting new crop loans after November 13. these rules and regulations were embodied in a circular letter (Exhibit C). upon petition of plaintiff's counsel. dated November 11. the trial court rendered judgment in favor of the plaintiff. Hence. to make any ruling on the cross-claim in the present Petition would not be legally feasible because PAL. one of the Vice-President of the Bank and head of the Branches and Agencies Department of said institution. were its Agent and Assistant Agent. respectively. Exhibit 11.[53] WHEREFORE. Although PAL was petitioners co-party in the case before the RTC and the CA. On March 31. and that furthermore. Juan Tueres. 1946. that the Managers and Agents of the Bank should not allow themselves to be fooled.903. Because of the Pacific War and by reason of the destruction and loss of animals of labor. before this Court can make a final ruling on this matter. judgment of a court cannot attain real finality. Costs against petitioner. the Petition is DENIED. it is imperative and in accordance with due process and fair play that PAL should have been impleaded as a party in the present proceedings. the amount of the claim was reduced to P699. 1949. with legal interest thereon from the date of the filing of the complaint. said agency sent a telegram. 1951 PHILIPPINE NATIONAL BANK. cannot be bound thereby. initiated this suit in the Court of First Instance of Cotabato for the purpose of collecting from the defendants Bernardo Bagamaspad and Bienvenido M. without authority and in a careless manner to manifestly insolvent. Consequently. Delfin Buencamino. Hence. 1946. violated the instructions of the Bank. He arrived late but Tueres explained to him what had been discussed during the conference. Defendant Ferrer. Ferrer who. 1946. The appeal was first taken to the Court of Appeals but in view of the amount involved it was certified to this Tribunal by the said Court of Appeals. In the course of the trial.: On May 25. the sum of P704. after liberation there was acute shortage of foodstuff. BERNARDO BAGAMASPAD and BIENVENIDO M. plus costs.57. 1948. No. under certain conditions. MONTEMAYOR. farm implements. unqualified or fictitious borrowers. all contrary to the rules and regulations issued by the Bank. Delfin Buencamino sent a letter.803. President of the bank. ordering both defendants to pay jointly and severally to it the sum of P699.

1946 to the central office in Manila. Exhibit F. namely. As the purpose for which special crop loans are being granted by the Bank is to provide the farmers with funds to meet the expenses of their farms and if said farms have already been planted.). From this letter of Bagamaspad of which his co-defendant and Ferrer must have been aware. Exhibit E. and that Ferrer was able to secure P300. the Cotabato Agency may again request for replenishment. On the first assigned error appellants maintain that outside of the telegram.680. in response to question asked by the trial court during the hearing. considering that at this period planting season in low-land palay region is now over. reiterating the Agency's heavy disbursements on second installments for crop loans and stating that Ferrer had been instructed to proceed to Zamboanga to secure the needed cash. of the of the Cotabato Agency. with the statement that as soon as the said amount was exhausted. but that said idea of the central office could be gathered from its letter. which they claim to have received only on December 7.n. (Emphasis ours) In answer to this letter. authorizing him to obtain only P3. could be given crop loans. will run to P600. we believe that the farmers may not need said credit facilities unless it has been found out by actual investigation and verification that said loans are needed by them. Bagamaspad in his letter said: the Zamboanga Agency." Please. we would like to state that the purpose of these funds is to meet the release of the second installment of crop loans being granted by that agency. that they were no longer authorized to grant new special crop loans. that he received the answer from the central office. This letter of the Central Office again emphasized the necessity of strict compliance with the rules and regulations regarding the required field inspection before releasing the second installment. t. of your above mentioned letter. according to your said telegram. let us hear from you regarding this matter. Yesterday they held a demonstration and copy of the picture is hereto attached. stating that for Cotabato. Exhibit F. dated November 28. to the central office making reference to said Exhibit E. Ferrer to Zamboanga to despatch this letter without delay and wait there for whatever instruction that you may give with reference to our desire to secure more cash from our Zamboanga Agency. Agent B. defendants sent a telegram.000 and whether we shall continue granting special crop loans or not. Exhibit I. 31. he asks if they (defendants) could still entertain new applications for special crop loans? At least. In answer to Exhibit H. may we know if could still entertain new applicants on Special Crop Loans? We are constrained to request for this matter because there are now on file no less than 1. once in Zamboanga.000 daily. and that it was understood and clearly. Exhibit H. it will be seen that without waiting for authority to secure funds from the Zamboanga Agency. expressly instructing the Cotabato Agency to discontinue granting new crop loans. did so at their own risk and in violation of the instructions received from the Manila office. we shall appreciate if you could give us definite course of action towards the clarifications of our stand to the public.000 from the Zamboanga Agency. as required by the regulations. Exhibit G. amounting to P726. 340-344. and that Bagamaspad again had sent Ferrer to Zamboanga to await instruction from the central office regarding their desire and intention to secure in additional P1. respectively. Exhibit G. ended with the following: Concerning the new special crop loan applications numbering about 1. as they as Agent and Assistant Agent. we would like to be informed whether the farms of the said applicants have already been actually planted. by the defendants. Ferrer again secured P500.000 for the Cotabato Agency. and it emphasized the necessity of performing inspection of the field to verify whether the amount released as first installment was actually used for the purpose for which it was granted. also that the court erred in holding that they (appellants) acted with extreme laxity. Then making reference to and quoting a portion of the letter of Buencamino. there are about 5. Ferrer obtained P300.0000. said that in case of doubt as to whether or not to disburse funds of the bank. We are again sending Asst. however. 1946. 1946 to the Technical Assistant to the President of the Philippines. particularly that portion wherein after quoting a portion of the central office letter Exhibit E. say P1. If we could not therefore disburse from the funds taken from Zamboanga Agency against first installment of applicants on crop loans. therefore. In their brief the appellant contend that the trial court erred in finding and holding that extending new special crop loans after November 26. This request for instructions is contained clearly in Bagamaspad's letter. It may be that there was no such express instruction couched in so many words directly ordering the defendants to stop granting new special crop loans. It was while Ferrer already carrying the P500. 1946. according to your indorsement of Oct. Exhibit E. Appellants asked for instructions as to whether or not they should grant new special crop loans. In relation with the said letter. dated November 18. before releasing the second installment. In addition. If defendants did not so understand it. Appellant Ferrer himself. As matter of fact. In connection with the following portion: "In this connection.office had not yet received the Agency's monthly reports on special crop loans granted. because he himself prepared it upon order of Bagamaspad(pp.M. The defendants claim that this telegram. they then doubted their to grant new special crop loans and until that doubt was cleared up and determined by new instructions from their superiors. was received by them by mail on December 7.s. Exhibit G.000 from the Zamboanga Agency. the central office sent a telegram. the planting season for second crops of December. he should consult and await instructions. there was no instruction by the central office stopping the granting of new special crop loans. negligence and carelessness in granting said new special crops loans. we could tell you with assurance that the same shall arrive their safely under guard on a chartered plane which will cost not more than P300 only.000. and without waiting for instructions. 1946.000 settlers in Koronadal Valley who.000. 1946. particularly the portion abovequoted.000 from Page 139 of PAT CASE: AGENCY 150 . it was their bounden duty to stop granting new loans. The said letter. Exhibit I. how else may we interpret the contents of the letter of Bagamaspad. which.000 new applicants which we could not entertain because of your above quoted statement. where in one paragraph he ask: "May With reference to the cash that we desire to secure more. dated November 25.000. 1946. Exhibit F. is evident. Exhibit I.000 from said Agency.000 was about to board the plane that was to taken him to Cotabato.

