G.R. No.

9184, February 02, 1916

A short time thereafter, defendant reported to plaintiff that he had a

purchaser for the land in the person of Antonio M. Barretto, who was willing

MACONDRAY & CO., INC., PLAINTIFF AND APPELLEE, VS. GEORGE C.

to pay P2.75 per square meter, or a total of P18,892.50. Plaintiff thereupon

SELLNER, DEFENDANT AND APPELLANT.

executed a formal deed of conveyance which, together with the certificate

of title (Torrens), was delivered to defendant, with the understanding that

DECISION

he was to conclude the sale, deliver the title-deed and certificate to

Barretto, and receive from him the purchase price. The deed was dated

CARSON, J.:

August, 21, 1912. Thereafter defendant advised Barretto that plaintiff had
executed the title-deed and that he was ready to close the deal. Barretto

This action was brought to recover the sum of P17,175 by way of damages

agreed to accept the land if, upon examination, the title and the deed

alleged to have been suffered by the plaintiff as a result of the sale of a

should prove satisfactory; and defendant left the deed of conveyance with

parcel of land which it is alleged was made by the defendant for and on

him, with the understanding that if the title and the deed of conveyance

behalf of the plaintiff after authority to make the sale had been revoked.

were as represented, Barretto would give him his check for the amount of

Judgment was rendered in favor of the plaintiff for the sum of P3,435,

the purchase price. Defendant retained possession of the Torrens

together with interest at 6 per cent per annum from the date of the

certificate of title. A few days afterwards Barretto was compelled to go to

institution of this action. From this judgment defendant appealed, and

Tayabas on business and was detained by a typhoon which delayed his

brought the case here on his duly certified bill of exceptions.

return until the 31st of August.

Early in 1912 the defendant, a real estate broker, sold the parcel of land

During Barretto's absence the plaintiff company advised defendant that he

described in the complaint to the plaintiff company for P17,175. The

must consummate the sale and collect the purchase money without delay

formal deed of sale was not executed and accepted until July 29, 1912, the

upon Barretto's return to Manila. On the arrival of Barretto on Saturday,

agreement to purchase being conditioned on the delivery of a Torrens title,

August 31st, defendant called upon him and informed him that the plaintiff

which was not secured until early in that month. In the meantime the land

company desired to close up the transaction at once, and Barretto, who

was flooded by high tides, and the plaintiff company became highly

was somewhat indisposed from his trip, promised to examine the papers as

dissatisfied with its purchase. When the final transfer was made the

soon as he could get to them, and assured the defendant that he would

plaintiff company informed defendant that the land was wholly unsuited for

send his check for the purchase price in a day or two if he found the

use as a coal-yard, for which it had been purchased, and requested him to

documents in proper shape. These assurances were reported to Young, the

find another purchaser. At that time it was expressly understood and

plaintiff company's general manager and representative throughout the

agreed that the plaintiff company was willing to dispose of the land for

transaction, on Monday morning, September 2d. Young then formally

P17,175, and that defendant was to have as his commission for securing a

notified defendant that unless the purchase price was paid before five

purchaser anything over that amount which he could get.

o'clock of that same afternoon the deal would be off. Defendant again
called upon Barretto, who informed him that if he would turn over the
Torrens certificate of title he would let him have a check for the purchase

price. Defendant sent the certificate as requested, but did not receive the

Plaintiff's manager testified that as he had no confidence in Barretto, he

check until thirty-six hours afterwards, on Wednesday morning. On receipt

expressly instructed defendant not to deliver the title deeds until Barretto

of Barretto's check he immediately tendered plaintiff company a check for

turned over the purchase price. Defendant swore that he had received no

the agreed selling price, P17,175. Plaintiff's manager refused to accept the

such instructions. Upon this conflict of testimony we do not deem it

check and soon thereafter filed this action, claiming that the sale had been

necessary to make an express finding, because, as we view the

"cancelled" upon the failure of defendant to turn over the purchase price

transaction, it could in no event affect our disposition of this appeal.

on the afternoon of Monday, September 2d.

We are of opinion that the disputed evidence clearly discloses that on
The following is a copy of plaintiff company's letter to defendant advising

August 21st the plaintiff company, through the defendant real estate

him that the sale would be "cancelled" unless the purchase price was paid

broker, agreed to sell the land to Barretto for P18,892.50, and that Barretto

at five o'clock of the day on which it was written.

agreed to buy the land at that price on the usual condition precedent that
before turning over the purchase price the title deeds and deed of transfer
"SEPT. 2, 1912,

from the company should be found to be in due and legal form. That for
the purpose of consummating the sale the plaintiff company turned over to

"Mr. GEO. C. SELLNER, Manila.

the defendant a deed of transfer to Barretto, together with a Torrens title

certificate to the land, executed as of the day when the agreement to sell

"DEAR SIR: In accordance with our conversation today, this is to notify you

was entered into. That the defendant, with full authority from plaintiff

that we consider the sale of our lot in Nagtajan to Antonio M. Barretto as

company, agreed to deliver the deed and certificate to Barretto on

cancelled in view of the nonpayment of the purchase price before five

payment of the purchase price. That from the very nature of the

o'clock this afternoon.

transaction it was understood that the purchaser should have a reasonable

time in which to examine the deed of transfer and the other documents of

"Please confirm.
"Yours very truly,

title, and that defendant exercising an authority impliedly if not expressly

MACONDRAY & CO., INC.,
(Sgd.) "CARLOS YOUNG
"General Manager."

conferred upon him, gave the purchaser a reasonable time in which to

satisfy himself as to the legality and correctness of the documents of title.
That the company through its manager Young, acquiesced in and ratified
what had been done by defendant in this regard when, with full knowledge
of all the facts, Young advised the defendant, during Barretto's absence in
Tayabas, that the deal must be closed up without delay on Barretto's return

As to the facts just narrated there is practically no dispute, the only

matters of fact as to which there is any real contention in the record being
limited to questions as to the value of the land, and as to the original
instructions to defendant in regard to the delivery of the title deeds.

to Manila.
No reason appears, nor has any reason been assigned for the demand by
the plaintiff company for the delivery of the purchase price at the hour
specified under threat in the event of failure to make payment at that hour
it would decline to carry out the agreement, other than that the manager

of the plaintiff company had been annoyed by the delays which occurred

It may be that the land has a speculative value much higher than the

during the earlier stage of the negotiations, and had changed his mind as

actual market value at the time of the sale, so that if held for an opportune

to the desirability of making the sale at the price agreed upon, either

turn in the market, or until a buyer of some special need for it happened to

because he believed that he could get a better price elsewhere, or that the

present himself, a price approximating that indicated by this witness might

land was worth more to his company than the price he had agreed to take

be secured for it. But the question of fact ruled upon is the actual market

for it. It is very evident that plaintiff company's manager hoped that by

value of the land at the time of its sale to Barretto, and not any speculative

setting a limit of a few hours upon the time within which he would receive

value which might be assigned to it in anticipation of unknown, indefinite

the money, his company would be relieved of the obligation to carry out its

and uncertain contingencies.

contract.
Among other definitions of "market value" to be found in "Words and
Upon the question of the value of the land we think that the evidence

Phrases," vol. 5, p. 4383, and supported by citation of authority, are the

clearly discloses that at the date of the sale its actual and its true market

following:

value was not more than the amount paid for it by Barretto, that is to say,
P18,892.50. The evidence discloses that it had been in the hands of an

"The 'market value' of property is the price which the property will bring in

expert real estate agent for many months prior to the sale, with every

a fair market after fair and reasonable efforts have been made to find a

inducement to him to secure the highest cash price which could be gotten

purchaser who will give the highest price for it.

for it. That he actually sold it to the plaintiff company, a few months prior
*******

to the sale to Barretto, for P17,175. That the plaintiff company was highly
dissatisfied with its purchase, and readily agreed to resell at that price.
That the defendant, in his capacity as a real estate agent, with a personal

"The market value of land is the price that would in all probability result

and direct interest in securing the highest possible price for the land, sold

from fair negotiations where the seller is willing to sell and the buyer

it to Barretto for P18,892.50.

desires to buy."

The only evidence in the record tending to prove that the land had a higher

Upon the foregoing statement of the facts disclosed by the record, we are

market value than the price actually paid for it under such circumstances is

of opinion that the judgment entered in the court below should be reversed

the testimony of a rival real estate broker, who had never been on the

and the complaint dismissed without costs in this instance.

land, but claimed that he was familiar with its general location from maps
and discription, and asserted that in his opinion it was worth considerably

1.

Even were we to admit, which we do not, that the plaintiff

more than the price actually paid for it, and that he thought he could have

company had the right to terminate the negotiations at the

sold the land for P3 a meter, or approximately P20,610. Of course an

time indicated by its manager, and to direct its real estate

expert opinion of this kind, however sincere and honest the witness may

agent not to make the sale to Barretto after the hour

have been in forming it, is wholly insufficient to maintain a finding that the

indicated, nevertheless we would be compelled to hold,

land was worth any more than it actually brought when sold under the

upon the evidence before us, that the plaintiff company

conditions above set forth.

has no cause of action for monetary damages against the

real estate agent had already earned the commissions agreed upon, and

defendant real estate agent.

could not be deprived thereof by the arbitrary action of the plaintiff

company in declining to execute the contract of sale for some reason

The measure of the damages which the plaintiff would be entitled to

personal to itself.

recover from the real estate agent for the unauthorized sale of its property
would be the actual market value of the property, title to which had been

The question as to what constitutes a sale so as to entitle a real estate

lost as a result of the sale. We are not now considering any question as to

broker to his commissions is extensively an- notated in the case of Lunney

the right of the owner, under such circumstances, to recover the property

vs. Healey (Nebraska) 56313 reported in 44 Law Rep. Ann., 593 [Note], and

from the purchaser, or damages for its detention or the like; but merely his

the long line of authorities there cited support the following rule:

right to recover monetary damages from his agent should he elect, as the
plaintiff company did in this case, to ratify the sale and recoup from the

"The business of a real estate broker or agent, generally, is only to find a

agent any loss resulting from his alleged unauthorized consummation of

purchaser, and the settled rule as stated by the courts is that, in the

the sale.

absence of an express contract between the broker and his principal, the
implication generally is that the broker becomes entitled to the usual

The market value of the land in question was P18,892.50. Of this the

commissions whenever he brings to his principal a party who is able and

plaintiff company has received P17,175, leaving a balance of P1,717.50

willing to take the property and enter into a valid contract upon the terms

unpaid. But, whatever may be the view which should be taken as to the

then named by the principal, although the particulars may be arranged

right of the plaintiff company to terminate the negotiations for the sale of

and the matter negotiated and completed between the principal and the

the property to Barretto at the time fixed by it in its letter to the defendant

purchaser directly."

real estate agent, there can be no question as to the liability of the plaintiff
company to the real estate agent, in the event that it did so terminate the

In the case of Watson vs. Brooks (17 Fed. Rep., 540; 8 Sawy., 316), it was

negotiations, for the amount of the commission which it agreed to pay him

held that a sale of real property, entitling a broker to his commissions, was

should he find a purchaser for the land at the price agreed upon in his

an agreement by the vendor to convey the title thereto, or an estate

agency contract. The commission agreed upon was all over P17,175 which

therein to the vendee for a certain valuable consideration then or

the defendant could secure from the property, and it is clear that allowing

thereafter to be paid, and was complete without conveyance, although the

the defendant this commission, and offsetting it against the unpaid

legal title remained in the vendor.

balance of the market value of the land, the plaintiff company is not
entitled to a money judgment against the defendant.

The rights of a real estate broker to be protected against the arbitrary

revocation of his agency, without remuneration for services rendered in

We do not mean to question the general doctrine as to the power of a

finding a suitable purchaser prior to the revocation, are clearly and

principal to revoke the authority of his agent at will, in the absence of a

forcefully stated in the following citation from the opinion in the case of

contract fixing the duration of the agency (subject, however, to some well

Blumenthal vs. Goodall (89 Cal., 251).

defined exceptions). Our ruling is that at the time fixed by the manager of
the plaintiff company for the termination of the negotiations, the defendant

"The act of the agent in finding a purchaser required time and labor for its

consummation of the sale by the defendant upon the terms and at the

completion, and within three days of the execution of the contract, and

price agreed upon prior to the revocation of his agency.

prior to its revocation, he had placed the matter in the position that
success was practically certain and immediate, and it would be the height

Without considering any of the disputed questions of fact it clearly appears

of injustice to permit the principal then to withdraw the authority and

that before the manager of the plaintiff company wrote the letter dated

terminate the agency as against an express provision of the contract, and

September 2, 1912, which is set forth in the foregoing statement of facts,

perchance reap the benefit of the agent's labors, without being liable to

and before the conversation was had to which that letter refers, the

him for his commissions. This would be to make the contract an

defendant real estate agent had offered to sell the land to Barretto for

unconscionable one, and would offer a premium for fraud by enabling one

P18,892.50 and that he did so with the knowledge and consent, and under

of the parties to take advantage of his own wrong and secure the labor of

the authority of the plaintiff company. It further clearly appears that this

the other without remuneration."

offer had been duly accepted by Barretto, who stood ready and willing to
pay over the agreed purchase price, upon the production and delivery of

2.

We are of opinion that under all the circumstances

the necessary documents of title, should these documents be found, upon

surrounding the negotiations as disclosed by the

examination, to be executed in due and legal form. The only question,

practically undisputed evidence of record, the plaintiff

then, which we need consider, is whether the plaintiff company could

company could not lawfully terminate the negotiations at

lawfully "cancel" or rescind this agreement for the sale and purchase of the

the time it attempted to do so and thereafter decline to

land, on the sole ground that the purchase price was not paid at the hour

convey the land to Barretto, who had accepted an offer of

designated in the letter to the defendant.

sale made to him by the plaintiff's duly authorized agent,

subject only to an examination of the documents of title,

The only reasons assigned for the sudden and arbitrary demand for the

and stood ready to pay the purchase price upon the

payment of the purchase price which was made with the manifest hope

delivery of the duly executed deed of conveyance and

that it would defeat the agent's deal with Barretto, are that the plaintiff

other necessary documents of title. We are not now

company's manager had become satisfied that the land was worth more

considering the right or the power of the plaintiff company

than he had agreed to accept for it; and that he was piqued and annoyed

to terminate or revoke the agency of the defendant at that

at the delays which marked the earlier stages of the negotiations.

time. The revocation of the agent's authority at that time

could in no wise relieve the plaintiff company of its

Time does not appear to have been of the essence of the contract. The

obligation to sell the land to Barretto for the price and on

agreement to sell was made without any express stipulation as to the time

the terms agreed upon before the agency was revoked.

within which the purchase price was to be paid, except that the purchaser
reserved the right to examine the documents of title before making

If we are correct in our conclusions in this regard, it follows, of course that

payment of the purchase price, though it was understood that the sale was

no matter what was the actual value of the land, the plaintiff company

for cash upon the delivery of the documents of title executed in due form.

suffered no damage by the delivery of the title deeds to Barretto, and the

Under the agreement with the agent of the plaintiff company, the
purchaser had a perfect right to examine the documents of title; and in the

absence of an express agreement fixing the time to be allowed therefore,

provide that the purchaser shall be furnished an abstract of title, and shall

he was clearly entitled to such time as might be reasonably necessary for

have a specified time in which to examine the title and pay the purchase

that purpose.

money, the purchaser must determine in that time whether he will take the
title, and that he cannot tender the purchase money after that time, even

The plaintiff company, through its agent, had given Barretto an opportunity

though no abstract of the title was furnished.

to examine the documents of title, with the express understanding that if

they were satisfactory he would hand the agent his cheek for the purchase

"The purchaser is entitled to a reasonable time within which to determine

price, and it is very clear that the plaintiff company could not arbitrarily,

by investigation the validity of apparent liens disclosed by the record. After

and for its own convenience, deprive Barretto of this opportunity to make

the purchaser has examined the abstract, or investigated the title in the

such examination of the documents as might be reasonably necessary.

time allowed for that purpose, it is his duty to point out or make known his
objections to the title, if any, so as to give the vendor an opportunity to

Of course we are not to be understood as denying the right of the vendor

remove them."

to couple his agreement to sell with a stipulation that the purchase price
must be paid at a specific day, hour and minute; nor that the obligation to

In the case of Hoyt vs. Tuxbury (70 111., 331, 332), the rule is stated as

pay over the purchase price forthwith may not be inferred from all the

follows:

circumstances surrounding the transaction in a particular case. Time may

be, and often is of the very essence of the contract. But in a contract for

"Where the purchase of land is made upon condition the title is found

the sale of real estate, where no agreement to the contrary appears, it may

good, the purchaser is only entitled to a reasonable time in which to

fairly be assumed that it was the intention of the parties to allow a

determine whether he will take the title the vendor has, or reject it. He

reasonable time for the examination of the documents of title; and in any

cannot keep the contract open indefinitely, so as to avail of a rise in the

case in which time has been expressly allowed for that purpose, the vendor

value of the property, or relieve himself in case of a depreciation."

cannot arbitrarily demand the payment of the purchase price before the
expiration of the time reasonably necessary therefor.

In the case of Easton vs. Montgomery (90 Cal., 307), the rule is set forth as
follows:

The doctrine supported by citation of authority is set forth as follows on

page 165, "Maupin on Marketable Title to Real Estate:"

"A contract for the sale of land which provides 'title to prove good or no
sale,' without specifying the time within which the examination is to be

"The contract of sale usually specifies a time in which the purchaser may

made, implies a reasonable time."

examine the title before completing the purchase. If no time be specified,

he will be entitled to a reasonable time for that purpose, but cannot keep

In 39 Cyc, 1332, the general rule, supported by numerous citations, is set

the contract open indefinitely so as to avail himself of a rise in the value of

forth as follows:

the property or escape loss in case of depreciation. He cannot be required

to pay the purchase money before he has examined the abstract, unless

"If the contract of sale does not specify the time of performance, a

he has expressly stipulated so to do. It has been held that if the contract

reasonable time will be implied. In other words a reasonable time for

performance will be allowed, and performance within a reasonable time

Perhaps we should indicate that in arriving at these conclusions we have

will be required. What is a reasonable time necessarily depends upon the

not found it necessary to pass upon the disputed question of fact, as to

facts and circumstances of the particular case. The rule permitting and

whether or not the plaintiff company's manager instructed the defendant

requiring performance within a reasonable time applies both to the time for

not to deliver the title-deed until he had received the purchase price. On

making and executing the conveyance by the vendor, and to the time for

this point there is a direct conflict of evidence. But as we understand the

making or tendering payment by the purchaser; and where some

transaction, it was clearly understood that the purchaser would have a

precedent act or demand is necessary, the rule applies to the time of

reasonable opportunity to inspect and examine the documents of title

performance after such act is done, or after such demand has been made.

before paying over a large sum of money in exchange therefor, whether

It also applies to the time within which any condition precedent is to be

the agent did or did not have the authority to make actual delivery of the

performed, or within which a contingency upon which the transaction

title deed for that purpose.

depends is to happen, and to the performance of various acts by the

parties such as the furnishing of an abstract of title, or making a survey, or

Twenty days hereafter let judgment be entered reversing the judgment

any act which is to precede or may affect the time of conveyance or

entered in the court below without costs in this instance, and directing the

payment, or which one of the parties may do at his option which may

dismissal of the complaint with the costs in first instance against the

affect the rights of the parties under the contract. If the purchaser is

plaintiff company, and ten days thereafter let the record be returned to the

entitled to an examination of the title a reasonable time therefor will be

court wherein it originated. So ordered.

implied."
Arellano, C. J., Torres, Moreland, Trent, and Araullo, JJ., concur.
Under all the circumstances surrounding the transaction in the case at bar,
as they appear from the evidence of record, we have no hesitation in
holding that the plaintiff company's letter of September 2, 1912
demanding payment before five o'clock of the afternoon of that day, under
penalty of the cancellation of its agreement to sell, was an arbitrary and
unreasonable attempt to deny to the purchaser the reasonable opportunity
to inspect the documents of title, to which he was entitled by virtue of the
express agreement of the plaintiff company's agent before any attempt
was made to revoke his agency. It follows that Barretto's right to enforce
the agreement to sell was in no wise affected by the attempt of the plaintiff
company to "cancel" the agreement; and that the plaintiff company
suffered no damage by the consummation of the agreement by the
acceptance of the stipulated purchase price by the defendant real estate
agent.

cause, rendered a judgment in favor of the plaintiff and against the

defendant for the sum of P60,000, with costs. From that judgment the
defendant appealed to this court.
The proof with regard to the authority of the plaintiff to sell the factory in
question for the defendant, on commission, is extremely unsatisfactory. It
consists solely of the testimony of the plaintiff, on the one hand, and of the
G. R .No. 15823, September 12, 1921

manager of the defendant company, Antonio A. Brimo, on the other. From a

reading of their testimony we believe that neither of them has been

JULIO DANON, PLAINTIFF AND APPELLEE, VS. ANTONIO A. BRIMO & CO.,

entirely free from prevarications. However, after giving due weight to the

DEFENDANT AND APPELLANT.

finding of the trial court in this regard and after carefully considering the
inherent probability or improbability of the testimony of each of said

DECISION

witnesses, we believe we are approximating the truth in finding: (1) That

Antonio A. Brimo, in a conversation with the plaintiff, Julio Danon, about the

JOHNSON, J.:
This action was brought to recover the sum of P60,000, alleged to be the
value of services rendered to the defendant by the plaintiff as a broker. The
plaintiff alleges that in the month of August, 1918, the defendant
company, through its manager, Antonio A. Brimo, employed him to look for
a purchaser of its factory known as "Holland American Oil Co.," for the sum
of P1,200,000, payable in cash; that the defendant promised to pay to the
plaintiff, as compensation for his services, a commission of five per cent on
the said sum of P1,200,000, if the sale was consummated, or if the plaintiff
should find a purchaser ready, able and willing to buy said factory for the
said sum of P1,200,000; that subsequently the plaintiff found such a
purchaser, but that the defendant refused to sell the said factory without
any justifiable motive or reason therefor and without having previously

middle of August, 1918, informed the latter that he (Brimo) desired to sell
his factory, the Holland American Oil Co., for the sum of P1,200,000; (2)
that he agreed and promised to pay to the plaintiff a commission of 5 per
cent provided the latter could sell said factory for that amount; and (3) that
no definite period of time was fixed within which the plaintiff should effect
the sale. It seems that another broker, Sellner, was also negotiating the
sale, or trying to find a purchaser for the same property and that the
plaintiff was informed of that fact either by Brimo himself or by someone
else; at least, it is probable that the plaintiff was aware that he was not
alone in the field, and his whole effort was to forestall his competitor by
being the first to find a purchaser and effect the sale. Such, we believe,
was the contract between the plaintiff and the defendant, upon which the
present action is based.

notified the plaintiff of its desistance or variation in the price and terms of

The next question to determine is whether the plaintiff had performed all

the sale.

that was required of him under that contract to entitle him to recover the

To that complaint the defendant interposed a general denial. Upon the

issue thus presented, the Honorable Simplicio del Rosario, judge, after
hearing and considering the evidence adduced during the trial of the

commission agreed upon. The proof in this regard is no less unsatisfactory.