. or if the applicant be tenant he must be recommended by the landowner concerned or in the absence of said landowner must be properly identified that he is the bona fide tenant actually tilling the land from which the crop to mortgage would be harvested. and were to be secured by chattel mortgages on the crops to be produced. Part of the booty went to the pockets of those who acted as intermediaries in the procurement of the loans under the very noses of the defendants fully knowing that such practice was prohibited by the rules and regulations of the Philippine National Bank governing the operation of the provincial agencies (Exhibits "W".000 secured from the Zamboanga Agency on or about November 18.58 was paid on account of new special crop loans or first installments. That work of clearing would take some time. the applicants who were neither landowners or tenants. From all appearances. a statement prepared by Felicisimo Lopez. negligence and carelessness of the appellants. the door of the Cotabato Agency was left wide open by the defendants as an invitation for all persons to come in secure from them special crop loans regardless of whether or not under the rules prescribed therefor they were rightfully entitled thereto. Then about the end of the same month Villamarzo accompanied by Almonte. 1946. . a Division Land Inspector of the Bureau of Lands. takes it out and then files his application. we quote with approval a portion of the well considered decision of the trial Judge. . Record on Appeal) xxx xxx The record further shows that Mr. Appellants not only granted new special crop loans after they were given to understand by the central office that they should no longer grant said loans and before appellants received instructions as to what they should do in that regard. and wait there for further instructions that you may give . but the contrary is amply established by Exhibit T. . . the defendants released large loans aggregating P348. Ferrer to Zamboanga . and whether we shall continue granting special crops loans or not. (pp. is hardly in a position to meet the requirements of the regulations governing the granting of special crop loans. 165. especially if covered with trees or underbrush. negligent and careless in granting new special crop loans.931. much less cultivation and dominion. District Land Officer for Cotabato with whom these sale applications had been filed. 176-177. in another paragraph he says? "We are again sending Asst. taking undue advantage of the laxity and looseness of the defendants in doling out these loans. Agent B. appellants granted new special crop loans to 103 of these public land sales applicants." The trouble is that without waiting for said requested instructions. . who. Chief Examiner of the Bank showing that out of the P500. 1947. It is a well known fact that when a person desires to apply for the purchase of public lands usually containing trees. negligence and carelessness established by the record. appellants proceeded to grant new special crop loans from November 26. and never previously cultivated. Hon. The evidence shows that in violation of these instructions and regulations. Furthermore. on this point: From the evidence of record. A virgin land.22 to about 103 borrowers who were neither landowners or tenants but only public land sales applicants that is to say. persons who have merely filed applications to buy public lands. xxx What really happened was that in those days of crop loan boom. It seems that all precautions to protect the interest of the Philippine National Bank as the principal of the defendants were thrown overboard. Arsenio Solidum. Despite all these. its identity. provide that before a crop is granted the Agent or Sub-Agent of the Bank must be satisfied that the applicant is either landowner well known to be possessing the particular property on which the crop is to be produced. secured special crop loan funds without the least idea of investing them in food production campaign for which they were primarily intended. had been used by said applicants to secure special crop loans. 1946. he merely goes over the land.000 secured from the Zamboanga Agency were all used in paying second installments. the amount of P232. under brush. in spite of all this.we know if we could still entertain new applications on special crop loans?" And. "U-1" to "U-2") . cogon or other wild vegetation. The plaintiff-appellee Bank in its brief explains in details this use of part of the Zamboanga funds in paying first installments on new crop loans. Of course. And yet. needs to be cleared and placed in condition for cultivation before crops may produced. Exhibit C and D which contain instructions and rules and regulations governing the granting of special crop loans. proceeds to classify it to see if it is open to sale and if so. Out of the numerous acts of laxity. Record on Appeal) Appellants in their over-enthusiasm and seemingly inordinate desire to grant as many loans as possible and in amounts disproportionate to the needs of the borrowers. one cannot help but be amazed at the extreme laxity. to mortgage the crop he is going to produce. to "T-11".M. namely. tries to determine the location of the land. A public land sale applicant. possession. knowing as they must have known that the borrowers were neither landowners nor tenants. the borrowers made a holiday of the funds of the Cotabato Agency of the Philippine National Bank with indulgence and tolerance of the defendants as the managing officials of the Agency. came to know that he had been issuing to the applicants. . negligence and carelessness on the part of the defendants in the granting of the special crop loans. severely critcized and condemned the acts of laxity. perhaps makes rough survey of it to establish its exact location and fix boundaries with respect to the entire area of the public domain. defendants contend that the total of P800. admitted and passed upon more loan Page 140 of PAT CASE: AGENCY 150 . . much less that the lands covered by them had been surveyed. And the saddest part of it all was that the money did not go to the farmers who needed it most but to unscrupulous persons. The lower court as may be seen. (p. to January 4. The application naturally carries no implication of occupancy. even assuming that he immediately began to clear the land applied for even before favorable action on his application is taken. it should be remembered that these special crop loans according to regulations were payable in ten (10) months. again went to the defendants and repeated the advice and warning. but they also violated the express instructions of the Bank to the effect that funds received from the Zamboanga Agency should be utilized only to pay second installments on special crop loans. which were nothing but acknowledgements of the filing of the applications. "T-1". and pay the loan within ten months. Villamarzo.768. But the severity of this criticism and condemnation would appear to be amply warranted by the evidence. . As to the alleged error committed by the trial court in finding and holding that the appellants were extremely lax. a few cases may be cited. as already stated. the particular property on which the crop ids to be produced. and so he went to see the appellants as early as the middle of August of 1946 and advised them that those certificates were issued merely to show that applications had been filed with him but that it did not mean that said applications had already been investigated.

loan applications and chattel mortgages scattered all over the Agency. 1947 the total amount of about eight and half (81/2) million pesos was released in the form of special crop loans to about 5. the record shows that in January. belies the correctness of this statement and information. This was evidently intended to justify the granting of special crop loans even at the end of the year. was sent to Cotabato in June. 1946 to March. especially those relating to loans with their corresponding securities. From this.000 mentioned by appellant Page 141 of PAT CASE: AGENCY 150 . Lagdameo. Bagamaspad in his letter. some on the desks of employees. In order to make thorough investigation of the anomalies reportedly obtaining in the Cotabato Agency. perhaps to be later given by him to said intermediaries. Mr. Answering this query. Whether this incorrect information was given deliberately or thru negligence and carelessness. in a relatively sparsely populated province like Cotabato. 1947. however. lack of care and method with which the Cotabato Agency was managed by the appellants.. methodical and businesslike manner. after which. went to work on the books and records of the books and records of the Cotabato Agency and it took them almost four months to straighten out the special crop loan accounts and bring the books up-to-date. Danao from Oriental Misamis. 1946. Macuja (who later succeeded Benjamin de Guzman). which is the Provincial Agricultural Station in Cotabato. Traveling Auditor of the Philippine National Bank.applications than they could properly handle. were the heavy expenses incurred by the borrowers to secure crop loans. which portion we quote below: To give a further idea of the confusion. told the court that his office. are properly filed. Intal he found the Cotabato Agency like a market place full of people. There is evidence to the effect that sometimes the fees of these intermediaries were collected by the Agency itself and were later turned over to appellant Ferrer. that its papers. Mr. On top of this. dated November 19. the plaintiff Bank wanted to know whether on that date. business agents and other persons intervened in the granting of the loans. was also sent to Cotabato and there he found the same condition found and reported by Intal. now Branch Auditor in Legaspi.864. 1947. April up to May. that for lowland palay is June and July. do not show the number of cavans of palay to be produced on the land and to be mortgaged in favor of the Bank. . and that its funds are not given out in loans without careful and scrupulous scrutiny of the responsibility and It will be remembered that in the letter of Vice President Buencamino. one may conclude that it is not true as the appellants informed the bank that the planting season for palay (second crop) in Cotabato ends in December. Romena of the Davao Branch. the Assistant Agent. The rush was so unprecendented that applicants had to stay had to stay for weeks in hotels in Cotabato to lobby for the approval of their applications. Branch Auditor of the Bank at the Davao Branch. According to Mr. We may have an idea of the of the part played by these intermediaries by referring to a portion of the report. etc. Simeon Intal. Lopez and Intal and assisted by Benjamin de Guzman. shows that many of the special crop loans released by the appellants have not been approved by this Board and others have not even been approved by anyone of them. Antonio Cruz of the Head Office. Aniceto Padilla. The evidence however. He found that transactions which had taken place five months before were not yet posted in the books of the Agency. they found that as of June 10. There were so many applications acted upon and accepted that they could not all be carefully examined and many of them do not even bear the initials or signatures of the appellants as required by regulations. a graduate of the College of Agriculture of the University of the Philippines. . Amado Lagdameo. These intermediaries are government employees and business agents and particularly practicing attorneys who charged fees up to 5 per cent of the total loans approved. the Cotabato Agency under the appellants. 1946. To us who have always had the impression and the idea that the business of a Bank is conducted in an orderly. From July. Some of the chattel mortgages given to secure the payments of the loans. contrary to regulations.688. we deem it unnecessary to determine. the defendants allowed intermediaries to intervene in the granting of special crop loans. sent a telegram (Exhibit H) dated November 25. to the plaintiff Bank saying that the planting season for Cotabato for second crops ends in December. Mr. Mr. Mr. Mr. As a consequence of this big volume of business the bookkeeper of the Agency could not keep up with the posting of the daily transactions in his books and ledgers and he was several months behind.105 borrowers and this. He checked up the findings of Intal about the deplorable condition of the books and records of the Agency and he agreed with said findings. the intermediaries themselves were the ones who received the proceeds of the loans and distributed them to the borrowers. Assistant Provincial Agricultural Supervisor. Exhibit G. Exhibit V. on open shelves or on top of filing cabinets. Juan B. like defendant Ferrer or the Inspector if there is no Assistant Agent. Felicisimo Lopez. has determined the proper period for planting crops raised in that province and that for upland palay. Exhibit F.. the Cotabato Agency had released special crop loans in the aggregate sum of P8. Mr. one of the Assistant Managers of the Agencies and Branches Department of the plaintiff Bank. . was sent to Cotabato with instructions to make an audit of the accounts of the Cotabato Agency and to see for himself the reported irregularities being committed in said Agency with respect to the granting of special crop loans. the farmers in Cotabato had already planted their farms in which case there was no need for obtaining crop loans to meet the expenses of planting. November 19th. the planting season is during the months of March. In other cases. its books kept up-to-date. He saw crop loan papers like promissory notes. 1947. One of the provisions of the rules and regulations concerning the granting of loans is to the effect that loans to be released by a Provincial Agency like that of the appellant's should be approved by loan Board to be composed of the Agent. well-kept and in a safe place. and others on the floor. like defendant Bagamaspad. Mr. Contrary to the Bank's rules and regulations regarding the granting of special crops loans. then one of the Assistant Managers of the Branches and Agencies Department of the Bank. prepared by Mr. and the Municipal Treasurer where the borrower resides. a certified public accountant and Chief Examiner of the plaintiff Bank. sent to Cotabato to investigate the crop loan anomalies in the Cotabato Agency. They even went to the extent of engaging intermediaries who in the words of some borrowers were the best ones to fix things with the agency for the approval and immediate release of the loan. and that second crops may be planted in September even as late as October. Instances have been shown that the Agency itself collected the attorney's fees and delivered them to the parties concerned. It has also been found that loan papers including the preparation of promissory notes. 1947. were prepared by said intermediaries and submitted to the Agency already executed. Fernandez from Zamboanga and Mr. Sanchez. debit tickets. In February. speaking of the new special crop loan applications numbering about 1. The evidence. Many lawyers.

Neither did the plaintiff receive any substantial benefit by its act of filing these suits if we consider the fact that the collections so far made. Appellants while agreeing with the meaning and scope of the legal provisions cited. all of which were fully understood by them. Anno. thereby ratifies the said act of the agent. are manifestly insolvent or unqualified. and. or whether it should first pursue its remedies against the borrowers or await the liquidation of their estates. The damage as well as the injury was complete at that time. whatever of value the Bank recovered from the borrowers on account of the loan would go in diminution of the damages. not contingent or collateral. what is more. in filing suits against some of the borrowers to collect at least part of the unauthorized loans.solvency of the borrowers and the sufficiency of the security given by them. the same is hereby affirmed with costs against the appellants. it is a matter of serious doubt if they are in a position to pay it. ordinarily. and finding no reversible error in the decision appealed from. when the Bank. 1907. petitioner. and that neither are they guilty of negligence of carelessness as found by the trial court. ed. 259 of the Code of Commerce which provides that an agent must observe the provisions of law and regulations with respect to business transactions entrusted to him otherwise he shall be responsible for the consequences resulting from their breach or omissions.18 to P699. We quote a part of that decision: The trial court based the civil liability of the appellants herein on the provisions of Arts.. G. thru their carelessness. No. Of course.R. It is the contention of the appellants that the act of plaintiff Bank in filling suits against the borrowers to whom appellants were said to have granted loans without authority. p. And. Rev. and the Bank was not obliged to await the maturity of the notes. any act or omission which causes damage to another by his fault or negligence. the same way that the original claim of P704. because the plaintiff Bank is not trying to enrich itself at the expense of the defendants but is merely trying to diminish as much as possible the loss to itself and automatically decrease the financial liability of appellants. the conditions obtaining in the Cotabato Agency due to the apparent indifference. INC.. exhaust all remedies against them and then hold the defendants liable only for the balance which cannot be collected. convinces us and we agree with the trial court that the defendants-appellants have not only violated instructions of the plaintiff Bank. That would be enriching the plaintiff at the expense of the defendants. And it is because of these shortcomings of the appellants their disregard of the elementary rules and practice of banking and their violation of instructions of their superiors. Appellants further contend that the present action is rather premature for the reason that there is no showing that the borrowers to whom they allegedly gave loans without authority. knowingly participated in or assented to by defendant as a director of the Bank. whatever amount is collected by the plaintiff Bank from borrowers. serves to diminish the financial liability of the appellants. at the very instance of plaintiff was reduced to P699. the act of the plaintiff Bank in the matter. 1718 and 1719 of the Civil Code. through his act. 2d ed. that these anomalies resulting in financial losses to the Bank were made possible. Stat. The Supreme Court of the United States in said case held that the cause of action of the Bank accrued and the injury to it was complete on the very day that the amounts of the unauthorized loans were released by the erring official. Stat. It is not necessary for the plaintiff Bank to first go against the individual borrowers. receiving in return only negotiable paper that it could not lawfully accept because the transaction was prohibited by section 5200. nevertheless insist that those provisions are not applicable to them inasmuch as they are not guilty of any violation of instructions or regulations of the plaintiff Bank. 141. a principal who collects either judicially or extrajudicially a loan made by an agent without authority. including things which said Bank wanted done or not done. 1902 of the Civil Code which provides for the liability of one for his tortious act. and also Art. is indeed shocking. (Comp. however. that is to say. we fail to see any iniquity in this act of the plaintiff in suing some of the borrowers to collect what it could at the same time holding the appellants liable for the balance. The case of Corsicana National Bank vs. laxity and negligence. cited by the trial court and by the plaintiff bank is in point. 107282 March 16. should be interpreted and considered as a ratification of the acts of the appellants. As pointed out by Counsel for appellee. Assuming the Fleming and Templeton notes were found to represent an excessive loan. which suits resulted in the payment of part of said loans resulting in the reduction of the original claim of the plaintiff Bank from P704. it is contended that it would be iniquitous for the plaintiff to go against the defendants for whatever amounts may have been loaned by the latter and at the same time go against the individual borrowers for collection of the respective sums borrowed by them. in In view of all the foregoing. carelessness or negligence of the appellants. Stat." We cannot subscribe to this theory.57.903. far from being iniquitous. Considering the large amount for which appellants are found liable. The issue in that case whether or not a bank could proceed against one of its officials for losses which it had sustained in consequence of the unauthorized loans released by said official.. is really beneficial to the appellants. 6 Fed. In the present case. The liability imposed by the statute upon the director is a direct liability. 761). parted with the money loaned. A careful study and consideration of the record. and Art. Johnson. form a small or insignificant portion of the entire principal and interest.57. What is more. In other words. because immediately it became the duty of the officers or directors who knowingly participated in making the excessive loan to undo the wrong done by taking the notes off the hands of the Bank and restoring to it the money that had been loaned. however. 64 L. defining and enumerating the duties and obligations of an agent and his liability for failure to comply with such duties.803. it is more. and that the loans granted to them are uncollectible and have been written off the books of the Bank as "bad debts". there was no intention on the part of the plaintiff Bank to ratify the acts of appellants. Moreover.18. they allowed loans to be granted to persons who were not entitled to receive loans. but the responsible officials would have no right to require the Bank to pursue its remedies against the borrowers or await the liquidation of their estates. section 9761.803. So ordered. in our opinion the cause of action against him accrued on or about June 10. Page 142 of PAT CASE: AGENCY 150 . but they (appellants) also violated standing regulations regarding the granting of loans. vs. 1994 THE MANILA REMNANT CO.903. We find this contention untenable.