It seems that immediately after having an interview with Mr. Brimo, as
above stated, the plaintiff went to see Mr. Mauro Prieto, president of the
Santa Ana Oil Mill, a corporation, and offered to sell to him the defendant's

property at P1,200,000. The said corporation was at that time in need of

because of the obstacle placed

such a factory as the plaintiff was offering for sale, and Mr. Prieto, its

by the Government.

president, instructed the manager, Samuel E. Kane, to see Mr. Brimo and
ascertain whether he really wanted to sell said factory, and, if so, to get
permission from him to inspect the premises. Mr. Kane inspected the

"Q.

And did you inform Mr. Danon

of this acceptance?

A. I did not explain to Mr. Danon."

On cross-examination the same witness testified:

factory and, presumably, made a favorable report to Mr. Prieto. The latter
asked for an appointment with Mr. Brimo to perfect the negotiation. In the

"Q. What actions did the board of

meantime Sellner, the other broker referred to, had found a purchaser for

directors of the Santa Ana Oil

because Mr. Danon stated that

the same property, who ultimately bought it for P1,300,000. For that

Mill take in order to acquire or

the property had been sold

reason Mr. Prieto, the would be purchaser found by the plaintiff, never

to make an offer to Mr. Brimo

when I was going to deal with

came to see Mr. Brimo to perfect the proposed negotiation.

of the Holland American Oil

him.

A. But nothing was effected,

Company?
Under the proofs in this case, the most that can be said as to what the
plaintiff had accomplished is, that he had found a person who might have
bought the defendant's factory if the defendant had not sold it to someone
else. The evidence does not show that the Santa Ana Oil Mill had definitely
decided to buy the property in question at the fixed price of P1,200,000.
The board of directors of said corporation had not resolved to purchase
said property; and even if its president could legally make the purchase
without previous formal authorization of the board of directors, yet said
president does not pretend that he had definitely and formally agreed to
buy the factory in question on behalf of his corporation at the price stated.
On direct examination he testified for the plaintiff as follows:
"Q. You say that we were going to

accept or that it was beneficial

A. Our company, the Santa Ana

Oil Mill.

for us; will you say to whom

you refer, when you say 'we?'
"Q.

And is that company able to

pay the sum of P1,200,000?

"Q. And you accepted it at that

price of P1,200,000?

"Q. But do you not say that you

made an offer of P1,200,000?

A. No; it was Mr. Danon who made

the offer and we were sure to
put the deal through because
we have bound ourselves"

The plaintiff claims that the reasons why the sale to the Santa Ana Oil Mill
was not consummated was because Mr. Brimo refused to sell to a Filipino
firm and preferred an American buyer; that upon learning such attitude of
the defendant the plaintiff endeavored to procure another purchaser and
found a Mr. Leas, who delivered to the plaintiff a letter addressed to Mr.
Brimo, offering to buy the factory in question at P1,200,000, the offer
being good for twenty-four hours; that said offer was not accepted by
Brimo because while he was reading the letter of Leas, Sellner came in,
drew Brimo into another room, and then and there closed the deal at
P1,300,000. The last statement is admitted by the defendant.
Such are the facts in this case, as nearly accurate as we can gather them

A. Yes, sir.

from the conflicting evidence before us. Under those facts, is the plaintiff
entitled to recover the sum of P60,000, claimed by him as compensation

A. Surely, because as I already

for his services? It will be noted that, according to the plaintiff's own

said before, we were in the

testimony, the defendant agreed and promised to pay him a commission of

difficult position of not being

5 per cent provided he (the plaintiff) could sell the factory at P1,200,000

able to operate our factory,

("con tal que V. me venda la fabrica en P1,200,000"). It will also be noted

that all that the plaintiff had accomplished by way of performance of his

A leading case on the subject is that of Sibbald vs. Bethlehem Iron Co. (83

contract was, that he had found a person who might have bought the

N. Y., 378; 38 Am. Rep., 441). In that case, after an exhaustive review of

factory in question had not the defendant sold it to someone else.

various cases, the Court of Appeals of New York stated the rule as follows:

(Beaumont vs. Prieto, 41 Phil., 670; 249 U. S., 554.)

"In all the cases, under all and varying forms of expression, the
Under these circumstances it is difficult to see how the plaintiff can recover

fundamental and correct doctrine is, that the duty assumed by the broker

anything in the premises. The plaintiff's action is not one for damages for

is to bring the minds of the buyer and seller to an argument for a sale, and

breach of contract; it is an action to recover "the reasonable value" of

the price and terms on which it is to be made, and until that is done his

services rendered. This is unmistakable both from the plaintiff's complaint

right to commissions does not accrue. (McGavock vs. Woodlief, 20 How.,

and his testimony as a witness during the trial.

221; Barnes vs. Roberts, 5 Bosw., 73; Holly vs. Gosling, 3 E. D. Smith, 262;
Jacobs vs. Kolff, 2 Hilt., 133; Kock vs. Emmerling, 22 How., 72; Corning vs.

"Q. And what is the reasonable

value of the services you

A. Five per cent of the price at

which it was sold.

Calvert, 2 Hilt., 56; Trundy vs. N. Y. & Hartf. Steamboat Co., 6 Robt., 312;
Van Lien vs. Burns, 1 Hilt., 134.)"

rendered to Mr. doctrine is,

*******

that .. (McGavock Brimo?

"Q. Upon what do you base your

A. First, because that is the

qualification that those

common rate in the city, and,

"It follows, as a necessary deduction from the established rule, that a

services were reasonable?

secondly, because of the big

broker is never entitled to commissions for unsuccessful efforts. The risk of

gain that he obtained from the

a failure is wholly his. The reward comes only with his success. That is the

sale."

plain contract and contemplation of the parties. The broker may devote his

What benefit did the plaintiff, by his "services," bestow upon the defendant

time and labor, and expend his money with ever so much/of devotion to

to entitle him to recover from the latter the sum of P50,000? It is perfectly

the interest of his employer, and yet if the fails, if without effecting an

clear and undisputed that his "services" did not in any way contribute

agreement or accomplishing a bargain, he abandons the effort, or his

towards bringing about the sale of the factory in question. He was not "the

authority is fairly and in good faith terminated, he gains no right to

efficient agent or the procuring1 cause of the sale."

commissions. He loses the labor and effort which was staked upon success.
And in such event it matters not that after his failure, and the termination

"The broker must be the efficient agent or the procuring cause of the sale.

of his agency, what he has done proves of use and benefit to the principal.

The means employed by him and his efforts must result in the sale. He

In a multitude of cases that must necessarily result. He may have

must find the purchaser, and the sale must proceed from his efforts acting

introduced to each other parties who otherwise would have never met; he

as broker." (Wylie vs. Marine National Bank, 61 N. Y., 415, 416, citing:

may have created impressions, which under later and more favorable

McClure vs. Paine, 49 N. Y., 561; Lloyd vs. Mathews, 51 id., 124; Lyon vs.

circumstances naturally lead to and materially assist in the consummation

Mitchell, 36 id., 235; Briggs vs. Rowe, 4 Keyes, 424; Murray vs. Currie, 7

of a sale; he may have planted the very seed from which others reap the

Carr. & Payne, 584; Wilkinson vs. Martin, 8 id., 5.)

harvest; but all that gives him no claim. It was part of his risk that failing
himself, not successful in fulfilling his obligation, others might be left to

10

some extent to avail themselves of the fruit of his labors. As was said in

Thus, if in the midst of negotiations instituted by the broker, and which

Wylie vs. Marine National Bank (61 N. Y., 416), in such a case the principal

were plainly and evidently approaching success, the seller should revoke

violates no right of the broker by selling to the first party who offers the

the authority of the broker, with the view of concluding the bargain without

price asked, and it matters not that sale is to the very party with whom the

his aid, and avoiding the payment of commission about to be earned, it

broker had been negotiating. He failed to find or produce a purchaser upon

might be well said that the due performance his obligation by the broker

the terms prescribed in his employment, and the principal was under no

was purposely prevented by the principal. But if the latter acts in good

obligation to wait longer that he might make further efforts. The failure

faith, not seeking to escape the payment of commissions, but moved fairly

therefore and its consequences were the risk of the broker only. This

by a view of his own interest, he has the absolute right before a bargain is

however must be taken with one important and necessary limitation. If the

made while negotiations remain unsuccessful, before commissions are

efforts of the broker are rendered a failure by the fault of the employer; if

earned, to revoke the broker's authority, and the latter cannot thereafter

capriciously he changes his mind after the purchaser, ready and willing,

claim compensation for a sale made by the principal, even though it be to

and consenting to the prescribed terms, is produced; or if the latter

a customer with whom the broker unsuccessfully negotiated, and even

declines to complete the contract because of some defect of title in the

though, to some extent, the seller might justly be said to have availed

ownership of the seller, some unremoved incumbrance, some defect which

himself of the fruits of the broker's labor." (Ibid. pp. 444, 445 and 446.)

is the fault of the latter, then the broker does not lose his commissions.
And that upon the familiar principle that no one can avail himself of the

The rule laid down in the foregoing case was adopted and followed in the,

nonperformance of a condition precedent, who has himself occasioned its

cases of Zeimer vs. Antisell (75 Cal. 509), and Ayres vs. Thomas (116 Cal.,

nonperformance. But this limitation is not even an exception to the general

140).

rule affecting the broker's right for it goes on the ground that the broker
has done his duty, that he has brought buyer and seller to an agreement,

"The undertaking to procure a purchaser requires of the party so

but that the contract is not consummated and fails though the after-fault of

undertaking, not simply to name or introduce a person who may be willing

the seller. The cases are uniform in this respect. (Moses vs. Burling, 31 N.

to make any sort of contract in reference to the property, but to produce a

Y., 462; Glentworth vs. Luther, 21 Barb., 147; Van Lien vs. Burns, 1 Hilt.,

party capable, and who ultimately becomes the purchaser." (Kimberly vs.

134.)

Henderson and Lupton, 29 Md., 512, 515, citing: Keener vs. Harrod &
Brooke, 2 Md. 63; McGavock vs. Woodlief, 20 How., 221. See also Richards,

"One other principle applicable to such a contract as existed in the present

Executor, vs. Jackson, 31 Md., 250.)

case needs to be kept in view. Where no time for the continuance of the
contract is fixed by its terms either party is at liberty to terminate it at will,

"The defendant sent a poposal to a broker in these words: If you send or

subject only to the ordinary requirements of good faith. Usually the broker

cause to be sent to me, by advertisement or otherwise, any party with

is entitled to a fair and reasonable opportunity to perform his obligation,

whom I may see fit and proper to effect a sale or exchange of my real

subject of course to the right of the seller to sell independently. But having

estate, above described I will pay you the sum of $200. The broker found a

been granted him, the right of the principal to terminate his authority is

person who proposed to purchase the property, but the sale was not

absolute and unrestricted, except only that he may not do it in bad faith,

effected. Held: That the broker was not entitled to compensation." (Walker

and as a mere device to escape the payment of the broker's commissions.

vs. Tirrel, 3 Am. Rep., 352.)

11

It is clear from the foregoing authorities that, although the present plaintiff
could probably have effected the sale of the defendant's factory had not
the defendant sold it to someone else, he is not entitled to the
commissions agreed upon because he had no intervention whatever in,
and much sale in question. It must be borne in mind that no definite period
was fixed by the defendant within which the plaintiff might effect the sale
of its factory. Nor was the plaintiff given by the defendant the exclusive
agency of such sale. Therefore, the plaintiff cannot complain of the
defendant's conduct in selling the property through another agent before
the plaintiff's efforts were crowned with success. "One who has employed a
broker can himself sell the property to a purchaser whom he has procured,

THIRD DIVISION

without any aid from the broker/' (Hungerford vs. Hicks, 39 Conn., 259;
G.R. NO. 141525, September 02, 2005

Wylie vs. Marine National Bank, 61 N. Y., 415, 416.)

For the foregoing reasons the judgment appealed from is hereby revoked
and the defendant is hereby absolved from all liability under the plaintiff's

CARLOS SANCHEZ, PETITIONER, VS. MEDICARD PHILIPPINES, INC., DR.

NICANOR MONTOYA AND CARLOS EJERCITO,RESPONDENTS.

complaint, with costs in both instances against the plaintiff. So ordered.

Araullo, Street, Avancena, and Villamor, JJ., concur.

DECISION
SANDOVAL-GUTIERREZ, J.
This petition for review on certiorari seeks to reverse the Decision[1] of the
Court of Appeals dated February 24, 1999 and its Resolution dated January
12, 2000 in CA-G.R. CV No. 47681.
The facts, as established by the trial court and affirmed by the Court of
Appeals, follow:
Sometime in 1987, Medicard Philippines, Inc. (Medicard), respondent,
appointed petitioner as its special corporate agent. As such agent,
Medicard gave him a commission based on the "cash brought in."
In September, 1988, through petitioner's efforts, Medicard and United
Laboratories Group of Companies (Unilab) executed a Health Care Program
Contract. Under this contract, Unilab shall pay Medicard a fixed monthly

12

premium for the health insurance of its personnel. Unilab paid Medicard

In a letter dated March 15, 1991, petitioner demanded from Medicard

P4,148,005.00 representing the premium for one (1) year. Medicard then

payment of P338,000.00 as his commission plus damages, but the latter

handed petitioner 18% of said amount or P746,640.90 representing his

refused to heed his demand.

commission.
Thus, petitioner filed with the Regional Trial Court (RTC), Branch 66, Makati
Again, through petitioner's initiative, the agency contract between

City, a complaint for sum of money against Medicard, Dr. Nicanor Montoya

Medicard and Unilab was renewed for another year, or from October 1,

and Carlos Ejercito, herein respondents.

1989 to September 30, 1990, incorporating therein the increase of

premium from P4,148,005.00 to P7,456,896.00. Medicard paid petitioner

After hearing, the RTC rendered its Decision dismissing petitioner's

P1,342,241.00 as his commission.

complaint and respondents' counterclaim.

Prior to the expiration of the renewed contract, Medicard proposed to

On appeal, the Court of Appeals affirmed the trial court's assailed

Unilab, through petitioner, an increase of the premium for the next year.

Decision. The Appellate Court held that there is no proof that the

Unilab rejected the proposal "for the reason that it was too high,"

execution of the new contract between the parties under the "cost plus"

prompting Dr. Nicanor Montoya (Medicard's president and general

system is a strategy to deprive petitioner of his commission; that Medicard

manager), also a respondent, to request petitioner to reduce his

did not commit any fraudulent act in revoking its agency contract with

commission, but the latter refused.

Sanchez; that when Unilab rejected Medicard's proposal for an increase of

premium, their Health Care Program Contract on its third year was

In a letter dated October 3, 1990, Unilab, through Carlos Ejercito, another

effectively revoked; and that where the contract is ineffectual, then the

respondent, confirmed its decision not to renew the health program

agent is not entitled to a commission.

contract with Medicard.

Petitioner filed a motion for reconsideration, but this was denied by the
Meanwhile, in order not to prejudice its personnel by the termination of

Court of Appeals on January 12, 2000.

their health insurance, Unilab, through respondent Ejercito, negotiated with

Dr. Montoya and other officers of Medicard, to discuss ways in order to

Hence, the instant petition for review on certiorari.

continue the insurance coverage of those personnel.

The basic issue for our resolution is whether the Court of Appeals erred in
Under the new scheme, Unilab shall pay Medicard only the amount

holding that the contract of agency has been revoked by Medicard, hence,

corresponding to the actual hospitalization expenses incurred by each

petitioner is not entitled to a commission.

personnel plus 15% service fee for using Medicard facilities, which amount
shall not be less than P780,000.00.

It is dictum that in order for an agent to be entitled to a commission, he

must be the procuring cause of the sale, which simply means that the

Medicard did not give petitioner any commission under the new scheme.

measures employed by him and the efforts he exerted must result in a

sale.[2] In other words, an agent receives his commission only upon the

13

successful conclusion of a sale.[3] Conversely, it follows that where his

service fee. Under the "cost plus" system which replaced the premium

efforts are unsuccessful, or there was no effort on his part, he is not

scheme, petitioner was not given a commission.

entitled to a commission.
It is clear that since petitioner refused to reduce his commission, Medicard
In Prats vs. Court of Appeals,

[4]

this Court held that for the purpose of

directly negotiated with Unilab, thus revoking its agency contract with

equity, an agent who is not the efficient procuring cause is nonetheless

petitioner. We hold that such revocation is authorized by Article 1924 of

entitled to his commission, where said agent, notwithstanding the

the Civil Code which provides:

expiration of his authority, nonetheless, took diligent steps to bring

back together the parties, such that a sale was finalized and

"Art. 1924. The agency is revoked if the principal directly manages the

consummated between them. In Manotok Borthers vs. Court of

business entrusted to the agent, dealing directly with third persons."

Moreover, as found by the lower courts, petitioner did not render services
to Medicard, his principal, to entitle him to a commission. There is no
indication from the records that he exerted any effort in order that Unilab
and Medicard, after the expiration of the Health Care Program Contract,
can renew it for the third time. In fact, his refusal to reduce his
commission constrained Medicard to negotiate directly with Unilab. We
find no reason in law or in equity to rule that he is entitled to a
commission. Obviously, he was not the agent or the "procuring cause" of
the third Health Care Program Contract between Medicard and Unilab.

Appeals,

[5]

where the Deed of Sale was only executed after the agent's

extended authority had expired, this Court, applying its ruling in Prats, held
that the agent (in Manotok) is entitled to a commission since he was the
efficient procuring cause of the sale, notwithstanding that the sale took
place after his authority had lapsed. The proximate, close, and causal
connection between the agent's efforts and the principal's sale of his
property can not be ignored.
It may be recalled that through petitioner's efforts, Medicard was able to
enter into a one-year Health Care Program Contract with Unilab. As a

WHEREFORE, the petition is DENIED. The challenged Decision and

Resolution of the Court of Appeals in CA-G.R. CV No. 47681 are AFFIRMED
IN TOTO. Costs against petitioner.

result, Medicard paid petitioner his commission. Again, through his

efforts, the contract was renewed and once more, he received his

SO ORDERED.

commission. Before the expiration of the renewed contract, Medicard,

through petitioner, proposed an increase in premium, but Unilab rejected
this proposal. Medicard then requested petitioner to reduce his
commission should the contract be renewed on its third year, but he was
obstinate. Meantime, on October 3, 1990, Unilab informed Medicard it
was no longer renewing the Health Care Program contract.
In order not to prejudice its personnel, Unilab, through respondent Ejercito,
negotiated with respondent Dr. Montoya of Medicard, in order to find
mutually beneficial ways of continuing the Health Care Program. The

G. R. No. L-5180, August 31, 1953

CONSEJO INFANTE, PETITIONER, VS. JOSE CUNANAN, JUAN MIJARES AND
THE COURT OF APPEALS, SECOND DIVISION, RESPONDENTS.

negotiations resulted in a new contract wherein Unilab shall pay Medicard

the hospitalization expenses actually incurred by each employees, plus a

DECISION

14

BAUTISTA ANGELO, J.:

The lower court found that the preponderance of evidence was in favor of
This is a petition for review of a decision of the Court of Appeals affirming

the plaintiffs and rendered judgment sentencing the defendant to pay the

the judgment of the court of origin which orders the defendant to pay the

plaintiffs the sum of P2,500 with legal interest thereon from February 2,

plaintiffs the sum of P2,500 with legal interest thereon from February 2,

1949 plus the costs of action. This decision was affirmed in toto by the

1949 and the costs of action.

Court of Appeals.

Consejo Infante, defendant herein, was the owner of two parcels of land,

There is no dispute that respondents were authorized by petitioner to sell

together with a house built thereon, situated in the City of Manila and

her property for the sum of P30,000 with the understanding that they will

covered by Transfer Certificate of Title No. 61786. On or before November

be given a commission of 5 percent plus whatever overprice they may

30, 1948, she contracted the services of Jose Cunanan and Juan Mijares,

obtain for the property. Petitioner, however, contends that authority has

plaintiffs herein, to sell the above-mentioned property for a price of

already been withdrawn on November 30, 1948 when, by the voluntary act

P30,000 subject to the condition that the purchaser would assume the

of respondents, they executed a document stating that said authority shall

mortgage existing thereon in favor of the Rehabilitation Finance

be considered cancelled and without any effect, so that when petitioner

Corporation. She agreed to pay them a commission of 5 per cent on the

sold the property to Pio S. Noche on December 20, 1948, she was already

purchaser price plus whatever overprice they may obtain for the property.

free from her commitment with respondents and, therefore, was not in

Plaintiffs found one Pio S. Noche who was willing to buy the property under

duty bound to pay them any commission for the transaction.

the terms agreed upon with defendant, but when they introduced him to
defendant, the latter informed them that she was no longer interested in

If the facts were as claimed by petitioner, there is indeed no doubt that she

selling the property and succeeded in making them sign a document

would have no obligation to pay respondents the commission which was

stating therein that the written authority she had given them was already

promised them under the original authority because, under the old Civil

cancelled. However, on December 20, 1948, defendant dealt directly with

Code, her right to withdraw such authority is recognized. A principal may

Pio S. Noche selling to him the property for P31,000. Upon learning this

withdraw the authority given to an agent at will. (Article 1733.) But this

transaction, plaintiffs demanded from defendant the payment of their

fact is disputed. Thus, respondents claim that while they agreed to cancel

commission, but she refused and so they brought the present action.

the written authority given to them, they did so merely upon the verbal
assurance given by petitioner that, should the property be sold to their

Defendant admitted having contracted the services of the plaintiffs to sell

own buyer, Pio S. Noche, they would be given the commission agreed

her property as set forth in the complaint, but stated that she agreed to

upon. True, this verbal assurance does not appear in the written

pay them a commission of P1,200 only on condition that they buy her a

cancellation, Exhibit 1, and, on the other hand, it is disputed by petitioner,

property somewhere in Taft Avenue to where she might transfer after

but respondents were allowed to present oral evidence to prove it, and this

selling her property. Defendant avers that while plaintiffs took steps to sell

is now assigned as error in this petition for review.

her property as agreed upon, they sold the property at Taft Avenue to
another party and because of this failure it was agreed that the authority

The plea that oral evidence should not have been allowed to prove the

she had given them be cancelled.

alleged verbal assurance is well taken it appearing that the written

15

authority given to respondents has been cancelled in a written statement.

parties takes advantage of the benevolence of the other and acts in a

The rule on this matter is that "When the terms of an agreement have

manner that would promote his own selfish interest. This act is unfair as

been reduced to writing, it is to be considered as containing all those

would amount to bad faith. This act cannot be sanctioned without

terms, and, therefore, there can be, between the parties and their

according to the party prejudiced the reward which is due him. This is the

successors in interest, no evidence of the terms of the agreement other

situation in which respondents were placed by petitioner. Petitioner took

than the contents of the writing." (Section 22, Rule 123, Rules of Court.)

advantage of the services rendered by respondents, but believing that she

The only exceptions to this rule are: "(a) Where a mistake or imperfection

could evade payment of their commission, she made use of a ruse by

of the writing, or its failure to express the true intent and agreement of the

inducing them to sign the deed of cancellation Exhibit 1. This act of

parties, or the validity of the agreement is put in issue by the pleadings";

subversion cannot be sanctioned and cannot serve as basis for petitioner

and (b) Where there is an intrinsic ambiguity in the writing." (Ibid.) There

to escape payment of the commission agreed upon.

is no doubt that the point raised does not come under any of the cases
excepted, for there is nothing therein that has been put in issue by

Wherefore, the decision appealed from is hereby affirmed, with costs

respondents in their complaint. The terms of the document, Exhibit 1,

against petitioner.

seem to be clear and they do not contain any reservation which may in any
way run counter to the clear intention of the parties.