26411 in the Court of First Instance of Quezon City. 1973. this Court affirmed the decision by the Court of Appeals and declared the judgment of the trial court immediately executory. J. Valencia. 1990. COURT OF APPEALS. The present petition is an offshoot of our decision in Manila Remnant Co. It ordered the MRCI to execute an absolute deed of sale in favor of the Ventanillas. respondents. Nevertheless. Inc.000. Inc. Court of Appeals. On November 21.: From this decision. AUVCI was to convert the lands into a subdivision. 1970. Valencia was also held liable to MRCI for moral and exemplary damages and attorney's fees. Judge Elsie Ligot-Telan issued the following order: To ensure that there is enough amount to cover the value of the lots involved if transfer thereof to plaintiff may no longer be effected.571. and in contempt of court and that no claim of ownership over the properties in question had ever been made by Marquez. MRCI offered to reimburse the amount paid by the respondents... At the time of the agreement. For a stipulated fee. execute contracts and issue official receipts to the lot buyers. Oscar C.00 were also awarded to the Ventanillas for which the MRCI. Valencia and Co.. OSCAR C. Valencia was removed by the board of directors of MRCI as its president. in favor of spouses Oscar C. Inc. 1990. while their petition was pending in this Court.. payable monthly in ten years. After ten days and without the knowledge of the Ventanilla couple. annulment of deeds. the spouses Ventanilla filed with the trial court a motion for the issuance of a writ of execution in Civil Case No. fraudulent. Branch 7-B. the monthly payments of the Ventanillas were remitted to the MRCI as payments of Crisostomo. On June 6. The Present Case Pursuant to the above agreement.122. manage the sale of the lots. pending litigation of said issue. Ventanilla. Upon orders of Valencia. AND SPS.. free from all liens and encumbrances. AUVCI executed two contracts to sell dated March 3. They contended that the alleged sale to Samuel Marquez was void. (AUVCI) by virtue of which the latter was to act as the petitioner's agent in the development and sale of the property. 1980. Page 143 of PAT CASE: AGENCY 150 . the Ventanilla spouses. 1990. promulgated on November 22. the trial court rendered a decision declaring the contracts to sell in favor of the Ventanillas valid and subsisting. Inc. Valencia and Co. covering Lots 1 and 2. AUVCI. and Carlos Crisostomo. A. In a manifestation and motion filed by MRCI with the trial court on May 24.. Valencia. On November 17. The Ventanillas continued paying their monthly installments. 1991. 1978. and legal interest thereon from March 1970.HON. and Augusto Garmaitan for private respondents. and annulling the contract to sell in favor of Crisostomo. resold the same parcels to Carlos Crisostomo. commenced an action for specific performance. 1991. 26411. That case involved parcels of land in Quezon City which were owned by petitioner MRCI and became the subject of its agreement with A.00 in cash. 1991. the garnishment made by the Sheriff upon the bank account of Manila Remnant may be lifted only upon the deposit to the Court of the amount of P500. (MRCI) v. The writ was issued on May 3. On January 25. Block 17. CRUZ. On July 19. The receipts were kept by Valencia without the knowledge of the Ventanillas and Crisostomo. VENTANILLA AND CARMEN GLORIA DIAZ. and damages against Manila Remnant Co. sustained the trial court in toto. as president of MRCI. On May 30. Tabalingcos & Associates Law Office for petitioner. Damages and attorney's fees in the total amount of P210. AUVCI and Carlos Crisostomo for the payment of moral and exemplary damages and attorney's fees to the Ventanillas. 1973. and Crisostomo were held solidarily liable. The appellate court. one of his sales agents. It was docketed as Civil Case No. On November 22. 1991. Jr.U.35. representing the amount paid for the two lots. however.00 as damages and attorney's fees but opposed the reimbursement offered by MRCI in lieu of the execution of the absolute deed of sale. and served upon MRCI on May 9. 1991. the defendants would be solidarily liable to the Ventanillas for reimbursement of the sum of P73. having learned of the supposed sale of their lots to Crisostomo.. The Ventanillas accepted the amount of P210. MRCI informed AUVCI that it was terminating their agreement because of discrepancies discovered in the latter's collections and remittances. the petitioner alleged that the subject properties could not be delivered to the Ventanillas because they had already been sold to Samuel Marquez on February 7. the president of both MRCI and AUVCI was Artemio U. for which receipts were issued in his name. The lower court ruled further that if for any reason the transfer of the lots could not be effected. without any consideration. MRCI then filed before this Court a petition for certiorari to review the portion of the decision of the Court of Appeals upholding the solidary liability of MRCI. plus the decreed damages and attorney's fees.000. MRCI also prayed that its tender of payment be accepted and all garnishments on their accounts lifted. Ventanilla and Carmen Gloria Diaz for the combined contract price of P66.00. separate appeals were filed by Valencia and MRCI.U. including legal interest plus the aforestated damages..000.

On top of all this.074.000. The subject matter of the controversy having passed to an innocent purchaser for value. 1990. the respondent court erred in ordering the execution of the absolute deed of sale in favor of the Ventanillas. the petitioner said it was ready to deliver the titles to the Ventanillas provided that their counterclaims against private respondents were paid or offset first. These orders were questioned by MRCI in a petition for certiorari before the respondent court on the ground that they were issued with grave abuse of discretion. 1 The validity of the contract to sell in favor of the Ventanilla spouses is not disputed by the parties. the petitioner would still earn more profit if the Marquez contract were to be sustained. First. MRCI further maintains that the sale to Samuel Marquez was valid and constitutes a legal impediment to the execution of the absolute deed of sale to the Ventanillas. They also point to the unusual lack of interest of Marquez in protecting and asserting his right to the disputed property. the respondents argue that the validity of the sale to them had already been established even while the previous petition was still pending resolution.000. 2 Lastly. not to say the very existence. in its manifestation and motion dated December 21. As there is no such situation in this case. Even if it paid the P210. No less importantly. 1991.10 and that the garnishment of its bank deposit be lifted.000. There was no need then for an order enjoining the petitioner from re-selling the property in litigation. The appellate court also set aside the show-cause order and held that the trial court should have proceeded under Section 10. Fourth. In the petition now before us. the petitioner did not invoke the contract with Marquez during the hearing on the motion for the issuance of the writ of execution filed by the private respondents. For their part.000. It is also averred that the trial court gravely abused its discretion when it arbitrarily fixed the amount of the cash bond for the lifting of the garnishment order at P500.00.00 damages to the private respondents as decreed by the trial court. At the time of the sale to Marquez. There was no mention of the contract to sell with Marquez on February 7. there is no need for a garnishment order. the issue of the validity of the sale to the Ventanillas had not yet been resolved. to the Supreme Court. A second manifestation and motion filed by MRCI was denied on December 18. The Court of Appeals ruled that the contract to sell in favor of Marquez did not constitute a legal impediment to the immediate execution of the judgment. it is submitted that the trial court and the Court of Appeals committed certain reversible errors to the prejudice of MRCI. The fact that the MRCI did not question the legality of the award for damages to the Ventanillas also shows that it even then already acknowledged the validity of the contract to sell in favor of the private respondents. The trial court also required MRCI to show cause why it should not be cited for contempt for disobedience of its judgment. This motion was denied by the trial court in its order dated September 30. 1991. the cash bond fixed by the trial court for the lifting of the garnishment was fair and reasonable because the value of the lot in question had increased considerably. Furthermore. the petitioner insists that Marquez was a buyer in good faith and had a right to rely on the recitals in the certificate of title. The Court notes that the petitioner stands to benefit more from the supposed contract with Marquez than from the contract with the Ventanillas with the agreed price of only P66. Furthermore. the records do not show that Marquez has already paid the supposed balance amounting to P616.00 of the original price of over P800. the recognition of that contract was not assigned as error of either the trial court or appellate court. it cannot prevail over the final and executory judgment ordering MRCI to execute an absolute deed of sale in favor of the Ventanillas. 1990. Even in the previous petition.00. there was no specific injunction against the petitioner re-selling the property. At any rate. The petitioner contends that the trial court may not enforce it garnishment order after the monetary judgment for damages had already been satisfied and the amount for reimbursement had already been deposited with the sheriff. the contract to sell in favor of Marquez was entered into after the lapse of almost ten years from the rendition of the judgment of the trial court upholding the sale to the Ventanillas.00. It disclosed the contract only after the writ of execution had been served upon it. The petition must fail. Garnishment as a remedy is intended to secure the payment of a judgment debt when a well-founded belief exists that the erring party will abscond or deliberately render the execution of the judgment nugatory.571.MRCI then filed a manifestation and motion for reconsideration praying that it be ordered to reimburse the Ventanillas in the amount of P263. Rule 39 of the Rules of Court and not Section 9 thereof. The portion of the decision ordering the MRCI to execute an absolute deed of sale in favor of the Ventanillas became final and executory when the petitioner failed to appeal it Page 144 of PAT CASE: AGENCY 150 . there are other circumstances that cast suspicion on the validity. That petition only questioned the solidary liability of MRCI to the Ventanillas. even if it be assumed that the contract to sell in favor of Marquez is valid. a clear indication that the alleged sale to him was merely a ploy of the petitioner to evade the execution of the absolute deed of sale in their favor. Third. of the contract with Marquez. Second. Marquez has not intervened in any of these proceedings to assert and protect his rights to the subject property as an alleged purchaser in good faith.

000. its unjustified refusal to do so warranted the issuance of the garnishment order.000. It is so ordered. or to deliver deeds or other documents. the trial court may enter judgment canceling the title of the petitioner over the property and transferring the same to the respondents. Once the consignation has been duly made. No legal impediment exists to the execution. we find that: 1. Page 145 of PAT CASE: AGENCY 150 . the court may direct the act to be done at the cost of the disobedient party by some other person appointed by the court and the act when so done shall have like effect as if done by the party. Art. the lower court did not err when it fixed the same at P500. refused to execute the absolute deed of sale. It was for the purpose of ensuring their compliance with this portion of the judgment that the trial court issued the garnishment order which by its term could be lifted only upon the filling of a cash bond of P500. that amount corresponds to the current fair market value of the property in litigation and was a reasonable basis for determining the amount of the counterbond. The consignation having been made. The petitioner questions the propriety of this order on the ground that it has already partially complied with the judgment and that it has always expressed its willingness to reimburse the amount paid by the respondents. . 4 The rules on attachment also apply to garnishment proceedings. Art.000. 10. Neither does the petitioner's willingness to reimburse render the garnishment order unnecessary. Section 10 of Rule 39 of the Rules of Court reads as follows: While the petitioners have readily complied with the order of the trial court for the payment of damages to the Ventanillas. . the debtor shall be released from responsibility by the consignation of the thing or sum due. the remedy of the respondents is consignation. of an absolute deed of sale of the subject property in favor of the respondent Ventanillas. either by the petitioner or the trial court. If real or personal property is within the Philippines. 1260. Against the unjustified refusal of the petitioner to accept payment of the balance of the contract price. however. Consignation shall be made by depositing the things due at the disposal of the judicial authority. (a) the party whose accounts have been garnished has posted a counterbond or has made the requisite cash deposit. As the main obligation of the petitioner is to execute the absolute deed of sale in favor of the Ventanillas. 10 In sum. 5 Accordingly.00 cash bond for the lifting of the garnishment order. Judgment for specific act. with costs against the petitioner. The lower court did not abuse its discretion when it required the posting of a P500. in a proper case. This judgment shall have the same force and effect as conveyance duly executed in accordance with the requirements of the law. It says that there is no need for a garnishment order because it is willing to reimburse the Ventanillas in lieu of execution of the absolute deed of sale. but it has not been shown that there is an obstacle to such conveyance. the court in lieu of directing a conveyance thereof may enter judgment divesting the title of any party and vesting it in others and such judgment shall have the force and effect of a conveyance executed in due form of law. the petition is DENIED and the challenged decision of the Court of Appeals is AFFIRMED in toto. 1256. 1258. the debtor may ask the judge to order the cancellation of the obligation. the interested parties shall also be notified thereof. Regarding the refusal of the petitioner to execute the absolute deed of sale. As correctly pointed out by the respondent court. (b) the order was improperly or irregularly issued 6 as where there is no ground for garnishment 7 or the affidavit and/or bond filed therefor are defective or insufficient. and Partial execution of the judgment is not included in the above enumeration of the legal grounds for the discharge of a garnishment order. As for the counterbond. 2.00. vesting title — If a judgment directs a party to execute a conveyance of land. conformably to the following provisions of the Civil Code: The alternative judgment of reimbursement is applicable only if the conveyance of the lots is not possible. and the party fails to comply within the time specified.00 for the lifting of its garnishment order. hence exempt from preliminary attachment 9 (d) the judgment is rendered against the attaching or garnishing creditor.We come now to the order of the trial court requiring the posting of the sum of P500. or to perform any other specific act. 3 It is an attachment by means of which the plaintiff seeks to subject to his claim property of the defendant in the hands of a third person or money owed by such third person or garnishee to the defendant. A garnishment order shall be lifted if it established that: Art. Garnishment is a species of attachment for reaching credits belonging to the judgment debtor and owing to him from a stranger to the litigation.000. Sec. and the announcement of the consignation in other cases. upon consignation by the Ventanillas of the sum due.00. they have. 8 (c) or the property attached is exempt from execution. before whom the tender of payment shall be proved. If the creditor to whom tender of payment has been made refuses without just cause to accept it. WHEREFORE.