Paras, C. J., Pablo, Bengzon, Padilla, Tuason, Montemayor, Reyes and Jugo,
JJ., concur.

But even disregarding the oral evidence adduced by respondents in

contravention of the parole evidence rule, we are, however, of the opinion
that there is enough justification for the conclusion reached by the lower
court as well as by the Court of Appeals to the effect that respondents are
entitled to the commission originally agreed upon. It is a fact found by the
Court of Appeals that after petitioner had given the written authority to sell

CONCURRING AND DISSENTING

her land for the sum of P30,000, respondent found a buyer in the person of
one Pio S. Noche who was willing to buy the property under the terms

LABRADOR, J.,

agreed upon, and this matter was immediately brought to the knowledge
of petitioner. But the latter, perhaps by way of stratagem, advised

I concur in the result. I can not agree, however, to the ruling made in the

respondents that she was no longer interested in the deal and was able to

majority decision that the petitioners can not introduce evidence of the

prevail upon them to sign a document agreeing to the cancellation of the

circumstances under which the document was signed, i. e. upon promise

written authority.

by respondent that should the property be sold to petitioner's buyer they

would nevertheless be entitled to the commission agreed upon. Such

That petitioner had changed her mind even if respondent had found a

evidence is not excluded by the parole evidence rule, because it does not

buyer who was willing to close the deal, is a matter that would not give rise

tend to alter or vary the terms of the document. This document was

to a legal consequence if respondents agree to call off the transaction in

merely a withdrawal of the authority granted the petitioner to sell the

deference to the request of petitioner. But the situation varies if one of the

property, not an agreement that they shall not be paid their commission

16

The facts, as found by the CA and adopted by Maxicare in its petition,

follow:
[Maxicare] is a domestic corporation engaged in selling health insurance
plans whose Chairman Dr. Roberto K. Macasaet, Chief Operating Officer
Virgilio del Valle, and Sales/Marketing Manager Josephine Cabrera were
impleaded as defendants-appellants.
On September 15, 1990, [Maxicare] allegedly engaged the services of
Carmela Estrada who was doing business under the name of CARA HEALTH
[SERVICES] to promote and sell the prepaid group practice health care
delivery program called MAXICARE Plan with the position of Independent
Account Executive. [Maxicare] formally appointed [Estrada] as its General
Agent, evidenced by a letter-agreement dated February 16, 1991. The
letter agreement provided for plaintiff-appellees [Estradas] compensation
in the form of commission, viz.:
Commission
THIRD DIVISION
G.R. No. 171052, January 28, 2008

In consideration of the performance of your functions and duties as

specified in this letter-agreement, [Maxicare] shall pay you a commission
equivalent to 15 to 18% from individual, family, group accounts; 2.5 to

PHILIPPINE HEALTH-CARE PROVIDERS, INC. (MAXICARE), Petitioner,

10% on tailored fit plans; and 10% on standard plans of commissionable

vs. CARMELA ESTRADA/CARA HEALTH SERVICES, Respondent.

amount on corporate accounts from all membership dues collected and

remitted by you to [Maxicare].

DECISION
[Maxicare] alleged that it followed a franchising system in dealing with
its agents whereby an agent had to first secure permission from [Maxicare]

NACHURA, J.:

to list a prospective company as client. [Estrada] alleged that it did apply

This petition for review on certiorari assails the Decision[1] dated June 16,

with [Maxicare] for the MERALCO account and other accounts, and in fact,

2005 of the Court of Appeals (CA) in CA-G.R. CV No. 66040 which affirmed

its franchise to solicit corporate accounts, MERALCO account included, was

in toto the Decision

renewed on February 11, 1991.

[2]

dated October 8, 1999 of the Regional Trial Court

(RTC), Branch 135, of Makati City in an action for breach of contract and

Plaintiff-appellee [Estrada] submitted proposals and made representations

damages filed by respondent Carmela Estrada, sole proprietor of Cara

to the officers of MERALCO regarding the MAXICARE Plan but when

Health Services, against Philippine Health-Care Providers, Inc. (Maxicare).

MERALCO decided to subscribe to the MAXICARE Plan, [Maxicare] directly

negotiated with MERALCO regarding the terms and conditions of the

17

agreement and left plaintiff-appellee [Estrada] out of the discussions on

officers with the Regional Trial Court (RTC) of Makati City, docketed as Civil

the terms and conditions.

Case No. 93-935, raffled to Branch 135.

On November 28, 1991, MERALCO eventually subscribed to the MAXICARE

Defendants-appellants [Maxicare] and its officers filed their Answer with

Plan and signed a Service Agreement directly with [Maxicare] for medical

Counterclaim on September 13, 1993 and their Amended Answer with

coverage of its qualified members, i.e.: 1) the enrolled dependent/s of

Counterclaim on September 28, 1993, alleging that: plaintiff-appellee

regular MERALCO executives; 2) retired executives and their dependents

[Estrada] had no cause of action; the cause of action, if any, should be is

who have opted to enroll and/or continue their MAXICARE membership up

against [Maxicare] only and not against its officers; CARA HEALTHs

to age 65; and 3) regular MERALCO female executives (exclusively for

appointment as agent under the February 16, 1991 letter-agreement to

maternity benefits). Its duration was for one (1) year from December 1,

promote the MAXICARE Plan was for a period of one (1) year only; said

1991 to November 30, 1992. The contract was renewed twice for a term of

agency was not renewed after the expiration of the one (1) year period;

three (3) years each, the first started on December 1, 1992 while the

[Estrada] did not intervene in the negotiations of the contract with

second took effect on December 1, 1995.

MERALCO which was directly negotiated by MERALCO with [Maxicare] and

[Estradas] alleged other clients/accounts were not accredited with

The premium amounts paid by MERALCO to [Maxicare] were alleged to be

[Maxicare] as required, since the agency contract on the MAXICARE health

the following: a) P215,788.00 in December 1991; b) P3,450,564.00 in

plans were not renewed. By way of counterclaim, defendants-appellants

1992; c) P4,223,710.00 in 1993; d) P4,782,873.00 in 1994; e)

[Maxicare] and its officers claimed P100,000.00 in moral damages for each

P5,102,108.00 in 1995; and P2,394,292.00 in May 1996. As of May 1996,

of the officers of [Maxicare] impleaded as defendant, P100,000.00 in

the total amount of premium paid by MERALCO to [Maxicare] was

exemplary damages, P100,000.00 in attorneys fees, and P10,000.00 in

P20,169,335.00.

litigation expenses.[3]
After trial, the RTC found Maxicare liable for breach of contract and ordered

On March 24, 1992, plaintiff-appellee [Estrada], through counsel,

it to pay Estrada actual damages in the amount equivalent to 10% of

demanded from [Maxicare] that it be paid commissions for the MERALCO

P20,169,335.00, representing her commission for the total premiums paid

account and nine (9) other accounts. In reply, [Maxicare], through counsel,

by Meralco to Maxicare from the year 1991 to 1996, plus legal interest

denied [Estradas] claims for commission for the MERALCO and other

computed from the filing of the complaint on March 18, 1993, and

accounts because [Maxicare] directly negotiated with MERALCO and the

attorneys fees in the amount of P100,000.00.

other accounts(,) and that no agent was given the go signal to intervene in
the negotiations for the terms and conditions and the signing of the service

On appeal, the CA affirmed in toto the RTCs decision. In ruling for Estrada,

agreement with MERALCO and the other accounts so that if ever [Maxicare]

both the trial and appellate courts held that Estrada was the efficient

was indebted to [Estrada], it was only for P1,555.00 and P43.l2 as

procuring cause in the execution of the service agreement between

commissions on the accounts of Overseas Freighters Co. and Mr. Enrique

Meralco and Maxicare consistent with our ruling in Manotok Brothers, Inc.

Acosta, respectively.

v. Court of Appeals.[4]

[Estrada] filed a complaint on March 18, 1993 against [Maxicare] and its

18

Undaunted, Maxicare comes to this Court and insists on the reversal of the

Maxicare urges us that both the RTC and CA failed to take into account the

RTC Decision as affirmed by the CA, raising the following issues, to wit:

stipulations contained in the February 19, 1991 letter agreement

authorizing the payment of commissions only upon satisfaction of twin

1.

Whether the Court of Appeals committed serious error in

conditions, i.e., collection and contemporaneous remittance of premium

affirming Estradas entitlement to commissions for the

dues by Estrada to Maxicare. Allegedly, the lower courts disregarded

execution of the service agreement between Meralco and

Estradas admission that the negotiations with Meralco failed. Thus, the

Maxicare.

flawed application of the efficient procuring cause doctrine enunciated in

Manotok Brothers, Inc. v. Court of Appeals,[9] and the erroneous conclusion

2.

Corollarily, whether Estrada is entitled to commissions for

upholding Estradas entitlement to commissions on contracts completed

the two (2) consecutive renewals of the service agreement

without her participation.

effective on December 1, 1992

[5]

and December 1, 1995.

[6]

We are not persuaded.

We are in complete accord with the trial and appellate courts ruling.
Estrada is entitled to commissions for the premiums paid under the service

Contrary to Maxicares assertion, the trial and the appellate courts

agreement between Meralco and Maxicare from 1991 to 1996.

carefully considered the factual backdrop of the case as borne out by the
records. Both courts were one in the conclusion that Maxicare successfully

Well-entrenched in jurisprudence is the rule that factual findings of the trial

landed the Meralco account for the sale of healthcare plans only by virtue

court, especially when affirmed by the appellate court, are accorded the

of Estradas involvement and participation in the negotiations. The assailed

highest degree of respect and are considered conclusive between the

Decision aptly states:

parties.[7] A review of such findings by this Court is not warranted except

There is no dispute as to the role that plaintiff-appellee [Estrada] played in

upon a showing of highly meritorious circumstances, such as: (1) when the

selling [Maxicares] health insurance plan to Meralco. Plaintiff-appellee

findings of a trial court are grounded entirely on speculation, surmises or

[Estradas] efforts consisted in being the first to offer the Maxicare plan to

conjectures; (2) when a lower courts inference from its factual findings is

Meralco, using her connections with some of Meralco Executives, inviting

manifestly mistaken, absurd or impossible; (3) when there is grave abuse

said executives to dinner meetings, making submissions and

of discretion in the appreciation of facts; (4) when the findings of the

representations regarding the health plan, sending follow-up letters, etc.

appellate court go beyond the issues of the case, or fail to notice certain
relevant facts which, if properly considered, will justify a different

These efforts were recognized by Meralco as shown by the certification

conclusion; (5) when there is a misappreciation of facts; (6) when the

issued by its Manpower Planning and Research Staff Head Ruben A.

findings of fact are conclusions without mention of the specific evidence on

Sapitula on September 5, 1991, to wit:

which they are based, are premised on the absence of evidence, or are

This is to certify that Ms. Carmela Estrada has initiated talks with us since

contradicted by evidence on record.

November 1990 with regards (sic) to the HMO requirements of both our

[8]

None of the foregoing exceptions

which would warrant a reversal of the assailed decision obtains in this

rank and file employees, managers and executives, and that it was

instance.

favorably recommended and the same be approved by the Meralco

Management Committee.

19

xxxx

that admission, we note that Meralcos Assistant Vice-President, Donatila

San Juan, in a letter[13] dated January 21, 1992 to then Maxicare President

This Court finds that plaintiff-appellee [Estradas] efforts were instrumental

Pedro R. Sen, categorically acknowledged Estradas efforts relative to the

in introducing the Meralco account to [Maxicare] in regard to the latters

sale of Maxicare health plans to Meralco, thus:

Maxicare health insurance plans. Plaintiff-appellee [Estrada] was the

Sometime in 1989, Meralco received a proposal from Philippine Health-

efficient intervening cause in bringing about the service agreement with

Care Providers, Inc. (Maxicare) through the initiative and efforts of Ms.

Meralco. As pointed out by the trial court in its October 8, 1999 Decision, to

Carmela Estrada, who introduced Maxicare to Meralco. Prior to this time,

wit:

we did not know that Maxicare is a major health care provider in the

xxx Had not [Estrada] introduced Maxicare Plans to her bosom friends,

country. We have since negotiated and signed up with Maxicare to provide

Messrs. Lopez and Guingona of Meralco, PHPI would still be an anonymity.

a health maintenance plan for dependents of Meralco executives, effective

xxx

December 1, 1991 to November 30, 1992.

[10]

Under the foregoing circumstances, we are hard pressed to disturb the

At the very least, Estrada penetrated the Meralco market, initially closed to

findings of the RTC, which the CA affirmed.

Maxicare, and laid the groundwork for a business relationship. The only
reason Estrada was not able to participate in the collection and remittance

We cannot overemphasize the principle that in petitions for review on

of premium dues to Maxicare was because she was prevented from doing

certiorari under Rules 45 of the Rules of Court, only questions of law may

so by the acts of Maxicare, its officers, and employees.

be put into issue. Questions of fact are not cognizable by this Court. The
finding of efficient procuring cause by the CA is a question of fact which

In Tan v. Gullas,[14] we had occasion to define a broker and distinguish it

we desist from passing upon as it would entail delving into factual matters

from an agent, thus:

on which such finding was based. To reiterate, the rule is that factual

[O]ne who is engaged, for others, on a commission, negotiating contracts

findings of the trial court, especially those affirmed by the CA, are

relative to property with the custody of which he has no concern; the

conclusive on this Court when supported by the evidence on record. [11]

negotiator between the other parties, never acting in his own name but in
the name of those who employed him. [A] broker is one whose occupation

The jettisoning of the petition is inevitable even upon a close perusal of the

is to bring the parties together, in matter of trade, commerce or

merits of the case.

navigation.[15]

First. Maxicares contention that Estrada may only claim commissions from

An agent receives a commission upon the successful conclusion of a sale.

membership dues which she has collected and remitted to Maxicare as

On the other hand, a broker earns his pay merely by bringing the buyer

expressly provided for in the letter-agreement does not convince us. It is

and the seller together, even if no sale is eventually made.[16]

readily apparent that Maxicare is attempting to evade payment of the

In relation thereto, we have held that the term procuring cause in

commission which rightfully belongs to Estrada as the broker who brought

describing a brokers activity, refers to a cause originating a series of

the parties together. In fact, Maxicares former Chairman Roberto K.

events which, without break in their continuity, result in the

Macasaet testified that Maxicare had been trying to land the Meralco

accomplishment of the prime objective of the employment of the broker

account for two (2) years prior to Estradas entry in 1990. [12] Even without

producing a purchaser ready, willing and able to buy on the owners terms.

20

[17]

To be regarded as the procuring cause of a sale as to be entitled to a

taken out of context.

commission, a brokers efforts must have been the foundation on which the
negotiations resulting in a sale began.[18] Verily, Estrada was instrumental

This may be interpreted as to mean not in the sense in which the

in the sale of the Maxicare health plans to Meralco. Without her

admission is made to appear. That is the reason for the modifier such.[21]

intervention, no sale could have been consummated.

In this case, the letter, although part of Estradas Complaint, is not, ipso
facto, an admission of the statements contained therein, especially since

Second. Maxicare next contends that Estrada herself admitted that her

the bone of contention relates to Estradas entitlement to commissions for

negotiations with Meralco failed as shown in Annex F of the Complaint.

the sale of health plans she claims to have brokered. It is more than
obvious from the entirety of the records that Estrada has unequivocally

The chicanery and disingenuousness of Maxicares counsel is not lost on

and consistently declared that her involvement as broker is the proximate

this Court. We observe that this Annex F is, in fact, Maxicares counsels

cause which consummated the sale between Meralco and Maxicare.

letter dated April 10, 1992 addressed to Estrada. The letter contains a
unilateral declaration by Maxicare that the efforts initiated and

Moreover, Section 34,[22] Rule 132 of the Rules of Court requires the

negotiations undertaken by Estrada failed, such that the service

purpose for which the evidence is offered to be specified. Undeniably, the

agreement with Meralco was supposedly directly negotiated by Maxicare.

letter was attached to the Complaint, and offered in evidence, to

Thus, the latter effectively declares that Estrada is not the efficient

demonstrate Maxicares bad faith and ill will towards Estrada. [23]

procuring cause of the sale, and as such, is not entitled to commissions.

Even a cursory reading of the Complaint and all the pleadings filed
Our holding in Atillo III v. Court of Appeals,

[19]

ironically the case cited by

thereafter before the RTC, CA, and this Court, readily show that Estrada

Maxicare to bolster its position that the statement in Annex F amounted

does not concede, at any point, that her negotiations with Meralco failed.

to an admission, provides a contrary answer to Maxicares ridiculous

Clearly, Maxicares assertion that Estrada herself does not pretend to be

contention. We intoned therein that in spite of the presence of judicial

the efficient procuring cause in the execution of the service agreement

admissions in a partys pleading, the trial court is still given leeway to

between Meralco and Maxicare is baseless and an outright falsehood.

consider other evidence presented.

[20]

We ruled, thus:

As provided for in Section 4 of Rule 129 of the Rules of Court, the general

After muddling the issues and representing that Estrada made an

rule that a judicial admission is conclusive upon the party making it and

admission that her negotiations with Meralco failed, Maxicares counsel

does not require proof admits of two exceptions: 1) when it is shown that

then proceeds to cite a case which does not, by any stretch of the

the admission was made through palpable mistake, and 2) when it is

imagination, bolster the flawed contention.

shown that no such admission was in fact made. The latter exception
allows one to contradict an admission by denying that he made such an

We, therefore, ADMONISH Maxicares counsel, and, in turn, remind every

admission.

member of the Bar that the practice of law carries with it responsibilities

For instance, if a party invokes an admission by an adverse party, but

which are not to be trifled with. Maxicares counsel ought to be

cites the admission out of context, then the one making the admission

reacquainted with Canon 10[24] of the Code of Professional Responsibility,

may show that he made no such admission, or that his admission was

specifically, Rule 10.02, to wit:

21

Rule 10.02 A lawyer shall not knowingly misquote or misrepresent the

contents of a paper, the language or the argument of opposing counsel, or
the text of a decision or authority, or knowingly cite as law a provision
already rendered inoperative by repeal or amendment, or assert as a fact
that which has not been proved.
Third. Finally, we likewise affirm the uniform ruling of the RTC and CA that
Estrada is entitled to 10% of the total amount of premiums paid[25] by
Meralco to Maxicare as of May 1996. Maxicares argument that assuming
Estrada is entitled to commissions, such entitlement only covers the initial
year of the service agreement and should not include the premiums paid
for the succeeding renewals thereof, fails to impress. Considering that we
have sustained the lower courts factual finding of Estradas close,
proximate and causal connection to the sale of health plans, we are not
wont to disturb Estradas complete entitlement to commission for the total
premiums paid until May 1996 in the amount of P20,169,335.00.
WHEREFORE, premises considered and finding no reversible error
committed by the Court of Appeals, the petition is hereby DENIED. Costs
against the petitioner.
SO ORDERED.

22

SO ORDERED."[1]
On September 23, 1968, Antonio E. Prats, doing business under the name
FIRST DIVISION

of "Philippine Real Estate Exchange" instituted against Alfonso Doronila

and Philippine National Bank Civil Case No. Q-12412 in the Court of First

G.R. No. L-39822, January 31, 1978

ANTONIO E. PRATS, DOING BUSINESS UNDER THE NAME OF
PHILIPPINE REAL ESTATE EXCHANGE, PETITIONER, VS. HON. COURT
OF APPEALS, ALFONSO DORONILA AND PHILIPPINE NATIONAL
BANK, RESPONDENTS.

Instance of Rizal at Quezon City to recover a sum of money and damages.

The complaint stated that defendant Alfonso Doronila was the registered
owner of 300 hectares of land situated in Montalban, Rizal, covered by
Transfer Certificates of Title Nos. 77011, 77013, 216747 and 216750; that
defendant Doronila had for sometime tried to sell his aforesaid 300
hectares of land and for that purpose had designated several agents; that

DECISION

at one time, he had offered the same property to the Social Security
System but failed to consummate any sale; that his offer to sell to the

FERNANDEZ, J.:

Social Security System having failed, defendant Doronila on February 14,

1968 gave the plaintiff an exclusive option and authority in writing to

This is a petition for certiorari to review the decision of the Court of

negotiate the sale of his aforementioned property, which exclusive option

Appeals in CA-G.R. No. 45974-R entitled "Antonio E. Prats, doing business

and authority the plaintiff caused to be published in the Manila Times on

under the name of Philippine Real Estate Exchange, versus Alfonso

February 22, 1968; that it was the agreement between plaintiff and

Doronila and the Philippine National Bank", the dispositive part of which

defendant Doronila that the basic price shall be P3.00 per square meter;

reads:

that plaintiff shall be entitled to a commission of 10% based on P2.10 per

square meter or at any price finally agreed upon and if the property be sold
over and above P3.00 per square meter, the excess shall be credited and

"In view of all the foregoing, it is our considered opinion and so hold that

paid to the plaintiff in addition to his 10% commission based on P2.10 per

the decision of the lower court be, as it is hereby reversed, and the

square meter; that as a result of the grant of the exclusive option and

complaint, dismissed. On appellant's counterclaim, judgment is hereby

authority to negotiate the sale of his 300 hectares of land situated in

rendered directing appellee to pay attorney's fees in the sum of P10,000 to

Montalban, Rizal, in favor of the plaintiff, the defendant Doronila, on

appellant, no moral damages as therein claimed being awarded for lack of

February 20, 1968, wrote a letter to the Social Security System

evidence to justify the same. The injunction issued by the lower court on

withdrawing his previous offer to sell the same land and requesting the

the P2,000,000.00 cash deposit of the appellant is hereby lifted. No special

return to him of all papers concerning his offered property; that the Social

pronouncement as to costs.

Security System, complying with said request of defendant Doronila,

returned all the papers thereon and defendant Doronila, in turn, gave them
to the plaintiff as his duly authorized real estate broker; that by virtue of
the exclusive written option and authority granted him and relying upon

23

the announced policy of the President of the Philippines to promote low

price for the purchase of the defendant Doronila's 300 hectares of land

housing program, the plaintiff immediately worked to negotiate the sale of

was, among others, taken up; that on June 20, 1968, the Social Security

defendant Doronila's 300 hectares of land to the Social Security System,

Commission passed Resolution No. 636 making a counter-offer of P3.25 per

making the necessary contacts and representations to bring the parties

square meter subject to an appraisal report; that on June 27, 1968,

together, namely, the owner and the buyer, and bring about the ultimate

Resolution No. 662 was adopted by the Social Security Commission autho-

sale of the land by defendant Doronila to the Social Security System; that

rizing the Toples & Harding (Far East) Inc. to conduct an appraisal of the

on February 27, 1968, after plaintiff had already contacted the Social

property and to submit a report thereon; that pursuant thereto, the said

Security System, its Deputy Administrator, Reynaldo J. Gregorio, wrote a

company submitted its appraisal report specifying that the present value of

letter to defendant Doronila inviting the latter to a conference regarding

the property is P3.34 per square meter and that a housing program

the property in question with Administrator Teodoro, Chairman Gaviola and

development would represent the highest and best use thereof; that on

said Reynaldo J. Gregorio on March 4, 1968 at 10:00 o'clock in the morning,

July 18, 1968, the Social Security Commission, at its regular meeting,

stating that the SSS would like to take up the offer of the lot; that having

taking note of the favorable appraisal report of the Toples & Harding (Far

granted plaintiff the exclusive written option and authority to negotiate the

East) Inc., passed Resolution No. 738, approving the purchase of defendant

sale of his 300 hectares of land, defendant Doronila in a letter dated

Doronila's 300 hectares of land in Montalban, Rizal, at a price of P3.25 per

February 28, 1968 declined the invitation extended by the Social Security

square meter or for a total purchase price of Nine Million Seven Hundred

System to meet with its Administrator and Chairman, and requested them

Fifty Thousand Pesos (P9,750,000.00), appropriating the said amount for

instead "to deal directly" with the plaintiff; that on March 16, 1968, at the

the purpose and authorizing the SSS Administrator to sign the necessary

suggestion of defendant Doronila, the plaintiff wrote a letter to the Social

documents to implement the said resolution; that on July 30, 1968,

Security System to the effect that plaintiff would be glad to sit with the

defendant Doronila and the Social Security System executed the

officials of the Social Security System to discuss the sale of the property of

corresponding deed of absolute sale over the 300 hectares of land in

the defendant Doronila; that on March 18, 1968, the Social Security

Montalban, Rizal, covered by Transfer Certificates of Title Nos. 77011,

System sent a telegram to defendant Doronila to submit certain

77013, 216747 and 216750 under the terms of which the total price of

documents regarding the property offered; that on May 6, 1968, a written

P9,750,000.00 shall be payable as follows: (a) 60% of the agreed purchase

offer to sell the 300 hectares of land belonging to defendant Doronila was

price, or Five Million Eight Hundred Fifty Thousand Pesos (P5,850,000.00)

formally made by the plaintiff to the Social Security System and

immediately after signing the deed of sale, and (b) the balance of 40% of

accordingly, on May 7, 1968, the Social Security System Administrator

the agreed price, or Three Million Nine Hundred Thousand Pesos

dispatched the following telegram to defendant Doronila: "SSS considering

(P3,900,000.00) thirty days after the signing of the deed of absolute sale;

purchase your property for its housing project Administrator Teodoro"; that

that on August 21, 1968, after payment of the purchase price, the deed of

a few days thereafter, the plaintiff accompanied the defendant Doronila to

absolute sale executed by defendant Doronila in favor of the Social

the China Banking Corporation to arrange the matter of clearing payment

Security System was presented for registration in the Office of the Register

by check and delivery of the titles over the property to the Social Security

of Deeds of Rizal, and Transfer Certificates of Title Nos. 226574, 226575,

System; that having been brought together by the plaintiff, the defendant

226576 and 226577 in the name of the Social Security System were

Doronila and the officials of the Social Security System, on May 29, 1968

issued; that defendant Doronila has received the full purchase price for his

and on June 4, 1968, met at the office of the SSS Administrator wherein the

300 hectares of land in the total amount of P9,750,000.00, which amount

24

he deposited in his bank Account No. 0012-443 with the defendant

had no right to demand the payment for services not rendered according

Philippine National Bank; that on September 17, 1968, the plaintiff

to the agreement of the parties. The answering defendant interposed a

presented his statement to, and demanded of defendant Doronila the

counterclaim for damages and attorney's fees.

payment of his professional fee as real estate broker as computed under

the agreement of February 14, 1968 in the total amount of P1,380,000.00;

On January 18, 1969, the plaintiff and defendant Alfonso Doronila

that notwithstanding such demand, the defendant Doronila, in gross and

submitted the following stipulation of facts:

evident bad faith, after having availed of the services of plaintiff as real
estate broker, refused to pay the professional fees due him; that as a result
of defendant Doronila's gross and evident bad faith and unjustified refusal
"STIPULATION OF FACTS

to pay plaintiff the professional fees due him under the agreement, the
latter has suffered and continues to suffer mental anguish, serious anxiety,
and social humiliation for which defendant Doronila shall be held liable to
pay moral damages; and, that by reason likewise of the aforesaid act of
defendant Doronila, the plaintiff has been compelled to file this action and
to engage the services of counsel at a stipulated professional fee of
P250,000.00.
In his answer filed on November 18, 1968, the defendant Doronila alleged

COME NOW the plaintiff and defendant DORONILA, through their respective
undersigned counsel, and to this Honorable Court, by way of abbreviating
the proceeding in the case at bar, without prejudice to presentation of
explanatory evidence, respectfully submit the following STIPULATION OF
FACTS:

that when the plaintiff offered the answering defendant's property to the
Social Security System on May 6, 1968, said defendant had already offered
his property to, and had a closed transaction or contract of sale of, said

1.

property with the Social Security System; that the letter agreement had
become null and void because defendant Doronila had not received any
written offer from any prospective buyers of the plaintiff during the agreed
period of 60 days until the last day of the authorization which was April 13,
1968 counting from February 14, 1968; that it is not true that plaintiff
brought together defendant Doronila and the officials of the Social Security
System to take up the purchase price of defendant Doronila's property for
the simple reason that the plaintiff's offer was P6.00 per square meter and

That defendant Doronila was the registered owner of 300 hectares of land,
situated in Montalban, Rizal, covered by Transfer Certificates of Title Nos.
77011, 77013, 216747 (formerly TCT No. 116631) and 216750 (formerly
TCT No. 77012).

later on reduced to P4.50 per square meter because the SSS Chairman had
already a closed transaction with the defendant Doronila at the price of
P3.25 per square meter and that the offer of the plaintiff was refused by
the officials of the Social Security System; and that defendant Doronila did

2.

not answer the statement of collection of the plaintiff because the latter

25

That on July 3, 1967, defendant DORONILA under his letter (marked Annex
'1' of the answer) addressed to the SSS Chairman, offered his said property
2-a

to the Social Security System (SSS) at P4.00 per square meter.

That on July 17, 1967 (Annex '2' of the Answer) the SSS Chairman, Mr.

That on July 19, 1967, defendant DORONILA wrote a letter (a xerox copy,

Ramon G. Gaviola, Jr., replied to defendant DORONILA, as follows:

attached hereto marked as Annex '2-a' for DORONILA) to NAWASA, and

that in reply thereto, on July 25, 1967, the NAWASA wrote the following
letter (Xerox copy attached hereto to be marked as Annex '2-b' for
DORONILA) to defendant DORONILA.

'This will acknowledge your letter of July 3rd, 1967 relative to your offer for
sale of your real estate property.
'In connection with your proposed subdivision plan of your properties
adjacent to our Novaliches Watershed, this Office would like to impose the
In this regard, may I please be informed as to how many hectares, out of

following conditions:

the total 300 hectares offered, are located in Quezon City and how many
hectares are located in Montalban, Rizal. Likewise, as regards your offer of
P4.00 per square meter, would there be any possibility that the same be
reduced to P3.25 per square meter? Finally and before I submit your

1.

Since your property is an immediate boundary of

proposal for process it is requested that the NAWASA certify to the effect

our Novaliches Watershed, a 20-meter road should

that they have no objection to having this parcel of land subdivided for

be constructed along our common boundary.

residential house purposes.

2.

That no waste or drainage water from the

subdivision should flow towards the watershed.

Thank you for your offer and may I hear from you at the earliest possible
time.'

3.

That the liquid from the septic tanks or similar

waste water should be treated before it is drained
to the Alat River above our Alat Dam.

26

The above conditions are all safeguards to the drinking water of the people

That on August 10, 1967, the SSS Chairman, Mr. Ramon G. Gaviola, Jr.,

of Manila and Suburbs. It is therefore expected that we all cooperate to

wrote the following (Xerox copy attached hereto and marked as Annex '2-c'

make our drinking water safer from any pollution.'

for DORONILA: addressed to defendant DORONILA:

3.
'With reference to your letter, dated July 1967, please be informed that the
same is now with the Admi-nistrator for study and comment. The
Commission will act on receipt of information re such studies.
That on July 19, 1967, defendant DORONILA wrote another letter (marked
as Annex '3' on his Answer) addressed to the SSS Chairman, Mr. Ramon G.
Gaviola, Jr., stating, among others, the following:
With the assurance that you will be periodically informed of developments,
we remain.'

'In this connection, I have your counter-offer of P3.25 per square meter
against my offer of P4.00 per square meter, although your counter-offer is
lower comparing to the prices of adjacent properties, I have to consider the

3-b

difference as my privilege and opportunity to contribute or support the

Presidential policy to promote low cost housing in this country particularly
to the SSS members by accepting gladly your counter-offer of P3.25 per
square meter with the condition that it should be paid in cash and such

That on October 30, 1967, Mr. Pastor B. Sajorda, 'By authority of Atty.

payment shall be made within a period of 30 days from the above stated

Alfonso Doronila, property owner', wrote the following request (Xerox copy

date' (2nd paragraph of letter dated July 18, 1967, Annex '3' of the

attached hereto and marked as Annex '2-d' for DORONILA) addressed to

Answer).

Realtor Vicente L. Narciso for a certification regarding the actual prices of

DORONILA's property, quoted as follows:

3-a
'May I have the honor to request for your certification as a member of the
Board of Realtor regarding the actual prices of my real estate raw-land

27

properties described as Lots 3-B-7, 26-B, 6 and 4-C-3 all adjacent to each
other, containing a total area of 3,000,000 square meters, all registered in
the name of Alfonso Doronila, covered by T.C.T. Nos. 116631, 77013,

Current prices before reaching Doronila's property range from P6.00 to

77011, and 77012, located at Montalban, Rizal, all adjacent to the Northern

P7.00 per square meter.

portion of the NAWASA properties in Quezon City including those other

surrounding adjacent properties and even those properties located before
reaching my own properties coming from Manila.

This request is purposely made for my references in case I decided to sell

my said properties mentioned above.'
4.

3-c

That on February 14, 1968, defendant DORONILA granted plaintiff an

exclusive option and authority (Annex 'A' of the complaint), under the
following terms and conditions:

That on November 3, 1967, Realtor Vicente Narciso wrote the following

reply (Xerox copy attached hereto and marked as Annex '2-e' for
DORONILA) to Mr. Pastor B. Sajorda
'1. The price of the property is THREE (P3.00) PESOS per square meter.

'As per your request dated October 30, 1967, regarding prices of raw land,

2. A commission of TEN (10%) PERCENT will be paid to us based on P2.10

it is my finding that the fair market value of raw land in the vicinity of the

per square meter, or at any price that you (DORONILA) finally agree upon,

NAWASA properties at Quezon City and Montalban, Rizal, including the

and all expenses shall be for our account, including preparation of the

properties of Atty. Alfonso Doronila, more particularly known as lots 3-B-7,

corresponding deed of conveyance, documentary stamps and registration

26-B, and 4-C-3 containing approximately 3,000,000 square meters is

fee, whether the sale is caused directly or indirectly by us within the time

P3.00 to P3.50 per square meter.

of this option. If the property is sold over and above P3.00 per square
meter, the excess amount shall be credited and paid to the herein brokers.

28

In addition to the 10% commission based on P2.10 per square meter,

7. There are some squatters occupying small portions of the property,

provided the brokers shall pay the corresponding taxes to the owner of the

which fact will be reported to the prospective buyers, and said squatters

excess amount over P3.00 per square meter, unless paid by check which

will be removed at our expense.' (Annex 'A' of the complaint)

would then be deductible as additional expenses.

Very truly yours,

3. This exclusive option and authority is good for a period of sixty (60) days
from the date of your conformity; provided, however, that should
negotiations have been started with a buyer, said period is automatically
PHILIPPINE REAL ESTATE EXCHANGE

extended until said negotiations is terminated, but not more than fifteen
(15) days;

(Sgd.) ANTONIO E. PRATS

General Manager

4. The written offers must be made by the prospective buyers, unless they
prefer to have us take the offer for and in their behalf some buyers do not
want to be known in the early stages of the negotiations;
CONFORME:

(Sgd.) ALFONSO DORONILA'

5. If no written offer is made to you until the last day of this authorization,

Date: February 14, 1968

this option and authority shall expire and become null and void;

6. It is clearly understood that prospective buyers and all parties interested

in this property shall be referred to us, and that you will not even quote a

5.

price directly to any agent or buyer. You agree to refer all agents or brokers
to us DURING the time this option is in force; and
That on February 19, 1968, plaintiff wrote the following letter to defendant
DORONILA (Annex '4' of the Answer), quoted as follows:

29

'February 19, 1968

RECEIVED ORIGINAL:
By: (Sgd.) ROGELIO DAPITAN',
Don AlfonsoDoronila
Plaza Ferguzon
Ermita, Manila
6.

Dear Don Alfonso:

That on February 20, 1968, pursuant to the letter dated February 19, 1968
of plaintiff, defendant DORONILA wrote a letter (Annex 'B' of the complaint)
to the SSS Administrator stating:
In view of the exclusive option extended to us for the sale of your property
consisting 300 hectares located at Montalban, Rizal, we earnestly request
that you take immediate steps to withdraw any and all papers pertaining to
'Inasmuch as the SSS has not acted on my offer to sell a 300 hectare lot

this property offered to the SOCIAL SECURITY SYSTEM.

located in Montalban, Rizal, for the last five (5) months I respectfully
requested for the return of all my papers concerning this offered pro-perty.'
Very truly yours,
7.
PHILIPPINE REAL
ESTATE EXCHANGE
That on February 27, 1968, defendant DORONILA received the following
(Sgd.) ANTONIO E. PRATS
General Manager

letter (Annex 'C' of the complaint) from the SSS Deputy Administrator, Mr.
Reynaldo J. Gregorio, to wit:

AEP/acc

30

'May I take this opportunity of inviting you in behalf of Administrator

land, and I am no longer at liberty to negotiate its sale personally; I shall

Teodoro, to meet with him, Chairman Gaviola and myself on Friday, March

therefore request you communicate directly with the Philippine Real Estate

4, 10:00 A.M. lot offer.

Exchange, P. O. Box 84, Quezon City, and deal with them directly if you are
still interested in my property.

Thanks and regards.

With my kind personal regards, I am'

8.
9.

That on February 28, 1968, defendant DORONILA wrote the following letter
(Annex 'D' of the complaint) to the SSS Deputy Administrator:

That on March 16, 1968, plaintiff, acting upon the letter of defendant
DORONILA dated February 28, 1968 (Annex 'D' for plaintiff), wrote the
following letter to SSS Administrator:

'Thank you for your invitation to meet Administrator Teodoro, Chairman

Gaviola and your goodself, to take up my former offer to sell my property
to the Social Security System.

'Don Alfonso Doronila, owner of the 300 hectare land located at Montalban,
Rizal, adjoining the Quezon City boundary, has informed us that the
Administrator of the SOCIAL SECURITY SYSTEM, through Mr. Reynaldo J.
Gregorio, has invited him to meet with the Administrator and Chairman

Since the SSS had not acted on my offer dated July 19, 1967, more than

Gaviola to take up the former offer to sell his property to the SSS.

seven (7) months ago, I have asked for the return of my papers, as per my
letter of February 20, 1968, and which you have kindly returned to me.
'In his letter to the Administrator dated February 20, 1968 (which has been
received by the SSS on the same day), Mr. Doronila advised you that as of
As of February 20, 1968, I gave the Philippine Real Estate Exchange an

February 20, 1968, he gave the PHILIPPINE REAL ESTATE EXCHANGE

exclusive option and authority to negotiate the sale of this 300 hectare

31

(PHILREX) the exclusive option and authority to negotiate the sale of his

11.

300 hectare land in Montalban, and that he is no longer at liberty to

negotiate its sale personally, and that, if you are still interested in this
property, the SSS should communicate directly with the PHILIPPINE REAL
That on May 6, 1968, plaintiff made a formal written offer to the Social

ESTATE EXCHANGE.

Security System to sell the 300 hectare land of defendant DORONILA at the
price of P6.00 per square meter, a Xerox copy of which, bearing the stamp
or receipt of the Social Security System is attached hereof as Annex 'D''It is by virtue of this arrangement that Mr. Doronila now refers to us your

plaintiff.

invitation and his reply to the SSS and has requested us to get in touch
with you.'
12.
'While, at present we have several prospective buyers interested in this
property, we shall, in compliance with the request of Mr. Doronila, be
happy to sit down with you and Chairman Ramon Gaviola, Jr.'

That on May 17, 1968, the defendant DORONILA received the following
telegram (Annex 'E' of the complaint) from the SSS Administrator, reading:

'Please let us know when it will be convenient to hold the conference.'

'SSS CONSIDERING PURCHASE YOUR PROPERTY FOR ITS HOUSING
PROJECT'

10.
That on April 18, 1968, defendant DORONILA extended the plaintiff
exclusive option and authority to expire May 18, 1968. (Annex 'B' -Reply,

13.

letter of Doronila to SSS Deputy Administrator dated May 8, 1968).

32

That on May 18, 1968, after plaintiff's exclusive option and authority had

'x x x . . . provided, however, that should negotiation have been started

been extended, plaintiff wrote the following letter (Annex 'A-Reply' of

with a buyer, said period is automatically extended until said negotiation is

plaintiff's REPLY TO ANSWER) to defendant DORONILA, to wit:

terminated, but no more than fifteen (15) days.'

'Please be assured that we will do our very best to complete these

'CONFIDENTIAL'

negotiations for the sale of your property within this fifteen-day period. In
the meantime, we hope you will also observe the provisions of paragraph 6
of the exclusive option you have extended to us.'

'In our conference last Monday, May 13, 1968, you have been definitely
advised by responsible parties that the SOCIAL SECURITY SYSTEM is
acquiring your 300-hectare land at Montalban, Rizal, adjoining the Quezon
City Boundary - - and that said property will be acquired in accordance with

14.

the exclusive option and authority you gave the PHILIPPINE REAL ESTATE
EXCHANGE. You were assured in that conference that the property will be
acquired definitely, but, as it has been mentioned during the conference, it
may take from 30 to 60 days to have all the papers prepared and to effect

That on May 18, 1968, plaintiff wrote the following letter (Xerox copy

the corresponding payment. The telegram from the SSS confirming these

attached and marked hereof as Annex 'H' for plaintiff) addressed to

negotiations has already been received by you, a copy of which you

defendant DORONILA, to wit:

yourself have kindly furnished us.

'By virtue of the exclusive option and authority you have granted the
'Pursuant to paragraph 3 of the terms of the option that you have kindly

PHILIPPINE REAL ESTATE EXCHANGE to negotiate the sale of your 300-

extended, we still have fifteen days more from today, May 18, 1968, within

hectare land located at Montalban, Rizal, adjoining the Quezon City

which to finish the negotiations for the sale of your property to the SSS. For

boundary, which properties are covered by Transfer Certificate of Titles

your convenience, we quote the pertinent portion of paragraph 3 of the

Nos. 116631, 77011, 77012 and 77013, of the Registry of Deeds for the

option:

Province of Rizal, we hereby make a firm offer, for and in behalf of our
buyer, to purchase said property at the price of FOUR PESOS AND FIFTY
CENTAVOS (P4.50) per square meter, or the total amount of THIRTEEN
MILLION FIVE HUNDRED THOUSAND (P13,500,000.00) PESOS, Philippine

33

Currency, payable in Cash and D.B.P. Progress Bonds, on a ratio to be

MISSION. The details will have to be taken up between you and the

decided between you and our principal.'

Chairman, and we suggest that you communicate with the Chairman at

your earliest convenience.'

'To expedite the negotiations, we suggest that we sit down sometime early
next week with our principal to take up the final arrangement and other

'This negotiation was made by virtue of the exclusive option and authority

details in connection with the purchase of the subject property.'

you have granted the PHILIPPINE REAL ESTATE EXCHANGE, which option is
in full force and effect, and covers the transaction referred above.'

'To give you further assurance of the validity of this offer, we refer you to
the CHINA BANKING CORPORATION (Trust Department) who has already
been apprised of these negotiations, to which Bank we strongly

16.

recommend that this transaction be coursed through, for your own security
and protection.'
That on June 6, 1968, defendant DORONILA wrote the following letter
(Annex '7' for DORONILA), to the plaintiff, to wit:
15.

'I have to inform you officially, that I have not received any written offer
That on May 30, 1968, plaintiff wrote the following letter (Xerox copy

from the SSS or others, to purchase my Montalban property of which you

attached hereto, and marked as Annex 'I' for plaintiff) to defendant

were given an option and exclusive authority as appearing in your letter-

DORONILA, quoted as follows:

contract dated February 14, 1968, during the 60 days of your exclusive
authority which expired on April 14, 1968, nor during the extension which
was properly a new exclusive authority of 30 days from April 18, which
expired on May 18, 1968, nor during the provided 15 days grace, in case
that you have closed any transaction to terminate it during that period,

'This is to advise you that the SOCIAL SECURITY SYSTEM agreed to

which also expired on June 3, 1968.'

purchase your 300-hectare land located at Montalban, Rizal, which

purchase can be confirmed by the Chairman of the SOCIAL SECURITY COM-

34

'As stated in said letter, we have the following condition:

That on June 19, 1968, defendant DORONILA wrote the following letter
(Annex '5' of the Answer) to the SSS Administrator, renewing his offer to
sell his 300 hectare land to the SSS at P4.00 per square meter, to wit:
'5. If no written offer is made to you until the last day of this authorization,
this option and authority shall expire and becomes null and void.'

'This is to renew my offer to sell my properties located at Montalban, Rizal

'As I have informed you, that on April 16, 1968 or two days after your

identified as Lot Nos. 3-B-7, 26-B, 6, and 4-C-3, registered in my name in

option expired I have signed an agreement to sell my property to a group

the office of the Registry of Deeds of Rizal under T.C.T. Nos. 116631,

of buyers to whom I asked later that the effectivity of said agreement will

77013, 77011 and 216750, containing a total area of 300 hectares or

be after your new authority has expired will be on June 2, 1968, and they

3,000,000 square meters.

have accepted; As your option has expired, and they know that there was
no written offer made by the SSS for any price of my property, aside of
their previous letter announcing me that they are ready to pay, I was
notified on June 4, 1968 by their representative, calling my attention about

You will recall that last year, I offered to the Social Security System the

our agreement; that is why I am writing you, that having expired your

same properties at the price of Four (P4.00) pesos per square meter. After

option and exclusive authority to offer for sale my said property, I notified

3 ocular inspection of Chairman Gaviola, one of said inspections

only this afternoon said group that I am ready to comply our agreement.

accompanied by Commissioner Arroyo and after receiving the written

appraisal report of Manila realtor Vicente L. Narciso, the System then made
a counter-offer of Three pesos and twenty-five (P3.25) per square meter
which I accepted under the condition that the total amount be paid within

'Hoping for your consideration on the matter, as we have to be guided by

a period of thirty (30) days from the date of my acceptance (July 19, 1967).

contracts that we have to comply, I hereby express to you my sincere

My acceptance was motivated by the fact that within said period of time I

sentiments.'

had hoped to repurchase my sugarcane hacienda in Iloilo with the

proceeds I expected from the sale. No action was however taken by the
System thereon.