G.R. No. 137686

This is an action for mandamus with damages. On April 10, 1996, [herein petitioner] was declared in
default on motion of the [respondents] for failure to file an answer within the reglementary-period after it
was duly served with summons. On April 26, 1996, [herein petitioner] filed a motion to set aside the order
of default with objection thereto filed by [herein respondents].

February 8, 2000

RURAL BANK OF MILAOR (CAMARINES SUR), petitioner,
vs.
FRANCISCA OCFEMIA, ROWENA BARROGO, MARIFE O. NIÑO, FELICISIMO OCFEMIA, RENATO
OCFEMIA JR, and WINSTON OCFEMIA, respondents.

On June 17, 1996, an order was issued denying [petitioner's] motion to set aside the order of default. On
July 10, 1996, the defendant filed a motion for reconsideration of the order of June 17, 1996 with
objection thereto by [respondents]. On July 12, 1996, an order was issued denying [petitioner's] motion
for reconsideration. On July 31, 1996, [respondents] filed a motion to set case for hearing. A copy thereof
was duly furnished the [petitioner] but the latter did not file any opposition and so [respondents] were
allowed to present their evidence ex-parte. A certiorari case was filed by the [petitioner] with the Court of
Appeals docketed as CA GR No. 41497-SP but the petition was denied in a decision rendered on March
31, 1997 and the same is now final.

PANGANIBAN, J.:
When a bank, by its acts and failure to act, has clearly clothed its manager with apparent authority to sell
an acquired asset in the normal course of business, it is legally obliged to confirm the transaction by
issuing a board resolution to enable the buyers to register the property in their names. It has a duty to
perform necessary and lawful acts to enable the other parties to enjoy all benefits of the contract which it
had authorized.

The evidence presented by the [respondents] through the testimony of Marife O. Niño, one of the
[respondents] in this case, show[s] that she is the daughter of Francisca Ocfemia, a co-[respondent] in
this case, and the late Renato Ocfemia who died on July 23, 1994. The parents of her father, Renato
Ocfemia, were Juanita Arellano Ocfemia and Felicisimo Ocfemia. Her other co-[respondents] Rowena O.
Barrogo, Felicisimo Ocfemia, Renato Ocfemia, Jr. and Winston Ocfemia are her brothers and
sisters.1âwphi1.nêt

The Case
Before this Court is a Petition for Review on Certiorari challenging the December 18, 1998 Decision of
the Court of Appeals 1 (CA) in CA-GR SP No. 46246, which affirmed the May 20, 1997 Decision 2 of the
Regional Trial Court (RTC) of Naga City (Branch 28). The CA disposed as follows:

Marife O. Niño knows the five (5) parcels of land described in paragraph 6 of the petition which are
located in Bombon, Camarines Sur and that they are the ones possessing them which [were] originally
owned by her grandparents, Juanita Arellano Ocfemia and Felicisimo Ocfemia. During the lifetime of her
grandparents, [respondents] mortgaged the said five (5) parcels of land and two (2) others to the
[petitioner] Rural Bank of Milaor as shown by the Deed of Real Estate Mortgage (Exhs. A and A-1) and
the Promissory Note (Exh. B).

Wherefore, premises considered, the Judgment appealed from is hereby AFFIRMED. Costs against the
respondent-appellant. 3
The dispositive portion of the judgment affirmed by the CA ruled in this wise:
WHEREFORE, in view of all the foregoing findings, decision is hereby rendered whereby the [petitioner]
Rural Bank of Milaor (Camarines Sur), Inc. through its Board of Directors is hereby ordered to
immediately issue a Board Resolution confirming the Deed of Sale it executed in favor of Renato
Ocfemia marked Exhibits C, C-1 and C-2); to pay [respondents] the sum of FIVE HUNDRED (P500.00)
PESOS as actual damages; TEN THOUSAND (P10,000.00) PESOS as attorney's fees; THIRTY
THOUSAND (P30,000.00) PESOS as moral damages; THIRTY THOUSAND (P30,000.00) PESOS as
exemplary damages; and to pay the costs. 4

The spouses Felicisimo Ocfemia and Juanita Arellano Ocfemia were not able to redeem the mortgaged
properties consisting of seven (7) parcels of land and so the mortgage was foreclosed and thereafter
ownership thereof was transferred to the [petitioner] bank. Out of the seven (7) parcels that were
foreclosed, five (5) of them are in the possession of the [respondents] because these five (5) parcels of
land described in paragraph 6 of the petition were sold by the [petitioner] bank to the parents of Marife O.
Niño as evidenced by a Deed of Sale executed in January 1988 (Exhs. C, C-1 and C-2).
The aforementioned five (5) parcels of land subject of the deed of sale (Exh. C), have not been, however
transferred in the name of the parents of Merife O. Niño after they were sold to her parents by the
[petitioner] bank because according to the Assessor's Office the five (5) parcels of land, subject of the
sale, cannot be transferred in the name of the buyers as there is a need to have the document of sale
registered with the Register of Deeds of Camarines Sur.

Also assailed is the February 26, 1999 CA Resolution 5 which denied petitioner's Motion for
Reconsideration.
The Facts
The trial court's summary of the undisputed facts was reproduced in the CA Decision as follows:

Page 146 of

PAT CASE: AGENCY
150

In view of the foregoing, Marife O. Niño went to the Register of Deeds of Camarines Sur with the Deed of
Sale (Exh. C) in order to have the same registered. The Register of Deeds, however, informed her that
the document of sale cannot be registered without a board resolution of the [petitioner] Bank. Marife Niño
then went to the bank, showed to if the Deed of Sale (Exh. C), the tax declaration and receipt of tax
payments and requested the [petitioner] for a board resolution so that the property can be transferred to
the name of Renato Ocfemia the husband of petitioner Francisca Ocfemia and the father of the other
[respondents] having died already.

The [respondents] are interested in having the property described in paragraph 6 of the petition
transferred to their names because their mother and co-petitioner, Francisca Ocfemia, is very sickly and
they want to mortgage the property for the medical expenses of Francisca Ocfemia. The illness of
Francisca Ocfemia beg[a]n after her husband died and her suffering from arthritis and pulmonary
disease already became serious before December 1995.
Marife O. Niño declared that her mother is now in serious condition and they could not have her
hospitalized for treatment as they do not have any money and this is causing the family sleepless nights
and mental anguish, thinking that their mother may die because they could not submit her for medication
as they do not have money. 6

The [petitioner] bank refused her request for a board resolution and made many alibi[s]. She was told
that the [petitioner] bank ha[d] a new manager and it had no record of the sale. She was asked and she
complied with the request of the [petitioner] for a copy of the deed of sale and receipt of payment. The
president of the [petitioner] bank told her to get an authority from her parents and other [respondents]
and receipts evidencing payment of the consideration appearing in the deed of sale. She complied with
said requirements and after she gave all these documents, Marife O. Niño was again told to wait for two
(2) weeks because the [petitioner] bank would still study the matter.