17.

Recently, the same properties were offered by Antonio E. Prats of the

Philippine Real Estate Exchange to the Presidential Assistant on Housing, at

35

the price of six pesos (P6.00) per square meter, who referred it to the
System, but again no action had been taken by the System.
'This has reference to your letter dated June 19, 1968 renewing your offer
to sell your property located at Montalban, Rizal containing an area of 300
Considering the lapse of time since our original offer during which prices of

hectares at P4.00 per square meter. Please be informed that the said letter

real estate have increased considerably, on the one hand, and in

was submitted for the consideration of the Social Security Commission at

cooperation with the System's implementation of our government's policy

its last meeting on June 20, 1968 and pursuant to its Resolution No. 636,

to provide low cost houses to its members, on the other hand, I am

current series, it decided that the System reiterate its counter-offer for

renewing my offer to sell my properties to the System only at the same

P3.25 per square meter subject to a favorable appraisal report by a

price of P4.00 per square meter, or for a total amount of twelve million

reputable appraisal entity as regards particularly to price and housing

pesos (P12,000,000.00), provided the total amount is paid in cash within a

project feasibility. Should this counter-offer be acceptable to you, kindly so

period of fifteen (15) days from this date.

indicate by signing hereunder your conformity thereon.

Trusting that the foregoing sufficiently advises you on the matter, I remain
18.

Very truly yours,

That on June 20, 1968, the Social Security Commission passed Resolution
No. 636 by which the SSS formalized its counter-offer of P3.25 per square
meter. (See Annex 'F' of the complaint)
GILBERTO TEODORO
Administrator
19.
CONFORME: With condition that the sale will be consummated within
Twenty (20) days from this date.
That on June 25, 1968, the SSS Administrator, Mr. Gilberto Teodoro, wrote
the following reply letter (Annex '6' of the Answer) to defendant
DORONILA, to wit:
ALFONSO DORONILA

36

Returned and received the original by

That on July 30, 1968, defendant DORONILA executed the deed of absolute
sale (Annex 'G' of the complaint) over his 300-hectare land, situated in
Montalban, Rizal, covered by TCT Nos. 77011, 77013, 216747 (formerly
TCT No. 116631) and 216750 (formerly TCT No. 77012), in favor of the
June 25/68
Admtr's Office'

Social Security System, for the total purchase price of NINE MILLION SEVEN
HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), Philippine currency,
which deed of sale was presented for registration in the Office of the
Register of Deeds of Rizal on August 21, 1968.

20.
23.

That on June 27, 1968, the Social Security Commission passed Resolution
No. 662 authorizing the Toples & Harding (Far East) to conduct an appraisal

That defendant DORONILA had received the full purchase price of NINE

of the property of defendant DORONILA and to submit a report thereon.

MILLION SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00),

(See Annex 'F' of the complaint)

Philippine Currency, in two installments.

21.
24.

That on July 17, 1968, the Social Security Commission taking note of the
report of Toples & Harding (Far East), passed Resolution No. 738, approving
the purchase of the 300 hectare land of defendant DORONILA, at the price
of P3.25 per square meter, for a total purchase price of NINE MILLION

That on September 17, 1968, plaintiff presented his STATEMENT OF

SEVEN HUNDRED FIFTY THOUSAND PESOS (P9,750,000.00), and

ACCOUNT, dated September 16, 1968 (Xerox copy of which is attached

appropriating the said amount of money for the purpose. (See Annex 'F' of

hereto and marked as Annex 'J-plaintiff' to defendant DORONILA for the

the complaint).

payment of his professional services as real estate broker in the amount of

P1,380,000.00, as computed on the basis of the letter-agreement, Annex
'A' of the complaint, which defendant failed to pay.
22.

37

Counsel for the defendant

9 West Point Street
Manila, for Quezon City, January 18, 1968.

Quezon City

Respectfully submitted:

ALFONSO DORONILA
Counsel for the defendant
428 Plaza de Ferguson
Ermita, Manila"[2]

CRISPIN D. BAIZAS & ASSOCIATES

and A.N. BOLINAO, JR.
The trial court rendered its decision dated December 12, 1969, the
dispositive part of which reads:
By: (Sgd.)

"WHEREFORE, judgment is hereby rendered in favor of plaintiff, ordering

Counsel for the plaintiff

defendant Alfonso Doronila, under the first cause of action, to pay to

Suite 305, Shurdut Bldg.

plaintiff the sum of P1,380,000.00 with interest thereon at the rate of 6%

Intramuros, Manila

per annum from September 23, 1968 until fully paid; and under the second
Cause of Action, to pay plaintiff the sum of P200,000.00 as moral damages;
the sum of P100,000.00 as exemplary damages; the sum of P150,000.00

(Sgd.) E. V. Obon

Atty. EUGENIO V. OBON

as attorney's fees, including the expenses of litigation and costs of this

suit.

The writ of preliminary injunction issued in this case is hereby made

permanent; and the defendant Philippine National Bank is hereby ordered
to pay to the plaintiff the amount of P1,380,000.00 and interest on the
P1,380,000.00 to be computed separately out of the P2,000,000.00 which
it presently holds under a fixed time deposit.

38

negotiations deemed started? In the light of the provisions just cited, it

would be when a response is given by the prospective buyer showing his
SO ORDERED.

interest to buy the property when an offer is made by the seller or broker
and make an offer of the price. Strictly, therefore, prior to May 29, 1968,
there were no negotiations yet started within the contemplation of the
letter-agreement of brokerage (Exh. A). Nevertheless, appellant extended

December 12, 1969, Quezon City, Philippines.

appellee's exclusive authority to expire on May 18, 1968 (par. 10,

Stipulation of Facts; R.A. p. 89), which was automatically extended by 15
days under their agreement, to expire on June 2, 1968, if the period

(SGD.) LOURDES P. SAN DIEGO

Judge"[3]
The defendant appealed to the Court of Appeals where the appeal was
docketed as CA-G.R. No. 45974-R.
In a decision promulgated on September 19, 1974, the Court of Appeals
reversed the decision of the trial court and dismissed the complaint
because:

extended up to May 18, 1968 was a new authority. For, it may even be
considered as taking the place of the 15-day automatic extension, since
appellee's pretension is that negotiations have been started within the
original period of 60 days. Appellant, in fixing the expiry date on June 2,
1968, has thus made a liberal concession in favor of appellee, when he
chose not to regard the extension up to May 18, 1968 as the automatic
extension which ought to have been no more than 15 days, but which he
generously stretched twice as long."[4]
The petitioner assigned the following errors:

"In any event, since it has been found that the authority of appellee

"I

expired on June 2, 1968, rather than June 12, 1968 as the lower court
opined, the inquiry would be whether up to that time, a written offer was
made by appellee in behalf of the SSS. The stipulation is clear on this point.
There should be a written offer by the prospective buyer or by appellee for

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT

or in their behalf, and that if no such written offer is made until the last day

PETITIONER WAS NOT THE EFFICIENT PROCURING CAUSE IN BRINGING

of the authorization, the option and authority shall expire and become null

ABOUT THE SALE OF PRIVATE RESPONDENT DORONILA'S LAND TO THE

and void. Note that the emphasis is placed on the need of a written offer to

SSS.

save the authority from an automatic termination on the last day of the
authorization. We note such emphasis with special significance in view of
the condition relative to automatic extension of not more than 15 days if
negotiations have been started. The question then is when are

II

39

June 20, 1968 after the exclusive authority, Exhibit A, in favor of the
plaintiff, petitioner herein, had expired. The respondent court's factual
THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT

findings that petitioner was not the efficient procuring cause in bringing

THERE WAS FAILURE ON THE PART OF HEREIN PETITIONER TO COMPLY

about the sale (prescinding from the fact of expiration of his exclusive

WITH THE TERMS AND CONDITIONS OF HIS CONTRACT WITH PRIVATE

authority) which are admittedly final for purposes of the present petition,

RESPONDENT.

provide no basis in law to grant relief to petitioner. The following pertinent

excerpts from respondent court's extensive decision amply demonstrate
this:
III
"It is noted, however, that even in his brief, when he said --

THE RESPONDENT COURT OF APPEALS ERRED IN CONCLUDING THAT

PETITIONER IS NOT ENTITLED TO HIS COMMISSION.
'According to the testimony of the plaintiff-appellee a few days before May
29, 1968, he arranged with Mr. Gilberto Teodoro, SSS Administrator, a
IV

meeting with the defendant Doronila. He talked with Mr. Teodoro over the
telephone and fixed the date of the meeting with defendant-appellant
Doronila for May 29, 1968, and that he was specifically requested by Mr.

THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING ATTORNEY'S

FEES TO PRIVATE RESPONDENT DORONILA INSTEAD OF AFFIRMING THE
AWARD OF MORAL AND EXEMPLARY DAMAGES AS WELL AS ATTORNEY'S
FEES TO PETITIONER."

[5]

The Court in its Resolution of May 23, 1975 originally denied the petition
for lack of merit but upon petitioner's motion for reconsideration and

Teodoro not to be present at the meeting, as he, Teodoro, wanted to deal

directly with the defendant-appellant alone. (Tsn., pp. 44-46, March 1,
1969). Finding nothing wrong with such a request, as the sale could be
caused directly or indirectly (Exh. 'A'), and believing that as a broker all
that he needed to do to be entitled to his commission was to bring about a
meeting between the buyer and the seller as to ripen into a sale, plaintiffappellee readily acceded to the request.'

supplemental petition invoking equity, resolved in its Resolution of August

20, 1975 to give due course thereto.
From the stipulation of facts and the evidence of record, it is clear that the
offer of defendant Doronila to sell the 300 hectares of land in question to
the Social Security System was formally accepted by the System only on

appellee is not categorical that it was through his efforts that the meeting
took place on May 29, 1968. He refers to a telephone call he made 'a few

40

days before May 29, 1968,' but in the conversation he had with Mr.

offer' of P4.50 per sq. m. made by appellee betrayed his lack of any

Teodoro, the latter requested him not to be present in the meeting. From

efficient intervention in the negotiations with the SSS for the purchase by it

these facts, it is manifest that the SSS officials never wanted to be in any

of appellant's property. x x x"[7]

way guided by, or otherwise subject to, the mediation or intervention of,
appellee relative to the negotiation for the purchase of the property. It is
thus more reasonable to conclude that if a meeting was held on May 29,
1968, it was done independently, and not by virtue of, appellee's wish or
efforts to hold such meeting."

xxx xxx xxx

[6]

"x x x This becomes more evident when it is considered that on May 6,

xxx xxx xxx

1968 he was making his first offer to sell the property at P6.00 per sq. m.
to the SSS to which offer he received no answer. It is this cold indifference
of the SSS to him that must have prompted him to look for other buyers,
resulting in his making the firm offer of P4.50 per sq. m. on May 18, 1968,

"x x x It is even doubtful if he tried to make any arrangement for meeting

a fact which only goes to show that for being ignored by the SSS, he gave

at all, because on May 18, 1968, he told appellant:

up all efforts to deal with the SSS. x x x."[8]

xxx xxx xxx

'x x x we hereby make a firm offer, for and in behalf of our buyer, to
purchase said property at the price of Four Pesos and Fifty Centavos
(P4.50) per square meter x x x. '
"x x x For him to claim that it was he who aroused the interest of the SSS in
buying appellant's property is to ignore the fact that as early as June, (July)
1967, the SSS had directly dealt with appellant to such an extent that the
price of P3.25 as offered by the SSS was accepted by appellant, the latter
"As this offer is evidently made in behalf of buyer other than the SSS which

imposing only the condition that the price should be paid in cash, and

had never offered the price of P4.50 per square meter, appellee could not

within 30 days from the date of the acceptance. It can truly be said then

have at the same time arranged a meeting between the SSS officials and

that the interest of SSS to acquire the property had been sufficiently

appellant with a view to consummating the sale in favor of the SSS which

aroused for there to be any need for appellee to stimulate it further.

had made an offer of only P3.25 per sq. m. and thus lose the much bigger

Appellee should know this fact for according to him, the 10-day grace

profit he would realize with a higher price of P4.50 per sq. meter. This 'firm

period was agreed upon to give the SSS a chance to pay the price of the

41

land at P3.25 per sq. m., as a 'compromise' to appellant's insistence that

Doronila's property for its housing project. Prats and his witness Raagas

the SSS be excluded from appellee's option or authority to sell the land." [9]

testified that Prats had several dinner and lunch meetings with Doronila
and/or his nephew, Atty. Manuel D. Asencio, regarding the progress of the
negotiations with the SSS.

xxx xxx xxx

Atty. Asencio had declared that he and his uncle, Alfonso Doronila, were
invited several times by Prats, sometimes to luncheons and sometimes to
dinner. On a Sunday, June 2, 1968, Prats and Raagas had luncheon in Sulu
Hotel in Quezon City and they were joined later by Chairman Gaviola of the

"x x x There should be a written offer by the prospective buyer or by

SSS.

appellee for or in their behalf, and that if no such written offer is made until
the last day of the authorization, the option and authority shall expire and

The Court has noted on the other hand that Doronila finally sold the

become null and void. x x x Yet, no such written offer was made. x x x"

property to the Social Security System at P3.25 per square meter which

[10]

was the very same price counter-offered by the Social Security System and
In equity, however, the Court notes that petitioner had diligently taken

accepted by him in July, 1967 when he alone was dealing exclusively with

steps to bring back together respondent Doronila and the SSS, among

the said buyer long before Prats came into the picture but that on the other

which may be mentioned the following:

hand Prats' efforts somehow were instrumental in bringing them together

again and finally consummating the transaction at the same price of P3.25

In July, 1967, prior to February 14, 1968, respondent Doronila had offered

per square meter, although such finalization was after the expiration of

to sell the land in question to the Social Security System. Direct

Prats' extended exclusive authority. Still, such price was higher than that

negotiations were made by Doronila with the SSS. The SSS did not then

stipulated in the exclusive authority granted by Doronila to Prats.

accept the offer of Doronila. Thereafter, Doronila executed the exclusive

authority in favor of petitioner Prats on February 14, 1968.

Under the circumstances, the Court grants in equity the sum of One
Hundred Thousand Pesos (P100,000.00) by way of compensation for his

Prats communicated with the Office of the Presidential Housing

efforts and assistance in the transaction, which however was finalized and

Commission on February 23, 1968 offering the Doronila property. Prats

consummated after the expiration of his exclusive authority and sets aside

wrote a follow-up letter on April 18, 1968 which was answered by the

the P10,000.00-attorneys' fees award adjudged against him by respondent

Commission with the suggestion that the property be offered directly to the

court.

SSS. Prats wrote the SSS on March 16, 1968, inviting Chairman Ramon
Gaviola, Jr. to discuss the offer of the sale of the property in question to the

WHEREFORE, the decision appealed from is hereby affirmed, with the

SSS. On May 6, 1968, Prats made a formal written offer to the Social

modification that private respondent Alfonso Doronila in equity is ordered

Security System to sell the 300-hectare land of Doronila at the price of

to pay petitioner or his heirs the amount of One Hundred Thousand Pesos

P6.00 per square meter. Doronila received on May 17, 1968 from the SSS

(P100,000.00) and that the portion of the said decision sentencing

Administrator a telegram that the SSS was considering the purchase of

42

petitioner Prats to pay respondent Doronila attorneys' fees in the sum of

P10,000.00 is set aside.
The lifting of the injunction issued by the lower court on the P2,000,000.00
cash deposit of respondent Doronila as ordered by respondent court is
hereby affirmed, with the exception of the sum of One Hundred Thousand
Pesos (P100,000.00) which is ordered segregated therefrom to satisfy the
award herein given to petitioner; the lifting of said injunction, as herein
ordered, is immediately executory upon promulgation hereof.
No pronouncement as to costs.

SECOND DIVISION
G.R. No. 94753, April 07, 1993

43

MANOTOK BROTHERS, INC., PETITIONER, VS. THE HONORABLE COURT OF

APPEALS, THE HONORABLE JUDGE OF THE REGIONAL TRIAL COURT OF
MANILA (BRANCH VI), AND SALVADOR SALIGUMBA, RESPONDENTS.

The amended petition[3] admitted by this Court sought relief from this
Courts Resolution abovequoted. In the alternative, petitioner begged leave
of court to re-file its Petition for Certiorari[4] (G.R. No. 78898) grounded on
the allegation that petitioner was deprived of its opportunity to be heard.

DECISION
The facts as found by the appellate court, revealed that petitioner herein
CAMPOS, JR., J.:
Petitioner Manotok Brothers., Inc., by way of the instant Petition docketed
as G.R. No. 94753 sought relief from this Courts Resolution dated May 3,
1989, which reads:
G.R. No. 78898 (Manotok Brothers, Inc. vs. Salvador Saligumba and Court
of Appeals). - Considering the manifestation of compliance by counsel for
petitioner dated April 14, 1989 with the resolution of March 13, 1989 which
required the petitioner to locate private respondent and to inform this
Court of the Present address of said private respondent, the Court Resolved

(then defendant-appellant) is the owner of a certain parcel of land and

building which were formerly leased by the City of Manila and used by the
Claro M. Recto High School, at M.F. Jhocson Street, Sampaloc Manila.
By means of a letter[5] dated July 5, 1966, petitioner authorized herein
private respondent Salvador Saligumba to negotiate with the City of Manila
the sale of the aforementioned property for not less than P425,000.00. In
the same writing, petitioner agreed to pay private respondent a five
percent (5%) commission in the event the sale is finally consummated and
paid.

to DISMISS this case, as the issues cannot be joined as private

Petitioner, on March 4, 1967, executed another letter[6] extending the

respondents and counsels addresses cannot be furnished by the

authority of private respondent for 120 days. Thereafter, another extension

petitioner to this court.[1]

was granted to him for 120 more days, as evidenced by another letter [7]

In addition, petitioner prayed for the issuance of a preliminary injunction to

dated June 26, 1967.

prevent irreparable injury to itself pending resolution by this Court of its

cause. Petitioner likewise urged this Court to hold in contempt private
respondent for allegedly adopting sinister ploy to deprive petitioner of its
constitutional right to due process.

[3]

Acting on said Petition, this Court in a Resolution [2] dated October 1, 1990

[4]

set aside the entry of judgment made on May 3, 1989 in case G.R. No.
78898; admitted the amended petition; and issued a temporary restraining
order to restrain the execution of the judgment appealed from.

[5]

[1]

[6]

[2]

[7]
44

Finally, through another letter[8] dated November 16, 1967, the corporation

commission only if the sale was consummated and the price paid within

with Rufino Manotok, its President, as signatory, authorized private

the period given in the respective letters of authority; and (2) private

respondent to finalize and consummate the sale of the property to the City

respondent was not the person responsible for the negotiation and

of Manila for not less than P410,000.00. With this letter came another

consummation of the sale, instead it was Filomeno E. Huelgas, the PTA

extension of 180 days.

president for 1967-1968 of the Claro M. Recto High School. As a

counterclaim, petitioner (then defendant-appellant) demanded the sum of

The Municipal Board of the City of Manila eventually, on April 26, 1968,

P4,000.00 as attorneys fees and for moral damages.

passed Ordinance No. 6603, appropriating the sum of P410,816.00 for the
purchase of the property which private respondent was authorized to sell.

Thereafter, trial ensued. Private respondent, then plaintiff, testified as to

Said ordinance however, was signed by the City Mayor only on May 17,

the efforts undertaken by him to ensure the consummation of the sale. He

1968, one hundred eighty three (183) days after the last letter of

recounted that it first began at a meeting with Rufino Manotok at the office

authorization.

of Fructuoso Ancheta, principal of C.M. Recto High School. Atty. Dominador

Bisbal, then president of the PTA, was also present. The meeting was set

On January 14, 1969, the parties signed the deed of sale of the subject

precisely to ask private respondent to negotiate the sale of the school lot

property. The initial payment of P200,000.00 having been made, the

and building to the City of Manila. Private respondent then went to

purchase price was fully satisfied with a second payment on April 8, 1969

Councilor Mariano Magsalin, the author of the Ordinance which

by a check in the amount of P210,816.00.

appropriated the money for the purchase of said property, to present the
project. He also went to the Assessors Office for appraisal of the value of

Notwithstanding the realization of the sale, private respondent never

the property. While these transpired and his letters of authority expired,

received any commission, which should have amounted to P20,554.50.

Rufino Manotok always renewed the formers authorization until the last

This was due to the refusal of petitioner to pay private respondent said

was given, which was to remain in force until May 14, 1968. After securing

amount as the former does not recognize the latters role as agent in the

the report of the appraisal committee, he went to the City Mayors Office,

transaction.

which indorsed the matter to the Superintendent of City Schools of Manila.

The latter office approved the report and so private respondent went back

Consequently, on June 29, 1969, private respondent filed a complaint

to the City Mayors Office, which thereafter indorsed the same to the

against petitioner, alleging that he had successfully negotiated the sale of

Municipal Board for appropriation. Subsequently, on April 26, 1968,

the property. He claimed that it was because of his efforts that the

Ordinance No. 6603 was passed by the Municipal Board for the

Municipal Board of Manila passed Ordinance No. 6603 which appropriated

appropriation of the sum corresponding to the purchase price. Petitioner

the sum for the payment of the property subject of the sale.

received the full payment of the purchase price, but private respondent did
not receive a single centavo as commission.

Petitioner claimed otherwise. It denied the claim of private respondent on

the following grounds: (1) private respondent would be entitled to a

[8]

Fructuoso Ancheta and Atty. Dominador Bisbal both testified

acknowledging the authority of private respondent regarding the
transaction.

45

Petitioner presented as its witnesses Filomeno Huelgas and the petitioners

Its Motion for Reconsideration having been denied by respondent appellate

President, Rufino Manotok.

court in a Resolution dated June 22, 1987, petitioner seasonably elevated

its case on Petition for Review on Certiorari on August 10, 1987 before this

Huelgas testified to the effect that after being inducted as PTA president in

Court, docketed as G.R. No. 78898.

August, 1967 he followed up the sale from the start with Councilor
Magsalin until after it was approved by the Mayor on May 17, 1968. He also

Acting on said Petition, this Court issued a Minute Resolution [11] dated

said that he came to know Rufino Manotok only in August, 1968, at which

August 31, 1987 ordering private respondent to comment on said Petition.

meeting the latter told him that he would be given a gratification in the
It appearing that the abovementioned Resolution was returned unserved

amount of P20,000.00 if the sale was expedited.

with the postmasters notation unclaimed, this Court in another

Rufino Manotok confirmed that he knew Huelgas and that there was an

Resolution[12] dated March 13, 1989, required petitioner to locate private

agreement between the two of them regarding the gratification.

respondent and to inform this Court of the present address of private

respondent within ten (10) days from notice. As petitioner was

On rebuttal, Atty. Bisbal said that Huelgas was present in the PTA meetings

unsuccessful in its efforts to locate private respondent, it opted to manifest

from 1965 to 1967 but he never offered to help in the acquisition of said

that private respondents last address was the same as that address to

property. Moreover, he testified that Huelgas was aware of the fact that it

which this Courts Resolution was forwarded.

was private respondent who was negotiating the sale of the subject
property.