The trial court granted the Petition. As noted earlier, the CA affirmed the RTC Decision.
Hence, this recourse. 7 In a Resolution dated June 23, 1999, this Court issued a Temporary Restraining
Order directing the trial court "to refrain and desist from executing [pending appeal] the decision dated
May 20, 1997 in Civil Case No. RTC-96-3513, effective immediately until further orders from this Court."
8

After two (2) weeks, Marife O. Niño returned to the [petitioner] bank and she was told that the resolution
of the board would not be released because the [petitioner] bank ha[d] no records from the old manager.
Because of this, Marife O. Niño brought the matter to her lawyer and the latter wrote a letter on
December 22, 1995 to the [petitioner] bank inquiring why no action was taken by the board of the
request for the issuance of the resolution considering that the bank was already fully paid [for] the
consideration of the sale since January 1988 as shown by the deed of sale itself (Exh. D and D-1 ).

Ruling of the Court of Appeals
The CA held that herein respondents were "able to prove their present cause of action" against
petitioner. It ruled that the RTC had jurisdiction over the case, because (1) the Petition involved a matter
incapable of pecuniary estimation; (2) mandamus fell within the jurisdiction of RTC; and (3) assuming
that the action was for specific performance as argued by the petitioner, it was still cognizable by the said
court.

On January 15, 1996 the [petitioner] bank answered [respondents'] lawyer's letter (Exh. D and D-1)
informing the latter that the request for board resolution ha[d] already been referred to the board of
directors of the [petitioner] bank with another request that the latter should be furnished with a certified
machine copy of the receipt of payment covering the sale between the [respondents] and the [petitioner]
(Exh. E). This request of the [petitioner] bank was already complied [with] by Marife O. Niño even before
she brought the matter to her lawyer.

Issues
In its Memorandum, 9 the bank posed the following questions:

On January 23, 1996 [respondents'] lawyer wrote back the branch manager of the [petitioner] bank
informing the latter that they were already furnished the receipts the bank was asking [for] and that the
[respondents] want[ed] already to know the stand of the bank whether the board [would] issue the
required board resolution as the deed of sale itself already show[ed] that the [respondents were] clearly
entitled to the land subject of the sale (Exh. F). The manager of the [petitioner] bank received the letter
which was served personally to him and the latter told Marife O. Niño that since he was the one himself
who received the letter he would not sign anymore a copy showing him as having already received said
letter (Exh. F).

1. Question of Jurisdiction of the Regional Trial Court. — Has a Regional Trial Court original jurisdiction
over an action involving title to real property with a total assessed value of less than P20,000.00?
2. Question of Law. — May the board of directors of a rural banking corporation be compelled to confirm
a deed of absolute sale of real property owned by the corporation which deed of sale was executed by
the bank manager without prior authority of the board of directors of the rural banking corporation? 10
This Court's Ruling

After several days from receipt of the letter (Exh. F) when Marife O. Niño went to the [petitioner] again
and reiterated her request, the manager of the [petitioner] bank told her that they could not issue the
required board resolution as the [petitioner] bank ha[d] no records of the sale. Because of this Merife O.
Niño already went to their lawyer and ha[d] this petition filed.

The present Petition has no merit.
First Issue:
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Jurisdiction of the Regional Trial Court
Sec. 7. Action or defense based on document. — Whenever an action or defense is based upon a
written instrument or document, the substance of such instrument or document shall be set forth in the
pleading, and the original or a copy thereof shall be attached to the pleading as an exhibit, which shall be
deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.

Petitioner submits that the RTC had no jurisdiction over the case. Disputing the ruling of the appellate
court that the present action was incapable of pecuniary estimation, petitioner argues that the matter in
fact involved title to real property worth less than P20,000. Thus, under RA 7691, the case should have
been filed before a metropolitan trial court, a municipal trial court or a municipal circuit trial court.

Sec. 8. How to contest genuineness of such documents.— When an action or defense is founded upon a
written instrument, copied in or attached to the corresponding pleading as provided in the preceding
section, the genuineness and due execution of the instrument shall be deemed admitted unless the
adverse party, under oath, specifically denies them, and sets forth what he claims to be the facts; but this
provision does not apply when the adverse party does not appear to be a party to the instrument or when
compliance with an order for an inspection of the original instrument is refused. 12

We disagree. The well-settled rule is that jurisdiction is determined by the allegations of the complaint. 11
In the present case, the Petition for Mandamus filed by respondents before the trial court prayed that
petitioner-bank be compelled to issue a board resolution confirming the Deed of Sale covering five
parcels of unregistered land, which the bank manager had executed in their favor. The RTC has
jurisdiction over such action pursuant to Section 21 of BP 129, which provides:
Sec. 21. Original jurisdiction in other cases. — Regional Trial Courts shall exercise original jurisdiction;

In failing to file its answer specifically denying under oath the Deed of Sale, the bank admitted the due
execution of the said contract. Such admission means that it acknowledged that Tena was authorized to
sign the Deed of Sale on its behalf. 13 Thus, defenses that are inconsistent with the due execution and
the genuineness of the written instrument are cut off by an admission implied from a failure to make a
verified specific denial.

(1) in the issuance of writ of certiorari, prohibition, mandamus, quo warranto, habeas corpus and
injunction which may be enforced in any part of their respective regions; and
(2) In actions affecting ambassadors and other public ministers and consuls.

Other Acts of the Bank
A perusal of the Petition shows that the respondents did not raise any question involving the title to the
property, but merely asked that petitioner's board of directors be directed to issue the subject resolution.
Moreover, the bank did not controvert the allegations in the said Petition. To repeat, the issue therein
was not the title to the property; it was respondents' right to compel the bank to issue a board resolution
confirming the Deed of Sale.

In any event, the bank acknowledged, by its own acts or failure to act, the authority of Fe S. Tena to
enter into binding contracts. After the execution of the Deed of Sale, respondents occupied the
properties in dispute and paid the real estate taxes due thereon. If the bank management believed that it
had title to the property, it should have taken some measures to prevent the infringement or invasion of
its title thereto and possession thereof.

Second Issue:
Authority of the Bank Manager

Likewise, Tena had previously transacted business on behalf of the bank, and the latter had
acknowledged her authority. A bank is liable to innocent third persons where representation is made in
the course of its normal business by an agent like Manager Tena, even though such agent is abusing her
authority. 14 Clearly, persons dealing with her could not be blamed for believing that she was authorized
to transact business for and on behalf of the bank. Thus, this Court has ruled in Board of Liquidators v.
Kalaw: 15

Respondents initiated the present proceedings, so that they could transfer to their names the subject five
parcels of land; and subsequently, to mortgage said lots and to use the loan proceeds for the medical
expenses of their ailing mother. For the property to be transferred in their names, however, the register of
deeds required the submission of a board resolution from the bank confirming both the Deed of Sale and
the authority of the bank manager, Fe S. Tena, to enter into such transaction. Petitioner refused. After
being given the runaround by the bank, respondents sued in exasperation.