Subsequently, this Court issued a Resolution dated May 3, 1989 dismissing

petitioners case on the ground that the issues raised in the case at bar

Thereafter, the then Court of First Instance (now, Regional Trial Court)

cannot be joined. Thus, the above-entitled case became final and

rendered judgment sentencing petitioner and/or Rufino Manotok to pay

executory by the entry of judgment on May 3, 1989.

unto private respondent the sum of P20,540.00 by way of his commission

fees with legal interest thereon from the date of the filing of the complaint

Thereafter, on January 9, 1990 private respondent filed a Motion to Execute

until payment. The lower court also ordered petitioner to pay private

the said judgment before the court of origin. Upon discovery of said

respondent the amount of P4,000.00 as and for attorneys fees.

development, petitioner verified with the court of origin the circumstances

[9]

by which private respondent obtained knowledge of the resolution of this

Petitioner appealed said decision, but to no avail. Respondent Court of

Court. Sensing a fraudulent scheme employed by private respondent,

Appeals affirmed the said ruling of the trial court.

petitioner then instituted this instant Petition for Relief, on August 30,

[10]

1990. On September 13, 1990, said petition was amended to include, in

[9]

[11]

[10]

[12]
46

the alternative, its petition to re-file its Petition for Certiorari (G.R. No.

In its decision in the abovecited case, this Court said, that while it was

78898).

respondent courts (referring to the Court of Appeals) factual findings that

petitioner Prats (claimant-agent) was not the efficient procuring cause in

The sole issue to be addressed in this petition is whether or not private

bringing about the sale (prescinding from the fact of expiration of his

respondent is entitled to the five percent (5%) agents commission.

exclusive authority), still petitioner was awarded compensation for his

services. And We quote:

It is petitioners contention that as a broker, private respondents job is to

bring together the parties to a transaction. Accordingly, if the broker does

In equity, however, the Court notes that petitioner had diligently taken

not succeed in bringing the minds of the purchaser and the vendor to an

steps to bring back together respondent Doronila and the SSS,

agreement with respect to the sale, he is not entitled to a commission.

xxx

xxx

The court has noted on the other hand that Doronila finally sold the
Private respondent, on the other hand, opposes petitioners position

property to the Social Security System at P3.25 per square meter which

maintaining that it was because of his efforts that a purchase actually

was the very same price counter-offered by the Social Security System and

materialized between the parties.

accepted by him in July, 1967 when he alone was dealing exclusively with
the said buyer long before Prats came into the picture but that on the other

We rule in favor of private respondent.

hand Prats efforts somehow were instrumental in bringing them together

again and finally consummating the transaction at the same price of P3.25

At first sight, it would seem that private respondent is not entitled to any

per square meter, although such finalization was after the expiration of

commission as he was not successful in consummating the sale between

Prats extended exclusive authority.

the parties, for the sole reason that when the Deed of Sale was finally

xxx

executed, his extended authority had already expired. By this alone, one

Under the circumstances, the Court grants in equity the sum of One

might be misled to believe that this case squarely falls within the ambit of

Hundred Thousand Pesos (P100,000.00) by way of compensation for his

the established principle that a broker or agent is not entitled to any

efforts and assistance in the transaction, which however was finalized and

commission until he has successfully done the job given to him. [13]

consummated after the expiration of his exclusive authority x x x.[15]

Going deeper however into the case would reveal that it is within the
coverage of the exception rather than of the general rule, the exception
being that enunciated in the case of Prats vs. Court of Appeals.[14] In the
said case, this Court ruled in favor of claimant-agent, despite the
expiration of his authority, when a sale was finally consummated.

xxx

(Underscoring supplied.)
From the foregoing, it follows then that private respondent herein, with
more reason, should be paid his commission. While in Prats vs. Court of
Appeals, the agent was not even the efficient procuring cause in bringing
about the sale, unlike in the case at bar, it was still held therein that the
agent was entitled to compensation. In the case at bar, private respondent

[13]

is the efficient procuring cause for without his efforts, the municipality

[14]

[15]
47

would not have anything to pass and the Mayor would not have anything

While it may be true that Filomeno Huelgas followed up the matter with

to approve.

Councilor Magsalin, the author of Municipal Ordinance No. 6603 and Mayor
Villegas, his intervention regarding the purchase came only after the

In an earlier case,

[16]

this Court ruled that when there is a close, proximate

ordinance had already been passed -- when the buyer has already agreed

and causal connection between the agents efforts and labor and the

to the purchase and to the price for which said property is to be paid.

principals sale of his property, the agent is entitled to a commission.

Without the efforts of private respondent then, Mayor Villegas would have
nothing to approve in the first place. It was actually private respondents

We agree with respondent Court that the City of Manila ultimately became

labor that had set in motion the intervention of the third party that

the purchaser of petitioners property mainly through the efforts of private

produced the sale, hence he should be amply compensated.

respondent. Without discounting the fact that when Municipal Ordinance

No. 6603 was signed by the City Mayor on May 17, 1968, private

WHEREFORE, in the light of the foregoing and finding no reversible error

respondents authority had already expired, it is to be noted that the

committed by respondent Court, the decision of the Court of Appeals is

ordinance was approved on April 26,1968 when private respondents

hereby AFFIRMED. The temporary restraining order issued by this Court in

authorization was still in force. Moreover, the approval by the City Mayor

its Resolution dated October 1, 1990 is hereby lifted.

came only three days after the expiration of private respondents authority.
It is also worth emphasizing that from the records, the only party given a

SO ORDERED.

written authority by petitioner to negotiate the sale from July 5, 1966 to

May 14, 1968 was private respondent.
Contrary to what petitioner advances, the case of Danon vs. Brimo,[17] on
which it heavily anchors its justification for the denial of private
respondents claim, does not apply squarely to the instant petition.
Claimant-agent in said case fully comprehended the possibility that he may
not realize the agents commission as he was informed that another agent
was also negotiating the sale and thus, compensation will pertain to the
one who finds a purchaser and eventually effects the sale. Such is not the
case herein. On the contrary, private respondent pursued with his goal of
seeing that the parties reach an agreement, on the belief that he alone
was transacting the business with the City Government as this was what
petitioner made it to appear.

[16]
[17]
48

FIRST DIVISION
G.R. No. 95909, August 16, 1991
UNILAND RESOURCES, PETITIONER, VS. DEVELOPMENT BANK OF THE
PHILIPPINES,* RESPONDENT.  
DECISION
GANCAYCO, J.:
In the law on agency, it is elementary that when the main transaction
between the principal parties does not materialize, the claim for
commission of the duly authorized broker is disallowed. [1] How about the
instance when the sale was eventually consummated between parties
introduced by a middleman who, in the first place, had no authority,
express or implied, from the seller to broker the transaction? Should the
interloper be allowed a commission? On these simplified terms rests the
nature of the controversy on which this case turns.
As stated by the respondent Court of Appeals [2] the ambient circumstances
of this case are as follows:
(1) [Petitioner] Uniland Resources is a private corporation engaged in real
estate brokerage and licensed as such (p. 2, Rec.), while [respondent] DBP,
as we all know [sic], is a government corporation engaged in finance and
banking in a proprietary capacity.
(2) Long before this case arose, Marinduque Mining Corporation obtained
a loan from the DBP and as security therefor, mortgaged certain real

[1]
[2]
49

properties to the latter, among them two lots located in Makati, M.M.,

Caltex would expire on May 8, 1987, DBP retrieved the account from APT

described as follows:

and, on the last day for the exercise of its right of redemption, May 8,1987,

(a) Corner lot, covered by TCT No. 114138, located at Pasong

redeemed said lots from Caltex for P33,096,321.62 (Exh. "5"), thus

Tamo, Makati, with an area of 3,330 sq. mts., on which is

acquiring them as its physical assets.

constructed a [four]-story concrete building, etc., which,

(7)

for brevity, shall be called the office building lot; and

pre-bidding conference wherein a new set of bidding guidelines were

In preparation for the sale of the two lots in question, DBP called a

formulated (Exh. "3"). Then, on July 30, 1987, the public bidding for the
(b) Lot covered by TCT No. 16279 with 12,355 sq. mts.,

sale of the two lots was held and again, there was only one bidder, the

located at Pasong Tamo, Makati, on which is constructed

Clarges Realty Corp. [another affiliate of Glaxo, Philippines], for only the

a concrete/steel warehouse, etc., which, for brevity,

warehouse lot and for the amount of P24,070,000.00, which is slightly

shall be called the warehouse lot.

higher than the amount previously offered by Counsel Realty Corp.,

therefor at the May 5, 1987 bidding (see Exh. "5," p. 100, Rec.). No bid

The aforesaid lots had, however, been previously mortgaged by

was submitted for the office building lot (id.).

Marinduque Mining Corp., to Caltex, and the mortgage in favor of DBP was

(8)

entered on their titles as a second mortgage (Pre-Trial Order, p. 37, Rec.).

the DBP approved the sale of the warehouse lot to Clarges Realty Corp.,

The account of the Marinduque Mining Corp., with the DBP was later

and on November 23, 1987, the proper documentation of the sale was

transferred to the Assets Privatization Trust (APT) pursuant to Proclamation

made (Exh. "D"). As for the office building lot, it was later sold by DBP in a

[No.] 50.

negotiated sale to the Bank of P. I. as trustee for the "Perpetual Care Fund

(3) For failure of the Marinduque Mining Corp. to pay its obligations to

of the Manila Memorial Park" for P17,460,000.00, and proper

Caltex, the latter foreclosed its mortgage on the aforesaid two lots (pp. 37-

documentation of the sale was made on November 17, 1987 (Exh. "E" and

38, Rec.). APT, on the other hand, to recover its investment on the

submarkings). The DBP admittedly paid the [five percent] broker's fee on

Marinduque Account, offered for sale to the public through DBP its right of

this sale to the DBP Management Corporation, which acted as broker for

redemption on said two lots by public bidding (Exhs. "1" and "2").

said negotiated sale (p. 15, Appellant DBP's brief).

(4)Considering, however, that Caltex had required that both lots be

(9)

redeemed, the bidding guidelines set by DBP provided that any bid to

two letters [respondent DBP], the first through its Senior Vice President

purchase either of the two lots would be considered only should there be

(Exh. "C"), and the second, through its Vice Chairman (Exh. "4" [sic]),

two bids or a bid for the two items which, when combined, would fully

asking for the payment of its broker's fee in instrumenting the sale of its

cover the sale of the two lots in question (Exh. "1").

(DBP's) warehouse lot to Clarges Realty Corp. The claim was referred to

(5)

the Bidding Committee chaired by Amanda S. Guiam, which met on

The aforesaid bidding was held on May 5, 1987 with only one

Notwithstanding that there was no bidder for the office building lot,

After the aforesaid sale, [petitioner], through its President, wrote

bidder, the Counsel Realty Corp. [an affiliate of Glaxo, Philippines, the

November 9, 1987, and which, on November 18, 1987, issued a decision

client of petitioner], which offered a bid only for the warehouse lot in the

denying [petitioner's] claim (Exh. "5"). Hence, the instant case filed by

amount of P23,900,000.00. Said bid was thus rejected by DBP.

[petitioner] to recover from [respondent] DBP the aforesaid broker's fee.

(6)

After trial, the lower court, on October 25, 1988, rendered judgment

Seeing, however, that it would make a profit if it redeemed the two

lots and then offer them for sale, and as its right to redeem said lots from

50

"ORDERING [respondent DBP] to pay [petitioner] the sum of

The rule is that in petitions for certiorari as a mode of appeal, only

P1,203,500.00 which is the equivalent of [five percent] broker's

questions of law distinctly set forth may be raised. [8] Such questions have

fee plus Iegal interest thereto (sic) from the filing of the

been defined as those that do not call for any examination of the probative

complaint on February 18, 1988 until fully paid and the sum of

value of the evidence presented by the parties.[9] Petitioner's singular

P50,000.00 as and for attorney's fees. Costs against [respondent

assignment of error would, however, have this Court go over the facts of

DBP)]." (p. 122, Rec.)[3]

this case because it necessarily involves the examination of the evidence

and its subsequent re-evaluation. Under the present proceeding, the

On appeal, the Court of Appeals reversed the judgment of the lower court

[4]

same, therefore, cannot be done.

and dismissed the complaint. The motion for reconsideration filed by

petitioner was also subsequently denied.[5]

It bears emphasizing that mere disagreement between the Court of

Appeals and the trial court as to the facts of a case does not of itself

Petitioner is now before this Court alleging that the petition "RAISES A

warrant this Court's review of the same. It has been held that the doctrine

QUESTION OF LAW IN THE SENSE THAT THE RESPONDENT COURT OF

that the findings of fact made by the Court of Appeals, being conclusive in

APPEALS BASED ITS DECISION ONLY ON THE CONTROVERSIAL FACTS

nature, are binding on this Court, applies even if the Court of Appeals was

FAVORABLE TO THE PRIVATE RESPONDENT DBP,

in disagreement with the lower court as to the weight of evidence with a

[6]

primarily making capital

of the disparity between the factual conclusions of the trial court and of the

consequent reversal of its findings of fact, so long as the findings of the

appellate court. Petitioner asserts that the respondent Court of Appeals

Court of Appeals are borne out by the record or based on substantial

disregarded evidence in its favor consisting of its letters to respondent

evidence.[10] While the foregoing doctrine is not absolute, petitioner has not

DBP's higher officers sent prior to the bidding and sale, wherein petitioner

sufficiently proved that his case falls under the known exceptions. [11]

requested accreditation as a broker and, in the process of informing that it

had offered the DBP properties for sale, also volunteered the name of its
client, Glaxo, Philippines, as an interested prospective buyer. [7]

[5]
[6]
[7]
[8]

[3]

[9]

[4]

[10]
51

Be that as it may, the Court has perused the assailed decision of the Court

dealings with the DBP, it was always made clear to petitioner that only

of Appeals and still finds the primary assertion of petitioner to be

accredited brokers may look for buyers on behalf of respondent DBP. This

unfounded. The Court of Appeals has addressed all the factual contentions

is not a situation wherein a third party was prejudiced by the refusal of

of petitioner and chose not to give credence to petitioner's version.

respondent DBP to recognize petitioner as its broker. The controversy is

Moreover, the findings of the Court of Appeals are consistent with, and

only between the DBP and petitioner, to whom it was emphasized in no

sufficiently supported by, the records of this case.

uncertain terms that the arrangement sought did not exist. Article 1869,
therefore, has no room for operation in this case.

It is obvious that petitioner was never able to secure the required

accreditation from respondent DBP to transact business on behalf of the

Petitioner would also disparage the formality of accreditation as "merely a

latter. The letters sent by petitioner to the higher officers of the DBP and

mechanical act, which requires not much discretion, as long as a person or

the APT are merely indicative of petitioner's desire to secure such

entity looks for a buyer [and] initiate or promote [sic] the interests of the

accreditation. At best these missives are self-serving; the most that they

seller."[16] Being engaged in business, petitioner should do better to adopt

prove is that they were sent by petitioner and received by respondent DBP,

the opposite attitude and appreciate that formalities, such as the need for

which clearly never agreed to be bound thereto. As declared by the trial

accreditation, result from the evolution of sound business practices for the

court even when it found in favor of petitioner, there was no express reply

protection and benefit of all parties concerned. They are designed and

from the DBP or the APT as to the accreditation sought by petitioner.

adopted specifically to prevent the occurrence of situations similar to that

[12]

From the very beginning, therefore, petitioner was aware that it had no

obtaining in this case.

express authority from DBP to find buyers of its properties.

More importantly, petitioner's stance goes against the basic axiom in Civil
In its reply submitted pursuant to the resolution requiring the same, [13]

Law that no one may contract in the name of another without being

petitioner also invokes Article 1869 of the new Civil Code

authorized by the latter, unless the former has by law a right to represent

[14]

in contending

that an implied agency existed. Petitioner argues that it "should have been

him.[17] From this principle, among others, springs the relationship of

stopped, disauthorized and outrightly prevented from dealing the 12,355

agency which, as with other contracts, is one founded on mutual consent:

sq. m. (with warehouse) [sic] by the DBP from the inception.[15] On the

the principal agrees to be bound by the acts of the agent and the latter in

contrary, these steps were never necessary. In the course of petitioner's

turn consents to render service on behalf or in representation of the

[11]

principal.[18]

[12]

[15]

[13]

[16]

[14]

[17]
52

Petitioner, however, also invokes equity considerations, and in equity, the

on the subsequent decisions made by respondent DBP as regards the

Court recognizes the efforts of petitioner in bringing together respondent

disposition of its properties.

DBP and an interested and financially-able buyer. While not actively

involved in the actual bidding and transfer of ownership of the warehouse

Petitioner claims the amount of P1,203,500.00 awarded by the trial court

property, petitioner may be said to have initiated, albeit without proper

as commission computed at five percent of the sale price of the warehouse

authority, the transaction that eventually took place. The Court is also

property. Under the foregoing disquisition and following the precedent, as

aware that respondent DBP was able to realize a substantial profit from the

well as roughly the proportion, set in Prats, the Court in equity grants

sale of its two properties. While purely circumstantial, there is sufficient

petitioner the sum of One Hundred Thousand Pesos (P100,000.00) for the

reason to believe that the DBP became more confident to venture and

role it played in the transaction between respondent DBP and buyer Glaxo,

redeem the properties from the APT due to the presence of a ready and

Philippines. It is emphasized, however, that the circumstances that came

willing buyer, as communicated and assured by petitioner.

into play in this case do not meet the minimum legal standards required
for the existence of an agency relationship and that the award is based

In Prats v. Court of Appeals,[19] there was a finding that the petitioner

purely on equity considerations. Accordingly, petitioner's other arguments

therein as the agent was no longer the efficient procuring cause in bringing

need not now be discussed.

about the sale proceeding from the fact of expiration of his exclusive
authority. There was therefore, no basis in law to grant the relief sought.

WHEREFORE, the decision appealed from is hereby AFFIRMED, with the

Nevertheless, this Court in equity granted the sum of P100,000.00, out of

MODIFICATION that in equity respondent DBP is ordered to pay petitioner

the P1,380,000.00 claimed as commission, by way of compensation for the

the amount of One Hundred Thousand Pesos (P100,000.00). No

efforts and assistance rendered by the agent in the transaction prior to the

pronouncement as to costs.

expiration of his authority. These consist in offering the lot for sale to the
eventual buyer, sending follow-up letters, inviting the buyer to dinner and

SO ORDERED.

luncheon meetings, etc.

Parallel circumstances obtain in the case at bar. It was petitioner who
advised Glaxo, Philippines of the availability of the warehouse property and
aroused its interest over the same. Through petitioner, respondent DBP
was directly informed of the existence of an interested buyer. Petitioner's
persistence in communicating with respondent DBP reinforced the
seriousness of the offer. This piece of information no doubt had a bearing

[18]
[19]
53

d) To pay the cost of this suit.

Quezon City, Metro Manila, December 20, 1991.
The Antecedent Facts
On May 29, 1989, private respondent Francisco Artigo (Artigo for brevity)
sued petitioners Constante A. De Castro (Constante for brevity) and
Corazon A. De Castro (Corazon for brevity) to collect the unpaid balance
of his brokers commission from the De Castros.[4] The Court of Appeals

THIRD DIVISION
G.R. No. 115838, July 18, 2002
CONSTANTE AMOR DE CASTRO AND CORAZON AMOR DE CASTRO,
PETITIONERS, VS. COURT OF APPEALS AND FRANCISCO ARTIGO,
RESPONDENTS.

summarized the facts in this wise:

x x x. Appellants[5] were co-owners of four (4) lots located at EDSA corner
New York and Denver Streets in Cubao, Quezon City. In a letter dated
January 24, 1984 (Exhibit A-1, p. 144, Records), appellee[6] was authorized
by appellants to act as real estate broker in the sale of these properties for
the amount of P23,000,000.00, five percent (5%) of which will be given to

DECISION

the agent as commission. It was appellee who first found Times Transit
Corporation, represented by its president Mr. Rondaris, as prospective

CARPIO, J.:

buyer which desired to buy two (2) lots only, specifically lots 14 and 15.
Before us is a Petition for Review on Certiorari
Decision of the Court of Appeals

[2]

[1]

seeking to annul the

dated May 4, 1994 in CA-G.R. CV No.

37996, which affirmed in toto the decision

[3]

of the Regional Trial Court of

Eventually, sometime in May of 1985, the sale of lots 14 and 15 was

consummated. Appellee received from appellants P48,893.76 as
commission.

Quezon City, Branch 80, in Civil Case No. Q-89-2631. The trial court
disposed as follows:

It was then that the rift between the contending parties soon emerged.
Appellee apparently felt short changed because according to him, his total

WHEREFORE, the Court finds defendants Constante and Corazon Amor de

commission should be P352,500.00 which is five percent (5%) of the

Castro jointly and solidarily liable to plaintiff the sum of:

agreed price of P7,050,000.00 paid by Times Transit Corporation to

appellants for the two (2) lots, and that it was he who introduced the buyer

a) P303,606.24 representing unpaid commission;

to appellants and unceasingly facilitated the negotiation which ultimately

led to the consummation of the sale. Hence, he sued below to collect the

b) P25,000.00 for and by way of moral damages;

balance of P303,606.24 after having received P48,893.76 in advance.

c) P45,000.00 for and by way of attorneys fees;

54

On the other hand, appellants completely traverse appellees claims and

the 5% commission on the purchase price as provided in the contract of

essentially argue that appellee is selfishly asking for more than what he

agency.

truly deserved as commission to the prejudice of other agents who were

more instrumental in the consummation of the sale. Although appellants

Second. The Court of Appeals ruled that Artigos complaint is not

readily concede that it was appellee who first introduced Times Transit

dismissible for failure to implead as indispensable parties the other co-

Corp. to them, appellee was not designated by them as their exclusive real

owners of the two lots. The Court of Appeals explained that it is not

estate agent but that in fact there were more or less eighteen (18) others

necessary to implead the other co-owners since the action is exclusively

whose collective efforts in the long run dwarfed those of appellees,

based on a contract of agency between Artigo and Constante.

considering that the first negotiation for the sale where appellee took
active participation failed and it was these other agents who successfully

Third. The Court of Appeals likewise declared that the trial court did not err

brokered in the second negotiation. But despite this and out of appellants

in admitting parol evidence to prove the true amount paid by Times Transit

pure liberality, beneficence and magnanimity, appellee nevertheless was

to the De Castros for the two lots. The Court of Appeals ruled that evidence

given the largest cut in the commission (P48,893.76), although on the

aliunde could be presented to prove that the actual purchase price was

principle of quantum meruit he would have certainly been entitled to less.

P7.05 million and not P3.6 million as appearing in the deed of sale.

So appellee should not have been heard to complain of getting only a

Evidence aliunde is admissible considering that Artigo is not a party, but a

pittance when he actually got the lions share of the commission and

mere witness in the deed of sale between the De Castros and Times

worse, he should not have been allowed to get the entire commission.

Transit. The Court of Appeals explained that, the rule that oral evidence is

Furthermore, the purchase price for the two lots was only P3.6 million as

inadmissible to vary the terms of written instruments is generally applied

appearing in the deed of sale and not P7.05 million as alleged by appellee.

only in suits between parties to the instrument and strangers to the

Thus, even assuming that appellee is entitled to the entire commission, he

contract are not bound by it. Besides, Artigo was not suing under the deed

would only be getting 5% of the P3.6 million, or P180,000.00.

of sale, but solely under the contract of agency. Thus, the Court of Appeals
upheld the trial courts finding that the purchase price was P7.05 million

Ruling of the Court of Appeals

and not P3.6 million.

The Court of Appeals affirmed in toto the decision of the trial court.

Hence, the instant petition.

First. The Court of Appeals found that Constante authorized Artigo to act as

The Issues

agent in the sale of two lots in Cubao, Quezon City. The handwritten
authorization letter signed by Constante clearly established a contract of

According to petitioners, the Court of Appeals erred in -

agency between Constante and Artigo. Thus, Artigo sought prospective

buyers and found Times Transit Corporation (Times Transit for brevity).

I. NOT ORDERING THE DISMISSAL OF THE COMPLAINT FOR FAILURE TO

Artigo facilitated the negotiations which eventually led to the sale of the

IMPLEAD INDISPENSABLE PARTIES-IN-INTEREST;

two lots. Therefore, the Court of Appeals decided that Artigo is entitled to

55

II. NOT ORDERING THE DISMISSAL OF THE COMPLAINT ON THE GROUND

courts cannot proceed without their presence.[8] Whenever it appears to

THAT ARTIGOS CLAIM HAS BEEN EXTINGUISHED BY FULL PAYMENT,

the court in the course of a proceeding that an indispensable party has not

WAIVER, OR ABANDONMENT;

been joined, it is the duty of the court to stop the trial and order the
inclusion of such party.[9]

III. CONSIDERING INCOMPETENT EVIDENCE;

However, the rule on mandatory joinder of indispensable parties is not
IV. GIVING CREDENCE TO PATENTLY PERJURED TESTIMONY;

applicable to the instant case.

V. SANCTIONING AN AWARD OF MORAL DAMAGES AND ATTORNEYS FEES;

There is no dispute that Constante appointed Artigo in a handwritten note

dated January 24, 1984 to sell the properties of the De Castros for P23

VI. NOT AWARDING THE DE CASTROS MORAL AND EXEMPLARY DAMAGES,

million at a 5 percent commission. The authority was on a first come, first

AND ATTORNEYS FEES.

serve basis. The authority reads in full:

The Courts Ruling

24 Jan. 84

The petition is bereft of merit.

To Whom It May Concern:

First Issue: whether the complaint merits dismissal for failure to implead

This is to state that Mr. Francisco Artigo is authorized as our real estate

other co-owners as indispensable parties

broker in connection with the sale of our property located at Edsa Corner
New York & Denver, Cubao, Quezon City.

The De Castros argue that Artigos complaint should have been dismissed
for failure to implead all the co-owners of the two lots. The De Castros

Asking price P23,000,000.00 with

claim that Artigo always knew that the two lots were co-owned by
Constante and Corazon with their other siblings Jose and Carmela whom

5% commission as agents fee.

Constante merely represented. The De Castros contend that failure to

implead such indispensable parties is fatal to the complaint since Artigo, as

C.C. de Castro

agent of all the four co-owners, would be paid with funds co-owned by the
four co-owners.

owner & representing

The De Castros contentions are devoid of legal basis.

co-owners

An indispensable party is one whose interest will be affected by the courts

This authority is on a first-come

action in the litigation, and without whom no final determination of the

case can be had.[7] The joinder of indispensable parties is mandatory and

First serve basis CAC

56

Constante signed the note as owner and as representative of the other co-

When the law expressly provides for solidarity of the obligation, as in the

owners. Under this note, a contract of agency was clearly constituted

liability of co-principals in a contract of agency, each obligor may be

between Constante and Artigo. Whether Constante appointed Artigo as

compelled to pay the entire obligation.[12] The agent may recover the whole

agent, in Constantes individual or representative capacity, or both, the De

compensation from any one of the co-principals, as in this case.

Castros cannot seek the dismissal of the case for failure to implead the
other co-owners as indispensable parties. The De Castros admit that

Indeed, Article 1216 of the Civil Code provides that a creditor may sue any

the other co-owners are solidarily liable under the contract of

of the solidary debtors. This article reads:

agency,

[10]

citing Article 1915 of the Civil Code, which reads:

Art. 1216. The creditor may proceed against any one of the solidary

Art. 1915. If two or more persons have appointed an agent for a common

debtors or some or all of them simultaneously. The demand made against

transaction or undertaking, they shall be solidarily liable to the agent for all

one of them shall not be an obstacle to those which may subsequently be

the consequences of the agency.

directed against the others, so long as the debt has not been fully
collected.

The solidary liability of the four co-owners, however, militates against the

Thus, the Court has ruled in Operators Incorporated vs. American Biscuit

De Castros theory that the other co-owners should be impleaded as

Co., Inc.[13] that

indispensable parties. A noted commentator explained Article 1915 thus

x x x solidarity does not make a solidary obligor an indispensable
The rule in this article applies even when the appointments were made by

party in a suit filed by the creditor. Article 1216 of the Civil Code says

the principals in separate acts, provided that they are for the same

that the creditor `may proceed against anyone of the solidary debtors or

transaction. The solidarity arises from the common interest of the

some or all of them simultaneously. (Emphasis supplied)

principals, and not from the act of constituting the agency. By

virtue of this solidarity, the agent can recover from any principal

Second Issue: whether Artigos claim has been extinguished by full

the whole compensation and indemnity owing to him by the

payment, waiver or abandonment

others. The parties, however, may, by express agreement, negate this

solidary responsibility. The solidarity does not disappear by the mere

The De Castros claim that Artigo was fully paid on June 14, 1985, that is,

partition effected by the principals after the accomplishment of the agency.

Artigo was given his proportionate share and no longer entitled to any
balance. According to them, Artigo was just one of the agents involved in

If the undertaking is one in which several are interested, but only some

the sale and entitled to a proportionate share in the commission. They

create the agency, only the latter are solidarily liable, without prejudice to

assert that Artigo did absolutely nothing during the second negotiation but

the effects of negotiorum gestio with respect to the others. And if the

to sign as a witness in the deed of sale. He did not even prepare the

power granted includes various transactions some of which are common

documents for the transaction as an active real estate broker usually does.

and others are not, only those interested in each transaction shall be liable
for it.[11]

The De Castros arguments are flimsy.

57

A contract of agency which is not contrary to law, public order, public

to inquire as to the licenses of Prudencio and Castillo. (tsn, April 11, 1991,

policy, morals or good custom is a valid contract, and constitutes the law

pp. 39-40).[15] (Emphasis supplied)

between the parties.

[14]

The contract of agency entered into by Constante

with Artigo is the law between them and both are bound to comply with its

In any event, we find that the 5 percent real estate brokers commission is

terms and conditions in good faith.

reasonable and within the standard practice in the real estate industry for
transactions of this nature.

The mere fact that other agents intervened in the consummation of the
sale and were paid their respective commissions cannot vary the terms of

The De Castros also contend that Artigos inaction as well as failure to

the contract of agency granting Artigo a 5 percent commission based on

protest estops him from recovering more than what was actually paid him.

the selling price. These other agents turned out to be employees of

The De Castros cite Article 1235 of the Civil Code which reads:

Times Transit, the buyer Artigo introduced to the De Castros. This

prompted the trial court to observe:

Art. 1235. When the obligee accepts the performance, knowing its
incompleteness and irregularity, and without expressing any protest or

The alleged `second group of agents came into the picture only during

objection, the obligation is deemed fully complied with.

the so-called `second negotiation and it is amusing to note that these (sic)
second group, prominent among whom are Atty. Del Castillo and Ms.

The De Castros reliance on Article 1235 of the Civil Code is misplaced.

Prudencio, happened to be employees of Times Transit, the buyer of the

Artigos acceptance of partial payment of his commission neither amounts

properties. And their efforts were limited to convincing Constante to part

to a waiver of the balance nor puts him in estoppel. This is the import of

away with the properties because the redemption period of the foreclosed

Article 1235 which was explained in this wise:

properties is around the corner, so to speak. (tsn. June 6, 1991).

The word accept, as used in Article 1235 of the Civil Code, means to take
xxx

as satisfactory or sufficient, or agree to an incomplete or irregular

performance. Hence, the mere receipt of a partial payment is not

To accept Constantes version of the story is to open the floodgates of

equivalent to the required acceptance of performance as would extinguish

fraud and deceit. A seller could always pretend rejection of the offer and

the whole obligation.[16] (Emphasis supplied)

wait for sometime for others to renew it who are much willing to accept a
commission far less than the original broker. The immorality in the

There is thus a clear distinction between acceptance and mere receipt. In

instant case easily presents itself if one has to consider that the

this case, it is evident that Artigo merely received the partial payment

alleged `second group are the employees of the buyer, Times

without waiving the balance. Thus, there is no estoppel to speak of.

Transit and they have not bettered the offer secured by Mr. Artigo
for P7 million.

The De Castros further argue that laches should apply because Artigo did
not file his complaint in court until May 29, 1989, or almost four years later.

It is to be noted also that while Constante was too particular about the

Hence, Artigos claim for the balance of his commission is barred by laches.

unrenewed real estate brokers license of Mr. Artigo, he did not bother at all

58

Laches means the failure or neglect, for an unreasonable and unexplained

cannot, as a rule, be used to abate a collection suit filed within

length of time, to do that which by exercising due diligence could or should

the prescriptive period mandated by the Civil Code.[22]

have been done earlier. It is negligence or omission to assert a right within

a reasonable time, warranting a presumption that the party entitled to

Clearly, the De Castros defense of laches finds no support in law, equity or

assert it either has abandoned it or declined to assert it.

jurisprudence.

[17]

Artigo disputes the claim that he neglected to assert his rights. He was

Third issue: whether the determination of the purchase price was made in

appointed as agent on January 24, 1984. The two lots were finally sold in

violation of the Rules on Evidence

June 1985. As found by the trial court, Artigo demanded in April and July of
The De Castros want the Court to re-examine the probative value of the

1985 the payment of his commission by Constante on the basis of the

selling price of P7.05 million but there was no response from Constante.

[18]

evidence adduced in the trial court to determine whether the actual selling

After it became clear that his demands for payment have fallen on deaf

price of the two lots was P7.05 million and not P3.6 million. The De Castros

ears, Artigo decided to sue on May 29, 1989.

contend that it is erroneous to base the 5 percent commission on a

purchase price of P7.05 million as ordered by the trial court and the

Actions upon a written contract, such as a contract of agency, must be

appellate court. The De Castros insist that the purchase price is P3.6

brought within ten years from the time the right of action accrues. [19] The

million as expressly stated in the deed of sale, the due execution and

right of action accrues from the moment the breach of right or duty occurs.

authenticity of which was admitted during the trial.

From this moment, the creditor can institute the action even as the tenyear prescriptive period begins to run.[20]

The De Castros believe that the trial and appellate courts committed a
mistake in considering incompetent evidence and disregarding the best

The De Castros admit that Artigos claim was filed within the ten-year

evidence and parole evidence rules. They claim that the Court of Appeals

prescriptive period. The De Castros, however, still maintain that Artigos

erroneously affirmed sub silentio the trial courts reliance on the various

cause of action is barred by laches. Laches does not apply because only

correspondences between Constante and Times Transit which were mere

four years had lapsed from the time of the sale in June 1985. Artigo made a

photocopies that do not satisfy the best evidence rule. Further, these

demand in July 1985 and filed the action in court on May 29, 1989, well

letters covered only the first negotiations between Constante and Times

within the ten-year prescriptive period. This does not constitute an

Transit which failed; hence, these are immaterial in determining the final

unreasonable delay in asserting ones right. The Court has ruled, a delay

purchase price.

within the prescriptive period is sanctioned by law and is not

considered to be a delay that would bar relief.[21] In explaining that

The De Castros further argue that if there was an undervaluation, Artigo

laches applies only in the absence of a statutory prescriptive period, the

who signed as witness benefited therefrom, and being equally guilty,

Court has stated -

should be left where he presently stands. They likewise claim that the
Court of Appeals erred in relying on evidence which were not offered for

Laches is recourse in equity. Equity, however, is applied only in the

the purpose considered by the trial court. Specifically, Exhibits B, C,

absence, never in contravention, of statutory law. Thus, laches,

D and E were not offered to prove that the purchase price was P7.05

59

Million. Finally, they argue that the courts a quo erred in giving credence to

abuse of discretion, such findings must stand, for this court is not expected

the perjured testimony of Artigo. They want the entire testimony of Artigo

or required to examine or contrast the oral and documentary evidence

rejected as a falsehood because he was lying when he claimed at the

submitted by the parties. (Morales vs. Court of Appeals, 197 SCRA 391

outset that he was a licensed real estate broker when he was not.

[1991]citing Santa Ana vs. Hernandez, 18 SCRA 973 [1966]).

Whether the actual purchase price was P7.05 Million as found by the trial

We find no reason to depart from this principle. The trial and appellate

court and affirmed by the Court of Appeals, or P3.6 Million as claimed by

courts are in a much better position to evaluate properly the evidence.

the De Castros, is a question of fact and not of law. Inevitably, this calls for

Hence, we find no other recourse but to affirm their finding on the actual

an inquiry into the facts and evidence on record. This we can not do.

purchase price.

It is not the function of this Court to re-examine the evidence submitted by

Fourth Issue: whether award of moral damages and attorneys fees is

the parties, or analyze or weigh the evidence again. [23] This Court is not the

proper

proper venue to consider a factual issue as it is not a trier of facts. In

petitions for review on certiorari as a mode of appeal under Rule 45, a

The De Castros claim that Artigo failed to prove that he is entitled to moral

petitioner can only raise questions of law. Our pronouncement in the case

damages and attorneys fees. The De Castros, however, cite no concrete

of Cormero vs. Court of Appeals[24] bears reiteration:

reason except to say that they are the ones entitled to damages since the
case was filed to harass and extort money from them.

At the outset, it is evident from the errors assigned that the petition is
anchored on a plea to review the factual conclusion reached by the

Law and jurisprudence support the award of moral damages and attorneys

respondent court. Such task however is foreclosed by the rule that in

fees in favor of Artigo. The award of damages and attorneys fees is left to

petitions for certiorari as a mode of appeal, like this one, only questions of

the sound discretion of the court, and if such discretion is well exercised, as

law distinctly set forth may be raised. These questions have been defined

in this case, it will not be disturbed on appeal. [25] Moral damages may be

as those that do not call for any examination of the probative value of the

awarded when in a breach of contract the defendant acted in bad faith, or

evidence presented by the parties. (Uniland Resources vs. Development

in wanton disregard of his contractual obligation.[26] On the other hand,

Bank of the Philippines, 200 SCRA 751 [1991] citing Goduco vs. Court of

attorneys fees are awarded in instances where the defendant acted in

appeals, et al., 119 Phil. 531; Hernandez vs. Court of Appeals, 149 SCRA

gross and evident bad faith in refusing to satisfy the plaintiffs plainly valid,

67). And when this court is asked to go over the proof presented by the

just and demandable claim.[27] There is no reason to disturb the trial

parties, and analyze, assess and weigh them to ascertain if the trial court

courts finding that the defendants lack of good faith and unkind

and the appellate court were correct in according superior credit to this or

treatment of the plaintiff in refusing to give his due commission deserve

that piece of evidence and eventually, to the totality of the evidence of one

censure. This warrants the award of P25,000.00 in moral damages and

party or the other, the court cannot and will not do the same. (Elayda vs.

P45,000.00 in attorneys fees. The amounts are, in our view, fair and

Court of Appeals, 199 SCRA 349 [1991]). Thus, in the absence of any

reasonable. Having found a buyer for the two lots, Artigo had already

showing that the findings complained of are totally devoid of support in the

performed his part of the bargain under the contract of agency. The De

record, or that they are so glaringly erroneous as to constitute serious

Castros should have exercised fairness and good judgment in dealing with

60

Artigo by fulfilling their own part of the bargain - paying Artigo his 5

Petitioner Manila Remnant Co., Inc. is the owner of the parcels of land

percent brokers commission based on the actual purchase price of the two

situated in Quezon City covered by Transfer Certificates of Title Nos.

lots.

26400, 26401, 30783 and 31986 and constituting the subdivision known as
Capital Homes Subdivision Nos. I and II. On July 25, 1972, Manila Remnant

WHEREFORE, the petition is denied for lack of merit. The Decision of the

and A.U. Valencia & Co. Inc. entered into a written agreement entitled

Court of Appeals dated May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED

"Confirmation of Land Development and Sales Contract" to formalize an

in toto.

earlier verbal agreement whereby for a consideration of 17 and 1/2% fee,

including sales commission and management fee, A.U. Valencia and Co.,

SO ORDERED.

Inc. was to develop the aforesaid subdivision with authority to manage the
sales thereof, execute contracts to sell to lot buyers and issue official
receipts.[1]
At that time the President of both A.U. Valencia and Co. Inc. and Manila
THIRD DIVISION
G.R. No. 82978, November 22, 1990

Remnant Co., Inc. was Artemio U. Valencia.

On March 3, 1970, Manila Remnant thru A.U. Valencia and Co. executed

THE MANILA REMNANT CO., INC., PETITIONER, VS. THE HONORABLE COURT

two "contracts to sell" covering Lots 1 and 2 of Block 17 in favor of Oscar

OF APPEALS AND AND OSCAR VENTANILLA, JR. AND CARMEN GLORIA DIAZ,

C. Ventanilla and Carmen Gloria Diaz for the combined contract price of

RESPONDENTS.

P66,571.00 payable monthly for ten years.[2] As thus agreed in the

contracts to sell, the Ventanillas paid the down payments on the two lots

DECISION
FERNAN, C.J.:

even before the formal contract was signed on March 3, 1970.

Ten (10) days after the signing of the contracts with the Ventanillas or on
March 13, 1970, Artemio U. Valencia, as President of Manila Remnant, and

Like any other couple, Oscar Ventanilla and his wife Carmen, both faculty

without the knowledge of the Ventanilla couple, sold Lots 1 and 2 of Block

members of the University of the Philippines and renting a faculty unit,

17 again, this time in favor of Carlos Crisostomo, one of his sales agents

dreamed of someday owning a house and lot. Instead of attaining this

without any consideration.[3] Artemio Valencia then transmitted the ficti-

dream, they became innocent victims of deceit and found themselves in

tious Crisostomo contracts to Manila Remnant while he kept in his files the

the midst of an ensuing squabble between a subdivision owner and its real

contracts to sell in favor of the Ventanillas. All the amounts paid by the

estate agent.

Ventanillas were deposited in Valencia's bank account.

The facts as found by the trial court and adopted by the Appellate Court

Beginning March 13, 1970, upon orders of Artemio Valencia, the monthly

are as follows:

payments of the Ventanillas were remitted to Manila Remnant as payments

of Crisostomo for which the former issued receipts in favor of Crisostomo.

61

Since Valencia kept the receipts in his files and never transmitted the same

Since A.U. Valencia and Co. failed to forward its collections after May 1973,

to Crisostomo, the latter and the Ventanillas remained ignorant of

Manila Remnant caused on August 20, 1976 the publication in the Times

Valencia's scheme. Thus, the Ventanillas continued paying their monthly

Journal of a notice cancelling the contracts to sell of some lot buyers

installments.

including that of Carlos Crisostomo in whose name the payments of the

Ventanillas had been credited.[12]

Subsequently, the harmonious business relationship between Artemio

Valencia and Manila Remnant ended. On May 30, 1973, Manila Remnant,

To prevent the effective cancellation of their contracts, Artemio Valencia

through its General Manager Karl Landahl, wrote Artemio Valencia

instigated on September 22, 1976 the filing by Carlos Crisostomo and

informing him that Manila Remnant was terminating its existing collection

seventeen (17) other lot vendees of a complaint for specific performance

agreement with his firm on account of the considerable amount of

with damages against Manila Remnant before the Court of First Instance of

discrepancies and irregularities discovered in its collections and

Quezon City. The complaint alleged that Crisostomo had already paid a

remittances by virtue of confirmations received from lot buyers.

[4]

As a

total of P17,922.40 and P18,136.85 on Lots 1 and 2, respectively. [13]

consequence, on June 6, 1973, Artemio Valencia was removed as President

by the Board of Directors of Manila Remnant. Therefore, from May of 1973,

It was not until March 1978 when the Ventanillas, after learning of the

Valencia stopped transmitting Ventanilla's monthly installments which at

termination of the agency agreement between Manila Remnant and A.U.

that time had already amounted to P17,925.40 for Lot 1 and P18,141.95

Valencia & Co., decided to stop paying their amortizations to the latter.

for Lot 2, (which appeared in Manila Remnant's record as credited in the

The Ventanillas, believing that they had already remitted P37,007.00 for

name of Crisostomo).

Lot I and P36,911.00 for Lot 2 or a grand total, inclusive of interest, of

[5]

P73,122.35 for the two lots, thereby leaving a balance of P13,531.58 for
On June 8, 1973, A.U. Valencia and Co. sued Manila Remnant before Branch

Lot 1 and P13,540.22 for Lot 2, went directly to Manila Remnant and

19 of the then Court of First Instance of Manila

offered to pay the entire outstanding balance of the purchase price. [14] To

[6]

to impugn the abrogation

of their agency agreement. On June 10 and July 10, 1973, said court

their shock and utter consternation, they discovered from Gloria Caballes,

ordered all lot buyers to deposit their monthly amortizations with the court.

an accountant of Manila Remnant, that their names did not appear in the

[7]

But on July 17, 1973, A.U. Valencia and Co. wrote the Ventanillas that it

records of A.U. Valencia and Co. as lot buyers. Caballes showed the

was still authorized by the court to collect the monthly amortizations and

Ventanillas copies of the contracts to sell in favor of Carlos Crisostomo,

requested them to continue remitting their amortizations with the

duly sighed by Artemio U. Valencia as President of Manila Remnant.[15]

assurance that said payments would be deposited later in court. [8] On May

Whereupon, Manila Remnant refused the offer of the Ventanillas to pay for

22, 1974, the trial court issued an order prohibiting A.U. Valencia and Co.

the remainder of the contract price because they did not have the

from collecting the monthly installments.

personality to do so. Furthermore, they were shown the published Notice

[9]

On July 22, 1974 and February

6, 1976 the same court ordered the Valencia firm to furnish the court with

of Cancellation in the January 29, 1978 issue of the Times Journal

a complete list of all lot buyers who had already made down payments to

rescinding the contracts of delinquent buyers including Crisostomo.