Settled jurisprudence has it that where similar acts have been approved by the directors as a matter of
general practice, custom, and policy, the general manager may bind the company without formal
authorization of the board of directors. In varying language, existence of such authority is established, by
proof of the course of business, the usages and practices of the company and by the knowledge which
the board of directors has, or must be presumed to have, of acts and doings of its subordinates in and
about the affairs of the corporation. So also,

Allegations in the Petition for Mandamus Deemed Admitted
Respondents based their action before the trial court on the Deed of Sale, the substance of which was
alleged in and a copy thereof was attached to the Petition for Mandamus. The Deed named Fe S. Tena
as the representative of the bank. Petitioner, however, failed to specifically deny under oath the
allegations in that contract. In fact, it filed no answer at all, for which reason it was declared in default.
Pertinent provisions of the Rules of Court read:

. . . authority to act for and bind a corporation may be presumed from acts of recognition in other
instances where the power was in fact exercised.
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2 In this light. by general or special laws. Orientalist Co. concurring opinion. it is familiar doctrine that if a corporation knowingly permits one of its officers. There is just a brief clarificatory statement that I thought could be made. it behooves the bank to confirm the Deed of Sale so that the buyers may enjoy its full use. it was less than candid in dealing with respondents regarding this matter. Worse. in addition to the award of damages. ultra vires has also been used to designate those acts of the board of directors or of corporate officers when acting beyond their respective spheres of authority. 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. The board resolution is. Separate Opinions .persistently and unjustifiably refused to perform its legal duty. Ultra vires acts of corporations. petitioner has failed to file an answer to the Petition below within the reglementary period. in its generic sense. Treble costs against petitioner.. 45 of the Corporation Code provides: Sec." 16 The Civil Code. be estopped from denying the agent's authority. although perhaps loosely. Indeed. or any other agent. The language of the Code appears to confine the term ultra vires to an act outside or beyond express. Having authorized her to sell the property. among some other special laws. an officer has been allowed in his official capacity to manage its affairs. it has a clear legal duty to issue the board resolution sought by respondent's. In more recent times. Today. and he must necessarily rely upon the external manifestation of corporate consent. the Court finds it proper to assess the bank treble costs. in ancient Rome. it may be fairly considered within corporate powers. Accordingly. . either proscribed or declared illegal. as against anyone who has in good faith dealt with it through such agent. it holds the agent out to the public as possessing the power to do those acts. 38 Phil. 45. in fact. went to the bank to ask for the board resolution. In general. implied and incidental corporate powers. As already observed. was merely used to distinguish it from jus gentium or the law common to all the nations within the empire and. This Court has observed in Ramirez vs. civil law is so referred to as private law in distinction from public law and criminal law. the corporation will. In this light. the corporation will. I share the views expressed in the ponencia written for the Court by our esteemed colleague Mr. in the usual course of business of a corporation. his authority to represent the corporation may be implied from the manner in which he has been permitted by the directors to manage its business. In the context that the law has used the term in Article 45 of the Corporation Code. . it is paper work necessary in the orderly operations of the register of deeds and the full enjoyment of respondents' rights. an ultra vires act would be void and not susceptible to ratification. — No corporation under this Code shall possess or exercise any corporate powers except those conferred by this Code or by its articles of incorporation and except such as are necessary or incidental to the exercise of the powers so conferred. as being a branch of civil law. The Temporary Restraining Order issued by this Court is hereby LIFTED. to do acts within the scope of an apparent authority. as against any one who has in good faith dealt with the corporation through such agent. Panganiban. 17 Unquestionably. let alone present evidence controverting such authority. Naturally he can have little or no information as to what occurs in corporate meetings. Indeed. Jus civile.. civil law can rightly be said to encompass commercial law. when. For if the act were one which is lawful in itself or not otherwise prohibited and done for the purpose of serving corporate ends or reasonably contributes to the promotion of those ends in a substantial and not merely in a remote and fanciful sense. 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. 634. Justice Artemio V. This Court stresses the following: SO ORDERED. The bank failed to categorically declare that Tena had no authority. Thus. the concept can also include those acts that may ostensibly be within such powers but are. the bank is estopped from questioning the authority of the bank manager to enter into the contract of sale. petitioner has authorized Tena to enter into the Deed of Sale. Petitioner-bank Page 149 of PAT CASE: AGENCY 150 . 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. and thus holds him out to the public as possessing power to do those acts. 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. 654655. only in contrast to international law. mere paper work. If a corporation knowingly permits one of its officers or any other agent to act within the scope of an apparent authority. . . it may not be totally inaccurate to consider commercial law. Nonetheless. Notwithstanding the putative authority of the manager to bind the bank in the Deed of Sale. the Petition is hereby DENIED and the assailed Decision and Resolution AFFIRMED. . be estopped from denying his authority. one considers the logical and necessary relation between the act assailed and the corporate purpose expressed by the law or in the charter. 1 In determining whether or not a corporation may perform an act. can be suppletory to special laws and certainly not preclusive of those that govern commercial transactions. being a law of general application. Nino. when one of herein respondents. at some time later. J. that — VITUG. and we would be sorry to announce a doctrine which would permit the property of man in the city of Paris to be whisked out of his hands and carried into a remote quarter of the earth without recourse against the corporation whose name and authority had been used in the manner disclosed in this case. Sec. Marife S. WHEREFORE. thus. she was merely told to bring the receipts. Nevertheless.

and all property of corporations controlled and held. and he is put to notice accordingly. the action is not necessarily and totally devoid of effects.nêt Corporate officers. implied or incidental powers as so provided by law or the charter would be void under Article 5 11 of the Civil Code. too. may act on such matters as may be authorized either expressly by the By-laws or Board Resolutions or impliedly such as by general practice or policy or as are implied by express powers. the varied ascriptions to its effects heretofore expressed. When the act of the board is within corporate powers but it is done without the concurrence of the shareholders as and when such approval is required by law 3 or when the act is beyond its competence to do. 8 It may be said. When officers are allowed to act in certain particular cases. would only be unenforceable conformably with Article 1403 12 of the Civil Code but. acting within its competence. an unauthorized act (if within corporate powers) of the board or a corporate officer. the act cannot accurately be likened to an ultra vires act of the corporation itself defined in Section 45 of the Code. as unenforceable. by the Board of Directors.1âwphi1. Where the act is within corporate powers but the board has acted without being competent to independently do so. it would generally behoove such a person to look into the extent of the authority of corporate agents since the onus would ordinarily be with him. although still susceptible thereunder to ratification by the principal. Here reiterated. 7 These holdings notwithstanding. corporate powers but it is done without any express or implied authority therefor from the by-laws. nonetheless. the act should aptly be deemed inoperative and specific performance cannot be validly demanded but. Thus. all business conducted.Sec. Thus. however. The Board. a corporate officer entrusted with general management and control of the business has the implied authority to act or contract for the corporation which may be necessary or appropriate to conduct the ordinary business. hence. and the act is not susceptible to ratification. however. if the party with whom the agent has contracted is aware of the latter's limits of powers. 9 If the act of corporate officers comes within Page 150 of PAT CASE: AGENCY 150 . an acceptance of benefits derived by the shareholders from an outside investment made by the board without the required concurrence of the stockholders may. their acts conformably therewith can bind the company. Any person dealing with corporate boards and officers may be said to be charged with the knowledge that the latter can only act within their respective limits of power. normally unknown in void contracts. Nevertheless. may ratify the unauthorized act of the corporate officer. Hence. however. It may well be to consider futile any further attempt to have these situations bear any exact equivalence to the civil law precepts of defective contracts. So. if for any reason. the contemplated action is carried out. be so considered as an effective investment. 10 The Corporation Code itself has not been that explicit with respect to the consequences of ultra vires acts. that when the board resolution is yet executory. 4 the act has been described as void 5 or. the unauthorized act is declared void by Article 1898 13 of the same Code. and it may generally be ratified expressly or impliedly. board resolutions or corporate practices. a corporation may be held in estoppel from denying as against innocent third persons the authority of its officers or agents who have been clothed by it with ostensible or apparent authority. can serve to negate a claim for the total nullity thereof. 6 or as ineffective and not legally binding. general statements could be made. such principles as ratification or prescription when applicable. such an act does not bind the corporation. while an act of the corporation which is either illegal or outside of express. 23 of the Corporation Code states that the corporate powers are to be exercised. in their case.