Manila Remnant before December 1972. [10] Valencia complied with the
court's order on August 6, 1974 by submitting a list which excluded the

Thus, on November 21, 1978, the Ventanillas commenced an action for

name of the Ventanillas.

specific performance, annulment of deeds and damages against Manila

[11]

62

Remnant, A.U. Valencia and Co. and Carlos Crisostomo before the Court of

While petitioner Manila Remnant has not refuted the legality of the award

First Instance of Quezon City, Branch 17-B.[16] Crisostomo was declared in

of damages per se, it believes that it cannot be made jointly and severally

default for failure to file an answer.

liable with its agent A.U. Valencia and Co. since it was not aware of the
illegal acts perpetrated nor did it consent or ratify said acts of its agent.

On November 17, 1980, the trial court rendered a decision 1) declaring the
contracts to sell issued in favor of the Ventanillas valid and subsisting and

The argument is devoid of merit.

annulling the contracts to sell in Crisostomo's favor; 2) ordering Manila

Remnant to execute in favor of the Ventanillas an Absolute Deed of Sale

In the case at bar, the Valencia realty firm had clearly overstepped the

free from all liens and encumbrances; and 3) condemning defendants A.U.

bounds of its authority as agent-- and for that matter, even the law -- when

Valencia and Co. Inc., Manila Remnant and Carlos Crisostomo jointly and

it undertook the double sale of the disputed lots. Such being the case, the

severally to pay the Ventanillas the amount of P100,000.00 as moral

principal, Manila Remnant, would have been in the clear pursuant to Article

damages, P100,000.00 as exemplary damages, and P100,000.00 as

1897 of the Civil Code which states that "(t)he agent who acts as such is

attorneys fees. The lower court also added that if, for any legal reason,

not personally liable to that party with whom he contracts, unless he

the transfer of the lots could no longer be effected, the defendants should

expressly binds himself or exceeds the limits of his authority without giving

reimburse jointly and severally to the Ventanillas the total amount of

such party sufficient notice of his powers."

P73,122.35 representing the total amount paid for the two lots plus legal
interest thereon from March 1970 plus damages as aforestated. With

However, the unique relationship existing between the principal and the

regard to the cross claim of Manila Remnant against Valencia, the court

agent at the time of the dual sale must be underscored. Bear in mind that

found that Manila Remnant could have not been dragged into this suit

the president then of both firms was Artemio U. Valencia, the individual

without the fraudulent manipulations of Valencia. Hence, it adjudged A.U.

directly responsible for the sale scam. Hence, despite the fact that the

Valencia and Co. to pay the Manila Remnant P5,000.00 as moral damages

double sale was beyond the power of the agent, Manila Remnant as

and exemplary damages and P5,000.00 as attorney's fees.

principal was chargeable with the knowledge or constructive notice of that

[17]

fact and not having done anything to correct such an irregularity was
Subsequently, Manila Remnant and A.U. Valencia and Co. elevated the

deemed to have ratified the same.[19]

lower court's decision to the Court of Appeals through separate appeals.

On October 13, 1987, the Appellate Court affirmed in toto the decision of

More in point, we find that by the principle of estoppel, Manila Remnant is

the lower court. Reconsideration sought by petitioner Manila Remnant was

deemed to have allowed its agent to act as though it had plenary powers.

denied, hence the instant petition.

Article 1911 of the Civil Code provides:

There is no question that the contracts to sell favor of the Ventanilla

"Even when the agent has exceeded his authority, the principal is solidarily

spouses are valid and subsisting. The only issue remaining is whether or

liable with the agent if the former allowed the latter to act as though he

not petitioner Manila Remnant should be held solidarily liable together with

had full powers." (Underscoring supplied).

A.U. Valencia and Co. and Carlos Crisostomo for the payment of moral,
exemplary damages and attorney's fees in favor of the Ventanillas.[18]

63

The above-quoted article is new. It is intended to protect the rights of

the Times Journal came three years after Manila Remnant had revoked its

innocent persons. In such a situation, both the principal and the agent

agreement with A.U. Valencia and Co.

may be considered as jointfeasors whose liability is joint and solidary.

[20]

Moreover, Manila Remnant also failed to check the records of its agent
Authority by estoppel has arisen in the instant case because by its

immediately after the revocation of the agency contract despite the fact

negligence, the principal, Manila Remnant, has permitted its agent, A.U.

that such revocation was due to reported anomalies in Valencia's

Valencia and Co., to exercise powers not granted to it. That the principal

collections. Altogether, as pointed out by the counsel for the Ventanillas,

might not have had actual knowledge of the agent's misdeed is of no

Manila Remnant could and should have devised a system whereby it could

moment. Consider the following circumstances:

monitor and require a regular accounting from A.U. Valencia and Co., its
agent. Not having done so, Manila Remnant has made itself liable to those

Firstly, Manila Remnant literally gave carte blanche to its agent A.U.

who have relied on its agent and the representation that such agent was

Valencia and Co. in the sale and disposition of the subdivision lots. As a

clothed with sufficient powers to act on behalf of the principal.

disclosed principal in the contracts to sell in favor of the Ventanilla couple,

there was no doubt that they were in fact contracting with the principal.

Even assuming that Manila Remnant was as much a victim as the other

Section 7 of the Ventanillas contracts to sell states:

innocent lot buyers, it cannot be gainsaid that it was precisely its

negligence and laxity in the day to day operations of the real estate

"7. That all payments whether deposits, down payment and monthly

business which made it possible for the agent to deceive unsuspecting

installment agreed to be made by the vendee shall be payable to A.U.

vendees like the Ventanillas.

Valencia and Co., Inc. It is hereby expressly understood that unauthorized

payments made to real estate brokers or agents shall be the sole and

In essence, therefore, the basis for Manila Remnant's solidary liability is

exclusive responsibility and at the risk of the vendee and any and all such

estoppel which, in turn, is rooted in the principals neglectfulness in failing

payments shall not be recognized by the vendors unless the official

to properly supervise and control the affairs of its agent and to adopt the

receipts therefor shall have been duly signed by the vendors duly

needed measures to prevent further misrepresentation. As a consequence,

authorized agent, A.U. Valencia and Co., Inc." (Underscoring supplied).

Manila Remnant is considered estopped from pleading the truth that it had

Indeed, once Manila Remnant had been furnished with the usual copies of

no direct hand in the deception employed by its agent. [22]

the contracts to sell, its only participation then was to accept the
collections and pay the commissions to the agent. The latter had complete

A final word. The Court cannot help but be alarmed over the reported

control of the business arrangement.

practice of supposedly reputable real estate brokers of manipulating prices

[21]

by allowing their own agents to "buy" lots in their names in the hope of
Secondly, it is evident from the records that Manila Remnant was less than

reselling the same at a higher price to the prejudice of bona fide lot buyers,

prudent in the conduct of its business as a subdivision owner. For instance,

as precisely what the agent had intended to happen in the present case.

Manila Remnant failed to take immediate steps to avert any damage that

This is a serious matter that must be looked into by the appropriate

might be incurred by the lot buyers as a result of its unilateral abrogation

government housing authority.

of the agency contract. The publication of the cancelled contracts to sell in

64

WHEREFORE, in view of the foregoing, the appealed decision of the Court

of Appeals dated October 13, 1987 sustaining the decision of the Quezon
City trial court dated November 17, 1980 is AFFIRMED. This judgment is
immediately executory. Costs against petitioner.
So ordered.

THIRD DIVISION
G.R. No. 95641, September 22, 1994
SANTOS B. AREOLA AND LYDIA D. AREOLA, PETITIONERS-APPELLANTS, VS.
COURT OF APPEALS AND PRUDENTIAL GUARANTEE AND ASSURANCE, INC.,
RESPONDENTS-APPELLEES.
DECISION
ROMERO, J.:
On June 29, 1985, seven months after the issuance of petitioner Santos
Areola's Personal Accident Insurance Policy No. PA-20015, respondent
insurance company unilaterally cancelled the same since company records
revealed that petitioner-insured failed to pay his premiums.
On August 3, 1985, respondent insurance company offered to reinstate
same policy it had previously cancelled and even proposed to extend its
lifetime to December 17, 1985, upon a finding that the cancellation was
erroneous and that the premiums were paid in full by petitioner-insured but

65

were not remitted by Teofilo M. Malapit, respondent insurance company's

If payment is made to our office, demand for an OFFICIAL RECEIPT."

branch manager.

On December 17, 1984, respondent insurance company issued collector's

provisional receipt No. 9300 to petitioner-insured for the amount of

These, in brief, are the material facts that gave rise to the action for

P1,609.65.[3] On the lower portion of the receipt the following is written in

damages due to breach of contract instituted by petitioner-insured before

capital letters:

Branch 40 RTC, Dagupan City against respondent insurance company.

"Note: This collector's provisional receipt will be confirmed by our official
There are two issues for resolution in this case:

receipt. If our official receipt is not received by you within 7 days, please
notify us."[4]

(1) Did the erroneous act of cancelling subject insurance policy entitle

On June 29, 1985, respondent insurance company, through its Baguio City

petitioner-insured to payment of damages?

manager, Teofilo M. Malapit, sent petitioner-insured Endorsement No. BG002/85 which "cancelled flat" Policy No. PA BG-20015 "for non-payment of

(2) Did the subsequent act of reinstating the wrongfully cancelled

premium effective as of inception dated."[5] The same endorsement also

insurance policy by respondent insurance company, in an effort to rectify

credited "a return premium of P1,609.65 plus documentary stamps and

such error, obliterate whatever liability for damages it may have to bear,

premium tax" to the account of the insured.

thus absolving it therefrom?

Shocked by the cancellation of the policy, petitioner-insured confronted
From the factual findings of the trial court, it appears that petitioner-

Carlito Ang, agent of respondent insurance company, and demanded the

insured, Santos Areola, a lawyer from Dagupan City, bought, through the

issuance of an official receipt. Ang told petitioner-insured that the

Baguio City branch of Prudential Guarantee and Assurance, Inc.

cancellation of the policy was a mistake but he would personally see to its

(hereinafter referred to as Prudential), a personal accident insurance policy

rectification. However, petitioner-insured failed to receive any official

covering the one-year period between noon of November 28, 1984 and

receipt from Prudential.

noon of November 28, 1985.[1] Under the terms of the statement of

account issued by respondent insurance company, petitioner-insured was

Hence, on July 15, 1985, petitioner-insured sent respondent insurance

supposed to pay the total amount of P1,609.65 which included the

company a letter demanding that he be insured under the same terms and

premium of P1,470.00, documentary stamp of P110.25 and 2% premium

conditions as those contained in Policy No. PA-BG-20015 commencing upon

tax of P29.40.[2] At the lower left-hand corner of the statement of account,

its receipt of his letter, or that the current commercial rate of increase on

the following is legibly printed:

the payment he had made under provisional receipt No. 9300 be returned
within five days.[6] Areola also warned that should his demands be

"This Statement of Account must not be considered a receipt. Official

unsatisfied, he would sue for damages.

Receipt will be issued to you upon payment of this account.

If payment is made to our representative, demand for a Provisional Receipt

On July 17, 1985, he received a letter from production manager Malapit

and if our Official Receipts is (sic) not received by you within 7 days please

informing him that the "partial payment" of P1,000.00 he had made on the

notify us.

policy had been "exhausted pursuant to the provisions of the Short Period

66

Rate Scale" printed at the back of the policy. Malapit warned Areola that

inconvenience caused on petitioner-insured and after taking steps to rectify

should he fail to pay the balance, the company's liability would cease to

its omission by reinstating the cancelled policy prior to the filing of the

operate.

complaint, respondent insurance company had complied with its obligation

[7]

under the contract. Hence, it concluded that petitioner-insured no longer

In reply to the petitioner-insured's letter of July 15, 1985, respondent

has a cause of action against it. It insists that it cannot be held liable for

insurance company, through its Assistant Vice-President Mariano M. Ampil

damages arising from breach of contract, having demonstrated fully well

III, wrote Areola a letter dated July 25, 1985 stating that the company was

its fulfillment of its obligation.

verifying whether the payment had in fact been remitted to said company
and why no official receipt had been issued therefor. Ampil emphasized

The trial court, on June 30, 1987, rendered a judgment in favor of

that the official receipt should have been issued seven days from the

petitioner-insured, ordering respondent insurance company to pay the

issuance of the provisional receipt but because no official receipt had been

former the following:

issued in Areola's name, there was reason to believe that no payment had
been made. Apologizing for the inconvenience, Ampil expressed the

"a) P1,703.65 as actual damages;

company's concern by agreeing "to hold you cover (sic) under the terms of

b) P200,000.00 as moral damages; and

the referenced policy until such time that this matter is cleared."

c) P50,000.00 as exemplary damages;

[8]

2. To pay to the plaintiff, as and for attorney's fees the amount of

On August 3, 1985, Ampil wrote Areola another letter confirming that the

P10,000.00; and

amount of P1,609.65 covered by provisional receipt No. 9300 was in fact

3. To pay the costs."

received by Prudential on December 17, 1984. Hence, Ampil informed

In its decision, the court below declared that respondent insurance

Areola that Prudential was "amenable to extending PGA-PA-BG-20015 up to

company acted in bad faith in unilaterally cancelling subject insurance

December 17, 1985 or one year from the date when payment was

policy, having done so only after seven months from the time that it had

received." Apologizing again for the inconvenience caused Areola, Ampil

taken force and effect and despite the fact of full payment of premiums

exhorted him to indicate his conformity to the proposal by signing on the

and other charges on the issued insurance policy. Cancellation from the

space provided for in the letter.[9]

date of the policy's inception, explained the lower court, meant that the
protection sought by petitioner-insured from the risks insured against was

The letter was personally delivered by Carlito Ang to Areola on August 13,

never extended by respondent insurance company. Had the insured met an

1985[10] but unfortunately, Areola and his wife, Lydia, as early as August 6,

accident at the time, the insurance company would certainly have

1985 had filed a complaint for breach of contract with damages before the

disclaimed any liability because technically, the petitioner could not have

lower court.

been considered insured. Consequently, the trial court held that there was
breach of contract on the part of respondent insurance company, entitling

In its Answer, respondent insurance company admitted that the

petitioner-insured to an award of the damages prayed for.

cancellation of petitioner-insured's policy was due to the failure of Malapit

to turn over the premiums collected, for which reason no official receipt
was issued to him. However, it argued that, by acknowledging the

67

This ruling was challenged on appeal by respondent insurance company,

Prudential liable for the cancellation of the insurance contract which was

denying bad faith on its part in unilaterally cancelling subject insurance

admittedly caused by the fraudulent acts and bad faith of its own officers.

policy.

II

After consideration of the appeal, the appellate court issued a reversal of

Respondent Court of Appeals committed serious and reversible error and

the decision of the trial court, convinced that the latter had erred in finding

abused its discretion in ruling that the defenses of good faith and honest

respondent insurance company in bad faith for the cancellation of

mistake can co-exist with the admitted fraudulent acts and evident bad

petitioner-insured's policy. According to the Court of Appeals, respondent

faith.

insurance company was not motivated by negligence, malice or bad faith

III

in cancelling subject policy. Rather, the cancellation of the insurance policy

was based on what the existing records showed, i.e., absence of an official

Respondent Court of Appeals committed a reversible error in not finding

receipt issued to petitioner-insured confirming payment of premiums. Bad

that even without considering the fraudulent acts of its own officer in

faith, said the Court of Appeals, is some motive of self-interest or ill-will; a

misappropriating the premium payment, the act itself in cancelling the

furtive design or ulterior purpose, proof of which must be established

insurance policy was done with bad faith and/or gross negligence and

convincingly. On the contrary, it further observed, the following acts

wanton attitude amounting to bad faith, because among others, it was Mr.

indicate that respondent insurance company did not act precipitately or

Malapit - the person who committed the fraud - who sent and signed the

willfully to inflict a wrong on petitioner-insured: (a) the investigation

notice of cancellation.

conducted by Alfredo Bustamante to verify if petitioner-insured had indeed

IV

paid the premium; (b) the letter of August 3, 1985 confirming that the
premium had been paid on December 17, 1984; (c) the reinstatement of

Respondent Court of Appeals has decided a question of substance contrary

the policy with a proposal to extend its effective period to December 17,

to law and applicable decision of the Supreme Court when it refused to

1985; and (d) respondent insurance company's apologies for the

award damages in favor of herein Petitioner-Appellants."

"inconvenience" caused upon petitioner-insured. The appellate court added

It is petitioner-insured's submission that the fraudulent act of Malapit,

that respondent insurance company even relieved Malapit, its Baguio City

manager of respondent insurance company's branch office in Baguio, in

manager, of his job by forcing him to resign.

misappropriating his premium payments is the proximate cause of the

cancellation of the insurance policy. Petitioner-insured theorized that

Petitioner-insured moved for the reconsideration of the said decision which

Malapit's act of signing and even sending the notice of cancellation

the Court of Appeals denied. Hence, this petition for review on certiorari

himself, notwithstanding his personal knowledge of petitioner-insured's full

anchored on these arguments:

payment of premiums, further reinforces the allegation of bad faith. Such

fraudulent act committed by Malapit, argued petitioner-insured, is

"I

attributable to respondent insurance company, an artificial corporate being

which can act only through its officers or employees. Malapit's actuation,

Respondent Court of Appeals is guilty of grave abuse of discretion and

concludes petitioner-insured, is therefore not separate and distinct from

committed a serious and reversible error in not holding Respondent

that of respondent-insurance company, contrary to the view held by the

68

Court of Appeals. It must, therefore, bear the consequences of the

"ART. 1910. The principal must comply with all the obligations which the

erroneous cancellation of subject insurance policy caused by the non-

agent may have contracted within the scope of his authority.

remittance by its own employee of the premiums paid. Subsequent

As for any obligation wherein the agent has exceeded his power, the

reinstatement, according to petitioner-insured, could not possibly absolve

principal is not bound except when he ratifies it expressly or tacitly."

respondent insurance company from liability, there being an obvious

Malapit's failure to remit the premiums he received cannot constitute a

breach of contract. After all, reasoned out petitioner-insured, damage had

defense for private respondent insurance company; no exoneration from

already been inflicted on him and no amount of rectification could remedy

liability could result therefrom. The fact that private respondent insurance

the same.

company was itself defrauded due to the anomalies that took place in its
Baguio branch office, such as the non-accrual of said premiums to its

Respondent insurance company, on the other hand, argues that where

account, does not free the same from its obligation to petitioner Areola. As

reinstatement, the equitable relief sought by petitioner-insured was

held in Prudential Bank v. Court of Appeals[13] citing the ruling in McIntosh

granted at an opportune moment i.e. prior to the filing of the complaint,

v. Dakota Trust Co.:[14]

petitioner-insured is left without a cause of action on which to predicate his

claim for damages. Reinstatement, it further explained, effectively restored

"A bank is liable for wrongful acts of its officers done in the interests of the

petitioner-insured to all his rights under the policy. Hence, whatever cause

bank or in the course of dealings of the officers in their representative

of action there might have been against it, no longer exists and the

capacity but not for acts outside the scope of their authority. A bank

consequent award of damages ordered by the lower court is unsustainable.

holding out its officers and agent as worthy of confidence will not be
permitted to profit by the frauds they may thus be enabled to perpetrate in

We uphold petitioner-insured's submission. Malapit's fraudulent act of

the apparent scope of their employment; nor will it be permitted to shirk its

misappropriating the premiums paid by petitioner-insured is beyond doubt

responsibility for such frauds, even though no benefit may accrue to the

directly imputable to respondent insurance company. A corporation, such

bank therefrom. Accordingly, a banking corporation is liable to innocent

as respondent insurance company, acts solely thru its employees. The

third persons where the representation is made in the course of its

latters' acts are considered as its own for which it can be held to account.

business by an agent acting within the general scope of his authority even

[11]

The facts are clear as to the relationship between private respondent

though, in the particular case, the agent is secretly abusing his authority

insurance company and Malapit. As admitted by private respondent

and attempting to perpetrate a fraud upon his principal or some other

insurance company in its answer,

person, for his own ultimate benefit."

[12]

Malapit was the manager of its Baguio

branch. It is beyond doubt that he represented its interests and acted in its

Consequently, respondent insurance company is liable by way of damages

behalf. His act of receiving the premiums collected is well within the

for the fraudulent acts committed by Malapit that gave occasion to the

province of his authority. Thus, his receipt of said premiums is receipt by

erroneous cancellation of subject insurance policy. Its earlier act of

private respondent insurance company who, by provision of law,

reinstating the insurance policy can not obliterate the injury inflicted on

particularly under Article 1910 of the Civil Code, is bound by the acts of its

petitioner-insured. Respondent company should be reminded that a

agent.

contract of insurance creates reciprocal obligations for both insurer and

insured. Reciprocal obligations are those which arise from the same cause

Article 1910 thus reads:

69

and in which each party is both a debtor and a creditor of the other, such

contract, private respondent insurance company, within a reasonable time

that the obligation of one is dependent upon the obligation of the other. [15]

took steps to rectify the wrong committed by reinstating the insurance

policy of petitioner. Moreover, no actual or substantial damage or injury

Under the circumstances of instant case, the relationship as creditor and

was inflicted on petitioner Areola at the time the insurance policy was

debtor between the parties arose from a common cause: i.e., by reason of

cancelled. Nominal damages are "recoverable where a legal right is

their agreement to enter into a contract of insurance under whose terms,

technically violated and must be vindicated against an invasion that has

respondent insurance company promised to extend protection to

produced no actual present loss of any kind, or where there has been a

petitioner-insured against the risk insured for a consideration in the form of

breach of contract and no substantial injury or actual damages whatsoever

premiums to be paid by the latter. Under the law governing reciprocal

have been or can be shown."[18]

obligations, particularly the second paragraph of Article 1191,

[16]

the

injured party, petitioner-insured in this case, is given a choice between

WHEREFORE, the petition for review on certiorari is hereby GRANTED and

fulfillment or rescission of the obligation in case one of the obligors, such

the decision of the Court of Appeals in CA-GR. No. 16902 on May 31, 1990,

as respondent insurance company, fails to comply with what is incumbent

REVERSED. The decision of Branch 40, RTC Dagupan City, in Civil Case No.

upon him. However, said article entitles the injured party to payment of

D-7972 rendered on June 30, 1987 is hereby REINSTATED subject to the

damages, regardless of whether he demands fulfillment or rescission of the

following modifications: (a) that nominal damages amounting to

obligation. Untenable then is respondent insurance company's argument,

P30,000.00 be awarded petitioner in lieu of the damages adjudicated by

namely, that reinstatement being equivalent to fulfillment of its obligation,

court a quo; and (b) that in the satisfaction of the damages awarded

divests petitioner-insured of a rightful claim for payment of damages. Such

therein, respondent insurance company is ORDERED to pay the legal rate

a claim finds no support in our laws on obligations and contracts.

of interest computed from date of filing of complaint until final payment

thereof.

The nature of damages to be awarded, however, would be in the form of

nominal damages[17] contrary to that granted by the court below. Although

SO ORDERED.

the erroneous cancellation of the insurance policy constituted a breach of

70